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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q

☑ |  | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|  | For the quarterly period ended | November 30, 2021
or
☐ |  | Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to

Commission file number: 001-36079
CHS Inc.
(Exact name of Registrant as specified in its charter)

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

5500 Cenex Drive
Inver Grove Heights, Minnesota 55077
(Address of principal executive offices, including zip code)
(651) 355-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes ☑ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o | Accelerated filer o | Non-accelerated filer | ☑ | Smaller reporting company | ☐ | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
The issuer has no common stock outstanding.

TABLE OF CONTENTS

| PART I. FINANCIAL INFORMATION | Page No.
Item 1. | Financial Statements (unaudited) | 2
| Condensed Consolidated Balance Sheets as of November 30, 2021, and August 31, 202 1 | 2
| Condensed Consolidated Statements of Operations for the T hree M onths E nded November 30, 2021 and 2020 | 3
| Condensed Consolidated Statements of Comprehensive Income for the T hree M onths E nded November 30, 2021 and 2020 | 4
| Condensed Consolidated Statements of Cash Flows for the T hree M onths E nded November 30, 2021 and 2020 | 5
| Notes to Condensed Consolidated Financial Statements | 6
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 21
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 36
Item 4. | Controls and Procedures | 36
| PART II. OTHER INFORMATION | 37
Item 1. | Legal Proceedings | 37
Item 1A. | Risk Factors | 37
Item 6. | Exhibits | 37
Signatures | 38

Unless the context otherwise requires, for purposes of this Quarterly Report on Form 10-Q, the words "CHS," "we," "us" and "our" refer to CHS Inc., a Minnesota cooperative corporation, and its subsidiaries as of November 30, 2021.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains, and our other publicly available documents may contain, and our officers, directors and other representatives may from time to time make "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our businesses, financial condition and results of operations, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements are discussed or identified in our public filings made with the U.S. Securities and Exchange Commission, including in the "Risk Factors" discussion in Item 1A of our Annual Report on Form 10-K for the year ended August 31, 2021. These factors may include changes in commodity prices; the impact of government policies, mandates, regulations and trade agreements; global and regional political, economic, legal and other risks of doing business globally; the impact of the ongoing COVID-19 outbreak or other similar outbreaks; the impact of market acceptance of alternatives to refined petroleum products; consolidation among our suppliers and customers; nonperformance by contractual counterparties; changes in federal income tax laws or our tax status; the impact of compliance or noncompliance with applicable laws and regulations; the impact of any governmental investigations; the impact of environmental liabilities and litigation; actual or perceived quality, safety or health risks associated with our products; the impact of seasonality; the effectiveness of our risk management strategies; business interruptions and casualty losses; the impact of workforce factors; our funding needs and financing sources; financial institutions' and other capital sources' policies concerning energy-related businesses; uncertainty regarding the transition away from LIBOR and the replacement of LIBOR with an alternative reference rate; technological improvements that decrease the demand for our agronomy and energy products; our ability to complete, integrate and benefit from acquisitions, strategic alliances, joint ventures, divestitures and other nonordinary course-of-business events; security breaches or other disruptions to our information technology systems or assets; the impact of our environmental, social and governance practices; the impairment of long-lived assets; and other factors affecting our businesses generally. Any forward-looking statements made by us in this Quarterly Report on Form 10-Q are based only on information currently available to us and speak only as of the date on which the statement is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by applicable law.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

| November 30, 2021 |  | August 31, 2021
| (Dollars in thousands)
ASSETS |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 310,002 |  |  | $ | 413,159 |
Receivables | 3,579,417 |  |  | 2,860,884 |
Inventories | 4,608,816 |  |  | 3,334,675 |
Other current assets | 1,498,883 |  |  | 1,390,233 |
Total current assets | 9,997,118 |  |  | 7,998,951 |
Investments | 3,809,509 |  |  | 3,669,111 |
Property, plant and equipment | 4,738,246 |  |  | 4,810,005 |
Other assets | 1,070,105 |  |  | 1,098,208 |
Total assets | $ | 19,614,978 |  |  | $ | 17,576,275 |
LIABILITIES AND EQUITIES |  |  |
Current liabilities: |  |  |
Notes payable | $ | 1,905,371 |  |  | $ | 1,740,859 |
Current portion of long-term debt | 38,343 |  |  | 38,450 |
Accounts payable | 4,219,458 |  |  | 2,616,052 |
Accrued expenses | 475,729 |  |  | 622,723 |
Other current liabilities | 1,466,985 |  |  | 1,307,929 |
Total current liabilities | 8,105,886 |  |  | 6,326,013 |
Long-term debt | 1,576,769 |  |  | 1,579,911 |
Other liabilities | 682,397 |  |  | 653,025 |
Commitments and contingencies (Note 13) |  |  |
Equities: |  |  |
Preferred stock | 2,264,038 |  |  | 2,264,038 |
Equity certificates | 5,166,786 |  |  | 5,247,238 |
Accumulated other comprehensive loss | (231,809) |  |  | (216,391) |
Capital reserves | 2,043,305 |  |  | 1,713,976 |
Total CHS Inc. equities | 9,242,320 |  |  | 9,008,861 |
Noncontrolling interests | 7,606 |  |  | 8,465 |
Total equities | 9,249,926 |  |  | 9,017,326 |
Total liabilities and equities | $ | 19,614,978 |  |  | $ | 17,576,275 |

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
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CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

| Three Months Ended November 30, |  |  |  |
| 2021 |  | 2020 |  |  |  |  |  |  |  |
| (Dollars in thousands)
Revenues | $ | 10,880,757 |  |  | $ | 8,715,643 |  |  |  |  |  |  |  |  |
Cost of goods sold | 10,360,849 |  |  | 8,537,539 |  |  |  |  |  |  |  |  |
Gross profit | 519,908 |  |  | 178,104 |  |  |  |  |  |  |  |  |
Marketing, general and administrative expenses | 204,934 |  |  | 170,661 |  |  |  |  |  |  |  |  |
Operating earnings | 314,974 |  |  | 7,443 |  |  |  |  |  |  |  |  |
Interest expense | 23,432 |  |  | 25,050 |  |  |  |  |  |  |  |  |
Other income | (23,776) |  |  | (12,624) |  |  |  |  |  |  |  |  |
Equity income from investments | (151,345) |  |  | (50,023) |  |  |  |  |  |  |  |  |
Income before income taxes | 466,663 |  |  | 45,040 |  |  |  |  |  |  |  |  |
Income tax expense (benefit) | 14,720 |  |  | (24,329) |  |  |  |  |  |  |  |  |
Net income | 451,943 |  |  | 69,369 |  |  |  |  |  |  |  |  |
Net loss attributable to noncontrolling interests | (18) |  |  | (302) |  |  |  |  |  |  |  |  |
Net income attributable to CHS Inc. | $ | 451,961 |  |  | $ | 69,671 |  |  |  |  |  |  |  |  |

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
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CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

| Three Months Ended November 30, |  |
| 2021 |  | 2020 |  |  |  |
| (Dollars in thousands)
Net income | $ | 451,943 |  |  | $ | 69,369 |  |  |  |  |
Other comprehensive (loss) income, net of tax: |  |  |  |  |  |  |
Pension and other postretirement benefits | 3,768 |  |  | 3,645 |  |  |  |  |
Cash flow hedges | (9,141) |  |  | 1,669 |  |  |  |  |
Foreign currency translation adjustment | (10,045) |  |  | 3,603 |  |  |  |  |
Other comprehensive (loss) income, net of tax | (15,418) |  |  | 8,917 |  |  |  |  |
Comprehensive income | 436,525 |  |  | 78,286 |  |  |  |  |
Comprehensive loss attributable to noncontrolling interests | (18) |  |  | (302) |  |  |  |  |
Comprehensive income attributable to CHS Inc. | $ | 436,543 |  |  | $ | 78,588 |  |  |  |  |

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
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CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

| Three Months Ended November 30,
| 2021 |  | 2020
| (Dollars in thousands)
Cash flows from operating activities: |  |  |
Net income | $ | 451,943 |  |  | $ | 69,369 |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |  |  |
Depreciation and amortization, including amortization of deferred major maintenance | 132,772 |  |  | 134,692 |
Equity income from investments, net of distributions received | (140,387) |  |  | (40,842) |
Provision for current expected credit losses | 1,472 |  |  | 1,564 |
Deferred taxes | 11,856 |  |  | 477 |
Other, net | (8,556) |  |  | (5,263) |
Changes in operating assets and liabilities: |  |  |
Receivables | (696,984) |  |  | (430,234) |
Inventories | (1,274,141) |  |  | (967,637) |
Accounts payable and accrued expenses | 1,420,237 |  |  | 773,776 |
Other, net | (81,799) |  |  | (209,355) |
Net cash used in operating activities | (183,587) |  |  | (673,453) |
Cash flows from investing activities: |  |  |
Acquisition of property, plant and equipment | (74,878) |  |  | (85,680) |
Proceeds from disposition of property, plant and equipment | 2,822 |  |  | 3,350 |
Expenditures for major maintenance | (5,541) |  |  | (6,313) |
Proceeds from sale of business | 55,546 |  |  | 42,585 |
Changes in CHS Capital notes receivable, net | (31,509) |  |  | (79,045) |
Financing extended to customers | (456) |  |  | (617) |
Payments from customer financing | 3,833 |  |  | 3,875 |
Other investing activities, net | (2,013) |  |  | 7,534 |
Net cash used in investing activities | (52,196) |  |  | (114,311) |
Cash flows from financing activities: |  |  |
Proceeds from notes payable and long-term debt | 4,952,834 |  |  | 6,620,876 |
Payments on notes payable, long-term debt and finance lease obligations | (4,792,770) |  |  | (5,752,925) |
Preferred stock dividends paid | (42,167) |  |  | (42,167) |
Redemptions of equities | (12,221) |  |  | (7,726) |
Other financing activities, net | 50,326 |  |  | (9,167) |
Net cash provided by financing activities | 156,002 |  |  | 808,891 |
Effect of exchange rate changes on cash and cash equivalents | (3,550) |  |  | 2,324 |
(Decrease) increase in cash and cash equivalents and restricted cash | (83,331) |  |  | 23,451 |
Cash and cash equivalents and restricted cash at beginning of period | 542,484 |  |  | 216,993 |
Cash and cash equivalents and restricted cash at end of period | $ | 459,153 |  |  | $ | 240,444 |

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
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CHS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1 Basis of Presentation and Significant Accounting Policies
Basis of Presentation
These unaudited condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented. The results of operations and cash flows for interim periods are not necessarily indicative of results for a full fiscal year because of the seasonal nature of our businesses, among other things. Our unaudited condensed consolidated financial statements and notes are presented as permitted by the requirements for Quarterly Reports on Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended August 31, 2021, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC").
Significant Accounting Policies
No significant accounting policies were updated or changed since our Annual Report on Form 10-K for the year ended August 31, 2021.
Recent Accounting Pronouncements
No recent accounting pronouncements are expected to have a material impact on our condensed consolidated financial statements.
Note 2 Revenues
The following table presents revenues recognized under Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), disaggregated by reportable segment, as well as the amount of revenues recognized under ASC Topic 815, Derivatives and Hedging ("ASC Topic 815"), and other applicable accounting guidance for the three months ended November 30, 2021 and 2020. Other applicable accounting guidance primarily includes revenues recognized under ASC Topic 470, Debt, and ASC Topic 842, Leases, that fall outside the scope of ASC Topic 606.

|  | ASC Topic 606 |  | ASC Topic 815 |  | Other Guidance |  | Total Revenues
Three Months Ended November 30, 2021 |  | (Dollars in thousands)
Energy |  | $ | 2,047,277 |  |  | $ | 256,710 |  |  | $ | — |  |  | $ | 2,303,987 |
Ag |  | 2,531,956 |  |  | 6,029,260 |  |  | 8,043 |  |  | 8,569,259 |
Corporate and Other |  | 3,590 |  |  | — |  |  | 3,921 |  |  | 7,511 |
Total revenues |  | $ | 4,582,823 |  |  | $ | 6,285,970 |  |  | $ | 11,964 |  |  | $ | 10,880,757 |
Three Months Ended November 30, 2020 |  |  |  |  |  |  |  |
Energy |  | $ | 1,064,963 |  |  | $ | 192,884 |  |  | $ | — |  |  | $ | 1,257,847 |
Ag |  | 1,344,508 |  |  | 6,087,241 |  |  | 13,653 |  |  | 7,445,402 |
Corporate and Other |  | 6,460 |  |  | — |  |  | 5,934 |  |  | 12,394 |
Total revenues |  | $ | 2,415,931 |  |  | $ | 6,280,125 |  |  | $ | 19,587 |  |  | $ | 8,715,643 |

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.
Contract Assets and Contract Liabilities
Contract assets relate to unbilled amounts arising from goods that have already been transferred to customers where the right to payment is not conditional on the passage of time. This results in the 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 Condensed Consolidated Balance Sheets and were $40.1 million and $29.0 million as of November 30, 2021, and August 31, 2021, respectively.
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Contract liabilities relate to advance payments from customers for goods and services that we have yet to provide. Contract liabilities of $419.5 million and $213.9 million as of November 30, 2021, and August 31, 2021, respectively, are recorded within other current liabilities on our Condensed Consolidated Balance Sheets. For the three months ended November 30, 2021 and 2020, we recognized revenues of $107.2 million and $60.7 million related to contract liabilities, respectively. These amounts were included in the other current liabilities balance at the beginning of the respective period.
Note 3 Receivables

| November 30, 2021 |  | August 31, 2021
| (Dollars in thousands)
Trade accounts receivable | $ | 2,577,018 |  |  | $ | 2,047,198 |
CHS Capital short-term notes receivable | 529,376 |  |  | 505,778 |
Other | 623,088 |  |  | 451,630 |
Gross receivables | 3,729,482 |  |  | 3,004,606 |
Less: allowances and reserves | 150,065 |  |  | 143,722 |
Total receivables | $ | 3,579,417 |  |  | $ | 2,860,884 |

Receivables are composed of trade accounts receivable, short-term notes receivable in our wholly-owned subsidiary, CHS Capital, LLC ("CHS Capital"), and other receivables, less an allowance for expected credit losses. The allowance for expected credit losses is based on our best estimate of expected credit losses in existing receivable balances and is determined using historical write-off experience, adjusted for various industry and regional data and current expectations of future credit losses.
Notes receivable from commercial borrowers are collateralized by various combinations of mortgages, personal property, accounts and notes receivable, inventories and assignments of certain regional cooperatives' capital stock. These loans are primarily originated in the states of Minnesota, North Dakota and South 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 originated in the same states as the commercial notes.
In addition to the short-term balances included in the table above, CHS Capital had long-term notes receivable, with durations of generally not more than 10 years, totaling $66.1 million and $55.4 million as of November 30, 2021, and August 31, 2021, respectively. Long-term notes receivable are included in other assets on our Condensed Consolidated Balance Sheets. As of November 30, 2021, and August 31, 2021, commercial notes represented 43% and 28%, respectively, and producer notes represented 57% and 72%, respectively, of total CHS Capital notes receivable.
CHS Capital has commitments to extend credit to customers if there are no violations of contractually established conditions. As of November 30, 2021, CHS Capital customers had additional available credit of $740.0 million. No significant troubled debt restructuring activity occurred and no third-party customer or borrower accounted for more than 10% of the total receivables balance as of November 30, 2021, or August 31, 2021.
Note 4 Inventories

| November 30, 2021 |  | August 31, 2021
| (Dollars in thousands)
Grain and oilseed | $ | 2,290,770 |  |  | $ | 1,435,544 |
Energy | 926,801 |  |  | 762,317 |
Agronomy | 1,176,564 |  |  | 958,548 |
Processed grain and oilseed | 156,281 |  |  | 140,975 |
Other | 58,400 |  |  | 37,291 |
Total inventories | $ | 4,608,816 |  |  | $ | 3,334,675 |

As of November 30, 2021, and August 31, 2021, we valued approximately 11% and 13%, respectively, of inventories, primarily crude oil and refined fuels within our Energy segment, using the lower of cost, determined on the last in, first out ("LIFO") method, or net realizable value. If the first in, first out ("FIFO") method of accounting had been used, inventories would have been higher than the reported amount by $402.2 million and $359.2 million as of November 30, 2021, and
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August 31, 2021, respectively. Actual valuation of inventory under the LIFO method can be made only at the end of each year based on inventory levels and costs at that time. Interim LIFO calculations are based on management's estimates of expected year-end inventory levels and values and are subject to final year-end LIFO inventory valuation.
Note 5 Investments

| November 30, 2021 |  | August 31, 2021
| (Dollars in thousands)
Equity method investments: |  |  |
CF Industries Nitrogen, LLC | $ | 2,783,637 |  |  | $ | 2,667,164 |
Ventura Foods, LLC | 389,818 |  |  | 388,612 |
Ardent Mills, LLC | 225,889 |  |  | 220,132 |
TEMCO, LLC | 44,319 |  |  | 31,464 |
Other equity method investments | 235,511 |  |  | 232,923 |
Other investments | 130,335 |  |  | 128,816 |
Total investments | $ | 3,809,509 |  |  | $ | 3,669,111 |

Joint ventures and other investments, in which we have significant ownership and influence but not control, are accounted for in our condensed consolidated financial statements using the equity method of accounting. Our significant equity method investments consist of CF Industries Nitrogen, LLC ("CF Nitrogen"), Ventura Foods, LLC ("Ventura Foods"), Ardent Mills, LLC ("Ardent Mills"), and TEMCO, LLC ("TEMCO"), which are summarized below. In addition to the recognition of our share of income from equity method investments, our equity method investments are evaluated for indicators of other-than-temporary impairment on an ongoing basis in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Other investments consist primarily of investments in cooperatives without readily determinable fair values and are generally recorded at cost, unless an impairment or other observable market price change occurs requiring an adjustment. We have approximately $575.2 million of cumulative undistributed earnings from our equity method investees included in the investments balance as of November 30, 2021.
CF Nitrogen
We have a $2.8 billion investment in CF Nitrogen, a strategic venture with CF Industries Holdings, Inc. ("CF Industries"). The investment consists of an approximate 10% membership interest (based on product tons) in CF Nitrogen. We account for this investment using the hypothetical liquidation at book value method, recognizing our share of the earnings and losses of CF Nitrogen as equity income from investments in our Nitrogen Production segment based on our contractual claims on the entity's net assets pursuant to the liquidation provisions of the CF Nitrogen Limited Liability Company Agreement, adjusted for semiannual cash distributions.
The following table provides summarized unaudited financial information for our equity method investment in CF Nitrogen for the three months ended November 30, 2021 and 2020:

| Three Months Ended November 30,
| 2021 |  | 2020
| (Dollars in thousands)
Net sales | $ | 1,316,899 |  |  | $ | 606,340 |
Gross profit | 575,571 |  |  | 94,068 |
Net earnings | 562,593 |  |  | 81,173 |
Earnings attributable to CHS Inc. | 116,473 |  |  | 21,688 |

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Ventura Foods, Ardent Mills and TEMCO
We have a 50% interest in Ventura Foods, a joint venture with Mitsui & Co., that produces and distributes primarily edible oil-based products. We also have a 12% interest in Ardent Mills, which is a joint venture with Cargill, Incorporated ("Cargill") and Conagra Brands, Inc., and is the largest flour miller in the United States. Additionally, we have a 50% interest in TEMCO, which is a joint venture with Cargill focused on export elevation, primarily to Asia. We account for Ventura Foods, Ardent Mills and TEMCO as equity method investments. Our shares of the results of Ventura Foods and Ardent Mills are included in Corporate and Other and our share of the results of TEMCO is included in our Ag segment.
The following table provides aggregate summarized unaudited financial information for our equity method investments in Ventura Foods, Ardent Mills and TEMCO for the three months ended November 30, 2021 and 2020:

| Three Months Ended November 30,
| 2021 |  | 2020
| (Dollars in thousands)
Net sales | $ | 2,313,761 |  |  | $ | 3,375,014 |
Gross profit | 238,883 |  |  | 204,426 |
Net earnings | 112,641 |  |  | 89,656 |
Earnings attributable to CHS Inc. | 26,737 |  |  | 25,178 |

Our investments in other equity method investees are not significant in relation to our condensed consolidated financial statements, either individually or in the aggregate.
Note 6 Notes Payable and Long-Term Debt
Our notes payable and long-term debt are subject to various restrictive requirements for maintenance of minimum consolidated net worth and other financial ratios. We were in compliance with our debt covenants as of November 30, 2021. The table below summarizes our notes payable as of November 30, 2021, and August 31, 2021:

| November 30, 2021 |  | August 31, 2021
| (Dollars in thousands)
Notes payable | $ | 1,011,825 |  |  | $ | 864,147 |
CHS Capital notes payable | 893,546 |  |  | 876,712 |
Total notes payable | $ | 1,905,371 |  |  | $ | 1,740,859 |

As of November 30, 2021, our primary line of credit was a five-year, unsecured revolving credit facility with a syndicate of domestic and international banks. The credit facility provides a committed amount of $2.75 billion that expires on July 16, 2024. As of November 30, 2021, there was $200.0 million outstanding under this facility, and no borrowings outstanding as of August 31, 2021.
We have a receivables and loans securitization facility ("Securitization Facility") with certain unaffiliated financial institutions ("Purchasers"). Under the Securitization Facility, we and certain of our subsidiaries ("Originators") sell trade accounts and notes receivable ("Receivables") to Cofina Funding, LLC ("Cofina"), a wholly-owned bankruptcy-remote indirect subsidiary of CHS. Cofina in turn transfers the Receivables to the Purchasers, and this arrangement is accounted for as a secured borrowing. We use the proceeds from the sale of Receivables under the Securitization Facility for general corporate purposes and settlements are made on a monthly basis. The amount available under the Securitization Facility fluctuates over time based on the total amount of eligible Receivables generated during the normal course of business. The Securitization Facility consists of a committed portion with a maximum availability of $700.0 million and an uncommitted portion with a maximum availability of $250.0 million. As of November 30, 2021, total availability under the Securitization Facility was $777.0 million, of which $700.0 million had been utilized.
We also have a repurchase facility ("Repurchase Facility") related to the Securitization Facility. Under the Repurchase Facility, we can borrow up to $150.0 million, collateralized by a subordinated note issued by Cofina in favor of the Originators and representing a portion of the outstanding balance of the Receivables sold by the Originators to Cofina under the Securitization Facility. As of November 30, 2021, and August 31, 2021, the outstanding balance under the Repurchase Facility was $150.0 million.
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On February 19, 2021, we amended our 10-year term loan facility to convert the entire $366.0 million aggregate principle amount outstanding thereunder into a revolving loan, which can be paid down and readvanced in an amount up to the referenced $366.0 million until February 19, 2022. On February 19, 2022, the total funded loan balance outstanding reverts to a nonrevolving term loan that is payable on September 4, 2025. There was no balance outstanding under this facility as of November 30, 2021.
The following table presents summarized long-term debt (including current portion) as of November 30, 2021, and August 31, 2021:

| November 30, 2021 |  | August 31, 2021
| (Dollars in thousands)
Private placement debt | $ | 1,552,059 |  |  | $ | 1,552,974 |
Finance lease obligations | 34,051 |  |  | 36,034 |
Other notes and contracts payable | 32,950 |  |  | 33,443 |
Deferred financing costs | (3,948) |  |  | (4,090) |
Total long-term debt | 1,615,112 |  |  | 1,618,361 |
Less current portion | 38,343 |  |  | 38,450 |
Long-term portion | $ | 1,576,769 |  |  | $ | 1,579,911 |

Interest expense for the three months ended November 30, 2021 and 2020, was $23.4 million and $25.1 million, respectively, net of capitalized interest of $2.3 million and $2.1 million, respectively.
Note 7 Income Taxes
Our effective tax rate for the three months ended November 30, 2021, was 3.2% compared to (54.0)% for the three months ended November 30, 2020. Our income tax expense for the three months ended November 30, 2021, reflects the mix of full-year earnings projected across business units and current equity management assumptions. Income taxes and effective tax rates vary each year based on profitability and nonpatronage business activity during the year.
Our uncertain tax positions are affected by the tax years that are under audit or remain subject to examination by the relevant taxing authorities. Reserves are recorded against unrecognized tax benefits when we believe certain fully supportable tax return positions are likely to be challenged, and we may not prevail. If we were to prevail on all positions taken in relation to uncertain tax positions, $114.5 million and $114.3 million of the unrecognized tax benefits would ultimately benefit our effective tax rate as of November 30, 2021, and August 31, 2021, respectively. It is reasonably possible that the total amount of unrecognized tax benefits could significantly change in the next 12 months.
Note 8 Equities
Changes in Equities
Changes in equities for the three months ended November 30, 2021 and 2020, are as follows:

| Equity Certificates |  |  |  | Accumulated Other Comprehensive Loss |  |  |  |  |  |
| Capital Equity Certificates |  | Nonpatronage Equity Certificates |  | Nonqualified Equity Certificates |  | Preferred Stock |  |  | Capital Reserves |  | Noncontrolling Interests |  | Total Equities
| (Dollars in thousands)
Balances, August 31, 2021 | $ | 3,583,911 |  |  | $ | 28,431 |  |  | $ | 1,634,896 |  |  | $ | 2,264,038 |  |  | $ | (216,391) |  |  | $ | 1,713,976 |  |  | $ | 8,465 |  |  | $ | 9,017,326 |
Reversal of prior year redemption estimates | 12,221 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 12,221 |
Redemptions of equities | (9,824) |  |  | (318) |  |  | (2,079) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (12,221) |
Preferred stock dividends | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (84,334) |  |  | — |  |  | (84,334) |
Other, net | (1,023) |  |  | 17 |  |  | (64) |  |  | — |  |  | — |  |  | 1,393 |  |  | (841) |  |  | (518) |
Net income (loss) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 451,961 |  |  | (18) |  |  | 451,943 |
Other comprehensive loss, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | (15,418) |  |  | — |  |  | — |  |  | (15,418) |
Estimated 2022 cash patronage refunds | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (39,691) |  |  | — |  |  | (39,691) |
Estimated 2022 equity redemptions | (79,382) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (79,382) |
Balances, November 30, 2021 | $ | 3,505,903 |  |  | $ | 28,130 |  |  | $ | 1,632,753 |  |  | $ | 2,264,038 |  |  | $ | (231,809) |  |  | $ | 2,043,305 |  |  | $ | 7,606 |  |  | $ | 9,249,926 |

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| Equity Certificates |  |  |  | Accumulated Other Comprehensive Loss |  |  |  |  |  |
| Capital Equity Certificates |  | Nonpatronage Equity Certificates |  | Nonqualified Equity Certificates |  | Preferred Stock |  |  | Capital Reserves |  | Noncontrolling Interests |  | Total Equities
| (Dollars in thousands)
Balances, August 31, 2020 | $ | 3,724,187 |  |  | $ | 28,727 |  |  | $ | 1,408,696 |  |  | $ | 2,264,038 |  |  | $ | (233,924) |  |  | $ | 1,618,147 |  |  | $ | 9,302 |  |  | $ | 8,819,173 |
Reversal of prior year redemption estimates | 7,726 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 7,726 |
Redemptions of equities | (6,539) |  |  | (31) |  |  | (1,156) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (7,726) |
Preferred stock dividends | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (84,334) |  |  | — |  |  | (84,334) |
Other, net | (654) |  |  | (47) |  |  | (197) |  |  | — |  |  | — |  |  | (7,798) |  |  | 35 |  |  | (8,661) |
Net income (loss) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 69,671 |  |  | (302) |  |  | 69,369 |
Other comprehensive income, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | 8,917 |  |  | — |  |  | — |  |  | 8,917 |
Estimated 2021 cash patronage refunds | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (9,304) |  |  | — |  |  | (9,304) |
Estimated 2021 equity redemptions | (9,304) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (9,304) |
Balances, November 30, 2020 | $ | 3,715,416 |  |  | $ | 28,649 |  |  | $ | 1,407,343 |  |  | $ | 2,264,038 |  |  | $ | (225,007) |  |  | $ | 1,586,382 |  |  | $ | 9,035 |  |  | $ | 8,785,856 |

Preferred Stock Dividends
The following is a summary of dividends per share by series of preferred stock for the three months ended November 30, 2021 and 2020:

|  |  | Three Months Ended November 30, |  |
| Nasdaq symbol |  | 2021 |  | 2020 |  |  |  |
Series of preferred stock: |  |  | (Dollars per share)
8% Cumulative Redeemable | CHSCP |  | $ | 1.00 |  |  | $ | 1.00 |  |  |  |  |
Class B Cumulative Redeemable, Series 1 | CHSCO |  | $ | 0.98 |  |  | $ | 0.98 |  |  |  |  |
Class B Reset Rate Cumulative Redeemable, Series 2 | CHSCN |  | $ | 0.88 |  |  | $ | 0.88 |  |  |  |  |
Class B Reset Rate Cumulative Redeemable, Series 3 | CHSCM |  | $ | 0.84 |  |  | $ | 0.84 |  |  |  |  |
Class B Cumulative Redeemable, Series 4 | CHSCL |  | $ | 0.94 |  |  | $ | 0.94 |  |  |  |  |

Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) by component, net of tax, for the three months ended November 30, 2021 and 2020, are as follows:

| Pension and Other Postretirement Benefits |  | Cash Flow Hedges |  | Foreign Currency Translation Adjustment |  | Total
| (Dollars in thousands)
Balance as of August 31, 2021, net of tax | $ | (141,385) |  |  | $ | 4,824 |  |  | $ | (79,830) |  |  | $ | (216,391) |
Other comprehensive income (loss), before tax: |  |  |  |  |  |  |
Amounts before reclassifications | (83) |  |  | 870 |  |  | (9,983) |  |  | (9,196) |
Amounts reclassified | 5,064 |  |  | (12,954) |  |  | — |  |  | (7,890) |
Total other comprehensive income (loss), before tax | 4,981 |  |  | (12,084) |  |  | (9,983) |  |  | (17,086) |
Tax effect | (1,213) |  |  | 2,943 |  |  | (62) |  |  | 1,668 |
Other comprehensive income (loss), net of tax | 3,768 |  |  | (9,141) |  |  | (10,045) |  |  | (15,418) |
Balance as of November 30, 2021, net of tax | $ | (137,617) |  |  | $ | (4,317) |  |  | $ | (89,875) |  |  | $ | (231,809) |

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| Pension and Other Postretirement Benefits |  | Cash Flow Hedges |  | Foreign Currency Translation Adjustment |  | Total
| (Dollars in thousands)
Balance as of August 31, 2020, net of tax | $ | (159,680) |  |  | $ | 10,886 |  |  | $ | (85,130) |  |  | $ | (233,924) |
Other comprehensive income (loss), before tax: |  |  |  |  |  |  |
Amounts before reclassifications | (125) |  |  | 14,506 |  |  | 3,629 |  |  | 18,010 |
Amounts reclassified | 4,977 |  |  | (12,284) |  |  | — |  |  | (7,307) |
Total other comprehensive income, before tax | 4,852 |  |  | 2,222 |  |  | 3,629 |  |  | 10,703 |
Tax effect | (1,207) |  |  | (553) |  |  | (26) |  |  | (1,786) |
Other comprehensive income, net of tax | 3,645 |  |  | 1,669 |  |  | 3,603 |  |  | 8,917 |
Balance as of November 30, 2020, net of tax | $ | (156,035) |  |  | $ | 12,555 |  |  | $ | (81,527) |  |  | $ | (225,007) |

Amounts reclassified from accumulated other comprehensive income (loss) were related to pension and other postretirement benefits, cash flow hedges and foreign currency translation adjustments. Pension and other postretirement reclassifications include amortization of net actuarial loss, prior service credit and transition amounts and are recorded as cost of goods sold and marketing, general and administrative expenses (see Note 9, Benefit Plans, for further information). Gains or losses associated with cash flow hedges are recorded as cost of goods sold (see Note 11, Derivative Financial Instruments and Hedging Activities, for further information). Gains or losses on foreign currency translation reclassifications related to sales of businesses are recorded as other income.
Note 9 Benefit Plans
We have various pension and other defined benefit and defined contribution plans, in which substantially all employees may participate. We also have nonqualified supplemental executive and Board retirement plans.
Components of net periodic benefit costs for the three months ended November 30, 2021 and 2020, are as follows:

| Three Months Ended November 30,
| Qualified Pension Benefits |  | Nonqualified Pension Benefits |  | Other Benefits
| 2021 |  | 2020 |  | 2021 |  | 2020 |  | 2021 |  | 2020
Components of net periodic benefit costs: | (Dollars in thousands)
Service cost | $ | 11,569 |  |  | $ | 11,307 |  |  | $ | 232 |  |  | $ | 108 |  |  | $ | 249 |  |  | $ | 297 |
Interest cost | 4,292 |  |  | 4,141 |  |  | 70 |  |  | 68 |  |  | 126 |  |  | 123 |
Expected return on assets | (10,990) |  |  | (10,910) |  |  | — |  |  | — |  |  | — |  |  | — |
Prior service cost (credit) amortization | 44 |  |  | 45 |  |  | (29) |  |  | (28) |  |  | (111) |  |  | (111) |
Actuarial loss (gain) amortization | 5,852 |  |  | 5,447 |  |  | 120 |  |  | 53 |  |  | (315) |  |  | (341) |
Net periodic benefit cost (benefit) | $ | 10,767 |  |  | $ | 10,030 |  |  | $ | 393 |  |  | $ | 201 |  |  | $ | (51) |  |  | $ | (32) |

