Monsanto Announces Second-Quarter Financial Results in Line with Mid-Teens Earnings Growth Opportunity

Company Confirms Full-Year Ongoing Earnings Per Share Guidance, Raises Free Cash Flow Expectation

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Apr 06, 2011, 08:00 ET

ST. LOUIS, April 6, 2011 /PRNewswire/ -- With half its fiscal year complete, Monsanto Company (NYSE: MON) today said a solid sales season for its U.S. seeds and traits business and disciplined approach to spending have positioned the company to realize its mid-teens earnings growth opportunity this year and set a strong foundation for coming seasons. In reporting its earnings results for the quarter ending Feb. 28, 2011, the company highlighted performance tracking with projections in both the seeds and genomics and agricultural productivity segments that affirms its full-year ongoing earnings per share guidance. The company also increased its free cash flow guidance for the full-year, driven by better than expected working-capital management and a strong economic climate in agriculture.


			Second Quarter				Six Months
($ in millions)		2011		2010		2011		2010
Net Sales By Segment
	Corn seed and traits	$	2,397	$	2,247	$	3,011	$	2,816
	Soybean seed and traits		615		633		841		834
	Cotton seeds and traits		67		34		179		93
	Vegetable seeds		229		223		412		396
	All other crops seeds and traits		113		111		141		140
TOTAL Seeds and Genomics		$	3,421	$	3,248	$	4,584	$	4,279

	Agricultural productivity	$	708	$	642	$	1,375	$	1,308
TOTAL Agricultural Productivity		$	708	$	642	$	1,375	$	1,308

TOTAL Net Sales		$	4,129	$	3,890	$	5,959	$	5,587

Gross Profit		$	2,308	$	2,099	$	3,126	$	2,838

Operating Expenses		$	823	$	821	$	1,583	$	1,598

Interest Expense – Net		$	20	$	27	$	48	$	55
Other Expense (Income) – Net		$	11	$	2	$	23	$	(10)

Net Income Attributable to Monsanto Company		$	1,017	$	887	$	1,023	$	868

Diluted Earnings per Share (See note 1.)		$	1.88	$	1.60	$	1.88	$	1.57
Items Affecting Comparability – EPS Impact
	Restructuring charges		—		0.10		0.01		0.12
	Income on discontinued operations		(0.01)		—		—		(0.01)
Diluted Earnings per Share from Ongoing Business (For the definition of ongoing EPS, see note 1.)		$	1.87	$	1.70	$	1.89	$	1.68

Effective Tax Rate			29%		29%		29%		28%


		Second Quarter		Six Months
Comparison as a Percent of Net Sales:		2011	2010	2011	2010
	Gross profit	56%	54%	52%	51%
	Selling, general and administrative expenses (SG&A)	12%	13%	16%	18%
	Research and development expenses	8%	7%	10%	10%
	Income from continuing operations before income taxes	35%	32%	25%	21%
	Net income attributable to Monsanto Company	25%	23%	17%	16%

"We came into this year with an operational plan built around creating value for our customers," said Hugh Grant, chairman, president and chief executive officer for Monsanto. "It was a plan that was designed for balanced growth – across crops, across geographies and through a combination of mix and volume improvements. We exist to serve our farmer customers, and it is rewarding to see this plan is resonating with them. Given the tempo of the year, we are where we should be, and we have the right pieces and the right execution to feel very good that mid-teens earnings growth in 2011 is on track."

Results of Operations

Net sales increased $239 million, or 6 percent, in the three-month comparison driven by volume in both the seeds and genomics and agricultural productivity segments. Net income in the second quarter was $1 billion.

Gross profit rose 10 percent in the quarter to $2.3 billion, with margins higher due to cost improvements. For the first six months, gross profit is up 10 percent or $288 million.

Operating expenses were up $2 million in the second quarter compared to the prior year. In the three-month comparison, selling, general and administrative (SG&A) expenses decreased 2 percent. R&D expenses increased as the company continues to manage more projects in advanced pipeline phases.

Earnings per share (EPS) for the second quarter was $1.88 on an as-reported basis, and $1.87 on an ongoing basis. EPS for the first six months of fiscal year 2011 was $1.88 on an as-reported basis, and $1.89 on an ongoing basis. (For a reconciliation of EPS to ongoing EPS see page 1).

Cash Flow

The second quarter saw a continuation of the strong start to the year. For the first half of fiscal year 2011, cash flow from operations was a source of $1.4 billion compared to $256 million in the first half last year. Net cash required by investing activities for the first half of fiscal year 2011 was $524 million, compared to $345 million for the same period of fiscal year 2010.

Net cash required by financing activities for the first half of 2011 was $668 million, compared to net cash required of $259 million for the same period of fiscal year 2010. The company continues to make progress on its current $1 billion, three-year share repurchase authorization, spending $114 million on repurchases in the second quarter for a total purchase of $381 million for the first half of the fiscal year.

