<PAGE> 1
===============================================================================
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-2516
------
MONSANTO COMPANY
----------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 43-0420020
-------- ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
800 NORTH LINDBERGH BLVD., ST. LOUIS, MISSOURI 63167
----------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(314) 694-1000
--------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING TWELVE MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
----- --------
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
<TABLE>
<CAPTION>
OUTSTANDING AT
CLASS SEPTEMBER 30, 1996
----- ------------------
<S> <C>
COMMON STOCK, $2 PAR VALUE 588,020,312 SHARES<F*>
-------------------------- ----------------------
<F*>Adjusted for five-for-one stock split approved April 26, 1996 to shareowners
of record on May 15, 1996.
</TABLE>
==============================================================================
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Statement of Consolidated Income of Monsanto Company and subsidiaries
for the three months and nine months ended September 30, 1996 and 1995, the
Statement of Consolidated Financial Position as of September 30, 1996 and
December 31, 1995, the Statement of Consolidated Cash Flow for the nine months
ended September 30, 1996 and 1995 and related Notes to Financial Statements
follow. In the opinion of management, these unaudited consolidated financial
statements contain all adjustments necessary to present fairly the financial
position, results of operations and cash flows for the interim periods
reported.
Unless otherwise indicated by the context, ``Monsanto'' means Monsanto
Company and consolidated subsidiaries, and ``the Company'' means Monsanto
Company only.
<TABLE>
MONSANTO COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
(DOLLARS IN MILLIONS, EXCEPT PER SHARE)
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales................................................................. $2,176 $2,048 $7,059 $6,848
Cost of Goods Sold........................................................ 1,148 1,180 3,631 3,862
------ ------ ------ ------
Gross Profit.............................................................. 1,028 868 3,428 2,986
Marketing Expenses........................................................ 335 302 1,044 923
Administrative Expenses................................................... 167 139 533 440
Technological Expenses.................................................... 213 173 559 508
Amortization of Intangible Assets......................................... 32 30 94 85
------ ------ ------ ------
Operating Income.......................................................... 281 224 1,198 1,030
Interest Expense.......................................................... (43) (47) (134) (143)
Interest Income........................................................... 14 18 39 46
Other Income (Expense)--Net............................................... (21) 8 33 22
------ ------ ------ ------
Income Before Income Taxes................................................ 231 203 1,136 955
Income Taxes.............................................................. 61 63 341 296
------ ------ ------ ------
Net Income................................................................ $ 170 $ 140 $ 795 $ 659
------ ------ ------ ------
Earnings per Share........................................................ $ 0.28 $ 0.23 $ 1.33 $ 1.14
------ ------ ------ ------
Dividends per Share....................................................... $0.150 $0.138 $0.438 $0.402
------ ------ ------ ------
Weighted Average Number of Common and
Common Equivalent Shares (in millions).................................. 597.9 576.8
------ ------
</TABLE>
1
<PAGE> 3
<TABLE>
MONSANTO COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(DOLLARS IN MILLIONS, EXCEPT PER SHARE)
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................................. $ 122 $ 297
Trade receivables, net of allowances of $51 in 1996 and $57 in 1995........ 2,165 1,629
Miscellaneous receivables and prepaid expenses............................. 414 596
Deferred income tax benefit................................................ 365 415
Inventories................................................................ 1,361 1,368
------- -------
Total Current Assets............................................... 4,427 4,305
------- -------
Property, Plant and Equipment.................................................. 7,460 7,237
Less Accumulated Depreciation.................................................. 4,485 4,405
------- -------
Net Property, Plant and Equipment.......................................... 2,975 2,832
------- -------
Investments in Affiliates...................................................... 785 544
Intangible Assets, net of accumulated amortization of $755 in 1996 and
$638 in 1995................................................................. 2,096 1,964
Other Assets................................................................... 880 966
------- -------
Total Assets................................................................... $11,163 $10,611
------- -------
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Accounts payable........................................................... $ 566 $ 648
Accrued liabilities........................................................ 1,810 1,799
Short-term debt............................................................ 854 365
------- -------
Total Current Liabilities.......................................... 3,230 2,812
------- -------
Long-Term Debt................................................................. 1,603 1,667
Deferred Income Taxes.......................................................... 74 85
