1. Thomas D. Larson Executive Vice President Member and Public Affairs
Restructuring for Troubled Times 5th Annual Farmer Cooperatives Conference November 13-15, 2002  St. Louis, Missouri
Applying information and lessons learned from the 2001 Farmer Cooperatives Conference to Our Cooperative
Thomas D. Larson Executive Vice President Member and Public Affairs

2. Today’s Discussion Review 2001 value creation concept
What and how CHS implementing
What and how implementing local co-op
Performance management module

3. Overview Current co-op financial performance unacceptable
Ag supply has many untapped opportunities
Winning in future food landscape will be critical
Need to execute against a 5-part success model

4. Value creation is a key metric
Return on
invested capital*
Value created
Cost of capital
Invested capital =
ROIC – X
Annual return of investment above that expected given risk level
Rate of return required to compensate investors for risk
* Impact of extraordinary items excluded

5. Value Creation
Industry
Regional co-ops
Local co-ops

6. Most ag segments destroy value
Contribution to GDP, $ billions, 1999
ESTIMATE
Feed
Seed
Financing
Fuel and electric
Equipment
Ag chem
Fertilizer
Farm services
16.4% of U.S. GDP
Secon-dary proces-sing
Ag inputs
Input Distri-bution
Farm produc-tion
Primary proces-sing
Food distri-bution
Cost of capital Percent
11.1
10.9
10.4
10.9
10.8
10.6
Value created Percent, share of invested capital
-2.0
-7.0
-5.4
-1.1
-2.3
0.1

7. Financial performance of distribution particularly poor
ESTIMATE
Value created
$ Millions
Value created/ invested capital
Percent
Revenue
$ Billions
ROIC
Percent
Machinery 19
-187
-2.5
7.9
Feed 16
-53
-1.3
8.5
Fertilizer 11
9.1
-122
-3.5
Chemicals 11
12.6 2
0.1
Total 57
-360
-2.0
9.1
Input Distribution
138
-2,519
-7.0
3.9

8. Regionals struggled to create value in 1999…
ESTIMATE
Value created
$ Millions
Value created/ invested capital
Percent
Revenue
$ Billions
ROIC
Percent
-0.6
Farmland 11
Dairy Farmers of America 8
5.2
Cenex Harvest States 6
4.1
Land O’Lakes 6
1.6
Agrilink 1
5.2

9. Value Created Across Local Co-ops24 27 26 14 23 1 2 3 4
Quartile*
Revenue**
$ Millions
248
-227
-559
-424
-169
Value created**
$ Thousands
5.1
-4.8
-3.0
-7.8
Value created/ invested capital
Percent
ROIC
14.2
6.3
1.8
-9.3
Cost of capital
9.2
9.3
9.5
9.4
Total
4.6
-18.7
* Segmented by value created/invested capital
** Mean values for co-ops in quartile
Source: Member co-op survey; team analysis

10. CHS Value Creation (EVA)
Mid 1990s
Executive management and board
Operating management
Financial measurement
Recognition program

11. EVA (economic value-added)
Earnings minus (equity x minimum acceptable rate of return)
EVA recognizes there is no free capital
Equity represents an investment
Investor expects a return

12. CHS Co-op Performance Measurements
Profit
EVA
Cash Flow
ROI
Investment Grade

13. Local Co-op value creation
4% above cost of borrowed capital
9 - 12% ROE
Numerous meetings
Benchmarking

14. Return on Local Equity Analysis
9% % 96% % %
5-9% % % % %
0-5% % % % 27%
Below % (17%) % 49% 0%
% Greater than
Rate of # % of % of Local % of % Term Debt/
Return Accts. Sales Savings Accounts Local Equity

15. Cooperative System Ag Supply Grain $ Sales
$(0-10) $(10-25) $(25-50) $(50-75) $(75-100) $(100+) Volume
278 accounts
63% savings
49 accounts
49% savings
9%+
5-9%
0-5%
Below
# accts. 216
savings- 96%
203 accounts
(10%) savings
23 accounts
(2%) savings
Summary
# accounts # accounts 72
% savings 53% % savings 47%
Return on
local equity

16. PFP success model Strategy 2 4 5 1 3 Structure Existing Emerging
Pursue operational excellence 2
Drive customer integration 4
Create performance obsession 5
Leverage
horizontal scale 1
Exploit vertical opportunities 3
Structure
Existing
Emerging

17. Thank you!!