St. Louis, Missouri
April 2, 2009
($in millions) Second Second Six Six
Quarter Quarter Months Months
2009 2008 2009 2008
Net Sales by Segment
Corn seed and traits $2,078 $1,747 $2,706 $2,214
Soybean seed and traits 615 455 827 617
Cotton seed and traits 33 40 80 82
Vegetable seeds 209 206 366 336
All other crops seeds and
traits 107 97 162 132
TOTAL Seeds and Genomics $3,042 $2,545 $4,141 $3,381
Roundup and other
glyphosate-based
herbicides $776 $982 $2,135 $1,990
All other agricultural
productivity products 217 200 408 405
TOTAL Agricultural
Productivity $993 $1,182 $2,543 $2,395
TOTAL Net Sales $4,035 $3,727 $6,684 $5,776
Gross Profit $2,521 $2,211 $4,071 $3,250
Operating Expenses $949 $748 $1,751 $1,404
Interest Expense
(Income) - Net $8 $(6) $6 $(4)
Other Expense (Income) - Net $32 $(203) $58 $(184)
Net Income $1,092 $1,129 $1,648 $1,385
Diluted (Loss) Earnings
per Share $1.97 $2.02 $2.96 $2.48
Items Affecting
Comparability - EPS Impact
Income on Discontinued
Operations - $(0.02) $(0.02) $(0.03)
Acquired In-Process R&D
(Aly Participacoes Ltda.) $0.19 - $0.19 -
Solutia Claim Settlement - $(0.23) - $(0.23)
Diluted Earnings per Share
from Ongoing Business (For
the definition of ongoing
EPS, see note 1.) $2.16 $1.77 $3.13 $2.22
Effective Tax Rate
(Continuing Operations) 29% 33% 27% 32%
Comparison as a Percent
of Net Sales: Second Second Six Six
Quarter Quarter Months Months
2009 2008 2009 2008
Gross profit 62% 59% 61% 56%
Selling, general and
administrative expenses
(SG&A) 13% 14% 16% 17%
Research and development
expenses (excluding
acquired in-process R&D) 7% 6% 8% 7%
Income from continuing
operations before income
taxes and minority
interest 38% 45% 34% 35%
Net Income 27% 30% 25% 24%
Comment from Monsanto Chairman, President and Chief Executive Officer Hugh Grant:
"Through the first half of the year, we've done what we had committed to do: We've preserved value across the portfolio, which has allowed us to lift gross profit by 25 percent, margins by 5 percent, and ongoing earnings by 41 percent. We've leveraged our SG&A while maintaining an R&D spend that will allow us to launch two major new products in 2010. That growth, combined with spending and working capital discipline, is keeping us on track for more than 20 percent growth in earnings for the full fiscal year and allowed us to maintain our $1.8 billion guidance for free cash generation."
Operations Update
Monsanto reported record net sales of $4 billion for the second quarter of fiscal year 2009, which were 8 percent higher than sales in the same period in fiscal year 2008. Key drivers for the quarter were increased revenues from the company's U.S. corn and soybean seeds and traits businesses. The results in the quarter were partially offset by lower volumes of Roundup agricultural herbicides. Last year Monsanto saw increased U.S. Roundup volumes in the second quarter ahead of an anticipated price increase. In 2009, sales have returned to more historical patterns, which mean the majority of U.S. branded Roundup volume will move to the third and fourth quarters.
Monsanto saw record sales of $6.7 billion in the first six months of the company's fiscal year 2009. The year-to-date sales were 16 percent higher than sales in the same period in fiscal year 2008. Key contributors to the company's growth included increased revenues from the company's U.S. corn and soybean seeds and traits businesses, as well as higher Roundup sales in Brazil in the first quarter.
Monsanto reported net income of $1.1 billion in the second quarter of fiscal year 2009, down 3 percent from the same period last year. For the first six months of fiscal year 2009, Monsanto reported net income of $1.6 billion, which was 19 percent higher than net income of $1.4 billion realized in the first six months of fiscal year 2008. Both periods were affected by $162 million or $0.19 per share attributable to in-process research and development (IPR&D) charges related to the company's acquisition of Aly Participacoes Ltda. (Aly), which operates the sugarcane breeding and technology companies, CanaVialis S.A. and Alellyx S.A., based in Brazil. In the second quarter and first-half of 2008, Monsanto reported a gain of $210 million pre-tax, or $0.23 per share after-tax, as part of the company's settlement of claims associated with Solutia's emergence from bankruptcy.
The company's selling, general and administrative expenses (SG&A) as a percent of sales in the quarter and for the first half of fiscal year 2009 was down by 1 percentage point. Research and development (R&D) as a percent of sales was up for the quarter and the first six months because of the high level of regulatory activity from bringing multiple new products toward launch and the integration of the De Ruiter vegetable seeds business.
Earnings per share (EPS) for the second quarter was $1.97 on an as-reported basis, and $2.16 on an ongoing basis. EPS for the first six months of fiscal year 2009 was $2.96 on an as-reported basis, and $3.13 on an ongoing basis. (For a reconciliation of EPS to ongoing EPS see page 1).
Cash Flow
For the first half of fiscal year 2009, net cash provided by operating activities was $1.5 billion, compared with $1.9 billion in the same period of fiscal year 2008. Net cash required by investing activities was $359 million for the first half of fiscal year 2009, compared with $404 million for the same period of fiscal year 2008. As a result, free cash flow was more than $1.1 billion for the first half of fiscal year 2009, compared with approximately $1.5 billion for the same period in fiscal year 2008. (For a reconciliation of free cash flow, see note 1.) Free cash flow in the first half of 2009 reflected an improvement in net income which was offset by higher level of inventories. Net cash required by financing activities was $596 million for the first half of fiscal year 2009, compared with $142 million for the same period in fiscal year 2008. This reflects an increase in cash returned to shareowners in the form of higher dividends and share repurchases.
Outlook
Monsanto's full-year 2009 EPS is expected to be in the range of $4.23 to $4.33 on a reported basis and in the range of $4.40 to $4.50 on an ongoing basis. (For a reconciliation of ongoing EPS, see note 1).
The company expects that its free cash flow for fiscal year 2009 will be approximately $1.8 billion. The company expects net cash provided by operating activities to be about $3 billion, and net cash required by investing activities to be approximately $1.2 billion for fiscal year 2009. (For a reconciliation of free cash flow, see note 1.)
Seeds and Genomics Segment Detail
---------------------------------
($in millions) Net Sales Gross Profit
Seeds
and
Genomics Second Second Six Six Second Second Six Six
Quarter Quarter Months Months Quarter Quarter Months Months
2009 2008 2009 2008 2009 2008 2009 2008
Corn
seed
and
traits $2,078 $1,747 $2,706 $2,214 $1,412 $1,173 $1,815 $1,458
Soybean
seed
and
traits 615 455 827 617 373 269 518 380
Cotton
seed
and
traits 33 40 80 82 21 33 47 57
Vegetable
seeds 209 206 366 336 115 113 195 177
All
other
crops
seeds
and
traits 107 97 162 132 56 46 80 57
TOTAL
Seeds
and
Genomics $3,042 $2,545 $4,141 $3,381 $1,977 $1,634 $2,655 $2,129
($in millions) Earnings Before Interest & Taxes (EBIT)
Seeds and Genomics Second Second Six Six
Quarter Quarter Months Months
2009 2008 2009 2008
EBIT (For a
reconciliation of
EBIT, see note 1.) $1,212 $1,077 $1,277 $1,057
Unusual Items Affecting EBIT
IPR&D resulting from
acquisition of Aly $162 None $162 None
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 $3 billion for the second quarter of fiscal year 2009, or 20 percent higher than sales in the same period last year.
During the second quarter of fiscal year 2009, the company realized increased revenue from its branded corn seed and traits business in the United States as well as from its U.S. soybean seed and traits business. This strong gain was somewhat offset by fewer planted acres for corn in Brazil because of drought conditions.
Monsanto's results also reflect a pre-tax charge of $42 million that the company incurred against its ongoing earnings. The charge relates to Monsanto's commitment to compensate a small number of farmers who experienced variable pollination and yield with three white corn hybrids in South Africa.
Growth in the quarter was also driven by the continued strong adoption of its higher-margin triple-stack corn technology in its U.S. corn seed brands. Monsanto estimates that its triple-stack corn technology could be grown on 33 million acres or 10 percent more acres in 2009 than the previous season despite an anticipated overall decline in acres planted to corn in the United States. Monsanto now estimates that its portfolio mix of the higher-margin triple-stack technology in its U.S. corn seed brands will be 70 percent.
Sales for the segment were also higher for the first six months of the 2009 fiscal year compared with sales in the same period last year. First-half segment sales were $4.1 billion, or 22 percent higher than first-half segment sales in fiscal year 2008. The key drivers for growth in the second quarter were also the primary contributors to growth in the first-half of the fiscal year.
Gross profit for the segment was also higher for the first six months of the 2009 fiscal year compared with the same period last year. Gross margins increased 1 percentage point in the period-over-period comparison to 64 percent. This increase was primarily driven by increased prices in U.S. corn and soybeans and a demand shift to higher margin triple-trait corn products.
Monsanto noted that it expects farmers to plant approximately 1.5 million acres of Genuity Roundup Ready 2 Yield soybeans across the Midwest this spring. The company now expects that Genuity Roundup Ready 2 Yield will be available on 7 million to 8 million acres for the product's full-scale launch in 2010, or expanded from its initial estimate of 5 million to 6 million acres.
Agricultural Productivity Segment Detail
----------------------------------------
($in millions) Net Sales Gross Profit
Second Second Six Six Second Second Six Six
Agricultural Quarter Quarter Months Months Quarter Quarter Months Months
Productivity 2009 2008 2009 2008 2009 2008 2009 2008
Roundup
and
other
glyphosate-
based
herbicides $776 $982 $2,135 $1,990 $437 $478 $1,241 $965
All other
agricultural
productivity
products 217 200 408 405 107 99 175 156
TOTAL
Agricultural
Productivity $993 $1,182 $2,543 $2,395 $544 $577 $1,416 $1,121
($in millions) Earnings Before Interest & Taxes (EBIT)
Second Second Six Six
Agricultural Productivity Quarter Quarter Months Months
2009 2008 2009 2008
EBIT (For a
reconciliation of
EBIT, see note 1.) $326 $601 $999 $985
Unusual Items Affecting EBIT
Solutia Claim Settlement None $210 None $210
EBIT from Discontinued
Operations $1 $11 $19 $20
The Agricultural Productivity segment consists of the crop protection products and lawn-and-garden herbicide products.
Sales for Monsanto's Agricultural Productivity segment were $993 million for the second quarter of fiscal year 2009, or 16 percent lower compared with sales in the same period last year. Lower volumes of Roundup and other glyphosate-based herbicides contributed to the results in the quarter. This was largely a timing effect, as our customers' shipments were ahead of a pre-announced price increase in mid-February last year. In 2009, U.S. orders have returned to previous selling patterns with sales shifting back to third and fourth quarters when farmers use Roundup over the top of Roundup Ready acres. Additionally, results in the quarter were also affected by lower branded volumes of glyphosate due to the drought conditions in Latin America.
First-half segment sales were $2.5 billion or 6 percent higher than first-half segment sales in fiscal year 2008. Improved pricing of Roundup and other glyphosate-based herbicides globally and higher sales in Brazil were key drivers for growth in the first half of the fiscal year. These results were slightly offset by lower volumes of U.S. branded Roundup herbicides as a result of shipments returning to historical patterns this year.
Gross profit for the segment in the first six months was $1.4 billion or 26 percent higher than gross profit realized in the same period last year. The increase in the period related primarily to higher pricing of branded Roundup herbicides and sales in Brazil partially offset by timing of sales in the United States.
Monsanto Company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality. Monsanto remains focused on enabling both small-holder and large- scale farmers to produce more from their land while conserving more of our world's natural resources such as water and energy.
DEKALB, Genuity, Roundup Ready 2 Yield, and Roundup are trademarks of Monsanto Company and its wholly owned subsidiaries.
References to Roundup herbicides in this release mean Roundup branded herbicides, excluding lawn-and-garden herbicide products.
Monsanto Company
Selected Financial Information
(Dollars in millions, except per share amounts)
Unaudited
Statements of Consolidated Three Three Six Six
Operations Months Months Months Months
Ended Ended Ended Ended
Feb. 28, Feb. 29, Feb. 28, Feb. 29,
2009 2008 2009 2008
Net Sales $4,035 $3,727 $6,684 $5,776
Cost of Goods Sold 1,514 1,516 2,613 2,526
Gross Profit 2,521 2,211 4,071 3,250
Operating Expenses:
Selling, General and
Administrative Expenses 522 529 1,072 985
Research and Development
Expenses 265 219 517 418
Acquired In-Process Research
and Development 162 - 162 1
Total Operating Expenses 949 748 1,751 1,404
Income From Operations 1,572 1,463 2,320 1,846
Interest Expense 26 32 49 66
Interest Income (18) (38) (43) (70)
Solutia-Related Income - (204) - (187)
Other Expense - Net 32 1 58 3
Income From Continuing
Operations Before Income
Taxes and Minority Interest 1,532 1,672 2,256 2,034
Income Tax Provision 440 552 616 657
Minority Interest Expense
(Income) 1 (1) 3 6
Income From Continuing
Operations 1,091 1,121 1,637 1,371
Discontinued Operations:
Income From Operations of
Discontinued Businesses 1 11 19 19
Income Tax Provision - 3 8 5
Income on Discontinued
Operations 1 8 11 14
Net Income $1,092 $1,129 $1,648 $1,385
EBIT (See note 1) $1,538 $1,678 $2,276 $2,042
Basic Earnings per Share:
Income From Continuing
Operations $2.00 $2.05 $2.99 $2.51
Income on Discontinued
Operations - 0.01 0.02 0.02
Net Income $2.00 $2.06 $3.01 $2.53
Diluted Earnings per Share:
Income From Continuing
Operations $1.97 $2.00 $2.94 $2.45
Income on Discontinued
Operations - 0.02 0.02 0.03
Net Income $1.97 $2.02 $2.96 $2.48
Weighted Average Shares
Outstanding:
Basic 546.6 547.8 547.3 547.0
Diluted 555.2 559.2 556.3 558.5
Monsanto Company
Selected Financial Information
(Dollars in millions)
Unaudited
Condensed Statements of Consolidated Financial Position
As of As of
Feb. 28, 2009 Aug. 31, 2008
Assets
Current Assets:
Cash and Cash Equivalents $2,004 $1,613
Trade Receivables, Net 2,171 2,067
Miscellaneous Receivables 616 742
Deferred Tax Assets 411 338
Inventory, Net 3,112 2,453
Assets of Discontinued Operations - 153
Other Current Assets 156 243
Total Current Assets 8,470 7,609
Property, Plant and Equipment, Net 3,202 3,323
Goodwill 3,035 3,132
Other Intangible Assets, Net 1,411 1,531
Noncurrent Deferred Tax Assets 818 1,000
Long-Term Receivables 544 636
Noncurrent Assets of Discontinued Operations - 236
Other Assets 513 524
Total Assets $17,993 $17,991
Liabilities and Shareowners' Equity
Current Liabilities:
Short-Term Debt, Including Current
Portion of Long-Term Debt $110 $24
Accounts Payable 761 1,090
Income Taxes Payable 540 161
Accrued Compensation and Benefits 254 441
Accrued Marketing Programs 819 754
Deferred Revenues 1,022 867
Grower Production Accruals 308 172
Dividends Payable 145 132
Liabilities of Discontinued Operations 6 26
Miscellaneous Short-Term Accruals 686 772
Total Current Liabilities 4,651 4,439
Long-Term Debt 1,704 1,792
Postretirement Liabilities 562 590
Long-Term Deferred Revenue 518 566
Noncurrent Deferred Tax Liabilities 139 204
Long-Term Portion of Environmental and
Litigation Reserve 215 226
Noncurrent Liabilities of Discontinued
Operations - 52
Other Liabilities 600 748
Shareowners' Equity 9,604 9,374
Total Liabilities and Shareowners' Equity $17,993 $17,991
Debt to Capital Ratio: 16% 16%
Monsanto Company
Selected Financial Information
(Dollars in millions)
Unaudited
Statements of Consolidated Cash Flows
Six Months Ended Six Months Ended
Feb. 28, 2009 Feb. 29, 2008
Operating Activities:
Net Income $1,648 $1,385
Adjustments to Reconcile Cash Provided by
Operating Activities:
Items That Did Not Require (Provide) Cash:
Depreciation and Amortization 270 281
