Latin America Seed Growth Lifts Monsanto to Stronger-Than-Expected First Quarter as Company Guides to High End of Fiscal Year EPS Outlook

Record Number of Pipeline Advancements Underscore R&D Leadership; Strong U.S. Seed Order Book Reinforces Positive Momentum

News provided by

Monsanto Company

Jan 05, 2012, 08:00 ET

ST. LOUIS, Jan. 5, 2012 /PRNewswire/ -- Monsanto Company (NYSE: MON) delivered above-estimate results for the first quarter of its fiscal year 2012 and pointed to the high end of its previously reported earnings per share guidance for the year on the strength of its seed business.  The company also previewed a strong U.S. order book and announced 14 phase advancements across its breeding, biotechnology, and chemistry and agronomic research and development platforms, representing a record number of advancements for its annual pipeline update.

($ in millions)

First Quarter

2012

 

First Quarter

2011

Net Sales By Segment

 

 

 

 

 

 

Corn seed and traits

$

895

 

$

614

 

Soybean seed and traits

 

242

 

 

226

 

Cotton seeds and traits

 

194

 

 

112

 

Vegetable seeds

 

157

 

 

183

 

All other crops seeds and traits

 

46

 

 

28

TOTAL Seeds and Genomics

$

1,534

 

$

1,163

 

 

 

 

 

 

 

 

Agricultural Productivity

 

905

 

 

673

TOTAL Agricultural Productivity

$

905

 

$

673

 

 

 

 

 

 

 

TOTAL Net Sales

$

2,439

 

$

1,836

 

 

 

 

 

 

 

Gross Profit

$

1,096

 

$

824

 

 

 

 

 

 

 

Operating Expenses

$

851

 

$

760

 

 

 

 

 

 

 

Interest Expense – Net

$

35

 

$

28

Other Expense – Net

$

6

 

$

12

 

 

 

 

 

 

 

Net Income Attributable to Monsanto Company

$

126

 

$

9

 

 

 

 

 

 

 

Diluted Earnings per Share (See note 1.)

$

0.23

 

$

0.02

Items Affecting Comparability – EPS Impact

 

 

 

 

 

 

Restructuring charges

 

—

 

 

0.01

Diluted Earnings per Share from Ongoing Business (For the definition of ongoing EPS, see note 1.)

$

0.23

 

$

0.03

 

 

 

 

 

 

 

Effective Tax Rate

 

34%

 

 

38%

 

 

 

First Quarter 2012

 

First Quarter 2011

Comparison as a Percent of Net Sales:

 

 

 

 

Gross profit

45%

 

45%

 

Selling, general and administrative expenses (SG&A)

21%

 

25%

 

Research and development expenses

14%

 

17%

 

Income before income taxes

8%

 

1%

 

Net Income Attributable to Monsanto Company

5%

 

—%

"We've seen a very strong start to the year, with real growth in Latin America and early orders in the United States that underscore our sustained momentum carrying into 2012," said Hugh Grant, chairman, president and chief executive officer for Monsanto.  "We are pleased growers have recognized the value of our products and the benefits they provide on farm.  Our pipeline progress continues to be a competitive differentiator, and that's ever more important as we put an even greater focus on delivering yield to growers."

Results of Operations

The company achieved a strong first quarter that reflected the expected structural change in its earnings pattern based on improved sales in the growing Latin America market.  Net sales increased 33 percent over the prior year's quarter to $2.4 billion, with significant gains in corn driven by the Latin America market.  Gross profit for the total company increased 33 percent to $1.1 billion, and gross profit as a percent of sales was even with the prior year at 45 percent.  

Selling, general and administrative (SG&A) expenses increased to $500 million as a result of inflation and commissions from higher sales.  R&D expenses increased to $351 million based in part on investments in breeding facilities to support international and U.S. corn.

The company's first quarter earnings per share (EPS) was $0.23 on an ongoing and as-reported basis. (For a reconciliation of ongoing EPS, see note 1.)

Cash Flow

The strong first quarter was evident in the company's free cash flow, which was $856 million compared to $500 million for the prior year first quarter.  The increase reflects growth in net income as well as an increase in customer prepayments ahead of the U.S. selling season. (For a reconciliation of free cash flow, see note 1.)

Net cash provided by operating activities was $1.1 billion, compared to $624 million in the first quarter last year. Net cash required by investing activities for the first quarter of fiscal 2012 was $254 million, compared with a use of $124 million for the year-ago quarter.  Net cash required by financing activities was $340 million, even with the prior year's first quarter.

Outlook

The company affirmed its guidance of free cash flow for fiscal year 2012 in the range of $1.3 billion to $1.5 billion, reflecting an investment of $600 to $700 million in capital expenditures.  The company expects net cash provided by operating activities to be $2.2 billion to $2.5 billion, and net cash required by investing activities to be approximately $900 million to $1 billion for fiscal year 2012. (For a reconciliation of free cash flow, see note 1.) 

The company guided to the high end of its full-year 2012 ongoing EPS mid-teens earnings growth guidance, expecting to achieve $3.39 to $3.44 of ongoing and as-reported EPS.  (For a reconciliation of EPS, see note 1.)

Seeds and Genomics Segment Detail

 

($ in millions)

 

Net Sales

 

Gross Profit

 

Seeds and Genomics

 

First

Quarter

2012

 

First

Quarter

2011

 

First

Quarter

2012

 

First

Quarter

2011

 

Corn seed and traits

$

895

$

614

$

531

$

339

 

Soybean seed and traits

 

242

 

226

 

173

 

153

 

Cotton seed and traits

 

194

 

112

 

135

 

74

 

Vegetable seeds

 

157

 

183

 

81

 

113

 

All other crops seeds and traits

 

46

 

28

 

(4)

 

—

 

TOTAL Seeds and Genomics

$

1,534

$

1,163

$

916

$

679

 

($ in millions)

Earnings (Loss) Before

Interest & Taxes (EBIT)

 

Seeds and Genomics

 

First

Quarter

2012

 

First

Quarter

2011

 

EBIT (For a reconciliation of EBIT, see note 1.)

$

147

$

(20)

 

Unusual Items Affecting EBIT: Restructuring

$

—

$

(11)

The Seeds and Genomics segment consists of the company's global seeds and related traits business.

Sales for Monsanto's Seeds and Genomics segment increased 32 percent in the first quarter to $1.5 billion, reflecting the strength of the Latin America business and some timing benefits from the Australian cotton business.

Corn seed and traits net sales increased 46 percent over last year's quarter to $895 million, driven by volume growth and a mix benefit that came from significant trait expansion in Brazil and Argentina.

Cotton seed and traits net sales increased 73 percent to $194 million based on a timing effect in Australia, where growers' decisions to purchase technology upfront advanced revenues to the first quarter that would traditionally have been expected following harvest based on growers' yields in the fourth quarter of this fiscal year. Higher planted hectares in Australia compared to the prior year also were a contributor.

In soybeans, seed and trait sales were up 7 percent to $242 million.  Vegetable sales were $157 million, a decrease from the prior year.

The company noted the pace of its U.S. order book is ahead of the same point in time last year and tracking well with 2012 targets.

Agricultural Productivity Segment Detail

 

($ in millions)

 

Net Sales

 

Gross Profit

 

Agricultural Productivity

 

First

Quarter

2012

 

First

Quarter

2011

 

First

 Quarter

2012

 

First

Quarter

2011

 

TOTAL Agricultural Productivity

$

905

$

673

$

180

$

145

 

($ in millions)

Earnings Before Interest & Taxes (EBIT)

 

Agricultural Productivity

 

First

Quarter

2012

 

 

First

Quarter

2011

 

EBIT (For a reconciliation of EBIT, see note 1.)

$

82

 

$

66

 

Unusual Items Affecting EBIT: Restructuring

$

—

 

$

4

The Agricultural Productivity segment consists of the crop protection products including Roundup® and other herbicides, and lawn-and-garden herbicide products.

Sales in the first quarter of fiscal 2012 for Monsanto's Agricultural Productivity segment increased 34 percent or $232 million. 

Webcast Information
In conjunction with this announcement, Monsanto will hold a conference call at 8:30 a.m. central time (9:30 a.m. eastern time) today. The call will focus on these results, future expectations and an update of projects within the company's R&D pipeline, including the 14 phase advancements. The call also may include a discussion of Monsanto's strategic initiatives, product performance and other matters related to the company's business.

Presentation slides and a simultaneous audio webcast of the conference call may be accessed by visiting the company's web site at www.monsanto.com and clicking on "Investor Information." 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 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. To learn more about our business and our commitments, please visit: www.monsanto.com. Follow our business on Twitter® at www.twitter.com/MonsantoNews, on Facebook® at www.facebook.com/MonsantoCo, or subscribe to our News Release RSS Feed.

Cautionary Statements Regarding Forward-Looking Information:

Certain statements contained in this release are "forward-looking statements," such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company's actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: continued competition in seeds, traits and agricultural chemicals; the company's exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public acceptance of biotechnology products; the success of the company's research and development activities; the outcomes of major lawsuits and the previously-announced SEC investigation; the previously reported material weakness in our internal controls over financial reporting; developments related to foreign currencies and economies; successful operation of recent acquisitions; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company's estimates related to distribution inventory levels; the company's ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters and accidents on the agriculture business or the company's facilities; and other risks and factors detailed in the company's most recent Form 10-K Report to the SEC. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this release. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results.

Notes to editors: Roundup is a trademark 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,

 

 

 

2011

 

 

2010

Net Sales

$

2,439

 

$

1,836

Cost of Goods Sold

 

1,343

 

 

1,012

Gross Profit

 

1,096

 

 

824

Operating Expenses:

 

 

 

 

 

 

Selling, General and Administrative Expenses

 

500

 

 

450

 

Research and Development Expenses

 

351

 

 

303

 

Restructuring Charges, Net

 

—

 

 

7

Total Operating Expenses

 

851

 

 

760

Income From Operations

 

245

 

 

64

Interest Expense

 

53

 

 

43

Interest Income

 

(18)

 

 

(15)

Other Expense, Net

 

6

 

 

12

Income Before Income Taxes

 

204

 

 

24

Income Tax Provision

 

70

 

 

9

 

 

 

 

 

 

 

Net Income Including Portion Attributable to Noncontrolling Interest

$

134

 

$

15

Less: Net Income Attributable to Noncontrolling Interest

 

8

 

 

6

Net Income Attributable to Monsanto Company

$

126

 

$

9

 

 

 

 

 

 

 

EBIT (see note 1)

$

229

 

$

46

 

 

 

 

 

 

 

Basic Earnings per Share Attributable to Monsanto Company

$

0.24

 

$

0.02

 

 

 

 

 

 

 

Diluted Earnings per Share Attributable to Monsanto Company

$

0.23

 

$

0.02

 

 

 

 

 

 

 

Weighted Average Shares Outstanding:

 

 

 

 

 

 

Basic

 

535.4

 

 

538.6

 

Diluted

 

541.4

 

 

544.5

Monsanto Company
Selected Financial Information
(Dollars in millions, except per share amounts)
Unaudited

Condensed Statements of Consolidated Financial Position

As of

 

As of

 

 

Nov. 30, 2011

 

Aug. 31, 2011

Assets

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents (variable interest entities restricted - 2012: $73 and 2011: $96)

$

3,007

 

$

2,572

 

Short-term investments

 

302

 

 

302

 

Trade Receivables, net (variable interest entities restricted - 2012: $64 and 2011: $51)

 

1,993

 

 

2,117

 

Miscellaneous Receivables

 

639

 

 

629

 

Deferred Tax Assets

 

494

 

 

446

 

Inventory, Net

 

3,136

 

 

2,591

 

Other Current Assets

 

163

 

 

152

Total Current Assets

 

9,734

 

 

8,809

 

 

 

 

 

 

 

Property, Plant and Equipment, Net

 

4,230

 

 

4,394

Goodwill

 

3,348

 

 

3,365

Other Intangible Assets, Net

 

1,300

 

 

1,309

Noncurrent Deferred Tax Assets

 

822

 

 

873

Long-Term Receivables, Net

 

404

 

 

475

Other Assets

 

585

 

 

619

Total Assets

$

20,423

 

$

19,844

Liabilities and Shareowners' Equity

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Short-Term Debt, Including Current Portion of Long-Term Debt

 

522

 

 

678

 

Accounts Payable

 

735

 

 

839

 

Income Taxes Payable

 

165

 

 

117

 

Accrued Compensation and Benefits

 

262

 

 

427

 

Accrued Marketing Programs

 

754

 

 

1,110

 

Deferred Revenues

 

1,997

 

 

373

 

Grower Production Accruals

 

586

 

 

87

 

Dividends Payable

 

—

 

 

161

 

Customer Payable

 

16

 

 

94

 

Restructuring Reserves

 

19

 

 

24

 

Miscellaneous Short-Term Accruals

 

797

 

 

819

Total Current Liabilities

 

5,853

 

 

4,729

 

 

 

 

 

 

 

Long-Term Debt

 

1,542

 

 

1,543

Postretirement Liabilities

 

514

 

 

509

Long-Term Deferred Revenue

 

319

 

 

337

Noncurrent Deferred Tax Liabilities

 

124

 

 

152

Long-Term Portion of Environmental and Litigation Reserves

 

174

 

 

176

Other Liabilities

 

697

 

 

682

Monsanto Shareowners' Equity

 

11,041

 

 

11,545

Noncontrolling Interest

 

159

 

 

171

Total Shareowners' Equity

 

11,200

 

 

11,716

Total Liabilities and Shareowners' Equity

$

20,423

 

$

19,844

 

 

 

 

 

 

 

Debt to Capital Ratio:

 

16%

 

 

16%

Monsanto Company
Selected Financial Information
(Dollars in millions, except per share amounts)
Unaudited

Statements of Consolidated Cash Flows

Three Months Ended

 

 

 

Nov. 30,

 

 

 

 

2011

 

 

2010

Operating Activities:

 

 

 

 

 

 

Net Income

$

134

 

$

15

 

Adjustments to Reconcile Cash Provided by Operating Activities:

 

 

 

 

 

 

Items That Did Not Require (Provide) Cash:

 

 

 

 

 

 

 

Depreciation and Amortization

 

155

 

 

155

 

 

Bad-Debt Expense

 

(1)

 

 

(1)

 

 

Stock-Based Compensation Expense

 

23

 

 

27

 

 

Excess Tax Benefits from Stock-Based Compensation

 

(6)

 

 

(9)

 

 

Deferred Income Taxes

 

(48)

 

 

26

 

 

Restructuring Charges, Net

 

—

 

 

7

 

 

Equity Affiliate Income, Net

 

1

 

 

(1)

 

 

Net Gain on Sales of a Business or Other Assets

 

(1)

 

 

(1)

 

 

Other Items

 

(55)

 

 

23

 

Changes in Assets and Liabilities that Provided (Required) Cash, Net of Acquisitions:

 

 

 

 

 

 

 

Trade Receivables, Net

 

49

 

 

34

 

 

Inventory, Net

 

(679)

 

 

(555)

 

 

Deferred Revenues

 

1,624

 

 

1,101

 

 

Accounts Payable and Other Accrued Liabilities

 

(127)

 

 

(143)

 

 

Restructuring Cash Payments

 

(4)

 

 

(76)

 

 

Pension Contributions

 

(5)

 

 

—

 

 

Other Items

 

50

 

 

22

Net Cash Provided by Operating Activities

 

1,110

 

 

624

 

 

 

 

 

 

 

 

Cash Flows Provided (Required) by Investing Activities:

 

 

 

 

 

 

 

Purchases of Short-Term Investments

 

(142)

 

 

—

 

 

Maturities of Short-Term Investments

 

142

 

 

—

 

 

Capital Expenditures

 

(138)

 

 

(125)

 

 

Acquisitions of Businesses, Net of Cash Acquired

 