The service cost component of defined benefit net periodic benefit cost is recorded in cost of goods sold and marketing, general and administrative expenses. The other components of net periodic benefit cost are recorded in other income.
Employer Contributions
Any contributions made during fiscal 2022 will depend primarily on market returns on the pension plan assets and minimum funding level requirements. No contributions were made to the pension plans during the three months ended November 30, 2021, and we do not currently anticipate being required to make contributions for our pension plans in fiscal 2022.
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Note 10 Segment Reporting
We are an integrated agricultural cooperative, providing grain, foods and energy resources to businesses and consumers on a global basis. We provide a wide variety of products and services, from initial agricultural inputs such as fuels, farm supplies, crop nutrients and crop protection products, to agricultural outputs that include grains and oilseeds, processed grains and oilseeds, 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 grains and oilseeds originated by our country operations business, by our member cooperatives and by third parties; serves as a wholesaler and retailer of crop inputs; and produces and markets ethanol. Our Nitrogen Production segment consists of our equity method investment in CF Nitrogen and allocated expenses, which entitles us, pursuant to our supply agreement with CF Nitrogen, to purchase up to a specified quantity of granular urea and urea ammonium nitrate ("UAN") annually from CF Nitrogen. Corporate and Other represents our financing and hedging businesses, which primarily consist 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 Food and Ardent Mills are also included in our Corporate and Other category.
Corporate administrative expenses and interest are allocated to each reportable segment and Corporate and Other, based on direct use of services, such as information technology and legal, and other factors or considerations relevant to the costs incurred.
Many of our business activities are highly seasonal and our operating results vary throughout the year. Our revenues generally trend lower during the second and fourth fiscal quarters and higher during the first and third fiscal quarters; however, our income before income taxes does not necessarily follow the same trend due to weather and other events that can impact profitability. 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 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, grains, oilseeds, crop nutrients and flour. Changes in market prices for commodities that we purchase without a corresponding change in the selling prices of those products can affect revenues and operating earnings. Commodity prices are affected by a wide range of factors beyond our control, including weather, crop damage due to plant disease or insects, drought, availability and adequacy of supply, availability of reliable rail and river transportation networks, outbreaks of disease, government regulations and policies, global trade disputes, and general political and economic conditions.
While our revenues and operating results are derived primarily from businesses and operations that are wholly-owned or subsidiaries and limited liability companies in which we have a controlling interest, a portion of our business operations are conducted through companies in which we hold ownership interests of 50% or less or do not control the operations. We account for these investments primarily using the equity method of accounting, wherein we record our proportionate share of income or loss reported by the entity as equity income from investments, without consolidating the revenues and expenses of the entity in our Condensed Consolidated Statements of Operations. In our Ag segment, this includes our 50% interest in TEMCO. In our Nitrogen Production segment, this consists of our approximate 10% membership interest (based on product tons) in CF Nitrogen. In Corporate and Other, this principally includes our 50% ownership in Ventura Foods and our 12% ownership in Ardent Mills. See Note 5, Investments, for more information on these entities.
Reconciling amounts represent the elimination of revenues between segments. Such transactions are executed at market prices to more accurately evaluate the profitability of individual business segments.
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Segment information for the three months ended November 30, 2021 and 2020, is presented in the tables below:

| Energy |  | Ag |  | Nitrogen Production |  | Corporate and Other |  | Reconciling Amounts |  | Total
Three Months Ended November 30, 2021 | (Dollars in thousands)
Revenues, including intersegment revenues | $ | 2,468,343 |  |  | $ | 8,577,403 |  |  | $ | — |  |  | $ | 10,204 |  |  | $ | (175,193) |  |  | $ | 10,880,757 |
Intersegment revenues | (164,356) |  |  | (8,144) |  |  | — |  |  | (2,693) |  |  | 175,193 |  |  | — |
Revenues, net of intersegment revenues | $ | 2,303,987 |  |  | $ | 8,569,259 |  |  | $ | — |  |  | $ | 7,511 |  |  | $ | — |  |  | $ | 10,880,757 |
Operating earnings (loss) | 67,850 |  |  | 259,773 |  |  | (10,183) |  |  | (2,466) |  |  | — |  |  | 314,974 |
Interest expense | 488 |  |  | 13,661 |  |  | 11,254 |  |  | (1,820) |  |  | (151) |  |  | 23,432 |
Other income | (728) |  |  | (20,579) |  |  | (1,547) |  |  | (1,073) |  |  | 151 |  |  | (23,776) |
Equity income from investments | (1,100) |  |  | (19,734) |  |  | (116,473) |  |  | (14,038) |  |  | — |  |  | (151,345) |
Income before income taxes | $ | 69,190 |  |  | $ | 286,425 |  |  | $ | 96,583 |  |  | $ | 14,465 |  |  | $ | — |  |  | $ | 466,663 |
Total assets as of November 30, 2021 | $ | 4,315,331 |  |  | $ | 9,335,801 |  |  | $ | 2,796,671 |  |  | $ | 3,167,175 |  |  | $ | — |  |  | $ | 19,614,978 |
| Energy |  | Ag |  | Nitrogen Production |  | Corporate and Other |  | Reconciling Amounts |  | Total
Three Months Ended November 30, 2020 | (Dollars in thousands)
Revenues, including intersegment revenues | $ | 1,357,845 |  |  | $ | 7,450,305 |  |  | $ | — |  |  | $ | 15,481 |  |  | $ | (107,988) |  |  | $ | 8,715,643 |
Intersegment revenues | (99,998) |  |  | (4,903) |  |  | — |  |  | (3,087) |  |  | 107,988 |  |  | — |
Revenues, net of intersegment revenues | $ | 1,257,847 |  |  | $ | 7,445,402 |  |  | $ | — |  |  | $ | 12,394 |  |  | $ | — |  |  | $ | 8,715,643 |
Operating earnings (loss) | (68,385) |  |  | 75,524 |  |  | (7,623) |  |  | 7,927 |  |  | — |  |  | 7,443 |
Interest expense | (238) |  |  | 14,505 |  |  | 11,163 |  |  | 1,138 |  |  | (1,518) |  |  | 25,050 |
Other income | (482) |  |  | (11,817) |  |  | (1,566) |  |  | (277) |  |  | 1,518 |  |  | (12,624) |
Equity income from investments | (489) |  |  | (10,174) |  |  | (21,688) |  |  | (17,672) |  |  | — |  |  | (50,023) |
Income (loss) before income taxes | $ | (67,176) |  |  | $ | 83,010 |  |  | $ | 4,468 |  |  | $ | 24,738 |  |  | $ | — |  |  | $ | 45,040 |

Note 11 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 Condensed Consolidated Balance Sheets at fair value with changes in fair value being recorded directly to earnings, primarily within cost of goods sold in our Condensed Consolidated Statements of Operations. See Note 12, Fair Value Measurements, for additional information. The majority of our exchange traded agricultural commodity futures are settled daily through CHS Hedging, LLC, our wholly-owned FCM.
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Derivatives Not Designated as Hedging Instruments
Although we have certain netting arrangements for our exchange-traded futures and options contracts and certain over-the-counter ("OTC") contracts, we have elected to report our derivative instruments on a gross basis on our Condensed Consolidated Balance Sheets under ASC Topic 210-20, Balance Sheet—Offsetting. The following tables present the gross fair values of derivative assets, derivative liabilities and margin deposits (cash collateral) recorded on our Condensed Consolidated Balance Sheets, along with related amounts permitted to be offset in accordance with U.S. GAAP:

| November 30, 2021
|  |  | Amounts Not Offset on Condensed Consolidated Balance Sheet but Eligible for Offsetting |  |
| Gross Amount Recognized |  | Cash Collateral |  | Derivative Instruments |  | Net Amount
| (Dollars in thousands)
Derivative Assets |  |  |  |  |  |  |
Commodity derivatives | $ | 445,798 |  |  | $ | — |  |  | $ | 3,629 |  |  | $ | 442,169 |
Foreign exchange derivatives | 8,483 |  |  | — |  |  | 4,045 |  |  | 4,438 |
Embedded derivative asset | 13,034 |  |  | — |  |  | — |  |  | 13,034 |
Total | $ | 467,315 |  |  | $ | — |  |  | $ | 7,674 |  |  | $ | 459,641 |
Derivative Liabilities |  |  |  |  |  |  |
Commodity derivatives | $ | 293,629 |  |  | $ | 1,478 |  |  | $ | 4,297 |  |  | $ | 287,854 |
Foreign exchange derivatives | 27,463 |  |  | — |  |  | 4,045 |  |  | 23,418 |
Total | $ | 321,092 |  |  | $ | 1,478 |  |  | $ | 8,342 |  |  | $ | 311,272 |

| August 31, 2021
|  |  | Amounts Not Offset on Condensed Consolidated Balance Sheet but Eligible for Offsetting |  |
| Gross Amount Recognized |  | Cash Collateral |  | Derivative Instruments |  | Net Amount
| (Dollars in thousands)
Derivative Assets |  |  |  |  |  |  |
Commodity derivatives | $ | 532,832 |  |  | $ | — |  |  | $ | 4,174 |  |  | $ | 528,658 |
Foreign exchange derivatives | 19,429 |  |  | — |  |  | 5,582 |  |  | 13,847 |
Embedded derivative asset | 16,488 |  |  | — |  |  | — |  |  | 16,488 |
Total | $ | 568,749 |  |  | $ | — |  |  | $ | 9,756 |  |  | $ | 558,993 |
Derivative Liabilities |  |  |  |  |  |  |
Commodity derivatives | $ | 444,861 |  |  | $ | 2,485 |  |  | $ | 4,174 |  |  | $ | 438,202 |
Foreign exchange derivatives | 8,506 |  |  | — |  |  | 5,582 |  |  | 2,924 |
Total | $ | 453,367 |  |  | $ | 2,485 |  |  | $ | 9,756 |  |  | $ | 441,126 |

Derivative assets and liabilities with maturities of 12 months or less are recorded in other current assets and other current liabilities, respectively, on our Condensed Consolidated Balance Sheets. Derivative assets and liabilities with maturities greater than 12 months are recorded in other assets and other liabilities, respectively, on our Condensed Consolidated Balance Sheets. The amount of long-term derivative assets recorded on our Condensed Consolidated Balance Sheets as of November 30, 2021, and August 31, 2021, was $21.3 million and $21.6 million, respectively. The amount of long-term derivative liabilities recorded on our Condensed Consolidated Balance Sheets as of November 30, 2021, and August 31, 2021, was $1.6 million and $4.8 million, respectively.
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The majority of our derivative instruments have not been designated as hedging instruments. The following table sets forth the pretax gains (losses) on derivatives not accounted for as hedging instruments that have been included in our Condensed Consolidated Statements of Operations for the three months ended November 30, 2021 and 2020:

|  |  | Three Months Ended November 30, |  |
| Location of Gain (Loss) |  | 2021 |  | 2020 |  |  |  |
|  |  | (Dollars in thousands)
Commodity derivatives | Cost of goods sold |  | $ | 31,598 |  |  | $ | (201,362) |  |  |  |  |
Foreign exchange derivatives | Cost of goods sold |  | (32,494) |  |  | 22,641 |  |  |  |  |
Foreign exchange derivatives | Marketing, general and administrative expenses |  | (1,194) |  |  | 608 |  |  |  |  |
Embedded derivative | Other income |  | 1,546 |  |  | 1,564 |  |  |  |  |
Total |  | $ | (544) |  |  | $ | (176,549) |  |  |  |  |

Commodity Contracts
As of November 30, 2021, and August 31, 2021, 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:

| November 30, 2021 |  | August 31, 2021
| Long |  | Short |  | Long |  | Short
| (Units in thousands)
Grain and oilseed (bushels) | 884,816 |  |  | 961,591 |  |  | 666,726 |  | 851,582
Energy products (barrels) | 6,585 |  |  | 6,234 |  |  | 9,881 |  | 7,656
Processed grain and oilseed (tons) | 1,550 |  |  | 4,299 |  |  | 559 |  | 3,418
Crop nutrients (tons) | 52 |  |  | 35 |  |  | 66 |  | 12
Ocean freight (metric tons) | 155 |  |  | — |  |  | 210 |  | —

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 we have some risk exposure related 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 $1.2 billion as of November 30, 2021, and August 31, 2021.
Embedded Derivative Asset
Under the terms of our strategic investment in CF Nitrogen, if the CF Industries credit rating is reduced below certain levels by two of three specified credit ratings agencies, we are entitled to receive a nonrefundable annual payment of $5.0 million from CF Industries. These payments will continue on an annual basis until the date that the CF Industries credit rating is upgraded to or above certain levels by two of the three specified credit ratings agencies or February 1, 2026, whichever is earlier.
Since the CF Industries credit rating was reduced below the specified levels during fiscal 2017, we have received an annual payment of $5.0 million from CF Industries. Gains totaling $1.5 million and $1.6 million were recognized in other income in our Condensed Consolidated Statements of Operations for the three months ended November 30, 2021 and 2020, respectively. The fair value of the embedded derivative asset recorded on our Condensed Consolidated Balance Sheets as of November 30, 2021, was equal to $13.0 million. The current and long-term portions of the embedded derivative asset are included in other current assets and other assets on our Condensed Consolidated Balance Sheets, respectively. See Note 12, Fair Value Measurements, for additional information regarding valuation of the embedded derivative asset.
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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 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 based on prevailing futures 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 income for 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 November 30, 2021, and August 31, 2021, the aggregate notional amount of cash flow hedges was 3.4 million and 2.7 million barrels, respectively.
The following table presents the fair value of our commodity derivative instruments designated as cash flow hedges and the line items on our Condensed Consolidated Balance Sheets in which they are recorded:

|  | Derivative Assets |  |  |  | Derivative Liabilities
Balance Sheet Location |  | November 30, 2021 |  | August 31, 2021 |  | Balance Sheet Location |  | November 30, 2021 |  | August 31, 2021
|  | (Dollars in thousands) |  |  |  | (Dollars in thousands)
Other current assets |  | $ | 6,571 |  |  | $ | 11,874 |  |  | Other current liabilities |  | $ | 3,836 |  |  | $ | 1,001 |

The following table presents the pretax gains (losses) recorded in other comprehensive income relating to cash flow hedges for the three months ended November 30, 2021 and 2020:

|  | Three Months Ended November 30, |  |
|  | 2021 |  | 2020 |  |  |  |
|  | (Dollars in thousands)
Commodity derivatives |  | $ | (13,296) |  |  | $ | 1,974 |  |  |  |  |

The following table presents the pretax gains relating to our existing cash flow hedges that were reclassified from accumulated other comprehensive loss into our Condensed Consolidated Statements of Operations for the three months ended November 30, 2021 and 2020:

|  |  | Three Months Ended November 30, |  |
| Location of Gain |  | 2021 |  | 2020 |  |  |  |
|  |  | (Dollars in thousands)
Commodity derivatives | Cost of goods sold |  | $ | 13,254 |  |  | $ | 12,673 |  |  |  |  |

Note 12 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.
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. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs include 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, and other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 inputs are unobservable inputs that are supported by little or no market activity for the assets or liabilities. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
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Recurring fair value measurements as of November 30, 2021, and August 31, 2021, are as follows:

| November 30, 2021
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
| (Dollars in thousands)
Assets |  |  |  |  |  |  |
Commodity derivatives | $ | 2,841 |  |  | $ | 449,528 |  |  | $ | — |  |  | $ | 452,369 |
Foreign exchange derivatives | — |  |  | 8,483 |  |  | — |  |  | 8,483 |
Deferred compensation assets | 51,113 |  |  | — |  |  | — |  |  | 51,113 |
Embedded derivative asset | — |  |  | 13,034 |  |  | — |  |  | 13,034 |
Segregated investments and marketable securities | 96,447 |  |  | — |  |  | — |  |  | 96,447 |
Other assets | 6,616 |  |  | — |  |  | — |  |  | 6,616 |
Total | $ | 157,017 |  |  | $ | 471,045 |  |  | $ | — |  |  | $ | 628,062 |
Liabilities |  |  |  |  |  |  |
Commodity derivatives | $ | 3,860 |  |  | $ | 293,605 |  |  | $ | — |  |  | $ | 297,465 |
Foreign exchange derivatives | — |  |  | 27,463 |  |  | — |  |  | 27,463 |
Total | $ | 3,860 |  |  | $ | 321,068 |  |  | $ | — |  |  | $ | 324,928 |

| August 31, 2021
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
| (Dollars in thousands)
Assets |  |  |  |  |  |  |
Commodity derivatives | $ | 2,453 |  |  | $ | 542,253 |  |  | $ | — |  |  | $ | 544,706 |
Foreign exchange derivatives | — |  |  | 19,429 |  |  | — |  |  | 19,429 |
Deferred compensation assets | 51,940 |  |  | — |  |  | — |  |  | 51,940 |
Embedded derivative asset | — |  |  | 16,488 |  |  | — |  |  | 16,488 |
Segregated investments and marketable securities | 99,837 |  |  | — |  |  | — |  |  | 99,837 |
Other assets | 6,052 |  |  | — |  |  | — |  |  | 6,052 |
Total | $ | 160,282 |  |  | $ | 578,170 |  |  | $ | — |  |  | $ | 738,452 |
Liabilities |  |  |  |  |  |  |
Commodity derivatives | $ | 1,615 |  |  | $ | 444,247 |  |  | $ | — |  |  | $ | 445,862 |
Foreign exchange derivatives | — |  |  | 8,506 |  |  | — |  |  | 8,506 |
Total | $ | 1,615 |  |  | $ | 452,753 |  |  | $ | — |  |  | $ | 454,368 |

Commodity and foreign exchange 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 transactions in either listed or OTC markets. Changes in the fair values of these contracts are recognized in our Condensed Consolidated Statements of Operations as a component of cost of goods sold.
Deferred compensation and other assets. Our deferred compensation investments consist primarily of rabbi trust assets that are valued based on unadjusted quoted prices on active exchanges and are classified within Level 1. Changes in the fair values of these other assets are primarily recognized in our Condensed Consolidated Statements of Operations as a component of marketing, general and administrative expenses.
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Embedded derivative asset. The embedded derivative asset relates to contingent payments inherent to our investment in CF Nitrogen. The inputs used in the fair value measurement include the probability of future upgrades and downgrades of the CF Industries credit rating based on historical credit rating movements of other public companies and the discount rates applied to potential annual payments based on applicable historical and current yield coupon rates. Based on these observable inputs, our fair value measurement is classified within Level 2. See Note 11, Derivative Financial Instruments and Hedging Activities, for additional information.
Segregated investments and marketable securities. Our segregated investments and marketable securities are comprised of investments in various government agencies and U.S. Treasury securities, which are valued using quoted market prices and classified within Level 1.
Note 13 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 and administrative expenses in our Condensed 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 believe any resulting liabilities, individually or in 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 net income for any fiscal period; however, we currently believe any resulting liabilities, individually or in 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 bank covenants allow maximum guarantees of $1.0 billion, of which $134.0 million were outstanding on November 30, 2021. 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 were current as of November 30, 2021.
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Note 14 Other Current Assets and Liabilities
Other current assets and liabilities as of November 30, 2021, and August 31, 2021, are as follows:

| November 30, 2021 |  | August 31, 2021
Other current assets | (Dollars in thousands)
Derivative assets (Note 11) | $ | 452,555 |  |  | $ | 559,056 |
Margin and related deposits | 286,196 |  |  | 336,397 |
Supplier advance payments | 446,979 |  |  | 194,706 |
Restricted cash | 149,151 |  |  | 129,325 |
Other | 164,002 |  |  | 170,749 |
Total other current assets | $ | 1,498,883 |  |  | $ | 1,390,233 |
Other current liabilities |  |  |
Customer margin deposits and credit balances | $ | 252,266 |  |  | $ | 269,114 |
Customer advance payments | 592,388 |  |  | 439,293 |
Derivative liabilities (Note 11) | 323,313 |  |  | 449,522 |
Dividends and equity payable | 299,018 |  |  | 150,000 |
Total other current liabilities | $ | 1,466,985 |  |  | $ | 1,307,929 |

