Right Tool … for the Right Job! How to Evolve Long-Term Planning, Analyzing the Pros and Cons of Hyperion Strategic Finance

October 15, 2012 Ellen Scipta CHS Inc. Finance & Business Planning

Ryan Meester Edgewater Ranzal Strategic Planning Practice

Introductions

Long-Term Planning Overview

CHS Study

High Level Demonstration

Q & A

Agenda

How Confident are You in Developing the Corporate Strategy?

CFO

Treasury Corporate Finance M&A

• Corporate Cost Cutting • Strengthen Balance Sheet • Easing of Credit Markets • Economic Stimulus

2008

• Credit Crunch • Housing Bubble • Global Recession • Stock Market Crash • Bankruptcies

2007

• Global Growth • High Leverage • Commodity Prices Skyrocket • Stock Market Boom

Best Use of Capital

Survival

2009 - ?

High Growth?

Slow Growth?

Deeper Recession?

Planning for Any Economic Environment

Complex spreadsheet models

No consolidated or consistent view

Lack of integrated models make scenario analysis cumbersome

Limited history or documentation

Version control and security

Duplicative efforts Treasury

Board of Directors Senior Management

Banks Investors Acquisitions Divestitures

Long-Term Planning

Corporate Development

Traditional Long-Range Planning Challenges

Align the Planning Process

Update Targets with Latest Forecast

Corporate Development

Value Management

Long-Term Financial Planning

Treasury Strategies

Predictive Modeling & Simulation

Long-Term (3-5 Year) Full Financial Statement Projections Key Performance Metrics

New Product Offerings Acquisitions / Divestitures

Discounted Cash Flow Economic Value Added

Liquidation Value

Capital Requirements

Reserve Ratios Debt Issuances/Payments

What-if Analysis

Economic Shifts

Commodity Pricing Product Pricing

Growth Initiatives

Cost Cutting

Capacity Planning

Hyperion Strategic Planning Overview

CHS Inc. 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 CHS Foods and Processing CHS Business Solutions

10,000 preferred stockholders (CHSCP on

NASDAQ Exchange)

Non-voting owners

62,000 individual producers (through

company-owned facilities)

Voting Equity 30%

CHS Ownership

1,100 locally owned cooperatives serving about

300,000 producers

Voting Equity 70%

2012 Fortune #78 Fiscal 2011 Net Income $961.4 Million Fiscal 2011 Net Revenues $36.9 Billion Fiscal 2012 Q3 YTD Net Income $899.7 Million

Earnings History

$ in millions

CHS Recent Highlights

Creating Value for Owners – Cash Returns

$ in millions

New Leadership and Vision

New CEO & Key Leadership Retirements/Changes, Jan 2011

Updated Guiding Principles • Not a holding company • Not a speculative buyer and seller of businesses • Leveraging the diverse CHS enterprise to enhance

producers’ profitability

Focused on Growth • Strategic expansion • Balanced business portfolio • Aspirations

CHS Finance Department Created, February 2011

CHS Finance Team Challenge

Quarterly forecasts Create Proactive Forecast Deliverables & Process Reduce Annual Budgeting Efforts through ongoing Forecast and Strategy

discussions Drive Consistency: Apples to Apples Comparison Across All Businesses Units

Annual and long range planning 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

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 funding 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

15

Aspirations

CHS ASPIRATIONS

STRATEGIC IMPERATIVES

STRATEGIC OBJECTIVES

FINANCIAL MERITS &

CHS 5-YEAR

GROWTH PLAN

Aspirations: From Concept To Tactical Plans To Strategic Financial Models

• Business Units Defined Actions Required to Remain Relevant And Grow Organically In Current Space

• Aggregated Customer, Operational, Regional, and 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: Prioritizing A Playbook

• Score each Play Based on: Relevance to the

Aspirations Risk in Execution Reward Potential

A Unique and All Encompassing Solution: Hyperion Strategic Finance (HSF)

Independent of ERP system Data can be imported via Excel, Essbase / Planning, HFM, FDM Can leverage the strengths of other Hyperion products (i.e. Essbase for

reporting)

Speed of Implementation Fully Integrated 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

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 Don’t underestimate the effort to gather / validate data

Keep it Simple and Strategic

Business Units own and manage the operational plans outside of HSF Focus on primary business drivers, manage # of inputs 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 Document religiously Continuous improvement

HSF Implementation Lessons Learned

Demo Screen Shots

• Pre-built, fully integrated financial statement foundation

• Pre-built forecast methods and formula functions

• What-if Analysis toolkit

Pre-Built Accounting Integrity

Powerful Scenario Capabilities

Mix and Match Scenarios

Capital Projects included

Acquisition excluded

Easily Analyze Various Combinations

World Class Treasury Analysis

• Calculates net cash surplus or deficit from multiple models and scenarios

• Funding Options tool to re-allocate surpluses and fund deficits

• Debt scheduler

• User-defined reports to monitor covenants, credit ratings, and earnings per share

Acquisition / Divestiture Modeling

Set Strategic Targets in HSF

Seed Budgets With Strategic Targets

From Strategic Plan

Tweak Budget with Targets In Mind

Update Targets with Latest Forecast