UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
Form 10-Q
________________________________________
þ
 
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended May 31, 2015.
or
o
 
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
 (State or other jurisdiction of
incorporation or organization)
 
41-0251095
 (I.R.S. Employer
Identification Number)
 
 
 
5500 Cenex Drive Inver Grove Heights, Minnesota 55077
 (Address of principal executive office,
including zip code)
 
(651) 355-6000
 (Registrant’s telephone number,
including area code)
________________________________________


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 þ NO o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
YES þ NO o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ
Smaller reporting company o
 
 
(Do not check if a smaller reporting company)
 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o NO þ

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date: The Registrant has no common stock outstanding.

 


INDEX
 
 
 
 
Page
No.
 
 
 
 
 
 
 
 
 
 


PART I. FINANCIAL INFORMATION
SAFE HARBOR STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the results discussed in the forward-looking statements. These factors include those set forth in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the caption “Cautionary Statements for Purposes of the Safe Harbor Provisions of the Securities Litigation Reform Act,” to this Quarterly Report on Form 10-Q for the quarterly period ended May 31, 2015.


1

ITEM 1.     FINANCIAL STATEMENTS

CHS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
May 31,
2015
 
August 31,
2014
 
(Dollars in thousands)
ASSETS
 
 
 
Current assets:
 

 


Cash and cash equivalents
$
1,101,872

 
$
2,133,207

Receivables
3,073,731

 
2,988,563

Inventories
3,118,838

 
2,760,253

Derivative assets
605,024

 
603,933

Margin deposits
266,151

 
301,045

Supplier advance payments
514,203

 
331,345

Other current assets
420,310

 
279,304

Total current assets
9,100,129

 
9,397,650

Investments
998,671

 
923,227

Property, plant and equipment
4,648,282

 
4,031,023

Other assets
972,177

 
795,079

Total assets
$
15,719,259

 
$
15,146,979

LIABILITIES AND EQUITIES
 
 
 
Current liabilities:
 

 
 

Notes payable
$
1,272,048

 
$
1,159,473

Current portion of long-term debt
150,079

 
156,836

Current portion of mandatorily redeemable noncontrolling interest
151,627

 
65,981

Customer margin deposits and credit balances
185,690

 
265,556

Customer advance payments
609,075

 
602,374

Checks and drafts outstanding
107,599

 
167,846

Accounts payable
1,917,428

 
2,208,211

Derivative liabilities
529,172

 
599,990

Accrued expenses
547,130

 
547,781

Dividends and equities payable
301,577

 
409,961

Total current liabilities
5,771,425

 
6,184,009

Long-term debt
1,171,604

 
1,299,664

Mandatorily redeemable noncontrolling interest
—

 
148,756

Long-term deferred tax liabilities
595,004

 
566,647

Other liabilities
459,806

 
481,059

Commitments and contingencies


 


Equities:
 

 
 

Preferred stock
2,167,540

 
1,190,177

Equity certificates
3,742,389

 
3,816,428

Accumulated other comprehensive loss
(160,267
)
 
(156,757
)
Capital reserves
1,960,533

 
1,598,660

Total CHS Inc. equities
7,710,195

 
6,448,508

Noncontrolling interests
11,225

 
18,336

Total equities
7,721,420

 
6,466,844

Total liabilities and equities
$
15,719,259

 
$
15,146,979


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

2


CHS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
For the Three Months Ended
May 31,
 
For the Nine Months Ended
May 31,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in thousands)
Revenues
$
8,740,905

 
$
11,967,398

 
$
26,596,101

 
$
32,673,793

Cost of goods sold
8,430,249

 
11,460,774

 
25,450,359

 
31,324,819

Gross profit
310,656

 
506,624

 
1,145,742

 
1,348,974

Marketing, general and administrative
165,341

 
158,859

 
498,084

 
447,771

Operating earnings
145,315

 
347,765

 
647,658

 
901,203

(Gain) loss on investments
—

 
(108,792
)
 
(5,074
)
 
(111,401
)
Interest, net
9,557

 
42,489

 
39,648

 
102,263

Equity (income) loss from investments
(34,750
)
 
(25,522
)
 
(83,548
)
 
(89,249
)
Income before income taxes
170,508

 
439,590

 
696,632

 
999,590

Income taxes
(7,327
)
 
59,717

 
47,569

 
116,068

Net income
177,835

 
379,873

 
649,063

 
883,522

Net income (loss) attributable to noncontrolling interests
(215
)
 
418

 
(504
)
 
1,812

Net income attributable to CHS Inc. 
$
178,050

 
$
379,455

 
$
649,567

 
$
881,710


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


3


CHS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
For the Three Months Ended
May 31,
 
For the Nine Months Ended
May 31,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in thousands)
Net income
$
177,835

 
$
379,873

 
$
649,063

 
$
883,522

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
     Postretirement benefit plan activity, net of tax expense (benefit) of $2,024, $2,770, $6,391 and $7,145, respectively
3,258

 
4,385

 
10,262

 
11,480

     Unrealized net gain (loss) on available for sale investments, net of tax expense (benefit) of $(125), $20, $351 and $937, respectively
(202
)
 
32

 
570

 
1,520

     Cash flow hedges, net of tax expense (benefit) of $223, $81, $(1,262) and $(8,961), respectively
362

 
131

 
(2,047
)
 
(14,535
)
     Foreign currency translation adjustment, net of tax expense (benefit) of $(796), $1,017, $(7,581) and $(514), respectively
(1,290
)
 
1,650

 
(12,295
)
 
(833
)
Other comprehensive income (loss), net of tax
2,128

 
6,198

 
(3,510
)
 
(2,368
)
Comprehensive income
179,963

 
386,071

 
645,553

 
881,154

     Less: comprehensive income (loss) attributable to noncontrolling interests
(215
)
 
418

 
(504
)
 
1,812

Comprehensive income attributable to CHS Inc. 
$
180,178

 
$
385,653

 
$
646,057

 
$
879,342


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



4

CHS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
For the Nine Months Ended May 31,
 
2015
 
2014
 
(Dollars in thousands)
Cash flows from operating activities:
 

 
 

Net income
$
649,063

 
$
883,522

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 

 
 

Depreciation and amortization
227,323

 
193,161

Amortization of deferred major repair costs
30,022

 
37,411

(Income) loss from equity investments
(83,548
)
 
(89,249
)
Distributions from equity investments
62,449

 
62,019

Noncash patronage dividends received
(4,882
)
 
(5,058
)
(Gain) loss on disposition of property, plant and equipment
(3,897
)
 
1,473

(Gain) loss on investments
(5,074
)
 
(111,401
)
Unrealized (gain) loss on crack spread contingent liability
(5,697
)
 
(3,975
)
Deferred taxes
29,836

 
99,574

Other, net
3,071

 
16,463

Changes in operating assets and liabilities, net of acquisitions:
 

 
 

Receivables
(9,607
)
 
(242,348
)
Inventories
(332,906
)
 
(150,039
)
Derivative assets
7,799

 
(67,986
)
Margin deposits
35,075

 
(41,111
)
Supplier advance payments
(182,858
)
 
(241,495
)
Other current assets and other assets
20,960

 
(10,223
)
Customer margin deposits and credit balances
(109,116
)
 
(48,474
)
Customer advance payments
5,305

 
448,920

Accounts payable and accrued expenses
(301,956
)
 
(211,126
)
Derivative liabilities
(74,725
)
 
(52,595
)
Other liabilities
(27,923
)
 
4,847

Net cash provided by (used in) operating activities
(71,286
)
 
472,310

Cash flows from investing activities:
 

 
 

Acquisition of property, plant and equipment
(827,228
)
 
(656,288
)
Proceeds from disposition of property, plant and equipment
8,348

 
4,373

Expenditures for major repairs
(145,550
)
 
—

Short-term investments, net
(170,000
)
 
—

Investments in joint ventures and other
(57,595
)
 
(67,457
)
Investments redeemed
11,281

 
130,445

Proceeds from sale of investments
8,284

 
2,725

Changes in notes receivable, net
(116,556
)
 
(321,376
)
Business acquisitions, net of cash acquired
(8,929
)
 
(114,438
)
Other investing activities, net
(5,343
)
 
(3,558
)
Net cash provided by (used in) investing activities
(1,303,288
)
 
(1,025,574
)
Cash flows from financing activities:
 

 
 

Changes in notes payable
128,356

 
241,070

Long-term debt borrowings
3,546

 
1,426

Principal payments on long-term debt
(155,302
)
 
(141,760
)
Mandatorily redeemable noncontrolling interest payments
(65,981
)
 
(65,981
)
Payments on crack spread contingent liability
—

 
(8,670
)
Changes in checks and drafts outstanding
(58,962
)
 
(4,328
)
Preferred stock issued
1,010,000

 
702,979

Preferred stock issuance costs
(32,637
)
 
(23,134
)
Preferred stock dividends paid
(93,211
)
 
(29,860
)
Distributions to noncontrolling interests
(430
)
 
(575
)
Retirements of equities
(114,048
)
 
(87,666
)
Cash patronage dividends paid
(277,020
)
 
(286,718
)
Other financing activities, net
581

 
(1,635
)
Net cash provided by (used in) financing activities
344,892

 
295,148

Effect of exchange rate changes on cash and cash equivalents
(1,653
)
 
(918
)
Net increase (decrease) in cash and cash equivalents
(1,031,335
)
 
(259,034
)
Cash and cash equivalents at beginning of period
2,133,207

 
1,808,532

Cash and cash equivalents at end of period
$
1,101,872

 
$
1,549,498

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

5

CHS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1        Summary of Significant Accounting Policies

Basis of Presentation

The unaudited Consolidated Balance Sheet as of May 31, 2015, the Consolidated Statements of Operations for the three and nine months ended May 31, 2015 and 2014, the Consolidated Statements of Comprehensive Income for the three and nine months ended May 31, 2015 and 2014, and the Consolidated Statements of Cash Flows for the nine months ended May 31, 2015 and 2014, reflect in the opinion of our management, all normal recurring adjustments necessary for a fair statement of the financial position, results of operations and cash flows for the interim 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, among other things, the seasonal nature of our businesses. Our Consolidated Balance Sheet data as of August 31, 2014, has been derived from our audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP).

The notes to our consolidated financial statements make reference to our Energy and Ag reportable segments, as well as our Corporate and Other category, which represents an aggregation of individually immaterial operating segments. See Note 11, Segment Reporting for more information.

Our consolidated financial statements include the accounts of CHS and all of our wholly-owned and majority-owned subsidiaries and limited liability companies, including National Cooperative Refinery Association (NCRA) in our Energy segment. The effects of all significant intercompany transactions have been eliminated.

These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended August 31, 2014, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission.

Derivative Financial Instruments and Hedging Activities

Our derivative instruments primarily consist of commodity and freight futures and forward contracts and, to a lesser degree, may include foreign currency and interest rate swap contracts. These contracts are economic hedges of price risk, but are not designated or accounted for as hedging instruments for accounting purposes, with the exception of certain interest rate swap contracts which are accounted for as cash flow hedges or fair value hedges. Derivative instruments are recorded on our Consolidated Balance Sheets at fair value. See Note 12, Derivative Financial Instruments and Hedging Activities and Note 13, Fair Value Measurements for additional information.

Even though we have netting arrangements for our exchange-traded futures and options contracts and certain over-the-counter (OTC) contracts, we report our derivatives on a gross basis on our Consolidated Balance Sheets. Our associated margin deposits are also reported on a gross basis.

Major Maintenance Activities

In our Energy segment, major maintenance activities (turnarounds) at our two refineries are accounted for under the deferral method. Turnarounds are the scheduled and required shutdowns of refinery processing units. The costs related to the significant overhaul and refurbishment activities include materials and direct labor costs. The costs of turnarounds are deferred when incurred and amortized on a straight-line basis over the period of time estimated to lapse until the next turnaround occurs, which is generally 2 to 4 years. The amortization expense related to turnaround costs is included in cost of goods sold in our Consolidated Statements of Operations. The selection of the deferral method, as opposed to expensing the turnaround costs when incurred, results in deferring recognition of the turnaround expenditures. The deferral method also results in the classification of the related cash outflows as investing activities in our Consolidated Statements of Cash Flows, whereas expensing these costs as incurred would result in classifying the cash outflows as operating activities.    

For the three and nine months ended May 31, 2015, major repairs turnaround expenditures were $137.3 million and $145.6 million, respectively. There were no turnaround expenditures for the nine months ended May 31, 2014.


6

Recent Accounting Pronouncements

In May 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-07, "Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)." The update provides guidance on the disclosures for investments in certain entities that calculate net asset value (NAV) per share (or its equivalent). The amendments remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the NAV per share (or its equivalent) as a practical expedient. ASU No. 2015-07 is to be applied retrospectively and is effective for annual reporting periods beginning after December 15, 2015, and interim periods within those fiscal years, with early application permitted. We do not expect the standard to have a material impact on our consolidated financial statements in fiscal 2016.
    
In February 2015, the FASB issued ASU No. 2015-02, "Amendments to the Consolidation Analysis." ASU No. 2015-02 amended the process that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. ASU No. 2015-02 is effective for the annual period ending after December 15, 2015, and for annual periods and interim periods thereafter. Early application is permitted. We are currently evaluating the impact the adoption will have on our consolidated financial statements in fiscal 2017.

In November 2014, the FASB issued ASU No. 2014-16, "Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity." The amendments in this ASU do not change the current criteria in GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. The ASU applies to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The adoption of ASU 2014-16 is not expected to have a material effect on our consolidated financial statements in fiscal 2016.
    
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers." ASU No. 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those good or services. The guidance also requires an entity to disclose sufficient qualitative and quantitative information surrounding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts from customers. This ASU supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. The amendments in this standard are effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, although the FASB has issued an exposure draft proposing to delay the effective date by one year (though early adoption would be allowed). The guidance permits the use of either a retrospective or cumulative effect transition method. We have not yet selected a transition method and we are currently evaluating the impact the adoption will have on our consolidated financial statements.

Note 2        Receivables
 
May 31, 2015
 
August 31, 2014
 
(Dollars in thousands)
Trade accounts receivable
$
2,049,338

 
$
2,153,929

CHS Capital notes receivable
754,091

 
633,475

Other
376,949

 
304,798

 
3,180,378

 
3,092,202

Less allowances and reserves
106,647

 
103,639

Total receivables
$
3,073,731

 
$
2,988,563


Trade accounts receivable are initially recorded at a selling price, which approximates fair value, upon the sale of goods or services to customers. Subsequently, trade accounts receivable are carried at net realizable value, which includes an allowance for estimated uncollectible amounts. We calculate this allowance based on our history of write-offs, level of past due accounts, and our relationships with, and the economics status of, our customers.


7

CHS Capital, LLC (CHS Capital), our wholly-owned subsidiary, has notes receivable from commercial borrowers and producer borrowings. The short-term notes receivable generally have terms of 12-14 months and are reported at their outstanding principle balances as CHS Capital has the ability and intent to hold these notes to maturity. The carrying value of CHS Capital notes receivable approximates fair value, given their short duration and the use of market pricing adjusted for risk. The 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, Wisconsin, North Dakota and Michigan. CHS Capital also has loans receivable from producer borrowers which are collateralized by various combinations of growing crops, livestock, inventories, accounts receivable, personal property and supplemental mortgages. In addition to the short-term amounts included in the table above, CHS Capital had long-term notes receivable with durations of not more than 10 years of $157.1 million and $159.7 million at May 31, 2015 and August 31, 2014, respectively. The long-term notes receivable are included in other assets on our Consolidated Balance Sheets. As of May 31, 2015 and August 31, 2014 the commercial notes represented 45% and 46%, respectively, and the producer notes represented 55% and 54%, respectively, of the total CHS Capital notes receivable.

CHS Capital evaluates the collectability of both commercial and producer notes on a specific identification basis, based on the amount and quality of the collateral obtained, and records specific loan loss reserves when appropriate. A general reserve is also maintained based on historical loss experience and various qualitative factors. In total, our specific and general loan loss reserves related to CHS Capital are not material to our consolidated financial statements, nor are the historical write-offs. The accrual of interest income is discontinued at the time the loan is 90 days past due unless the credit is well-collateralized and in process of collection. The amount of CHS Capital notes that were past due was not material at any reporting date presented.

CHS Capital has commitments to extend credit to a customer as long as there is no violation of any condition established in the contract. As of May 31, 2015, customers of CHS Capital have additional available credit of approximately $1.0 billion.

Note 3        Inventories        
 
May 31, 2015
 
August 31, 2014
 
(Dollars in thousands)
Grain and oilseed
$
1,288,769

 
$
961,327

Energy
864,370

 
875,719

Crop nutrients
298,933

 
374,023

Feed and farm supplies
582,900

 
448,454

Processed grain and oilseed
73,381

 
84,498

Other
10,485

 
16,232

Total inventories
$
3,118,838

 
$
2,760,253


As of May 31, 2015, we valued approximately 18% of inventories, primarily related to Energy, using the lower of cost, determined on the LIFO method, or market (16% as of August 31, 2014). If the FIFO method of accounting had been used, inventories would have been higher than the reported amount by $194.9 million and $538.7 million at May 31, 2015 and August 31, 2014, respectively. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Interim LIFO calculations are based on management's estimates of expected year-end inventory levels and costs, and are subject to the final year-end LIFO inventory valuation.


8

Note 4        Investments

As of August 31, 2014, we owned 84.0% of NCRA and with the closings in September 2014, our ownership increased to 88.9%. In fiscal 2012, we entered into an agreement to purchase the remaining shares of NCRA from Growmark Inc. and MFA Oil Company in separate closings to be held annually thereafter, with the final closing occurring on September 1, 2015. Pursuant to this agreement, we made payments during the nine months ended May 31, 2015 and 2014 of $66.0 million and $66.0 million, respectively. The present value of the remaining payments is included as mandatorily redeemable noncontrolling interest on our Consolidated Balance Sheets. In addition to these payments, we paid $16.5 million during the nine months ended May 31, 2014 related to the associated crack spread contingent liability. The fair value of the remaining contingent liability was $109.2 million as of May 31, 2015.

Equity Method Investments

Joint ventures and other investments, in which we have significant ownership and influence, but not control, are accounted for in our consolidated financial statements using the equity method of accounting. Our significant equity method investments are summarized below.

We have a 50% interest in Ventura Foods, LLC (Ventura Foods), a joint venture which produces and distributes primarily vegetable oil-based products, and is included in Corporate and Other. We account for Ventura Foods as an equity method investment, and as of May 31, 2015, our carrying value of Ventura Foods exceeded our share of their equity by $12.9 million, which represents equity method goodwill. As of May 31, 2015, the carrying value of our investment in Ventura Foods was $341.5 million.

In fiscal 2014, we formed Ardent Mills, LLC (Ardent Mills), a joint venture with Cargill Incorporated (Cargill) and ConAgra Foods, Inc., which combines the North American flour milling operations of the three parent companies, giving CHS a 12% interest in Ardent Mills. Prior to closing, we contributed $32.8 million to Horizon Milling, LLC to pay off existing debt as a pre-condition to close. Upon closing, Ardent Mills was financed with funds from third-party borrowings, which did not require credit support from the owners. We received $121.2 million of cash proceeds distributed to us in proportion to our ownership interest, adjusted for deviations in specified working capital target amounts, and recognized a total gain of $109.2 million associated with this transaction. In connection with the closing, the parties also entered into various ancillary and non-compete agreements including, among other things, an agreement for us to supply Ardent Mills with certain wheat products. As we hold one of the five board seats, we account for Ardent Mills as an equity method investment included in Corporate and Other. As of May 31, 2015, the carrying value of our investment in Ardent Mills was $195.2 million.

TEMCO, LLC (TEMCO) is owned and governed by Cargill (50%) and CHS (50%). Both owners have committed to sell all of their feedgrains, wheat, oilseeds and by-product origination that are tributary to the Pacific Northwest, United States (Pacific Northwest) to TEMCO and to use TEMCO as their exclusive export-marketing vehicle for such grains exported through the Pacific Northwest through January 2037. We account for TEMCO as an equity method investment included in our Ag segment. As of May 31, 2015, the carrying value of our investment in TEMCO was $60.0 million.

Other Short-Term Investments

In the first quarter of fiscal 2015, we invested $315.0 million of the proceeds from the September 2014 Class B Series 3 Preferred Stock issuance (see Note 9, Equities for additional information) in time deposits with original maturities of six and nine months with select highly-rated financial institution counterparties. As of May 31, 2015, $145.0 million of these short-term investments had matured and were reconverted into cash and cash equivalents. The remaining $170.0 million of short-term investments are included in other current assets on our Consolidated Balance Sheet.

Note 5        Property, Plant and Equipment

As of May 31, 2015 and August 31, 2014, total property, plant and equipment, net of accumulated depreciation and amortization, was $4.6 billion and $4.0 billion, respectively. The increase in fiscal 2015 is driven by an increase in construction in progress of $540.5 million related primarily to capital projects at our refineries and the fertilizer plant project described below.

In September 2014, our Board of Directors approved plans to begin construction of a nitrogen fertilizer plant located in Spiritwood, North Dakota. We currently estimate the construction costs to be more than $3.0 billion, with the plant anticipated to be operational during calendar year 2018. For additional information about this project, see "Liquidity and Capital Resources." As of May 31, 2015, we have included in construction-in-process approximately $74.4 million related to

9

this project. As required by GAAP, we review long-lived assets for impairment when events or changes in circumstances, including significant changes in actual or expected operating results, indicate that the asset’s carrying value may not be recoverable.

Depreciation expense during the three and nine months ended May 31, 2015 was $75.8 million and $219.0 million, respectively. Depreciation expense during the three and nine months ended May 31, 2014 was $62.4 million and $182.5 million, respectively.

Note 6        Goodwill and Other Intangible Assets

Goodwill of $156.5 million and $158.7 million on May 31, 2015 and August 31, 2014, respectively, is included in other assets on our Consolidated Balance Sheets. Changes in the net carrying amount of goodwill for the nine months ended May 31, 2015, by segment, are as follows:
 
Energy
 
Ag
 
Corporate
and Other
 
Total
 
(Dollars in thousands)
Balances, August 31, 2014
$
552

 
$
151,246

 
$
6,898

 
$
158,696

Goodwill acquired during the period
—

 
1,213

 
—

 
1,213

Effect of foreign currency translation adjustments
—

 
(3,459
)
 
—

 
(3,459
)
Balances, May 31, 2015
$
552

 
$
149,000

 
$
6,898

 
$
156,450


Intangible assets subject to amortization primarily include customer lists, trademarks and agreements not to compete, and are amortized over their respective useful lives (ranging from 2 to 30 years). Information regarding intangible assets included in other assets on our Consolidated Balance Sheets is as follows:
 
May 31,
2015
 
August 31,
2014
 
Carrying Amount
 
Accumulated Amortization
 
Net
 
Carrying Amount
 
Accumulated Amortization
 
Net
 
(Dollars in thousands)
Customer lists
$
71,244

 
$
(29,658
)
 
$
41,586

 
$
69,862

 
$
(26,114
)
 
$
43,748

Trademarks and other intangible assets
42,409

 
(31,482
)
 
10,927

 
41,293

 
(29,587
)
 
11,706

Total intangible assets
$
113,653

 
$
(61,140
)
 
$
52,513

 
$
111,155

 
$
(55,701
)
 
$
55,454


Total amortization expense for intangible assets during the three and nine months ended May 31, 2015 was $1.8 million and $5.4 million, respectively. Total amortization expense for intangible assets during the three and nine months ended May 31, 2014 was $2.4 million and $7.3 million, respectively. The estimated annual amortization expense related to intangible assets subject to amortization for the next five years is as follows:
 
(Dollars in thousands)
Year 1
$
7,195

Year 2
5,996

Year 3
4,712

Year 4
3,767

Year 5
3,543



10

Note 7        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 May 31, 2015.


May 31, 2015

August 31, 2014

(Dollars in thousands)
Notes payable
$
912,905


$
840,699

CHS Capital notes payable
359,143


318,774

Total notes payable
$
1,272,048


$
1,159,473


On May 31, 2015, our primary line of credit was a five-year revolving facility with a committed amount of $2.5 billion. We had no amounts outstanding as of May 31, 2015 and August 31, 2014.
    
Interest, net for the three and nine months ended May 31, 2015 and 2014 is as follows:
 
For the Three Months Ended May 31,
 
For the Nine Months Ended May 31,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in thousands)
Interest expense
$
24,365

 
$
23,397

 
$
64,975

 
$
57,823

Interest-purchase of NCRA noncontrolling interests
4,844

 
23,862

 
23,772

 
56,258

Capitalized interest
(17,104
)
 
(2,641
)
 
(41,715
)
 
(6,503
)
Interest income
(2,548
)
 
(2,129
)
 
(7,384
)
 
(5,315
)
Interest, net
$
9,557

 
$
42,489

 
$
39,648

 
$
102,263


In February 2014, we terminated interest rate swaps and recorded a resulting $13.5 million gain as a reduction to interest expense in our Consolidated Statement of Operations for the nine months ended May 31, 2014. See Note 12, Derivative Financial Instruments and Hedging Activities for additional information.

Note 8        Income Taxes

During the three months ended May 31, 2015, our Board of Directors adopted a resolution to treat non-qualified equity certificates issued in fiscal 2014 and fiscal 2013 in the same manner as qualified equity certificates under the “Eligible Producer Member Equity” provision of the Policy for the Redemption of CHS Inc. Equities. Previously we had not established an intent of non-qualified equity certificates revolvement to eligible producer members, thus the tax benefit associated with redemption would have been recognized in future periods as those redemptions occur. As a result of the new resolution, we recorded a $30.7 million deferred tax benefit during the third quarter of fiscal 2015 related to the future redemption, at the discretion of our Board of Directors, of non-qualified equity certificates to eligible producer members.

Note 9        Equities

Preferred Stock

In June 2014, we filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (SEC). Under the shelf registration, which has been declared effective by the SEC, we may offer and sell, from time to time, up to $2.0 billion of our Class B cumulative redeemable preferred stock over a three-year period.

In September 2014, we issued 19,700,000 shares of Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 3 (Class B Series 3 Preferred Stock) with a total redemption value of $492.5 million, excluding accumulated dividends. Net proceeds from the sale of our Class B Series 3 Preferred Stock, after deducting the underwriting discount and offering expenses payable by us, were approximately $476.7 million. The Class B Series 3 Preferred Stock is listed on the NASDAQ Stock Market LLC under the symbol CHSCM and accumulates dividends at a rate of 6.75% per year to, but excluding, September 30, 2024, and at a rate equal to the three-month LIBOR plus 4.155%, not to exceed 8.00% per annum thereafter, which are payable quarterly. Our Class B Series 3 Preferred Stock may be redeemed at our option beginning September 30, 2024.

11


In January 2015, we issued 20,700,000 shares of Class B Cumulative Redeemable Preferred Stock, Series 4 (Class B Series 4 Preferred Stock) with a total redemption value of $517.5 million, excluding accumulated dividends. Net proceeds from the sale of our Class B Series 4 Preferred Stock, after deducting the underwriting discount and offering expenses payable by us, were approximately $501.0 million. The Class B Series 4 Preferred Stock is listed on the NASDAQ Stock Market LLC under the symbol CHSCL and accumulates dividends at a rate of 7.50% per year, which are payable quarterly. Our Class B Series 4 Preferred Stock may be redeemed at our option beginning January 21, 2025.
    
Changes in Equities

Changes in equities for the nine months ended May 31, 2015 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, 2014
$
3,508,473

 
$
23,256

 
$
284,699

 
$
1,190,177

 
$
(156,757
)
 
$
1,598,660

 
$
18,336

 
$
6,466,844

Reversal of prior year patronage and redemption estimates
(276,966
)
 
—

 
(148,579
)
 
—

 
—

 
810,641

 
—

 
385,096

Distribution of 2014 patronage refunds
396,443

 
—

 
147,715

 
—

 
—

 
(821,178
)
 
—

 
(277,020
)
Redemptions of equities
(113,484
)
 
(131
)
 
(453
)
 
—

 
—

 
20

 
—

 
(114,048
)
Equities issued, net
12,365

 
—

 
—

 
977,363

 
—

 
—

 
—

 
989,728

Preferred stock dividends
—

 
—

 
—

 
—

 
—

 
(105,223
)
 
—

 
(105,223
)
Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
(430
)
 
(430
)
Other, net
(243
)
 
—

 
(606
)
 
—

 
—

 
2,646

 
(6,177
)
 
(4,380
)
Net income
—

 
—

 
—

 
—

 
—

 
649,567

 
(504
)
 
649,063

Other comprehensive income (loss), net of tax
—

 
—

 
—

 
—

 
(3,510
)
 
—

 
—

 
(3,510
)
Estimated 2015 cash patronage refunds
—

 
—

 
—

 
—

 
—

 
(174,600
)
 
—

 
(174,600
)
Estimated 2015 equity redemptions
(90,100
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(90,100
)
Balances, May 31, 2015
$
3,436,488

 
$
23,125

 
$
282,776

 
$
2,167,540

 
$
(160,267
)
 
$
1,960,533

 
$
11,225

 
$
7,721,420

    
Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive income (loss) by component, net of tax, are as follows for the nine months ended May 31, 2015:
 
Pension and Other Postretirement Benefits
 
Unrealized Net Gain on Available for Sale Investments
 
Cash Flow Hedges
 
Foreign Currency Translation Adjustment
 
Total
 
(Dollars in thousands)
Balance as of August 31, 2014
$
(151,852
)
 
$
4,398

 
$
(2,722
)
 
$
(6,581
)
 
$
(156,757
)
Current period other comprehensive income (loss), net of tax
236

 
570

 
(2,418
)
 
(12,295
)
 
(13,907
)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
10,026

 
—

 
371

 
—

 
10,397

Net other comprehensive income (loss), net of tax
10,262

 
570

 
(2,047
)
 
(12,295
)
 
(3,510
)
Balance as of May 31, 2015
$
(141,590
)
 
$
4,968

 
$
(4,769
)
 
$
(18,876
)
 
$
(160,267
)
    
Amounts reclassified from accumulated other comprehensive income (loss) were primarily related to pension and other postretirement benefits and were recorded to net income. Pension and other postretirement reclassifications include amortization of net actuarial loss, prior service credit and transition amounts as disclosed in Note 10, Benefit Plans.


12

Note 10        Benefit Plans

We have various pension and other defined benefit and defined contribution plans, in which substantially all employees may participate. We also have non-qualified supplemental executive and Board retirement plans.

Components of net periodic benefit costs for the three and nine months ended May 31, 2015 and 2014 are as follows:
 
Qualified
Pension Benefits
 
Non-Qualified
Pension Benefits
 
Other Benefits
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Components of net periodic benefit costs for the three months ended May 31 are as follows:
 (Dollars in thousands)
  Service cost
$
8,889

 
$
7,543

 
$
206

 
$
219

 
$
188

 
$
339

  Interest cost
7,003

 
7,495

 
357

 
423

 
288

 
418

  Expected return on assets
(12,431
)
 
(11,910
)
 
—

 
—

 
—

 
—

  Prior service cost (credit) amortization
407

 
398

 
57

 
57

 
(30
)
 
(30
)
  Actuarial (gain) loss amortization
4,916

 
4,566

 
272

 
250

 
(342
)
 
(228
)
Net periodic benefit cost
$
8,784

 
$
8,092

 
$
892

 
$
949

 
$
104

 
$
499

Components of net periodic benefit costs for the nine months ended May 31 are as follows:
 

 
 

 
 

 
 

 
 

 
 

  Service cost
$
27,005

 
$
22,812

 
$
656

 
$
646

 
$
1,134

 
$
1,297

  Interest cost
21,019

 
22,433

 
1,061

 
1,245

 
1,118

 
1,439

  Expected return on assets
(37,305
)
 
(35,726
)
 
—

 
—

 
—

 
—

  Prior service cost (credit) amortization
1,223

 
1,195

 
171

 
171

 
(90
)
 
(90
)
  Actuarial (gain) loss amortization
14,724

 
13,655

 
794

 
718

 
(553
)
 
(415
)
Net periodic benefit cost
$
26,666

 
$
24,369

 
$
2,682

 
$
2,780

 
$
1,609

 
$
2,231


Employer Contributions

Total contributions to be made during fiscal 2015, including the NCRA plan, will depend primarily on market returns on the pension plan assets and minimum funding level requirements. During the nine months ended May 31, 2015, CHS made a voluntary contribution of $29.1 million to the pension plans. At this time, we do not anticipate having to make a required contribution for our benefit plans in fiscal 2015.

Note 11        Segment Reporting

We have aligned our segments based on an assessment of how our businesses are operated and the products and services they sell.

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, and also serves as a wholesaler and retailer of crop inputs. Corporate and Other primarily represents our non-consolidated wheat milling and packaged food joint ventures, as well as our business solutions operations, which consist of commodities hedging, insurance and financial services related to crop production.

Corporate administrative expenses are allocated to each business segment, and Corporate and Other, based on direct usage for services that can be tracked, such as information technology and legal, and other factors or considerations relevant to the costs incurred.

Prior to fiscal 2015, our renewable fuels marketing business was included in our Energy segment and our renewable fuels production business was included in our Ag segment. Effective in the first quarter of fiscal 2015, we reorganized certain parts of our business to better align our ethanol supply chain. As a result, our renewable fuels marketing business is now managed together with our renewable fuels production business within our Ag segment. In accordance with ASC Topic 280, Segment Reporting, we have identified our operating segments to reflect the manner in which our chief operating decision maker evaluates performance and manages the business, and we have aggregated those operating segments into our reportable

13

Energy and Ag segments. Prior period segment information below has been revised to reflect this change to ensure comparability.

Many of our business activities are highly seasonal and operating results will vary throughout the year. Historically, our income is generally lowest during the second fiscal quarter and highest during the third fiscal quarter. For example, in our Ag segment, agronomy and country operations businesses experience higher volumes and income during the spring planting season and in the fall, which corresponds to harvest. Also in our Ag segment, our grain marketing operations are subject to fluctuations in volumes and earnings based on producer harvests, world grain prices and demand. Our Energy segment generally experiences higher volumes and profitability in certain operating areas, such as refined products, in the summer and early fall when gasoline and diesel fuel usage is highest and is subject to global supply and demand forces. Other energy products, such as propane, may experience higher volumes and profitability during the winter heating and 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 the weather, crop damage due to disease or insects, the availability and adequacy of supply, government regulations and policies, world events, and general political and economic conditions.

While our revenues and operating results are derived from businesses and operations which are wholly-owned and majority-owned, a portion of our business operations are conducted through companies in which we hold ownership interests of 50% or less and do not control the operations. We account for these investments primarily using the equity method of accounting, wherein we record our proportionate share of income or loss reported by the entity as equity income from investments, without consolidating the revenues and expenses of the entity in our Consolidated Statements of Operations. In our Ag segment, this principally includes our 50% ownership in TEMCO. In Corporate and Other, these investments principally include our 50% ownership in Ventura Foods and our 12% ownership in Ardent Mills.

Reconciling Amounts represent the elimination of revenues between segments. Such transactions are executed at market prices to more accurately evaluate the profitability of the individual business segments.

Segment information for the three and nine months ended May 31, 2015 and 2014 is as follows:

Energy

Ag

Corporate
and Other

Reconciling
Amounts

Total
For the Three Months Ended May 31, 2015:
(Dollars in thousands)
Revenues
$
1,732,192


$
7,088,072


$
17,750


$
(97,109
)

$
8,740,905

Cost of goods sold
1,618,937


6,908,435


(14
)

(97,109
)

8,430,249

Gross profit
113,255


179,637


17,764


—


310,656

Marketing, general and administrative
37,956


111,438


15,947


—


165,341

Operating earnings (losses)
75,299


68,199


1,817


—


145,315

(Gain) loss on investments
—


—


—


—


—

Interest, net
(7,678
)

14,478


2,757


—


9,557

Equity (income) loss from investments
(364
)

(7,964
)

(26,422
)

—


(34,750
)
Income before income taxes
$
83,341


$
61,685


$
25,482


$
—


$
170,508

Intersegment revenues
$
(94,092
)

$
(3,017
)

$
—


$
97,109


$
—

 
 
 
 
 
 
 
 
 
 

14

 
Energy
 
Ag
 
Corporate
and Other
 
Reconciling
Amounts
 
Total
For the Three Months Ended May 31, 2014:
 
Revenues
$
2,862,239

 
$
9,236,768

 
$
18,195

 
$
(149,804
)
 
$
11,967,398

Cost of goods sold
2,603,480

 
9,007,141

 
(43
)
 
(149,804
)
 
11,460,774

Gross profit
258,759

 
229,627

 
18,238

 
—

 
506,624

Marketing, general and administrative
37,915

 
102,224

 
18,720

 
—

 
158,859

Operating earnings (losses)
220,844

 
127,403

 
(482
)
 
—

 
347,765

(Gain) loss on investments
—

 
—

 
(108,792
)
 
—

 
(108,792
)
Interest, net
23,952

 
15,449

 
3,088

 
—

 
42,489

Equity (income) loss from investments
(780
)
 
(5,216
)
 
(19,526
)
 
—

 
(25,522
)
Income before income taxes
$
197,672

 
$
117,170

 
$
124,748

 
$
—

 
$
439,590

Intersegment revenues
$
(141,501
)
 
$
(8,303
)
 
$
—

 
$
149,804

 
$
—

 
 
 
 
 
 
 
 
 
 
 
Energy
 
Ag
 
Corporate
and Other
 
Reconciling
Amounts
 
Total
For the Nine Months Ended May 31, 2015:
 

 
 

 
 

 
 

 
 

Revenues
$
6,697,942

 
$
20,231,391

 
$
53,546

 
$
(386,778
)
 
$
26,596,101

Cost of goods sold
6,217,789

 
19,619,374

 
(26
)
 
(386,778
)
 
25,450,359

Gross profit
480,153

 
612,017

 
53,572

 
—

 
1,145,742

Marketing, general and administrative
118,082

 
321,986

 
58,016

 
—

 
498,084

Operating earnings (losses)
362,071

 
290,031

 
(4,444
)
 
—

 
647,658

(Gain) loss on investments
—

 
(2,875
)
 
(2,199
)
 
—

 
(5,074
)
Interest, net
(11,121
)
 
43,284

 
7,485

 
—

 
39,648

Equity (income) loss from investments
(1,440
)
 
(12,427
)
 
(69,681
)
 
—

 
(83,548
)
Income before income taxes
$
374,632

 
$
262,049

 
$
59,951

 
$
—

 
$
696,632

Intersegment revenues
$
(374,612
)
 
$
(12,166
)
 
$
—

 
$
386,778

 
$
—

Capital expenditures
$
467,700

 
$
305,136

 
$
54,392

 
$
—

 
$
827,228

Depreciation and amortization
$
104,984

 
$
112,252

 
$
10,087

 
$
—

 
$
227,323

Total assets at May 31, 2015
$
4,600,786

 
$
8,033,290

 
$
3,085,183

 
$
—

 
$
15,719,259

 
 
 
 
 
 
 
 
 
 
 
Energy
 
Ag
 
Corporate
and Other
 
Reconciling
Amounts
 
Total
For the Nine Months Ended May 31, 2014:
 

 
 

 
 

 
 

 
 

Revenues
$
9,064,748

 
$
24,001,467

 
$
52,403

 
$
(444,825
)
 
$
32,673,793

Cost of goods sold
8,351,509

 
23,418,189

 
(54
)
 
(444,825
)
 
31,324,819

Gross profit
713,239

 
583,278

 
52,457

 
—

 
1,348,974

Marketing, general and administrative
108,012

 
288,992

 
50,767

 
—

 
447,771

Operating earnings (losses)
605,227

 
294,286

 
1,690

 
—

 
901,203

(Gain) loss on investments
—

 
116

 
(111,517
)
 
—

 
(111,401
)
Interest, net
54,974

 
39,736

 
7,553

 
—

 
102,263

Equity (income) loss from investments
(2,937
)
 
(19,906
)
 
(66,406
)
 
—

 
(89,249
)
Income before income taxes
$
553,190

 
$
274,340

 
$
172,060

 
$
—

 
$
999,590

Intersegment revenues
$
(436,522
)
 
$
(8,303
)
 
$
—

 
$
444,825

 
$
—

Capital expenditures
$
367,044

 
$
250,607

 
$
38,637

 
$
—

 
$
656,288

Depreciation and amortization
$
99,546

 
$
85,315

 
$
8,300

 
$
—

 
$
193,161

Total assets at May 31, 2014
$
4,203,832

 
$
7,370,032

 
$
3,371,083

 
$
—

 
$
14,944,947


Note 12        Derivative Financial Instruments and Hedging Activities

Our derivative instruments primarily consist of commodity and freight futures and forward contracts and, to a minor degree, may include foreign currency and interest rate swap contracts. These contracts are economic hedges of price risk, but are not designated or accounted for as hedging instruments for accounting purposes, with the exception of certain interest rate

15

swap contracts which are accounted for as cash flow or fair value hedges. Derivative instruments are recorded on our Consolidated Balance Sheets at fair value as described in Note 13, Fair Value Measurements.

The following tables present the gross fair values of derivative assets, derivative liabilities, and margin deposits (cash collateral) recorded on the Consolidated Balance Sheets along with the related amounts permitted to be offset in accordance with GAAP. We have elected not to offset derivative assets and liabilities when we have the right of offset under ASC Topic 210-20, Balance Sheet - Offsetting; or when the instruments are subject to master netting arrangements under ASC Topic 815-10-45, Derivatives and Hedging - Overall.
 
May 31, 2015
 
 
 
Amounts Not Offset on the Consolidated Balance Sheet but Eligible for Offsetting
 
 
 
Gross Amounts Recognized
 
Cash Collateral
 
Derivative Instruments
 
Net Amounts
 
(Dollars in thousands)
Derivative Assets:
 
 
 
 
 
 
 
Commodity and freight derivatives
$
573,592

 
$
—

 
$
79,969

 
$
493,623

Foreign exchange derivatives
16,783

 
—

 
7,156

 
9,627

Interest rate derivatives - hedge
14,649

 
—

 
—

 
14,649

Total
$
605,024

 
$
—

 
$
87,125

 
$
517,899

Derivative Liabilities:
 
 
 
 
 
 
 
Commodity and freight derivatives
$
500,137

 
$
16,829

 
$
79,969

 
$
403,339

Foreign exchange derivatives
22,887

 
—

 
7,156

 
15,731

Interest rate derivatives - hedge
6,064

 
—

 
—

 
6,064

Interest rate derivatives - non-hedge
84

 
—

 
—

 
84

Total
$
529,172

 
$
16,829

 
$
87,125

 
$
425,218


 
August 31, 2014
 
 
 
Amounts Not Offset on the Consolidated Balance Sheet but Eligible for Offsetting
 
 
 
Gross Amounts Recognized
 
Cash Collateral
 
Derivative Instruments
 
Net Amounts
 
(Dollars in thousands)
Derivative Assets:
 
 
 
 
 
 
 
Commodity and freight derivatives
$
597,210

 
$
—

 
$
42,229

 
$
554,981

Foreign exchange derivatives
2,523

 
—

 
1,174

 
1,349

Interest rate derivatives - hedge
4,200

 
—

 
—

 
4,200

Total
$
603,933

 
$
—

 
$
43,403

 
$
560,530

Derivative Liabilities:
 
 
 
 
 
 
 
Commodity and freight derivatives
$
597,612

 
$
2,504

 
$
42,229

 
$
552,879

Foreign exchange derivatives
2,248

 
—

 
1,174

 
1,074

Interest rate derivatives - non-hedge
130

 
—

 
—

 
130

Total
$
599,990

 
$
2,504

 
$
43,403

 
$
554,083


16


Derivatives Not Designated as Hedging Instruments

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 Consolidated Statements of Operations for the three and nine months ended May 31, 2015 and 2014. We have revised the information that we have historically included in this table below to correct for errors in the previously disclosed amounts. Although such gains and losses have been and continue to be appropriately recorded in the Consolidated Statements of Operations, the previous disclosures did not accurately reflect the derivative gains and losses in each period. These revisions did not materially impact our consolidated financial statements.

 
 
 
For the Three Months Ended May 31,
 
For the Nine Months Ended May 31,
 
Location of
Gain (Loss)
 
2015
 
2014
 
2015
 
2014
 
 
 
(Dollars in thousands)
Commodity and freight derivatives
Cost of goods sold
 
$
113,554

 
$
28,051

 
$
327,745

 
$
178,278

Foreign exchange derivatives
Cost of goods sold
 
4,211

 
(6,487
)
 
12,401

 
(6,681
)
Interest rate derivatives
Interest, net
 
10

 
24

 
84

 
75

Total
 
$
117,775

 
$
21,588

 
$
340,230

 
$
171,672


Commodity and Freight Contracts:
    
As of May 31, 2015 and August 31, 2014, we had outstanding commodity and freight futures 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 and freight contracts accounted for as derivative instruments. We have made revisions to the information that we have historically included in this table below to correct for errors in the previously disclosed amounts. We previously disclosed volume information for physically-settled forward purchase and sale contracts, including some contracts not accounted for as derivatives. As a result, we have corrected the derivative volume disclosure presented below to include information on the notional amounts for contracts accounted for as derivatives in accordance with ASC Topic 815, Derivatives and Hedging. These revisions did not materially impact our previously issued consolidated financial statements.
 
May 31, 2015
 
August 31, 2014
 
Long
 
Short
 
Long
 
Short
 
(Units in thousands)
Grain and oilseed - bushels
614,214

 
819,346
 
655,799

 
802,479
Energy products - barrels
21,777

 
15,569
 
20,191

 
16,431
Processed grain and oilseed- tons
906

 
3,939
 
749

 
3,047
Crop nutrients - tons
84

 
191
 
59

 
126
Ocean and barge freight - metric tons
5,643

 
1,829
 
5,727

 
4,250
Rail freight - rail cars
354

 
175
 
364

 
186
Livestock - pounds
13,800

 
35,680
 
11,960

 
46,520

Foreign Exchange Contracts:

We conduct a substantial portion of our business in U.S. dollars, but we are exposed to some risk relating to foreign currency fluctuations primarily due to grain marketing transactions in South America and Europe and purchases of products from Canada. We use foreign currency derivative instruments to mitigate the impact of exchange rate fluctuations. Although our overall risk relating to foreign currency transactions is not significant, exchange rate fluctuations do, however, impact 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 amounts of our foreign exchange derivative contracts were $912.4 million and $784.4 million as of May 31, 2015 and August 31, 2014, respectively.


17

Interest Rate Contracts:

CHS Capital, our wholly-owned finance subsidiary, has interest rate swaps that lock the interest rates of underlying loans with a combined notional amount of $3.4 million expiring at various times through fiscal 2018, with $0.1 million of the notional amount expiring during fiscal 2015. None of CHS Capital’s interest rate swaps qualify for hedge accounting, and as a result, changes in fair value are recorded in earnings within interest, net in our Consolidated Statements of Operations.

Derivatives Designated as Cash Flow or Fair Value Hedging Strategies

As of May 31, 2015 and August 31, 2014, we had certain derivatives designated as cash flow and fair value hedges.

Interest Rate Contracts:

We have outstanding interest rate swaps with an aggregate notional amount of $420.0 million designated as fair value hedges of portions of our fixed-rate debt. Our objective in entering into these transactions is to offset changes in the fair value of the debt associated with the risk of variability in the 3-month U.S. dollar LIBOR interest rate, in essence converting the fixed-rate debt to variable-rate debt. Offsetting changes in the fair values of both the swap instruments and the hedged debt are recorded contemporaneously each period and only create an impact to earnings to the extent that the hedge is ineffective. During the nine months ended May 31, 2015, we recorded offsetting fair value adjustments of $8.3 million, with no ineffectiveness recorded in earnings.

During the nine months ended May 31, 2015, we entered into interest rate swaps with an aggregate notional amount of $300.0 million designated as cash flow hedges of the expected variability of future interest payments on our anticipated issuance of fixed-rate debt. The swaps expire in fiscal 2016 with no amounts expected to be included in earnings during the next 12 months.

In fiscal 2013, we entered into interest rate swaps designated as cash flow hedges of the expected variability of future interest payments on the forecasted issuance of fixed-rate debt. Gains and losses related to these swaps were initially recorded in accumulated other comprehensive income. In February 2014, the swaps were terminated as the issuance of the underlying debt was no longer probable and, as a result, a $13.5 million pre-tax gain was reclassified into net income in that period.

The following table presents the pretax gains (losses) recorded in other comprehensive income relating to cash flow hedges for the three and nine months ended May 31, 2015 and 2014.
 
 
For the Three Months Ended May 31,
 
For the Nine Months Ended May 31,
 
 
2015
 
2014
 
2015
 
2014
 
 
(Dollars in thousands)
Interest rate derivatives
 
$
389

 
$
—

 
$
(3,907
)
 
$
(10,580
)

The following table presents the pretax gains (losses) relating to cash flow hedges that were reclassified from accumulated other comprehensive loss into income for the three and nine months ended May 31, 2015 and 2014.
 
