-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K9lJBlZF6NoWxGZAkOB72J3Ki61oODmM9VKk9CTVtyaKIFuiYGHatXOJxaK+uniJ j7oGUp7o9Bgjd0L9/4sYDA== 0000950114-96-000056.txt : 19960318 0000950114-96-000056.hdr.sgml : 19960318 ACCESSION NUMBER: 0000950114-96-000056 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960315 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-02516 FILM NUMBER: 96535318 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-K 1 1995 FORM 10-K 1 1 9 9 5 =============================================================================== 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, 1995 ----------------- 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. [ ] STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF THE REGISTRANT: APPROXIMATELY $15.8 BILLION AS OF THE CLOSE OF BUSINESS ON FEBRUARY 29, 1996. INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE: 117,814,610 SHARES OF COMMON STOCK, $2 PAR VALUE, OUTSTANDING AT FEBRUARY 29, 1996. DOCUMENTS INCORPORATED BY REFERENCE 1. PORTIONS OF MONSANTO COMPANY ANNUAL REPORT TO SECURITY HOLDERS FOR THE YEAR ENDED DECEMBER 31, 1995. (PARTS I AND II OF FORM 10-K.) 2. PORTIONS OF MONSANTO COMPANY NOTICE OF ANNUAL MEETING AND PROXY STATEMENT DATED MARCH 14, 1996. (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 diversified line of agricultural products; chemical products; pharmaceuticals; and food ingredients. 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 March 8, 1996, Monsanto and DEKALB Genetics Corp. finalized a long-term research and development collaboration in agricultural biotechnology. In addition, Monsanto acquired approximately 40 percent of the total outstanding common stock of DEKALB for approximately $152 million. This includes approximately 10 percent of DEKALB's Class A voting shares and approximately 45 percent of the Class B non-voting shares. In December 1995, the Company's Board of Directors approved a restructuring plan as part of an overall strategy to reduce costs and eliminate redundant functions. The pretax charge of $169 million ($125 million aftertax, or $1.08 per share) associated with this action is intended to cover the costs of work force reductions, business consolidations, facility closures and the exit from nonstrategic businesses and facilities. See ``Review of Consolidated Results of Operations'' and ``Restructuring and Other Actions'' on pages 29 and 51, respectively, of the Company's Annual Report to shareowners for the year ended December 31, 1995 (the ``1995 Annual Report''). In December 1995, Monsanto sold its worldwide styrenics plastics business for $580 million. In a separate but related transaction, Monsanto has reached an agreement to sell its shares in Monsanto Premier Kasei Co. Ltd., a styrenics plastics manufacturing joint venture in Thailand, to one of its joint venture partners. See ``Review of Consolidated Results of Operations'' and ``Principal Acquisitions and Divestitures'' on pages 29 and 53, respectively, of the 1995 Annual Report. In June 1995, Monsanto announced that it had signed a letter of intent to acquire a 49.9 percent interest in Calgene, Inc. for approximately $30 million in cash, certain intellectual property, and 100 percent of the partnership interests in Gargiulo L. P. and Gargiulo G. P. (jointly ``Gargiulo''). In addition, Monsanto will provide long-term credit facilities for the general business needs of Calgene and Gargiulo. The Calgene transaction is subject to the approval of the shareowners of Calgene and is anticipated to close in early 1996. See ``Review of Changes in Financial Position'' and ``Principal Acquisitions and Divestitures'' on pages 45 and 53, respectively, of the 1995 Annual Report. INDUSTRY SEGMENTS; PRINCIPAL PRODUCTS For 1995, Monsanto reported its business under four industry segments: Agricultural Products, Chemicals, Pharmaceuticals, and Food Ingredients. The tabular and narrative information appearing under ``Segment Data'' and ``Geographic Data'' on pages 34, 35 and 43 of the 1995 Annual Report is incorporated herein by reference. The following is a list of principal products categorized by major end-use markets, within the industry segments in which they were reported for 1995.
AGRICULTURAL PRODUCTS Major End-Use Manufacturing Major Raw Materials Major End-Use Markets Major Products Products & Applications Locations & Components --------------------- -------------- ----------------------- ------------- ------------------- Agricultural, industrial, Roundup(R) herbicide Multipurpose, non- Alvin, TX; Antwerp, Disodiumiminodiacetate; turf and ornamental and other glyphosate- selective agricultural and Belgium; Fayetteville, NC; Phosphorus Trichloride applications based herbicides industrial applications Luling, LA; Sao Jose dos Campos, Brazil -------------------------------------------------------------------------------------------------------- 1 3 AGRICULTURAL PRODUCTS (CONT'D) Major End-Use Manufacturing Major Raw Materials Major End-Use Markets Major Products Products & Applications Locations & Components --------------------- -------------- ----------------------- ------------- ------------------- Lasso(R) and Corn, soybean, peanut and Muscatine, IA Chloroacetyl Chloride; Harness(R) herbi- milo (sorghum) crops Diethylaniline cides and other acetanilide-based herbicides corn only --------------------------------------------------------------------------------------------------------- Avadex(R) BW Wheat crops Antwerp, Belgium; Ammonium Thiocyanate; herbicide; Far-Go(R) Muscatine, IA Diisopropylamine; herbicide Trichloropropane --------------------------------------------------------------------------------------------------------- Permit(R) herbicide Postemergence control of Manufactured by third Halosulfuron sedges and broadleaf weeds party in corn and grain sorghum crops - ------------------------------------------------------------------------------------------------------------------------------------ Residential applications Roundup(R) herbicide; Herbicides; insecticides; Fort Madison, IA Acephate; Chlorpyrifos; Ortho(R) lawn-and- fungicides; fertilizers Diazinon; Glyphosate; garden products Malathion - ------------------------------------------------------------------------------------------------------------------------------------ Animal agricultural Posilac(R) bovine Increase efficiency of Manufactured by third No major raw materials applications somatotropin milk production in dairy party cows - ------------------------------------------------------------------------------------------------------------------------------------ CHEMICALS 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 --------------------------------------------------------------------------------------------------------- Polymer modifiers Vinyl flooring; caulks and Antwerp, Belgium; Butanol; Chlorine; sealants; adhesives; Bridgeport, NJ; LaSalle, 2-Ethylhexanol; Phenol; coatings; wall covering; Quebec, Canada Phthalic Anhydride; vinyl upholstery; Toluene insulation; furniture --------------------------------------------------------------------------------------------------------- Saflex(R) plastic Architectural glass Ghent, Belgium; Sao Butyraldehyde; Ethanol; interlayer Jose dos Campos, Brazil; Polyvinyl Alcohol; Vinyl Springfield, MA; Acetate Monomer Trenton, MI --------------------------------------------------------------------------------------------------------- Specialty resins Coatings and adhesives Alvin, TX; LaSalle, Acrylate Esters; Butanol; Quebec, Canada; Formaldehyde; Melamine; Springfield, MA; Methanol; Vinyl Acetate Trenton, MI Monomer --------------------------------------------------------------------------------------------------------- Ammonium Fire retardant coatings; Camden, NJ Phosphorus polyphosphate polymer additives --------------------------------------------------------------------------------------------------------- Doormats Doormats Ghent, Belgium; Polyethylene St. Louis, MO - ------------------------------------------------------------------------------------------------------------------------------------ Vehicles Saflex(R) plastic Windshields Ghent, Belgium; Sao Jose Butyraldehyde; Ethanol; interlayer dos Campos, Brazil; Polyvinyl Alcohol; Vinyl Springfield, MA; Trenton, Acetate Monomer MI --------------------------------------------------------------------------------------------------------- Vydyne(R) nylon Automotive exterior and Pensacola, FL Acrylonitrile; Ammonia; molding resins interior molded parts; Cyclohexane; Propylene under-the-hood applications --------------------------------------------------------------------------------------------------------- 2 4 CHEMICALS (CONT'D) Major End-Use Manufacturing Major Raw Materials Major End-Use Markets Major Products Products & Applications Locations & Components --------------------- -------------- ----------------------- ------------- ------------------- Nylon filament; nylon Tires; molding resins for Pensacola, FL Acrylonitrile; Ammonia; polymer auto grilles, bumpers and Cyclohexane; Propylene gears --------------------------------------------------------------------------------------------------------- Specialty resins; Automotive coatings and Antwerp, Belgium; Butanol; Chlorine; polymer modifiers sealants Bridgeport, NJ; LaSalle, Formaldehyde; Melamine; Quebec, Canada; Methanol; Phthalic Springfield, MA Anhydride; Toluene --------------------------------------------------------------------------------------------------------- Skydrol(R) aviation Hydraulic fluids for St. Louis, MO Phosphorus Oxychloride hydraulic fluids; commercial aircraft lubricants - ------------------------------------------------------------------------------------------------------------------------------------ Personal Products Acrilan(R) acrylic Sweaters; half-hose; Decatur, AL Acrylonitrile fiber active wear; hand-knit yarns; craft yarns --------------------------------------------------------------------------------------------------------- Vydyne(R) nylon Consumer electronics; Pensacola, FL Acrylonitrile; Ammonia; molding resins medical devices Cyclohexane; Propylene --------------------------------------------------------------------------------------------------------- Dental phosphates; Dentifrices; dish Augusta, GA; Newport, Benzene; Caustic Soda; industrial phosphates detergents; water United Kingdom; Ruabon, Phosphorus; Soda Ash conditioners United Kingdom; St. Louis, MO; Sao Jose dos Campos, Brazil; Soda Springs, ID; Trenton, MI - ------------------------------------------------------------------------------------------------------------------------------------ Chemicals Industrial phosphates; Metal treating, cleaning Augusta, GA; Luling, LA; Ammonia; Chlorine; phosphoric acid; and etching; plant food St. Louis, MO; Sauget, IL; Phosphorus; Soda Ash; phosphorus fertilizers; oil additives Trenton, MI Sulphur pentasulfide; phosphorus trichloride --------------------------------------------------------------------------------------------------------- Nitrochlorobenzene Dyes; pigments; rubber Anniston, AL; Nitro, WV; Benzene; Caustic Soda; derivatives; Sodium preservatives; Ruabon, United Kingdom; Chlorine MBT engineering; 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 - ------------------------------------------------------------------------------------------------------------------------------------ Food Food additives Bakery; dairy; meat St. Louis, MO; Sao Jose dos Caustic Soda; Lime; Campos, Brazil; Trenton, MI Phosphorus - ------------------------------------------------------------------------------------------------------------------------------------ PHARMACEUTICALS Pharmaceuticals 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) --------------------------------------------------------------------------------------------------------- 3 5 PHARMACEUTICALS (CONT'D) Major End-Use Manufacturing Major Raw Materials Major End-Use Markets Major Products Products & Applications Locations & Components --------------------- -------------- ----------------------- ------------- ------------------- Daypro(R) (oxaprozin); Anti-inflammatory Augusta, GA; Caguas, Benzoin; Diclofenac; Arthrotec(R) Puerto Rico; Morpeth, Misoprostol (misoprostol/ United Kingdom diclofenac) --------------------------------------------------------------------------------------------------------- Ambien(R) (zolpidem Central nervous system Caguas, Puerto Rico Zolpidem tartrate) (Sleep) --------------------------------------------------------------------------------------------------------- Cytotec(R) Gastrointestinal Caguas, Puerto Rico; Coapa, Norprostol (misoprostol) Mexico; Morpeth, United Kingdom --------------------------------------------------------------------------------------------------------- Demulen(R) (ethynodiol Women's health Caguas, Puerto Rico; Ethinyl Estradiol; diacetate); Tri- Morpeth, United Kingdom Ethynodiol Diacetate; Norinyl(R) Synarel(R) Nefarelin Acetate; Norethindrone - ------------------------------------------------------------------------------------------------------------------------------------ FOOD INGREDIENTS Food NutraSweet(R) brand High-intensity sweetener Augusta, GA; University Aspartic Acid; sweetener available primarily in Park, IL L-Phenylalanine beverages and dessert products --------------------------------------------------------------------------------------------------------- Equal(R), Canderel(R), Tabletop sweeteners Manteno, IL; Evreux, Aspartame NutraSweet(R) and France; Morpeth, United other tabletop Kingdom sweeteners --------------------------------------------------------------------------------------------------------- Keltone(R) and Soups; sauces; gravies; Girvan, United Kingdom; Corn Syrup; Seaweed Manugel(R) sodium dressings; beverages; Okmulgee, OK; San Diego, CA alginates; snack foods; breadings; Kelcoloid(R) propylene batters; bakery products; glycol alginate; dairy products; pet foods Keltrol(R) SF and Kel- lite(R) xanthan gums; Kelcogel(R) gellan gum - ------------------------------------------------------------------------------------------------------------------------------------ Oil Field Production Kelzan(R) X, Kelzan(R) Oil and gas well drilling Knowsley, United Kingdom; Corn Syrup XCD, Xanvis(R) xanthan applications Okmulgee, OK; San Diego, CA gums; Biozan(R) welan gum - ------------------------------------------------------------------------------------------------------------------------------------ Industrial Applications Manutex(R) and Cleaners; textile Barcaldine, United Kingdom; Corn Syrup; Seaweed Kelgin(R) sodium printing; paper sizings Girvan, United Kingdom; alginates; Kelzan(R) and coatings; firefighting Knowsley, United Kingdom; AR xanthan gum foams Okmulgee, OK; San Diego, CA - ------------------------------------------------------------------------------------------------------------------------------------ Pharmaceuticals Kelacid(R) alginic Tablets; liquid Girvan, United Kingdom; Corn Syrup; Seaweed acid; Keltrol(R) CR suspensions; controlled Okmulgee, OK; San Diego, CA xanthan gum; Kelmar(R) release medications; potassium alginate; dental impression Gelrite(R) gellan gum materials - ------------------------------------------------------------------------------------------------------------------------------------
4 6 PRINCIPAL EQUITY AFFILIATES Monsanto participates in a number of joint ventures in which it shares management control with other companies. Principal joint ventures in which Monsanto has a fifty percent ownership interest include: Flexsys L.P., headquartered in Belgium, which produces and sells rubber chemicals and rubber test instruments; Advanced Elastomer Systems, L.P., headquartered in the United States, which produces and sells thermoplastic elastomers; and Companhia Brasileira de Estireno, headquartered in Brazil, which produces and sells styrene monomer. In addition, aspartame is manufactured and sold in Europe by fifty percent-owned joint ventures. See ``Geographic Data'' on page 43 of the 1995 Annual Report. Monsanto also has investments in a number of other equity affiliates. The Company has recently taken a significant equity position in DEKALB Genetics Corp., and expects to take a significant equity position in Calgene, Inc. during the first quarter of 1996. See ``Recent Developments,'' above. 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 63 of the 1995 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 Products segment 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 Products segment sometimes results in short-term borrowings to finance 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 Food Ingredients segment, however, makes significant 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, the Pharmaceuticals segment pays rebates to state governments for pharmaceuticals sold under state Medicaid programs and under state-funded programs for the indigent. The Pharmaceuticals segment also grants discounts to certain managed health care providers. Sales through managed health care providers constitute an increasing percentage of that segment's sales. Introduction of new products by the Agricultural Products, Pharmaceuticals and Food Ingredients 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. Governmental actions may also affect the pricing of certain products, particularly in the Pharmaceuticals segment. 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 generally 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 5 7 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 Products and Pharmaceuticals segments and with respect to NutraSweet(R) brand sweetener. Certain proprietary products such as Roundup(R) 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(R) 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 or licensed by The NutraSweet Company, a subsidiary of the Company. 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. 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 Chemicals segment. 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. Monsanto leases or subleases a number of kelp beds off the coast of California from the State of California and several private parties. Monsanto also has leases to harvest seaweed off the coasts of Scotland and (through a joint venture) Ireland. None of these leases taken individually is deemed by Monsanto to be material, although the leases to harvest seaweed in the aggregate are significant to the Food Ingredients segment. The leases have varying terms. 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. 6 8 RESEARCH AND DEVELOPMENT; NEW PRODUCTS Research and development constitute an important part of Monsanto's activities. The discovery and development of pharmaceutical and agricultural products continue to be the focus of most research and development expenditures. Roundup Ready(TM) soybeans and cotton, NewLeaf(R) insect-protected potatoes, and Bollgard(TM) insect-protected cotton, all developed through biotechnology, received regulatory approvals in 1995 and early 1996. See ``Review of Consolidated Results of Operations'' and ``Supplemental Data'' on pages 32 and 61, respectively, of the 1995 Annual Report, incorporated herein by reference. ENVIRONMENTAL MATTERS Monsanto continues to make a strong commitment to comply with various laws and government regulations concerning environmental matters and employee safety and health in the United States and other countries. Compliance with stringent requirements will continue to be an obligation of 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; 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 long-term environmental protection and compliance programs that reduce and monitor emissions of hazardous materials into the environment, as well as to the remediation of identified existing environmental concerns. Expenditures in 1995 were approximately $47 million for environmental capital projects and approximately $210 million for the management of environmental programs, including the operation and maintenance of facilities for environmental control. Monsanto estimates that during 1996 and 1997 approximately $30 million to $40 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 93 Superfund sites. Monsanto has resolved disputes, entered partial consent decrees, and executed administrative orders between Monsanto and the EPA in 58 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 contaminated 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. Monsanto has an accrued liability of $71 million as of December 31, 1995, 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 Superfund sites in this category include the noncompany-owned Brio, Fike/Artel, MOTCO and Woburn sites, which account for $44 million of the accrued amount. 7 9 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. Because of these uncertainties, primarily related to the method and extent of remediation, potential future expenses could be as much as $10 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 $90 million as of December 31, 1995, 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. Because of these uncertainties, potential expenses could be as much as $20 million for these sites. Four sites in this category account for $58 million of the accrued amount and for approximately all of the potential future expenses. Monsanto spent $60 million in 1995 for remediation of Superfund and other contaminated sites. Most of these expenditures were related to the Chemicals segment, and similar or lesser amounts can be expected in future years. For hazardous and other waste facilities at operating locations, Monsanto recognizes postclosure environmental costs and remediation costs over the estimated remaining useful life of the related facilities, not to exceed 20 years. Monsanto spent $14 million in 1995 for remediation of these facilities and has an accrued liability of $49 million as of December 31, 1995, 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 $120 million. While the ultimate costs and results of remediation of contaminated 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, 1995, Monsanto had approximately 28,500 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 potentially subject to a number of unique risks and limitations, including: fluctuations in currency values; exchange control regulations; import and trade restrictions, including embargoes; governmental instability; and other potentially detrimental domestic and foreign governmental practices or policies affecting U.S. companies doing business abroad. See ``Geographic Data'' on page 43 of the 1995 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, profitability or liquidity in any one year, as applicable. 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 has 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 11 cases brought in Harris County District Court or the United 8 10 States District Court for the Southern District of Texas on behalf of 936 plaintiffs who owned homes or lived in the Southbend, Sageglen or other subdivisions, attended school in the Southbend subdivision, or used nearby recreational baseball fields. Plaintiffs claim to have suffered various personal injuries and fear future disease; they assert the need for medical monitoring; and, in the case of the homeowners, claim property damage. In addition to their claims of personal injury, four 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 actions brought in Harris County District Court by 417 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 in one of these actions also owned homes or lived in subdivisions near the site, attended school in the Southbend subdivision, or used nearby recreational ball fields. 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, G. D. Searle & Co., a subsidiary of the Company (``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(R) 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(R) caused personal injury resulting from pelvic inflammatory disease, perforation, pregnancy or ectopic pregnancy. As of March 1, 1996, there were approximately 35 cases pending in various U.S. state and federal courts and approximately 345 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(R) in the United States, citing the cost of defending such litigation. Searle has been named, together with numerous other prescription pharmaceutical manufacturers and in some cases wholesalers or distributors, as a defendant in a large number of related actions brought in federal and/or state court, based on the practice of providing discounts or rebates to managed-care organizations and certain other large purchasers. The federal cases have been consolidated for pre-trial proceedings in the Northern District of Illinois. The federal suits include a certified class action on behalf of retail pharmacies representing the majority of retail pharmacy sales in the United States. The class plaintiffs allege an industry-wide agreement in violation of the Sherman Act to deny favorable pricing on sales of brand-name prescription pharmaceuticals to certain retail pharmacies in the United States. The other federal suits, brought as individual claims by several thousand pharmacies, allege price discrimination in violation of the Robinson-Patman Act as well as Sherman Act claims. Certain defendants, not including Searle, have reached tentative agreement to settle the class action. Searle has entered into an agreement that would significantly limit its liability (based generally on its share of the relevant market) should the federal class action result in an adverse judgment. In addition, consumers and a number of retail pharmacies have filed suit in various state courts throughout the country alleging violations of state antitrust and pricing laws. Searle believes it has meritorious defenses and is vigorously defending each of these lawsuits. 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 formerly owned 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 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 9 11 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 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. 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, 1996, 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, and major portions of the San Diego, California plant, are 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 1995. 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 page 49 and ``Quarterly Data'' (for the years 1994 and 1995) on page 62 of the 1995 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 for the years 1991 through 1995, appearing on page 64 of the 1995 Annual Report, is 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 33, ``Segment Data'' on pages 34 through 42, ``Review of Changes in Financial Position'' on page 45, and ``Review of Cash Flow'' on pages 47 through 49 of the 1995 Annual Report is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of Monsanto appearing on pages 28, 44, 46, 50 and 51 through 61; the Independent Auditors' Opinion appearing on page 27; and the tabular and narrative information appearing under ``Quarterly Data'' on pages 62 and 63 of the 1995 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 and page 6 of the Monsanto Company Notice of Annual Meeting and Proxy Statement (the ``1996 Proxy Statement'') dated March 14, 1996, is incorporated herein by reference. The following information with respect to the Executive Officers of the Company on March 1, 1996, 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, 1991 --------- -------------------------------- ---------- ----------------------------------------------- Richard U. De Schutter, 55 Chairman, Chief Executive 1995 Chairman, International Operations, G. D. Searle & Co., Officer and President, G. 1989; President, G. D. Searle & Co., 1991; President D. Searle & Co. (a and Chief Operating Officer, G. D. Searle & Co., 1993; subsidiary of the and present position, 1995. Company); Advisory Director--Monsanto Company Steven L. Engelberg, 53 Senior Vice President 1995 Partner, Keck, Mahin & Cate, 1986; Partner-in-Charge, --Monsanto Company Keck, Mahin & Cate Washington, D.C. office, 1986; Chief of Staff of Office of the United States Trade Representative (on leave from Keck, Mahin & Cate until May 1993), 1993; Vice President, Worldwide Government Affairs--Monsanto Company, 1994; and present position, 1996. Pierre Hochuli, 48 Vice President--Monsanto 1995 Regional Director, Europe/Africa/Middle East--Monsanto Company; President--Growth Europe, S.A., 1985; Vice President, Finance and Enterprises Business Unit; Planning--The Agricultural Group, 1991; Vice President Chairman, Monsanto and General Manager, New Products Division--The Europe-Africa Agricultural Group, 1992; Group Vice President and General Manager, New Products Division--The Agricultural Group, 1993; Vice President, Corporate Planning--Monsanto Company, 1993; Vice President--Monsanto Company; President--Growth Enterprises, 1995; and present position, 1996. Robert B. Hoffman, 59 Senior Vice President and 1994 Vice President, FMC Corporation, 1990; and present Chief Financial Officer; position, 1994. Advisory Director--Monsanto Company Teresa E. McCaslin, 46 Vice President, Human 1994 Vice President, Human Resources, Avery Dennison Resources--Monsanto Corporation, 1989; and present position, 1994. Company Philip Needleman, 57 Senior Vice President, 1991 Vice President, Research and Development--Monsanto Research and Development Company, 1989; Vice President, Research and and Chief Scientist; Development; Advisory Director--Monsanto Company, 1991; Advisory Director--Monsanto Vice President, Research and Development; Advisory Company; President, Director--Monsanto Company; President, Research and Research and Development, Development, G. D. Searle & Co., 1992; and present G. D. Searle & Co. position, 1993. Robert G. Potter, 56 Executive Vice President 1981 Executive Vice President and Advisory and Advisory Director-- Director--Monsanto Company; President--The Chemical Monsanto Company Group, 1990; and present position, 1995. 12 14 Year First Became an Executive Name--Age Present Position with Registrant Officer Other Business Experience since January 1, 1991 --------- -------------------------------- ---------- ----------------------------------------------- Nicholas L. Reding, 61 Director; Vice Chairman-- 1976 Executive Vice President, Environment, Safety, Health Monsanto Company and Manufacturing and Advisory Director--Monsanto Company, 1990; and present position, 1993. Robert W. Reynolds, 52 Vice President, 1994 Vice President and General Manager, Crop Protection International Operations Products Division--Monsanto Agricultural Company, 1990; and Development-- Vice President and Managing Director, Latin America Monsanto Company World Area--Monsanto Company, 1992; and present position, 1994. Robert B. Shapiro, 57 Director; Chairman, Chief 1987 Executive Vice President and Advisory Executive Officer and Director--Monsanto Company and President--The President--Monsanto Agricultural Group, 1990; Director; President and Chief Company Operating Officer--Monsanto Company, 1993; and present position, 1995. Hendrik A. Verfaillie, 50 Executive Vice President 1993 Vice President and General Manager, Roundup and Advisory Director-- Division--The Agricultural Group, 1990; Vice President Monsanto Company and Advisory Director--Monsanto Company; President--The Agricultural Group, 1993; Vice President and Advisory Director--Monsanto Company, 1995; and present position, 1995. Virginia V. Weldon, 60 Senior Vice President, 1990 Vice President, Public Policy; Advisory Director-- Public Policy; Advisory Monsanto Company, 1990; and present position, 1993. Director--Monsanto Company
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. 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 17 of the 1996 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 1996 Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. 13 15 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, 44, 46, 50 and 51 through 61 of the 1995 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, 1995, 1994 and 1993: 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 10.23 on pages 19 through 21 of the Exhibit Index. The following Exhibits listed in the Exhibit Index are filed with this Report: 10 20. Letter Agreement between the Company and Hendrik A. Verfaillie entered into as of June 27, 1988 21. Agreement between the Company and Hendrik A. Verfaillie entered into as of July 5, 1988 22. Agreement dated January 29, 1993 between the Company and Hendrik A. Verfaillie, amending the Letter Agreement entered into as of June 27, 1988, and amending the Agreement entered into as of July 5, 1988 23. Amendment to Letter Agreement between the Company and Robert B. Shapiro entered into as of July 23, 1990 13 The Company's 1995 Annual Report to shareowners 21 Subsidiaries of the registrant (See page 22) 23 1. Consent of Independent Auditors (See page 23) 2. Consent of Company Counsel (See page 23) 24 1. Powers of attorney submitted by Joan T. Bok, Robert M. Heyssel, Robert B. Hoffman, Michael R. Hogan, 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, 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 24) (b) Reports on Form 8-K during the quarter ended December 31, 1995: No reports on Form 8-K were filed by the Company during the quarter ended December 31, 1995. 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, 1995 and 1994 and the related statements of consolidated income, shareowners' equity and cash flow for each of the three years in the period ended December 31, 1995 and have issued our opinion thereon dated February 23, 1996; such financial statements and opinion are included in your 1995 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 23, 1996 15 17 SCHEDULE V MONSANTO COMPANY AND SUBSIDIARIES --------------------------------- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (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, 1995: Reserves deducted from related assets in the Statement of Consolidated Financial Position: Doubtful receivables and returns and allowances...................... $ 57 $ 24 $ 24 $ 57 ----- ---- ----- ----- Inventory and obsolescence losses.................................... $ 34 $ 6 $ 6 $ 34 ----- ---- ----- ----- Amortization of intangible assets.................................... $ 522 $128 $ 12 $ 638 ----- ---- ----- ----- Deferred tax asset valuation allowances.............................. $ 85 $ 15 $ 10 $ 90 ----- ---- ----- ----- Year Ended December 31, 1994: Reserves deducted from related assets in the Statement of Consolidated Financial Position: Doubtful receivables 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 ----- ---- ---- ----- NOTES: Principally allowances granted. Includes $9 million charged to cost of goods sold.
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 Michael R. Hogan ----------------------------------- Michael R. Hogan Vice President and Controller (Principal Accounting Officer) Date: March 15, 1996 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 --------- ----- ---- Karl R. Barnickol - --------------------------------------------------- Chairman, President and Director March 15, 1996 (Robert B. Shapiro) (Principal Executive Officer) Karl R. Barnickol - --------------------------------------------------- Vice Chairman and Director March 15, 1996 (Nicholas L. Reding) Karl R. Barnickol - --------------------------------------------------- Senior Vice President March 15, 1996 (Robert B. Hoffman) (Principal Financial Officer) Michael R. Hogan - --------------------------------------------------- Vice President and Controller March 15, 1996 (Michael R. Hogan) (Principal Accounting Officer) Karl R. Barnickol - --------------------------------------------------- Director March 15, 1996 (Joan T. Bok) Karl R. Barnickol - --------------------------------------------------- Director March 15, 1996 (Robert M. Heyssel) Karl R. Barnickol - --------------------------------------------------- Director March 15, 1996 (Gwendolyn S. King) Karl R. Barnickol - --------------------------------------------------- Director March 15, 1996 (Philip Leder) Karl R. Barnickol - --------------------------------------------------- Director March 15, 1996 (Howard M. Love) Karl R. Barnickol - --------------------------------------------------- Director March 15, 1996 (Richard J. Mahoney) 17 19 SIGNATURE TITLE DATE --------- ----- ---- Karl R. Barnickol - --------------------------------------------------- Director March 15, 1996 (Frank A. Metz, Jr.) Karl R. Barnickol - --------------------------------------------------- Director March 15, 1996 (Buck Mickel) Karl R. Barnickol - --------------------------------------------------- Director March 15, 1996 (Jacobus F.M. Peters) Karl R. Barnickol - --------------------------------------------------- Director March 15, 1996 (John S. Reed) Karl R. Barnickol - --------------------------------------------------- Director March 15, 1996 (William D. Ruckelshaus) Karl R. Barnickol - --------------------------------------------------- Director March 15, 1996 (John B. Slaughter) Karl R. Barnickol, 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. Karl R. Barnickol -------------------------------------- Karl R. Barnickol 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 Omitted--Inapplicable 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) 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) 19 21 Exhibit No. Description - ----------- ----------- 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. 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) 17. 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) 18. 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) 19. 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) 20. Letter Agreement between the Company and Hendrik A. Verfaillie entered into as of June 27, 1988 21. Agreement between the Company and Hendrik A. Verfaillie entered into as of July 5, 1988 22. Agreement dated January 29, 1993 between the Company and Hendrik A. Verfaillie, amending the Letter Agreement entered into as of June 27, 1988, and amending the Agreement entered into as of July 5, 1988 20 22 EXHIBIT INDEX (CONT'D) Exhibit No. Description - ----------- ----------- 23. Amendment to Letter Agreement between the Company and Robert B. Shapiro entered into as of July 23, 1990 11 Omitted--Inapplicable; see ``Earnings per Share'' on page 60 of the 1995 Annual Report 12 Statement re Computation of the Ratio of Earnings to Fixed Charges--See Exhibit 99 below 13 The Company's 1995 Annual Report to shareowners. (The electronic submission includes only the financial report section of the Annual Report, consisting of pages 26 through 64 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 22) 22 Omitted--Inapplicable 23 1. Consent of Independent Auditors (See page 23) 2. Consent of Company Counsel (See page 23) 24 1. Powers of attorney submitted by Joan T. Bok, Robert M. Heyssel, Robert B. Hoffman, Michael R. Hogan, 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, 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 24) - ------- Only Exhibits Nos. 13, 21, 23.1, 23.2 and 99 have been included in the printed copy of this Report.
21 23 APPENDIX Throughout the printed Form 10-K, trademarks are designated by the superscript letters "R" in a circle or "TM"; the EDGAR copy indicates trademarks with the "R" or "TM" in parentheses. EX-10.20 2 LETTER AGREEMENT TO H. A. VERFAILLIE 1 EXHIBIT 10.20 June 27, 1988 Hendrik A. Verfaillie Monsanto Company 800 North Lindbergh St. Louis, MO 63167 Dear Hendrik: If the Company receives any proposal from a third party concerning a possible business combination with, or an acquisition of the Company, the Board of Directors believes it essential that the Company and the Board be able to rely upon you to continue in your present position and that the Company be able to receive your advice in assessing the proposal, in determining what is in the best interests of the Company and its shareholders and in determining what action the Company should take. Your continued employment with the Company during the assessment of any such proposal and following any business combination will provide critical continuity of management and will enhance the value of the Company. As you know, in order to be eligible for unreduced early retirement pension benefits, you must retire from the Company after attainment of age 55 and your age and years of service must total 80 ("Combo 80"). Moreover, in order for you and your eligible dependents to be eligible for retiree medical benefits plan coverage, you must terminate employment after age 55 with 10 or more years of benefit service. Because you are not yet age 55, you are not yet Combo 80 eligible, and you and your eligible dependents are not yet eligible for retiree medical benefits plan coverage. Therefore, the Executive Compensation and Development Committee ("ECDC") has decided that in order to minimize any distraction that could be caused by the personal uncertainties and risks created by a change of control proposal, it is in the Company's best interests to provide you at this time with the early retirement protection described below. A. Supplemental Pension. -------------------- If you Terminate Employment with the Company after a Change of Control and are not yet Combo 80 eligible, you will be paid a Supplemental Pension in an amount equal to the difference between what you would have 2 -2- received from the Monsanto Company Salaried Employees' Pension Plan ("Salaried Pension Plan") and the Monsanto Company ERISA Parity Pension Plan ("Parity Pension Plan") in effect when you Terminate Employment (computed without reduction for early commencement of benefits) less what you are actually paid from both plans. Your Supplemental Pension will be paid to you monthly under the same option election and with the same beneficiary designation you make under the Salaried Pension Plan. In order to receive your Supplemental Pension in the form of monthly payments, you must, in the case of retirement, commence receiving your pension payments from the Salaried Pension Plan on the first day of the month coinciding with or following your retirement date. In the case of vested termination, you must commence receiving your pension payments on the first day of the month coinciding with or following your attainment of age 55. Alternatively, you may elect to receive the actuarially commuted value of your Supplemental Pension, or a portion thereof, in a single sum, in which case the value of your Supplemental Pension will be calculated actuarially by the Qualified Actuary for the Salaried Pension Plan who was serving as such immediately prior to the Change of Control using the actuarial assumptions applicable to the Plan. The amount so calculated by the Qualified Actuary will be paid to you in a single sum as soon as practicable after you Terminate Employment. In the event that you do not elect to receive your Supplemental Pension in a single sum, and the amount payable to you under your Key Executive Employment Agreement is limited because of the Excise Tax limitation set forth in Section 3(b) of the Key Executive Employment Agreement, the Public Accounting Firm in considering how much can be paid to you under the Excise Tax Limitation provision of the Key Executive Employment Agreement will first reduce the cash portion of any Payment which is subject to Excise Taxes in order to preserve as much of your Supplemental Pension as possible. 3 -3- B. Parity Plan/Bonus Deferral Plan. ------------------------------- The ECDC has amended the Pension Parity Plan to permit you to receive the actuarially commuted value of your accrued benefit under the Plan in a single sum when you Terminate Employment even if you are not eligible to receive a Commuted Value Option distribution from the Salaried Pension Plan. It also has amended the Deferred Payment Plan ("Bonus Deferral Plan") to permit you to receive the amount of any deferred bonus plus accrued earnings thereon and the actuarially commuted value of any amounts accrued under the Supplemental Pension Plan in a single sum when you Terminate Employment. C. Medical Coverage. ---------------- If at the time you Terminate Employment you are not eligible for Retiree Medical Plan coverage, you will receive a $15,000 payment to compensate you for the loss of medical plan coverage for you and your eligible dependents. If you wish, and do not have coverage through other employment, you may elect COBRA continuation and keep your Monsanto coverage in effect for up to 18 months following your Termination of Employment, at which time you may purchase a conversion policy from Metropolitan Life Insurance Company. You have an absolute right to this $15,000 payment regardless of when you obtain continuation or replacement coverage and regardless of what such coverage costs. D. Executive Life Insurance Coverage. --------------------------------- The ECDC has amended the Executive Life Insurance Plan to require the Company to continue to make its premium payments under the terms of the plan, the underlying policy and your collateral assignment agreement even if you Terminate Employment prior to age 62. This provision is contingent upon you continuing to make your required contributions under the plan. You must make your election to receive the actuarially commuted value of your Supplemental Pension, any Pension Parity Plan or Supplemental Pension Plan benefits and any deferred bonus payments in a single sum by signing the 4 -4- enclosed election form and filing it with the Management Liaison Officer to the ECDC within 30 days of the date of this letter. If you make this election, it will remain binding on you unless there is a Change of Control, in which case you will be entitled to make a second written election within 30 days of the Change of Control to receive your Supplemental Pension as monthly payments and any Pension Parity Plan or Supplemental Pension Plan benefits and any deferred bonus pay- ments as otherwise permitted under the terms of these plans. Unless you make this second written election in a timely manner, your election to receive it in a single sum will be binding on you and irrevocable. As used herein, the term "Terminate Employment" has the same meaning as does the term "Termination of Employment" in the Key Executive Employment Agreement ("Key Executive Employment Agreement") executed by you and the Company contemporaneously with this Agreement. The terms "Change of Control", "Payment" and "Termination of Employment" have the same meanings as do the same terms in the Key Executive Employment Agreement, a copy of which is attached hereto as Exhibit A. For purposes of this Agreement, the relevant sections of the Key Executive Employment Agreement are incorporated by reference herein and made a part hereof. Where appropriate, all references to "the Company" or "Monsanto" also refer to any Monsanto subsidiary or affiliate and to any successor corporation. The Company's obligation to pay you the benefits set forth herein is absolute and unconditional and will not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against you. The Company will make from any payments all tax and other withholdings required by law to be made. This Agreement will inure to your benefit and that of your beneficiary and will be binding upon the Company and any successor of the Company. Moreover, the benefits provided under this Agreement are not intended to qualify under Section 401 of the Internal Revenue Code. This Agreement will not be subject to the claims of your creditors and may not be assigned either by you or your spouse or any beneficiary, and any attempted assignment, pledge or other transfer will be void. Finally, the Supplemental Pension will expire and become null and void if you are still employed by the Company when you attain Combo 80 eligibility and the payment for medical plan coverage will expire if you become eligible for retiree medical benefits plan coverage. 5 -5- On behalf of the Company, I am pleased to be able to extend this Agreement you. Please acknowledge your acceptance of its terms by signing both copies of this letter and returning one copy to R. L. Berra, Management Liaison Officer to the ECDC, c/o Mr. R. N. Abercrombie, Mail Zone B2NA. Very truly yours, ACKNOWLEDGED AND AGREED: MONSANTO COMPANY, /s/ H.A. Verfaillie /s/ Richard J. Mahoney - ------------------------- (name) Richard J. Mahoney EX-10.21 3 AGREEMENT - H. A. VERFAILLIE 1 EXHIBIT 10.21 KEY EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT between Monsanto Company, a Delaware corporation ("Monsanto"), and Hendrik A. Verfaillie (the "Executive"); WHEREAS, the Executive Compensation and Development Committee (the "Committee") of the Board of Directors (the "Board") of Monsanto has recommended and the Board has approved the execution of employment agreements with specified key executives of Monsanto; WHEREAS, the Board has determined that the Executive is a key executive of Monsanto; WHEREAS, should Monsanto receive any proposal from a third party concerning a possible business combination with, or an acquisition of, equity securities of Monsanto, the Board believes it imperative that Monsanto and the Board be able to rely upon the Executive to continue in his position, and that Monsanto and the Board be able to receive and rely upon his advice, if they request, as to the best interests of Monsanto and its shareholders without concern that the Executive might be distracted by the personal uncertainties and risks created by such a proposal; and WHEREAS, should Monsanto receive any such proposals, in addition to the Executive's regular duties, the Executive may be called upon to assist in the assessment of such proposals, advise Monsanto and the Board as to whether such proposals would be in the best interests of Monsanto and its shareholders, and to take such other actions as Monsanto and the Board might determine to be appropriate; WHEREAS, the retention of Executive during the time any such proposal is being evaluated and following any business combination or acquisition will provide needed continuity of 2 -2- management, thus enhancing Monsanto's business and business prospects, and shareholder value; NOW, THEREFORE, to assure Monsanto and the Board that it will have the continued dedication of the Executive and the availability of his advice and counsel notwithstanding the possibility, threat or occurrence of such a proposal, and to induce the Executive to remain in the employ of Monsanto, and for other good and valuable consideration, Monsanto and the Executive agree as follows: 1. Employment. Monsanto hereby agrees to continue the ---------- Executive in its employ, and the Executive hereby agrees to remain in the employ of Monsanto for the period commencing on the Effective Date of this Agreement (as defined in Section 5(b) below) and ending on the earlier to occur of the third anniversary of such date or the Executive's Normal Retirement Date under the Monsanto Company Salaried Employees' Pension Plan (the "Employment Period"), with the Executive to exercise such authority and perform such executive duties as are commensurate with the authority being exercised and duties being performed by the Executive immediately prior to the Effective Date of this Agreement, which duties shall be performed at the location where the Executive was employed immediately prior to the Effective Date of this Agreement. The Executive agrees that during the Employment Period he shall devote his full business time exclusively to his executive duties as described herein and perform such duties faithfully and efficiently; provided, however, that Executive shall also be permitted to serve or continue to serve as a member of the Board of Directors of other corporations. 3 -3- 2. Compensation, Compensation Plans, Perquisites. During the --------------------------------------------- Employment Period, the Executive shall be compensated as follows: (a) He shall receive an annual salary at a rate which is not less than his rate of annual salary immediately prior to the Effective Date of this Agreement, with the opportunity for increases, from time to time thereafter, which are in accordance with the Monsanto's regular practices. (b) He shall be eligible to participate on a reasonable basis in the applicable bonus, stock option, restricted stock, performance award and other incentive compensa- tion plans (hereinafter collectively referred to as "Incentive Compensation Plans") sponsored by Monsanto (including, but not limited to, the Monsanto Management Incentive Plan of 1984 and the Monsanto Management Incentive Plan of 1988/I), which provide opportunities to receive compensation which are the greater of the opportunities provided by Monsanto after the Effective Date of this Agreement for executives with comparable duties or the opportunities under any such plans under which he was participating immediately prior to the Effective Date of this Agreement. (c) He shall be entitled to participate in the applicable Pension Plans and Excess Benefit Plans sponsored by Monsanto (including, but not limited to, the Monsanto Company Salaried Employees' Pension Plan, the Monsanto Company Savings and Investment Plan, the Monsanto Company ERISA Parity Pension Plan and the Monsanto Company ERISA Parity SIP Plan), which provide pension, retirement benefits and savings opportunities which are 4 -4- the greater of those provided by Monsanto after the Effective Date of this Agreement for executives with comparable duties or the opportunities under any such plans in which he was participating immediately prior to the Effective Date of this Agreement. (d) He shall be entitled to participate in the applicable Employee Welfare Plans sponsored by Monsanto (including, but not limited to, those which provide medical, dental, life insurance, and disability income benefits) and receive perquisites which provide Employee Welfare Plan benefits and perquisites which are the greater of those provided by Monsanto after the Effective Date of this Agreement to executives with comparable duties or the Employee Welfare Plan benefits and perquisites to which he was entitled immediately prior to the Effective Date of this Agreement. (e) He shall be entitled to the benefits provided in any Supplemental Executive Retirement Plan ("SERP") or other similar contract which is applicable to him. 3. Termination of Employment After Change of Control. ------------------------------------------------- (a) Notwithstanding the provisions of Sections 1 and 2 above, if the Executive terminates employment in a manner which constitutes a Termination of Employment (as defined in Section 5(c) below) during the Employment Period, Monsanto shall pay to the Executive a Termination Amount. Except as provided in Section 3(b) below, the Termination Amount shall be an amount equal to: 5 -5- (i) two times the sum of the Executive's annual base pay in effect at the time of his Termination of Employment (which in no event shall be less than his annual base pay in effect at the Effective Date of this Agreement) plus the Executive's target annual bonus under the applicable Incentive Compensation Plan for the year in which his Termination of Employment occurs; plus (ii) if the Executive's Termination of Employment occurs within the first year of an applicable long-term Incentive Compensation Plan cycle, an additional amount equal to the Executive's target annual bonus under the applicable Incentive Compensation Plan for the year in which his Termination of Employment occurs. The amount due hereunder shall be paid in a single sum as soon as practicable after the Executive's Termination of Employment and shall be in lieu of any further obligation of Monsanto to make salary payments under Section 2(a) or to permit the Executive to further participate in any of the Incentive Compensation, Pension and Employee Welfare Plans described in Sections 2(b), 2(c) and 2(d) hereof (except and to the extent that under the terms of any of those plans the Executive is permitted to participate as a terminated or retired employee). In the event that there are fewer than twenty-four whole or partial months remaining from the date of the Executive's Termination of Employment to his Normal Retirement Date, the amount payable under this paragraph shall be reduced by multiplying it by a 6 -6- fraction, the numerator of which is the number of whole or partial months remaining to his Normal Retirement Date and the denominator of which is twenty-four. (b) Excise Tax Provision. -------------------- (i) The Public Accounting Firm that serves as Monsanto's principal independent auditors immediately prior to the Effective Date of this Agreement ("Public Accounting Firm") shall determine if any payment made pursuant to this Agreement or any other payment received or deemed to be received by Executive from Monsanto or any of its subsidiaries and affiliates, or from any Pension, Employee Welfare, Incentive Compensation or other plans sponsored by Monsanto or any of its subsidiaries and affiliates (collectively, the "Payment") is or will become subject to any excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended ("Code"), or any similar tax payable under any federal, state, local or other law ("Excise Taxes"). The determination and computations made by the Public Accounting Firm shall be based on its understanding of Section 280G and 4999 of the Code, any regulations promulgated thereunder and any relevant rulings or judicial decisions relative thereto, and its determinations and computations shall be final and binding on all parties. All determinations hereunder shall be made in adequate time to permit the Executive to prepare and file his individual tax returns in a timely fashion. 