($ in millions) |
Third Quarter 2006 |
Third Quarter 2005 |
Nine Months 2006 |
Nine Months 2005 |
Net Sales by Segment |
|
|
|
|
Corn seed and traits |
$ 502 |
$ 431 |
$1,580 |
$1,304 |
Soybean seed and traits |
311 |
204 |
933 |
827 |
Vegetable and fruit seed |
142 |
87 |
415 |
87 |
All other crops seeds and traits |
380 |
336 |
568 |
489 |
TOTAL Seeds and Genomics |
$1,335 |
$1,058 |
$3,496 |
$2,707 |
|
|
|
|
|
Roundup and other glyphosate-based herbicides |
$ 654 |
$ 626 |
$1,630 |
$1,541 |
All other agricultural productivity products |
359 |
356 |
827 |
$ 772 |
TOTAL Agricultural Productivity |
$1,013 |
$ 982 |
$2,457 |
$2,313 |
|
|
|
|
|
TOTAL Net Sales |
$2,348 |
$2,040 |
$5,953 |
$5,020 |
|
|
|
|
|
Gross Profit |
$1,194 |
$1,005 |
$3,068 |
$2,511 |
|
|
|
|
|
Operating Expenses |
$ 619 |
$ 776 |
$1,703 |
$1,622 |
|
|
|
|
|
Interest Expense – Net |
$ 25 |
$ 22 |
$ 63 |
$ 52 |
Other Expense – Net |
$ 34 |
$ 38 |
$ 57 |
$ 373 |
|
|
|
|
|
Net Income |
$ 334 |
$ 47 |
$ 833 |
$ 380 |
|
|
|
|
|
Diluted Earnings per Share |
$ 1.21 |
$ 0.17 |
$ 3.02 |
$ 1.40 |
Items Affecting Comparability – EPS Impact |
|
|
|
|
Solutia-Related Charge |
– |
– |
– |
0.66 |
Tax Benefit on Loss from European Wheat and Barley Business |
– |
– |
– |
(0.39) |
Restructuring Charges – Net |
– |
– |
– |
0.03 |
Seminis & Stoneville In-Process R&D |
– |
0.91 |
– |
0.91 |
Income on Discontinued Operations |
– |
(0.02) |
– |
(0.03) |
Diluted Earnings per Share from Ongoing Business (For the definition of ongoing EPS, see note 1.) |
$ 1.21 |
$ 1.06 |
$ 3.02 |
$ 2.58 |
|
|
|
|
|
Effective Tax Rate (Continuing Operations) |
35% |
76% |
33% |
38% |
Comparison as a Percent of Net Sales: |
Third Quarter 2006 |
Third Quarter 2005 |
Nine Months 2006 |
Nine Months 2005 |
Gross profit |
51% |
49% |
52% |
50% |
Selling, general and administrative expenses (SG&A) |
18% |
18% |
20% |
19% |
Research and development expenses (excluding acquired in-process R&D) |
8% |
8% |
9% |
8% |
Income from continuing operations before income taxes |
22% |
8% |
21% |
9% |
Net income |
14% |
2% |
14% |
8% |
Comment from Monsanto Chairman, President and Chief Executive Officer Hugh Grant:
“Nothing says growth like raising the ceiling on what is possible, and that is exactly the trend we’ve seen in the performance of our seeds and traits business up to this point in the year. This performance sets us on the future trajectory for growth, and enhances our leadership position through the end of the decade.”
Market Conditions
The 2006 crop season
is well under way throughout the
Northern Hemisphere. In the
In the Southern
Hemisphere, the harvest season is
mostly complete. By late May,
farmers in
Operations Update
Monsanto reported
record net sales of $2.3 billion for
the third 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 seeds and
traits revenues in the
The company reported
record net sales of $5.95 billion
through the company’s first three
quarters of fiscal year 2006, which
were 19 percent higher compared with
sales in the first nine months of
last year. Key contributors to the
company’s growth included higher
Monsanto reported net
income of $334 million in the third
quarter of fiscal year 2006, which
was significantly higher than the
same period last year. The increase
in net income for the third quarter
related to higher revenue from the
company’s
Earnings per share (EPS), both on an as-reported and ongoing basis, was $1.21 for the third quarter and $3.02 for the first nine months of the 2006 fiscal year.
Cash Flow
For the first nine months of fiscal year 2006, net cash provided by operating activities was $184 million, compared with $533 million in the same period in 2005. Net cash required by investing activities was $408 million for the first nine months of 2006, compared with net cash required of $1.4 billion for the same period last year. As a result, free cash flow was a use of $224 million for the first nine months of fiscal year 2006, compared with a use of $838 million in the same period in fiscal year 2005. (For a reconciliation of free cash flow, see note 1.) Free cash flow in the first three quarters, when compared with free cash in the same period last year, reflected lower spending on acquisitions which was partially offset by increased working capital requirements, planned higher spending on capital expenditures as well as lower proceeds from short-term securities. Net cash provided by financing activities was $294 million for the first nine months of 2006, compared with net cash provided of $268 million for the same period last year.
Outlook
Monsanto confirmed that its full-year 2006 EPS guidance on an ongoing basis will be in the range of $2.50 to $2.55. The company now expects that its full-year 2006 EPS guidance on an as-reported basis will be in the range of $2.41 to 2.48, following a one-time tax charge associated with repatriated earnings. The company expects to incur the charge in the fourth-quarter of fiscal year 2006. (For a reconciliation of on-going EPS, see note 1.) 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, with net cash provided by operating activities in the range of $1.375 billion to $1.450 billion, and net cash required by investing activities of approximately $550 million. EPS guidance does not reflect the company’s announced two-for-one stock split. (For a reconciliation of free cash flow, see note 1.)
Seeds and Genomics Segment Detail
($ in millions) |
Net Sales |
Gross Profit |
||||||
Seeds and Genomics |
Third Quarter 2006 |
Third Quarter 2005 |
Nine Months 2006 |
Nine Months 2005 |
Third Quarter 2006 |
Third Quarter 2005 |
Nine Months 2006 |
Nine Months 2005 |
Corn seed and traits |
$ 502 |
$ 431 |
$1,580 |
$1,304 |
$257 |
$215 |
$ 948 |
$ 750 |
Soybean seed and traits |
311 |
204 |
933 |
827 |
203 |
115 |
655 |
564 |
Vegetable and fruit seed |
142 |
87 |
415 |
87 |
72 |
42 |
221 |
42 |
All other crops seeds and traits |
380 |
336 |
568 |
489 |
287 |
240 |
390 |
313 |
TOTAL Seeds and Genomics |
$1,335 |
$1,058 |
$3,496 |
$2,707 |
$819 |
$612 |
$2,214 |
$1,669 |
($ in millions) |
Earnings Before Interest & Taxes (EBIT) |
|||
Seeds and Genomics |
Third Quarter 2006 |
Third Quarter 2005 |
Nine Months 2006 |
Nine Months 2005 |
EBIT (For a reconciliation of EBIT, see note 1.) |
$393 |
$4 |
$1,027 |
$510 |
Unusual Items Affecting EBIT |
|
|
|
|
Seminis & Stoneville In-Process R&D |
None |
(248) |
None |
(248) |
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 $1.3 billion for the third quarter of fiscal year 2006, or 26 percent higher than sales in the same period last year.
During the third
quarter of fiscal year 2006, the
company realized increased
Sales from the
Seminis
business also contributed to the
favorable results in the third
quarter. Sales reported in the third
quarter of the 2005 fiscal year were
based only on
Seminis sales from
Sales for the segment were also higher for the first nine months of the 2006 fiscal year compared with sales in the same period last year. Segment sales through the first three quarters were $3.5 billion, or 29 percent higher when compared with segment sales from the same period in fiscal year 2005. The key drivers for growth in the third quarter were also the primary contributors to growth in the first three quarters of the fiscal year.
Agricultural Productivity Segment Detail
($ in millions) |
Net Sales |
Gross Profit |
||||||
Agricultural Productivity |
Third Quarter 2006 |
Third Quarter 2005 |
Nine Months 2006 |
Nine Months 2005 |
Third Quarter 2006 |
Third Quarter 2005 |
Nine Months 2006 |
Nine Months 2005 |
Roundup and other glyphosate-based herbicides |
$ 654 |
$626 |
$1,630 |
$1,541 |
$216 |
$241 |
$502 |
$529 |
All other agricultural productivity products |
359 |
356 |
827 |
772 |
159 |
152 |
352 |
313 |
TOTAL Agricultural Productivity |
$1,013 |
$982 |
$2,457 |
$2,313 |
$375 |
$393 |
$854 |
$842 |
($ in millions) |
Earnings Before Interest & Taxes (EBIT) |
|||
Agricultural Productivity |
Third Quarter 2006 |
Third Quarter 2005 |
Nine Months 2006 |
Nine Months 2005 |
EBIT (For a reconciliation of EBIT, see note 1.) |
$147 |
$191 |
$280 |
$12 |
Unusual Items Affecting EBIT |
|
|
|
|
Pre-tax charge associated with certain liabilities in connection with the Solutia bankruptcy |
None |
None |
None |
(284) |
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 $1 billion for the third
quarter of fiscal year 2006, or 3
percent higher compared with sales
in the same period last year. Higher
sales of Roundup and other
glyphosate-based
herbicides in the
Segment sales through
the first three quarters were $2.5
billion or 6 percent higher than
segment sales in the same period of
fiscal year 2005. Increased volumes
and prices of Roundup herbicides in
the
Gross profit for the
segment in the third quarter was
affected by higher raw material and
energy costs for production of
Roundup and other
glyphosate-based
herbicides, as well as higher
operating costs in
Monsanto Company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality.
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
Statements of Consolidated Operations |
Three Months Ended |
Three Months Ended |
Nine Months Ended |
Nine Months Ended |
Net Sales |
$2,348 |
$2,040 |
$5,953 |
$5,020 |
Cost of Goods Sold |
1,154 |
1,035 |
2,885 |
2,509 |
Gross Profit |
1,194 |
1,005 |
3,068 |
2,511 |
Operating Expenses: |
|
|
|
|
Selling, General and Administrative Expenses |
430 |
367 |
1,173 |
947 |
Research and Development Expenses |
191 |
155 |
532 |
401 |
Acquired In-Process Research and Development |
— |
254 |
— |
266 |
Restructuring Charges (Reversals) – Net |
(2) |
— |
(2) |
8 |
Total Operating Expenses |
619 |
776 |
1,703 |
1,622 |
Income From Operations |
575 |
229 |
1,365 |
889 |
Interest Expense |
35 |
29 |
100 |
78 |
Interest Income |
(10) |
(7) |
(37) |
(26) |
Solutia-Related Expenses |
7 |
7 |
20 |
300 |
Other Expense – Net |
27 |
31 |
37 |
73 |
Income From Continuing Operations Before Income Taxes |
516 |
169 |
1,245 |
464 |
Income Tax Provision |
182 |
128 |
412 |
178 |
Income From Continuing Operations |
334 |
41 |
833 |
286 |
Discontinued Operations: |
|
|
|
|
Income (Loss) From Operations of Discontinued Businesses |
(1) |
4 |
(1) |
6 |
Income Tax Benefit |
(1) |
(2) |
(1) |
(88) |
Income on Discontinued Operations |
— |
6 |
— |
94 |
Net Income |
$334 |
$47 |
$833 |
$380 |
EBIT (See note 1) |
$540 |
$195 |
$1,307 |
$522 |
Basic Earnings per Share: |
|
|
|
|
Income From Continuing Operations |
$ 1.23 |
$ 0.16 |
$ 3.09 |
$ 1.08 |
Income on Discontinued Operations |
— |
0.02 |
— |
0.35 |
Net Income |
$ 1.23 |
$ 0.18 |
$ 3.09 |
$ 1.43 |
|
|
|
|
|
Diluted Earnings per Share: |
|
|
|
|
Income From Continuing Operations |
$ 1.21 |
$ 0.15 |
$ 3.02 |
$ 1.05 |
Income on Discontinued Operations |
— |
0.02 |
— |
0.35 |
Net Income |
$ 1.21 |
