Equity management
Equity management priorities
Each year, the CHS Board of Directors makes decisions on the amount of cash patronage and equity redeemed and distributed to owners. Those decisions are based on three key criteria:
CHS has returned nearly $3.5 billion to owners over the past 10 years
Equity program changes approved by CHS members at the 2023 CHS Annual Meeting
Amendments to the CHS Bylaws approved by CHS members in December 2023 give the CHS Board of Directors more tools to manage the equity program so it maintains value for future generations of CHS owners.
Amend CHS Bylaws to allow equity holdback from 0% to 35%
- Give CHS Board flexibility to make equity decisions based on market conditions
- This will not change the amount of cash generated by CHS
Amend CHS Bylaws to allow reduction of earnings by preferred stock dividends when calculating patronage
- Treat preferred stock dividends similar to interest
- This will not change the amount of cash generated by CHS
Equity issued to and redeemed by CHS owners
Patronage equity issued and equity redeemed by year
Approved amendments will give the CHS Board added flexibility to address allocated equity volume and years to redemption
FAQs
-
Does a change in the holdback percentage affect available cash?
-
Why not only change how preferred stock dividends are treated and leave holdback as is?
-
How did you arrive at zero to 35% for holdback?
-
What would happen if no action had been taken?
Helpful definitions
- Allocated equity: equity that has been issued and assigned to a specific owner through patronage.
- Equity redemption: redeeming previously issued allocated equity, usually with cash (also called retirement in the CHS Bylaws)
- Unallocated equity: owner equity that has not been issued to a specific owner. Unallocated equity, reported on the CHS balance sheet as the capital reserve, may include:
- Annual net income attributable to nonpatronage business.
- An annual amount not to exceed 10% of the annual distributable net income from patronage business per current CHS Bylaws. (Please note: The bylaws amendments approved by CHS owners at the 2023 CHS Annual Meeting will adjust this figure to not exceed 35% of the annual distributable net income from patronage business. The change will be effective at the start of fiscal year 2025 on Sept. 1, 2024.)
- Annual net income from patrons that does not meet a minimum amount of business.
Forward-looking statements: This document and other CHS Inc. publicly available documents contain, and CHS officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on CHS current beliefs, expectations and assumptions regarding the future of its businesses, financial condition and results of operations, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of CHS control. CHS actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements. Important factors that could cause CHS actual results and financial condition to differ materially from those indicated in the forward-looking statements are discussed or identified in CHS filings made with the U.S. Securities and Exchange Commission, including in the "Risk Factors" discussion in Item 1A of CHS Annual Report on Form 10-K for the fiscal year ended August 31, 2024. These factors may include: changes in commodity prices; the impact of government policies, mandates, regulations and trade agreements; global and regional political, economic, legal and other risks of doing business globally; the ongoing war between Russia and Ukraine; the escalation of conflict in the Middle East; the impact of inflation; the impact of epidemics, pandemics, outbreaks of disease and other adverse public health developments; the impact of market acceptance of alternatives to refined petroleum products; consolidation among our suppliers and customers; nonperformance by contractual counterparties; changes in federal income tax laws or our tax status; the impact of compliance or noncompliance with applicable laws and regulations; the impact of any governmental investigations; the impact of environmental liabilities and litigation; actual or perceived quality, safety or health risks associated with our products; the impact of seasonality; the effectiveness of our risk management strategies; business interruptions, casualty losses and supply chain issues; the impact of workforce factors; our funding needs and financing sources; financial institutions’ and other capital sources’ policies concerning energy-related businesses; technological improvements that decrease the demand for our agronomy and energy products; our ability to complete, integrate and benefit from acquisitions, strategic alliances, joint ventures, divestitures and other nonordinary course-of-business events; security breaches or other disruptions to our information technology systems or assets; the impact of our environmental, social and governance practices, including failures or delays in achieving our strategies or expectations related to climate change or other environmental matters; the impairment of long-lived assets; the impact of bank failures; and other factors affecting our businesses generally. Any forward-looking statements made by CHS in this document are based only on information currently available to CHS and speak only as of the date on which the statement is made. CHS undertakes no obligation to update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise except as required by applicable law.