CHS 2014 Annual Report Download - page 66

will expand our grain origination opportunities and September 1, 2014 and September 1, 2015, for an aggre-
increase renewable fuels capacity. Additionally, we gate base purchase price of $95.5 million (approxi-
acquired the fertilizer business and assets of Terral River- mately $18.0 million of which has been paid at each of
Service, a transportation service company specializing in the first three closings, and $41.6 million of which will be
the bulk storage and handling of dry and liquid materials paid at the final closing). In addition, MFA is entitled to
along the Mississippi River system, the Gulf Intracoastal receive up to two contingent purchase price payments
Waterway and inland waterways of Louisiana and following each individual closing, calculated as set forth
southern Arkansas. See Note 6, Other Assets for infor- in the agreement with MFA, if the average crack spread
mation about the amounts of goodwill and intangible margin referred to therein over the year ending on
assets recorded as a result of these transactions. August 31 of the calendar year in which the contingent
payment date falls exceeds a specified target.
On November 29, 2011, our Board of Directors approved a As all conditions associated with the purchase have been
stock transfer agreement, dated as of November 29, 2011, met, we have accounted for this transaction as a forward
between us and GROWMARK, Inc. (Growmark), and a purchase contract which required recognition in the first
stock transfer agreement, dated as of November 29, 2011, quarter of fiscal 2012 in accordance with ASC Topic 480,
between us and MFA Oil Company (MFA). Pursuant to Distinguishing Liabilities from Equity. As a result, we are
these agreements, we began to acquire from Growmark no longer including the noncontrolling interests related
and MFA shares of Class A common stock and Class B to NCRA as a component of equity. Instead, we recorded
common stock of NCRA representing approximately the present value of the future payments to be made to
25.571% of NCRA’s outstanding capital stock. Prior to the Growmark and MFA as a liability on our Consolidated
first closing, we owned the remaining approximately Balance Sheets as of November 30, 2011. The liability as
74.429% of NCRA’s outstanding capital stock as of of August 31, 2014 and 2013 was $214.7 million and
August 31, 2012 and accordingly, upon completion of the $275.4 million, including interest accretion of $5.3 million
acquisitions contemplated by these agreements, NCRA and $6.7 million, respectively. Noncontrolling interests in
will be a wholly-owned subsidiary. As of August 31, 2014, the amount of $337.1 million was reclassified and an addi-
our ownership was 84.0% and with the closing in Sep- tional adjustment to equity in the amount of $96.7 million
tember 2014, our ownership increased to 88.9%. was recorded as a result of the transaction in fiscal 2012.
The equity adjustment included the initial fair value of the
Pursuant to the agreement with Growmark, we will crack spread contingent payments of $105.2 million. The
acquire stock representing approximately 18.616% of fair value of the liability associated with the crack spread
NCRA’s outstanding capital stock in four separate clos- contingent payments was calculated utilizing an average
ings held or to be held on September 1, 2012, Sep- price option model, an adjusted Black-Scholes pricing
tember 1, 2013, September 1, 2014 and September 1, 2015, model commonly used in the energy industry to value
for an aggregate base purchase price of $255.5 million options. As of August 31, 2014 and 2013, the amounts
(approximately $48.0 million of which has been paid at recognized as liabilities for these crack spread payments
each of the first three closings, and $111.4 million of which are $114.9 million and $150.6 million, respectively, and are
will be paid at the final closing). In addition, Growmark is included on our Consolidated Balance Sheets in other
entitled to receive up to two contingent purchase price liabilities with a gain of $19.2 million and a loss of
payments following each individual closing, calculated as $23.1 million included in cost of goods sold in our Consol-
set forth in the agreement with Growmark, if the average idated Statements of Operations during the years ended
crack spread margin referred to therein over the year August 31, 2014 and 2013, respectively. The first crack
ending on August 31 of the calendar year in which the spread contingent payment in the amount of $16.5 mil-
contingent payment date falls exceeds a specified target. lion was made in October 2013. Based on the average
crack spread margin during fiscal 2014, no payment was
Pursuant to the agreement with MFA, we will acquire made in October 2014. The portion of NCRA earnings
stock representing approximately 6.955% of NCRA’s attributable to Growmark and MFA for the first quarter of
outstanding capital stock in four separate closings held fiscal 2012, prior to the transaction date, were included in
or to be held on September 1, 2012, September 1, 2013, net income attributable to noncontrolling interests.
64 CHS 2014
SEVENTEEN: Acquisitions, continued
NCRA: