With Solid First-Quarter Results, Monsanto Confirms Full Year Guidance with Global Business on Track to Deliver Mid-to-High Teens Operational Growth

  • Company Achieves Second Straight Quarter of Record Amount of Cash for Share Repurchases
  • Order Pace of U.S. Business Demonstrates Positive Momentum
  • Announces First-of-its-Kind Agreement on Precision Agriculture Collaboration Opportunities With Leading Agricultural Retail Distributor WinField
  • Record R&D Project Advancements Reinforce Leadership In Driving Yield And Productivity

ST. LOUIS--()--Monsanto Company (NYSE: MON) delivered on track results for the first quarter of its fiscal year as the company reaffirmed its earnings growth and free cash flow guidance for fiscal year 2014. The company previewed a strong U.S. order book and noted that it is on track to deliver its largest soybean launch with an expected three million acres of Intacta RR2 PRO. The company also highlighted a record 29 phase advancements across its research and development (R&D) platforms, including breeding, biotechnology, and new breakthrough areas such as Integrated Farming Systems® and agricultural biologicals.

       
    First Quarter
($ in millions)     2014     2013
Net Sales by Segment    
Corn seed and traits $ 1,054 $ 1,139
Soybean seed and traits 267 231
Cotton seed and traits 137 185
Vegetable seeds 157 156
All other crops seeds and traits 61       44  
TOTAL Seeds and Genomics $ 1,676 $ 1,755
 
Agricultural productivity $ 1,467       $ 1,184  
TOTAL Agricultural Productivity $ 1,467 $ 1,184
             
TOTAL Net Sales     $ 3,143       $ 2,939  
             
Gross Profit     $ 1,563       $ 1,397  
             
Operating Expenses     $ 998       $ 888  
Interest Expense – Net $ 29 $ 28
Other Expense – Net     $ 20       $ 17  
Net Income Attributable to Monsanto Company     $ 368       $ 339  
             
Diluted Earnings per Share (See note 1.)     $ 0.69       $ 0.63  
Item Affecting Comparability – EPS Impact
Income from discontinued operations     (0.02 )     (0.01 )
Diluted Earnings per Share from Ongoing Business (For the definition of ongoing EPS, see note 1.)     $ 0.67       $ 0.62  
Effective Tax Rate     29 %     26 %
         
      First Quarter
Comparison as a Percent of Net Sales:     2014     2013
Gross profit 50%     48%
Selling, general and administrative expenses 19% 18%
Research and development expenses 13% 12%
Income from continuing operations before income taxes 16% 16%
  Net income attributable to Monsanto Company     12%     12%

“The first quarter demonstrated that our business performance is squarely on track with several key milestones and that we have the right growth strategy in place,” said Hugh Grant, chairman and chief executive officer for Monsanto. “The strength in our business is also seen in the record number of research and development advancements this year. It’s the innovation in our pipeline that’s going to define what’s next for our industry and help deliver on our commitment to bring additional opportunity for farmers around the world.”

Results of Operations

Net sales for the quarter increased over the prior year’s first quarter to $3.1 billion. Gross profit for the 2014 first quarter also increased over the prior year period to $1.6 billion.

Selling, general and administrative (SG&A) costs were $589 million in the first quarter. R&D expenses increased year-over-year to $409 million for the quarter. Both SG&A and R&D costs increased based in part on investments to support new platforms and product launches.

The company’s first quarter earnings per share (EPS) was $0.67 on an ongoing and $0.69 on an as-reported basis. (For a reconciliation of ongoing EPS, see note 1.)

Cash Flow

Free cash flow was a source of $457 million compared with a source of $1.5 billion for the prior year first quarter. (For a reconciliation of free cash flow, see note 1.) Net cash provided by operating activities for the 2014 fiscal year first quarter was a source of $1.7 billion, compared to a source of $1.6 billion in the first quarter last year. Net cash required by investing activities for the first quarter of 2014 was $1.2 billion, compared with $96 million for the same period of fiscal year 2013. Net cash provided by financing activities for the first quarter of 2014 was $346 million, compared to net cash required of $116 million for the prior year’s first quarter.

In the quarter, Monsanto continued its more aggressive approach in the company’s cash deployment strategy, including investment in additional growth through The Climate Corporation acquisition. The first quarter free cash flow reflects $917 million (net of cash acquired) for the acquisition of The Climate Corporation. Additionally, the company completed a second-consecutive quarter of record amount of cash for share repurchases. The company has purchased approximately $1.1 billion in shares over the last two quarters, lowering the share count in comparison to the prior year first quarter by nearly eight million shares.

Outlook

In fiscal year 2014, Monsanto continues to expect strong operational growth from its core business, reflected in mid-to-high teens growth in EBITDA. The company also confirmed its fiscal year 2014 ongoing earnings guidance, stating that it continues to expect to achieve ongoing EPS of $5.00 to $5.20. Full-year 2014 EPS guidance on an as-reported basis is expected in the range of $5.02 to $5.22 per share. (For a reconciliation of EPS, see note 1.) The company also reaffirmed free cash flow in the range of $600 million to $800 million for fiscal year 2014, after approximately $917 million (net of cash acquired) in cash for The Climate Corporation acquisition and investment to support the recently announced alliance on microbials with Novozymes. The company expects net cash provided by operating activities to be $2.9 billion to $3.3 billion, and net cash required by investing activities to be approximately $2.3 billion to $2.5 billion for fiscal year 2014, including capital expenditures and acquisition-related costs. (For a reconciliation of free cash flow, see note 1.)

       

Seeds and Genomics Segment Detail

             
($ in millions)     Net Sales     Gross Profit
First Quarter   First Quarter
Seeds and Genomics     2014     2013       2014     2013
Corn Seed and Traits     $ 1,054       $ 1,139         $ 650       $ 686
Soybean Seed and Traits     267       231         168       118
Cotton Seed and Traits     137       185         92       127
Vegetable Seeds     157       156         68       83
All Other Crops Seeds and Traits     61       44         27       11
TOTAL Seeds and Genomics     $ 1,676       $ 1,755         $ 1,005       $ 1,025
       
($ in millions)   Earnings Before Interest & Taxes (EBIT)

 

    First Quarter
Seeds and Genomics     2014     2013
EBIT (For a reconciliation of EBIT, see note 1.)     $ 104       $ 220

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

Sales for Monsanto’s Seeds and Genomics segment in the first quarter were $1.7 billion as the company achieved growth in its soybean business and strong corn portfolio upgrades, including expected trait upgrades across its Latin American portfolio. Those results are balanced against the expected decrease in corn acres in Latin America, some acre and timing effects related to cotton in Australia, and a more normalized U.S. sales contribution pattern after the step up from last year's accelerated season.

Tracking the upcoming U.S. season, the company noted the pace of its U.S. order book and strong pre-pays are tracking well with 2014 targets, reflecting a strong end to the U.S. harvest for the company’s products.

Corn trait upgrade and expansion is also on track in both Brazil and Argentina where the company is achieving strong demand for its newest corn products. Complementing the trait upgrade and expansion in corn, Monsanto noted that with the South America summer acres planted the company is expecting to reach three million acres in its launch of Intacta RR2 PRO soybeans. The company is focused on making sure farmers have a good experience with the product in its initial launch year and preparing for what it expects will be its fastest ramp up of any soybean product.

Additionally, Monsanto announced today it has entered a memorandum of understanding with one of the company’s largest distribution partners and the largest U.S. agricultural retail distributor, WinField, to explore connections between Monsanto’s Integrated Farming Systems® and The Climate Corporation portfolio with Winfield’s industry-leading R7® Tool, with integrated Satellite Imagery Technology licensed from Geosys, for precision farming. The joint work would represent a first-of-its kind opportunity on new technology for precision agriculture and the development of new broad decision-support tools to help farmers produce more food with fewer resources.

       

Agricultural Productivity Segment Detail

 
 

($ in millions)

    Net Sales     Gross Profit

 

First Quarter First Quarter
      2014     2013     2014     2013
Agricultural Productivity     $ 1,467       $ 1,184       $ 558       $ 372
TOTAL Agricultural Productivity     $ 1,467       $ 1,184       $ 558       $ 372
         

($ in millions)

    Earnings Before Interest & Taxes (EBIT)

 

    First Quarter
Agricultural Productivity     2014     2013
EBIT (For a reconciliation of EBIT, see note 1.)     $ 450       $ 270
Unusual Item Affecting EBIT:    
EBIT from Discontinued Operations     $ 14       $ 11

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

Net sales in the first quarter of fiscal 2014 for Monsanto’s Agricultural Productivity segment increased $283 million, reflecting the continued benefit of a favorable marketplace environment.