Postretirement Liabilities..................................................... 1,495 1,415
Other Liabilities.............................................................. 612 900
Shareowners' Equity:
Common stock (authorized, 850,000,000 shares, par value $2)
Issued, 821,970,970 shares in 1996 and 164,394,194 shares in 1995...... 1,644 329
Additional contributed capital......................................... 24 902
Treasury stock, at cost (239,752,408 shares in 1996 and
48,923,899 shares in 1995)........................................... (2,680) (2,550)
Reserve for ESOP debt retirement........................................... (177) (181)
Net unrealized investment holding gains.................................... 10 34
Accumulated currency adjustment............................................ 36 101
Reinvested earnings........................................................ 5,292 5,097
------- -------
Total Shareowners' Equity.......................................... 4,149 3,732
------- -------
Total Liabilities and Shareowners' Equity...................................... $11,163 $10,611
------- -------
</TABLE>
2
<PAGE> 4
<TABLE>
MONSANTO COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOW
(DOLLARS IN MILLIONS)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
---- ----
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Operating Activities:
Net income............................................................................. $ 795 $ 659
Add income taxes....................................................................... 341 296
------ -------
Income before income taxes............................................................. 1,136 955
Adjustments to reconcile to Cash Provided by Operations:
Income tax payments................................................................ (244) (258)
Items that did not use (provide) cash:
Depreciation and amortization.................................................. 436 445
Other.......................................................................... 27 (7)
Working capital changes that provided (used) cash:
Accounts receivable............................................................ (519) (259)
Inventories.................................................................... 15 (171)
Accounts payable and accrued liabilities....................................... (192) (133)
Other.......................................................................... 9 (43)
Other items........................................................................ (58) 107
------ -------
Total Cash Provided by Operations.......................................................... 610 636
------ -------
Investing Activities:
Property, plant and equipment purchases................................................ (458) (341)
Acquisition of Kelco and pharmaceutical product line................................... (1,293)
Acquisition and investment payments.................................................... (644) (116)
Investment and property disposal proceeds.............................................. 170 43
------ -------
Cash Used in Investing Activities.......................................................... (932) (1,707)
------ -------
Financing Activities:
Net change in short-term financing..................................................... 489 492
Long-term debt proceeds................................................................ 115 656
Long-term debt reductions.............................................................. (164) (383)
Treasury stock purchases............................................................... (253)
Dividend payments...................................................................... (255) (226)
Common stock issued under employee stock plans......................................... 123 157
Other financing activities............................................................. 92 12
------ -------
Cash Provided by Financing Activities...................................................... 147 708
------ -------
Increase (Decrease) in Cash and Cash Equivalents........................................... (175) (363)
Cash and Cash Equivalents:
Beginning of year...................................................................... 297 507
------ -------
End of period.......................................................................... $ 122 $ 144
------ -------
</TABLE>
The effect of exchange rate changes on cash and cash equivalents was not
material.
Cash payments for interest (net of amounts capitalized) were $131 million in
1996 and $122 million in 1995.
3
<PAGE> 5
MONSANTO COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
1. Effective January 1, 1996, Monsanto adopted SFAS No. 123, ``Accounting
for Stock-Based Compensation,'' and, as permitted by the standard, has elected
to continue following the guidance of APB Opinion No. 25, ``Accounting for
Stock Issued to Employees,'' for measurement and recognition of stock-based
transactions with employees. Adoption of this new accounting standard will
require additional disclosures. It will not have a material effect on the
Company's financial position or results of operations.
2. In March 1996, Monsanto acquired significant equity positions in
Calgene, Inc. (``Calgene'') and DeKalb Genetics Corporation (``DeKalb''). The
combined investment in these biotechnology businesses totaled approximately
$290 million. In May 1996, Monsanto acquired the plant-biotechnology assets of
Agracetus from W. R. Grace & Co. for approximately $150 million. On July 26,
1996, the Company's board of directors approved an additional investment in
Calgene of $50 million, subject to the approval of Calgene's shareholders,
after which Monsanto will be entitled to nominate five of the nine authorized
directors. In September 1996, the Company signed a letter of intent to acquire
the Asgrow Agronomics seed business from Empresas La Moderna, S.A. for $240
million.
3. At the Company's annual meeting on April 26, 1996, the shareowners
approved an increase in the number of authorized shares of common stock from
200,000,000 to 850,000,000. In conjunction with this action, the Company's
board of directors approved a five-for-one stock split to be effected in the
form of a stock dividend, payable in shares of Company common stock to
shareowners of record on May 15, 1996. The split is reflected in the
accompanying statement of consolidated financial position as of September 30,
1996, and all per share amounts in the financial statements, notes to financial
statements, and management's discussion and analysis have been adjusted to
reflect the new number of shares outstanding.
4. Earnings per share were computed using the weighted average number of
common shares and common share equivalents outstanding each period (597,931,214
and 576,790,750 in 1996 and 1995, respectively). Common share equivalents
(17,642,386 and 12,447,660 in 1996 and 1995, respectively) consist of common
stock issuable upon exercise of outstanding stock options. Earnings per share
assuming full dilution were not significantly different from the primary
amounts.
5. Components of inventories at September 30, 1996 and December 31, 1995
were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Finished goods................................ $ 831 $ 874
Goods in process.............................. 303 305
Raw materials and supplies.................... 450 434
------ ------
Inventories, at FIFO cost..................... 1,584 1,613
Excess of FIFO over LIFO cost................. (223) (245)
------ ------
Total..................................... $1,361 $1,368
====== ======
</TABLE>
6. Monsanto is a party to a number of lawsuits and claims, which it is
vigorously defending. Such matters arise out of the normal course of business
and relate to product liability, government regulation, including environmental
issues, and other issues. Certain of the lawsuits and claims seek damages in
very large amounts. While the results of litigation cannot be predicted with
certainty, management believes, based upon the advice of Company counsel, that
the final outcome of such litigation will not have a material adverse effect on
Monsanto's consolidated financial position, profitability or liquidity in any
one year, as applicable.
4
<PAGE> 6
7. Segment data for the three months and nine months ended September 30,
1996 and 1995 were as follows:
MONSANTO COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------------------------
1996 1995
------------------------ ------------------------
OPERATING OPERATING
NET INCOME NET INCOME
SALES (LOSS) SALES (LOSS)
----- --------- ----- ---------
<S> <C> <C> <C> <C>
Segment:
Agricultural Products...................... $ 613 $ 92 $ 464 $ 47
Chemicals.................................. 773 101 873 83
Pharmaceuticals............................ 497 49 435 62
Food Ingredients........................... 293 55 276 43
Corporate.................................. (16) (11)
------ ------ ------ ------
Total.......................................... $2,176 $ 281 $2,048 $ 224
------ ------ ------ ------
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------------------------
1996 1995
------------------------ ------------------------
OPERATING OPERATING
NET INCOME NET INCOME
SALES (LOSS) SALES (LOSS)
----- --------- ----- ---------
<S> <C> <C> <C> <C>
Segment:
Agricultural Products...................... $2,480 $ 731 $2,050 $ 577
Chemicals.................................. 2,278 242 2,786 265
Pharmaceuticals............................ 1,430 145 1,223 109
Food Ingredients........................... 871 132 789 122
Corporate.................................. (52) (43)
------ ------ ------ ------
Total.......................................... $7,059 $1,198 $6,848 $1,030
------ ------ ------ ------
</TABLE>
As of January 1, 1996, the industrial business of the Food Ingredients
segment was transferred to Chemicals and Chemicals' food phosphate business was
transferred to Food Ingredients. In addition, a small agricultural business was
transferred to Chemicals. Segment information for prior periods has been
reclassified to conform to the current presentation.
Financial information for the first nine months of 1996 should not be
annualized. Monsanto's sales and operating income are historically higher
during the first half of the year, primarily because of the concentration of
generally more profitable sales from the Agricultural Products segment in the
first half of the year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Note 7 of the Notes to Financial Statements indicates operating results by
operating unit, including the concentration of the generally more profitable
sales of Agricultural Products in the first half of the year.
