-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Y7+LYkkrDW/dRX8xl8noyTGf36yi2mQxoI4pvtP1LO0vrO3jFq/guvI8vDS/ErZt nMQNFg4spoerta9GnCVuRg== 0000950114-95-000040.txt : 19950615 0000950114-95-000040.hdr.sgml : 19950615 ACCESSION NUMBER: 0000950114-95-000040 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950317 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONSANTO CO CENTRAL INDEX KEY: 0000067686 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 430420020 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-02516 FILM NUMBER: 95521432 BUSINESS ADDRESS: STREET 1: 800 N LINDBERGH BLVD CITY: ST LOUIS STATE: MO ZIP: 63167 BUSINESS PHONE: 3146941000 FORMER COMPANY: FORMER CONFORMED NAME: MONSANTO CHEMICAL CO DATE OF NAME CHANGE: 19711003 10-K405 1 1994 FORM 10-K 1 1 9 9 4 - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 ----------------- 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, MO. 63167 ----------------------------------------- ----- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (314) 694-1000 -------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- COMMON STOCK $2 PAR VALUE NEW YORK STOCK EXCHANGE PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE 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 12 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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X] STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF THE REGISTRANT: APPROXIMATELY $9.0 BILLION AS OF THE CLOSE OF BUSINESS ON FEBRUARY 28, 1995. INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE: 114,097,214 SHARES OF COMMON STOCK, $2 PAR VALUE, OUTSTANDING AT FEBRUARY 28, 1995. DOCUMENTS INCORPORATED BY REFERENCE 1. PORTIONS OF MONSANTO COMPANY ANNUAL REPORT TO SECURITY HOLDERS FOR THE YEAR ENDED DECEMBER 31, 1994. (PARTS I AND II OF FORM 10-K.) 2. PORTIONS OF MONSANTO COMPANY NOTICE OF ANNUAL MEETING AND PROXY STATEMENT DATED MARCH 16, 1995. (PART III OF FORM 10-K.) - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ 2 PART I ITEM 1. BUSINESS. Monsanto Company and its subsidiaries are engaged in the worldwide manufacture and sale of a widely diversified line of agricultural products; chemical products, including plastics and manufactured fibers; pharmaceuticals; and food products, including low-calorie sweeteners. Monsanto Company was incorporated in 1933 under Delaware law and is the successor to a Missouri corporation, Monsanto Chemical Works, organized in 1901. Unless otherwise indicated by the context, "Monsanto" means Monsanto Company and consolidated subsidiaries, and the "Company" means Monsanto Company only. RECENT DEVELOPMENTS On February 20, 1995, Monsanto completed its acquisition of the worldwide business of Kelco, a division of Merck & Co., Inc., for approximately $1,075 million. See "Review of Changes in Financial Position" and "Principal Acquisitions and Divestitures" on pages 42 and 49, respectively, of the Company's Annual Report to shareowners for the year ended December 31, 1994 (the "1994 Annual Report"). In December 1994, the Company's Board of Directors approved a plan to eliminate redundant staff activities across Monsanto and to consolidate certain staff and administrative business functions. In addition, Monsanto will close or exit certain facilities and programs. See "Review of Consolidated Results of Operations" and "Restructuring and Other Actions" on pages 29 and 48 of the 1994 Annual Report. In 1995, The Chemical Group intends to merge its rubber chemicals and instruments businesses with the rubber chemicals business of Akzo Nobel N.V. to form a joint venture. See "Chemical Group Outlook" and "Principal Acquisitions and Divestitures" on pages 37 and 49, respectively, of the 1994 Annual Report. INDUSTRY SEGMENTS; PRINCIPAL PRODUCTS For 1994, Monsanto reported its business under four industry segments: The Agricultural Group, The Chemical Group, Searle, and NutraSweet. The tabular information appearing under "Operating Unit Segment Data" and "Geographic Data" on pages 33 and 40 of the 1994 Annual Report is incorporated herein by reference. The following is a list of principal products categorized by major end-use markets within each industry segment:
THE AGRICULTURAL GROUP Major End-Use Manufacturing Major Raw Materials Major End-Use Markets Major Products Products & Applications Locations & Components --------------------- -------------- ----------------------- ----------- ------------------- Agricultural, Roundup(R) herbicide Multipurpose, non- Alvin, TX; Antwerp, Belgium; Disodiumiminodiacetate; industrial, turf and and other glyphosate- selective agricultural Fayetteville, NC; Luling, Phosphorus Trichloride ornamental based herbicides and industrial LA; Sao Jose dos Campos, applications applications Brazil ---------------------------------------------------------------------------------------------------------- Lasso(R) and Harness(R) Corn, soybean, peanut Muscatine, IA Chloroacetyl Chloride; herbicides and other and milo (sorghum) Diethylaniline acetanilide-based crops herbicides ---------------------------------------------------------------------------------------------------------- Avadex(R) BW herbicide; Wheat crops Antwerp, Belgium; Ammonium Thiocyanate; Far-Go(R) herbicide Muscatine, IA Diisopropylamine; Trichloropropane - --------------------------------------------------------------------------------------------------------------------------------- Animal agricultural Posilac(R) bovine Increase efficiency of Toll manufactured No major raw materials applications somatotropin milk production in dairy cows - --------------------------------------------------------------------------------------------------------------------------------- Residential Roundup herbicide; Herbicides, Fort Madison, IA Acephate; Chlorpyrifos; applications Ortho(R) lawn-and- insecticides, Diazinon; Glyphosate; garden products fungicides and Malathion; Triforine fertilizers - --------------------------------------------------------------------------------------------------------------------------------- 1 3 THE CHEMICAL GROUP Fibers Major End-Use Manufacturing Major Raw Materials Major End-Use Markets Major Products Products & Applications Locations & Components --------------------- -------------- ----------------------- ----------- ------------------- Construction & Home Nylon carpet staple; Broadloom carpet; Decatur, AL; Greenwood, SC; Acrylonitrile; Ammonia; Furnishings nylon bulk continuous upholstery; blankets Pensacola, FL Cyclohexane; Propylene filament; Acrilan(R) acrylic fiber - --------------------------------------------------------------------------------------------------------------------------------- Personal Products Acrilan acrylic fiber Sweaters; half-hose; Decatur, AL Acrylonitrile active wear; hand-knit yarns - --------------------------------------------------------------------------------------------------------------------------------- Vehicles Nylon filament; nylon Tires; molding resins Pensacola, FL Acrylonitrile; Ammonia; polymer for auto grilles, Cyclohexane; Propylene bumpers and gears - --------------------------------------------------------------------------------------------------------------------------------- Industrial Products Vehicles Santocure(R) CBS, Tires; tubes; belts; Antwerp, Belgium; Newport, Aniline; Carbon Disulfide; Santocure MOR, hoses; retreads; mats United Kingdom; Nitro, WV; Para-Nitrochlorobenzene; Santocure NS, Ruabon, United Kingdom; Tertiary-Butylamine Santocure TBSI Sauget, IL vulcanization accelerators; Santoflex(R) 13 antidegradant; Santogard(R) PVI prevulcanization inhibitor ---------------------------------------------------------------------------------------------------------- Specialty resins; Automotive coatings and Addyston, OH; Antwerp, Butanol; Chlorine; polymer modifiers sealants Belgium; Bridgeport, NJ; Formaldehyde; Melamine; LaSalle, Quebec, Canada; Methanol; Phthalic Springfield, MA Anhydride; Toluene ---------------------------------------------------------------------------------------------------------- Skydrol(R) aviation Hydraulic fluids for St. Louis, MO Phosphorus Oxychloride hydraulic fluids; commercial aircraft lubricants - --------------------------------------------------------------------------------------------------------------------------------- Chemicals Industrial phosphates; Metal treating, Augusta, GA; Luling, LA; Ammonia; Chlorine; phosphoric acid; cleaning and etching; St. Louis, MO; Sauget, IL; Phosphorus; Soda Ash; phosphorus plant food fertilizers; Trenton, MI Sulphur pentasulfide; oil additives phosphorus trichloride ---------------------------------------------------------------------------------------------------------- Nitrochlorobenzene Dyes; pigments; rubber Anniston, AL; Nitro, WV; Benzene; Caustic Soda; derivatives; Sodium MBT preservatives; Sauget, IL; Ruabon, United Chlorine engineering; Kingdom; Sauget, IL thermoplastics; antifreeze; water treatment - --------------------------------------------------------------------------------------------------------------------------------- Capital Equipment Sulfuric acid and Process plants On-Site Construction Various Construction process plants (design Components and construction); air emission control systems ---------------------------------------------------------------------------------------------------------- Therminol(R) heat Heat transfer fluids Alvin, TX; Anniston, AL; Benzene; Phenol transfer fluids; Newport, United Kingdom diphenyl oxide ---------------------------------------------------------------------------------------------------------- Dequest(R) water Scale inhibitors; oil Newport, United Kingdom Phosphorus Trichloride treatment chemicals field chemicals - --------------------------------------------------------------------------------------------------------------------------------- 2 4 THE CHEMICAL GROUP (CONT'D) Industrial Products (Cont'd) Major End-Use Manufacturing Major Raw Materials Major End-Use Markets Major Products Products & Applications Locations & Components --------------------- -------------- ----------------------- ----------- ------------------- Construction & Home Polymer modifiers Vinyl flooring; caulks Antwerp, Belgium; Butanol; Chlorine; Furnishings and sealants; Bridgeport, NJ; LaSalle, 2-Ethylhexanol; Phenol; adhesives; coatings; Quebec, Canada Phthalic Anhydride; Toluene wall covering; vinyl upholstery; insulation; furniture ---------------------------------------------------------------------------------------------------------- Flectol(R) rubber Roofing; flooring; Antwerp, Belgium; Nitro, WV; Aniline; Carbon Disulfide; preservative, tape; industrial hose Ruabon, United Kingdom; Tertiary-Butylamine Santocure(R) CBS, Sauget, IL Santocure MOR, Santocure NS, Santocure TBSI vulcanization accelerators ---------------------------------------------------------------------------------------------------------- Specialty resins Coatings and adhesives Addyston, OH; Alvin, TX; Acrylate Esters; Butanol; LaSalle, Quebec, Canada; Formaldehyde; Melamine; Springfield, MA; Trenton, MI Methanol; Vinyl Acetate Monomer ---------------------------------------------------------------------------------------------------------- Doormats Doormats Ghent, Belgium; Polyethylene St. Louis, MO ---------------------------------------------------------------------------------------------------------- Ammonium polyphosphate Fire retardant Phosphorus coatings; polymer additives - --------------------------------------------------------------------------------------------------------------------------------- Food Food additives Bakery; dairy; meat St. Louis, MO; Sao Jose dos Caustic Soda; Lime; Campos, Brazil; Trenton, MI Phosphorus - --------------------------------------------------------------------------------------------------------------------------------- Personal Products Dental phosphates; Dentifrices; dish Augusta, GA; Newport, United Benzene; Caustic Soda; industrial phosphates detergents; water Kingdom; Ruabon, United Phosphorus; Soda Ash conditioners Kingdom; St. Louis, MO; Sao Jose dos Campos, Brazil; Soda Springs, ID; Trenton, MI ---------------------------------------------------------------------------------------------------------- Polymer modifiers Packaging Antwerp, Belgium; Butanol; Chlorine; Phthalic Bridgeport, NJ; LaSalle, Anhydride; Toluene Quebec, Canada - --------------------------------------------------------------------------------------------------------------------------------- Other A variety of resin Electronics; paper; Addyston, OH; Earth City, Acrylate Esters; products; Flectron(R) graphics; packaging MO; LaSalle, Quebec, Canada; Formaldehyde; Maleic metalized materials Trenton, MI Anhydride; Melamine; Methanol - --------------------------------------------------------------------------------------------------------------------------------- Plastics and Saflex(R) Vehicles Saflex(R) plastic Windshields Ghent, Belgium; Sao Jose dos Butyraldehyde; Ethanol; interlayer Campos, Brazil; Springfield, Polyvinyl Alcohol; Vinyl MA; Trenton, MI Acetate Monomer ---------------------------------------------------------------------------------------------------------- Lustran(R) ABS and Automotive interior and Addyston, OH; Antwerp, Acrylonitrile; Butadiene; Lustran SAN exterior molded parts; Belgium; LaSalle, Quebec, Maleic Anhydride; Nylon thermoplastics; under-the-hood Canada; Muscatine, IA; Salt; Styrene Vydyne(R) nylon molding applications; Pensacola, FL resins; Cadon(R) automotive aftermarket; thermoplastics; transportation Triax(R) thermoplastic alloys; Centrex(R) polymers - --------------------------------------------------------------------------------------------------------------------------------- 3 5 THE CHEMICAL GROUP (CONT'D) Plastics and Saflex(R) (Cont'd) Major End-Use Manufacturing Major Raw Materials Major End-Use Markets Major Products Products & Applications Locations & Components --------------------- -------------- ----------------------- ----------- --------------- Personal Products Centrex(R) polymers; Toys; boats; tools; Addyston, OH; Antwerp, Acrylonitrile; Butadiene; Lustran(R) ABS and housewares; consumer Belgium; LaSalle, Quebec, Maleic Anhydride; Nylon Lustran SAN electronics; business Canada; Muscatine, IA; Salt; Styrene thermoplastics; machines; cosmetic Pensacola, FL Triax(R) thermoplastic packaging; personal alloys; Vydyne(R) nylon care items; spas and molding resins hot tubs; food processing; medical appliances - --------------------------------------------------------------------------------------------------------------------------------- Construction & Home Lustran ABS Drain pipe; Addyston, OH; Antwerp, Acrylonitrile; Butadiene; Furnishings thermoplastics; Triax refrigeration; Belgium; LaSalle, Quebec, Maleic Anhydride; Styrene thermoplastic alloys telecommunications Canada; Muscatine, IA ---------------------------------------------------------------------------------------------------------- Saflex(R) plastic Architectural glass Ghent, Belgium; Sao Jose dos Butyraldehyde; Ethanol; interlayer Campos, Brazil; Springfield, Polyvinyl Alcohol; Vinyl MA; Trenton, MI Acetate Monomer - --------------------------------------------------------------------------------------------------------------------------------- SEARLE Pharmaceuticals Maxaquin(R) Anti-infective Augusta, GA; Caguas, Puerto Trifluoroaniline (Lomefloxacin HCl) Rico; Evreux, France ---------------------------------------------------------------------------------------------------------- Daypro(R) (Oxaprozin); Anti-inflammatory Augusta, GA; Caguas,Puerto Benzoin; Diclofenac; Arthrotec(R) Rico; Morpeth, United Misoprostol (Misoprostol/ Kingdom Diclofenac) ---------------------------------------------------------------------------------------------------------- Aldactone(R) Cardiovascular Augusta, GA; Caguas, Puerto Androstenedione; (Spironolactone); Rico; Evreux, France; Hydrochlorothiazide; Aldactazide(R) Morpeth, United Kingdom Verapamil HCl (Spironolactone/ Hydrochlorothiazide); Calan(R) formulations (Verapamil HCl) ---------------------------------------------------------------------------------------------------------- Oral contraceptives Fertility control Caguas, Puerto Rico; Ethynodiol Diacetate Morpeth, United Kingdom ---------------------------------------------------------------------------------------------------------- Cytotec(R) Gastrointestinal Caguas, Puerto Rico; Coapa, Norprostol (Misoprostol) Mexico; Morpeth, United Kingdom ---------------------------------------------------------------------------------------------------------- Ambien(R) (Zolpidem Central nervous system Caguas, Puerto Rico Zolpidem Tartrate) - --------------------------------------------------------------------------------------------------------------------------------- Food (ex-U.S. only) Canderel(R) and Low-calorie tabletop Evreux, France; Morpeth, Aspartame Equal(R) tabletop sweetener United Kingdom sweeteners - --------------------------------------------------------------------------------------------------------------------------------- NUTRASWEET Food NutraSweet(R) brand High-intensity Augusta, GA; Harbor Beach, Aspartic Acid; sweetener sweetener available MI; University Park, IL L-Phenylalanine primarily in beverages, dessert products and tabletop sweeteners ---------------------------------------------------------------------------------------------------------- Equal and NutraSweet(R) Low-calorie tabletop Manteno, IL Aspartame Spoonful(TM) tabletop sweeteners sweeteners ---------------------------------------------------------------------------------------------------------- Simplesse(R) all All natural fat Toll manufactured Whey protein concentrate natural fat substitute substitute for use primarily in dairy products and baked goods - ---------------------------------------------------------------------------------------------------------------------------------
4 6 SALE OF PRODUCTS Monsanto's products are sold directly to customers in various industries, to wholesalers and other distributors and jobbers, to retailers and to the ultimate consumer, principally by its own sales force, or, in some cases, through third parties. With respect to pharmaceuticals, such sales force concentrates on detailing to physicians and managed health care providers. As indicated on page 57 of the 1994 Annual Report, Monsanto's net income is historically higher during the first half of the year, primarily because of the concentration of generally more profitable sales of The Agricultural Group during that part of the year. Monsanto's marketing and distribution practices do not result in unusual working capital requirements on a consolidated basis, although the seasonality of sales of The Agricultural Group segment sometimes results in short-term borrowings to finance the customer accounts receivable and inventories. Inventories of finished goods, goods in process and raw materials are maintained to meet customer requirements and Monsanto's scheduled production. In general, Monsanto does not manufacture its products against a backlog of firm orders; production is geared primarily to the level of incoming orders and to projections of future demand. Monsanto generally is not dependent upon one or a group of customers. The NutraSweet segment, however, makes a majority of its sales to a few companies for use in carbonated soft drinks. Monsanto has no material contracts with the government of the United States or any state, local or foreign government. However, pursuant to contracts executed under U.S. federal and state laws, Monsanto's Searle segment pays rebates to state governments for pharmaceuticals sold under state Medicaid programs and under state-funded programs for the indigent. The Searle segment also grants discounts to certain managed health care providers. Sales through managed health care providers constitute an increasing percentage of Searle's sales. Introduction of new products by The Agricultural Group, Searle and NutraSweet segments is typically subject to prior review and approval by the U.S. Food & Drug Administration, the U.S. Environmental Protection Agency and/or the U.S. Department of Agriculture (or comparable agencies of ex-U.S. governments) before they can be sold. Such reviews are often time-consuming and costly. These agencies also have continuing jurisdiction over many existing products of these segments. RAW MATERIALS AND ENERGY RESOURCES Monsanto is both a producer and significant purchaser of a wide spectrum of its basic and intermediate raw material requirements. Major requirements for key raw materials and fuels are typically purchased pursuant to long-term contracts. Monsanto is not dependent on any one supplier for a material amount of its raw materials or fuel requirements, but certain important raw materials are obtained from a few major suppliers. In general, where Monsanto has limited sources of raw materials, it has developed contingency plans to minimize the effect of any interruption or reduction in supply. Information with respect to specific raw materials is set forth in the table above under "Industry Segments; Principal Products." While temporary shortages of raw materials and fuels may occasionally occur, these items are sufficiently available to cover current and projected requirements. However, their continuing availability and price are subject to unscheduled plant interruptions occurring during periods of high demand, or due to domestic and world market and political conditions, as well as to the direct or indirect effect of U.S. and other countries' government regulations. The impact of any future raw material and energy shortages on Monsanto's business as a whole or in specific world areas cannot be accurately predicted. Operations and products may, at times, be adversely affected by legislation, shortages or international or domestic events. PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS Monsanto owns a large number of patents which relate to a wide variety of products and processes, has pending a substantial number of patent applications, and is licensed under a small number of patents of others. Also, Monsanto owns a considerable number of established trademarks in many countries under which it markets its products. Monsanto's patents and trademarks in the aggregate are of material importance in the operation of its business, particularly in The Agricultural Group and Searle segments and with respect to NutraSweet(R) brand sweetener. Certain proprietary products such as Roundup(R) 5 7 herbicide are covered by patents. Although patents protecting Roundup(R) herbicide have now expired in most countries, compound per se patent protection for the active ingredient in Roundup herbicide continues in the United States into the year 2000. All patents covering the use of aspartame as a sweetener have expired. NutraSweet(R) brand sweetener is currently manufactured under several patents owned by The NutraSweet Company and patented processes licensed from a third party for the duration of the applicable patents. Calan(R) SR, an antihypertensive pharmaceutical, is licensed through the year 2004 to Searle by a third party, which has retained co-marketing rights. The product no longer has patent protection nor non-patent regulatory exclusivity conferred by the Waxman-Hatch amendments to the U.S. Food, Drug and Cosmetics Act. Cytotec(R) ulcer preventive drug is protected by a U.S. compound patent to March 26, 1996 and a U.S. composition patent until July 29, 2000. Ambien(R) short-term treatment for insomnia is licensed to a joint venture, of which Searle is a general partner and holds a controlling interest, for the duration of the venture. This product is protected by a U.S. patent to October 21, 2006, and by non- patent regulatory exclusivity until December 16, 1997. Daypro(R) once- a-day arthritis treatment is licensed to Searle until January 5, 2003 in the U.S. and varying dates in other countries. This product is protected by a U.S. process patent that expires on February 26, 1999, and by non-patent regulatory exclusivity extending to October 29, 1997. The trademarks "Roundup," "Equal(R)," "Canderel(R)" and "NutraSweet" and the NutraSweet symbol are protected by registration in the United States and in other countries where the products are marketed. Roundup herbicide, Calan SR antihypertensive and NutraSweet brand sweetener are each substantial contributors to earnings. Monsanto holds (directly or by assignment) numerous phosphate leases, which were issued on behalf of or granted by the United States, political subdivisions of various states, or private parties. None of these leases taken individually is deemed by Monsanto to be material, although Monsanto's phosphate leases in the aggregate are significant to The Chemical Group segment of its business. Monsanto's phosphate leases have varying terms, with leases obtained from the United States being of indefinite duration subject to the modification of lease terms at twenty-year intervals. COMPETITION Monsanto encounters substantial competition in each of its industry segments. This competition, from other manufacturers of the same products and from manufacturers of different products designed for the same uses, is expected to continue in both U.S. and ex-U.S. markets. Depending on the product involved, various types of competition are encountered, including price, delivery, service, performance, product innovation, product recognition and quality. The number of Monsanto's principal competitors varies from product to product. It is not practical to discuss Monsanto's numerous competitors because of the large variety of Monsanto's products, the markets served and the worldwide business interests of Monsanto. Overall, however, Monsanto regards its principal product groups to be competitive with many other products of other producers and believes that it is an important producer of many of such product groups. RESEARCH AND DEVELOPMENT Research and development constitute an important part of Monsanto's activities. See "Operating Unit Segment Data" on page 33 of the 1994 Annual Report, incorporated herein by reference. ENVIRONMENTAL MATTERS Monsanto is subject to various laws and government regulations concerning environmental matters, employee safety and employee health in the United States and other countries. It is anticipated that increasingly stringent requirements will be imposed upon Monsanto, its competitors and industry in general. U.S. federal environmental legislation having particular impact on Monsanto includes the Toxic Substances Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Resource Conservation and Recovery Act; the Clean Air Act; the Clean Water Act; the Safe Drinking Water Act; 6 8 and the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA," commonly known as "Superfund"), as amended by the Superfund Amendments and Reauthorization Act ("SARA"). Monsanto is also subject to the Occupational Safety and Health Act and regulations of the Occupational Safety and Health Administration ("OSHA") concerning employee safety and health matters. The Environmental Protection Agency ("EPA"), OSHA and other federal agencies have the authority to promulgate regulations which have an impact on Monsanto's operations. In addition to these federal activities, various states have been delegated certain authority under the aforementioned federal statutes. Many state and local governments have adopted environmental and employee safety and health laws and regulations, some of which are similar to federal requirements. State and federal authorities may seek fines and penalties for violation of these laws and regulations. Monsanto is dedicated to a long-term environmental protection program that reduces emissions of hazardous materials into the environment, as well as to the remediation of identified existing environmental concerns. In 1988, management committed to a 90 percent reduction in toxic air emissions from worldwide operations by the end of 1992, including emissions reportable in the U.S. under Title III of SARA. Monsanto achieved its goal, based on 1992 year-end operating rates. The cost to accomplish this target did not materially affect operating results. In fact, some of the target capital projects lowered operating costs and improved operating efficiency. Expenditures in 1994 were approximately $47 million for environmental capital projects and approximately $202 million for management of environmental programs, including the operation and maintenance of