Free cash flow was a source of $917 million for the first half of fiscal year 2011, compared to a use of $89 million for the first half of fiscal year 2010. (For a reconciliation of free cash flow, see note 1.)

Outlook

The company affirmed its previously announced ongoing EPS guidance and raised its full-year free cash flow guidance for fiscal year 2011 to the range of $900 million to $1.1 billion. The company expects net cash provided by operating activities to be $1.8 billion to $2.1 billion, and net cash required by investing activities to be approximately $900 million to $1 billion for fiscal year 2011. (For a reconciliation of free cash flow, see note 1.)

The company confirmed full-year 2011 ongoing EPS guidance is in the range of $2.72 to $2.82. Full-year 2011 EPS guidance on an as-reported basis is in the range of $2.66 to $2.79. (For a reconciliation of EPS, see note 1.)

Seeds and Genomics Segment Detail
($ in millions)		Net Sales								Gross Profit
		Second Quarter				Six Months				Second Quarter				Six Months
Seeds and Genomics		2011		2010		2011		2010		2011		2010		2011		2010
Corn Seed and Traits	$	2,397	$	2,247	$	3,011	$	2,816	$	1,506	$	1,420	$	1,845	$	1,724
Soybean Seed and Traits		615		633		841		834		414		386		567		525
Cotton Seed and Traits		67		34		179		93		42		15		116		48
Vegetable Seeds		229		223		412		396		125		138		238		250
All Other Crops Seeds and Traits		113		111		141		140		44		53		44		62
TOTAL Seeds and Genomics	$	3,421	$	3,248	$	4,584	$	4,279	$	2,131	$	2,012	$	2,810	$	2,609


($ in millions)	Earnings (Loss) Before Interest & Taxes (EBIT)
		Second Quarter				Six Months
Seeds and Genomics	2011		2010		2011		2010
EBIT (For a reconciliation of EBIT, see note 1.)	$	1,403	$	1,362	$	1,383	$	1,305
Unusual Items Affecting EBIT: Restructuring	$	(3)	$	(59)	$	(14)	$	(62)

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

In total, sales for Monsanto's Seeds and Genomics segment in the second quarter of fiscal 2011 increased 5 percent or $173 million, driven by global unit volume growth and a mix upgrade in the United States.

While it's early in the season, the company indicated sales are pacing to meet the mid-teens millions of U.S. acres it had expected for both its Genuity® Roundup Ready 2 Yield® soybeans and the Genuity® reduced refuge corn family this year. This brings a positive mix improvement across Monsanto's U.S. soybean and corn portfolios.

Globally, the company saw higher branded corn sales in Brazil, the United States and Europe in the quarter. In U.S. corn, the company has made significant product and pricing strategy moves, identifying lead products in each of the major geographies while making all products available across areas to meet farmers' needs. Genuity® SmartStax®, which provides the broadest spectrum of insect and weed control, is receiving strong interest in heavy rootworm areas of the Northern Corn Belt. Genuity® VT Triple PRO® and Genuity® VT Double PRO® are complementing the Genuity® SmartStax® build-out, with Genuity® VT Triple PRO® generating strong interest in the South as Genuity® VT Double PRO® does the same in areas with an established doubles market.

The cotton business also is performing well this year, with mix and volume improvements led by second-generation trait offerings and continued breeding gains. The company maintained a positive outlook for vegetables, with the gross profit decline attributed primarily to sales mix timing, which is expected to normalize over the rest of the year.

Agricultural Productivity Segment Detail
($ in millions)	Net Sales								Gross Profit
	Second Quarter				Six Months				Second Quarter				Six Months
		2011		2010		2011		2010		2011		2010		2011		2010
Agricultural Productivity	$	708	$	642	$	1,375	$	1,308	$	177	$	87	$	316	$	229
TOTAL Agricultural Productivity	$	708	$	642	$	1,375	$	1,308	$	177	$	87	$	316	$	229


($ in millions)		Earnings (Loss) Before Interest & Taxes (EBIT)
			Second Quarter				Six Months
Agricultural Productivity			2011		2010		2011		2010
EBIT (For a reconciliation of EBIT, see note 1.)		$	60	$	(87)	$	120	$	(53)
Unusual Items Affecting EBIT:
	EBIT from Discontinued Operations	$	4	$	—	$	4	$	5
	Restructuring	$	—	$	(25)	$	4	$	(36)

The Agricultural Productivity segment consists of the crop protection products and lawn-and-garden herbicide products.

Over the last year, the company has made fundamental changes in the crop protection business in particular as it relates to Roundup® and other glyphosate-based herbicides. With this quarter, the structural changes made to this segment are now reflected in the company's financial statements.