7 -7- (ii) If it is determined by the Public Accounting Firm that any Payment is or will become subject to any Excise Taxes, then it shall determine if the payment of the Excise Taxes in addition to any federal, state, local or other income, excise or other taxes ("Other Taxes") payable by the Executive with respect to the Payment to be received will cause the Executive to pay an amount of Excise and Other Taxes such that the net Payment the Executive will receive after payment of all Excise and Other Taxes on such Payment is less than if the Payment he would receive was reduced to the maximum amount payable without imposition of any Excise Taxes ("Economic Detriment".) If the Public Accounting Firm determines that the Executive will incur an Economic Detriment as a result of the receipt of the full Payment, the Payment to the Executive shall be reduced to the maximum possible Payment that can be paid the Executive without him incurring any Economic Detriment. (iii) The Public Accounting Firm, in determining whether the Payment is subject to Excise Taxes, may reasonably conclude that certain items are neither subject to Excise Taxes, nor are to be counted in determining whether the Payment is subject to Excise Taxes or may be considered to be reasonable compensation for personal services (such items hereinafter referred to as "Non-Included Items"). If at a later date, it is determined (pursuant to final regulations or published rulings of the Internal Revenue Service, final judgment of a court of competent jurisdiction or, if requested 8 -8- by the Executive, an opinion of a nationally recognized accounting or tax law firm) that any of the Non-Included Items are subject to Excise Taxes, are to be counted in determining whether all or any portion of the Payment is subject to Excise Taxes or are not considered to be reasonable compensation for personal services, with the result that the Executive will incur an Economic Detriment. Monsanto shall, immediately upon such determination pay the Executive an amount equal to the sum of (A) any such Excise Taxes, plus (B) any interest, fines, penalties, expenses and other costs incurred by the Executive and resulting from the Executive having taken a position that the Payment or a portion of the Payment, is not subject to Excise Taxes in accordance with a determination made pursuant to Subsection(b)(ii) above, plus (C) the amount necessary to reimburse the Executive for any federal, state, local or other income taxes payable by the Executive with respect to the amounts of (I) the Excise Tax reimbursement provided in Clause A above, (II) the reimbursement for interest, fines, penalties and other amounts paid provided in Clause B above, plus (III) the amount paid to the Executive as reimbursement of any federal, state, local or other income, excise or other taxes (as determined for Clauses I, II and III hereof) in accordance with the formula set forth on Schedule 3, which is attached hereto and incorporated by reference herein. 9 -9- (iv) Consultation. At Monsanto's reasonable request ------------ the Executive shall consult with Monsanto regarding (A) the preparation and filing of the Executive's federal income and excise tax returns for any year in which any Payment is received, and (B) any federal tax issues which may arise with respect to any Payment made in connection with a Change of Control. At Monsanto's request, the Executive shall retain counsel and other experts and consultants reasonably satisfactory to Monsanto in connection with any or all of the matters described in items (A) and (B) of this Subsection 3(b)(iv) and Monsanto shall reimburse the Executive (in accordance with Section 6(b) hereof) for all fees, expenses and costs (including audit costs, attorneys' and accountants' fees and expenses, and court costs) incurred by Executive as a result of the retention of such counsel and other experts and consultants. Anything to the contrary herein notwithstanding, the Executive shall not in any way be restricted from making such disclosure in his individual tax returns with respect to payments received hereunder as he shall deem reasonable and appropriate. (v) The fees, expenses and costs charged by the Public Accounting Firm shall be paid entirely by Monsanto. 4. Executive Covenants, Duties and Responsibilities. ------------------------------------------------ (a) Satisfaction and Discharge. Except for any payments or -------------------------- benefits payable under a Supplemental Executive 10 -10- Retirement Plan or Agreement ("SERP"), Executive hereby acknowledges and agrees that Monsanto's execution and delivery of this Agreement to the Executive is in full satisfaction, fulfillment and discharge of any and all claims the Executive may have against Monsanto, any Monsanto subsidiary or affiliate, any Monsanto separation pay plan and any of their respective directors, officers, employees, agents or fiduciaries for any contract notice pay, or separation, severance, or redundancy pay to which Executive is or otherwise might be entitled to under any applicable employment agreement, international assignment agreement, separation or severance pay plan or policy, or any other welfare plan, or pursuant to any statute, court or administrative decision of any country (hereinafter individually and collectively referred to as "Severance Payments"). If any Severance Payments are required to be made to Executive, Executive agrees that any payments made pursuant to this Agreement shall be offset and reduced by the amount of the Severance Payments. (b) Executive as a Consultant. During the period ------------------------- commencing on the date of Executive's Termination of Employment and ending one year thereafter, Executive agrees that, during such times as are compatible with Executive's other obligations, duties and responsibilities, he will perform such consulting services as Monsanto may reasonably request at such locations as shall be reasonably convenient to the Executive. Monsanto shall pay Employee for such services at rates which are comparable to the Executive's compensation rate in effect immediately prior to his date of Termination of Employment. If the 11 -11- Executive incurs any reasonable travel or other expenses in connection with the performance of his services pursuant to this Section 4(b), Monsanto shall promptly reimburse the Executive for all such expenses. In the performance of the consulting services hereunder, the Executive shall be in all respects an independent contractor without the legal capacity to bind Monsanto and shall not be considered an agent or employee of Monsanto. The Executive shall be free to render services to or accept employment with others while providing consulting services to Monsanto. (c) Employment Contract. Executive acknowledges and agrees ------------------- that the provisions of this Agreement shall not have any effect on Executive's Monsanto Employment Contract, which remains in full force and affect. As used herein, the term "Monsanto Employment Contract" shall mean any contracts (including any and all amendments thereto) between Monsanto and the Executive relating to contract notice, confidential information, competitive activity, intellectual property, ideas, inventions, patent assignments and other similar matters and which is usually signed by a Monsanto employee prior to or at commencement of his employment. 5. Definitions. ----------- (a) "Change of Control." For the purposes of this ----------------- Agreement, a "Change of Control" shall be deemed to have taken place if: (i) a third party, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of Monsanto having 25% or more of the total number of votes that may be cast for the election of 12 -12- directors of Monsanto; or (ii) as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a "Transaction"), (A) the persons who were directors of Monsanto before the Transaction shall cease to constitute a majority of the Board of Directors of Monsanto or any successor to Monsanto, or (B) there is the sale, exchange or other disposition of all or substantially all of Monsanto's assets to a third party. (b) The "Effective Date of this Agreement" shall be the ------------------------------------- date on which a Change of Control occurs. (c) "Termination of Employment" shall occur: ------------------------- 1. if Monsanto, within three years after a Change of Control, terminates the Executive's employment with Monsanto other than: (i) for Justifiable Cause; or (ii) as a consequence of his death, Total and Permanent Disability (as determined under the Monsanto Salaried Employees' Disability Income Plan) or his retirement at or after his Normal Retirement Date; 2. if the Executive resigns as an employee of Monsanto for Good Reason within three years after a Change of Control. 13 -13- (d) "Justifiable Cause." Monsanto shall have Justifiable ----------------- Cause to terminate the Executive's employment hereunder upon the Executive's: 1. willful and continued failure to perform his usual duties or to work full-time for Monsanto (other than any such failure resulting from the Execu- tive's incapacity due to physical or mental illness); 2. willful engagement in conduct that is materially injurious to Monsanto; 3. willful engagement in actions that result in or are intended to result in the illegal personal enrichment of the Executive at the expense of Monsanto; 4. embezzlement of funds or misappropriation of other property; 5. engaging in acts of dishonesty or common law fraud in connection with his employment; or 6. commission of a felony. For purposes of this subsection, no act or failure to act on the part of the Executive shall be considered "willful" unless such act or omission was not in good faith and without reasonable belief that his action or omission was in the best interests of Monsanto. The employment of the Executive shall in no event be considered to have been terminated by Monsanto for 14 -14- Justifiable Cause if termination of his employment took place: 1. as the result of bad judgment or negligence on the part of the Executive; 2. as the result of an act or omission without intent of gaining therefrom directly or indirectly a profit to which the Executive was not legally entitled; 3. because of an act or omission believed by the Executive in good faith to have been in or not opposed to the interests of Monsanto; 4. because of any act or omission in respect of which a determination could properly be made that the Executive met the applicable standard of conduct prescribed for indemnification or reimbursement or payment of expenses under either the Bylaws of Monsanto or the laws of the State of Delaware or the directors' and officers' liability insurance of Monsanto, in each case as in effect at the time of such act or omission; 5. as the result of an act or omission which occurred more than twelve calendar months prior to the notification of the Executive of his Termination of Employment for such act or omission unless the commission of such act or such omission could not at the time of such commission or omission have been known to either a member of the Board of Directors (other than the Executive, if he is then a member of the Board of Directors) or the Execu- 15 -15- tive's immediate superior, in which case more than twelve calendar months from the date that the commission of such act or such omission was or could reasonably have been so known; or 6. as the result of a continuing course of action which commenced and was or could reasonably have been known to a member of the Board of Directors (other than the Executive if he is then a member of the Board of Directors) or the Executive's immediate superior more than twelve calendar months prior to notice having been given to the Executive of his Termination of Employment. (e) "Good Reason." Resignation by the Executive as an ----------- employee for "Good Reason" shall mean the resignation of the Executive as an employee within three years following a Change of Control after: 1. a good faith determination by the Executive that his duties, status or responsibilities have been diminished or that he has been assigned duties inconsistent with his duties with Monsanto prior to the Change of Control; 2. a removal or the Executive from office (if the Executive is an officer of Monsanto) or any failure to reelect the Executive to office; 3. any reduction in the Executive's base salary; 4. any failure by Monsanto to continue any Incentive Compensation Plans in which the Executive was entitled to participate in at the time the Change 16 -16- of Control occurred or to provide comparable successor Incentive Compensation Plans should amendment of existing Incentive Compensation Plans become necessary or advisable or any failure by Monsanto to continue the Executive in any Incentive Compensation Plan on at least the same basis as he was entitled to participate immediately before the Change of Control; 5. the failure by Monsanto to continue in effect and make contributions to, or fund, any Pension Plan (except for the Monsanto Company Payroll Related Employee Stock Ownership Plan), Excess Benefit Plan or Employee Welfare Plan (except for the Monsanto Employee Stock Purchase Plan), in which the Executive is participating at the time of a Change of Control of Monsanto (or plans providing him with substantially similar benefits), the taking or any action by Monsanto which would adversely affect his participation in or materially reduce his benefits under any of such plans or deprive him of any material perquisites or fringe benefit enjoyed by him at the time of the Change of Control, or the failure by Monsanto to provide him with the number of paid vacation days to which he is then entitled in accordance with Monsanto's normal vacation policy in effect on the date hereof; 6. the failure by Monsanto to continue in effect or honor the provisions of any SERP which covers the Executive; 17 -17- 7. any relocation of the Executive's principal place of employment more than fifty (50) miles from the Executive's location immediately before the Change of Control unless Executive is on international assignment at the time of the Change of Control and the relocation is a result of Executive's being repatriated pursuant to the terms of his international assignment agreement; or 8. the failure by Monsanto to obtain the assumption of the performance of this Agreement by any successor. (f) "Normal Retirement Date" shall mean the first day of ---------------------- the month following the month in which the executive attains age 65. (g) "Monsanto." Where appropriate, all references to -------- "Monsanto" shall also refer to any Monsanto subsidiary or affiliate, and to any successor, whether such succession results from a merger consolidation, liquidation, purchase of securities, acquisition of assets or otherwise. (h) "Successor Plans." Where appropriate, all references --------------- to a Monsanto Pension, Employee Welfare Benefit, Incentive Compensation Plan or other plans shall include any successor plan adopted by Monsanto or any successor. (i) "Pension Plan," "Employee Welfare Plan," "Excess ----------------------------------------------- Benefit Plan," and "ERISA." As used herein, the terms ------------------------- "Pension Plan," "Employee Welfare Plan" and "Excess Benefit Plan," shall have the same meanings as they do 18 -18- in Section 3 of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). 6. General. ------- (a) Indemnification. If litigation shall be brought to --------------- enforce or interpret any provision contained herein, Monsanto, to the extent permitted by applicable law and Monsanto's Articles of Incorporation and Bylaws, hereby indemnifies the Executive for his reasonable attorneys' fees and disbursements incurred in such litigation, and hereby agrees to pay prejudgment interest on any money judgment obtained by the Executive calculated at the Citibank, N.A. prime interest rate in effect from time to time from the date that payment(s) to him should have been made to him under this Agreement. (b) Expenses. -------- (i) If the Executive incurs (A) legal or other fees and expenses in an effort to establish entitlement to benefits under this Agreement, regardless of whether the Executive ultimately prevails, or (B) legal, accounting and other fees and expenses in connection with the retention of counsel and other experts and consultants as requested by Monsanto pursuant to Subsection 3(b)(iv) above, Monsanto shall reimburse him for such fees and expenses. To the extent such fees and expenses may be covered, and be reimbursable, under Monsanto's officers' and directors' insurance policies, the Executive shall, following payment of such fees and expenses by Monsanto, reasonably cooperate with Monsanto in obtaining reimbursement of such 19 -19- fees and expenses pursuant to such policies, and any amounts so recovered shall be paid to Monsanto. (ii) Reimbursement of fees and expenses described in Subsection 6(b)(i), above, shall be made monthly during the course of any action upon the written submission of a request for reimbursement together with proof that the fees and expenses were incurred. (c) Payment Obligations Absolute. Monsanto's obligation to ---------------------------- make the payments and arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which Monsanto may have against him or anyone else. All amounts payable by Monsanto hereunder shall be paid without notice or demand. Each and every payment made hereunder by Monsanto shall be final and Monsanto shall not seek to recover all or any part of such payment from the Executive or from whosoever may be entitled thereto, for any reason whatsoever. The Executive shall not be obligated to seek other employment in mitigation of the post-employment amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any post-termination employment shall in no event effect any reduction of Monsanto's obligations to make the post-employment payments and arrangements required to be made under this Agreement. (d) Withholding. Monsanto shall withhold all amounts ----------- required by law to be withheld from any payments made 20 -20- pursuant to this agreement, including any or all amounts required to be withheld by the Code or by the Federal Insurance Contributions Act, any applicable state or foreign country's income tax act, and any applicable city, county or municipality's earnings or income tax act. (e) Successors. This Agreement shall be binding upon and ---------- inure to the benefit of the Executive and his estate, and Monsanto and any successor, direct or indirect, of Monsanto, whether such succession results from a merger, consolidation, liquidation, purchase of securities, acquisition of assets or otherwise. (f) Limitations on Payments. The interests of the ----------------------- Executive are not subject to the claims of his creditors and may not be voluntarily or involuntarily sold, transferred, alienated, assigned, pledged, anticipated, or encumbered. Any attempt by the Executive or any other person or entity to sell, transfer, alienate, assign, pledge, anticipate, encumber, charge or otherwise dispose of any right to benefits payable under this Agreement shall be void. (g) Severability. Any section in this Agreement which is ------------ prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating or affecting the remaining sections hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such section in any other jurisdiction. Any section or part of a section so declared to be unlawful or invalid shall be construed in a manner 21 -21- which will give effect to the terms of such section or part of a section to the fullest extent possible while remaining lawful and valid. (h) Controlling Law. This Agreement shall in all respects --------------- be governed by, and construed in accordance with, the laws of the State of Delaware. (i) Headings and Titles. Section headings and titles are ------------------- for reference only. In the event of a conflict between a title and the content of a section, the content of the section shall control. (j) No Employment Guarantee. This Agreement shall not be ----------------------- deemed to entitle the Executive to continued employment with Monsanto, and the rights of Monsanto to terminate the employment of the Executive shall continue as fully as if this Agreement were not in effect, provided that after a Change of Control, any Termination of Employment shall entitle the Executive to the benefits provided in Section 3 above. (k) Assignment. Except as may be specifically provided by ---------- operation of law, this Agreement may not be assigned by any party hereto without the prior written consent of the other party. (l) Amendment and Waiver. This Agreement shall not be -------------------- altered, amended or modified except by written instru- ment executed by the Company and Employee. A waiver of any term, covenant, agreement or condition contained in this Agreement shall not be deemed a waiver of any other term, covenant, agreement or condition, and any waiver of any default in any such term, covenant, 22 -22- agreement or condition shall not be deemed a waiver of any later default thereof or of any other term, covenant, agreement or condition. (m) Notices. All notices required by this Agreement shall ------- be in writing and delivered by hand or by first class registered or certified mail, postage prepaid, and addressed as follows: If to Monsanto: Monsanto Company 800 North Lindbergh Blvd. St. Louis, MO 63167 Attention: General Counsel If to the Executive: Hendrik A. Verfaillie 14308 Strawbridge Ct. Chesterfield, MO 63017 Either party may from time to time designate a new address by notice given in accordance with this Section. (n) Termination. This Agreement shall terminate if the ----------- Board determines that the Executive is no longer a key executive and so notifies the Executive in writing prior to a Change of Control; except that such determination shall not be made, and if made, shall have no effect, during any period of time when Monsanto has knowledge that any third party has taken steps reasonably calculated to effect a Change of Control until, in the opinion of the Board, the third party has abandoned or terminated his efforts to effect a Change of Control. 23 -23- IN WITNESS WHEREOF, the parties have executed this Agreement on the 5th day of July 1988. ------- ------------ MONSANTO COMPANY By /s/ Richard J. Mahoney --------------------------- Richard J. Mahoney Chairman of the Board and Chief Executive Officer /s/ Cynthia Tisher /s/ H.A. Verfaillie - ------------------------------ ------------------------------ Witness Executive 24 -24- SCHEDULE 3 - ---------- Gross-up Formula Any payment made pursuant to Section 3(b) of the Agreement (a "Gross-up Payment") shall be calculated as follows: A. The Gross-up Payment shall be the product of (i) the amount of the Excise Taxes, any interest, fines, penalties, expenses, and other costs relating to Excise Taxes incurred by the Executive times (ii) a fraction the numerator of which is 1, and the denominator of which is 1 minus the combined total rates expressed as a fraction, determined in accordance with paragraph B hereof, of all federal, state, local and other income and other taxes and any Excise Taxes applicable to such Gross-up Payment. In the event that different rates of tax are applicable to any portion of a Gross-up Payment, the denominator of the fraction set forth in clause (ii) above shall be 1 minus the combined total of the weighted average rates expressed as a fraction, determined in accordance with paragraph B hereof, of all federal, state, local and other income and other taxes and any Excise Taxes applicable to such Gross-up Payment. B. For purposes of determining the denominator of the fraction set forth in clause (ii) of paragraph A hereof, the rates of federal, state, local and other income and other taxes and Excise Taxes shall be the lesser of the actual rates of such taxes (giving effect to the Executive's net effective tax rates determined net of the benefit of any tax deduction or tax credit) or the rates set forth in the table below. 25 -25-
