News section
Monsanto Company reports financial results for periods ended Dec. 31, 2003 and 2002
St. Louis, Missouri
February 4, 2004

To fulfill the company’s commitment to report its calendar-year results following its change to an Aug. 31 fiscal year end, Monsanto Company (NYSE: MON) today reported results for the 12 months of 2003. 

In July 2003, Monsanto’s board of directors changed Monsanto’s fiscal year end from Dec. 31 to Aug. 31.  As a result, Monsanto reported results for its new fiscal year-end in October, including results from the eight-month “transition” period ended Aug. 31, 2003. 

The results reported today include the eight-month transition period as well as the four-months ended Dec. 31, 2003, that completes the company’s results for the 12 calendar months of 2003.  For comparability, the company also provided previously reported calendar-year 2002 results.  The results for the eight-month transition period in 2003 and the 12 months of 2002 have not been restated to reflect discontinued operations recorded in the final four months of 2003.  The restatements would not be expected to have a material impact on the results.  As the company provides future earnings reports, Monsanto will restate the results for fiscal-year 2003, calendar years 2001 and 2002, and the transition period.

Based on these results, Monsanto met or exceeded its guidance on the key financial targets – including earnings per share (EPS) on an ongoing basis in the range of $1.30 to $1.40 and free cash flow of approximately $200 million – established for calendar-year 2003.

Net sales:  Net sales for the four months ended Dec. 31, 2003, were $1,682 million and $3,373 million for the eight months ended Aug. 31, 2003.  For the 12 months of 2002, Monsanto reported net sales of $4,673 million.

Net sales for the four months ended Dec. 31, 2003, were $806 million for the Seeds and Genomics segment and $876 million for the Agricultural Productivity segment.  For the eight months ended Aug. 31, 2003, net sales for the Seeds and Genomics segment were $1,165 million and $2,208 million for the Agricultural Productivity segment.  For the 12 months of 2002, Monsanto reported net sales of $1,585 for the Seeds and Genomics segment and $3,088 for the Agricultural Productivity segment.

Sales performance improved primarily because of increased sales of Monsanto’s seeds and traits and improvements in the sales of Roundup herbicide in Brazil.  Combined, these sales improvements more than offset expected decreases in overall sales revenues associated with the company’s U.S. Roundup herbicide business.

Net income and earnings per share results: Monsanto recorded net income of
$34 million, or 13 cents per share, for the four months ended Dec. 31, 2003, and a net loss of $23 million, or a loss of 9 cents per share, for the eight months ended Aug. 31, 2003.  This compares with a $1,693 million loss, or a loss of $6.45 per share, for 2002.

EPS guidance on an as reported basis for calendar year 2003 had been expected to be in the range of a net loss of 13 cents to a net loss of 3 cents per share.

Items affecting comparability for the four-month period ending Dec 31, 2003 include:
·         Net restructuring charges of $(0.09) per share.
·         A $(0.07) per share charge for discontinued operations and related restructuring.
·         Write-off of goodwill associated with the global wheat business of $(0.26) per share. 

Items affecting comparability for the eight-month period ending Aug 31, 2003 include:
·         Restructuring reversals of $0.02 per share.
·         Asset retirement charges of $(0.05) per share.
·         Monsanto's contribution to the settlement of litigation in Anniston, Alabama of $(0.96) per share. 

Items affecting comparability for 2002 calendar year include:
·         Net restructuring charges of $(0.31) per share.
·         Goodwill impairment charges of $(6.94) per share.
·         Establishment of Argentine bad-debt reserve of $(0.38) per share.
·         A gain of $0.08 per share related to certain asset sales.

Cash flow:  Free cash flow represents the total of cash flows from operations and investing activities for the 12 months of 2003.  For the 12 months of 2003, net cash provided by operations was $521 million, compared with $1,108 million in calendar year 2002.  Net cash required by investing activities was $238 million, compared with $469 million in 2002.  As a result, free cash flow for the 12 months of 2003 was $283 million, compared with $639 million in 2002.  In addition, net cash provided (required) by financing activities for the 12 months of 2003 was $182 million, compared with $(518) million in 2002.  (For a reconciliation of free cash flow, see note 1.)