 
 
For the Three Months Ended May 31,
 
For the Nine Months Ended May 31,
 
Location of
Gain (Loss)
 
2015
 
2014
 
2015
 
2014
 
 
 
(Dollars in thousands)
Interest rate derivatives
Interest income (expense)
 
$
(197
)
 
$
(210
)
 
$
(598
)
 
$
12,933


Note 13        Fair Value Measurements

The following tables present assets and liabilities, included on our Consolidated Balance Sheets, that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair values. Assets and liabilities are classified, in their entirety, based on the lowest level of input that is a significant component of the fair value measurement. The lowest level of input is considered Level 3. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of fair value assets and liabilities within the fair value hierarchy levels.


18

Recurring fair value measurements at May 31, 2015 and August 31, 2014 are as follows:
 
May 31, 2015
 
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:
 

 
 

 
 

 
 

Readily marketable inventories
$
—

 
$
1,227,368

 
$
—

 
$
1,227,368

Commodity and freight derivatives
72,412

 
501,180

 
—

 
573,592

Foreign currency derivatives
—

 
16,783

 
—

 
16,783

Interest rate swap derivatives
—

 
14,649

 
—

 
14,649

Deferred compensation assets
75,723

 
—

 
—

 
75,723

Other assets
11,150

 
—

 
—

 
11,150

Total
$
159,285

 
$
1,759,980

 
$
—

 
$
1,919,265

Liabilities:
 

 
 

 
 
 
 

Commodity and freight derivatives
$
131,312

 
$
368,825

 
$
—

 
$
500,137

Interest rate swap derivatives
—

 
6,148

 
—

 
6,148

Foreign currency derivatives
—

 
22,887

 
—

 
22,887

Accrued liability for contingent crack spread payments related to purchase of noncontrolling interests
—

 
—

 
109,220

 
109,220

Total
$
131,312

 
$
397,860

 
$
109,220

 
$
638,392


 
August 31, 2014
 
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:
 
 
 
 
 
 
 
Readily marketable inventories
$
—

 
$
921,554

 
$
—

 
$
921,554

Commodity and freight derivatives
78,590

 
518,620

 
—

 
597,210

Interest rate swap derivatives
—

 
4,200

 
—

 
4,200

Foreign currency derivatives
2,523

 
—

 
—

 
2,523

Deferred compensation assets
83,217

 
—

 
—

 
83,217

Other assets
8,778

 
—

 
—

 
8,778

Total
$
173,108

 
$
1,444,374

 
$
—

 
$
1,617,482

Liabilities:
 
 
 
 
 
 
 
Commodity and freight derivatives
$
117,690

 
$
479,922

 
$
—

 
$
597,612

Interest rate swap derivatives
—

 
130

 
—

 
130

Foreign currency derivatives
2,248

 
—

 
—

 
2,248

Accrued liability for contingent crack spread payments related to purchase of noncontrolling interests
—

 
—

 
114,917

 
114,917

Total
$
119,938

 
$
480,052

 
$
114,917

 
$
714,907


Readily marketable inventories — Our readily marketable inventories primarily include grain, oilseed, and minimally processed soy-based inventories that are stated at fair values. These commodities are readily marketable, have quoted market prices and may be sold without significant additional processing. We estimate the fair market values of these inventories included in Level 2 primarily based on exchange quoted prices, adjusted for differences in local markets. Changes in the fair market values of these inventories are recognized in our Consolidated Statements of Operations as a component of cost of goods sold.

19


Commodity, freight and foreign currency derivatives — Exchange traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified within Level 1. Our forward commodity purchase and sales contracts, flat price or basis fixed derivative contracts, 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, adjusted for location specific inputs, and are classified within Level 2. The location specific inputs are generally broker or dealer quotations, or market transactions in either the listed or OTC markets. Changes in the fair values of these contracts are recognized in our Consolidated Statements of Operations as a component of cost of goods sold.

Interest rate swap derivatives — Fair values of our interest rate swap liabilities are determined utilizing valuation models that are widely accepted in the market to value such OTC derivative contracts. The specific terms of the contracts, as well as market observable inputs, such as interest rates and credit risk assumptions, are factored into the models. As all significant inputs are market observable, all interest rate swaps are classified within Level 2. Changes in the fair values of contracts not designated as hedging instruments for accounting purposes are recognized in our Consolidated Statements of Operations as a component of interest, net. See Note 12, Derivative Financial Instruments and Hedging Activities for additional information about interest rate swaps designated as fair value and cash flow hedges.
        
Deferred compensation and other assets — Our deferred compensation investments, Rabbi Trust assets and available-for-sale investments in common stock of other companies 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 Consolidated Statements of Operations as a component of marketing, general and administrative expenses.
 
Accrued liability for contingent crack spread payment related to purchase of noncontrolling interests — The fair value of the accrued contingent consideration liability was calculated utilizing an average price option model, an adjusted Black-Scholes pricing model commonly used in the energy industry to value options. The model uses market observable inputs and unobservable inputs. Due to significant unobservable inputs used in the pricing model, the liability is classified within Level 3.
Quantitative Information about Level 3 Fair Value Measurements
 
 
Fair Value
 
 
 
 
 
Range
Item
 
May 31, 2015
(Dollars in thousands)
 
Valuation Technique
 
Unobservable Input
 
(Weighted Average)
Accrued liability for contingent crack spread payments related to purchase of noncontrolling interests
 
$109,220
 
Adjusted Black-Scholes option pricing model
 
Forward crack spread margin on May 31, 2015 (a)
 
 $20.27-$25.30 ($24.16)
 
Contractual target crack spread margin (b)
 
$17.50
 
Expected volatility (c)
 
157.34%
 
Risk-free interest rate (d)
 
0.09-0.94% (0.54%)
 
Expected life - years (e)
 
0.25-2.25
(1.34)
(a) Represents forward crack spread margin quotes and management estimates based on future settlement dates
(b) Represents the minimum contractual threshold that would require settlement with the counterparties
(c) Represents quarterly adjusted volatility estimates derived from daily historical market data
(d) Represents yield curves for U.S. Treasury securities
(e) Represents the range in the number of years remaining related to each contingent payment

Valuation processes for Level 3 measurements — Management is responsible for determining the fair value of our Level 3 financial instruments. Option pricing methods are utilized, as indicated above. Inputs used in the option pricing models are based on quotes obtained from third party vendors as well as management estimates for periods in which quotes cannot be obtained. Each reporting period, management reviews the unobservable inputs provided by third-party vendors for reasonableness utilizing relevant information available to us. Management also takes into consideration current and expected market trends and compares the liability’s fair value to hypothetical payments using known historical market data to assess reasonableness of the resulting fair value.

Sensitivity analysis of Level 3 measurements — The significant unobservable inputs that are susceptible to periodic fluctuations used in the fair value measurement of the accrued liability for contingent crack spread payments related to the purchase of noncontrolling interests are the adjusted forward crack spread margin and the expected volatility. Significant

20

increases (decreases) in either of these inputs in isolation would result in a significantly higher (lower) fair value measurement. Although changes in the expected volatility are driven by fluctuations in the underlying crack spread margin, changes in expected volatility are not necessarily accompanied by a directionally similar change in the forward crack spread margin. Directional changes in the expected volatility can be affected by a multitude of factors including the magnitude of daily fluctuations in the underlying market data, market trends, timing of fluctuations, and other factors.

The following table represents a reconciliation of liabilities measured at fair value using significant unobservable inputs (Level 3) for the three months ended May 31, 2015 and 2014, respectively:
 
 
Level 3 Liabilities
 
 
Accrued liability for contingent crack spread payments related to purchase of noncontrolling interests
 
 
2015
 
2014
 
 
(Dollars in thousands)
Balances, February 28, 2015 and 2014, respectively
 
$
121,070

 
$
140,631

Total (gains) losses included in cost of goods sold
 
(11,850
)
 
(10,472
)
Balances, May 31, 2015 and 2014, respectively
 
$
109,220

 
$
130,159


The following table represents a reconciliation of liabilities measured at fair value using significant unobservable inputs (Level 3) for the nine months ended May 31, 2015 and 2014, respectively:
 
 
Level 3 Liabilities
 
 
Accrued liability for contingent crack spread payments related to purchase of noncontrolling interests
 
 
2015
 
2014
 
 
(Dollars in thousands)
Balances, August 31, 2014 and 2013, respectively
 
$
114,917

 
$
134,134

Total (gains) losses included in cost of goods sold
 
(5,697
)
 
(3,975
)
Balances, May 31, 2015 and 2014, respectively
 
$
109,220

 
$
130,159


There were no material transfers between Level 1, Level 2 and Level 3 assets and liabilities.

Note 14        Commitments and Contingencies

Unconditional Purchase Obligations

Unconditional purchase obligations are commitments to transfer funds in the future for fixed or minimum amounts or quantities of goods or services at fixed or minimum prices. Our long-term unconditional purchase obligations primarily relate to pipeline and grain handling take-or-pay and through-put agreements, and are not recorded on our Consolidated Balance Sheets. As of May 31, 2015, minimum future payments required under long-term commitments that are noncancelable, and that third parties have used to secure financing for the facilities that will provide the contracted goods, are as follows:
 
Payments Due by Period
 
Total
 
Less than
1 Year
 
1 - 3
Years
 
3 - 5
Years
 
More than
5 Years
 
(Dollars in thousands)
Long-term unconditional purchase obligations
$
912,183

 
$
79,751

 
$
129,020

 
$
114,110

 
$
589,302


The discounted aggregate amount of the minimum required payments under long-term unconditional purchase obligations, based on current exchange rates at May 31, 2015 is $729.9 million.


21

Guarantees

We are a guarantor for lines of credit and performance obligations of related companies. As of May 31, 2015, our bank covenants allowed maximum guarantees of $1.0 billion, of which $94.6 million was outstanding. 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 guarantees were current as of May 31, 2015.

22

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The following discussions of financial condition and results of operations should be read in conjunction with the unaudited interim financial statements and notes to such statements and the cautionary statement regarding forward-looking statements found at the beginning of Part I, Item 1, of this Quarterly Report on Form 10-Q, as well as our consolidated financial statements and notes thereto for the year ended August 31, 2014, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission. This discussion contains forward-looking statements based on current expectations, assumptions, estimates and projections of management. Actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, as more fully described in the cautionary statement and elsewhere in this Quarterly Report on Form 10-Q.

CHS Inc. (CHS, we or us) is a diversified company, which provides grain, foods and energy resources to businesses and consumers on a global basis. As a cooperative, we are owned by farmers, ranchers and their member cooperatives across the United States. We also have preferred stockholders that own shares of our 8% Cumulative Redeemable Preferred Stock (8% Preferred Stock), our Class B Cumulative Redeemable Preferred Stock, Series 1 (Class B Series 1 Preferred Stock), our Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 2 (Class B Series 2 Preferred Stock), our Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 3 (Class B Series 3 Preferred Stock) and our Class B Cumulative Redeemable Preferred Stock, Series 4 (Class B Series 4 Preferred Stock) listed on the NASDAQ Stock Market LLC (NASDAQ) under the symbols CHSCP, CHSCO, CHSCN, CHSCM and CHSCL, respectively.

We provide a full range of production agricultural inputs such as refined fuels, propane, farm supplies, animal nutrition and agronomy products, as well as services, which include hedging, financing and insurance services. We own and operate petroleum refineries and pipelines and market and distribute refined fuels and other energy products under the Cenex® brand through a network of member cooperatives and independents. We purchase grains and oilseeds directly and indirectly from agricultural producers primarily in the midwestern and western United States. These grains and oilseeds are either sold to domestic and international customers or further processed into a variety of grain-based food and other products.

Our consolidated financial statements include the accounts of CHS and all of our wholly-owned and majority-owned subsidiaries and limited liability companies, including National Cooperative Refinery Association (NCRA) in our Energy segment. The effects of all significant intercompany transactions have been eliminated.

Prior to fiscal 2015, our renewable fuels marketing business was included in our Energy segment and our renewable fuels production business was included in our Ag segment. Effective in the first quarter of fiscal 2015, we reconfigured certain parts of our business to better align our ethanol supply chain. As a result, our renewable fuels marketing business is now managed together with our renewable fuels production business within our Ag segment. In accordance with Accounting Standards Codification (ASC) Topic 280, Segment Reporting, we have identified our operating segments to reflect the manner in which our chief operating decision maker evaluates performance and manages the business, and we have aggregated those operating segments into our reportable Energy and Ag segments. Prior period segment information has been revised to reflect this change to ensure comparability.

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, and also serves as wholesaler and retailer of crop inputs. Corporate and Other primarily represents our non-consolidated wheat milling and packaged food joint ventures, as well as our business solutions operations, which consist of commodities hedging, insurance and financial services related to crop production.

Corporate administrative expenses are allocated to each business segment, and Corporate and Other, based on direct usage for services that can be tracked, 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 operating results vary throughout the year. Our income is generally lowest during the second fiscal quarter and highest during the third fiscal quarter. For example, in our Ag segment, our crop nutrients and country operations businesses generally experience higher volumes and income during the spring planting season and in the fall, which corresponds to harvest. Our grain marketing operations are also subject to fluctuations in volume and earnings based on producer harvests, world grain prices and demand. Our Energy segment generally experiences

23

higher volumes and profitability in certain operating areas, such as refined products, in the summer and early fall when gasoline and diesel fuel usage is highest and is subject to global supply and demand forces. Other energy products, such as propane, may experience higher volumes and profitability during the winter heating and 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 the weather, crop damage due to disease or insects, drought, the availability and adequacy of supply, government regulations and policies, world events, and general political and economic conditions.

While our revenues and operating results are derived from businesses and operations which are wholly-owned and majority-owned, a portion of our business operations are conducted through companies in which we hold ownership interests of 50% or less and do not control the operations. We account for these investments primarily using the equity method of accounting, wherein we record our proportionate share of income or loss reported by the entity as equity income from investments, without consolidating the revenues and expenses of the entity in our Consolidated Statements of Operations. In our Ag segment, this principally includes our 50% ownership in TEMCO, LLC. In Corporate and Other, these investments principally include our 50% ownership in Ventura Foods, LLC (Ventura Foods) and our 12% ownership in Ardent Mills, LLC.


Results of Operations

Comparison of the three months ended May 31, 2015 and May 31, 2014

General.  We recorded income before income taxes of $170.5 million during the three months ended May 31, 2015 compared to $439.6 million during the three months ended May 31, 2014, a decrease of $269.1 million. Operating results reflected decreased pretax earnings in our Energy and Ag segments as well as Corporate and Other due to a one-time gain in fiscal 2014.

Our Energy segment generated income before income taxes of $83.3 million for the three months ended May 31, 2015 compared to $197.7 million in the three months ended May 31, 2014, representing a decrease of $114.4 million (58%). The majority of our decreased earnings for the three months ended May 31, 2015 was driven by our refined fuels business due to significantly lower refining margins due to a turnaround at our McPherson refinery during the third quarter of fiscal 2015. We are subject to the Renewable Fuels Standard (RFS) which requires refiners to blend renewable fuels (e.g., ethanol, biodiesel) into their finished transportation fuels or purchase renewable energy credits, identified as RINs, in lieu of blending. The Environmental Protection Agency (EPA) generally establishes new annual renewable fuels percentage standards (mandate) for each compliance year in the preceding year, although the EPA did not release the proposed mandate for 2014 or 2015 until May 2015. We generate RINs under the RFS in our renewable fuels operations and through our blending activities at our terminals, however 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 extremely volatile as refiners await an EPA adjustment to the mandate. As mentioned above, in May 2015, the EPA released the proposed mandate for years 2014, 2015, and 2016 which resulted in a decline in the price of RINs. A significant change in the price of RINs could have a material impact on our results.

Our Ag segment generated income before income taxes of $61.7 million for the three months ended May 31, 2015 compared to $117.2 million in the three months ended May 31, 2014, a decrease in earnings of $55.5 million (47%). Earnings from our wholesale crop nutrients business decreased $32.7 million for the three months ended May 31, 2015 compared with the three months ended May 31, 2014, primarily due to lower margins and volumes. Our grain marketing earnings decreased by $22.6 million during the three months ended May 31, 2015, compared with the three months ended May 31, 2014, primarily as a result of decreased volumes and margins as well as robust logistical performance in our third quarter of fiscal 2014 that didn't occur in fiscal 2015. Our country operations earnings decreased $19.5 million during the three months ended May 31, 2015, compared with the three months ended May 31, 2014, primarily from decreased retail agronomy margins. Earnings from our renewable fuels marketing and production operations decreased by $1.0 million for the three months ended May 31, 2015 compared with the three months ended May 31, 2014, due primarily to significantly lower market prices on ethanol resulting in lower marketing commissions, which offset the impact of an earnings increase associated with the acquisition of our Rochelle, Illinois ethanol plant in the fourth quarter of fiscal 2014. These decreases were partially offset by our processing and food ingredients businesses which experienced increased earnings of $25.5 million for the three months ended May 31, 2015 compared with the three months ended May 31, 2014, primarily related to decreased operating expenses as well as improved margins in our soybean crushing with a change in product mix.


24


Corporate and Other generated income before income taxes of $25.5 million during the three months ended May 31, 2015 compared to $124.7 million during the three months ended May 31, 2014, a decrease in earnings of $99.2 million. The decrease was primarily driven by a gain associated with the contribution of our Horizon Milling assets to Ardent Mills in fiscal 2014. See Note 4, Investments to our consolidated financial statements included in our Quarterly Report on Form 10-Q for additional information.

Net Income attributable to CHS Inc.  Consolidated net income attributable to CHS Inc. for the three months ended May 31, 2015 was $178.1 million compared to $379.5 million for the three months ended May 31, 2014, which represents a $201.4 million (53%) decrease.

Revenues.  Consolidated revenues were $8.7 billion for the three months ended May 31, 2015 compared to $12.0 billion for the three months ended May 31, 2014, a 28% decrease in revenues.

Our Energy segment revenues, after elimination of intersegment revenues, of $1.6 billion decreased by $1.1 billion (40%) during the three months ended May 31, 2015 compared to the three months ended May 31, 2014. During the three months ended May 31, 2015 and 2014, our Energy segment recorded revenues from sales to our Ag segment of $94.1 million and $149.8 million, respectively, which are eliminated as part of the consolidation process. Refined fuels revenues decreased $973.3 million (40%), of which $857.0 million was related to lower prices and $116.3 million was due to lower volumes when compared to the same period of the previous year. The sales price of refined fuels decreased $1.17 per gallon (37%) and volume decreased approximately 5%. Revenues from propane sales decreased $96.8 million (44%), which included $73.2 million related to lower volumes and $23.5 million related to lower average selling prices when compared to the same period in fiscal 2014. The average selling price of propane decreased $0.20 per gallon (16%) when compared to the same period in fiscal 2014. The decrease in volumes and price was primarily caused by an over-supply of propane in the market place due to the mild winter in the current year.

Our Ag segment revenues, after elimination of intersegment revenues, of $7.1 billion decreased $2.1 billion (23%) during the three months ended May 31, 2015 compared to the three months ended May 31, 2014.

Grain revenues in our Ag segment were $4.0 billion and $5.8 billion for the three months ended May 31, 2015 and 2014, respectively. The decrease in grain revenues was primarily the result of lower average sales prices of $935.3 million and lower net volumes of $723.0 million during the three months ended May 31, 2015 compared to the same period in fiscal 2014. The average sales price of all grain and oilseed commodities sold reflected a decrease of $1.40 per bushel (19%) when compared to the three months ended May 31, 2014. Wheat, corn and soybean volumes decreased by approximately 13% compared to the three months ended May 31, 2014.

Revenues in our processing and food ingredients business in our Ag segment were $365.2 million, a decrease of $62.2 million (15%) during the three months ended May 31, 2015 compared to the three months ended May 31, 2014. This net decrease in revenues was due to a $147.4 million decrease in the average selling price of our oilseed products, partially offset by an increase in volumes of $85.2 million compared to the three months ended May 31, 2014.

Wholesale crop nutrient revenues in our Ag segment totaled $900.4 million and $1.1 billion during the three months ended May 31, 2015 and 2014, respectively, a decrease of $162.4 million (15%). This decrease was due to $137.6 million in lower volumes and $24.9 million associated with lower prices during the three months ended May 31, 2015 compared to the same period of the previous year. The average sales price of all fertilizers sold decreased $9.57 (3%) per ton compared to the same period of the previous year. Our wholesale crop nutrient volumes decreased 13% during the three months ended May 31, 2015 compared with the three months ended May 31, 2014. This decrease in volumes is primarily the result of uncertainty in the agricultural economy and, consequently, producers being more conservative in their approach to crop nutrients.

Our renewable fuels revenues from our marketing and production operations decreased by $218.8 million during the three months ended May 31, 2015 when compared with the same period in 2014. These decreased renewable fuels revenues were driven by a decrease of $331.0 million associated with lower average selling prices partially offset by higher volumes of $112.2 million. The lower prices of our renewable fuels were driven by lower prices of traditional fuels and was partially offset by the acquisition of our ethanol plant in our fourth quarter of fiscal 2014 which generated higher volumes in the three months ended May 31, 2015 than in the previous year.

Our Ag segment other product revenues during the three months ended May 31, 2015, primarily feed and farm supplies, were $1.3 billion, a decrease of $23.2 million (2%) compared to the three months ended May 31, 2014, primarily the result of a decrease in our country operations energy product sales price and feed sales.

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Total revenues also include other revenues generated primarily within our Ag segment and Corporate and Other. Our Ag segment’s country operations elevators and agri-service centers derive other revenues from activities related to production agriculture, which include grain storage, grain cleaning, fertilizer spreading, crop protection spraying and other services of this nature, and our grain marketing operations receive other revenues at our export terminals from activities related to loading vessels. Corporate and Other derives revenues primarily from our financing, hedging and insurance operations.

Cost of Goods Sold.  Consolidated cost of goods sold was $8.4 billion for the three months ended May 31, 2015 compared to $11.5 billion for the three months ended May 31, 2014, representing a 26% decrease.

Our Energy segment cost of goods sold, after elimination of intersegment costs, of $1.5 billion decreased by $937.1 million (38%) during the three months ended May 31, 2015 compared to the three months ended May 31, 2014. For the three months ended May 31, 2015, refined fuels costs decreased $836.9 million, which was primarily driven by a decrease in the average cost of $1.00 per gallon (35%) when compared to the three months ended May 31, 2014. Cost of goods sold for propane decreased $97.0 million (45%), which reflects a 33% decrease in volumes and an average cost decrease of $0.22 per gallon (18%), when compared to the three months ended May 31, 2014.

Our Ag segment cost of goods sold, after elimination of intersegment costs, of $6.9 billion decreased $2.1 billion (23%) during the three months ended May 31, 2015 compared to the three months ended May 31, 2014. Grain cost of goods sold in our Ag segment totaled $3.9 billion and $5.7 billion during the three months ended May 31, 2015 and 2014, respectively. The cost of grains and oilseed procured through our Ag segment decreased $1.8 billion (32%) compared to the three months ended May 31, 2014. This decrease is primarily the result of a $1.41 (19%) decrease in the average cost per bushel and a 13% decrease in the bushels sold, as compared to the same period of the previous year. The average month-end market price per bushel of corn, soybeans and spring wheat have all decreased compared to the same period of the previous year.

Our processing and food ingredients cost of goods sold in our Ag segment of $351.6 million decreased $76.2 million (18%) during the three months ended May 31, 2015 compared to the three months ended May 31, 2014, which was primarily due to the lower cost of soybeans purchased.

Wholesale crop nutrients cost of goods sold in our Ag segment totaled $855.6 million and $986.9 million during the three months ended May 31, 2015 and 2014, respectively. The net decrease of $131.3 million (13%) was due to a net 13% decrease in the tons sold when compared to the same period of the previous year.

Renewable fuels cost of goods sold from our marketing and production operations decreased $210.0 million during the three months ended May 31, 2015, due to a significant decrease in the average cost per gallon of $1.25 (45%), which was partially offset by higher volumes associated with the acquisition of our ethanol plant in the fourth quarter of fiscal 2014.

Our Ag segment other product cost of goods sold, primarily feed and farm supplies, was approximately flat during the three months ended May 31, 2015 compared to the three months ended May 31, 2014, primarily the result of an increase in volumes of 15% which were almost completely offset by decreased product costs.

Marketing, General and Administrative.  Marketing, general and administrative expenses of $165.3 million for the three months ended May 31, 2015 increased by $6.5 million (4%) compared to the three months ended May 31, 2014, primarily due to an increased bad debt provision related to an international customer.

