Comparison as a Percent of Net
Sales: |
Second Quarter 2006 |
Second
Quarter 2005 |
Six Months
2006 |
Six
Months
2005 |
Gross profit |
56% |
53% |
52% |
51% |
Selling, general and
administrative expenses (SG&A) |
18% |
16% |
21% |
19% |
Research and development expenses
(excluding acquired in-process R&D) |
8% |
7% |
9% |
8% |
Income from continuing operations
before income taxes |
29% |
28% |
20% |
10% |
Net income |
20% |
20% |
14% |
11% |
Comment from Monsanto Chairman, President and Chief
Executive Officer Hugh Grant:
“Our business performed solidly in the first
half of this fiscal year. Our second-quarter results, which
serve as a key contributor to our overall fiscal year
performance, were strong based on greater adoption of our
corn seed and traits, and the addition of our Seminis
business. These businesses are contributing nicely to our
overall portfolio and should help us build positive momentum
as we head into the crop season in the United States – the
largest market for our business.
“We continue to see strong adoption of our
corn seed and traits offerings, including our stacked-trait
products which allow farmers to get more benefits out of a
single seed. This adoption, in combination with our breeding
efforts, has our business poised for market share gains in
the U.S. corn seed market for a fifth consecutive year.”
Market
Conditions
Farmers in the United States are gearing up
for the 2006 crop season, both taking delivery of their crop
inputs as well as evaluating their field conditions and
planting windows. Over the next two months, U.S. farmers are
slated to plant their corn hybrids, as well as their soybean
and cotton varieties. Pre-season estimates from the U.S.
Department of Agriculture (USDA) suggest that corn will be
planted on 78 million acres, soybeans will be planted on
more than 76 million acres and cotton will be planted on
more than 14 million acres. Ultimately, the number of acres
may change based on weather conditions and other variables
related to planting.
In the Southern Hemisphere, the harvest
season is under way. In Brazil, a consensus of industry
sources note that soybean farmers are nearly halfway through
their harvest by the first week of April. Soybean farmers in
Argentina have also started harvesting beans, and estimates
suggest that they will reach the mid-point by early May.
Following last season’s drought in parts of South America,
the late-season rains are expected to have provided some
benefit to this year’s production.
Operations
Update
Monsanto reported record net sales of $2.2
billion for the second quarter of fiscal year 2006, which
were 15 percent higher than sales in the same period in
fiscal year 2005. Key drivers for the quarter were increased
corn seed and traits revenues in the United States, as well
as the addition of revenues from the Seminis vegetable and
fruit seed business, which was not part of the company’s
operations during this period last year. Increased sales in
the current quarter were partially offset by lower sales of
Roundup and other glyphosate-based herbicides in the
Europe-Africa and Asia-Pacific regions.
Record net sales in the company’s first and
second quarters of fiscal year 2006 resulted in record
year-to-date sales, which were 21 percent higher compared
with sales in the same period last year. Key contributors to
the company’s organic growth included higher U.S. corn seed
and traits revenues and stronger purchases of Roundup
herbicides in the United States and Argentina. The addition
of revenue from the Seminis business was also a key driver
for the increase in the first six months.
Monsanto recorded higher net income for the
second quarter of fiscal year 2006, which was 18 percent
higher than net income in the same period last year. Higher
revenue from the company’s U.S. corn seed and traits
business contributed to the net income increase in the
second quarter. Net income for the first six months of
fiscal year 2006 was 50 percent higher than net income in
the same period last year.
Earnings per share (EPS), both on an
as-reported and ongoing basis, was $1.60 for the second
quarter and $1.82 for the first six months of the 2006
fiscal year.
