* Monsanto’s fiscal
year begins Sept. 1 and ends Aug. 31.
References to the first quarter refer to the three-month period ended
Nov. 30.
·
Quarterly sales increased 22 percent, primarily because of
higher sales of Roundup herbicide in the United States and Brazil.
·
Reported net loss for the quarter was $(97) million and
includes a $69 million goodwill write-off and net restructuring charges of $42
million ($24 million of the restructuring charge is associated with
discontinued operations).
·
Free cash flow (as defined below) for the quarter was $836
million, compared with $660 million in the comparable period last year. Components of free cash flow for the first
quarter of 2004 and 2003, respectively, were:
Net cash provided by operations of $661 million versus $729 million, and
net cash provided (required) by investing activities of $175 million versus
$(69) million. In addition, net cash
(required) by financing activities for the first quarter of 2004 and 2003 was
$(81) million and $(468) million respectively.
(For a reconciliation of free cash flow, see note 1.)
Comment from
Monsanto Chairman, President and Chief Executive Officer Hugh Grant:
“Our
first-quarter performance was anchored by improved Roundup and branded corn
seed results in Brazil. We’re also pleased
that our free cash flow generation remains strong. As we begin the major selling season for seeds in the United
States, early indications point to another solid showing for Monsanto’s branded
seeds and technology traits in this major agricultural market.”
First-Quarter
2004 Performance Summary:
Net sales increased 22 percent to $1 billion in the first
quarter primarily because of higher sales of Roundup in Brazil and a shift in
the timing of Roundup sales in the United States.
Net loss per share: The company
recorded a first-quarter 2004 net loss of $(97) million, or a loss of $(0.37)
per share, compared with last year’s first-quarter net loss of
$(18) million, or a loss of $(0.07) per share.
Items
affecting comparability for first-quarter 2004 included:
·
$(0.26) charge for the
write-off of goodwill associated with the global wheat business.
·
Net restructuring
charges of $(0.07).
·
Discontinued businesses
and related restructurings of $(0.08).
In
the first quarter of 2003, the only item affecting comparability was a net
restructuring charge of $(0.03).
Cost management:
Research-and-development (R&D) expenses were flat at $116 million in
the first quarter. In the first
quarter, selling, general and administrative (SG&A) expenses were $60
million higher, primarily because of accruals for potential incentive payments
to employees and higher costs associated with sales and marketing activities
compared with the same period last year.
Cash flow:
Free cash flow
improved by $176 million, from $660 million in the first quarter of 2003 to
$836 million in this year’s first quarter.
Free cash flow represents the
total of cash flows from operations and investing activities. In the first quarter of 2004, net cash
provided by operations was $661 million, compared with $729 million in the
first quarter of 2003. Net cash
provided (required) by investing activities was $175 million, compared with
$(69) million in the first quarter of 2003.
In
addition, net cash (required) by financing activities for the first quarter of
2004 was $(81) million, compared with $(468) million in the first quarter of
2003. (For a reconciliation of free
cash flow, see note 1.)
Seeds and Genomics Segment Detail
|
Product net sales
($ in
millions)
|
First Quarter
2004
|
First Quarter
2003
|
Change
|
|
Corn seed and traits
|
$186
|
$188
|
(1)%
|
|
Soybean seed and traits
|
$169
|
$158
|
7%
|
|
All other crop seeds and traits
|
$30
|
$19
|
58%
|
|
TOTAL seeds and genomics
|
$385
|
$365
|
5%
|
The Seeds and Genomics segment
consists of the global seeds and related trait business, and genetic technology
platforms.
First-quarter 2004 net sales of
$385 million for the Seeds and Genomics segment were $20 million higher
than sales of $365 million recorded in last year’s first quarter. This improvement was largely driven by a
rebound in the performance of the Brazilian branded corn seed business and
stronger corn seed sales in Mexico, where favorable weather and planting
conditions prevailed. Higher revenues
from cotton traits in Australia also contributed to the increase. A severe drought in Argentina that reduced
sales of branded corn somewhat offset these gains.
EBIT (earnings (loss) from
continuing operations before interest and income taxes) for the Seeds and
Genomics segment declined to a loss of $(96) million in the first quarter,
compared with EBIT of $45 million in the first quarter of 2003. Operational improvements – especially in the
Brazilian branded corn seed business – were more than offset by the
$69 million goodwill write-off related to the global wheat business and
$23 million in restructuring charges.
