<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): FEBRUARY 17, 1995
MONSANTO COMPANY
----------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
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(STATE OF INCORPORATION)
1-2516 43-0420020
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(COMMISSION (IRS EMPLOYER
FILE NUMBER) IDENTIFICATION NUMBER)
800 NORTH LINDBERGH BOULEVARD, ST. LOUIS, MISSOURI 63167
- -------------------------------------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(314) 694-1000
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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<PAGE> 2
The undersigned registrant hereby amends its Form 8-K dated February
17, 1995 and filed on February 28, 1995, by adding Items 7(a) and 7(b),
and Exhibits 23.1 and 23.2.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of The Kelco Division of Merck & Co., Inc.
("Kelco")
(i) Financial statements of Kelco, together with the related
Independent Auditors' Report, for the year ended December 31, 1994
(pages 2 through 11)
(b) Pro Forma Financial Information
(i) Unaudited Pro Forma Condensed Combined Statement of Financial
Position of Monsanto Company and Kelco as of December 31, 1994,
including notes thereto (pages 12 and 13)
(ii) Unaudited Pro Forma Condensed Combined Statement of Income of
Monsanto Company and Kelco for the year ended December 31, 1994,
including notes thereto (pages 14 and 15)
(c) Exhibits.
See the Exhibit Index attached hereto and incorporated herein by
reference.
1
<PAGE> 3
THE KELCO DIVISION OF MERCK & CO., INC.
FINANCIAL STATEMENTS FOR THE
YEAR ENDED DECEMBER 31, 1994 AND
INDEPENDENT AUDITORS' REPORT
2
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
To Monsanto Company:
We have audited the accompanying combined balance sheet of the Kelco
Division of Merck & Co., Inc. ("Kelco") as of December 31, 1994, and
the related combined statements of income, division equity, and cash
flows for the year then ended. These financial statements are the
responsibility of Kelco's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the combined financial position of the Kelco
Division of Merck & Co., Inc. as of December 31, 1994 and the results
of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
March 13, 1995
3
<PAGE> 5
<TABLE>
THE KELCO DIVISION OF MERCK & CO., INC.
COMBINED BALANCE SHEET
DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash...................................................................................... $ 6,435
Short-term investments.................................................................... 1,061
Trade receivables, net of allowances of $570.............................................. 60,658
Inventories............................................................................... 42,774
Prepaid expenses and other................................................................ 3,630
---------
Total current assets.................................................................... 114,558
---------
Property, Plant and Equipment:
Land...................................................................................... 8,636
Buildings................................................................................. 41,050
Machinery and equipment................................................................... 256,765
Furniture and fixtures.................................................................... 12,740
Construction in progress.................................................................. 28,835
---------
Total property, plant and equipment..................................................... 348,026
Less accumulated depreciation............................................................. 154,538
---------
Net property, plant and equipment....................................................... 193,488
---------
Intangible Assets, net of accumulated amortization of $16,913............................... 28,800
Other Assets................................................................................ 8,287
---------
TOTAL....................................................................................... $ 345,133
=========
<CAPTION>
LIABILITIES AND DIVISION EQUITY
<S> <C>
Current Liabilities:
Accounts payable.......................................................................... $ 14,015
Accrued expenses.......................................................................... 15,518
Income taxes payable...................................................................... 6,213
Short-term debt........................................................................... 2,076
Other current liabilities................................................................. 1,177
---------
Total current liabilities............................................................... 38,999
---------
Deferred Income Taxes....................................................................... 6,356
Division Equity:
Contributed capital....................................................................... 87,363
Retained earnings......................................................................... 689,164
Net advances to Merck..................................................................... (476,749)
---------
Division equity......................................................................... 299,778
---------
TOTAL....................................................................................... $ 345,133
=========
The accompanying notes are an integral part of these combined
financial statements.
</TABLE>
4
<PAGE> 6
<TABLE>
THE KELCO DIVISION OF MERCK & CO., INC.
COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<S> <C>
Net Sales................................................................................... $310,481
Cost of Goods Sold.......................................................................... 163,485
--------
Gross profit............................................................................ 146,996
Operating Expenses:
Selling, general and administrative....................................................... 42,345
Research and development.................................................................. 16,025
Other..................................................................................... 1,116
--------
Operating Income............................................................................ 87,510
Other income (expense) - net................................................................ (1,942)
---------
Income Before Income Taxes.................................................................. 85,568
Income Taxes................................................................................ 6,913
--------
Net Income.................................................................................. $ 78,655
========
Pro Forma Information:
Income before income taxes................................................................ $ 85,568
Pro forma income taxes.................................................................... 33,171
--------
Pro forma net income...................................................................... $ 52,397
========
The accompanying notes are an integral part of these combined
financial statements.
</TABLE>
5
<PAGE> 7
<TABLE>
THE KELCO DIVISION OF MERCK & CO., INC.
COMBINED STATEMENT OF DIVISION EQUITY
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<CAPTION>
NET
CONTRIBUTED RETAINED ADVANCES
CAPITAL EARNINGS TO MERCK TOTAL
----------- -------- -------- -----
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994........................................ $79,832 $634,175 $(412,610) $301,397
Capital contribution.......................................... 7,531 7,531
Net income.................................................... 78,655 78,655
Dividends..................................................... (23,666) (23,666)
Net advances to Merck......................................... (64,139) (64,139)
------- -------- --------- ---------
BALANCE, DECEMBER 31, 1994...................................... $87,363 $689,164 $(476,749) $299,778
======= ======== ========= ========
The accompanying notes are an integral part of these combined financial
statements.
</TABLE>
6
<PAGE> 8
<TABLE>
THE KELCO DIVISION OF MERCK & CO., INC.
COMBINED STATEMENT OF CASH FLOW
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<S> <C>
OPERATING ACTIVITIES:
Net income................................................................................ $ 78,655
Adjustments to reconcile to cash provided by operating activities:
Items that did not use cash:
Depreciation and amortization......................................................... 17,993
Deferred tax expense.................................................................. 263
Changes in assets and liabilities that (used) provided cash:
Trade receivables..................................................................... (10,176)
Inventories........................................................................... 1,749
Accounts payable and accrued expenses................................................. 4,422
Other................................................................................. 978
Gain on sale of investment.............................................................. (855)
--------
Cash provided by operating activities................................................ 93,029
--------
INVESTING ACTIVITIES:
Property, plant and equipment purchases................................................... (31,201)
Proceeds from sale of investment.......................................................... 16,104
Net sales of short-term investments....................................................... 713
--------
Cash used in investing activities.................................................... (14,384)
--------
FINANCING ACTIVITIES:
Net increase in short-term debt........................................................... 2,076
Net advances to Merck..................................................................... (60,677)
Dividends................................................................................. (23,666)
--------
Cash used in financing activities.................................................... (82,267)
--------
DECREASE IN CASH............................................................................ (3,622)
CASH, BEGINNING OF YEAR..................................................................... 10,057
--------
CASH, END OF YEAR........................................................................... $ 6,435
========
The accompanying notes are an integral part of these combined
financial statements.
</TABLE>
7
<PAGE> 9
THE KELCO DIVISION OF MERCK & CO., INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1994
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF COMBINATION - On February 17, 1995, Monsanto Company
completed its acquisition of the Kelco Division of Merck & Co., Inc.
("Merck") and certain related wholly-owned subsidiaries of Merck which,
together, are referred to in these financial statements and footnotes
as "Kelco". These financial statements have been prepared on an
historical cost basis and reflect no adjustments which may result from
this acquisition. Kelco develops, produces and supplies specialty
chemicals called hydrocolloids on a worldwide basis for food and
industrial applications. Kelco is headquartered in San Diego,
California, and has production facilities in San Diego; Okmulgee,
Oklahoma; Barcaldine and Girvan, Scotland; and Knowsley, England. The
attached financial statements reflect the operations and financial
position of Kelco on a combined basis. All material intercompany
transactions have been eliminated.
