CHS 2011 Annual Report Download - page 46

2011 CHS 45
amount deductible in prior periods. The unrecognized tax
benefit, if recognized, would affect the annual effective tax
rate. The Company does not believe it is reasonably pos-
sible that the total amounts of unrecognized tax benefits
will significantly increase or decrease during the
next 12 months.
The Company recognizes interest and penalties related
to unrecognized tax benefits in its provision for income
taxes. During the years ended August 31, 2011 and 2010,
the Company recognized approximately $0.1 million and
$0.3 million in interest, respectively. The Company had
approximately $0.1 million and $0.9 million for the pay-
ment of interest accrued on August 31, 2011 and
2010, respectively.
NOTE 9
EQUITIES
In accordance with the bylaws and by action of the
Board of Directors, annual net earnings from patronage
sources are distributed to consenting patrons following
the close of each fiscal year, and are based on amounts
using financial statement earnings. The cash portion of
the patronage distribution is determined annually by
the Board of Directors, with the balance issued in the
form of capital equity certificates. Total patronage
refunds for fiscal 2011 are estimated to be $674.7 mil-
lion, while the cash portion is estimated to be
$260.1 million. The actual patronage refunds and cash
portion for fiscal years 2010 and 2009 were $402.4 mil-
lion ($141.5 million in cash) and $438.0 million
($153.9 million in cash), respectively. By action of the
Board of Directors, patronage losses incurred in fiscal
2009 from the wholesale crop nutrients business, total-
ing $60.2 million, were offset against the fiscal 2008
wholesale crop nutrients and CF Industries Holdings,
Inc. patronage through the cancellation of capital equity
certificates in fiscal 2010.
Annual net savings from patronage or other sources
may be added to the unallocated capital reserve or, upon
action by the Board of Directors, may be allocated to
members in the form of nonpatronage equity certifi-
cates. The Board of Directors authorized, in accordance
with the Company’s bylaws, that 10% of the earnings
from patronage business for fiscal 2011, be added to the
Company’s capital reserves.
Redemptions are at the discretion of the Board of Direc-
tors. Redemptions of capital equity certificates
approved by the Board of Directors are divided into
two pools, one for non-individuals (primarily member
cooperatives) who may participate in an annual pro-
gram for equities held by them and another for indi-
vidual members who are eligible for equity redemptions
at age 70 or upon death. In accordance with authoriza-
tion from the Board of Directors, the Company expects
total redemptions related to the year ended August 31,
2011, that will be distributed in fiscal 2012, to be
approximately $136.0 million. These expected distribu-
tions are classified as a current liability on the
August 31, 2011 Consolidated Balance Sheet.
For the years ended August 31, 2011, 2010 and 2009, the
Company redeemed in cash, equities in accordance with
authorization from the Board of Directors, in the
amounts of $61.2 million, $23.1 million and $49.7 mil-
lion, respectively. An additional $36.7 million and
$49.9 million of capital equity certificates were
redeemed in fiscal years 2010 and 2009, respectively,
by issuance of shares of the Company’s 8% Cumulative
Redeemable Preferred Stock (Preferred Stock). The
amount of equities redeemed with each share of Pre-
ferred Stock issued was $28.30 and $25.90, which was
the closing price per share of the stock on the NASDAQ
Global Select Market on February 22, 2010 and Janu-
ary 23, 2009, respectively.
The Preferred Stock is listed on the NASDAQ Global
Select Market under the symbol CHSCP. On August 31,
2011, the Company had 12,272,003 shares of Preferred
Stock outstanding with a total redemption value of
approximately $306.8 million, excluding accumulated
dividends. The Preferred Stock accumulates dividends
at a rate of 8% per year, which are payable quarterly.
Dividends paid on the Preferred Stock during the years
ended August 31, 2011, 2010 and 2009, were $24.5 mil-
lion, $23.2 million, and $20.0 million, respectively.
The Preferred Stock is redeemable at the Company’s
option. At this time, the Company has no current plan or
intent to redeem any Preferred Stock.