facilities for environmental control. Monsanto estimates that during 1995 and 1996 approximately $35 million-$45 million per year will be spent on additional capital projects for environmental protection. Monsanto periodically receives notices from the EPA that it is a potentially responsible party ("PRP") under Superfund. The EPA has designated Monsanto as a PRP at 92 Superfund sites. Monsanto has resolved disputes, entered partial consent decrees, and executed administrative orders between Monsanto and the EPA in 47 of these cases, settling a portion or all of Monsanto's liability for these Superfund cases. Six other matters involve sites where allegations are predicated on tentative findings of reuse of drums by others that once contained products sold by Monsanto. These six matters have been inactive as to Monsanto for at least ten years. At one other site, Monsanto has determined that it has no liability whatsoever. Monsanto's policy is to accrue costs for remediation of waste disposal sites in the accounting period in which the responsibility is established and the cost is estimable. Monsanto's estimates of its liabilities for Superfund sites are based on evaluations of currently available facts with respect to each individual site and take into consideration factors such as existing technology, presently enacted laws and regulations, and prior experience in remediation of contaminated sites. Monsanto does not discount these liabilities, and they have not been reduced for any claims for recoveries from insurance or from third parties. However, Monsanto is engaged in litigation with some of its insurance carriers regarding both the applicability and the amount of its coverage responsive to claims for damages at these sites. Monsanto has an accrued liability of $72 million as of December 31, 1994, for Superfund sites. As assessments and remediation activities progress at individual sites, these liabilities are reviewed periodically and adjusted to reflect additional technical, engineering and legal information that becomes available. Major sites in this category include the noncompany-owned Brio, Fike/Artel, MOTCO and Woburn sites, which account for $54 million of the accrued amount. Monsanto's estimate of its Superfund liability is affected by several uncertainties such as, but not limited to, the method and extent of remediation, the percentage of material attributable to Monsanto at the sites relative to that attributable to other parties, and the financial capabilities of the other PRPs at most sites. Due to these uncertainties, primarily related to the method and extent of remediation, potential future expenses could be as much as $25 million for these sites. These potential future expenses may be incurred over the balance of the decade. There are various other lawsuits, claims and proceedings that state agencies and others have asserted against the Company seeking remediation of alleged environmental impairments. Monsanto is 7 9 in the process of determining its involvement, if any, at 41 of these sites. Monsanto has an accrued liability of $108 million as of December 31, 1994, for these matters and for environmental reserves at certain former Monsanto plant sites. The Company's estimate of its liability related to these sites is affected by several uncertainties such as, but not limited to, the extent of Monsanto's involvement, and the method and extent of remediation. Due to these uncertainties, potential future expenses could be as much as $75 million for these sites. Four sites in this category account for $58 million of the accrued amount and for approximately $55 million of the potential future expenses. Monsanto spent $52 million in 1994 for remediation of Superfund and other waste disposal sites. Most of these expenditures related to The Chemical Group, and similar or greater amounts can be expected in future years. For hazardous and other waste facilities at operating locations, Monsanto recognizes post-closure environmental costs and remediation costs over the estimated remaining useful life of the related facilities, not to exceed 20 years. Monsanto spent $13 million in 1994 for remediation of these facilities and has an accrued liability of $27 million as of December 31, 1994, for these sites. Uncertainties related to these costs are evolving government regulations, the method and extent of remediation, and future changes in technology. Monsanto's estimated closure costs for these facilities are approximately $135 million. While the ultimate costs and results of remediation of waste disposal sites cannot be predicted with certainty, Monsanto's liquidity, financial position and profitability are not expected to be materially affected. EMPLOYEE RELATIONS As of December 31, 1994, Monsanto had approximately 29,000 employees worldwide. Satisfactory relations have prevailed between Monsanto and its employees. INTERNATIONAL OPERATIONS Monsanto and affiliated companies are engaged in manufacturing, sales and/or research and development in the United States, Europe, Canada, Latin America, Australia, Asia and Africa. A large number of products are manufactured abroad. Ex-U.S. operations are subject to a number of potential risks and limitations, including: fluctuations in currency values; exchange control regulations; approvals of therapeutic claims and pricing for pharmaceutical and other products; employment regulations; import and trade restrictions, including embargoes; governmental instability, civil disorders, civil wars and other hostilities; and other potentially detrimental domestic and foreign governmental practices or policies affecting U.S. companies doing business abroad. See "Geographic Data" on page 40 of the 1994 Annual Report, incorporated herein by reference. LEGAL PROCEEDINGS Because of the size and nature of its business, Monsanto is a party to numerous legal proceedings. Most of these proceedings have arisen in the ordinary course of business and involve claims for money damages. While the results of litigation cannot be predicted with certainty, Monsanto does not believe these matters or their ultimate disposition will have a material adverse effect on Monsanto's financial position. The Company was named as a defendant in a lawsuit filed in United States District Court, Southern District of Texas, Houston Division on December 3, 1991 by IT Corporation (IT), a remediation contractor at the MOTCO site, an 11 acre waste site in La Marque, Texas. IT sought compensatory and punitive damages for alleged breach of contract, negligent misrepresentation and fraud relating to conditions at the site. On April 20, 1994, a jury returned a verdict in IT's favor on all claims, and awarded IT $52.8 million in compensatory damages, $28.6 million in punitive damages and $2.6 million in attorneys' fees. On December 13, 1994, the federal trial judge set aside the jury's findings of fraud and negligent misrepresentation but upheld the finding of breach of contract. The court set aside the 8 10 punitive damage award and reduced the amount of compensatory damages to $43.8 million. On January 26, 1995, the trial judge issued a memorandum confirming that prejudgment interest would be awarded to IT and specifying the manner in which the amount of such interest should be calculated. Based upon that memorandum, it is not likely that such interest will exceed approximately $21 million. No judgment has yet been entered. The Company believes based on the advice of counsel that it has meritorious defenses to IT's claims, including that the Company and the Trust did not breach the contract with IT; that IT bore the risk that the conditions at the site were different from the conditions set forth in the site remedial investigations; that IT had the opportunity to, and in fact did, investigate site conditions, and that IT represented that it was familiar with site conditions when it submitted its bid on the contract. The Company will appeal the judgment when it is entered and will continue to defend this matter vigorously. No provision for loss has been made in the Company's consolidated financial statements. On April 12, 1985, the Company was named as a defendant in the first of a number of lawsuits in which plaintiffs claim injuries resulting from alleged exposure to substances present at or emanating from the Brio Superfund site near Houston, Texas. The Company is one of a number of companies that had sold materials to the chemical reprocessor at that site. Currently pending against the Company are the following matters: (a) The Company is one of a number of defendants in 10 cases brought in Harris County District Court on behalf of 863 plaintiffs who owned homes or lived in the Southbend or Sageglen subdivisions, attended school in the Southbend subdivision, or used nearby recreational baseball fields. Plaintiffs claim to have suffered various personal injuries and fear future disease; the need for medical monitoring; and, in the case of the homeowners, property damage. In addition to their claims of personal injury, seven plaintiffs in one of these cases allege business losses. Plaintiffs seek compensatory and punitive damages in an unspecified amount. (b) The Company is one of a number of defendants in two additional actions brought in Harris County District Court by 408 plaintiffs, who are former employees of the owners/operators of the Brio site, and members of the employees' families or persons who worked near the Brio site. Plaintiffs claim physical and emotional injury and seek compensatory and punitive damages in an unspecified amount. The Company believes that it has meritorious defenses to all of these lawsuits including lack of proximate cause, lack of negligent or other improper conduct on the part of the Company, and negligence of plaintiffs (or their parents) and/or of builders and developers of the Southbend subdivision. The Company is vigorously defending these actions. In 1974, Searle introduced in the United States an intrauterine contraceptive product, commonly referred to as an intrauterine device ("IUD"), under the name Cu-7(R). Following extensive testing by Searle and review by the FDA, the Cu-7 was approved for sale as a prescription drug. Searle has been named a defendant in a number of product liability lawsuits alleging that the Cu-7 caused personal injury resulting from pelvic inflammatory disease, perforation, pregnancy or ectopic pregnancy. As of March 1, 1995, there were approximately 68 cases pending in various U.S. state and federal courts and approximately 346 cases filed outside the United States (the vast majority in Australia). The lawsuits seek damages in varying amounts, including compensatory and punitive damages, with most suits seeking at least $50,000 in damages. Searle believes it has meritorious defenses and is vigorously defending each of these lawsuits. On January 31, 1986, Searle voluntarily discontinued the sale of the Cu-7 in the United States, citing the cost of defending such litigation. On September 30, 1994, the U.S. Environmental Protection Agency ("EPA") issued an administrative Complaint and Proposed Compliance Order alleging violations by the Company of certain sections of the Resource Conservation and Recovery Act. The alleged violations relate to the disposal of certain wastes at the Company's facility in Addyston, Ohio. The EPA has proposed penalties in the amount of $555,900. The Company has denied the allegations and is vigorously defending itself in the proceedings. The Company registered, on June 27, 1991, for the Compliance Audit Program ("CAP") administered by the EPA under the authority of Section 8(e) of the Toxic Substances Control Act ("TSCA"). It has been reported that over 120 companies in the United States registered for the CAP. The CAP requires registrants to audit health and environmental effect information in order to determine whether information in the registrant's possession is reportable to the EPA under TSCA Section 8(e). A 9 11 registrant's liability, under the CAP, for late reporting of information under TSCA 8(e), will be assessed on the basis of a set amount per study submitted with the total liability not to exceed $1,000,000. The Company voluntarily entered into a similar Consent Agreement with the EPA before the CAP, and under that Agreement performed a more limited audit than is required by the CAP and paid a settlement of $648,000. This settlement amount has been credited to the Company under the CAP. It has now been determined that the Company's remaining liability under the CAP will be $352,000. RISK MANAGEMENT Monsanto continually evaluates risk retention and insurance levels for product liability, property damage and other potential areas of risk. Monsanto devotes significant effort to maintaining and improving safety and internal control programs, which reduce its exposure to certain risks. Based on the cost and availability of insurance and the likelihood of a loss, management determines the amount of insurance coverage to be purchased from unaffiliated companies and the appropriate amount of risk to retain. Since 1986, Monsanto's liability insurance has been on the "claims made" policy form. Management believes that the current levels of risk retention are consistent with those of other companies in the various industries in which Monsanto operates. There can be no assurance that Monsanto will not incur losses beyond the limits of, or outside the coverage of, its insurance. However, Monsanto's liquidity, financial position and profitability are not expected to be affected materially by the levels of risk retention that the Company accepts. ITEM 2. PROPERTIES. The General Offices of the Company are located on a 285-acre tract of land in St. Louis County, Missouri. The Company also owns a 210-acre tract in St. Louis County on which additional research facilities are located. Monsanto also has research laboratories and technical centers throughout the world. Information with respect to Monsanto's manufacturing locations worldwide and the industry segments which use such plants as of January 1, 1995, is set forth under "Business- Industry Segments; Principal Products" in Item 1 of this Report, which is incorporated herein by reference. Monsanto's principal plants are suitable and adequate for their use. Utilization of these facilities may vary with seasonal, economic and other business conditions, but none of the principal plants is substantially idle. The facilities generally have sufficient capacity for existing needs and expected near-term growth. Most of these plants are owned in fee. However, the land at the Antwerp, Belgium plant is leased. In addition, a portion of a plant at Augusta, Georgia is currently leased with an option to purchase, pursuant to an industrial revenue bond financing. The Company has granted leases, with options to purchase, on approximately 366 acres of the 3,000 acres at the Alvin, Texas plant site. In limited instances, Monsanto has granted leases on portions of other plant sites not required for current operations. ITEM 3. LEGAL PROCEEDINGS. For information concerning certain legal proceedings involving Monsanto, see "Business-Environmental Matters" and "Business-Legal Proceedings" contained in Item 1 of this Report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to the security holders during the fourth quarter of 1994. EXECUTIVE OFFICERS OF THE REGISTRANT. Information regarding executive officers is contained in Item 10 of Part III of this Report (General Instruction G) and is incorporated herein by reference. 10 12 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The narrative or tabular information regarding the market for the Company's common equity and related stockholder matters appearing under "Review of Cash Flow" on pages 45 through 47 and "Quarterly Data" on page 57 of the 1994 Annual Report is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. The tabular information under "Financial Summary-Operating Results, Earnings per Share and Year-End Financial Position" and the amounts of Dividends per Share, all appearing on page 58 of the 1994 Annual Report, are incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. The tabular and narrative information appearing under "Review of Consolidated Results of Operations" on pages 29 through 32, "Operating Unit Segment Data" on pages 33 through 39, "Review of Changes in Financial Position" on page 42, and "Review of Cash Flow" on pages 45 through 47 of the 1994 Annual Report is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of Monsanto appearing on pages 28, 41, 43, 44 and 47 through 56; the Independent Auditors' Opinion appearing on page 27; and the tabular and narrative information appearing under "Quarterly Data" on page 57 of the 1994 Annual Report are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 11 13 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information regarding directors and executive officers appearing under "Election of Directors" on pages 2 through 4 of the Monsanto Company Notice of Annual Meeting and Proxy Statement (the "1995 Proxy Statement") dated March 16, 1995, is incorporated herein by reference. The following information with respect to the Executive Officers of the Company on March 1, 1995, is included pursuant to Instruction 3 of Item 401(b) of Regulation S-K:
Year First Became an Executive Name - Age Present Position with Registrant Officer Other Business Experience since January 1, 1990 - -------------------------- ---------------------------------- ---------- --------------------------------------------------- Richard U. De Schutter, 54 President and Chief Operating 1995 Chairman, International Operations, G. D. Searle Officer, G. D. Searle & Co. (a & Co., 1989; President, G. D. Searle & subsidiary of the Company) Co., 1991; and present position, 1993. Richard W. Duesenberg, 64 Senior Vice President, 1977 Present position, 1982. Secretary and General Counsel- Monsanto Company Steven L. Engelberg, 52 Vice President, Worldwide 1995 Partner, Keck, Mahin & Cate, 1986; Partner-in-Charge, Government Affairs-Monsanto Keck, Mahin & Cate Washington, D.C. office, 1986; Company Chief of Staff of Office of the United States Trade Representative (on leave from Keck, Mahin & Cate until May 1993), 1993; and present position, 1994. Robert E. Flynn, 61 Chairman and Chief Executive 1987 Chairman, Chief Executive Officer and President, Officer, The NutraSweet Company Fisher Controls International, Inc. (a former (a subsidiary of the Company); subsidiary of the Company), 1988; Chairman and Chief Advisory Director-Monsanto Executive Officer, The NutraSweet Company, 1990; and Company present position, 1993. Sheldon G. Gilgore, 63 Chairman and Chief Executive 1987 Chairman, President and Chief Executive Officer, G. D. Officer, Searle & Co., 1986; Chairman and Chief Executive G. D. Searle & Co. (a Officer, G. D. Searle & Co., 1991; and present subsidiary of the Company); position, 1993. Advisory Director-Monsanto Company Pierre Hochuli, 47 Vice President-Monsanto 1995 Regional Director, Europe/Africa/Middle East-Monsanto Company; President-Growth Europe, S.A., 1985; Vice President, Finance and Enterprises Planning-The Agricultural Group, 1991; Vice President and General Manager, New Products Division-The Agricultural Group, 1992; Group Vice President and General Manager, New Products Division-The Agricultural Group, 1993; Vice President, Corporate Planning-Monsanto Company, 1993; and present position, 1995. Robert B. Hoffman, 58 Senior Vice President and Chief 1994 International business consultant, 1988; Vice Financial Officer; Advisory President, FMC Corporation, 1990; and present Director-Monsanto Company position, 1994. Richard J. Mahoney, 61 Director; Chairman and Chief 1975 Present position, 1986. Executive Officer-Monsanto Company 12 14 Year First Became an Executive Name - Age Present Position with Registrant Officer Other Business Experience since January 1, 1990 - -------------------------- ---------------------------------- ---------- --------------------------------------------------- Teresa E. McCaslin, 45 Vice President, Human 1994 Vice President, Human Resources, Avery Dennison Resources-Monsanto Company Corporation, 1989; and present position, 1994. Philip Needleman, 56 Senior Vice President, Research 1991 Vice President, Research and Development-Monsanto and Development; Advisory Company, 1989; Vice President, Research and Director-Monsanto Company; Development; Advisory Director-Monsanto Company, 1991; President, Research and Vice President, Research and Development; Advisory Development, G. D. Searle & Co. Director-Monsanto Company; President, Research and Development, G.D. Searle & Co., 1992; and present position, 1993. Robert G. Potter, 55 Executive Vice President and 1981 Group Vice President and Advisory Director- Advisory Director-Monsanto Monsanto Company and President-Monsanto Chemical Company Company, 1986; Executive Vice President and Advisory Director-Monsanto Company; President-The Chemical Group, 1990; and present position, 1995. Nicholas L. Reding, 60 Director; Vice Chairman- 1976 Executive Vice President and Advisory Director- Monsanto Company Monsanto Company and President-Monsanto Agricultural Company, 1986; Executive Vice President, Environment, Safety, Health and Manufacturing and Advisory Director-Monsanto Company, 1990; and present position, 1993. Robert W. Reynolds, 51 Vice President, International 1994 Vice President, North America-Monsanto Agricultural Operations and Develop- Company, 1986; Vice President and General Manager, ment-Monsanto Company Crop Protection Products Division-Monsanto Agricultural Company, 1990; Vice President and Managing Director, Latin America World Area-Monsanto Company, 1992; and present position, 1994. Robert B. Shapiro, 56 Director; President and Chief 1987 Chairman and Chief Executive Officer, The NutraSweet Operating Officer-Monsanto Company, 1986; Executive Vice President and Advisory Company Director-Monsanto Company and President-The Agricultural Group, 1990; and present position, 1993. Hendrik A. Verfaillie, 49 Vice President and Advisory 1993 Vice President, Commercial Development-Monsanto Director-Monsanto Company Agricultural Company, 1986; Vice President and General Manager, Roundup Division-The Agricultural Group, 1990; Vice President and Advisory Director-Monsanto Company; President-The Agricultural Group, 1993; and present position, 1995. Virginia V. Weldon, 59 Senior Vice President, Public 1990 Vice President, Public Policy-Monsanto Company, 1989; Policy; Advisory Director- Vice President, Public Policy; Advisory Director- Monsanto Company Monsanto Company, 1990; and present position, 1993.
Mr. Mahoney will retire on March 31, 1995 and Mr. Shapiro will become Chairman, President and Chief Executive Officer of Monsanto Company, effective April 1, 1995. Dr. Gilgore will retire on April 26, 1995 and Mr. De Schutter will become Chairman and Chief Executive Officer of G. D. Searle & Co. Otherwise, the above-listed individuals are elected to the offices set opposite their names to hold office until their successors are duly elected and have qualified, or until their earlier death, resignation or removal. 13 15 ITEM 11. EXECUTIVE COMPENSATION. Information appearing under "Directors' Fees and Other Arrangements" on pages 8 and 9 and under "Executive Compensation" on pages 13 through "Certain Agreements" on page 18 of the 1995 Proxy Statement is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information appearing under "Stock Ownership of Management and Certain Beneficial Owners" on pages 5 and 6 of the 1995 Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) Documents filed as part of this Report: 1. The financial statements set forth at pages 28, 41, 43, 44 and 47 through 58 of the 1994 Annual Report (See Exhibit 13 under Paragraph (a)3 of this Item 14) 2. Financial Statement Schedules The following supplemental schedule for the years ended December 31, 1994, 1993 and 1992: V--Valuation and Qualifying Accounts All other supplemental schedules are omitted because of the absence of the conditions under which they are required. 3. Exhibits--See the Exhibit Index beginning at page 19 of this Report. For a listing of all management contracts and compensatory plans or arrangements required to be filed as exhibits to this Form 10-K, see the Exhibits listed under Exhibit Nos. 10.1 through 10.32 on pages 19 through 22 of the Exhibit Index, all of which were previously filed. The following Exhibits listed in the Exhibit Index are filed with this Report: 13 The Company's 1994 Annual Report to shareowners 21 Subsidiaries of the registrant (See page 23) 23 1. Consent of Independent Auditors (See page 24) 2. Consent of Company Counsel (See page 24) 24 1. Powers of attorney submitted by Joan T. Bok, Robert M. Heyssel, Robert B. Hoffman, Gwendolyn S. King, Philip Leder, Howard M. Love, Richard J. Mahoney, Frank A. Metz, Jr., Buck Mickel, Jacobus F.M. Peters, Nicholas L. Reding, John S. Reed, William D. Ruckels- haus, Bruce R. Sents, Robert B. Shapiro and John B. Slaughter. 2. Certified copy of Board resolution authorizing Form 10-K filing utilizing powers of attorney 27 Financial Data Schedule (part of electronic submission only) 99 Computation of the Ratio of Earnings to Fixed Charges for Monsanto Company and Subsidiaries (See page 25) (b) Reports on Form 8-K during the quarter ended December 31, 1994: No reports on Form 8-K were filed by the Company during the quarter ended December 31, 1994. 14 16 OPINION OF INDEPENDENT AUDITORS Monsanto Company: We have audited the statement of consolidated financial position of Monsanto Company and Subsidiaries as of December 31, 1994 and 1993 and the related statements of consolidated income, shareowners' equity and cash flow for each of the three years in the period ended December 31, 1994 and have issued our opinion thereon dated February 24, 1995; such financial statements and opinion are included in your 1994 Annual Report to shareowners and are incorporated herein by reference. Our audits also comprehended the schedule of Monsanto Company and Subsidiaries, listed in Item 14(a)2. This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information shown therein. DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Saint Louis, Missouri February 24, 1995 15 17 SCHEDULE V MONSANTO COMPANY AND SUBSIDIARIES --------------------------------- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (Dollars in millions)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E -------- -------- ------------- -------- -------- Additions Balance at Charged to Balance at Beginning Costs and End of Description of Year Expenses Deductions Year ----------- ---------- ---------- ---------- ---------- Year Ended December 31, 1994: Reserves deducted from related assets in the Statement of Consolidated Financial Position: Doubtfulreceivables and returns and allowances.................. $ 51 $ 25 $ 19 $ 57 ------ ---- ------ ---- Inventory and obsolescence losses................................ $ 45 $ 12 $ 23 $ 34 ------ ---- ------ ---- Amortization of intangible assets................................ $ 450 $ 81 $ 9 $522 ------ ---- ------ ---- Deferred tax asset valuation allowances.......................... $ 89 $ (9) $ (5) $ 85 ------ ---- ------- ---- Year Ended December 31, 1993: Reserves deducted from related assets in the Statement of Consolidated Financial Position: Doubtful receivables and returns and allowances.................. $ 33 $ 36 $ 18 $ 51 ------ ---- ------ ------ Inventory and obsolescence losses................................ $ 23 $ 31 $ 9 $ 45 ------ ---- ------ ------ Amortization of intangible assets................................ $ 383 $ 81 $ 14 $ 450 ------ ---- ------ ------ Deferred tax asset valuation allowances.......................... $ 62 $ 34 $ 7 $ 89 ------ ---- ------ ------ Year Ended December 31, 1992: Reserves deducted from related assets in the Statement of Consolidated Financial Position: Doubtful receivables and returns and allowances.................. $ 36 $ 15 $ 18 $ 33 ------ ---- ------ ------ Inventory and obsolescence losses................................ $ 31 $ 11 $ 19 $ 23 ------ ---- ------ ------ Amortization of intangible assets................................ $1,422 $238 $1,277 $ 383 ------ ---- ------ ------ Deferred tax asset valuation allowances.......................... $ 32 $ 33 $ 3 $ 62 ------ ---- ------ ------ NOTES: Principally allowances granted. Includes $1,270 million related to NutraSweet's fully amortized aspartame-use patent.