Comment from Monsanto Chairman, President and Chief Executive Officer Hugh Grant:

“In 2003, we stressed focus and financial discipline.  We set commitments that we believed were realistic and achievable, but that would also provide us a platform for growth in the mid-term.  We delivered on those commitments.  This is another milestone that underscores our ability as a company to deliver on our promises and to guide our company through our transition to a seeds-and-traits-based business.”

Monsanto Company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality.   
Roundup is a trademark 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
(Dollars in millions, except per share amounts)
Unaudited

 

Condensed Statement of

Consolidated Operations

Four Months

Ended

Dec. 31, 2003

Net Sales

$ 1,682

Cost of Goods Sold

836

Gross Profit

846

Operating Expenses:

 

     Selling, General and Administrative Expenses

369

     Bad-Debt Expense

39

     Research and Development Expenses

163

     Adjustments of Goodwill

69

     Restructuring Charges – Net (4)

36

Total Operating Expenses

676

Income From Operations

170

Interest Expense – Net

22

Other Expense – Net

38

Income From Continuing Operations Before Income Taxes

110

Income Tax Provision

57

Income From Continuing Operations

53

Discontinued Operations:

 

     Loss From Operations of Discontinued Businesses (Including Estimated Loss on Disposal of $29 in

     Fiscal Year 2004)

 

 

(27)

     Income Tax Benefit

(8)

Loss On Discontinued Operations

(19)

Net Income

$ 34

 

Basic Earnings (Loss) Per Share:

 

Income From Continuing Operations

$  0.20

Loss On Discontinued Operations

(0.07)

Net Income

$  0.13

 

 

Diluted Earnings (Loss) Per Share:

 

Income From Continuing Operations

$  0.20

Loss On Discontinued Operations

(0.07)

Net Income

 $  0.13

 

 

Shares Outstanding:

 

     Basic Shares

262.3

     Diluted Shares

266.2

 Monsanto Company and Subsidiaries
Selected Financial Information
(Dollars in millions, except per share amounts)
Unaudited

 

Condensed Statement of

Consolidated Operations

Eight Months

Ended

Aug. 31, 2003

Net Sales

$3,373

Cost of Goods Sold

1,796

Gross Profit

1,577

Operating Expenses:

 

     Selling, General and Administrative Expenses

741

     Bad-Debt Expense

40

     Research and Development Expenses

330

     Restructuring Reversals (4)

(5)

Total Operating Expenses

1,106

Income From Operations

471

Interest Expense – Net

46

PCB Litigation Settlement Expense – Net

396

Other Expense – Net

67

Loss Before Income Taxes and Cumulative Effect of Accounting Change

 

(38)

Income Tax Benefit

(27)

Loss Before Cumulative Effect of Accounting Change

(11)

Cumulative Effect of a Change in Accounting Principle (2)

(12)

Net Loss

$ (23)

 

Basic and Diluted Loss per Share:

 

Loss Before Cumulative Effect of Accounting Change

$  (0.04)

Cumulative Effect of Accounting Change – Net of Tax

(0.05)

Net Loss

$  (0.09)

 

 

Shares Outstanding:

 

     Basic and Diluted Shares

261.7

 Monsanto Company and Subsidiaries
Selected Financial Information
(Dollars in millions, except per share amounts)
Unaudited

 

 

Condensed Statement of

Consolidated Operations

12 Months Ended

Dec. 31, 2002

Net Sales

$4,673

Cost of Goods Sold

2,493

Gross Profit

2,180

Operating Expenses:

 

     Selling, General and Administrative Expenses

1,023

     Bad-Debt Expense

208

     Research and Development Expenses

527

     Restructuring Charges – Net

103

Total Operating Expenses

1,861

Income from Operations

319

Interest Expense – Net

59

Other Expense – Net

58

Income Before Taxes and Cumulative

 

