<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 JUNE 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)
DELAWARE 43-0420020
-------- ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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 JUNE 30, 1996
----- --------------
<S> <C>
COMMON STOCK, $2 PAR VALUE 586,284,476 SHARES<F*>
--------------------------- -----------------------
</TABLE>
[FN]
<F*>Adjusted for five-for-one stock split approved April 26, 1996 to shareowners
of record on May 15, 1996.
==============================================================================
<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 six months ended June 30, 1996 and 1995, the Statement
of Consolidated Financial Position as of June 30, 1996 and December 31, 1995,
the Statement of Consolidated Cash Flow for the six months ended June 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
JUNE 30, JUNE 30,
---------------- ----------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Sales................................................................. $2,579 $2,482 $4,883 $4,800
Cost of Goods Sold........................................................ 1,296 1,358 2,483 2,682
------ ------ ------ ------
Gross Profit.............................................................. 1,283 1,124 2,400 2,118
Marketing Expenses........................................................ 382 325 709 621
Administrative Expenses................................................... 170 143 366 301
Technological Expenses.................................................... 188 181 346 335
Amortization of Intangible Assets......................................... 31 30 62 55
------ ------ ------ ------
Operating Income.......................................................... 512 445 917 806
Interest Expense.......................................................... (51) (54) (91) (96)
Interest Income........................................................... 14 17 25 28
Other Income (Expense)--Net............................................... 48 7 54 14
------ ------ ------ ------
Income Before Income Taxes................................................ 523 415 905 752
Income Taxes.............................................................. 158 125 280 233
------ ------ ------ ------
Net Income................................................................ $ 365 $ 290 $ 625 $ 519
------ ------ ------ ------
Earnings per Share........................................................ $ 0.62 $ 0.51 $ 1.05 $ 0.91
------ ------ ------ ------
Dividends per Share....................................................... $0.150 $0.138 $0.288 $0.264
------ ------ ------ ------
Weighted Average Number of Common and
Common Equivalent Shares (in millions).................................. 597.6 572.2
------ ------
</TABLE>
1
<PAGE> 3
<TABLE>
MONSANTO COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(DOLLARS IN MILLIONS, EXCEPT PER SHARE)
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................................................... $ 197 $ 297
Trade receivables, net of allowances of $61 in 1996 and $57 in 1995............. 2,513 1,629
Miscellaneous receivables and prepaid expenses.................................. 518 596
Deferred income tax benefit..................................................... 341 415
Inventories..................................................................... 1,319 1,368
------- -------
Total Current Assets.................................................... 4,888 4,305
------- -------
Property, Plant and Equipment....................................................... 7,411 7,237
Less Accumulated Depreciation....................................................... 4,503 4,405
------- -------
Net Property, Plant and Equipment............................................... 2,908 2,832
------- -------
Investments in Affiliates........................................................... 785 544
Intangible Assets, net of accumulated amortization of $723 in 1996 and
$638 in 1995...................................................................... 2,118 1,964
Other Assets........................................................................ 954 966
------- -------
Total Assets........................................................................ $11,653 $10,611
------- -------
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Accounts payable................................................................ $ 638 $ 648
Accrued liabilities............................................................. 1,745 1,799
Short-term debt................................................................. 1,400 365
------- -------
Total Current Liabilities............................................... 3,783 2,812
------- -------
Long-Term Debt...................................................................... 1,623 1,667
Deferred Income Taxes............................................................... 82 85
Postretirement Liabilities.......................................................... 1,477 1,415
Other Liabilities................................................................... 653 900
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.............................................. 8 902
Treasury stock, at cost (241,925,959 shares in 1996 and
48,923,899 shares in 1995)................................................ (2,696) (2,550)
Reserve for ESOP debt retirement................................................ (175) (181)
Net unrealized investment holding gains......................................... 26 34
Accumulated currency adjustment................................................. 19 101
Reinvested earnings............................................................. 5,209 5,097
------- -------
Total Shareowners' Equity............................................... 4,035 3,732
------- -------
Total Liabilities and Shareowners' Equity........................................... $11,653 $10,611
------- -------
</TABLE>
2
<PAGE> 4
<TABLE>
MONSANTO COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOW
(DOLLARS IN MILLIONS)
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1996 1995
------ -------
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Operating Activities:
Net income............................................................................. $ 625 $ 519
Add income taxes....................................................................... 280 233
------ -------
Income before income taxes............................................................. 905 752
Adjustments to reconcile to Cash Provided by (Used in) Operations:
Income tax payments................................................................ (221) (201)
