St. Louis, Missouri
June 30, 2004                       

Download the Results in PDF Format  | 1996 - 2004 Monsanto Biotechnology Trait Acreage

* Monsanto’s fiscal year begins Sept. 1 and ends Aug. 31.  References to the third quarter and nine months refer to the three-month and nine-month periods ended May 31. 

·         Quarterly sales increased 14 percent, primarily because of increased sales of Roundup herbicide in most world areas, and higher revenues for Monsanto’s biotech traits in North America.  Sales for the nine months of fiscal year 2004 increased
16 percent to $4.2 billion primarily as a result of higher U.S. seed and trait revenues, increased corn seed sales in Europe, and higher Roundup revenues in most world areas. 

·         Reported net income for the quarter was $252 million, which includes net restructuring income of $18 million (charges of $7 million related to continuing operations and credits of $25 million related to discontinued operations).  For the first nine months of the fiscal year, reported net income was $309 million, including $69 million in adjustments of goodwill and $56 million in net restructuring charges (charges of $57 million related to continuing operations and credits of $1 million related to discontinued operations). 
(For a reconciliation of restructuring, see note 3.)

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

“This has been a good quarter and a good year so far because it has been a good year for agriculture.  But, it’s also been a good year for Monsanto because the strategy we have put in place is working.  We continue to be impressed by the strong performance from our seed and trait business and, even in a very competitive market for our Roundup business, we believe Monsanto is well positioned to meet our growth targets.”

Third-Quarter and Nine-Month 2004 Performance Summary:

Net sales increased 14 percent to $1.7 billion in the third quarter primarily because of strong performance across Monsanto’s business segments, including increased sales of Roundup and continued growth of the Seeds and Genomics segment, particularly in North America.  For the quarter, sales of Roundup and other glyphosate-based herbicides within the Agricultural Productivity segment increased 27 percent, with increased sales in most world areas.  With the increased Roundup sales, net sales for the Agricultural Productivity segment increased 17 percent for the quarter.

Sales in the overall Seeds and Genomics segment increased by 11 percent for the quarter driven by higher trait revenues in the United States and Canada, and continued strong sales of branded corn seed in Europe. 

Through the first nine months of fiscal year 2004, net sales were $4.2 billion, a 16 percent improvement compared with net sales in the same period last year.  The sales increase through these three quarters was primarily driven by solid year-to-date performance in the global Roundup business, increased sales of Monsanto’s traits for the U.S. planting season, and improvements in the corn and soybean seed businesses. 

Net income and earnings per share:  On a reported basis, third-quarter fiscal year 2004 net income was $252 million, or $0.93 per share, compared with net income of
$174 million, or $0.66 per share for the same period in 2003. 

            Items affecting comparability for quarter ending May 31, 2004, included:

·         Net restructuring charges of $(0.03) per share.

·         A net $0.09 per share benefit from discontinued operations from the sale of the European wheat and barley business because of higher sales value for the business than originally anticipated and lower employee-related costs.

·         A $(0.01) per share charge for other discontinued operations.

Items affecting comparability for the three-month period ending May 31, 2003, included:

·         A $(0.02) per share charge for discontinued operations.

Net income for the first nine months of fiscal year 2004 was $309 million, or $1.15 per share, compared with net income of $256 million, or $0.98 per share, for the same period in 2003. 

            Items affecting comparability for the first nine months of fiscal year 2004 included:

·         Net restructuring charges of $(0.21) per share.

·         Write-off of goodwill associated with the global wheat business of $(0.26) per share.

Items affecting comparability for the nine-month period ending May 31, 2003, included:

·         Net restructuring charges of $(0.12) per share.

·         A $(0.03) per share charge for discontinued operations.

·         A $(0.05) per share charge associated with an accounting change related to asset retirement obligations. 

Both the third-quarter and the nine-month results also are benefiting from a lower tax rate resulting from a one-time benefit from a favorable adjustment to the company’s income tax reserve following resolution with the Internal Revenue Service concerning several tax issues.  For the quarter, the effective tax rate was approximately 24 percent compared to approximately 33 percent for the same period in 2003.  For the nine-month period, the effective rate was approximately 34 percent, compared to approximately 35 percent for 2003.

Operating costs:  Research-and-development (R&D) expenses increased 9 percent to $128 million for the third quarter of fiscal year 2004 and increased 3 percent to $370 million through the first nine months of fiscal year 2004 when compared with the same periods in 2003.  As a percent of sales, R&D expenses for fiscal year 2004 have decreased for both the quarter and nine-month period when compared with the same periods in 2003.