Tax Rate --- ---- Federal Income Tax The highest marginal federal income tax rate in effect for the applicable year, including the effective rate resulting from Code Section l(g) (relating to the phaseout of the 15 percent rate and personal exemptions and any surcharge), ("Federal Income Tax Rate") State & Local Income Tax Actual Rate x (100 minus the Federal Income Tax Rate) Excise Tax 20% (or if Section 4999 of the Code is amended, the excise tax rate in effect after the amendment) All Other Taxes Actual Net Tax Rate
26 EXECUTIVE TERMINATION OF EMPLOYMENT ----------------------------------- ELECTION FORM ------------- In the event that I Terminate Employment with Monsanto Company ("Monsanto") following a Change of Control of Monsanto, I hereby elect to receive the actuarially commuted value of my Supplemental Pension and Pension Parity Plan benefits, and any amounts deferred under the Bonus Deferral Plan (including the actuarially commuted value of any amounts accrued under the Supplemental Pension Plan) in a single sum as soon as practicable after I Terminate Employment. I acknowledge and agree that once this election is filed with the Management Liaison Officer to the Executive Compensation and Development Committee ("ECDC") of Monsanto's Board of Directors, it shall be binding and irrevocable except that if there is a Change of Control of Monsanto, I will have an opportunity to make a second written election within 30 days of the Change of Control to receive my Supplemental Pension in the form of monthly payments and my Pension Plan and Supplemental Pension Plan benefits and any deferred bonus payments as otherwise permitted under those plans. As used herein the terms "Supplemental Pension" and "Terminate Employment" have the same meanings as they do in my Supplemental Executive Retirement Plan ("SERP") contract dated June 27, 1988. The term "Change of Control" has the same meaning as it does in my Key Executive Employment Agreement. Date: 5-7-1988 /s/ Hendrik A. Verfaillie ---------------- ----------------------------- Hendrik A. Verfaillie After signature, return to Mr. R. L. Berra, Management Liaison Officer to the ECDC, c/o R. N. Abercrombie, Mail Zone B2NA. EX-10.22 4 AMENDMENTS TO AGREEMENTS - H. A. VERFAILLIE 1 EXHIBIT 10.22 AMENDMENTS TO KEY EXECUTIVE EMPLOYMENT AGREEMENT AND SUPPLEMENTAL AGREEMENT AGREEMENT between Monsanto Company, a Delaware corporation ("Monsanto"), and Hendrik A. Verfaillie (the "Executive"); WHEREAS, the Board of Directors (the "Board") of Monsanto has determined that the Executive is a key executive of Monsanto and appointed the Executive to the Management Council of Monsanto; WHEREAS, because of the determination that the Executive is a key executive of Monsanto and because of his appointment to the Management Council of Monsanto, the Board authorized Monsanto to enter into a Key Executive Employment Agreement dated July 5, 1988 ("Key Executive Employment Agreement") and a Supplemental Agreement dated June 27, 1988 ("Supplemental Agreement") with the Executive, which are attached hereto as Exhibits A and B, respectively, and made a part hereof; WHEREAS, the Executive has been appointed to the Monsanto Executive Management Committee; NOW, THEREFORE, to assure Monsanto and the Board that it will have the continued dedication of the Executive and the availability of his advice and counsel notwithstanding the possibility, threat or occurrence of a Change of Control proposal, and to induce the Executive to remain in the employ of Monsanto, and for other good and valuable consideration, Monsanto and the Executive agree as follows: 1. Paragraph 5(a) of the Key Executive Employment Agreement is hereby amended to read in its entirety as follows: 2 -2- (a) "Change of Control." For the purposes of this ----------------- Agreement, a "Change of Control" shall be deemed to have taken place if: (i) a third party, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of Monsanto having 10% or more of the total number of votes that may be case for the election of directors of Monsanto; or (ii) as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a "Transaction"), (A) the persons who were directors of Monsanto before the Transaction shall cease to constitute a majority of the Board of Directors of Monsanto or any successor to Monsanto, or (B) there is the sale, exchange or other disposition of all or substantially all of Monsanto's assets to a third party. 2. The amended definition of Change of Control set forth above in paragraph 1 shall also extend to the applicable provisions of the Supplemental Agreement, as amended. 3. Except as amended hereby, all terms and provisions of the Key Executive Employment Agreement and the Supplemental Agreement, as amended, shall remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this Agreement on the 29 day of January , 1993. ----- ----------- MONSANTO COMPANY By /s/ Richard J. Mahoney ---------------------------- Richard J. Mahoney Chairman of the Board and Chief Executive Officer /s/ Hendrik A. Verfaillie ------------------------------ Hendrik A. Verfaillie /s/ Cynthia Tisher - ------------------------------ Witness EX-10.23 5 AMENDMENT TO AGREEMENT - R. B. SHAPIRO 1 EXHIBIT 10.23 ACTION APPROVED BY EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE APRIL 28, 1995 AFFECTING CERTAIN EXECUTIVE OFFICERS, INCLUDING ROBERT B. SHAPIRO Retiree Medical Proration ------------------------- / / The next item is a request to amend the supplemental retirement agreements (SERP's) for those EMC members shown in Exhibit 1 so that the calculation for their retiree medical coverage is based in a like manner to their supplemental retirement provisions. / / Over the years, Monsanto has provided executives in certain senior positions supplemental retirement benefits. The decision to provide these benefits is normally based on having to recruit a senior employee with experience in the middle of his or her career. / / Calculation of the supplemental retirement benefit (SERP) normally assumes the executive will be treated as if he or she were a Monsanto employee with 30 years of service. From this total benefit is subtracted the retirement benefit which would be available from the executive's prior employer. / / In 1992, Monsanto made changes to the retiree medical plan that addressed FAS 106 liability issues. Included in these changes was a proration of Monsanto's contribution to retiree medical coverage for employees with less than 25 years of service and who retire after the year 2000. / / Therefore, under current policy, those senior executives with SERP's who will have less than twenty-five years service and retire after the year 2000, will have their contributions to retiree medical pro-rated to reflect actual years of service. This is inconsistent with our philosophy of treating those executives as 30 year Monsanto employees. / / Therefore, we recommend the Committee approve an amendment to existing SERP's for those EMC members shown in Exhibit 1 that would provide a supplement to their Monsanto retiree medical benefit contribution equal to what a Monsanto eligible retiree with 30 years of service would receive. Of course, they would need to achieve eligibility for retiree medical (age 55 and 10 yrs). The example at the bottom of Exhibit 1 shows how our current plan would work and what is being proposed. / / The benefits would be a taxable supplement to their SERP representing the difference between what the executive will pay for the retiree medical plan as a retiree with less than 25 years of service and the same executive with 25 or more years of service. These benefits are typically paid as a lump sum and we would pay the retiree medical supplement similarly. / / This change would be disclosed in the 1996 proxy as part of the existing SERPs. EX-13 6 ANNUAL REPORT TO SECURITY HOLDERS 1 Financial Table of Contents Management Report, Audit Committee Report, Independent Auditors' Opinion 26 Statement of Consolidated Income 28 Statement of Consolidated Financial Position 44 Statement of Consolidated Cash Flow 46 Statement of Consolidated Shareowners' Equity 50 Notes to Financial Statements 51 Financial Summary 64 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, 1995, is effective and adequate to accomplish the objectives described above. /s/R. B. Shapiro Robert B. Shapiro Chairman and Chief Executive Officer /s/Robert B. Hoffman Robert B. Hoffman Senior Vice President and Chief Financial Officer Feb. 23, 1996 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. 26 1995 Monsanto Annual Report 2 Audit Committee Report The audit committee, composed of six nonemployee members of the board of directors, met four times during 1995. 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 1995 annual meeting, Deloitte & Touche LLP 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 management, 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. 23, 1996 Independent Auditors' Opinion To the shareowners of Monsanto Company: We have audited the accompanying statement of consolidated financial position of Monsanto Company and subsidiaries as of Dec. 31, 1995 and 1994, and the related statements of consolidated income, shareowners' equity and cash flow for each of the three years in the period ended Dec. 31, 1995. 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, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended Dec. 31, 1995, in conformity with generally accepted accounting principles. /s/Deloitte & Touche LLP Deloitte & Touche LLP St. Louis, Missouri Feb. 23, 1996 1995 Monsanto Annual Report 27 3 Statement of Consolidated Income
(Dollars in millions, except per share) 1995 1994 1993 - -------------------------------------------------------------------------------------- Net Sales $8,962 $8,272 $7,902 Cost of goods sold 5,109 4,774 4,564 - ------------------------------------------------------------------------------------ Gross Profit 3,853 3,498 3,338 Marketing expenses 1,282 1,191 1,199 Administrative expenses 598 589 548 Technological expenses 713 674 695 Amortization of intangible assets 119 81 81 Restructuring expenses -- net 156 40 5 - ------------------------------------------------------------------------------------ Operating Income 985 923 810 Interest expense (190) (131) (129) Interest income 59 81 40 Gain on sale of styrenics plastics business 189 Other income (expense) -- net 44 22 8 - ------------------------------------------------------------------------------------ Income Before Income Taxes 1,087 895 729 Income taxes 348 273 235 - ------------------------------------------------------------------------------------ Net Income $ 739 $ 622 $ 494 - ------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------ Earnings per Share $ 6.36 $ 5.32 $ 4.10 - ------------------------------------------------------------------------------------ The above statement should be read in conjunction with pages 51-63 of this report.
Key Financial Statistics 1995 1994 1993 - ------------------------------------------------------------------------------------------------------ As a Percent of Net Sales: Gross Profit 43% 42% 42% Marketing, Administrative and Technological Expenses 29 30 31 Research and Development Expenses 7 7 8 Operating Income 11 11 10 Net Income 8 8 6 Effective Income Tax Rate 32 31 32 Return on Shareowners' Equity 22.1 21.4 16.9 - ---------------------------------------------------------------------------------------------------
28 1995 Monsanto Annual Report 4 Review of Consolidated Results of Operations Monsanto Reports Record Earnings per Share and Net Income In 1995, Monsanto Company set new records for earnings per share and net income. Earnings per share increased 20 percent to $6.36 from last year's previous record of $5.32 per share. Net income of $739 million was up 19 percent from $622 million in 1994. The Agricultural Products segment contributed significantly to the company's strong operating performance, as worldwide sales volumes of Roundup(R) herbicide continued to grow. Sales volumes and operating income for acetanilides, such as Harness(R) herbicide, were stronger in 1995. The Chemicals segment's operating results increased because of the effects of selective pricing actions and continued cost reduction efforts, despite the combined effects of higher raw material costs and worldwide competitive conditions. The Pharmaceuticals segment's operating performance more than doubled from operating income last year, primarily because of higher sales volumes of key growth products and higher income from alliances. Operating income for the Food Ingredients segment declined in 1995, primarily because of restructuring charges. Net of unusual items, operating results for the Food Ingredients segment, which included 10 months of operations from the acquired Kelco business, were up moderately and benefited from higher international sales. The Food Ingredients segment is aggressively pursuing international markets that offer strong growth potential for both tabletop sweeteners and NutraSweet(R) brand sweetener, the company's trademark aspartame product. The increase in international sales, however, was more than offset by declining U.S. sales of aspartame. Events Affecting Comparability In December 1995, Monsanto sold its worldwide styrenics plastics business for $580 million. In a separate but related transaction, Monsanto reached an agreement to sell its shares in Monsanto Premier Kasei Co. Ltd., a styrenics plastics manufacturing joint venture in Thailand, to one of its joint venture partners. As a result of these transactions, Monsanto recognized a pretax gain of $189 million ($116 million aftertax, or $1.00 per share). Monsanto's results of operations for 1995 included net sales and operating income of $663 million and $12 million, respectively, from the styrenics plastics business. As part of the company's overall strategy to reduce costs and eliminate redundant functions, the board of directors approved a restructuring plan in December 1995. The pretax charge of $169 million ($125 million aftertax, or $1.08 per share) associated with this action is intended to cover the costs of work force reductions, business consolidations, facility closures, and the exit from nonstrategic businesses and facilities. Approximately 550 positions are expected to be eliminated by these actions. These actions are expected to have a favorable effect on future net earnings and aftertax cash flows in the range of $60 million to $75 million annually. A charge was taken in the first quarter of 1995 for actions associated with the formation of the Flexsys L.P. joint venture, which is discussed in the Notes to Financial Statements. The venture partners, Monsanto and Akzo Nobel N.V., agreed to bear the one-time costs required to integrate their respective rubber chemicals businesses into the joint venture. For Monsanto, these integration costs totaled $40 million pretax ($25 million aftertax, or $0.22 per share). The charge primarily covered the cost of reducing the work force by approximately 120 people and providing special termination benefits for approximately 300 people transferring from Monsanto to the joint venture. Other items that affected results in 1995 included the receipt in the first and third quarters of settlement payments from various insurers related to environmental and other insurance litigation. The combined effect of these settlements totaled $92 million pretax ($57 million aftertax, or $0.50 per share). In addition, Monsanto settled a lawsuit related to a contractual dispute concerning cleanup obligations at a Superfund site by paying $41 million pretax ($25 million aftertax, or $0.22 per share). The payment was recorded by Monsanto in the third quarter of 1995. The company also recorded approximately $20 million in favorable pretax adjustments ($13 million aftertax, or $0.11 per share) under certain sales rebate programs in the United States for product sales made in prior years. 1995 Monsanto Annual Report 29 5 Review of Consolidated Results of Operations 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, which was substantially completed by the end of 1995, reduced worldwide employment levels by approximately 450 people. In addition, the company closed certain facilities and ended some programs. The pretax expense related to these actions was $89 million ($55 million aftertax, or $0.47 per share). Separately, in the fourth quarter of 1994, the board approved the reversal of $49 million pretax ($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-than-expected 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 (IRS) settled certain tax matters related to the 1985 acquisition of Searle. Monsanto recognized an aftertax gain of $21 million, or $0.18 per share, in interest on the settlement. Without the unusual events in 1995 and 1994, net income for 1995 would have been $728 million, compared with $623 million for the prior year, an increase of 17 percent. Earnings per share in 1995 would have been $6.27, an 18 percent increase from 1994 earnings per share. Net Sales Reach Record Net sales in 1995 were approximately $9 billion, 8 percent higher than those in 1994. The increase came primarily from the continued strong performances by the Agricultural Products and Pharmaceuticals segments. After adjusting for prior year sales of businesses contributed to Flexsys, Chemicals' net sales were up moderately because of higher average selling prices. The increase in Food Ingredients' net sales primarily reflects the inclusion of 10 months of net sales from the acquired Kelco business. Net sales in 1995 for Agricultural Products increased 11 percent from those in 1994 to a record $2.5 billion, primarily because of a significant increase in worldwide sales volumes for Roundup(R) herbicide. Worldwide demand continues to be strong for this family of glyphosate-based herbicides because of continued global expansion of conservation tillage techniques, effective pricing and new end-use strategies. Sales of acetanilide products, such as Harness(R) herbicide, also contributed to the increase in net sales. The increase in Pharmaceuticals' net sales can be attributed to sales of key growth products, principally Daypro(R) and Arthrotec(R) arthritis treatments, and Ambien(R) short-term treatment for insomnia. Lower sales of the family of Calan(R) calcium channel blockers, which continues to be negatively affected by generic competition, partially offset the growth in net sales. Chemicals' net sales from continuing businesses for 1995 were approximately 7 percent higher than those in 1994, primarily because of higher average selling prices. Net sales for the Food Ingredients segment, exclusive of the sales of the acquired Kelco business, declined primarily because of lower average selling prices for aspartame. Monsanto's net sales in markets outside the United States represented 43 percent of 1995 net sales, compared with 40 percent last year. An analysis of the company's sales change follows:
Selling Price and Volume Changes 1995 1994 1993 - --------------------------------------------------------------------------------------- Selling prices 2% (2)% (5)% Sales volumes and mix (net of acquisitions and divestitures) 6 7 7 - --------------------------------------------------------------------------------------- Total Change 8% 5% 2% - ---------------------------------------------------------------------------------------
Operating Results Are Higher Operating income in 1995 of $985 million increased by $62 million from operating income in 1994. If the net pretax restructuring and unusual items of $125 million and $40 million in 1995 and 1994, respectively, were excluded, operating income would have increased by $147 million, or 15 percent, in 1995. This significant increase in operating income was principally related to higher sales volumes and better pricing. The increase in operating results was partially offset by higher raw material costs experienced by the Chemicals segment and higher marketing and technological expenses overall. 30 1995 Monsanto Annual Report 6 Review of Consolidated Results of Operations If the aforementioned restructuring charges and unusual items in 1995 and 1994 were excluded, operating results would have improved for all segments, with the largest increase occurring in the Pharmaceuticals segment. Operating income in 1995 for the Agricultural Products segment benefited from significantly higher worldwide sales volumes for Roundup(R) herbicide. Strong sales volumes of acetanilide products also contributed to the increase in operating income. Operating results for the Chemicals segment benefited from higher average selling prices and lower operating costs, but were hurt by the effect of higher raw material costs. Competitive pressures worldwide have limited the ability of the Chemicals businesses to recover the increased costs fully through selling price increases. If restructuring charges and unusual items in 1995 and 1994 were excluded, the Pharmaceuticals segment would have more than tripled its operating income, principally through the success of key growth products and higher income from alliances. Net of restructuring and unusual items, operating income in 1995 improved moderately for Food Ingredients, primarily because of the addition of Kelco income and the benefit of higher sales of tabletop sweetener products. Lower aspartame sales and higher operating expenses partially offset this increase. Marketing, administrative and technological expenses increased in 1995, principally because of higher marketing expenses used to support higher sales, and the inclusion of 10 months of operating expenses from the acquired Kelco business. Technological expenses were up because of higher research and development expenses. Amortization of intangible assets increased primarily because of the increase in intangible assets associated with the Kelco and pharmaceutical product line acquisitions. Interest expense increased in 1995, primarily because of higher short-term debt levels related to the acquisition of Kelco. Interest income was higher in 1994, primarily because of the inclusion of the aforementioned settlement with the IRS. The increase in "Other income (expense) -- net" is principally the result of higher income from joint ventures and equity affiliates. Monsanto Sustains 20 Percent ROE Performance, Moves to New Performance Measurement Monsanto's principal financial target of a 20 percent return on shareowners' equity (ROE) was achieved once again in 1995. Although ROE is considered a useful measurement tool, management, after careful evaluation, has decided to implement in 1996 a new value-based performance measurement system called Economic Value Added (EVA).
ROE Building Blocks 1995 1994 1993 - ------------------------------------------------------------------------------------- (a) Net sales as a percent of total assets 84.5% 93.0% 91.5% (b) Net income as a percent of net sales 8.3 7.5 6.3 (c) Total assets as a percent of average shareowners' equity 317.7 306.4 294.9 Return on shareowners' equity 22.1 21.4 16.9 - ------------------------------------------------------------------------------------- ROE is the product of items (a), (b) and (c).
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 in excess of $300 million in 1995. These savings are in line with original expectations and are expected to continue on an annual basis. The continuation of business redesign and other productivity efforts has yielded significant benefits as well. These initiatives will continue as the company responds to increased global competition and higher customer expectations. 1995 Monsanto Annual Report 31 7 Review of Consolidated Results of Operations New Products Continue as a Strategic Priority New product development and commercialization continue to be strategic priorities for Monsanto. For example, four agricultural products that were developed through biotechnology received regulatory approvals in 1995 and early 1996. These products are Roundup Ready(TM) soybeans and cotton, NewLeaf(R) insect-protected potatoes and Bollgard(TM) insect-protected cotton. Monsanto's research and development (R&D) expenditures were $658 million in 1995, or 7 percent of net sales, a level that reflects 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. As a result, 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 1994, Monsanto's operating results were significantly higher than those in 1993. The Agricultural Products segment 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 Chemicals' earnings, if the year-to-year effect of restructurings was excluded. Pharmaceuticals' performance improved dramatically as sales from new products increased significantly, infrastructure costs were lower, and costs from new product introductions declined. Food Ingredients performed well, as significant cost reductions largely offset lower average selling prices. As a result, net income for 1994 was $622 million, or $5.32 per share, compared with income of $494 million, or $4.10 per share, in 1993. Both years' results, however, were affected by unusual events. As described in the Notes to Financial Statements, Monsanto recognized a net restructuring charge of $22 million aftertax, or $0.19 per share, in December 1994. The company also settled certain tax matters related to the 1985 acquisition of Searle with the IRS and recognized an aftertax gain of $21 million, or $0.18 per share, in 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, 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 Products segment and the Chemicals segment. 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(R). The settlement resulted in a $22 million aftertax gain, or $0.18 per share. These costs were expensed in 1992, pending resolution of the claim. Net sales in 1994 were 5 percent higher than those in 1993. Sales in 1994 for Agricultural Products were up 13 percent from those in 1993, primarily because of a significant increase in worldwide sales volumes of Roundup(R) herbicide. Continued worldwide adoption of conservation tillage techniques, 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. Pharmaceuticals' net sales growth was led by a significant increase in sales of newly introduced 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 competition on sales of the Calan(R) family of calcium channel blockers. Chemicals' net sales for 1994 were slightly higher than those in 1993. If 1993 net sales from divested businesses were excluded, net sales for 1994 would have increased 6 percent, as sales volumes increased for all key products worldwide. Food Ingredients' net sales declined because of lower average selling prices 32 1995 Monsanto Annual Report 8 Review of Consolidated Results of Operations for aspartame. Sales volumes for NutraSweet(R) brand sweetener, the company's trademark aspartame product, declined 4 percent from volumes in 1993. However, sales of tabletop sweeteners, such as Equal(R), Canderel(R) and NutraSweet(R), increased slightly. Operating income in 1994 of $923 million increased 14 percent, compared with $810 million in operating income in 1993. If the $40 million in net pretax restructuring and unusual items in 1994 and the $30 million net pretax gain from unusual items in 1993 were excluded, operating income would have increased by $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 Chemicals segment. If the aforementioned 1994 and 1993 restructuring charges and unusual items were excluded, operating results would have improved significantly for the Agricultural Products, Chemicals and Pharmaceuticals segments. Food Ingredients' operating income declined modestly from that in the prior year. Agricultural Products' operating income in 1994 was a record, primarily because of significantly higher worldwide sales volumes for Roundup(R) herbicide, the inclusion of a full year of earnings from the acquired Ortho business, and the introduction of new products. Operating results for Chemicals 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. Pharmaceuticals' improved operating results benefited from significant growth in sales of new products, cost savings from restructuring actions, and lower new product introduction costs. Food Ingredients' lower operating income in 1994 resulted from reduced selling prices and sales volumes for aspartame, partially offset by cost reductions and higher sales of tabletop sweeteners. Marketing and administrative expenses increased in 1994, principally because of 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. These higher costs were partially offset by lower new product introduction costs for the Pharmaceuticals segment. 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. Analysis of Change in Earnings per Share
Better (Worse) - ------------------------------------------------------------------------------------- 1995 vs. 1994 vs. 1994 1993 - ------------------------------------------------------------------------------------- Sales-Related Factors: Selling prices $ 0.78 $(0.71) Sales volumes and mix 1.77 1.70 - ------------------------------------------------------------------------------------- Total Sales-Related Factors 2.55 0.99 - ------------------------------------------------------------------------------------- Cost-Related Factors: Raw material and manufacturing costs (1.06) 0.22 Marketing, administrative and technological expenses (0.66) (0.27) Amortization of intangible assets (0.05) 0.03 - ------------------------------------------------------------------------------------- Total Cost-Related Factors (1.77) (0.02) - ------------------------------------------------------------------------------------- Other Factors: Change in shares outstanding 0.04 0.15 Other expenses -- net 0.11 0.24 Divestitures 0.01 (0.01) - ------------------------------------------------------------------------------------- Total Other Factors 0.16 0.38 - ------------------------------------------------------------------------------------- Change in Earnings per Share Before Restructuring and Unusual Factors 0.94 1.35 Restructuring and unusual factors 0.10 (0.13) - ------------------------------------------------------------------------------------- Change in Earnings per Share $ 1.04 $ 1.22 - -------------------------------------------------------------------------------------
1995 Monsanto Annual Report 33 9 Review of Consolidated Results of Operations [SALES VOLUME INDEX GRAPH] ^The sales volume index increase in 1995 was led by a significant increase in worldwide sales volumes for Roundup(R) herbicide and by sales volume increases for key growth products at Searle. The Agricultural Products segment is discussed on pages 35-37, and the Pharmaceuticals segment on pages 39-41. [SELLING PRICE INDEX GRAPH] ^The index of selling prices increased slightly in 1995. This was primarily because of the effect of higher selling prices for the Chemicals segment. The Chemicals segment is discussed on pages 37-39. [RAW MATERIAL COST INDEX GRAPH] ^The raw material cost index in 1995 primarily affected the Chemicals segment. The Chemicals segment is discussed on pages 37-39. Segment Data
Operating Operating Net Sales Contribution Income (Loss) - ------------------------------------------------------------------------------------------------------------------------------------ 1995 1994 1993 1995 1994 1993 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ Agricultural Products $2,472 $2,224 $1,967 $ 523 $ 501 $408 $486 $476 $400 Chemicals 3,689 3,715 3,684 357 338 290 322 304 331 Pharmaceuticals 1,711 1,520 1,387 142 51 (22) 131 54 (34) Food Ingredients 1,090 813 864 204 173 187 109 157 166 Corporate (60) (63) (52) (63) (68) (53) - ------------------------------------------------------------------------------------------------------------------------------------ Total $8,962 $8,272 $7,902 $1,166 $1,000 $811 $985 $923 $810 - ------------------------------------------------------------------------------------------------------------------------------------
Depreciation Total Assets Capital Expenditures and Amortization - ------------------------------------------------------------------------------------------------------------------------------------ 1995 1994 1993 1995 1994 1993 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ Agricultural Products $ 2,589 $2,434 $2,166 $134 $106 $109 $137 $138 $129 Chemicals 2,699 3,101 3,146 220 212 224 214 254 263 Pharmaceuticals 2,561 2,037 2,044 78 61 70 127 110 115 Food Ingredients 2,182 1,003 1,011 65 29 32 115 57 63 Corporate 580 316 273 3 1 2 5 2 2 - ------------------------------------------------------------------------------------------------------------------------------------ Total $10,611 $8,891 $8,640 $500 $409 $437 $598 $561 $572 - ------------------------------------------------------------------------------------------------------------------------------------ Operating contribution is a measure of a segment's cash-based operating profitability. It excludes goodwill amortization and the effects of restructuring actions and unusual items from operating income. Operating income was affected by the 1995, 1994 and 1993 restructurings and other unusual items as follows: Income (Expense) - ------------------------------------------------------------------------------------- Segment 1995 1994 1993 - ------------------------------------------------------------------------------------- Agricultural Products $ (27) $(16) $ (3) Chemicals (33) (33) 43 Pharmaceuticals 7 20 3 Food Ingredients (69) (7) (12) Corporate (3) (4) (1) - ------------------------------------------------------------------------------------- Total $(125) $(40) $ 30 - -------------------------------------------------------------------------------------
34 1995 Monsanto Annual Report 10 Segment Data In February 1995, Monsanto created a new organizational structure that assigns primary business responsibilities to individual business units. As a result of those changes and the acquisition of Kelco, Monsanto has realigned its segment structure. The Food Ingredients segment in 1995 reflected Monsanto's Kelco operations, NutraSweet(R) brand sweetener, and tabletop sweeteners and other consumer products. The Pharmaceuticals segment reflected the operations of Searle after the transfer of the Canderel(R) tabletop sweetener business to the Food Ingredients segment. Segment information for 1994 and 1993 has been reclassified to conform to the current presentation. 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 were stated on a current cost basis. Sales between segments were not significant. Certain corporate expenses, primarily those related to the overall management of Monsanto, were not allocated to the segments or geographic areas. Corporate assets primarily include investments in affiliates and a portion of the cash balance. [1995 NET SALES GRAPH] The principal factors that accounted for the segments' performances in 1995 and 1994, along with the factors that are expected to affect operating results in the near term, are described on the following pages. Agricultural Products
1995 1994 1993 - -------------------------------------------------------------------------------------- Net Sales $2,472 $2,224 $1,967 Operating Contribution 523 501 408 Operating Income 486 476 400 Total Assets 2,589 2,434 2,166 Capital Expenditures 134 106 109 Depreciation and Amortization 137 138 129 - -------------------------------------------------------------------------------------- Operating contribution is operating income excluding goodwill amortization and the effect of restructuring actions and unusual items.
The Agricultural Products segment is a leading worldwide developer, manufacturer and marketer of crop protection 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 made in markets outside the United States. Weather conditions in agricultural markets worldwide affect sales volumes. The Agricultural Products segment set sales and operating income records in 1995, primarily because of another year of outstanding performance from the family of Roundup(R) herbicides. Net sales for the segment in 1995 were a record $2.5 billion, 11 percent higher than those in 1994. The increase was driven by significantly higher sales volumes of Roundup(R) herbicide. Demand for this family of glyphosate- based products continues to be strong worldwide, and can be attributed to further increases in the use of conservation tillage practices, effective pricing, and new end-use strategies. Selling price reductions, principally in markets outside the United States, made Roundup(R) cost effective for weed control in a broader range of crop and industrial uses. The effect of [AGRICULTURAL PRODUCTS NET SALES GRAPH] 1995 Monsanto Annual Report 35 11 Segment Data generic competition, principally in certain foreign markets, dampened selling prices modestly. However, the effect of increased sales volumes on operating income exceeded the effect of lower selling prices. Net sales in 1995 also benefited from higher sales of Posilac(R) bovine somatotropin (BST) and Harness(R) herbicide. Net sales of Harness(R) increased significantly from those in 1994, primarily because of higher volumes. However, these factors were somewhat offset by lower net sales of the lawn-and-garden products of the Solaris group. This decline was caused by unfavorable weather conditions in the western United States, which is a large consumer market for garden products. In addition, distribution changes in 1995 that are designed to move product sales closer to the time of consumer demand have been implemented, effectively moving sales from 1995 into 1996. [AGRICULTURAL PRODUCTS OPERATING MEASURES GRAPH] Both operating contribution and operating income increased from last year's levels, up 4 percent and 2 percent, respectively. The increase in operating income was affected by unusual items in both 1995 and 1994. The unusual items included in 1995 operating income were $27 million in restructuring charges and other actions, principally related to facility closures and the cost of work force reductions. Operating income in 1994 included $30 million in restructuring charges for employment reductions and costs to terminate a program. The 1994 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. If unusual items in 1995 and 1994 were excluded, 1995 operating income for Agricultural Products would have increased $21 million, or 4 percent. In addition to the strong operating performance of Roundup(R) and other crop protection products, operating contribution and operating income in 1995 also benefited from lower manufacturing costs. Higher marketing expenses used to support the base business and new product introductions partially offset the increases in operating contribution and operating income. Prior Year Review Net sales for Agricultural Products in 1994 were 13 percent higher than net sales in 1993. Operating contribution and operating income increased $93 million and $76 million, respectively, from those in 1993. 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 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). Worldwide sales volumes in 1994 for the family of Roundup(R) herbicides improved significantly from 1993 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 foreign markets, continued to benefit sales volumes by making Roundup(R) cost effective for weed control in a broader range of crop and industrial uses. The effect of generic competition, principally in certain foreign 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(R) in the United States. Earnings from the acetanilide family 36 1995 Monsanto Annual Report 12 Segment Data of herbicides declined because of lower sales into the former Soviet Union as a result of poor economic conditions, and because of one-time launch costs for the successful introduction of Harness(R) in the United States. Agricultural Products outlook Roundup(R) and other glyphosate-based herbicides face competition from generic producers in certain markets outside the United States. Patents protecting Roundup(R) in various countries expired in 1991, while compound per se patent protection for the active ingredient in Roundup(R) 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. Monsanto has introduced new formulations of Roundup(R), called Roundup(R) Ultra and Roundup(R) Pro herbicides, in the United States. Significant growth potential for Roundup(R) remains in conservation tillage applications worldwide. A significant number of new herbicide and biotechnology-related products are in the research and development pipeline, some of which should be commercialized in the next few years. These products are being developed either by Monsanto or in partnership with biotechnology and seed production companies. Posilac(R) bovine somatotropin (BST) offers significant value to the dairy industry by increasing the efficiency of milk production. The U.S. Food and Drug Administration has made no changes to its interim guidance issued in February 1994 on the labeling of milk and milk products from cows supplemented with BST. Any significant change that might restrict the use of Posilac(R) or the movement of milk among milk processors could affect future sales. Chemicals
1995 1994 1993 - -------------------------------------------------------------------------------------- Net Sales $3,689 $3,715 $3,684 Operating Contribution 357 338 290 Operating Income 322 304 331 Total Assets 2,699 3,101 3,146 Capital Expenditures 220 212 224 Depreciation and Amortization 214 254 263 - -------------------------------------------------------------------------------------- Operating contribution is operating income excluding goodwill amortization and the effect of restructuring actions and unusual items.
The Chemicals segment produces and markets a range of performance materials -- including nylon and acrylic fibers, Saflex(R) plastic interlayer, phosphorus and its derivatives, and specialty chemicals -- used by customers to make consumer, household, automotive and industrial products. Chemicals' net sales decreased slightly in 1995. Both operating contribution and operating income increased 6 percent from 1994 results. However, net sales and operating results for the first four months of 1995 and for all of 1994 include those from the company's rubber chemicals and instruments businesses. As further discussed in the Notes to Financial Statements, Monsanto and Akzo Nobel N.V. formed a 50-50 joint venture in 1995, known as Flexsys L.P., by combining their respective rubber chemical businesses. Operations for Flexsys commenced on May 1, 1995. As a result, sales and operating results for the company's rubber chemicals and instruments businesses are no longer included in consolidated totals. If the sales from these businesses were excluded in both 1995 and 1994, Chemicals' sales in 1995 would have increased 7 percent from those in 1994. All business units included in the Chemicals segment posted sales gains in 1995 from prior year amounts. The sales increases for these units can be attributed primarily to higher average selling prices and to an improved sales mix. [CHEMICALS NET SALES GRAPH] 1995 Monsanto Annual Report 37 13 Segment Data Net sales for fibers products increased modestly, primarily because of higher selling prices for acrylic fibers and intermediates. Nylon fiber sales were down moderately compared with sales last year, as the carpet industry experienced lower consumer demand in 1995. Nylon intermediate sales in 1995 increased significantly from sales in the prior year, primarily on the strength of higher selling prices. Demand for acrylic fibers in U.S. markets was soft during 1995 and negatively affected sales volumes. This decline was partially offset by higher export sales, particularly in China. Sales of specialty products in 1995 increased from those in 1994, principally because higher average selling prices offset the effect of slightly lower sales volumes. Net sales of performance materials were up slightly from sales in 1994 on the strength of higher sales volumes and an improved sales mix, although partially offset by lower average selling prices. Net sales of Saflex(R) plastic interlayer increased modestly from sales in 1994, principally because of favorable exchange rates. Sales volumes were essentially even with last year's volumes as expected growth in the global automotive markets failed to materialize in 1995. Net sales of plastics products in 1995 were higher than those in 1994, primarily because of higher average selling prices. As further discussed in the Notes to Financial Statements, Monsanto sold its worldwide styrenics plastics business in December 1995 for $580 million. This sale resulted in an aftertax gain of $116 million. Monsanto's 1995 results included net sales and operating income of $663 million and $12 million, respectively, from the styrenics plastics business. [CHEMICALS OPERATING MEASURES GRAPH] Operating contribution and operating income for the Chemicals segment increased in 1995 from those in the prior year. A number of unusual items affected profitability in both years. Operating income in 1995 included a net charge of $33 million for restructuring and other actions, primarily for the costs to close several facilities. Operating income in 1994 was reduced by $33 million in restructuring charges, principally related to employment reductions and costs to close several facilities. Operating contribution and operating income were positively affected by higher selling prices, the effect of continued cost reduction efforts, and manufacturing efficiencies, but were hurt by higher raw material costs. Competitive pressures worldwide have limited the Chemicals segment's ability to recover the increased raw material costs fully through increased selling prices. Prior Year Review In 1994, the Chemicals segment 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. Chemicals' 1994 net sales were slightly higher than net sales in 1993. Sales in 1993 included those from businesses later divested as part of a restructuring program. If net sales from these divested businesses were excluded, 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 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 1993. 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. 38 1995 Monsanto Annual Report 14 Segment Data Operating contribution and 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 segment's profitability, was 86 percent in 1994 vs. 77 percent in 1993. Partially offsetting these gains were significantly higher raw material prices. Chemicals outlook The Chemicals segment is affected by economic conditions, particularly as they relate to the automotive and housing industries. The prices of purchased raw materials used by the Chemicals segment have been coming down as the world economy slows and as production capacity comes on line worldwide. If global economic growth remains in line with expectations, continuing announcements of new capacity should result in more favorable raw material costs for Monsanto in the next few years. However, global competition and customer demands for efficiency will continue to make price increases difficult. The Chemicals segment intends to improve its performance through cost reductions and redesign of its businesses. Growth opportunities exist through expansion into global markets, the development of new products and new markets for existing or modified products, and strategic acquisitions, partnerships or joint ventures. Pharmaceuticals
1995 1994 1993 - -------------------------------------------------------------------------------------- Net Sales $1,711 $1,520 $1,387 Operating Contribution 142 51 (22) Operating Income (Loss) 131 54 (34) Total Assets 2,561 2,037 2,044 Capital Expenditures 78 61 70 Depreciation and Amortization 127 110 115 - -------------------------------------------------------------------------------------- Operating contribution is operating income excluding goodwill amortization and the effect of restructuring actions and unusual items.
The Pharmaceuticals segment reflects the operations of Searle. 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, to treat certain infections, and to provide better women's health care. Net sales for the Pharmaceuticals segment in 1995 were a record $1.7 billion, or 13 percent higher than net sales last year. This strong increase was driven by higher sales volumes, principally from excellent growth in key products, such as Daypro(R) and Arthrotec(R) arthritis treatments, and Ambien(R) short-term treatment for insomnia. Each of these products had double-digit increases in net sales vs. those in the prior year. In total, these key products contributed approximately $500 million to 1995 net sales. Sales and earnings growth also benefited from the women's health care product line recently acquired from Syntex. The sales increase also reflects the effect of approximately $20 million in favorable adjustments under certain sales rebate programs in the United States for product sales made in prior years. The 1995 net sales increase for Pharmaceuticals was partially offset by lower sales of the family of Calan(R) calcium channel blockers. [PHARMACEUTICALS NET SALES GRAPH] 1995 Monsanto Annual Report 39 15 Segment Data Both operating contribution and operating income for Pharmaceuticals more than doubled from the 1994 amounts. Operating results in 1995 and 1994 were affected by unusual items. Operating income in 1995 included a $13 million charge for restructuring, principally related to employment reductions, and other actions. Operating results in 1995 also reflected the aforementioned $20 million in favorable sales adjustments. Pharmaceuticals' operating income in 1994 included $15 million in restructuring charges, primarily for employment reductions, and a $35 million gain from the reversal of prior year restructuring reserves. The reversal of the reserves was primarily caused by higher-than-anticipated proceeds and lower-than-expected exit costs related to certain divested facilities. If the effect of these unusual items were excluded, operating income would have been $124 million in 1995 and $34 million in 1994. The significant improvement in operating income primarily came from higher sales of key growth products. Higher income from cost-sharing alliances also benefited operating results in 1995. The increase in operating income was partially offset by higher marketing expenditures incurred to support the sales growth in key products. [PHARMACEUTICALS OPERATING MEASURES GRAPH] Searle's investment in research and development (R&D) continues to be significant. R&D expenditures, before cost-sharing payments from alliances, were 21 percent and 22 percent of the segment's net sales in 1995 and 1994, respectively. Future R&D spending is also expected to be significant. Searle will continue to seek R&D collaborations to share development costs and to combine strengths to speed product development. This investment reflects the segment's commitment to securing a continuing stream of new products. Prior Year Review Net sales for the Pharmaceuticals segment were 10 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), Ambien(R) and Arthrotec(R) -- more than offset a decline in sales of the family of Calan(R) calcium channel blockers. In total, these new products contributed $310 million to 1994 net sales. Net sales of the family of Calan(R) products, sold primarily in Canada and the United States, were $321 million, 8 percent lower than sales in 1993. This decline primarily reflected the effect of generic competition on Calan(R) SR in the United States. However, the effect was substantially reduced by the segment's sales of verapamil SR resulting from a distribution arrangement with a generic distributor. Pharmaceuticals' operating contribution and operating income in 1994 increased $73 million and $88 million, respectively, from the 1993 amounts. Unusual items included in 1994 operating income were $15 million in restructuring charges, principally related to employment reductions, and $35 million in reversals of prior year restructuring reserves, primarily for higher-than-anticipated proceeds and lower-than-expected exit costs related to certain divested facilities. Operating contribution and operating income 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. Pharmaceuticals outlook Arthrotec(R) arthritis treatment -- a combination of diclofenac, a nonsteroidal anti-inflammatory drug (NSAID), and Cytotec(R), Searle's ulcer preventive drug -- was launched in five new markets, including Germany, in 1995. In 1996, additional launches are expected in Italy and several other markets in Europe and Asia-Pacific. A new drug application for Arthrotec(R) was filed with the U.S. Food and Drug 40 1995 Monsanto Annual Report 16 Segment Data Pharmaceuticals outlook (continued) Administration (FDA) in December 1995. A study, published in the third quarter of 1995, demonstrated that Cytotec(R) effectively reduces the risk of serious gastrointestinal problems in patients on NSAID therapy. This study should continue to positively affect sales of Cytotec(R). In the United States, generic competition and continuing controversy following the results of a recent study about the use of calcium channel blockers have negatively affected sales of the family of Calan(R) calcium channel blockers. In the first quarter of 1996, Searle received FDA approval for its new verapamil product, Covera-HS(TM). The product is designed to provide peak protection for hypertension and angina at the time of day when patients are most vulnerable to rises in blood pressure and heart rate, which should differentiate it from other calcium channel blockers and anti-hypertensive drugs. Searle plans to launch Covera-HS(TM) in the first half of 1996. In addition to Covera-HS(TM), Searle has a number of other compounds in various stages of development. Drugs being developed for the treatment of cardiovascular conditions include xemilofiban, an oral anti-platelet agent to inhibit the clotting of blood vessels associated with angioplasty; tissue factor pathway inhibitor (TFPI) to prevent blood from clotting during microvascular surgery and to treat sepsis; and epoxymexrenone to treat congestive heart failure, hypertension and cirrhosis. Searle's participation in the arthritis market potentially could increase with the development of oxaprozin salt, for the relief of arthritis and pain, as well as COX-2 inhibitors, products that selectively treat arthritis and pain without gastrointestinal side effects. Also in development is synthokine-1, an adjunctive therapy to stimulate the replenishment of white blood cells and platelets in chemotherapy patients. Food Ingredients
1995 1994 1993 - -------------------------------------------------------------------------------------- Net Sales $1,090 $ 813 $ 864 Operating Contribution 204 173 187 Operating Income 109 157 166 Total Assets 2,182 1,003 1,011 Capital Expenditures 65 29 32 Depreciation and Amortization 115 57 63 - -------------------------------------------------------------------------------------- Operating contribution is operating income excluding goodwill amortization and the effect of restructuring actions and unusual items.
