CHS Inc.

11/05/2025 | Press release | Distributed by Public on 11/05/2025 10:33

Annual Report for Fiscal Year Ending 08-31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of our management regarding our financial condition and results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections:
•Overview
•Business Strategy
•Fiscal 2025 Highlights
•Fiscal 2026 Outlook
•Operating Metrics
•Results of Operations
•Liquidity and Capital Resources
•Critical Accounting Policies
•Recent Accounting Pronouncements
Our MD&A should be read in conjunction with the accompanying audited financial statements and notes to those financial statements and the Cautionary Statement regarding forward-looking statements found in Part I, Item 1A of this Annual Report on Form 10-K.
Overview
CHS Inc. is a diversified company that provides grain, food, agronomy and energy resources to businesses and consumers on a global scale. As a cooperative, we are owned by farmers, ranchers and member cooperatives across the United States. We also have preferred shareholders who own our five series of preferred stock, all of which are listed and traded on Nasdaq. We operate in the following three reportable segments:
•Energy.Produces and provides petroleum products primarily for wholesale distribution and transportation.
•Ag.Purchases and further processes or resells grain and oilseed originated by our ag retail and global grain and processing businesses, by our member cooperatives and by third parties. This segment also includes our renewable fuels business and serves as a wholesaler and retailer of agronomy products.
•Nitrogen Production.Produces and distributes nitrogen fertilizer. This segment consists of our equity method investment in CF Nitrogen and allocated expenses.
In addition, our financing and hedging businesses, along with our nonconsolidated food production and distribution and wheat milling joint ventures, have been aggregated within our Corporate and Other category.
The consolidated financial statements include the accounts of CHS and all subsidiaries and limited liability companies in which we have control. The effects of all significant intercompany transactions have been eliminated.
Corporate administrative expenses and interest are allocated to each reportable segment and Corporate and Other, based on direct use of services, such as information technology and legal, and other factors or considerations relevant to the costs incurred.
Management's Focus. When evaluating our operating performance, management focuses on income before income taxes ("IBIT"). As a company that operates heavily in global commodities, there is significant unpredictability and volatility in pricing, costs and global trade volumes. Consequently, we focus on managing the margin we can earn and the resulting IBIT. We also focus on ensuring balance sheet strength through appropriate management of financial liquidity, leverage, capital allocation and cash flow optimization.
Seasonality. Many of our business activities are highly seasonal and our operating results vary throughout the year. Our revenues and IBIT generally trend lower during the second fiscal quarter and increase in the third fiscal quarter. For example, in our Ag segment, our ag retail business generally experiences higher volumes and revenues during the fall harvest and spring planting seasons, which generally correspond to our first and third fiscal quarters, respectively. Additionally, our agronomy business generally experiences higher volumes and revenues during the spring planting season. Our global grain and processing operations are subject to fluctuations in volumes and revenues based on producer harvests, world grain prices, global demand and international trade relationships. Our Energy segment generally experiences higher volumes and revenues in
certain operating areas, such as refined fuel products, in the spring, summer and early fall when gasoline and diesel fuel use by agricultural producers is highest and is subject to global supply and demand forces. Other energy products, such as propane, generally experience higher volumes and revenues during the winter heating and fall crop-drying seasons. The graphs below depict the seasonality inherent in our businesses.
Pricing and Volumes. Our revenues, assets and cash flows can be significantly affected by global market prices and sales volumes of commodities such as petroleum products, natural gas, grain, oilseed products and agronomy products. Changes in market prices for commodities we purchase without a corresponding change in the selling prices of those products can affect revenues and operating earnings. Similarly, increased or decreased sales volumes without a corresponding change in the purchase and selling prices of those products can affect revenues and operating earnings. Commodity prices and sales volumes are affected by a wide range of factors beyond our control, including weather; crop damage due to plant disease or insects; drought; availability/adequacy of supply of a commodity; availability of reliable rail, river, truck and ocean transportation networks; disease outbreaks; government regulations and policies; global trade disputes; wars and civil unrest; and general political and/or economic conditions.
Business Strategy
Our business strategies focus on an enterprisewide effort to create an experience that empowers customers to make CHS their first choice, expand market access to add value for our owners and transform and evolve our core businesses by capitalizing on changing market dynamics. To execute these strategies, we are focused on implementing agile, efficient and sustainable technology platforms; building robust and efficient supply chains; hiring, developing and retaining high-performing, diverse and passionate teams; achieving operational excellence and continuous improvement; and maintaining a strong balance sheet.
Fiscal 2025 Highlights
•Our Ag segment performed well, although down from strong results in the prior year. This was mainly due to softening grain and oilseed product margins, lower oilseed crush margins, declining commodity prices and global market conditions.
•Despite strong volumes, our Energy segment results declined significantly from the prior year. This was driven by decreased Western Canadian Select crude oil discounts, unfavorable crack spreads and expected lower sales of produced, higher-margin refined products as a result of our planned major maintenance at our McPherson, Kansas refinery in the third quarter of fiscal year 2025.
•Equity method investments continued to provide solid contributions to CHS income, including strong results from our investments in CF Nitrogen and Ventura Foods.
Fiscal 2026 Outlook
Our segments operate in cyclical environments in which market conditions can change rapidly with significant positive or negative impacts on our results. We anticipate various macroeconomic factors will continue to drive uncertainty and instability in global energy and agricultural commodity markets, as well as global financial markets, which could have a significant impact on each of our segments during fiscal 2026. These factors include, among others, the ongoing war between Russia and Ukraine and further conflict in the Middle East, shifts in global trade flows for commodities, including global competitiveness giving rise to a weak export market for U.S.-sourced agricultural products, potential changes in U.S. trade policy, increased or fluctuating tariffs, a changing interest rate environment, and continued pricing pressures impacting costs of labor, freight and materials. These factors, or any form of them, could cause significant margin pressure and lower profitability. In addition to these broad macroeconomic factors, other factors could impact demand and pricing for agricultural inputs and outputs, as well as our ability to supply those inputs and outputs while remaining profitable. These include regional factors, such as unpredictable weather conditions, including those due to climate change. We currently expect global supply and demand factors impacting energy and agricultural commodities to be unfavorable for us in fiscal 2026. Further, in light of increasing uncertainty in the markets we serve, we are unable to predict how long the current environment will last or the significance of the financial and operational impacts to us; however, we currently expect the trend of reduced margins for energy and agricultural commodities to persist in fiscal 2026. Refer to Item 1A of this Annual Report on Form 10-K for additional consideration these risks may have on our business operations and financial performance.
We will continue to execute our enterprise priorities for fiscal 2026, including maximizing our platforms through our integrated supply chains and capitalizing on domestic and global opportunities, as we navigate less favorable market conditions for energy and agricultural commodities.
Operating Metrics
Energy
Our Energy segment operations primarily include our refineries in Laurel, Montana, and McPherson, Kansas, which process crude oil to produce refined products, including gasolines, distillates and other products. To ensure the reliability of our refineries, we perform major maintenance activities every two to five years, which require a temporary shutdown of operations. These planned shutdowns allow us to extend the life, increase the capacity and improve the safety and efficiency of our refinery processing assets. They also minimize unplanned business interruptions and are essential to the long-term reliability and profitability of our Energy segment.
During periods of maintenance, utilization rates, throughput volumes and refined fuel yields are lower, and we may purchase refined petroleum products from third parties to meet the needs of our customers. These third-party purchases may result in lower margins than for products produced by our refineries, which reduces our profitability. The following table provides information about our consolidated refinery operations:
Years Ended August 31,
2025 2024
Refinery throughput volumes* (Barrels per day)
Heavy, high-sulfur crude oil 100,029 108,713
All other crude oil 61,776 69,137
Other feedstocks and blendstocks 13,032 11,574
Total refinery throughput volumes 174,837 189,424
Refined fuel yields
Gasolines 81,030 85,210
Distillates 76,297 84,739
*Lower refinery throughput volumes and refined fuel yields experienced during fiscal 2025 were primarily due to a planned shutdown to perform major
maintenance at our McPherson, Kansas, refinery during the third quarter of fiscal 2025.
We are subject to the Renewable Fuel Standard that requires refiners to blend renewable fuels (e.g., ethanol and biodiesel) into their finished transportation fuels or purchase renewable energy credits, known as renewable identification numbers ("RINs"), in lieu of blending. The U.S. Environmental Protection Agency ("EPA") generally establishes new annual renewable fuel percentage standards for each compliance year in the preceding year. We generate RINs through our blending activities, but we cannot generate enough RINs to meet the needs of our refining capacity; therefore, RINs must be purchased on the open market. The price of RINs can be volatile, with prices for D6 ethanol RINs and D4 biodiesel RINs increasing by 24% and 29%, respectively, during fiscal 2025, compared to the prior year, which negatively impacted our earnings. Estimates of our RIN expenses are calculated using an average RIN price each month.
