-----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, ALprkbASBKl3a3ymLww/duIQ3VfgARQf3nQfbb0pAjeRIpRYng+aayfAWbQKxFHH Ek+LlE+R1xIUsQrNOl0z/g== 0000950114-97-000158.txt : 19970325 0000950114-97-000158.hdr.sgml : 19970325 ACCESSION NUMBER: 0000950114-97-000158 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970324 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONSANTO CO CENTRAL INDEX KEY: 0000067686 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 430420020 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-02516 FILM NUMBER: 97561200 BUSINESS ADDRESS: STREET 1: 800 N LINDBERGH BLVD CITY: ST LOUIS STATE: MO ZIP: 63167 BUSINESS PHONE: 3146941000 MAIL ADDRESS: STREET 1: 800 NORTH LINDBERGH BLVD CITY: ST LOUIS STATE: MO ZIP: 63167 FORMER COMPANY: FORMER CONFORMED NAME: MONSANTO CHEMICAL CO DATE OF NAME CHANGE: 19711003 10-K405 1 1996 FORM 10-K 1 1 9 9 6 =============================================================================== 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, 1996 ----------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-2516 ------ MONSANTO COMPANY ---------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 43-0420020 -------- ---------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 800 NORTH LINDBERGH BLVD., ST. LOUIS, MO. 63167 ----------------------------------------- ----- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (314) 694-1000 -------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- COMMON STOCK $2 PAR VALUE NEW YORK STOCK EXCHANGE PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO ----- ----- INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X] STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF THE REGISTRANT: APPROXIMATELY $21.4 BILLION AS OF THE CLOSE OF BUSINESS ON FEBRUARY 28, 1997. INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE: 590,765,089 SHARES OF COMMON STOCK, $2 PAR VALUE, OUTSTANDING AT FEBRUARY 28, 1997. DOCUMENTS INCORPORATED BY REFERENCE 1. PORTIONS OF MONSANTO COMPANY ANNUAL REPORT TO SECURITY HOLDERS FOR THE YEAR ENDED DECEMBER 31, 1996. (PARTS I AND II OF FORM 10-K.) 2. PORTIONS OF MONSANTO COMPANY NOTICE OF ANNUAL MEETING AND PROXY STATEMENT DATED MARCH 13, 1997. (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; pharmaceuticals; food ingredients; and chemical products. 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 In December 1996, the Company's Board of Directors approved a plan, subject to shareholder approval and other conditions, to spin off the Company's chemical businesses to its shareowners. In addition, the Board approved the recording of pretax restructuring and other special charges totaling $716 million ($500 million aftertax, or $0.84 per share). This charge is intended to cover the costs necessary to exit the chemicals businesses and to complete the spinoff, the costs associated with the closure or rationalization of certain facilities, asset write-offs, and work force reductions. See "Review of Consolidated Results of Operations," "Review of Consolidated Results of Operations--Events Affecting Comparability," and "Restructuring and Other Actions," on pages 29 and 50, respectively, of the Company's Annual Report to shareowners for the year ended December 31, 1996 (the "1996 Annual Report"). In February 1997, the Company acquired the Asgrow Agronomics seed business from Empresas La Moderna, S.A., for $240 million. In January 1997, Monsanto announced that it had reached separate agreements to acquire Holden's Foundation Seeds, Inc., Corn States Hybrid Service, Inc. and Corn States International S.a.r.l., for a total cost of up to $1.02 billion. See "Review of Changes in Financial Position" and "Principal Acquisitions and Divestitures" on pages 45 and 52, respectively, of the 1996 Annual Report. In March 1996, Monsanto acquired a significant equity position in Calgene, Inc. ("Calgene"). In November 1996, Monsanto acquired a controlling interest in Calgene, allowing Monsanto the right to nominate five of the nine authorized directors on Calgene's Board. In January 1997, Monsanto made a proposal to the Board of Directors of Calgene to acquire the remaining shares outstanding of Calgene. The proposal is subject, among other things, to the approval of a special committee of Calgene's Board of Directors. INDUSTRY SEGMENTS; PRINCIPAL PRODUCTS For 1996, Monsanto reported its business under four industry segments: Agricultural Products, Pharmaceuticals, Food Ingredients and Chemicals. The tabular and narrative information appearing under "Segment Data" and "Geographic Data" on pages 34, 35 and 43 of the 1996 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 1996.
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, Phosphorus Trichloride applications based herbicides industrial applications NC; Luling, LA; Melbourne, Australia; Sao Jose dos Campos, Brazil ------------------------------------------------------------------------------------------------------ Lasso(R) and Corn, soybean, peanut Muscatine, IA Chloroacetyl Chloride; Harness(R) and milo (sorghum) Diethylaniline; herbicides and other crops Methylethylaniline acetanilide-based herbicides corn only ------------------------------------------------------------------------------------------------------ Avadex(R) BW Wheat crops Antwerp, Belgium; Ammonium Thiocyanate; herbicide; Far-Go(R) Muscatine, IA Diisopropylamine; herbicide Methylethylaniline; Trichloropropane ------------------------------------------------------------------------------------------------------ 1 3 AGRICULTURAL PRODUCTS (CONT'D) Major End-Use Manufacturing Major Raw Materials Major End-Use Markets Major Products Products & Applications Locations & Components --------------------- -------------- ----------------------- ------------- ------------------- Permit(R), Manage(R) Postemergence control of Manufactured by third Halosulfuron and Sempra(R) sedges and broadleaf party herbicides weeds in corn and grain sorghum, turf and sugarcane crops ------------------------------------------------------------------------------------------------------ Roundup Ready(R) Crops tolerant of Seeds propagated by No major raw materials soybeans; Roundup nonselective herbicides contract farmers Ready(R) canola ------------------------------------------------------------------------------------------------------ Insect-protected Crops protected against Seeds propagated by No major raw materials cotton with the certain insect pests contract farmers Bollgard(R) gene; NewLeaf(R) insect- protected potatoes - -------------------------------------------------------------------------------------------------------------------------------- Residential applications Roundup(R) herbicide; Herbicides; insecticides; Fort Madison, IA Acephate; Chlorpyrifos; Ortho(R) lawn-and- fungicides; fertilizers Diazinon; Glyphosate; garden products; Malathion Green Cross(R) brand lawn-and-garden products - -------------------------------------------------------------------------------------------------------------------------------- Animal agricultural Posilac(R) bovine Increase efficiency of Manufactured by third No major raw materials applications somatotropin milk production in dairy party cows - -------------------------------------------------------------------------------------------------------------------------------- PHARMACEUTICALS Pharmaceuticals Aldactone(R) Cardiovascular Augusta, GA; Caguas, Androstenedione; (spironolactone); Puerto Rico; Evreux, Hydrochlorothiazide; Aldactazide(R) France; Morpeth, United Verapamil HCl (spironolactone/ Kingdom hydrochlorothiazide); Covera-HS(TM) and Calan(R) formulations (verapamil HCl) ------------------------------------------------------------------------------------------------------ Daypro(R) Anti-inflammatory Augusta, GA; Caguas, Benzoin; Diclofenac; (oxaprozin); Puerto Rico; Morpeth, Misoprostol Arthrotec(R) United Kingdom (misoprostol/ 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) Women's health Caguas, Puerto Rico; Ethinyl Estradiol; (ethynodiol Morpeth, United Kingdom Ethynodiol Diacetate; diacetate); Nafarelin Acetate; Synarel(R) Norethindrone (nafarelin acetate); Tri-Norinyl(R) (ethinyl estradiol) - -------------------------------------------------------------------------------------------------------------------------------- FOOD INGREDIENTS Food NutraSweet(R) brand High-intensity sweetener Augusta, GA Aspartic Acid; sweetener used primarily in L-Phenylalanine beverages and dessert products ------------------------------------------------------------------------------------------------------ 2 4 FOOD INGREDIENTS (CONT'D) Major End-Use Manufacturing Major Raw Materials Major End-Use Markets Major Products Products & Applications Locations & Components --------------------- -------------- ----------------------- ------------- ------------------- Equal(R), Tabletop sweeteners Evreux, France; Manteno, Aspartame Canderel(R), IL; Morpeth, United Kingdom NutraSweet(R) and other tabletop sweeteners ------------------------------------------------------------------------------------------------------ Keltone(R) and Soups; sauces; gravies; Girvan, United Kingdom; Corn Syrup; Seaweed Manugel(R) sodium dressings; beverages; Okmulgee, OK; San alginates; snack foods; breadings; Diego, CA Kelcoloid(R) batters; bakery products; propylene glycol dairy products; pet foods alginate; Keltrol(R) and Kel-lite(R) xanthan gums; Kelcogel(R) gellan gum ------------------------------------------------------------------------------------------------------ Nutrifos(R), Bakery; dairy; meat St. Louis, MO; Sao Jose Caustic Soda; Lime; Levn-lite(R) dos Campos, Brazil; Phosphorus and Pan-o-lite(R) Trenton, MI food additives - -------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals Kelacid(R) alginic Tablets; liquid Girvan, United Kingdom; Corn Syrup; Seaweed acid; Keltrol(R) CR suspensions; controlled Okmulgee, OK; San Diego, xanthan gum; release medications; CA Kelmar(R) potassium dental impression alginate; Gelrite(R) materials gellan gum - -------------------------------------------------------------------------------------------------------------------------------- CHEMICALS Construction & Home Nylon carpet staple; Broadloom carpet; Decatur, AL; Acrylonitrile; Ammonia; Furnishings nylon bulk upholstery; blankets Greenwood, SC; Cyclohexane; Propylene continuous filament; Pensacola, FL Acrilan(R) acrylic fiber ------------------------------------------------------------------------------------------------------ Polymer modifiers Vinyl flooring; caulks Antwerp, Belgium; Butanol; Chlorine; and sealants; adhesives; Bridgeport, NJ; LaSalle, 2-Ethylhexanol; Phenol; coatings; wall covering; Quebec, Canada Phthalic Anhydride; Toluene vinyl upholstery; insulation; furniture ------------------------------------------------------------------------------------------------------ Saflex(R) plastic Architectural glass Ghent, Belgium; Sao Jose Butyraldehyde; Ethanol; interlayer dos Campos, Brazil; Polyvinyl Alcohol; Vinyl Springfield, MA; Trenton, Acetate Monomer MI ------------------------------------------------------------------------------------------------------ Specialty resins Coatings and adhesives Alvin, TX; LaSalle, Quebec, Acrylate Esters; Butanol; Canada; Springfield, MA; Formaldehyde; Melamine; Trenton, MI Methanol; Vinyl Acetate Monomer ------------------------------------------------------------------------------------------------------ Phos-Chek(R) fire Fire retardant coatings; Camden, NJ Phosphorus retardant latex and polymer additives organic solvent- based intumescent paint-based formulations ------------------------------------------------------------------------------------------------------ Doormats Doormats Ghent, Belgium; St. Louis, Polyethylene 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 ------------------------------------------------------------------------------------------------------ 3 5 CHEMICALS (CONT'D) Major End-Use Manufacturing Major Raw Materials Major End-Use Markets Major Products Products & Applications Locations & Components --------------------- -------------- ----------------------- ------------- ------------------- Nylon filament; Tires; molding resins Pensacola, FL Acrylonitrile; Ammonia; nylon polymer for auto grilles, Cyclohexane; Propylene bumpers and 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 Metal treating, cleaning