St. Louis,
Missouri
March 31, 2004
Download the Results in PDF Format
|
Financial Summary
($ in
millions, except per share) |
Second Quarter 2004* |
Second Quarter 2003* |
%
Change |
Six
Months 2004* |
Six
Months 2003* |
%
Change |
|
Net
Sales |
$1,492 |
$1,293 |
15% |
$2,520 |
$2,139 |
18% |
|
Net
Income
|
$154 |
$100 |
54% |
$57 |
$82 |
(30)% |
|
Diluted Earnings per Share |
$0.57 |
$0.38 |
50% |
$0.21 |
$0.31 |
(32)% |
* Monsanto’s
fiscal year begins Sept. 1 and ends Aug. 31. References to the
second quarter and first half refer to the three-month and
six-month periods ended Feb. 28 or 29, depending on the year.
·
Quarterly sales increased 15 percent, primarily because of
increased corn seed sales and higher revenues for corn and
soybean traits. Similarly, sales for the first half of fiscal
year 2004 increased 18 percent to $2.5 billion, benefiting from
a shift in timing of Monsanto’s biotechnology trait royalties.
·
Reported net income for the quarter was $154 million, which
includes net restructuring charges of $32 million. For the
first half of the fiscal year, reported net income was
$57 million, including $74 million in net restructuring charges
and $69 million in adjustments of goodwill.
Comment
from Monsanto Chairman, President and Chief Executive Officer
Hugh Grant:
“The growth in
our seeds and traits business in this first half of our 2004
fiscal year – especially in our corn seeds and traits business –
gives us a strong foundation for continued growth. We believe
we have a clear path established to achieve a 10 percent
compounded annual growth rate in earnings per share on an
ongoing business basis for 2005 and 2006.”
Second-Quarter and First-Half 2004 Performance Summary:
Net sales
increased 15 percent to $1.5 billion in the second quarter
primarily because of the continuing growth of the Seeds and
Genomics segment, particularly in the United States. For the
quarter, sales of corn seeds and traits increased 46 percent,
driven by increased sales of branded corn seed in the United
States, Europe and Brazil, and higher trait revenues in the
United States. Sales of soybean seeds and traits also improved,
primarily driven by increased U.S. trait revenues.
Though sales
of branded Roundup herbicide in Brazil improved, net lower sales
of Roundup in the United States led to a slight overall decline
in the Agricultural Productivity segment for the quarter.
For the first
half of 2004, net sales were $2.5 billion, an 18 percent
improvement compared with net sales in the same period last
year. The first-half sales increase was primarily driven by
improvements in the corn and soybean business and a shift in the
timing associated with biotechnology traits revenues, along with
increased sales of Roundup herbicide in Brazil.
Net income and
earnings per share:
On a reported basis, second-quarter fiscal year 2004 net income
was $154 million, or $0.57 per share, compared with net income
of
$100 million, or $0.38 per share for the same period in 2003.
Items affecting comparability for second quarter 2004 included:
·
Net restructuring charges of $(0.12) per share.
·
A $(0.01) per share charge for discontinued operations and
related restructuring.
Items
affecting comparability for the three-month period ending Feb.
28, 2003, included:
·
Net restructuring charges of $(0.08) per share.
·
A $(0.01) per share charge for discontinued operations.
·
A $(0.05) per share charge for an accounting change related to
asset retirement obligations.
The company’s
first-half fiscal year 2004 net income of $57 million, or $0.21
per share, compared with net income of $82 million, or $0.31 per
share, for the same period in 2003.
Items affecting comparability for the first half of fiscal year
2004 included:
·
Net restructuring charges of $(0.19) per share.
·
A $(0.09) per share charge for discontinued operations and
related restructuring.
·
Write-off of goodwill associated with the global wheat business
of $(0.26) per share.
·
A $0.01 per share benefit for non-restructuring discontinued
operations.
Items affecting comparability for
the six-month period ending Feb. 28, 2003, included:
·
Net restructuring charges of $(0.12) per share.
·
A $(0.01) per share charge for discontinued operations.
·
A $(0.05) per share charge associated with an accounting change
related to asset retirement obligations.
Operating
costs:
Research-and-development (R&D) expenses were essentially flat at
$126 million for the second quarter and $242 million for the
first half of fiscal year 2004.
Selling,
general and administrative (SG&A) expenses increased from $241
million to
$275 million for the second quarter 2004, and from $458 million
to $552 million for the first half of fiscal year 2004. SG&A for
the second quarter includes the expenses associated with the
institution of a value-capture program for Roundup Ready soybean
traits in Brazil. Additionally, the increase includes higher
accruals for employee incentives and other benefit-related
expenses.
Cash flow:
Year-to-date 2004 net cash provided by operations
was $217 million, compared with $801 million through the six
months ended Feb. 28, 2003. Net cash required by investing
activities was $146 million through the first half of the fiscal
year 2004, and
$388 million for the same period in 2003. As a result,
year-to-date free cash flow decreased from $413 million in the
first half of 2003 to $71 million in this year’s first half.
The decrease in free cash flow was driven by payments related to
the Solutia PCB litigation settlement and higher voluntary
pension contributions. (For reconciliation of free cash flow,
see note 1.)
Seeds and
Genomics Segment Detail
|
Product sales
($ in
millions) |
Second Quarter 2004 |
Second Quarter 2003 |
%
Change |
Six
Months 2004 |
Six
Months 2003 |
%
Change |
|
Corn
seed and traits |
$479 |
$327 |
46% |
$665 |
$515 |
29% |
|
Soybean seed and traits |
$308 |
$260 |
18% |
$477 |
$418 |
14% |
|
All
other crops seeds and traits |
$70 |
$60 |
17% |
$100 |
$79 |
27% |
|
TOTAL
Seeds and Genomics |
$857 |
$647 |
32% |
$1,242 |
$1,012 |
23% |
The Seeds and Genomics segment consists of the
global seeds and related trait business, and genetic technology
platforms.
Second-quarter net sales of $857 million for the
Seeds and Genomics segment were approximately one-third higher
than sales recorded in the same period in 2003. Within the
Seeds and Genomics segment, sales of corn seeds and traits were
up 46 percent as a result of increased sales of branded corn
seed in the United States, Europe and Brazil, and higher
revenues from corn traits in the United States. Soybean seeds
and traits increased 18 percent because of higher revenues
associated with soybean traits while branded soybean seeds sales
were relatively flat.
The increase in sales of corn and soybean seeds
and traits, as well as a shift in timing of biotechnology traits
revenues, drove improvements for the first half of 2004, with
overall sales increasing 23 percent in the segment, from $1,012
million in 2003 to $1,242 million in the first half of 2004.
EBIT (earnings from continuing operations before
cumulative effect of accounting change, interest, and income
taxes) for the Seeds and Genomics segment improved by $125
million in the second quarter, to $276 million from $151 million
in the same period in 2003. The EBIT gains within Seeds and
Genomics are due to higher overall sales of seeds and traits,
notably driven by increased penetration of Monsanto’s stacked
corn traits. With continued growth in both corn and soybean
seeds and traits, gross profit for the first half of 2004 for
the Seeds and Genomics segment increased 28 percent compared
with the previous year. The higher allocation of SG&A costs to
the Seeds and Genomics segment, the global wheat goodwill
impairment, and restructuring costs caused a decrease in EBIT
for the first half of fiscal year 2004. (For a reconciliation
of EBIT, see note 1.)