During the fourth quarter of fiscal 2025, we received notice from the EPA that our petitions seeking an extension of the small refinery exemption ("SRE") under the Renewable Fuels Standard for our Laurel, Montana, refinery were granted in full or in part for compliance years 2019 through 2024. This action by the EPA reduced our renewable volume obligation ("RVO") for production at our Laurel, Montana, refinery for those specific years and resulted in a benefit of approximately $90 million during the fourth quarter of fiscal year 2025. We may be eligible for exemptions for compliance years 2025 and beyond, but this is highly dependent on volumes of crude oil average throughput at that time and the EPA's evaluation of those potential future petitions. Further, we may incur future liabilities that partially or fully offset those benefits if the EPA reallocates the RVOs waived through the SRE process by increasing the blending requirements for larger refineries, including our McPherson, Kansas, refinery, in future years.
In addition to our internal operational reliability, the profitability of our Energy segment is largely driven by crack spreads (i.e., the price differential between refined products and crude oil inputs) and Western Canadian Select ("WCS") crude oil discounts (i.e., the price discount for WCS crude oil relative to West Texas Intermediate ("WTI") crude oil), which are driven by supply and demand of refined products. Crack spreads and WCS crude oil discounts both decreased in fiscal 2025, compared to the prior year, contributing to significantly decreased IBIT for the Energy segment. The table below provides
information about average market reference prices and differentials that impacted our Energy segment:
Years Ended August 31,
2025 2024
Market indicators
WTI crude oil (dollars per barrel) $ 68.08 $ 79.41
WTI - WCS crude oil discount (dollars per barrel) $ 11.57 $ 17.24
Group 3 2:1:1 crack spread (dollars per barrel)* $ 19.91 $ 21.97
Group 3 5:3:2 crack spread (dollars per barrel)* $ 19.12 $ 20.60
D6 ethanol RIN (dollars per RIN) $ 0.8428 $ 0.6801
D4 biodiesel RIN (dollars per RIN) $ 0.8823 $ 0.6829
*Group 3 refers to the oil refining and distribution system serving the Midwest markets from the Gulf Coast through the Plains states.
Ag
Our Ag segment operations work together to facilitate the production, purchase, sale and eventual use of grain and other agricultural commodities within the United States and internationally. Profitability in our Ag segment is mostly driven by throughput and production volumes, as well as commodity price spreads; however, revenues and cost of goods sold ("COGS") are largely affected by market-driven commodity prices outside our control. The table below provides information about average market prices for agricultural commodities, as well as sales and throughput volumes that impacted our Ag segment for the years ended August 31, 2025 and 2024:
Years Ended August 31,
Market Source* 2025 2024
Commodity prices
Corn (dollars per bushel) Chicago Board of Trade $ 4.36 $ 4.37
Soybeans (dollars per bushel) Chicago Board of Trade $ 10.16 $ 11.88
Wheat (dollars per bushel) Chicago Board of Trade $ 5.40 $ 5.76
Urea (dollars per ton) Green Markets NOLA $ 368.95 $ 332.46
Urea ammonium nitrate (dollars per ton) Green Markets NOLA $ 285.44 $ 238.84
Ethanol (dollars per gallon) Chicago Platts $ 1.70 $ 1.83
Volumes
Grain and oilseed (thousands of bushels) 2,433,258 2,382,219
North American grain and oilseed port throughput (thousands of bushels) 770,867 664,025
Wholesale crop nutrients (thousands of tons) 7,311 7,245
Ethanol (thousands of gallons) 565,835 711,451
*Market source information represents the average week-end or month-end price during the period.
Results of Operations
Consolidated Statements of Operations
Years Ended August 31,
2025 2024
Dollars % of Revenues* Dollars % of Revenues*
(In thousands) (In thousands)
Revenues $ 35,462,608 100.0 % $ 39,261,229 100.0 %
Cost of goods sold 34,325,794 96.8 37,509,902 95.5
Gross profit 1,136,814 3.2 1,751,327 4.5
Marketing, general and administrative expenses 1,046,059 2.9 1,166,969 3.0
Operating earnings 90,755 0.3 584,358 1.5
Interest expense 146,079 0.4 104,064 0.3
Other income (100,431) (0.3) (137,630) (0.4)
Equity income from investments (569,665) (1.6) (479,863) (1.2)
Income before income taxes 614,772 1.7 1,097,787 2.8
Income tax (benefit) expense 16,777 - (4,872) -
Net income 597,995 1.7 1,102,659 2.8
Net loss attributable to noncontrolling interests 78 - 340 -
Net income attributable to CHS Inc. $ 597,917 1.7 % $ 1,102,319 2.8 %
*Amounts less than 0.1% are shown as zero percent. Percentage subtotals may not sum due to rounding.
The charts below detail revenues, net of intersegment revenues, and IBIT by segment for fiscal 2025. Our Nitrogen Production segment represents an equity method investment that records earnings and allocated expenses, but not revenues.