Augusta, GA; Luling, LA; Ammonia; Chlorine; phosphates; and etching; plant food St. Louis, MO; Sauget, IL; Phosphorus; Soda Ash; phosphoric acid; fertilizers; Trenton, MI Sulphur phosphorus oil additives 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 ------------------------------------------------------------------------------------------------------ Manutex(R) and Cleaners; textile Girvan, United Kingdom; Corn Syrup; Seaweed Kelgin(R) sodium printing; paper sizings Knowsley, United Kingdom; alginates; Kelzan(R) and coatings; Okmulgee, OK; San Diego, AR xanthan gum firefighting foams CA ------------------------------------------------------------------------------------------------------ Kelzan(R) X, Oil and gas well Knowsley, United Kingdom; Corn syrup Kelzan(R) drilling Okmulgee, OK; XCD, Xanvis(R) applications San Diego, CA xanthan gums; Biozan(R) welan gum - -------------------------------------------------------------------------------------------------------------------------------- Capital Equipment Sulfuric acid and Process plants On-Site Construction Various Construction process plants Components (design 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 - --------------------------------------------------------------------------------------------------------------------------------
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 and Advanced Elastomer Systems, L.P., headquartered in the United States, which produces and sells thermoplastic elastomers. In addition, aspartame is manufactured and sold in Europe by fifty percent-owned joint ventures. See "Geographic Data" on page 43 of the 1996 Annual Report. In addition, the Company has a significant equity position in DeKalb Genetics Corp. 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 61 of the 1996 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 countries' government regulations. The impact of any future raw material and energy shortages on Monsanto's 5 7 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. 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, 2002, and by non-patent regulatory exclusivity extending to October 29, 1999. Monsanto's insect-resistant plant products (including NewLeaf(R) potato and Bollgard(R) cotton) are protected by patents which extend until at least 2013. Monsanto's herbicide-resistant plant product, Roundup Ready(R) soybean, is protected by patents which extend until at least 2014. 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 Research and development constitute an important part of Monsanto's activities. See "Review of Consolidated Results of Operations" and "Supplemental Data" on pages 31 and 60, respectively, of the 1996 Annual Report, incorporated herein by reference. ENVIRONMENTAL MATTERS Monsanto remains strongly committed to complying 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 1996 were approximately $48 million for environmental capital projects and approximately $203 million for the management of environmental programs, including the operation and maintenance of facilities for environmental control. Monsanto estimates that during 1997 and 1998 approximately $40 million to $50 million per year will be spent on additional capital projects for environmental protection. Monsanto intermittently receives notices from the EPA alleging that it is a potentially responsible party ("PRP") under Superfund. In 1996 Monsanto received three such notices. For many of Monsanto's notices, it has resolved disputes, entered partial and complete consent decrees, and executed administrative orders with EPA settling a portion or all of Monsanto's liability. Monsanto's policy is to accrue costs for remediation of waste disposal sites in the accounting period in which the responsibility is established and the cost is estimable. Monsanto's estimates of its liabilities for Superfund sites, which are based on evaluations of currently available facts with respect to each site, 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 for Superfund sites of $58 million as of December 31, 1996. 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 $34 million of the accrued amount. Monsanto's estimate of its Superfund liability is affected by several uncertainties. These include, but are 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 based upon existing technology and other currently available information. These potential future expenses may be incurred over the next decade. 7 9 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 36 of these sites. Monsanto has an accrued liability of $72 million as of December 31, 1996, 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. These include, but are not limited to, the extent of Monsanto's involvement, and the method and extent of remediation. Because of these uncertainties, potential future expenses could be as much as $50 million for these sites based upon existing technology and other currently available information. Four sites in this category account for $43 million of the accrued amount and for substantially all of the potential future expenses. Monsanto spent $43 million in 1996 for remediation of Superfund and other waste disposal sites. Most of these expenditures were related to the Chemicals segment. Similar or greater 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 $19 million in 1996 for remediation of these facilities and has an accrued liability of $45 million as of December 31, 1996, for these sites. Uncertainties related to these costs include evolving government regulations, the method and extent of remediation, and future changes in technology. Monsanto's estimated closure costs for these facilities are approximately $75 million based upon existing technology and other currently available information. Although the ultimate costs and results of remediation of waste disposal sites cannot be predicted with certainty, Monsanto's liquidity, financial position and profitability are not expected to be materially affected. In October 1996, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities," which is effective for Monsanto in 1997. SOP 96-1 establishes authoritative guidance regarding the recognition, measurement and disclosure of environmental remediation liabilities. The preliminary estimate of the one-time charge resulting from the adoption of this statement is in the range of $20 million to $25 million aftertax. EMPLOYEE RELATIONS As of December 31, 1996, Monsanto had approximately 28,000 employees worldwide. Satisfactory relations have prevailed between Monsanto and its employees. INTERNATIONAL OPERATIONS Monsanto and affiliated companies are engaged in manufacturing, sales and/or research and development in the United States, Europe, Canada, Latin America, Australia, Asia and Africa. A large number of products are manufactured abroad. Ex-U.S. operations are 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 1996 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 8 10 Company is one of a number of defendants in 11 cases brought in Harris County District Court or the United States District Court for the Southern District of Texas on behalf of 960 plaintiffs who owned homes or lived in subdivisions near the Brio site or along Clear Creek downstream from the site, attended school near the site, 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 and one action brought in Galveston County District Court on behalf of 409 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 schools near the site, 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. On November 15, 1993, the Company was named in the first of a number of lawsuits in which plaintiffs claim to have sustained personal injuries or property damage as a result of the