CHS 2011 Annual Report Download - page 44

2011 CHS 43
(h) In March 2004, the Company entered into a note purchase and private shelf agreement with Prudential Capital Group. In April 2004, two long-
term notes were issued for $15.0 million each. In April 2007, the agreement was amended with Prudential Investment Management, Inc. and
several other participating insurance companies to expand the uncommitted facility from $70.0 million to $150.0 million. In February 2008,
the Company borrowed $50.0 million under the shelf arrangement and in November 2010, the Company borrowed $100.0 million under the
shelf arrangement.
(i) In June 2011, the Company entered into a private placement with certain accredited investors for long-term debt in the amount of
$500.0 million, which was layered into four series. Under the agreement, the Company may, from time to time, issue additional series of notes
pursuant to the agreement, provided that the aggregate principal amount of all notes outstanding at any time may not exceed $1.5 billion.
(j) Other notes and contracts payable of $5.4 million are collateralized by property, plant and equipment, with a cost of $17.1 million, less
accumulated depreciation of $9.4 million on August 31, 2011.
(k) The debt is unsecured; however, restrictive covenants under various agreements have requirements for maintenance of minimum working
capital levels and other financial ratios.
(l) Cofina Funding, LLC (Cofina Funding), a wholly-owned subsidiary of CHS Capital, has available credit totaling $450.0 million as of
August 31, 2011, under note purchase agreements with various purchasers, through the issuance of short-term notes payable. CHS Capital
sells eligible commercial loans receivable it has originated to Cofina Funding, which are then pledged as collateral under the note purchase
agreements. The notes payable issued by Cofina Funding bear interest at variable rates with a weighted-average interest rate of 1.96% as of
August 31, 2011. Borrowings by Cofina Funding utilizing the available credit under the note purchase agreements totaled $371.3 million as of
August 31, 2011. CHS Capital sells loan commitments it has originated to ProPartners Financial (ProPartners) on a recourse basis. The total
capacity for commitments under the ProPartners program is $200.0 million. The total outstanding commitments under the program totaled
$174.0 million as of August 31, 2011, of which $117.6 million was borrowed under these commitments with an interest rate of 2.03%. CHS
Capital borrows funds under short-term notes issued as part of a surplus funds program. Borrowings under this program are unsecured and
bear interest at variable rates ranging from 0.85% to 1.35% as of August 31, 2011, and are due upon demand. Borrowings under these notes
totaled $96.6 million as of August 31, 2011. As of August 31, 2010, the net borrowings under the Cofina Funding note purchase agreements
were $75.0 million. CHS Capital borrowings under the ProPartners program and the surplus funds program were $71.4 million and
$85.9 million, respectively, as of August 31, 2010.
Weighted-average interest rates at August 31:
2011 2010
Notes payable 2.37% 2.24%
CHS Capital notes payable 1.86% 1.75%
Long-term debt 5.25% 5.92%
Based on quoted market prices of similar debt, the
carrying value of the Company’s long-term debt
approximated its fair value.
The aggregate amount of long-term debt payable as of
August 31, 2011 is as follows:
(DOLLARS IN THOUSANDS)
2012 $ 90,804
2013 100,707
2014 154,549
2015 154,500
2016 129,517
Thereafter 871,920
$1,501,997
Interest, net for the years ended August 31, 2011, 2010
and 2009 is as follows:
(DOLLARS IN THOUSANDS) 2011 2010 2009
Interest expense $83,044 $69,901 $85,669
Capitalized interest (5,487) (6,212) (5,201)
Interest income (2,722) (5,365) (9,981)
Interest, net $74,835 $58,324 $70,487
NOTE 8
INCOME TAXES
The provision for income taxes for the years ended
August 31, 2011, 2010 and 2009 is as follows:
(DOLLARS IN THOUSANDS) 2011 2010 2009
Current $19,539 $ 8,931 $19,328
Deferred 56,426 34,691 31,665
Valuation allowance 10,663 4,816 12,311
Income taxes $86,628 $48,438 $63,304
The Company’s current tax provision is significantly
impacted by the utilization of loss carryforwards and tax
benefits passed to the Company from NCRA. The pass-
through tax benefits are associated with refinery upgrades
that enable NCRA to produce ultra-low sulfur fuels as
mandated by the Environmental Protection Agency.
Deferred taxes are comprised of basis differences
related to investments, accrued liabilities and certain
federal and state tax credits. NCRA files separate tax
returns and, as such, these items must be assessed
independent of the Company’s deferred tax assets when
determining recoverability.