$ 0.17 |
$ 3.02 |
$ 1.40 |
|
|
|
|
|
Weighted Average Shares Outstanding: |
|
|
|
|
Basic |
270.8 |
268.0 |
269.6 |
266.4 |
Diluted |
276.1 |
273.8 |
275.5 |
272.3 |
Monsanto Company
Selected Financial Information
(Dollars in millions)
Unaudited
Condensed Statements of Consolidated Financial Position |
As of
|
As of
|
Assets |
|
|
|
|
|
Current Assets: |
|
|
Cash and Cash Equivalents |
$ 595 |
$ 525 |
Short-Term Investments |
22 |
150 |
Trade Receivables – Net of Allowances of $303 and $275, respectively |
2,899 |
1,473 |
Miscellaneous Receivables |
350 |
370 |
Deferred Tax Assets |
339 |
374 |
Inventories |
1,700 |
1,664 |
Assets of Discontinued Operations |
10 |
15 |
Other Current Assets |
76 |
73 |
Total Current Assets |
5,991 |
4,644 |
|
|
|
Property, Plant and Equipment – Net |
2,331 |
2,378 |
Goodwill |
1,467 |
1,248 |
Other Intangible Assets – Net |
1,239 |
1,153 |
Noncurrent Deferred Tax Assets |
582 |
680 |
Other Assets |
499 |
476 |
Total Assets |
$12,109 |
$10,579 |
|
|
|
Liabilities and Shareowners’ Equity |
|
|
|
|
|
Current Liabilities: |
|
|
Short-Term Debt |
$ 666 |
$ 126 |
Accounts Payable |
454 |
525 |
Income Taxes Payable |
284 |
208 |
Accrued Compensation and Benefits |
208 |
273 |
Accrued Marketing Programs |
470 |
457 |
Deferred Revenues |
50 |
43 |
Grower Accruals |
30 |
18 |
Liabilities of Discontinued Operations |
4 |
11 |
Miscellaneous Short-Term Accruals |
589 |
498 |
Total Current Liabilities |
2,755 |
2,159 |
|
|
|
Long-Term Debt |
1,376 |
1,458 |
Postretirement Liabilities |
740 |
732 |
Long-Term Portion of Solutia-Related Reserve |
164 |
184 |
Other Liabilities |
498 |
433 |
Shareowners’ Equity |
6,576 |
5,613 |
Total Liabilities and Shareowners’ Equity |
$12,109 |
$10,579 |
|
|
|
Debt to Capital Ratio: |
24% |
22% |
Monsanto Company
Selected Financial Information
(Dollars in millions)
Unaudited
Statements of Consolidated Cash Flows |
Nine Months Ended |
Nine Months Ended |
Operating Activities: |
|
|
Net Income |
$ 833 |
$ 380 |
Adjustments to Reconcile Cash Provided (Required) by Operations: |
|
|
Items That Did Not Require (Provide) Cash: |
|
|
Depreciation and Amortization Expense |
386 |
348 |
Bad-Debt Expense |
40 |
36 |
Stock-Based Compensation Expense |
47 |
— |
Tax Benefit on Employee Stock Options |
— |
67 |
Excess Tax Benefits from Stock-Based Compensation |
(81) |
— |
Deferred Income Taxes |
159 |
(90) |
Equity Affiliate Expense – Net |
21 |
20 |
Acquired In-Process Research and Development |
— |
266 |
Solutia-Related Charge |
— |
284 |
Other Items That Did Not Require Cash |
30 |
53 |
Changes in Assets and Liabilities That Provided (Required) Cash, Net of Acquisitions: |
|
|
Trade Receivables |
(1,368) |
(917) |
Inventories |
(51) |
(10) |
Accounts Payable and Accrued Liabilities |
176 |
156 |
PCB Litigation Settlement Insurance Proceeds |
21 |
9 |
Solutia-Related Payments |
(23) |
(36) |
Other Items |
(6) |
(33) |
Net Cash Provided by Operating Activities |
184 |
533 |
|
|
|
Cash Flows Provided (Required) by Investing Activities: |
|
|
Purchases of Short-Term Investments |
(21) |
— |
Maturities of Short-Term Investments |
150 |
300 |
Capital Expenditures |
(234) |
(144) |
Acquisitions of Businesses, Net of Cash Acquired |
(185) |
(1,506) |
Technology and Other Investments |
(128) |
(44) |
Other Investment and Property Disposal Proceeds |
10 |
23 |
Net Cash Required by Investing Activities |
(408) |
(1,371) |
|
|
|
Cash Flows Provided (Required) by Financing Activities: |
|
|
Net Change in Financing With Less Than 90-Day Maturities |