Agricultural
Productivity Segment Detail
|
Product sales
($ in
millions) |
Second Quarter 2004 |
Second Quarter 2003 |
%
Change |
Six
Months
2004 |
Six
Months
2003 |
%
Change |
|
Roundup and other glyphosate-based agricultural herbicides |
$363 |
$373 |
(3)% |
$792 |
$633 |
25% |
|
All
other agricultural productivity products
|
$272 |
$273 |
0% |
$486 |
$494 |
(2)% |
|
TOTAL
Agricultural Productivity |
$635 |
$646 |
(2)% |
$1,278 |
$1,127 |
13% |
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 declined by $11 million, from $646
million in 2003 to $635 million in 2004. For the first half of
fiscal year 2004, Agricultural Productivity sales increased by
$151 million, primarily as a result of increased sales of
branded Roundup herbicide in Latin America.
EBIT (earnings (loss) from continuing operations
before cumulative effect of accounting change, interest, and
income taxes) for the segment was $(16) million for the second
quarter of fiscal year 2004, as compared to $55 million in the
same period last year. The EBIT decline in the quarter was
driven primarily by lower volumes of branded Roundup and a shift
of sales volume to Monsanto’s lower-priced brands of Roundup
herbicide, as expected in the post-patent U.S. market. For the
first half of 2004, EBIT for this segment was $14 million, as
higher sales of branded Roundup herbicide in Brazil offset lower
U.S. sales. The sales growth in the Agricultural Productivity
segment was somewhat offset by higher restructuring expenses and
increased other expenses. (For a reconciliation of EBIT, see
note 1.)
Other Items of
Note:
Monsanto
continues to make progress on a value-capture system for Roundup
Ready soybeans in Brazil for the 2004 season. As of March 31,
Monsanto has completed the major steps to establish the
value-capture system, including developing a grain-based
value-capture concept, signing contracts with the major global
grain handlers, and completing enrollment of local elevators and
processors. With those milestones complete, the company expects
to begin receiving royalty payments in late April as the
Brazilian harvest continues. The company expects the initial
start-up costs associated with this program to offset any
potential additional earnings for Monsanto in fiscal year 2004.
On March 29,
Monsanto announced it had signed a definitive agreement for the
sale of the assets associated with the company’s European wheat
and barley business to the French company, RAGT Genetique, S.A.
Monsanto originally stated its intention to exit the European
wheat and barley breeding business as a part of its October 2003
global restructuring plan.
On Feb. 23,
Monsanto and Syngenta announced an agreement that resolves a
patent interference proceeding in the U. S. Patent and Trademark
Office involving transgenic broadleaf crops and
Agrobacterium-mediated transformation technology. The agreement
dismissed a patent infringement lawsuit brought by Syngenta that
had been pending in the U.S. District Court for the District of
Delaware.
On Feb. 3, the
company won a key patent dispute regarding biotech-gene
technology for protection of plants against insect damage. The
decision by the U.S. Patent and Trademark Office that Monsanto's
scientists were the first to invent this important discovery
ended a nearly eight-year Patent Office dispute with Mycogen
Seeds, a subsidiary of Dow AgroSciences.
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 $14 million in other expenses in
the first half of fiscal 2004 associated with Solutia-related
liabilities and expenses. The company 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, 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:
“With the
North American planting season approaching, most of our seeds
and traits sales are completed, giving us a strong start to our
fiscal year. The primary season is still ahead for our U.S.
Roundup business, and with the expected declines in that
franchise, we believe it’s prudent to maintain our current
full-year guidance, although we do believe our results are
likely to fall in the mid- to high-end of our range of $1.40 to
$1.50 per share for our ongoing business.”
2004
Earnings and Free Cash Flow Outlook:
Monsanto management confirmed the company’s EPS
guidance for fiscal year 2004, expected in the range of $1.40 to
$1.50 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), $(0.13) 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 for the year.
Management reiterated its expectation of
generating free cash flow for fiscal-year 2004 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. (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.