Items that did not use (provide) cash:
Depreciation and amortization.................................................. 284 292
Other.......................................................................... 19 18
Working capital changes that provided (used) cash:
Accounts receivable............................................................ (866) (672)
Inventories.................................................................... 57 (111)
Accounts payable and accrued liabilities....................................... (111) (119)
Other.......................................................................... (36) (12)
Other items........................................................................ (102) 71
------ -------
Total Cash Provided by (Used in) Operations................................................ (71) 18
------ -------
Investing Activities:
Property, plant and equipment purchases................................................ (294) (209)
Acquisition of Kelco................................................................... (1,062)
Acquisition and investment payments.................................................... (632) (93)
Investment and property disposal proceeds.............................................. 131 30
------ -------
Cash Used in Investing Activities.......................................................... (795) (1,334)
------ -------
Financing Activities:
Net change in short-term financing..................................................... 1,035 861
Long-term debt proceeds................................................................ 129 654
Long-term debt reductions.............................................................. (159) (372)
Treasury stock purchases............................................................... (253)
Dividend payments...................................................................... (168) (148)
Common stock issued under employee stock plans......................................... 106 88
Other financing activities............................................................. 76 4
------ -------
Cash Provided by Financing Activities...................................................... 766 1,087
------ -------
Increase (Decrease) in Cash and Cash Equivalents........................................... (100) (229)
Cash and Cash Equivalents:
Beginning of year...................................................................... 297 507
------ -------
End of period.......................................................................... $ 197 $ 278
------ -------
</TABLE>
The effect of exchange rate changes on cash and cash equivalents was not
material.
Cash payments for interest (net of amounts capitalized) were $100 million in
1996 and $88 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 nine authorized
directors.
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 June 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 (597,579,951
and 572,208,520 in 1996 and 1995, respectively). Common share equivalents
(17,752,303 and 11,291,565 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 June 30, 1996 and December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
<S> <C> <C>
Finished goods...................................... $ 799 $ 874
Goods in process.................................... 298 305
Raw materials and supplies.......................... 449 434
------ ------
Inventories, at FIFO cost........................... 1,546 1,613
Excess of FIFO over LIFO cost....................... (227) (245)
------ ------
Total ....................................... $1,319 $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
MONSANTO COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. Segment data for the three months and six months ended June 30, 1996 and
1995 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-----------------------------------------------------------
1996 1995
------------------------ ------------------------
OPERATING OPERATING
NET INCOME NET INCOME
SALES (LOSS) SALES (LOSS)
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Segment:
Agricultural Products...................... $1,042 $ 367 $ 840 $ 294
Chemicals.................................. 769 77 943 90
Pharmaceuticals............................ 456 36 402 30
Food Ingredients........................... 312 52 297 48
Corporate.................................. (20) (17)
------ ----- ------ -----
Total.......................................... $2,579 $ 512 $2,482 $ 445
------ ----- ------ -----
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------------
1996 1995
------------------------ ------------------------
OPERATING OPERATING
NET INCOME NET INCOME
SALES (LOSS) SALES (LOSS)
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Segment:
Agricultural Products...................... $1,867 $ 639 $1,586 $ 530
Chemicals.................................. 1,505 141 1,913 182
Pharmaceuticals............................ 933 96 788 47
Food Ingredients........................... 578 77 513 79
Corporate.................................. (36) (32)
------ ----- ------ -----
Total.......................................... $4,883 $ 917 $4,800 $ 806
------ ----- ------ -----
</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 six 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--SECOND QUARTER 1996 COMPARED WITH THE SECOND QUARTER
1995
Net income for the second quarter of 1996 was $365 million, or $0.62 per
share, compared with net income of $290 million, or $0.51 per share, in the
second quarter of last year. Net sales of $2,579 million were 4 percent higher
than the comparable figure in 1995. For the quarter, the Company's gross profit
percentage increased to 50 percent compared to 45 percent in the second quarter
of last year. This increase can be primarily attributed to an improved
5
<PAGE> 7
MONSANTO COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 24 percent versus sales for
the same period last year to a record level of $1,042 million. Net sales in the
second quarter of 1996 benefited from higher sales volumes of the family of
Roundup(R) herbicides. The increased sales volumes reflected continued strong
worldwide demand, with significant volume gains in Latin America, Australia and
Asia. Also contributing to the increase were higher sales of lawn-and-garden
products of the Solaris unit resulting from the effects of a new distribution
strategy and increased promotional efforts. The sales increase was also driven
by improved sales of Posilac(R) bovine somatotropin and the successful
introduction of Roundup Ready(R) soybeans and Bollgard(R) insect-protected
cotton, new crops developed through the Company's biotechnology research.
Operating income for the segment was up $73 million, or 25 percent, over the
prior year, also a quarterly record, primarily the result of higher sales.
Increased marketing expenditures used to support new product launches partially
offset the increase in operating income which resulted from the higher sales.
Net sales and operating income for Chemicals declined $174 million and $13
million, respectively, for the quarter 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. However, if sales and operating
income of the styrenics plastics business are excluded, sales were essentially
even with second-quarter 1995 sales and operating income declined moderately.
Sales volume increases, particularly for specialty chemicals, fibers and
Saflex(R) plastic interlayer were offset by lower average selling prices. The
decrease in operating income was due primarily to higher manufacturing costs
associated with lower capacity utilization.
Pharmaceutical net sales for the quarter increased 13 percent, or $54
million over the second quarter of 1995 to a record $456 million. Operating
income in the second quarter of 1996 of $36 million increased 20 percent, or $6
million, over the second quarter of 1995. The increase in net sales and
operating income was primarily due to the addition of the women's health care
product lines acquired from Syntex in September of 1995. In addition, the
launch of Covera-HS(R), a chronotherapeutic drug used in the treatment of
hypertension and angina, and higher sales of key growth products also
contributed to the sales increase. Operating results continued to benefit from
cost sharing alliances and licensing agreements. 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 the result of costs associated with the launch of
Covera-HS(R) 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.
Food Ingredient net sales and operating income for the second quarter of
1996 were up 5 percent and 8 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 aspartame, biogums and
tabletop sweeteners. Operating income also benefited from lower manufacturing
costs. These increases in operating income were partially offset by higher
advertising and promotion expenses for tabletop sweeteners.
For Monsanto, marketing expenses for the second 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, as well as
increased spending on growth initiatives. The increase in administrative
expenses for Monsanto in the second quarter of 1996 over those in the second
quarter of last year was principally the result of higher spending on growth
and other strategic initiatives. The increase in ``Other Income (Expense) -
Net'' for the second quarter of 1996 can be primarily attributed to a gain from
the sale of certain pharmaceutical assets and an increase in earnings from
equity affiliates.
RESULTS OF OPERATIONS--FIRST SIX MONTHS 1996 COMPARED WITH FIRST SIX MONTHS
1995
Net income for the first six months of 1996 was $625 million, or $1.05 per
share, compared with net income of $519 million, or $0.91 per share, in the
first six months of last year. Net sales of $4,883 million were 2 percent
higher
6
<PAGE> 8
MONSANTO COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
than the comparable figure in 1995. For the first six months of 1996, the
Company's gross profit percentage increased to 49 percent compared to 44
percent for the first six 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 18 percent, or $281 million,
during the first six 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 Roundup(R) herbicide. 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) soy beans and Bollgard(R) insect-protected cotton helped to
fuel the sales growth. Operating income in 1996 increased $109 million, or 21
percent, compared with the results for the first six months of 1995, primarily
because of increased sales volumes and lower manufacturing and other costs.
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 $408 million and $41
million, respectively, for the six months ended June 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 half of 1995, Chemicals'
sales for the first half of 1996 would have increased $83 million, while
operating income would have decreased $22 million. The sales increase can be
attributed to higher sales volumes, partially offset by lower average selling
prices. The decrease in operating income was primarily the result of higher
manufacturing costs due, in part, to costs associated with downtime for
maintenance and capacity expansion projects. In addition, higher spending on
growth initiatives negatively affected operating income.