(Loss) Income Before Income Taxes by Segment
Energy
Years Ended August 31, Change
2025 2024 Dollars Percent
(Dollars in thousands)
(Loss) Income before income taxes $ (7,042) $ 429,053 $ (436,095) (101.6) %
The following waterfall analysis and commentary presents the changes in our Energy segment IBIT for the year ended August 31, 2025, compared to the prior year:
*See commentary related to these changes in the marketing, general and administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.
The change in Energy segment IBIT for fiscal 2025 reflects the following:
•Significantly lower WCS crude oil discounts and crack spreads compared to the prior fiscal year, due to less favorable global market conditions, including higher U.S. refinery capacity utilization and global production, as well as additional export opportunities for Canadian crude oil, contributed to a $308.1 million decrease of IBIT.
• Decreased refined fuels production volumes contributed to a $88.5 million decrease in IBIT, primarily due to planned major maintenance at our McPherson refinery which reduced the sales mix of higher-margin, produced refined fuels products relative to lower-margin, purchased refined fuels products.
•The overall IBIT decrease was partially offset by an approximately $90 million favorable impact due to the small refinery exemption. During the fourth quarter of fiscal 2025, we received notice from the EPA that our petitions seeking an extension of the small refinery exemption under the Renewable Fuels Standard for our Laurel, Montana, refinery were granted in full or in part for compliance years 2019 through 2024. This action by the EPA reduced our renewable volume obligation for production at our Laurel, Montana, refinery for those specific years and resulted in a benefit during the fourth quarter of fiscal year 2025.
• Higher costs for RINs, exclusive of the small refinery exemption, contributed to a $45.7 million decrease of IBIT.
Ag
Years Ended August 31, Change
2025 2024 Dollars Percent
(Dollars in thousands)
Income before income taxes $ 245,660 $ 342,677 $ (97,017) (28.3) %
The following waterfall analysis and commentary presents the changes in our Ag segment IBIT for the year ended August 31, 2025, compared to the prior year:
*See commentary related to these changes in the marketing, general and administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.
The change in Ag segment IBIT for fiscal 2025 reflects the following:
•Decreased margins for our grain and oilseed product category are primarily a result of unfavorable market conditions in North America, South America and Europe, costs associated with closing our Superior, Wisconsin, grain facility and the timing impact of mark-to-market adjustments, collectively contributed to a $118.8 million decrease in IBIT.
•Decreased margins for our oilseed processing product category, due to a higher global supply of soybean and canola meal and oil, resulted in lower crush margins compared to the prior fiscal year and contributed to a $105.3 million decrease in IBIT.
All Other Segments
Years Ended August 31, Change
2025 2024 Dollars Percent
(Dollars in thousands)
Nitrogen Production IBIT* $ 159,541 $ 151,235 $ 8,306 5.5 %
Corporate and Other IBIT $ 216,613 $ 174,822 $ 41,791 23.9 %
*See Note 6, Investments, of the notes to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
Our Nitrogen Production segment IBIT increased slightly from the prior fiscal year due to higher equity income primarily attributed to favorable market conditions associated with urea. Corporate and Other IBIT increased largely as a result of a gain on the sale of a business, recognized by our equity investment Ventura Foods, during the year ended August 31, 2025.
Revenues by Segment
Energy
Years Ended August 31, Change
2025 2024 Dollars Percent
(Dollars in thousands)
Revenues $ 7,635,033 $ 8,766,495 $ (1,131,462) (12.9) %
The following waterfall analysis and commentary presents the changes in our Energy segment revenues for the year ended August 31, 2025, compared to the prior year:
The change in Energy segment revenues for fiscal 2025 reflects the following:
•Global market conditions contributed to decreased selling prices for refined fuels that resulted in a $1.1 billion decrease in revenues.
Ag
Years Ended August 31, Change
2025 2024 Dollars Percent
(Dollars in thousands)
Revenues $ 27,748,481 $ 30,416,859 $ (2,668,378) (8.8) %
The following waterfall analysis and commentary presents the changes in our Ag segment revenues for the year ended August 31, 2025, compared to the prior year:
The change in Ag segment revenues for fiscal 2025 reflects the following:
•Decreased selling prices across most of our Ag segment product categories due to global market conditions were experienced during fiscal 2025, including:
◦$2.7 billion decrease for grain and oilseed;
◦ $453.5 million decrease for oilseed processing; and
◦ $111.3 million decrease associated with renewable fuels.
•Increased volumes were realized across most of our Ag segment product categories, including:
◦$590.7 million for wholesale and retail agronomy products as a result of more favorable weather conditions and strategic initiatives to grow the business and;
◦$446.7 million for grain and oilseed as a result of higher demand due to lower prices.