448 |
1,154 |
Short-Term Debt Proceeds |
6 |
38 |
Short-Term Debt Reductions |
(26) |
(18) |
Long-Term Debt Proceeds |
4 |
16 |
Long-Term Debt Reductions |
(78) |
(288) |
Payments on Debt Assumed in Seminis Acquisition |
— |
(495) |
Payments on Other Financing |
(5) |
(5) |
Treasury Stock Purchases |
(87) |
(149) |
Stock Option Exercises |
105 |
144 |
Excess Tax Benefits From Stock-Based Compensation |
81 |
— |
Dividend Payments |
(154) |
(129) |
Net Cash Provided by Financing Activities |
294 |
268 |
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents |
70 |
(570) |
Cash and Cash Equivalents at Beginning of Period |
525 |
1,037 |
Cash and Cash Equivalents at End of Period |
$ 595 |
$ 467 |
Monsanto Company
Selected Financial Information
(Dollars in millions)
Unaudited
1. EBIT, Ongoing EPS and Free Cash Flow: The presentations of EBIT, ongoing EPS and free cash flow are 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 EBIT, ongoing EPS and free cash flow to the respective most directly comparable financial measure calculated in accordance with GAAP.
Reconciliation of EBIT to Net Income (Loss): EBIT is defined as earnings (loss) before interest and taxes. Earnings (loss) is intended to mean net income (loss) as presented in the Statements of Consolidated Operations under GAAP. The following table reconciles EBIT to the most directly comparable financial measure, which is net income (loss).
|
Three Months
Ended
May 31, |
Nine Months
Ended
May 31, |
||
2006 |
2005 |
2006 |
2005 |
|
EBIT –
Seeds and Genomics
Segment |
$ 393 |
$ 4 |
$1,027 |
$ 510 |
EBIT –
Agricultural
Productivity Segment
|
147 |
191 |
280 |
12 |
EBIT–
Total |
540 |
195 |
1,307 |
522 |
Interest
Expense – Net |
25 |
22 |
63 |
52 |
Income
Tax Provision(1) |
181 |
126 |
411 |
90 |
Net
Income
|
$ 334 |
$ 47 |
$ 833 |
$ 380 |
(1) Includes the income tax provision from continuing operations and the income tax benefit on discontinued operations.
Reconciliation of Ongoing EPS to EPS: Ongoing EPS is calculated excluding certain after-tax items which Monsanto does not consider part of ongoing operations. The reconciliation of EPS to ongoing EPS for the third quarter and first nine months of fiscal years 2006 and 2005 is included on page 1 of this release.
|
Fourth
Quarter
2006
Target |
Fiscal
Year
2006
Target |
Diluted
Earnings (Loss) per
Share |
$(0.56) -
$(0.59)
|
$2.41 -
$2.48 |
Tax
Charge on Repatriated
Earnings |
$0.07 -
$0.09 |
$0.07 -
$0.09 |
Diluted
Earnings (Loss) per
Share from Ongoing
Business
|
$(0.47) -
$(0.52) |
$2.50 -
$2.55 |
Reconciliation of Free Cash Flow: Free cash flow represents the total of cash flows from operating activities and investing activities, as reflected in the Statements of Consolidated Cash Flows presented in this release. With respect to the projected free cash flow guidance provided under the caption “Outlook,” Monsanto does not include any estimates or 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.
|
Fiscal Year 2006 Target |
Nine Months Ended May 31, |
|
2006 |
2005 |
||
Net Cash Provided by Operating Activities |
$1,375 - $1,450 |
$ 184 |
$ 533 |
Net Cash Required by Investing Activities |
(550) |
(408) |
(1,371) |
Free Cash Flow |
$825 - $900 |
$(224) |
$ (838) |
Net Cash Provided (Required) by Financing Activities |
N/A |
294 |
268 |
Net Increase in Cash and Cash Equivalents |
N/A |
$ 70 |
$ (570) |
Cash and Cash Equivalents at Beginning of Period |
N/A |
$ 525 |
$1,037 |
Cash and Cash Equivalents at End of Period |
N/A |
$ 595 |
$ 467 |