CHS 2014 Annual Report Download - page 40

5NOV201416072344
5NOV201416070913
Inventories
Inventories as of August 31, 2014 and 2013 are as follows: As of August 31, 2014, we valued approximately 16% of
inventories, primarily crude oil and refined fuels within
(DOLLARS IN THOUSANDS) 2014 2013 our Energy segment, using the lower of cost, deter-
Grain and oilseed $ 961,327 $ 1,133,555 mined on the LIFO method, or market (16% as of
Energy 875,719 742,194 August 31, 2013). If the FIFO method of accounting had
been used, inventories would have been higher than the
Crop nutrients 374,023 293,370
reported amount by $538.7 million and $652.6 million at
Feed and farm supplies 448,454 407,023
August 31, 2014 and 2013, respectively.
Processed grain and oilseed 84,498 79,706
Other 16,232 8,887
Total inventories $ 2,760,253 $ 2,664,735
38 CHS 2014
Investments
Joint ventures and other investments, in which we have board seats, we account for Ardent Mills as an equity
significant ownership and influence, but not control, are method investment included in Corporate and Other. As of
accounted for in our consolidated financial statements August 31, 2014, the carrying value of our investment in
using the equity method of accounting. Our significant Ardent Mills was $198.4 million.
equity method investments are summarized below.
We have a 50% interest in Ventura Foods, LLC (Ventura
During the first three quarters of fiscal 2014, we had a 24% Foods), a joint venture which produces and distributes
interest in Horizon Milling, LLC and Horizon Milling, ULC, primarily vegetable oil-based products, and is included in
which were flour milling joint ventures with Cargill, Incorpo- Corporate and Other. We account for Ventura Foods as an
rated (Cargill) and were accounted for as equity method equity method investment, and as of August 31, 2014, our
investments included in Corporate and Other. In our third carrying value of Ventura Foods exceeded our share of its
quarter of fiscal 2014, we formed Ardent Mills LLC (Ardent equity by $12.9 million, which represents equity method
Mills), a joint venture with Cargill and ConAgra Foods, Inc., goodwill. As of August 31, 2014, the carrying value of our
which combines the North American flour milling opera- investment in Ventura Foods was $321.3 million.
tions of the three parent companies, including the Horizon
Milling, LLC and Horizon Milling G.P. (Horizon Milling) assets TEMCO, LLC (TEMCO) is owned and governed by Cargill
and CHS-owned mills, with CHS holding a 12% interest in (50%) and CHS (50%). During the year ended August 31,
Ardent Mills. Prior to closing, we contributed $32.8 million 2012, we entered into an amended and restated agreement
to Horizon Milling to pay off existing debt as a pre-condition to expand the scope of the original agreement with Cargill.
to close. Upon closing, Ardent Mills was financed with funds Pursuant to the terms of the agreement, CHS and Cargill
from third-party borrowings, which did not require credit each agreed to commit to sell all of their feedgrains, wheat,
support from the owners. We received $121.2 million of cash oilseeds and by-product origination that are tributary to the
proceeds distributed to us in proportion to our ownership Pacific Northwest, United States (Pacific Northwest) to
interest, adjusted for deviations in specified working capital TEMCO and to use TEMCO as their exclusive export-mar-
target amounts, and recognized a gain of $109.2 million keting vehicle for such grains exported through the Pacific
associated with this transaction. In connection with the Northwest for a term of 25 years. Cargill’s Tacoma, Wash-
closing, the parties also entered into various ancillary and ington facility will continue to be subleased to TEMCO. We
non-compete agreements including, among other things, account for TEMCO as an equity method investment
an agreement for us to supply Ardent Mills with certain included in our Ag segment. As of August 31, 2014, the car-
wheat and durum products. As we hold one of the five rying value of our investment in TEMCO was $68.4 million.