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January 7, 2009
Greater demand in Latin America for Monsanto Company's products propelled the company to record-setting net sales and net income results for its fiscal 2009 first quarter, which ended Nov. 30, 2008.
In connection with these results, the company announced that it is raising full-year earnings-per-share (EPS) guidance from a range of $4.20 to $4.40 to a range of $4.40 to $4.50 on an ongoing basis. As discussed further in Note 1, at this time the company is not able to provide a reconciliation to reported EPS guidance for fiscal year 2009.
($ in millions) First Quarter First Quarter
2009 2008
Net Sales By Segment
Corn seed and traits $628 $467
Soybean seed and traits 212 162
Vegetable seeds 157 130
Cotton seed and traits 47 42
All other crops seeds and traits 55 35
TOTAL Seeds and Genomics $1,099 $836
Roundup and other glyphosate-based
herbicides $1,359 $1,008
All other agricultural productivity
products 191 205
TOTAL Agricultural Productivity $1,550 $1,213
TOTAL Net Sales $2,649 $2,049
Gross Profit $1,550 $1,039
Operating Expenses $802 $656
Interest (Income) Expense - Net $(2) $2
Other Expense - Net $26 $19
Net Income $556 $256
Diluted Earnings per Share (See note 1.) $1.00 $0.46
Items Affecting Comparability - EPS Impact
Income on discontinued operations 0.02 0.01
Diluted Earnings per Share from Ongoing Business
(For the definition of ongoing EPS, see note 1.) $0.98 $0.45
Effective Tax Rate 24% 29%
First Quarter First Quarter
2009 2008
Comparison as a Percent of Net Sales:
Gross profit 59% 51%
Selling, general and
administrative expenses (SG&A) 21% 22%
Research and development expenses
(excluding acquired in-process R&D) <10% <10%
Income from continuing operations
before income taxes and minority interest 27% 18%
Net income 21% 12%
"The ongoing demand from farmers for our world-class technologies has allowed us to deliver such strong earnings growth while staying fully invested in our research and development pipeline," said Hugh Grant, chairman, president and chief executive officer for Monsanto. "Our Latin American business once again displayed its strength and set the pace for a great fiscal 2009, giving us confidence to raise our earnings projections and helping us take another solid step toward fulfilling our 2012 gross profit commitments. And with the latest progress of our research and development pipeline, we look forward to having additional opportunities to earn farmers' business by unlocking more yield power from their crops."
Results of Operations
The company reported net sales of $2.6 billion for the first quarter of fiscal 2009, a 29 percent increase compared to the first quarter of fiscal 2008. Strong demand in Brazil for Roundup and other glyphosate-based herbicides led the increase in Monsanto's first-quarter sales, followed by higher corn seed and trait sales in the United States and Brazil, and higher sales growth in soybean seeds and traits in the United States from strong early-season deliveries.
Monsanto recorded net income of $556 million for the first quarter of fiscal 2009, a 117 percent increase compared with net income of $256 million for the same period last year. Earnings per share (EPS) for the quarter were $1.00 on an as-reported basis and $0.98 on an ongoing basis, compared to year-ago EPS of $0.46 on an as-reported basis and $0.45 on an ongoing basis. The quarter's results included $44 million, or $0.08 per share, in discrete tax items.
The first quarter of Monsanto's fiscal year typically and primarily reflects the impact of its Latin American businesses. The second and third quarters are expected to be the primary drivers for the company's full-year results, as they largely reflect both the relative size of the company's U.S. business and the importance of its seeds-and-traits business to Monsanto's earnings.
Cash Flow
For the first quarter of fiscal 2009, net cash provided by operating activities was $114 million, compared with $996 million in the first quarter last year. Net cash provided by investing activities for the first quarter of fiscal 2009 was $10 million, compared with $256 million required for the year-ago quarter, as proceeds received from the sale of our dairy business were partially offset by capital expenditures. As a result, free cash flow was $124 million for the first quarter of fiscal 2009, compared with $740 million for the first quarter in fiscal 2008. (For a reconciliation of free cash flow, see note 1.) The decrease in the three-month comparison related mainly to a decrease in customer pre-payments in the United States due to the late corn harvest which resulted in delayed corn seed and trait orders. Net cash required by financing activities was $258 million for the first quarter of fiscal 2009, compared with $47 million for the same period in fiscal 2008.
Update to Cash Flow Guidance
Monsanto also now expects its free cash to be slightly above $1.8 billion for fiscal 2009, underscoring the company's ability to grow yet maintain its financial discipline.
The company expects net cash provided by operating activities to be in the range of $3.0 billion, and net cash required by investing activities to be approximately $1.2 billion for fiscal 2009. (For a reconciliation of free cash flow, see note 1.)
Seeds and Genomics Segment Detail
($ in millions) Net Sales Gross Profit
Seeds and Genomics First First First First
Quarter Quarter Quarter Quarter
2009 2008 2009 2008
Corn seed and traits $628 $467 $403 $285
Soybean seed and traits 212 162 145 111
Vegetable seeds 157 130 80 64
Cotton seed and traits 47 42 26 24
All other crops seeds
and traits 55 35 24 11
TOTAL Seeds and
Genomics $1,099 $836 $678 $495
($ in millions) Earnings Before
Interest & Taxes (EBIT)
Seeds and Genomics First Quarter First Quarter
2009 2008
EBIT (For a reconciliation of EBIT,
see note 1.) $65 $(20)
Unusual Items Affecting EBIT None None
The Seeds and Genomics segment consists of the company's global seeds and related traits business, and biotechnology platforms.
Sales for Monsanto's Seeds and Genomics segment in the first quarter of fiscal 2009 increased 31 percent ($263 million) compared to the same period last year.
Corn seed and traits net sales increased 34 percent ($161 million) to lead the overall growth in the segment for the quarter. Along with higher selling prices in the United States for corn seeds and traits, these sales increases were largely driven by the successful launches of the YieldGard Corn Borer trait technology in Brazil and the double-trait offering of YieldGard Corn Borer and Roundup Ready Corn 2 in Argentina. The company expects to sell 1.5 million to 2 million acres of YieldGard Corn Borer in Brazil this year, and has sold more than 2 million acres of YieldGard Corn Borer and Roundup Ready Corn 2 in Argentina.
Specific to Monsanto's U.S. corn business sales, the company anticipates triple-trait offerings through its DEKALB and American Seeds (ASI) brands to represent approximately 70 percent of their volume this year. The triple-trait technology offers farmers both above-the-ground and below-the- ground insect protection, as well as weed control flexibility. The company is forecasting that its triple-trait product could be planted on 34 million to 35 million acres in the United States, an increase of roughly 17 percent to 21 percent from last year.
Soybean seed and traits net sales posted a 31 percent ($50 million) increase versus the year-ago quarter due mainly to higher U.S. sales stemming from strong early-season deliveries of its Asgrow brand.
Vegetable seeds net sales grew by 21 percent ($27 million), largely reflecting the addition of De Ruiter Seeds, which the company acquired in June 2008. De Ruiter is a leading protected-culture vegetable seeds business based in the Netherlands.
Agricultural Productivity Segment Detail
($ in millions) Net Sales Gross Profit
Agricultural First First First First
Productivity Quarter Quarter Quarter Quarter
2009 2008 2009 2008
Roundup and other
glyphosate-based
herbicides $1,359 $1,008 $804 $487
All other agricultural
productivity products 191 205 68 57
TOTAL Agricultural
Productivity $1,550 $1,213 $872 $544
($ in millions) Earnings Before
Interest & Taxes (EBIT)
Agricultural Productivity First Quarter First Quarter
2009 2008
EBIT (For a reconciliation of EBIT,
see note 1.) $673 $384
Unusual Items Affecting EBIT:
EBIT from Discontinued Operations 18 9
The Agricultural Productivity segment consists of the crop protection products and lawn-and-garden herbicide products.
Sales in the first quarter of fiscal 2009 for Monsanto's Agricultural Productivity segment grew 28 percent ($337 million) compared with the same period last year. The segment's growth largely resulted from higher net selling prices and higher sales volumes of the company's Roundup and other glyphosate-based herbicides in Brazil along with higher net selling prices in all major world areas.
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, Asgrow, YieldGard, Roundup and Roundup Ready 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 Operations Three Months Ended
Nov. 30,
2008 2007
Net Sales $ 2,649 $ 2,049
Cost of Goods Sold 1,099 1,010
Gross Profit 1,550 1,039
Operating Expenses:
Selling, General and Administrative Expenses 550 456
Research and Development Expenses 252 199
Acquired In-Process Research and Development - 1
Total Operating Expenses 802 656
Income From Operations 748 383
Interest Expense 23 34
Interest Income (25) (32)
Solutia-Related Expenses - 17
Other Expense, Net 26 2
Income from Continuing Operations Before Income
Taxes and Minority Interest 724 362
Income Tax Provision 176 105
Minority Interest Expense 2 7
Income from Continuing Operations $ 546 $ 250
Discontinued Operations:
Income from Operations of Discontinued Businesses 18 8
Income Tax Expense 8 2
Income on Discontinued Operations 10 6
Net Income $ 556 $ 256
EBIT (see note 1) $ 738 $ 364
Basic Earnings per Share:
Income from Continuing Operations $ 1.00 $ 0.46
Income on Discontinued Operations 0.01 0.01
Net Income $ 1.01 $ 0.47
Diluted Earnings per Share:
Income from Continuing Operations $ 0.98 $ 0.45
Income on Discontinued Operations 0.02 0.01
Net Income $ 1.00 $ 0.46
Weighted Average Shares Outstanding:
Basic 548.2 546.2
Diluted 557.4 557.7
Monsanto Company
Selected Financial Information
(Dollars in millions)
Unaudited
Condensed Statements of Consolidated
Financial Position As of As of
Nov. 30, 2008 Aug. 31, 2008
Assets
Current Assets:
Cash and Cash Equivalents $ 1,342 $ 1,613
Trade Receivables, Net 1,751 2,067
Miscellaneous Receivables 754 742
Deferred Tax Assets 370 338
Inventory, Net 3,012 2,453
Assets of Discontinued Operations 7 153
Other Current Assets 253 243
Total Current Assets 7,489 7,609
Property, Plant and Equipment, Net 3,153 3,323
Goodwill 2,993 3,132
Other Intangible Assets, Net 1,434 1,531
Noncurrent Deferred Tax Assets 778 1,000
Long-Term Receivables, Net 550 636
Noncurrent Assets of Discontinued Operations - 236
Other Assets 512 524
Total Assets $ 16,909 $ 17,991
Liabilities and Shareowners' Equity
Current Liabilities:
Short-Term Debt, Including Current
Portion of Long-Term Debt $ 70 $ 24
Accounts Payable 804 1,090
Income Taxes Payable 117 161
Accrued Compensation and Benefits 247 441
Accrued Marketing Programs 708 754
Deferred Revenues 607 867
Grower Production Accruals 654 172
Dividends Payable - 132
Liabilities of Discontinued Operations 12 26
Miscellaneous Short-Term Accruals 699 772
Total Current Liabilities 3,918 4,439
Long-Term Debt 1,755 1,792
Postretirement Liabilities 575 590
Long-Term Deferred Revenue 542 566
Noncurrent Deferred Tax Liabilities 171 204
Long-Term Portion of Environmental
and Litigation Liabilities 216 226
Noncurrent Liabilities of Discontinued
Operations - 52
Other Liabilities 650 748
Shareowners' Equity 9,082 9,374
Total Liabilities and Shareowners' Equity $16,909 $17,991
Debt to Capital Ratio: 17% 16%
Monsanto Company
Selected Financial Information
(Dollars in millions)
Unaudited
Statements of Consolidated Cash Flows Three Months Ended
Nov. 30,
