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| MON > SEC Filings for MON > Form 10-K on 27-Oct-2009 | All Recent SEC Filings |
27-Oct-2009
Annual Report
within the company. See Note 26 - Segment and Geographic Data - for a
reconciliation of EBIT to net income (loss) for fiscal years 2009, 2008 and
2007.
We also provide information regarding free cash flow, an important liquidity
measure for Monsanto. We define free cash flow as the total of net cash provided
or required by operating activities and net cash provided or required by
investing activities. We believe that free cash flow is useful to investors and
management as a measure of the ability of our business to generate cash. This
cash can be used to meet business needs and obligations, to reinvest in the
company for future growth, or to return to our shareowners through dividend
payments or share repurchases. Free cash flow is also used by management as one
of the performance measures in determining incentive compensation. See the
"Financial Condition, Liquidity, and Capital Resources - Cash Flow" section of
MD&A for a reconciliation of free cash flow to net cash provided by operating
activities and net cash required by investing activities on the Statements of
Consolidated Cash Flows.
Executive Summary
Discontinued Operations - As discussed in Note 29 - Discontinued Operations, we
recorded income of discontinued operations of $11 million aftertax in 2009,
related to the gain on the sale of the Dairy business. We entered into an
agreement to divest our Dairy business in 2008. The income on discontinued
operations of $17 million aftertax, or $0.03 per share, in 2008 relates only to
the Dairy business. In conjunction with the DOJ consent decree, we sold our
cotton businesses for $317 million during fourth quarter 2007. We recorded
income of discontinued operations of $80 million aftertax, or $0.14 per share in
2007, primarily related to the gain on the sale of the divested cotton
businesses which were part of the Seeds and Genomics segment.
Consolidated Operating Results - Net sales in 2009 increased $359 million from
2008. This improvement was primarily a result of increased sales of corn and
soybean seed and traits in the United States combined with higher sales of
Roundup and other glyphosate-based herbicides in Brazil. Net income in 2009 was
$3.80 per share, compared with $3.62 per share in 2008.
The following non-recurring factors affected the two-year comparison:
2009:
• We recorded a restructuring charge of $406 million in fourth quarter 2009
which was recorded in restructuring charges for $361 million and cost of
goods sold for $45 million in the Statement of Consolidated Operations. See
Note 5 - Restructuring - for further discussion.
2008:
• We recorded an after-tax gain of $130 million ($210 million pretax), or
$0.23 per share (Solutia-related gain), associated with the settlement of
our claim on Feb. 28, 2008, in connection with Solutia's emergence from
bankruptcy. See Note 27 -Other Income and Expense and Solutia-Related Items
- for further discussion.
Financial Condition, Liquidity, and Capital Resources - In 2009, net cash
provided by operating activities was $2,236 million, compared with
$2,799 million in 2008. Net cash required by investing activities was
$723 million in 2009, compared with $2,027 million in 2008. As a result, our
free cash flow, as defined in the "Overview - Non-GAAP Financial Measures"
section of MD&A, was a source of cash of $1,513 million in 2009, compared with
$772 million in 2008. We used cash of $329 million in 2009 for acquisitions of
businesses, compared with $1,007 million in 2008. For a more detailed discussion
of the factors affecting the free cash flow comparison, see the "Cash Flow"
section of the "Financial Condition, Liquidity, and Capital Resources" section
in this MD&A.
Outlook - We plan to continue to improve our products in order to maintain
market leadership and to support near-term performance. We are focused on
applying innovation and technology to make our farmer customers more productive
and profitable by protecting yields and improving the ways they can produce
food, fiber and feed. We use the tools of modern biology to make seeds easier to
grow, to allow farmers to do more with fewer resources, and to produce healthier
foods for consumers. Our current research and development (R&D) strategy and
commercial priorities are focused on bringing our farmer customers
second-generation traits, on delivering multiple solutions in one seed
("stacking"), and on developing new pipeline products. Our capabilities in
biotechnology and breeding research are generating a rich product pipeline that
is
expected to drive long-term growth. The viability of our product pipeline
depends in part on the speed of regulatory approvals globally, and on continued
patent and legal rights to offer our products.
We plan to improve and to grow our vegetable seeds business. We have applied our
molecular breeding and marker capabilities to our library of vegetable
germplasm. In the future, we will continue to focus on accelerating the
potential growth of this new business and executing our business plans.
Roundup herbicides remain the largest crop protection brand globally. The
previous two-year period has seen increasing demand in the glyphosate market in
a time of tight supply, causing a period of higher prices. More recently the
significant supply of lower priced generics has caused increased competitive
pressure in the market and an anticipated decline in the business. We are
focused on managing the costs associated with our agricultural chemistry
business as that sector matures globally.
See the "Outlook" section of MD&A for a more detailed discussion of some of the
opportunities and risks we have identified for our business. For additional
information related to the outlook for Monsanto, see "Caution Regarding
Forward-Looking Statements" above and Part I - Item 1A - Risk Factors of this
Form 10-K.
