St. Louis, Missouri
October 10, 2007 Fourth Fourth Fiscal Fiscal
($ in millions) Quarter Quarter Year Year
2007 2006 2007 2006
Net Sales by Segment
Corn seed and traits $364 $212 $2,807 $1,793
Soybean seed and traits 33 27 901 960
Cotton seed and traits 58 52 319 376
Vegetable and fruit seed 168 155 612 569
All other crops seeds and traits 119 85 325 280
TOTAL Seeds and Genomics $742 $531 $4,964 $3,978
Roundup and other glyphosate-based
herbicides $632 $632 $2,568 $2,262
All other agricultural productivity
products 199 227 1,031 1,054
TOTAL Agricultural Productivity $831 $859 $3,599 $3,316
TOTAL Net Sales $1,573 $1,390 $8,563 $7,294
Gross Profit $653 $480 $4,286 $3,519
Operating Expenses $1,008 $662 $2,868 $2,348
Interest Expense - Net $10 $16 $17 $79
Other Expense (Income) - Net $33 $(2) $65 $43
Net (Loss) Income $(210) $(144) $993 $689
Diluted (Loss) Earnings per Share
(See note 1.) $(0.39) $(0.27) $1.79 $1.25
Items Affecting Comparability - EPS
Impact
Loss (Income) on Discontinued
Operations $(0.13) $0.01 $(0.13)
Delta and Pine Land In-Process R&D
Expense $0.34 $0.34
Tax Charge on Repatriated Earnings $0.04 $0.04
Cumulative Effect of Change in
Accounting Principle $0.01 $0.01
Diluted (Loss) Earnings per Share
from Ongoing $(0.18) $(0.21) $2.00 $1.30
Business (For the definition of
ongoing EPS, see note 2.)
Effective Tax Rate (Continuing
Operations) 30% 36% 30% 32%
Fourth Fourth Fiscal Fiscal
Comparison as a Percent of Net Sales: Quarter Quarter Year Year
2007 2006 2007 2006
Gross profit 42% 35% 50% 48%
Selling, general and administrative
expenses (SG&A) 38% 34% 22% 22%
Research and development expenses 14% 14% 9% 10%
Income (Loss) before income taxes and
minority interest (25)% (14)% 16% 14%
Net Income (Loss) (13)% (10)% 12% 9%
Comment from Monsanto Chairman, President and Chief Executive Officer Hugh Grant:
"This year was a benchmark year for our company, as more and more farmers throughout the world rewarded us for the value our products are delivering to their farms. We realized record sales for a fourth consecutive year, made several strategic acquisitions and rewarded shareowners with our largest dividend increase in our history. Our results this year have created a strong foundation for continued earnings growth for our business leading into 2008 and well into the next decade."
Market Conditions
The 2007 harvest season is well under way throughout the Northern Hemisphere. U.S. corn farmers are harvesting what the U.S. Department of Agriculture (USDA) now estimates to be the largest corn crop ever produced, estimated at approximately 13 billion bushels. The USDA currently estimates that this year's corn crop is 42 percent harvested, the cotton crop is 30 percent harvested, and the soybean crop is 50 percent harvested.
In South America, farmers are gearing up for planting and during the next several months will be seeding their fields with their crops. Early-season estimates suggest that soybean production in Brazil is expected to remain flat year over year. Meanwhile, farmers in both Brazil and Argentina are expected to increase their plantings of corn as they work to support the growing demand on Latin America export needs.
Operations Update
Monsanto reported record net sales of $1.6 billion for the fourth quarter of fiscal year 2007, which were 13 percent higher than sales in the same period in fiscal year 2006. Key drivers for the quarter were a strong conclusion to the corn seed and traits season in the United States as well as increased corn seed revenues in Argentina and Brazil. Results in the quarter also included results from our Delta and Pine Land (D&PL) cotton business, which included a $186 million in-process research and development (IPR&D) charge.