REVENUE RECOGNITION - Sales and related costs are recorded upon
shipment of goods to customers.
INVENTORIES - Inventories are stated at the lower of cost or market.
Actual cost is used to value raw materials while standard cost, which
approximates actual cost, is used to value finished goods and work in
process. The cost of certain inventories (65% of total inventories as
of December 31, 1994), is determined by using the last-in, first-out
(LIFO) method, which generally reflects the effects of inflation or
deflation on cost of goods sold earlier than other inventory methods.
The cost of other inventories generally is determined using the average
cost method.
<TABLE>
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is
recorded at cost. The cost of plant and equipment is depreciated on the
straight-line method over the estimated useful lives of the assets as
follows:
<CAPTION>
<S> <C>
Buildings....................................... 45-50 years
Machinery and equipment......................... 5-15 years
Furniture and fixtures.......................... 10-15 years
</TABLE>
INTANGIBLE ASSETS - Intangible assets, consisting primarily of
goodwill arising from business acquisitions in years prior to 1994, are
recorded at cost and are amortized on a straight-line basis over their
estimated useful lives which range from 5 to 40 years. The carrying
value of intangible assets is reviewed periodically based on projected
cash flows to be received from operations. If such projected cash flows
are less than the carrying value of intangible assets, the difference
will be charged as an expense.
PRO FORMA FINANCIAL INFORMATION AND INCOME TAXES - Income tax
accounts included in the combined balance sheet and statement of income
relate only to certain entities which have traditionally provided for
income taxes calculated on a separate return basis. No provision for
income taxes was allocated by Merck to the U.S. operations of the Kelco
Division. Pro forma financial information is presented in the statement
of income which includes a pro forma tax provision for the combined
operations of Kelco calculated on a separate return basis.
FOREIGN CURRENCY TRANSLATION - The U.S. dollar serves as the
functional currency for each of Kelco's foreign entities. Accordingly,
currency gains and losses resulting from remeasuring foreign currency
financial statements into the U.S. dollar are reflected in current year
income.
FINANCIAL INSTRUMENTS - The recorded amounts of Kelco's financial
instruments, consisting of cash, short-term investments, trade
receivables, accounts payable, and short-term debt approximate their
fair values.
8
<PAGE> 10
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. INVENTORIES
<TABLE>
The components of inventories at December 31, 1994 are summarized
below (in thousands):
<S> <C>
Finished goods.............................................................................. $ 30,719
Work in process............................................................................. 16,112
Raw materials and supplies.................................................................. 8,925
--------
Inventories, at average cost................................................................ 55,756
LIFO reserve................................................................................ (12,982)
--------
Total....................................................................................... $ 42,774
========
</TABLE>
Income before income taxes for 1994 was increased by $292,000 due to
the partial liquidation of a LIFO layer.
3. INCOME TAXES
<TABLE>
Except as discussed below, Kelco entities are generally included in a
Merck consolidated tax group. As discussed in Note 1, income tax
accounts included in the combined financial statements relate only to
certain entities which have traditionally provided for income taxes
calculated on a separate return basis. A pro forma income tax provision
for the combined operations of Kelco calculated on a separate return
basis is included on the combined statement of income. The components
of pro forma income taxes for 1994 were as follows (in thousands):
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
U.S. Federal.................................................................. $17,727 $2,121 $19,848
U.S. State.................................................................... 4,720 617 5,337
Foreign....................................................................... 8,096 (110) 7,986
------- ------- -------
Total pro forma income taxes.................................................. $30,543 $2,628 $33,171
======= ====== =======
</TABLE>
<TABLE>
The difference between 1994 pro forma income taxes computed at the
U.S. federal statutory rate of 35 percent and pro forma income taxes is
accounted for as follows (in thousands):
<S> <C>
Taxes computed at the federal statutory tax rate............................................ $29,949
Increase (decrease) resulting from:
State income taxes, net of federal benefit................................................ 3,203
Foreign sales corporation benefit......................................................... (459)
Nondeductible goodwill.................................................................... 349
Other nondeductible expenses.............................................................. 278
Other..................................................................................... (149)
--------
Pro forma income taxes...................................................................... $33,171
=======
</TABLE>
The deferred tax liability balance of $6,356,000 relates to
differences in the book and tax bases of property, plant, and equipment
owned by the Kelco corporate unit located in the United Kingdom, which
is a stand-alone tax-paying entity.
