Liquidity and Capital Resources

In assessing our financial condition, we consider factors such as working capital and internal benchmarking related to our applicable financial covenants. We fund our operations primarily through a combination of cash flows from operations and revolving credit facilities. We fund our capital expenditures and growth primarily through long-term debt financing and issuance of preferred stock.

On August 31, 2015 and August 31, 2014 , we had working capital, defined as current assets less current liabilities, of $2.8 billion and $3.2 billion , respectively. Our current ratio, defined as current assets divided by current liabilities, was 1.5 and 1.5 as of August 31, 2015 and August 31, 2014 , respectively.

As of August 31, 2015 we had cash and cash equivalents of $953.8 million , total equities of $7.7 billion , long-term debt of $1.4 billion and notes payable of $1.2 billion . Our capital allocation priorities include maintaining our assets, paying our dividends, returning cash to our member-owners in the form of patronage refunds, investing to grow our business and taking advantage of strategic opportunities. Our primary sources of cash in fiscal 2015 were net cash flows from operations and equity financing through the issuance of preferred stock. Primary uses of cash were capital expenditures, dividends (patronage and preferred stock), business acquisitions, retirement of equity certificates, and payments on indebtedness. We believe that cash generated by operating activities, along with available borrowing capacity under our revolving credit facility, will be sufficient to support our operations in fiscal 2016, including dividend payments, capital expenditures and required interest payments related to our long-term debt.

In addition to our working capital and other normal liquidity requirements, we expect to utilize available liquidity, including cash and cash equivalents, to fund our ongoing capital expenditures. For fiscal 2016, we expect total capital expenditures to be approximately $1.1 billion . Included in that amount is approximately $392.0 million for the acquisition of property, plant and equipment and major repairs at our Laurel, Montana and McPherson, Kansas refineries. That amount includes $40.0 million for the remainder of a multi-year project to replace a coker at the McPherson refinery with an expected total cost of $579.0 million and expected completion in fiscal 2016. We incurred $167.4 million , $186.8 million and $124.0 million of costs related to the coker project during the years ended August 31, 2015, 2014 and 2013, respectively. We also began a $353.0 million expansion at the McPherson refinery during the year ended August 31, 2013 which is anticipated to be completed in fiscal 2016. We incurred $159.2 million , $128.3 million and $25.0 million of costs related to the expansion during the years ended August 31, 2015, 2014 and 2013, respectively.

We announced in September 2014 that our Board of Directors had approved plans to begin construction of a fertilizer manufacturing plant in Spiritwood, North Dakota that was anticipated to cost more than $3.0 billion. We planned to finance the project through a combination of issuance of preferred stock and debt. In September 2014 and January 2015, we took initial steps in the financing of this project by issuing shares of Class B Series 3 Preferred Stock and Class B Series 4 Preferred Stock, respectively, as described in "Cash Flows from Financing Activities - Other Financing" below. These preferred stock offerings yielded approximately $977.8 million in cash after underwriting discounts and offering expenses.

    

In August 2015 we announced our intention to not move forward with the construction of the Spiritwood facility. We instead entered into an agreement with CF Industries to invest $2.8 billion in cash in exchange for an 11.4% membership interest (based on product tons) in CF Nitrogen and a separate agreement to purchase nitrogen fertilizer products from that entity over an 80-year term. The closing date for our investment in CF Nitrogen is anticipated to be February 1, 2016, and we intend to finance this transaction using additional long-term debt in combination with existing credit facilities and available cash.

As of August 31, 2015 we had access to a five-year, unsecured revolving credit facility with a committed amount of $2.5 billion that expires in June 2018, which had no amounts outstanding as of August 31, 2015 or 2014. The financial covenants for this credit facility require us to have, as of the end of each fiscal quarter, a minimum consolidated net worth, as defined in the credit agreements of $2.5 billion, and a consolidated funded debt to consolidated cash flow ratio of no greater than 3.00 to 1.00. A third financial covenant required that our ratio of adjusted consolidated funded debt to adjusted consolidated equity not exceed 0.80 to 1.00, as measured at the end of each fiscal quarter. As of August 31, 2015, we were in compliance with all covenants.

