CHS 2011 Annual Report Download - page 41

40 2011 CHS
NOTE 4
Investments, continued
During fiscal 2010 and 2009 the Company made capital
contributions of $24.0 million and $76.3 million, respec-
tively, to its Multigrain, AG (Multigrain) joint venture
due to expansion of their operations. This venture,
included in the Company’s Ag Business segment,
includes grain storage, export facilities and grain pro-
duction and is headquartered in Sao Paulo, Brazil. During
the year ended August 31, 2011, the Company sold all of
its 45% ownership interest in Multigrain to one of its joint
venture partners, Mitsui & Co., Ltd., for $225.0 million
and recognized a pre-tax gain of $119.7 million.
Agriliance LLC (Agriliance) is owned and governed by
CHS (50%) and Land O’Lakes, Inc. (50%). The Company
accounts for its Agriliance investment using the equity
method of accounting within Corporate and Other. Agri-
liance is currently winding down its business activities and
primarily holds long-term liabilities. During the years
ended August 31, 2011, 2010 and 2009, the Company
received $28.0 million, $105.0 million, and $25.0 million,
respectively, of cash distributions from Agriliance as
returns of capital for proceeds from the sale of many of
the Agriliance retail facilities, and the collection of receiv-
ables. The Company recorded pre-tax gains of $9.0 million
and $28.4 million during fiscal 2011 and 2010, respec-
tively, related to these cash distributions.
During the year ended August 31, 2011, the Company
dissolved its United Harvest, LLC (United Harvest) joint
venture which operated two grain export facilities in
Washington that were leased from the joint venture
participants. As a result of the dissolution, the Company
is now operating its Kalama, Washington export facility,
and its joint venture partner is operating their own
Vancouver, Washington facility.
The following provides combined financial information
for the Company’s major equity investments, excluding
Ventura Foods, for balance sheets as of August 31, 2011
and 2010, and statements of operations for the twelve
months ended August 31, 2011, 2010 and 2009:
(DOLLARS IN THOUSANDS) 2011 2010
Current assets $595,862 $1,254,966
Non-current assets 130,464 881,998
Current liabilities 316,066 765,393
Non-current liabilities 4,922 491,643
(DOLLARS IN THOUSANDS) 2011 2010 2009
Net sales $8,399,779 $7,212,848 $6,748,412
Gross profit 406,338 356,708 306,158
Net earnings 232,473 150,798 128,807
Earnings attributable to
CHS Inc. 89,575 50,731 45,728
The Company previously held a minority ownership inter-
est in VeraSun Energy Corporation (VeraSun), an ethanol
production company. In fiscal 2009, VeraSun filed for
relief under Chapter 11 of the U.S. Bankruptcy Code.
Consequently, the Company’s management recorded an
impairment charge of $74.3 million during fiscal 2009. The
impairment did not affect the Company’s cash flows and
did not have a bearing upon its compliance with any
covenants under its credit facilities.
During the year ended August 31, 2009, the Company
sold its available-for-sale investment of common stock
in the New York Mercantile Exchange (NYMEX Hold-
ings) for proceeds of $16.1 million and recorded a
pretax gain of $15.7 million. The Company also received
proceeds of $25.5 million from the sale of a Canadian
agronomy investment during the year ended August 31,
2009, and recorded a gain of $2.8 million.
CHS Capital, a finance company formed in fiscal 2005,
makes seasonal and term loans to member cooperatives
and businesses and to individual producers of agricultural
products. Through August 31, 2008, the Company
accounted for its 49% ownership interest in CHS Capital,
within Corporate and Other, using the equity method of
accounting. On September 1, 2008, CHS Capital became a
wholly-owned subsidiary when the Company purchased
the remaining 51% ownership interest for $53.3 million.
The purchase price included cash of $48.5 million and the
assumption of certain liabilities of $4.8 million.
Various agreements with other owners of investee com-
panies and a majority-owned subsidiary set out param-
eters whereby CHS may buy and sell additional interests
in those companies, upon the occurrence of certain
events, at fair values determinable as set forth in the
specific agreements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS