NM = Not Meaningful

 

* Effective Sept. 1, 2003, Monsanto's fiscal year begins Sept. 1 and ends Aug. 31.  In this release, all references to the fourth quarter and fiscal year refer to the three-month and 12-month periods ended Aug. 31, respectively. 

 

• Quarterly sales were slightly down as higher revenues for Monsanto’s cotton traits in the United States and India were offset by decreased revenue from sales of Roundup herbicide in the United States.  For fiscal year 2004, sales increased 11 percent to $5.5 billion as a result of higher U.S. trait revenues, increased corn seed sales in the United States, Europe, and Brazil, and higher revenues for Roundup and non-branded glyphosate herbicides in all world areas outside of the United States.

• Reported net loss for the fourth quarter was $(42) million, which includes after-tax restructuring charges of $44 million (charges of $41 million related to continuing operations and $3 million related to discontinued operations) and a $5 million tax benefit associated with a goodwill write-off of the global wheat business.  For fiscal year 2004, reported net income was $267 million, including a $64 million after-tax goodwill adjustment and after-tax restructuring charges of $100 million (charges of $98 million related to continuing operations and $2 million related to discontinued operations). (For a reconciliation of restructuring, see note 3.)

• Monsanto increased growth projections for fiscal years 2005 and 2006, as the company now expects a compounded annual growth rate in fiscal year 2005 of 10 to 18 percent, from the fiscal-year 2004 diluted earnings per share (EPS) base of $1.61 per share on an ongoing basis.  From the higher fiscal year 2005 base, Monsanto expects a growth rate of 10 percent for fiscal year 2006.  (For a reconciliation of ongoing EPS, see note 1).

Comment from Monsanto Chairman, President and Chief Executive Officer Hugh Grant:

“At the beginning of this fiscal year, we set aggressive – but achievable – targets to advance our business.  We’ve not only delivered on those targets, but we’ve raised and beat them.  The success we’ve had this year – especially in our seeds and traits business – sets a foundation that allows us to be more aggressive in our growth-rate expectations, and to set those expectations from a higher starting point.”

Fourth-Quarter and Fiscal-Year 2004 Performance Summary:

Net sales were slightly down at $1.3 billion in the fourth quarter of fiscal year 2004.  Sales in the overall Seeds and Genomics segment increased by 39 percent for the quarter driven by higher cotton trait revenues in the United States and India, and continued strong sales of branded corn seed in the United States and Europe.  However, higher revenues from seeds and traits were offset by lower sales of Roundup in the United States.  For the quarter, sales of Roundup and other glyphosate-based herbicides within the Agricultural Productivity segment decreased 17 percent, driven by the decreased revenue in the United States. 

For the full fiscal year 2004, net sales were $5.5 billion, an 11 percent improvement compared with net sales for fiscal year 2003.  The sales increase for the fiscal year was primarily driven by solid performance across the business, including increased sales of Monsanto’s traits in the U.S. market, higher revenues from corn seed sales in the United States, Europe and Brazil, and higher sales of Roundup and non-branded glyphosate-based herbicides in all world areas outside the United States. 

Net income (loss) and earnings (loss) per share:  Monsanto recorded a fourth-quarter fiscal year 2004 net loss of $(42) million, or $(0.16) per share, compared with a net loss of $(188) million, or $(0.72) per share for the fourth quarter of fiscal year 2003. 

            Items affecting comparability for the fourth-quarter fiscal year 2004, included:

• After-tax charges of $(0.15) per share in continuing operations relating to Monsanto’s 2004 restructuring plan, net of reversals.

• An after-tax loss of $(0.02) per share for discontinued operations and related restructuring.

• A $0.02 per share tax benefit associated with the goodwill write-off of the global wheat business

Items affecting comparability for the fourth-quarter fiscal year 2003, included:

• A $(0.96) per share after-tax charge associated with Monsanto’s contribution to the settlement of Solutia’s PCB litigation in Anniston, Alabama.

• A $0.02 per share after-tax benefit from the reversal of restructuring charges.

• An after-tax loss on discontinued operations of $(0.02) per share.

For fiscal year 2004, Monsanto reported net income of $267 million, or $0.99 per share, compared with net income of $68 million, or $0.26 per share, in fiscal year 2003. 

            Items affecting comparability for fiscal year 2004 included:

• After-tax charges of $(0.36) per share in continuing operations relating to Monsanto’s 2004 restructuring plan, net of reversals.

• An after-tax loss on discontinued operations of $(0.02) per share for discontinued operations and related restructuring.

• Write-off of goodwill, net of tax, associated with the global wheat business of $(0.24) per share.

Items affecting comparability for fiscal year 2003 included:

• A $(0.96) per share after-tax charge associated with Monsanto’s contribution to the settlement of Solutia’s PCB litigation in Anniston, Alabama.

• After-tax charges of $(0.10) per share associated with the 2000 and 2002 restructuring plans, net of reversals.

• A $(0.05) per share after-tax charge associated with an accounting change related to asset retirement obligations. 

• An after-tax loss on discontinued operations of $(0.05) per share.

Operating costs:  Research-and-development (R&D) expenses increased 14 percent to $141 million for the fourth quarter of fiscal year 2004 and increased 6 percent to $511 million for fiscal year 2004 when compared with the same periods in 2003.  As a percent of sales, R&D expenses for fourth quarter of fiscal year 2004 increased to 11 percent, up from 10 percent in the comparable 2003 period.  For fiscal year 2004, R&D expenses as a percent of sales have decreased to 9 percent of sales compared to 10 percent for fiscal year 2003.

Selling, general and administrative (SG&A) expenses, including bad-debt expense, increased 8 percent to $336 million for the fourth quarter of fiscal year 2004, while increasing by 13 percent to $1,254 million for fiscal year 2004.  The significant factors affecting the SG&A increase for the full fiscal year were higher accruals for employee incentives, expenses to implement the Brazilian value-capture program, and expenses associated with U.S. marketing-related spending. 

For the fourth quarter of fiscal year 2004, bad-debt expense increased $1 million, or 3 percent, compared with bad-debt expense in the fourth quarter of fiscal year 2003.  For the full fiscal year 2004, bad-debt expense increased $37 million, or 51 percent, as the company continued to change its business model and monitor unfavorable economic and business conditions in Argentina.  The increase in bad-debt expense primarily reflects an increase in the allowance for estimated uncollectible receivables in Argentina.

For fiscal year 2004, Monsanto set a target for SG&A as a percent of sales of 22 percent.  SG&A as a percent of sales for the completed fiscal year is 23 percent, including the higher-than-anticipated bad-debt expense.

Other expenses: In the fourth quarter of fiscal year 2004, Monsanto reported other expense of
$38 million compared with $431 million for the same period in 2003.  The fourth quarter of fiscal year 2003 included $396 million in expenses associated with the settlement of the Solutia PCB litigation.  For fiscal year 2004, reported other expense was $152 million, compared with the fiscal year 2003 total of $471 million, which also included $396 million associated with the Solutia PCB settlement.   Other expense for fiscal year 2004 includes $58 million associated with Solutia-related liabilities and expenses.  Monsanto intends to file claims to recover some of these expenses through Solutia’s bankruptcy proceedings.

Cash flow:  For fiscal year 2004, net cash provided by operations was $1,261 million, compared with $1,128 million for fiscal year 2003.  Net cash required by investing activities was $262 million for fiscal year 2004.  For fiscal year 2003, net cash required by investing activities was $482 million.  As a result, free cash flow increased from $646 million in fiscal year 2003 to $999 million in fiscal year 2004.  The increase in free cash flow was driven by working capital improvements for the U.S. Roundup business and better collections globally, somewhat offset by payments related to the Solutia PCB litigation settlement and higher voluntary pension contributions in fiscal year 2004.  (For reconciliation of free cash flow, see note 1.)

Seeds and Genomics Segment Detail

The Seeds and Genomics segment consists of the global seeds and related traits business, and genetic technology platforms. 

Fourth-quarter net sales of $354 million for the Seeds and Genomics segment were 39 percent higher than sales recorded in the same period in 2003.  Within the segment, sales of all other crops seeds and traits increased 67 percent to $142 million, driven by higher revenue for Monsanto’s cotton traits in the United States and India. 

The higher penetration of Monsanto’s germplasm and traits, and increased revenues for corn, soybean and other crop traits drove the improvements for fiscal year 2004, with overall sales increasing 21 percent in the segment to $2.3 billion for fiscal year 2004 from $1.9 billion for fiscal year 2003. 

EBIT (earnings (loss) from continuing operations before cumulative effect of accounting change, interest, and income taxes) for the Seeds and Genomics segment in the fourth quarter was
$(131) million, compared to $(137) million in the same period in 2003.  For the full fiscal year, EBIT for the Seeds and Genomics segment was $210 million, an increase of $4 million compared with the fiscal year 2003 total Seeds and Genomics segment EBIT of $206 million.  The major factor for the improvement in both periods was the higher overall sales of seeds and traits, somewhat offset by higher operating expenses.  (For a reconciliation of EBIT, see note 1.)

Agricultural Productivity Segment Detail

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 decreased 14 percent to
$904 million in fiscal year 2004, reflecting decreased revenues from sales of Roundup herbicide in the United States. 

For fiscal year 2004, Agricultural Productivity sales increased 5 percent to $3.2 billion, primarily driven by increased sales of Roundup and other glyphosate-based herbicides in markets outside of the United States. 

EBIT (earnings (loss) from continuing operations before cumulative effect of accounting change, interest, and income taxes) for the segment was $82 million for the fourth quarter of fiscal year 2004, compared with $(137) million in the same period last year.  For fiscal year 2004, EBIT for this segment was $259 million.  For fiscal year 2003, EBIT for the Agricultural Productivity segment included the costs associated with the settlement of the Solutia PCB litigation, which reduced EBIT for this segment to breakeven.  Excluding the Solutia PCB litigation from fiscal year 2003, EBIT for fiscal year 2004 declined as a result of decreased sales of Roundup in the United States, restructuring charges, and assumed liabilities and expenses associated with Solutia.  (For a reconciliation of EBIT, see note 1.)

Other Items of Note:

In early October, Monsanto announced it won a key patent battle regarding biotech-gene technology for the transformation of dicot plants, such as cotton. The decision, issued by U.S. Patent and Trademark Office, recounts the basis for finding that Monsanto was the first company to invent agrobacterium transformation in dicot plants. 

In mid-September, Monsanto announced separate technology collaborations with Divergence, Inc. and Devgen N.V.  The company intends to work with Divergence in a collaborative relationship to develop nematode-resistant soybeans.  Monsanto’s research-and-development agreement with Devgen is intended to develop varieties of crop plants with improved resistance against insects.

On Sept. 9, Monsanto announced it acquired the North American canola seed assets of Advanta Seeds from Advanta B.V., a company previously purchased by Fox Paine Capital Fund II International, L.P., including the Advanta Seeds brand in Canada and the Interstate Seed brand in the United States.

On Aug. 18, Monsanto announced that it has received written notification that the U.S. Department of Justice, Antitrust Division, has concluded its inquiry regarding possible anticompetitive conduct in the glyphosate-based herbicide industry. The inquiry was closed with no actions required by Monsanto.

On July 27, Monsanto Company expanded a breach-of-contract lawsuit against Syngenta to seek damages and termination of the Roundup Ready soybean license that Monsanto originally granted to Ciba-Geigy Corp., one of Syngenta’s corporate predecessors.  On the same day, DEKALB, a Monsanto subsidiary, initiated a new patent infringement lawsuit in Illinois federal court to enjoin Syngenta Seeds, Inc., from developing, using and selling herbicide-tolerant corn seed such as Monsanto’s GA21 Roundup Ready corn product.

On July 19, the European Commission approved the import, processing and use in animal feed of Monsanto’s NK603 Roundup Ready Corn grain in the European Union (EU), conditional upon its pending approval under the EU Novel Foods Regulation. The Council of Ag Ministers failed to reach a qualified majority on the use of NK603 corn and its processed products as foods and food ingredients under the Novel Foods Regulation. This decision will continue in the regulatory process.  The approval does not include the approval of NK603 Roundup Ready Corn for cultivation in the EU, which is the subject of a separate submission.

On July 13, the Argentina government approved Monsanto’s Roundup Ready corn event, NK603, for planting.  Roundup Ready corn will be available to growers this fall in limited quantities of Monsanto’s branded corn seed for the 2004 planting season in Argentina and should be available more widely in the 2005 and 2006 growing season.

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 $58 million in other expenses for fiscal year 2004 associated with Solutia-related liabilities and expenses.  Monsanto 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 and estimated acreage planted with Monsanto’s biotech traits from 1996 to 2004, can also be found in the Investor Information section on the company’s web site at: www.monsanto.com. 

Outlook Comment from Monsanto Chairman, President and Chief Executive Officer Hugh Grant:

“The success of our seeds and traits business to this point has set an early standard in the industry.  From that leadership platform, we believe our next-generation of products advancing through the pipeline is going to raise the bar again.  And, as our seeds and traits business grows, we believe the prospects for growth across our company are strong.”

2005 and 2006 Guidance:

Monsanto management announced today it had raised its growth projections for fiscal years 2005 and 2006.  Monsanto now expects to achieve a compounded annual growth rate in fiscal year 2005 of 10 to 18 percent, from the fiscal-year 2004 EPS base of $1.61 per share on an ongoing basis.  From the higher fiscal year 2005 base, Monsanto expects a growth rate of 10 percent for fiscal year 2006.  (For a reconciliation of ongoing EPS, see note 1).

The company’s EPS guidance for fiscal year 2005 is in the range of $1.77 to $1.90 on a reported business basis. 

Throughout fiscal year 2004, Monsanto management expected a 10 percent compounded annual growth rate for fiscal years 2005 and 2006, which was based on an anticipated 2004 fiscal year-end base of EPS of $1.55 to $1.60 on an ongoing business basis.

Additionally, Monsanto established a target for SG&A as a percent of sales for fiscal year 2005 of 21 percent.  The company’s fiscal-year 2004 SG&A target was 22 percent of sales.

Free cash flow generation for fiscal year 2005 is expected to be in the range of $600 million.  The company expects net cash provided by operations to be approximately $1 billion, and net cash required by investing activities to be approximately $400 million.  (For a reconciliation of free cash flow, see note 1).

Monsanto Company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality.

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