Investments
Investments as of August 31, 2013 and 2012 are as follows:
|
| | | | | | | |
| 2013 | | 2012 |
| (Dollars in thousands) |
Joint ventures: | |
| | |
|
Ventura Foods, LLC | $ | 309,480 |
| | $ | 292,393 |
|
Horizon Milling, LLC | 92,635 |
| | 78,372 |
|
TEMCO, LLC | 63,547 |
| | 60,734 |
|
Horizon Milling, ULC | 19,314 |
| | 16,727 |
|
Cooperatives: | |
| | |
|
Land O’Lakes, Inc. | 66,255 |
| | 58,382 |
|
Ag Processing Inc. | 19,970 |
| | 19,577 |
|
Other | 194,745 |
| | 147,203 |
|
| $ | 765,946 |
| | $ | 673,388 |
|
CHS has a 24% interest in Horizon Milling, LLC and Horizon Milling, ULC, flour milling joint ventures with Cargill, Incorporated (Cargill), which are accounted for as equity method investments and are included in Corporate and Other. On March 4, 2013, CHS entered into a definitive agreement with Cargill and ConAgra Foods, Inc. to form Ardent Mills, a joint venture combining the North American flour milling operations of the three parent companies, including the Horizon Milling, LLC and Horizon Milling, ULC assets and the assets leased by CHS to Horizon Milling, with CHS holding a 12% interest. Upon closing, Ardent Mills is expected to be financed with funds from third-party borrowings, which would not require credit support from the owners. The borrowings are anticipated to be no less than $600 million with proceeds distributed to each owner in proportion to the ownership interests, adjusted for any deviations in specified working capital target amounts. The transaction is expected to close during fiscal 2014, subject to financing and certain other customary closing conditions. In connection with the closing, the parties will also enter into various ancillary and non-compete agreements, including, among other things, an agreement for CHS to supply Ardent Mills with certain wheat and durum products.
CHS has a 50% interest in Ventura Foods, LLC (Ventura Foods), a joint venture which produces and distributes primarily vegetable oil-based products, and is included in Corporate and Other. We account for Ventura Foods as an equity method investment, and as of August 31, 2013, our carrying value of Ventura Foods exceeded our share of their equity by $12.9 million, which represents equity method goodwill. The following provides summarized unaudited financial information for Ventura Foods balance sheets as of August 31, 2013 and 2012, and statements of operations for the twelve months ended August 31, 2013, 2012 and 2011:
|
| | | | | | | |
| 2013 | | 2012 |
| (Dollars in thousands) |
Current assets | $ | 532,995 |
| | $ | 574,925 |
|
Non-current assets | 503,369 |
| | 459,070 |
|
Current liabilities | 216,704 |
| | 197,251 |
|
Non-current liabilities | 226,515 |
| | 277,760 |
|
|
| | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
| (Dollars in thousands) |
Net sales | $ | 2,541,483 |
| | $ | 2,550,018 |
| | $ | 2,350,895 |
|
Gross profit | 267,602 |
| | 244,969 |
| | 255,748 |
|
Net earnings | 106,405 |
| | 94,586 |
| | 105,754 |
|
Earnings attributable to CHS Inc. | 53,203 |
| | 47,293 |
| | 52,877 |
|
During the year ended August 31, 2011, we sold all of our 45% ownership interest in Multigrain, AG to one of our joint venture partners, Mitsui & Co., Ltd., for $225.0 million and recognized a pre-tax gain of $119.7 million.
Agriliance LLC (Agriliance) is owned and governed by CHS (50%) and Land O’Lakes, Inc. (50%). We account for our Agriliance investment using the equity method of accounting within Corporate and Other. Agriliance has essentially ceased its business activities and primarily holds long-term liabilities. During the year ended August 31, 2011, we received $28.0 million of cash distributions from Agriliance as returns of capital for proceeds from the sale of many of the Agriliance retail facilities, and the collection of receivables. We recorded a pre-tax gain of $9.0 million during fiscal 2011 related to these cash distributions. During the year ended August 31, 2012, we made cash contributions of $45.4 million to Agriliance, which were primarily used to fully fund the Agriliance Employee Retirement Plan (Agriliance Plan). The Agriliance Plan assets and liabilities were transferred to CHS and Land O' Lakes, Inc. during fiscal 2012. CHS received pension plan assets and liabilities of $97.2 million and $84.5 million, respectively. We recorded the net $12.7 million pension plan asset as a non-cash dividend and recorded a $0.8 million pre-tax loss related to the distribution.
TEMCO is owned and governed by Cargill (50%) and CHS (50%). During the year ended August 31, 2012, we entered into an amended and restated agreement to expand the scope of the original agreement with Cargill. Pursuant to the terms of the agreement, CHS and Cargill each agreed to commit to sell all of their feedgrains, wheat, oilseeds and by-product origination that are tributary to the Pacific Northwest, United States (Pacific Northwest) to TEMCO and to use TEMCO as their exclusive export-marketing vehicle for such grains exported through the Pacific Northwest for a term of 25 years. Cargill's Tacoma, Washington facility will continue to be subleased to TEMCO. We agreed to sublease our Kalama, Washington facility to TEMCO, and Cargill agreed to lease their Irving facility in Portland, Oregon to TEMCO to provide TEMCO with more capacity to conduct this business.
The following provides combined financial information for our major equity investments, excluding Ventura Foods, for balance sheets as of August 31, 2013 and 2012, and statements of operations for the twelve months ended August 31, 2013, 2012 and 2011:
|
| | | | | | | |
| 2013 | | 2012 |
| (Dollars in thousands) |
Current assets | $ | 513,327 |
| | $ | 631,335 |
|
Non-current assets | 248,809 |
| | 158,675 |
|
Current liabilities | 256,681 |
| | 352,016 |
|
Non-current liabilities | 5,387 |
| | 5,642 |
|
|
| | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
| (Dollars in thousands) |
Net sales | $ | 5,388,248 |
| | $ | 5,402,241 |
| | $ | 8,399,779 |
|
Gross profit | 200,353 |
| | 225,680 |
| | 406,338 |
|
Net earnings | 43,168 |
| | 121,107 |
| | 232,473 |
|
Earnings attributable to CHS Inc. | 27,702 |
| | 36,032 |
| | 89,575 |
|
