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 May 31, 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 May 31, 2004

NONE		NONE

INDEX


		Page No.

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

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		34

Item 4.	Controls and Procedures		34

PART II. OTHER INFORMATION

Item 6.	Exhibits and Reports on Form 8-K		35

SIGNATURE PAGE			36
First Amendment to Credit Agreement
Sixth Amendment to Credit Agreement
Note Purchase and Private Shelf Agreement
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 May 31, 2004.


Item 1.	*Financial Statements*

CHS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


			May 31,		August 31,		May 31,
			2004		2003		2003


			(dollars in thousands)
ASSETS
Current assets:
	Cash and cash equivalents		$	138,550	$	168,249	$	160,198
	Receivables			954,440		763,780		741,047
	Inventories			906,801		801,883		678,501
	Other current assets			392,714		178,661		194,274

		Total current assets		2,392,505		1,912,573		1,774,020
Investments				575,154		532,893		528,505
Property, plant and equipment				1,203,488		1,122,982		1,095,231
Other assets				244,222		239,520		185,543

		Total assets	$	4,415,369	$	3,807,968	$	3,583,299


LIABILITIES AND EQUITIES
Current liabilities:
	Notes payable		$	446,500	$	251,131	$	321,131
	Current portion of long-term debt			30,900		14,951		14,987
	Customer credit balances			100,405		58,417		71,527
	Customer advance payments			137,662		123,383		101,534
	Checks and drafts outstanding			91,542		85,239		65,291
	Accounts payable			658,887		627,250		452,140
	Accrued expenses			395,702		254,415		236,081
	Dividends and equities payable			84,485		39,049		43,287

		Total current liabilities		1,946,083		1,453,835		1,305,978
Long-term debt				655,780		648,222		646,153
Other liabilities				132,604		111,555		117,404
Minority interests in subsidiaries				136,187		112,645		104,491
Commitments and contingencies
Equities				1,544,715		1,481,711		1,409,273

		Total liabilities and equities	$	4,415,369	$	3,807,968	$	3,583,299

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 Nine Months Ended

		May 31,			May 31,			May 31,			May 31,
		2004			2003			2004			2003


		(dollars in thousands)
Revenues:
	Net sales	$	2,817,529		$	2,220,455		$	7,961,469		$	6,949,205
	Patronage dividends		1,809			1,351			5,770			2,310
	Other revenues		41,392			29,071			104,875			89,058

			2,860,730			2,250,877			8,072,114			7,040,573
Cost of goods sold			2,734,235			2,152,467			7,776,864			6,792,462
Marketing, general and administrative			54,174			49,483			154,717			140,703

Operating earnings			72,321			48,927			140,533			107,408
Gain on sale of investment			(14,666	)					(14,666	)
Gain on legal settlements						(178	)					(10,867	)
Interest			13,782			12,284			38,804			36,533
Equity income from investments			(32,406	)		(30,003	)		(64,193	)		(32,396	)
Minority interests			16,417			5,913			23,559			14,689

Income before income taxes			89,194			60,911			157,029			99,449
Income taxes			7,805			8,738			16,390			11,020

Net income		$	81,389		$	52,173		$	140,639		$	88,429

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						For the Nine
					Months Ended						Months Ended

					May 31,			May 31,			May 31,			May 31,
					2004			2003			2004			2003


					(dollars in thousands)
Cash flows from operating activities:
	Net income				$	81,389		$	52,173		$	140,639		$	88,429
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
		Depreciation and amortization				26,668			25,498			80,528			77,132
		Noncash income from equity investments				(32,406	)		(30,003	)		(64,193	)		(32,396	)
		Minority interests				16,417			5,913			23,559			14,689
		Noncash portion of patronage dividends received				(884	)		(671	)		(3,714	)		(1,352	)
		Gain on sale of property, plant and equipment				(1,051	)		(466	)		(910	)		(736	)
		Gain on sale of investment				(14,666	)					(14,666	)
		Other, net				247			455			787			2,915
		Changes in operating assets and liabilities:
			Receivables			(187,725	)		24,766			(175,927	)		17,074
			Inventories			94,466			183,252			(94,647	)		89,617
			Other current assets and other assets			105,460			56,255			(217,710	)		(61,753	)
			Customer credit balances			(26,248	)		(31,893	)		39,358			45,066
			Customer advance payments			26,346			(58,004	)		14,267			(67,589	)
			Accounts payable and accrued expenses			168,714			(13,078	)		152,451			(57,276	)
			Other liabilities			1,099			6,103			12,817			(875	)

				Net cash provided by (used in) operating activities		257,826			220,300			(107,361	)		112,945

Cash flows from investing activities:
	Acquisition of property, plant and equipment					(66,185	)		(45,092	)		(168,407	)		(122,467	)
	Proceeds from disposition of property, plant and equipment					2,005			3,976			31,747			15,901
	Investments					(47,750	)		(36,449	)		(48,772	)		(40,624	)
	Equity investments redeemed					10,990			3,341			54,493			31,434
	Investments redeemed					1,158			2,532			7,273			5,915
	Proceeds from sale of investment					25,000						25,000
	Changes in notes receivable					(3,100	)		(2,754	)		(8,996	)		(14,270	)
	Acquisitions of intangibles								(333	)					(767	)
	Acquisitions of working capital, net														(13,030	)
	Distribution to minority owners											(1,338	)		(463	)
	Other investing activities, net					(74	)		(34	)		3,129			433

				Net cash used in investing activities		(77,956	)		(74,813	)		(105,871	)		(137,938	)

Cash flows from financing activities:
	Changes in notes payable					(154,335	)		(49,430	)		195,370			(11,383	)
	Long-term debt borrowings					35,012						35,457			175,000
	Principal payments on long-term debt					(4,094	)		(48,710	)		(12,365	)		(85,989	)
	Payments on derivative instruments														(7,574	)
	Changes in checks and drafts outstanding					(10,762	)		9,541			5,528			(18,960	)
	Proceeds from sale of preferred stock, net of expenses					(98	)		(96	)		(151	)		82,484
	Redemption of preferred stock								(2,002	)					(2,002	)
	Preferred stock dividends paid					(2,113	)		(1,327	)		(5,861	)		(1,701	)
	Retirements of equities					(2,873	)		(2,042	)		(5,724	)		(26,402	)
	Cash patronage dividends paid					(563	)		(109	)		(28,721	)		(26,474	)

				Net cash (used in) provided by financing activities		(139,826	)		(94,175	)		183,533			76,999
							&n

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