◦These increases were partially offset by decreased volumes of renewable fuels as a result of unfavorable global market conditions, which contributed to decreased revenues of $272.6 million.
All Other Segments*
Years Ended August 31, Change
2025 2024 Dollars Percent
(Dollars in thousands)
Corporate and Other revenues $ 79,094 $ 77,875 $ 1,219 1.6 %
*Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues.
There were no significant changes to Corporate and Other revenues during fiscal 2025 compared to the prior year.
Cost of Goods Sold by Segment
Energy
Years Ended August 31, Change
2025 2024 Dollars Percent
(Dollars in thousands)
Cost of goods sold $ 7,339,336 $ 8,041,588 $ (702,252) (8.7) %
The following waterfall analysis and commentary presents the changes in our Energy segment COGS for the year ended August 31, 2025, compared to the prior year:
The change in Energy segment COGS for fiscal 2025 reflects the following:
•Decreased costs for refined fuels, due to global market conditions, contributed to a $618.7 million decrease in COGS.
•COGS was further decreased by an approximately $90 million favorable impact due to the small refinery exemption. During the fourth quarter of fiscal 2025, we received notice from the EPA that our petitions seeking an extension of the small refinery exemption under the Renewable Fuels Standard for our Laurel, Montana, refinery were granted in full or in part for compliance years 2019 through 2024. This action by the EPA reduced our renewable volume obligation for production at our Laurel, Montana, refinery for those specific years and resulted in a benefit during the fourth quarter of fiscal year 2025.
• The overall COGS decrease was partially offset by increased costs for propane of $36.9 million, which were a result of higher product volumes and hedging impacts.
Ag
Years Ended August 31, Change
2025 2024 Dollars Percent
(Dollars in thousands)
Cost of goods sold $ 26,985,759 $ 29,478,231 $ (2,492,472) (8.5) %
The following waterfall analysis and commentary presents the changes in our Ag segment COGS for the year ended August 31, 2025, compared to the prior year:
The change in Ag segment COGS for fiscal 2025 reflects the following:
•Decreased costs across most of our Ag segment product categories due to global market conditions were experienced during fiscal 2025, including:
◦$2.5 billion decrease for grain and oilseed;
◦ $348.2 million decrease for oilseed processing; and
◦ $101.0 million decrease associated with renewable fuels.
•Increased volumes were realized across most of our Ag segment product categories, including:
◦$493.5 million for wholesale and retail agronomy products as a result of more favorable weather conditions and strategic initiatives to grow the business and;
◦$441.6 million for grain and oilseed as a result of higher demand due to lower prices.
◦These increases were partially offset by decreased volumes of renewable fuels as a result of unfavorable global market conditions, which contributed to decreased COGS of $258.3 million.
All Other Segments
Years Ended August 31, Change
2025 2024 Dollars Percent
(Dollars in thousands)
Nitrogen Production COGS $ 1,673 $ 138 $ 1,535 1,112.3%
Corporate and Other COGS $ (974) $ (10,055) $ 9,081 90.3%
There were no significant changes on a dollar basis to COGS for our Nitrogen Production segment or Corporate and Other during fiscal 2025 compared to the prior year.
Marketing, General and Administrative Expenses
Years Ended August 31, Change
2025 2024 Dollars Percent
(Dollars in thousands)
Marketing, general and administrative expenses $ 1,046,059 $ 1,166,969 $ (120,910) (10.4) %
Marketing, general and administrative expenses decreased during fiscal 2025 primarily due to lower expenses for performance-based incentive compensation associated with our lower profitability during the current fiscal year.
Interest Expense
Years Ended August 31, Change
2025 2024 Dollars Percent
(Dollars in thousands)
Interest expense $ 146,079 $ 104,064 $ 42,015 40.4 %
Interest expense increased during fiscal 2025, as a result of a higher short-term notes payable balance, along with higher weighted-average interest rates, compared to the prior fiscal year.
Other Income
Years Ended August 31, Change
2025 2024 Dollars Percent
(Dollars in thousands)
Other income $ 100,431 $ 137,630 $ (37,199) (27.0) %
Other income decreased during fiscal 2025 primarily due to decreased interest income as a result of a smaller cash balance compared to the prior fiscal year.
Equity Income from Investments
Years Ended August 31, Change
2025 2024 Dollars Percent
(Dollars in thousands)
Equity income from investments* $ 569,665 $ 479,863 $ 89,802 18.7 %
*See Note 6, Investments, of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for additional information.