Pharmaceuticals' net sales and operating income for the first half of 1996
increased $145 million and $49 million, respectively, over net sales and
operating income in the same period last year. These increases can be
attributed to sales of key growth products: Ambien(R), a short-term treatment
for insomnia, and Daypro(R) and Arthrotec(R) arthritis treatments. In the
first six months of 1996, sales of these growth products increased 31 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). 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 $65 million in the first half of
1996 compared to the first half of 1995. Operating income for the first six
months of 1996 declined slightly versus operating income for the same period
last year. The sales increase was primarily the result of higher aspartame
sales volumes and the addition of sales from Kelco which was acquired in
February 1995. The decrease in operating income was principally due to higher
administrative expenses associated with growth initiatives and other costs, as
well as higher advertising and promotion costs for tabletop sweeteners.
For Monsanto, marketing expenses for the first half 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 six 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.
7
<PAGE> 9
MONSANTO COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
CHANGES IN FINANCIAL CONDITION--JUNE 30, 1996 COMPARED WITH DECEMBER 31, 1995
Working capital at June 30, 1996 decreased to $1,105 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 1.3 at June 30, 1996 and 1.5 at year-end 1995. The percent of total debt to
total capitalization increased to 43 percent at June 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 June 30, 1996 was principally the
result of the equity positions taken in Calgene and DeKalb. The increase in
``Intangible Assets'' at June 30, 1996 was primarily attributable to the
acquisition of the plant-biotechnology assets of Agracetus.
Cash used in operations totaled a net $71 million in 1996, compared with
cash provided by operations of $18 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 $795 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 six 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 a number of lawsuits relating to the Brio Superfund site near
Houston, Texas. (a) A number of lawsuits were described that are pending in
Harris County, Texas, District Courts and the United States District Court for
the Southern District of Texas on behalf of a number of plaintiffs who owned
homes or lived in the Southbend, Sageglen or other subdivisions, attended
school in the Southbend subdivision, or used nearby recreational baseball
fields. As a result of settlements and amendments to the petitions in some of
these cases, there are now pending nine actions brought on behalf of 953
individual plaintiffs and one business partnership. (b) Two actions were
described that had been brought in Harris County District Court on behalf of
plaintiffs who are former employees of the owners/operators of the Brio site
and members of those employees' families or persons who worked near the Brio
site. As a result of amendments to the petition in one of these actions, there
are now pending two such cases brought on behalf of 406 plaintiffs.
The Company's Report on Form 10-K for the year ended December 31, 1995,
described a number of product liability lawsuits arising out of sales by G. D.
Searle & Co., a subsidiary of the Company acquired in 1985, of the
Cu-7(R), an intrauterine device. As of August 1, 1996, there were approximately
16 cases pending in various U.S. state and federal courts and approximately 351
cases filed outside the United States (the vast majority in Australia).
The Company's Report on Form 10-K for the year ended December 31, 1995, and
the Company's Report on Form 10-Q for the quarter ended March 31, 1996,
described a number of related actions brought in federal and/or state court,
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of stockholders on April 26, 1996, five
matters were submitted to a vote of stockholders.
1. The following directors were elected, each to hold office until the next
Annual Meeting or until a successor is elected and has qualified or until his
or her earlier death, resignation, or removal. Votes were cast as follows:
<TABLE>
<CAPTION>
VOTES
VOTES ``WITHHOLD
NAME ``FOR'' AUTHORITY''
---- ------- ----------
<S> <C> <C>
Robert B. Shapiro................................. 106,581,503 695,283
Joan T. Bok....................................... 106,553,825 722,961
Robert M. Heyssel................................. 106,575,484 701,302
Gwendolyn S. King................................. 106,507,705 769,081
Philip Leder...................................... 106,271,528 1,005,258
Howard M. Love.................................... 106,578,908 697,878
Frank A. Metz, Jr................................. 106,624,605 652,181
Jacobus F. M. Peters.............................. 106,578,702 698,084
Nicholas L. Reding................................ 106,648,598 628,188
John S. Reed...................................... 97,570,370 9,706,416
William D. Ruckelshaus............................ 106,600,415 676,371
John B. Slaughter................................. 106,595,774 681,012
</TABLE>
2. The amendment of the Company's Certificate of Incorporation to increase
the number of authorized shares of Common Stock from 200,000,000 to 850,000,000
shares was approved by the shareholders. A total of 102,740,785 votes were cast
in favor of the amendment, 4,092,665 votes were cast against it, and 443,336
votes were counted as abstentions.