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of our management regarding our financial condition and results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections:
•Overview
•Business Strategy
•Fiscal 2022 First Quarter Highlights
•Fiscal 2022 Trends Update
•Operating Metrics
•Results of Operations
•Liquidity and Capital Resources
•Critical Accounting Policies
•Recent Accounting Pronouncements
Our MD&A should be read in conjunction with our Annual Report on Form 10-K for the year ended August 31, 2021 (including the information presented therein under Risk Factors), as well as the condensed consolidated financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q.
Overview
CHS Inc. is a diversified company that provides grain, food, agronomy and energy resources to businesses and consumers on a global scale. As a cooperative, we are owned by farmers, ranchers and member cooperatives across the United States. We also have preferred shareholders who own our five series of preferred stock, all of which are listed and traded on the Global Select Market of The Nasdaq Stock Market LLC. We operate in the following three reportable segments:
•Energy. Produces and provides primarily for the wholesale distribution and transportation of petroleum products.
•Ag. Purchases and further processes or resells grains and oilseeds originated by our country operations business, by our member cooperatives and by third parties; it also serves as a wholesaler and retailer of agronomy products.
•Nitrogen Production. Produces and distributes nitrogen fertilizer. It consists of our equity method investment in CF Industries Nitrogen, LLC ("CF Nitrogen"), and allocated expenses.
In addition, our financing and hedging businesses, along with our nonconsolidated food production and distribution and wheat milling joint ventures, have been aggregated within Corporate and Other.
The condensed consolidated financial statements include the accounts of CHS and all subsidiaries and limited liability companies in which we have a controlling interest. The effects of all significant intercompany transactions have been eliminated.
Corporate administrative expenses and interest are allocated to each reporting 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.
Management's Focus. When evaluating our operating performance, management focuses on gross profit and income before income taxes ("IBIT"). As a company that operates heavily in global commodities, there is significant unpredictability and volatility in pricing, costs and global trade volumes. Consequently, we focus on managing the margin we can earn and the resulting IBIT. Management also focuses on ensuring balance sheet strength through appropriate management of financial liquidity, leverage, capital allocation and cash flow optimization.
Seasonality. Many of our business activities are highly seasonal and our operating results vary throughout the year. Our revenues generally trend lower during the second and fourth fiscal quarters and higher during the first and third fiscal quarters; however, our IBIT does not necessarily follow the same trend due to weather and other events that can impact profitability. 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
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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 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. The graphs below depict the seasonality inherent in our businesses:
*The COVID-19 pandemic started during the second quarter of fiscal 2020.
Pricing and Volumes. Our revenues, assets and cash flows can be significantly affected by global market prices and sales volumes of commodities such as petroleum products, natural gas, grains, oilseed products and agronomy products. Changes in market prices for commodities we purchase without a corresponding change in the selling prices of those products can affect revenues and operating earnings. Similarly, increased or decreased sales volumes without a corresponding change in the purchase and selling prices of those products can affect revenues and operating earnings. Commodity prices and sales volumes are affected by a wide range of factors beyond our control, including weather, crop damage due to plant disease or insects, drought, availability/adequacy of supply of a commodity, availability of reliable rail and river transportation networks, outbreaks of disease, government regulations and policies, global trade disputes and general political and/or economic conditions.
Business Strategy
Our business strategies focus on an enterprisewide effort to create an experience that empowers customers to make CHS their first choice, expand market access to add value for our owners and transform and evolve our core businesses by capitalizing on changing market dynamics. To execute these strategies, we are focused on implementing agile, efficient and sustainable new technology platforms; building robust and efficient supply chains; hiring, developing and retaining high-
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performing, diverse and passionate teams; achieving operational excellence and continuous improvement; and maintaining a strong balance sheet.
Fiscal 2022 First Quarter Highlights
•Robust global demand drove commodity prices higher and provided favorable market conditions for improved margins across our Ag segment. As a result, our global grain and processing and wholesale agronomy businesses experienced significantly improved earnings compared to the same period of the prior year.
•Refining margins were higher in our Energy segment as a result of improved crack spreads and more favorable pricing for Canadian crude oil, which is processed by our refineries.
•Equity earnings from our CF Nitrogen investment improved as a result of increased urea and urea ammonium nitrate ("UAN") pricing due to strong global demand and global supply disruptions.
Fiscal 2022 Trends Update
Our Energy and Ag segments operate in cyclical environments in which unforeseen market conditions can have significant positive or negative impacts. For example, we have experienced and anticipate continued effects of inflation on costs such as labor, freight and materials. Additionally, we expect there to be continued uncertainty during fiscal 2022 that could have significant impacts on our results as we continue to navigate the lingering effects of the COVID-19 pandemic. Most of our operations are considered to be essential; however, periods of depressed demand and margins could result in decreased profitability and the need to assess for potential impairments. Easing of measures taken to mitigate the spread of COVID-19, the effectiveness of vaccines and other efforts to respond to the pandemic in the United States and globally could also impact the profitability of our businesses. Refer to Item 1A of our Annual Report on Form 10-K for the year ended August 31, 2021, for additional considerations of risks the COVID-19 pandemic may continue to have on our business, liquidity, capital resources and financial results.
The energy industry continued to experience improved margins and maintain higher volumes compared to the lows experienced during the early stages of the COVID-19 pandemic; however, the volumes and margins remain lower than historical levels. These lower volumes and margins are primarily the result of the COVID-19 pandemic, which began in our second quarter of fiscal 2020 and significantly reduced our profitability. In addition, the cost of renewable energy credits remains significantly higher than historical levels, which continued to negatively impact our profitability during the first quarter of fiscal 2022. We are unable to predict how long the current environment will last or the severity of the financial and operational impacts; however, we expect uncertainty and volatility to continue in the energy industry during fiscal 2022, which could significantly impact our earnings.
Although challenges remain, the U.S. agricultural industry has experienced continued strong demand for grain and oilseed commodities following the Phase One trade agreement with China, which has resulted in improved commodity prices. In addition, due to decreased global supply and strong global demand for fertilizer and related products, the current improved profitability will likely continue in our Ag and Nitrogen Production segments until supply becomes more balanced with the current strong demand. However, unforeseen global market conditions can positively or negatively impact agricultural commodity prices and volumes sold. We are unable to predict these conditions or the severity of the impact such conditions could have on our pricing and volumes. In addition to global supply and demand impacts, regional factors such as unpredictable weather conditions, including those due to climate change, could impact our operations. For example, unfavorable weather events and conditions experienced in fiscal 2021, including the effects of Hurricane Ida on our grain export terminal in Myrtle Grove, Louisiana, and drought conditions experienced in portions of our trade territory, have negatively impacted our revenues, margins and cash flows from core operations during fiscal 2022. As with others in our industry, we are seeing significantly higher freight costs that are the result of inflation and logistical challenges in the shipping industry, and we expect these challenges to continue during fiscal 2022. Additionally, unforeseen global market conditions with negative impacts remain a risk that could put pressure on asset valuations in our Ag segment.
In addition to market conditions that impact our businesses, we will continue to take actions to protect our financial health during fiscal 2022, while continuing to deliver on our enterprise resource planning system implementation and advancing our operating model.
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Operating Metrics
Energy
Our Energy segment operations primarily include our refineries in Laurel, Montana, and McPherson, Kansas, which process crude oil to produce refined products, including gasoline, distillates and other products. The following table provides information about our consolidated refinery operations:

| Three Months Ended November 30, |  |
| 2021 |  | 2020 |  |  |  |
Refinery throughput volumes | (Barrels per day)
Heavy, high-sulfur crude oil | 102,340 |  |  | 92,594 |  |  |  |  |
All other crude oil | 70,327 |  |  | 60,082 |  |  |  |  |
Other feedstocks and blendstocks | 18,338 |  |  | 15,815 |  |  |  |  |
Total refinery throughput volumes | 191,005 |  |  | 168,491 |  |  |  |  |
Refined fuel yields |  |  |  |  |  |  |
Gasolines | 92,886 |  |  | 84,263 |  |  |  |  |
Distillates | 78,924 |  |  | 65,853 |  |  |  |  |

We are subject to the Renewable Fuel Standard, which requires refiners to blend renewable fuels (e.g., ethanol, biodiesel) into their finished transportation fuels or purchase renewable energy credits, known as Renewable Identification Numbers ("RINs"), in lieu of blending. The U.S. Environmental Protection Agency ("EPA") generally establishes new annual renewable fuel percentage standards for each compliance year in the preceding year. In December 2021, the EPA issued a proposal for the renewable volume obligation ("RVO") for calendar years 2020 through 2022. As proposed, the RVO for calendar year 2020 is lower than previously issued, and calendar year 2021 is lower than anticipated as a result of lower demand for refined fuels due to the COVID-19 pandemic. We generate RINs through our blending activities, but we cannot generate enough RINs to meet the needs of our refining capacity, and RINs must be purchased on the open market. The price of RINs can be volatile, with prices for D6 ethanol RINs and D4 ethanol RINs rising by 114% and 81%, respectively, during the first quarter of fiscal 2022 compared to the same period of the prior year, which negatively impacted our profitability during the first quarter of fiscal 2022. Estimates of our RIN expense are based on past practice and are calculated using an average RIN price each month.
In addition to our internal operational reliability, the profitability of our Energy segment is largely driven by crack spreads (i.e., the price differential between refined products and inputs such as crude oil) and Western Canadian Select ("WCS") crude oil differentials (i.e., the price differential between West Texas Intermediate ("WTI") crude oil and WCS crude oil), which are driven by the supply and demand of refined product. Crack spreads and WCS crude oil differentials both increased during the three months ended November 30, 2021, compared to the same period during the prior year, contributing to improved IBIT for the Energy segment. The table below provides information about average market reference prices and differentials that impact our Energy segment:

| Three Months Ended November 30, |  |
| 2021 |  | 2020 |  |  |  |
Market indicators |  |  |  |  |  |  |
WTI crude oil (dollars per barrel) | $ | 77.14 |  |  | $ | 40.18 |  |  |  |  |
WTI - WCS crude oil differential (dollars per barrel) | $ | 12.95 |  |  | $ | 9.79 |  |  |  |  |
Group 3 2:1:1 crack spread (dollars per barrel)* | $ | 18.04 |  |  | $ | 7.65 |  |  |  |  |
Group 3 5:3:2 crack spread (dollars per barrel)* | $ | 17.56 |  |  | $ | 7.38 |  |  |  |  |
D6 ethanol RIN (dollars per RIN) | $ | 1.1760 |  |  | $ | 0.5485 |  |  |  |  |
D4 ethanol RIN (dollars per RIN) | $ | 1.4648 |  |  | $ | 0.8105 |  |  |  |  |

*Group 3 refers to the oil refining and distribution system serving Midwest markets from the Gulf Coast through the Plains states.
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Ag
Our Ag segment operations work together to facilitate production, purchase, sale and eventual use of grain and other agricultural commodities within the United States and internationally. Profitability in our Ag segment is largely driven by throughput and production volumes, as well as commodity price spreads; however, revenues and cost of goods sold ("COGS") are largely affected by market-driven commodity prices that are outside our control. The table below provides information about average market prices for agricultural commodities and our sales/throughput volumes that impacted our Ag segment for the three months ended November 30, 2021 and 2020:

|  |  | Three Months Ended November 30, |  |
| Market Source* |  | 2021 |  | 2020 |  |  |  |
Commodity prices |  |  |  |  |  |  |  |  |
Corn (dollars per bushel) | Chicago Board of Trade |  | $ | 5.57 |  |  | $ | 4.20 |  |  |  |  |
Soybeans (dollars per bushel) | Chicago Board of Trade |  | $ | 12.36 |  |  | $ | 11.69 |  |  |  |  |
Wheat (dollars per bushel) | Chicago Board of Trade |  | $ | 7.57 |  |  | $ | 5.80 |  |  |  |  |
Urea (dollars per ton) | Green Markets NOLA |  | $ | 676.00 |  |  | $ | 225.00 |  |  |  |  |
Urea ammonium nitrate (dollars per ton) | Green Markets NOLA |  | $ | 456.64 |  |  | $ | 119.32 |  |  |  |  |
Ethanol (dollars per gallon) | Chicago Platts |  | $ | 2.81 |  |  | $ | 1.33 |  |  |  |  |
Volumes |  |  |  |  |  |  |  |  |
Grain and oilseed (thousands of bushels) |  | 564,112 |  |  | 746,584 |  |  |  |  |
North American grain and oilseed port throughput (thousands of bushels) |  | 172,987 |  |  | 219,707 |  |  |  |  |
Wholesale crop nutrients (thousands of tons) |  | 1,823 |  |  | 1,875 |  |  |  |  |
Ethanol (thousands of gallons) |  | 224,246 |  |  | 220,771 |  |  |  |  |

*Market source information represents the average month-end price during the period.
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Results of Operations
Three months ended November 30, 2021 and 2020

| Three Months Ended November 30,
| 2021 |  | % of Revenues* |  | 2020 |  | % of Revenues*
| (Dollars in thousands)
Revenues | $ | 10,880,757 |  |  | 100.0 | % |  | $ | 8,715,643 |  |  | 100.0 | %
Cost of goods sold | 10,360,849 |  |  | 95.2 |  |  | 8,537,539 |  |  | 98.0 |
Gross profit | 519,908 |  |  | 4.8 |  |  | 178,104 |  |  | 2.0 |
Marketing, general and administrative expenses | 204,934 |  |  | 1.9 |  |  | 170,661 |  |  | 2.0 |
Operating earnings | 314,974 |  |  | 2.9 |  |  | 7,443 |  |  | 0.1 |
Interest expense | 23,432 |  |  | 0.2 |  |  | 25,050 |  |  | 0.3 |
Other income | (23,776) |  |  | (0.2) |  |  | (12,624) |  |  | (0.1) |
Equity income from investments | (151,345) |  |  | (1.4) |  |  | (50,023) |  |  | (0.6) |
Income before income taxes | 466,663 |  |  | 4.3 |  |  | 45,040 |  |  | 0.5 |
Income tax expense (benefit) | 14,720 |  |  | 0.1 |  |  | (24,329) |  |  | (0.3) |
Net income | 451,943 |  |  | 4.2 |  |  | 69,369 |  |  | 0.8 |
Net loss attributable to noncontrolling interests | (18) |  |  | — |  |  | (302) |  |  | — |
Net income attributable to CHS Inc. | $ | 451,961 |  |  | 4.2 | % |  | $ | 69,671 |  |  | 0.8 | %