Roundup 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
(In millions, except per share
amounts)
Unaudited
|
Condensed Statement of
Consolidated Operations |
Three Months
Ended
Feb. 29, 2004 |
Three Months
Ended
Feb. 28, 2003 |
Six Months
Ended
Feb. 29, 2004 |
Six Months
Ended
Feb. 28, 2003 |
|
Net
Sales |
$ 1,492 |
$ 1,293 |
$ 2,520 |
$ 2,139 |
|
Cost of
Goods Sold |
744 |
654 |
1,304 |
1,150 |
Gross Profit
|
748 |
639 |
1,216 |
989 |
|
Operating Expenses:` |
|
|
|
|
|
Selling, General and Administrative Expenses |
275 |
241 |
552 |
458 |
|
Bad-Debt Expense |
22 |
14 |
40 |
34 |
|
Research and Development Expenses |
126 |
127 |
242 |
243 |
|
Adjustments of Goodwill |
— |
— |
69 |
— |
|
Restructuring Charges – Net |
28 |
31 |
57 |
39 |
|
Total
Operating Expenses |
451 |
413 |
960 |
774 |
|
Income From Operations |
297 |
226 |
256 |
215 |
|
Interest
Expense – Net |
15 |
19 |
32 |
34 |
|
Other
Expense – Net |
37 |
20 |
62 |
19 |
|
Income From Continuing Operations Before Income Taxes and
Cumulative Effect of Accounting Change |
245 |
187 |
162 |
162 |
|
Income Tax Expense |
89 |
72 |
83 |
64 |
|
Income From Continuing Operations Before Cumulative Effect
of Accounting Change |
156 |
115 |
79 |
98 |
|
Cumulative Effect of a Change in Accounting Principle –
Net of Tax Benefit of $7 (2) |
— |
(12) |
— |
(12) |
Income
From Continuing Operations
|
156 |
103 |
79 |
86 |
|
Discontinued Operations: |
|
|
|
|
|
Loss From Operations of Discontinued Businesses (Including
Estimated Loss on Disposal of $29 for the Six Months Ended
Feb. 29, 2004) |
(3) |
(5) |
(31) |
(7) |
|
Income Tax Benefit |
(1) |
(2) |
(9) |
(3) |
|
Net
Loss On Discontinued Operations |
(2) |
(3) |
(22) |
(4) |
|
Net
Income |
$ 154 |
$ 100 |
$ 57 |
$ 82 |
|
EBIT
(1) |
$ 260 |
$ 206 |
$ 194 |
$ 196 |
|
Basic
Earnings (Loss) Per Share: |
|
|
|
|
|
Income
From Continuing Operations Before Cumulative Effect of
Accounting Change |
$ 0.59 |
$ 0.44 |
$ 0.30 |
$ 0.37 |
|
Cumulative Effect of a Change in Accounting Principle |
— |
(0.05) |
— |
(0.05) |
|
Income
From Continuing Operations |
0.59 |
0.39 |
0.30 |
0.32 |
|
Net Loss
On Discontinued Operations |
(0.01) |
(0.01) |
(0.08) |
(0.01) |
Net Income
|
$ 0.58 |
$ 0.38 |
$ 0.22 |
$
0.31 |
|
|
|
|
|
|
|
Diluted Earnings (Loss) Per Share: |
|
|
|
|
|
Income
From Continuing Operations Before Cumulative Effect of
Accounting Change |
$ 0.58 |
$ 0.44 |
$ 0.29 |
$ 0.37 |
|
Cumulative Effect of a Change in Accounting Principle |
— |
(0.05) |
— |
(0.05) |
|
Income
From Continuing Operations |
0.58 |
0.39 |
0.29 |
0.32 |
|
Net Loss
On Discontinued Operations |
(0.01) |
(0.01) |
(0.08) |
(0.01) |
|
Net
Income |
$ 0.57 |
$ 0.38 |
$
0.21 |
$
0.31 |
|
|
|
|
|
|
|
Shares Outstanding: |
|
|
|
|
|
Basic Shares |
264.3 |
261.4 |
263.2 |
261.4 |
|
Diluted Shares |
268.8 |
261.4 |
267.4 |
261.4 |
Monsanto Company and
Subsidiaries
Selected
Financial Information
(Dollars in
millions)
Unaudited
|
Condensed Statement of
Consolidated Financial Position |
As of
Feb. 29, 2004 |
As of
Aug. 31, 2003 |
|
Assets |
|
|
|
|
|
|
|
Current Assets: |
|
|
|
Cash
and Cash Equivalents |
$
298 |
$
281 |
|
Short-Term Investments |
250 |
230 |
|
Trade Receivables – Net of Allowances of $273 and $254,
respectively |
2,060 |
2,296 |
|
Inventories |
1,316 |
1,207 |
|
Assets of Discontinued Operations |
17 |
— |
|
Other Current Assets |
775 |
925 |
|
|
4,716 |
4,939 |
|
|
|
|
|
Property, Plant and Equipment – Net |
2,198 |
2,280 |
|
Goodwill
– Net |
