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.