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, product performance, and an update of projects within the company’s R&D pipeline. The call may include a discussion of strategic initiatives 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 website at www.monsanto.com/investors or http://edge.media-server.com/m/p/kpropn5v/lan/en. 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 website for three weeks. Monsanto publishes details on upcoming webcasts on this website in both the Presentation and Financial Reports section and the Calendar of Events section. Investors should look to this site as the source of information on future investor conference webcasts. The site includes a calendar of upcoming investor events, details on accessing scheduled webcasts and information from previous investor events.

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 and the previously-announced SEC investigation; 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: Monsanto and the Vine Design, Integrated Farming Systems and Intacta RR2 PRO are trademarks of Monsanto Company and its wholly-owned subsidiaries.

   

Monsanto Company

Selected Financial Information

(Dollars in millions, except per share amounts)

Unaudited

       
Statements of Consolidated Operations Three Months Ended
      Nov. 30, 2013     Nov. 30, 2012
Net Sales $ 3,143     $ 2,939
Cost of Goods Sold 1,580       1,542  
Gross Profit 1,563 1,397
Operating Expenses:
Selling, General and Administrative Expenses 589 542
Research and Development Expenses 409       346  
Total Operating Expenses 998 888
Income From Operations 565 509
Interest Expense 53 51
Interest Income (24 ) (23 )
Other Expense, Net 20       17  
Income from Continuing Operations Before Income Taxes 516 464
Income Tax Provision 152       122  
Income from Continuing Operations Including Portion Attributable to Noncontrolling Interest $ 364       $ 342  
Discontinued Operations:
Income from Operations of Discontinued Businesses 14 11
Income Tax Provision 5       4  
Income from Discontinued Operations 9       7  
Net Income $ 373       $ 349  
Less: Net Income Attributable to Noncontrolling Interest 5       10  
Net Income Attributable to Monsanto Company $ 368       $ 339  
       
EBIT (see note 1) $ 554       $ 490  
 
Basic Earnings per Share Attributable to Monsanto Company:
Income from Continuing Operations $ 0.68 $ 0.62
Income from Discontinued Operations 0.02       0.01  
Net Income Attributable to Monsanto Company $ 0.70       $ 0.63  
 
Diluted Earnings per Share Attributable to Monsanto Company:
Income from Continuing Operations $ 0.67 $ 0.62
Income from Discontinued Operations 0.02       0.01  
Net Income Attributable to Monsanto Company $ 0.69       $ 0.63  
 
Weighted Average Shares Outstanding:
Basic 526.9 534.8
Diluted     532.6       540.4  
       

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, 2013     Aug. 31, 2013
Assets
Current Assets:
Cash and cash equivalents (variable interest entity restricted - 2014: $31 and 2013: $140) $ 4,496 $ 3,668
Short-term investments 249 254
Trade receivables, net (variable interest entity restricted - 2014: $116 and 2013: $0) 2,283 1,715
Miscellaneous receivables 774 748
Deferred tax assets 631 579
Inventory, net 3,873 2,947
Other current assets 190       166  
Total Current Assets 12,496 10,077
Property, Plant and Equipment, Net 4,686 4,654
Goodwill 4,325 3,520
Other Intangible Assets, Net 1,367 1,226
Noncurrent Deferred Tax Assets 484 454
Long-Term Receivables, Net 153 237
Other Assets 566       496  
Total Assets $ 24,077       $ 20,664  
Liabilities and Shareowners’ Equity
Current Liabilities:
Short-term debt, including current portion of long-term debt 262 51
Accounts payable 853 995
Income taxes payable 101 91
Accrued compensation and benefits 281 492
Accrued marketing programs 756 1,078
Deferred revenues 2,866 517
Grower production accruals 634 60
Dividends payable 228
Customer payable 2 12
Miscellaneous short-term accruals 943       812  
Total Current Liabilities 6,698 4,336
Long-Term Debt 3,057 2,061
Postretirement Liabilities 348 357
Long-Term Deferred Revenue 113 138
Noncurrent Deferred Tax Liabilities 544 469
Long-Term Portion of Environmental and Litigation Reserves 186 193
Other Liabilities 392 382
Monsanto Shareowners’ Equity 12,572 12,559
Noncontrolling Interest 167       169  
Total Shareowners’ Equity 12,739       12,728  
Total Liabilities and Shareowners’ Equity $ 24,077       $ 20,664  
Debt to Capital Ratio:     21 %     14 %
   