4. EMPLOYEE BENEFIT PLANS
PENSION BENEFITS - Kelco employees in the United States are eligible
to participate in a defined benefit pension plan administered by Merck.
All liabilities and duties of administration and funding of the plan
reside with Merck. As discussed in Note 5, Kelco is allocated a portion
of the cost of the plan calculated as a percentage of its gross payroll
expense.
Kelco employees in the United States are also eligible to participate
in a voluntary defined contribution savings plan sponsored by Merck,
which is responsible for providing matching contributions to the plan.
Kelco is allocated a cost for these benefits calculated as a percentage
of its gross payroll.
9
<PAGE> 11
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Kelco employees in the United Kingdom are covered by a contributory
defined benefit pension plan. Pension benefits are based on employees'
years of service and compensation levels. The plan is funded in
accordance with projections of the plan's financial condition which
take into account benefits earned and expected to be earned,
anticipated future returns on plan assets, and income tax and other
regulations. Plan assets are invested primarily in equity securities.
The components of pension expense under this plan for 1994 are
summarized below (in thousands).
<TABLE>
<S> <C>
Service cost for benefits earned during the year............................................ $ 1,572
Interest cost on benefit obligation......................................................... 1,770
Actual loss on plan assets.................................................................. 2,702
Net deferral and amortization............................................................... (5,319)
-------
Total....................................................................................... $ 725
=======
</TABLE>
The following table sets forth the funded status of the United
Kingdom plan as of December 31, 1994 (in thousands).
<TABLE>
<S> <C>
Plan assets at fair value:.................................................................. $28,641
=======
Actuarial present value of plan benefits:
Vested.................................................................................... $24,102
Nonvested................................................................................. -
------
Accumulated benefit obligation.............................................................. 24,102
Effect of projected future compensation increases........................................... 718
-------
Projected benefit obligation................................................................ $24,820
=======
Excess of plan assets over projected benefit obligation..................................... $ 3,821
Less:
Unamortized initial net asset............................................................. (2,897)
Unrecognized prior service cost........................................................... 519
Unrecognized net loss..................................................................... 2,787
-------
Net prepaid pension cost.................................................................... $ 4,230
=======
</TABLE>
The pension obligation and pension costs were determined using an
assumed discount rate of 9 percent, an assumed long-term rate of return
on plan assets of 9.5 percent, and an assumed rate of compensation
increases of 5.5 percent.
OTHER POSTEMPLOYMENT BENEFITS - Healthcare and other postemployment
benefits are provided to Kelco employees in the United States through
plans sponsored by Merck. All liabilities and duties of administration
and funding the plan reside with Merck. As discussed in Note 5, Kelco
is allocated a cost for these benefits calculated as a percentage of
gross payroll.
5. RELATED PARTY TRANSACTIONS
Costs associated with health benefits, pension and postemployment
benefits (see Note 4) and payroll taxes for certain employees are paid
by Merck on behalf of Kelco. Kelco pays a fee to Merck which is
calculated as a percentage of its gross payroll and approximates the
estimated costs of these services. This fee totalled $12,287,000 for
1994.
Certain administrative services are provided to Kelco without charge
by Merck, including payroll processing for certain employees, property
and liability insurance coverage, legal services, and treasury
functions. The financial statements contain an estimate of the costs of
these services which are not material, individually or in total, to the
financial statements.
10
<PAGE> 12
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Kelco purchases a portion of its inventory materials from Merck at
their estimated fair value. Such purchases totalled $9,331,000 in 1994.