Selling, general and administrative (SG&A) expenses decreased 3 percent to $291 million for the third quarter of fiscal year 2004, while increasing by 11 percent to $843 million for the first nine months of fiscal year 2004.  SG&A for the third quarter includes reductions in spending in the North American commercial organization and in administrative support.  The year-to-date SG&A increase includes higher accruals for employee incentives and other benefit-related expenses, and expenses associated with the institution of a value-capture program for Roundup Ready soybean traits in Brazil. 

For the third quarter and first nine months of 2004, bad-debt expense increased as the company continues to manage unfavorable economic and business conditions in Argentina.  The increase in bad-debt expense primarily reflects an increase in the allowance for estimated uncollectible receivables in Argentina.

Other expense: For third quarter fiscal year 2004, Monsanto reported net other expense of $52 million compared with $21 million for the same period in 2003.  Net other expenses for third-quarter fiscal year 2004 includes $29 million associated with Solutia-related liabilities and expenses.  For the first nine months of fiscal year 2004, other expense increased to $114 million from $40 million in 2003.  Monsanto has reported $43 million in other expenses in the first nine months of fiscal 2004 associated with Solutia-related liabilities and expenses.  Monsanto intends to file claims to recover some of these expenses through Solutia’s bankruptcy proceedings.

Cash flow:  Year-to-date 2004 net cash provided by operations was $112 million, compared with $554 million through the nine months ended May 31, 2003.  Net cash provided by investing activities was $60 million through the first nine months of fiscal year 2004, which reflects the timing of the maturity of short-term investments of $480 million, offset by purchases of short-term investments of $250 million.  For the same period in 2003, net cash required by investing activities was $195 million.  As a result, year-to-date free cash flow decreased from $359 million through the nine-month period ended May 31, 2003, to $172 million in the first nine months of fiscal year 2004.  The decrease in free cash flow was driven by payments related to the Solutia PCB litigation settlement and higher voluntary pension contributions in fiscal year 2004.  (For reconciliation of free cash flow, see note 1.)

Seeds and Genomics Segment Detail

The Seeds and Genomics segment consists of the global seeds and related traits business, and genetic technology platforms. 

Third-quarter net sales of $681 million for the Seeds and Genomics segment were
11 percent higher than sales recorded in the same period in 2003.  Within the Seeds and Genomics segment, sales of corn seeds and traits were up 9 percent as a result of increased sales of branded corn seed in Europe and higher revenues from corn traits in North America.  The company also reported higher revenue for its U.S. branded soybean seeds sales.  Increased revenues from cotton traits and sales of canola traits in Canada were also key factors contributing to a 14 percent increase for all other crops seeds and traits in this segment.

The higher penetration of Monsanto’s germplasm and traits, and increased revenues for corn and soybean traits drove the improvements for the first nine months of fiscal year 2004, with overall sales increasing 18 percent in the segment to $1,923 million in the first nine months of fiscal year 2004 from $1,624 million for the comparable period in 2003. 

EBIT (earnings from continuing operations before cumulative effect of accounting change, interest, and income taxes) for the Seeds and Genomics segment improved by $14 million in the third quarter, to $161 million from $147 million in the same period in 2003.  The EBIT gains within Seeds and Genomics reflect higher overall sales of seeds and traits.  The higher allocation of SG&A costs to the Seeds and Genomics segment, the global wheat goodwill impairment, higher bad-debt expense, increased R&D expenses, and restructuring costs caused a slight decrease in EBIT for the nine-month period to $341 million in fiscal year 2004 from $343 million in 2003.  (For a reconciliation of EBIT, see note 1.)

Agricultural Productivity Segment Detail

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 for the quarter increased 17 percent to $998 million in fiscal year 2004, reflecting strong sales of Roundup herbicide in most world areas. 

For the first nine months of fiscal year 2004, Agricultural Productivity sales increased
15 percent to $2.3 billion, primarily driven by increased sales of branded Roundup herbicide globally.  In the first nine months, sales of all other agricultural productivity products increased 1 percent to $896 million, with sales increases for lawn-and-garden herbicides being partially offset by decreased sales in the company’s animal agriculture business.

EBIT (earnings from continuing operations before cumulative effect of accounting change, interest, and income taxes) for the segment was $163 million for the third quarter of fiscal year 2004, compared with $137 million in the same period last year.  For the first nine months of fiscal year 2004, EBIT for this segment was $177 million compared with
$137 million in the same period in 2003.  The EBIT improvement reflects increased sales of Roundup herbicide in most world areas as well as the lower allocation of SG&A costs to the Agricultural Productivity segment.  The earnings from the sales growth in the Agricultural Productivity segment was somewhat offset by increased other expenses and higher restructuring expenses.  (For a reconciliation of EBIT, see note 1.)