Gain/Loss on Investments. Gain on investments for the three months ended May 31, 2015 compared to the same period of the prior year decreased $108.8 million. The change was primarily driven by a gain associated with the contribution of our Horizon Milling assets to Ardent Mills in fiscal 2014.

Interest, net.  Net interest of $9.5 million for the three months ended May 31, 2015 decreased $33.0 million compared to the three months ended May 31, 2014. The decrease was primarily driven by a $19.0 million decrease in patronage earned by the noncontrolling interests of NCRA, which is recorded as interest expense as a result of our agreement to purchase the remaining NCRA noncontrolling interest, and the impact of increased capitalized interest of $14.5 million associated with our ongoing capital projects. These reductions to interest expense were partially offset by increased interest of $1.0 million associated with higher borrowings.

Equity Income from Investments.  Equity income from investments of $34.8 million for the three months ended May 31, 2015 increased $9.3 million (36%) compared to the three months ended May 31, 2014. We record equity income or loss

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primarily from the investments in which we have an ownership interest of 50% or less and have significant influence, but not control, for our proportionate share of income or loss reported by the entity, without consolidating the revenues and expenses of the entity in our Consolidated Statements of Operations.

Income Taxes.  We recorded an income tax benefit of $7.3 million for the three months ended May 31, 2015, compared to a tax expense of $59.7 million for the three months ended May 31, 2014, with respective effective tax rates of (4.3%) and 13.6%. The tax benefit for the three months ended May 31, 2015 is primarily due to the recognition of deferred tax benefits related to the issuance of non-qualified equity certificates in fiscal 2013 and 2014.

Comparison of the nine months ended May 31, 2015 and May 31, 2014

General.  We recorded income before income taxes of $696.6 million during the nine months ended May 31, 2015 compared to $999.6 million during the nine months ended May 31, 2014, a decrease of $303.0 million (30%). Results reflected decreased pretax earnings in our Energy and Ag segments, as well as Corporate and Other due to a one-time gain in fiscal 2014.

Our Energy segment generated income before income taxes of $374.6 million for the nine months ended May 31, 2015 compared to $553.2 million in the nine months ended May 31, 2014, representing a decrease of $178.6 million (32%), primarily due to significantly reduced refining margins in fiscal 2015 due to the turnaround at our McPherson refinery in the third quarter of fiscal 2015 and, to a lesser extent, decreased earnings in our propane business. We are subject to the RFS which requires refiners to blend renewable fuels (e.g., ethanol, biodiesel) into their finished transportation fuels or purchase renewable energy credits, identified as RINs, in lieu of blending. The EPA generally establishes new annual renewable fuels percentage standards (mandate) for each compliance year in the preceding year, although the EPA did not release the proposed mandate for 2014 or 2015 until May 2015. We generate RINs under the RFS in our renewable fuels operations and through our blending activities at our terminals, however 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 extremely volatile as refiners await an EPA adjustment to the mandate. As mentioned above, in May 2015, the EPA released the proposed mandate for years 2014, 2015, and 2016, which resulted in a decline in the price of RINs. A significant change in the price of RINs could have a material impact on our results.
  
Our Ag segment generated income before income taxes of $262.0 million for the nine months ended May 31, 2015 compared to $274.3 million in the nine months ended May 31, 2014, a decrease in earnings of $12.3 million (5%). Our grain marketing earnings decreased $32.7 million during the nine months ended May 31, 2015 compared with the same period in the prior year, primarily as a result of robust logistical performance in fiscal 2014 which didn't reoccur in fiscal 2015 as well as decreased grain volumes and foreign currency exchange losses. Our country operations earnings decreased $14.8 million primarily from decreased retail agronomy margins, which was partially offset by increased grain volumes and margins during the nine months ended May 31, 2015. Earnings from our wholesale crop nutrients business decreased $5.0 million for the nine months ended May 31, 2015, compared with the same period in fiscal 2014, primarily due to decreased volumes. Earnings from our renewable fuels marketing and production operations decreased $0.9 million for the nine months ended May 31, 2015 compared with the nine months ended May 31, 2014, primarily due to significantly lower market prices for ethanol which resulted in lower marketing commissions and was mostly offset by earnings from the acquisition of our Rochelle, Illinois ethanol plant in the fourth quarter of fiscal 2014. Our processing and food ingredients businesses experienced an increase in earnings of $32.1 million for the nine months ended May 31, 2015 compared to the same period of the previous year, primarily due to a decrease in operating expenses at our plants and a change in our product mix which drove our margins higher.

Corporate and Other generated income before income taxes of $60.0 million for the nine months ended May 31, 2015 compared to $172.1 million during the same period of the previous year, a decrease in earnings of $112.1 million (65%). The decrease is primarily related to the gain associated with the contribution of our Horizon Milling assets to Ardent Mills in fiscal 2014. See Note 4, Investments to our consolidated financial statements included in our Quarterly Report on Form 10-Q for additional information.

Net Income attributable to CHS Inc.  Consolidated net income attributable to CHS Inc. for the nine months ended May 31, 2015 was $649.6 million compared to $881.7 million for the nine months ended May 31, 2014, which represents a $232.1 million decrease (26%).

Revenues.  Consolidated revenues were $26.6 billion for the nine months ended May 31, 2015 compared to $32.7 billion for the nine months ended May 31, 2014, which represents a $6.1 billion decrease (19%).

Our Energy segment revenues of $6.3 billion, after elimination of intersegment revenues, decreased by $2.3 billion (27%) during the nine months ended May 31, 2015 compared to the nine months ended May 31, 2014. During the nine months ended May 31, 2015 and 2014, our Energy segment recorded revenues from sales to our Ag segment of $374.6 million and

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$436.5 million, respectively. Refined fuels revenues decreased $1.9 billion (27%), all of which was related to a decrease in the net average selling price, compared to the same period in the previous year. The sales price of refined fuels products decreased $0.81 per gallon (26%), compared to the same nine-month period of the previous year. Propane revenues decreased $367.6 million (30%), of which $219.4 million was related to a decrease in volumes and $148.2 million was attributable to a decrease in the net average selling price. The average sales price for our propane products decreased due to an extremely cold winter as well as a condensed crop drying season in fiscal 2014 that didn't reoccur in the current year. Propane sales volume decreased 18%, and the average selling price of propane decreased $0.21 per gallon (15%) in comparison to the same period of the previous year.

Our Ag segment revenues of $20.2 billion, after elimination of intersegment revenues, decreased $3.8 billion (16%) during the nine months ended May 31, 2015 compared to the nine months ended May 31, 2014.

Grain revenues in our Ag segment totaled $13.1 billion and $16.2 billion during the nine months ended May 31, 2015 and 2014, respectively, a decrease of $3.1 billion (19%). Approximately $2.4 billion of this decrease is due to decreased average grain selling prices, with the remaining decrease driven by a $655.0 million net decrease in volume during the nine months ended May 31, 2015 compared to the same period in the prior year. The average sales price of all grain and oilseed commodities sold reflected a decrease of $1.14 per bushel (15%) over the same nine-month period in the previous year.

Our processing and food ingredients revenues in our Ag segment of $1.2 billion decreased $161.4 million (12%) during the nine months ended May 31, 2015 compared to the nine months ended May 31, 2014. The net decrease in revenues is comprised of $331.4 million from a decrease in the average selling price, partially offset by a $169.9 million increase in volumes of our oilseed products compared to the nine months ended May 31, 2014. Typically, changes in average selling prices of oilseed products are primarily driven by the average market prices of soybeans.

Wholesale crop nutrient revenues in our Ag segment totaled $1.9 billion and $2.1 billion during the nine months ended May 31, 2015 and 2014, respectively, a decrease of $275.1 million (12%). Of this decrease, $233.4 million was related to a decrease in volumes and $41.7 million was related to a decrease in average fertilizer selling prices, during the nine months ended May 31, 2015 compared to the same period in the prior year. Our wholesale crop nutrient volumes decreased 11% during the nine months ended May 31, 2015 compared with the same period in the previous year. The average selling price of all fertilizers sold reflected a decrease of $7.33 per ton (2.1%) compared with the same period of the previous year.

Our renewable fuels revenue from our marketing and production operations decreased $286.6 million during the nine months ended May 31, 2015 compared to the nine months ended May 31, 2014. The decrease was primarily the result of significantly lower prices of $0.69 (29%) per gallon which accounted for $530.8 million of the decrease. The impact of lower prices was partially offset by higher volumes which increased revenues by $244.3 million. The lower average selling price of our ethanol was impacted by the decline in the price of traditional fuels. The increase in volumes sold is mostly due to the acquisition of our Rochelle, Illinois ethanol plant in our fourth quarter of fiscal 2014.

Our Ag segment other product revenues, primarily feed and farm supplies, of $2.3 billion decreased by $64.7 (3%) million during the nine months ended May 31, 2015 compared to the nine months ended May 31, 2014. The decrease was primarily the result of decreased country operations retail sales of feed and the sales price of energy related products.

Total revenues include other revenues generated primarily within our Ag segment and Corporate and Other. Our Ag segment's country operations elevators and agri-service centers derive other revenues from activities related to production agriculture, which include grain storage, grain cleaning, fertilizer spreading, crop protection spraying and other services of this nature, and our grain marketing operations receive other revenues at our export terminals from activities related to loading vessels. Corporate and Other derives revenues primarily from our financing, hedging and insurance operations.

Cost of Goods Sold.  Consolidated cost of goods sold was $25.5 billion for the nine months ended May 31, 2015 compared to $31.3 billion for the nine months ended May 31, 2014, which represents a $5.8 billion (19%) decrease.

Our Energy segment cost of goods sold, after elimination of intersegment costs, of $5.8 billion decreased by $2.1 billion (26%) during the nine months ended May 31, 2015 compared to the nine months ended May 31, 2014. The decrease in cost of goods sold is primarily due to a decrease in the cost of goods sold for refined fuels and propane. Specifically, refined fuels cost of goods sold decreased $1.7 billion (26%) which reflects a $0.72 per gallon (26%) decrease in the average cost of refined fuels when compared to the same period of the previous year. The cost of goods sold of propane decreased $342.3 million (29%), primarily from an average cost decrease of $0.19 per gallon (13%) and an 18% decrease in volumes when compared to the prior year. The prior year experienced higher volumes and prices due to extremely cold temperatures and a condensed crop drying season; none of which occurred during the nine months ended May 31, 2015.

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Our Ag segment cost of goods sold, after elimination of intersegment costs, of $19.6 billion, decreased $3.8 billion (16%) during the nine months ended May 31, 2015 compared to the nine months ended May 31, 2014. Grain cost of goods sold in our Ag segment totaled $12.8 billion and $15.9 billion during the nine months ended May 31, 2015 and 2014, respectively. The cost of grains and oilseed procured through our Ag segment decreased $3.1 billion (19%) compared to the nine months ended May 31, 2014. The majority of the decrease was driven by a lower average cost per bushel of $1.18 (16%), which accounted for $2.4 billion of the decrease, with the remainder attributable to a 4% decrease in volumes contributing $643.4 million to the decrease, for the nine months ended May 31, 2015, compared to the same period in the prior year. The average month-end market price per bushel of soybeans, corn and spring wheat decreased compared to the same period of the previous year.

Our processing and food ingredients cost of goods sold in our Ag segment of $1.1 billion decreased $180.5 million (14%) during the nine months ended May 31, 2015 compared to the nine months ended May 31, 2014, which was primarily due to decreases in the cost of soybeans purchased, partially offset by higher volumes.

Wholesale crop nutrients cost of goods sold in our Ag segment totaled $1.8 billion and $2.1 billion during the nine months ended May 31, 2015 and 2014, respectively, a decrease of $279.3 million (13%). This decrease is comprised of a decrease in the average cost per ton of fertilizer of $9.94 (3%), and a decrease in the tons sold of 11%, when compared to the same nine-month period in the prior year.

Renewable fuels cost of goods sold associated with our marketing and production operations decreased $303.8 million, during the nine months ended May 31, 2015, primarily from a decrease in the average cost per gallon of $0.71 (30%) which was partially offset by an increase in volumes, when compared with the same period of the previous year. The increase in volumes was due to the ethanol sales associated with the ethanol plant we acquired in the fourth quarter of fiscal 2014.

Our Ag segment other product cost of goods sold, primarily feed and farm supplies, decreased $49.1 million (2%) during the nine months ended May 31, 2015 compared to the nine months ended May 31, 2014, primarily the result of decreased country operations retail sales of feed and the purchase price of energy related products.

Marketing, General and Administrative.  Marketing, general and administrative expenses of $498.0 million for the nine months ended May 31, 2015 increased by $50.2 million (11%) compared to the nine months ended May 31, 2014, primarily due to additional head count to support our operations and expansion, increased bad debt provision related to an international customer and increased information technology maintenance and marketing costs.

Gain/Loss on Investments. Gain on investments for the nine months ended May 31, 2015 compared to the same period of the prior year decreased $106.3 million. The change was primarily driven by a gain associated with the contribution of our Horizon Milling assets to Ardent Mills in fiscal 2014.

Interest, net.  Net interest of $39.6 million for the nine months ended May 31, 2015 decreased $62.7 million compared to the nine months ended May 31, 2014. Approximately $35.2 million of the decrease was related to capitalized interest associated with our ongoing capital projects, and $32.5 million was associated with a decrease in patronage earned by the noncontrolling interests of NCRA. These were partially offset by a gain on interest rate swaps in the second quarter of fiscal 2014 that didn't reoccur in fiscal 2015.
 
Equity Income from Investments.  Equity income from investments of $83.5 million for the nine months ended May 31, 2015 decreased $5.7 million (6%) compared to the nine months ended May 31, 2014. We record equity income or loss from the investments in which we have an ownership interest of 50% or less and have significant influence, but not control, for our proportionate share of income or loss reported by the entity, without consolidating the revenues and expenses of the entity in our Consolidated Statements of Operations.

Income Taxes.  Income tax expense was $47.6 million for the nine months ended May 31, 2015 compared with $116.1 million for the nine months ended May 31, 2014, resulting in effective tax rates of 6.8% and 11.6%, respectively. The decrease in the effective tax rates is primarily due to the recognition of deferred tax benefits during the third quarter of fiscal 2015 related to the issuance of non-qualified equity certificates in fiscal 2013 and 2014. The federal and state statutory rate applied to nonpatronage business activity was 38.1% for the nine-month periods ended May 31, 2015 and 2014. The income taxes and effective tax rate vary each year based upon profitability and nonpatronage business activity during each of the comparable years. We expect to settle with the Internal Revenue Service on a certain tax item in the fourth quarter of fiscal 2015, which would have a significant favorable impact to our tax rate and, consequently, to our net income.


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Liquidity and Capital Resources
    
In assessing our financial condition, we consider factors such as working capital and internal benchmarking related to our applicable financial bank covenants. We fund our operations through a combination of cash flows from operations and our revolving credit facility. We fund our capital expenditures and growth primarily through a combination of operating cash flows, long-term debt and preferred stock.

We announced in September 2014 that our Board of Directors approved plans to begin construction of a fertilizer manufacturing plant in Spiritwood, North Dakota, anticipated to cost more than $3.0 billion. We continue to evaluate the feasibility of these plans relating to several factors. Those factors include the financial and contractual suitability of a proposed lump sum turn key contract to construct the facility and the technical ability to secure a reliable, adequate, long-term supply of water to operate the facility. If constructed, we would expect to finance the project through a combination of issuance of preferred stock and long-term debt. In September 2014, we took an initial step in developing financing capability for this project by issuing 19,700,000 shares of Class B Series 3 Preferred Stock, which yielded approximately $476.7 million in cash after underwriting discounts and offering expenses. In January 2015, we issued 20,700,000 shares of Class B Series 4 Preferred Stock, which yielded approximately $501.0 million after underwriting discounts and offering expenses, to provide partial financing capability for this project. See "Cash Flows from Financing Activities - Other Financing" below for additional information about the preferred stock issued.
    
On May 31, 2015, we had working capital, defined as current assets less current liabilities, of $3.3 billion and a current ratio, defined as current assets divided by current liabilities, of 1.6 compared to working capital of $3.2 billion and a current ratio of 1.5 on August 31, 2014. On May 31, 2014, we had working capital of $3.5 billion and a current ratio of 1.6 compared to working capital of $3.1 billion and a current ratio of 1.5 on August 31, 2013.
    
On May 31, 2015 and August 31, 2014 we had a five-year revolving credit facility with a syndication of domestic and international banks which expires in June 2018, with a committed amount of $2.5 billion and no amounts outstanding as of May 31, 2015 and August 31, 2014. The major financial covenants for the revolving facility require us to maintain a minimum consolidated net worth, adjusted as defined in the credit agreements, of $2.5 billion and a consolidated funded debt to consolidated cash flow ratio of no greater than 3.00 to 1.00. The term consolidated cash flow is principally our earnings before interest, taxes, depreciation and amortization (EBITDA) with adjustments as defined in the credit agreements. A third financial ratio does not allow our adjusted consolidated funded debt to adjusted consolidated equity to exceed 0.80 to 1.00 at any time. As of May 31, 2015, we were in compliance with all of these covenants. With our current cash balances and our available capacity on our committed lines of credit, we believe that we have adequate liquidity to cover any increase in net operating assets and liabilities and expected maintenance capital expenditures.

In addition, our wholly-owned subsidiary, CHS Capital, LLC (CHS Capital), makes seasonal and term loans to member cooperatives, businesses and individual producers of agricultural products included in our cash flows from investing activities, and has its own financing explained in further detail below under “Cash Flows from Financing Activities.”

Cash Flows from Operations

Cash flows from operations are generally affected by commodity prices and the seasonality of our businesses. These commodity prices are influenced by a wide range of factors beyond our control, including weather, crop conditions, drought, the availability and the adequacy of supply and transportation, government regulations and policies, world events, and general political and economic conditions. These factors are described in the Cautionary Statements section and may affect net operating assets and liabilities and liquidity.

Cash flows used in operating activities were $71.3 million for the nine months ended May 31, 2015 compared to cash flows provided by operating activities of $472.3 million for the nine months ended May 31, 2014. The fluctuation in cash flows when comparing the two periods is primarily due to increased cash outflows in fiscal 2015 for increased working capital needs combined with lower net income for the nine months ended May 31, 2015 when compared to the same period in fiscal 2014.

Our operating activities used net cash of $71.3 million during the nine months ended May 31, 2015. The cash used in operating activities resulted from a decrease in cash flows due to changes in net operating assets and liabilities of $970.0 million, partially offset by net income of $649.1 million and net non-cash expenses and cash distributions from equity investments of $249.6 million. The primary components of net non-cash expenses and cash distributions from equity investments included depreciation and amortization, including amortization of major repair costs, of $257.3 million and deferred taxes of $29.8 million, partially offset by net equity investment activity of $21.1 million. The decrease in cash flows from changes in net operating assets and liabilities was caused primarily by decreases in accounts payable and accrued

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expenses and increases in grain and oilseed inventory (34% increase related to an above average fall harvest) and supplier advance payments from August 31, 2014 to May 31, 2015. Increases in inventory quantities were partially offset by decreases in certain commodity prices on May 31, 2015 compared to August 31, 2014. On May 31, 2015, the per bushel market prices of wheat, soybeans and corn decreased by $0.84 (14%), $1.55 (14%), and $0.08 (2%), respectively, when compared to spot prices on August 31, 2014. Comparing the same periods, fertilizer commodity prices affecting our wholesale crop nutrients and country operations retail businesses generally decreased or increased slightly depending upon the product, with the exception of urea, which had a more significant price decrease of approximately 22%. Additionally, crude oil market prices decreased by $36 per barrel (37%) from August 31, 2014 to May 31, 2015.

Our operating activities provided net cash of $472.3 million during the nine months ended May 31, 2014. The cash provided by operating activities resulted from net income of $883.5 million and net non-cash expenses and cash distributions from equity investments of $200.4 million, partially offset by an increase in net operating assets and liabilities of $611.6 million. The primary components of net non-cash expenses and cash distributions from equity investments included depreciation and amortization, including amortization of major repair costs, of $230.6 million and deferred taxes of $99.6 million, partially offset by a gain on the sale of investments of $111.4 million, primarily due to a $108.8 million gain associated with the contribution of our Horizon Milling assets to the Ardent Mills joint venture. See Note 4, Investments to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information. The increase in net operating assets and liabilities was caused primarily by an increase in fertilizer commodity prices and an increase in inventory quantities on May 31, 2014, when compared to August 31, 2013. On May 31, 2014, fertilizer commodity prices affecting our wholesale crop nutrients and country operations retail businesses primarily reflected increases between 15% and 21%, depending on the specific products, compared to prices on August 31, 2013. On May 31, 2014, the per bushel market prices of our primary grain commodities, corn and spring wheat, decreased by $0.16 (3%) and $0.24 (3%), respectively, while the soybeans per bushel market price increased $1.36 (10%) when compared to the spot prices on August 31, 2013. In general, crude oil market prices decreased $5 per barrel (5%) on May 31, 2014 when compared to August 31, 2013. An increase in feed and farm supplies and grain inventories in our Ag segment also contributed to the increases in net operating assets and liabilities when comparing inventories at May 31, 2014 to August 31, 2013.

Our cash usage in our operating activities has historically been the lowest during our fourth fiscal quarter when, by this time, we have sold a large portion of our seasonal agronomy-related inventories in our Ag segment operations and continue to collect cash from the related receivables, although we cannot ensure this historical trend will continue.
    
Cash Flows from Investing Activities

For the nine months ended May 31, 2015 and 2014, the net cash used in our investing activities totaled $1.3 billion and $1.0 billion, respectively.

We acquired property, plant and equipment totaling $827.2 million and $656.3 million for the nine months ended May 31, 2015 and 2014, respectively. In addition, during the nine months ended May 31, 2015, we invested $315.0 million of the proceeds from the September 2014 Class B Series 3 Preferred Stock issuance in high-quality, short-term deposit instruments. As of May 31, 2015, $145.0 million of these short-term deposits had reached maturity, resulting in offsetting cash inflows.

For the nine months ended May 31, 2015, major repairs turnaround expenditures were $145.6 million. There were no turnaround expenditures for the nine months ended May 31, 2014. Refineries have planned major maintenance to overhaul, repair, inspect and replace process materials and equipment which typically occur for a five-to-six week period every 2-4 years. Our NCRA refinery recently completed a turnaround and our Laurel, Montana refinery has planned maintenance scheduled to begin before the end of fiscal 2015.

For the year ending August 31, 2015, we expect total expenditures for the acquisition of property, plant and equipment and major repairs at our refineries to be approximately $690.0 million. Included in our expected capital expenditures for fiscal 2015 is $200.0 million for a project to replace a coker at NCRA's McPherson, Kansas refinery with an expected total cost of approximately $555.0 million and expected completion in calendar year 2015. We incurred $186.8 million of costs related to the coker project during fiscal 2014 and $121.3 million during the nine months ended May 31, 2015. We also began an approximately $330.0 million expansion in fiscal 2013, which is anticipated to be completed in fiscal 2016, at NCRA's McPherson, Kansas refinery. We incurred $128.3 million of costs related to the NCRA expansion during fiscal 2014 and $105.1 million during the nine months ended May 31, 2015.

Cash paid to acquire businesses, net of cash acquired, totaled $8.9 million and $114.4 million during the nine months ended May 31, 2015 and 2014, respectively. These acquisitions were in our Ag segment.

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Investments in joint ventures and other entities during the nine months ended May 31, 2015 and 2014, totaled $57.6 million and $67.5 million, respectively.

Changes in notes receivable during the nine months ended May 31, 2015 and 2014 resulted in net decreases in cash flows of $116.6 million and $321.4 million, respectively. The primary cause of the decreases in cash flows during both periods relates to changes in CHS Capital notes receivable.
    
Cash Flows from Financing Activities

For the nine months ended May 31, 2015 and 2014, our financing activities provided net cash of $344.9 million and $295.1 million, respectively.

Working Capital Financing:

We finance our working capital needs through lines of credit with domestic and international banks. On May 31, 2015 and August 31, 2014, we had a five-year revolving credit facility, expiring in June 2018, with a committed amount of $2.5 billion, which had no amounts outstanding. In addition to our primary revolving line of credit, we have a three-year $250.0 million committed revolving pre-export credit facility for CHS Agronegocio Industria e Comercio Ltda (CHS Agronegocio), a wholly-owned subsidiary, to provide financing for its working capital needs arising from its purchases and sales of grains, fertilizers and other agricultural products which expires in October 2016. The outstanding balance on this facility was $240.0 million as of May 31, 2015.

