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Press release from PR Newswire

Milestone Achievements for Seeds and Traits and Improved Performance Across Core Business Drive Stronger Outlook for Monsanto

Wednesday, June 29, 2011

Milestone Achievements for Seeds and Traits and Improved Performance Across Core Business Drive Stronger Outlook for Monsanto08:00 EDT Wednesday, June 29, 2011Company Raises Full-Year Ongoing Earnings Per Share Guidance to $2.84 to $2.88, or $2.82 to $2.86 As-Reported, While Increasing Free Cash Flow Guidance for the Second TimeST. LOUIS, June 29, 2011 /PRNewswire/ -- Looking at the scorecard of milestones to achieve this year, Monsanto Company (NYSE: MON) executives today said the strength of its seeds and traits business in the United States and Latin America combined with the well-received implementation of its agricultural productivity strategy drove a successful fiscal third quarter for the company.  The key third quarter ? one of the company's most significant historically ? is a highlight in a year that has created real momentum with the establishment of key products in the United States, accelerated adoption in Latin America and the growth of other key markets.  The company is well-positioned to conclude fiscal 2011 at a high-teens ongoing earnings growth target and translate that growth into greater free cash flow. Third QuarterNine Months($ in millions)2011 2010 2011 2010 Net Sales By SegmentCorn seed and traits$1,123$1,020$4,134$3,836Soybean seed and traits6055491,4461,383Cotton seeds and traits487420666513Vegetable seeds216204628600All other crops seeds and traits216169357309TOTAL Seeds and Genomics$2,647$2,362$7,231$6,641Agricultural productivity$943$600$2,318$1,908TOTAL Agricultural Productivity$943$600$2,318$1,908TOTAL Net Sales$3,590$2,962$9,549$8,549Gross Profit$1,955$1,387$5,081$4,225Operating Expenses$952$828$2,535$2,426Interest Expense ? Net$18$17$66$72Other Expense (Income) ? Net $15$7$38$(3)Net Income Attributable to Monsanto Company$680$384$1,703$1,252Diluted Earnings per Share (See note 1.)$1.26$0.70$3.14$2.27Items Affecting Comparability ? EPS ImpactRestructuring charges?0.110.010.23Income on discontinued operations??(0.01)(0.01)Diluted Earnings per Share from Ongoing Business (For the definition of ongoing EPS, see note 1.)$1.26$0.81$3.14$2.49Effective Tax Rate28%26%29%27%Third QuarterNine MonthsComparison as a Percent of Net Sales:2011 2010 2011 2010 Gross profit54%47%53%49%Selling, general and administrative expenses (SG&A)16%17%16%18%Research and development expenses10%10%10%10%Income from continuing operations before income taxes 27%18%26%20%Net income attributable to Monsanto Company19%13%18%15%"The third quarter is always an important quarter for Monsanto, as it effectively concludes our fiscal year from an operational standpoint," said Hugh Grant, Monsanto's president and chief executive officer.  "Our U.S. selling season is almost complete, and farmers in Latin America are now harvesting their crops.  That gives us real data to validate the momentum we've felt.  We made significant changes to our business this year, and those changes resonated with our customers.  We earned their business and achieved what we set out to achieve: unit volume growth in our core crops, a successful implementation of our agricultural productivity strategy and sustained cost-discipline across our operations.  That positions us well for the coming years and the mid-teens earnings growth opportunity we see for this company." Results of OperationsNet sales increased $628 million, or 21 percent, in the three-month comparison driven by unit volume growth in both the seeds and genomics and agricultural productivity segments.  Net income attributable to Monsanto Company in the third quarter was $680 million. Gross profit rose 41 percent in the quarter to approximately $2 billion, with margins higher due to mix and cost improvements.  For the first nine months, gross profit is up 20 percent or $856 million.Operating expenses were up $124 million in the third quarter compared to the prior year, as expected. In the three-month comparison, selling, general and administrative (SG&A) expenses were up 20 percent, tracking with the increase expected as the company realizes more investments in employee and sales incentives and new product launches.  Research & Development (R&D) expenses increased as the company continues to make incremental investments in R&D to help fuel future growth.Earnings per share (EPS) for the third quarter were $1.26 on both an as-reported basis and an ongoing basis. EPS for the first nine months of fiscal year 2011 were $3.14 on both an as-reported basis and an ongoing basis. (For a reconciliation of EPS to ongoing EPS see page 1).Cash FlowThe company's strong cash position continued in the third quarter.  For the first nine months of the fiscal year, cash flow from operations was a source of $944 million compared with a use of $538 million in the first nine months last year. Net cash required by investing activities for the first nine months of fiscal year 2011 was $707 million, compared to $614 million for the same period of fiscal year 2010.  Net cash required by financing activities for the first nine months of 2011 was $766 million, compared to net cash required of $323 million for the same period of fiscal year 2010.  Free cash flow was a source of $237 million for the first nine months of fiscal year 2011, compared to a use of nearly $1.2 billion for the first nine months of fiscal year 2010. (For a reconciliation of free cash flow, see note 1.) The company continues to make progress on its current $1 billion, three-year share repurchase authorization, representing one of its most significant uses of cash.  The company spent $105 million on repurchases in the third quarter for total repurchases to date of $487 million, nearly half the authorization. OutlookThe company raised its full-year as-reported and ongoing EPS guidance and free cash flow guidance.  The company expects full-year 2011 ongoing EPS in the range of $2.84 to $2.88.  Full-year 2011 EPS guidance on an as-reported basis is expected in the range of $2.82 to $2.86.  (For a reconciliation of EPS, see note 1.)The company expects free-cash for fiscal year 2011 in the range of $1.1 billion to $1.3 billion.  The company expects net cash provided by operating activities to be $2 billion to $2.3 billion, and net cash required by investing activities to be approximately $900 million to $1 billion for fiscal year 2011. (For a reconciliation of free cash flow, see note 1.)Seeds and Genomics Segment Detail($ in millions)Net SalesGross ProfitThird QuarterNine MonthsThird QuarterNine MonthsSeeds and Genomics2011 2010 2011 2010 2011 2010 2011 2010 Corn Seed and Traits$1,123 $1,020 $4,134 $3,836 $679 $570 $2,524 $2,294 Soybean Seed and Traits605 549 1,446 1,383 386 292 953 817 Cotton Seed and Traits487 420 666 513 386 328 502 376 Vegetable Seeds216 204 628 600 123 112 361 362 All Other Crops Seeds and Traits216 169 357 309 132 104 176 166 TOTAL Seeds and Genomics$2,647 $2,362 $7,231 $6,641 $1,706 $1,406 $4,516 $4,015 ($ in millions)Earnings (Loss) Before Interest & Taxes (EBIT)Third QuarterNine MonthsSeeds and Genomics2011 2010 2011 2010 EBIT (For a reconciliation of EBIT, see note 1.)$880 $ 704 $2,263 $ 2,009 Unusual Items Affecting EBIT: Restructuring$(1)$ (68)$(15)$ (130)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 third quarter of fiscal 2011 increased 12 percent or $285 million over the prior year period, driven by global unit volume growth and a mix upgrade in the United States.  The company expects to reach the high end of its gross-profit range of $5.1 billion to $5.2 billion for the business on the strength of the double-digit gross profit results year-to-date.The company expects to achieve the mid-teens millions of U.S. acres it had targeted for both its Genuity® Roundup Ready 2 Yield® soybeans and the Genuity® reduced refuge corn family this year, adding a positive mix improvement across its U.S. soybean and corn portfolios and establishing a foundation for future growth across both crops.  U.S. corn volume growth is complemented by volume growth in Europe and Latin America, where Monsanto has seen volume increases in Argentina and a rebound in planted acres in Brazil.  The cotton business continues to deliver a strong performance, with an increase in acres and breeding improvements bringing growth.  Monsanto expects to grow volume as the cotton market expands.The company continues to work towards achieving sales growth and margin expansion in vegetables. Agricultural Productivity Segment Detail($ in millions)Net SalesGross Profit (Loss)Third QuarterNine MonthsThird QuarterNine Months2011 2010 2011 2010 2011 2010 2011 2010 Agricultural Productivity$943 $600 $2,318 $1,908 $249 $(19)$565 $210 TOTAL Agricultural Productivity$943 $600 $2,318 $1,908 $249 $(19)$565 $210 ($ in millions)Earnings (Loss) Before Interest & Taxes (EBIT)Third QuarterNine MonthsAgricultural Productivity2011 2010 2011 2010 EBIT (For a reconciliation of EBIT, see note 1.)$76 $(175)$196 $(228)Unusual Items Affecting EBIT:EBIT from Discontinued Operations$?$?$4 $5 Restructuring$?$(18)$4 $(54)The Agricultural Productivity segment consists of the crop protection products and lawn-and-garden herbicide products. The segment saw a strong quarter, with gross profit of $249 million led by the positive response to the repositioning of the glyphosate business and contributions from the lawn-and-garden business, which despite unfavorable weather is set to achieve its second year of above-historical profitability.The company now expects the segment to deliver gross profit of roughly $700 million for the year, an increase from the previous estimate. Sales in the third quarter of fiscal 2011 for Monsanto's Agricultural Productivity segment increased 57 percent, with gross profit improvement as well as a function of volume and cost improvements.  Monsanto announced the staff of the Securities and Exchange Commission is conducting an investigation regarding Monsanto's customer incentive programs relating to its glyphosate products in fiscal years 2009 and 2010, and Monsanto has received a subpoena for documents in connection therewith.  Monsanto is cooperating with the staff's investigation.Webcast InformationIn 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" or at http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=122069&eventID=4137207.  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 CompanyMonsanto 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: Genuity and Roundup Ready 2 Yield are trademarks of Monsanto Company and its wholly-owned subsidiaries. Monsanto CompanySelected Financial Information(Dollars in millions, except per share amounts)UnauditedStatements of Consolidated Operations Three Months EndedNine Months EndedMay 31,May 31,2011 2010 2011 2010 Net Sales$3,590$2,962$9,549$8,549Cost of Goods Sold 1,6351,5754,4684,324Gross Profit1,9551,3875,0814,225Operating Expenses:Selling, general and administrative expenses5914921,5431,500Research and development expenses 360302983848Restructuring charges, net134978Total Operating Expenses9528282,5352,426Income From Operations1,0035592,5461,799Interest Expense3535117115Interest Income(17)(18)(51)(43)Other Expense (Income), Net 15738(3)Income from Continuing Operations Before Income Taxes9705352,4421,730Income Tax Provision270138704468Income from Continuing Operations Including PortionAttributable to Noncontrolling Interest$700$397$1,738$1,262Discontinued Operations:Income from Operations of Discontinued Businesses??45Income Tax Provision??1?Income on Discontinued Operations??35Net Income$700$397$1,741$1,267Less: Net Income Attributable to Noncontrolling Interest20133815Net Income Attributable to Monsanto Company$680$384$1,703$1,252EBIT (see note 1)$956$529$2,459$1,781Basic Earnings per Share Attributable to Monsanto Company:Income from Continuing Operations$1.27$0.71$3.17$2.29Income on Discontinued Operations???0.01Net Income Attributable to Monsanto Company$1.27$0.71$3.17$2.30Diluted Earnings per Share Attributable to Monsanto Company:Income from Continuing Operations$1.26$0.70$3.13$2.26Income on Discontinued Operations??0.010.01Net Income Attributable to Monsanto Company$1.26$0.70$3.14$2.27Weighted Average Shares Outstanding: Basic535.5543.2536.9544.7Diluted541.2549.9542.9552.1Monsanto CompanySelected Financial Information(Dollars in millions, except per share amounts)Unaudited Condensed Statements of Consolidated Financial PositionAs ofAs ofMay 31, 2011Aug. 31, 2010AssetsCurrent Assets:Cash and cash equivalents (variable interest entities restricted - 2011: $103)$1,074$1,485Short-term investments250?Trade receivables, net (variable interest entities restricted - 2011: $88)3,5791,590Miscellaneous receivables 740717Deferred tax assets384511Inventory, net2,8262,739Other current assets13480Total Current Assets8,9877,122Property, Plant and Equipment, Net4,2704,227Goodwill 3,3643,204Other Intangible Assets, Net1,3351,263Noncurrent Deferred Tax Assets1,0851,014Long-Term Receivables, Net474513Other Assets571524Total Assets$20,086$17,867Liabilities and Shareowners' EquityCurrent Liabilities:Short-term debt, including current portion of long-term debt216241Accounts payable 603752Income taxes payable33366Accrued compensation and