In our Agricultural Productivity reportable segment, the company has consolidated the Roundup® and other glyphosate-based herbicides, selective chemistry and lawn-and-garden businesses. The company made this change because the Agricultural Productivity segment now is managed as one business, and the ongoing operations of that business reflect the restructuring that is now complete.

Sales in the second quarter of fiscal 2011 for Monsanto's Agricultural Productivity segment increased 10 percent, with gross profit improvement as well as a function of volume and cost improvements primarily related to production efficiencies following the restructuring.

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 and future expectations and 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/MonsantoCo, on the company blog, Beyond the Rows® at www.monsantoblog.com, 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; 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, Genuity, SmartStax and Roundup Ready 2 Yield, VT Triple PRO and VT Double PRO 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				Six Months Ended
			Feb. 28,				Feb. 28,
			2011		2010		2011		2010
Net Sales		$	4,129	$	3,890	$	5,959	$	5,587
Cost of Goods Sold			1,821		1,791		2,833		2,749
Gross Profit			2,308		2,099		3,126		2,838
Operating Expenses:
	Selling, general and administrative expenses		502		512		952		1,008
	Research and development expenses		320		279		623		546
	Restructuring charges, net		1		30		8		44
Total Operating Expenses			823		821		1,583		1,598
Income From Operations			1,485		1,278		1,543		1,240
Interest Expense			39		41		82		80
Interest Income			(19)		(14)		(34)		(25)
Other Expense (Income), Net			11		2		23		(10)
Income from Continuing Operations Before Income Taxes			1,454		1,249		1,472		1,195
Income Tax Provision			428		360		434		330
Income from Continuing Operations Including Portion
	Attributable to Noncontrolling Interest	$	1,026	$	889	$	1,038	$	865
Discontinued Operations:
Income from Operations of Discontinued Businesses			4		—		4		5
Income Tax Provision			1		—		1		—
Income on Discontinued Operations			3		—		3		5
Net Income		$	1,029	$	889	$	1,041	$	870
Less: Net Income Attributable to Noncontrolling Interest			12		2		18		2
Net Income Attributable to Monsanto Company		$	1,017	$	887	$	1,023	$	868

EBIT (see note 1)		$	1,463	$	1,275	$	1,503	$	1,252

Basic Earnings per Share Attributable to Monsanto Company:
Income from Continuing Operations		$	1.89	$	1.63	$	1.90	$	1.58
Income on Discontinued Operations			0.01		—		—		0.01
Net Income Attributable to Monsanto Company		$	1.90	$	1.63	$	1.90	$	1.59

Diluted Earnings per Share Attributable to Monsanto Company:
Income from Continuing Operations		$	1.87	$	1.60	$	1.88	$	1.56
Income on Discontinued Operations			0.01		—		—		0.01
Net Income Attributable to Monsanto Company		$	1.88	$	1.60	$	1.88	$	1.57

Weighted Average Shares Outstanding:
	Basic		536.3		545.8		537.6		545.7
	Diluted		542.4		553.4		543.7		553.4

Monsanto Company Selected Financial Information (Dollars in millions, except per share amounts) Unaudited
Condensed Statements of Consolidated Financial Position		As of		As of
		Feb. 28, 2011		Aug. 31, 2010
Assets
Current Assets:
	Cash and cash equivalents (variable interest entities restricted - 2011: $13)	$	1,837	$	1,485
	Short-term investments		180		—
	Trade receivables, net (variable interest entities restricted - 2011: $101)		2,377		1,590
	Miscellaneous receivables		620		717
	Deferred tax assets		451		511
	Inventory, net		3,090		2,739
	Other current assets		137		80
Total Current Assets			8,692		7,122

Property, Plant and Equipment, Net			4,222		4,227
Goodwill			3,320		3,204
Other Intangible Assets, Net			1,353		1,263
Noncurrent Deferred Tax Assets			1,038		1,014
Long-Term Receivables, Net			459		513
Other Assets			565		524
Total Assets		$	19,649	$	17,867

Liabilities and Shareowners' Equity
Current Liabilities:
	Short-term debt, including current portion of long-term debt		409		241
	Accounts payable		634		752
	Income taxes payable		284		66
	Accrued compensation and benefits		258		179
	Accrued marketing programs		881		839
	Deferred revenues		919		219
	Grower production accruals		256		130
	Dividends payable		150		151
	Customer payable		3		83
	Restructuring reserves		59		197
	Miscellaneous short-term accruals		668		684
Total Current Liabilities			4,521		3,541

Long-Term Debt			1,729		1,862
Postretirement Liabilities			923		920
Long-Term Deferred Revenue			375		395
Noncurrent Deferred Tax Liabilities			143		137
Long-Term Portion of Environmental and Litigation Reserves			179		188
Other Liabilities			645		681
Monsanto Shareowners' Equity			11,001		10,099
Noncontrolling Interest			133		44
Total Shareowners' Equity			11,134		10,143
Total Liabilities and Shareowners' Equity		$	19,649	$	17,867