723 |
768 |
|
Other
Intangible Assets – Net |
508 |
571 |
|
Other
Assets |
817 |
903 |
|
Total
Assets |
$8,962 |
$9,461 |
|
|
|
|
|
Liabilities and Shareowners’ Equity |
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
Short-Term Debt |
$ 365 |
$269 |
|
Accounts Payable |
316 |
290 |
|
PCB
Litigation Settlement Liability |
— |
400 |
|
Liabilities of Discontinued Operations |
3 |
— |
|
Accrued Liabilities |
845 |
985 |
|
Total
Current Liabilities |
1,529 |
1,944 |
|
|
|
|
|
Long-Term Debt |
1,174 |
1,258 |
|
Postretirement and Other Liabilities |
958 |
1,103 |
|
Shareowners’ Equity |
5,301 |
5,156 |
Total Liabilities and
Shareowners’ Equity
|
$8,962 |
$9,461 |
|
|
|
|
|
Debt to
Capital Ratio: |
23% |
23% |
Monsanto
Company and Subsidiaries
Selected
Financial Information
(Dollars in
millions)
Unaudited
|
Statement of Consolidated Cash Flows |
Six
Months Ended
Feb.
29, 2004 |
Six
Months Ended
Feb.
28, 2003 |
|
Operating Activities: |
|
|
|
Net
Income |
$ 57 |
$82 |
|
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 |
|
Depreciation and amortization expense |
228 |
224 |
|
Adjustments of goodwill |
69 |
— |
|
Impairment of assets included in discontinued operations |
29 |
— |
|
Bad-debt expense |
40 |
34 |
|
Noncash restructuring |
33 |
19 |
|
Deferred income taxes |
246 |
(54) |
|
Gain on disposal of investments and property - net |
(5) |
(3) |
|
Equity affiliate expense - net |
20 |
21 |
|
Write-off of retired assets |
4 |
15 |
|
Other items that did not require (provide) cash |
15 |
(19) |
|
Changes in assets and liabilities that
provided (required) cash: |
|
|
|
Trade receivables |
477 |
693 |
|
Inventories |
(79) |
(86) |
|
Accounts payable and accrued
liabilities |
(399) |
(107) |
|
PCB litigation settlement liability |
(400) |
— |
|
Pension contributions |
(150) |
(20) |
|
Related-party transactions |
— |
6 |
|
Other Items |
32 |
(23) |
|
Net Cash
Provided by Operations |
217 |
801
|
|
|
|
|
|
Cash
Flows Provided (Required) by Investing Activities: |
|
|
|
Purchases of short-term investments |
(250) |
(250) |
|
Maturities of short-term investments |
230 |
— |
|
Capital
expenditures |
(103) |
(114) |
|
Technology and other investments |
(33) |
(31) |
|
Property
disposal proceeds |
10 |
7 |
|
Net Cash
Required by Investing Activities |
(146) |
(388) |
|
|
|
|
|
Cash
Flows Provided (Required) by Financing Activities: |
|
|
|
Net
change in short-term financing |
(54) |
(370) |
|
|
|
|
|
|
|
|
|
Payments
on other financing |
(3) |
(10) |
|
Treasury
stock purchases |
(106) |
— |
|
Stock
option exercises |
119 |
— |
|
Dividend
payments |
(68) |
(63) |
|
Net Cash
Required by Financing Activities |
(54) |
(463) |
|
|
|
|
|
|
|
|
|
Cash and
Cash Equivalents at Beginning of Period |
281 |
137 |
|
Cash and
Cash Equivalents at End of Period |
$ 298 |
$87 |
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 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. The following tables reconcile historical
EBIT and free cash flow to the respective most directly
comparable financial measure calculated in accordance with
GAAP. With respect to the projected free cash flow guidance
provided under the caption “2004 Earnings and Free Cash Flow
Outlook,” Monsanto does not include any estimates of projections
of Net Cash Provided (Required) by Financing Activities because
in order to prepare any such estimate or projection, Monsanto
would need to rely on market factors and conditions that are
outside of its control.