Other Items of Note:

In early June, Monsanto’s YieldGard Plus insect-protected corn technology completed all necessary regulatory steps in Japan.  This technology, which combines protection against the corn rootworm and the European corn borer, can be seen by growers through an extensive demonstration program in the United States during the 2004 season, with a broad U.S. launch planned for the 2005 season.

On May 21, the Supreme Court of Canada ruled in favor of Monsanto that Mr. Percy Schmeiser and Schmeiser Enterprises Ltd. of Bruno, Saskatchewan, infringed a patent held by Monsanto for Roundup Ready canola, upholding the right of Monsanto to patent biotechnology traits for agricultural use. 

On May 20, Monsanto announced that it is seeking the right to terminate its licensing agreements with Delta and Pine Land Company (D&PL) because of long-standing unresolved business disputes. Monsanto filed its request with the American Arbitration Association after several attempts to resolve issues directly with D&PL during the past two years failed.

On May 13, Dow AgroScience (DAS) dismissed with prejudice a 1995 lawsuit, originally filed by Mycogen Plant Genetics Inc., now owned by DAS, related to biotech-gene technology for protection of plants against insect damage. The abandonment of the litigation followed an earlier determination by the U.S. Patent and Trademark Office, confirming Monsanto’s scientists were the first to invent this important technology.

On May 12, Monsanto filed suit against Syngenta for infringement of Monsanto’s patent covering the fundamental technique used in producing glyphosate-tolerant plants, including the GA21 glyphosate-tolerance trait in corn.

On April 26, the U.S. Environmental Protection Agency extended the registrations of Monsanto’s YieldGard Rootworm corn product and Bollgard II insect-protected cotton technology through the 2006 growing season. This extension enables Monsanto and licensed seed companies to sell these respective technologies through this period.

On Dec. 17, 2003, Solutia Inc. and 14 of its U.S. subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York.  Subsequently, Solutia notified Pharmacia Corporation and Monsanto that it was repudiating its obligation to defend certain litigation that Solutia had been managing and to perform certain environmental remediation obligations under its 1997 spinoff agreement.  Monsanto believes Solutia remains obligated to perform on its liabilities unless and until discharged from such obligations by the Bankruptcy Court.  Monsanto has reported $43 million in other expenses in the first nine months of fiscal 2004 associated with Solutia-related liabilities and expenses.  Monsanto intends to file claims to recover some of the expenses through Solutia’s bankruptcy proceedings.

Other supplemental data to this news release, including slides that accompany the company’s financial results conference call and estimated acreage planted with Monsanto’s biotech traits in 2004, can also be found in the Financial Reports section under the investor information page of the company’s web site at:    www.monsanto.com.  

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

“The strength of our seeds and traits business has created a platform for our growth.  Even as we’ve been able to increase our earnings expectations, creating a higher base, we believe the growth opportunity in our seeds and traits business will allow us to meet our target of compounded annual growth of 10 percent for EPS from ongoing business in fiscal years 2005 and 2006 from our fiscal year-end 2004 base.”

2004 Earnings and Free Cash Flow Outlook:

On June 21, Monsanto management announced an increase in the company’s EPS guidance for fiscal year 2004, expected in the range of $1.55 to $1.60 on an ongoing basis, excluding the effect of the restructuring actions, discontinued operations associated with restructurings, and related goodwill write-offs related to the global wheat business (estimated at $(0.46), $(0.04) 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 $0.79 to $0.84 for the year. 

The company expects free cash flow will reach the $500 million level for the 2004 fiscal year.  Net cash provided by operations is expected to be in the range of $750 and net cash required by investing activities to be in the range of $250 million.  (For a reconciliation of free cash flow guidance, see note 1.)

Monsanto Company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality.

Notes to editors: Roundup, YieldGard, Roundup Ready, GA21 and Bollgard are trademarks owned by Monsanto Company and its wholly owned subsidiaries.

References to "Roundup" herbicides mean Roundup branded and other branded glyphosate-based herbicides, excluding all lawn-and-garden herbicides; references to "Roundup and other glyphosate-based herbicides” mean both branded and nonbranded glyphosate-based herbicides, excluding all lawn-and-garden herbicide products.

Download the Results in PDF Format  | 1996 - 2004 Monsanto Biotechnology Trait Acreage