Monsanto saw record sales of $8.6 billion in the company's fiscal year 2007. The year-to-date sales were 17 percent higher than sales in fiscal year 2006. Key contributors to the company's growth included higher worldwide corn seed and traits revenues, as well as increased sales of Roundup and other glyphosate-based herbicides globally. These results were partially offset by lower revenues from the company's soybean seed and trait business, as farmers reduced the number of acres planted in favor of corn. Results also reflected lower cotton trait revenues, as the total number of acres planted in Australia and the United States were reduced compared with the prior year.
Monsanto reported a net loss of $210 million in the fourth quarter of fiscal year 2007, compared with a reported net loss of $144 million in the same period last year. The increase in the fourth quarter loss related primarily to the D&PL IPR&D charge. For fiscal year 2007, Monsanto reported net income of $993 million which was significantly higher than net income of $689 million in fiscal year 2006.
Loss per share for the fourth quarter was $(0.39) on an as-reported basis, and was $(0.18) on an ongoing basis. Earnings per share (EPS) for fiscal year 2007 were $1.79 on an as-reported basis, and $2.00 on an ongoing basis. (For a reconciliation of ongoing EPS, see page 1. See note 2 for a discussion of ongoing EPS.) As reported EPS results for both periods reflect the effect of discontinued operations for the Stoneville® and NexGen® cottonseed businesses, as well as the D&PL IPR&D charge.
The company's results also reflect a lower tax rate for continuing operations in 2007 primarily resulting from the resolution of several tax audits and the company's ability to use net operating loss carry forwards in Argentina. These positive factors were partially offset by approximately 4 points attributable to non-deductible IPR&D charges associated with the company's recent acquisition of D&PL.
Cash Flow
For fiscal year 2007, net cash provided by operating activities was $1.9 billion, compared with $1.7 billion in the same period in 2006. Net cash required by investing activities was $1.9 billion in fiscal year 2007, compared with net cash required of $625 million for the same period last year. As a result, free cash flow was a use of $57 million for fiscal year 2007, compared with a source of $1 billion in fiscal year 2006. (For a reconciliation of free cash flow, see note 2.) Free cash flow in fiscal year 2007 reflected higher net income and higher spending on acquisitions when compared with fiscal year 2006. Net cash required by financing activities was $583 million for fiscal year 2007, compared with net cash required of $117 million last year.
Outlook
Monsanto said that its full-year 2008 EPS guidance, both on a reported and ongoing basis, is in the range of $2.20 to $2.40. The company's 2008 EPS guidance reflects a projected growth rate of 10 percent to 20 percent from the fiscal year 2007 EPS ongoing base of $2.00 per share.
The company also confirmed guidance for free cash flow for fiscal year 2008 will be in the range of $800 million to $900 million. The company expects net cash provided by operating activities to be in the range of $1.75 billion to $1.85 billion, and net cash required by investing activities to be approximately $950 million for fiscal year 2008. (For a reconciliation of free cash flow, see note 2.)
Monsanto also noted that it expects that SG&A expense as a percent of sales for fiscal year 2008 will be in the range of 20 percent to 21 percent. The company also confirmed that its R&D expenses as a percent of sales for fiscal year 2008 are expected to be approximately 10 percent.
Trait Acreage Report
As part of today's announcement, Monsanto published its year-end report on the company's biotech trait acreage for fiscal year 2007. This report is available on Monsanto's web site at: http://www.monsanto.com/monsanto/layout/investor/company/crop.asp.
Seeds and Genomics Segment Detail
($ in millions) Net Sales Gross Profit
Fourth Fourth Fiscal Fiscal Fourth Fourth Fiscal Fiscal
Seeds and Quarter Quarter Year Year Quarter Quarter Year Year
Genomics 2007 2006 2007 2006 2007 2006 2007 2006
Corn seed
and traits $364 $212 $2,807 $1,793 $178 $71 $1,721 $1,019
Soybean seed
and traits 33 27 901 960 7 12 588 667
Cotton seed
and traits 58 52 319 376 45 46 267 305
Vegetable
and fruit
seed 168 155 612 569 57 75 267 296
All other
crops seeds
and traits 119 85 325 280 72 44 171 146
TOTAL Seeds
and
Genomics $742 $531 $4,964 $3,978 $359 $248 $3,014 $2,433
($ in millions) Earnings Before Interest & Taxes (EBIT)
Fourth Fourth Fiscal Fiscal
Seeds and Genomics Quarter Quarter Year Year
2007 2006 2007 2006
EBIT (For a reconciliation of
EBIT, see note 2.) $(397) $(228) $905 $794
Unusual Items Affecting EBIT
DPL Acquired In-Process R&D $(186) None $(186) None
Income (Loss) on
discontinued operations $50 $(6) $45 $6
Pre-tax Cumulative Effect of
Change in Accounting
Principle None $(5) None $(5)
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 $742 million for the fourth quarter of fiscal year 2007, or 40 percent higher than sales in the same period last year.