16 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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) By BRUCE R. SENTS ............................................. Bruce R. Sents Vice President and Controller (Principal Accounting Officer) Date: March 17, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- RICHARD W. DUESENBERG Chairman and Director March 17, 1995 ................................................................ (Principal Executive Officer) (Richard J. Mahoney) RICHARD W. DUESENBERG President and Director March 17, 1995 ................................................................ (Robert B. Shapiro) RICHARD W. DUESENBERG Vice Chairman and Director March 17, 1995 ................................................................ (Nicholas L. Reding) RICHARD W. DUESENBERG Senior Vice President March 17, 1995 ................................................................ (Principal Financial Officer) (Robert B. Hoffman) BRUCE R. SENTS Vice President and Controller March 17, 1995 ................................................................ (Principal Accounting Officer) (Bruce R. Sents) RICHARD W. DUESENBERG Director March 17, 1995 ................................................................ (Joan T. Bok) RICHARD W. DUESENBERG Director March 17, 1995 ................................................................ (Robert M. Heyssel) RICHARD W. DUESENBERG Director March 17, 1995 ................................................................ (Gwendolyn S. King) RICHARD W. DUESENBERG Director March 17, 1995 ................................................................ (Philip Leder) RICHARD W. DUESENBERG Director March 17, 1995 ................................................................ (Howard M. Love) 17 19 SIGNATURE TITLE DATE --------- ----- ---- RICHARD W. DUESENBERG Director March 17, 1995 ................................................................ (Frank A. Metz, Jr.) RICHARD W. DUESENBERG Director March 17, 1995 ................................................................ (Buck Mickel) RICHARD W. DUESENBERG Director March 17, 1995 ................................................................ (Jacobus F.M. Peters) RICHARD W. DUESENBERG Director March 17, 1995 ................................................................ (John S. Reed) RICHARD W. DUESENBERG Director March 17, 1995 ................................................................ (William D. Ruckelshaus) RICHARD W. DUESENBERG Director March 17, 1995 ................................................................ (John B. Slaughter) Richard W. Duesenberg, by signing his name hereto, does sign this document on behalf of the above noted individuals, pursuant to powers of attorney duly executed by such individuals which have been filed as an Exhibit to this Report. RICHARD W. DUESENBERG ........................................ Richard W. Duesenberg Attorney-in-Fact
18 20 EXHIBIT INDEX These Exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K.
Exhibit No. Description - ----------- ----------- 2 1. Agreement of Purchase and Sale dated as of December 20, 1994, by and between Merck & Co., Inc. ("Merck") and The NutraSweet Company relating to the purchase and sale of Merck's Kelco Business, plus identification of contents of omitted schedules and exhibits and agreement to furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request (incorporated herein by reference to Exhibit 2.1 of the Company's Form 8-K dated as of February 17, 1995 and filed on February 28, 1995) 2. Amendment, dated as of February 15, 1995, to the Agreement of Purchase and Sale dated as of December 20, 1994 between Merck & Co., Inc., a New Jersey corporation, and The NutraSweet Company, a Delaware corporation, plus identification of contents of omitted schedules and exhibits and agreement to furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request (incorporated herein by reference to Exhibit 2.2 of the Company's Form 8-K dated as of February 17, 1995 and filed on February 28, 1995). 3 1. Restated Certificate of Incorporation of the Company effective as of April 27, 1987 (incorporated herein by reference to Exhibit 19(ii)2 of the Company's Form 10-Q for the quarter ended June 30, 1987) 2. By-Laws of the Company, as amended effective September 1, 1993 (incorporated herein by reference to Exhibit 99.1 of the Company's Form 10-Q for the quarter ended September 30, 1993) 4 1. Form of Rights Agreement, dated as of January 26, 1990 between the Company and The First National Bank of Boston (incorporated herein by reference to Form 8-A filed on January 31, 1990) 2. Registrant agrees to furnish to the Securities and Exchange Commission upon request copies of instruments defining the rights of holders of certain long-term debt not being registered of the registrant and all subsidiaries for which consolidated or unconsolidated financial statements are required to be filed. 9 Omitted - Inapplicable 10 1. Non-Employee Directors Stock Plan, as amended in 1991 (incorporated herein by reference to Exhibit 19(ii)1 of the Company's Form 10-Q for the quarter ended June 30, 1991) 2. Non-Employee Directors Retirement Plan, as amended in 1991 (incorporated herein by reference to Exhibit 19(ii) of the Company's Form 10-Q for the quarter ended September 30, 1991) 3. Charitable Contribution Program effective April 1, 1992 (incorporated herein by reference to Exhibit 19(i)1 of the Company's Form 10-K for the year ended December 31, 1991) 4. Deferred Compensation Plan for Non-Employee Directors, as amended in 1983 and 1991 (incorporated herein by reference to Exhibit 19(ii)1 of the Company's Form 10-K for the year ended December 31, 1991) 19 21 EXHIBIT INDEX (CONT'D) Exhibit No. Description - ----------- ----------- 5. Consulting Agreement between the Company and Philip Leder dated January 17, 1990 (incorporated herein by reference to Exhibit 19(i)3 of the Company's Form 10-K for the year ended December 31, 1989) 6. Financial Planning Services Program for Monsanto Management Council Members, as amended in 1993 (incorporated herein by reference to Exhibit 10.1 of the Company's Form 10-Q for the quarter ended March 31, 1993) 7. Monsanto Management Incentive Plan of 1984, as amended in 1987, 1988 and 1989 (incorporated herein by reference to Exhibit 19(ii)2 of the Company's Form 10-K for the year ended December 31, 1989) 8. Monsanto Management Incentive Plan of 1988/I, as amended in 1988, 1989, 1991 and 1992 (incorporated herein by reference to Exhibit 99.1 of the Company's Form 10-K for the year ended December 31, 1992) 9. Monsanto Management Incentive Plan of 1988/II, as amended in 1989, 1991 and 1992 (incorporated herein by reference to Exhibit 99.2 of the Company's Form 10-K for the year ended December 31, 1992) 10. Monsanto Management Incentive Plan of 1994 (incorporated herein by reference to Appendix A of the Monsanto Company Notice of Annual Meeting and Proxy Statement dated March 14, 1994) 11. Annual Incentive Program for Executive Officers (incorporated herein by reference to the description on pages 22-23 of the Monsanto Company Notice of Annual Meeting and Proxy Statement dated March 14, 1994) 12. Long-Term Incentive Program for Executive Officers (incorporated herein by reference to the description on page 23 of the Monsanto Company Notice of Annual Meeting and Proxy Statement dated March 14, 1994) 13. Split-dollar Life Insurance Plan (incorporated herein by reference to Exhibit 10(iii)19 of the Company's Form 10-K for the year ended December 31, 1987) 14. Executive Health Program (incorporated herein by reference to Exhibit 19(i) of the Company's Form 10-Q for the quarter ended March 31, 1989) 15. Agreements between the Company and Richard J. Mahoney and Nicholas L. Reding entered into as of May 16, 1988 (incorporated herein by reference to Exhibit 19(i)18 of the Company's Form 10-Q for the quarter ended June 30, 1988) 16. Letter from the Company to Dr. Sheldon G. Gilgore dated February 12, 1986 (incorporated herein by reference to Exhibit 10(iii)14 of the Company's Form 10-K for the year ended December 31, 1986) 17. Letter Agreement between G. D. Searle & Co. and Dr. Sheldon G. Gilgore, dated March 7, 1991, amending the Letter from the Company dated February 12, 1986 (incorporated herein by reference to Exhibit 19(ii)1 of the Company's Form 10-Q for the quarter ended March 31, 1991) 20 22 EXHIBIT INDEX (CONT'D) Exhibit No. Description - ----------- ----------- 18. Agreement between the Company and Robert G. Potter entered into as of May 16, 1988 (incorporated herein by reference to Exhibit 19(i)5 of the Company's Form 10-K for the year ended December 31, 1989) 19. Agreement between the Company and Robert B. Shapiro entered into as of July 23, 1990 (incorporated herein by reference to Exhibit 19(i)1 of the Company's Form 10-Q for the quarter ended September 30, 1990) 20. Letter Agreement between the Company and Robert B. Shapiro entered into as of July 23, 1990 (incorporated herein by reference to Exhibit 19(i)2 of the Company's Form 10-Q for the quarter ended September 30, 1990) 21. Letter Agreement between the Company and Robert B. Shapiro entered into as of July 23, 1990 (incorporated herein by reference to Exhibit 19(i)3 of the Company's Form 10-Q for the quarter ended September 30, 1990) 22. Searle Phantom Stock Option Plan of 1986, as amended in 1990, 1991 and 1992 (incorporated herein by reference to Exhibit 99.3 of the Company's Form 10-K for the year ended December 31, 1992) 23. Searle Monsanto Stock Option Plan of 1986, as amended in 1988, 1989, 1990 and 1991 (incorporated herein by reference to Exhibit 19(ii)4 of the Company's Form 10-Q for the quarter ended June 30, 1991) 24. Searle/Monsanto Stock Plan of 1994 (incorporated herein by reference to and filed with the Monsanto Company Notice of Annual Meeting and Proxy Statement dated March 14, 1994) 25. G. D. Searle & Co. Executive Travel Accident Insurance Plan, as amended in 1989 (incorporated herein by reference to Exhibit 19(ii)4 of the Company's Form 10-Q for the quarter ended June 30, 1989) 26. G. D. Searle & Co. Executive Supplemental Long Term Disability Plan (incorporated herein by reference to Exhibit 19(i)7 of the Company's Form 10-Q for the quarter ended June 30, 1988) 27. G. D. Searle & Co. Split Dollar Life Insurance Plan, as amended in 1989 (incorporated herein by reference to Exhibit 19(ii)3 of the Company's Form 10-Q for the quarter ended June 30, 1989) 28. G. D. Searle & Co. Legal/Tax/Financial Counseling Plan (incorporated herein by reference to Exhibit 19(i)8 of the Company's Form 10-Q for the quarter ended June 30, 1988) 29. G. D. Searle & Co. Executive Relocation Plan (incorporated herein by reference to Exhibit 10.7 of the Company's Form 10-Q for the quarter ended June 30, 1994) 30. G. D. Searle & Co. Supplemental Medical Reimbursement Plan (incorporated herein by reference to Exhibit 19(i)10 of the Company's Form 10-Q for the quarter ended June 30, 1988) 21 23 EXHIBIT INDEX (CONT'D) Exhibit No. Description - ----------- ----------- 31. G. D. Searle & Co. Deferred Compensation Plan, as amended in 1994 (incorporated herein by reference to Exhibit 10.6 of the Company's Form 10-Q for the quarter ended June 30, 1994) 32. G. D. Searle & Co. Executive Physical Examinations Program, as amended in 1992 (incorporated herein by reference to Exhibit 99.1 of the Company's Form 10-Q for the quarter ended June 30, 1992) 11 Omitted - Inapplicable; see "Earnings per Share" on page 55 of the 1994 Annual Report 12 Statement re Computation of the Ratio of Earnings to Fixed Charges - See Exhibit 99 below 13 The Company's 1994 Annual Report to shareowners. (The electronic submission includes only the financial report section of the Annual Report, consisting of pages 26 through 58 of that Report.) Only those portions expressly incorporated by reference into this Form 10-K are deemed "filed"; other portions are furnished only for the information of the Commission. 18 Omitted - Inapplicable 21 Subsidiaries of the registrant (See page 23) 22 Omitted - Inapplicable 23 1. Consent of Independent Auditors (See page 24) 2. Consent of Company Counsel (See page 24) 24 1. Powers of attorney submitted by Joan T. Bok, Robert M. Heyssel, Robert B. Hoffman, Gwendolyn S. King, Philip Leder, Howard M. Love, Richard J. Mahoney, Frank A. Metz, Jr., Buck Mickel, Jacobus F.M. Peters, Nicholas L. Reding, John S. Reed, William D. Ruckelshaus, Bruce R. Sents, Robert B. Shapiro and John B. Slaughter. 2. Certified copy of Board resolution authorizing Form 10-K filing utilizing powers of attorney 27 Financial Data Schedule (part of electronic submission only) 28 Omitted - Inapplicable 99 Computation of the Ratio of Earnings to Fixed Charges for Monsanto Company and Subsidiaries (See page 25) - ----- Only Exhibits Nos. 13, 21, 23.1, 23.2 and 99 have been included in the printed copy of this Report.
22 24 APPENDIX Throughout the printed Form 10-K, trademarks are initially designated on each page by the superscript letter "R" in a circle or by the superscript letters "TM." EX-13 2 ANNUAL REPORT TO SECURITY HOLDERS 1 EXHIBIT 13
FINANCIAL TABLE OF CONTENTS MANAGEMENT REPORT, AUDIT COMITTEE REPORT, INDEPENDENT AUDITORS' OPINION 26 STATEMENT OF CONSOLIDATED INCOME 28 STATEMENT OF CONSOLIDATED FINANCIAL POSITION 41 STATEMENT OF CONSOLIDATED SHAREOWNERS' EQUITY 43 STATEMENT OF CONSOLIDATED CASH FLOW 44 NOTES TO FINANCIAL STATEMENTS 47 FINANCIAL SUMMARY 58
Unless otherwise indicated by the context, "Monsanto" means Monsanto Company and consolidated subsidiaries, and "the company" means Monsanto Company only. All dollars are in millions, except per share data. MANAGEMENT REPORT Monsanto Company's management is responsible for the fair presentation and consistency, in accordance with generally accepted accounting principles, of all the financial information included in this annual report. Where necessary, the information reflects management's best estimates and judgments. Management is also responsible for maintaining a system of internal accounting controls with the objectives of providing reasonable assurance that Monsanto's assets are safeguarded against material loss from unauthorized use or disposition and that authorized transactions are properly recorded to permit the preparation of accurate financial information. Cost/benefit judgments are an important consideration in this regard. The effectiveness of internal controls is maintained by personnel selection and training, division of responsibilities, establishment and communication of policies, and ongoing internal review programs and audits. Management believes that Monsanto's system of internal accounting controls as of Dec. 31, 1994, is effective and adequate to accomplish the objectives described above. /s/Richard J. Mahoney Richard J. Mahoney Chairman and Chief Executive Officer /s/Robert B. Hoffman Robert B. Hoffman Senior Vice President and Chief Financial Officer Feb. 24, 1995 26 2 AUDIT COMMITTEE REPORT The audit committee, composed of six nonemployee members of the board of directors, met four times during 1994. The committee reviews and monitors Monsanto's internal accounting controls, financial reports, accounting practices, and the scope and effectiveness of the audits performed by the independent auditors and internal auditors. The committee also recommends to the full board of directors the appointment of Monsanto's principal independent auditors, and it approves in advance all significant audit and nonaudit services provided by such auditors. As ratified by shareowner vote at the 1994 annual meeting, Deloitte & Touche LLP (Deloitte & Touche) were appointed independent auditors to examine, and to express an opinion as to the fair presentation of, the consolidated financial statements. This opinion follows. The audit committee discusses audit and financial reporting matters with representatives of the company's financial manage- ment, its internal auditors and Deloitte & Touche. The internal auditors and Deloitte & Touche meet with the committee, with and without management representatives present, to discuss the results of their examinations, the adequacy of Monsanto's internal accounting controls, and the quality of its financial reporting. The committee encourages the internal auditors and Deloitte & Touche to communicate directly with the committee. The audit committee has reviewed the financial section of this annual report. Pursuant to the recommendation of the committee, the board of directors has approved the financial section. /s/Buck Mickel Buck Mickel Chair, Audit Committee Feb. 24, 1995 INDEPENDENT AUDITORS' OPINION To the shareowners of Monsanto Company: We have audited the accompanying statement of consolidated finan- cial position of Monsanto Company and Subsidiaries as of Dec. 31, 1994 and 1993, and the related statements of consoli- dated income, shareowners' equity and cash flow for each of the three years in the period ended Dec. 31, 1994. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly in all material respects the financial position of Monsanto Company and Subsidiaries as of Dec. 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended Dec. 31, 1994, in conformity with generally accepted accounting principles. As discussed in the Notes to Financial Statements, in 1992 Monsanto changed its methods of accounting for postretirement benefits other than pensions and for income taxes. /s/Deloitte & Touche LLP Deloitte & Touche LLP St. Louis, Missouri Feb. 24, 1995 27 3 STATEMENT OF CONSOLIDATED INCOME
(Dollars in millions, except per share) 1994 1993 1992 - ------------------------------------------------------------------------------- NET SALES $8,272 $7,902 $7,763 Cost of goods sold 4,774 4,564 4,710 - ------------------------------------------------------------------------------- GROSS PROFIT 3,498 3,338 3,053 Marketing expenses 1,191 1,199 1,115 Administrative expenses 589 548 487 Technological expenses 674 695 720 Amortization of intangible assets 81 81 237 Restructuring expenses -- net 40 5 436 - ------------------------------------------------------------------------------- OPERATING INCOME 923 810 58 Interest expense (131) (129) (169) Interest income 81 40 43 Other income (expense) -- net 22 8 (106) - ------------------------------------------------------------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 895 729 (174) Income taxes 273 235 (48) - ------------------------------------------------------------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS 622 494 (126) - ------------------------------------------------------------------------------- DISCONTINUED OPERATIONS: Income from Fisher Controls 24 Gain on sale of Fisher Controls 554 - ------------------------------------------------------------------------------- INCOME FROM DISCONTINUED OPERATIONS 578 - ------------------------------------------------------------------------------- INCOME BEFORE ACCOUNTING CHANGES 622 494 452 CUMULATIVE EFFECT OF ACCOUNTING CHANGES: Postretirement Benefits Other Than Pensions (658) Income Taxes 118 - ------------------------------------------------------------------------------- NET INCOME (LOSS) $ 622 $ 494 $ (88) - ------------------------------------------------------------------------------- EARNINGS PER SHARE: Income (Loss) from Continuing Operations $ 5.32 $ 4.10 $(1.01) Discontinued Operations 4.68 Accounting Changes (4.38) - ------------------------------------------------------------------------------- NET INCOME (LOSS) $ 5.32 $ 4.10 $(0.71) - ------------------------------------------------------------------------------- The above statement should be read in conjunction with pages 47 through 57 of this report.