     Effect of Accounting Change

202

Income Tax Provision

73

Income Before Cumulative Effect of Accounting Change

 

129

Cumulative Effect of Change in Accounting Principle (3)

 

(1,822)

Net Loss

$(1,693)

 

Basic Earnings (Loss) Per Share

 

Income Before Cumulative Effect

 

     of Accounting Change

$   0.49

Cumulative Effect of Accounting Change – Net of Tax

(6.99)

Net Loss

$(6.50)

 

 

Diluted Earnings (Loss) Per Share

 

Income Before Cumulative Effect

 

     of Accounting Change

$  0.49

Cumulative Effect of Accounting Change – Net of Tax

(6.94)

Net Loss

$(6.45)

 

 

Shares Outstanding:

 

     Basic Shares

260.7

     Diluted Shares

262.6

 Monsanto Company and Subsidiaries
Selected Financial Information
(Dollars in millions)
Unaudited

 

Condensed Statement of Consolidated Financial Position

As of

Dec. 31, 2003

As of

Dec. 31, 2002

Assets

 

 

 

 

 

Current Assets:

 

 

    Cash and Cash Equivalents

$   893

$   428

Short-Term Investments

250

250

    Trade Receivables – Net of Allowances of $285 in 2003

        and $247 in 2002

 

1,690

 

1,752

    Inventories

1,354

1,272

    Assets of Discontinued Operations

27

     —

    Other Current Assets

783

722                                           

Total Current Assets

4,997

4,424

 

 

 

Property, Plant and Equipment – Net

2,242

2,339

Goodwill – Net

723

757

Other Intangible Assets – Net

523

643

Other Assets

807

727

Total Assets

$9,292

$8,890

 

 

 

Liabilities and Shareowners’ Equity

 

 

 

 

 

Current Liabilities:

 

 

    Short-Term Debt

$  409

$   393

    Accounts Payable

314

275

    Liabilities of Discontinued Operations

5

    Accrued Liabilities

1,195

1,142

Total Current Liabilities

1,923

1,810

 

 

 

Long-Term Debt

1,158

851

Postretirement and Other Liabilities

963

1,049

Shareowners’ Equity

5,248

5,180

Total Liabilities and Shareowners’ Equity

$9,292

$8,890

 

 

 

Debt to Capital Ratio:

23%

19%

 Monsanto Company and Subsidiaries
Selected Financial Information
(Dollars in millions)
Unaudited 

 

 

Statement of Consolidated Cash Flows

12 Months Ended

Dec. 31, 2003

12 Months Ended

Dec. 31, 2002

 

Operating Activities:

 

 

Net Income (Loss)

$   11

$(1,693)

Adjustments to reconcile cash provided (required) by operations:

 

 

   Items that did not require (provide) cash:

 

 

Pretax cumulative effect of change in accounting principle

19

1,984

      Depreciation and amortization expense

455

460

Adjustments of goodwill

69

Impairment of assets included in discontinued operations

29

Bad-debt expense

79

208

Noncash restructuring

13

50

      Deferred income taxes

120

(258)

       Gain on disposal of investments and property – net

(59)

Equity affiliate expense – net

40

43

Write-off of retired assets

27

28

      Other items that did not provide cash

(20)

Changes in assets and liabilities that provided (required) cash:

 

 

      Trade receivables

324

221

      Inventories

(5)

74

      Accounts payable and accrued liabilities

(221)

(3)

PCB litigation settlement insurance receivables

(155)

Pension contributions

(261)

(20)

      Related-party transactions

2

(46)

Tax benefit on employee stock options

6

11

   Deferred revenue on supply agreements

Net investment hedge proceeds (loss)

(35)

42

20  

      Other Items

24         

46

Net Cash Provided by Operations

521

1,108

 

 

 

Cash Flows Provided (Required) by Investing Activities:

 

 

Purchases of short-term investments

(480)

(250)

Maturities of short-term investments

480

Technology and other investments

(58)

