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Pro Forma Financial Information Reflecting the Acquisition of Delta and Pine Land Company
With the completion of Monsanto's acquisition of Delta and Pine Land, Monsanto has voluntarily made available unaudited pro forma historical financial data to provide a better understanding of the transaction.
The link on this page provides the unaudited pro forma consolidated financial information. Specifically, these are the historical statements of operations for Monsanto and Delta and Pine Land individually, as well as the pro forma adjustments made to reach the unaudited pro forma consolidated statements of operations presentation as if Monsanto had owned Delta and Pine Land at the start of fiscal year 2006.
Understanding the Data Presented
There are several factors that will help in understanding the presentation of the
data and the assumptions that went into compiling the statements. Those factors
include:
- Time periods presented – All data in this presentation is based on the assumption that Monsanto owned Delta and Pine Land as of Sept. 1, 2005. The unaudited proforma consolidated statements of operations cover the full 2006 fiscal year and the first nine months of the 2007 fiscal year. The presentation includes the third quarter of fiscal year 2007, which was not previously publicly reported by Delta and Pine Land because it ceased to be a reporting company following the acquisition by Monsanto.
- Historical presentations – The operating results of Stoneville and NexGen have been conformed to discontinued operations presentation in Monsanto's historical results as of the start of the 2006 fiscal year.
- Pro Forma Adjustments – In order to consolidate Monsanto's and Delta Pine Land's historical results, a few significant adjustments were required by US generally accepted accounting principles. These adjustments have been identified in a column designated "Pro Forma Adjustments."
A significant pro forma adjustment results from the difference in methods Delta and Pine Land and Monsanto used to record sales related to biotechnology traits fees. Delta and Pine Land historically recorded biotechnology trait revenue using a "gross" approach, meaning Delta and Pine Land included Monsanto's portion of the revenue in its sales. Delta and Pine Land adjusted Monsanto's portion of the revenue through cost of goods sold, so the gross margin properly reflected Delta and Pine Land's portion of the gross margin related to these biotechnology trait fees. However, Monsanto historically recorded biotechnology trait revenue using a "net" approach, meaning Monsanto only recorded its portion of the revenue and costs associated with the biotechnology trait fees. In this presentation of data, the gross sales and cost of goods sold included in Delta and Pine Land's historical results have been adjusted to align with Monsanto's historical results using the "net" approach. For the purposes of this presentation of data, these intercompany transactions were eliminated in the pro forma adjustments column. As a result, the unaudited pro forma revenues and cost of goods sold in this presentation will appear lower than those previously publicly reported by Delta and Pine Land.
A significant pro forma adjustment stems from the assumption that if Monsanto would have purchased Delta and Pine Land as of Sept. 1, 2005, it would have been responsible for the financing of the transaction at that time. Therefore, beginning Sept. 1, 2005, it is assumed that Monsanto incurred a purchase outlay of $1.2 billion (reflecting the purchase price of Delta and Pine Land, net of cash on hand contributed by Delta and Pine Land and cash acquired through the divestiture of the U.S. Stoneville and NexGen cotton seed businesses). It is assumed that this purchase was financed through commercial paper, and the interest expense was recorded at a twelve-month weighted average commercial paper rate of 4.67 percent in fiscal year 2006 and a nine-month weighted average commercial paper rate of 5.35 percent in fiscal year 2007. These commercial paper rates are based on the London Interbank Offered Rate (LIBOR). It was also assumed that this commercial paper financing was not paid down in the time span presented.
As a result, the assumed interest expense included in the pro forma adjustments for fiscal year 2006 is $34 million, net of tax, or approximately $0.06 earnings per diluted share. For the nine months of 2007, the assumed interest expense included in this presentation is $29 million, net of tax, or approximately $0.05 earnings per diluted share.
The other significant pro forma adjustments relate to the estimated amortization from the acquired intangible assets and the estimated additional depreciation incurred as a result of the step-up to fair value of the acquired property, plant and equipment. These adjustments are based on preliminary appraisals and our estimated purchase price allocation. These allocations are subject to adjustment pending further assessments, including the valuation of intangible assets.
Finally, certain direct transaction costs – such as legal, accounting and other costs – incurred and expensed by Delta and Pine Land related to the acquisition were eliminated from other expenses -net and included in the pro forma adjustments.
Because of their non-recurring nature, the write-off of In-Process Research & Development (IPR&D) and the effects of the step-up to fair value of inventory have not been included in the pro forma adjustments.
For further information on historically reported data, please see Monsanto's Report on Form 10-K for the fiscal year ended Aug. 31, 2006 and Delta and Pine Land's Report on Form 10-K for the fiscal year ended Aug. 31, 2006.
To download a copy of the complete pro forma data, please right click on the link presented and select the "Save Target As" option to save a copy.