MONSANTO COMPANY 2009 FORM 10-K
---------------------------------
RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------------------------
Year Ended Aug. 31,
-------------------------------------------------------------
Change
-----------------------
2009 vs. 2008 vs.
(Dollars in millions, except per share amounts) 2009 2008 2007 2008 2007
---------------------------------------------------------------------------------------------------------------------------------------------------
Net Sales $ 11,724 $ 11,365 $ 8,349 3 % 36 %
Gross Profit 6,762 6,177 4,230 9 % 46 %
Operating Expenses:
Selling, general and administrative expenses 2,037 2,312 1,858 (12 )% 24 %
Research and development expenses 1,098 980 770 12 % 27 %
Acquired in-process research and development 163 164 193 (1 )% (15 )%
Restructuring charges 361 - - NM NM
---------------------------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 3,659 3,456 2,821 6 % 23 %
---------------------------------------------------------------------------------------------------------------------------------------------------
Income from Operations 3,103 2,721 1,409 14 % 93 %
Interest expense 129 110 136 17 % (19 )%
Interest income (71 ) (132 ) (120 ) (46 )% 10 %
Solutia-related (income) expense, net - (187 ) 40 NM NM
Other expense, net 78 4 25 NM (84 )%
---------------------------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations Before Income Taxes and Minority Interest 2,967 2,926 1,328 1 % 120 %
Income tax provision 845 899 403 (6 )% 123 %
Minority interest expense 24 20 12 20 % 67 %
---------------------------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 2,098 2,007 913 5 % 120 %
Discontinued Operations:
Income from operations of discontinued businesses 19 20 52 (5 )% (62 )%
Income tax provision (benefit) 8 3 (28 ) NM NM
---------------------------------------------------------------------------------------------------------------------------------------------------
Income on Discontinued Operations 11 17 80 (35 )% (79 )%
---------------------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 2,109 $ 2,024 $ 993 4 % 104 %
---------------------------------------------------------------------------------------------------------------------------------------------------
Diluted Earnings per Share:
Income from continuing operations $ 3.78 $ 3.59 $ 1.65 5 % 118 %
Income on discontinued operations 0.02 0.03 0.14 (33 )% (79 )%
---------------------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 3.80 $ 3.62 $ 1.79 5 % 102 %
---------------------------------------------------------------------------------------------------------------------------------------------------
NM = Not Meaningful
Effective Tax Rate (continuing operations) 28 % 31 % 30 %
Comparison as a Percent of Net Sales:
Gross profit 58 % 54 % 51 %
Selling, general and administrative expenses 17 % 20 % 22 %
Research and development expenses (excluding acquired IPR&D) 9 % 9 % 9 %
Total operating expenses 31 % 30 % 34 %
Income from continuing operations before income taxes and minority interest expense 25 % 26 % 16 %
Net income 18 % 18 % 12 %
|
Overview of Financial Performance (2009 compared with 2008)
The following section discusses the significant components of our results of
operations that affected the comparison of fiscal year 2009 with fiscal year
2008.
Net sales increased 3 percent in 2009 from 2008. Our Seeds and Genomics segment
net sales improved 15 percent, and our Agricultural Productivity segment net
sales declined 11 percent. The following table presents the percentage changes
in 2009 worldwide net sales by segment compared with net sales in 2008,
including the effect that volume, price, currency and acquisitions had on these
percentage changes:
2009 Percentage Change in Net Sales vs. 2008
----------------------------------------------------------------------------------------------------
Impact of
Volume Price Currency Subtotal Acquisitions(1) Net Change
----------------------------------------------------------------------------------------------------------------------
Seeds and
Genomics
Segment (1 )% 19 % (5 )% 13 % 2 % 15 %
Agricultural
Productivity
Segment (24 )% 17 % (4 )% (11 )% - (11 )%
Total
Monsanto
Company (11 )% 17 % (4 )% 2 % 1 % 3 %
|
(1) See Note 4 - Business Combinations - and "Financial Condition, Liquidity, and Capital Resources" in MD&A for details of our acquisitions in fiscal years 2009 and 2008. In this presentation, acquisitions are segregated for one year from the acquisition date.
For a more detailed discussion of the factors affecting the net sales
comparison, see the "Seeds and Genomics Segment" and the "Agricultural
Productivity Segment" sections.
Gross profit increased 9 percent, or $585 million. Total company gross profit as
a percent of net sales increased 4 percentage points to 58 percent in 2009,
driven by increases in average net selling prices of corn and soybean seed and
traits and Roundup and other glyphosate-based herbicides. Gross profit as a
percent of net sales for the Seeds and Genomics segment increased 1 percentage
point to 62 percent in the 12-month comparison. Gross profit as a percent of net
sales for the Agricultural Productivity segment increased 5 percentage points to
51 percent in the 12-month comparison. See the "Seeds and Genomics Segment" and
"Agricultural Productivity Segment" sections of MD&A for details.