(For a reconciliation of EBIT, see note 1.)
Agricultural
Productivity Segment Detail
|
Product net sales
($ in
millions)
|
First Quarter 2004
|
First Quarter
2003
|
Change
|
|
Roundup and other glyphosate-based agricultural
herbicide
|
$429
|
$260
|
65%
|
|
All other agricultural
productivity products
|
$214
|
$221
|
(3)%
|
|
TOTAL agricultural
productivity
|
$643
|
$481
|
34%
|
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 increased to $429 million in the quarter, up from $260
million in the comparable 2003 period, mainly because of higher sales of Roundup
in the United States and Brazil. Higher
volumes and a larger portion of higher-value branded Roundup sold in the United
States were the primary contributors to the increase.
EBIT (earnings (loss) from
continuing operations before interest and income taxes) for this segment
improved to $30 million in the first quarter, compared with a loss of $(55)
million in the first quarter of 2003.
The increase was driven primarily by the same factors mentioned above,
and these improvements were somewhat offset by charges of $7 million related to
the fiscal year 2004 restructuring plan.
(For a reconciliation of EBIT, see note 1.)
Other
Items of Note:
On
Nov. 3, 2003, Monsanto announced that the U.S. Environmental Protection Agency
(EPA) had granted registration for YieldGard Plus corn, the company’s first
double-stacked insect-protected product.
Following the necessary regulatory clearances on a state level in the
United States and receipt of the Japanese import approval, this technology will
be made available for planting in the United States and Canada.
On
Dec. 5, 2003, the company announced that the European Food Safety Authority had
issued a favorable scientific opinion on Monsanto’s NK603 Roundup Ready
corn. The completion of this opinion
allows this product to move forward for consideration for final approval by the
European Commission and its member states.
On
Jan. 5, 2004, Monsanto was named by the U.S. Trustee as a member of the
Creditors' Committee for Solutia Inc.'s Chapter 11 reorganization process. Monsanto Vice President and Treasurer Robert
A. Paley will serve on this nine-member committee, which is charged with
representing the interests of unsecured creditors during Solutia's bankruptcy
proceedings.
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.
2004 Earnings and Free
Cash Flow Guidance:
The company reiterated its
EPS guidance for fiscal year 2004 in the range of $1.40 to $1.50, excluding the
effect of the restructuring actions, discontinued operations associated with
restructurings, and related goodwill write-offs (estimated at $(0.48), $(0.11)
and $(0.26), respectively). On a
reported basis and including the estimated restructuring charges and goodwill
write-off, EPS guidance is in the range of $0.55 to $0.65.
On an ongoing business
basis, roughly 30 percent of the fiscal year earnings are expected in the
first half of the year, with 50 percent in the third quarter, and
20 percent in the fourth quarter.
Monsanto also reiterated
that free cash flow generation for fiscal year 2004 is expected to be in the
range of $350 million to $400 million.
The company expects net cash provided by operations to be in the range
of $540 million to $570 million, and net cash required by investing
activities to be in the range of $170 million to $190 million.
2003 Calendar Year
Earnings and Free Cash Flow Outlook:
Management intends to report
summary earnings and cash flow information for the periods ended Dec. 31, 2003,
so that the company’s progress toward meeting its original 2003 financial
commitments can be tracked. The company
intends to release this 2003 12-month information on Feb. 4, 2004.
The 2003 calendar-year EPS
guidance remains in the range of $1.30 to $1.40 per share, and excludes the
following:
-
$(0.96) charge associated with Monsanto’s
contribution to the settlement of Solutia’s PCB litigation in Anniston,
Alabama
-
$(0.26) charge for the write-off of goodwill
associated with the global wheat business
-
Net restructuring charges estimated at $(0.16),
$(0.09) of which is associated with discontinued operations
-
$(0.05) charge related to asset retirement
obligations
Including these items, the
company’s reported 2003 calendar year EPS guidance is expected to be a loss in
the range of $(0.03) to $(0.13) per share.
Management also said that it
now expects to generate free cash flow in the 2003 calendar year of
approximately $200 million. Net cash
provided by operations is expected to be approximately $410 million, and net
cash (required) by investing activities is expected to be approximately $(210)
million.
Monsanto
Company is a leading global provider of technology-based solutions and
agricultural products that improve farm productivity and food quality.