benefits396179Accrued marketing programs849839Deferred revenues324219Grower production accruals158130Dividends payable?151Customer payable2783Restructuring reserves48197Miscellaneous short-term accruals764684Total Current Liabilities3,7183,541Long-Term Debt2,0271,862Postretirement Liabilities923920Long-Term Deferred Revenue351395Noncurrent Deferred Tax Liabilities145137Long-Term Portion of Environmental and Litigation Reserves183188Other Liabilities669681Monsanto Shareowners' Equity 11,85910,099Noncontrolling Interest21144Total Shareowners' Equity12,07010,143Total Liabilities and Shareowners' Equity$20,086$17,867Debt to Capital Ratio:16%17%Monsanto CompanySelected Financial Information(Dollars in millions, except per share amounts)Unaudited Statements of Consolidated Cash FlowsNine Months Ended May 31,2011 2010 Operating Activities:Net Income $1,741$1,267Adjustments to reconcile cash provided (required) by operating activities:Items that did not require (provide) cash:Depreciation and amortization 457446Bad-debt expense(6)41Stock-based compensation expense8372Excess tax benefits from stock-based compensation(24)(40)Deferred income taxes(45)(98)Restructuring charges, net978Equity affiliate income, net(12)(21)Net gain on sales of a business or other assets(5)(2)Other items4638Changes in assets and liabilities that provided (required) cash, net of acquisitions:Trade receivables, net(1,759)(1,648)Inventory, net3678Deferred revenues30(80)Accounts payable and other accrued liabilities757(324)Restructuring cash payments(164)(175)Pension contributions(47)(95)Net investment hedge settlement?(4)Other items(153)(71)Net Cash Provided (Required) by Operating Activities944(538)Cash Flows Required by Investing Activities:Purchases of short-term investments(430)?Maturities of short-term investments180?Capital expenditures(326)(560)Acquisitions of businesses, net of cash acquired(99)(57)Purchases of long-term equity securities?(14)Technology and other investments(51)(26)Other investments and property disposal proceeds1943Net Cash Required by Investing Activities(707)(614)Cash Flows Required by Financing Activities:Net change in financing with less than 90-day maturities(40)596Short-term debt proceeds5926Short-term debt reductions(33)(54)Long-term debt proceeds300?Long-term debt reductions(192)(3)Payments on other financing(3)(3)Debt issuance costs(3)?Treasury stock purchases(486)(498)Stock option exercises4550Excess tax benefits from stock-based compensation2440Tax withholding on restricted stock and restricted stock units(4)?Dividend payments(452)(434)Proceeds from noncontrolling interests69?Dividend payments to noncontrolling interests(50)(43)Net Cash Required by Financing Activities(766)(323)Cash Assumed from Initial Consolidations of Variable Interest Entities77?Effect of Exchange Rate Changes on Cash and Cash Equivalents41(6)Net Decrease in Cash and Cash Equivalents(411)(1,481)Cash and Cash Equivalents at Beginning of Period1,4851,956Cash and Cash Equivalents at End of Period$1,074$475Monsanto CompanySelected 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 EndedNine Months EndedMay 31,May 31,2011 2010 2011 2010 EBIT ? Seeds and Genomics Segment  $880$704$2,263$2,009EBIT ? Agricultural Productivity Segment 76(175)196(228)EBIT? Total  9565292,4591,781Interest Expense, Net 18176672Income Tax Provision(A)258128690457Net Income Attributable to Monsanto Company $680$384$1,703$1,252(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 YearNine Months2011 EndedGuidanceMay 31, 2011Diluted Earnings per Share$2.82-$2.86$3.14Restructuring Charges, Net$0.02$0.01Income on Discontinued Operations?(0.01)Diluted Earnings per Share from Ongoing Business$2.84-$2.88$3.14Reconciliation 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 Nine MonthsEnded2011 May 31,Guidance2011 2010 Net Cash Provided (Required) by Operating Activities$2,000-2,300$944$(538)Net Cash Required by Investing Activities (900)-(1,000)(707)(614)Free Cash Flow$1,100-1,300237(1,152)Net Cash Required by Financing ActivitiesN/A(766)(323)Cash Assumed from Initial Consolidations of Variable Interest EntitiesN/A77?Effect of Exchange Rate Changes on Cash and Cash EquivalentsN/A41(6)Net Decrease in Cash and Cash EquivalentsN/A(411)(1,481)Cash and Cash Equivalents at Beginning of PeriodN/A1,4851,956Cash and Cash Equivalents at End of PeriodN/A$1,074$475ContactMedia:       Kelli Powers  (314-694-4003)Analysts:  Bryan Hurley (314-694-8148)SOURCE Monsanto Company