RESULTS OF OPERATIONS--THIRD QUARTER 1996 COMPARED WITH THE THIRD QUARTER 1995
Net income for the third quarter of 1996 was $170 million, or $0.28 per
share, compared with net income of $140 million, or $0.23 per share, in the
third quarter of last year. Net sales increased to a record $2,176 million and
were 6 percent higher than the comparable figure in 1995. For the quarter, the
Company's gross profit percentage increased to 47 percent compared to 42
percent in the third quarter of last year. This increase can be primarily
attributed to an
5
<PAGE> 7
MONSANTO COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
improved sales mix, as current year operations no longer include the styrenics
plastics business that was part of the Chemicals segment last year.
Third quarter net sales for Agricultural Products increased 32 percent over
sales for the same period last year to a record level of $613 million. The
increase was fueled by higher worldwide sales volumes of the family of
Roundup(R) herbicides. The practice of conservation tillage continues to be the
primary driver behind the growth in worldwide sales volume. Also contributing
to the increase were higher sales of Posilac(R) bovine somatotropin and higher
sales of lawn-and-garden products of the Solaris unit. Operating income for the
segment increased to $92 million, nearly double the operating results for the
same period in 1995. The increase in operating income, primarily the result of
higher sales, was partially offset by increased marketing expenditures and
higher technological expenses for biotechnological research.
Net sales for Chemicals declined $100 million for the quarter compared with
net sales in the third quarter of 1995, while operating income increased $18
million over the same period last year. Prior year operations reflect sales and
operating income from the Company's styrenics plastics business which was
divested at the end of 1995. If sales and operating income of this business are
excluded, sales and operating income for the quarter increased moderately over
the third quarter of 1995. Prior year earnings also reflect a net gain from
litigation settlements. The improved operating performance was driven by higher
sales volumes for the fibers business, performance materials and Saflex(R)
plastic interlayer. Reduced manufacturing costs for specialty chemicals and
fibers also contributed to the increase in operating income.
Pharmaceuticals' net sales for the quarter increased 14 percent, or $62
million over the third quarter of 1995 to $497 million. Operating income in the
third quarter of 1996 declined $13 million when compared to the same period
last year. However, operating income in 1995 includes $20 million for favorable
revenue adjustments under certain sales rebate programs in the United States
for product sales made in prior years. Excluding these adjustments, operating
income increased 17 percent in the third quarter of 1996 versus the same period
last year. The increase in net sales and operating income was primarily due to
strong sales performances of Ambien(R), a short-term treatment for insomnia,
and Daypro(R) and Arthrotec(R) arthritis treatments. Combined third quarter
sales of these products increased 53 percent over the same period last year.
This increase more than offset the effect of significantly lower sales of
Calan(R), a calcium channel blocker. The increased operating performance in the
third quarter also benefited from the addition of the women's health care
product lines acquired from Syntex in September of 1995. The increase in
operating income resulting from the higher sales was partially offset by higher
investments in marketing and research and development. The higher marketing
expenses were primarily associated with new product launch costs and
expenditures incurred to support the sales growth in key products. Increased
research and development expenses were associated with new product candidates
that are moving into the later, more expensive stages of clinical trials. The
third quarter of 1995 also benefited from cost-sharing payments from alliances.
Food Ingredients' net sales and operating income for the third quarter of
1996 were up 6 percent and 28 percent, respectively, over the same period last
year. The improved sales and operating income performance can be primarily
attributed to higher sales volumes, particularly for tabletop sweeteners. The
timing of aspartame shipments to major accounts, as well as lower operating
expenses also contributed to the improved operating performance. These
increases in operating income were partially offset by lower average pricing on
aspartame sales and higher advertising and promotion expenses for tabletop
sweeteners.
For Monsanto, marketing expenses for the third quarter of 1996 were higher
than the comparable period in 1995, primarily because of the aforementioned new
product launch costs for Agricultural Products and Pharmaceuticals. The
increase in administrative expenses for Monsanto in the third quarter of 1996
over those in the third quarter of last year was principally the result of
higher spending on growth and other strategic initiatives. Technological
expenses for the third quarter of 1996 were higher than the same period last
year principally because of higher research and development expenses in the
Agricultural Products and Pharmaceuticals segments. The decrease in ``Other
Income (Expense) - Net'' for the third quarter of 1996 can be primarily
attributed to lower earnings from equity affiliates, principally associated with
the Calgene and DeKalb investments.