KEY FINANCIAL STATISTICS 1994 1993 1992 - ------------------------------------------------------------------------------ AS A PERCENT OF NET SALES: Gross Profit 42% 42% 39% Marketing, Administrative and Technological Expenses 30 31 30 Research and Development Expenses 7 8 8 Operating Income 11 10 1 Income (Loss) from Continuing Operations 8 6 (2) Net Income (Loss) 8 6 (1) EFFECTIVE INCOME TAX RATE 31 32 (28) RETURN ON SHAREOWNERS' EQUITY 21.4 16.9 (2.6) - ------------------------------------------------------------------------------
28 4 REVIEW OF CONSOLIDATED RESULTS OF OPERATIONS MONSANTO REPORTS RECORD EARNINGS PER SHARE Monsanto Company's earnings per share in 1994 were a record $5.32, and net income was the second-best in Monsanto's history. Net income for 1994 was $622 million, compared with income of $494 million, or $4.10 per share, in 1993. Return on shareowners' equity (ROE) for 1994 was 21.4 percent. The Agricultural Group continued its impressive growth, fueled by record sales volumes for Roundup(R) herbicide and significant income contributions from sales of new products. Higher sales volumes for key products, excellent manufacturing performance, and continued cost reduction efforts led to a substantial increase in The Chemical Group's earnings, excluding the year-to-year effect of restructurings. Searle's performance improved dramatically as sales from new products increased significantly, infrastructure costs were lower, and costs from new product introductions declined. The NutraSweet Company performed well, as significant cost reductions largely offset lower average selling prices. EVENTS AFFECTING COMPARABILITY In December 1994, Monsanto's board of directors approved a plan to eliminate redundant staff activities across the company and to consolidate certain staff and administrative business functions. The plan will result in worldwide employment reductions of approximately 500 people. In addition, the company will close or exit certain facilities and programs. These work force reductions and closures will be substantially completed by the end of 1995. The pretax expense related to these actions was $89 million ($55 million aftertax, or $0.47 per share). The effect of these actions is anticipated to generate future pretax cash savings and benefit future operating income by approximately $100 million annually. Separately, in the fourth quarter of 1994, the board approved the reversal of $49 million ($33 million aftertax, or $0.28 per share) of excess restructuring reserves from prior years. The excess was primarily due to higher than expected proceeds and lower exit costs from the sale and shutdown of nonstrategic businesses and facilities included in the 1993 and 1992 restructuring actions. In September 1994, Monsanto and the U.S. Internal Revenue Service settled certain tax matters related to the 1985 acquisition of Searle, and Monsanto recognized an aftertax gain of $21 million, or $0.18 per share, for interest on the settlement. In December 1993, the board of directors approved a small reserve to cover the sale of or exit from certain nonstrategic products, the withdrawal from the pyridine research program in The Agricultural Group, and the consolidation of some manufacturing capacity. The net aftertax expense for these actions was $7 million, or $0.06 per share, and principally affected The Agricultural and Chemical Groups. In March 1993, Monsanto received reimbursement from insurance companies for various costs associated with damage to a manufacturing site of a raw material for Roundup. The settlement resulted in a $22 million aftertax gain, or $0.18 per share. These costs had been expensed in 1992, pending resolution of the claim. Without the unusual events in 1994 and 1993, net income for 1994 would have been $623 million, compared with $479 million for the prior year, an increase of 30 percent. Earnings per share in 1994 would have been $5.33, a 34 percent increase from 1993 earnings per share. NET SALES ARE HIGHER Net sales in 1994 were 5 percent higher than those in 1993, led by increases in net sales for The Agricultural Group and Searle. Net sales for The Chemical Group increased slightly as a result of higher sales volumes. Net sales for The NutraSweet Company declined, in line with expectations. The Agricultural Group reached record net sales in 1994, up 13 percent from those in 1993, due primarily to a significant increase in worldwide sales volumes for Roundup herbicide. Continued worldwide adoption of conservation tillage techniques by farmers, pricing and new end-use strategies contributed to this sales volume increase. Sales of new products, such as Posilac(R) bovine somatotropin (BST) and Harness(R) herbicide, and the inclusion of a full year's net sales of lawn-and-garden products from the Ortho acquisition also were significant contributors to the sales increase. Searle's net sales growth was led by significant growth in sales of recently introduced new products in the United States, principally Daypro(R), a once-daily arthritis treatment, and Ambien(R), a short-term treatment for insomnia. Sales of these and other new products more than offset the effect of generic 29 5 competition on sales of the Calan(R) family of calcium channel blockers. The Chemical Group's net sales for 1994 were slightly higher than those in 1993. However, after adjusting for 1993 net sales from divested businesses, net sales for 1994 would have increased 6 percent, as sales volumes increased for all key products worldwide. The NutraSweet Company's net sales declined, because of lower average selling prices for aspartame. Sales volumes for NutraSweet(R) brand sweetener, the company's trademark aspartame product, declined 4 percent from volumes last year. However, sales of tabletop sweeteners, such as Equal(R) and NutraSweet(R) Spoonful(TM), increased slightly. Monsanto's net sales in markets outside the United States represented 40 percent of 1994 net sales, about the same percentage as last year. MONSANTO ACHIEVES HIGHER OPERATING RESULTS Operating income in 1994 of $923 million was the second-best in Monsanto's history, and increased 14 percent compared with $810 million in operating income in 1993. Excluding the $40 million in net pretax restructuring and unusual items in 1994 and the $30 million net pretax gain from unusual items in 1993, operating income would have increased by approximately $183 million, or 23 percent, in 1994. Operating results in 1994 benefited from strong sales volume gains for several major products, the successful introduction of new products, and savings from cost reduction efforts. These increases in operating income were partially offset by the effects of lower selling prices in all units and by substantial cost increases for raw materials experienced by The Chemical Group. Excluding the aforementioned 1994 and 1993 restructuring charges and unusual items, operating results would have improved significantly for The Agricultural Group, The Chemical Group and Searle. NutraSweet's operating income declined modestly from that in the prior year. The Agricultural Group's operating income in 1994 was a record and benefited from significantly higher worldwide sales volumes for Roundup(R) herbicide, from the inclusion of a full year of earnings from the acquired Ortho business, and from the introduction of new products. Operating results for The Chemical Group benefited from significantly higher sales volumes in several major products, lower manufacturing costs and cost reduction efforts. These factors were partially offset by significantly higher raw material costs and lower average selling prices, principally in Europe and Japan. Searle's improved operating results benefited from significant growth in sales of new products, cost savings from restructuring actions, and lower new product introduction costs. NutraSweet's lower operating income in 1994 resulted from reduced selling prices and sales volumes for aspartame, partially offset by cost reductions and by higher sales of tabletop sweeteners. Marketing and administrative expenses increased in 1994, principally because of the higher costs associated with various employee incentive programs, and inclusion of a full year's operating expenses of the acquired Ortho lawn-and-garden products business, partially offset by lower new product introduction costs at Searle. Interest income in 1994 increased because of the aforementioned Searle tax refund. "Other income (expense) -- net" increased in 1994, principally because of lower currency losses. MONSANTO REACHES 20 PERCENT ROE TARGET In 1994, Monsanto achieved its goal of a 20 percent return on equity (ROE). The company continues to believe that the 20 percent ROE target is useful. COST SAVINGS CONTINUE In the past few years, Monsanto has taken steps to make worldwide operations more focused, productive and cost effective. The effect of these actions benefited operating income by approximately $250 million in 1994. These savings are in line with original expectations and are expected to continue on an annual basis. Continuing business redesign and other productivity enhancement efforts have yielded significant benefits as well. These initiatives will continue as the company responds to increased global competition and higher customer expectations. NEW PRODUCTS ARE STRATEGIC PRIORITY New product development and commercialization continue to be strategic priorities for Monsanto. For example, three agricultural products developed through the use of biotechnology completed the U.S. Food and Drug Administration's consultation process in 1994, an important step toward regulatory approval. Monsanto's research and development (R&D) expenditures were $609 million in 1994, or 7 percent of net sales, a level that reflects 30 6 management's strong, long-term commitment to R&D. The discovery and development of pharmaceutical and agricultural products continue to be the focus of most of these expenditures. Significant R&D efforts in existing product technologies and new product applications also continue across all business units. Additionally, Monsanto's research program includes the acquisition of new technologies through licensing. The result is that Monsanto has many potential products in the R&D pipeline. Several of them should be commercialized in the next few years. PRIOR YEAR REVIEW In 1993, Monsanto Company's operating results improved substantially from those in 1992. Net income for 1993 was $494 million, or $4.10 per share, although it was affected by several unusual events. The Agricultural Group continued its impressive growth, fueled by record sales volumes for Roundup(R) herbicide. Savings from cost reductions and from working capital reduction efforts, coupled with slightly higher sales volumes, led to increased earnings in The Chemical Group. Searle's performance improved as sales from new products and significant cost savings from restructuring actions more than offset new product launch costs and the effect of generic competition on sales of the Calan(R) family of calcium channel blockers in the United States. The NutraSweet Company, which completed its first postpatent year for NutraSweet(R) brand sweetener in the United States, showed continued growth in 1993 in sales volumes and improved earnings. As more fully described on page 29, in December 1993, the board of directors approved a small restructuring reserve. In March 1993, Monsanto received reimbursement from insurance companies for various costs associated with damage to a manufacturing site of a raw material for Roundup. In 1992, restructuring actions were approved, which primarily affected Searle, and resulted in a one-time aftertax expense of $425 million, or $3.44 per share. The Fisher Controls business was sold in 1992, which resulted in an aftertax gain of $554 million, or $4.49 per share. Net income in 1992 also included $24 million, or $0.19 per share, in partial-year earnings from Fisher Controls prior to the sale of this subsidiary. In addition, Monsanto implemented new accounting rules related to postretirement benefits and income taxes in 1992, which resulted in a net one-time aftertax charge of $540 million, or $4.38 per share. Other unusual items in 1992 totaled an aftertax expense of $47 million, or $0.38 per share. These items were principally the costs incurred from damage in January 1992 to a manufacturing unit that produces a raw material for Roundup, and from the settlement in the second quarter of 1992 of certain lawsuits related to the Brio Superfund site. Consolidated net sales in 1993 were 2 percent higher than those in the prior year. Net sales for The Agricultural Group grew 17 percent from those in 1992, due primarily to a 24 percent increase in worldwide sales volumes for Roundup. Rapid worldwide adoption of conservation tillage techniques by farmers, the effects of the wet spring in the United States, and pricing and new end-use strategies contributed to this sales volume increase. Searle's net sales growth was led by new product introductions in the United States, principally Daypro(R), a once-daily arthritis treatment, and Ambien(R), a short-term treatment for insomnia. Sales of these and other new products more than offset lower sales of Calan, which was subject to generic competition in the United States. The Chemical Group's net sales for 1993 were slightly lower, as sales volume increases in the United States were offset by lower worldwide average selling prices. The lower selling prices were principally due to the recession in Europe and Japan. In NutraSweet's first year following the expiration of its aspartame-use patent in the United States, net sales declined, as expected, because of lower average selling prices. However, aspartame sales volumes grew 6 percent from volumes in 1992. Operating income was $810 million in 1993, compared with $58 million in operating income in 1992. Excluding the unusual items in 1993 and the restructuring and unusual charges in 1992, operating results would have improved for all business segments. The Agricultural Group in 1993 benefited from significantly higher worldwide sales volumes for Roundup and from lower manufacturing costs. Operating results for The Chemical Group benefited from lower raw material costs, cost reduction efforts, and increased demand in the United States. Operating results for Searle improved as a result of cost savings from restructuring actions and from higher net sales. These factors more than offset substantial costs of new product introductions and the effect of generic competition on sales of Calan in the United States. NutraSweet's improved operating income in 1993 resulted from increased aspartame sales volumes, and from reduced operating and amortization expenses, which combined to offset lower postpatent prices in the United States for NutraSweet brand sweetener. 31 7 Marketing and administrative expenses increased in 1993, principally because of the aforementioned product launch costs incurred by Searle, higher costs associated with various employee incentive programs, and operating expenses of the acquired Ortho lawn-and-garden products business. Amortization of intangible assets declined because of the expiration of NutraSweet's U.S. aspartame-use patent in December 1992. Interest expense in 1993 fell 24 percent, primarily because of lower average debt levels. "Other income (expense) -- net" increased in 1993, principally because of lower currency losses and higher income from equity affiliates. The 1992 amount included a write-down of investments to market value. ANALYSIS OF CHANGE IN EARNINGS PER SHARE -- BETTER (WORSE)
1994 vs. 1993 1993 vs. 1992 ------------- ------------- SALES-RELATED FACTORS: Selling prices $(0.71) $(1.90) Sales volumes and mix 1.70 1.33 - ----------------------------------------------------------------------- Total Sales-Related Factors 0.99 (0.57) - ----------------------------------------------------------------------- COST-RELATED FACTORS: Raw material costs (0.52) 0.55 Manufacturing capacity utilization 0.40 0.01 Other manufacturing costs 0.34 0.23 Marketing, administrative and technological expenses (0.27) (0.43) Amortization of intangible assets 0.03 0.85 - ----------------------------------------------------------------------- Total Cost-Related Factors (0.02) 1.21 - ----------------------------------------------------------------------- Interest expense (0.01) 0.20 Interest income 0.04 (0.02) Other income (expense) -- net 0.07 0.20 Change in income taxes 0.14 0.19 Change in shares outstanding 0.15 0.10 - ----------------------------------------------------------------------- Change in Earnings per Share Before Other Factors 1.36 1.31 - ----------------------------------------------------------------------- OTHER FACTORS: Restructuring and other unusual actions (0.13) 3.94 Gain on sale of Fisher Controls (4.49) Divestitures (0.01) (0.33) Accounting change for postretirement benefits 5.34 Accounting change for income taxes (0.96) - ----------------------------------------------------------------------- Total Other Factors (0.14) 3.50 - ----------------------------------------------------------------------- Change in Earnings per Share $1.22 $4.81 - -----------------------------------------------------------------------
[SELLING (1989 = 1.0) PRICE INDEX The index of selling prices declined in 1994. This was GRAPH] primarily due to the effect of lower selling prices for The Agricultural Group and for The NutraSweet Company. Refer to the discussion of the operating unit segment data for The Agricultural Group on pages 34 - 35, and for NutraSweet on page 39. [RAW (1989 = 1.0) MATERIAL COST INDEX The higher raw material cost index in 1994 primarily GRAPH] affected The Chemical Group. Refer to the discussion of the operating unit segment data for The Chemical Group on pages 36 - 37. [SALES (1989 = 1.0) VOLUME INDEX GRAPH] The sales volume index increase in 1994 was led by higher sales volumes for key products in The Chemical Group, a significant increase in worldwide sales volumes for Roundup(R) herbicide from those last year, and from sales volume increases for new products at Searle. Refer to the discussion of the operating unit segment data for The Agricultural Group on pages 34 - 35, for The Chemical Group on pages 36 - 37, and for Searle on pages 37 - 38. 32 8 OPERATING UNIT SEGMENT DATA
Operating Research Net Sales Income (Loss) and Development - ---------------------------------------------------------- ------------------------- ------------------------- 1994 1993 1992 1994 1993 1992 1994 1993 1992 ------ ------ ------ ----- ----- ----- ----- ----- ----- The Agricultural Group $2,224 $1,967 $1,676 $ 476 $ 400 $ 242 $ 141 $ 152 $ 152 The Chemical Group 3,715 3,684 3,705 304 331 91 95 113 112 Searle 1,681 1,546 1,503 72 (13) (288) 330 305 332 The NutraSweet Company 652 705 879 139 145 72 30 42 44 Corporate (68) (53) (59) 13 14 11 - ---------------------------------------------------------------------------------------------------------------------- Total $8,272 $7,902 $7,763 $ 923 $ 810 $ 58 $ 609 $ 626 $ 651 - ----------------------------------------------------------------------------------------------------------------------
Capital Depreciation Total Assets Expenditures and Amortization -------------------------- ------------------------- ------------------------- 1994 1993 1992 1994 1993 1992 1994 1993 1992 ------ ------ ------ ----- ----- ----- ----- ----- ----- The Agricultural Group $2,434 $2,166 $1,680 $ 106 $ 109 $ 136 $ 138 $ 129 $ 112 The Chemical Group 3,101 3,146 3,236 212 224 290 254 263 301 Searle 2,139 2,145 2,435 63 72 110 114 119 116 The NutraSweet Company 901 910 934 27 30 49 53 59 234 Corporate 316 273 800 1 2 1 2 2 2 - ---------------------------------------------------------------------------------------------------------------------- Total $8,891 $8,640 $9,085 $ 409 $ 437 $ 586 $ 561 $ 572 $ 765 - ----------------------------------------------------------------------------------------------------------------------
Amounts for 1992 have been restated from those previously reported for the reclassification of expenses and assets estimated to be attributable to biotechnology product discovery. In 1993, these expenses and assets were charged to the respective business units to reflect the current organizational structure. [FN] Operating income was affected by the 1994, 1993 and 1992 restructurings and other unusual items as follows:
Income (Expense) -------------------------- Operating Unit: 1994 1993 1992 ------ ------ ------ The Agricultural Group $ (16) $ (3) $(135) The Chemical Group (33) 43 (148) Searle 19 3 (265) The NutraSweet Company (6) (12) (70) Corporate (4) (1) (6) ----- ----- ----- Total $ (40) $ 30 $(624) ----- ----- -----
Although inflation is relatively low in most of Monsanto's major markets, it continues to affect operating results. To mitigate the effect of inflation, Monsanto has implemented measures to control costs, to improve productivity, to manage new fixed and working capital, and to raise selling prices where government regulations and competitive conditions permit. In addition, the current cost of replacing certain assets is estimated to be greater than their historical cost presented in the financial statements. Accordingly, the depreciation expense reported in the Statement of Consolidated Income would be greater if the expense was stated on a current cost basis. Sales between operating units were not significant. Certain corporate expenses, primarily those related to the overall management of Monsanto, were not allocated to the operating units or geographic areas. Corporate assets primarily include investments in affiliates and a portion of the cash balance. [1994 NET SALES GRAPH] The principal factors that accounted for the operating units' performances in 1994 and 1993, along with the factors that are expected to affect operating results in the near term, are described on the following pages. 33 9 THE AGRICULTURAL GROUP
1994 1993 1992 - ------------------------------------------------------------------ Net Sales: Crop chemicals $2,123 $1,936 $1,647 Animal sciences 101 31 29 - ------------------------------------------------------------------ Total $2,224 $1,967 $1,676 Operating Income 476 400 242 - ------------------------------------------------------------------
The Agricultural Group is a leading worldwide developer, producer and marketer of crop protection products and lawn-and-garden products. This group also develops and markets products enhanced by biotechnology. These products improve the efficiency of food production and preserve environmental quality for agricultural, industrial, turf and residential uses. More than half of the unit's herbicide net sales are in markets outside the United States. Weather conditions in agricultural markets worldwide affect sales volumes. [AGRICULTURAL GROUP NET SALES GRAPH] The Agricultural Group's sales and operating performance in 1994 were records, helped by strong sales from the family of Roundup(R) herbicides, the successful introduction of new products, and excellent manufacturing performance. Net sales for The Agricultural Group in 1994 were 13 percent higher than net sales in 1993. Net sales in 1994 benefited from higher worldwide sales of Roundup, from the inclusion of a full year of lawn-and-garden sales from the acquired Ortho business, and from sales of newly introduced Posilac(R) bovine somatotropin (BST). However, these factors were somewhat offset by lower net sales from the acetanilide family of herbicides, which include Lasso(R) herbicide and newly introduced Harness(R) herbicide. Sales volumes of Lasso declined from volumes last year; however, sales of Harness have substantially replaced those of Lasso in many U.S. markets. Operating income increased $76 million, or 19 percent. The increase in operating income was affected by unusual items in both 1994 and 1993. The unusual items included in 1994 operating income were $30 million in restructuring charges, principally for employment reductions and costs to terminate a program. These charges were partially offset by $14 million in reversals of prior year restructuring reserves, primarily for higher than anticipated proceeds from the sale of the pyridine research program. Operating income in 1993 included $38 million in net charges primarily related to the withdrawal from the pyridine research program, and a $35 million pretax gain resulting from reimbursement by insurance companies for various costs incurred in 1992 from damage to a manufacturing site that produces a key raw material for Roundup. An analysis of the change in operating income shows:
Better (Worse) -------------------- 1994 vs. 1993 vs. 1993 1992 --------- -------- Selling prices $ (68) $ (60) Sales volumes and mix 106 157 Raw material and other manufacturing costs 41 24 Restructuring and other charges 22 25 Glyphosate plant damage costs 42 Insurance settlement (35) 35 Inventory write-down 30 Effect of divested businesses 30 Other (primarily volume-related expenses) (20) (95) ----- ---- Change in operating income $ 76 $158 ----- ----
Worldwide sales volumes in 1994 for the family of Roundup herbicides improved significantly from last year's sales volumes, reflecting strong demand in most key worldwide markets. The continued worldwide adoption of conservation tillage techniques by farmers and satisfactory weather conditions, on balance, in many key markets contributed to this sales volume increase. Selling price declines for certain products, principally in ex- U.S. markets, continued to benefit sales volumes by making Roundup cost effective for weed control in a broader range of crop and industrial uses. The effect of generic competition, principally in certain ex-U.S. markets, dampened selling prices modestly. However, the effect of increased sales volumes on operating income exceeded the effect of the lower selling prices. Operating income in 1994 benefited from excellent manufacturing performance, from inclusion of a full year's operating income from the acquired Ortho business, and from sales of Posilac in the United States. 34 10 Earnings from the acetanilide family of herbicides declined due to lower sales into the former Soviet Union as a result of poor economic conditions, and one-time launch costs for the successful introduction of Harness in the United States. PRIOR YEAR REVIEW Net sales for The Agricultural Group in 1993 were 17 percent higher than sales in 1992. Operating income increased $158 million, or 65 percent. The increase in operating income was affected by unusual items occurring in both 1993 and 1992. The unusual items included in 1993 operating income were $38 million in net charges primarily related to withdrawal from the pyridine research program and a $35 million pretax gain resulting from reimbursement by insurance companies for various costs incurred in 1992 from damage to a manufacturing site that produces a key raw material for Roundup(R) herbicide. The unusual items included in 1992 operating income were $63 million in restructuring charges and other items, principally related to employment reductions; a $42 million loss associated with the aforementioned costs incurred from damage to a manufacturing site of a raw material for Roundup; and a $30 million charge for the write-down of certain bovine somatotropin (BST) inventories because of shelf-life expiration. Worldwide sales volumes for Roundup in 1993 improved 24 percent from 1992 sales volumes, reflecting strong demand in most key markets. The rapid worldwide adoption of conservation tillage techniques by farmers; the effects of the wet spring in the United States; and good weather conditions, on balance, in many key markets contributed to this sales volume increase. The decline in selling prices, principally for certain products in ex-U.S. markets, continued to benefit sales volumes for Roundup by making the herbicide cost-effective for weed control in a broader range of crop and industrial uses. The effect of these increased sales volumes on operating income exceeded the effect of lower selling prices. While 1993 sales benefited from the addition of the Ortho lawn- and-garden products business, operating income was hurt by the dilutive effect of that acquisition. Expenditures in 1993 for BST continued to affect financial results adversely. AGRICULTURAL GROUP OUTLOOK Patents protecting Roundup and other glyphosate herbicides in various countries expired in 1991, while compound per se patent protection for the active ingredient in Roundup herbicide continues in the United States until the year 2000. Management expects that manufacturing process and formulation patents that are important to Monsanto's cost position will help maintain our competitive position after the expiration of this other patent. Roundup faces competition from several generic producers in certain markets outside the United States. Sales of Harness(R) herbicide should continue to replace those of Lasso(R) herbicide in most U.S. markets. This trend is expected to continue in future periods with some incremental growth anticipated. In December 1994, the U.S. Environmental Protection Agency registered Permit(R) herbicide for control of sedges and broadleaf weeds in corn and grain sorghum, and Manage(R) herbicide for nutsedge control in turf. Posilac bovine somatotropin (BST) offers significant value to the dairy industry by increasing the efficiency of milk production, but it continues to meet opposition from certain groups. The U.S. Food and Drug Administration has yet to finalize labeling regulations for milk products, and several state legislatures are considering milk labeling bills, which could affect future sales. The Agricultural Group has a significant number of new products in the research and development pipeline, some of which should be commercialized in the next few years. The focus continues to be on a number of herbicide and biotechnology-related products. 35 11 THE CHEMICAL GROUP
1994 1993 1992 - ---------------------------------------------------------------- Net Sales: Industrial Products Group $1,391 $1,522 $1,371 Fibers 1,239 1,141 1,089 Plastics and Saflex 1,085 1,021 1,053 Discontinued products 192 - ---------------------------------------------------------------- Total $3,715 $3,684 $3,705 Operating Income 304 331 91 - ----------------------------------------------------------------
The Chemical Group produces and markets a range of performance materials -- including plastics, nylon and acrylic fibers, rubber chemicals, Saflex(R) plastic interlayer, and phosphorus and its derivatives -- used by customers to make countless consumer, household, automotive and industrial products. [CHEMICAL GROUP NET SALES GRAPH] In 1994, The Chemical Group benefited from significantly higher sales volumes for several key products, from improved worldwide capacity utilization levels, and from savings from continuing cost reduction efforts. Partially offsetting these gains were significantly higher raw material costs, principally in the last half of the year, and global pricing pressures in certain businesses. The Chemical Group's 1994 net sales were slightly higher than net sales last year. Sales in 1993 included those from businesses later divested as part of the previously announced restructuring program. Excluding net sales from these divested businesses, net sales in 1994 would have increased 6 percent from sales in 1993. Sales volumes increased 7 percent from sales volumes in 1993. This increase was offset by lower selling prices, principally in the rubber chemicals business. The sales volume increase in 1994 benefited from increased demand in the North American and certain European automotive markets, from increases in U.S. housing starts and resales, which resulted in an improved U.S. market for replacement carpet, and from an increase in the architectural use of laminated glass. Operating income in 1994 declined from operating income in the prior year. However, a number of unusual items affected profitability in both years. Specifically, 1994 operating income included $33 million in restructuring charges, principally related to employment reductions and costs to close several facilities. Operating income in 1993 benefited from $43 million in gains from the sale of several nonstrategic businesses, partially offset by expenses related to facility rationalization and other costs. An analysis of the change in operating income shows:
Better (Worse) ------------------------- 1994 vs. 1993 vs. 1993 1992 ---------- ---------- Selling prices $ (14) $ (85) Sales volumes and mix 128 11 Capacity utilization and other manufacturing costs 74 21 Raw material costs (74) 71 Restructuring (76) 120 Asset impairment 30 Brio litigation settlement 41 Effect of inventory reduction (11) 31 Effect of divested businesses (32) (5) Other (22) 5 ----- ----- Change in operating income $ (27) $ 240 ----- -----
Operating income in 1994 benefited from the effect of higher sales volumes, excellent manufacturing performance and continued cost reduction efforts. Capacity utilization, an important factor for The Chemical Group's profitability, was 86 percent in 1994 vs. 77 percent in 1993. Partially offsetting these gains were significantly higher raw material prices. Net sales for the Industrial Products Group showed growth in North America and Asia. This growth was offset by the depressed economic conditions in the former Soviet Union during 1994 and in Europe during the first half of the year. The Fibers Division's net sales in 1994 were 9 percent higher than those in 1993. This strong performance was primarily due to increased nylon sales in the United States to carpet manufacturers for the home replacement carpet market and to tire producers for tire reinforcement. The Plastics and Saflex Divisions' net sales in 1994 were higher than those in 1993, primarily because of sales volume increases worldwide. Selling prices stabilized compared with those in 1993, principally in the United States. PRIOR YEAR REVIEW In 1993, The Chemical Group benefited from lower raw material prices, cost reduction efforts, and an improved U.S. economy. However, the group was adversely affected 36 12 by the recession in Europe and Japan, which continued to constrict demand for chemical products. The Chemical Group's 1993 net sales were slightly lower than net sales in 1992. Sales volumes increased 3 percent from sales volumes in 1992. This increase was offset by lower selling prices, principally in the Plastics and Resins Divisions. The sales volume increase in 1993 was primarily in the United States, and benefited from a stronger market for replacement carpet. Sales volumes also benefited from increased U.S. automotive production, which rebounded from 1992 levels. Various product sales volumes in Europe, Japan and the former Soviet Union declined as a result of weak demand. Operating income in 1993 more than tripled when compared with 1992 operating income. However, a number of unusual items affected profitability both years. In 1993, operating income benefited from $43 million in gains from the sale of several nonstrategic businesses, partially offset by expenses related to facility rationalization and other costs. In 1992, operating income was adversely affected by $77 million in restructuring expenses associated with implementing further cost cutting actions; $41 million in costs associated with the settlement of certain litigation related to the Brio Superfund site; and $30 million in expenses related to a facility asset impairment. CHEMICAL GROUP OUTLOOK In 1995, The Chemical Group intends to merge its rubber chemicals and instruments businesses with the rubber chemicals business of Akzo Nobel N.V. to form a 50/50 joint venture. The new organization will serve the global rubber industry. When the venture is formed, certain redundant activities and functions for the combined businesses are expected to be consolidated, and a one-time charge will be recorded. Net sales and operating income of the joint venture will not be included with those of The Chemical Group. The Chemical Group's share of the joint venture's earnings will be reflected in "Other income (expense) - net" in the Statement of Consolidated Income. The Chemical Group's outlook is for growth based on continued improvement of existing businesses through process redesign and cost reductions, development of new markets for existing or modified products, development of new products, and growth through rational and synergistic acquisitions. SEARLE
1994 1993 1992 - ---------------------------------------------------------------- Net Sales $1,681 $1,546 $1,503 Operating Income (Loss) 72 (13) (288) - ----------------------------------------------------------------
Searle develops, produces and markets prescription pharmaceuticals. Its products include medications to relieve the symptoms of arthritis, to control high blood pressure, to relieve insomnia, to prevent the formation of ulcers, and to treat certain infections. [SEARLE NET SALES GRAPH] Searle's 1994 net sales were 9 percent higher than net sales last year. This increase in net sales was driven by 10 percent higher volumes, partially offset by lower net selling prices. Sales growth from new products -- led by Daypro(R), a once-daily arthritis treatment, Ambien(R), a short-term treatment for insomnia, and Arthrotec(R), a combination of Cytotec(R) ulcer preventive drug with the nonsteroidal anti-inflammatory drug diclofenac, for the treatment of arthritis -- more than offset a decline in sales of the Calan(R) family of calcium channel blockers. In total, these new products contributed $310 million to 1994 net sales. Net sales of the Calan family of products, sold primarily in Canada and the United States, were $321 million, 8 percent lower than last year's. This decline primarily reflected the effect of generic competition on Calan SR in the United States. However, the effect was substantially reduced by Searle sales of verapamil SR resulting from a distribution arrangement with a generic distributor. Net sales of Canderel(R) tabletop sweetener, made with NutraSweet brand sweetener and marketed by Searle outside the United States, were $155 million in 1994, up 3 percent from net sales in 1993, due to higher sales volumes. Searle's operating income in 1994 was $72 million compared with an operating loss of $13 million in 1993. Unusual items included in 1994 operating income were $16 million in restructuring charges, principally related 37 13 to employment reductions; and $35 million in reversals of prior year restructuring reserves, primarily for higher than anticipated proceeds and lower exit costs related certain divested facilities. Operating results in 1994 benefited from increased sales of new products, lower new product introduction costs in 1994, and cost savings, primarily from restructuring actions initiated in 1992. An analysis of the change in operating income shows:
Better (Worse) ----------------------- 1994 vs. 1993 vs. 1993 1992 -------- -------- Selling prices $ (24) $ (34) Sales volumes and mix 100 94 Restructuring 16 268 Marketing, administrative and technological expenses 1 (31) Other (8) (22) ----- ----- Change in operating income $ 85 $ 275 ----- -----
Searle's investment in research and development (R&D) continues to be significant. R&D expenditures were 20 percent of the unit's net sales for both 1994 and 1993. Future R&D spending is also expected to be significant, and Searle will continue to seek R&D collaborations to share development costs and combine strengths to speed development. This investment reflects Searle's commitment to securing a continuing stream of new products through discovery and development. PRIOR YEAR REVIEW Searle's 1993 net sales were 3 percent higher than 1992 net sales driven by 5 percent higher volumes, partially offset by lower net selling prices. Sales growth from new products more than offset a decline in sales of Calan(R). New product introductions included Daypro(R) and Ambien(R) in the United States and Arthrotec(R) in the United Kingdom, Canada, Sweden and Ireland. In total, these products contributed $159 million to 1993 net sales. Net sales of Calan, sold primarily in the U.S. and Canadian markets, were $350 million, 23 percent lower than those in 1992. This decline primarily reflected the effect of generic competition in the United States. Sales in 1993 of Maxaquin(R) quinolone anti- infective agent were almost 50 percent higher than those in 1992, the year the product was launched in the United States. But 1993 sales of Maxaquin were short of expectations because of photosensitivity issues. Net sales of Canderel(R) were $151 million in 1993, down 4 percent from net sales in 1992, because of a stronger U.S. dollar. Operating results in 1993 benefited from cost savings, primarily from restructuring actions initiated in 1992. However, results were negatively affected by substantial new product introduction costs and global health care reforms. The 1992 operating loss included a $265 million pretax restructuring charge. SEARLE OUTLOOK Arthrotec, a combination of Cytotec ulcer preventive drug and diclofenac for the treatment of arthritis, was launched in the Netherlands and Portugal in 1994. Additional launches in Germany and Italy, as well as the filing of the U.S. new product application, are anticipated in 1995. Cytotec has now been approved in all major markets. Recent clinical developments related to Cytotec are believed to represent a potential opportunity to enhance future sales and performance of this product. Calan calcium channel blocker participates in an increasingly competitive market for antihypertensive drugs and faces generic competition. This increased competition is likely to continue to affect the future sales and profits of Calan adversely. Searle, in conjunction with ALZA Corp., is developing a formulation of verapamil hydrochloride (the active ingredient in Calan) with proprietary delayed-release technology. The new product application for Verapamil OROS was recently filed with the Food and Drug Administration for marketing approval in the United States. A positive review could enhance Searle's competitive position for such hypertension products. Searle's current product development activities are focused on areas of strategic importance. In addition to Verapamil OROS, Searle is developing drugs for the treatment of cardiovascular conditions, including an oral antiplatelet agent to inhibit blood clots from forming after bypass surgery or angioplasty; tissue pathway factor inhibitor (TPFI) to be used during microvascular surgery to prevent blood clots; and epoxymexrenone for the treatment of hypertension, congestive heart failure and cirrhosis. COX-2 inhibitor, in early development as an improved treatment for arthritis, could potentially increase Searle's participation in this important therapeutic market. Other products in development include eliprodil, a neuroprotective agent to limit the damage caused by stroke, and IL-3 synthokine to help chemotherapy patients replenish white blood cells and platelets more rapidly. 38 14 THE NUTRASWEET COMPANY
1994 1993 1992 - ---------------------------------------------------------------- Net Sales $652 $705 $879 Operating Income 139 145 72 - ----------------------------------------------------------------
The NutraSweet Company manufactures and markets sweeteners, including NutraSweet(R) brand sweetener and Equal(R) and NutraSweet(R) Spoonful(TM) tabletop sweeteners, and other food ingredients. Approximately 90 percent of NutraSweet's net sales are in the U.S. market. NutraSweet brand sweetener is produced and sold by 50 percent-owned European joint ventures in the European market. These sales and operating income are not included with those of NutraSweet. NutraSweet's share of the European joint ventures' earnings is reflected in "Other income (expense) -- net" in the Statement of Consolidated Income. In 1994, NutraSweet's net sales decreased 8 percent from 1993 net sales as the result of lower average selling prices of NutraSweet brand sweetener. This decline was expected, and resulted from lower postpatent prices in the United States for that product. Sales volumes for NutraSweet brand sweetener decreased slightly from those in 1993, primarily due to lower contractual shipments to customers. Sales volumes for Equal and NutraSweet Spoonful increased 4 percent in 1994 from those in 1993. NutraSweet's 1994 operating income decreased 4 percent from 1993 operating income. Operating income in 1994 and 1993 included pretax restructuring charges for work force reductions of $6 million and $12 million, respectively. The decline in 1994 resulted from lower average selling prices and lower sales volumes, which were partially offset by lower operating expenses and higher sales of tabletop sweeteners. An analysis of the change in operating income shows:
Better (Worse) ----------------------- 1994 vs. 1993 vs. 1993 1992 -------- -------- Sales decline (lower selling prices and change in sales volumes) $ (64) $(177) Restructuring charge 6 12 Inventory adjustment 46 Patent amortization 173 Other, principally lower operating costs 52 19 ----- ----- Change in operating income $ (6) $ 73 ----- -----
PRIOR YEAR REVIEW In 1993, NutraSweet's net sales decreased 20 percent from 1992 net sales as the result of lower average selling prices of NutraSweet brand sweetener. This decline was expected, and resulted from lower postpatent prices in the United States for that product. Sales volumes for NutraSweet brand sweetener were 6 percent higher than those in 1992, led by growth in the private label and specialty flavor segments of the diet soft drink market. Sales volumes for Equal and NutraSweet Spoonful tabletop sweeteners increased 7 percent in 1993 from those in 1992. Despite the expiration of its aspartame-use patent, NutraSweet increased its market share in 1993 in the U.S. tabletop market as the result of the successful launch of NutraSweet Spoonful in mid-1992. NutraSweet's 1993 operating income included a pretax restructuring charge of $12 million, and 1992 operating income was reduced by a $46 million inventory write-down and by restructuring actions totaling $24 million. The improvement in 1993 operating income resulted from reduced operating expenses and from lower amortization expense, as the U.S. aspartame-use patent was fully amortized in 1992. These lower expenses more than offset the lower average selling prices. NUTRASWEET OUTLOOK The market prospects for high-intensity sweeteners, such as aspartame, are strong worldwide as an ingredient and in tabletop products. NutraSweet has built important competitive market advantages, including brand name identity, logo recognition, and the reputation as a superior quality, highly reliable supplier. In addition, NutraSweet brand sweetener potentially offers an economical replacement for sugar in certain markets. Competition from generic aspartame producers and other sweeteners now being reviewed by the U.S. Food and Drug Administration could negatively affect sales in the future. This could adversely affect operating income and cash flow. The United States will remain the principal market for NutraSweet brand sweetener in 1995, but international markets offer significant growth potential, particularly in the tabletop category. NutraSweet is developing a next-generation, high-intensity sweetener and expects to file a food additive petition with the U.S. Food and Drug Administration near the end of the decade. 39 15 GEOGRAPHIC DATA
Net Sales to Operating Unaffiliated Customers Income (Loss) Total Assets ---------------------------- ---------------------------- ---------------------------- 1994 1993 1992 1994 1993 1992 1994 1993 1992 ------ ------ ------ ------ ------ ------ ------ ------ ------ United States $5,376 $5,162 $4,964 $ 507 $ 656 $ 181 $5,844 $5,928 $5,641 Europe-Africa 1,653 1,559 1,652 340 129 (168) 1,947 1,801 2,046 Asia-Pacific 552 533 566 39 (2) 50 586 502 533 Canada 318 311 290 37 28 18 135 121 147 Latin America 373 337 291 65 43 29 300 261 242 Interarea Eliminations 3 9 7 (237) (246) (324) Corporate (68) (53) (59) 316 273 800 - ------------------------------------------------------------------------------------------------------------------------------ Total $8,272 $7,902 $7,763 $ 923 $ 810 $ 58 $8,891 $8,640 $9,085 - ------------------------------------------------------------------------------------------------------------------------------
The data above are prepared on an "entity basis," which means that net sales, operating income and assets of a legal entity are assigned to the geographic area where the legal entity is located. For example, a sale from the United States to Latin America is reported as a U.S. export sale. Interarea sales, which are sales between Monsanto locations in different world areas, were made on a market price basis. Interarea sales have been excluded from the above table and were:
1994 1993 1992 ---- ---- ---- World area shipped from: United States $ 682 $ 625 $ 683 Europe-Africa 248 133 105 Asia-Pacific 5 2 5 Canada 44 38 33 Latin America 2 4 2 Interarea Eliminations (981) (802) (828) ----- ----- ----- TOTAL $ -- $ -- $ -- ----- ----- -----
Following is a reconciliation of ex-U.S. operating income and total assets to the net income and net assets of consolidated ex- U.S. subsidiaries:
1994 1993 1992 ------ ------ ------ Operating income (loss) $ 481 $ 198 $ (71) Interest and other income (expense) -- net (33) (16) (89) Income taxes (133) (67) 54 ------ ------ ------ NET INCOME (LOSS) OF CONSOLIDATED EX-U.S. SUBSIDIARIES $ 315 $ 115 $ (106) Total operating assets $2,968 $2,685 $2,968 Total liabilities 1,088 1,080 1,416 ------ ------ ------ NET ASSETS OF CONSOLIDATED EX-U.S. SUBSIDIARIES $1,880 $1,605 $1,552 ------ ------ ------
The reported operating income for the individual geographic areas does not include the full profitability generated by sales of Monsanto products imported from other locations, principally from the United States. Direct export sales from the United States to third-party customers outside the United States were $399 million for 1994, $435 million for 1993 and $393 million for 1992. Sales and operating income for the geographic segments do not include the financial results from those joint venture companies in which Monsanto does not have management control. Monsanto's share of the income or loss of these companies is reflected in "Other income (expense) -- net" in the Statement of Consolidated Income. Monsanto's share of the unconsolidated net sales and income or loss of these companies for 1994 follows:
Monsanto's Share -------------------- Net Income Sales (Loss) ----- ------ United States $ 179 $ 10 Europe-Africa 90 2 Asia-Pacific 20 (2) Latin America 130 10
Geographic area operating income was affected by the 1994, 1993 and 1992 restructurings and other unusual items as follows:
Income (Expense) -------------------------- 1994 1993 1992 ----- ---- ----- United States $(105) $ 78 $(327) Europe-Africa 69 (26) (295) Asia-Pacific (11) (15) 13 Canada 2 (4) (8) Latin America 9 (2) (1) Corporate (4) (1) (6) ----- ----- ----- Total $ (40) $ 30 $(624) ----- ----- -----
40 16 STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(Dollars in millions, except per share) At Dec. 31, - -------------------------------------------------------------------------------------- ASSETS 1994 1993 - -------------------------------------------------------------------------------------- CURRENT ASSETS: Cash and cash equivalents $ 507 $ 273 Trade receivables, net of allowances of $57 in 1994 and $51 in 1993 1,530 1,445 Miscellaneous receivables and prepaid expenses 313 388 Deferred income tax benefit 321 342 Inventories 1,212 1,224 - -------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 3,883 3,672 - -------------------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT: Land 102 107 Buildings 1,268 1,237 Machinery and equipment 5,916 5,793 Construction in progress 269 245 - -------------------------------------------------------------------------------------- Total property, plant and equipment 7,555 7,382 Less accumulated depreciation 4,738 4,580 - -------------------------------------------------------------------------------------- NET PROPERTY, PLANT AND EQUIPMENT 2,817 2,802 - -------------------------------------------------------------------------------------- INVESTMENTS IN AFFILIATES 279 227 INTANGIBLE ASSETS, net of accumulated amortization of $522 in 1994 and $450 in 1993 1,134 1,189 OTHER ASSETS 778 750 - -------------------------------------------------------------------------------------- TOTAL ASSETS $8,891 $8,640 - -------------------------------------------------------------------------------------- LIABILITIES AND SHAREOWNERS' EQUITY - ------------------------------------------------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 629 $ 538 Wages and benefits 343 299 Income and other taxes 150 140 Restructuring reserves 129 255 Miscellaneous accruals 872 840 Short-term debt 312 223 - ------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 2,435 2,295 - ------------------------------------------------------------------------------------- LONG-TERM DEBT 1,405 1,502 DEFERRED INCOME TAXES 65 54 POSTRETIREMENT LIABILITIES 1,341 1,256 OTHER LIABILITIES 697 678 SHAREOWNERS' EQUITY: Common stock (authorized, 200,000,000 shares, par value $2) Issued, 164,394,194 shares in 1994 and 1993 329 329 Additional contributed capital 849 826 Treasury stock, at cost (52,859,031 shares in 1994 and 48,418,545 shares in 1993) (2,744) (2,348) Reserve for ESOP debt retirement (199) (218) Unrealized investment holding gain 19 Accumulated currency adjustment 33 (59) Reinvested earnings 4,661 4,325 - ------------------------------------------------------------------------------------- TOTAL SHAREOWNERS' EQUITY 2,948 2,855 - ------------------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $8,891 $8,640 - ------------------------------------------------------------------------------------- The above statement should be read in conjunction with pages 47 through 57 of this report.
ESOP stands for Employee Stock Ownership Plan. 41 17 REVIEW OF CHANGES IN FINANCIAL POSITION FINANCIAL POSITION REMAINS STRONG Monsanto's financial position remained strong in 1994, as evidenced by Monsanto's current "A" debt rating. Financial resources were adequate to support existing businesses and to fund new business opportunities. Working capital was higher at year-end 1994, principally because of higher cash and cash equivalent balances, offset, in part, by higher short-term commercial paper borrowings. Trade receivables at year-end 1994 increased compared with those at the prior year- end, primarily because of higher fourth-quarter sales of The Agricultural Group. Inventories at year-end 1994 declined slightly, primarily because of planned inventory reductions in The Chemical Group. The amount of net property, plant and equipment was higher than at year-end 1993, as $409 million in capital additions and the effect of a stronger U.S. dollar exceeded 1994 depreciation expense. Total deferred tax benefits, both current and noncurrent, of $392 million at year-end 1994 are primarily related to U.S. operations, which generally have a strong earnings history. Long-term debt at year-end 1994 was lower than that at the prior year-end, primarily because of principal payments on the company's medium term notes. On Feb. 20, 1995, Monsanto completed its acquisition of the worldwide business of Kelco, the specialty chemicals division of Merck & Co. Inc., for approximately $1,075 million. Kelco is the worldwide leader in the development, application and production of alginates and biogums. Monsanto will fund the acquisition through a combination of cash and debt. Net sales in 1995 will benefit from the acquisition of Kelco. However, the effect on Monsanto's 1995 operating income from the acquisition is expected to be slightly dilutive. Monsanto uses financial markets worldwide for its financing needs and has available various short- and medium-term bank credit facilities, which are discussed in the Notes to Financial Statements (page 51). These credit facilities provide the financing flexibility to let Monsanto take advantage of investment opportunities that may arise and to satisfy future funding requirements. To maintain adequate financial flexibility and access to debt markets worldwide, Monsanto management intends to maintain an "A" debt rating. The company's strong financial position will not be significantly affected by the debt issued to fund the Kelco acquisition. In October 1991, Monsanto's board of directors approved the establishment of an Employee Stock Ownership Plan (ESOP). In January 1992, the ESOP purchased from Monsanto $250 million in common stock, which is being used to match employee contributions under the company's existing savings and investment plan. A more detailed description of the ESOP is provided in the Notes to Financial Statements on page 54. In February 1994, Monsanto established a grantor trust that had been approved by the board of directors. A more detailed description of the grantor trust is provided in the Notes to Financial Statements on page 55. Monsanto's commitments and contingencies are described in the Notes to Financial Statements on page 55. Monsanto's return on shareowners' equity (ROE) was 21.4 percent in 1994. The ROE and other key financial statistics are presented in the table below.
KEY FINANCIAL STATISTICS 1994 1993 1992 - ---------------------------------------------------------------------------------------- Return on Shareowners' Equity (ROE) 21.4% 16.9% (2.6)% (Net income divided by average shareowners' equity) Current Ratio 1.6 1.6 1.6 (Current assets divided by current liabilities) Trade Receivables-Days Sales Outstanding 67 71 67 (Fourth-quarter trade receivables divided by fourth-quarter net sales times 30 days) Inventory Turnover Ratio 3.9 3.7 4.1 (Cost of goods sold divided by inventory) Interest Coverage 7.3 6.1 -- (Income before interest expense and income taxes divided by total interest cost) Cash Provided by Operations/Total Debt 76% 42% 54% Total Debt/Total Capitalization 37% 38% 36% - ---------------------------------------------------------------------------------------- Total capitalization is the sum of short-term debt, long-term debt and shareowners' equity.
42 18 STATEMENT OF CONSOLIDATED SHAREOWNERS' EQUITY
(Dollars in millions, except per share) 1994 1993 1992 - -------------------------------------------------------------------------------------------- COMMON STOCK: BALANCE, JAN. 1 AND DEC. 31 $ 329 $ 329 $ 329 - -------------------------------------------------------------------------------------------- ADDITIONAL CONTRIBUTED CAPITAL: Balance, Jan. 1 $ 826 $ 820 $ 726 Employee stock plans and ESOP 23 6 94 - -------------------------------------------------------------------------------------------- BALANCE, DEC. 31 $ 849 $ 826 $ 820 - -------------------------------------------------------------------------------------------- TREASURY STOCK: Balance, Jan. 1 $(2,348) $(2,029) $(1,797) Shares purchased (6,170,016; 5,795,600; and 6,732,300 shares in 1994, 1993 and 1992, respectively) (478) (380) (417) Shares issued under employee stock plans and ESOP (1,729,530; 1,306,882; and 4,269,180 shares in 1994, 1993 and 1992, respectively) 82 61 185 - -------------------------------------------------------------------------------------------- BALANCE, DEC. 31 $(2,744) $(2,348) $(2,029) - -------------------------------------------------------------------------------------------- RESERVE FOR ESOP DEBT RETIREMENT: Balance, Jan. 1 $ (218) $ (233) $ (250) Allocation of ESOP shares 19 15 17 - -------------------------------------------------------------------------------------------- BALANCE, DEC. 31 $ (199) $ (218) $ (233) - -------------------------------------------------------------------------------------------- UNREALIZED INVESTMENT HOLDING GAIN: Balance, Jan. 1 $ 15 Net change in market value 4 - -------------------------------------------------------------------------------------------- BALANCE, DEC. 31 $ 19 - -------------------------------------------------------------------------------------------- ACCUMULATED CURRENCY ADJUSTMENT: Balance, Jan. 1 $ (59) $ 15 $ 187 Translation adjustments 92 (74) (172) - -------------------------------------------------------------------------------------------- BALANCE, DEC. 31 $ 33 $ (59) $ 15 - -------------------------------------------------------------------------------------------- REINVESTED EARNINGS: Balance, Jan. 1 $ 4,325 $ 4,103 $ 4,459 Net income (loss) 622 494 (88) Dividends (net of ESOP tax benefits) (286) (272) (268) - -------------------------------------------------------------------------------------------- BALANCE, DEC. 31 $ 4,661 $ 4,325 $ 4,103 - -------------------------------------------------------------------------------------------- The above statement should be read in conjunction with pages 47 through 57 of this report. ESOP stands for Employee Stock Ownership Plan.