Roundup, YieldGard and Roundup Ready 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
(Dollars in millions, except per share amounts)
Unaudited
|
Condensed Statement of
Consolidated Operations
|
Three Months
Ended
Nov. 30, 2003
|
Three Months
Ended
Nov. 30, 2002
|
|
Net Sales
|
$1,028
|
$
846
|
|
Cost of Goods Sold
|
560
|
496
|
Gross
Profit
|
468
|
350
|
|
Operating Expenses:
|
|
|
|
Selling, General and Administrative Expenses
|
277
|
217
|
|
Bad-Debt Expense
|
18
|
20
|
|
Research and Development Expenses
|
116
|
116
|
|
Adjustments of Goodwill
|
69
|
—
|
|
Restructuring Charges
– Net
|
29
|
8
|
Total
Operating Expenses
|
509
|
361
|
|
Loss From
Operations
|
(41)
|
(11)
|
|
Interest Expense – Net
|
17
|
15
|
|
Other Expense (Income) – Net
|
25
|
(1)
|
|
Loss From Continuing Operations
Before Income Taxes
|
(83)
|
(25)
|
|
Income Tax Benefit
|
(6)
|
(8)
|
|
Loss From Continuing Operations
|
(77)
|
(17)
|
|
Discontinued
Operations:
|
|
|
|
Loss From
Operations of Discontinued Businesses (Including Estimated Loss on Disposal
of $29 in
Fiscal Year 2004)
|
(28)
|
(2)
|
|
Income Tax Benefit
|
(8)
|
(1)
|
Loss On Discontinued Operations
|
(20)
|
(1)
|
|
Net Loss
|
$ (97)
|
$ (18)
|
|
EBIT (1)
|
$ (66)
|
$ (10)
|
|
Basic and
Diluted Loss Per Share:
|
|
|
|
Loss
From Continuing Operations
|
$ (0.29)
|
$ (0.07)
|
|
Loss On Discontinued Operations
|
(0.08)
|
—
|
Net Loss
|
$ (0.37)
|
$ (0.07)
|
|
|
|
|
|
Shares
Outstanding:
|
|
|
|
Basic and Diluted Shares
|
262.1
|
261.4
|
Monsanto Company
and Subsidiaries
Selected
Financial Information
(Dollars in
millions)
Unaudited
|
Condensed
Statement of Consolidated Financial Position
|
As of
Nov. 30, 2003
|
As of
Aug. 31, 2003
|
|
Assets
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
Cash and Cash Equivalents
|
$ 1,036
|
$ 281
|
|
Short-Term Investments
|
—
|
230
|
|
Trade Receivables – Net of
Allowances of $268 and
$254, respectively
|
1,586
|
2,296
|
|
Inventories
|
1,373
|
1,230
|
|
Assets of Discontinued
Operations
|
32
|
—
|
|
Other Current Assets
|
829
|
925
|
|
|
4,856
|
4,962
|
|
|
|
|
|
Property, Plant and Equipment –
Net
|
2,228
|
2,280
|
|
Goodwill – Net
|
716
|
768
|
|
Other Intangible Assets – Net
|
516
|
571
|
|
Other Assets
|
867
|
880
|
|
Total Assets
|
$9,183
|
$9,461
|
|
|
|
|
|
Liabilities and Shareowners’ Equity
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
Short-Term Debt
|
$ 288
|
$ 269
|
|
Accounts Payable
|
290
|
290
|
|
PCB Litigation Settlement Liability
|
—
|
400
|
|
Liabilities of Discontinued Operations
|
3
|
—
|
|
Accrued Liabilities
|
1,225
|
985
|
|
Total Current Liabilities
|
1,806
|
1,944
|
|
|
|
|
|
Long-Term Debt
|
1,222
|
1,258
|
|
Postretirement and Other
Liabilities
|
1,082
|
1,103
|
|
Shareowners’ Equity
|
5,073
|
5,156
|
Total
Liabilities and Shareowners’ Equity
|
$9,183
|
$9,461
|
|
|
|
|
|
Debt to Capital Ratio:
|
23%
|
23%
|
Monsanto
Company and Subsidiaries
Selected
Financial Information
(Dollars in
millions)
Unaudited
|
Statement of Consolidated Cash Flows
|
Three
Months Ended
Nov. 30,
2003
|
Three
Months Ended
Nov. 30,
2002
|
|
Operating Activities:
|
|
|
|
Net Loss
|
$ (97)
|
$ (18)
|
|
Adjustments to reconcile cash provided (required)
by operations:
|
|
|
|
Items that
did not require (provide) cash:
|
|
|
|
Depreciation
and amortization expense
|
114
|
109
|
|