2008 2007
Operating Activities:
Net Income $556 $256
Adjustments to Reconcile Cash
Provided by Operating Activities:
Items That Did Not Require (Provide) Cash:
Depreciation and Amortization 135 143
Bad-Debt Expense 36 19
Stock-Based Compensation Expense 26 19
Excess Tax Benefits from Stock-Based
Compensation (5) (45)
Deferred Income Taxes 52 50
Equity Affiliate (Income) Expense, Net (6) 2
Acquired In-Process Research and Development - 1
Gain on Sale of a Business (6) -
Other Items 7 (13)
Changes in Assets and Liabilities That
Provided (Required) Cash, Net
of Acquisitions:
Trade Receivables 165 46
Inventory, Net (832) (460)
Deferred Revenues (238) 933
Accounts Payable and Other
Accrued Liabilities 195 99
Net Investment Hedge Settlement 18 (6)
Other Items 11 (48)
Net Cash Provided by Operating Activities 114 996
Cash Flows Provided (Required) by
Investing Activities:
Capital Expenditures (264) (154)
Acquisitions of Businesses,
Net of Cash Acquired (2) (92)
Purchases of Long-Term Equity Securities (7) (26)
Technology and Other Investments (18) (12)
Proceeds From Divestiture of a Business 300 -
Other Investments and Property
Disposal Proceeds 1 28
Net Cash Provided (Required) by
Investing Activities 10 (256)
Cash Flows Provided (Required) by
Financing Activities:
Net Change in Financing With Less Than
90-Day Maturities (90) 22
Short-Term Debt Proceeds 31 -
Long-Term Debt Reductions (4) -
Payments on Other Financing - (1)
Treasury Stock Purchases (75) (49)
Stock Option Exercises 7 32
Excess Tax Benefits From Stock-Based
Compensation 5 45
Dividend Payments (132) (96)
Net Cash Required by Financing Activities (258) (47)
Effect of Exchange Rate Changes on
Cash and Cash Equivalents (137) 58
Net (Decrease) Increase in Cash
and Cash Equivalents (271) 751
Cash and Cash Equivalents at
Beginning of Period 1,613 866
Cash and Cash Equivalents at End of Period $1,342 $1,617
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
Nov. 30,
2008 2007
EBIT - Seeds and Genomics Segment $65 $(20)
EBIT - Agricultural Productivity Segment 673 384
EBIT- Total 738 364
Interest (Income) Expense, Net (2) 2
Income Tax Provision(A) 184 106
Net Income $556 $256
(A) Includes the income tax provision from continuing operations,
the income tax provision (benefit) on minority interest, and the
income tax expense 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 company is not able to provide a
reconciliation to reported EPS guidance for fiscal year 2009 at this
time, as it is still evaluating purchase accounting adjustments
related to its recent $264 million acquisition of the Brazilian sugar
cane business Aly Participacoes Ltda. Such adjustments are dependent
upon the completion of valuations of certain intangible assets,
including acquired in-process R&D which requires immediate expense
recognition and is expected to be significant.
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
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 Three Months Ended
2009 Nov. 30,
Guidance 2008 2007
Net Cash Provided by
Operating Activities $3,000 $114 $996
Net Cash Provided (Required)
by Investing Activities (1,200) 10 (256)
Free Cash Flow $1,800 124 740
Net Cash Required by
Financing Activities N/A (258) (47)
Effect of Exchange Rate Changes
on Cash and Cash Equivalents N/A (137) 58
Net (Decrease) Increase in
Cash and Cash Equivalents N/A (271) 751
Cash and Cash Equivalents at
Beginning of Period N/A 1,613 866
Cash and Cash Equivalents at
End of Period N/A $1,342 $1,617
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