*Amounts less than 0.1% are shown as zero percent. Percentage totals may differ due to rounding.
The charts below detail revenues, net of intersegment revenues, and IBIT by reportable segment for the three months ended November 30, 2021. Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues.
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Income (Loss) Before Income Taxes by Segment
Energy

| Three Months Ended November 30, |  | Change
| 2021 |  | 2020 |  | Dollars |  | Percent
| (Dollars in thousands) |  |
Income (loss) before income taxes | $ | 69,190 |  |  | $ | (67,176) |  |  | $ | 136,366 |  |  | 203.0 | %

The following waterfall analysis and commentary presents the changes in our Energy segment IBIT for the three months ended November 30, 2021, compared to the same period during the prior year:
*See commentary related to these changes in the marketing, general and administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.
The change in Energy segment IBIT reflects the following:
•Higher crack spreads and increased WCS crude oil differentials reflect improved market conditions in our refined fuels business and contributed to a $165.6 million increase of IBIT.
•Improved margins in our refined fuels business were partially offset by higher RIN prices due to market conditions driven by the regulatory environment.
•Lower propane margins resulting from global market conditions and the reversal of unrealized hedging gains during the first quarter of fiscal 2022 also partially offset the improved earnings in our refined fuels business.
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Ag

| Three Months Ended November 30, |  | Change
| 2021 |  | 2020 |  | Dollars |  | Percent
| (Dollars in thousands) |  |
Income before income taxes | $ | 286,425 |  |  | $ | 83,010 |  |  | $ | 203,415 |  |  | 245.0 | %

The following waterfall analysis and commentary presents the changes in our Ag segment IBIT for the three months ended November 30, 2021, compared to the same period during the prior year:
*See commentary related to these changes in the marketing, general and administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.
The change in Ag segment IBIT reflects the following:
•Increased margins across all our Ag segment businesses, including an $85.6 million increase for grain and oilseed that resulted primarily from mark-to-market changes associated with our commodity derivatives, including the reversal of unrealized losses and unrealized gains that we expect to reverse in future periods; a $78.0 million increase for wholesale agronomy products, which resulted from strong global market demand and global supply disruptions during the first quarter of fiscal 2022; and a $38.0 million increase for oilseed processing as a result of strong meal and oil demand.
•Decreased volumes of grain and oilseed resulted from a combination of factors, including the comparable period of the prior year experiencing elevated volumes following the Phase One trade agreement with China, which have since plateaued, the lower crop yields due to drought conditions experienced in portions of our trade territory and the impact of Hurricane Ida on our grain export terminal in Myrtle Grove, Louisiana, during the first quarter of fiscal 2022.
All Other Segments

| Three Months Ended November 30, |  | Change
| 2021 |  | 2020 |  | Dollars |  | Percent
| (Dollars in thousands) |  |
Nitrogen Production IBIT* | $ | 96,583 |  |  | $ | 4,468 |  |  | $ | 92,115 |  |  | 2,061.7 | %
Corporate and Other IBIT | $ | 14,465 |  |  | $ | 24,738 |  |  | $ | (10,273) |  |  | (41.5) | %

*For additional information, see Note 5, Investments, of the notes to the unaudited condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q.
Our Nitrogen Production segment IBIT increased as a result of higher equity income attributed to increased sale prices of urea and UAN, which was partially offset by increased natural gas costs. Corporate and Other IBIT decreased primarily due to lower equity income from our investment in Ventura Foods, which experienced less favorable market conditions for edible oil-based products, and higher performance-based incentive compensation expenses associated with improved results in comparison to the prior year.
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Revenues by Segment
Energy

| Three Months Ended November 30, |  | Change
| 2021 |  | 2020 |  | Dollars |  | Percent
| (Dollars in thousands) |  |
Revenues | $ | 2,303,987 |  |  | $ | 1,257,847 |  |  | $ | 1,046,140 |  |  | 83.2 | %

The following waterfall analysis and commentary presents the changes in our Energy segment revenues for the three months ended November 30, 2021, compared to the same period during the prior year:
The change in Energy segment revenues reflects the following:
•Increased selling prices and volumes for refined fuels contributed to $852.1 million and $38.0 million increases in revenues, respectively. Increased refined fuels selling prices resulted from global market conditions and increased volumes resulted from a continued improvement in demand following the initial demand shocks associated with the COVID-19 pandemic.
•Increased selling prices for propane as a result of global market conditions during the first quarter of fiscal 2022 positively impacted revenue by $136.9 million.
•Increased revenues were partially offset by lower volumes of propane driven by lower demand as a result of warm and dry weather conditions during most of the first quarter of fiscal 2022.
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Ag

| Three Months Ended November 30, |  | Change
| 2021 |  | 2020 |  | Dollars |  | Percent
| (Dollars in thousands) |  |
Revenues | $ | 8,569,259 |  |  | $ | 7,445,402 |  |  | $ | 1,123,857 |  |  | 15.1 | %

The following waterfall analysis and commentary presents the changes in our Ag segment revenues for the three months ended November 30, 2021, compared to the same period during the prior year:
The change in Ag segment revenues reflects the following:
•Higher pricing for grain and oilseed was driven by increased global demand and contributed to a $1.2 billion increase in revenues. The remaining price increase was attributed to a combination of market-driven price increases and product mix across our other Ag segment businesses, including wholesale agronomy, feed and farm supplies, renewable fuels and processing.
•Decreased volumes of grain and oilseed contributed to a $1.4 billion decrease in revenues. The decreased volumes resulted from a combination of factors, including the comparable period of the prior year experiencing elevated volumes following the Phase One trade agreement with China, which have since plateaued; a business model change at our TEMCO, LLC ("TEMCO") equity method investment during the second quarter of fiscal 2021 that resulted in reduced revenues and COGS during the current period on certain transactions associated with TEMCO; the lower crop yields due to drought conditions experienced in portions of our trade territory and the impact of Hurricane Ida on our grain export terminal in Myrtle Grove, Louisiana, during the first quarter of fiscal 2022.
•Decreased grain and oilseed volumes were partially offset by the net impact of volume increases and decreases across our other Ag segment businesses, including a $112.9 million increase in volumes for renewable fuels and a $95.0 million increase in volumes for oilseed processing as a result of strong demand in the ethanol and edible oil markets, respectively.
All Other Segments

| Three Months Ended November 30, |  | Change
| 2021 |  | 2020 |  | Dollars |  | Percent
| (Dollars in thousands) |  |
Corporate and Other revenues* | $ | 7,511 |  |  | $ | 12,394 |  |  | $ | (4,883) |  |  | (39.4) | %

*Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues.
Corporate and Other revenues decreased during the three months ended November 30, 2021, compared to the same period during the prior year primarily as a result of decreased revenues in our hedging business due to lower commissions from hedging activities.
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Cost of Goods Sold by Segment
Energy

| Three Months Ended November 30, |  | Change
| 2021 |  | 2020 |  | Dollars |  | Percent
| (Dollars in thousands) |  |
Cost of goods sold | $ | 2,179,625 |  |  | $ | 1,281,042 |  |  | $ | 898,583 |  |  | 70.1 | %

The following waterfall analysis and commentary presents the changes in our Energy segment COGS for the three months ended November 30, 2021, compared to the same period during the prior year:
The change in Energy segment COGS reflects the following:
•Increased costs and volumes for refined fuels contributed to $686.2 million and $39.5 million increases of COGS, respectively. Increased refined fuels costs resulted from global market conditions and increased volumes resulted from a continued improvement in demand following the initial demand shocks associated with the COVID-19 pandemic.
•Increased costs for propane as a result of global market conditions and the reversal of unrealized hedging gains resulted in a $154.0 million increase of COGS.
•Increased COGS was partially offset by lower volumes of propane driven by lower demand as a result of warm and dry weather conditions during most of the first quarter of fiscal 2022.
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Ag

| Three Months Ended November 30, |  | Change
| 2021 |  | 2020 |  | Dollars |  | Percent
| (Dollars in thousands) |  |
Cost of goods sold | $ | 8,183,993 |  |  | $ | 7,260,342 |  |  | $ | 923,651 |  |  | 12.7 | %

The following waterfall analysis and commentary presents the changes in our Ag segment COGS for the three months ended November 30, 2021, compared to the same period during the prior year:
The change in Ag segment COGS reflects the following:
•Higher costs of grain and oilseed were driven by increased global demand and contributed to a $1.1 billion increase in COGS. The remaining cost increase was attributed to a combination of price increases and product mix across our remaining Ag segment businesses, including wholesale agronomy, feed and farm supplies, renewable fuels and processing.
•Decreased volumes of grain and oilseed contributed to a $1.4 billion decrease in COGS. The decreased volumes resulted from a combination of factors, including the comparable period of the prior year experiencing elevated volumes following the Phase One trade agreement with China which have since plateaued; a business model change at our TEMCO equity method investment during the second quarter of fiscal 2021 that resulted in reduced revenues and COGS during the current period on certain transactions associated with TEMCO; the lower crop yields due to drought conditions experienced in portions of our trade territory and COGS during the current period on certain transactions associated with TEMCO and the impact of Hurricane Ida on our grain export terminal in Myrtle Grove, Louisiana, during the first quarter of fiscal 2022.
•Decreased grain and oilseed volumes were partially offset by the net impact of volume increases and decreases across our other Ag segment businesses, including a $109.3 million increase for renewable fuels and a $91.6 million increase for oilseed processing as a result of strong demand in the ethanol and edible oil markets, respectively.
All Other Segments

| Three Months Ended November 30, |  | Change
| 2021 |  | 2020 |  | Dollars |  | Percent
| (Dollars in thousands) |  |
Nitrogen Production COGS | $ | 414 |  |  | $ | 421 |  |  | $ | (7) |  |  | (1.7)%
Corporate and Other COGS | $ | (3,183) |  |  | $ | (4,266) |  |  | $ | 1,083 |  |  | 25.4%

There were no significant changes to COGS in our Nitrogen Production segment or Corporate and Other during the three months ended November 30, 2021, compared to the same period during the prior year.
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Marketing, General and Administrative Expenses

| Three Months Ended November 30, |  | Change
| 2021 |  | 2020 |  | Dollars |  | Percent
| (Dollars in thousands) |  |
Marketing, general and administrative expenses | $ | 204,934 |  |  | $ | 170,661 |  |  | $ | 34,273 |  |  | 20.1 | %

Marketing, general and administrative expenses increased during the three months ended November 30, 2021, primarily due to higher performance-based incentive compensation expenses driven by improved results in comparison to the prior year.
Interest Expense

| Three Months Ended November 30, |  | Change
| 2021 |  | 2020 |  | Dollars |  | Percent
| (Dollars in thousands) |  |
Interest expense | $ | 23,432 |  |  | $ | 25,050 |  |  | $ | (1,618) |  |  | (6.5) | %

Interest expense decreased during the three months ended November 30, 2021, as a result of lower notes payable and long-term debt balances compared to the same period of the prior year.
Other Income

| Three Months Ended November 30, |  | Change
| 2021 |  | 2020 |  | Dollars |  | Percent
| (Dollars in thousands) |  |
Other income | $ | 23,776 |  |  | $ | 12,624 |  |  | $ | 11,152 |  |  | 88.3 | %