During the fourth quarter of fiscal year 2007, the company realized increased revenues from its corn seed and traits business. The key factors for growth included a successful conclusion to the seed and traits season in the United States and strong farmer demand for the company's corn seed products in Argentina and Brazil.
Monsanto realized record segment sales of $5 billion for fiscal year 2007 which were 25 percent higher compared with sales last fiscal year. The key driver for growth in the fiscal year was higher global corn seed and traits revenue. Strong customer demand for the company's branded corn seed products contributed to a sixth consecutive year of market share gains in the U.S. corn seed market for our DEKALB brand. This year the brand gained 4 percentage points.
The increased corn sales for the fiscal year 2007 were partially offset by lower sales of soybean seeds and traits in the United States, as well as lower sales of cotton traits in Australia and the United States. Lower sales in the United States reflect farmer planting trends, while the lower sales in Australia were a result of drought conditions.
Agricultural Productivity Segment Detail
($ in millions) Net Sales Gross Profit
Fourth Fourth Fiscal Fiscal Fourth Fourth Fiscal Fiscal
Agricultural Quarter Quarter Year Year Quarter Quarter Year Year
Productivity 2007 2006 2007 2006 2007 2006 2007 2006
Roundup and
other
glyphosate-
based
herbicides $632 $632 $2,568 $2,262 $219 $146 $854 $648
All other
agricultural
productivity
products 199 227 1,031 1,054 75 86 418 438
TOTAL
Agricultural
Productivity $831 $859 $3,599 $3,316 $294 $232 $1,272 $1,086
($ in millions) Earnings Before Interest & Taxes (EBIT)
Fourth Fourth Fiscal Fiscal
Agricultural Productivity Quarter Quarter Year Year
2007 2006 2007 2006
EBIT (For a reconciliation of
EBIT, see note 2.) $48 $21 $471 $301
Unusual Items Affecting EBIT
Loss on Discontinued
Operations $(2) $(4) $(2) $(5)
Pre-tax Cumulative Effect of
Change in Accounting
Principle None $(4) None $(4)
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 $831 million for the fourth quarter of fiscal year 2007, or 3 percent lower compared with sales in the same period last year. Results in the quarter reflect lower sales from the company's selective chemistry business.
Sales for the segment were $3.6 billion for fiscal year 2007, or 9 percent higher compared with sales in the same period last year. Segment year-to-date sales benefited from higher sales of Roundup and other glyphosate-based herbicides globally primarily in the United States, Brazil, the Europe-Africa region, Asia, Canada and Argentina. Segment sales were partially offset by lower sales from the company's selective chemistry and dairy businesses.
Webcast Information
Presentation slides and a simultaneous audio webcast of the conference call may be accessed by visiting the company's web site at http://www.monsanto.com/investor/. 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 (NYSE: MON) 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 http://www.monsanto.com/.
