CHS INC - 10-Q filing on 2021-07-08

Investments

9 Months Ended

May 31, 2021


	May 31, 2021		August 31, 2020
	(Dollars in thousands)
Equity method investments:
CF Industries Nitrogen, LLC	$	2,717,270	$	2,662,618
Ventura Foods, LLC	418,571		381,351
Ardent Mills, LLC	218,822		208,927
Other equity method investments	279,020		253,182
Other investments	130,253		123,955
Total investments	$	3,763,936	$	3,630,033

Joint ventures and other investments, in which we have significant ownership and influence but not control, are accounted for in our condensed consolidated financial statements using the equity method of accounting. Our significant equity method investments consist of CF Industries Nitrogen, LLC ("CF Nitrogen"); Ventura Foods, LLC ("Ventura Foods"); Ardent Mills, LLC ("Ardent Mills"); and TEMCO, LLC ("TEMCO"), which are summarized below. In addition to recognition of our share of income from equity method investments, our equity method investments are evaluated for indicators of other-than-temporary impairment on an ongoing basis in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Other investments consist primarily of investments in cooperatives without readily determinable fair values and are generally measured at cost, unless an impairment or other observable market price change occurs, requiring an adjustment. Approximately $552.6 million of cumulative undistributed earnings from our equity method investees are included in the investments balance as of May 31, 2021.

CF Nitrogen

We have an approximate $2.7 billion investment in CF Nitrogen, a strategic venture with CF Industries Holdings, Inc. ("CF Industries"). The investment consists of an approximate 10% membership interest (based on product tons) in CF Nitrogen. We account for this investment using the hypothetical liquidation at book value method, recognizing our share of the earnings and losses of CF Nitrogen as equity income from investments in our Nitrogen Production segment based on our contractual claims on the entity's net assets pursuant to the liquidation provisions of the CF Nitrogen Limited Liability Company Agreement, adjusted for the semi-annual cash distributions we receive as a result of our membership interest in CF Nitrogen.

The following table provides summarized unaudited financial information for our equity method investment in CF Nitrogen for the nine months ended May 31, 2021 and 2020:


	Nine Months Ended May 31,
	2021		2020
	(Dollars in thousands)
Net sales	$	2,116,040	$	1,954,660
Gross profit	565,067		481,711
Net earnings	524,071		452,859
Earnings attributable to CHS Inc.	118,477		104,021

Ventura Foods

We have a 50% interest in Ventura Foods, a joint venture with Mitsui & Co., that produces and distributes primarily vegetable-oil-based products. We account for Ventura Foods as an equity method investment, and our share of the results of this equity method investment are included in Corporate and Other.

The following table provides aggregate summarized unaudited financial information for our equity method investment in Ventura Foods for the nine months ended May 31, 2021 and 2020:


	Nine Months Ended May 31,
	2021		2020
	(Dollars in thousands)
Net sales	$	1,807,997	$	1,693,097
Gross profit	304,720		450,510
Net earnings	154,384		39,175
Earnings attributable to CHS Inc.	77,192		19,588

Ardent Mills and TEMCO

We have a 12% interest in Ardent Mills, which is a joint venture with Cargill Incorporated ("Cargill") and Conagra Brands, Inc., and is the largest flour miller in the United States. Additionally, we have a 50% interest in TEMCO, which is a joint venture with Cargill focused on export elevation, primarily to Asia. We account for Ardent Mills and TEMCO as equity method investments, and our shares of the results of these equity method investments are included in Corporate and Other and our Ag segment, respectively.

The following table provides aggregate summarized unaudited financial information for our equity method investments in Ardent Mills and TEMCO for the nine months ended May 31, 2021 and 2020:


	Nine Months Ended May 31,
	2021		2020
	(Dollars in thousands)
Net sales	$	5,663,762	$	4,524,569
Gross profit	436,741		269,901
Net earnings	209,604		67,483
Earnings attributable to CHS Inc.	39,244		(3,875)

Our investments in other equity method investees are not significant in relation to our condensed consolidated financial statements, either individually or in the aggregate.