Equity income from investments increased during fiscal 2025 compared to the prior year, primarily due to a gain on the sale of a business recognized by our equity investment Ventura Foods.
Income Tax (Benefit) Expense
Years Ended August 31, Change
2025 2024 Dollars Percent
(Dollars in thousands)
Income tax (benefit) expense $ 16,777 $ (4,872) $ 21,649 (444.4) %
Increased income tax expense during fiscal 2025 resulted primarily from lower research and development tax credits, a change in a state law and a fluctuation between taxable and nontaxable patronage income. Effective tax rates for the years ended August 31, 2025 and 2024, were 2.7% and (0.4)%, respectively. Federal and state statutory rates of 24.3% and 24.5% were applied to nonpatronage business activity for the years ended August 31, 2025 and 2024, respectively. Income taxes and effective tax rates vary each year based on profitability and nonpatronage business activity.
Comparison of Results of Operations for the Years Ended August 31, 2024 and 2023
For a discussion of results of operations for fiscal 2024 compared to fiscal 2023, please refer to Part II, Item 7, 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, 2024, filed with the SEC on November 6, 2024.
Liquidity and Capital Resources
In assessing our financial condition, we consider factors such as working capital, internal benchmarking related to our applicable covenants and other financial information. The following financial information is used when assessing our liquidity and capital resources to meet our capital allocation priorities, which include maintaining the safety and compliance of our operations, paying interest on debt and preferred stock dividends, returning cash to our member-owners in the form of cash patronage and equity redemptions, and taking advantage of strategic opportunities that benefit our member-owners:
August 31,
2025 2024
(Dollars in thousands)
Cash and cash equivalents $ 327,826 $ 794,865
Notes payable 1,152,457 306,831
Long-term debt including current maturities 1,835,833 2,161,460
Total equities 11,080,174 10,761,924
Working capital 2,803,865 3,307,969
Current ratio* 1.5 1.6
*Current ratio is defined as current assets divided by current liabilities.
Summary of Our Major Sources of Cash and Cash Equivalents
We fund our current operations primarily through our cash flows from operations and with short-term borrowings through our committed and uncommitted revolving credit facilities, including our securitization facility with certain unaffiliated financial institutions ("Securitization Facility"). We fund certain of our long-term capital needs, primarily those related to acquisitions of property, plant and equipment, with cash flows from operations, our revolving term loan facility and by issuing long-term debt. See Note 9, Notes Payable and Long-Term Debt, of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for additional information on our short-term borrowings and long-term debt, including tables with summarized long-term debt outstanding. We will continue to consider opportunities to further diversify and enhance our sources and amounts of liquidity.
Summary of Our Major Uses of Cash and Cash Equivalents
Annually, our Board of Directors approves our capital expenditure budget. Our fiscal 2026 capital expenditure priorities include maintaining our assets through repairs and maintenance; complying with environmental, health and safety requirements; enhancing information technology capabilities; improving productivity; and growth. Our refining business requires continued investment in our refining process to maintain its safety, operational reliability and profitability. In addition, our Board of Directors approved our cash patronage and equity redemptions to be paid in fiscal 2026, based on fiscal 2025 financial performance. The following is a summary of our primary expected cash requirements for fiscal 2026:
•Capital expenditures.We expect total capital expenditures for fiscal 2026 to be approximately $575.1 million, compared to capital expenditures of $728.6 million in fiscal 2025, as we continue to invest in capital expenditures projects to meet the evolving needs of our owners and customers and enhance value for the cooperative system during fiscal 2026.
•Major maintenance. We expect total major maintenance for fiscal 2026 to be approximately $53.3 million, compared to major maintenance of $271.4 million in fiscal 2025. Decreased major maintenance expectation for fiscal 2026 is due to significantly reduced turnaround activities at our refineries compared to the turnaround at our McPherson refinery during fiscal 2025.
•Preferred stock dividends. We had approximately $2.3 billion of preferred stock outstanding as of August 31, 2025. We expect to pay dividends on our preferred stock of approximately $168.7 million during fiscal 2026.
•Patronage. Our Board of Directors authorized approximately $30.0 million of our fiscal 2025 patronage-sourced earnings to be paid to our member-owners during fiscal 2026.
•Equity redemptions. Our Board of Directors authorized approximately $90.0 million of equity redemptions to be distributed in fiscal 2026 in the form of redemptions of qualified and nonqualified equity owned by individual producer-members and association members. The Board of Directors will continue to periodically evaluate the level of equity redemption activity throughout fiscal 2026 with respect to the amounts it has authorized for redemption during the fiscal year.