Operating expenses increased 6 percent, or $203 million, in 2009 from 2008,
primarily because of the $361 million pre-tax restructuring charge in 2009.
Selling, general and administrative (SG&A) expenses decreased 12 percent
primarily because of lower spending for marketing, administrative functions and
incentives. R&D expenses increased 12 percent due to an increase in our
investment in our product pipeline. As a percent of net sales, SG&A expenses
decreased 3 points to 17 percent of net sales, and R&D expenses remained at
9 percent of net sales in 2009.
Interest expense increased 17 percent, or $19 million, in fiscal year 2009 from
2008. The increased expense was primarily due to higher long-term debt interest
expense due to the $550 million of debt issued in third quarter 2008.
Interest income decreased 46 percent, or $61 million, in 2009 because of lower
average cash balances primarily in Brazil and lower interest rates.
We recorded Solutia-related income of $187 million in 2008. We recorded a gain
of $210 million pretax (Solutia-related gain), associated with the settlement of
our claim on Feb. 28, 2008, in connection with Solutia's emergence from
bankruptcy. Since Solutia has emerged from bankruptcy, any related expenses for
these assumed liabilities are now included within operating expenses.
Other expense - net increased $74 million, to $78 million in 2009. The increase
is primarily due to hedging losses partially offset by foreign currency gains.
Income tax provision for 2009 decreased to $845 million, a decrease of
$54 million from 2008. The effective tax rate on continuing operations was
28 percent, a decrease of 3 percentage points from fiscal year 2008. This
difference was primarily the result of the following items:
• Benefits totaling $168 million were recorded in 2009 relating to several
discrete tax adjustments. The majority of these items was the result of the
resolution of several domestic and ex-U.S. tax audits and other tax matters
in
addition to the retroactive extension of the R&D credit that was enacted on Oct. 3, 2008, as part of the Emergency Economic Stabilization Act of 2008.
• The effective rate for 2008 was affected by our Solutia-related gain of $210 million pretax for which taxes were provided at a higher U.S.-based rate, a tax benefit of $43 million for the reversal of our remaining net operating loss valuation allowance in Argentina and additional tax expense for a transfer pricing item.
Without these items, our effective tax rate for 2009 would have been higher than
the 2008 rate, primarily driven by a shift in our earnings mix to higher
tax-rate jurisdictions.
The factors noted above explain the change in income from continuing operations.
In 2009, we recorded income on discontinued operations of $11 million compared
to $17 million in 2008 due to the gain recorded on the sale of the Dairy
business. In 2008, the $17 million related to income from operations of the
Dairy business.
Overview of Financial Performance (2008 compared with 2007)
The following section discusses the significant components of our results of
operations that affected the comparison of fiscal year 2008 with fiscal year
2007.
Net sales increased 36 percent in 2008 from 2007. Our Seeds and Genomics segment
net sales improved 28 percent, and our Agricultural Productivity segment net
sales improved 48 percent. The following table presents the percentage changes
in 2008 worldwide net sales by segment compared with net sales in 2007,
including the effect that volume, price, currency and acquisitions had on these
percentage changes:
2008 Percentage Change in Net Sales vs. 2007
-----------------------------------------------------------------------------------------------------
Impact of
Volume Price Currency Subtotal Acquisitions(1) Net Change
-----------------------------------------------------------------------------------------------------
Seeds and Genomics
Segment 10 % 9 % 3 % 22 % 6 % 28 %
Agricultural
Productivity Segment 5 % 35 % 8 % 48 % - 48 %
Total Monsanto Company 8 % 20 % 5 % 33 % 3 % 36 %
|
(1) See Note 4 - Business Combinations - and "Financial Condition, Liquidity, and Capital Resources" in MD&A for details of our acquisitions in fiscal years 2008 and 2007. In this presentation, acquisitions are segregated for one year from the acquisition date.
For a more detailed discussion of the factors affecting the net sales
comparison, see the "Seeds and Genomics Segment" and the "Agricultural
Productivity Segment" sections.
Gross profit increased 46 percent, or $1,947 million. Total company gross profit
as a percent of net sales increased 3 percentage points to 54 percent in 2008,
driven by the increase in Roundupand other glyphosate-based herbicides average
net selling prices. Gross profit as a percent of sales for the Seeds and
Genomics segment remained at 61 percent. Gross profit as a percent of sales for
the Agricultural Productivity segment increased 10 percentage points to
46 percent in the 12-month comparison. See the "Seeds and Genomics Segment" and
"Agricultural Productivity Segment" sections of MD&A for details.
Operating expenses increased 23 percent, or $635 million, in 2008 from 2007.
Selling, general and administrative (SG&A) expenses increased 24 percent, and
R&D expenses increased 27 percent, primarily because of the Seeds and Genomics
business growth and acquisitions coupled with the increase in our investment in
our product pipeline. In addition, we incurred higher incentive compensation
expense and charitable and business donations in 2008. As a percent of net
sales, SG&A expenses decreased 2 points to 20 percent, and R&D expenses remained
at 9 percent of sales in 2008.
. . .
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