Evolution of Long Range Planning

February 24, 2012

© 2012 CHS Inc.1

Agenda

Introduction to CHS

Setting the Stage

The Usual Tools

Finance Team Challenge

Choosing Solutions

Lessons Learned

Getting to Done

Who We Are

The nation‟s leading cooperative, owned by farmers, ranchers and co-ops across the United States.

A diversified energy, grains and foods business committed to providing the essential resources that enrich lives around the world.

Business Divisions CHS Grains, Crop Nutrients

and Retail

CHS Energy

Renewable Energy

CHS Foods and Processing

CHS Business Solutions

Recent Highlights

Fiscal 2011 net income $961.4 million

Fiscal 2011 net revenues $36.9 billion

#103 on 2011 Fortune 500 listing

Supplier of grain and other products to customers in 60 countries

About 9,000 employees worldwide

9 years as Fortune “Most Admired” company

Earnings History

$ in millions

Ownership

1,100 locally owned cooperatives serving

about 300,000 producers

Voting members

10,000 preferred stockholders(CHSCP on

NASDAQ Exchange)

Non-voting owners

62,000 individual producers (through

company-owned facilities)

Voting members

Creating Value for Member Owners

$421M

$ Returns

$ in millions

Cash Patronage and Equity Returns

New Leadership and Vision

© 2011 CHS Inc.7

• New CEO and Key Leadership Retirements/Changes

Jan 2011

New CFO, Controller, Business Unit Leaders

• Updated Guiding Principles

Not a Holding Company

Not a Speculative Buyer and Seller of Businesses

• Focused on Growth

Strategic Expansion

Balanced Business Portfolio

Aspirations

• CHS Finance Department Created

Feb 2011

Food and

Food

Ingredients: Aggressively

grow our grains

and oilseed

based food

businesses by

expanding our

North America

operations and

selectively

pursuing global

opportunities.

© 2011 CHS Inc.8

Aspirations

Enhance/Lever

Enterprise Value: Enhance our value proposition by levering our Enterprise capabilities

and efficiently delivering products and services

Producer

Focused: Expand

and fully integrate

Ag retail operations

to be the full service

solutions provider of

products, services

and financing.

Energy: Drive

CHS energy

business by

opportunistically

expanding our

energy platform.

Global Commodities: Develop and expand

CHS global capabilities

and footprint in

agriculture

and energy

commodities.

Leverage enterprise for

more customer value

CHS

Aspirations

Aspirations To Tactical Plans To Financial Models

CHS ASPIRATIONS

STRATEGIC IMPERATIVES

STRATEGIC OBJECTIVES

FINANCIAL MERITS &

CHS 5-YEAR

GROWTH PLAN

• Business Units Defined Actions

Required to Remain Relevant And

Grow Organically In Current Space

• Aggregated

Customer, Operational, Regional, a

nd Enterprise Leader POVs on

Future Incremental Opportunities

• Outcome: Tactical Playbook for

Next 5 Years By Business

• Producer –

Focused

• Global

Commodities

• Energy

• Food and

Food

Ingredients

• Enhance/

Leverage

Enterprise

Value

The result of our work was a Strategic Growth Plan that carves

the path of CHS for the next 5 years

This is a key component of our planning process going

forward as it defines where our growth will come from

• Unbiased Validation of Plays aka

“The Aspirations”

• First Pass Financials:

EBITDA, CAPITAL, Time to Scale

• Objective Scoring/First Pass at

Prioritizing Playbook

• Score each Play Based on:

Relevance to the

Aspirations

Risk in Execution

Reward Potential

CHS Finance Team Challenge

Driver based 5 year strategic planning at an annual level Vary drivers/growth rates by line of business

Analyze and set top down‟s annual budget targets by line of business

Assess patron equity options and allocations

Drive Consistency: Apples to Apples Comparison Across All Businesses Units

Prioritize and optimize current portfolio and playbook over next 5 years Scenario Analysis: Include/Exclude Aspirations based on Objective Scores

Value acquisitions/divestitures independently and integrated within portfolio

Model Range of Risk/Uncertainty

Analyze various funding strategies/scenarios and capital needs by year Connect treasury / corporate development with corporate FP&A functions

Funding routine to define cash balancing process

Model debt issuances, share buybacks, credit ratings & debt covenants

Ability to update plans with actuals and forecasts Create Proactive Forecast Deliverables & Process

Minimal IT involvement, Minimal ongoing costs

State of CHS Financial Modeling

Complex spreadsheet models

Lack of standardization or continuity

Limited history or documentation

Lack of integrated models make scenario analysis cumbersome

Limited consolidated view

Minimal Analysis

Version Control and Security

Duplicative efforts

Board of DirectorsSenior Management

Investors

Corporate Development

FP&A

Annual Plan & Forecast

Revenue & Cost Models

M&A

Operational and

Departmental Plans

Headcount Plans

Treasury Plans

Long-Term Planning

A Unique Solution: Hyperion Strategic Finance

Confidence in Forecasts Out-of-the-box integrated

financial statements Enhanced accounting integrity

Flexibility for end-users End users can modify accounts /

forecast methods on the fly without IT Involvement

Enhanced Scenario Capabilities Scenarios can be created on the

fly and layered on top of each other

Mix & match scenarios across various entities to build the overall plan

Powerful Treasury Utilities Funding routine allows users to

define cash balancing process Model debt issuances, share

buybacks, credit ratings & debt covenants with ease

Independent of ERP system Data can be imported via

Excel, Essbase, FDM

Speed of Implementation 12 Weeks from A-Z

Linked Financial Statements

Customized Drivers and Metrics for

Individual Business Units

Requires Minimal Business Resources

and reasonable consultant hours

Ease of Use Time spent on analysis and

recommendations not development

Ability to solve or allocate targets

Scenarios in a cinch, base case

simplified

Reduces hours spent budgeting

annually

Sales Pitch VS. Real Life

Key Functionality

Tops Down View

Linked Financial

Statements

Primary Business

Models and

Spreadsheets

Consolidated in 1

model, 1 location

Aspirations

Valuation Model

Funding Logic

Patronage Logic

Intercompany Logic

What-If Analysis

Defining the Financial Model

Model Structure and Dimensions

Entities by Business

Dimensions by Region and/or Product

Minority Interest

Alternate Consolidation Structures

Forecast Methodologies

Defined Growth Drivers by Business for

Revenue

Margin

Expense

© 2011 CHS Inc.13

Spend the Time on Model Design

Business team awareness, partnership, and buy-in

Capture the “right” details, build „placeholders‟ as needed

Don‟t doubt the capability of the HSF tool

Know the constraints of the tool and your IT systems up front

Keep it Simple and Strategic

Let the Business Units own and manage the operational plans outside of

HSF

Focus on primary business drivers

Use historic trend as available, play via scenarios

Spend the time: Run the data to find the Optimal solutions

Train the Team on the Functionality of the Tool

Get your hands dirty on reporting, scenarios, updates, formula changes etc.

Manage access effectively

Lessons Learned

© 2011 CHS Inc.14

What’s Next?

Complete HSF Model

Expected, Early March

Use 5 Year Plan to “Kick-Off” FY13 Annual Planning

Employ “Tops Down POV”

Rolling Quarterly Forecast = 5 Year Update

Aspiration Deep Dives

Complete Financial Models

Monte Carlo Optimization of Portfolio

HSF Phase 2: Continuous Improvement

Expected, October 2012

Thank You!

Questions?

© 2012 CHS Inc.