Other income increased during the three months ended November 30, 2021, primarily due to a gain on the sale of a business in our Ag segment that did not occur during the same period of the prior year.
Equity Income from Investments

| Three Months Ended November 30, |  | Change
| 2021 |  | 2020 |  | Dollars |  | Percent
| (Dollars in thousands) |  |
Equity income from investments* | $ | 151,345 |  |  | $ | 50,023 |  |  | $ | 101,322 |  |  | 202.6 | %

*For additional information, see Note 5, Investments, of the notes to the condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q.
Equity income from investments increased during the three months ended November 30, 2021, compared to the same period during the prior year, primarily due to increased income associated with our equity method investment in CF Nitrogen. CF Nitrogen experienced increased sale prices of urea and UAN due to strong global demand and decreased global supply.
Income Tax Expense (Benefit)

| Three Months Ended November 30, |  | Change
| 2021 |  | 2020 |  | Dollars |  | Percent
| (Dollars in thousands) |  |
Income tax expense (benefit) | $ | 14,720 |  |  | $ | (24,329) |  |  | $ | 39,049 |  |  | 160.5 | %

The increased income tax expense during the three months ended November 30, 2021, primarily resulted from increased earnings during the first quarter of fiscal 2022. Effective tax rates for the three months ended November 30, 2021 and 2020, were 3.2% and (54.0)%, respectively. Federal and state statutory rates applied to nonpatronage business activity were 24.4% and 24.9% for the three months ended November 30, 2021 and 2020, respectively. Income taxes and effective tax rates vary each year based on profitability and nonpatronage business activity.
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Liquidity and Capital Resources
In assessing our financial condition, we consider factors such as working capital, internal benchmarking related to our applicable covenants and other financial information. The following financial information is used when assessing our liquidity and capital resources to meet our capital allocation priorities, which include maintaining the safety and compliance of our operations, paying interest on debt and preferred stock dividends, returning cash to our member-owners in the form of cash patronage and equity redemptions and taking advantage of strategic opportunities that benefit them:

| November 30, 2021 |  | August 31, 2021
| (Dollars in thousands)
Cash and cash equivalents | $ | 310,002 |  |  | $ | 413,159 |
Notes payable | 1,905,371 |  |  | 1,740,859 |
Long-term debt including current maturities | 1,615,112 |  |  | 1,618,361 |
Total equities | 9,249,926 |  |  | 9,017,326 |
Working capital | 1,891,232 |  |  | 1,672,938 |
Current ratio* | 1.2 |  |  | 1.3 |

*Current ratio is defined as current assets divided by current liabilities.
Summary of Our Major Sources of Cash and Cash Equivalents
We fund our current operations primarily through a combination of cash flows from operations supplemented with short-term borrowings through our committed and uncommitted revolving credit facilities, including our securitization facility, with certain unaffiliated financial institutions ("Securitization Facility") and our repurchase facility relating thereto ("Repurchase Facility"). We fund certain of our long-term capital needs, primarily those related to acquisitions of property, plant and equipment, with cash flows from operations and by issuing long-term debt. See Note 6, Notes Payable and Long-Term Debt, of the notes to the unaudited condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q for additional information on our short-term borrowings and long-term debt. We will continue to consider opportunities to further diversify and enhance our sources and amounts of liquidity.
Summary of Our Major Uses of Cash and Cash Equivalents
The following is a summary of our primary cash requirements for fiscal 2022:
•Capital expenditures. We expect total capital expenditures for fiscal 2022 to be approximately $669.7 million, compared to capital expenditures of $317.8 million in fiscal 2021. During the three months ended November 30, 2021, we acquired $74.9 million of property, plant and equipment.
•Debt and interest. We expect to repay approximately $38.5 million of long-term debt and finance lease obligations and incur interest payments related to long-term debt of approximately $70.7 million during fiscal 2022. During the three months ended November 30, 2021, we repaid $0.2 million of scheduled long-term debt maturities.
•Preferred stock dividends. We had approximately $2.3 billion of preferred stock outstanding as of November 30, 2021. We expect to pay dividends on our preferred stock of approximately $168.7 million during fiscal 2022. Dividends paid on our preferred stock during the three months ended November 30, 2021, were $42.2 million.
•Patronage. Our Board of Directors authorized approximately $50.0 million of our fiscal 2021 patronage-sourced earnings to be paid to our member-owners during fiscal 2022.
•Equity redemptions. Our Board of Directors has authorized equity redemptions of $100.0 million to be distributed in fiscal 2022 in the form of redemptions of qualified and nonqualified equity owned by individual producer-members and association members. During the three months ended November 30, 2021, we redeemed $12.2 million of member equity.
We believe cash generated by operating and investing activities, along with available borrowing capacity under our credit facilities, will be sufficient to support our operations for the foreseeable future. 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 all our debt covenants and restrictions as of November 30, 2021. Based on our current fiscal 2022 projections, we expect continued covenant compliance.
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Working Capital
We measure working capital as current assets less current liabilities and believe this information is meaningful to investors as a measure of operational efficiency and short-term financial health. Working capital is not defined under U.S. generally accepted accounting principles ("U.S. GAAP") and may not be computed the same as similarly titled measures used by other companies. Working capital as of November 30, 2021, and August 31, 2021, is as follows:

| November 30, 2021 |  | August 31, 2021 |  | Change
| (Dollars in thousands)
Current assets | $ | 9,997,118 |  |  | $ | 7,998,951 |  |  | $ | 1,998,167 |
Less current liabilities | 8,105,886 |  |  | 6,326,013 |  |  | 1,779,873 |
Working capital | $ | 1,891,232 |  |  | $ | 1,672,938 |  |  | $ | 218,294 |

As of November 30, 2021, working capital increased by $218.3 million compared with August 31, 2021. Current asset balance changes increased working capital by $2.0 billion, primarily driven by increases in receivables and inventories, which were driven by higher commodity prices. Current liabilities balance changes decreased working capital by $1.8 billion, primarily due to increases in accounts payable and notes payable, which were also driven by higher commodity prices.
We finance our working capital needs through committed and uncommitted lines of credit with domestic and international banks. We believe our current cash balances and available capacity on our committed and uncommitted lines of credit will provide adequate liquidity to meet our working capital needs.
Contractual Obligations
For information regarding our estimated contractual obligations, see the MD&A discussion included in Item 7 of Part II of our Annual Report on Form 10-K for the year ended August 31, 2021.
Cash Flows
The following table presents summarized cash flow data for the three months ended November 30, 2021 and 2020:

| Three Months Ended November 30, |  |
| 2021 |  | 2020 |  | Change
| (Dollars in thousands)
Net cash used in operating activities | $ | (183,587) |  |  | $ | (673,453) |  |  | $ | 489,866 |
Net cash used in investing activities | (52,196) |  |  | (114,311) |  |  | 62,115 |
Net cash provided by financing activities | 156,002 |  |  | 808,891 |  |  | (652,889) |
Effect of exchange rate changes on cash and cash equivalents | (3,550) |  |  | 2,324 |  |  | (5,874) |
(Decrease) increase in cash and cash equivalents and restricted cash | $ | (83,331) |  |  | $ | 23,451 |  |  | $ | (106,782) |

Cash flows from operating activities can fluctuate significantly from period to period as a result of various factors, including seasonality and timing differences associated with purchases, sales, taxes and other business decisions. The $489.9 million decrease in cash used in operating activities primarily reflects increased net income during the first quarter of fiscal 2022 compared to the same period of the prior year.
The $62.1 million decrease in cash used in investing activities primarily reflects timing differences associated with borrowings and payments for CHS Capital notes receivable balances during the first quarter of fiscal 2022 compared to the same period during fiscal 2021 and decreased acquisitions of property, plant and equipment.
The $652.9 million decrease in cash provided by financing activities primarily reflects decreased net cash inflows associated with our notes payable and long-term debt facilities as the funding of a $375.0 million Note Purchase Agreement occurred during the first quarter of fiscal 2021.
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Preferred Stock
The following is a summary of our outstanding preferred stock as of November 30, 2021, all shares of which are listed on the Global Select Market of The Nasdaq Stock Market LLC:

|  | Nasdaq Symbol |  | Issuance Date |  | Shares Outstanding |  | Redemption Value |  | Net Proceeds (a) |  | Dividend Rate (b) (c) |  | Dividend Payment Frequency |  | Redeemable Beginning (d)
|  |  |  |  |  |  |  | (Dollars in millions) |  |  |  |  |  |
8% Cumulative Redeemable |  | CHSCP |  | (e) |  | 12,272,003 |  |  | $ | 306.8 |  |  | $ | 311.2 |  |  | 8.00 | % |  | Quarterly |  | 7/18/2023
Class B Cumulative Redeemable, Series 1 |  | CHSCO |  | (f) |  | 21,459,066 |  |  | $ | 536.5 |  |  | $ | 569.3 |  |  | 7.875 | % |  | Quarterly |  | 9/26/2023
Class B Reset Rate Cumulative Redeemable, Series 2 |  | CHSCN |  | 3/11/2014 |  | 16,800,000 |  |  | $ | 420.0 |  |  | $ | 406.2 |  |  | 7.10 | % |  | Quarterly |  | 3/31/2024
Class B Reset Rate Cumulative Redeemable, Series 3 |  | CHSCM |  | 9/15/2014 |  | 19,700,000 |  |  | $ | 492.5 |  |  | $ | 476.7 |  |  | 6.75 | % |  | Quarterly |  | 9/30/2024
Class B Cumulative 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) 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 LIBOR plus 4.298%, not to exceed 8.00% per annum, subsequent to March 31, 2024.
(c) 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 LIBOR 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 2002 through 2010.
(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.
Critical Accounting Policies
Other than as described within the Significant Accounting Policies section of Note 1, Basis of Presentation and Significant Accounting Policies, to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, our critical accounting policies as presented in MD&A in our Annual Report on Form 10-K for the year ended August 31, 2021, have not materially changed during the three months ended November 30, 2021.
Recent Accounting Pronouncements
See Note 1, Basis of Presentation and Significant Accounting Policies, to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that apply to us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We did not experience material changes in market risk exposures for the period ended November 30, 2021, that would affect the quantitative and qualitative disclosures presented in our Annual Report on Form 10-K for the year ended August 31, 2021.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under
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the Securities Exchange Act of 1934), as of November 30, 2021. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of that date, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There have been no changes in internal control over financial reporting during the quarter ended November 30, 2021, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of our material pending legal proceedings, please see Note 13, Commitments and Contingencies, of the notes to the unaudited condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in Item 1A of our Annual Report on Form 10–K for the year ended August 31, 2021.
ITEM 6. EXHIBITS

Exhibit | Description
10.1 | Amendment No. 6 to Amended and Restated Loan Origination and Participation Agreement dated as of September 1, 2011, by and among AgStar Financial Services, PCA, d/b/a ProPartners Financial, and CHS Capital, LLC. (incorporated by reference to our Form 10-K for the year ended August 31, 2021, filed November 4, 2021).
10.2 | Amendment No 2. To Employment Agreement, dated as of November 3, 2021, between CHS Inc. and Jay D. Debertin (incorporated by reference to our Form 10-K for the year ended August 31, 2021, filed November 4, 2021).
31.1 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 | Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 | Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS | XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH | XBRL Taxonomy Extension Schema Document.
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document.
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CHS Inc.
(Registrant)

Date: | January 5, 2022 |  | By: |  | /s/ Olivia Nelligan
|  |  |  |  | Olivia Nelligan
|  |  |  |  | Executive Vice President and Chief Financial Officer

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