6
<PAGE> 8
MONSANTO COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
RESULTS OF OPERATIONS--FIRST NINE MONTHS 1996 COMPARED WITH FIRST NINE MONTHS
1995
Net income for the first nine months of 1996 was $795 million, or $1.33 per
share, compared with net income of $659 million, or $1.14 per share, in the
first nine months of last year. Net sales of $7,059 million were 3 percent
higher than the comparable figure in 1995. For the first nine months of 1996,
the Company's gross profit percentage increased to 49 percent compared to 44
percent for the first nine months of 1995. As previously indicated, this
increase can be attributed to an improved sales mix, as current year operations
no longer include the styrenics plastics and rubber chemicals businesses that
were part of the Chemicals segment last year.
Net sales for Agricultural Products increased 21 percent, or $430 million,
during the first nine months of 1996 compared to the same period in 1995. The
increase in net sales in 1996 was primarily the result of higher worldwide
sales volumes of the family of Roundup(R) herbicides. Most world areas posted
solid sales volume gains in 1996. Continued increases in conservation tillage
practices, favorable weather conditions in certain key markets and an increase
in planted acreage have driven the increased demand. Also contributing to the
sales growth were improved sales of lawn-and-garden products of the Solaris
unit and higher sales of Posilac(R) bovine somatotropin. In addition,
successful introductions of new products such as Roundup(R) Ultra herbicide,
Roundup Ready(R) soybeans and Bollgard(R) insect-protected cotton helped to
fuel the sales growth. Operating income in 1996 increased $154 million, or 27
percent, compared with the results for the first nine months of 1995, primarily
because of increased sales volumes. The increase in operating income was
partially offset by higher marketing expenditures used to support new product
introductions, as well as higher biotechnology research and development
spending.
Net sales and operating income for Chemicals declined $508 million and $23
million, respectively, for the nine months ended September 30, 1996 compared
with net sales and operating income in the same period in 1995, primarily
because prior year operations reflect sales and operating income from the
Company's styrenics plastics business which was divested at the end of 1995 and
the Company's rubber chemicals business which was contributed to the formation
of a joint venture in May of 1995. Excluding sales and operating income from
these businesses and other nonrecurring items in the first nine months of 1995,
Chemicals' sales through September 1996 would have increased $135 million,
while operating income would have been essentially even with the prior year.
The sales increase can be attributed to higher sales volumes, partially offset
by lower average selling prices. The effect of the sales increase was offset
primarily by higher manufacturing costs due, in part, to costs associated with
downtime for maintenance and capacity expansion projects.
Pharmaceuticals' net sales and operating income for the first nine months
of 1996 increased $207 million and $36 million, respectively, over net sales
and operating income in the same period last year. Prior year results reflect
the impact of favorable adjustments under certain sales rebate programs in the
United States from prior years. The increases in net sales and operating income
can be attributed to sales of Ambien(R), Daypro(R) and Arthrotec(R). In the
first nine months of 1996, sales of these products increased 39 percent over
sales for the same period in 1995. In addition, the women's health care product
lines, acquired from Syntex in September of 1995, contributed to the improved
sales and operating income performance. Sales growth was also fueled by the
launch of Covera-HS(R), a chronotherapeutic drug used in the treatment of
hypertension and angina. Lower sales of Calan(R) partially offset the overall
sales increase. Increased expenditures for marketing and product development
costs were offset, in part, by cost-sharing payments from alliances and
licensing agreements.
Net sales for Food Ingredients increased $82 million during the first nine
months of 1996 compared to the first nine months of 1995. Operating income for
the first nine months of 1996 increased $10 million over operating income for
the same period last year. The sales increase was primarily the result of
higher aspartame sales, principally due to the timing of shipments to major
accounts, and higher sales of biogum products. Also contributing to the sales
increase were higher sales volumes of tabletop sweeteners. The increase in
operating income can be primarily attributed to the effect of higher sales, as
well as lower manufacturing costs. The increase in operating income was
partially offset by higher advertising and promotion costs for tabletop
sweeteners, as well as higher administrative expenses associated with growth
initiatives and other costs.