In September of 2015, this facility was amended and restated as a five-year, unsecured revolving credit facility with a committed amount of $3.0 billion that expires in September 2020. In addition, the minimum consolidated net worth as defined in the credit agreement was increased to $3.5 billion, and the maximum consolidated funded debt to consolidated cash flow was increased to 3.50 to 1.00.

    

Our revolving credit facility is established with a syndication of domestic and international banks, and our inventories and receivables financed with them are highly liquid. We believe our current cash balances and our available capacity on our committed lines of credit will provide adequate liquidity to meet our working capital needs.

In addition, our wholly-owned subsidiary, CHS Capital, makes seasonal and term loans to member cooperatives, businesses and individual producers of agricultural products included in our cash flows from investing activities, and has its own financing explained in further detail below under “Cash Flows from Financing Activities.”

Cash Flows from Operations

Cash flows from operations are generally affected by commodity prices and the seasonality of our businesses. These commodity prices are influenced by a wide range of factors beyond our control, including weather, crop conditions, drought, the availability and the adequacy of supply and transportation, government regulations and policies, world events, and general political and economic conditions. These factors are described in the Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 section and may affect net operating assets and liabilities, and liquidity.

Cash flows provided by operating activities were $570.0 million , $1.4 billion and $2.5 billion for the years ended August 31, 2015, 2014 and 2013 , respectively. The fluctuation in cash flows between fiscal 2015 and fiscal 2014 is primarily the result of significant uses of cash related to net changes in operating assets and liabilities during the year ended August 31, 2015 compared to the overall cash inflows associated with changes in operating assets and liabilities during the year ended August 31, 2014.

Our operating activities provided net cash of $570.0 million during the year ended August 31, 2015 . The cash provided by operating activities resulted from net income including noncontrolling interests of $780.3 million and net non-cash expenses and cash distributions from equity investments of $450.2 million , partially offset by a decrease in cash flows due to changes in net operating assets and liabilities of $660.5 million . The primary components of net non-cash expenses and cash distributions from equity investments include depreciation and amortization, including amortization of major repair costs, of $401.4 million and long-lived asset impairment charges of $103.7 million , partially offset by a gain of $36.3 million on our crack spread contingent consideration liability and net equity investment activity of $26.9 million . The decrease in cash flows from changes in net operating assets and liabilities was caused primarily by decreases in accounts payable and accrued expenses and customer advance payments, partially offset by decreases in receivables and inventories. These decreases were

driven by decreases in commodity prices on August 31, 2015, when compared to August 31, 2014. On August 31, 2015, the per bushel market prices of two of our primary grain commodities, soybeans and spring wheat, decreased by $1.92 (18%) and $1.19 (19%), respectively, when compared to the spot prices on August 31, 2014. The per bushel market price of our third primary commodity, corn, increased by $0.33 (9%) when compared to the spot price on August 31, 2014. In general, crude oil market prices decreased $47 per barrel (49%) on August 31, 2015 when compared to August 31, 2014. Comparing the same periods, fertilizer commodity prices affecting our wholesale crop nutrients and country operations retail businesses reflected decreases of up to 26%, depending on the specific products, compared to prices on August 31, 2014. In addition, slight increases in grain inventory quantities on August 31, 2015 compared to the prior year partially offset the impact that lower grain commodity prices had on net operating assets and liabilities on August 31, 2015.

Our operating activities provided net cash of $1.4 billion during the year ended August 31, 2014. Net income including noncontrolling interests of $1.1 billion , net non-cash expenses and cash distributions from equity investments of $234.9 million and an increase in cash flows due to changes in net operating assets and liabilities of $123.4 million contributed to the net cash provided by operating activities. The primary components of net non-cash expenses and cash distributions from equity investments included depreciation and amortization, including amortization of major repair costs, of $351.3 million , partially offset by gains on the sale of investments of $114.2 million , primarily due to a $109.2 million gain associated with the contribution of our Horizon Milling assets to the newly formed Ardent Mills joint venture. See Note 4, Investments, to our audited consolidated financial statements included in this Annual Report on Form 10-K for additional information. The cash inflow resulting from the decrease in net operating assets and liabilities was caused primarily by a decrease in commodity prices on August 31, 2014, when compared to August 31, 2013. On August 31, 2014, the per bushel market prices of our primary grain commodities, corn, spring wheat, and soybeans, decreased by $1.23 (26%), $1.15 (16%), and $2.68 (19%), respectively, when compared to the spot prices on August 31, 2013. In general, crude oil market prices decreased $12 per barrel (11%) on August 31, 2014 when compared to August 31, 2013. On August 31, 2014, fertilizer commodity prices affecting our wholesale crop nutrients and country operations retail businesses reflected increases up to 29%, depending on the specific products, compared to prices on August 31, 2013. In addition, increased grain inventory quantities on August 31, 2014 compared to the prior year, partially offset the impact that lower grain commodity prices had on net operating assets and liabilities on August 31, 2014.