(113)

 

 

—

 

 

Technology and Other Investments

 

(5)

 

 

(2)

 

 

Other Investments and Property Disposal Proceeds

 

2

 

 

3

Net Cash Required by Investing Activities

 

(254)

 

 

(124)

 

 

 

 

 

 

 

 

Cash Flows Provided (Required) Provided by Financing Activities:

 

 

 

 

 

 

 

Net Change in Financing With Less Than 90-Day Maturities

 

(8)

 

 

72

 

 

Short-Term Debt Proceeds

 

—

 

 

15

 

 

Short-Term Debt Reductions

 

(17)

 

 

(16)

 

 

Long-Term Debt Proceeds

 

1

 

 

—

 

 

Long-Term Debt Reductions

 

(138)

 

 

(1)

 

 

Payments on Other Financing

 

—

 

 

(2)

 

 

Treasury Stock Purchases

 

(26)

 

 

(267)

 

 

Stock Option Exercises

 

12

 

 

16

 

 

Excess Tax Benefits from Stock-Based Compensation

 

6

 

 

9

 

 

Tax Withholding on Restricted Stock and Restricted Stock Units

 

(1)

 

 

—

 

 

Dividend Payments

 

(161)

 

 

(151)

 

 

Dividend Payments to Noncontrolling Interests

 

(8)

 

 

(15)

Net Cash Required by Financing Activities

 

(340)

 

 

(340)

Cash Assumed from Initial Consolidations of Variable Interest Entities

 

—

 

 

77

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

(81)

 

 

10

Net Increase in Cash and Cash Equivalents

 

435

 

 

247

Cash and Cash Equivalents at Beginning of Period

 

2,572

 

 

1,485

Cash and Cash Equivalents at End of Period

$

3,007

 

$

1,732

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)

 

attributable to Monsanto Company, 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) attributable to Monsanto Company 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) attributable to Monsanto.

 

 

Three Months Ended

 

 

Nov. 30,

 

 

2011

 

 

2010

EBIT – Seeds and Genomics Segment  

$

147

 

$

(20)

EBIT – Agricultural Productivity Segment

 

82

 

 

66

EBIT– Total  

 

229

 

 

46

Interest Expense, Net

 

35

 

 

28

Income Tax Provision(A)

 

68

 

 

9

Net Income Attributable to Monsanto Company

$

126

 

$

9

(A)     

Includes the income tax provision from continuing operations and the income tax provision on noncontrolling interest.

Reconciliation of EPS to Ongoing EPS:  Ongoing EPS is calculated excluding certain after-tax items which Monsanto does not consider part of ongoing operations.

 

 

Fiscal Year

Three months

Three months

 

 

 

2012

ended

ended

 

 

 

Guidance

Nov. 30, 2011

Nov. 30, 2010

 

 

Diluted Earnings per Share

$3.39-$3.44

$0.23

$0.02

 

 

Restructuring Charges

—

—

$0.01

 

 

Diluted Earnings per Share from Ongoing Business

$3.39-$3.44

$0.23

$0.03

 

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 2012 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

 

Three Months Ended

 

2012

 

Nov. 30,

 

Guidance

 

2011

 

2010

Net Cash Provided by Operating Activities

$

2,200-2,500

$

1,110

$

624

Net Cash Required by Investing Activities

 

(900)-(1,000)

 

(254)

 

(124)

Free Cash Flow

$

1,300-1,500

 

856

 

500

Net Cash Required by Financing Activities

 

N/A

 

(340)

 

(340)

Cash Assumed from Initial Consolidations of Variable Interest Entities

 

N/A

 

-

 

77

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

N/A

 

(81)

 

10

Net Increase in Cash and Cash Equivalents

 

N/A

 

435

 

247

Cash and Cash Equivalents at Beginning of Period

 

N/A

 

2,572

 

1,485

Cash and Cash Equivalents at End of Period

 

N/A

$

3,007

$

1,732

Contact

Media:      Kelli Powers  (314-694-4003)

 

Analysts:  Bryan Hurley (314-694-8148)

SOURCE Monsanto Company

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