Cash Flow
For the first half of fiscal year 2006, net
cash provided by operating activities was $331 million,
compared with $453 million in the same period in 2005. Net
cash required by investing activities was $466 million for
the first six months of 2006, compared with net cash
provided of $47 million for the same period last year. As a
result, free cash flow was $(135) million for the first half
of fiscal year 2006, compared with $500 million in the same
period in fiscal year 2005. (For a reconciliation of free
cash flow, see note 1.) The first-half decrease, when
compared with free cash in the same period last year, was
related to lower proceeds from maturities of short-term
securities,
lower accrued liabilities because of timing
of tax payments, higher spending on capital and investments
as well as greater receivables from increased
seed and traits revenue. Net cash provided by
financing activities was $191 million for the first six
months of 2006, compared with net cash required of $441
million for the same period last year.
Outlook
Monsanto confirmed that its full-year 2006
EPS guidance, both on a reported and ongoing basis, will be
toward the upper end of its previously announced range of
$2.35 to $2.50. The company also confirmed that its guidance
for free cash flow in fiscal year 2006 remains in the range
of $825 million to $900 million. The company confirmed that
in fiscal year 2006 it expects net cash provided by
operating activities to be in the range of $1.375 billion to
$1.450 billion, and net cash required by investing
activities to be approximately $550 million. Free cash flow
guidance excludes cash that may be used for a rights
offering in connection with the bankruptcy proceedings of
Solutia, Inc. Monsanto’s current guidance also does not
reflect any equity in Solutia, Inc., that the company may
receive as a result of the bankruptcy process. (For a
reconciliation of free cash flow, see note 1.)
Seeds and
Genomics Segment Detail
($ in millions) |
Net Sales |
Gross Profit |
Seeds and Genomics |
Second
Quarter 2006 |
Second Quarter 2005 |
Six Months
2006 |
Six Months
2005 |
Second
Quarter 2006 |
Second Quarter 2005 |
Six Months
2006 |
Six Months
2005 |
Corn seed and traits |
$ 811 |
$ 646 |
$1,078 |
$ 873 |
$538 |
$407 |
$ 691 |
$ 535 |
Soybean seed and traits |
449 |
443 |
622 |
623 |
338 |
334 |
452 |
449 |
Vegetable and fruit seed |
148 |
– |
273 |
– |
86 |
– |
149 |
– |
All other crops seeds and traits |
97 |
92 |
188 |
153 |
47 |
34 |
103 |
73 |
TOTAL Seeds and Genomics |
$1,505 |
$1,181 |
$2,161 |
$1,649 |
$1,009 |
$775 |
$1,395 |
$1,057 |
($ in millions) |
Earnings Before Interest & Taxes
(EBIT) |
Seeds and Genomics |
Second Quarter
2006 |
Second
Quarter
2005 |
Six Months
2006 |
Six Months 2005 |
EBIT
(For a reconciliation of EBIT,
see note 1.) |
$615 |
$492 |
$634 |
$506 |
Unusual Items Affecting EBIT |
|
|
|
|
Restructuring charges – net |
None |
$ (7) |
None |
$ (7) |
The Seeds and Genomics segment consists of
the company’s global seeds and related traits business, and
genetic technology platforms.
Sales for Monsanto’s Seeds and Genomics
segment were $1.5 billion for the second quarter of fiscal
year 2006, or 27 percent higher than sales in the same
period last year.
During the second quarter of fiscal year
2006, the company realized increased U.S. corn seed and
traits revenue. The company expects continued growth in the
upcoming planting season from its U.S. corn seed and traits
business, which is poised to gain market share in the U.S.
corn seed market for a fifth consecutive year.
The addition of sales from the Seminis
business also contributed to increased sales in the second
quarter. Seminis sales, which were not part of the company’s
operations in the second quarter last year, were lower
compared with pro forma sales for the same period last year.
First-half sales from Seminis were flat when compared with
pro forma sales for the first six months of fiscal year
2005.
Sales for the segment were also higher for
the first six months of the 2006 fiscal year compared with
sales in the same period last year. First-half segment sales
were $2.2 billion, or 31 percent higher than first-half
segment sales in fiscal year 2005. The key drivers for
growth in the second quarter were also the primary
contributors to growth in the first-half of the fiscal year.
As expected, the second quarter of fiscal
year 2006 also included the continuing effect of an
inventory step-up related to the Seminis acquisition of $12
million for the quarter, and $23 million for the first half
of the 2006 fiscal year.
Agricultural Productivity Segment Detail
($ in millions) |
Net Sales |
Gross Profit |
Agricultural Productivity |
Second
Quarter 2006 |
Second Quarter 2005 |
Six Months
2006 |
Six Months
2005 |
Second
Quarter 2006 |
Second Quarter 2005 |
Six Months
2006 |
Six Months
2005 |
Roundup and other
glyphosate-based herbicides |
$427 |
$480 |
$ 976 |
$ 915 |
$104 |
$137 |
$286 |
$288 |
All other agricultural
productivity products
|
268 |
247 |
468 |
416 |
127 |
103 |
193 |
161 |
TOTAL Agricultural Productivity |
$695 |
$727 |
$1,444 |
$1,331 |
$231 |
$240 |
$479 |
$449 |
($ in millions) |
Earnings Before Interest & Taxes
(EBIT) |
Agricultural Productivity |
Second Quarter
2006 |
Second
Quarter
2005 |
Six Months
2006 |
Six Months 2005 |
EBIT
(For a reconciliation of EBIT,
see note 1.) |
$40 |
$49 |
$133 |
$(179) |
Unusual Items Affecting EBIT |
|
|
|
|
Pre-tax charge associated
with certain liabilities in connection with the
Solutia bankruptcy |
None |
None |
None |
$(284) |
Restructuring charges – net
|
None |
None |
None |
$ (1) |
Income on Discontinued Operations |
None |
$ 2 |
None |
$ 2 |
The Agricultural Productivity segment
consists primarily of crop protection products, the
lawn-and-garden herbicide business, and the company’s animal
agricultural business.
Sales for Monsanto’s Agricultural
Productivity segment were $695 million for the second
quarter of fiscal year 2006, or 4 percent lower compared
with sales in the same period last year. Sales of Roundup
and other glyphosate-based herbicides were down modestly in
the Europe-Africa and Asia-Pacific regions during the
quarter; however, this decrease was partially offset by
higher sales of Roundup herbicide in the United States.
Sales for the segment were higher for the
first six months of the 2006 fiscal year compared with sales
in the same period last year. First-half segment sales were
$1.4 billion or 8 percent higher than first-half segment
sales in fiscal year 2005. Improved sales of Roundup and
other glyphosate-based herbicides in the United States and
Argentina were key drivers for growth in the first half of
the fiscal year. Segment sales in the first half also
benefited from increased sales from the company’s selective
chemistry and dairy businesses.
Webcast Information
In conjunction with this announcement,
Monsanto will hold a conference call at 8 a.m. central time
(9 a.m. eastern time) today. The call will focus on these
results, future expectations and an update of the company’s
U.S. business operations. The call may also include a
discussion of Monsanto’s strategic initiatives, product
performance and other matters related to the company’s
business.
Presentation slides and a simultaneous audio
webcast of the conference call may be accessed by visiting
the company’s web site at
www.monsanto.com and clicking on “Investor Information.”
Visitors may need to download Windows Media Player™
prior to listening to the webcast. Following the live
broadcast, a replay of the webcast will be available on the
Monsanto web site for three weeks.
About Monsanto Company
Monsanto Company is a leading global provider
of technology-based solutions and agricultural products that
improve farm productivity and food quality. For more
information on Monsanto, see
www.monsanto.com.
Roundup is a registered trademark owned by
Monsanto Company and its wholly owned subsidiaries.
References to Roundup herbicides in this
release mean Roundup branded herbicides, excluding
lawn-and-garden herbicide products, and references to
“Roundup and other glyphosate-based herbicides” exclude all
lawn-and-garden herbicides.
