CHS INC - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q


(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		for the quarterly period ended February 29, 2004.

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 0-50150

CHS Inc.

(Exact name of registrant as specified in its charter)


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

5500 Cenex Drive Inver Grove Heights, MN 55077		(651) 355-6000
(Address of principal executive offices, including zip code)		(Registrant’s telephone number, including area code)

Include 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 is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


		Number of Shares Outstanding
Class		at February 29, 2004

NONE		NONE

INDEX


		Page No.

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements		3
	Consolidated Balance Sheets as of February 29, 2004, August 31, 2003 and February 28, 2003 (unaudited)		3
	Consolidated Statements of Operations for the three months and six months ended February 29, 2004 and February 28, 2003 (unaudited)		4
	Consolidated Statements of Cash Flows for the three months and six months ended February 29, 2004 and February 28, 2003 (unaudited)		5
	Notes to Consolidated Financial Statements (unaudited)		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		32

Item 4.	Controls and Procedures		32

PART II. OTHER INFORMATION

Item 6.	Exhibits and Reports on Form 8-K		33

SIGNATURE PAGE			34
2003 Amended and Restated Credit Agreement
Master Loan Agreement
Uncommitted Revolving Credit Supplement
Uncommitted Revolving Credit Supplement
Certification Pursuant to Section 302
Certification Pursuant to Section 302
Certification Pursuant to Section 906
Certification Pursuant to Section 906

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 the Company’s 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 Statement Regarding Forward-Looking Statements” to this Quarterly Report on Form 10-Q for the quarterly period ended February 29, 2004.


Item 1.	*Financial Statements*

CHS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


			February 29,		August 31,		February 28,
			2004		2003		2003


			(dollars in thousands)
ASSETS
Current assets:
	Cash and cash equivalents		$	98,506	$	168,249	$	108,886
	Receivables			762,892		763,780		767,147
	Inventories			1,001,276		801,883		861,753
	Other current assets			493,864		178,661		254,841

		Total current assets		2,356,538		1,912,573		1,992,627
Investments				522,340		532,893		469,456
Property, plant and equipment				1,156,256		1,122,982		1,075,152
Other assets				250,420		239,520		178,357

		Total assets	$	4,285,554	$	3,807,968	$	3,715,592


LIABILITIES AND EQUITIES
Current liabilities:
	Notes payable		$	600,836	$	251,131	$	370,561
	Current portion of long-term debt			18,606		14,951		59,987
	Customer credit balances			126,653		58,417		103,420
	Customer advance payments			111,317		123,383		159,538
	Checks and drafts outstanding			102,304		85,239		55,750
	Accounts payable			502,322		627,250		470,048
	Accrued expenses			383,242		254,415		229,990
	Dividends and equities payable			36,058		39,049		20,580

		Total current liabilities		1,881,338		1,453,835		1,469,874
Long-term debt				636,964		648,222		649,863
Other liabilities				123,273		111,555		111,302
Minority interests in subsidiaries				119,769		112,645		98,222
Commitments and contingencies
Equities				1,524,210		1,481,711		1,386,331

		Total liabilities and equities	$	4,285,554	$	3,807,968	$	3,715,592

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

CHS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



		For the Three Months Ended						For the Six Months Ended

		February 29,			February 28,			February 29,			February 28,
		2004			2003			2004			2003


		(dollars in thousands)
Revenues:
	Net sales	$	2,654,596		$	2,328,154		$	5,143,940		$	4,728,750
	Patronage dividends		3,641			793			3,961			959
	Other revenues		30,770			26,645			63,483			59,987

			2,689,007			2,355,592			5,211,384			4,789,696
Cost of goods sold			2,628,099			2,303,183			5,042,629			4,639,995
Marketing, general and administrative			52,811			48,072			100,543			91,220