Debt to Capital Ratio:			16%		17%

Monsanto Company Selected Financial Information (Dollars in millions, except per share amounts) Unaudited
Statements of Consolidated Cash Flows			Six Months Ended Feb. 28,
				2011		2010
Operating Activities:
	Net Income		$	1,041	$	870
	Adjustments to reconcile cash provided (required) by operating activities:
	Items that did not require (provide) cash:
		Depreciation and amortization		310		294
		Bad-debt expense		(6)		26
		Stock-based compensation expense		55		52
		Excess tax benefits from stock-based compensation		(19)		(31)
		Deferred income taxes		(13)		(62)
		Restructuring charges, net		8		44
		Equity affiliate income, net		(8)		(18)
		Net gain on sales of a business or other assets		(4)		(2)
		Other items		59		38
	Changes in assets and liabilities that provided (required) cash, net of acquisitions:
		Trade receivables, net		(612)		(459)
		Inventory, net		(269)		(241)
		Deferred revenues		656		341
		Accounts payable and other accrued liabilities		507		(323)
		Restructuring cash payments		(152)		(124)
		Pension contributions		(44)		(86)
		Net investment hedge settlement		—		(4)
		Other items		(68)		(59)
Net Cash Provided by Operating Activities				1,441		256

Cash Flows Required by Investing Activities:
		Purchases of short-term investments		(180)		—
		Capital expenditures		(217)		(342)
		Acquisitions of businesses, net of cash acquired		(99)		(23)
		Purchases of long-term equity securities		—		(8)
		Technology and other investments		(44)		(14)
		Other investments and property disposal proceeds		16		42
Net Cash Required by Investing Activities				(524)		(345)

Cash Flows Required by Financing Activities:
		Net change in financing with less than 90-day maturities		(12)		126
		Short-term debt proceeds		45		25
		Short-term debt reductions		(27)		(32)
		Long-term debt reductions		(2)		(1)
		Payments on other financing		(2)		(1)
		Treasury stock purchases		(381)		(124)
		Stock option exercises		37		38
		Excess tax benefits from stock-based compensation		19		31
		Tax withholding on restricted stock and restricted stock units		(4)		—
		Dividend payments		(302)		(290)
		Proceeds from noncontrolling interests		8		—
		Dividend payments to noncontrolling interests		(47)		(31)
Net Cash Required by Financing Activities				(668)		(259)
Cash Assumed from Initial Consolidations of Variable Interest Entities				77		—
Effect of Exchange Rate Changes on Cash and Cash Equivalents				26		(1)
Net Increase (Decrease) in Cash and Cash Equivalents				352		(349)
Cash and Cash Equivalents at Beginning of Period				1,485		1,956
Cash and Cash Equivalents at End of Period			$	1,837	$	1,607

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				Six Months Ended
	Feb. 28,				Feb. 28,
		2011		2010		2011		2010
EBIT – Seeds and Genomics Segment	$	1,403	$	1,362	$	1,383	$	1,305
EBIT – Agricultural Productivity Segment		60		(87)		120		(53)
EBIT– Total		1,463		1,275		1,503		1,252
Interest Expense, Net		20		27		48		55
Income Tax Provision(A)		426		361		432		329
Net Income Attributable to Monsanto Company	$	1,017	$	887	$	1,023	$	868

(A)	Includes the income tax provision from continuing operations, the income tax benefit (provision) on noncontrolling 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.


	Fiscal Year	Six Months
	2011	Ended
	Guidance	Feb. 28, 2011
Diluted Earnings per Share	$2.66-$2.79	$1.88
Restructuring Charges, Net	$0.03 - $0.06	$0.01
Income on Discontinued Operations	—	—
Diluted Earnings per Share from Ongoing Business	$2.72-$2.82	$1.89

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 2011 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
	2011			Feb. 28,
	Guidance			2011		2010
Net Cash Provided by Operating Activities	$	1,800-2,100	$	1,441	$	256
Net Cash Required by Investing Activities		(900)-(1,000)		(524)		(345)
Free Cash Flow	$	900-1,100		917		(89)
Net Cash Required by Financing Activities		N/A		(668)		(259)
Cash Assumed from Initial Consolidations of Variable Interest Entities		N/A		77		—
Effect of Exchange Rate Changes on Cash and Cash Equivalents		N/A		26		(1)
Net Increase (Decrease) in Cash and Cash Equivalents		N/A		352		(349)
Cash and Cash Equivalents at Beginning of Period		N/A		1,485		1,956
Cash and Cash Equivalents at End of Period		N/A	$	1,837	$	1,607

CONTACT	Media: Kelli Powers (314-694-4003)
	Analysts: Bryan Hurley (314-694-8148)

SOURCE Monsanto Company