Monsanto Company
Selected Financial
Information
(Dollars in millions,
except per share amounts)
Unaudited
Statement of Consolidated
Operations |
Three Months
Ended
Feb. 28, 2006 |
Three Months
Ended
Feb. 28, 2005 |
Six Months
Ended
Feb. 28, 2006 |
Six Months
Ended
Feb. 28, 2005 |
Net Sales |
$2,200 |
$1,908
|
$3,605 |
$2,980 |
Cost of Goods Sold
|
960 |
893 |
1,731 |
1,474 |
Gross Profit |
1,240 |
1,015 |
1,874 |
1,506 |
Operating Expenses: |
|
|
|
|
Selling, General and
Administrative Expenses |
393 |
314 |
743 |
580 |
Research and Development
Expenses |
173 |
127 |
341 |
246 |
Acquired In-Process
Research and Development |
— |
— |
— |
12 |
Restructuring Charges – Net |
— |
7 |
— |
8 |
Total Operating Expenses |
566 |
448
|
1,084 |
846 |
Income From Operations |
674 |
567 |
790 |
660 |
Interest Expense |
33 |
24 |
65 |
49 |
Interest Income |
(13) |
(10) |
(27) |
(19) |
Solutia-Related Expenses |
7 |
9
|
13 |
293 |
Other Expense – Net
|
12 |
19 |
10 |
42 |
Income From Continuing Operations
Before Income Taxes |
635 |
525 |
729 |
295 |
Income Tax Provision |
195 |
154 |
230 |
50 |
Income From Continuing Operations
|
440
|
371 |
499 |
245 |
Discontinued Operations: |
|
|
|
|
Income From Operations of
Discontinued Businesses |
— |
2 |
— |
2 |
Income Tax Benefit |
— |
— |
—
|
(86) |
Income on Discontinued Operations |
— |
2 |
— |
88 |
Net Income
|
$ 440
|
$ 373 |
$ 499 |
$ 333 |
EBIT (See note 1) |
$ 655
|
$ 541 |
$ 767 |
$ 327 |
Basic Earnings per Share: |
|
|
|
|
Income From Continuing Operations
|
$ 1.63 |
$ 1.39 |
$ 1.86 |
$ 0.92 |
Income on Discontinued Operations |
— |
0.01 |
— |
0.33 |
Net Income |
$ 1.63 |
$ 1.40 |
$ 1.86 |
$ 1.25 |
|
|
|
|
|
Diluted Earnings per Share: |
|
|
|
|
Income From Continuing Operations
|
$ 1.60 |
$ 1.36 |
$ 1.82 |
$ 0.90 |
Income on Discontinued Operations |
— |
0.01 |
— |
0.33 |
Net Income
|
$ 1.60 |
$ 1.37 |
$ 1.82 |
$ 1.23 |
|
|
|
|
|
Weighted Average Shares
Outstanding: |
|
|
|
|
Basic |
269.6 |
266.5 |
269.0 |
265.6 |
Diluted |
275.3 |
272.9 |
274.8 |
271.3 |
Monsanto Company
Selected
Financial Information
(Dollars
in millions)
Unaudited
Condensed
Statement of Consolidated Financial Position |
As of
Feb. 28, 2006 |
As of
Aug. 31, 2005 |
Assets |
|
|
|
|
|
Current Assets: |
|
|
Cash and Cash Equivalents |
$ 581 |
$ 525 |
Short-Term Investments |
171 |
150 |
Trade Receivables – Net of
Allowances of $302 and $275, respectively |
2,010 |
1,473 |
Miscellaneous
Receivables |
391 |
370 |
Deferred Tax Assets |
321 |
374 |
Inventories |
1,856 |
1,664 |
Assets of Discontinued
Operations |
10 |
15 |
Other Current Assets |
124 |
73 |
|
5,464 |
4,644 |
|
|
|
Property, Plant and Equipment –
Net |
2,353 |
2,378 |
Goodwill |
1,462 |
1,248 |
Other Intangible Assets – Net |
1,265 |
1,153 |
Noncurrent
Deferred Tax Assets |
610 |
680 |
Other Assets |
449 |
476 |
Total Assets |
$11,603 |
$10,579 |
|
|
|
Liabilities and Shareowners’
Equity |
|
|
|
|
|