7
<PAGE> 9
MONSANTO COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For Monsanto, marketing expenses for the nine months of 1996 were higher
than the comparable period in 1995, primarily because of new-product launch
costs for Agricultural Products and Pharmaceuticals. The increase in
administrative expenses was principally due to higher costs associated with
various employee incentive programs, as well as increased spending on growth
initiatives and other programs. The increase in ``Other Income (Expense) -
Net'' for the first nine months of 1996 over the same period in 1995 can be
attributed to gains on the sales of certain assets and higher currency gains.
This increase in ``Other Income (Expense) - Net'' was partially offset by lower
earnings from equity affiliates, principally associated with the Calgene and
DeKalb investments.
CHANGES IN FINANCIAL CONDITION--SEPTEMBER 30, 1996 COMPARED WITH DECEMBER 31,
1995
Working capital at September 30, 1996 decreased to $1,197 million from
$1,493 million at December 31, 1995, primarily because of higher short-term
debt offset, in part, by a seasonal increase in trade receivables. The current
ratio was 1.4 at September 30, 1996 and 1.5 at year-end 1995. The percent of
total debt to total capitalization increased to 37 percent at September 30,
1996 versus 35 percent at year-end 1995 primarily because of the increase in
short-term debt. The increase in ``Investments in Affiliates'' at September 30,
1996 was principally the result of the equity positions taken in Calgene and
DeKalb. The increase in ``Intangible Assets'' at September 30, 1996 was
primarily attributable to the acquisition of the plant-biotechnology assets of
Agracetus.
Cash provided by operations totaled a net $610 million in 1996, compared
with cash provided by operations of $636 million in 1995. The decrease in cash
flow from operations resulted primarily from higher seasonal working capital
requirements for Agricultural Products and higher payouts associated with
employee incentive programs and other reserves. Investing activities in 1996
used $932 million, principally for the equity investments in Calgene and DeKalb
and for the acquisition of the plant-biotechnology assets of Agracetus. The
increase in short-term financing was primarily used to finance investment
activity and higher seasonal working capital levels for Agricultural Products.
During the first nine months of 1996, Monsanto purchased in the market 8.2
million shares of its stock for $253 million, the market value on the dates of
the purchases.
8
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company's Report on Form 10-K for the year ended December 31, 1995,
described an administrative Complaint and Proposed Compliance Order issued by
the U.S. Environmental Protection Agency (``EPA'') alleging violations by the
Company of certain sections of the Resource Conservation and Recovery Act. The
Company has signed a Consent Agreement which includes penalties substantially
less than the $555,900 amount proposed by the EPA, but the Agreement has not
yet been executed by EPA.
The Company's Report on Form 10-K for the year ended December 31, 1995, and
the Company's Reports on Form 10-Q for the quarters ended March 31, 1996, and
June 30, 1996, described a number of related actions brought in federal and/or
state court, against G. D. Searle & Co. (``Searle'') and numerous other
defendants, based on the practice of providing discounts or rebates to
managed-care organizations and certain other large purchasers. An agreement
reached by several defendants, not including Searle, to settle the federal
class action case, was approved by the trial judge on June 21, 1996. Certain
members of the class objected to the settlement and have appealed the approval
by the trial judge to the U.S. Court of Appeals for the Seventh Circuit.
ITEM 5. OTHER INFORMATION
On October 10, 1996, Monsanto announced that it is analyzing alternatives
for the future of its chemical businesses, including: separating the corporation
into two public companies, one a life sciences company and the other a chemical
company; combining the chemical businesses with one or more other companies; or
keeping the chemical businesses and restructuring them.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits--See the Exhibit Index at page 11 of this report.
(b) No reports on Form 8-K were filed by the Company during the quarter
ended September 30, 1996.