Monsanto Company

Selected Financial Information

(Dollars in millions, except per share amounts)

Unaudited

       
Statements of Consolidated Cash Flows Three Months Ended
      Nov. 30, 2013     Nov. 30, 2012
Operating Activities:    
Net Income $ 373 $ 349
Adjustments to reconcile cash provided by operating activities:
Items that did not require (provide) cash:
Depreciation and amortization 162 152
Bad-debt expense 11 7
Stock-based compensation expense 27 24
Excess tax benefits from stock-based compensation (15 ) (15 )
Deferred income taxes (6 ) 13
Equity affiliate (income) expense, net 3 (2 )
Net gain on sales of a business or other assets (1 ) (12 )
Other items 20 (16 )
Changes in assets and liabilities that required cash, net of acquisitions:
Trade receivables, net (478 ) (196 )
Inventory, net (898 ) (740 )
Deferred revenues 2,319 2,426
Accounts payable and other accrued liabilities 332 (341 )
Pension contributions (23 ) (16 )
Other items     (128 )     (64 )
Net Cash Provided by Operating Activities     1,698       1,569  
Cash Flows (Required) Provided by Investing Activities:
Purchases of short-term investments (105 ) (118 )
Maturities of short-term investments 110 110
Capital expenditures (303 ) (133 )
Acquisitions of businesses, net of cash acquired (917 )
Purchases of long-term debt and equity securities (12 )
Technology and other investments (21 ) (23 )
Other proceeds     7       68  
Net Cash Required by Investing Activities     (1,241 )     (96 )
Cash Flows Provided (Required) by Financing Activities:
Net change in financing with less than 90-day maturities 117 60
Short-term debt proceeds 2
Short-term debt reductions (7 )
Long-term debt proceeds 999 16
Long-term debt reductions (1 )
Payments on other financing (39 )
Debt issuance costs (8 )
Treasury stock purchases (561 ) (27 )
Stock option exercises 64 31
Excess tax benefits from stock-based compensation 15 16
Tax withholding on restricted stock and restricted stock units (2 ) (3 )
Dividend payments (228 ) (201 )
Dividend payments to noncontrolling interests     (12 )     (1 )
Net Cash Provided (Required) by Financing Activities     346       (116 )
Effect of Exchange Rate Changes on Cash and Cash Equivalents 25 (3 )
Net Increase in Cash and Cash Equivalents 828 1,354
Cash and Cash Equivalents at Beginning of Period     3,668       3,283  
Cash and Cash Equivalents at End of Period     $ 4,496       $ 4,637  

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 Company.

       

 

    Three Months Ended
      Nov. 30, 2013     Nov. 30, 2012
EBIT – Seeds and Genomics Segment $ 104     $ 220
EBIT – Agricultural Productivity Segment 450       270
EBIT– Total 554 490
Interest Expense, Net 29 28
Income Tax Provision(A) 157       123
Net Income Attributable to Monsanto Company     $ 368       $ 339

(A) Includes the income tax provision from continuing operations, the income tax benefit 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 2014 Three Months Ended
      Guidance     Nov. 30, 2013     Nov. 30, 2012
Diluted Earnings per Share $5.02-$5.22 $0.69     $0.63
Income from Discontinued Operations     (0.02)     (0.02)     (0.01)
Diluted Earnings per Share from Ongoing Business     $5.00-$5.20     $0.67     $0.62

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 2014 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 2014     Three Months Ended

 

    Guidance     Nov. 30, 2013     Nov. 30, 2012
Net Cash Provided by Operating Activities $ 2,900-3,300 $ 1,698     $ 1,569
Net Cash Required by Investing Activities   (2,300)-(2,500)     (1,241 )     (96 )
Free Cash Flow $ 600-800 $ 457 $ 1,473
Net Cash Provided (Required) by Financing Activities N/A 346 (116 )
Effect of Exchange Rate Changes on Cash and Cash Equivalents   N/A     25       (3 )
Net Increase in Cash and Cash Equivalents N/A 828 1,354
Cash and Cash Equivalents at Beginning of Period   N/A     3,668       3,283  
Cash and Cash Equivalents at End of Period     N/A     $ 4,496       $ 4,637  

Contacts

Monsanto Company
Media:
Sara Miller, 314-694-5824
or
Analysts:
Bryan Hurley, 314-694-8148

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Contacts

Monsanto Company
Media:
Sara Miller, 314-694-5824
or
Analysts:
Bryan Hurley, 314-694-8148