Operating earnings			8,097			4,337			68,212			58,481
Gain on legal settlements						(8,892	)					(10,689	)
Interest			13,482			11,436			25,022			24,249
Equity (income) loss from investments			(18,080	)		5,772			(31,787	)		(2,393	)
Minority interests			3,220			3,345			7,142			8,776

Income (loss) before income taxes			9,475			(7,324	)		67,835			38,538
Income taxes			964			(3,224	)		8,585			2,282

Net income (loss)		$	8,511		$	(4,100	)	$	59,250		$	36,256

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

CHS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



					For the Three Months Ended						For the Six Months Ended

					February 29,			February 28,			February 29,			February 28,
					2004			2003			2004			2003


					(dollars in thousands)
Cash flows from operating activities:
	Net income (loss)				$	8,511		$	(4,100	)	$	59,250		$	36,256
	Adjustments to reconcile net income (loss) to net cash used in operating activities:
		Depreciation and amortization				27,045			25,768			53,860			51,634
		Noncash (income) loss from equity investments				(18,080	)		5,772			(31,787	)		(2,393	)
		Minority interests				3,220			3,345			7,142			8,776
		Noncash portion of patronage dividends received				(2,519	)		(497	)		(2,830	)		(681	)
		Loss (gain) on sale of property, plant and equipment				198			(733	)		141			(270	)
		Other, net				313			2,014			540			2,460
		Changes in operating assets and liabilities:
			Receivables			56,820			58,292			11,798			(7,692	)
			Inventories			25,773			68,242			(189,113	)		(93,635	)
			Other current assets and other assets			(200,256	)		(51,237	)		(323,170	)		(118,008	)
			Customer credit balances			52,768			11,628			65,606			76,959
			Customer advance payments			(57,054	)		(62,599	)		(12,079	)		(9,585	)
			Accounts payable and accrued expenses			(106,537	)		(173,503	)		(16,263	)		(44,198	)
			Other liabilities			5,069			(4,842	)		11,718			(6,978	)

				Net cash used in operating activities		(204,729	)		(122,450	)		(365,187	)		(107,355	)

Cash flows from investing activities:
	Acquisition of property, plant and equipment					(49,989	)		(36,762	)		(102,222	)		(77,375	)
	Proceeds from disposition of property, plant and equipment					8,078			7,177			29,742			11,925
	Investments					(1,012	)		(2,791	)		(1,022	)		(4,175	)
	Equity investments redeemed					16,010			12,780			43,503			28,093
	Investments redeemed					2,657			1,670			6,115			3,383
	Changes in notes receivable					248			(275	)		(5,896	)		(11,516	)
	Acquisitions of intangibles								(55	)					(434	)
	Acquisitions of working capital, net														(13,030	)
	Distribution to minority owners											(1,338	)		(463	)
	Other investing activities, net					696			23			3,203			467

				Net cash used in investing activities		(23,312	)		(18,233	)		(27,915	)		(63,125	)

Cash flows from financing activities:
	Changes in notes payable					223,990			124,500			349,705			38,047
	Long-term debt borrowings					445						445			175,000
	Principal payments on long-term debt					(4,500	)		(33,377	)		(8,271	)		(37,279	)
	Payments on derivative instruments														(7,574	)
	Changes in checks and drafts outstanding					19,194			(14,400	)		16,290			(28,501	)
	Proceeds from sale of preferred stock, net of expenses					(53	)		82,516			(53	)		82,580
	Preferred stock dividends paid					(1,874	)		(190	)		(3,748	)		(374	)
	Retirements of equities					(1,583	)		(21,938	)		(2,851	)		(24,360	)
	Cash patronage dividends paid					(28,158	)		(26,365	)		(28,158	)		(26,365	)

				Net cash provided by financing activities		207,461			110,746			323,359			171,174

Net (decrease) increase in cash and cash equivalents						(20,580	)		(29,937	)		(69,743	)		694
Cash and cash equivalents at beginning of period						119,086			138,823			168,249			108,192

Cash and cash equivalents at end of period					$	98,506		$	108,886		$

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