Excess cash generated from Kelco's operations is advanced to Merck.
Kelco does not earn interest income on net advances to Merck. Cash
advances by Kelco less charges for benefits, inventory purchases, and
payroll funding by Merck comprise substantially the increase in Net
Advances to Merck for 1994.
During 1994, Kelco sold its interest in a finance company to Merck.
Proceeds from the sale totalled approximately $16,000,000 and resulted
in a pre-tax gain of $855,000 which is included in "Other income
(expense) - net" on the statement of income.
6. COMMITMENTS AND CONTINGENCIES
Future minimum payments under noncancelable operating leases are
$1,984,000 for 1995, $1,579,000 for 1996, $1,192,000 for 1997,
$1,183,000 for 1998, $1,025,000 for 1999, and $5,505,000 thereafter.
Concentrations of credit risk associated with trade receivables are
considered minimal due to Kelco's diverse customer base. Kelco monitors
the credit worthiness of its customers to which it grants credit in the
normal course of business and does not normally require collateral or
other security to support credit sales. Bad debts in 1994 were minimal.
In 1992, the United States Environmental Protection Agency ("EPA")
commenced a Federal Clean Air Act (the "Act") investigation against
Kelco. After a series of informational exchanges, the EPA issued a
Notice of Violation in May 1994, which alleged certain permitting and
New Source Review Violations under the Act. Although Kelco disputes the
merit of the alleged violations and has vigorously defended this
enforcement action, it commenced settlement discussions with the EPA.
In February 1995, Kelco and the EPA agreed in principle to a settlement
that includes both approximately $3 million in capital improvements and
a civil penalty of approximately $1.4 million. The financial statements
reflect the accrual for the capital improvements and the provision for
the penalty which was provided for in prior years.
Kelco is a party to other legal matters arising out of the normal
course of business, which it is vigorously defending. While the results
of litigation cannot be predicted with certainty, management believes,
based upon the advice of legal counsel, that the final outcome of such
litigation will not have a material adverse effect on Kelco's combined
financial position or results of operations.
7. GEOGRAPHIC DATA
Financial information by geographic region as of and for the year
ended December 31, 1994 presented below is prepared on an "entity
basis" which means that net sales, operating income and assets of an
entity are assigned to the geographic area where the entity is located.
For example, a sale from the United States to a customer in another
geographic area is reported as a U.S. sale.
<TABLE>
<CAPTION>
(IN THOUSANDS)
----------------------------------------------------------
SALES TO
UNAFFILIATED INTERAREA OPERATING TOTAL
CUSTOMERS SALES INCOME ASSETS
--------- --------- --------- ------
<S> <C> <C> <C> <C>
United States................................................. $189,047 $ 39,489 $66,677 $236,399
Europe........................................................ 76,392 15,148 18,490 96,808
Asia-Pacific.................................................. 34,115 - 648 12,955
Canada........................................................ 10,927 - 1,372 1,404
Interarea eliminations........................................ (54,637) 323 (2,433)
-------- -------- ------- ---------
Total......................................................... $310,481 $ 0 $87,510 $345,133
======== ======== ======= ========
</TABLE>
Interarea sales, which represent sales between Kelco locations in
different world areas, were made based on intercompany transfer pricing
arrangements. Direct export sales from the United States to non-U.S.
unaffiliated customers were $88,398,000 for 1994.
11
<PAGE> 13
PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION
OF MONSANTO COMPANY AND KELCO
AS OF DECEMBER 31, 1994
(UNAUDITED)
The following table sets forth the statement of consolidated
financial position of Monsanto Company ("Monsanto") and combined
balance sheet for the Kelco Division of Merck & Co., Inc. ("Kelco") as
of December 31, 1994, and the pro forma condensed combined statement of
financial position as if the acquisition of Kelco by Monsanto had been
consummated on December 31, 1994, accounted for as a purchase and
giving effect to the assumptions set forth in the accompanying notes.
Pro forma adjustments have been made to give effect to estimated
purchase accounting adjustments and eliminations arising from the
acquisition of Kelco and issuance of short- and long-term debt to
finance the acquisition of Kelco.
It is necessary to present the information in the following table
with cautions as to its interpretation and usefulness. The pro forma
adjustments are based on limited available information and upon certain
assumptions. The effects of purchase accounting adjustments are based
on the Agreement of Purchase and Sale ("Agreement") and will depend on
the results of recently initiated appraisals of the net assets acquired
and currently incomplete investigations into liabilities assumed as
specified under the Agreement. The changes in Monsanto's consolidated
financial position will depend on future events, the effects of which
cannot be estimated with certainty. Accordingly, it is probable that
purchase accounting adjustments will differ from the pro forma
adjustments, possibly by substantial amounts. For these reasons, the
table does not purport to present Monsanto's actual consolidated
financial position had the acquisition of Kelco occurred on December
31, 1994, nor to present Monsanto's consolidated financial position at
any subsequent date. In addition, the table and accompanying notes
should be read in conjunction with the historical consolidated
financial statements of Monsanto and the combined financial statements
of Kelco, including notes to such financial statements.
12
<PAGE> 14
<TABLE>
PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION
OF MONSANTO COMPANY AND KELCO
AS OF DECEMBER 31, 1994
(UNAUDITED, DOLLARS IN MILLIONS)
<CAPTION>
HISTORICAL
------------------------- PRO
<F5> FORMA FORMA
MONSANTO KELCO ADJUSTMENTS COMBINED
-------- ----- ----------- --------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents....................................... $ 507 $ 7 $(100)<F1> $ 414
Trade receivables............................................... 1,530 61 1,591
Other current assets............................................ 634 4 2 <F3> 640
7 <F2>
Inventories..................................................... 1,212 43 38 <F3> 1,300
------- ---- ----- -------
Total current assets.......................................... 3,883 115 (53) 3,945
------- ---- ----- -------
(7)<F2>
44 <F3>
Property, plant & equipment - cost.............................. 7,555 348 (155)<F3> 7,785
Less accumulated depreciation................................... 4,738 155 (155)<F3> 4,738
------- ---- ----- -------
Net property, plant & equipment............................... 2,817 193 37 3,047
------- ---- ----- -------
Investments in affiliates....................................... 279 1 280
(16)<F2>
775 <F1>
Intangible assets............................................... 1,134 29 (106)<F3> 1,816
Other assets.................................................... 778 7 53 <F3> 838
------- ---- ----- -------
Total Assets.................................................... $ 8,891 $345 $ 690 $ 9,926
======= ==== ===== =======
LIABILITIES AND SHAREOWNERS' EQUITY:
Accounts payable................................................ $ 629 $ 14 $ 643
Accrued liabilities............................................. 1,494 23 $ (10)<F2> 1,507
975 <F1>
Short-term debt................................................. 312 2 (550)<F4> 739
------- ---- ----- -------
Total current liabilities..................................... 2,435 39 415 2,889
------- ---- ----- -------
Long-term debt.................................................. 1,405 550 <F4> 1,955
(6)<F2>
Deferred income taxes........................................... 65 6 12 <F3> 77
Other liabilities............................................... 697 697
Postretirement liabilities...................................... 1,341 19 <F3> 1,360
Shareowners' equity:
Common stock.................................................. 329 329
Additional contributed capital................................ 849 87 (87)<F1> 849
Treasury stock, at cost....................................... (2,744) (2,744)
Other......................................................... (147) (147)
Reinvested earnings........................................... 4,661 213 (213)<F1> 4,661
------- ---- ----- -------
Total shareowners' equity....................................... 2,948 300 (300) 2,948
------- ---- ----- -------
Total Liabilities and Shareowners' Equity....................... $ 8,891 $345 $ 690 $ 9,926
======= ==== ===== =======
<FN>
- -----
<F1> To record the cash paid and debt assumed for the purchase price of
Kelco, the excess of purchase price over net assets acquired, and
to eliminate Kelco's historical equity accounts.