Our operating activities provided net cash of $2.5 billion during the year ended August 31, 2013. Net income including noncontrolling interests of $996.3 million , net non-cash expenses and cash distributions from equity investments of $375.3 million and an increase in cash flows due to changes in net operating assets and liabilities of $1.1 billion contributed to the net cash provided by operating activities. The primary components of net non-cash expenses and cash distributions from equity investments included depreciation and amortization, including amortization of major repair costs, of $311.4 million , deferred taxes of $92.7 million and the loss on our crack spread contingent liability of $23.1 million , which were partially offset by income from equity investments, net of distributions from those investments, of $34.6 million . The cash inflow resulting from the decrease in net operating assets and liabilities was caused primarily by decreases in commodity prices and inventory quantities, and was reflected in decreased receivables, inventories, margin deposits and derivative assets, partially offset by an increase in derivative liabilities on August 31, 2013 when compared to August 31, 2012. On August 31, 2013, the per bushel market prices of our primary grain commodities, corn, spring wheat and soybeans, decreased by $3.21 (40%), $2.02 (22%) and $4.07 (23%), respectively, when compared to the spot prices on August 31, 2012. In general, crude oil market prices increased $11 per barrel (12%) on August 31, 2013 when compared to August 31, 2012. On August 31, 2013, fertilizer commodity prices affecting our wholesale crop nutrients and country operations retail businesses reflected decreases between 19% and 31%, depending on the specific products, compared to prices on August 31, 2012. A decrease in grain inventory quantities in our Ag segment of 44.1 million bushels (30%) also contributed to the decrease in net operating assets and liabilities when comparing inventories at August 31, 2013 to August 31, 2012.

Cash Flows from Investing Activities

For the years ended August 31, 2015, 2014 and 2013 , the net cash flows used in our investing activities totaled $1.9 billion , $1.3 billion and $495.3 million , respectively.

Total cash expenditures for the acquisition of property, plant and equipment totaled $1.2 billion , $919.1 million and $619.9 million for the years ended August 31, 2015, 2014 and 2013 , respectively. The significant increases from fiscal 2013 to fiscal 2014 and from fiscal 2014 to fiscal 2015 were primarily related to multi-year projects involving the replacement of a coker and expansion of capacity at our CHS McPherson refinery as discussed below.

Expenditures for major repairs related to our refinery turnarounds were $201.7 million , $2.9 million and $73.6 million during the years ended August 31, 2015, 2014 and 2013 , respectively. Refineries have planned major maintenance to overhaul, repair, inspect and replace process materials and equipment (referred to as "turnaround") which typically occur for a five-to-six

week period every 2-4 years. Both our Laurel, Montana refinery and our McPherson, Kansas refinery had turnarounds during the year ended August 31, 2015. Neither of the refineries has turnarounds scheduled for fiscal 2016.

Cash acquisitions of businesses, net of cash acquired, totaled $305.2 million , $281.5 million and $12.7 million during the years ended August 31, 2015, 2014 and 2013 , respectively. The fiscal 2015 activity included our Patriot Renewable Fuels and Northstar Agri Industries acquisitions in our Ag segment. See Note 17, Acquisitions, to our audited consolidated financial statements included in this Annual Report on Form 10-K for additional information.

Investments in joint ventures and other entities during the years ended August 31, 2015, 2014 and 2013 , totaled $64.3 million , $80.1 million and $21.4 million , respectively. Of the amount invested in joint ventures in fiscal 2014, $48.2 million was associated with the winding down of our Horizon Milling joint venture and ownership interest that was contributed to our Ardent Mills joint venture.