Current Liabilities: |
|
|
Short-Term Debt |
$ 566 |
$ 282 |
Accounts Payable |
379 |
369 |
Income Taxes Payable |
163 |
208 |
Accrued Compensation and Benefits |
171 |
273 |
Accrued Marketing Programs |
313 |
457 |
Deferred Revenues |
357 |
43 |
Grower Accruals |
60 |
18 |
Liabilities of Discontinued
Operations |
4 |
11 |
Miscellaneous Short-Term
Accruals |
638 |
498 |
Total Current Liabilities |
2,651 |
2,159 |
|
|
|
Long-Term Debt |
1,378 |
1,458 |
Postretirement Liabilities |
717 |
732 |
Long-Term Portion of
Solutia-Related Reserve |
175 |
184 |
Other Liabilities |
463 |
433 |
Shareowners’ Equity
|
6,219 |
5,613 |
Total Liabilities and
Shareowners’ Equity
|
$11,603 |
$10,579 |
|
|
|
Debt to Capital Ratio: |
24% |
24% |
Monsanto Company
Selected
Financial Information
(Dollars
in millions)
Unaudited
Statement of Consolidated Cash
Flows |
Six Months Ended
Feb. 28, 2006 |
Six Months Ended
Feb. 28, 2005 |
Operating Activities: |
|
|
Net Income
|
$ 499 |
$ 333 |
Adjustments to reconcile cash
provided (required) by operations: |
|
|
Items that did not require
(provide) cash: |
|
|
Depreciation and
amortization expense |
259 |
221 |
Bad-debt expense |
22 |
21 |
Stock-based compensation
expense |
35 |
— |
Tax benefit on employee
stock options |
— |
35 |
Excess tax benefits from
stock-based compensation |
(38) |
— |
Deferred income taxes |
173 |
(143) |
Equity affiliate expense
– net |
15 |
15 |
Solutia-related charge
|
— |
284 |
Other items that did not
require (provide) cash |
(5) |
40 |
Changes in assets and
liabilities that provided (required) cash,
net of acquisitions: |
|
|
Trade receivables |
(64) |
65 |
Inventories |
(207) |
(157) |
Accounts payable and
accrued liabilities |
(353) |
(163) |
PCB litigation settlement
insurance proceeds |
16 |
4 |
Solutia-related payments |
(15) |
(29) |
Other Items |
(6) |
(73) |
Net Cash Provided by Operating
Activities |
331 |
453 |
|
|
|
Cash Flows Provided (Required) by
Investing Activities: |
|
|
Purchases of short-term
investments |
(21) |
— |
Maturities of short-term
investments |
— |
300 |
Acquisitions of businesses, net
of cash acquired |
(179) |
(173) |
Technology and other investments |
(118) |
(20) |
Capital expenditures |
(157) |
(83) |
Other investment and property
disposal proceeds |
9 |
23 |
Net Cash Provided (Required) by
Investing Activities |
(466) |
47 |
|
|
|
Cash Flows Provided (Required) by
Financing Activities: |
|
|
Net change in financing with less
than 90-day maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on other financing |
(4) |
(3) |
Treasury stock purchases |
— |
(74) |
Stock option exercises |
64 |
92 |
Excess tax benefits from
stock-based compensation |
38 |
— |
Dividend payments |
(100) |
(84) |
Net Cash Provided (Required) by
Financing Activities |
191 |
(441) |
|
|
|
|
56 |
59 |
Cash and Cash Equivalents at
Beginning of Period |
525 |
1,037 |
Cash and Cash Equivalents at End
of Period |
$ 581 |
$1,096 |