Adjustments of goodwill
|
69
|
—
|
|
Impairment of assets included in discontinued operations
|
29
|
—
|
|
Bad-debt expense
|
18
|
20
|
|
Noncash restructuring
|
13
|
8
|
|
Deferred
income taxes
|
139
|
(27)
|
|
Equity affiliate expense – net
|
11
|
10
|
|
Write-off of retired assets
|
4
|
8
|
|
Other
items that did not provide cash
|
(4)
|
(21)
|
|
Changes in assets and liabilities that
provided (required) cash:
|
|
|
|
Trade
receivables
|
981
|
706
|
|
Inventories
|
(123)
|
(107)
|
|
Accounts
payable and accrued liabilities
|
(72)
|
29
|
|
PCB litigation settlement liability
|
(400)
|
—
|
|
Pension contributions
|
(25)
|
(10)
|
|
Related-party
transactions
|
—
|
10
|
|
Other
Items
|
4
|
12
|
|
Net Cash Provided by Operations
|
661
|
729
|
|
|
|
|
|
Cash Flows Provided
(Required) by Investing Activities:
|
|
|
|
Maturities of short-term investments
|
230
|
—
|
|
Technology and other investments
|
(11)
|
(15)
|
|
Capital expenditures
|
(51)
|
(54)
|
|
Property disposal proceeds
|
7
|
—
|
|
Net Cash Provided (Required) by Investing Activities
|
175
|
(69)
|
|
|
|
|
|
Cash Flows Provided
(Required) by Financing Activities:
|
|
|
|
Net change in short-term financing
|
(73)
|
(426)
|
|
|
|
|
|
|
|
|
|
Payments on other financing
|
(1)
|
(5)
|
|
Treasury stock purchases
|
(55)
|
—
|
|
Stock option exercises
|
28
|
—
|
|
Dividend payments
|
(34)
|
(31)
|
|
Net Cash Required by Financing Activities
|
(81)
|
(468)
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents Beginning of Period
|
281
|
137
|
|
Cash and Cash Equivalents at End of Period
|
$ 1,036
|
$ 329
|
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) from continuing operations before 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
(GAAP) in the United States. The
following tables reconcile historical EBIT and free cash flow to the respective
most directly comparable financial measure calculated in accordance with GAAP.
Reconciliation
of EBIT to Loss From Continuing Operations:
|
Total Monsanto Company and Subsidiaries:
|
Three Months
Ended
Nov. 30, 2003
|
Three Months
Ended
Nov. 30, 2002
|
|
|
|
|
|
EBIT –
Seeds and Genomics Segment
|
$ (96)
|
$ 45
|
EBIT – Agricultural Productivity Segment
|
30
|
(55)
|
|
EBIT – Total Company
|
$ (66)
|
$ (10)
|
|
Interest
Expense – Net
|
(17)
|
(15)
|
|
Income
Tax Benefit
|
6
|
8
|
|
Loss
From Continuing Operations
|
$ (77)
|
$ (17)
|
Reconciliation
of Free Cash Flow:
|
Total Monsanto Company and Subsidiaries:
|
Three Months
Ended
Nov. 30, 2003
|
Three Months
Ended
Nov. 30, 2002
|
|
|
|
|
|
Net
Cash Provided by Operations
|
$ 661
|
$ 729
|
Net Cash Provided (Required) by Investing
Activities
|
175
|
(69)
|
|
Free Cash Flow
|
$ 836
|
$ 660
|
|
Net
Cash Required by Financing Activities
|
(81)
|
(468)
|
|
Net
Increase in Cash and Cash Equivalents
|
$ 755
|
$ 192
|
2.
Restructuring:
In October 2003, Monsanto announced plans to continue to reduce the costs
associated with is 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; $43 million of these charges were recorded in
first quarter of fiscal year 2004.
In 2002,
Monsanto’s management approved a restructuring plan to further consolidate or
shut down facilities and to reduce work force.
For the three months ended Nov. 30, 2002, Monsanto recorded a net charge
of $9 million aftertax as part of the 2002 restructuring plan.