The Food Ingredients segment manufactures and markets sweeteners, including NutraSweet(R) brand sweetener and Equal(R), Canderel(R) and NutraSweet(R) brand tabletop sweeteners. It also develops, produces and markets alginates, biogums and other food ingredients. Food Ingredients' net sales for the year were up $277 million, or 34 percent, from the prior year's net sales. Results in 1995 include sales from the acquired Kelco business. Without these sales, net sales for Food Ingredients would have declined, primarily because of lower average selling prices for aspartame. Sales of tabletop sweeteners were up 6 percent, primarily because of higher sales volumes. A large portion of the increased sales volumes has come from international markets that the Food Ingredients segment is aggressively pursuing. Lower sales of NutraSweet(R) brand sweetener, the company's trademark aspartame product, essentially offset this increase. Despite an increase in unit sales volumes for aspartame, the effects of lower average pricing were more than offsetting. Kelco sales were close to expectations and benefited from strong sales of biogum products. Operating contribution in 1995 for Food Ingredients increased signifi- cantly from the segment's contribution in 1994, primarily because of the addition of Kelco. Operating income declined significantly from income in the prior year. Certain unusual items affected earnings in both years. In 1995, operating income included restructuring and other charges of $69 million, principally for costs to exit a production facility and for work force reductions. Operating income in 1994 was reduced by $7 million in restructuring charges for work force reductions. If these unusual items were excluded, operating income for Food Ingredients 1995 Monsanto Annual Report 41 17 Segment Data would have increased moderately, primarily because of the addition of Kelco income, the benefit of higher sales of tabletop sweeteners, and manufacturing efficiencies. Lower aspartame sales and higher operating expenses partially offset the increase. [FOOD INGREDIENTS OPERATING MEASURES GRAPH] Prior Year Review In 1994, Food Ingredients' net sales decreased 6 percent from 1993 net sales, primarily as the result of lower average selling prices of NutraSweet(R) brand sweetener. This decline was expected and resulted from lower postpatent prices in the United States for that product. Sales volumes for NutraSweet(R) decreased slightly from those in 1993, primarily because of lower contractual shipments to customers. Sales volumes for tabletop sweeteners such as Equal(R), Canderel(R) and NutraSweet(R) increased modestly in 1994 from volumes in 1993. Food Ingredients' 1994 operating contribution and operating income declined moderately from the 1993 amounts. Operating income in 1994 and 1993 included pretax restructuring charges for work force reductions of $7 million and $12 million, respectively. The decline in 1994 operating contribution and income resulted from lower average selling prices and lower sales volumes, which were partially offset by lower operating expenses and higher sales of tabletop sweeteners. Food Ingredients outlook Competition from generic aspartame producers has lowered selling prices for NutraSweet(R) brand sweetener. However, the worldwide market share for this product has been maintained because of several competitive advantages, including a low cost position and superior quality and customer service. Other new sweeteners also compete with NutraSweet(R) in markets outside the United States. These sweeteners are now being reviewed by the U.S. Food and Drug Administration (FDA), and their possible approval could negatively affect future sales, operating income and cash flow. International markets offer the greatest growth potential, particularly for tabletop sweeteners. The company is developing next-generation, high- intensity sweeteners and expects to file a food additive petition with the FDA near the end of the decade. The Kelco lines of alginates and biogums hold strong positions in their food ingredients markets. While there has been some increased competition for biogums in certain industrial applications, the effect has not been significant. Seaweed is the raw material for alginates, and its sourcing continues to be an area of focus. 42 1995 Monsanto Annual Report 18 Geographic Data
Net Sales to Operating Unaffiliated Customers Income (Loss) Total Assets - ----------------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 1995 1994 1993 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ United States $5,631 $5,376 $5,162 $721 $507 $656 $ 7,181 $5,844 $5,928 Europe-Africa 1,891 1,653 1,559 240 340 129 1,927 1,947 1,801 Asia-Pacific 662 552 533 39 39 (2) 702 586 502 Canada 364 318 311 17 37 28 161 135 121 Latin America 414 373 337 63 65 43 372 300 261 Interarea Eliminations (32) 3 9 (312) (237) (246) Corporate (63) (68) (53) 580 316 273 - ------------------------------------------------------------------------------------------------------------------------------------ Total $8,962 $8,272 $7,902 $985 $923 $810 $10,611 $8,891 $8,640 - ------------------------------------------------------------------------------------------------------------------------------------
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:
1995 1994 1993 - ------------------------------------------------------------------------------------- World area shipped from: United States $ 878 $ 682 $ 625 Europe-Africa 293 248 133 Asia-Pacific 36 5 2 Canada 61 44 38 Latin America 2 2 4 Interarea Eliminations (1,270) (981) (802) - ------------------------------------------------------------------------------------- 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:
1995 1994 1993 - ------------------------------------------------------------------------------------- Operating income $ 359 $ 481 $ 198 Interest and other income (expense) -- net (32) (33) (16) Income taxes (112) (133) (67) - ------------------------------------------------------------------------------------- Net Income of Consolidated Ex-U.S. Subsidiaries $ 215 $ 315 $ 115 - ------------------------------------------------------------------------------------- Total operating assets $3,162 $2,968 $2,685 Total liabilities 873 1,088 1,080 - ------------------------------------------------------------------------------------- Net Assets of Consolidated Ex-U.S. Subsidiaries $2,289 $1,880 $1,605 - -------------------------------------------------------------------------------------
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 $550 million for 1995, $399 million for 1994, and $435 million for 1993. 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 1995 follows:
Monsanto's Share - ---------------------------------------------------------------------- Net Income Sales (Loss) - ---------------------------------------------------------------------- United States $177 $ 3 Europe-Africa 395 (1) Asia-Pacific 24 (3) Latin America 163 18 - ---------------------------------------------------------------------- Geographic area operating income was affected by the 1995, 1994 and 1993 restructurings and other unusual items as follows: Income (Expense) - ------------------------------------------------------------------------------------- 1995 1994 1993 - ------------------------------------------------------------------------------------- United States $ (64) $(105) $ 78 Europe-Africa (4) 69 (26) Asia-Pacific (40) (11) (15) Canada (13) 2 (4) Latin America (1) 9 (2) Corporate (3) (4) (1) - ------------------------------------------------------------------------------------ Total $(125) $ (40) $ 30 - ------------------------------------------------------------------------------------
1995 Monsanto Annual Report 43 19 Statement of Consolidated Financial Position
(Dollars in millions, except per share) As of Dec. 31, - ----------------------------------------------------------------------------------------------------------------------------------- ASSETS 1995 1994 - ----------------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents $ 297 $ 507 Trade receivables, net of allowances of $57 in 1995 and 1994 1,629 1,530 Miscellaneous receivables and prepaid expenses 596 313 Deferred income tax benefit 415 321 Inventories 1,368 1,212 - ----------------------------------------------------------------------------------------------------------------------------------- Total Current Assets 4,305 3,883 - ----------------------------------------------------------------------------------------------------------------------------------- Property, Plant and Equipment: Land 118 102 Buildings 1,231 1,268 Machinery and equipment 5,549 5,916 Construction in progress 339 269 - ----------------------------------------------------------------------------------------------------------------------------------- Total property, plant and equipment 7,237 7,555 Less accumulated depreciation 4,405 4,738 - ----------------------------------------------------------------------------------------------------------------------------------- Net Property, Plant and Equipment 2,832 2,817 - ------------------------------------------------------------------------------------------------------------------------------------ Investments in Affiliates 544 279 Intangible Assets, net of accumulated amortization of $638 in 1995 and $522 in 1994 1,964 1,134 Other Assets 966 778 - ------------------------------------------------------------------------------------------------------------------------------------ Total Assets $10,611 $ 8,891 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES AND SHAREOWNERS' EQUITY - ------------------------------------------------------------------------------------------------------------------------------------ Current Liabilities: Accounts payable $ 648 $ 629 Wages and benefits 456 343 Income and other taxes 240 150 Restructuring reserves 163 129 Miscellaneous accruals 940 872 Short-term debt 365 312 - ------------------------------------------------------------------------------------------------------------------------------------ Total Current Liabilities 2,812 2,435 - ------------------------------------------------------------------------------------------------------------------------------------ Long-Term Debt 1,667 1,405 Deferred Income Taxes 85 65 Postretirement Liabilities 1,415 1,341 Other Liabilities 900 697 Shareowners' Equity: Common stock (authorized: 200,000,000 shares, par value $2) Issued: 164,394,194 shares in 1995 and 1994 329 329 Additional contributed capital 902 849 Treasury stock, at cost (48,923,899 shares in 1995 and 52,859,031 shares in 1994) (2,550) (2,744) Reserve for ESOP debt retirement (181) (199) Unrealized investment holding gain 34 19 Accumulated currency adjustment 101 33 Reinvested earnings 5,097 $ 4,661 - ------------------------------------------------------------------------------------------------------------------------------------ Total Shareowners' Equity 3,732 2,948 - ------------------------------------------------------------------------------------------------------------------------------------ Total Liabilities and Shareowners' Equity $10,611 $ 8,891 - ------------------------------------------------------------------------------------------------------------------------------------ The above statement should be read in conjunction with pages 51-63 of this report. ESOP stands for Employee Stock Ownership Plan.
44 1995 Monsanto Annual Report 20 Review of Changes in Financial Position Financial Position Remains Strong Monsanto's financial position remained strong in 1995, 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 slightly higher at year-end 1995. Trade receivables at year-end 1995 increased compared with those at the prior year-end, primarily because of the acquisition of Kelco, and strong fourth-quarter sales by Searle. Inventories at year-end 1995 increased, primarily because of the inclusion of Kelco inventories, and higher inventories in the Agricultural Products segment. These increases were offset in part by lower cash and cash equivalent balances and higher accrued tax liabilities. The amount of net property, plant and equipment was slightly higher than at the end of 1994, as $500 million in capital additions and the effects of acquisitions exceeded 1995 depreciation expense and divestitures. Total deferred tax benefits, both current and noncurrent, of $575 million at year-end 1995 were primarily related to U.S. operations, which generally have a strong earnings history. The company's financial position at the end of 1995 reflects the estimated fair value of assets acquired and liabilities assumed of Kelco and of the pharmaceutical product line acquired from Syntex. The estimated fair value of these assets and liabilities was approximately $1.4 billion and $115 million, respectively. The allocation of the purchase price for these acquisitions is based on preliminary assumptions and is subject to change. Long-term debt at the end of 1995 was higher than that at the end of 1994, primarily because of the issuance of 8.2 percent debentures and higher balances of commercial paper classified as long-term issued to finance the Kelco acquisition. As further discussed in the Notes to Financial Statements, the company expects to take significant equity positions in Calgene Inc. and DeKalb Genetics Corp. in the first quarter of 1996. These investments will total approximately $290 million and will be funded with a combination of cash and debt. Monsanto's share of the earnings and losses from these equity affiliates is expected to have a slightly dilutive effect on net income in 1996. Monsanto uses financial markets worldwide for its financing needs. It has available various short- and medium-term bank credit facilities, which are discussed in the Notes to Financial Statements on page 56. 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. 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 59. Monsanto's commitments and contingencies are described in the Notes to Financial Statements on page 60. Monsanto's return on shareowners' equity (ROE) was 22.1 percent in 1995. The ROE and other key financial statistics are presented in the table below.
Key Financial Statistics 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------- Return on Shareowners' Equity (ROE) 22.1% 21.4% 16.9% (Net income divided by average shareowners' equity) Current Ratio (Current assets divided by current liabilities) 1.5 1.6 1.6 Trade Receivables -- Days Sales Outstanding 71 67 71 (Fourth-quarter trade receivables divided by fourth-quarter net sales times 30 days) Inventory Turnover Ratio (Cost of goods sold divided by inventory) 3.7 3.9 3.7 Interest Coverage 6.4 7.3 6.1 (Income before interest expense and income taxes divided by total interest cost) Cash Provided by Operations/Total Debt 41% 76% 42% Total Debt/Total Capitalization 35% 37% 38% - -------------------------------------------------------------------------------------------------------------------- Total capitalization is the sum of short-term debt, long-term debt and shareowners' equity.
1995 Monsanto Annual Report 45 21 Statement of Consolidated Cash Flow
(Dollars in millions) 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS - -------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income $ 739 $ 622 $ 494 Add income taxes 348 273 235 - -------------------------------------------------------------------------------------------------------------------- Income before income taxes 1,087 895 729 Adjustments to reconcile to Cash Provided by Continuing Operations: Income tax payments (335) (196) (166) Items that did not use cash: Depreciation and amortization 598 561 572 Restructuring expenses -- net 156 40 5 Other (6) 43 29 Working capital changes that provided (used) cash: Accounts receivable (36) (88) 62 Inventories (198) 15 (31) Accounts payable and accrued liabilities (198) (125) (202) Other (67) 74 34 Nonoperating pretax gains from asset disposals (125) (11) (6) Other items (53) 92 (4) - -------------------------------------------------------------------------------------------------------------------- Cash Provided by Continuing Operations 823 1,300 1,022 Cash Used in Discontinued Operations (291) - -------------------------------------------------------------------------------------------------------------------- Total Cash Provided by Operations 823 1,300 731 - -------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Property, plant and equipment purchases (500) (409) (437) Acquisition of Kelco and pharmaceutical product line (1,296) Acquisition and investment payments (197) (185) (510) Investment and property disposal proceeds 128 202 298 Proceeds from sale of styrenics plastics business 580 - -------------------------------------------------------------------------------------------------------------------- Cash Used in Investing Activities (1,285) (392) (649) - -------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Net change in short-term financing 53 89 (31) Long-term debt proceeds 658 49 379 Long-term debt reductions (403) (152) (299) Treasury stock purchases (478) (380) Dividend payments (306) (289) (275) Common stock issued under employee stock plans 194 82 55 Other financing activities 56 25 13 - -------------------------------------------------------------------------------------------------------------------- Cash Provided by (Used in) Financing Activities 252 (674) (538) - -------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (210) 234 (456) CASH AND CASH EQUIVALENTS: Beginning of year 507 273 729 - -------------------------------------------------------------------------------------------------------------------- End of year $ 297 $ 507 $ 273 - -------------------------------------------------------------------------------------------------------------------- The above statement should be read in conjunction with pages 51-63 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 $189 million, $129 million and $133 million in 1995, 1994 and 1993, respectively.
46 1995 Monsanto Annual Report 22 Review of Cash Flow Monsanto's cash flow for 1995, 1994 and 1993 is shown in the Statement of Consolidated Cash Flow on page 46. Cash Flow Remains Strong Cash provided by continuing operations of $823 million was strong in 1995, but decreased from last year's level of $1.3 billion. The decrease was primarily due to the effect of increased inventory balances, higher payments for accounts payable and accrued liabilities, and higher income tax payments. Working capital as a percentage of net sales was about the same as that for last year. 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. Investment and property disposal proceeds in 1995 were $708 million, principally related to the sale of the styrenics plastics business. Other investment and property disposals in 1994 generated more than $200 million in cash. The principal proceeds in 1994 and 1993 came from the sales of various businesses associated with restructuring actions. In December 1995, Monsanto sold its styrenics plastics business for $580 million. Approximately $150 million of the proceeds have been earmarked to prefund certain 1996 capital expenditures. The effect of this decision lowered cash flow from continuing operations in 1995, but will benefit 1996 cash flow. The balance of the sale proceeds was used to reduce short-term debt. [CASH PROVIDED BY CONTINUING OPERATIONS GRAPH] Major uses of cash in 1995, 1994 and 1993 included dividends and capital expenditures. Treasury stock purchases were made in 1994 and 1993. The acquisition of the Kelco business and the Syntex pharmaceutical product line in 1995, and investments in various 1994 and 1993 acquisitions were also major uses of cash. Monsanto's 1995 capital expenditures focused on improved technology, capacity expansions and environmental projects, and totaled $500 million. Business redesign efforts and productivity enhancements were successful in increasing effective capacity at many facilities, thereby reducing the need for additional capital expenditures. Long-term debt proceeds in 1995 included $150 million in 8.2 percent debentures and $400 million of commercial paper related to the Kelco acquisition. Long-term debt repayments in 1993 included $150 million in 9-3/8 percent debentures. 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. Management decides the amount of insurance coverage to purchase from unaffiliated companies and the appropriate amount of risk to retain based on the cost and availability of insurance and the likelihood of a loss. 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. 1995 Monsanto Annual Report 47 23 Review of Cash Flow Monsanto Maintains Strong Environmental Commitment Monsanto remains strongly committed to complying with various laws and government regulations concerning environmental matters and employee safety and health. Compliance with stringent requirements will continue to be an obligation of Monsanto, its competitors and industry in general. Monsanto is dedicated to long-term environmental protection and compliance programs that reduce and monitor emissions of hazardous materials into the environment, as well as to the remediation of identified existing environmental concerns. Expenditures in 1995 were approximately $47 million for environmental capital projects and approximately $210 million for the management of environmental programs, including the operation and maintenance of facilities for environmental control. Monsanto estimates that during 1996 and 1997 approximately $30 million to $40 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 93 Superfund sites. Monsanto has resolved disputes, entered partial consent decrees, and executed administrative orders between Monsanto and the EPA in 58 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 contaminated 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. Monsanto has an accrued liability of $71 million as of Dec. 31, 1995, 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 Superfund sites in this category include the noncompany-owned Brio, Fike/Artel, Motco and Woburn sites, which account for $44 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. Because of these uncertainties, primarily related to the method and extent of remediation, potential future expenses could be as much as $10 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 $90 million as of Dec. 31, 1995, 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. Because of these uncertainties, potential expenses could be as much as $20 million for these sites. Four sites in this category account for $58 million of the accrued amount and for approximately all of the potential future expenses. 48 1995 Monsanto Annual Report 24 Review of Cash Flow Monsanto spent $60 million in 1995 for remediation of Superfund and other contaminated sites. Most of these expenditures were related to the Chemicals segment, and similar or lesser amounts can be expected in future years. For hazardous and other waste facilities at operating locations, Monsanto recognizes postclosure environmental costs and remediation costs over the estimated remaining useful life of the related facilities, not to exceed 20 years. Monsanto spent $14 million in 1995 for remediation of these facilities and has an accrued liability of $49 million as of Dec. 31, 1995, 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 $120 million. While the ultimate costs and results of remediation of contaminated sites cannot be predicted with certainty, Monsanto's liquidity, financial position and profitability are not expected to be materially affected. Common Stock Purchase Program Suspended for 1995 The company has temporarily suspended the purchase of Monsanto common stock until the Kelco acquisition debt can be reduced to an appropriate level. As part of an ongoing treasury stock purchase program, Monsanto's board of directors authorized in October 1992 the purchase of 12 million shares of Monsanto common stock, of which 3.4 million shares have been purchased. This authority is in addition to the normal repurchase of shares for compensation and benefits programs. There were no shares of Monsanto common stock purchased in 1995 under this program. Dividend Increases for 23rd Consecutive Year Monsanto has paid quarterly dividends on its common shares without interruption or reduction since 1928, and it has increased the dividend per share in each of the past 23 years. Dividend payout for 1995 was 37 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. In any given 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. The number of shareowners of record as of Feb. 23, 1996, was 50,260. The high and low common stock prices on that date were $138 and $135-1/2, respectively. [DIVIDENDS PER SHARE GRAPH] ^ Monsanto's dividend per share on a calendar year basis has increased 120 percent since 1985. The dividend payout rate, which is cash dividends paid divided by net income, was 41 percent, 46 percent and 56 percent in 1995, 1994 and 1993, respectively. The dividend yield, which is dividends per share for the year divided by the average of the high and low common stock prices for the year, was 3 percent, 3 percent and 4 percent in 1995, 1994 and 1993, respectively. 1995 Monsanto Annual Report 49 25 Statement of Consolidated Shareowners' Equity
(Dollars in millions, except per share) 1995 1994 1993 - ----------------------------------------------------------------------------------------------------- COMMON STOCK: - ----------------------------------------------------------------------------------------------------- Balance, Jan. 1 and Dec. 31 $ 329 $ 329 $ 329 - ----------------------------------------------------------------------------------------------------- ADDITIONAL CONTRIBUTED CAPITAL: Balance, Jan. 1 $ 849 $ 826 $ 820 Employee stock plans 53 23 6 - ----------------------------------------------------------------------------------------------------- Balance, Dec. 31 $ 902 $ 849 $ 826 - ----------------------------------------------------------------------------------------------------- TREASURY STOCK: Balance, Jan. 1 $(2,744) $(2,348) $(2,029) Shares purchased (6,170,016 and 5,795,600 shares in 1994 and 1993, respectively) (478) (380) Net shares issued under employee stock plans (3,935,132; 1,729,530; and 1,306,882 shares in 1995, 1994 and 1993, respectively) 194 82 61 - ----------------------------------------------------------------------------------------------------- Balance, Dec. 31 $(2,550) $(2,744) $(2,348) - ----------------------------------------------------------------------------------------------------- RESERVE FOR ESOP DEBT RETIREMENT: Balance, Jan. 1 $ (199) $ (218) $ (233) Allocation of ESOP shares 18 19 15 - ----------------------------------------------------------------------------------------------------- Balance, Dec. 31 $ (181) $ (199) $ (218) - ----------------------------------------------------------------------------------------------------- UNREALIZED INVESTMENT HOLDING GAIN: Balance, Jan. 1 $ 19 $ 15 Net change in market value 15 4 - ----------------------------------------------------------------------------------------------------- Balance, Dec. 31 $ 34 $ 19 - ----------------------------------------------------------------------------------------------------- ACCUMULATED CURRENCY ADJUSTMENT: Balance, Jan. 1 $ 33 $ (59) $ 15 Translation adjustments 68 92 (74) - ----------------------------------------------------------------------------------------------------- Balance, Dec. 31 $ 101 $ 33 $ (59) - ----------------------------------------------------------------------------------------------------- REINVESTED EARNINGS: Balance, Jan. 1 $ 4,661 $ 4,325 $ 4,103 Net income 739 622 494 Dividends (net of ESOP tax benefits) (303) (286) (272) - ----------------------------------------------------------------------------------------------------- Balance, Dec. 31 $ 5,097 $ 4,661 $ 4,325 - ----------------------------------------------------------------------------------------------------- The above statement should be read in conjunction with pages 51-63 of this report. )ESOP stands for Employee Stock Ownership Plan.
Key Financial Statistics 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------- Stock Price High $124 3/4 $ 86 1/2 $ 75 Low 68 1/4 66 1/2 48 7/8 Year-End 122 1/2 70 1/2 73 3/8 - ----------------------------------------------------------------------------------------------------------------------- Per Share Dividends 2.70 2.47 2.30 Shareowners' Equity 32.32 26.43 24.62 - ----------------------------------------------------------------------------------------------------------------------- Average Daily Share Trading Volume (thousands of shares) 342 376 335 - ----------------------------------------------------------------------------------------------------------------------- Based on daily reported high and low stock prices.
50 1995 Monsanto Annual Report 26 Notes to Financial Statements Significant Accounting Policies Monsanto's significant accounting policies are italicized in the following Notes to Financial Statements. Previously reported amounts have been reclassified to make them consistent with the 1995 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' net earnings or losses 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 hyperinflationary 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 denominated in currencies other than the entity's currency. This hedging activity is intended to protect the company from adverse fluctuations in foreign currencies vs. the U.S. dollar. As of Dec. 31, 1995, Monsanto had currency forward contracts to purchase $247 million and to sell $268 million of other currencies, principally the Belgian franc, Japanese yen, French franc and British pound sterling. There were no purchased currency option contracts outstanding as of Dec. 31, 1995. 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, 1995, 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 1995, the board of directors approved a restructuring plan. The pretax charge associated with these actions was $169 million ($125 million aftertax) and is intended to cover the costs of work force reductions, business consolidations, facility closures, and the exit from nonstrategic businesses and facilities. Approximately 550 positions are expected to be eliminated by these actions. The other actions taken in 1995 were associated with the formation of the Flexsys joint venture, which is discussed in "Principal Acquisitions and Divestitures." The venture partners, Monsanto and Akzo Nobel N.V., agreed to bear the one-time costs required to integrate their respective rubber chemicals businesses into the joint venture. For Monsanto, these integration costs, which totaled $40 million pretax ($25 million aftertax), were primarily for the cost of reducing the work force by approximately 120 people and for special termination benefits for approximately 300 people transferring from Monsanto to the joint venture. The charge for these actions was recorded in the first quarter of 1995. 1995 Monsanto Annual Report 51 27 Notes to Financial Statements Other items that affected results of operations in 1995 included the receipt in the first and third quarters of settlement payments from various insurers related to environmental and other insurance litigation. The combined effect of these settlements totaled $92 million pretax ($57 million aftertax). In addition, Monsanto settled a lawsuit related to a Superfund site in La Marque, Texas. The suit was brought by IT Corporation (IT), a subsidiary of International Technology Corp., and claimed, among other things, breach of a contract calling for IT to perform incineration and remediation work at the site. Monsanto settled the suit by paying $41 million pretax ($25 million aftertax), and recorded the payment in the third quarter of 1995. The company also recorded approximately $20 million in favorable pretax adjustments ($13 million aftertax) under certain sales rebate programs in the United States for product sales made in prior years. In December 1994, the 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, which was substantially completed by the end of 1995, reduced worldwide employment by approximately 450 people. In addition, the company closed certain facilities and terminated certain programs. The pretax expense related to these actions was $89 million ($55 million aftertax). In the fourth quarter of 1994, the board approved the reversal of $49 million pretax of excess restructuring reserves from prior years. The excess was due primarily to higher-than-expected proceeds and lower-than-expected exit costs from the sale and shutdown of nonstrategic businesses and facilities included in the 1993 and 1992 restructuring actions. 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. This settlement included interest of $33 million pretax ($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 of or exit from some nonstrategic products, the withdrawal from the pyridine research program in the Agricultural Products segment, and the consolidation of some manufacturing capacity. The net pretax expense related to these actions was $5 million ($7 million aftertax) and principally affected Agricultural Products and Chemicals. 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(R) herbicide. These costs had been expensed in 1992 pending resolution of the claim. The components of the pretax expense (income) related to the restructuring programs and the other actions were:
1995 1994 1993 - ------------------------------------------------------------------------------------- Cost of employee reductions $ 62 $ 68 $ 5 Shutdown and consolidation of various facilities and departments 107 (25) 51 Glyphosate plant damage settlement (35) Insurance-related settlement (income) (92) Litigation settlement 41 Joint venture integration costs 40 Other costs (income) (20) (22) 47 Gains on business sales (189) (14) (98) - ------------------------------------------------------------------------------------- Total $ (51) $ 7 $(30) - -------------------------------------------------------------------------------------
Restructuring expenses are recorded based on estimates prepared at the time the restructuring actions are approved by the board of directors. The balance in restructuring reserves as of Dec. 31, 1995, was $275 million. It is earmarked primarily for work force reduction costs associated with the 1995 actions and for the planned facility dismantling and site closure costs that remain from previous restructurings. Management believes that the balance of these reserves as of Dec. 31, 1995, is adequate for completion of those activities. Restructuring actions during the last four years have reduced these liabilities by approximately $1.3 billion. Approximately two-thirds of these reductions were recorded for write-offs and expenditures related to the termination or sale 52 1995 Monsanto Annual Report 28 Notes to Financial Statements of nonstrategic products and facilities. The remainder of the reductions were primarily related to the cost of work force reduction programs, most of 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:
1995 1994 1993 - ------------------------------------------------------------------------------------- Net sales $ (20) Cost of goods sold (11) $(35) Restructuring expenses -- net 156 $ 40 5 - ------------------------------------------------------------------------------------- Decrease (increase) in operating income 125 40 (30) Interest income (33) Gain on sale of styrenics plastics business (189) Other expense 13 - ------------------------------------------------------------------------------------- Total decrease (increase) in income before income taxes $ (51) $ 7 $(30) - ------------------------------------------------------------------------------------- Monsanto's share of 1995 restructuring actions undertaken by the Flexsys joint venture.
Net income increased by $11 million, or $0.09 per share, in 1995; was reduced by $1 million, or $0.01 per share, in 1994; and increased by $15 million, or $0.12 per share, in 1993 because of these restructurings and unusual items. In 1993, net sales of $208 million and operating income of $1 million for divested businesses were included in Monsanto's net sales and operating income. Principal Acquisitions and Divestitures In February 1996, Monsanto and DeKalb Genetics Corp. agreed to a long-term research and development collaboration in agricultural biotechnology. In addition, Monsanto will acquire a significant equity position in DeKalb for approximately $160 million. In December 1995, Monsanto sold its worldwide styrenics plastics business. In a separate but related transaction, Monsanto has reached an agreement to sell its shares in Monsanto Premier Kasei Co. Ltd., a styrenics plastics manufacturing joint venture in Thailand, to one of its joint venture partners. As a result of these transactions, Monsanto received $580 million, which resulted in an after-tax gain of $116 million (net of applicable income taxes of $73 million). Monsanto's results of operations for 1995 included net sales and operating income of $663 million and $12 million, respectively, from the styrenics plastics business. In September 1995, Searle acquired the women's health care assets, primarily product rights, of the former Syntex Corp., a subsidiary of Roche Holding Ltd., for approximately $240 million. The results of operations for the acquired product rights were included in the Statement of Consolidated Income from the date of acquisition. The product rights are being amortized over 10 years. In June 1995, Monsanto announced that it had signed a letter of intent to acquire a 49.9 percent interest in Calgene Inc. for approximately $30 million in cash, certain intellectual property, and 100 percent of the partnership interests in Gargiulo L.P. and Gargiulo G.P. In addition, Monsanto will provide long-term credit facilities for the general business needs of Calgene and Gargiulo. The Calgene transaction is subject to the approval of the shareowners of Calgene and is anticipated to close in early 1996. In February 1995, Monsanto completed its acquisition of the worldwide business of Kelco, the specialty chemicals division of Merck & Co. Inc., for approximately $1,062 million. The acquisition included total assets with a fair value of $1,172 million and liabilities of $110 million. The excess of the purchase price over the estimated fair value of the net assets acquired is being amortized over 30 years. The financial results of the Kelco business were included in the Statement of Consolidated Income from the date of acquisition. On a pro forma basis, results of operations for the years ended Dec. 31, 1994 and 1993 would not have been significantly different assuming the acquisition had occurred as of the beginning of those years. In December 1994, Monsanto and Akzo Nobel N.V. agreed to form a 50-50 joint venture by combining their respective rubber chemicals businesses. On May 1, 1995, the joint venture, known as Flexsys L.P., began operations and is accounted for as an equity affiliate. Accordingly, Monsanto's share of Flexsys' earnings after that date was reflected in "Other income (expense) -- net" in the Statement of Consolidated Income. Certain integration costs were incurred by Monsanto upon the formation of the joint venture and are more fully described in "Restructuring and Other Actions." 1995 Monsanto Annual Report 53 29 Notes to Financial Statements 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 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. Depreciation and Amortization
1995 1994 1993 - ------------------------------------------------------------------------------------- Depreciation $459 $442 $469 Amortization of intangible assets 119 81 81 Obsolescence 20 38 22 - ------------------------------------------------------------------------------------- Total $598 $561 $572 - -------------------------------------------------------------------------------------
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 amortization. The components of intangible assets and their estimated remaining useful lives were:
Estimated Remaining Life 1995 1994 - --------------------------------------------------------------------------------------------- Goodwill 27 $1,370 $ 776 Patents 8 81 48 Other intangible assets 13 513 310 - --------------------------------------------------------------------------------------------- Total $1,964 $1,134 - --------------------------------------------------------------------------------------------- Weighted average, in years, as of Dec. 31, 1995.
Goodwill and other intangible assets increased in 1995, primarily because of the acquisition of Kelco and the acquisition of certain product rights. 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 (5 to 40 years). 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 Certain investments, primarily equity securities, are recorded at their market values. When a decline in market value is deemed other than temporary, the reduction to the investment in a security is charged to expense. As of Dec. 31, these equity securities were detailed as follows:
1995 1994 - ------------------------------------------------------------------------------------- Aggregate fair value $163 $140 Gross unrealized holding: Gains 63 44 Losses 7 8 - -------------------------------------------------------------------------------------
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, 1995 and 1994, the total amortized cost of these securities was $272 million and $247 million, respectively. 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 (66 percent as of Dec. 31, 1995) 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. 54 1995 Monsanto Annual Report 30 Notes to Financial Statements The components of inventories were:
1995 1994 - ------------------------------------------------------------------------------------- Finished goods $ 874 $ 751 Goods in process 305 285 Raw materials and supplies 434 459 - ------------------------------------------------------------------------------------- Inventories, at FIFO cost 1,613 1,495 Excess of FIFO over LIFO cost (245) (283) - ------------------------------------------------------------------------------------- Total $1,368 $1,212 - -------------------------------------------------------------------------------------
Inventories at FIFO cost approximate current cost. The effect of LIFO inventory liquidations increased pretax income by $24 million in 1995, related to the sale of the styrenics plastics business, and by $15 million in 1994. The effect of the 1995 liquidations is included in the gain on the sale of the styrenics plastics business. Income Taxes The components of income before income taxes were:
1995 1994 1993 - ------------------------------------------------------------------------------------- United States $ 760 $447 $547 Outside United States 327 448 182 - ------------------------------------------------------------------------------------- Total $1,087 $895 $729 - -------------------------------------------------------------------------------------
The components of income tax expense charged to operations were:
1995 1994 1993 - ------------------------------------------------------------------------------------- Current: U.S. federal $ 288 $118 $113 U.S. state 19 17 12 Outside United States 121 94 56 - ------------------------------------------------------------------------------------- 428 229 181 - ------------------------------------------------------------------------------------- Deferred: U.S. federal (80) 2 35 U.S. state 9 3 8 Outside United States (9) 39 11 - ------------------------------------------------------------------------------------- (80) 44 54 - ------------------------------------------------------------------------------------- Total $ 348 $273 $235 - -------------------------------------------------------------------------------------
Factors causing Monsanto's effective tax rate to differ from the U.S. federal statutory rate were:
1995 1994 1993 - ------------------------------------------------------------------------------------- U.S. federal statutory rate 35% 35% 35% Benefits attributable to: U.S. export earnings (2) (1) (2) Puerto Rican operations (2) (2) (1) Higher (lower) ex-U.S. rates -- -- (3) Nondeductible goodwill 1 1 1 Valuation allowances 1 (1) 5 Effect of U.S. tax rate change -- -- (2) U.S. state income taxes 2 1 2 Other (3) (2) (3) - ------------------------------------------------------------------------------------- Effective income tax rate 32% 31% 32% - -------------------------------------------------------------------------------------
Deferred income tax balances were related to:
1995 1994 - ------------------------------------------------------------------------------------------------------ Asset Liability Asset Liability - ------------------------------------------------------------------------------------------------------ Property $(388) $39 $(383) $40 Postretirement benefits 508 7 475 8 Restructuring reserves 130 (3) 69 (3) Environmental liabilities 65 69 Inventory 38 35 Other 312 42 212 20 Valuation allowances (90) (85) - ------------------------------------------------------------------------------------------------------ Total $ 575 $85 $ 392 $65 - ------------------------------------------------------------------------------------------------------
Income taxes and remittance taxes have not been recorded on $920 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 $111 million. 1995 Monsanto Annual Report 55 31 Notes to Financial Statements Short-Term Debt and Credit Arrangements Short-term debt was:
1995 1994 - ------------------------------------------------------------------------------------- Notes payable to banks $ 61 $ 79 Commercial paper 93 75 Bank overdrafts 113 77 Current portion of long-term debt 98 81 - ------------------------------------------------------------------------------------- Total $365 $312 - ------------------------------------------------------------------------------------- Weighted average interest rates of notes payable as of Dec. 31: Banks 7.0% 5.1% Commercial paper 5.8% 6.0% - ------------------------------------------------------------------------------------- Includes the effect of notes in certain countries where local inflation results in high interest rates.
Monsanto had aggregate short-term loan facilities of $262 million, under which loans totaling $61 million were outstanding as of Dec. 31, 1995. Interest on these loans is related to various bank rates. Monsanto's 364-day $450 million credit facility expired on Feb. 1, 1996, and was not renewed. On Feb. 13, 1996, Monsanto amended its existing $750 million credit facility. The amended facility was increased to $1 billion and expires in the year 2001. The company may request that lenders increase their commitments up to an aggregate $1.6 billion. There were no borrowings under the previous facilities as of Dec. 31, 1995. The amended credit facility is used to support the issuance of commercial paper. The company anticipates that interest on amounts borrowed under this agreement will be at money market rates. Covenants under this credit facility restrict maximum borrowings. The company does not anticipate that future borrowings will be limited by the terms of this agreement. Long-Term Debt Long-term debt (exclusive of current maturities) was:
1995 1994 - ------------------------------------------------------------------------------------- Industrial revenue bond obligations, average rate in 1995 of 5.4%, due 1997 to 2028 $ 335 $ 347 Medium-term notes, rates in 1995 ranging from 8.4% to 9%, due 1997 to 2005 185 200 Commercial paper 425 181 6% notes due 2000 150 150 7.09% and 8.13% amortizing ESOP notes and debentures due 2000 and 2006, guaranteed by the company 150 160 8-7/8% debentures due 2009 99 99 8.7% debentures due 2021 100 100 8.2% debentures due 2025 150 Other 73 168 - ------------------------------------------------------------------------------------- Total $1,667 $1,405 - ------------------------------------------------------------------------------------- $150 million swapped to an effective rate of 8.6 percent through February 1996.
Maturities and sinking fund requirements on long-term debt are $98 million in 1996, $72 million in 1997, $72 million in 1998, $74 million in 1999, and $207 million in 2000. Commercial paper balances of $425 million and $181 million as of Dec. 31, 1995 and 1994, respectively, have been classified as long-term debt. Monsanto has the ability and intent to renew these obligations beyond 1996. 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 its debt portfolio. As of Dec. 31, 1995, Monsanto was party to interest-rate swap agreements with an aggregate notional principal amount of $371 million related to existing debt. The agreements effectively convert floating-rate debt into fixed-rate debt. This 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 to be paid or received because of swap agreements are accrued as interest rates change over the related debt period. 56 1995 Monsanto Annual Report 32 Notes to Financial Statements Fair Values Of Financial Instruments The estimated fair values of Monsanto's financial instruments were:
1995 1994 - ---------------------------------------------------------------------------------------------------- Recorded Fair Recorded Fair Amount Value Amount Value - ---------------------------------------------------------------------------------------------------- Assets: Investments in securities and other assets $378 $433 $409 $400 Foreign currency option contracts 7 5 Liabilities: Currency swaps 1 4 2 9 Interest-rate swaps 5 19 1 17 Long-term debt 1,667 1,781 1,405 1,408 - ----------------------------------------------------------------------------------------------------
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 by the use of quoted market prices, estimates obtained from brokers, and other appropriate valuation techniques based on information available as of Dec. 31, 1995. 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:
1995 1994 1993 - ------------------------------------------------------------------------------------- Service cost for benefits earned during the year $ 70 $ 75 $ 75 Interest cost on benefit obligation 291 269 285 Assumed return on plan assets (326) (317) (342) Amortization of unrecognized net gain (25) (12) (26) - ------------------------------------------------------------------------------------- Total $ 10 $ 15 $ (8) - ------------------------------------------------------------------------------------- Actual returns (losses) on plan assets were $671 million, $(142) million and $550 million in 1995, 1994 and 1993, respectively.
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 through the use of the preceding year-end rate assumptions. Assumptions used as of Dec. 31 for the principal plans were:
1995 1994 1993 - ------------------------------------------------------------------------------------- Discount rate 7.25% 8.50% 7.25% Assumed long-term rate of return on plan assets 9.50% 9.50% 9.50% Annual rates of salary increase (for plans that base benefits on final compensation level) 4.50% 5.00% 4.25% - -------------------------------------------------------------------------------------
The funded status of Monsanto's pension plans at year-end was:
1995 1994 - ------------------------------------------------------------------------------------- Plan assets at fair value $3,690 $3,358 - ------------------------------------------------------------------------------------- Actuarial present value of plan benefits: Vested $3,457 $2,913 Nonvested 145 130 - ------------------------------------------------------------------------------------- Accumulated benefit obligation 3,602 3,043 Effect of projected future salary increases 385 360 - ------------------------------------------------------------------------------------- Projected benefit obligation $3,987 $3,403 - ------------------------------------------------------------------------------------- Deficiency of plan assets over projected benefit obligation $ (297) $ (45) Less: Unrecognized initial net gain 119 121 Unrecognized prior service costs (192) (202) Unrecognized subsequent net gain (loss) (5) 206 - ------------------------------------------------------------------------------------- Accrued net pension liability $ 219 $ 170 - ------------------------------------------------------------------------------------- Includes $204 million and $146 million, respectively, for unfunded plans. Includes $152 million and $126 million, respectively, for unfunded plans.
The accrued net pension liability was included in: Postretirement liabilities $277 $225 Less other assets (58) (55) - ------------------------------------------------------------------------------------- Accrued net pension liability $219 $170 - -------------------------------------------------------------------------------------
1995 Monsanto Annual Report 57 33 Notes to Financial Statements Included in the preceding table are plan assets and projected benefit obligations for the principal U.S. plans of approximately $3,263 million and $3,348 million, respectively, as of Dec. 31, 1995. The assumptions used to compute the funded status of the principal U.S. plans were changed as of Dec. 31, 1995. These changes in assumptions resulted in an increase of approximately $367 million in the projected benefit obligation. Plan assets consist principally of common stocks and U.S. government and corporate obligations. Contributions to these plans were neither required nor made in 1995, 1994 and 1993 because the company's principal pension plans are adequately funded, using assumed returns. 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. The costs of postretirement benefits are 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:
1995 1994 1993 - ------------------------------------------------------------------------------------- Service cost for benefits earned during the year $ 21 $ 23 $ 24 Interest cost on benefit obligation 94 87 92 Amortization of unrecog- nized net (gain) loss (2) 7 -- - ------------------------------------------------------------------------------------- Total $113 $117 $116 - -------------------------------------------------------------------------------------
Postretirement costs are determined by using the preceding year-end rate assumptions. Assumptions used as of Dec. 31 for the principal plans were:
1995 1994 1993 - ------------------------------------------------------------------------------------ Discount rate 7.25% 8.50% 7.25% Initial trend rate for health care costs 9.00% 11.50% 12.00% Ultimate trend rate for health care costs 5.00% 5.50% 5.00% - ------------------------------------------------------------------------------------ The initial trend rate for health care costs declines by 1 percent per year to 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 1995 postretirement health care benefits by $4 million and the accumulated benefit obligation by $44 million as of Dec. 31, 1995. As of Dec. 31, the status of Monsanto's postretirement health care and life insurance benefit plans, and employee disability benefit plans was:
1995 1994 - ------------------------------------------------------------------------------------- Accumulated benefit obligation: Retirees $1,006 $ 869 Eligible active employees 52 55 Other active employees 213 214 - ------------------------------------------------------------------------------------- Total $1,271 $1,138 - ------------------------------------------------------------------------------------- Unrecognized benefits from prior service 34 43 Unrecognized subsequent net gain (loss) (81) 17 - ------------------------------------------------------------------------------------- Accrued liability $1,224 $1,198 - -------------------------------------------------------------------------------------
The accrued liability was included in: Miscellaneous accruals $ 86 $ 82 Postretirement liabilities 1,138 1,116 - ------------------------------------------------------------------------------------- Accrued liability $1,224 $1,198 - -------------------------------------------------------------------------------------
The assumptions used to compute the accumulated benefit obligation of the principal plans were changed as of Dec. 31, 1995, resulting in an increase of approximately $100 million in the obligation. 58 1995 Monsanto Annual Report 34 Notes to Financial Statements 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 1995, $30 million in 1994, and $31 million in 1993. Monsanto has established an Employee Stock Ownership Plan (ESOP), which holds 3.7 million shares of Monsanto common stock as of Dec. 31, 1995. The ESOP acquired shares by using proceeds from the issuance of long-term notes and debentures that are guaranteed by Monsanto. The ESOP also borrowed $50 million from Monsanto. Dividends on the common stock owned by the ESOP are being used to repay the ESOP borrowings. A portion of the ESOP shares is allocated each year to employee savings accounts as matching contributions. In 1995, 301,036 shares were allocated to participants under the plan, leaving 2,675,119 unallocated shares as of Dec. 31, 1995. Unallocated shares held by the ESOP are considered outstanding for earnings per share calculations. Compensation expense is equal to the cost of the shares allocated to participants, less dividends paid on the shares held by the ESOP. ESOP borrowings totaled $187 million as of Dec. 31, 1995.
