CHS 2013 Annual Report Download - page 60

8NOV201319002576
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Acquisitions
ending on August 31 of the calendar year in which the
contingent payment date falls exceeds a specified
On November 29, 2011, our Board of Directors approved
target.
a stock transfer agreement, dated as of November 29,
2011, between us and GROWMARK, Inc. (Growmark),
As all conditions associated with the purchase have
and a stock transfer agreement, dated as of
been met, we have accounted for this transaction as a
November 29, 2011, between us and MFA Oil Company
forward purchase contract which required recognition
(MFA). Pursuant to these agreements, we have begun to
in the first quarter of fiscal 2012 in accordance with ASC
acquire from Growmark and MFA shares of Class A
Topic 480, Distinguishing Liabilities from Equity
common stock and Class B common stock of NCRA
(ASC 480). As a result, we are no longer including the
representing approximately 25.571% of NCRA’s out-
noncontrolling interests related to NCRA as a compo-
standing capital stock. Prior to the first closing, we
nent of equity. Instead, we recorded the present value of
owned the remaining approximately 74.429% of NCRA’s
the future payments to be made to Growmark and MFA
outstanding capital stock as of August 31, 2012 and
as a liability on our Consolidated Balance Sheets as of
accordingly, upon completion of the acquisitions con-
November 30, 2011. The liability as of August 31, 2013
templated by these agreements, NCRA will be a wholly-
and 2012 was $275.4 million and $334.7 million,
owned subsidiary. As of August 31, 2013, our ownership
including interest accretion of $6.7 million and $6.0 mil-
was 79.2% and with the closing in September 2013, our
lion, respectively. Noncontrolling interests in the amount
ownership increased to 84.0%.
of $337.1 million was reclassified and an additional
adjustment to equity in the amount of $96.7 million was
Pursuant to the agreement with Growmark, we will
recorded as a result of the transaction. The equity
acquire stock representing approximately 18.616% of
adjustment included the initial fair value of the crack
NCRA’s outstanding capital stock in four separate clos-
spread contingent payments of $105.2 million. The fair
ings held or to be held on September 1, 2012, Sep-
value of the liability associated with the crack spread
tember 1, 2013, September 1, 2014 and September 1,
contingent payments was calculated utilizing an
2015, for an aggregate base purchase price of
average price option model, an adjusted Black-Scholes
$255.5 million (approximately $48.0 million of which has
pricing model commonly used in the energy industry to
or will be paid at each of the first three closings, and
value options. As of August 31, 2013 and 2012, the fair
$111.4 million of which will be paid at the final closing). In
value of the crack spread contingent payments was
addition, Growmark is entitled to receive up to two con-
$150.6 million and $127.5 million, respectively, and is
tingent purchase price payments following each indi-
included on our Consolidated Balance Sheets in other
vidual closing, calculated as set forth in the agreement
liabilities with an increase of $23.1 million and $22.3 mil-
with Growmark, if the average crack spread margin
lion included in cost of goods sold in our Consolidated
referred to therein over the fiscal year ending on
Statements of Operations during the years ended
August 31 of the calendar year in which the contingent
August 31, 2013 and 2012, respectively. The first crack
payment date falls exceeds a specified target.
spread contingent payment in the amount of $16.5 mil-
lion was made in October 2013. The portion of NCRA
Pursuant to the agreement with MFA, we will acquire
earnings attributable to Growmark and MFA for the first
stock representing approximately 6.955% of NCRA’s
quarter of fiscal 2012, prior to the transaction date, were
outstanding capital stock in four separate closings held
included in net income attributable to noncontrolling
or to be held on September 1, 2012, September 1, 2013,
interests. Beginning in the second quarter of fiscal 2012,
September 1, 2014 and September 1, 2015, for an aggre-
in accordance with ASC 480, earnings are no longer
gate base purchase price of $95.5 million (approxi-
attributable to the noncontrolling interests, and
mately $18.0 million of which has or will be paid at each
patronage earned by Growmark and MFA is included as
of the first three closings, and $41.6 million of which will
interest, net in our Consolidated Statements of Opera-
be paid at the final closing). In addition, MFA is entitled
tions. During the years ended August 31, 2013 and 2012,
to receive up to two contingent purchase price pay-
$142.4 million and $107.2 million, respectively, was
ments following each individual closing, calculated as
included in interest for the patronage earned by
set forth in the agreement with MFA, if the average crack
Growmark and MFA.
spread margin referred to therein over the fiscal year
CHS 2013 65
NCRA: