Financial Summary
($ in millions, except per share) First First
Quarter Quarter Change
2003 2002
Net Sales $1,147 $1,221 (6)%
Net Income (Loss) $60 $(1,736) NM
Net Income Before Cumulative Effect
of Accounting Changes* $72 $86 (16)%
Diluted Earnings (Loss) per Share $0.23 $(6.59) NM
Diluted Earnings per Share Before
Cumulative Effect of Accounting Changes* $0.28 $0.33 (15)%
NM = Not Meaningful
* 2003 operational results exclude asset retirement obligations
(see note 2), and 2002 operational results exclude goodwill impairment
(see note 3).
-- Quarterly sales declined 6 percent, primarily because of lower sales of
Roundup herbicide in the United States.
-- Reported net income for the quarter was $60 million; excluding
accounting changes, net income was $72 million compared with
$86 million.
-- Year-to-date cash required by operations improved by $153 million.
Comment from Monsanto Chairman and Interim Chief Executive
Officer and President Frank AtLee:
"Our focus is to deliver on our commitments, and we have done
so with both our earnings and free cash flow generation in the
first quarter. We are on-track to meet our commitments to
deliver value to shareowners through sustainable cash
generation, earnings, and increased dividends."
First-Quarter 2003 Performance Summary:
Net sales decreased 6 percent to $1.1 billion in the first quarter
primarily because of lower U.S. sales of Roundup. Lower sales of branded
soybean seeds and traits in the United States, and of selective herbicides
globally, also affected the quarter-to-quarter comparison.
Net income and earnings per share: On a reported basis, this year's
first-quarter income of $60 million, or 23 cents per share, includes a 5 cent-
per-share charge associated with an accounting change related to asset
retirement obligations. First-quarter 2002 reported net loss of $1.7 billion
includes the $1.8 billion aftertax charge for goodwill impairment. Excluding
the effects of accounting changes in both periods, first-quarter 2003 net
income was $72 million, or 28 cents per share, compared with last year's
first-quarter net income of $86 million, or 33 cents per share.
Cost management: Research-and-development (R&D) expenses were $116
million in the first quarter, down 3 percent compared with R&D expenses in the
same period last year. In the first quarter, selling, general and
administrative (SG&A) expenses were $21 million lower than SG&A costs in the
same period last year.
Cash flow: Net cash required by operations improved by $153 million and
net cash required by investing activities improved by $2 million.
Accordingly, year-to-date free cash flow improved by $155 million, from a
negative $915 million in the first quarter of 2002 to a negative $760 million
in this year's first quarter. (For reconciliation, see note 5.)
Seeds and Genomics Segment Detail
Product net sales and segment EBIT
($ in millions) First First
Quarter Quarter
2003 2002 Change
Total seeds and genomics net sales $550 $585 (6)%
Total seeds and genomics EBIT $95 $116 (18)%
The Seeds and Genomics segment consists of the global seeds and related
trait business, and genetic technology platforms.
First-quarter net sales of $550 million for the Seeds and Genomics segment
were $35 million lower than sales of $585 million recorded in last year's
first quarter, primarily a result of timing of sales in the U.S. business.
U.S. branded soybean seed sales were lower for the quarter and are expected to
be modestly lower for the 2003 crop year. For the quarter, corn seed sales
were up. Revenues for Monsanto's corn and soybean technology traits were
lower in the quarter-to-quarter comparison. However, sales are expected to
increase on a U.S. crop year basis, as shifts in the timing of U.S. sales were
the major factors affecting this year's first-quarter results.
EBIT (earnings before cumulative effect of accounting change, interest,
and income taxes) for the Seeds and Genomics segment decreased to $95 million,
from $116 million in the first quarter of 2002, primarily because of lower
sales. (For reconciliation, see note 4.)
Agricultural Productivity Segment Detail
Product net sales and segment EBIT
($ in millions) First First
Quarter Quarter
2003 2002 Change
Roundup and other glyphosate-based
agricultural herbicide net sales $321 $361 (11)%
All other agricultural
productivity products net sales $276 $275 0%
Total agricultural productivity net sales $597 $636 (6)%
Total agricultural productivity EBIT $29 $28 4%
The Agricultural Productivity segment consists primarily of crop
protection products, the lawn-and-garden herbicide business, and the company's
animal agricultural business.
Net sales in the Agricultural Productivity segment declined by $39 million
in the quarter-to-quarter comparison, primarily as a result of lower volumes
and pricing of branded Roundup.
EBIT (earnings before cumulative effect of accounting change, interest,
and income taxes) was relatively flat at $29 million for the first quarter of
2003, from $28 million in the same period last year. The sales shortfall
noted above was primarily offset by lower SG&A costs attributed to the
Agricultural Productivity segment. (For reconciliation, see note 4.)
Other Items of Note:
In late February, the company's YieldGard Rootworm insect-protected corn
trait was registered by the U.S. Environmental Protection Agency (EPA). This
allowed Monsanto to market the first biotech corn designed to control the corn
rootworm pest. Limited quantities of seed containing the YieldGard Rootworm
trait will be available for the 2003 growing season.
In April, Monsanto and DuPont announced a licensing agreement for the
YieldGard Rootworm corn technology. Monsanto will receive royalties and
certain other payments from DuPont based on this agreement.
Supplemental data to this news release, including slides that accompany
the company's financial results conference call, are found at
www.monsanto.com . To access this supplemental information, please go to the
"Financial Reports" section under the investor information page of the web
site.
2003 Earnings and Free Cash Flow Outlook:
Monsanto management expects full-year 2003 earnings per share (EPS) in the
range of $1.25 to $1.40, excluding the 5-cent cumulative effect of the new
accounting standard (see note 2).
First-half 2003 EPS is now expected to be in the range of $1.19 to $1.33
per share, or 95 percent of the full-year EPS guidance. This is up from the
earlier guidance of 85 percent to 90 percent of full-year EPS in the first
half. Accordingly, second-quarter 2003 EPS is expected to be in the range of
$0.91 to $1.05 per share. All EPS guidance excludes the cumulative effect of
adopting the asset retirement obligations accounting standard.
Management reiterated its expectation of generating free cash flow in 2003
in the range of $350 million to $400 million. Management anticipates cash
from operating activities will be in the range of $530 million to $560
million, and that cash used in investing activities will be in the range of
$160 million to $180 million. For a reconciliation of projected free cash
flow for 2003 see note 6.
Monsanto Company is a leading global provider of technology-based
solutions and agricultural products that improve farm productivity and food
quality.
Roundup and YieldGard are trademarks owned by Monsanto
Company and its wholly owned subsidiaries.
References to Roundup products in this release mean Roundup branded and
other glyphosate-based herbicides, excluding lawn-and-garden products.
Monsanto Company and Subsidiaries
Selected Financial Information
(In millions, except per share amounts)
Unaudited
Condensed Statement of
Consolidated Operations Three Months Three Months
Ended Ended
March 31, 2003 March 31, 2002
Net Sales $1,147 $1,221
Cost of Goods Sold 614 617
Gross Profit 533 604
Operating Expenses:
Selling, General and
Administrative Expenses 274 295
Bad Debt Expense 2 3
Research and Development Expenses 116 119
Total Operating Expenses 392 417
Income from Operations 141 187
Interest Expense - Net 17 14
Other Expense - Net 17 43
Income Before Taxes and Cumulative
Effect of Accounting Change 107 130
Income Tax Expense 35 44
Income Before Cumulative Effect
of Accounting Change 72 86
Cumulative Effect of Change in
Accounting Principle
- Net of Taxes of $7 and $162 (2, 3) (12) (1,822)
Net Income (Loss) $60 $(1,736)
EBIT (1) $124 $144
Basic Earnings (Loss) Per Share:
Income Before Cumulative Effect
of Accounting Change $0.28 $0.33
Cumulative Effect of Accounting
Change - Net of Tax (0.05) (7.04)
Net Income (Loss) $0.23 $(6.71)
Diluted Earnings (Loss) Per Share:
Income Before Cumulative Effect
of Accounting Change $0.28 $0.33
Cumulative Effect of Accounting
Change - Net of Tax (0.05) (6.92)
Net Income (Loss) $0.23 $(6.59)
Shares Outstanding:
Basic Shares 261.4 258.8
Diluted Shares 261.4 263.4
Monsanto Company and Subsidiaries
Selected Financial Information
(Dollars in millions)
Unaudited
Condensed Statement of
Consolidated Financial Position March 31, 2003 Dec. 31, 2002
Assets
Current Assets:
Cash and Cash Equivalents $80 $428
Short-Term Investments 251 250
Trade Receivables - Net of Allowances
of $238 in 2003 and $247 in 2002 2,424 1,752
Inventories 1,336 1,272
Other Current Assets 678 722
Total Current Assets 4,769 4,424
Property, Plant and Equipment - Net 2,311 2,339
Goodwill - Net 760 757
Other Intangible Assets - Net 612 643
Other Assets 743 727
Total Assets $9,195 $8,890
Liabilities and Shareowners' Equity
Current Liabilities:
Short-Term Debt $847 $393
Accounts Payable 298 275
Accrued Liabilities 898 1,142
Total Current Liabilities 2,043 1,810
Long-Term Debt 849 851
Postretirement and Other Liabilities 1,066 1,049
Shareowners' Equity 5,237 5,180
Total Liabilities and Shareowners' Equity $9,195 $8,890
Debt to Capital Ratio: 24% 19%
Monsanto Company and Subsidiaries
Selected Financial Information
(Dollars in millions)
Unaudited
Statement of Consolidated Cash Flows
Three Months Ended Three Months Ended
March 31, 2003 March 31, 2002
Operating Activities:
Net Income (Loss) $60 $(1,736)
Adjustments to reconcile cash provided
(required) by operations:
Items that did not require
(provide) cash:
Pretax cumulative effect of a
change in accounting principle 19 1,984
Depreciation and amortization 112 110
Deferred income taxes (7) (154)
Other items that did not require cash 24 30
Changes in assets and liabilities
that provided (required) cash:
Trade receivables (679) (748)
Inventories (48) (28)
Accounts payable and
accrued liabilities (223) (318)
Related-party transactions - (48)
Other Items 29 42
Net Cash Required by Operations (713) (866)
Cash Flows Provided (Required)
by Investing Activities:
Property, plant and equipment purchases (36) (51)
Acquisitions and investments (11) (17)
Loans with related party - 19
Net Cash Required by Investing Activities (47) (49)
Cash Flows Provided (Required)
by Financing Activities:
Net change in short-term financing 479 519
Loans from related party - 338
Long-term debt proceeds - 19
Long-term debt reductions (31) (57)
Payments on vendor financing (5) -
Stock option exercises - 37
Dividend payments (31) (31)
Net Cash Provided by Financing Activities 412 825
Net Decrease in Cash and
Cash Equivalents (348) (90)
Cash and Cash Equivalents
Beginning of Year 428 307
Cash and Cash Equivalents
at End of Period $80 $217
Monsanto Company and Subsidiaries
Selected Financial Information
(Dollars in millions)
Unaudited
1. EBIT and Free Cash Flow: As reflected in Monsanto's Condensed
Statement of Consolidated Operations presented in this release, EBIT is
earnings (loss) before cumulative effect of accounting change, interest
and income taxes. Free cash flow represents the total of cash flows from
operations and investing activities, as reflected in Monsanto's Statement
of Consolidated Cash Flows presented in this release. The presentation of
EBIT and free cash flow is not intended to replace net income (loss), cash
flows, financial position or comprehensive income (loss), and they are not
measures of financial performance as determined in accordance with
generally accepted accounting principles in the United States.
2. Adjustment for New Accounting Standard No. 143: On Jan. 1, 2003,
Monsanto adopted Standard of Financial Accounting Standards (SFAS) No.
143, Accounting for Asset Retirement Obligations. SFAS No. 143 addresses
financial accounting for and reporting of costs and obligations associated
with the retirement of tangible long-lived assets. Upon adopting this
standard, Monsanto recorded a pretax cumulative effect of accounting
change of $19 million ($12 million aftertax, or $0.05 per share) effective
Jan. 1, 2003. In addition to this noncash charge, property, plant and
equipment was increased approximately $10 million, and asset retirement
obligations were increased approximately $30 million.
3. Adjustment for New Accounting Standard No. 142: On Jan. 1, 2002,
Monsanto adopted SFAS No. 142, Goodwill and Other Intangible Assets. SFAS
No. 142 changed the accounting for goodwill from an amortization method to
an impairment-only method and eliminated goodwill amortization. As a
result of the transitional goodwill impairment test completed in 2002,
goodwill was reduced by $2 billion and net deferred tax assets increased
by $162 million as a result of the related tax effect. This resulted in a
net loss and net reduction of $1.8 billion to shareowners' equity for the
year 2002.
4. Reconciliation of EBIT (1) to Income Before Cumulative Effect of
Accounting Change:
Total Monsanto Company and Subsidiaries:
Three Months Three Months
Ended Ended
March 31, 2003 March 31, 2002
EBIT - Seeds and Genomics Segment $95 $116
EBIT - Agricultural Productivity Segment 29 28
EBIT - Total Monsanto Company
and Subsidiaries $124 $144
Interest Expense - Net 17 14
Income Tax Expense 35 44
Income Before Cumulative Effect
of Accounting Change $72 $86
5. Reconciliation of Free Cash Flow (1) to Statement of Consolidated Cash
Flows:
Total Monsanto Company and Subsidiaries:
Three Months Three Months
Ended Ended
March 31, 2003 March 31, 2002
Net Cash Required by Operations $(713) $(866)
Net Cash Required by Investing Activities (47) (49)
Free Cash Flow $(760) $(915)
6. Reconciliation of Projected Free Cash Flow for 2003:
Total Monsanto Company and Subsidiaries:
Twelve Months
Ended
Dec. 31, 2003
Net Cash Provided by Operations $ 530 - $ 560
Net Cash Required by Investing Activities (180) - (160)
Projected Free Cash Flow for 2003 $ 350 - $ 400