1995 1994 1993 - ------------------------------------------------------------------------------------- Total ESOP expense $26 $29 $25 Interest portion of total ESOP expense 16 17 18 Cash contribution 18 19 20 Dividends paid on ESOP shares held 10 9 9 - -------------------------------------------------------------------------------------
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 Exercise 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 - ------------------------------------------------------------------------------------- 1995: Granted 1,455,745 69.88-103.31 Exercised (4,027,114) 22.81- 77.75 Expired (83,549) 35.44- 78.81 - ------------------------------------------------------------------------------------- Dec. 31, 1995 9,076,758 11,053,862 33.28-103.31 - -------------------------------------------------------------------------------------
Under the 1994 Management Incentive Plans, the Searle Plan, and the NutraSweet Plan, 4,076,427 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. 1995 Monsanto Annual Report 59 35 Notes to Financial Statements Earnings per Share Earnings per share were computed using the weighted average number of common shares and common share equivalents outstanding each year (116,127,872 in 1995; 116,984,960 in 1994; and 120,380,516 in 1993). Common share equivalents (2,678,265 in 1995; 2,399,245 in 1994; and 1,314,921 in 1993) 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, 1995, there were 15,130,334 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 then 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, as a result of a subsequent stock split, for every two rights held, the owner will be entitled 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, for every two rights held, the holder will be entitled 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, for every two rights held, the holder (other than such person or members of such group) will be entitled 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 basis of one share for every two rights. At any time prior to the acquisition of such a 20 percent position, the company can redeem each right for $0.01. 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 $107 million as of Dec. 31, 1995. Excluding the ESOP notes and debentures, Monsanto was contingently liable as a guarantor for bank loans and for discounted customers' receivables totaling approximately $388 million and $311 million as of Dec. 31, 1995 and 1994, respectively. Future minimum payments under noncancelable operating leases and unconditional inventory purchases are $121 million for 1996, $135 million for 1997, $110 million for 1998, $63 million for 1999, $20 million for 2000, and $69 million thereafter. The more significant concentrations in Monsanto's trade receivables at year-end were:
1995 1994 - ------------------------------------------------------------------------------------- U.S. agricultural product distributors $257 $295 European agricultural product distributors 117 103 Pharmaceutical distributors worldwide 357 287 Customers in the former Soviet Union 21 40 - -------------------------------------------------------------------------------------
Management does not anticipate incurring losses on its trade receivables in excess of established allowances. Costs for remediation of contaminated 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 $210 million and $207 million as of Dec. 31, 1995 and 1994, respectively, for the remediation of identified contaminated sites. Expenditures related to remediation activities were $74 million in 1995, $65 million in 1994, and $53 million in 1993. 60 1995 Monsanto Annual Report 36 Notes to Financial Statements Monsanto's future remediation expenses for contaminated 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 $30 million. Postclosure and remediation costs for contamination 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 reach approximately $120 million. Uncertainties related to these costs include evolving government standards, the method and extent of remediation, and future changes in technology. 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:
1995 1994 1993 - ------------------------------------------------------------------------------------- Raw material and energy costs $2,265 $2,375 $2,258 Employee compensation and benefits 2,283 2,193 2,092 Current income and other taxes 681 477 442 Rent expense 133 124 129 - ------------------------------------------------------------------------------------- Technological expenses: Research and development 658 609 626 Engineering, commercial development and patent 55 65 69 - ------------------------------------------------------------------------------------- Total technological expenses 713 674 695 - ------------------------------------------------------------------------------------- Interest expense: Total interest cost 201 141 141 Less capitalized interest (11) (10) (12) - ------------------------------------------------------------------------------------- Net interest expense 190 131 129 - ------------------------------------------------------------------------------------- Currency losses including equity in affiliates' currency gains and losses 9 23 6 - -------------------------------------------------------------------------------------
Segment Information Certain segment data and geographic data for 1995, 1994 and 1993 that appear on pages 34 and 43 are integral parts of the accompanying financial statements. The company's principal product lines are discussed in the segment data. 1995 Monsanto Annual Report 61 37 Notes to Financial Statements Quarterly Data -- Unaudited
First Second Third Fourth Total Quarter Quarter Quarter Quarter Year - ----------------------------------------------------------------------------------------------------------------------------------- Net Sales 1995 $2,318 $2,482 $2,048 $2,114 $8,962 1994 2,001 2,269 1,912 2,090 8,272 1993 1,941 2,230 1,849 1,882 7,902 - ----------------------------------------------------------------------------------------------------------------------------------- Gross Profit 1995 994 1,124 868 867 3,853 1994 893 1,045 733 827 3,498 1993 835 959 768 776 3,338 - ----------------------------------------------------------------------------------------------------------------------------------- Operating Income (Loss) 1995 361 445 224 (45) 985 1994 319 397 131 76 923 1993 231 326 152 101 810 - ----------------------------------------------------------------------------------------------------------------------------------- Net Income 1995 229 290 140 80 739 1994 194 258 116 54 622 1993 141 200 95 58 494 - ----------------------------------------------------------------------------------------------------------------------------------- Earnings per Share 1995 2.02 2.51 1.18 0.65 6.36 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 1995 0.63 0.69 0.69 0.69 2.70 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 1995 High $80-5/8 $90-7/8 $104-1/8 $124-3/4 $124-3/4 Low 68-1/4 79 89 97-1/4 68-1/4 - ----------------------------------------------------------------------------------------------------------------------------------- 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 - -----------------------------------------------------------------------------------------------------------------------------------
62 1995 Monsanto Annual Report 38 Notes to Financial Statements 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 Products segment during that part of the year. Net income in the first quarter of 1995 included an aftertax gain of $25 million, or $0.22 per share, for insurance-related settlement payments and an aftertax charge of $25 million, or $0.22 per share, for integration costs related to the formation of the Flexsys joint venture. In the third quarter of 1995, net income included an aftertax gain of $32 million, or $0.28 per share, for the receipt of settlement payments related to environmental insurance litigation, and an aftertax charge of $25 million, or $0.22 per share, for the settlement of a lawsuit related to a Superfund site in La Marque, Texas. Third-quarter net income also included favorable adjustments of approximately $13 million aftertax, or $0.11 per share, related to certain sales rebate programs in the United States for product sales made in prior years. Net income for the fourth quarter of 1995 included an aftertax charge of $125 million, or $1.08 per share, for restructuring actions and an aftertax gain of $116 million, or $1.00 per share, resulting from the sale of the styrenics plastics business. 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 the 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 to exit from 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. 1995 Monsanto Annual Report 63 39 Financial Summary
(Dollars in millions, except per share) 1995 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------------------------------------------ Operating Results Net Sales $ 8,962 $8,272 $7,902 $7,763 $7,936 $8,068 Gross Profit 3,853 3,498 3,338 3,053 3,417 3,281 As a Percent of Net Sales 43% 42% 42% 39% 43% 41% Operating Income 985 923 810 58 475 808 As a Percent of Net Sales 11% 11% 10% 1% 6% 10% Income (Loss) from Continuing Operations 739 622 494 (126) 238 486 As a Percent of Net Sales 8% 8% 6% (2)% 3% 6% Income from Discontinued Operations 578 58 60 Cumulative Effect of Accounting Changes (540) Net Income (Loss) 739 622 494 (88) 296 546 Return on Shareowners' Equity 22.1% 21.4% 16.9% (2.6)% 7.6% 13.6% - ------------------------------------------------------------------------------------------------------------------------------------ Earnings per Share Income (Loss) from Continuing Operations $ 6.36 $ 5.32 $ 4.10 $(1.01) $ 1.87 $ 3.77 Net Income (Loss) 6.36 5.32 4.10 (0.71) 2.33 4.23 - ------------------------------------------------------------------------------------------------------------------------------------ Year-End Financial Position Total Assets $10,611 $8,891 $8,640 $9,085 $9,227 $9,236 Working Capital 1,493 1,448 1,377 1,512 1,536 1,323 - ----------------------------------------------------------------------------------------------------------------------------------- Property, Plant and Equipment: Gross $ 7,237 $7,555 $7,382 $7,602 $7,510 $7,226 Net 2,832 2,817 2,802 3,005 3,191 3,316 - ------------------------------------------------------------------------------------------------------------------------------------ Long-Term Debt $ 1,667 $1,405 $1,502 $1,423 $1,871 $1,645 Shareowners' Equity 3,732 2,948 2,855 3,005 3,654 4,089 - ------------------------------------------------------------------------------------------------------------------------------------ Current Ratio 1.5 1.6 1.6 1.6 1.7 1.6 Percent of Total Debt to Total Capitalization 35% 37% 38% 36% 38% 35% - ------------------------------------------------------------------------------------------------------------------------------------ Other Data Property, Plant and Equipment Purchases $ 500 $ 409 $ 437 $ 586 $ 554 $ 711 Depreciation and Amortization 598 561 572 765 714 704 Interest Expense 190 131 129 169 166 176 Research and Development Expenses 658 609 626 651 610 595 Income Taxes 348 273 235 (48) 116 230 Cash Provided by Continuing Operations 823 1,300 1,022 912 1,180 1,104 - ------------------------------------------------------------------------------------------------------------------------------------ Stock Price: High $ 124-3/4 $ 86-1/2 $ 75 $ 71-1/4 $ 76 $ 60-1/8 Low 68-1/4 66-1/2 48-7/8 49-3/4 46 38-3/4 Year-End 122-1/2 70-1/2 73-3/8 57-5/8 67-7/8 48-1/4 Price/Earnings Ratio on Year-End Stock Price 19 13 18 -- 29 11 - ------------------------------------------------------------------------------------------------------------------------------------ Five-Year Market Return to Shareowners 298% 139% 198% 147% 182% 144% - ------------------------------------------------------------------------------------------------------------------------------------ Per Share: Dividends $ 2.70 $ 2.47 $ 2.30 $ 2.20 $2.045 $ 1.88 Shareowners' Equity 32.32 26.43 24.62 24.95 29.72 32.51 - ------------------------------------------------------------------------------------------------------------------------------------ Shareowners (year-end) 50,745 53,694 56,601 60,074 60,152 62,230 - ------------------------------------------------------------------------------------------------------------------------------------ Shares Outstanding (year-end, in millions) 115 112 116 120 123 126 - ------------------------------------------------------------------------------------------------------------------------------------ Employees (year-end) 28,514 29,354 30,019 33,797 39,281 41,081 - ------------------------------------------------------------------------------------------------------------------------------------ Net income for 1995 includes net restructuring expenses and other unusual items of $105 million, or $0.91 per share, and the gain on the sale of the styrenics plastics business of $116 million, or $1.00 per share. 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 expenses of $325 million, or $2.54 per share. Net income for 1990 includes $56 million, or $0.43 per share, in gains from divestitures, including the divestiture of certain assets of a joint venture in Japan. Assumes reinvestment of quarterly dividends.
64 1995 Monsanto Annual Report 40 APPENDIX 1. In Exhibit 13 to the printed Form 10-K, the following bar graphs appear, all depicting data for 1993, 1994 and 1995: on page 34, "Sales Volume Index"; "Selling Price Index" and "Raw Material Cost Index"; on page 35, "Agricultural Products Net Sales"; on page 36, "Agricultural Products Operating Measures"; on page 37, "Chemicals Net Sales"; on page 38, "Chemicals Operating Measures"; on page 39, "Pharmaceuticals Net Sales"; on page 40, "Pharmaceuticals Operating Measures"; on page 42, "Food Ingredients Operating Measures"; and on page 47, "Cash Provided by Continuing Operations". On page 35, a pie-chart graph entitled "1995 Net Sales" appears, depicting a percentage breakdown of Monsanto's 1995 net sales by segment. On page 49, a bar graph entitled "Dividend Per Share" appears, depicting annual dividend per share data for the years 1985 through 1995. 2. Throughout the electronic submission of Exhibit 13, trademarks are 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 7 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, 1995, except for unnamed subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.
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
22 EX-23.1 8 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. 33-60189) of our opinions dated February 23, 1996, appearing in and incorporated by reference in this annual report on Form 10-K of Monsanto Company for the year ended December 31, 1995. DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Saint Louis, Missouri March 15, 1996 ------------------------ EX-23.2 9 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 1995 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. 33-60189). In giving this consent I do not thereby admit that I am within the category of persons whose consent is required under Section 7 of the Securities Act of 1933. KARL R. BARNICKOL KARL R. BARNICKOL Associate General Counsel Monsanto Company Saint Louis, Missouri March 15, 1996 23 EX-24.1 10 POWERS 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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 18th day of January, 1996. JOAN T. BOK ------------------------------- COMMONWEALTH OF MASSACHUSETTS ) ) SS COUNTY OF WORCESTER ) On this 18th day of January, 1996, 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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 15 day of January, 1996. ROBERT M. HEYSSEL ------------------------------- STATE OF DELAWARE ) ) SS CITY OF SUSSEX ) On this 15th day of January, 1996, 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. AMY M. LITTLETON ---------------------------- Notary Public My Commission Expires: 6-20-99 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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 31st day of January, 1996. ROBERT B. HOFFMAN ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 31st day of January, 1996, 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. HARRIET CONLON ---------------------------- Notary Public My Commission Expires: 8/15/98 HARRIET CONLON Notary Public - Notary Seal STATE OF MISSOURI ST. LOUIS COUNTY My Commission Expires August 15, 1998 4 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Michael R. Hogan, 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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 9th day of January, 1996. MICHAEL R. HOGAN ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 9th day of January, 1996, before me personally appeared Michael R. Hogan, 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. RUTH M. HOULIHAN ---------------------------- Notary Public My Commission Expires: 5-27-97 RUTH M. HOULIHAN NOTARY PUBLIC, STATE OF MISSOURI MY COMMISSION EXPIRES 5-27-97 ST. LOUIS COUNTY 5 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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, 1996. GWENDOLYN S. KING ------------------------------- COMMONWEALTH OF PENNSYLVANIA ) ) SS COUNTY OF PHILADELPHIA ) On this 17 day of January, 1996, 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: August 23, 1999 Notarial Seal Suzanne Schwartz, Notary Public Philadelphia, Philadelphia County My Commission Expires Aug. 23, 1999 6 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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 12th day of January, 1996. PHILIP LEDER ------------------------------- COMMONWEALTH OF MASSACHUSETTS ) ) SS COUNTY OF SUFFOLK ) On this 12 day of January, 1996, 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 7 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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, 1996. HOWARD M. LOVE ------------------------------- COMMONWEALTH OF PENNSYLVANIA ) ) SS COUNTY OF ALLEGHENY ) On this 11th day of January, 1996, 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 City of Pittsburgh, Allegheny Co. My Commission Expires April 14, 1999 8 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Richard J. Mahoney, 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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 19 day of January, 1996. R. J. MAHONEY ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 19th day of January, 1996, 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. DONNA R. FRANZ ---------------------------- Notary Public My Commission Expires: 1/9/97 DONNA R. FRANZ Notary Public State of Missouri St. Louis County My Commission Exp. Jan. 9, 1997 9 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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 23 day of Jan., 1996. FRANK A. METZ, JR. ------------------------------- STATE OF NEW YORK ) ) SS COUNTY OF ROCKLAND ) On this 23 day of January, 1996, 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: 1/25/97 MARY ALICE CONWAY Notary Public, State of New York No. 5007249 Qualified in Orange County Commission Expires January 25, 1997 10 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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 12 day of January, 1996. BUCK MICKEL ------------------------------- STATE OF SOUTH CAROLINA ) ) SS COUNTY OF GREENVILLE ) On this 16th day of January, 1996, 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 11 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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 25th day of January, 1996. JACOBUS F. M. PETERS ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 25th day of January, 1996, 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. BEVERLY A. OHM ---------------------------- Notary Public My Commission Expires: Feb. 12, 1998 BEVERLY A. OHM NOTARY PUBLIC, STATE OF MISSOURI MY COMMISSION EXPIRES FEB. 12, 1998 ST. LOUIS COUNTY 12 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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 12th day of January, 1996. NICHOLAS L. REDING ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 12th day of January, 1996, 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. BEVERLY A. OHM ---------------------------- Notary Public My Commission Expires: 2/12/98 BEVERLY A. OHM NOTARY PUBLIC, STATE OF MISSOURI MY COMMISSION EXPIRES FEB. 12, 1998 ST. LOUIS COUNTY 13 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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 24 day of January, 1996. JOHN S. REED ------------------------------- STATE OF NEW YORK ) ) SS COUNTY OF NEW YORK ) On this 24th day of January, 1996, 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 14 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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 10th day of January, 1996. WILLIAM D. RUCKELSHAUS ------------------------------- William D. Ruckelshaus STATE OF WASHINGTON ) ) SS COUNTY OF KING ) On this 10th day of January, 1996, 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. DONNA L. HODGSON ---------------------------- Notary Public My Commission Expires: 11/12/97 15 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Robert B. Shapiro, 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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, 1996. R. B. SHAPIRO ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 11th day of January, 1996, 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: 2/12/98 BEVERLY A. OHM NOTARY PUBLIC, STATE OF MISSOURI MY COMMISSION EXPIRES FEB. 12, 1998 ST. LOUIS COUNTY 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 KARL R. BARNICKOL and J. RUSSELL BLEY, JR., both of St. Louis County, Missouri, or either 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. 33-60189 on Form S-3, which has previously been filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (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; (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; and (iii) any Registration Statements on Form S-8 and any amendments thereto to be filed with the Commission under the Act, covering the registration of the Company's securities to be issued under new stock-based incentive plans; 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, 1996. JOHN B. SLAUGHTER ------------------------------- STATE OF CALIFORNIA ) ) SS COUNTY OF LOS ANGELES ) On this 17th day of January, 1996, 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: KAY LYNN FUJIWARA COMM. #995481 Notary Public - California LOS ANGELES COUNTY My Comm. Expires JUN 11, 1997 EX-24.2 11 CERTIFICATE AUTHORIZING FORM 10-K FILING 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 23, 1996, 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. Karl R. Barnickol and J. Russell Bley, Jr., or either of them acting alone, 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 4th day of March, 1996. /s/ J. Russell Bley, Jr. ------------------------------ J. Russell Bley, Jr. Assistant Secretary SEAL EX-27 12 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT OF CONSOLIDATED INCOME OF MONSANTO COMPANY AND SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 31, 1995, AND THE STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF DECEMBER 31, 1995. SUCH INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 1,000,000 12-MOS DEC-31-1995 DEC-31-1995 297 0 1,629 0 1,368 4,305 7,237 4,405 10,611 2,812 1,667 329 0 0 3,403 10,611 8,962 8,962 5,109 5,109 0 0 190 1,087 348 739 0 0 0 739 6.36 0 Reported net of allowances of $57
EX-99 13 COMPUTATION OF 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, ---------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Income (loss) from continuing operations before provision for income taxes.................................... $1,087 $ 895 $ 729 $(174) $354 Add Fixed charges........................................... 245 182 184 231 233 Less capitalized interest............................... (11) (10) (12) (16) (24) Dividends from affiliated companies..................... 9 2 5 5 5 Less equity income (add equity loss) of affiliated companies...................................... (17) (21) (20) (1) (3) ------ ------ ----- ----- ---- Income as adjusted.................................. $1,313 $1,048 $ 886 $ 45 $565 ====== ====== ===== ===== ==== Fixed charges Interest expense............................................ $ 190 $ 131 $ 129 $ 169 $166 Capitalized interest........................................ 11 10 12 16 24 Portion of rents representative of interest factor.................................................... 44 41 43 46 43 ------ ------ ----- ----- ---- Fixed charges....................................... $ 245 $ 182 $ 184 $ 231 $233 ====== ====== ===== ===== ==== Ratio of earnings to fixed charges.............................. 5.36 5.76 4.82 0.19 2.42 ====== ====== ===== ===== ==== Includes restructuring and other unusual items of $(51) million, $7 million, $(30) million, $699 million and $457 million in 1995, 1994, 1993, 1992 and 1991, respectively. Excluding these restructurings and other unusual items, the ratio of earnings to fixed charges would have been 5.15, 5.80, 4.65, 3.22 and 4.39, respectively.
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