9
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MONSANTO COMPANY
-------------------------------------
(Registrant)
MICHAEL R. HOGAN
-------------------------------------
Vice President and Controller
(On behalf of the Registrant and
as Principal Accounting Officer)
Date: November 13, 1996
10
<PAGE> 12
EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of Item
601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2 Omitted--Inapplicable
3 Omitted--Inapplicable
4 Omitted--Inapplicable
10 Omitted--Inapplicable
11 Omitted--Inapplicable; see Note 4 of Notes to Financial Statements on page 4
15 Omitted--Inapplicable
18 Omitted--Inapplicable
19 Omitted--Inapplicable
22 Omitted--Inapplicable
23 Consent of Company Counsel
24 Omitted--Inapplicable
27 Financial Data Schedule
99 Computation of the Ratio of Earnings to Fixed Charges for Monsanto Company and Subsidiaries
</TABLE>
11
<PAGE> 1
EXHIBIT 23
CONSENT OF COMPANY COUNSEL
I hereby consent to the incorporation by reference in Monsanto Company's
Registration Statements on Form S-8 (Nos. 2-36636, 2-76696, 2-90152, 33-13197,
33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365,
33-53367, 333-02783, 333-02961, and 333-02963) and on Form S-3 (No. 33-60189) of
the reference to Company counsel in Note 6 to the Notes to Financial Statements
in the Company's Form 10-Q Report for the quarter ended September 30, 1996. In
giving this consent I do not thereby admit that I am within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933.
KARL R. BARNICKOL
Associate General Counsel
Monsanto Company
Saint Louis, Missouri
November 13, 1996
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF CONSOLIDATED INCOME OF MONSANTO COMPANY AND SUBSIDIARIES FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1996, AND THE STATEMENT OF CONSOLIDATED
FINANCIAL POSITION AS OF SEPTEMBER 30, 1996. SUCH INFORMATION IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 122
<SECURITIES> 0
<RECEIVABLES> 2,165
<ALLOWANCES> 0
<INVENTORY> 1,361
<CURRENT-ASSETS> 4,427
<PP&E> 7,460
<DEPRECIATION> 4,485
<TOTAL-ASSETS> 11,163
<CURRENT-LIABILITIES> 3,230
<BONDS> 1,603
<COMMON> 1,644
0
0
<OTHER-SE> 2,505
<TOTAL-LIABILITY-AND-EQUITY> 11,163
<SALES> 7,059
<TOTAL-REVENUES> 7,059
<CGS> 3,631
<TOTAL-COSTS> 3,631
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 134
<INCOME-PRETAX> 1,136
<INCOME-TAX> 341
<INCOME-CONTINUING> 795
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 795
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 0
<FN>
RECEIVABLES ARE STATED NET OF ALLOWANCES OF $51.
</TABLE>
<PAGE> 1
EXHIBIT 99
<TABLE>
MONSANTO COMPANY AND SUBSIDIARIES
COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------- ---------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Income from continuing
operations before provision
for income taxes.............. $1,136 $ 955 $1,087 $ 895 $729 ($174)<F*> $354<F*>
Add
Fixed charges................. 176 182 245 182 184 231 233
Less capitalized interest..... (9) (8) (11) (10) (12) (16) (24)
Dividends from
affiliated companies........ 10 -- 9 2 5 5 5
Less equity income (add equity
loss) of affiliated
companies..................... 7 (24) (17) (21) (20) (1) (3)
------ ------ ------ ------ ---- ----- ----
Income as adjusted $1,320 $1,105 $1,313 $1,048 $886 $ 45 $565
====== ====== ====== ====== ==== ===== ====
Fixed charges
Interest expense.............. $ 134 $ 143 $ 190 $ 131 $129 $ 169 $166
Capitalized interest.......... 9 8 11 10 12 16 24
Portion of rents
representative of interest
factor...................... 33 31 44 41 43 46 43
------ ------ ------ ------ ---- ----- ----
Fixed charges............... $ 176 $ 182 $ 245 $ 182 $184 $ 231 $233
====== ====== ====== ====== ==== ===== ====
Ratio of earnings to fixed
charges....................... 7.50 6.07 5.36 5.76 4.82 0.19 2.42
====== ====== ====== ====== ==== ===== ====
<FN>
- -------
<F*>Includes restructuring and other unusual items of $699 million and $457
million in 1992 and 1991, respectively. Excluding restructuring and other
unusual items, the ratio of earnings to fixed charges would have been 3.22
and 4.39, in 1992 and 1991, respectively. The ratio was not materially
affected by the restructuring and other unusual items in 1995, 1994 and
1993.
</TABLE>
13