Reconciliation of EBIT
to Net Income:
|
Total
Monsanto Company and Subsidiaries: |
Three Months
Ended
Feb. 29, 2004 |
Three Months
Ended
Feb. 28, 2003 |
Six Months
Ended
Feb. 29, 2004 |
Six Months
Ended
Feb. 28, 2003 |
|
|
|
|
|
|
|
EBIT –
Seeds and Genomics Segment |
$276 |
$151 |
$180 |
$196 |
EBIT – Agricultural
Productivity Segment
|
(16) |
55 |
14 |
— |
|
EBIT –
Total Monsanto Company and Subsidiaries |
$260 |
$206 |
$194 |
$196 |
|
Interest
Expense – Net |
15 |
19 |
32 |
34 |
|
Income Tax
Expense |
89 |
72 |
83 |
64 |
|
Income
From Continuing Operations Before Cumulative Effect of
Accounting Change |
$156 |
$115 |
$ 79 |
$ 98 |
|
Cumulative
Effect of a Change in Accounting Principle – Net of Tax
Benefit of $7 |
— |
(12) |
— |
(12) |
|
Income
From Continuing Operations |
$156 |
$103 |
$ 79 |
$ 86 |
|
Discontinued Operations: |
|
|
|
|
|
Loss From Operations of Discontinued Businesses (Including
Estimated Loss on Disposal of $29 for the Six Months Ended
Feb. 29, 2004) |
(3) |
(5) |
(31) |
(7) |
|
Income Tax Benefit |
(1) |
(2) |
(9) |
(3) |
|
Net Loss
On Discontinued Operations |
(2) |
(3) |
(22) |
(4) |
|
Net Income
|
$154 |
$100 |
$ 57 |
$ 82 |
Reconciliation of Free
Cash Flow:
|
Total
Monsanto Company and Subsidiaries: |
Fiscal Year
2004
Target |
Six Months
Ended
Feb. 29, 2004 |
Six Months
Ended
Feb. 28, 2003 |
|
|
|
|
|
|
Net Cash Provided by Operations |
$540-$570 |
$217 |
$801 |
|
Net Cash
Required by Investing Activities |
$(190)-$(170) |
(146) |
(388) |
Free Cash Flow
|
$350-$400 |
$ 71 |
$413 |
Net Cash Required by
Financing Activities
|
N/A |
(54) |
(463) |
Net Increase (Decrease)
in Cash and Cash Equivalents
|
N/A |
$ 17 |
$(50) |
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.
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 core 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 of up to $155 million aftertax in fiscal year 2004;
charges of $75 million aftertax have been recorded in the
first half 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 six months ended Feb. 28, 2003, Monsanto recorded a
net charge of $31 million aftertax as part of the 2002
restructuring plan, including restructuring reversals related
to prior year plans of $12 million.
Loss related
to the restructuring plan items were recorded in the Condensed
Statement of Consolidated Operations in the following
categories:
|
|
Three Months Ended
Feb. 29, 2004 |
Three Months Ended
Feb. 28, 2003 |
Six Months Ended
Feb. 29, 2004 |
Six Months Ended
Feb. 28, 2003 |
|
Cost of Goods Sold |
$ (17) |
$ (4) |
$ (17) |
$ (10) |
|
Restructuring Charges
– Net
(1) |
(28) |
(31) |
(57) |
(39) |
|
Loss
From Continuing Operations Before Income Taxes |
(45) |
(35) |
(74) |
(49) |
|
Income Tax Benefit |
13 |
13 |
24 |
18 |
|
Loss From Continuing Operations |
(32) |
(22) |
(50) |
(31) |
|
Loss On Operations of Discontinued Businesses |
(1) |
— |
(34) |
— |
|
Income Tax Benefit |
1 |
— |
10 |
— |
|
Loss from Discontinued Operations |
— |
— |
(24) |
— |
|
Net
loss |
$ (32) |
$
(22) |
$
(74) |
$
(31) |
(1) The
restructuring charges for the three months ended Feb. 29,
2004, and Feb. 28, 2003, were offset by $1 million and
$8 million, respectively, in restructuring reversals related
to prior plans. Restructuring charges for the six months ended
Feb. 29, 2004, and Feb. 28, 2003, were offset by $2 million
and $12 million, respectively.
For detail
of the restructuring charges related to the fiscal year 2004
restructuring plan, for charges included in continuing
operations and those in discontinued operations, refer to the
following tables. The loss from operations of discontinued
businesses was primarily attributable to the impairment of
other intangible assets related to the European wheat
business.
The following table displays the
net pretax charges incurred by segment for the three months
ended
Feb. 29, 2004:
| |
Segment
|
Work Force
Reductions |
Facility
Closures |
Asset
Impairments |
Total |
| |
Continuing Operations: |
|
|
|
|
| |
Seeds and Genomics |
$ 2 |
$ — |
$
8 |
$ 10 |
| |
Agricultural Productivity |
24 |
— |
12 |
36 |
| |
Total Continuing Operations |
26 |
— |
20 |
46 |
| |
Discontinued Operations: |
|
|
|
|
| |
Seeds and Genomics |
— |
1 |
— |
1 |
| |
Agricultural Productivity |
— |
— |
— |
— |
| |
Total Discontinued Operations |
— |
1 |
— |
1
|
| |
Total Segment:
|
|
|
|
|
| |
Seeds and Genomics
|
2 |
1 |
8 |
11 |
| |
Agricultural
Productivity
|
24 |
— |
12 |
36 |
| |
Total
Restructuring
|
$26 |
$
1 |
$
20 |
$
47 |
The following table displays the
net pretax charges incurred by segment for the six months
ended
Feb. 29, 2004:
| |
Segment
|
Work Force
Reductions |
Facility
Closures |
Asset
Impairments |
Total |
| |
Continuing Operations: |
|
|
|
|
| |
Seeds and Genomics |
$ 12 |
$ — |
$
21 |
$
33 |
| |
Agricultural Productivity |
31 |
— |
12 |
43 |
| |
Total Continuing Operations |
43 |
— |
33 |
76 |
| |
Discontinued Operations: |
|
|
|
|
| |
Seeds and Genomics |
3 |
2 |
29 |
34 |
| |
Agricultural Productivity |
— |
— |
— |
— |
| |
Total Discontinued Operations |
3 |
2 |
29 |
34
|
| |
Total Segment:
|
|
|
|
|
| |
Seeds and Genomics
|
15 |
2 |
50 |
67 |
| |
Agricultural Productivity
|
31 |
— |
12 |
43 |
| |
Total Restructuring
|
$ 46 |
$ 2 |
$ 62 |
$110 |
|
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