<F2> Adjustments to conform to Monsanto's accounting policies and adjust
Kelco's assets and liabilities under the Agreement.
<F3> To adjust Kelco's net assets acquired to estimated fair values,
including identifiable intangible assets of approximately $50
million.
<F4> To reclassify short-term borrowings expected to be refinanced on a
long-term basis. In February 1995, Monsanto amended its short-term
revolving credit facility to permit up to $1 billion in borrowings
under the facility. Monsanto has the ability and intent to renew
the debt related to the Kelco aquisition past 1995 and into future
periods.
<F5> Presentation reclassified to conform to Monsanto captions.
</TABLE>
13
<PAGE> 15
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
OF MONSANTO COMPANY AND KELCO
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
The following table sets forth the statement of consolidated income
of Monsanto Company ("Monsanto") and the combined statement of income
for the Kelco Division of Merck & Co., Inc. ("Kelco") for the year
ended December 31, 1994, and the pro forma condensed combined statement
of income as if the acquisition of Kelco by Monsanto had been
consummated on January 1, 1994, accounted for as a purchase and giving
effect to the assumptions set forth in the accompanying notes. Pro
forma adjustments have been made to give effect to estimated purchase
accounting adjustments and eliminations arising from the acquisition of
Kelco, and the issuance of short- and long-term debt to finance the
acquisition of Kelco.
It is necessary to present the information in the following table
with cautions as to its interpretation and usefulness. The pro forma
adjustments are based on limited available information and upon certain
assumptions. The effects of purchase accounting adjustments are based
on the Agreement of Purchase and Sale ("Agreement") and will depend on
the results of recently initiated appraisals of the net assets acquired
and currently incomplete investigations into liabilities assumed as
specified under the Agreement. The changes in Monsanto's consolidated
results of operations will depend on future events, the effects of
which cannot be estimated with certainty. Accordingly, it is probable
that purchase accounting adjustments and the effect of other
adjustments will differ from the pro forma adjustments, possibly by
substantial amounts. Further, the information in the following table
does not include any benefits that may result from the acquisition of
Kelco due to synergies that may be derived and from the elimination of
redundant activities. For these reasons, the table does not purport to
present Monsanto's actual consolidated results of operations had the
acquisition of Kelco occurred on January 1, 1994, nor to present
Monsanto's consolidated results of operations for any subsequent
period. In addition, the table and accompanying notes should be read in
conjunction with the historical consolidated financial statements of
Monsanto and the combined financial statements of Kelco, including
notes to such financial statements.
14
<PAGE> 16
<TABLE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
OF MONSANTO COMPANY AND KELCO
YEAR ENDED DECEMBER 31, 1994
(UNAUDITED, DOLLARS IN MILLIONS, EXCEPT PER SHARE)
<CAPTION>
HISTORICAL
----------------------- PRO PRO
<F6> FORMA FORMA
MONSANTO KELCO ADJUSTMENTS COMBINED
-------- ----- ----------- --------
<S> <C> <C> <C> <C>
Net sales....................................................... $8,272 $310 $8,582
$ 9 <F1>
Cost of goods sold.............................................. 4,774 163 18 <F2> 4,964
------ ---- ---- ------
Gross profit.................................................... 3,498 147 (27) 3,618
Marketing expenses.............................................. 1,191 22 1,213
Administrative expenses......................................... 589 20 609
Technological expenses.......................................... 674 16 690
Amortization of intangible assets............................... 81 1 21 <F1> 103
Restructuring expenses - net.................................... 40 40
------ ---- ---- ------
Operating income................................................ 923 88 (48) 963
Interest expense................................................ (131) (48)<F3> (179)
Interest income................................................. 81 1 82
Other income (expense) - net.................................... 22 (3) 19
------ ----- ---- ------
Income before income taxes...................................... 895 86 (96) 885
27 <F5>
Income taxes.................................................... 273 7 (35)<F4> 272
------ ---- ---- ------
Net income...................................................... $ 622 $ 79 $(88) $ 613
====== ==== ==== ======
Earnings per share.............................................. $ 5.32 $ 5.24
====== ======
Weighted average shares outstanding............................. 117.0 117.0
====== ======
<FN>
- -----
<F1> Additional depreciation and amortization expense resulting from the
fair market value adjustments to fixed assets, other assets, and
intangibles recorded in connection with the acquisition. The
amortization life of goodwill and identifiable intangible assets is
primarily over a 30-year period.
<F2> Effect of purchase accounting adjustments related to FIFO-based
inventories.
<F3> Represents the increase in interest expense resulting from the
issuance of approximately $825 million of commercial paper, at
assumed interest rates varying from 3.1% to 6.1% for 1994, and the
issuance of $150 million of fixed-rate long-term debt, at an
assumed interest rate of 7.2%.
<F4> Income tax effects of pro forma adjustments (1) through (3), based
on the statutory rate.
<F5> Represents the pro forma income tax effect of Kelco domestic pretax
income, which for 1994 was included in Merck's consolidated U.S.
tax returns.
<F6> Presentation reclassified to conform to Monsanto captions.
</TABLE>
15
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
MONSANTO COMPANY
......................................
(Registrant)
By /s/ BRUCE R. SENTS
...................................
Bruce R. Sents
Vice President and Controller
(Principal Accounting Officer)
Date: March 28, 1995
16
<PAGE> 18
EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of
Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<C> <S>
1 Omitted-Inapplicable
2 1. Agreement of Purchase and Sale dated as of December 20, 1994, by and between Merck & Co., Inc. ("Merck")
and The NutraSweet Company relating to the purchase and sale of Merck's Kelco Business, plus
identification of contents of omitted schedules and exhibits and agreement to furnish supplementally a
copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request
(incorporated herein by reference to Exhibit 2.1 of the Company's Form 8-K dated as of February 17, 1995
and filed on February 28, 1995).
2. Amendment, dated as of February 15, 1995, to the Agreement of Purchase and Sale dated as of December 20,
1994 between Merck & Co., Inc., a New Jersey corporation, and The NutraSweet Company, a Delaware
corporation, plus identification of contents of omitted schedules and exhibits and agreement to furnish
supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon
request (incorporated herein by reference to Exhibit 2.2 of the Company's Form 8-K dated as of February
17, 1995 and filed on February 28, 1995).
4 Omitted-Inapplicable
16 Omitted-Inapplicable
17 Omitted-Inapplicable
20 Omitted-Inapplicable
23 1. Consent of Deloitte & Touche LLP
2. Consent of Counsel
24 Omitted-Inapplicable
27 Omitted-Inapplicable
</TABLE>
17
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
MONSANTO COMPANY:
We consent to the incorporation by reference in Monsanto Company's
Registration Statements on Form S-8 (Nos. 2-36636, 2-76696, 2-90152,
33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717,
33-53363, 33-53365 and 33-53367) and on Form S-3 (No. 33-46845) of our
opinion dated March 13, 1995 (relating to the financial statements of
the Kelco Division of Merck & Co., Inc.), appearing on page 3 of this
Form 8-K/A of Monsanto Company.
DELOITTE & TOUCHE LLP
Saint Louis, Missouri
March 28, 1995
18
<PAGE> 1
EXHIBIT 23.2
CONSENT OF COUNSEL
I hereby consent to the reference to legal counsel in the
"Commitments and Contingencies" note to the financial statements of the
Kelco Division of Merck & Co., Inc., appearing on page 11 of this Form
8-K/A, and to its incorporation by reference into Monsanto Company's
Registration Statements on Form S-8 (Nos. 2-36636, 2-76696, 2-90152,
33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717,
33-53363, 33-53365, and 33-53367) and on Form S-3 (No. 33-46845). In
giving this consent I do not thereby admit that I am within the
category of persons whose consent is required under Section 7 of the
Securities Act of 1933.
FRANNE M. FICARA
Counsel
San Diego, California
March 28, 1995
19