As of May 31, 2015, our wholly-owned subsidiaries, CHS Europe S.a.r.l and CHS Agronegocio, had uncommitted lines of credit with $301.9 million outstanding. In addition, our other international subsidiaries had lines of credit with a total of $364.5 million outstanding at May 31, 2015, of which $272.9 million was collateralized. On May 31, 2015 and August 31, 2014 we had total short-term indebtedness outstanding on these various facilities and other miscellaneous short-term notes payable totaling $912.9 million and $840.7 million, respectively.

We have two commercial paper programs with an aggregate capacity of $125.0 million, with two banks participating in our revolving credit facilities. Terms of our credit facilities allow a maximum usage of $200.0 million to pay principal under any commercial paper facility. On May 31, 2015 and August 31, 2014, we had no commercial paper outstanding.

CHS Capital Financing:

Cofina Funding, LLC (Cofina Funding), a wholly-owned subsidiary of CHS Capital, has commitments totaling $350.0 million as of May 31, 2015, under note purchase agreements with various purchasers, through the issuance of short-term notes payable. CHS Capital sells eligible commercial loans receivable it has originated to Cofina Funding, which are then pledged as collateral under the note purchase agreements. The notes payable issued by Cofina Funding bear interest at variable rates based on commercial paper with a weighted average rate of 1.06% as of May 31, 2015. Borrowings by Cofina Funding utilizing the issuance of commercial paper under the note purchase agreements totaled $77.0 million as of May 31, 2015.

     CHS Capital has available credit under master participation agreements with numerous counterparties. Borrowings under these agreements are accounted for as secured borrowings and bear interest at variable rates ranging from 1.85% to 3.70% as of May 31, 2015. As of May 31, 2015, the total funding commitment under these agreements was $156.3 million, of which $34.4 million was borrowed.

CHS Capital sells loan commitments it has originated to ProPartners Financial (ProPartners) on a recourse basis. The total capacity for commitments under the ProPartners program is $300.0 million. The total outstanding commitments under the program totaled $76.3 million as of May 31, 2015, of which $50.0 million was borrowed with an interest rate of 1.60%.

CHS Capital borrows funds under short-term notes issued as part of a surplus funds program. Borrowings under this program are unsecured and bear interest at variable rates ranging from 0.10% to 0.90% as of May 31, 2015, and are due upon demand. Borrowings under these notes totaled $197.7 million as of May 31, 2015.
              

32

Long-term Debt Financing:

We use long-term debt agreements with various insurance companies and banks to finance certain of our long-term capital needs, primarily those related to the acquisition of property, plant and equipment.

On May 31, 2015, we had total long-term debt outstanding of $1.3 billion, of which $1.2 billion was private placement debt, $90.0 million was bank financing and $46.1 million was other notes and contracts payable. On August 31, 2014, we had total long-term debt outstanding of $1.5 billion. Our long-term debt is unsecured except for other notes and contracts in the amount of $0.6 million; however, restrictive covenants under various agreements have requirements for maintenance of minimum consolidated net worth and other financial ratios. We were in compliance with all debt covenants and restrictions as of May 31, 2015.

We did not have any significant new long-term borrowings during the nine months ended May 31, 2015 or 2014. During the nine months ended May 31, 2015 and 2014, we repaid long-term debt of $155.3 million and $141.8 million, respectively.    

Other Financing:

During the nine months ended May 31, 2015 and 2014, pursuant to our agreement to acquire the remaining shares of NCRA, we made payments of $66.0 million and $66.0 million, respectively, increasing our ownership to 88.9%.

Changes in checks and drafts outstanding resulted in decreases in cash flows of $59.0 million and $4.3 million during the nine months ended May 31, 2015 and 2014, respectively.

In accordance with the bylaws and by action of the Board of Directors, annual net earnings from patronage sources are distributed to consenting patrons following the close of each fiscal year. Patronage refunds are calculated based on amounts using financial statement earnings. The cash portion of the patronage distribution is determined annually by the Board of Directors, with the balance issued in the form of qualified and/or non-qualified capital equity certificates. Consenting patrons have agreed to take both the cash and qualified capital equity certificate portion allocated to them from our previous fiscal year’s income into their taxable income; and as a result, we are allowed a deduction from our taxable income for both the cash distribution and the allocated qualified capital equity certificates, as long as the cash distribution is at least 20% of the total qualified patronage distribution. Patronage earnings from the year ended August 31, 2014 were distributed during the nine months ended May 31, 2015. The cash portion of this distribution, deemed by the Board of Directors to be 40%, was $277.0 million. During the nine months ended May 31, 2014, we distributed cash patronage of $286.7 million.
    
Redemptions of capital equity certificates approved by the Board of Directors are divided into two pools, one for non-individuals (primarily member cooperatives) who may participate in an annual retirement program for qualified equities held by them and another for individuals who are eligible for equity redemptions at age 70 or upon death. In accordance with authorization from the Board of Directors, we expect total redemptions related to the year ended August 31, 2014, that will be paid in fiscal 2015, to be approximately $130.1 million, of which $114.0 million was redeemed in cash during the nine months ended May 31, 2015, compared to $87.7 million redeemed in cash during the nine months ended May 31, 2014.     

Our 8% Preferred Stock is listed on the NASDAQ under the symbol CHSCP. On May 31, 2015, we had 12,272,003 shares of 8% Preferred Stock outstanding with a total redemption value of approximately $306.8 million, excluding accumulated dividends. The 8% Preferred Stock accumulates dividends at a rate of 8% per year, which are payable quarterly. Our 8% Preferred Stock may be redeemed at our option beginning July 18, 2023.

In September 2013, we issued 11,319,175 shares of Class B Series 1 Preferred Stock, with a total redemption value of $283.0 million, excluding accumulated dividends. Net proceeds from the sale of our Class B Series 1 Preferred Stock, after deducting the underwriting discount and offering expenses payable by us, were $273.3 million. We issued an additional 6,752,188 shares of Class B Series 1 Preferred Stock in August 2014, to redeem approximately $200.0 million of qualified equity certificates to eligible owners at a market price of $29.62 per share. Our Class B Series 1 Preferred Stock is listed on the NASDAQ under the symbol CHSCO and accumulates dividends at a rate of 7.875% per year, which are payable quarterly. Our Class B Series 1 Preferred Stock may be redeemed at our option beginning September 26, 2023.

In March 2014, we issued 16,800,000 shares of Class B Series 2 Preferred Stock with a total redemption value of $420.0 million excluding accumulated dividends. Net proceeds from the sale of our Class B Series 2 Preferred Stock, after deducting the underwriting discount and offering expenses payable by us, were $406.2 million. The Class B Series 2 Preferred Stock is listed on the NASDAQ under the symbol CHSCN and accumulates dividends at a rate of 7.10% per year to, but

33

excluding, March 31, 2024, and at a rate equal to the three-month LIBOR plus 4.298%, not to exceed 8.00% per annum, thereafter, which are payable quarterly. Our Class B Series 2 Preferred Stock may be redeemed at our option beginning March 31, 2024.

In June 2014, we filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (SEC). Under the shelf registration, which was declared effective by the SEC, we may offer and sell, from time to time, up to $2.0 billion of our Class B cumulative redeemable preferred stock over a three-year period.

In September 2014, we issued 19,700,000 shares of Class B Series 3 Preferred Stock, pursuant to our shelf registration statement, with a total redemption value of $492.5 million, excluding accumulated dividends. Net proceeds from the sale of our Class B Series 3 Preferred Stock, after deducting the underwriting discount and offering expenses payable by us, were approximately $476.7 million. The Class B Series 3 Preferred Stock is listed on the NASDAQ under the symbol CHSCM and accumulates dividends at a rate of 6.75% per year to, but excluding, September 30, 2024, and at a rate equal to the three-month LIBOR plus 4.155%, not to exceed 8.00% per annum, thereafter, which are payable quarterly. Our Class B Series 3 Preferred Stock may be redeemed at our option beginning September 30, 2024.

In January 2015, we issued 20,700,000 shares of Class B Series 4 Preferred Stock, pursuant to our shelf registration statement, with a total redemption value of $517.5 million, excluding accumulated dividends. Net proceeds from the sale of our Class B Series 4 Preferred Stock, after deducting the underwriting discount and offering expenses payable by us, were approximately $501.0 million. The Class B Series 4 Preferred Stock is listed on the NASDAQ under the symbol CHSCL and accumulates dividends at a rate of 7.50% per year, which are payable quarterly. Our Class B Series 4 Preferred Stock may be redeemed at our option beginning January 21, 2025.

Dividends paid on our preferred stock during the nine months ended May 31, 2015 and 2014, were $93.2 million and $29.9 million, respectively.

Off Balance Sheet Financing Arrangements

Operating Leases

Our minimum future lease payments required under noncancelable operating leases presented in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended August 31, 2014 have not materially changed during the nine months ended May 31, 2015.

Guarantees

We are a guarantor for lines of credit and performance obligations of related companies. As of May 31, 2015, our bank covenants allowed maximum guarantees of $1.0 billion, of which $94.6 million was outstanding. 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 guarantees are current as of May 31, 2015.

Debt

There is no material off balance sheet debt.

Contractual Obligations

Our contractual obligations presented in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended August 31, 2014, have not materially changed during the nine months ended May 31, 2015.

Critical Accounting Policies

Our critical accounting policies presented in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended August 31, 2014, have not materially changed during the nine months ended May 31, 2015.


34

Effect of Inflation and Foreign Currency Transactions

We believe that inflation and foreign currency fluctuations have not had a material effect on our operations since we conduct an insignificant portion of our business in foreign currencies.

Recent Accounting Pronouncements

In May 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-07, "Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)." The update provides guidance on the disclosures for investments in certain entities that calculate net asset value (NAV) per share (or its equivalent). The amendments remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the NAV per share (or its equivalent) as a practical expedient. ASU No. 2015-07 is to be applied retrospectively and is effective for annual reporting periods beginning after December 15, 2015, and interim periods within those fiscal years, with early application permitted. We do not expect the standard to have a material impact on our consolidated financial statements in fiscal 2016.
    
In February 2015, the FASB issued ASU No. 2015-02, "Amendments to the Consolidation Analysis." ASU No. 2015-02 amended the process that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. ASU No. 2015-02 is effective for the annual period ending after December 15, 2015, and for annual periods and interim periods thereafter. Early application is permitted. We are currently evaluating the impact the adoption will have on our consolidated financial statements in fiscal 2017.

In November 2014, the FASB issued ASU No. 2014-16, "Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity." The amendments in this ASU do not change the current criteria in accounting principles generally accepted in the United States of America (GAAP) for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. The ASU applies to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The adoption of ASU 2014-16 is not expected to have a material effect on our consolidated financial statements in fiscal 2016.
    
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers." ASU No. 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those good or services. The guidance also requires an entity to disclose sufficient qualitative and quantitative information surrounding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts from customers. This ASU supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. The amendments in this standard are effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, although the FASB has issued an exposure draft proposing to delay the effective date by one year (though early adoption would be allowed). The guidance permits the use of either a retrospective or cumulative effect transition method. We have not yet selected a transition method and we are currently evaluating the impact the adoption will have on our consolidated financial statements.

CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE SECURITIES LITIGATION REFORM ACT

Any statements contained in this report regarding the outlook for our businesses and their respective markets, such as projections of future performance, statements of our plans and objectives, forecasts of market trends and other matters, are forward-looking statements based on our assumptions and beliefs. Such statements may be identified by such words or phrases as “will likely result,” “are expected to,” “will continue,” “outlook,” “will benefit,” “is anticipated,” “estimate,” “project,” “management believes” or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in such statements and no assurance can be given that the results in any forward-looking statement will be achieved. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any obligation to subsequently revise any forward-looking statement to reflect events or circumstances after such date or to reflect the occurrence of anticipated or unanticipated events.


35

Certain factors could cause our future results to differ materially from those expressed or implied in any forward-looking statements contained in this report. These factors include the factors described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended August 31, 2014 under the caption “Risk Factors,” the factors described below and any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statements. Since it is not possible to foresee all such factors, these factors should not be considered as complete or exhaustive.

•
Our revenues, results of operations and cash flows could be materially and adversely affected by changes in commodity prices, as well as global and domestic economic downturns and risks.
•
Our revenues, results of operations and cash flows could be materially and adversely affected if our members were to do business with others rather than with us.
•
We participate in highly competitive business markets and we may not be able to continue to compete successfully, which would have a material adverse effect on us.
•
Changes in federal income tax laws or in our tax status could increase our tax liability and reduce our net income significantly.
•
We incur significant costs in complying with applicable laws and regulations. Any failure to make the capital investments necessary to comply with these laws and regulations could expose us to unanticipated expenditures and liabilities.
•
Changing environmental and energy laws and regulation may result in increased operating costs and capital expenditures and may have a material and adverse effect on us.
•
Governmental policies and regulation affecting the agricultural sector and related industries could have a material adverse effect on us.
•
Environmental liabilities could have a material adverse effect on us.
•
Actual or perceived quality, safety or health risks associated with our products could subject us to significant liability and damage our business and reputation.
•
Our financial results are susceptible to seasonality.
•
Our operations are subject to business interruptions and casualty losses; we do not insure against all potential losses and could be seriously harmed by unanticipated liabilities.
•
Our cooperative structure limits our ability to access equity capital.
•
Consolidation among the producers of products we purchase or among customers for products we sell could materially and adversely affect our revenues, results of operations and cash flows.
•
If our customers choose alternatives to our refined petroleum products, our revenues, results of operations and cash flows could be materially and adversely affected.
•
Our agronomy business is volatile and dependent upon certain factors outside of our control.
•
Technological improvements in agriculture could decrease the demand for our agronomy and energy products.
•
We operate some of our business through joint ventures in which our rights to control business decisions are limited.
•
We face risk associated with our proposed new nitrogen fertilizer manufacturing plant, including access to sufficient capital, cost overruns, construction delays and operational issues.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We did not experience any material changes in market risk exposures for the period ended May 31, 2015 that affect the quantitative and qualitative disclosures presented in our Annual Report on Form 10-K for the year ended August 31, 2014.

ITEM 4.    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 the Securities Exchange Act of 1934 (Exchange Act) as of May 31, 2015. 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.

During the quarter ended May 31, 2015, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



36

PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We are involved as a defendant in various lawsuits, claims and disputes, which are in the normal course of our business. The resolution of any such matters may affect consolidated net income for any fiscal period; however, our management believes any resulting liabilities, individually or in the aggregate, will not have a material effect on our consolidated financial position, results of operations or cash flows during any fiscal year.

On August 30, 2012, we received from the United States Environmental Protection Agency (EPA) a request for information pursuant to Section 114 of the Clean Air Act. The information requested relates to operational information and design data for flares at our Laurel, Montana refinery for the period from January 1, 2006 to present. The information request could potentially result in an enforcement action by the EPA with respect to flare efficiency or other issues. We provided the requested information in December 2012 and are awaiting the EPA’s response. As it is too early to determine the potential liability or extent of potential costs associated with any such action, we have not recorded a liability associated with this request. While the facts and circumstances of enforcement actions under the Clean Air Act relating to flares at refineries differ on a case-by-case basis, some refineries have incurred significant penalties and other costs in connection with such enforcement actions.

ITEM 1A.     RISK FACTORS

There were no material changes to our risk factors during the period covered by this report. See the discussion of risk factors in Item 1A of our Annual Report on Form 10-K for the fiscal year ended August 31, 2014.

ITEM 5.     OTHER INFORMATION

We are investing in and implementing an enterprise resource planning (“ERP”) system on a worldwide basis, which is intended to replace non-integrated legacy systems used in our financial and related transaction processes. The gradual implementation is expected to occur in phases over several years beginning in fiscal 2016. The implementation of a worldwide ERP system will likely affect the processes that constitute our internal control over financial reporting and will require testing for effectiveness.

ITEM 6.     EXHIBITS
Exhibit
Description
10.1
CHS Inc. Deferred Compensation Plan Master Plan Document (2015 Restatement)
31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (*)
31.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (*)
32.1
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*)
32.2
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*)
101
The following financial information from CHS Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended May 31, 2015 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to the Consolidated Financial Statements. (*)
______________________________________
(*) Filed herewith


37

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:
July 10, 2015
 
/s/ Timothy Skidmore
 
 
 
Timothy Skidmore
 
 
 
Executive Vice President and Chief Financial Officer


38


CHS Inc.
Deferred Compensation Plan
Master Plan Document


 






CHS Inc.
Deferred Compensation Plan
Master Plan Document
(2015 Restatement)
First Adopted Effective December 30, 2004
As Amended and Restated Effective May 19, 2015





    
CHS Inc.
Deferred Compensation Plan
Master Plan Document
 


 
 
TABLE OF CONTENTS
 
 
 
 
Page
ARTICLE 1

 
Definitions
1
ARTICLE 2

 
Selection, Enrollment, Eligibility
7
2.1

 
Selection
7
2.2

 
Enrollment and Eligibility Requirements; Commencement of Participation
7
2.3

 
Director Retirement Plan
7
2.4

 
Termination of a Participant’s Eligibility
8
ARTICLE 3

 
Deferral Commitments/Company Contribution Amounts/Company Restoration Matching Amounts/Vesting/Crediting/Taxes
8
3.1

 
Minimum Deferrals
8
3.2

 
Maximum Deferral
9
3.3

 
Election to Defer; Effect of Election Form
9
3.4

 
Withholding and Crediting of Annual Deferral Amounts
10
3.5

 
Company Contribution Amount
10
3.6

 
Company Restoration Matching Amount
11
3.7

 
Director Retirement Plan Amount
11
3.8

 
Crediting of Amounts after Benefit Distribution
12
3.9

 
Vesting
12
3.10

 
Crediting/Debiting of Account Balances
13
3.11

 
Crediting/Debiting of Account Balances
14
ARTICLE 4

 
Scheduled Distribution; Unforeseeable Financial Emergencies;
15
4.1

 
Scheduled Distribution
15
4.2

 
Changing Scheduled Distributions
15
4.3

 
Certain Benefits Take Precedence Over Scheduled Distributions
16
4.4

 
Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies
16
ARTICLE 5

 
Change In Control Benefit
17
5.1

 
Change in Control Benefit
17
5.2

 
Payment of Change in Control Benefit
17
ARTICLE 6

 
Retirement Benefit
17
6.1

 
Retirement Benefit
17
6.2

 
Payment of Retirement Benefit
17
ARTICLE 7

 
Termination Benefit
18
7.1

 
Termination Benefit
18
7.2

 
Payment of Termination Benefit
18



i
    
CHS Inc.
Deferred Compensation Plan
Master Plan Document
 

ARTICLE 8

 
Disability Benefit
18
8.1

 
Disability Benefit
18
8.2

 
Payment of Disability Benefit
18
ARTICLE 9

 
Death Benefit
19
9.1

 
Death Benefit
19
9.2

 
Payment of Death Benefit
19
ARTICLE 10

 
Director Retirement Plan Benefit
19
10.1

 
Director Retirement Plan Benefit
19
10.2

 
Payment of Director Retirement Plan Benefit
19
10.3

 
Benefit Distribution Date
19
10.4

 
Effect of Change in Control
20
ARTICLE 11

 
Beneficiary Designation
20
11.1

 
Beneficiary
20
11.2

 
Beneficiary Designation; Change; Spousal Consent
20
11.3

 
Acknowledgement
20
11.4

 
No Beneficiary Designation
20
11.5

 
Doubt as to Beneficiary
20
11.6

 
Discharge of Obligations
20
ARTICLE 12

 
Leave of Absence
21
12.1

 
Paid Leave of Absence
21
12.2

 
Unpaid Leave of Absence
21
ARTICLE 13

 
Termination of Plan, Amendment or Modification
21
13.1

 
Termination of Plan
21
13.2

 
Amendment
21
13.3

 
Plan Agreement
22
13.4

 
Effect of Payment
22
ARTICLE 14

 
Administration
22
14.1

 
Committee Duties
22
14.2

 
Administration Upon Change In Control
22
14.3

 
Agents
23
14.4

 
Binding Effect of Decisions
23
14.5

 
Indemnity of Committee
23
14.6

 
Employer Information
23
ARTICLE 15

 
Other Benefits and Agreements
24
15.1

 
Coordination with Other Benefits
24



ii
    
CHS Inc.
Deferred Compensation Plan
Master Plan Document
 

ARTICLE 16

 
Claims Procedures
24
16.1

 
Presentation of Claim
24
16.2

 
Notification of Decision
24
16.3

 
Review of a Denied Claim
25
16.4

 
Decision on Review
25
16.5

 
Legal Action
25
16.6

 
Determinations
25
ARTICLE 17

 
Trust
26
17.1

 
Establishment of the Trust
26
17.2

 
Interrelationship of the Plan and the Trust
26
17.3

 
Distributions From the Trust
26
ARTICLE 18

 
Miscellaneous
26
18.1

 
Status of Plan
26
18.2

 
Unsecured General Creditor
26
18.3

 
Employer’s Liability
26
18.4

 
Nonassignability
26
18.5

 
Not a Contract of Employment
27
18.6

 
Furnishing Information
27
18.7

 
Terms
27
18.8

 
Captions
27
18.9

 
Governing Law
27
18.10

 
Notice
27
18.11

 
Successors
28
18.12

 
Spouse’s Interest
28
18.13

 
Validity
28
18.14

 
Incompetent
28
18.15

 
Deduction Limitation on Benefit Payments
28
18.16

 
Insurance
28
APPENDIX A - Share Option Plan Accounts
A-1
APPENDIX B - Supplemental Savings Plan Accounts
B-1
APPENDIX C - Supplemental Executive Retirement Plan Savings Accounts
C-1
APPENDIX D - Agriliance LLC Deferred Compensation Plan Accounts
D-1




iii
    
CHS Inc.
Deferred Compensation Plan
Master Plan Document


CHS INC.
DEFERRED COMPENSATION PLAN
Adopted Effective December 30, 2004

Purpose
The purpose of this Plan is to provide specified benefits to Directors and a select group of management or highly compensated Employees who contribute materially to the continued growth, development and future business success of CHS Inc., a Minnesota corporation, and its subsidiaries, if any, that sponsor this Plan. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA.
ARTICLE 1
Definitions
For the purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings:
1.1
“Account Balance” shall mean, with respect to a Participant, an entry on the records of the Employer equal to the sum of (i) the Deferral Account balance, (ii) the Company Contribution Account balance, (iii) the Company Restoration Matching Account balance, and (iv) the SOP Account balance, if any, transferred to this Plan in accordance with Appendix A. For purposes of this Section 3.10 and Article 13 only, the term “Account Balance” also includes the Director Retirement Plan Account balance of any Company Director. The Account Balance shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan.
1.2
“Annual Deferral Amount” shall mean that portion of a Participant’s Base Salary, Bonus and Director Fees that a Participant defers in accordance with Article 3 for any one Plan Year, without regard to whether such amounts are withheld and credited during such Plan Year. In the event of a Participant’s Retirement, Disability, death or Separation from Service prior to the end of a Plan Year, such year’s Annual Deferral Amount shall be the actual amount withheld prior to such event.
1.3
“Annual Director Retirement Plan Amount” shall mean the amount credited to the Director Retirement Plan Account of a non‑employee Company Director for any one fiscal year in accordance with Section 3.7.
1.4
“Annual Installment Method” shall be an annual installment payment over the number of years selected by the Participant in accordance with this Plan, calculated as follows: (i) for the first annual installment, the Participant’s vested Account Balance shall be calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as determined by the Committee in its sole discretion, and (ii) for remaining annual installments, the Participant’s vested Account Balance shall be calculated on every anniversary of such calculation date, as applicable. Each annual installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one and the denominator of which is the remaining number of annual payments due the Participant. By way of example, if the Participant elects a ten (10) year Annual Installment Method for the Retirement Benefit, the first payment shall be 1/10 of the vested Account Balance,

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calculated as described in this definition. The following year, the payment shall be 1/9 of the vested Account Balance, calculated as described in this definition.
1.5
“Base Salary” shall mean the annual cash compensation relating to services performed during any calendar year, excluding distributions from nonqualified deferred compensation plans, bonuses, commissions, overtime, fringe benefits, profit sharing contributions, stock options, relocation expenses, incentive payments, non‑monetary awards, director fees and other fees, and automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Employee’s gross income). Base Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or nonqualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participant’s gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by any Employer; provided, however, that all such amounts will be included in compensation only to the extent that had there been no such plan, the amount would have been payable in cash to the Employee. In no event shall Base Salary include any amounts payable to the Participant prior to the commencement of his or her participation in this Plan.
1.6
“Beneficiary” shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 10, that are entitled to receive benefits under this Plan upon the death of a Participant.
1.7
“Beneficiary Designation Form” shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries.
1.8
“Benefit Distribution Date” shall mean the date that triggers distribution of a Participant’s vested Account Balance. A Participant’s Benefit Distribution Date shall be determined upon the occurrence of any one of the following:
(a)
If the Participant Retires, his or her Benefit Distribution Date shall be the last day of the six‑month period immediately following the date on which the Participant Retires; provided, however, in the event the Participant changes his or her Retirement Benefit election in accordance with Section 6.2(a), his or her Benefit Distribution Date shall be postponed in accordance with such Section 6.2(a); or
(b)
If the Participant experiences a Separation from Service, his or her Benefit Distribution Date shall be the last day of the six‑month period immediately following the date on which the Participant experiences a Separation from Service; or
(c)
The date on which the Committee is provided with proof that is satisfactory to the Committee of the Participant’s death, if the Participant dies prior to the complete distribution of his or her vested Account Balance; or
(d)
The date on which the Committee determines the Participant is Disabled; or
(e)
The date on which the Affected Corporation (as defined in Section 1.11) experiences a Change in Control, as determined by the Committee in its sole discretion, if (i) the Participant has elected to receive a Change in Control Benefit, as set forth in Section 1.12

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below, and (ii) if a Change in Control occurs prior to the Participant’s Separation from Service, Retirement, death or Disability.
1.9
“Board” shall mean the board of directors of the Company.
1.10
“Bonus” shall mean any compensation, in addition to Base Salary, earned by a Participant for services rendered during a Plan Year as further specified on an Election Form approved by the Committee in its sole discretion, under any Employer’s annual bonus and cash incentive plans (and long term incentive plans).
1.11
“Change in Control” shall mean the occurrence of a “change in the ownership,” “change in effective control,” and/or a “change in the ownership of a substantial portion of the assets,” as defined under Treasury Regulation § 1.409A‑3(i)(5), of the Affected Corporation. For this purpose, the Affected Corporation is the Participant’s Employer, or any corporation (including the Company) in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending with the Participant’s Employer. A “majority shareholder” is a shareholder owning more than 50 percent of the total fair market value and total voting power of such corporation.
1.12
“Change in Control Benefit” shall have the meaning set forth in Article 5.
1.13
“Claimant” shall have the meaning set forth in Section 16.1.
1.14
“Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.
1.15
“Committee” shall mean the committee described in Article 14.
1.16
“Company” shall mean CHS Inc., a Minnesota corporation, and any successor to all or substantially all of the Company’s assets or business.
1.17
“Company Contribution Account” shall mean (i) the sum of the Participant’s Company Contribution Amounts, plus (ii) amounts credited or debited to the Participant’s Company Contribution Account in accordance with this Plan, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant’s Company Contribution Account.
1.18
“Company Contribution Amount” shall mean, for any one Plan Year, the amount determined in accordance with Section 3.5.
1.19
“Company Restoration Matching Account” shall mean (i) the sum of all of a Participant’s Company Restoration Matching Amounts, plus (ii) amounts credited or debited to the Participant’s Company Restoration Matching Account in accordance with this Plan, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant’s Company Restoration Matching Account.
1.20
“Company Restoration Matching Amount” shall mean, for any one Plan Year, the amount determined in accordance with Section 3.6.
1.21
“Death Benefit” shall mean the benefit set forth in Article 9.
1.22
“Deduction Limitation” shall mean the limitation on a benefit that may otherwise be distributable pursuant to the provisions of this Plan, as set forth in Section 18.15.

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1.23
“Deferral Account” shall mean (i) the sum of all of a Participant’s Annual Deferral Amounts, plus (ii) amounts credited or debited to the Participant’s Deferral Account in accordance with this Plan, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Deferral Account.
1.24
“Director” shall mean any member of the board of directors of any Employer.
1.25
“Director Fees” shall mean the annual fees earned by a Director from any Employer, including retainer fees and meetings fees, as compensation for serving on the board of directors.
1.26
“Director Retirement Plan” shall mean the non‑elective deferred compensation plan covering non‑employee Directors of the Company. Annual Director Retirement Plan Amounts shall be credited to the Director Retirement Plan Accounts of Directors of the Company in accordance with Section 3.7. Company Directors may direct investment of their Director Retirement Plan Accounts in one or more Measurement Funds in accordance with the rules prescribed by the Committee under Section 3.10. The Director Retirement Plan Accounts shall be paid in the manner described in Article 10.
1.27
“Director Retirement Plan Account” shall mean (i) the sum of a Participant’s Annual Director Retirement Plan Amounts, plus (ii) amounts credited or debited to the Participant’s Director Retirement Plan Account in accordance with this Plan, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Director Retirement Plan Account.
1.28
“Director Retirement Plan Benefit” shall mean the benefit set forth in Article 10.
1.29
“Disability” or “Disabled” shall mean that a Participant is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident or health plan covering employees of the Participant’s Employer.
1.30
“Disability Benefit” shall mean the benefit set forth in Article 8.
1.31
“Election Form” shall mean the form, which may be in electronic format, established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan.
1.32
“Employee” shall mean a person who is an employee of any Employer.
1.33
“Employer(s)” shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Committee to participate in the Plan and have adopted the Plan as a sponsor.
1.34
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.
1.35
“401(k) Plan” shall mean, with respect to an Employer, a plan qualified under Code Section 401(a) that contains a cash or deferral arrangement described in Code Section 401(k), adopted by the Employer, as it may be amended from time to time, or any successor thereto.

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1.36
“Participant” shall mean any Employee or Director (i) who is selected to participate in the Plan, (ii) who submits an executed Plan Agreement, Election Form and Beneficiary Designation Form, which are accepted by the Committee, and (iii) whose Plan Agreement has not terminated. Each non‑employee Director of the Company shall become a Participant for purposes of the Director Retirement Plan component of this Plan upon becoming a member of the Company’s Board.
1.37
“Plan” shall mean the CHS Inc. Deferred Compensation Plan, which shall be evidenced by this instrument and by each Plan Agreement, as they may be amended from time to time.
1.38
“Plan Agreement” shall mean a written agreement, as may be amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant and the Participant’s Employer shall provide for the entire benefit to which such Participant is entitled under the Plan; should there be more than one Plan Agreement, the Plan Agreement bearing the latest date of acceptance by the Employer shall supersede all previous Plan Agreements in their entirety and shall govern such entitlement. The terms of any Plan Agreement may be different for any Participant, and any Plan Agreement may provide additional benefits not set forth in the Plan or limit the benefits otherwise provided under the Plan; provided, however, that any such additional benefits or benefit limitations must be agreed to by both the Employer and the Participant.
1.39
“Plan Year” shall mean a period beginning on January 1 of each calendar year and continuing through December 31 of such calendar year. The first Plan Year for which the Plan shall be in effect shall commence on January 1, 2005.
1.40
“Retirement”, “Retire(s)” or “Retired” shall mean, with respect to an Employee, Separation from Service from all Employers for any reason other than a leave of absence, death or Disability on or after the earlier of the attainment of (a) age sixty‑five (65) or (b) age fifty‑five (55) with ten (10) Years of Service; and shall mean with respect to a Director who is not an Employee, Separation from Service as a Director with all Employers on or after the attainment of age sixty (60).
1.41
“Retirement Benefit” shall mean the benefit set forth in Article 6.
1.42
“Scheduled Distribution” shall mean the distribution set forth in Section 4.1.
1.43
“Terminate the Plan”, “Termination of the Plan” shall mean a determination by an Employer’s board of directors that (i) all of its Participants shall no longer be eligible to participate in the Plan, (ii) all deferral elections for such Participants shall terminate, and (iii) such Participants shall no longer be eligible to receive company contributions under this Plan.
1.44
“Termination Benefit” shall mean the benefit set forth in Article 7.
1.45
“Separation from Service” shall mean the separation from service (within the meaning of Treas. Regs. § 1.409A‑1(h)) with the Company Controlled Group, voluntarily or involuntarily, for any reason other than Retirement, Disability or death. Whether a separation from service has occurred is determined under Code Section 409A and Treasury Regulation 1.409A‑1(h) (i.e., whether the facts and circumstances indicate that the Employer and the employee reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the employee would perform after such date (whether as an employee or independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the

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immediately preceding thirty‑six (36) month period (or the full period of services to the employer if the employee has been providing services to the employer less than thirty‑six (36) months)). Separation from service shall not be deemed to occur while the employee is on military leave, sick leave or other bona fide leave of absence if the period does not exceed six (6) months or, if longer, so long as the employee retains a right to reemployment with any member of the Company Controlled Group under an applicable statute or by contract. For this purpose, a leave is bona fide only if, and so long as, there is a reasonable expectation that the employee will return to perform services for any member of the Company Controlled Group. Notwithstanding the foregoing, a twenty‑nine (29)‑month period of absence will be substituted for such six (6) month period if the leave is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of no less than six (6) months and that causes the employee to be unable to perform the duties of his or her position of employment. For this purpose, the “Company Controlled Group” is the Participant’s Employer and all persons with whom the Employer would be considered a single employer under Code sections 414(b) and 414(c); provided that, in applying Code sections 1563(a)(1), (2) and (3) for purposes of determining a controlled group of corporations under Code section 414(b), the language “at least 50 percent” shall be used instead of “at least 80 percent” each place it appears therein, and in applying Treas. Regs. § 1.414(c)‑2 for purposes of determining trades or businesses that are under common control for purposes of Code section 414(c), “at least 50 percent” shall be used instead of “at least 80 percent” each place it appears therein. For purposes of this Plan, a “Separation from Service” shall mean a complete severance of a Director’s relationship as a director of the Employer and all affiliates within the Company Controlled Group, if any, and as an independent contractor of the Employer and all affiliates within the Company Controlled Group, if any, for any reason (including death). A Director may have a Separation from Service upon resignation as a director even if the Director then becomes an officer or employee.
1.46
“Trust” shall mean one or more trusts established by the Company in accordance with Article 16.
1.47
“Unforeseeable Financial Emergency” shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant resulting from (i) a sudden and unexpected illness or accident of the Participant, the Participant’s spouse, or a dependent of the Participant, (ii) a loss of the Participant’s property due to casualty, or (iii) such other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee.
1.48
“Years of Service” shall mean an Employee’s period of service with CHS Inc., a participating Employer or a related employer measured in full years.  A Participant shall receive credit for one full year of “Service” for each Plan Year in which the Participant had at least 1,000 hours of service for CHS Inc., a participating Employer or related employer. For purposes of this section, a “related employer” means the member services department of Land O’ Lakes, Inc. and any trade or business that is part of a parent-subsidiary controlled group with CHS Inc. as determined under Code Sections 1563(a)(1) and 414(c), except that “at least 25 percent” voting control and ownership shall be used instead of “at least 80 percent” for purposes of establishing a controlled group.

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ARTICLE 2
Selection, Enrollment, Eligibility
2.1
Selection.     Participation in the Plan shall be limited to Directors and, as determined by the Chief Executive Officer in his or her sole discretion, a select group of management or highly compensated Employees. From that group, the Chief Executive Officer shall select, in his or her sole discretion, those individuals who may actually participate in this Plan.
2.2
Enrollment and Eligibility Requirements; Commencement of Participation.    
(a)
As a condition to participation, each Director or selected Employee who is eligible to participate in the Plan effective as of the first day of a Plan Year shall complete, execute and return to the Committee a Plan Agreement, an Election Form and a Beneficiary Designation Form, prior to the first day of such Plan Year, or such other earlier deadline as may be established by the Committee in its sole discretion. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines, in its sole discretion, are necessary.
(b)
A Director or selected Employee who first becomes eligible to participate in this Plan (and all other deferred compensation plans required to be aggregated with the Plan under Code Section 409A) after the first day of a Plan Year must complete these requirements within thirty (30) days after he or she first becomes eligible to participate in the Plan, or within such other earlier deadline as may be established by the Committee, in its sole discretion, in order to participate for that Plan Year. In such event, such person’s participation in this Plan shall not commence earlier than the date determined by the Committee pursuant to Section 2.2(c) and such person shall not be permitted to defer under this Plan any portion of his or her Base Salary, Bonus and/or Director Fees that are paid with respect to services performed prior to his or her participation commencement date, except as permitted by Section 3.3(c). Notwithstanding the foregoing, the Committee may, in its sole discretion, prohibit a deferral or specify an automatic time and form of payment if it determines that, based on the timing of a Participant’s entry into the Plan during a given deferral period, a voluntary deferral election of that Bonus would be administratively burdensome or impractical.
(c)
Each Director or selected Employee who is eligible to participate in the Plan shall commence participation in the Plan on the date that the Committee determines, in its sole discretion, that the Director or Employee has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the Committee within the specified time period. Notwithstanding the foregoing, the Committee shall process such Participant’s deferral election as soon as administratively practicable after such deferral election is submitted to and accepted by the Committee.
(d)
If a Director or an Employee fails to meet all requirements contained in this Section 2.2 within the period required, that Director or Employee shall not be eligible to participate in the Plan during such Plan Year.
2.3
Director Retirement Plan.     Notwithstanding the foregoing, each non‑employee Director of the Company shall, upon becoming a member of the Company’s Board, automatically become a

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Participant for purposes of the non‑elective Director Retirement Plan component of this Plan. Each Director of the Company shall complete and return to the Committee a Beneficiary Designation Form and an Election Form with respect to the Measurement Funds available under Section 3.10, but no Election Form with respect time and form of payment of Director Retirement Plan Accounts shall be necessary.
2.4
Termination of a Participant’s Eligibility.     The Committee shall have the right, in its sole discretion, to (i) terminate any deferral election the Participant has made for the remainder of the Plan Year in which the Committee makes such determination, (ii) prevent the Participant from making future deferral elections, and/or (iii) take further action that the Committee deems appropriate to the extent permitted under Code Section 409A. Notwithstanding the foregoing, in the event of a Termination of the Plan in accordance with Section 1.43, the termination of the affected Participants’ eligibility for participation in the Plan shall not be governed by this Section 2.3, but rather shall be governed by Section 1.43 and Section 13.1. In the event that a Participant is no longer eligible to defer compensation under this Plan, the Participant’s Account Balance shall continue to be governed by the terms of this Plan until such time as the Participant’s Account Balance is paid in accordance with the terms of this Plan.
ARTICLE 3
Deferral Commitments/Company Contribution Amounts/
Company Restoration Matching Amounts/Vesting/Crediting/Taxes
3.1
Minimum Deferrals.    
(a)
Annual Deferral Amount. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Base Salary, Bonus and/or Director Fees in the following minimum amounts for each deferral elected:

Deferral
Minimum Amount
Base Salary and/or Bonus
$2,000 aggregate
Director Fees
$0
If the Committee determines, in its sole discretion, prior to the beginning of a Plan Year that a Participant has made an election for less than the stated minimum amounts, or if no election is made, the amount deferred shall be zero. If the Committee determines, in its sole discretion, at any time after the beginning of a Plan Year that a Participant has deferred less than the stated minimum amounts for that Plan Year, any amount credited to the Participant’s Account Balance as the Annual Deferral Amount for that Plan Year shall be distributed to the Participant within sixty (60) days after the last day of the Plan Year in which the Committee determination was made.
(b)
Short Plan Year. Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year the minimum Annual Deferral Amount shall be an amount equal to the minimum set forth above, multiplied by a fraction, the numerator

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of which is the number of complete months remaining in the Plan Year and the denominator of which is 12.
3.2
Maximum Deferral.    
(a)
Annual Deferral Amount. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Base Salary, Bonus and/or Director Fees up to the following maximum percentages for each deferral elected:
Deferral
Maximum Percentage
Base Salary
75%
Bonus
100%
Director Fees
100%

(b)
Short Plan Year. Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, the maximum Annual Deferral Amount shall be limited to the amount of compensation not yet earned by the Participant as of the date the Participant submits a Plan Agreement and Election Form to the Committee for acceptance.
3.3
Election to Defer; Effect of Election Form.    
(a)
First Plan Year. In connection with a Participant’s commencement of participation in the Plan, the Participant shall make an irrevocable deferral election for the Plan Year in which the Participant commences participation in the Plan, along with such other elections as the Committee deems necessary or desirable under the Plan. For these elections to be valid, the Election Form must be completed and signed by the Participant, timely delivered to the Committee (in accordance with Section 2.2 above) and accepted by the Committee.
(b)
Subsequent Plan Years. For each succeeding Plan Year, an irrevocable deferral election for that Plan Year, and such other elections as the Committee deems necessary or desirable under the Plan, shall be made by timely delivering a new Election Form to the Committee, in accordance with its rules and procedures, before the end of the Plan Year preceding the Plan Year for which the election is made. If no such Election Form is timely delivered for a Plan Year, the Annual Deferral Amount shall be zero for that Plan Year.
(c)
Performance‑Based Compensation. Notwithstanding the foregoing, the Committee may, in its sole discretion, determine that an irrevocable deferral election pertaining to Bonuses that qualify as performance‑based compensation may be made by timely delivering a new Election Form to the Committee, in accordance with its rules and procedures, no later than six (6) months before the end of the performance service period, provided such compensation is not yet readily ascertainable. “Performance based compensation” shall be compensation based on services performed over a period of at least twelve (12) months, in accordance with Code Section 409A and related guidance.
(d)
Mandatory Credits. Notwithstanding the foregoing rules regarding voluntary deferrals, Bonuses shall be automatically credited to this Plan to the extent required by the Committee or the governing bonus or long term incentive plan under which the Bonus was awarded.

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With respect to any amounts that are automatically credited to this Plan, the Committee may specify an automatic time and form of payment in lieu of permitting a voluntary election as to time and form of payment
3.4
Withholding and Crediting of Annual Deferral Amounts.     For each Plan Year, the Base Salary portion of the Annual Deferral Amount shall be withheld from each regularly scheduled Base Salary payroll in equal amounts, as adjusted from time to time for increases and decreases in Base Salary. The Bonus and/or Director Fees portion of the Annual Deferral Amount shall be withheld at the time the Bonus or Director Fees are or otherwise would be paid to the Participant, whether or not this occurs during the Plan Year itself. Annual Deferral Amounts shall be credited to a Participant’s Deferral Account as soon as reasonably practicable following the time such amounts would otherwise have been paid to the Participant.
3.5
Company Contribution Amount    .
(a)
For each Plan Year, an Employer may be required to credit amounts to a Participant’s Company Contribution Account in accordance with employment or other agreements entered into between the Participant and the Employer. Such amounts shall be credited on the date or dates prescribed by such agreements.
(b)
For each Plan Year, an Employer, in its sole discretion, may, but is not required to, credit any amount it desires to any Participant’s Company Contribution Account under this Plan, which amount shall be for that Participant the Company Contribution Amount for that Plan Year and shall include any amounts credited in accordance with Section 3.5(a) above. The amount so credited to a Participant may be smaller or larger than the amount credited to any other Participant, and the amount credited to any Participant for a Plan Year may be zero, even though one or more other Participants receive a Company Contribution Amount for that Plan Year. The Company Contribution Amount described in this Section 3.5(b), if any, shall be credited on a date or dates to be determined by the Committee, in its sole discretion.
(c)
Notwithstanding any provision in this Plan to the contrary, Company Contribution Amounts may, as applicable, be distributed at the time or times determined under the relevant terms of the Company’s plan, agreement or other arrangement under which such amounts were contributed to this Plan.
3.6
Company Restoration Matching Amount.     A Participant’s Company Restoration Matching Amount for any Plan Year shall be an amount determined by the Committee, in its sole discretion, to make up for certain limits applicable to the 401(k) Plan or other qualified plan for such Plan Year, as identified by the Committee, or for such other purposes as determined by the Committee in its sole discretion. The amount so credited to a Participant under this Plan for any Plan Year (i) may be smaller or larger than the amount credited to any other Participant, and (ii) may differ from the amount credited to such Participant in the preceding Plan Year. The Participant’s Company Restoration Matching Amount, if any, shall be credited on a date or dates to be determined by the Committee, in its sole discretion.
3.7
Director Retirement Plan Amount.     For the Company’s 2013 fiscal year, the Company shall credit an amount to each Company Director Participant’s Director Retirement Plan Account based

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on three‑year cumulative CHS, Inc. Return On Equity (ROE) for fiscal years 2011, 2012 and 2013. Contribution amounts based on performance level are presented in the following table:
Amount
Target
Performance Definition
$50,000
14% ROAE
Maximum
$25,000
10% ROAE
Target
$5,000
8% ROAE
Minimum
$0
Below 8% ROAE
 

For the Company’s 2014 fiscal year and each fiscal year thereafter, the Company shall credit an amount to each Company Director Participant’s Director Retirement Plan Account based on three‑year cumulative CHS, Inc. Return On Adjusted Equity (ROAE). For example, the fiscal 2014 amount will be based on cumulative ROAE for fiscal years 2012, 2013 and 2014. Contribution amounts based on performance level are presented in the following table:
Amount
Target
Performance Definition
$100,000
20% ROAE
Superior Performance
$50,000
14% ROAE
Maximum
$25,000
10% ROAE
Target
$5,000
8% ROAE
Minimum
$0
Below 8% ROAE
 

Awards will be prorated for performance between performance levels. For Directors who leave the Board during a fiscal year, a Director’s credit for that partial fiscal year will be the target amount ($25,000) prorated through the end of the month in which the Director departs. Directors who join the Company’s Board during a fiscal year will receive a credit for that partial fiscal year based on actual ROE or ROAE (as applicable) for the fiscal year in which the Director joins the Board, prorated from the first of the month next following the month in which the Director joins the Board to the end of the fiscal year.
A Participant’s Annual Director Retirement Plan Amount, if any, shall be credited on a date or dates to be determined by the Company’s Board, in its sole discretion.
3.8
Crediting of Amounts after Benefit Distribution.     Notwithstanding any provision in this Plan to the contrary, should the complete distribution of a Participant’s vested Account Balance occur prior to the date on which any portion of (i) the Annual Deferral Amount that a Participant has elected to defer in accordance with Section 3.3, (ii) the Company Contribution Amount, or (iii) the Company Restoration Matching Amount, would otherwise be credited to the Participant’s Account Balance, such amounts shall be credited to the Participant’s Account Balance in accordance with the deferral election and shall be paid to the Participant in accordance with the terms of the Plan (and the Participant’s payment election, as applicable).

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3.9
Vesting    .
(a)
A Participant shall at all times be 100% vested in his or her Deferral Account. A Company Director Participant shall at all times be 100% vested in his or her Director Retirement Plan Account.
(b)
A Participant shall be vested in his or her Company Contribution Account in accordance with the vesting schedule(s) set forth in his or her Plan Agreement, employment agreement, any other agreement entered into between the Participant and his or her Employer, or as declared by the Committee in its sole discretion. If not addressed in such agreements or declared by the Committee, a Participant shall vest in each Company Contribution Amount, plus amounts credited and debited on such amount, on the anniversary of the date on which such Company Contribution Amount was credited to the Company Contribution Account, in accordance with the following schedule; provided, however, that the Participant must be in the service of an Employer as an Employee on such anniversary to receive vesting credit:
Time Elapsed Following Crediting of Company Contribution Amount
Vested Percentage
Less than 1 year
0%
1 year or more, but less than 2 years
33%
2 years or more, but less than 3 years
66%
3 years or more
100%
A new vesting schedule shall apply to each Company Contribution Amount credited to the Participant’s Company Contribution Account.
(c)
A Participant shall be vested in his or her Company Restoration Matching Account only to the extent that the Participant would be vested in such amounts under the provisions of the 401(k) Plan, as determined by the Committee in its sole discretion.
(d)
Notwithstanding anything to the contrary contained in this Section 3.9, in the event that, while a Participant is employed by an Employer or in the service of the Company as a Director, a Change in Control occurs (whether or not Article 5 has been implemented) or the Participant Retires, dies or becomes Disabled, the Participant’s Company Contribution Account and Company Restoration Matching Account shall immediately become 100% vested (if it is not already vested in accordance with the above vesting schedules).
(e)
Notwithstanding subsection 3.9(d) above, the vesting schedule for a Participant’s Company Contribution Account and Company Restoration Matching Account shall not be accelerated upon a Change in Control to the extent that the Committee determines that such acceleration would cause the deduction limitations of Section 280G of the Code to become effective. In the event that all of a Participant’s Company Contribution Account and/or Company Restoration Matching Account is not vested pursuant to such a determination, the Participant may request independent verification of the Committee’s calculations with respect to the application of Section 280G. In such case, the Committee

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must provide to the Participant within ninety (90) days of such a request an opinion from a nationally recognized accounting firm selected by the Participant (the “Accounting Firm”). The opinion shall state the Accounting Firm’s opinion that any limitation in the vested percentage hereunder is necessary to avoid the limits of Section 280G and contain supporting calculations. The cost of such opinion shall be paid for by the Company.
(f)
Section 3.9(e) shall not prevent the acceleration of the vesting schedule applicable to a Participant’s Company Contribution Account and/or Company Restoration Matching Account if such Participant is entitled to a “gross‑up” payment, to eliminate the effect of the Code section 4999 excise tax, pursuant to his or her employment agreement or other agreement entered into between such Participant and the Employer.
3.10
Crediting/Debiting of Account Balances.     In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts shall be credited or debited to a Participant’s Account Balance in accordance with the following rules. For purposes of this Section 3.10, the term “Account Balance” includes the Director Retirement Plan Account balance of any Company Director.
(a)
Measurement Funds. The Participant may elect one or more of the measurement funds selected by the Committee, in its sole discretion, which are based on investment options including, but not limited to, fixed interest credits, notional mutual fund(s) or an investment index (the “Measurement Funds”), for the purpose of crediting or debiting additional amounts to his or her Account Balance. As necessary, the Committee may, in its sole discretion, discontinue, substitute or add a Measurement Fund and such changes will take effect as soon as practicable.
(b)
Election of Measurement Funds. A Participant, in connection with his or her initial deferral election in accordance with Section 3.3(a) above (or as a result of a Company Director’s automatic participation in accordance with Section 3.7 above), shall elect, on the Election Form, one or more Measurement Fund(s) (as described in Section 3.10(a) above) to be used to determine the amounts to be credited or debited to his or her Account Balance. If a Participant does not elect any of the Measurement Funds as described in the previous sentence, the Participant’s Account Balance shall automatically be allocated into such default Measurement Fund as determined by the Committee from time to time, in its sole discretion. The Participant may (but is not required to) elect, by submitting an Election Form to the Committee that is accepted by the Committee, to add or delete one or more Measurement Fund(s) to be used to determine the amounts to be credited or debited to his or her Account Balance, or to change the portion of his or her Account Balance allocated to each previously or newly elected Measurement Fund. If an election is made in accordance with the previous sentence, it shall apply as of the first business day deemed reasonably practicable by the Committee, in its sole discretion, and shall continue thereafter for each subsequent day in which the Participant participates in the Plan, unless changed in accordance with the previous sentence.
(c)
Proportionate Allocation. In making any election described in Section 3.10(a) above, the Participant shall specify on the Election Form, in increments of one percent (1%), the percentage of his or her Account Balance or Measurement Fund, as applicable, to be allocated/reallocated.

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(d)
Crediting or Debiting Method. The performance of each Measurement Fund (either positive or negative) will be determined on a daily basis based on the manner in which such Participant’s Account Balance has been hypothetically allocated among the Measurement Funds by the Participant.
(e)
No Actual Investment. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participant’s election of any such Measurement Fund, the allocation of his or her Account Balance thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant’s Account Balance shall not be considered or construed in any manner as an actual investment of his or her Account Balance in any such Measurement Fund. In the event that the Company or the Trustee (as that term is defined in the Trust), in its own discretion, decides to invest funds in any or all of the investments on which the Measurement Funds are based, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participant’s Account Balance shall at all times be a bookkeeping entry only and shall not represent any investment made on his or her behalf by the Company or the Trust; the Participant shall at all times remain an unsecured creditor of the Company.
3.11
FICA and Other Taxes    .
(a)
Annual Deferral Amounts. For each Plan Year in which an Annual Deferral Amount is being withheld from a Participant, the Participant’s Employer(s) shall withhold from that portion of the Participant’s Base Salary and/or Bonus that is not being deferred, in a manner determined by the Employer(s), the Participant’s share of FICA and other employment taxes on such Annual Deferral Amount. If necessary, the Committee may reduce the Annual Deferral Amount in order to comply with this Section 3.11.
(b)
Company Restoration Matching Account and Company Contribution Account. When a Participant becomes vested in a portion of his or her Company Restoration Matching Account and/or Company Contribution Account, the Participant’s Employer(s) shall withhold from that portion of the Participant’s Base Salary and/or Bonus that is not deferred, in a manner determined by the Employer(s), the Participant’s share of FICA and other employment taxes on such Company Restoration Matching Amount and/or Company Contribution Amount. If necessary, the Committee may reduce the vested portion of the Participant’s Company Restoration Matching Account or Company Contribution Account, as applicable, in order to comply with this Section 3.11.
(c)
Distributions. The Participant’s Employer(s), or the trustee of the Trust, shall withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Employer(s), or the trustee of the Trust, in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Employer(s) and the trustee of the Trust.

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ARTICLE 4
Scheduled Distribution; Unforeseeable Financial Emergencies
4.1
Scheduled Distribution.     In connection with each election to defer an Annual Deferral Amount, a Participant may irrevocably elect to receive a Scheduled Distribution with respect to all or a portion of the Annual Deferral Amount, in the form of a lump sum payment or pursuant to an Annual Installment Method of up to ten (10) years. The Annual Deferral Amount (or portion thereof) subject to the election shall be credited or debited for earnings, gains or losses in the manner provided in Section 3.10 above. Subject to the other terms and conditions of this Plan, each Scheduled Distribution elected shall be paid out (or commenced in the case of installments) during a sixty (60) day period commencing immediately after the first day of any Plan Year designated by the Participant (the “Scheduled Distribution Date”). The Plan Year designated by the Participant must be at least two (2) Plan Years after the end of the Plan Year to which the Participant’s deferral election described in Section 3.3 relates. By way of example, if a Scheduled Distribution is elected for Annual Deferral Amounts that are earned in the Plan Year commencing January 1, 2014, the Scheduled Distribution would become payable during a sixty (60) day period commencing January 1, 2017.
4.2
Changing Scheduled Distributions.     A Participant may elect to postpone or change the form of a Scheduled Distribution election described in Section 4.1 above. In order to make this election, the Participant must submit a new Scheduled Distribution Election Form to the Committee in accordance with the following criteria:
(a)
Such Scheduled Distribution Election Form must be submitted to and accepted by the Committee in its sole discretion at least twelve (12) months prior to the Participant’s previously designated Scheduled Distribution Date;
(b)
The new Scheduled Distribution Date selected by the Participant must be the first day of a Plan Year, and must be at least five years after the previously designated Scheduled Distribution Date (even if the Participant is seeking merely to modify the form of payment);
(c)
The election to modify the Scheduled Distribution shall have no effect until at least twelve (12) months after the date on which the election is made.
4.3
Certain Benefits Take Precedence Over Scheduled Distributions.     Should a Benefit Distribution Date occur that triggers a benefit under Articles 5, 7, 8, or 9, any Annual Deferral Amount that is subject to a Scheduled Distribution election under Section 4.1 shall not be paid in accordance with Section 4.1, but shall be paid in accordance with the other applicable Article. The occurrence of a Benefit Distribution Date that triggers a Retirement Benefit under Article 6 shall not take precedence over any Annual Deferral Amount that is subject to a Scheduled Distribution election; such amount(s) shall be paid in accordance with the applicable Scheduled Distribution election. Notwithstanding the foregoing, the Committee shall interpret this Section 4.1 in a manner that is consistent with Code Section 409A and other applicable tax law, including but not limited to guidance issued after the effective date of this Plan.
4.4
Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies.
    

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(a)
If the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee to suspend deferrals of Base Salary, Bonus and Director Fees to the extent deemed necessary by the Committee to satisfy the Unforeseeable Financial Emergency. If suspension of deferrals is not sufficient to satisfy the Participant’s Unforeseeable Financial Emergency, or if suspension of deferrals is not required under Code Section 409A and other applicable tax law, the Participant may further petition the Committee to receive a partial or full payout from the Plan. The Participant shall only receive a payout from the Plan to the extent such payout is deemed necessary by the Committee to satisfy the Participant’s Unforeseeable Financial Emergency, plus amounts reasonably necessary to pay taxes reasonably anticipated as a result of the distribution.
(b)
The payout shall not exceed the lesser of (i) the Participant’s vested Account Balance, calculated as of the close of business on or around the date on which the amount becomes payable, as determined by the Committee in its sole discretion, or (ii) the amount necessary to satisfy the Unforeseeable Financial Emergency, plus amounts reasonably necessary to pay taxes reasonably anticipated as a result of the distribution. Notwithstanding the foregoing, a Participant may not receive a payout from the Plan to the extent that the Unforeseeable Financial Emergency is or may be relieved (A) through reimbursement or compensation by insurance or otherwise, (B) by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship or (C) by suspension of deferrals under this Plan, if the Committee, in its sole discretion, determines that suspension is required by Code Section 409A and other applicable tax law.
(c)
If the Committee, in its sole discretion, approves a Participant’s petition for suspension, the Participant’s deferrals under this Plan shall be suspended as of the date of such approval. If the Committee, in its sole discretion, approves a Participant’s petition for suspension and payout, the Participant’s deferrals under this Plan shall be suspended as of the date of such approval and the Participant shall receive a payout from the Plan within sixty (60) days of the date of such approval.
(d)
Notwithstanding the foregoing, the Committee shall interpret all provisions relating to suspension and/or payout under this Section 4.4 in a manner that is consistent with Code Section 409A and other applicable tax law, including but not limited to guidance issued after the effective date of this Plan.
ARTICLE 5
Change in Control Benefit
5.1
Change in Control Benefit.     The provisions of this Change in Control Benefit Article shall be subject to such conditions and limitations as the Committee may prescribe from time to time for administrative convenience and to comply with the provisions of Code Section 409A. Each Participant, in connection the implementation of this provision (or for any future Participant, in connection with his or her commencement of participation in the Plan), shall irrevocably elect on an Election Form whether to (i) receive a Change in Control Benefit upon the occurrence of a Change in Control, which shall be equal to the Participant’s vested Account Balance, calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as determined

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by the Committee in its sole discretion, or (ii) to have his or her Account Balance remain in the Plan upon the occurrence of a Change in Control and to have his or her Account Balance remain subject to the terms and conditions of the Plan. If a Participant does not make any election with respect to the payment of the Change in Control Benefit, then: (i) for Participants who first entered the Plan prior to June 1, 2012, such Participant’s Account Balance shall remain in the Plan upon a Change in Control and shall be subject to the terms and conditions of the Plan; and (ii) for Participants who first enter the Plan on or after June 1, 2012, such Participant’s Account Balance shall receive a Change in Control Benefit upon the occurrence of a Change in Control.
5.2
Payment of Change in Control Benefit.     The Change in Control Benefit, if any, shall be paid to the Participant in a lump sum no later than sixty (60) days after the Participant’s Benefit Distribution Date. Notwithstanding the foregoing, the Committee shall interpret all provisions in this Plan relating to a Change in Control Benefit in a manner that is consistent with Code Section 409A and other applicable tax law, including but not limited to guidance issued after the effective date of this Plan.
ARTICLE 6
Retirement Benefit
6.1
Retirement Benefit.     A Participant who Retires shall receive, as a Retirement Benefit, his or her vested Account Balance, calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as determined by the Committee in its sole discretion.
6.2
Payment of Retirement Benefit.    
(a)
A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form to receive the Retirement Benefit in a lump sum or pursuant to an Annual Installment Method of up to ten (10) years. The Participant may postpone or change the form of the Retirement Benefit by submitting an Election Form to the Committee in accordance with the following criteria:
(i)
Such Election Form must be submitted to and accepted by the Committee in its sole discretion at least twelve (12) months prior to the Participant’s previously scheduled Benefit Distribution Date described in Section 1.8(a); and
(ii)
The first Retirement Benefit payment is delayed at least five (5) years from the Participant’s previously scheduled Benefit Distribution Date described in Section 1.8(a); and
(iii)
The election to modify the Retirement Benefit shall have no effect until at least twelve (12) months after the date on which the election is made.
The Election Form most recently accepted by the Committee shall govern the payout of the Retirement Benefit. If a Participant does not make any election with respect to the payment of the Retirement Benefit in connection with his or her commencement of participation in the Plan, then such Participant shall be deemed to have elected to receive the Retirement Benefit in a lump sum.

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(b)
The lump sum payment shall be made, or installment payments shall commence, no later than sixty (60) days after the Participant’s Benefit Distribution Date. Remaining installments, if any, shall be paid no later than sixty (60) days after each anniversary of the Participant’s Benefit Distribution Date.
ARTICLE 7
Termination Benefit

7.1
Termination Benefit.     A Participant who experiences a Separation from Service shall receive, as a Termination Benefit, his or her vested Account Balance, calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as determined by the Committee in its sole discretion.
7.2
Payment of Termination Benefit.     The Termination Benefit shall be paid to the Participant in a lump sum payment no later than sixty (60) days after the Participant’s Benefit Distribution Date.
ARTICLE 8
Disability Benefit
8.1
Disability Benefit.     Upon a Participant’s Disability, the Participant shall receive a Disability Benefit, which shall be equal to the Participant’s vested Account Balance, calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as selected by the Committee in its sole discretion.
8.2
Payment of Disability Benefit.     
(a)
A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form to receive the Disability Benefit in a lump sum or pursuant to an Annual Installment Method of up to ten (10) years. The Participant may change this election by submitting an Election Form to the Committee, provided that any such Election Form is submitted to and accepted by the Committee in its sole discretion at least twelve (12) months prior to the Participant’s Disability.
Notwithstanding the foregoing, the Committee shall interpret all provisions relating to changing the Disability Benefit election under this Section 8.2 in a manner that is consistent with Code Section 409A and other applicable tax law, including but not limited to guidance issued after the effective date of this Plan.
The Election Form most recently accepted by the Committee shall govern the payout of the Disability Benefit. If a Participant does not make any election with respect to the payment of the Disability Benefit, then such benefit shall be payable in a lump sum.
(b)
The lump sum payment shall be made, or installment payments shall commence, no later than sixty (60) days after the Participant’s Benefit Distribution Date. Remaining installments, if any, shall be paid no later than sixty (60) days after each anniversary of the Participant’s Benefit Distribution Date.

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ARTICLE 9
Death Benefit
9.1
Death Benefit.     The Participant’s Beneficiary(ies) shall receive a Death Benefit upon the Participant’s death which will be equal to the Participant’s vested Account Balance, calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as selected by the Committee in its sole discretion.
9.2
Payment of Death Benefit.     The Death Benefit shall be paid to the Participant’s Beneficiary(ies) in a lump sum payment no later than sixty (60) days after the Participant’s Benefit Distribution Date.
ARTICLE 10
Director Retirement Plan Benefit
10.1
Director Retirement Plan Benefit.     A Director of the Company who experiences a Separation from Service, death or Disability shall receive, as a Director Retirement Plan Benefit, his or her Director Retirement Plan Account balance, calculated as of the close of business on or around the Director’s Benefit Distribution Date, as determined by the Committee in its sole discretion.
10.2
Payment of Director Retirement Plan Benefit.     The Director Retirement Plan Benefit shall be paid in annual installment payments over four (4) years, determined in accordance with the Annual Installment Method. The first installment be commenced to the Director no later than sixty (60) days after the Participant’s Benefit Distribution Date. Remaining installments shall be paid no later than sixty (60) days after each anniversary of the Participant’s Benefit Distribution Date.
10.3
Benefit Distribution Date.     For purposes of this Article 10, “Benefit Distribution Date” shall mean the date that triggers distribution of a Director Retirement Plan Account balance. A Director’s Benefit Distribution Date shall be determined upon the occurrence of any one of the following: (a) if the Participant experiences a Separation from Service, his or her Benefit Distribution Date shall be the last day of the six‑month period immediately following the date on which the Participant experiences a Separation from Service; or (b) the date on which the Committee is provided with proof that is satisfactory to the Committee of the Participant’s death; or (c) the date on which the Committee determines the Participant is Disabled; or
10.4
Effect of Change in Control.     Notwithstanding the foregoing provisions of this Article 10, if the Company experiences a Change in Control either before, on or after the Participant’s Separation from Service, death or Disability, the Director shall be entitled to a lump sum payment (no later than sixty (60) days following the date the Company experiences the Change in Control) which shall be equal to the Participant’s remaining vested Director Retirement Plan Account balance, calculated as of the date on which the Company experiences a Change in Control.

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ARTICLE 11
Beneficiary Designation
11.1
Beneficiary.     Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates.
11.2
Beneficiary Designation; Change; Spousal Consent.     A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee’s rules and procedures, as in effect from time to time. If the Participant names someone other than his or her spouse as a Beneficiary, the Committee may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Committee, executed by such Participant’s spouse and returned to the Committee. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee prior to his or her death.
11.3
Acknowledgment.     No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Committee or its designated agent.
11.4
No Beneficiary Designation.     If a Participant fails to designate a Beneficiary as provided in Sections 12.1, 11.2 and 11.3 above or, if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant’s benefits, then the Participant’s designated Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant’s estate.
11.5
Doubt as to Beneficiary.     If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Participant’s Employer to withhold such payments until this matter is resolved to the Committee’s satisfaction.
11.6
Discharge of Obligations.     The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant’s Plan Agreement shall terminate upon such full payment of benefits.
ARTICLE 12
Leave of Absence
12.1
Paid Leave of Absence.     If a Participant is authorized by the Participant’s Employer to take a paid leave of absence from the employment of the Employer, (i) the Participant shall continue to be considered eligible for the benefits provided in Articles 4, 5, 6, 7, 8, or 9 in accordance with

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the provisions of those Articles, and (ii) the Annual Deferral Amount shall continue to be withheld during such paid leave of absence in accordance with Section 3.3.
12.2
Unpaid Leave of Absence.     If a Participant is authorized by the Participant’s Employer to take an unpaid leave of absence from the employment of the Employer for any reason, such Participant shall continue to be eligible for the benefits provided in Articles 4, 5, 6, 7, 8, or 9 in accordance with the provisions of those Articles. However, the Participant shall be excused from fulfilling his or her Annual Deferral Amount commitment that would otherwise have been withheld during the remainder of the Plan Year in which the unpaid leave of absence is taken. During the unpaid leave of absence, the Participant shall not be allowed to make any additional deferral elections. However, if the Participant returns to employment, the Participant may elect to defer an Annual Deferral Amount for the Plan Year following his or her return to employment and for every Plan Year thereafter while a Participant in the Plan, provided such deferral elections are otherwise allowed and an Election Form is delivered to and accepted by the Committee for each such election in accordance with Section 3.3 above.
ARTICLE 13
Termination of Plan, Amendment or Modification
13.1
Termination of Plan.     Although each Employer anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that any Employer will continue the Plan or will not terminate the Plan at any time in the future. Accordingly, the board of directors of any Employer reserves the right to Terminate the Plan (as defined in Section 1.43) as to that Employer, and the Board of Directors of the Company reserves the right to Terminate the Plan in its entirety as to the Company and all Employers. In the event of a Termination of the Plan, the Measurement Funds available to Participants following the Termination of the Plan shall be comparable in number and type to those Measurement Funds available to Participants in the Plan Year preceding the Plan Year in which the Termination of the Plan is effective. Following a Termination of the Plan, Participant Account Balances shall remain in the Plan until the Participant becomes eligible for the benefits provided in Articles 4, 5, 6, 7, 8 or 9 in accordance with the provisions of those Articles. The Termination of the Plan shall not adversely affect any Participant or Beneficiary who has become entitled to the payment of any benefits under the Plan as of the date of termination. Provided, however, to the extent permissible under Code Section 409A and related Treasury Regulations and guidance, including but not limited to such guidance and Regulations as may be issued after the effective date of this Plan, if there is a Termination of the Plan with respect to all Participants, the Company may, in its discretion, amend the Plan to accelerate the time and form of payments.
13.2
Amendment.    
(a)
The Board may, at any time, amend or modify the Plan in whole or in part. In addition, the Committee may, at any time, amend or modify the Plan in whole or in part, so long as such amendment does not materially increase the cost of the Plan. Notwithstanding the foregoing, (i) no amendment shall be effective to decrease the value of a Participant’s vested Account Balance in existence at the time the amendment is made, and (ii) no amendment or modification of this Section 13.2 or Section 14.2 of the Plan shall be effective. In no event shall the Company or any Employer be responsible for any decline

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in a Participant’s Account Balance as a result of the selection, discontinuation, addition, substitution, crediting or debiting of the Measurement Funds pursuant to Section 3.10.
(b)
Notwithstanding any provision of the Plan to the contrary, in the event that the Committee determines that any provision of the Plan may cause amounts deferred under the Plan to become immediately taxable to any Participant under Code Section 409A, and related guidance, the Committee may (i) adopt such amendments to the Plan and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Committee determines necessary or appropriate to preserve the intended tax treatment of the Plan benefits provided by the Plan and/or (ii) take such other actions as the Committee determines necessary or appropriate to comply with the requirements of Code Section 409A, and related guidance.
13.3
Plan Agreement.     Despite the provisions of Sections 14.1 and 13.2 above, if a Participant’s Plan Agreement contains benefits or limitations that are not in this Plan document, the Employer may only amend or terminate such provisions with the written consent of the Participant.
13.4
Effect of Payment.     The full payment of the Participant’s vested Account Balance under Articles 4, 5, 6, 7, 8, or 9 of the Plan shall completely discharge all obligations to a Participant and his or her designated Beneficiaries under this Plan, and the Participant’s Plan Agreement shall terminate.
ARTICLE 14
Administration
14.1
Committee Duties.     Except as otherwise provided in this Article 14, this Plan shall be administered by the CHS Retirement Plan Committee (hereinafter, the “Committee”), which shall consist of the Chief Executive Officer of the Company, or such committee as the Chief Executive Officer of the Company shall appoint. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to (i) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan, and (ii) decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant or the Company.
14.2
Administration Upon Change In Control.     The provisions of this Section 14.2 shall not apply unless and until Article 5 has been implemented and a Trustee has been appointed. For purposes of this Plan, the Committee shall be the “Administrator” at all times prior to the occurrence of a Change in Control. Within one hundred and twenty (120) days following a Change in Control, an independent third party “Administrator” may be selected by the individual who, immediately prior to the Change in Control, was the Company’s Chief Executive Officer or, if not so identified, the Company’s highest ranking officer (the “Ex‑CEO”), and approved by the Trustee. The Committee, as constituted prior to the Change in Control, shall continue to be the Administrator until the earlier of (i) the date on which such independent third party is selected and approved, or (ii) the expiration of the one hundred and twenty (120) day period following the Change in Control. If an independent third party is not selected within one hundred and twenty (120) days of such

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Change in Control, the Committee, as described in Section 14.1 above, shall be the Administrator. The Administrator shall have the discretionary power to determine all questions arising in connection with the administration of the Plan and the interpretation of the Plan and Trust including, but not limited to benefit entitlement determinations; provided, however, upon and after the occurrence of a Change in Control, the Administrator shall have no power to direct the investment of Plan or Trust assets or select any investment manager or custodial firm for the Plan or Trust. Upon and after the occurrence of a Change in Control, the Company must: (1) pay all reasonable administrative expenses and fees of the Administrator; (2) indemnify the Administrator against any costs, expenses and liabilities including, without limitation, attorney’s fees and expenses arising in connection with the performance of the Administrator hereunder, except with respect to matters resulting from the gross negligence or willful misconduct of the Administrator or its employees or agents; and (3) supply full and timely information to the Administrator on all matters relating to the Plan, the Trust, the Participants and their Beneficiaries, the Account Balances of the Participants, the date and circumstances of the Retirement, Disability, death or Separation from Service of the Participants, and such other pertinent information as the Administrator may reasonably require. Upon and after a Change in Control, the Administrator may be terminated (and a replacement appointed) by the Trustee only with the approval of the Ex‑CEO. Upon and after a Change in Control, the Administrator may not be terminated by the Company.
14.3
Agents.     In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer.
14.4
Binding Effect of Decisions.     The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.
14.5
Indemnity of Committee.     All Employers shall indemnify and hold harmless the members of the Committee, any Employee to whom the duties of the Committee may be delegated, and the Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee, any of its members, any such Employee or the Administrator.
14.6
Employer Information.     To enable the Committee and/or Administrator to perform its functions, the Company and each Employer shall supply full and timely information to the Committee and/or Administrator, as the case may be, on all matters relating to the compensation of its Participants, the date and circumstances of the Retirement, Disability, death or Separation from Service of its Participants, and such other pertinent information as the Committee or Administrator may reasonably require.
ARTICLE 15
Other Benefits and Agreements
15.1
Coordination with Other Benefits.     The benefits provided for a Participant and Participant’s Beneficiary under the Plan are in addition to any other benefits available to such Participant under

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any other plan or program for employees of the Participant’s Employer. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided.
ARTICLE 16
Claims Procedures
16.1
Presentation of Claim.     Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a “Claimant”) may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.
16.2
Notification of Decision.     The Committee shall consider a Claimant’s claim within a reasonable time, but no later than ninety (90) days after receiving the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial ninety (90) day period. In no event shall such extension exceed a period of ninety (90) days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. The Committee shall notify the Claimant in writing:
(a)
that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or
(b)
that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant:
(i)
the specific reason(s) for the denial of the claim, or any part of it;
(ii)
specific reference(s) to pertinent provisions of the Plan upon which such denial was based;
(iii)
a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary;
(iv)
an explanation of the claim review procedure set forth in Section 16.3 below; and
(v)
a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.
16.3
Review of a Denied Claim.     On or before sixty (60) days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. The Claimant (or the Claimant’s duly authorized representative):

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(a)
may, upon request and free of charge, have reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits;
(b)
may submit written comments or other documents; and/or
(c)
may request a hearing, which the Committee, in its sole discretion, may grant.
16.4
Decision on Review.     The Committee shall render its decision on review promptly, and no later than sixty (60) days after the Committee receives the Claimant’s written request for a review of the denial of the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial sixty (60) day period. In no event shall such extension exceed a period of sixty (60) days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. In rendering its decision, the Committee shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The decision must be written in a manner calculated to be understood by the Claimant, and it must contain:
(a)
specific reasons for the decision;
(b)
specific reference(s) to the pertinent Plan provisions upon which the decision was based;
(c)
a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; and
(d)
a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a).
16.5
Legal Action.     A Claimant’s compliance with the foregoing provisions of this Article 16 is a mandatory prerequisite to a Claimant’s right to commence any legal action with respect to any claim for benefits under this Plan.
16.6
Determinations.      Benefits under the Plan will be paid only if the Committee decides in its discretion that the applicant is entitled to them. The Committee has discretionary authority to grant or deny benefits under the Plan. The Committee shall have the sole discretion, authority and responsibility to interpret and construe this Plan Statement and all relevant documents and information, and to determine all factual and legal questions under the Plan, including but not limited to the entitlement of all persons to benefits and the amounts of their benefits. The Committee shall make such determinations as may be required from time to time in the administration of the Plan. The discretionary authority shall include all matters arising under the Plan.
ARTICLE 17
Trust
17.1
Establishment of the Trust.     In order to provide assets from which to fulfill the obligations of the Participants and their beneficiaries under the Plan, the Company may establish a trust by a trust agreement with a third party, the trustee, to which each Employer may, in its discretion,

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contribute cash or other property, including securities issued by the Company, to provide for the benefit payments under the Plan, (the “Trust”).
17.2
Interrelationship of the Plan and the Trust.     The provisions of the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust. Each Employer shall at all times remain liable to carry out its obligations under the Plan.
17.3
Distributions From the Trust.     Each Employer’s obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Employer’s obligations under this Plan.
ARTICLE 18
Miscellaneous
18.1
Status of Plan    . The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that “is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Plan shall be administered and interpreted (i) to the extent possible in a manner consistent with that intent, and (ii) in accordance with Code Section 409A and other applicable tax law, including but not limited to Treasury Regulations promulgated pursuant to Code Section 409A.
18.2
Unsecured General Creditor.     Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of an Employer. For purposes of the payment of benefits under this Plan, any and all of an Employer’s assets shall be, and remain, the general, unpledged unrestricted assets of the Employer. An Employer’s obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.
18.3
Employer’s Liability.     An Employer’s liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Employer and a Participant. An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan and his or her Plan Agreement.
18.4
Nonassignability.     Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non‑transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise (including without limitation any domestic relations order, whether or not a “qualified domestic relations order” under section 414(p) of the Code and section 206(d) of ERISA) before the Account Balance is distributed to the Participant or Beneficiary.