Bad-Debt Expense 49 38
Receipt of Securities from Solutia
Settlement - (38)
Stock-Based Compensation Expense 55 41
Excess Tax Benefits from Stock-Based
Compensation (12) (118)
Deferred Income Taxes 2 156
Equity Affiliate (Income) Expense, Net (9) 3
Acquired In-Process Research and
Development 162 1
Gain on Sale of a Business (6) -
Other Items (4) (52)
Changes in Assets and Liabilities that
Provided (Required) Cash, Net of
Acquisitions:
Trade Receivables, Net (244) (505)
Inventory, Net (972) (439)
Deferred Revenues 158 603
Accounts Payable and Other Accrued
Liabilities 402 673
Net Investment Hedge Settlement 27 (64)
Other Items (31) (88)
Net Cash Provided by Operating Activities 1,495 1,877
Cash Flows Provided (Required) by Investing
Activities:
Maturities of Short-Term Investments 102 59
Capital Expenditures (461) (314)
Acquisitions of Businesses, Net of Cash
Acquired (273) (103)
Purchases of Long-Term Equity Securities (7) (78)
Technology and Other Investments (26) (16)
Proceeds from Divestiture of a Business 300 -
Other Investments and Property Disposal
Proceeds 6 48
Net Cash Required by Investing Activities (359) (404)
Cash Flows Provided (Required) by Financing
Activities:
Net Change in Financing With Less Than
90-Day Maturities (73) (19)
Short-Term Debt Reductions - (9)
Short-Term Debt Proceeds 55 -
Long-Term Debt Reductions (69) -
Payments on Other Financing - (1)
Treasury Stock Purchases (274) (121)
Stock Option Exercises 17 82
Excess Tax Benefits from Stock-Based
Compensation 12 118
Dividend Payments (264) (192)
Net Cash Required by Financing Activities (596) (142)
Effect of Exchange Rate Changes on Cash and
Cash Equivalents (149) 88
Net Increase in Cash and Cash Equivalents 391 1,419
Cash and Cash Equivalents at Beginning of
Period 1,613 866
Cash and Cash Equivalents at End of Period $2,004 $2,285
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 Six Months Ended
Feb. 28, Feb. 29, Feb. 28, Feb. 29,
2009 2008 2009 2008
EBIT - Seeds and Genomics
Segment $1,212 $1,077 $1,277 $1,057
EBIT - Agricultural
Productivity Segment 326 601 999 985
EBIT- Total 1,538 1,678 2,276 2,042
Interest Expense (Income) - Net 8 (6) 6 (4)
Income Tax Provision (A) 438 555 622 661
Net Income $1,092 $1,129 $1,648 $1,385
(A) Includes the income tax provision from continuing operations, the
income tax benefit (provision) on minority interest, and the income
tax provision on discontinued operations,
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 second quarter and six months ended Feb. 28, 2009 and Feb. 29,
2008 is included on page 1 of this release.
Fiscal Year
2009 Fiscal Year
Guidance 2008
Diluted Earnings (Loss) per Share $4.23-$4.33 $3.62
Solutia Claim Settlement - ($0.23)
Loss (Income) on Discontinued Operations ($0.02) ($0.04)
In-Process R & D Write-Off Related to the
De Ruiter Acquisition - $0.29
In-Process R & D Write-Off Related to the Aly $0.19 -
Diluted Earnings (Loss) per Share from
Ongoing Business $4.40-$4.50 $3.64
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 2009 free cash flow
guidance, 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 Six Months Ended
2009 Feb. 28, Feb. 29,
Guidance 2009 2008
Net Cash Provided by Operating
Activities $3,000 $1,495 $1,877
Net Cash Required by Investing
Activities (1,200) (359) (404)
Free Cash Flow $1,800 $1,136 $1,473
Net Cash Required by Financing Activities N/A (596) (142)
Effect of Exchange Rate Changes on Cash
and Cash Equivalents
N/A (149) 88
Net Increase in Cash and Cash Equivalents
N/A $391 $1,419
Cash and Cash Equivalents at Beginning of
Period N/A $1,613 $866
Cash and Cash Equivalents at End of Period N/A $2,004 $2,285
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