Segment Reporting

3 Months Ended

Nov. 30, 2011

Segment Reporting [Abstract]

Segment Reporting

Note 10. Segment Reporting

We have aligned our segments based on an assessment of how our businesses operate and the products and services they sell. During our second quarter of fiscal 2011, there were several changes in our senior leadership team which resulted in the realignment of our segments based on an assessment of how our businesses operate and the products and services they sell. One of these changes is that we no longer have a chief operating officer of Processing, resulting in the elimination of that segment. The revenues previously reported in our Processing segment were entirely from our oilseed processing operations, and those operations have grain-based commodity inputs and similar commodity risk management requirements and are managed along with other operations in our Ag Business segment. Accordingly, we have included oilseed processing in that segment. Our wheat milling and packaged food operations previously included in our Processing segment are now included in Corporate and Other, as those businesses are conducted through non-consolidated joint ventures. In addition, our non-consolidated agronomy joint venture is winding down its business activity and is included in Corporate and Other, rather than in our Ag Business segment, where it was previously reported. There was no change to our Energy segment. For comparative purposes, segment information for the three months ended November 30, 2010, have been retrospectively revised to reflect these changes. This revision had no impact on consolidated net income or net income attributable to CHS Inc.

Our Energy segment produces and provides primarily for the wholesale distribution of petroleum products and transportation of those products. Our Ag Business segment purchases and further processes or resells grains and oilseeds originated by our members or third parties, and also serves as a wholesaler and retailer of crop inputs. Corporate and Other primarily represents the non-consolidated wheat milling and packaged food joint ventures, as well as our business solutions operations, which consists 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 will vary throughout the year. Historically, our income is generally lowest during the second fiscal quarter and highest during the third fiscal quarter. Our business segments are subject to varying seasonal fluctuations. For example, in our Ag Business 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 Business 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, 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 Business segment, this principally includes our 50% ownership in TEMCO, LLC (TEMCO). In Corporate and Other, these investments principally include our 50% ownership in Ventura Foods and our 24% ownership in Horizon Milling and Horizon Milling G.P.

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 months ended November 30, 2011 and 2010 is as follows:

	Energy			Ag Business			Corporate and Other			Reconciling Amounts			Total
For the Three Months Ended November 30, 2011
Revenues	$	3,396,974		$	6,449,821		$	17,494		$	(130,130	)	$	9,734,159
Cost of goods sold		2,965,168			6,259,871			(757	)		(130,130	)		9,094,152
Gross profit		431,806			189,950			18,251			—			640,007
Marketing, general and administrative		32,903			61,843			17,774						112,520
Operating earnings		398,903			128,107			477			—			527,487
Gain on investments					(38	)								(38	)
Interest, net		3,502			13,914			3,391						20,807
Equity income from investments		(1,890	)		(7,162	)		(15,077	)					(24,129	)
Income before income taxes	$	397,291		$	121,393		$	12,163		$	—		$	530,847
Intersegment revenues	$	(130,130	)							$	130,130		$	—
Goodwill	$	1,165		$	18,170		$	6,898					$	26,233
Capital expenditures	$	59,716		$	37,504		$	1,681					$	98,901
Depreciation and amortization	$	26,429		$	20,358		$	4,858					$	51,645
Total identifiable assets at November 30, 2011	$	4,063,388		$	5,359,783		$	2,713,518					$	12,136,689
For the Three Months Ended November 30, 2010
Revenues	$	2,392,742		$	5,813,264		$	15,614		$	(88,766	)	$	8,132,854
Cost of goods sold		2,305,443			5,610,320			(969	)		(88,766	)		7,826,028
Gross profit		87,299			202,944			16,583			—			306,826
Marketing, general and administrative		30,076			52,716			15,431						98,223
Operating earnings		57,223			150,228			1,152			—			208,603
Interest, net		1,633			10,593			2,786						15,012
Equity income from investments		(1,666	)		(15,039	)		(20,930	)					(37,635	)
Income before income taxes	$	57,256		$	154,674		$	19,296		$	—		$	231,226
Intersegment revenues	$	(88,766	)							$	88,766		$	—
Goodwill	$	1,165		$	15,687		$	6,898					$	23,750
Capital expenditures	$	53,485		$	30,072		$	951					$	84,508
Depreciation and amortization	$	29,279		$	18,019		$	4,227					$	51,525
Total identifiable assets at November 30, 2010	$	2,941,978		$	4,930,830		$	2,225,980					$	10,098,788