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18.5
Not a Contract of Employment.     The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an “at will” employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer, either as an Employee or a Director, or to interfere with the right of any Employer to discipline or discharge the Participant at any time.
18.6
Furnishing Information.     A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary.
18.7
Terms.     Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply.
18.8
Captions.     The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.
18.9
Governing Law.     Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the State of Minnesota without regard to its conflicts of laws principles.
18.10
Notice.     Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand‑delivered, or sent by registered or certified mail, to the address below:
CHS Inc.
Attn: Kevin Newton, Benefits Manager
5500 Cenex Drive
Inver Grove Heights, Minnesota 55077
Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.
Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand‑delivered, or sent by mail, to the last known address of the Participant.
18.11
Successors.     The provisions of this Plan shall bind and inure to the benefit of the Participant’s Employer and its successors and assigns and the Participant and the Participant’s designated Beneficiaries.
18.12
Spouse’s Interest.     The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable

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Master Plan Document


by such spouse in any manner, including but not limited to such spouse’s will, nor shall such interest pass under the laws of intestate succession.
18.13
Validity.     In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.
18.14
Incompetent.     If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person’s property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount.
18.15
Deduction Limitation on Benefit Payments.     An Employer may determine that as a result of the application of the limitation under Code Section 162(m), a distribution payable to a Participant pursuant to this Plan would not be deductible by the Employer if such distribution were made at the time required by the Plan. If an Employer makes such a determination, then the distribution shall not be paid to the Participant until such time as the distribution first becomes deductible. The amount of the distribution shall continue to be adjusted in accordance with Section 3.10 above until it is distributed to the Participant. The amount of the distribution, plus amounts credited or debited thereon, shall be paid to the Participant or his or her Beneficiary (in the event of the Participant’s death) at the earliest possible date, as determined by the Employer, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Employer during which the distribution is made will not be limited by Section 162(m). Notwithstanding the foregoing, the Committee shall interpret this provision in a manner that is consistent with Code Section 409A and other applicable tax law, including but not limited to guidance issued after the effective date of this Plan.
18.16
Insurance. The Employers, on their own behalf or on behalf of the trustee of the Trust, and, in their sole discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the Trust may choose. The Employers or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the Employers shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom the Employers have applied for insurance.


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Deferred Compensation Plan
Master Plan Document


IN WITNESS WHEREOF, the Company has signed this Plan document as of ______________, 2015.
CHS Inc., a Minnesota corporation

By: __________________________________
Title: _________________________________



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Deferred Compensation Plan
Master Plan Document


CHS INC.
DEFERRED COMPENSATION PLAN
APPENDIX A
Share Option Plan Accounts
Except where expressly defined in this Appendix, the capitalized terms used herein shall have the same meanings as the same terms in the Plan document.
1.1
History. Since January 1, 1998, the Company has sponsored the CHS Inc. Share Option Plan (the “SOP”) for the purpose of providing stock options to certain key individuals. The options granted under the SOP are in shares of a private investment company established by the Company as well as shares of certain regulated investment companies. The Company has determined to discontinue the grant of additional options under the SOP effective December 9, 2005 and to amend the terms of all outstanding options as of December 31, 2005 to comply with Section 409A of the Code.
1.2
Right to Exercise in 2005. On or before December 9, 2005, each Participant in the SOP shall have the right to exercise all or any portion of such Participant’s vested options.
1.3
Conversion of Options. Effective December 10, 2005, options which are not exercised on or prior to December 9, 2005 shall be converted into an account balance (the “SOP Account”) which shall become part of the Participant’s Account Balance under the CHS Inc. Deferred Compensation Plan (the “Plan”). The initial SOP Account shall consist of two parts: (i) the difference of the value of the securities underlying the option less the exercise price (the “Option Spread”); and (ii) the exercise price of the option (the “Exercise Price Credit”). The Participant shall not be entitled to payment of the Exercise Price Credit; provided, however, that the Participant shall have a right to deemed earnings, if any, which accrue on the portion of the SOP Account representing the Exercise Price Credit.
1.4
Vesting. A Participant shall continue to vest in all options converted into an SOP Account (excluding the portion of the SOP Account representing the Exercise Price Credit) in accordance with the vesting schedule applicable to such options under the SOP.
1.5
Crediting/Debiting of SOP Account. Following the conversion, the Participant’s Option Spread shall no longer be tied to the value of the securities underlying the option immediately prior to conversion, but shall instead be credited or debited with earnings, gains or losses under one or more Measurement Funds elected by the Participant, in accordance with Section 3.9 of the Plan. The Participant’s Exercise Price Credit shall no longer be tied to the value of the securities underlying the option immediately prior to the conversion, but shall instead be credited or debited with earnings, gains or losses under one or more Measurement Funds selected by the Committee. With respect to a Participant who receives an installment or other partial distribution of the SOP Account in accordance with a Scheduled Distribution elected pursuant to Section 1.6 below, the portion of the SOP Account representing the Exercise Price Credit shall be reduced by a pro rata amount. Upon a complete distribution of the SOP Account, the Exercise Price Credit shall be reduced to zero (0).

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1.6
Scheduled Distributions. A Participant who does not exercise all of such Participant’s options pursuant to Section 1.2 of this Appendix A shall, on or before December 31, 2005, irrevocably elect on an Election Form to receive one or more (not to exceed five (5)) Scheduled Distributions with respect to the Participant’s SOP Account (minus the Exercise Price Credit). For purposes of this Section 1.6, the following special rules shall apply:
(a)
Subject to the limitations described this paragraph (a), the Participant may elect to receive or commence a Scheduled Distribution as of any fixed date selected by the Participant (e.g., January 1, 2007). No more than one (1) Scheduled Distribution as of a fixed date may be made or commenced in any Plan Year, and the Plan Year designated by the Participant for the first Scheduled Distribution must be at least one (1) Plan Year after the end of the Plan Year ending December 31, 2005.
(b)
The Participant may elect on an Election Form to receive each Scheduled Distribution in a lump sum or pursuant to an Annual Installment Method of up to ten (10) years. If a Participant does not make any election with respect to the form of payment, then such Participant’s Scheduled Distribution shall be distributed in a single lump sum.
(c)
A Scheduled Distribution of the SOP Account may be changed in accordance with Section 4.2 of the Plan. If the Participant has elected to receive multiple Scheduled Distributions, each Scheduled Distribution shall be treated as a separate payment, each of which may be changed through a separate election. If the Participant has elected to receive a Scheduled Distribution in installments, the installments shall be treated as a single payment which must be changed through a single election that applies to the entire payment.
(d)
Notwithstanding the foregoing, if the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee for a payout in accordance with Section 4.4 of the Plan.
(e)
With respect to a Participant who is not actively employed with the Company as of December 9, 2005, if the Participant fails to make a Scheduled Distribution election with respect to any portion of the SOP Account, that portion of the SOP Account shall be paid (minus the Exercise Price Credit) as a Scheduled Distribution during the sixty (60) day period commencing immediately after the Plan Year ending December 31, 2006. With respect to a Participant who is actively employed with the Company as of December 9, 2005, if the Participant fails to make a Scheduled Distribution election with respect to any portion of the SOP Account, that portion of the SOP Account shall be paid (minus the Exercise Price Credit) upon the occurrence of a Benefit Distribution Date on account of the Participant’s Separation from Service, Retirement or Disability, in accordance with the terms of the Plan.
1.7
Elections for Retirement or Disability Benefit. With respect to each Participant who is actively employed by the Company as of December 9, 2005 and who does not exercise all of such Participant’s options pursuant to Section 1.2 of this Appendix A, such Participant must complete a Retirement Benefit election in accordance with Article 6 and a Disability Benefit election in accordance with Article 8.

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1.8
Certain Benefits Take Precedence Over Scheduled Distributions.
(a)
Change in Control. On or before December 31, 2005, a Participant may irrevocably elect to receive a single lump sum Change in Control Benefit upon the occurrence of a Change in Control in accordance with Article 5 of the Plan. If the Participant elects to receive a Change in Control Benefit, the Change in Control shall trigger payment of the entire SOP Account (minus the Exercise Price Credit) notwithstanding any other election to receive one or more Scheduled Distributions. If a Participant does not make any election with respect to the payment of the Change in Control Benefit, then such Participant’s SOP Account shall remain in the Plan upon a Change in Control and shall be subject to the terms one or more Scheduled Distributions.
(b)
Termination, Retirement or Disability Benefit. In accordance with Section 4.3 of the Plan, the occurrence of a Benefit Distribution Date on account of the Participant’s Separation from Service or Disability that triggers a Termination or Disability Benefit shall take precedence over one or more Scheduled Distribution elections with respect to the SOP Account; provided, however, that the provisions of this Section 1.8 shall not be applicable to any Participant who was not actively employed with the Company at the time such Participant elects a Scheduled Distribution in accordance with Section 1.6 above. The occurrence of a Benefit Distribution Date that triggers a Retirement Benefit under Article 6 shall not take precedence over any SOP Account that is subject to a Scheduled Distribution election; the SOP Account shall be paid in accordance with the applicable Scheduled Distribution election.
(c)
Death Benefit. The occurrence of the Participant’s death that triggers an automatic Death Benefit under Section 9 of the Plan shall take precedence over one or more Scheduled Distribution elections with respect to the SOP Account; the SOP Account (minus the Exercise Price Credit) shall be paid in a single lump sum in accordance with Article 9 of the Plan.



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Deferred Compensation Plan
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CHS INC.
DEFERRED COMPENSATION PLAN
APPENDIX B
Supplemental Savings Plan Accounts
Except where expressly defined in this Appendix, the capitalized terms used herein shall have the same meanings as the same terms in the Plan document.
1.1
History. Since January 1, 1999, the Company has sponsored the CHS Inc. Supplemental Savings Plan (the “SSP”) for the purpose of allowing a select group of management and highly compensated employees to voluntarily defer compensation. The Company has determined to discontinue voluntary deferrals under the SSP effective July 1, 2006.
1.2
Conversion of Account Balances. Effective July 1, 2006, voluntary deferrals previously deferred pursuant to the terms of the SSP shall become part of the Participant’s Deferral Account balance under this Plan. Following the conversion, the Participant’s SSP Account shall no longer be credited with interest income under the terms of the SSP, but shall instead be credited or debited with earnings, gains or losses under one or more Measurement Funds elected by the Participant, in accordance with Section 3.9 of the Plan. Notwithstanding the foregoing, the following special rules shall apply:
(a)
Amounts deferred under the SSP pursuant to an election providing one or more scheduled payments, all of which are to be paid in full no later than December 31, 2008, shall not become part of the Plan, but shall instead continue to be governed by the terms of the SSP until such amounts, and any earnings thereon, are paid in full.
(b)
Amounts deferred under the SSP which are in pay status as of July 1, 2006 but which are not scheduled to be paid in full on or before December 31, 2008, shall become part of the Plan but shall be paid in accordance with the schedule elected under the SSP. Unpaid amounts shall be credited or debited with earnings, gains or losses in accordance with Section 3.9 of the Plan.
(b)
Amounts deferred under the SSP by any SSP Participant who is an employee of Cofina Financial, LLC as of July 1, 2006 shall not become part of this Plan, but rather, shall become part of the Participant’s Deferral Account balance under the Cofina Financial, LLC Deferred Compensation Plan.
1.3
Payment Elections. With respect to each Participant in the SSP who first becomes a Participant in this Plan when his or her SSP Account becomes part of the Deferral Account balance under this Plan, on or prior to July 1, 2006, such Participant must complete a Retirement Benefit election in accordance with Article 6 and a Disability Benefit election in accordance with Article 8 (other than with respect to benefits in pay status under Section 1.2(b) above). Such Participant may also (but need not) irrevocably elect to receive a single lump sum Change in Control Benefit upon the occurrence of a Change in Control in accordance with Article 5 of the Plan. With respect to each Participant in the SSP who is a Participant in this Plan when his or her SSP benefits become part


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Deferred Compensation Plan
Master Plan Document


of the Deferral Account balance under this Plan, such Participant’s prior payment elections with respect to the Participant’s Deferral Account shall apply to the SSP benefits.




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CHS Inc.
Deferred Compensation Plan
Master Plan Document


CHS INC.
DEFERRED COMPENSATION PLAN
APPENDIX C
Supplemental Executive Retirement Plan Savings Accounts
Except where expressly defined in this Appendix, the capitalized terms used herein shall have the same meanings as the same terms in the Plan document.
1.1
History. Since January 1, 1999, the Company has sponsored the CHS Inc. Supplemental Executive Retirement Plan (the “SERP”) for the purpose of providing deferred compensation to a select group of management and highly compensated employees. The Company has determined, effective July 1, 2006, to discontinue making restorative matching and non‑elective credits to the Savings Plan Accounts of Participants under Section 4.3 of the SERP.
1.2
Conversion of Account Balances. Effective July 1, 2006, a Participant’s Savings Plan Account under the SERP, if any, shall become part of the Participant’s Company Contribution Account balance under this Plan. Following the conversion, the Participant’s SERP Savings Plan Account shall no longer be credited with interest income under the terms of the SERP, but shall instead be credited or debited with earnings, gains or losses under one or more Measurement Funds elected by the Participant, in accordance with Section 3.9 of the Plan.
1.3
Payment Elections. With respect to each Participant in the SERP who first becomes a Participant in this Plan when his or her SERP Savings Plan Account becomes part of the Company Contribution Account balance under this Plan, on or prior to July 1, 2006, such Participant must complete a Retirement Benefit election in accordance with Article 6, a Disability Benefit election in accordance with Article 8. Such Participant may also (but need not) irrevocably elect to receive a single lump sum Change in Control Benefit upon the occurrence of a Change in Control in accordance with Article 5 of the Plan. With respect to each Participant in the SERP who is a Participant in this Plan when his or her SERP Savings Plan Account becomes part of the Company Contribution Account balance under this Plan, such Participant’s prior payment elections with respect to the Participant’s Company Contribution Account shall apply to the SERP Savings Plan Accounts.
1.4
Company Contribution Amount. In addition to such Company Contribution Amounts as may be made under Section 3.5 of the Plan, for each Plan Year, the Company Contribution Account of each Participant who qualifies as an Active Participant under the SERP shall be credited with a Company Contribution Amount determined under this Section 1.4. Such Company Contribution Amount for any Plan Year shall be the difference, if any, between:
(a)
the amount of the Active Participant’s “discretionary contribution” which would have been credited under the CHS Inc. Savings Plan for the Plan Year if: (i) the limitations on benefits imposed by Sections 401(a)(17) and 415 of the Code were disregarded; and (ii) compensation deferred upon the election of the Participant under this Plan were taken into account as includible compensation under the Savings Plan (except that amounts deferred or paid under any mandatory deferral portion of any long‑term incentive

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Deferred Compensation Plan
Master Plan Document


compensation program maintained by the Company or any Employer shall be disregarded for this purpose); and
(b)
the actual amount of discretionary contribution that is allocated on behalf of such Participant under the provisions of the Savings Plan for such Plan Year
1.5
Company Restoration Matching Amounts. In addition to such Company Restoration Matching Amounts as may be made under Section 3.6 of the Plan, for each Plan Year, the Company Restoration Matching Account of each Participant who qualifies as an Active Participant under the SERP shall be credited with a Company Restoration Matching Amount in determined under this Section 1.5. Such Company Restoration Matching Amount for any Plan Year shall be the difference, if any, between:
(a)
the amount of the Active Participant’s “matching contribution” which would have been credited under the CHS Inc. Savings Plan for the Plan Year if: (i) the limitations on benefits imposed by Sections 401(a)(17), 402(g) and 415 of the Code were disregarded; (ii) compensation deferred upon the election of the Participant under this Plan were taken into account as includible compensation under the Savings Plan (except that amounts deferred or paid under any mandatory deferral portion of any long‑term incentive compensation program maintained by the Company or any Employer shall be disregarded for this purpose); and (iii) for such Plan Year, the Participant made a “before tax contribution” (as defined in the Savings Plan) of the lesser of: (A) six percent (6%) of the Participant’s includible compensation as revised under (i) and (ii) above, or (B) the maximum before‑tax contribution, stated as a percentage of such compensation, which is permitted under the Savings Plan to be made by such Participant for that Plan Year, and
(b)
the actual amount of matching contribution that is allocated on behalf of such Participant under the provisions of the Savings Plan for such Plan Year (not in excess of the maximum dollar limit in effect for such Plan Year under Section 402(g) of the Code).



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Deferred Compensation Plan
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CHS INC.
DEFERRED COMPENSATION PLAN
APPENDIX D
Agriliance LLC Deferred Compensation Plan Accounts
Except where expressly defined in this Appendix, the capitalized terms used herein shall have the same meanings as the same terms in the Plan document.
1.1
History. In connection with the Company’s purchase of certain assets of Agriliance LLC (“Agriliance”), the Company assumed deferred compensation obligations under the Agriliance LLC Deferred Compensation Plan (“Agriliance Plan”) for those Participants who transferred employment to the Company as part of the asset purchase.
1.2
Transfer of Account Balances. For those Participants who transferred employment to the Company as part of the asset purchase, all voluntary deferrals previously deferred pursuant to the terms of the Agriliance Plan shall become part of the Participant’s Deferral Account balance under this Plan. Following the conversion, the Participant’s Agriliance Plan account shall no longer be credited with earnings, gains or losses under the terms of the Agriliance Plan, but shall instead be credited or debited with earnings, gains or losses under one or more Measurement Funds elected by the Participant, in accordance with Section 3.9 of the Plan.
1.3
Payment Elections. With respect to each Participant in the Agriliance Plan who becomes a Participant in this Plan, such Participant must upon commencement of participation complete a Beneficiary Designation Form, a Retirement Benefit election in accordance with Article 6 and a Disability Benefit election in accordance with Article 8. Such elections and Beneficiary designations shall apply both to deferrals previously made under the Agriliance Plan and to new deferrals, if any, made under this Plan. Such Participant may also (but need not) irrevocably elect to receive a single lump sum Change in Control Benefit upon the occurrence of a Change in Control in accordance with Article 5 of the Plan. All of the foregoing elections must be made on or before December 31, 2008 and must comply in all other respects with special transition rules issued by the IRS and the U.S. Department of Treasury in connection with the implementation of Section 409A of the Code.




D-1
CHS Inc.
Deferred Compensation Plan
Master Plan Document


CHS INC.
DEFERRED COMPENSATION PLAN
APPENDIX E
Cofina Deferred Compensation Plan Accounts
Except where expressly defined in this Appendix, the capitalized terms used herein shall have the same meanings as the same terms in the Plan document.
1.1
History. In connection with the Company’s acquisition of one hundred percent (100%) of Cofina Financial, LLC, a Minnesota limited liability company (“Cofina”), the Company assumed all deferred compensation obligations under the Cofina Financial, LLC Deferred Compensation Plan (“Cofina Plan”).
1.2
Transfer of Account Balances. All deferrals previously deferred pursuant to the terms of the Cofina Plan shall become part of the Participant’s Deferral Account balance under this Plan. Following the conversion, the Participant’s Cofina Plan account shall no longer be credited with earnings, gains or losses under the terms of the Cofina Plan, but shall instead be credited or debited with earnings, gains or losses under one or more Measurement Funds elected by the Participant, in accordance with Section 3.9 of the Plan.
1.3
Payment Elections. The Cofina Plan is maintained under a document entitled “Cofina Financial, LLC Deferred Compensation Plan, Master Plan Document”, as amended by two amendments. The terms of the Cofina Plan are, in all material respects, identical to this Plan. Accordingly, with respect to each Participant in the Cofina Plan, such Participant’s Beneficiary Designation Form, Retirement Benefit election, Disability Benefit election and Change in Control benefit election (if any) made in accordance with Articles 5, 6 and 8 of the Cofina Plan shall continue in effect, both with respect to deferrals previously made under the Cofina Plan and new deferrals, if any, made under this Plan. In addition, if the Participant has a Scheduled Distribution election in effect with respect to any Annual Deferral Amount under the Cofina Plan, such election shall remain in effect following transfer to this Plan.





4827-4983-70912 5/20/2015

E-1



Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Carl M. Casale, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of CHS Inc. for the quarterly period ended May 31, 2015;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 10, 2015
 
/s/ Carl M. Casale
 
Carl M. Casale
 
President and Chief Executive Officer



Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Timothy Skidmore, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of CHS Inc. for the quarterly period ended May 31, 2015;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 10, 2015
 
/s/ Timothy Skidmore
 
Timothy Skidmore
 
Executive Vice President and Chief Financial Officer



Exhibit 32.1

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report on Form 10-Q of CHS Inc. (the “Company”) for the quarterly period ended May 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Carl M. Casale, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 
/s/ Carl M. Casale
 
Carl M. Casale
 
President and Chief Executive Officer
 
July 10, 2015









Exhibit 32.2

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report on Form 10-Q of CHS Inc. (the “Company”) for the quarterly period ended May 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy Skidmore, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 
/s/ Timothy Skidmore
 
Timothy Skidmore
 
Executive Vice President and Chief Financial Officer
 
July 10, 2015

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