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 Three Months Three Months 12 Months 12 Months
Consolidated Ended Ended Ended Ended
Operations Aug. 31, Aug. 31, Aug. 31, Aug. 31,
2007 2006 2007 2006
Net Sales $1,573 $1,390 $8,563 $7,294
Cost of Goods Sold 920 910 4,277 3,775
Gross Profit 653 480 4,286 3,519
Operating Expenses:
Selling, General and
Administrative Expenses 596 472 1,895 1,638
Research and Development
Expenses 226 190 780 710
Acquired In-Process Research
and Development 186 - 193 -
Total Operating Expenses 1,008 662 2,868 2,348
Income (Loss) From Operations (355) (182) 1,418 1,171
Interest Expense 43 34 139 134
Interest Income (33) (18) (122) (55)
Solutia-Related Expenses 17 9 40 29
Other Expense (Income) - Net 16 (11) 25 14
Income (Loss) From Continuing
Operations Before
Income Taxes and Minority
Interest (398) (196) 1,336 1,049
Income Tax Provision (Benefit) (119) (70) 402 337
Minority Interest Expense 5 5 12 17
Income (Loss) From Continuing
Operations (284) (131) 922 695
Discontinued Operations:
Income (Loss) From
Operations of Discontinued
Businesses 48 (10) 43 1
Income Tax Provision
(Benefit) (26) (3) (28) 1
Income (Loss) on Discontinued
Operations 74 (7) 71 -
Income (Loss) Before Cumulative
Effect of
Accounting Change (210) (138) 993 695
Cumulative Effect of a Change
Accounting in Principle,
Net of Tax Benefit - (6) - (6)
Net Income (Loss) $(210) $(144) $993 $689
EBIT (See note 2) $(349) $(207) $1,376 $1,095
Basic Earnings (Loss) per
Share:(1)
Income (Loss) From
Continuing Operations $(0.52) $(0.25) $1.70 $1.29
Income (Loss) on
Discontinued Operations 0.13 (0.01) 0.13 -
Cumulative Effect of
Accounting Change - (0.01) - (0.01)
Net Income (Loss) $(0.39) $(0.27) $1.83 $1.28
Diluted Earnings (Loss) per
Share:(1)
Income (Loss) From
Continuing Operations $(0.52) $(0.25) $1.66 $1.26
Income (Loss) on
Discontinued Operations 0.13 (0.01) 0.13 -
Cumulative Effect of
Accounting Change - (0.01) - (0.01)
Net Income (Loss) $(0.39) $(0.27) $1.79 $1.25
Weighted Average Shares
Outstanding:(1)
Basic 545.1 542.8 544.1 540.0
Diluted 545.1 542.8 555.0 551.6
Monsanto Company
Selected Financial Information
(Dollars in millions)
Unaudited
Condensed Statements of Consolidated Financial As of As of
Position Aug. 31, Aug. 31,
2007 2006
Assets
Current Assets:
Cash and Cash Equivalents $866 $1,460
Trade Receivables - Net of Allowances of
$217 and $298, respectively 1,499 1,455
Miscellaneous Receivables 407 344
Deferred Tax Assets 449 390
Inventories 1,719 1,688
Other Current Assets 144 124
Total Current Assets 5,084 5,461
Property, Plant and Equipment - Net 2,656 2,418
Goodwill 2,625 1,522
Other Intangible Assets - Net 1,415 1,229
Noncurrent Deferred Tax Assets 732 625
Other Assets 473 473
Total Assets $12,985 $11,728
Liabilities and Shareowners' Equity
Current Liabilities:
Short-Term Debt, Including Current Portion
of Long-Term Debt $270 $28
Accounts Payable 649 514
Income Taxes Payable 150 234
Accrued Compensation and Benefits 349 295
Accrued Marketing Programs 517 494
Deferred Revenues 260 120
Miscellaneous Short-Term Accruals 880 594
Total Current Liabilities 3,075 2,279
Long-Term Debt 1,150 1,639
Postretirement Liabilities 542 600
Long-Term Portion of Solutia-Related Reserve 119 155
Other Liabilities 594 530
Shareowners' Equity 7,505 6,525
Total Liabilities and Shareowners' Equity $12,985 $11,728
Debt to Capital Ratio: 16% 20%
Monsanto Company
Selected Financial Information
(Dollars in millions)
Unaudited
Statements of Consolidated Cash Flows 12 Months 12 Months
Ended Ended
Aug. 31, Aug. 31,
2007 2006
Operating Activities:
Net Income $993 $689
Adjustments to Reconcile Cash Provided by
Operating Activities:
Items That Did Not Require (Provide) Cash:
Pre-Tax Cumulative Effect of Change in
Accounting Principle - 9
Depreciation and Amortization Expense 527 519
Bad-Debt Expense 70 47
Stock-Based Compensation Expense 73 63
Excess Tax Benefits from Stock-Based
Compensation (83) (98)
Deferred Income Taxes (88) 39
Equity Affiliate Expense - Net 34 31
Acquired In-Process Research and
Development 193 -
Other Items (39) 26
Changes in Assets and Liabilities, Net of the
Effects of Acquisitions:
Trade Receivables (2) 218
Inventories 60 (25)
Accounts Payable and Other Accrued
Liabilities 250 135
Solutia-Related Payments (26) (34)
PCB Litigation Settlement Proceeds 27 27
Net Investment Hedge Settlement (23) (1)
Other Items (112) 29
Net Cash Provided by Operating Activities 1,854 1,674
Cash Flows Provided (Required) by Investing
Activities:
Purchases of Short-Term Investments (59) (171)
Maturities of Short-Term Investments 22 300
Capital Expenditures (509) (370)
Acquisitions of Businesses,
Net of Cash Acquired (1,679) (258)
Technology and Other Investments (54) (147)
Proceeds from Sale of Stoneville and NexGen
Businesses 317 -
Other Investments and Property Disposal Proceeds 51 21
Net Cash Required by Investing Activities (1,911) (625)
Cash Flows Provided (Required) by Financing
Activities:
Net Change in Financing With Less Than 90-Day
Maturities (5) (106)
Short-Term Debt Proceeds 8 6
Short-Term Debt Reductions (8) (39)
Long-Term Debt Proceeds 8 256
Long-Term Debt Reductions (281) (118)
Payments on Other Financing (16) (9)
Treasury Stock Purchases (197) (114)
Stock Option Exercises 83 116
Excess Tax Benefits From Stock-Based
Compensation 83 98
Dividend Payments (258) (207)
Net Cash Required by Financing Activities (583) (117)
Effect of Exchange Rate Changes on Cash and Cash
Equivalents 46 3
Net Increase (Decrease) in Cash and Cash
Equivalents (594) 935
Cash and Cash Equivalents at Beginning of Period 1,460 525
Cash and Cash Equivalents at End of Period $866 $1,460
Monsanto Company
Selected Financial Information
(Dollars in millions)
Unaudited
(1) All earnings per share figures have been adjusted to reflect the
company's two-for-one stock split which was paid on July 28, 2006, in
the form of a 100 percent stock dividend.
(2) 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 12 Months
Ended Ended
Aug. 31 Aug. 31,
2007 2006 2007 2006
EBIT - Seeds and Genomics Segment $(397) $(228) $905 $794
EBIT - Agricultural Productivity
Segment 48 21 471 301
EBIT- Total (349) (207) 1,376 1,095
Interest Expense - Net 10 16 17 79
Income Tax Provision
(Benefit)(A) (149) (79) 366 327
Net Income (Loss) $(210) $(144) $993 $689
(A) Includes the income tax provision (benefit) from continuing
operations, the income tax benefit on minority interest, the income
tax provision (benefit) on discontinued operations, and the income
tax benefit on the cumulative effect of a change in accounting
principle.
Reconciliation of EPS to Ongoing 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 fourth quarter and twelve months ended Aug. 31, 2007 and 2006, is included on page 1 of this release.
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 fiscal year 2008 free cash flow target, 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 12 Months
2008 Ended
Guidance Aug. 31,
2007 2006
Net Cash Provided by Operating Activities $1,750-$1,850 $1,854 $1,674
(950) (1,911) (625)
Net Cash Required by Investing Activities
Free Cash Flow $800-$900 $(57) $1,049
Net Cash Required by Financing Activities N/A (583) (117)
Effect of Exchange Rate Changes on Cash
and Cash Equivalents N/A 46 3
Net Increase (Decrease) in Cash and Cash
Equivalents N/A $(594) $935
Cash and Cash Equivalents at Beginning of
Period N/A $1,460 $525
Cash and Cash Equivalents at End of
Period N/A $866 $1,460
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