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CHS Inc. 8% Cumulative Redeemable Prefe Reports Operating Results (10-Q)

July 08, 2010 | About:
10qk

10qk

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CHS Inc. 8% Cumulative Redeemable Prefe (CHSCP) filed Quarterly Report for the period ended 2010-05-31.

Chs Inc. 8% Cumulative Redeemable Prefe has a market cap of $305.1 million; its shares were traded at around $27.8 . The dividend yield of Chs Inc. 8% Cumulative Redeemable Prefe stocks is 7.1%.
This is the annual revenues and earnings per share of CHSCP over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of CHSCP.


Highlight of Business Operations:

Our Ag Business segment generated income before income taxes of $94.6 million for the three months ended May 31, 2010 compared to $23.7 million in the three months ended May 31, 2009, an increase in earnings of $70.9 million. Earnings from our wholesale crop nutrients business improved $39.8 million for the three months ended May 31, 2010 compared with the same period in fiscal 2009. The market prices for crop nutrients products fell significantly during most of our fiscal 2009 as fertilizer prices, an input to grain production, followed some of the declining grain prices. Late fall of calendar 2008 rains impeded the application of fertilizer during that time period, and as a result, we had a higher quantity of inventories on hand at the end of our first and second fiscal quarters of 2009 than is typical at that time of year. Because there are no future contracts or other derivative instruments that can be used to hedge fertilizer inventories and contracts effectively, a long inventory position with falling prices creates losses. From time to time, crop nutrients hedge some positions in over-the-counter (OTC) swaps. Depreciation in fertilizer prices continued throughout the third quarter of our fiscal 2009, which had the affect of dramatically reducing gross margins on this product. To reflect our wholesale crop nutrients inventories at net-realizable values, we recorded lower-of-cost or market adjustments of approximately $83 million during the nine months ended May 31, 2009, of which $8.2 million was remaining at the end of the third quarter of fiscal 2009. The price fluctuations for the nine months of fiscal 2010 were far less volatile and we carried less unhedged positions as well, which has the effect of reducing the potential for both large earnings and large losses. Also during the third quarter of fiscal 2010, we recorded a $10.0 million gain related to the sale of many of our Agriliance locations, an agronomy joint venture in which we hold a 50% interest. This, along with improved financial performance by Agriliance, resulted in a $10.9 million combined increase in earnings, net of allocated internal expenses. Our country operations earnings increased $30.3 million during the three months ended May 31, 2010 compared to the same period in the prior year, primarily as a result of improved retail crop nutrient and processed sunflower margins, in addition to overall increased margins related to higher volume, primarily attributed to acquisitions made over the past year. Our grain marketing earnings decreased by $10.1 million during the three months ended May 31, 2010 compared with the same period in fiscal 2009, primarily as a result of increased international expenses, coupled with reduced joint venture earnings, partially offset by improved margins and volumes on grain.

Our Energy segment revenues, after elimination of intersegment revenues, of $2.1 billion increased by $582.3 million (38%) during the three months ended May 31, 2010 compared to the three months ended May 31, 2009. During the three months ended May 31, 2010 and 2009, our Energy segment recorded revenues from our Ag Business segment of $72.3 million and $48.4 million, respectively. The net increase in revenues of $582.3 million is comprised of a net increase of $524.2 million related to higher prices on refined fuels and renewable fuels marketing products, in addition to $58.1 million related to a net increase in sales volume. Refined fuels revenues increased $359.5 million (34%), of which $416.3 million was related to a net average selling price increase, partially offset by $56.8 million, which was attributable to decreased volumes, compared to the same period in the previous year. The sales price of refined fuels increased $0.67 per gallon (42%), while volumes decreased 5%, mainly from the impact on the global economy with less transport diesel usage, when comparing the three months ended May 31, 2010 with the same period a year ago. Propane revenues decreased $11.7 million (12%), of which $17.8 million was due to a decrease in volume, partially offset by $6.1 million related an increase in the net average selling price, when compared to the same period in the previous year. The average selling price of propane increased $0.08 per gallon (8%), while sales volume decreased 18% in comparison to the same period of the prior year. Renewable fuels marketing revenues increased $129.0 million (102%), mostly from a 100% increase in volumes, coupled with an increase in the average selling price of $0.01 per gallon (1%), when compared with the same three-month period in the previous year.

Our Ag Business segment revenues, after elimination of intersegment revenues, of $4.2 billion, decreased $0.2 billion (4%) during the three months ended May 31, 2010 compared to the three months ended May 31, 2009. Grain revenues in our Ag Business segment totaled $2.8 billion and $3.0 billion during the three months ended May 31, 2010 and 2009, respectively. Of the grain revenues decrease of $135.5 million (5%), $564.4 million is due to decreased average grain selling prices, partially offset by $428.9 million due to a 15% net increase in volumes, during the three months ended May 31, 2010 compared to the same period last fiscal year. The average sales price of all grain and oilseed commodities sold reflected a decrease of $1.20 per bushel (17%) over the same three-month period in fiscal 2009. The average month-end market price per bushel of spring wheat, soybeans and corn decreased approximately $1.93, $1.13 and $0.56, respectively, when compared to the three months ended May 31, 2009. Wheat, corn and soybeans all had increased volumes compared to the three months ended May 31, 2009.

Interest, net. Net interest of $14.5 million for the three months ended May 31, 2010 decreased $1.8 million (11%) compared to the same period in fiscal 2009. Interest expense for the three months ended May 31, 2010 and 2009 was $17.3 million and $20.0 million, respectively. The decrease in interest expense of $2.7 million (13%) primarily relates to the principal payments on our long-term debt in the past 12 months. In addition, the average level of short-term borrowings decreased $182.7 million (51%) during the three months ended May 31, 2010 compared to the same period in fiscal 2009, mostly due to significantly reduced working capital needs resulting from lower commodity prices. For the three months ended May 31, 2010 and 2009, we capitalized interest of $1.5 million and $1.4 million, respectively, primarily related to construction projects at both refineries in our Energy segment. Interest income, generated primarily from marketable securities, was $1.3 million and $2.3 million for the three months ended May 31, 2010 and 2009, respectively. The net decrease in interest income of $1.0 million (44%) was mostly within Corporate and Other, which primarily relates to marketable securities with interest yields lower than a year ago.

Our Energy segment revenues, after elimination of intersegment revenues, of $6.3 billion increased by $779.9 million (14%) during the nine months ended May 31, 2010 compared to the nine months ended May 31, 2009. During the nine months ended May 31, 2010 and 2009, our Energy segment recorded revenues from our Ag Business segment of $221.7 million and $190.0 million, respectively. The net increase in revenues of $779.9 million is comprised of $205.0 million related to a net increase in sales volume and $574.9 million related to higher prices on refined fuels and renewable fuels marketing products. Refined fuels revenues increased $192.4 million (5%), of which $475.4 million was related to an increase in the net average selling price, partially offset by $283.0 million which was attributable to decreased volumes, compared to the same period in the previous year. While the sales price of refined fuels increased $0.26 per gallon (14%), volumes decreased 8%, mainly from the impact on the global economy with less transport diesel usage, when comparing the nine months ended May 31, 2010 with the same period a year ago. Propane revenues decreased $35.0 million (5%), of which $100.4 million was due to a decrease in the net average selling price, partially offset by $65.4 million related to an increase in volumes, when compared to the same period in the previous year. The average selling price of propane decreased $0.18 per gallon (13%), while sales volume increased 10% in comparison to the same period of the prior year. The increase in propane volumes primarily reflects increased demand including an improved crop drying season and an earlier home heating season. Renewable fuels marketing revenues increased $425.7 million (109%), mostly from a 102% increase in volumes, in

Our Ag Business segment revenues, after elimination of intersegment revenues, of $11.6 billion, decreased $1.2 billion (9%) during the nine months ended May 31, 2010 compared to the nine months ended May 31, 2009. Grain revenues in our Ag Business segment totaled $8.9 billion and $9.5 billion during the nine months ended May 31, 2010 and 2009, respectively. Of the grain revenues decrease of $657.5 million (7%), $1.9 billion is attributable to decreased average grain selling prices, partially offset by $1.2 billion, which is due to a 13% increase in volumes during the nine months ended May 31, 2010 compared to the same period last fiscal year. The average sales price of all grain and oilseed commodities sold reflected a decrease of $1.30 per bushel (17%) over the same nine-month period in fiscal 2009. The average month-end market price per bushel of spring wheat, corn and soybeans decreased approximately $1.54, $0.31 and $0.16, respectively, when compared to the nine months ended May 31, 2009. Wheat, corn and soybean volumes increased, while barley reflected a decrease compared to the nine months ended May 31, 2009.

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