KEY FINANCIAL STATISTICS 1994 1993 1992 - -------------------------------------------------------------------------------------------- Stock Price High $ 86 1/2 $75 $71 1/4 Low 66 1/2 48 7/8 49 3/4 Year-End 70 1/2 73 3/8 57 5/8 - --------------------------------------------------------------------------------------------- Per Share Dividends 2.47 2.30 2.20 Shareowners' Equity 26.43 24.62 24.95 - --------------------------------------------------------------------------------------------- Average Daily Share Trading Volume (thousands of shares) 376 335 392 - -------------------------------------------------------------------------------------------- Based on daily reported high and low stock prices.
43 19 STATEMENT OF CONSOLIDATED CASH FLOW
(Dollars in millions) 1994 1993 1992 - ------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS - ------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Income (loss) from continuing operations $ 622 $ 494 $ (126) Add income taxes -- continuing operations 273 235 (48) - ------------------------------------------------------------------------------------------- Income (loss) from continuing operations before income taxes 895 729 (174) Adjustments to reconcile to Cash Provided by Continuing Operations: Income tax payments (196) (166) (162) Items that did not use cash: Depreciation and amortization 561 572 765 Restructuring expenses -- net 40 5 436 Incremental SFAS No. 106 expenses 48 48 45 Other (5) (19) 157 Working capital changes that provided (used) cash: Accounts receivable (88) 62 21 Inventories 15 (31) (30) Accounts payable and accrued liabilities (125) (202) (107) Other 74 34 (125) Other items 81 (10) 22 - ------------------------------------------------------------------------------------------- CASH PROVIDED BY CONTINUING OPERATIONS 1,300 1,022 848 CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS (291) 64 - ------------------------------------------------------------------------------------------- TOTAL CASH PROVIDED BY OPERATIONS 1,300 731 912 - ------------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Property, plant and equipment purchases (409) (437) (586) Acquisition and investment payments (185) (510) (259) Investment and property disposal proceeds 202 298 177 Proceeds from sale of Fisher Controls 1,275 Discontinued operations -- other (30) - ------------------------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (392) (649) 577 - ------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Net change in short-term financing 89 (31) (78) Long-term debt proceeds 49 379 120 Long-term debt reductions (152) (299) (565) Treasury stock purchases (478) (380) (417) Dividend payments (289) (275) (270) Common stock issued to ESOP 250 Other financing activities 107 68 11 - ------------------------------------------------------------------------------------------- CASH USED IN FINANCING ACTIVITIES (674) (538) (949) - ------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 234 (456) 540 CASH AND CASH EQUIVALENTS: Beginning of year 273 729 189 - ------------------------------------------------------------------------------------------- End of year $ 507 $ 273 $ 729 - ------------------------------------------------------------------------------------------- The above statement should be read in conjunction with pages 47 through 57 of this report. The effect of exchange rate changes on cash and cash equivalents was not material. Cash payments for interest (net of amounts capitalized) were $129 million, $133 million and $176 million for the years 1994, 1993 and 1992, respectively. During 1991, Monsanto established an Employee Stock Ownership Plan (ESOP). Monsanto was guarantor of $70 million of ESOP notes and $100 million of ESOP debentures as of Dec. 31, 1994.
44 20 REVIEW OF CASH FLOW Monsanto's cash flow for 1994, 1993 and 1992 is shown in the Statement of Consolidated Cash Flow on the preceding page. CASH FLOW REMAINS STRONG Cash provided by continuing operations of $1,300 million was strong in 1994, 27 percent higher than that in 1993. This outstanding improvement was due primarily to higher net income in 1994, but also to successful efforts in streamlining working capital requirements and in inventory management. Working capital as a percentage of net sales was about the same as that for last year. Cash from continuing operations was generated primarily by The Chemical Group, The Agricultural Group and The NutraSweet Company. Monsanto's operations have historically generated sufficient cash to fund existing businesses and growth-related research and investments. Management expects that cash provided by operations, supplemented by periodic borrowings, will be adequate to fund future requirements. [CASH PROVIDED BY CONTINUING OPERATIONS GRAPH] Other investment and property disposals in 1994 generated more than $200 million in cash. The principal proceeds in 1994, 1993 and 1992 were from the sales of various businesses associated with restructuring actions. In 1992, Monsanto received $1,275 million in cash from the sale of Fisher Controls. A portion of the cash proceeds was used to reduce debt and to purchase Monsanto common stock. Cash used by discontinued operations in 1993 was for income taxes related to the sale of Fisher Controls. Major uses of cash for 1994, 1993 and 1992 included dividends, capital expenditures, and treasury stock purchases. The acquisition of the Ortho lawn-and-garden products business in 1993 and investments in various 1992 acquisitions were also major uses of cash. Monsanto's 1994 capital expenditures focused on improved technology, capacity expansions and environmental projects, and totaled $409 million. Business redesign efforts and productivity enhancements were successful in increasing effective capacity at many facilities, reducing the need for additional capital expenditures. Long-term debt repayments in 1993 included $150 million in 9 3/8 percent debentures. Long-term debt repayments in 1992 included $145 million in 11 3/8 percent debentures, $141 million in 8 3/4 percent debentures, $104 million in 8 1/2 percent debentures, and $51 million in industrial revenue bonds. Monsanto continually evaluates risk retention and insurance levels for product liability, property damage and other potential areas of risk. Monsanto devotes significant effort to maintaining and improving safety and internal control programs, which reduce its exposure to certain risks. Based on the cost and availability of insurance and the likelihood of a loss, management decides the amount of insurance coverage to purchase from unaffiliated companies and the appropriate amount of risk to retain. Since 1986, Monsanto's liability insurance has been on the "claims made" policy form. Management believes that the current levels of risk retention are consistent with those of other companies in the various industries in which Monsanto operates. There can be no assurance that Monsanto will not incur losses beyond the limits of, or outside the coverage of, its insurance. Monsanto's liquidity, financial position and profitability are not expected to be affected materially by the levels of risk retention that the company accepts. MONSANTO MAINTAINS STRONG ENVIRONMENTAL COMMITMENT Monsanto is subject to various laws and government regulations concerning environmental matters, employee safety and employee health. It is anticipated that increasingly stringent requirements will be imposed upon Monsanto, its competitors and industry in general. Monsanto is dedicated to a long-term environmental protection program that reduces emissions of hazardous materials into the environment, as well as to the remediation of identified existing environmental concerns. In 1988, management committed to a 90 percent reduction in toxic air emissions from worldwide operations by the end of 1992. Monsanto achieved its goal, based on 1992 year-end operating rates. The cost to accomplish this target did not materially affect operating results. In fact, some of the targeted capital projects lowered operating costs and improved operating efficiency. Expenditures in 1994 were approximately $47 million for environmental capital projects and approximately 45 21 $202 million for management of environmental programs, including the operation and maintenance of facilities for environmental control. Monsanto estimates that during 1995 and 1996 approximately $35 million to $45 million per year will be spent on additional capital projects for environmental protection. Monsanto periodically receives notices from the U.S. Environmental Protection Agency (EPA) that it is a potentially responsible party (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), commonly known as Superfund. The EPA has designated Monsanto as a PRP at 92 Superfund sites. Monsanto has resolved disputes, entered partial consent decrees, and executed administrative orders between Monsanto and the EPA in 47 of these cases, settling a portion or all of Monsanto's liability for these Superfund cases. Six other matters involve sites where allegations are predicated on tentative findings of reuse of drums by others that once contained products sold by Monsanto. These six matters have been inactive as to Monsanto for at least 10 years. At one other site, Monsanto has determined that it has no liability whatsoever. Monsanto's policy is to accrue costs for remediation of waste disposal sites in the accounting period in which the responsibility is established and the cost is estimable. Monsanto's estimates of its liabilities for Superfund sites are based on evaluations of currently available facts with respect to each individual site and take into consideration factors such as existing technology, presently enacted laws and regulations, and prior experience in remediation of contaminated sites. Monsanto does not discount these liabilities, and they have not been reduced for any claims for recoveries from insurance or from third parties. However, Monsanto is engaged in litigation with some of its insurance carriers regarding both the applicability and the amount of its coverage responsive to claims for damages at these sites. Monsanto has an accrued liability of $72 million as of Dec. 31, 1994, for Superfund sites. As assessments and remediation activities progress at individual sites, these liabilities are reviewed periodically and adjusted to reflect additional technical, engineering and legal information that becomes available. Major sites in this category include the noncompany-owned Brio, Fike/Artel, Motco and Woburn sites, which account for $54 million of the accrued amount. Monsanto's estimate of its Superfund liability is affected by several uncertainties such as, but not limited to, the method and extent of remediation, the percentage of material attributable to Monsanto at the sites relative to that attributable to other parties, and the financial capabilities of the other PRPs at most sites. Due to these uncertainties, primarily related to the method and extent of remediation, potential future expenses could be as much as $25 million for these sites. These potential future expenses may be incurred over the balance of the decade. There are various other lawsuits, claims and proceedings that state agencies and others have asserted against the company seeking remediation of alleged environmental impairments. Monsanto is in the process of determining its involvement, if any, at 41 of these sites. Monsanto has an accrued liability of $108 million as of Dec. 31, 1994, for these matters and for environmental reserves at certain former Monsanto plant sites. The company's estimate of its liability related to these sites is affected by several uncertainties such as, but not limited to, the extent of Monsanto's involvement, and the method and extent of remediation. Due to these uncertainties, potential future expenses could be as much as $75 million for these sites. Four sites in this category account for $58 million of the accrued amount and for approximately $55 million of the potential future expenses. Monsanto spent $52 million in 1994 for remediation of Superfund and other waste disposal sites. Most of these expenditures related to The Chemical Group, and similar or greater amounts can be expected in future years. For hazardous and other waste facilities at operational locations, Monsanto recognizes post-closure environmental costs and remediation costs over the estimated remaining useful life of the related facilities, not to exceed 20 years. Monsanto spent $13 million in 1994 for remediation of these facilities and has an accrued liability of $27 million as of Dec. 31, 1994, for these sites. Uncertainties related to these costs are evolving government regulations, the method and extent of remediation, and future changes in technology. Monsanto's estimated closure costs for these facilities are approximately $135 million. While the ultimate costs and results of remediation of waste disposal sites cannot be predicted with certainty, Monsanto's liquidity, financial position and profitability are not expected to be materially affected. COMMON STOCK PURCHASE PROGRAM CONTINUED IN 1994 In October 1992, Monsanto's board of directors authorized the purchase of 12 million shares of Monsanto common stock. This authority is in addition to the normal repurchase of shares for compensation and benefits 46 22 programs. In 1994, Monsanto purchased 6.2 million shares at a cost of $478 million. Since June 1987, Monsanto has purchased 55.8 million shares at a cost of $3,028 million. Management believes that the stock purchase program represents an appropriate use of excess cash. DIVIDEND INCREASES FOR THE 22ND CONSECUTIVE YEAR Monsanto has paid quarterly dividends on its common shares without interruption or reduction since 1928, and has increased the dividend per share in each of the past 22 years. Dividend payout for 1994 was 22 percent of cash provided by operations. Monsanto's dividend policy reflects a desired long-term payout percentage based on Monsanto's expectations of future growth and profitability levels. For both common stock repurchases and dividends in any individual year, additional consideration is given to expected financial position and results, acquisitions, working and fixed capital needs, scheduled debt repayments, and economic conditions, including inflation. Monsanto's common stock is traded principally on the New York Stock Exchange and is listed on other exchanges worldwide. The number of shareowners of record as of Feb. 24, 1995, was 53,312. The high and low common stock prices on that date were $ 79 1/4 and $78 3/8. [DIVIDENDS PER SHARE GRAPH] Monsanto's dividend per share has increased 120 percent on a calendar year basis since 1984. NOTES TO FINANCIAL STATEMENTS SIGNIFICANT ACCOUNTING POLICIES Monsanto's significant accounting policies are capitalized in the following Notes to Financial Statements. Previously reported amounts have been reclassified consistent with the 1994 presentation. BASIS OF CONSOLIDATION THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDE THE COMPANY AND ITS MAJORITY-OWNED SUBSIDIARIES. INTERCOMPANY TRANSACTIONS HAVE BEEN ELIMINATED IN CONSOLIDATION. OTHER COMPANIES IN WHICH MONSANTO HAS A SIGNIFICANT OWNERSHIP INTEREST (GENERALLY GREATER THAN 20 PERCENT) ARE INCLUDED IN "INVESTMENTS IN AFFILIATES" IN THE STATEMENT OF CONSOLIDATED FINANCIAL POSITION. MONSANTO'S SHARE OF THESE COMPANIES' INCOME OR LOSS IS INCLUDED IN "OTHER INCOME (EXPENSE) -- NET" IN THE STATEMENT OF CONSOLIDATED INCOME. CURRENCY TRANSLATION THE FINANCIAL STATEMENTS FOR MOST OF MONSANTO'S EX-U.S. ENTITIES ARE TRANSLATED INTO U.S. DOLLARS AT CURRENT EXCHANGE RATES. UNREALIZED CURRENCY ADJUSTMENTS IN THE STATEMENT OF CONSOLIDATED FINANCIAL POSITION ARE ACCUMULATED IN SHAREOWNERS' EQUITY. THE FINANCIAL STATEMENTS OF EX-U.S. ENTITIES THAT OPERATE IN HYPER- INFLATIONARY ECONOMIES, PRINCIPALLY BRAZIL, ARE TRANSLATED AT EITHER CURRENT OR HISTORICAL EXCHANGE RATES, AS APPROPRIATE. THESE CURRENCY ADJUSTMENTS ARE INCLUDED IN NET INCOME. Major currencies are the U.S. dollar, British pound sterling, Belgian franc and Japanese yen. Other important currencies include the Brazilian real, Canadian dollar, French franc, German mark and Italian lira. Currency restrictions are not expected to have a significant effect on Monsanto's cash flow, liquidity or capital resources. Currency option contracts are purchased to manage currency exposure for anticipated transactions (for example, expected export sales in the following year denominated in foreign currencies). Currency option and forward contracts are used to manage other currency exposures, primarily for receivables and payables outside the United States. This hedging activity is intended to protect the company from adverse fluctuations in currencies vs. the U.S. dollar. 47 23 As of Dec. 31, 1994, Monsanto had currency forward contracts to purchase $119 million and to sell $179 million, and purchased currency option contracts to sell $256 million of other currencies, principally the French franc, Japanese yen, Canadian dollar and British pound sterling. GAINS AND LOSSES ON CONTRACTS THAT ARE DESIGNATED AND EFFECTIVE AS HEDGES ARE DEFERRED AND ARE INCLUDED IN THE RECORDED VALUE OF THE TRANSACTION BEING HEDGED. Net deferred hedging losses as of Dec. 31, 1994, were not material. GAINS AND LOSSES ON OTHER CURRENCY FORWARD AND OPTION CONTRACTS ARE INCLUDED IN NET INCOME IMMEDIATELY. Monsanto is subject to loss if the counterparties to these contracts do not perform. RESTRUCTURING AND OTHER ACTIONS In December 1994, the board of directors approved a plan to eliminate redundant staff activities across the company and consolidate certain staff and administrative business functions. The plan will result in reductions in worldwide employment levels of approximately 500 people. In addition, the company will close or exit certain facilities and programs. These work force reductions and closures will be substantially completed by the end of 1995. The pretax expense related to these actions was $89 million ($55 million aftertax). In September 1994, Monsanto received $67 million from the U.S. Internal Revenue Service in settlement of certain tax matters related to the 1985 acquisition of Searle. The settlement included interest of $33 million ($21 million aftertax), recorded as a one-time gain. Most of the remainder of the proceeds reduced the balance of unamortized goodwill related to the Searle acquisition. In December 1993, the board of directors approved a small reserve to cover the sale or exit from some nonstrategic products, the withdrawal from the pyridine research program in The Agricultural Group, and the consolidation of some manufacturing capacity. The net pretax expense related to these actions was $5 million ($7 million aftertax) and principally affected The Agricultural and Chemical Groups. In the first quarter of 1993, Monsanto recognized a $35 million pretax gain resulting from reimbursement from insurance companies of various costs associated with damage in January 1992 to a manufacturing unit that produces a key raw material for Roundup herbicide. These costs had been expensed in 1992 pending resolution of the claim. In November 1992, the board of directors approved a series of actions designed to make Monsanto's worldwide operations more focused, productive and cost-effective. Major elements included reductions in employment; a realignment of selected research investments; a number of consolidations, closings and asset write-downs; and sales of nonstrategic businesses and facilities. These actions principally affected Searle, but also included a reduction in corporate staff and additional fine-tuning of other operating units. Other unusual items in 1992 included the aforementioned costs incurred from damage in January 1992 to a facility that makes Roundup herbicide and from the settlement in the second quarter of 1992 of certain lawsuits related to the Brio Superfund site. The components of the pretax expense (income) related to the restructuring programs and the other unusual items were:
1994 1993 1992 ---- ---- ---- Cost of employee reductions $ 68 $ 5 $224 Shutdown and consolidation of various facilities and departments (25) 51 164 Asset write-downs 188 Glyphosate plant damage costs (settlement) (35) 42 Brio litigation settlement 41 Other costs (income) (22) 47 111 Gains on business sales (14) (98) (71) ---- ---- ---- Total $ 7 $(30) $699 ---- ---- ---- In addition, Monsanto recognized net restructuring expenses of $457 million in 1991, primarily for the shutdown and consolidation of various facilities.
Restructuring expenses are recorded based on estimates prepared at the time the restructuring actions are approved by the board of directors. In the fourth quarter of 1994, the board approved the reversal of $49 million of pretax excess restructuring reserves from prior years. The excess was primarily due to higher than expected proceeds and lower exit costs from the sale and shutdown of nonstrategic businesses and facilities included in the 1993 and 1992 restructuring actions. The balance in restructuring reserves as of Dec. 31, 1994, was $254 million, and consisted primarily of work force reduction costs under the 1994 actions and planned facility dismantling and site closure costs remaining under previous restructurings. Management believes that the balance of these reserves at Dec. 31, 1994, is adequate for completion of those activities. Reductions to restructuring liabilities 48 24 over the last three years for restructuring actions taken were approximately $1.1 billion. Approximately two-thirds of these reductions were for write-offs and expenditures related to the closure or sale of nonstrategic products and facilities. Most of the remainder of the reductions related to the cost of work force reduction programs, which have been completed. The pretax expenses (income) related to the restructuring programs and the other unusual items were recorded in the Statement of Consolidated Income in the following categories:
1994 1993 1992 ---- ---- ---- Cost of goods sold $(35) $188 Restructuring expense -- net $ 40 5 436 ---- ---- ---- Decrease (increase) in operating income 40 (30) 624 Interest income (33) Other expense 75 ---- ---- ---- Total decrease (increase) in income from continuing operations before income taxes $ 7 $(30) $699 ---- ---- ----
Income from continuing operations was decreased by $1 million aftertax, or $0.01 per share, for 1994; increased by $15 million aftertax, or $0.12 per share, for 1993; and reduced by $472 million aftertax, or $3.82 per share, for 1992 from the effect of these restructurings and unusual items. Product sales of businesses targeted for divestiture in these restructurings were excluded from Monsanto's net sales after the board of directors approved the divestiture. Net sales and operating income for these businesses in 1993 and 1992, included in Monsanto's net sales and operating income, were:
1993 1992 ---- ---- Net sales $208 $289 Operating income $ 1 $ 26
PRINCIPAL ACQUISITIONS AND DIVESTITURES On Feb. 20, 1995, Monsanto completed its acquisition of the worldwide business of Kelco, the specailty chemicals division of Merck & Co. Inc., for approximately $1,075 million. Kelco is the worldwide leader in the development, application and production of alginates and biogums. In Dec. 1994, Monsanto and Akzo Nobel N.V. agreed to form a 50/50 joint venture by contributing their respective rubber chemicals businesses. When formed, the venture will be accounted for as an equity affiliate. In May 1993, Monsanto purchased the assets, including a seasonally high amount of working capital, of the Ortho Consumer Products Division of Chevron Chemical Co. for $412 million. The acquisition included total assets with a fair market value of $327 million and liabilities of $51 million. The financial results of the Ortho business were included in the Statement of Consolidated Income from the date of acquisition. On an unaudited, pro forma basis, assuming the acquisition of Ortho had occurred at the beginning of 1993 and 1992, Monsanto's net sales in each of those years would have been approximately $8 billion. Net income (loss) and earnings per share for those years would not have been significantly different from the reported amounts. In October 1992, Monsanto sold the worldwide Fisher Controls business. Monsanto received $1,275 million in cash, which resulted in an aftertax gain of $554 million (net of applicable income taxes of $371 million). Financial data for the nine months ended Sept. 30, 1992, for Fisher Controls were: net sales, $679 million; income before income taxes, $37 million; income taxes, $13 million; and net income, $24 million. DEPRECIATION AND AMORTIZATION
1994 1993 1992 ---- ---- ---- Depreciation $442 $469 $473 Amortization of intangible assets 81 81 237 Obsolescence 38 22 55 ---- ---- ---- TOTAL $561 $572 $765 ---- ---- ----
PROPERTY, PLANT AND EQUIPMENT IS RECORDED AT COST. THE COST OF PLANT AND EQUIPMENT IS DEPRECIATED OVER WEIGHTED AVERAGE PERIODS OF 18 YEARS FOR BUILDINGS AND 10 YEARS FOR MACHINERY AND EQUIPMENT, BY THE STRAIGHT-LINE METHOD. INTANGIBLE ASSETS ARE RECORDED AT COST LESS ACCUMULATED AMORTIZA- TION. The components of intangible assets and their estimated remaining useful lives were:
Estimated Remaining Life 1994 1993 ------------------ ---- ---- Goodwill 26 $ 776 $ 798 Patents 6 48 62 Other intangible assets 14 310 329 ------ ------ TOTAL $1,134 $1,189 ------ ------ Weighted average, in years, as of Dec. 31, 1994.
GOODWILL IS THE COST OF ACQUIRED BUSINESSES IN EXCESS OF THE FAIR VALUE OF THEIR IDENTIFIABLE NET ASSETS AND IS AMORTIZED OVER THE ESTIMATED PERIODS OF BENEFIT (FIVE TO 40 YEARS). 49 25 PATENTS OBTAINED IN A BUSINESS ACQUISITION ARE RECORDED AT THE PRESENT VALUE OF ESTIMATED FUTURE CASH FLOWS RESULTING FROM PATENT OWNERSHIP. THE COST OF PATENTS IS AMORTIZED OVER THEIR LEGAL LIVES. THE COST OF OTHER INTANGIBLE ASSETS (PRINCIPALLY PRODUCT RIGHTS AND TRADEMARKS) IS AMORTIZED OVER THEIR ESTIMATED USEFUL LIVES. IMPAIRMENT TESTS OF LONG-LIVED ASSETS ARE MADE WHEN CONDITIONS INDICATE A POSSIBLE LOSS. SUCH IMPAIRMENT TESTS ARE BASED ON A COMPARISON OF UNDISCOUNTED CASH FLOWS TO THE RECORDED VALUE OF THE ASSET. IF AN IMPAIRMENT IS INDICATED, THE ASSET VALUE IS WRITTEN DOWN TO ITS DISCOUNTED CASH VALUE, USING AN APPROPRIATE DISCOUNT RATE. INVESTMENTS Effective Jan. 1, 1994, Monsanto adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires that certain investments, primarily equity securities, be recorded at their market values. The Jan. 1, 1994, adoption of this standard resulted in a $15 million increase, net of taxes of $7 million, in investment balances and shareowners' equity, by the recognition of a net unrealized investment holding gain. As of Dec. 31, 1994, the aggregate fair value of these equity securities was $140 million, and gross unrealized holding gains and losses were $44 million and $8 million, respectively. Debt securities held are recorded at amortized cost, because the company has the ability and intent to hold these securities to their maturity date. Most of these securities mature in less than five years. As of Dec. 31, 1994, the total amortized cost of these securities was $247 million. WHEN A DECLINE IN MARKET VALUE IS DEEMED OTHER THAN TEMPORARY, THE REDUCTION TO THE INVESTMENT IN A SECURITY IS CHARGED TO EXPENSE. INVENTORY VALUATION INVENTORIES ARE STATED AT COST OR MARKET, WHICHEVER IS LESS. ACTUAL COST IS USED TO VALUE RAW MATERIALS AND SUPPLIES. STANDARD COST, WHICH APPROXIMATES ACTUAL COST, IS USED TO VALUE FINISHED GOODS AND GOODS IN PROCESS. STANDARD COST INCLUDES DIRECT LABOR AND RAW MATERIALS, AND MANUFACTURING OVERHEAD BASED ON PRACTICAL CAPACITY. THE COST OF CERTAIN INVENTORIES (54 PERCENT AS OF DEC. 31, 1994) IS DETERMINED BY USING THE LAST-IN, FIRST-OUT (LIFO) METHOD, WHICH GENERALLY REFLECTS THE EFFECTS OF INFLATION OR DEFLATION ON COST OF GOODS SOLD SOONER THAN OTHER INVENTORY COST METHODS. THE COST OF OTHER INVENTORIES GENERALLY IS DETERMINED BY USING THE FIRST-IN, FIRST-OUT (FIFO) METHOD. The components of inventories were:
1994 1993 ---- ---- Finished goods $ 751 $ 734 Goods in process 285 319 Raw materials and supplies 459 430 ------ ------ Inventories, at FIFO cost 1,495 1,483 Excess of FIFO over LIFO cost (283) (259) ------ ------ TOTAL $1,212 $1,224 ------ ------
Inventories at FIFO cost approximate current cost. The effect of LIFO inventory liquidations increased pretax income by $15 million in 1994 and by $31 million in 1993. INCOME TAXES The components of income (loss) from continuing operations before income taxes were:
1994 1993 1992 ----- ----- ----- United States $ 447 $ 547 $ (14) Outside United States 448 182 (160) ----- ----- ----- TOTAL $ 895 $ 729 $(174) ----- ----- -----
The components of income tax expense (benefit) charged to continuing operations were:
1994 1993 1992 ----- ----- ----- Current: U.S. federal $ 118 $ 113 $ 56 U.S. state 17 12 24 Outside United States 94 56 19 ----- ----- ----- 229 181 99 ----- ----- ----- Deferred: U.S. federal 2 35 (59) U.S. state 3 8 (15) Outside United States 39 11 (73) ----- ----- ----- 44 54 (147) ----- ----- ----- TOTAL $ 273 $ 235 $ (48) ----- ----- -----
Factors causing Monsanto's effective tax rate for continuing operations to differ from the U.S. federal statutory rate were:
1994 1993 1992 ---- ---- ---- U.S. federal statutory rate 35% 35% (34)% Benefits attributable to: U.S. export earnings (1) (2) (9) Puerto Rican operations (2) (1) (4) Higher (lower) ex-U.S. rates -- (3) (12) Nondeductible goodwill 1 1 3 Valuation allowances (1) 5 19 Effect of U.S. tax rate change (2) State income taxes 1 2 2 Other (2) (3) 7 ---- ---- ---- EFFECTIVE INCOME TAX RATE 31% 32% (28)% ---- ---- ----
50 26 In 1992, the income taxes netted against the gain on the sale of Fisher Controls and the cumulative effect of adopting Statement of Financial Accounting Standards (SFAS) No. 106 exceeded the 34 percent U.S. federal statutory rate, primarily because of the effect of state income taxes. Monsanto adopted SFAS No. 109, "Accounting for Income Taxes," effective Jan. 1, 1992, and recognized a gain of $118 million, or $0.96 per share. This gain has been reflected in the Statement of Consolidated Income as a cumulative effect of an accounting change. Deferred income tax balances reflect the effect of temporary differences between the amounts of assets and liabilities for income tax purposes, compared with the respective amounts for financial statement purposes. Deferred income tax balances were related to:
1994 1993 ----------------- ------------------ Asset Liability Asset Liability ----- --------- ----- --------- Property $(383) $ 40 $(347) $ 49 Postretirement benefits 475 8 480 2 Restructuring reserves 69 (3) 128 9 Environmental liabilities 69 93 Inventory 35 44 Other 212 20 145 (6) Valuation allowances (85) (89) ----- ---- ----- ---- Total $ 392 $ 65 $ 454 $ 54 ----- ---- ----- ----
INCOME AND REMITTANCE TAXES HAVE NOT BEEN RECORDED ON $700 MILLION IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES, EITHER BECAUSE ANY TAXES ON DIVIDENDS WOULD BE OFFSET SUBSTANTIALLY BY FOREIGN TAX CREDITS OR BECAUSE MONSANTO INTENDS TO REINVEST THOSE EARNINGS INDEFINITELY. If such earnings were paid as dividends, the estimated U.S. income tax would be $96 million. SHORT-TERM DEBT AND CREDIT ARRANGEMENTS Short-term debt was:
1994 1993 ---- ---- Notes payable to banks $ 79 $ 49 Commercial paper 75 16 Bank overdrafts 77 67 Current portion of long-term debt 81 91 ---- ---- TOTAL $312 $223 ---- ---- Weighted average interest rates of notes payable as of Dec. 31: Banks 5.1% 6.8% Commercial paper 4.1% 3.1% Includes the effect of notes in certain countries where local inflation results in high interest rates.
Monsanto had aggregate short-term loan facilities of $299 million, under which loans totaling $79 million were outstanding as of Dec. 31, 1994. Interest on these loans is related to various bank rates. Monsanto's worldwide unused short-term loan facilities were $220 million as of Dec. 31, 1994. On Feb. 2, 1995, Monsanto amended its existing $750 million credit facility to expire in the year 2000, and to permit the company to request that the lenders increase their commitments up to an aggregate of $1 billion. There were no borrowings under the previous facility as of Dec. 31, 1994. Also on Feb. 2, 1995, Monsanto entered into a new $450 million credit agreement with a term of 364 days. Monsanto may request that the lenders under that agreement increase their commitments up to an aggregate $650 million, and/or agree to renew the agreement for additional 364-day periods. To the extent that lenders decline to increase or, in the case of the 364-day agreement, renew their commitments, Monsanto may request that new lenders become parties to the agreements. These credit facilities will be used to support the issuance of commercial paper. Interest on amounts borrowed under these agreements would likely be at money market rates. Covenants under these credit facilities restrict maximum borrowings. The company does not anticipate that future borrowings will be limited by these restrictions. 51 27 LONG-TERM DEBT Long-term debt (exclusive of current maturities) was:
1994 1993 ------ ------ Industrial revenue bond obligations, average rate in 1994 of 5.3% due 1996 to 2028 $ 347 $ 353 Medium-term notes, rates in 1994 ranging from 8.4% to 9.0%, due 1996 to 2005 200 247 Commercial paper, swapped to an effective rate of 8.6% through February 1996 181 187 6% notes due 2000 150 150 7.09% and 8.13% amortizing ESOP notes and debentures due 2000 and 2006, guaranteed by the company 160 170 8 7/8% debentures due 2009 99 99 8.7% debentures due 2021 100 100 Other 168 196 ------ ------ Total $1,405 $1,502 ------ ------
Maturities and sinking fund requirements on long-term debt are $81 million, $280 million, $68 million, $68 million and $70 million for 1995, 1996, 1997, 1998 and 1999, respectively. Commercial paper balances of $181 million and $187 million as of Dec. 31, 1994 and 1993, respectively, have been classified as long-term debt. Monsanto has the ability and intent to renew these obligations past 1995 and into future periods. Interest rate swap agreements are used to reduce interest rate risks and to manage interest expense. By entering into these agreements, the company changes the fixed/variable interest rate mix of the debt portfolio. As of Dec. 31, 1994, Monsanto was party to interest rate swap agreements with an aggregate notional principal amount of $377 million related to existing debt. The agreements are primarily for conversion of floating-rate debt into fixed rates, which reduces the company's risk of incurring higher interest costs in periods of rising interest rates. Monsanto is subject to loss if the counterparties to these agreements do not perform. INTEREST DIFFERENTIALS FROM SWAP AGREEMENTS TO BE PAID OR RECEIVED ARE ACCRUED AS INTEREST RATES CHANGE OVER THE RELATED DEBT PERIOD. FAIR VALUES OF FINANCIAL INSTRUMENTS The estimated fair values of Monsanto's financial instruments were:
1994 1993 ---------------- ---------------- Recorded Fair Recorded Fair Amount Value Amount Value -------- ----- -------- ----- ASSETS: Investments in securities and other assets $ 409 $ 400 $ 328 $ 339 Foreign currency option contracts 7 5 6 3 LIABILITIES: Currency swaps 2 9 3 9 Interest rate swaps 1 17 3 23 Long-term debt 1,405 1,408 1,502 1,590
The recorded amounts of cash, trade receivables, discounted receivables, third-party guarantees, foreign currency forward contracts, accounts payable, and short-term debt approximate their fair values. Fair values are estimated using quoted market prices, estimates obtained from brokers, and other appropriate valuation techniques based on information available as of Dec. 31, 1994. The fair- value estimates do not necessarily reflect the values Monsanto could realize in the current market. POSTRETIREMENT BENEFITS -- PENSIONS Most Monsanto employees are covered by noncontributory pension plans. The components of pension cost (income) were:
1994 1993 1992 ---- ---- ---- Service cost for benefits earned during the year $ 75 $ 75 $ 65 Interest cost on benefit obligation 269 285 272 Assumed return on plan assets (317) (342) (291) Amortization of unrecognized net gain (12) (26) (41) ----- ----- ----- TOTAL $ 15 $ (8) $ 5 ----- ----- ----- Actual returns (losses) on plan assets were $(142) million, $550 million and $230 million in 1994, 1993 and 1992, respectively.
52 28 Pension benefits are based on the employee's years of service and/or compensation level. Pension plans are funded in accordance with Monsanto's long-range projections of the plans' financial conditions. These projections take into account benefits earned and expected to be earned, anticipated returns on pension plan assets, and income tax and other regulations. Pension costs are determined by using the preceding year-end rate assumptions. Assumptions used as of Dec. 31 for the principal plans were:
1994 1993 1992 ---- ---- ---- Discount rate 8.5% 7.25% 8.5% Assumed long-term rate of return on plan assets 9.5% 9.50% 9.5% Annual rates of salary increase (for plans that base benefits on final compensation level) 5.0% 4.25% 6.0%
The funded status of Monsanto's pension plans at year-end was:
1994 1993 ------ ------ PLAN ASSETS AT FAIR VALUE $3,358 $3,827 ------ ------ Actuarial present value of plan benefits: Vested $2,913 $3,266 Nonvested 130 120 ------ ------ Accumulated benefit obligation 3,043 3,386 Effect of projected future salary increases 360 373 ------ ------ PROJECTED BENEFIT OBLIGATION $3,403 $3,759 ------ ------ Excess (Deficiency) of plan assets over projected benefit obligation $ (45) $ 68 Less: Unrecognized initial net gain 121 161 Unrecognized prior service costs (202) (261) Unrecognized subsequent net gain 206 305 ------ ------ ACCRUED NET PENSION LIABILITY $ 170 $ 137 ------ ------ Includes $146 million and $122 million, respectively, for unfunded plans. Includes $126 million and $108 million, respectively, for unfunded plans.
The accrued net pension liability was included in: Postretirement liabilities $ 225 $ 185 Less: Other assets (55) (48) ------ ------ ACCRUED NET PENSION LIABILITY $ 170 $ 137 ------ ------
As a result of employment reductions from the 1992 restructuring program, Monsanto settled a portion of its projected benefit obligation through lump-sum payments to retirees in 1993. Accordingly, $30 million of accrued net pension liability was transferred to restructuring reserves during 1993. Included in the above table, plan assets and projected benefit obligations for the principal U.S. plans were approximately $2,983 million and $2,883 million, respectively, as of Dec. 31, 1994. The assumptions used to compute the funded status of the principal U.S. plans were changed as of Dec. 31, 1994. These changes in assumptions resulted in a decrease of approximately $360 million in the projected benefit obligation. Plan assets consist principally of common stocks and U.S. government and corporate obligations. Because the company's principal pension plans are well funded, contributions to these plans were neither required nor made in 1994, 1993 and 1992. POSTRETIREMENT BENEFITS -- HEALTH CARE AND OTHER Monsanto provides certain health care and life insurance benefits for retired employees. Substantially all of Monsanto's regular, full-time U.S. employees and certain employees in other countries may become eligible for these benefits if they reach retirement age while employed by Monsanto. These postretirement benefits are unfunded and are generally based on the employee's years of service and/or compensation level. Monsanto adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," effective Jan. 1, 1992, and recognized an aftertax expense of $658 million ($1,045 million pretax), or $5.34 per share, for retiree benefits earned through 1991. The expense was included in the Statement of Consolidated Income as a cumulative effect of an accounting change. SFAS No. 106 requires that the cost of other postretirement benefits be accrued by the date the employees become eligible for the benefits. The components of the cost of these postretirement benefits, principally health care and life insurance, were:
1994 1993 1992 ---- ---- ---- Service cost for benefits earned during the year $ 23 $ 24 $ 26 Interest cost on benefit obligation 87 92 88 Amortization of unrecognized net loss 7 -- ---- ---- ---- TOTAL $117 $116 $114 ---- ---- ----
53 29 Postretirement costs are determined by using the preceding year- end rate assumptions. Assumptions used as of Dec. 31 for the principal plans were:
1994 1993 1992 ---- ---- ---- Discount rate 8.5% 7.25% 8.5% Initial trend rate for health care costs 11.5% 12.00% 14.0% Ultimate trend rate for health care costs 5.5% 5.00% 6.0%
The initial trend rate for health care costs declines by 1 percent a year to 5.5 percent for years after the year 2000. A 1 percent increase in the assumed trend rate for health care costs would have increased the cost of 1994 postretirement health care benefits by $4 million and the accumulated benefit obligation as of Dec. 31, 1994, by $50 million. As of Dec. 31, the status of Monsanto's postretirement health care and life insurance benefit plans, and employee disability benefit plans was:
1994 1993 ------ ------ ACCUMULATED BENEFIT OBLIGATION: Retirees $ 869 $ 870 Eligible active employees 55 86 Other active employees 214 277 ------ ------ TOTAL $1,138 $1,233 Unrecognized benefits from prior service 43 36 Unrecognized subsequent net gain (loss) 17 (126) ------ ------ ACCRUED LIABILITY $1,198 $1,143 ------ ------
The accrued liability was included in: Miscellaneous accruals $ 82 $ 72 Postretirement liabilities 1,116 1,071 ------ ------ ACCRUED LIABILITY $1,198 $1,143 ------ ------
The assumptions used to compute the accumulated benefit obligation of the principal plans were changed as of Dec. 31, 1994, resulting in a decrease of approximately $100 million in the obligation. EMPLOYEE SAVINGS PLANS For some employee savings plans, employee contributions are matched in part by Monsanto. Matching contributions charged to expense for such plans were $30 million in 1994, $31 million in 1993 and $33 million in 1992. During 1991, Monsanto established an Employee Stock Ownership Plan (ESOP) and guaranteed the long-term notes and debentures issued by the ESOP. The ESOP also borrowed $50 million from Monsanto. In January 1992, the ESOP used the proceeds of the loans to purchase 3.7 million shares of common stock from Monsanto, a portion of which is allocated each year to employee savings accounts as matching contributions. UNALLOCATED SHARES HELD BY THE ESOP ARE CONSIDERED OUTSTANDING FOR EARNINGS PER SHARE CALCULATIONS. The proceeds from the issuance of common stock to the ESOP were used primarily for the purchase of an equivalent number of common shares under a treasury stock purchase program. COMPENSATION EXPENSE IS EQUAL TO THE COST OF THE SHARES ALLOCATED TO PARTICIPANTS, LESS DIVIDENDS PAID ON THE ESOP SHARES HELD. Dividends on the common stock owned by the ESOP are being used to repay the ESOP borrowings. In 1994, 324,020 shares were allocated to participants under the plan, leaving 2,976,155 unallocated shares as of Dec. 31, 1994.
1994 1993 1992 ---- ---- ---- Total ESOP expense $ 29 $ 25 $ 28 Interest portion of total ESOP expense 17 18 19 Cash contribution 19 20 19 Dividends paid on ESOP shares held 9 9 8
STOCK OPTION PLANS Key officers and employees have been granted Monsanto stock options under the company's 1994 Management Incentive Plans; the Searle Monsanto Stock Option Plan (Searle Plan); and the NutraSweet/Monsanto Stock Plan (NutraSweet Plan). Information about the status of such stock options is presented below:
Outstanding Exercisable --------------------------------- Shares Shares Price per Share - ------------------------------------------------------------------------------- Dec. 31, 1992 5,140,969 10,142,705 $21.31 - $74.25 - ------------------------------------------------------------------------------- 1993: Granted 4,710,999 51.19 - 65.81 Exercised (1,253,869) 21.31 - 68.13 Expired (337,230) 41.13 - 73.56 - ------------------------------------------------------------------------------- DEC. 31, 1993 5,724,125 13,262,605 22.81 - 74.25 - ------------------------------------------------------------------------------- 1994: Granted 2,579,294 69.44 - 82.06 Exercised (1,821,245) 22.81 - 74.25 Expired (311,874) 38.94 - 77.75 - ------------------------------------------------------------------------------- DEC. 31, 1994 7,168,599 13,708,780 22.81 - 82.06 - -------------------------------------------------------------------------------
54 30 Under the 1994 Management Incentive Plans, the Searle Plan and the NutraSweet Plan, 5,510,925 shares remain available for grant. In February 1994, Monsanto established a grantor trust and contributed 2.5 million shares of Monsanto common stock to be used to satisfy compensation and benefit arrangements and obligations, including issuance of shares upon the exercise of certain stock options. Shares held by the grantor trust are included in earnings per share calculations only after they are transferred to employees. EARNINGS PER SHARE Earnings per share were computed using the weighted average number of common shares and common share equivalents outstanding each year (116,984,960 in 1994; 120,380,516 in 1993; and 123,443,744 in 1992). Common share equivalents (2,399,245 in 1994; 1,314,921 in 1993; and 1,041,096 in 1992) consist primarily of common stock issuable upon exercise of outstanding stock options. Earnings per share assuming full dilution were not significantly different from the primary amounts. CAPITAL STOCK As of Dec. 31, 1994, there were 19,219,705 common shares reserved for employee stock options. In January 1990, the company's board of directors declared a dividend of one preferred stock purchase right on each outstanding share of the company's common stock. If a person or group acquires beneficial ownership of 20 percent or more, or announces a tender offer that would result in beneficial ownership of 20 percent or more, of the company's outstanding common stock, the rights become exercisable and each right will then entitle its holder to purchase one one-hundredth of a share of a new series of preferred stock for $450. If Monsanto is acquired in a business combination transaction while the rights are outstanding, each right will entitle its holder to purchase, for $450, common shares of the acquiring company having a market value of $900. In addition, if a person or group acquires beneficial ownership of 20 percent or more of the company's outstanding common stock, each right will entitle its holder (other than such person or members of such group) to purchase, for $450, a number of shares of the company's common stock having a market value of $900. Furthermore, at any time after a person or group acquires beneficial ownership of 20 percent or more (but less than 50 percent) of the company's outstanding common stock, the board of directors may, at its option, exchange part or all of the rights (other than rights held by the acquiring person or group) for shares of the company's common stock on a one-for-one basis. At any time prior to the acquisition of such a 20 percent position, the company can redeem each right for 1 cent. The board of directors is also authorized to reduce the aforementioned 20 percent thresholds to not less than 10 percent. The rights expire in the year 2000. COMMITMENTS AND CONTINGENCIES Commitments, principally in connection with uncompleted additions to property, were approximately $45 million as of Dec. 31, 1994. Excluding the ESOP notes and debentures, Monsanto was contingently liable as a guarantor for bank loans and for discounted customers' receivables totaling approximately $311 million and $316 million as of Dec. 31, 1994 and 1993, respectively. Future minimum payments under noncancelable operating leases and unconditional inventory purchases are $119 million for 1995, $96 million for 1996, $117 million for 1997, $59 million for 1998, $60 million for 1999, and $106 million thereafter. The more significant concentrations in Monsanto's trade receivables at year-end were:
1994 1993 ---- ---- U.S. agricultural product distributors $295 $294 European agricultural product distributors 103 117 Pharmaceutical distributors worldwide 287 287 Customers in the former Soviet Union 40 78
Management does not anticipate incurring losses on its trade receivables in excess of established allowances. COSTS FOR REMEDIATION OF WASTE DISPOSAL SITES ARE ACCRUED IN THE ACCOUNTING PERIOD IN WHICH THE RESPONSIBILITY IS ESTABLISHED AND WHEN THE COST IS ESTIMABLE. Monsanto's Statement of Consolidated Financial Position included accrued liabilities of $207 million and $266 million as of Dec. 31, 1994 and 1993, respectively, for the remediation of identified waste disposal sites. Expenditures related to remediation activities were $65 million in 1994, $53 million in 1993 and $46 million in 1992. 55 31 Monsanto's future remediation expenses for waste disposal sites are affected by a number of uncertainties, including, but not limited to, the method and extent of remediation, the percentage of material attributable to Monsanto at the sites relative to that attributable to other parties, and the financial capabilities of the other potentially responsible parties (PRPs). Because of the uncertainties associated with remediation activities, Monsanto's potential future expenses to remediate these sites could approximate an additional $100 million. POST-CLOSURE AND REMEDIATION COSTS FOR HAZARDOUS AND OTHER WASTE FACILITIES AT OPERATING LOCATIONS ARE ACCRUED OVER THE ESTIMATED LIFE OF THE FACILITY AS PART OF ITS ANTICIPATED CLOSURE COST. Monsanto's estimated closure costs for these facilities could approximate $135 million. Uncertainties related to these costs include evolving government standards, the method and extent of remediation, and future changes in technology. On April 20, 1994, a federal court jury verdict was returned against Monsanto in a lawsuit related to a Superfund site in La Marque, Texas. The lawsuit was brought by IT Corporation ("IT"), a subsidiary of International Technology Corporation, claiming fraud, negligent misrepresentation and breach of a contract calling for IT to perform incineration and remediation work at the site. The verdict awarded IT $52.8 million in compensatory damages, $28.6 million in punitive damages and $2.6 million in fees. On Dec. 13, 1994, the federal trial judge set aside the jury's findings of fraud and negligent misrepresentation but upheld the finding on breach of contract. The court set aside the punitive damage award and reduced the amount of compensatory damages to $43.8 million. On Jan. 26, 1995, the trial judge issued a memorandum confirming that prejudgment interest would be awarded to IT and specifying the manner in which the amount of such interest should be calculated. Based upon that memorandum, it is not likely that such interest will exceed approximately $21 million. No judgment has yet been entered. The company believes, based on the advice of counsel, that it has meritorious defenses to all of IT's claims. The company will appeal the judgment when it is entered and will continue to defend this matter vigorously. No provision has been made in the company's consolidated financial statements with respect to this matter. 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. SUPPLEMENTAL DATA Supplemental income statement data were:
1994 1993 1992 - ------------------------------------------------------------------------------ Raw material and energy costs $2,375 $2,258 $2,247 Employee compensation and benefits 2,193 2,092 1,994 Current income and other taxes 477 442 393 Rent expense 124 129 138 - ------------------------------------------------------------------------------ Technological expenses: Research and development 609 626 651 Engineering, commercial development and patent 65 69 69 --- --- --- TOTAL TECHNOLOGICAL EXPENSES 674 695 720 - ------------------------------------------------------------------------------ Interest expense: Total interest cost 141 141 185 Less capitalized interest (10) (12) (16) --- --- --- NET INTEREST EXPENSE 131 129 169 - ------------------------------------------------------------------------------ Currency gains (losses) including equity in affiliates' currency gains and losses (23) (6) (39) - ------------------------------------------------------------------------------
SEGMENT INFORMATION Certain operating unit segment data and geographic data for 1994, 1993 and 1992 that appear on pages 14 and 28 are integral parts of the accompanying financial statements. The principal product lines included in each operating unit are shown in the operating unit segment data. 56 32 QUARTERLY DATA -- UNAUDITED
- -------------------------------------------------------------------------- First Second Third Fourth Total Quarter Quarter Quarter Quarter Year - -------------------------------------------------------------------------- Net Sales 1994 $2,001 $2,269 $1,912 $2,090 $8,272 1993 1,941 2,230 1,849 1,882 7,902 - -------------------------------------------------------------------------- Gross Profit 1994 893 1,045 733 827 3,498 1993 835 959 768 776 3,338 - -------------------------------------------------------------------------- Operating Income 1994 319 397 131 76 923 1993 231 326 152 101 810 - -------------------------------------------------------------------------- Net Income 1994 194 258 116 54 622 1993 141 200 95 58 494 - -------------------------------------------------------------------------- Earnings per Share 1994 1.63 2.19 0.99 0.51 5.32 1993 1.17 1.66 0.78 0.49 4.10 - -------------------------------------------------------------------------- Dividends per Share 1994 0.58 0.63 0.63 0.63 2.47 1993 0.56 0.58 0.58 0.58 2.30 - -------------------------------------------------------------------------- Common Stock Price 1994 High 80 3/4 83 3/4 86 1/2 80 1/4 86 1/2 Low 72 3/8 73 5/8 74 1/2 66 1/2 66 1/2 - -------------------------------------------------------------------------- 1993 High 57 5/8 60 1/8 66 1/4 75 75 Low 49 3/4 48 7/8 56 1/8 65 3/8 48 7/8 - --------------------------------------------------------------------------
Historically, Monsanto's net income is higher during the first half of the year, primarily because of the concentration of generally more profitable sales of The Agricultural Group during that part of the year. In the third quarter of 1994, net income included an aftertax gain of $21 million, or $0.18 per share, for interest on the amount of settlement of certain tax matters with the U.S. Internal Revenue Service related to the 1985 acquisition of Searle. Net income for the fourth quarter of 1994 included an aftertax expense of $55 million, or $0.47 per share, for a work force reduction plan approved by the board of directors and for costs to close or exit certain facilities and programs. Also included in the quarter was an aftertax gain of $33 million, or $0.28 per share, from the reversal of excess restructuring reserves from prior years. Net income in the first quarter of 1993 included a $22 million aftertax gain, or $0.18 per share, resulting from reimbursement from insurance companies of various costs associated with damage to a manufacturing site of a raw material for Roundup(R) herbicide. Costs associated with the damage had been expensed in 1992, pending resolution of the claim. The fourth quarter of 1993 included an aftertax expense of $7 million, or $0.06 per share, for a restructuring program and other actions approved by the board of directors. 57 33 FINANCIAL SUMMARY
(Dollars in millions, except per share) 1994 1993 1992 1991 1990 1989 - --------------------------------------------------------------------------------------------------------------- OPERATING RESULTS Net Sales $8,272 $7,902 $7,763 $7,936 $8,068 $7,829 Operating Income 923 810 58 475 808 1,006 As a Percent of Net Sales 11% 10% 1% 6% 10% 13% Income (Loss) from Continuing Operations 622 494 (126) 238 486 627 As a Percent of Net Sales 8% 6% (2)% 3% 6% 8% Income from Discontinued Operations 578 58 60 52 Cumulative Effect of Accounting Changes (540) Net Income (Loss) 622 494 (88) 296 546 679 Return on Shareowners' Equity 21.4% 16.9% (2.6)% 7.6% 13.6% 17.6% - ----------------------------------------------------------------------------------------------------------- EARNINGS PER SHARE Income (Loss) from Continuing Operations $5.32 $4.10 $(1.01) $ 1.87 $ 3.77 $ 4.63 Net Income (Loss) 5.32 4.10 (0.71) 2.33 4.23 5.01 - ----------------------------------------------------------------------------------------------------------- YEAR-END FINANCIAL POSITION Total Assets $8,891 $8,640 $9,085 $9,227 $9,236 $8,604 Working Capital 1,448 1,377 1,512 1,536 1,323 1,326 - ----------------------------------------------------------------------------------------------------------- Property, Plant and Equipment: Gross $7,555 $7,382 $7,602 $7,510 $7,226 $6,578 Net 2,817 2,802 3,005 3,191 3,316 3,009 - ----------------------------------------------------------------------------------------------------------- Long-Term Debt $1,405 $1,502 $1,423 $1,871 $1,645 $1,464 Shareowners' Equity 2,948 2,855 3,005 3,654 4,089 3,941 - ----------------------------------------------------------------------------------------------------------- Current Ratio 1.6 1.6 1.6 1.7 1.6 1.7 Percent of Total Debt to Total Capitalization 37% 38% 36% 38% 35% 33% - ----------------------------------------------------------------------------------------------------------- OTHER DATA Property, Plant and Equipment Purchases $ 409 $ 437 $ 586 $ 554 $ 711 $ 578 Depreciation and Amortization 561 572 765 714 704 659 Interest Expense 131 129 169 166 176 176 Research and Development Expenses 609 626 651 610 595 581 Income Taxes 273 235 (48) 116 230 327 Cash Provided by Operations 1,300 731 912 1,180 1,104 1,037 - ----------------------------------------------------------------------------------------------------------- Stock Price: High $86 1/2 $75 $71 1/4 $76 $60 1/8 $62 1/8 Low 66 1/2 48 7/8 49 3/4 46 38 3/4 40 1/4 Year-End 70 1/2 73 3/8 57 5/8 67 7/8 48 1/4 57 3/4 Price/Earnings Ratio on Year-End Stock Price 13 18 -- 29 11 12 - ----------------------------------------------------------------------------------------------------------- Per Share: Dividends $ 2.47 $ 2.30 $ 2.20 $ 2.045 $ 1.88 $ 1.65 Shareowners' Equity 26.43 24.62 24.95 29.72 32.51 29.79 - ----------------------------------------------------------------------------------------------------------- Shareowners (year-end) 53,694 56,601 60,074 60,152 62,230 61,942 - ----------------------------------------------------------------------------------------------------------- Shares Outstanding (year-end, in millions) 112 116 120 123 126 132 - ----------------------------------------------------------------------------------------------------------- Employees (year-end) 29,354 30,019 33,797 39,281 41,081 42,179 - ----------------------------------------------------------------------------------------------------------- Income from continuing operations and net income for 1994 include a net aftertax loss for restructuring and other unusual items of $1 million, or $0.01 per share. Income from continuing operations and net income for 1993 include a net aftertax gain for restructuring and other unusual items of $15 million, or $0.12 per share. Loss from continuing operations and net loss for 1992 include a net aftertax loss for restructuring and other unusual items of $472 million, or $3.82 per share. Net income for 1991 includes net restructuring expense of $325 million, or $2.54 per share. Net income for 1990 includes $56 million, or $0.43 per share, in gains resulting from divestitures, including the divestiture of certain assets of a joint venture in Japan. Net income for 1989 includes a $36 million, or $0.27 per share, gain on the sale of the analgesics business.
58 34 APPENDIX 1. In Exhibit 13 to the printed Form 10-K, the following bar graphs appear, all depicting data for 1992, 1993 and 1994: on page 32, "Selling Price Index", "Raw Material Cost Index" and "Sales Volume Index"; on page 34, "Agricultural Group Net Sales"; on page 36, "Chemical Group Net Sales"; on page 37, "Searle Net Sales"; and on page 45, "Cash Provided by Continuing Operations". On page 33, a pie-chart graph entitled "1994 Net Sales" appears, depicting a percentage breakdown of Monsanto's 1994 consolidated net sales by Operating Unit Segment. On page 47, a bar graph entitled "Dividend Per Share" appears, depicting annual dividend per share data for the years 1984 through 1994. 2. Throughout the electronic submission of Exhibit 13, trademarks are initially designated on each page by the letter "R" in parentheses or the letters "TM" in parentheses; whereas in the printed copy of the annual report, all trademarks are italicized. EX-21 3 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT The following is a list of the Company's subsidiaries as of December 31, 1994, except for unnamed subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.
Percentage of Voting Power Owned by Monsanto ------------- G. D. Searle & Co. (Delaware Corporation)......................................................... 100 Monsanto Europe, S.A. (Belgian Corporation)....................................................... 100 Monsanto International Holdings, Inc. (Delaware Corporation).......................................................................... 100 Monsanto International Sales Company, Inc. (Virgin Islands Corporation).................................................................... 100 Monsanto p.l.c. (United Kingdom Corporation)...................................................... 100 The NutraSweet Company (Delaware Corporation)..................................................... 100
23 EX-23.1 4 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS MONSANTO COMPANY: We 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 and 33-53367) and on Form S-3 (No. 33-46845) of our opinions dated February 24, 1995, appearing in and incorporated by reference in this annual report on Form 10-K of Monsanto Company for the year ended December 31, 1994. DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Saint Louis, Missouri March 17, 1995 ----------------- EX-23.2 5 CONSENT OF COMPANY COUNSEL 1 EXHIBIT 23.2 CONSENT OF COMPANY COUNSEL I hereby consent to the reference to Company counsel in the "Commitments and Contingencies" note to the financial statements in the Company's 1994 Annual Report to shareowners and incorporated in the 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 and 33-53367) and on Form S-3 (No. 33-46845). 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. RICHARD W. DUESENBERG RICHARD W. DUESENBERG General Counsel Monsanto Company Saint Louis, Missouri March 17, 1995 24 EX-24.1 6 POWER OF ATTORNEY 1 EXHIBIT 24.1 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Joan T. Bok, of Boston, Commonwealth of Massachusetts, Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if personally present and executing any of said documents. Witness my hand this 5th day of January, 1995. JOAN T. BOK ------------------------------- COMMONWEALTH OF MASSACHUSETTS ) ) SS COUNTY OF WORCESTER ) On this 5th day of January, 1995, before me personally appeared Joan T. Bok, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that she executed the same as her free act and deed. RENEE M. KOSSUTH ---------------------------- Notary Public My Commission Expires: April 24, 1998 2 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Robert M. Heyssel, of Seaford, State of Delaware, Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if personally present and executing any of said documents. Witness my hand this 27th day of January, 1995. ROBERT M. HEYSSEL ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 27th day of January, 1995, before me personally appeared Robert M. Heyssel, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. HARRIET CONLON ---------------------------- Notary Public My Commission Expires: HARRIET CONLON Notary Public -- Notary Seal STATE OF MISSOURI ST. LOUIS COUNTY My Commission Expires August 15, 1998 3 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Robert B. Hoffman, of St. Louis County, State of Missouri, Principal Financial Officer of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if per- sonally present and executing any of said documents. Witness my hand this 5th day of January, 1995. R. B. HOFFMAN ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 5th day of January, 1995, before me personally appeared Robert B. Hoffman, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. MARY HELEN MOSS ---------------------------- Notary Public My Commission Expires: August 10, 1997 4 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Gwendolyn S. King, of Philadelphia, Commonwealth of Pennsylvania, Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if per- sonally present and executing any of said documents. Witness my hand this 6th day of January, 1995. GWENDOLYN S. KING ------------------------------- COMMONWEALTH OF PENNSYLVANIA ) ) SS COUNTY OF PHILADELPHIA ) On this 6th day of January, 1995, before me personally appeared Gwendolyn S. King, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that she executed the same as her free act and deed. SUZANNE SCHWARTZ ---------------------------- Notary Public My Commission Expires: June 12, 1995 NOTARIAL SEAL SUZANNE SCHWARTZ, Notary Public City of Philadelphia, Phila. County My Commission Expires June 12, 1995 5 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Philip Leder, of Chestnut Hill, Commonwealth of Massachusetts, Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if per- sonally present and executing any of said documents. Witness my hand this 12th day of January, 1995. PHILIP LEDER ------------------------------- COMMONWEALTH OF MASSACHUSETTS ) ) SS COUNTY OF SUFFOLK ) On this 12th day of January, 1995, before me personally appeared Philip Leder, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. TERRI BRODERICK ---------------------------- Notary Public My Commission Expires: 6/21/96 6 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Howard M. Love, of Pittsburgh, Commonwealth of Pennsylvania, Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if per- sonally present and executing any of said documents. Witness my hand this 5th day of January, 1995. HOWARD M. LOVE ------------------------------- COMMONWEALTH OF PENNSYLVANIA ) ) SS COUNTY OF ALLEGHENY ) On this 5th day of January, 1995, before me personally appeared Howard M. Love, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. JOAN M. ZAKOR ---------------------------- Notary Public My Commission Expires: Notarial Seal Joan M. Zakor, Notary Public Pittsburgh, Allegheny County My Commission Expires April 14, 1995 Member, Pennsylvania Association of Notaries 7 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Richard J. Mahoney, of St. Louis County, State of Missouri, Principal Executive Officer and Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if personally present and executing any of said documents. Witness my hand this 11th day of January, 1995. R. J. MAHONEY ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 11th day of January, 1995, before me personally appeared Richard J. Mahoney, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. MARY K. BRADY ---------------------------- Notary Public My Commission Expires: MARY K. BRADY NOTARY PUBLIC STATE OF MISSOURI ST. LOUIS COUNTY MY COMMISSION EXP. MAY 21, 1996 8 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Frank A. Metz, Jr., of Sloatsburg, State of New York, Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if per- sonally present and executing any of said documents. Witness my hand this 6th day of Jan., 1995. FRANK A. METZ, JR. ------------------------------- STATE OF NEW YORK ) ) SS COUNTY OF ROCKLAND ) On this 6th day of January, 1995, before me personally appeared Frank A. Metz, Jr., to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. MARY ALICE CONWAY ---------------------------- Notary Public My Commission Expires: 1/23/95 MARY ALICE CONWAY Notary Public, State of New York No. 5007249 Qualified in Orange County Commission Expires January 25, 1995 9 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Buck Mickel, of Greenville, State of South Carolina, Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if per- sonally present and executing any of said documents. Witness my hand this 5 day of January, 1995. BUCK MICKEL ------------------------------- STATE OF SOUTH CAROLINA ) ) SS COUNTY OF GREENVILLE ) On this 5th day of January, 1995, before me personally appeared Buck Mickel, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. DOROTHY F. KING ---------------------------- Notary Public My Commission Expires: My Commission Expires February 13, 2000 10 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Jacobus F. M. Peters, of Wassenaar, Country of The Netherlands, Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if per- sonally present and executing any of said documents. Witness my hand this 10th day of January, 1995. JACOBUS F. M. PETERS ------------------------------- COUNTRY OF THE NETHERLANDS ) ) SS CITY OF WASSENAAR ) On this ----- day of ---------------, 1995, before me personally appeared Jacobus F. M. Peters, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. ---------------------------- Notary Public My Commission Expires: --------------------------------------- Seen for legalisation of the above signature of Mr Drs Jacobus Franciscus Maria Peters, born on the eighth of September nineteen-hundred and thirty one in Amsterdam, residing at (2244 AK) Wassenaar, Dennenlaan 15, by me, Annemarie van Lonkhuijzen, civil law notary, residing in The Hague. The Hague, tenth of January nineteenhundred and ninety five. A. VAN LONKHUIJZEN NOTARIS TE 's-GRAVENHAGE A. VAN LONKHUIJZEN ------------------------------ 11 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Nicholas L. Reding, of St. Louis County, State of Missouri, Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if per- sonally present and executing any of said documents. Witness my hand this 18th day of January, 1995. NICHOLAS L. REDING ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 18th day of January, 1995, before me personally appeared Nicholas L. Reding, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. THERESA A. VALENTINE ---------------------------- Notary Public My Commission Expires: January 20, 1998 THERESA A. VALENTINE NOTARY PUBLIC STATE OF MISSOURI MY COMMISSION EXPIRES JAN. 20, 1998 ST. LOUIS COUNTY 12 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, John S. Reed, of Princeton, State of New Jersey, Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if personally present and executing any of said documents. Witness my hand this 17th day of January, 1995. JOHN S. REED ------------------------------- STATE OF NEW YORK ) ) SS COUNTY OF NEW YORK ) On this 17th day of January, 1995, before me personally appeared John S. Reed, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. MARY F. CHIODI ---------------------------- Notary Public My Commission Expires: MARY F. CHIODI Notary Public, State of New York No. 4506585 Qualified in Nassau County Commission Expires January 31, 1996 13 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, William D. Ruckelshaus, of Houston, State of Texas, Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if personally present and executing any of said documents. Witness my hand this 6 day of January, 1995. WILLIAM D. RUCKELSHAUS ------------------------------- STATE OF TEXAS ) ) SS COUNTY OF HARRIS ) On this 6th day of January, 1995, before me personally appeared William D. Ruckelshaus, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. CYNTHIA L. REYNOLDS ---------------------------- Notary Public My Commission Expires: 05-09-96 NOTARY PUBLIC CYNTHIA L. REYNOLDS STATE OF TEXAS MY COMMISSION EXPIRES May 9, 1996 14 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Bruce R. Sents, of St. Louis County, State of Missouri, Principal Accounting Officer of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if per- sonally present and executing any of said documents. Witness my hand this 5 day of January, 1995. BRUCE R. SENTS ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 5th day of January, 1995, before me personally appeared Bruce R. Sents, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. ROBERT L. KELLEY ---------------------------- Notary Public My Commission Expires: October 5, 1996 ROBERT L. KELLEY NOTARY PUBLIC STATE OF MISSOURI ST. LOUIS COUNTY MY COMMISSION EXP. OCT. 5, 1996 15 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That I, Robert B. Shapiro, of St. Louis County, State of Missouri, Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if per- sonally present and executing any of said documents. Witness my hand this 10th day of January, 1995. R. B. SHAPIRO ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 10th day of January, 1995, before me personally appeared Robert B. Shapiro, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. BEVERLY A. OHM ---------------------------- Notary Public My Commission Expires: Feb. 12, 1998 16 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, John B. Slaughter, of Pasadena, State of California, Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint RICHARD W. DUESENBERG, KARL R. BARNICKOL and J. RUSSELL BLEY, JR., all of St. Louis County, Missouri, or any of them acting alone, to be my true and lawful attorneys for me and in my name, place and stead, to execute and sign: (i) any Amendments to Registration Statement No. 33-46845 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements 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 and 33-53367, all on Form S-8, which have previously been filed with the Commission under the Act, covering the registration of shares of Common Stock of the Company; and (ii) the Annual Report on Form 10-K and any Amendments thereto to be filed with the Commission under the Securities Exchange Act of 1934; giving and granting unto said attorneys full power and authority to do and perform such actions as fully as I might have done or could do if per- sonally present and executing any of said documents. Witness my hand this 10th day of January, 1995. JOHN B. SLAUGHTER ------------------------------- STATE OF CALIFORNIA ) ) SS COUNTY OF LOS ANGELES ) On this 10th day of January, 1995, before me personally appeared John B. Slaughter to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. KAY LYNN FUJIWARA ---------------------------- Notary Public My Commission Expires: --------------------------------------- THE GREAT SEAL KAY LYNN FUJIWARA OF THE STATE OF COMM. #995481 CALIFORNIA Notary Public--California LOS ANGELES COUNTY My Comm. Expires JUN 11, 1997 EX-24.2 7 MONSANTO COMPANY CERTIFICATE 1 EXHIBIT 24.2 MONSANTO COMPANY CERTIFICATE ----------- I, J. Russell Bley, Jr., Assistant Secretary of Monsanto Company, hereby certify that the following is a full, true and correct copy of a resolution adopted by the Board of Directors of Monsanto Company on February 24, 1995, at which meeting a quorum was present and acting throughout: RESOLVED, that each officer and director who may be required to sign and execute Form 10-K or any document in connection therewith (whether for and on behalf of the Company, or as an officer or director of the Company, or otherwise), be and hereby is authorized to execute a power of attorney appointing Messrs. Richard W. Duesenberg, Karl R. Barnickol and J. Russell Bley, Jr., or any of them, severally, his true and lawful attorney or attorneys to sign in his name, place and stead in any such capacity such Form 10-K and any and all amendments thereto and documents in connection therewith, and to file the same with the Commission or any other governmental body, each of said attorneys to have power to act with or without the others, and to have full power and authority to do and perform, in the name and on behalf of each of said officers and directors, every act whatsoever which such attorneys, or any one of them, may deem necessary, appropriate or desirable to be done in connection therewith as fully and to all intents and purposes as such officers or directors might or could do in person. IN WITNESS WHEREOF, I have hereunto set my hand in my official capacity and affixed the corporate seal of Monsanto Company this 3rd day of March, 1995. J. RUSSELL BLEY, JR. ______________________________ J. Russell Bley, Jr. Assistant Secretary SEAL EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT OF CONSOLIDATED INCOME OF MONSANTO COMPANY AND SUBSIDIAIRES FOR THE YEAR ENDED DECEMBER 31, 1994, AND THE STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF DECEMBER 31, 1994. SUCH INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 1,000,000 12-MOS DEC-31-1994 DEC-31-1994 507 0 1,530 0 1,212 3,883 7,555 4,738 8,891 2,435 1,405 329 0 0 2,619 8,891 8,272 8,272 4,774 4,774 0 0 131 895 273 622 0 0 0 622 5.32 0 Reported net of allowances of $57
EX-99 9 COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 99 MONSANTO COMPANY AND SUBSIDIARIES --------------------------------- COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions)
Year Ended December 31, ----------------------------------------------------------------- 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Income (loss) from continuing operations before provision for income taxes........................... $ 895 $ 729 $(174) $354 $716 Add Fixed charges..................................... 182 184 231 233 248 Less capitalized interest......................... (10) (12) (16) (24) (29) Dividends from affiliated companies............... 2 5 5 5 6 Less equity income (add equity loss) of affiliated companies.......................................... (21) (20) (1) (3) 11 ------ ----- ----- ---- ---- Income as adjusted.............................. $1,048 $ 886 $ 45 $565 $952 ====== ===== ===== ==== ==== Fixed charges Interest expense.................................... $ 131 $ 129 $ 169 $166 $176 Capitalized interest................................ 10 12 16 24 29 Portion of rents representative of interest factor.. 41 43 46 43 43 ------ ----- ----- ---- ---- Fixed charges................................... $ 182 $ 184 $ 231 $233 $248 ====== ===== ===== ==== ==== Ratio of earnings to fixed charges.................... 5.76 4.82 0.19 2.42 3.84 ====== ===== ===== ==== ==== Includes restructuring and other unusual items of $7 million, $(30) million, $699 million and $457 million in 1994, 1993, 1992 and 1991, respectively. Excluding the restructuring and other unusual items, the ratio of earnings to fixed charges would have been 5.80, 4.65, 3.22 and 4.39, respectively.
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