We believe cash generated by operating and investing activities, along with available borrowing capacity under our credit facilities, will be sufficient to support our short-term (the next 12 months) and long-term (beyond the next 12 months) operations. Our notes payable and long-term debt are subject to various restrictive requirements for maintenance of minimum consolidated net worth and other financial ratios. We were in compliance with all our debt covenants and restrictions as of August 31, 2025. Based on our current 2026 projections, we expect continued covenant compliance.
Working Capital
We measure working capital as current assets less current liabilities as each amount appears on our Consolidated Balance Sheets. We believe this information is meaningful to investors as a measure of operational efficiency and short-term financial health. Working capital is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies. Working capital as of August 31, 2025 and 2024, was as follows:
2025 2024 Change
(Dollars in thousands)
Current assets $ 8,086,351 $ 8,708,783 $ (622,432)
Less current liabilities 5,282,486 5,400,814 (118,328)
Working capital $ 2,803,865 $ 3,307,969 $ (504,104)
As of August 31, 2025, working capital decreased by $504.1 million compared with August 31, 2024. Current asset balance changes decreased working capital by $622.4 million, primarily driven by a lower cash balance due to a decline in cash provided by operations during fiscal year 2025. Current liabilities balance changes increased working capital by $118.3 million, primarily due to a decrease in dividends and equity payable for lower cash patronage and equity redemptions expected to be distributed during fiscal year 2026 compared to fiscal year 2025.
We finance our working capital needs through committed and uncommitted lines of credit with domestic and international banks. We believe our current cash balances and available capacity on our committed and uncommitted lines of credit will provide adequate liquidity to meet our working capital needs.
Contractual Obligations
Below is a summary of our estimated future contractual obligations as of August 31, 2025 that are expected to be paid within the next year (short-term) and thereafter (long-term).
Payments Due by Period
Short-Term Long-Term Total
(Dollars in thousands)
Long-term debt $ 80,778 $ 1,703,751 $ 1,784,529
Interest payments related to long-term debt (1)
91,232 656,054 747,286
Finance lease (2)
10,984 54,763 65,747
Operating lease (2)
75,886 190,573 266,459
Purchase obligations(3)
4,694,972 1,154,109 5,849,081
Total $ 4,953,852 $ 3,759,250 $ 8,713,102
(1) Based on interest rates and long-term debt balances as of August 31, 2025.
(2) Finance and operating lease obligations are described in Note 19, Leases, of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K. Operating and finance lease obligations reflected in this table include related interest expense.
(3) Purchase obligations are legally binding and enforceable agreements to purchase goods or services that specify all significant terms, including fixed or minimum quantities to be purchased and fixed or estimated prices to be paid at the time of settlement.
Cash Flows
Years Ended August 31,
2025 2024 Change
(Dollars in thousands)
Net cash provided by operating activities $ 635,787 $ 1,272,880 $ (637,093)
Net cash used in investing activities (880,595) (1,431,588) 550,993
Net cash used in financing activities (230,567) (814,253) 583,686
Effect of exchange rate changes on cash and cash equivalents 773 2,236 (1,463)
Net decrease in cash and cash equivalents and restricted cash $ (474,602) $ (970,725) $ 496,123
Cash flows from operating activities can fluctuate significantly from period to period as a result of various factors, including seasonality and timing differences associated with purchases, sales, taxes and other business decisions. The $637.1 million decrease in cash provided by operating activities in fiscal 2025 primarily reflects decreased net income, as well as decreased cash provided by inventories during fiscal 2025.
The $551.0 million decrease in cash used in investing activities in fiscal 2025 reflects increased proceeds from the sale and maturity of investments and lower expenditures for property, plant and equipment during fiscal 2025 compared to fiscal 2024.
The $583.7 million decrease in cash used in financing activities in fiscal 2025 primarily reflects increased net proceeds from long-term debt and decreased cash outflows for patronage paid and equity redemptions during fiscal 2025 compared to fiscal 2024.
Critical Accounting Policies
Our consolidated financial statements are prepared in conformity with U.S. GAAP. Preparation of these consolidated financial statements requires use of estimates, as well as management's judgments and assumptions regarding matters that are subjective, uncertain or involve a high degree of complexity, all of which affect the results of operations and financial condition for the periods presented. We believe the following accounting policies are critical to our consolidated financial statements and may involve a higher degree of estimates, judgments and complexity.