9
<PAGE> 11
3. The Monsanto Management Incentive Plan of 1996 was approved by the
stockholders. A total of 74,917,101 votes were cast in favor of it, 24,990,137
votes were cast against it, 843,836 votes were counted as abstentions, and
6,525,712 votes were counted as broker non-votes.
4. The Monsanto Executive Stock Purchase Incentive Plan was approved by the
stockholders. A total of 94,844,558 votes were cast in favor of it, 4,967,914
votes were cast against it, 938,603 votes were counted as abstentions, and
6,525,711 votes were counted as broker non-votes.
5. The appointment by the Board of Directors of Deloitte & Touche as
principal independent auditors for the year 1996 was ratified by the
stockholders. A total of 106,293,874 votes were cast in favor of ratification,
546,039 votes were cast against it, and 436,873 votes were counted as
abstentions.
Brokers were permitted to vote on the election of directors, amendment to
the Articles of Incorporation, and ratification of auditors in the absence of
instructions from street-name holders; therefore broker non-votes did not occur
in those matters.
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 June 30, 1996.
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)
/s/ MICHAEL R. HOGAN
-------------------------------------
Vice President and Controller
(On behalf of the Registrant and
as Principal Accounting Officer)
Date: August 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 1. Monsanto Management Incentive Plan of 1996 (incorporated herein by reference to Appendix A of the
Monsanto Company Notice of Annual Meeting and Proxy Statement dated March 14, 1996)
2. Monsanto Executive Stock Purchase Incentive Plan (incorporated herein by reference to Appendix B of
the Monsanto Company Notice of Annual Meeting and Proxy Statement dated March 14, 1996)
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 June 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.
/s/ KARL R. BARNICKOL
KARL R. BARNICKOL
Associate General Counsel
Monsanto Company
Saint Louis, Missouri
August 13, 1996
12
<PAGE> 1
EXHIBIT 99
<TABLE>
<CAPTION>
MONSANTO COMPANY AND SUBSIDIARIES
COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
SIX MONTHS
ENDED
JUNE 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.............. $ 905 $752 $1,087 $ 895 $729 ($174)<F*> $354<F*>
Add
Fixed charges................. 117 121 245 182 184 231 233
Less capitalized interest..... (4) (4) (11) (10) (12) (16) (24)
Dividends from
affiliated companies........ 9 -- 9 2 5 5 5
Less equity income (add equity
loss) of affiliated
companies..................... (4) (19) (17) (21) (20) (1) (3)
------ ---- ------ ------ ---- ----- ----
Income as adjusted $1,023 $850 $1,313 $1,048 $886 $ 45 $565
====== ==== ====== ====== ==== ===== ====
Fixed charges
Interest expense.............. $ 91 $ 96 $ 190 $ 131 $129 $ 169 $166
Capitalized interest.......... 4 4 11 10 12 16 24
Portion of rents
representative of interest
factor...................... 22 21 44 41 43 46 43
------ ---- ------ ------ ---- ----- ----
Fixed charges............... $ 117 $121 $ 245 $ 182 $184 $ 231 $233
====== ==== ====== ====== ==== ===== ====
Ratio of earnings to fixed
charges....................... 8.74 7.02 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
<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
SIX MONTHS ENDED JUNE 30, 1996, AND THE STATEMENT OF CONSOLIDATED
FINANCIAL POSITION AS OF JUNE 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 197
<SECURITIES> 0
<RECEIVABLES> 2,513
<ALLOWANCES> 0
<INVENTORY> 1,319
<CURRENT-ASSETS> 4,888
<PP&E> 7,411
<DEPRECIATION> 4,503
<TOTAL-ASSETS> 11,653
<CURRENT-LIABILITIES> 3,783
<BONDS> 1,623
<COMMON> 1,644
0
0
<OTHER-SE> 2,391
<TOTAL-LIABILITY-AND-EQUITY> 11,653
<SALES> 4,883
<TOTAL-REVENUES> 4,883
<CGS> 2,483
<TOTAL-COSTS> 2,483
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 91
<INCOME-PRETAX> 905
<INCOME-TAX> 280
<INCOME-CONTINUING> 625
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 625
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 0
<FN>
RECEIVABLES ARE STATED NET OF ALLOWANCES OF $61.
</TABLE>