(97)

Capital expenditures

(193)

(224)

Property disposal proceeds

13

72

Loans with related party

30

Net Cash Required by Investing Activities

  (238)

(469)

 

 

 

Cash Flows Provided (Required) by Financing Activities:

 

 

Net change in short-term financing

88

(934)

Loans from related party

(254)

Long-term debt proceeds

332

856

Long-term debt reductions

(115)

(104)

Debt issuance costs

(2)

(10)

Payments on other financing

(9)

(10)

Treasury stock purchases

(55)

Stock option exercises

73

63

Dividend payments

          (130)

(125)

Net Cash Provided (Required) by Financing Activities

   182

(518)

 

 

 

Net Increase in Cash and Cash Equivalents

465

121

Cash and Cash Equivalents at Beginning of Period

   428

307

Cash and Cash Equivalents at End of Period

            $  893

               $  428


Monsanto Company and Subsidiaries
Selected Financial Information
(Dollars in millions)
Unaudited 

1.       Free Cash Flow:  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 free cash flow is not intended to replace cash flows, and it is not a measure of financial performance as determined in accordance with generally accepted accounting principles (GAAP) in the United States.  The following table reconciles historical free cash flow to the respective most directly comparable financial measure calculated in accordance with GAAP.

Reconciliation of Free Cash Flow:   

 

 

Total Monsanto Company and Subsidiaries:

12 Months

Ended

Dec. 31, 2003

12 Months Ended

Dec. 31, 2002

 

 

 

Net Cash Provided by Operations

$ 521

$1,108

Net Cash Required by Investing Activities

(238)

(469)

     Free Cash Flow 

$ 283

$ 639

Net Cash Provided (Required) by Financing Activities

182

(518)

Net Increase in Cash and Cash Equivalents

$ 465

$ 121

2.       Adjustment for New Accounting Standard No. 143: On Jan. 1, 2003, Monsanto adopted Statement 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.       Restructuring:  In October 2003, Monsanto announced plans to continue to reduce the costs associated with its agricultural chemistry business as that segment matures globally. The company will further concentrate its resources on its seeds and traits businesses. These plans include: (1) reducing costs associated with the company’s Roundup herbicide business; (2) exiting the European breeding and seed business for wheat and barley; and (3) discontinuing the plant-made pharmaceuticals program. These actions will require charges up to $155 million aftertax in fiscal year 2004; $49 million of these charges were recorded in the four months ended Dec. 31, 2003.

For the eight months ended Aug. 31, 2003, Monsanto reversed $8 million pretax ($5 million aftertax) of restructuring charges taken in prior years. The cost to carry out certain actions related to prior restructuring plans was less than originally anticipated. Restructuring items in 2003 and 2002 were primarily associated with the 2000 and 2002 plans related to facility rationalizations and work force reductions. 

Monsanto Company and Subsidiaries
Selected Financial Information
(Dollars in millions)
Unaudited

Income (loss/expense) related to these items were reported in the Condensed Statement of Consolidated Operations in the following captions:

 

 

Four Months Ended

Dec. 31, 2003

Eight Months Ended

Aug. 31, 2003

12 Months Ended

Dec. 31, 2002

 

 

 

 

   Cost of Goods Sold

      $   (2)

$3

$(21)

    Restructuring (Charges) Reversals – Net(a)

(36)

5

(103)

Income (Loss) From Continuing Operations Before Income Taxes

(38)  

 

8

(124)

   Income Tax (Provision) Benefit

       13

(3)

43

Income (Loss) From Continuing Operations

 (25)

5

(81)

     Loss From Operations of Discontinued Businesses                                       

 

(34)

 

 

     Income Tax Benefit

10

Loss On Discontinued Operations

(24)

Net Income (Loss)

$(49)

$5

$(81)

(a) For the four month period ended Dec. 31, 2003, restructuring charges were reduced by $2 million in restructuring reversals related to our past restructuring plans. The company recorded the reversals because it was able to carry out certain actions for less than originally anticipated.

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