Changes in notes receivable for the years ended August 31, 2015 and 2014 resulted in net decreases in cash flows of $184.1 million and $184.1 million , respectively. The primary cause of the decreases in cash flows during both periods relates to increases in CHS Capital notes receivable. Changes in notes receivable for the year ended August 31, 2013 resulted in a net increase in cash flows of $211.9 million . The primary cause of the net increase in cash flows during fiscal 2013 was a decrease in CHS Capital notes receivable of $189.3 million and a decrease in CHS McPherson (then known as NCRA) notes receivable, compared to August 31, 2012.

Partially offsetting our cash expenditures for investing activities during the years ended August 31, 2015, 2014 and 2013 , were proceeds from the redemption of investments of $19.9 million , $138.5 million and $13.0 million , respectively. Included in the fiscal 2014 amount is $121.2 million of cash proceeds that were distributed to us as part of our Ardent Mills joint venture. Also partially offsetting our cash expenditures for investing activities during the years ended August 31, 2015, 2014 and 2013 , were proceeds received from the disposal of property, plant and equipment of $11.3 million , $11.7 million and $7.7 million , respectively.

Cash Flows from Financing Activities

For the years ended August 31, 2015 and August 31, 2014, our financing activities provided net cash of $153.8 million and $201.5 million , respectively. For the year ended August 31, 2013, net cash used in our financing activities totaled $478.0 million .

Working Capital Financing:

We finance our working capital needs through lines of credit with domestic and international banks. On August 31, 2015, we had a five-year, unsecured, revolving facility with a committed amount of $2.5 billion, which had no amounts outstanding. This facility was amended and restated in September 2015 with a committed amount of $3.0 billion and a new five year term.

In addition to our primary revolving line of credit, we have a three-year $250.0 million committed revolving pre-export credit facility for CHS Agronegocio Industria e Comercio Ltda ("CHS Agronegocio"), our wholly-owned subsidiary in South America, to provide financing for its working capital needs arising from its purchases and sales of grains, fertilizers and other agricultural products which expires in October 2016. The outstanding balance on this facility was $200.0 million as of August 31, 2015. This facility was amended in October 2015 to conform its financial covenants with those of the five-year, unsecured, revolving facility.

As of August 31, 2015 our wholly-owned subsidiaries, CHS Europe S.a.r.l and CHS Agronegocio, had uncommitted lines of credit of $303.4 million outstanding. In addition, our other international subsidiaries had lines of credit totaling $310.2 million outstanding at August 31, 2015, of which $216.7 million was collateralized. On August 31, 2015 and 2014, we had total short-term indebtedness outstanding on these various facilities and other miscellaneous short-term notes payable totaling $813.7 million and $840.7 million , respectively.

We have two uncommitted commercial paper programs with an aggregate capacity of $125.0 million, with two banks participating in our revolving credit facilities. Terms of our revolving credit facility allow a maximum usage of $100.0 million to pay principal under any commercial paper facility. On August 31, 2015 and 2014, we had no commercial paper outstanding. In September 2015, we amended our five-year, unsecured, revolving facility and eliminated the provision that allowed proceeds to be used to pay principal under a commercial paper facility.

CHS Capital Financing:

Cofina Funding, LLC ("Cofina Funding"), a wholly-owned subsidiary of CHS Capital, had available credit totaling $350.0 million as of August 31, 2015, 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 based on commercial paper with a weighted average rate of 1.04% as of August 31, 2015. There were no borrowings by Cofina Funding utilizing the issuance of commercial paper under the note purchase agreements as of August 31, 2015.

CHS Capital has available credit under master participation agreements with numerous counterparties. Borrowings under these agreements are accounted for as secured borrowings and bear interest at variable rates ranging from 1.64% to 3.70% as of August 31, 2015. As of August 31, 2015, the total funding commitment under these agreements was $145.7 million, of which $35.9 million was borrowed.

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 $300.0 million. The total outstanding commitments under the program totaled $56.8 million as of August 31, 2015, of which $39.9 million was borrowed under these commitments with an interest rate of 1.62%.

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 0.10% to 0.90% as of August 31, 2015, and are due upon demand. Borrowings under these notes totaled $275.8 million as of August 31, 2015.

As of August 31, 2014, there were no borrowings under Cofina Funding through the issuance of commercial paper with $17.6 million of secured borrowings under CHS Capital. CHS Capital borrowings under the ProPartners program and the surplus funds program were $64.6 million and $236.6 million, respectively, as of August 31, 2014.

Long-term Debt Financing:

We use long-term debt agreements with various insurance companies and banks to finance certain of our long-term capital needs, primarily those related to the acquisition of property, plant and equipment.

On August 31, 2015, we had total long-term debt outstanding of approximately $1.4 billion , of which $75.0 million was bank financing, $1.2 billion was private placement debt, $125.9 million was obligations related to capital leases and $44.9 million was other notes and contracts payable. On August 31, 2014, we had total long-term debt outstanding of approximately $1.6 billion , of which $105.0 million was bank financing, $1.3 billion was private placement debt, $155.4 million was obligations related to capital leases and $43.8 million was other notes and contracts payable. Our long-term debt is unsecured except for other notes and contracts in the amount of $0.5 million ; however, restrictive covenants under various agreements have requirements for maintenance of minimum consolidated net worth and other financial ratios. We were in compliance with all debt covenants and restrictions as of August 31, 2015. Long-term debt outstanding as of August 31, 2015 has aggregate maturities, excluding fair value adjustments and capital leases, as follows:

During the years ended August 31, 2015, 2014 and 2013 we borrowed $3.5 million , $1.4 million and $280.0 million , respectively, on a long-term basis. During the years ended August 31, 2015 , 2014 and 2013 , we repaid long-term debt of $170.7 million , $157.8 million and $113.6 million , respectively; and we made principal payments on capital lease obligations of $38.9 million , $39.9 million , and $35.4 million , respectively.

Additional detail on our long-term borrowings and repayments is as follows:

In June 1998, we completed a private placement offering with several insurance companies for long-term debt in the amount of $225.0 million with an interest rate of 6.81%. Repayments were due in equal annual installments during the years 2008 through 2013 and the debt was fully repaid in fiscal 2013.

In October 2002, we completed a private placement with several insurance companies for long-term debt in the amount of $175.0 million, which was layered into two series. The first series of $115.0 million had an interest rate of 4.96% and was due in equal semi-annual installments of approximately $8.8 million during the years 2007 through 2013. The second series of $60.0 million has an interest rate of 5.60% and is due in equal semi-annual installments of approximately $4.6 million during the years 2012 through 2018.

In March 2004, we entered into a note purchase and private shelf agreement with Prudential Capital Group. In April 2007, we amended our Note Purchase and Private Shelf Agreement with Prudential Investment Management, Inc. and several other participating insurance companies to expand the uncommitted facility from $70.0 million to $150.0 million. We borrowed $50.0 million under the shelf arrangement in February 2008, for which the aggregate long-term notes have an interest rate of 5.78% and are due in equal annual installments of $10.0 million during the years 2014 through 2018. In November 2010, we borrowed $100.0 million under the shelf arrangement, for which the aggregate long-term notes have an interest rate of 4.0% and are due in equal annual installments of $20.0 million during the years 2017 through 2021.

In September 2004, we completed a private placement with several insurance companies for long-term debt in the amount of $125.0 million with an interest rate of 5.25%. The debt was due in equal annual installments of $25.0 million during the years 2011 through 2015, and was fully repaid in fiscal 2015.

In October 2007, we completed a private placement with several insurance companies and banks for long-term debt in the amount of $400.0 million with an interest rate of 6.18%. Repayments are due in equal annual installments of $80.0 million during the years 2013 through 2017.

In December 2007, we established a ten-year long-term credit agreement through a syndication of cooperative banks in the amount of $150.0 million, with an interest rate of 5.59%. Repayments are due in equal semi-annual installments of $15.0 million each, from June 2013 through December 2018.

In June 2011, we completed a private placement with certain accredited investors for long-term debt in the amount of $500.0 million, which was layered into four series. The first series of $130.0 million has an interest rate of 4.08% and is due in June 2019. The second series of $160.0 million has an interest rate of 4.52% and is due in June 2021. The third series of $130.0 million has an interest rate of 4.67% and is due in June 2023. The fourth series of $80.0 million has an interest rate of 4.82% and is due in June 2026. Under the agreement, we 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.

In March 2013, we issued $100 million of notes with an interest rate of 4.71%, which mature in fiscal 2033, in a private placement to institutional investors.

In July 2013, we issued $80 million and $100 million of notes with interest rates of 3.85% and 3.80%, respectively, which mature in fiscal 2025, in two private placements to institutional investors.

In September of 2015, we amended all outstanding notes to conform their financial covenants to those of the amended and restated five-year, unsecured, revolving facility. In addition, the amended notes contain a provision such that if our ratio of consolidated funded debt to consolidated cash flow is greater than 3.0 to 1.0, the interest rate on all outstanding notes is increased by 0.25% until the ratio declines to 3.0 or less.

In September 2015, we entered into a ten-year term loan with a syndication of banks. The agreement provides for committed term loans in an amount up to $600.0 million, which may be drawn down from time to time, but in no event on more than 10 occasions, from September 4, 2015 until September 4, 2016. Amounts drawn under this agreement that are subsequently repaid or prepaid may not be reborrowed. Principal on the term loans is payable in full on September 4, 2025. Borrowings under the agreement will bear interest at a base rate (or a LIBO rate) plus an applicable margin, or at a fixed rate of interest determined and quoted by the administrative agent under the agreement in its sole and absolute discretion from time to time. The applicable margin will be based on our leverage ratio and ranges between 1.50% and 2.00% for LIBO rate loans and between 0.50% and 1.00% for base rate loans. There are currently no amounts drawn under this agreement.

Other Financing:

During the years ended August 31, 2015 and August 31, 2014 , we made a payment of $66.0 million in each year related to our purchase of the CHS McPherson (formerly NCRA) noncontrolling interests.

During the years ended August 31, 2015 , August 31, 2014 , and August 31, 2013, changes in checks and drafts outstanding resulted in a decrease in cash flows of $43.4 million , $17.8 million and $20.4 million , respectively.

In accordance with our 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. Patronage refunds are calculated 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 qualified and/or non-qualified capital equity certificates. Consenting patrons have agreed to take both the cash and qualified capital equity certificate portion allocated to them from our previous fiscal year’s income into their taxable income; and as a result, we are allowed a deduction from our taxable income for both the cash distribution and the allocated qualified capital equity certificates, as long as the cash distribution is at least 20% of the total qualified patronage distribution. For the years ended August 31, 2014 and August 31, 2013, 10% of earnings from patronage business was added to our capital reserves and the remaining 90% was primarily distributed during the second fiscal quarters of the years ended August 31, 2015 and August 31, 2014, totaling $821.5 million and $841.1 million , respectively. The cash portion of the qualified distributions was deemed by the Board of Directors to be 40% for fiscal 2014 and 2013. Cash related to these distributions was $271.2 million and $286.8 million and was paid during the years ended August 31, 2015 and August 31, 2014, respectively. During the year ended August 31, 2013, we distributed patronage refunds of $976.0 million , of which the cash portion was $380.9 million .

In accordance with our bylaws and by action of the Board of Directors, 10% of the earnings from patronage business for the year ended August 31, 2015 was added to our capital reserves and the remaining 90%, or an estimated $625.4 million , will be distributed as patronage in fiscal 2016 , in the form of qualified equity certificates and cash. The cash portion of the qualified distribution, determined by the Board of Directors to be 40%, is expected to be approximately $250.2 million and is classified as a current liability on our August 31, 2015 Consolidated Balance Sheet in dividends and equities payable.

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 retirement program for qualified equities held by them and another for individuals who are eligible for qualified equity redemptions at age 70 or upon death. In accordance with authorization from the Board of Directors, we expect total redemptions related to the year ended August 31, 2015 , that will be distributed in fiscal 2016 , to be an estimated $107.3 million . These expected distributions are classified as a current liability on the August 31, 2015 Consolidated Balance Sheet.

For the years ended August 31, 2015, 2014 and 2013 , we redeemed in cash, qualified equities in accordance with authorization from the Board of Directors, in the amounts of $128.9 million , $99.6 million and $193.4 million , respectively.

The following is a summary of our outstanding preferred stock as of August 31, 2015 , all of which are listed on the Global Select Market of NASDAQ:

We made dividend payments on our preferred stock of $133.7 million , $50.8 million , and $24.5 million , during the years ended August 31, 2015 , 2014 and 2013 , respectively.

Off Balance Sheet Financing Arrangements

Guarantees:

We are a guarantor for lines of credit and performance obligations of related companies. Our bank covenants allow maximum guarantees of $1.0 billion , of which $94.6 million were outstanding on August 31, 2015 . We have collateral for a portion of these contingent obligations. We have not recorded a liability related to the contingent obligations as we do not expect to pay out any cash related to them, and the fair values are considered immaterial. The underlying loans to the counterparties for which we provide guarantees are current as of August 31, 2015 .

Operating leases:

    

Minimum future lease payments required under noncancelable operating leases as of August 31, 2015 were $249.7 million .

    

Critical Accounting Policies

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of these consolidated financial statements requires the use of estimates as well as management’s judgments and assumptions regarding matters that are subjective, uncertain or involve a high degree of complexity, all of which affect the results of operations and financial condition for the periods presented. We believe that of our significant accounting policies, the following may involve a higher degree of estimates, judgments and complexity.

Inventory Valuation and Reserves

Grain, processed grain, oilseed and processed oilseed are stated at net realizable values which approximate market values. All other inventories are stated at the lower of cost or market. The costs of certain energy inventories (wholesale refined products, crude oil and asphalt) are determined on the last-in, first-out ("LIFO") method; all other inventories of non-grain products purchased for resale are valued on the first-in, first-out ("FIFO") and average cost methods. Estimates are used in determining the net realizable values of grain and oilseed and processed grains and oilseeds inventories. These estimates include the measurement of grain in bins and other storage facilities, which use formulas in addition to actual measurements taken to arrive at appropriate quantity. Other determinations made by management include quality of the inventory and estimates for freight. Grain shrink reserves and other reserves that account for spoilage also affect inventory valuations. If estimates regarding the valuation of inventories, or the adequacy of reserves, are less favorable than management’s assumptions, then additional reserves or write-downs of inventories may be required.

Derivative Financial Instruments

We enter into exchange-traded commodity futures and options contracts to hedge our exposure to price fluctuations on energy, grain and oilseed transactions to the extent considered practicable for minimizing risk. Futures and options contracts used for hedging are purchased and sold through regulated commodity exchanges. We also use over-the-counter ("OTC") instruments to hedge our exposure on fixed-price contracts. Fluctuations in inventory valuations, however, may not be completely hedged, due in part to the absence of satisfactory hedging facilities for certain commodities and geographical areas and, in part, to our assessment of our exposure from expected price fluctuations. We also manage our risks by entering into fixed-price purchase contracts with preapproved producers and establishing appropriate limits for individual suppliers. Fixed-price sales contracts are entered into with customers of acceptable creditworthiness, as internally evaluated. The fair values of futures and options contracts are determined primarily from quotes listed on regulated commodity exchanges. Fixed-price purchase and sales contracts are with various counterparties, and the fair values of such contracts are determined from the market price of the underlying product. We are exposed to loss in the event of nonperformance by the counterparties to the contracts and, therefore, contract values are reviewed and adjusted to reflect potential nonperformance. Risk of nonperformance by counterparties includes the inability to perform because of a counterparty’s financial condition and also the risk that the counterparty will refuse to perform on a contract during periods of price fluctuations where contract prices are significantly different than the current market prices.

Pension and Other Postretirement Benefits

Pension and other postretirement benefits costs and obligations are dependent on assumptions used in calculating such amounts. These assumptions include discount rates, health care cost trend rates, benefits earned, interest costs, expected return on plan assets, mortality rates and other factors. In accordance with U.S. GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expenses and the recorded obligations in future periods. While our management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect our pension and other postretirement obligations and future expenses.

Deferred Tax Assets and Uncertain Tax Positions

We assess whether a valuation allowance is necessary to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. While we have considered future taxable income, as well as other factors, in assessing the need for the valuation allowance, in the event that we were to determine that we would not be able to realize all, or part of, our net deferred tax assets in the future, an adjustment to our deferred tax assets would be charged to income in the period such determination was made. We are also significantly impacted by the utilization of tax credits, some of which were passed to us from CHS McPherson (formerly known as NCRA), related to refinery upgrades that enable us to produce ultra-low sulfur fuels. Our tax credit carryforwards are available to offset future federal and state tax liabilities with the tax credits becoming unavailable to us if not used by their expiration date. Our net operating loss carryforwards for tax purposes are available to offset future taxable income. If our loss carryforwards are not used, these loss carryforwards will expire.

Tax benefits related to uncertain tax positions are recognized in our financial statements if it is more likely than not that the position would be sustained upon examination by a tax authority that has full knowledge of all relevant information. The benefits are measured using a cumulative probability approach. Under this approach, we record in our financial statements the greatest amount of tax benefits that have a more than 50% probability of being realized upon final settlement with the tax authorities. In determining these tax benefits, we assign probabilities to a range of outcomes that we feel we could ultimately settle on with the tax authorities using all relevant facts and information available at the reporting date. Due to the complexity of these uncertainties, the ultimate resolution may result in a benefit that is materially different than our current estimate.

Long-Lived Assets

Property, plant and equipment is depreciated or amortized over the expected useful lives of individual or groups of assets based on the straight-line method. Economic circumstances, or other factors, may cause management’s estimates of expected useful lives to differ from actual.

All long-lived assets, including property, plant and equipment, goodwill, investments in unconsolidated affiliates and other identifiable intangibles, are evaluated for impairment in accordance with U.S. GAAP, at least annually for goodwill, and whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset or asset group may not be recoverable. For goodwill, our annual impairment testing occurs in our third quarter. An impaired asset is written down to its estimated fair value based on the best information available. Fair value is generally measured by discounting estimated future

cash flows. Considerable management judgment is necessary to estimate discounted future cash flows and may differ from actual.

We have asset retirement obligations with respect to certain of our refineries and other assets due to various legal obligations to clean and/or dispose of the component parts at the time they are retired. In most cases, these assets can be used for extended and indeterminate periods of time, as long as they are properly maintained and/or upgraded. It is our practice and current intent to maintain refineries and related assets and to continue making improvements to those assets based on technological advances. As a result, we believe our refineries and related assets have indeterminate lives for purposes of estimating asset retirement obligations because dates or ranges of dates upon which we would retire a refinery and related assets cannot reasonably be estimated at this time. When a date or range of dates can reasonably be estimated for the retirement of any component part of a refinery or other asset, we will estimate the cost of performing the retirement activities and record a liability for the fair value of that future cost.

We have other assets that we may be obligated to dismantle at the end of corresponding lease terms subject to lessor discretion for which we have recorded asset retirement obligations. Based on our estimates of the timing, cost and probability of removal, these obligations are not material.

Effect of Inflation and Foreign Currency Transactions

We believe that inflation and foreign currency fluctuations have not had a significant effect on our operations during the three years ended August 31, 2015 since we conduct a significant portion of our business in U.S. dollars.

Recent Accounting Pronouncements

In February 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) No. 2015-02, "Amendments to the Consolidation Analysis." ASU No. 2015-02 amended the process that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. ASU No. 2015-02 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early application is permitted. We are currently evaluating the impact the adoption will have on our consolidated financial statements in fiscal 2017.

In November 2014, the FASB issued ASU No. 2014-16, "Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity." The amendments in this ASU do not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. The ASU applies to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The adoption of ASU 2014-16 is not expected to have a material effect on our consolidated financial statements in fiscal 2017.

    

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers." ASU No. 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those good or services. The guidance also requires an entity to disclose sufficient qualitative and quantitative information surrounding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts from customers. This ASU supersedes the revenue recognition requirements in Topic 605, Revenue Recognition and most industry-specific guidance throughout the Industry Topics of the Codification. In August 2015, the FASB issued ASU 2015-14 delaying the effective date for adoption. This update is now effective for annual and interim periods beginning after December 15, 2017, which will require us to adopt these provisions in the first quarter of fiscal 2019. Early application as of the original date is permitted. This update permits the use of either the full or modified retrospective method. We are evaluating the effect this guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.