Inventory Valuation and Reserves
Grain, processed grain, oilseed, processed oilseed and other minimally processed soy-based inventories are stated at net realizable value. All other inventories are stated at the lower of cost or net realizable value. The costs of certain energy inventories (wholesale refined products, crude oil and asphalt) are determined on the last-in, first-out ("LIFO") method; all other inventories of nongrain products purchased for resale are valued on the first-in, first-out ("FIFO") and average cost methods. Estimates are used in determining the net realizable values of grain and oilseed and processed grain and oilseed inventories. These estimates include using inputs that are generally based on exchange-traded prices and/or recent market bids and offers, including location-specific adjustments. If estimates regarding the valuation of inventories are less favorable than management's assumptions, write-downs of inventories may be required.
Derivative Financial Instruments
We enter into exchange-traded commodity futures and options contracts to hedge our exposure to price fluctuations on energy, grain and oilseed transactions to the extent considered practicable for minimizing risk. Futures and options contracts used for hedging are purchased and sold through regulated commodity exchanges. We also use over-the-counter instruments to hedge our exposure on fixed-price contracts. Fluctuations in inventory valuations, however, may not be completely hedged due in part to the absence of satisfactory hedging facilities for certain commodities and geographical areas and in part to our assessment of our exposure from expected price fluctuations. We also manage our risks by entering into fixed-price purchase contracts with preapproved producers and establishing appropriate limits for individual suppliers. Fixed-price sales contracts are entered into with customers of acceptable creditworthiness, as internally evaluated. The fair values of futures and options contracts are determined primarily from quotes listed on regulated commodity exchanges. Fixed-price purchase and sales contracts are with various counterparties, and the fair values of such contracts are determined from the market price of the underlying product. We are exposed to loss in the event of nonperformance by the counterparties to the contracts and, therefore, contract values are reviewed and adjusted to reflect potential nonperformance. Risk of nonperformance by counterparties includes the inability to perform because of a counterparty's financial condition and a risk that the counterparty will refuse to
perform on a contract during periods of price fluctuations where contract prices are significantly different from current market prices.
Pension and Other Postretirement Benefits
Pension and other postretirement benefits costs and obligations depend on assumptions used in calculating such amounts. These assumptions include discount rates, health care cost trend rates, benefits earned, interest costs, expected return on plan assets, mortality rates and other factors. In accordance with U.S. GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and therefore generally affect recognized expenses and the recorded obligations in future periods. While our management believes the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect our pension and other postretirement obligations and future expenses.
Deferred Tax Assets and Uncertain Tax Positions
We assess whether a valuation allowance is necessary to reduce our deferred tax assets to the amount we believe is more likely than not to be realized. While we have considered future taxable income, as well as other factors, in assessing the need for the valuation allowance, in the event that we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to our deferred tax assets would be charged to income in the period such determination was made. We are also significantly impacted by utilization of tax credits, some of which were passed to us from the McPherson refinery, related to refinery upgrades that enable us to produce ultra-low-sulfur fuels. Our tax credit carryforwards are available to offset future federal and state tax liabilities with the tax credits becoming unavailable to us if not used by their expiration date. Our net operating loss carryforwards for tax purposes are available to offset future taxable income. If our loss carryforwards are not used, they will expire.
Tax benefits related to uncertain tax positions are recognized in our financial statements if it is more likely than not the position would be sustained upon examination by a tax authority that has full knowledge of all relevant information. The benefits are measured using a cumulative probability approach. Under this approach, we record in our financial statements the greatest amount of tax benefits that have a more than 50% probability of being realized upon final settlement with the tax authorities. In determining these tax benefits, we assign probabilities to a range of outcomes that we feel we could ultimately settle on with the tax authorities using all relevant facts and information available at the reporting date. Due to the complexity of these uncertainties, the ultimate resolution may result in a benefit that is materially different than our current estimate.
Long-Lived Assets
Property, plant and equipment is depreciated or amortized over the expected useful lives of individual or groups of assets based on the straight-line method. Economic circumstances or other factors may cause management's estimates of expected useful lives to differ from actual useful lives.
All long-lived assets, including property, plant and equipment, goodwill, investments in unconsolidated affiliates and other identifiable intangibles, are evaluated for impairment in accordance with U.S. GAAP, at least annually for goodwill, and whenever events or changes in circumstances indicate the carrying amount of a long-lived asset or asset group may not be recoverable. For goodwill, our annual impairment testing occurs in our fourth quarter. An impaired asset is written down to its estimated fair value based on the best information available. Fair value is generally measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows and our estimates may differ from actual results.
We have other assets that we may be obligated to dismantle at the end of the corresponding lease terms subject to the lessor's discretion for which we have recorded an asset retirement obligation. Based on our estimates of the timing, cost and probability of removal, this obligation is not material.
Recent Accounting Pronouncements
See Note 1, Organization, Basis of Presentation and Significant Accounting Policies, of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for information concerning new accounting standards and the impact of implementation of those standards on our financial statements.
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