discharge of hazardous substances, including polychlorinated biphenyls ("PCBs"), from its Anniston, Alabama plant site. The following matters are currently pending: (a) The Company is a defendant in a case pending in Circuit Court in St. Clair County, Alabama which has been certified as a class action on behalf of all property owners in a specified area along waterways near the plant. Plaintiffs claim loss in the value of their property and seek compensatory and punitive damages in an unspecified amount. (b) The Company is a defendant in eight additional cases brought in Circuit Court in Calhoun County, Circuit Court in St. Clair County, Circuit Court in Taladega County or in U.S. District Court in the Northern District of Alabama on behalf of 1,641 individual plaintiffs who own or rent homes or own or operate businesses along waterways near the plant or who attend churches near the plant. One of the cases pending in U.S. District Court seeks certification of a plaintiff class. An additional case has been filed in Circuit Court in Calhoun County by one of the churches near the plant. The individual plaintiffs claim to have suffered various personal injuries and fear future disease; they assert the need for medical monitoring and claim to have suffered loss in the value of their property or commercial injury. They seek compensatory and punitive damages of $3 million or in unspecified amounts for each individual, and $20 million for the church. (c) The Company has also received notice of a potential Citizen Suit pursuant to Resource Conservation and Recovery Act Section 7002(a) (1) (B) on behalf of four individuals who are plaintiffs in one of the suits pending in Circuit Court in Calhoun County. The notice claims that hazardous substances, including PCBs, have been released from the Anniston plant and pose an imminent threat to health and the environment. The notice seeks statutory penalties of $25,000 per day for a period of more than 5 years, for a total of $45,625,000. The Company believes that it has meritorious defenses to all of these matters, including lack of proximate cause of any physical injury or property damage, lack of imminent threat to health or the environment and lack of negligence or other improper conduct. 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 6, 1997, there were approximately 10 cases pending in various U.S. state and federal courts and approximately 410 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 9 11 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. An agreement reached by several defendants, not including Searle, to settle the federal class action case, was approved by the trial judge on June 21, 1996. Certain members of the class objected to the settlement and have appealed the approval by the trial judge to the U.S. Court of Appeals for the Seventh Circuit. 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. In 1996 the Company was the first to commercially introduce cotton containing a gene encoding for Bacillus thuringiensis (Bt) endotoxin. Monsanto is a leader in this scientific field and has engaged in Bt research and biotechnology development over many years and owns a number of present and pending patents which relate to this technology. On October 22, 1996, Mycogen Corporation filed suit in U.S. District Court in Delaware seeking damages and injunctive relief against the Company, DeKalb Genetics Corporation and Delta & Pine Land alleging infringement of Bt related U.S. Patent Nos. 5,567,600 and 5,567,862 issued to Mycogen on that date. The Company has several meritorious defenses including non-infringement, lack of validity of Mycogen's patent and prior invention by the Company. The Company is vigorously defending against Mycogen's lawsuit and has assumed the defense of Delta & Pine Land. Several other lawsuits are pending between the Company and other parties involving Bt. On March 19, 1996, the Company was issued U.S. Patent No. 5,500,365 and filed suit in U.S. District Court in Delaware seeking damages and injunctive relief against Mycogen Plant Science, Inc., Agrigenetics, Inc. and Ciba-Geigy Corporation (Seed Division) for infringement of that patent. On May 19, 1995, Mycogen initiated suit in U.S. District Court in California against the Company alleging infringement of U.S. Patent 5,380,831 involving synthetic Bt genes and seeking damages and injunctive relief. The District Court has granted motions dismissing virtually all of Mycogen's patent claims on the basis that products containing Bt genes made prior to January 1995 do not infringe the patent. The Company has various meritorious defenses to the claims of Mycogen including non-infringement, lack of validity and prior invention. The Company is also a party in interference proceedings in the U.S. Patent and Trademark Office to determine the first party to invent certain inventions related to Bt technology. In all of the foregoing actions the Company is vigorously litigating its position. 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. Under a consent agreement with the EPA executed by the Company on December 13, 1996, the Company has agreed to pay a penalty of $105,515. 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 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. Under a consent agreement with the EPA executed by the Company on June 14, 1996, the Company's remaining liability under the CAP is $352,000. 10 12 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. 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. 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, 1997, 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 1996. 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. 11 13 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 48 and "Quarterly Data" (for the years 1995 and 1996) on page 61 of the 1996 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 1992 through 1996, appearing on page 62 of the 1996 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 and 48 of the 1996 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, 49 and 50 through 60; the Independent Auditors' Opinion appearing on page 27; and the tabular and narrative information appearing under "Quarterly Data" on page 61 of the 1996 Annual Report are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 12 14 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information regarding directors and executive officers appearing under "Election of Directors" on pages 2 through 4 of the Monsanto Company Notice of Annual Meeting and Proxy Statement (the "1997 Proxy Statement") dated March 13, 1997, is incorporated herein by reference. The following information with respect to the Executive Officers of the Company on March 1, 1997, is included pursuant to Instruction 3 of Item 401(b) of Regulation S-K:
Year First Became an Present Position Executive Name--Age with Registrant Officer Other Business Experience since January 1, 1992 - -------------------------- ------------------------ --------- ----------------------------------------------------------- Richard U. De Schutter, 56 Chairman, Chief Executive 1995 President, G. D. Searle & Co., 1991; President and Officer and President, G. Chief Operating Officer, G. D. Searle & Co., 1993; and D. Searle & Co. (a present position, 1995. subsidiary of the Company); Advisory Director--Monsanto Company Steven L. Engelberg, 54 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, 49 Vice President--Monsanto 1995 Vice President, Finance and Planning--The Agricultural Company; President--Growth Group, 1991; Vice President and General Manager, New Enterprises Business Unit; Products Division--The Agricultural Group, 1992; Group Chairman, Monsanto Vice President and General Manager, New Products Europe-Africa 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, 60 Senior Vice President and 1994 Vice President, FMC Corporation, 1990; and present Chief Financial Officer; position, 1994. Advisory Director--Monsanto Company John C. Hunter III, 50 President, Fibers Business 1997 Vice President and General Manager, Asia- Unit--Monsanto Company Pacific--Monsanto Chemical Company, 1989; Vice President and General Manager, Fibers Division and Asia-Pacific--The Chemical Group, 1993; and present position, 1995. R. William Ide III, 56 Senior Vice President, 1996 Partner, Kutak Rock, 1989; President, American Bar General Counsel and Association, 1993-1994; Partner, Long, Aldridge & Secretary--Monsanto Norman, 1993; and present position, 1996. Company Donna A. Kindl, 39 Vice President, Human 1996 Director of Human Resources Planning and Development, Resources--Monsanto Clorox Corporation, 1990; Director of Human Resources, Company Staff of the Vice Chairman--Monsanto Company, 1993; Director, Human Resources, Crop Protection Business Unit--Monsanto Company, 1995; and present position, 1996. 13 15 Year First Became an Present Position Executive Name--Age with Registrant Officer Other Business Experience since January 1, 1992 - -------------------------- ------------------------ --------- ----------------------------------------------------------- Philip Needleman, 58 Senior Vice President, 1991 Vice President, Research and Development; Advisory Research and Development Director--Monsanto Company, 1991; Vice President, and Chief Scientist; Research and Development; Advisory Director--Monsanto Advisory Director--Monsanto Company; President, Research and Development, G. D. Company; President, Searle & Co., 1992; and present position, 1993. Research and Development, G. D. Searle & Co. Robert G. Potter, 57 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. Nicholas L. Reding, 62 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, 53 Vice President, 1994 Vice President and General Manager, Crop Protection International Operations Products Division--Monsanto Agricultural Company, 1990; and Development--Monsanto Vice President and Managing Director, Latin America Company World Area--Monsanto Company, 1992; and present position, 1994. Robert B. Shapiro, 58 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, 51 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, 61 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 15 through "Certain Agreements" on page 21 of the 1997 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 1997 Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information appearing under "Other Information Regarding Management" on pages 21 and 22 of the 1997 Proxy Statement is incorporated herein by reference. 14 16 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, 49 and 50 through 60 of the 1996 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, 1996, 1995 and 1994: 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 20 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 10.36 on pages 20 through 22 of the Exhibit Index. The following Exhibits listed in the Exhibit Index are filed with this Report: 10 26. Supplemental Retirement Plan regarding Richard U. De Schutter 13 The Company's 1996 Annual Report to shareowners 21 Subsidiaries of the registrant (See page 24) 23 1. Consent of Independent Auditors (See page 25) 2. Consent of Company Counsel (See page 25) 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, Frank A. Metz, Jr., Jacobus F.M. Peters, Nicholas L. Reding, John S. Reed, John E. Robson, 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 26) (b) Reports on Form 8-K during the quarter ended December 31, 1996: A Form 8-K as of December 6, 1996, was filed by the Company regarding (1) a plan to spin off Monsanto's chemical businesses and form two new separately traded, publicly held companies--a life sciences company and a chemical company and (2) the approval of a reserve to cover certain costs. 15 17 OPINION OF INDEPENDENT AUDITORS Monsanto Company: We have audited the statement of consolidated financial position of Monsanto Company and Subsidiaries as of December 31, 1996 and 1995 and the related statements of consolidated income, shareowners' equity and cash flow for each of the three years in the period ended December 31, 1996 and have issued our opinion thereon dated February 28, 1997; such financial statements and opinion are included in your 1996 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. /S/ DELOITTE & TOUCHE DELOITTE & TOUCHE LLP Saint Louis, Missouri February 28, 1997 16 18 SCHEDULE V MONSANTO COMPANY AND SUBSIDIARIES --------------------------------- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (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, 1996: Reserves deducted from related assets in the Statement of Consolidated Financial Position: Doubtful receivables and returns and allowances....................... $ 57 $ 19 $ 23 $ 53 --------- -------- --------- -------- Inventory and obsolescence losses..................................... $ 34 $ 14 $ 2 $ 46 --------- -------- --------- -------- Amortization of intangible assets..................................... $ 638 $ 163 $ (6) $ 807 --------- -------- --------- -------- Deferred tax asset valuation allowances............................... $ 90 $ 2 $ (76) $ 168 --------- -------- --------- -------- 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 --------- -------- --------- -------- NOTES: Principally allowances granted. Includes $12 million and $9 million charged to cost of goods sold in 1996 and 1995, respectively. Also includes $23 million related to asset impairment charges in 1996. Principally related to the consolidation of Calgene balances for financial reporting purposes.
17 19 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 /S/ MICHAEL R. HOGAN ------------------------------------ Michael R. Hogan Vice President and Controller (Principal Accounting Officer) Date: March 24, 1997 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 --------- ----- ---- Chairman, President and March 24, 1997 --------------------------------------------- Director (Principal Executive (Robert B. Shapiro) Officer) Vice Chairman and Director March 24, 1997 --------------------------------------------- (Nicholas L. Reding) Senior Vice President March 24, 1997 --------------------------------------------- (Principal Financial Officer) (Robert B. Hoffman) /S/ MICHAEL R. HOGAN Vice President and Controller March 24, 1997 --------------------------------------------- (Principal Accounting Officer) (Michael R. Hogan) Director March 24, 1997 --------------------------------------------- (Joan T. Bok) Director March 24, 1997 --------------------------------------------- (Robert M. Heyssel) Director March 24, 1997 --------------------------------------------- (Gwendolyn S. King) Director March 24, 1997 --------------------------------------------- (Philip Leder) Director March 24, 1997 --------------------------------------------- (Howard M. Love) Director March 24, 1997 --------------------------------------------- (Frank A. Metz, Jr.) 18 20 SIGNATURE TITLE DATE --------- ----- ---- Director March 24, 1997 --------------------------------------------- (Jacobus F.M. Peters) Director March 24, 1997 --------------------------------------------- (John S. Reed) Director March 24, 1997 --------------------------------------------- (John E. Robson) Director March 24, 1997 --------------------------------------------- (William D. Ruckelshaus) Director March , 1997 --------------------------------------------- (John B. Slaughter) R. William Ide III, 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.
/S/ R. WILLIAM IDE III -------------------------------------- R. William Ide III Attorney-in-Fact 19 21 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 29, 1996 (incorporated herein by reference to Exhibit 3.(i) of the Company's Form 10-Q for the quarter ended March 31, 1996) 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) 20 22 EXHIBIT INDEX (CONT'D) 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. Monsanto Management Incentive Plan of 1996 (incorporated herein by reference to Appendix A of the Monsanto Company Notice of Annual Meeting and Proxy Statement dated March 14, 1996) 12. Monsanto Executive Stock Purchase Incentive Plan (incorporated herein by reference to Appendix B of the Monsanto Company Notice of Annual Meeting and Proxy Statement dated March 14, 1996) 13. 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) 14. 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) 15. 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) 16. 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) 17. Agreement between the Company 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) 18. Agreement between the Company and Robert G. Potter entered into as of May 16, 1988 (incorporated herein by reference to Exhibit 19(i)5 of the Company's Form 10-K for the year ended December 31, 1989) 19. Agreement between the Company and Robert B. Shapiro entered into as of July 23, 1990 (incorporated herein by reference to Exhibit 19(i)1 of the Company's Form 10-Q for the quarter ended September 30, 1990) 20. Letter Agreement between the Company and Robert B. Shapiro entered into as of July 23, 1990 (incorporated herein by reference to Exhibit 19(i)3 of the Company's Form 10-Q for the quarter ended September 30, 1990) 21. Letter Agreement between the Company and Hendrik A. Verfaillie entered into as of June 27, 1988 (incorporated herein by reference to Exhibit 10.20 of the Company's Form 10-K for the year ended December 31, 1996) 22. Agreement between the Company and Hendrik A. Verfaillie entered into as of July 5, 1988 (incorporated herein by reference to Exhibit 10.21 of the Company's Form 10-K for the year ended December 31, 1996) 21 23 EXHIBIT INDEX (CONT'D) Exhibit No. Description - ----------- ----------- 23. 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 (incorporated herein by reference to Exhibit 10.22 of the Company's Form 10-K for the year ended December 31, 1996) 24. Amendment to Letter Agreement between the Company and Robert B. Shapiro entered into as of July 23, 1990 (incorporated herein by reference to Exhibit 10.23 of the Company's Form 10-K for the year ended December 31, 1996) 25. Change of Control Agreement regarding Richard U. De Schutter (incorporated herein by reference to the description on page 21 of the Monsanto Company Notice of Annual Meeting and Proxy Statement dated March 13, 1997) 26. Supplemental Retirement Plan regarding Richard U. De Schutter 27. Searle Phantom Stock Option Plan of 1986, as amended in 1990, 1991, 1992 and 1995 (incorporated herein by reference in Exhibit 10.1 of the Company's Form 10-Q for the quarter ended March 31, 1995) 28. Searle Monsanto Stock Option Plan of 1986, as amended in 1988, 1989, 1990, 1991 and 1995 (incorporated herein by reference to Exhibit 10.2 of the Company's Form 10-Q for the quarter ended March 31, 1995) 29. Searle/Monsanto Stock Plan of 1994, as amended in 1995 (incorporated herein by reference to Exhibit 10.3 of the Company's Form 10-Q for the quarter ended March 31, 1995) 30. G. D. Searle & Co. Supplemental Medical Reimbursement Plan, as amended in 1995 (incorporated herein by reference to Exhibit 10.4 of the Company's Form 10-Q for the quarter ended March 31, 1995) 31. G. D. Searle & Co. Executive Travel Accident Insurance Plan, as amended in 1989 (incorporated herein by reference to Exhibit 19(ii)4 of the Company's Form 10-Q for the quarter ended June 30, 1989) 32. G. D. Searle & Co. Executive Supplemental Long Term Disability Plan (incorporated herein by reference to Exhibit 19(i)7 of the Company's Form 10-Q for the quarter ended June 30, 1988) 33. G. D. Searle & Co. Split Dollar Life Insurance Plan, as amended in 1989 (incorporated herein by reference to Exhibit 19(ii)3 of the Company's Form 10-Q for the quarter ended June 30, 1989) 34. G. D. Searle & Co. Legal/Tax/Financial Counseling Plan (incorporated herein by reference to Exhibit 19(i)8 of the Company's Form 10-Q for the quarter ended June 30, 1988) 35. G. D. Searle & Co. Executive Relocation Plan, as amended in 1994 (incorporated herein by reference to Exhibit 10.7 of the Company's Form 10-Q for the quarter ended June 30, 1994) 36. G. D. Searle & Co. Deferred Compensation Plan, as amended in 1994 (incorporated herein by reference to Exhibit 10.6 of the Company's Form 10-Q for the quarter ended June 30, 1994) 22 24 EXHIBIT INDEX (CONT'D) Exhibit No. Description - ----------- ----------- 11 Omitted--Inapplicable; see "Earnings per Share" on page 58 of the 1996 Annual Report 12 Statement re Computation of the Ratio of Earnings to Fixed Charges--See Exhibit 99 below 13 The Company's 1996 Annual Report to shareowners. (The electronic submission includes only the financial report section of the Annual Report, consisting of pages 25 through 62 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 24) 22 Omitted--Inapplicable 23 1. Consent of Independent Auditors (See page 25) 2. Consent of Company Counsel (See page 25) 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, Frank A. Metz, Jr., Jacobus F.M. Peters, Nicholas L. Reding, John S. Reed, John E. Robson, 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 26) - ------- Only Exhibits Nos. 13, 21, 23.1, 23.2 and 99 have been included in the printed copy of this Report.
23 25 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 an "R" or "TM" in parentheses. EX-10.26 2 MINUTES OF MEETING 1 EXCERPTS OF MINUTES OF MEETING EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE February 22, 1996 The first order of business was to review and approve an adjustment to the pension for R. U. De Schutter, President, Searle. Mr. De Schutter was transferred from Monsanto to Searle in 1985. At that time, he was told his pension would not be reduced as a result of his accepting the assignment. Because the Searle pension plan does not provide the same retirement benefit as the Monsanto plan, the Committee approved a supplemental executive retirement plan (SERP) for Mr. De Schutter. This SERP will calculate his pension under the Monsanto Pension Plan using all service at Monsanto and Searle, less the benefit provided by the Searle Plan. If he were to retire today, this SERP would provide an additional present value of $640,000. If he continues to work, the difference between the Monsanto plan and the Searle plan decreases to zero at age 65. /s/ Teresa E. McCaslin ---------------------- Ms. Teresa E. McCaslin Management Liaison Officer Executive Compensation and Development Committee EX-13 3 ANNUAL REPORT TO SECURITY HOLDERS 1 Financial Section Table of Contents Management Report, Audit Committee Report, Independent Auditors' Report Page 26 Statement of Consolidated Income Page 28 Statement of Consolidated Financial Position Page 44 Statement of Consolidated Cash Flow Page 46 Statement of Consolidated Shareowners' Equity Page 49 Notes to Financial Statements Page 50 Financial Summary Page 62 Unless otherwise indicated by the context,"Monsanto" means Monsanto Company and consolidated subsidiaries, and "the Company" means Monsanto Company only. In tables, all dollars are in millions, except per share data. 1996 Monsanto Annual Report 25 2 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, 1996, was effective and adequate to accomplish the objectives described above. /s/ Robert 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. 28, 1997 Audit Committee Report The audit committee, composed of five nonemployee members of the board of directors, met four times during 1996. 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 1996 annual meeting, Deloitte & Touche LLP was appointed independent auditor to examine, and to express an opinion as to the fair presentation of, the consolidated financial statements. This report 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/ Frank A. Metz Jr. Frank A. Metz Jr. Chair, Audit Committee Feb. 28, 1997 26 1996 Monsanto Annual Report 3 Independent Auditors' Report 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, 1996 and 1995, and the related statements of consolidated income, shareowners' equity and cash flow for each of the three years in the period ended Dec. 31, 1996. 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, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended Dec. 31, 1996, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Deloitte & Touche LLP St. Louis, Missouri Feb. 28, 1997 1996 Monsanto Annual Report 27 4 Statement of Consolidated Income
(Dollars in millions, except per share) 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------- Net Sales $9,262 $8,962 $8,272 Cost of goods sold 4,918 5,109 4,774 - --------------------------------------------------------------------------------------------------------------------- Gross Profit 4,344 3,853 3,498 Marketing expenses 1,426 1,282 1,191 Administrative expenses 750 598 589 Technological expenses 788 713 674 Amortization of intangible assets 151 119 81 Restructuring expenses and other special charges -- net 632 156 40 - --------------------------------------------------------------------------------------------------------------------- Operating Income 597 985 923 Interest expense (171) (190) (131) Interest income 51 59 81 Gain on sale of styrenics plastics business 189 Other income (expense) -- net 63 44 22 - --------------------------------------------------------------------------------------------------------------------- Income Before Income Taxes 540 1,087 895 Income taxes 155 348 273 - --------------------------------------------------------------------------------------------------------------------- Net Income $ 385 $ 739 $ 622 - --------------------------------------------------------------------------------------------------------------------- Earnings per Share $ 0.64 $ 1.27 $ 1.06 - --------------------------------------------------------------------------------------------------------------------- The above statement should be read in conjunction with pages 50 - 61 of this report.
Key Financial Statistics 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------- As a Percent of Net Sales: Gross Profit 47% 43% 42% Marketing, Administrative and Technological Expenses 32 29 30 Research and Development Expenses 8 7 7 Operating Income 6 11 11 Net Income 4 8 8 Effective Income Tax Rate 29 32 31 Return on Shareowners' Equity 10.4 22.1 21.4 - --------------------------------------------------------------------------------------------------------------------- Research and development expenses are included in total technological expenses.
28 1996 Monsanto Annual Report 5 Review of Consolidated Results of Operations Monsanto Announces the Formation of Two Separate Companies; 1996 Results Are Record, Excluding Special Charges The year 1996 was one of transition for Monsanto Company, as the company's board of directors approved a plan to spin off the chemical businesses. The plan is to form two separate publicly-traded companies -- a life sciences company that serves the agriculture, food and health care markets, and a chemical company that makes and markets an array of high-performance chemical-based products. This strategic decision was driven by the recognition that these businesses have different markets, products, research needs, investment needs, and plans for growth. Separating them into two independent companies will enhance their ability to focus on strategic initiatives and new business opportunities. It will also permit improved cost structures and operating efficiencies. Net income for 1996 totaled $385 million, or $0.64 per share, down 48 percent and 50 percent from last year's net income and earnings per share, respectively. In December 1996, the company recorded pretax restructuring and other special charges totaling $716 million ($500 million aftertax, or $0.84 per share). These charges cover the costs necessary to exit the chemical businesses and to complete the spinoff; and the costs associated with the closure or rationalization of certain facilities, asset write-offs, and work force reductions. If the one-time charges are excluded, net income would have been $885 million, or $1.48 per share, both records. It is the company's goal to complete the spinoff and the majority of the restructuring actions by the end of 1997. However, the spinoff is subject to several conditions, including shareowner approval. The company has filed a request for a ruling from the U. S. Internal Revenue Service (IRS) that this transaction would be free from federal income taxes. In 1996, the company continued its superior performance. Net sales for 1996 were $9.3 billion, up $300 million, or 3 percent from last year's record of approximately $9 billion. The Agricultural Products and Pharmaceutical segments contributed significantly to the net sales increase. Increased sales for Agricultural Products were driven by higher worldwide sales volumes for the family of Roundup(R) herbicides. Higher Pharmaceutical sales were primarily attributed to continued strong sales performances of Ambien(R), a short-term treatment for insomnia, and Daypro(R) and Arthrotec(R) arthritis treatments. Sales from the women's health care product lines acquired in the third quarter of 1995 also contributed to the sales growth. If sales of divested businesses were excluded from the prior-year's results, net sales for the Chemicals segment would have shown a modest increase on the strength of higher sales volumes. The Food Ingredients segment also contributed to the sales increase, principally because of higher sales volumes of NutraSweet(R) brand sweetener, the company's trademark aspartame product, tabletop sweeteners and biogum products. Events Affecting Comparability In December 1996, the board of directors approved a plan, subject to shareowner approval and certain other conditions, to spin off the company's chemical businesses to its shareowners. In addition, the board approved the recording of pretax restructuring and other special charges totaling $716 million ($500 million aftertax, or $0.84 per share). These charges cover the costs necessary to exit the chemical businesses and to complete the spinoff; and the costs associated with the closure or rationalization of certain facilities, asset write-offs, and work force reductions. Approximately 2,500 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 $120 million to $140 million annually. In December 1995, Monsanto sold its worldwide styrenics plastics business for $580 million. In a separate but related transaction, Monsanto sold its shares in Monsanto Premier Kasei Co. Ltd., a styrenics plastics manufacturing joint venture in Thailand, to one of its joint-venture partners. These transactions resulted in a pretax gain of $189 million ($116 million aftertax, or $0.20 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 $0.22 per share) associated with this action was used to cover the costs of work force reductions, business consolidations, facility closures and the exit from nonstrategic businesses and facilities. The plan, which was substantially completed by the end of 1996, reduced worldwide employment by approximately 470 people. 1996 Monsanto Annual Report 29 6 Review of Consolidated Results of Operations 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 to integrate their respective rubber chemical businesses into the joint venture. For Monsanto, these integration costs totaled $40 million pretax ($25 million aftertax, or $0.04 per share). The charge covered primarily the costs of reducing the work force by approximately 120 people and providing special termination benefits for approximately 300 people who transferred from Monsanto to the joint venture. Other items affected results in 1995. These included the receipt in the first and third quarters of settlement payments from various insurers related to environmental and other insurance litigation. Combined, these settlements totaled $92 million pretax ($57 million aftertax, or $0.10 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 $0.04 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 $0.02 per share) under certain sales rebate programs in the United States for product sales made in prior years. Without the unusual events in 1996 and 1995, net income for 1996 would have been $885 million, compared with $728 million for the prior year, an increase of 22 percent. Earnings per share in 1996 would have been $1.48, an 18 percent increase from 1995 earnings per share. Net Sales Set Record Net sales in 1996 were approximately $9.3 billion, 3 percent higher than sales in 1995. However, if sales from businesses that were acquired or divested in 1996 and 1995 were excluded, the sales increase in the underlying base businesses in 1996 would have been 13 percent. The Agricultural Products, Pharmaceuticals and Food Ingredients segments all contributed to the increase, primarily because of higher sales volumes. After adjusting for prior year sales of divested businesses, the Chemicals segment also contributed to the increase, principally because of higher sales volumes. The effects of lower average selling prices, particularly for the Agricultural Products and Chemicals segments, partially offset the increase in net sales. Net sales for Agricultural Products in 1996 increased 23 percent from those in 1995, to a record $3 billion. This increase was primarily the result of higher worldwide sales volumes for the family of Roundup(R) herbicides. Most world areas posted solid sales volume gains in 1996. Continued increases in conservation tillage practices, favorable weather conditions in certain key markets, and an increase in planted acreage have driven the increased demand. Higher sales of lawn-and-garden products and higher sales of Posilac(R) bovine somatotropin also contributed to the sales increase. The increase in Pharmaceuticals' net sales can be attributed to sales of key products, principally Ambien(R), a short-term treatment for insomnia, and Daypro(R) and Arthrotec(R) arthritis treatments. In addition, sales from the women's health care product lines acquired from Syntex in the third quarter of 1995 contributed to the sales growth. Lower sales for the family of Calan(R) calcium channel blockers partially offset the increase in net sales. Chemicals' net sales from continuing businesses for 1996 were approximately 6 percent higher than those in 1995, primarily because of higher sales volumes. Net sales for the Food Ingredients segment increased, principally on the strength of higher sales volumes of NutraSweet(R) brand sweetener, tabletop sweeteners and biogum products. Monsanto's net sales in markets outside the United States represented 42 percent of 1996 net sales, compared with 43 percent in 1995. An analysis of the company's sales change, along with comparative data, follows:
Selling Price and Volume Changes 1996 1995 1994 - --------------------------------------------------------------------------------- Selling prices (2)% 2% (2)% Sales volumes and mix (net of acquisitions and divestitures) 5 6 7 - --------------------------------------------------------------------------------- Total Change 3% 8% 5% - ---------------------------------------------------------------------------------
Operating Results Adversely Affected by Special Charges Operating income in 1996 was $597 million, $388 million lower than operating income in 1995. If the net pretax restructuring charges, special charges and unusual items of $739 million and $125 million in 1996 and 1995, respectively, were excluded, operating income would have increased by approximately $226 million, or 20 percent, in 1996. This significant increase in operating income was related principally to higher sales volumes and an improved gross profit. The increase in gross profit can be attributed primarily to an improved sales mix. 30 1996 Monsanto Annual Report 7 Review of Consolidated Results of Operations Current-year operations reflect an increased percentage of higher-margin sales in Agricultural Products and Pharmaceuticals, and they no longer include the styrenics plastics and rubber chemical businesses that were part of the Chemicals segment last year. The gross profit improvement was partially offset by higher marketing, administrative and technological expenses. If the aforementioned restructuring charges, special charges and unusual items in 1996 and 1995 were excluded, operating results in 1996 would have improved significantly from the prior year for the Agricultural Products and Pharmaceuticals segments. In 1996, operating income for the Agricultural Products segment benefited from significantly higher worldwide sales volumes for Roundup(R) herbicide. In addition, higher sales of lawn-and-garden products and higher sales of Posilac(R) bovine somatotropin also contributed to the operating income improvement. The increase in operating income for the Pharmaceuticals segment can be attributed primarily to higher sales volumes of key products, principally Ambien(R), a short-term treatment for insomnia, and Daypro(R) and Arthrotec(R) arthritis treatments. Sales from the women's health care product lines acquired from Syntex in the third quarter of last year also contributed to the increase. If the results of divested businesses and other nonrecurring items in 1996 and 1995 were excluded, operating income for the Chemicals segment would have been up slightly from the prior year. The effect of higher Chemicals' sales volumes and lower raw material prices on operating results was offset by lower average selling prices and higher manufacturing costs. Net of nonrecurring items, operating income in 1996 improved moderately for Food Ingredients, primarily because of the effect of higher sales volumes, combined with lower manufacturing costs. Increased marketing expenses in 1996 supported higher sales and new product launches for Agricultural Products and Pharmaceuticals. Administrative expenses increased, principally because of higher costs associated with employee incentive programs, and increased spending on growth initiatives and other programs. Technological expenses were up because of higher research and development expenses in the Agricultural Products and Pharmaceuticals segments. Cost sharing payments from alliances partially offset this increase. If the effect of unusual charges is excluded, amortization of intangible assets would have increased, primarily because of the increase in intangible assets associated with current-year investments and acquisitions in biotechnology businesses. If one-time charges are excluded, "Other income (expense) -- net" would have decreased, principally because of lower income from equity affiliates. Monsanto Adopts EVA Performance Measurement In 1996, Monsanto put in place a new performance measurement system called economic value added (EVA). The company will begin measuring its performance against EVA targets in 1997. The company will continue to report its return on shareowners' equity (ROE), which was 10.4 percent in 1996. If the nonrecurring items that were recorded in 1996 were excluded from the calculation, the company's ROE in 1996 would have been 22.3 percent. The company's ROE was 22.1 percent and 21.4 percent in 1995 and 1994, respectively. Cost Savings Continue In prior 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 1996. These savings are in line with original expectations, and are expected to continue. Business redesign and other productivity efforts have yielded significant benefits as well. These initiatives will continue as the company responds to increased global competition and higher customer expectations. Commitment to New Product Development Continues New product development and commercialization continue to be strategic priorities for Monsanto. Recent successes from these efforts include five agricultural products that were launched in 1996. These products are Roundup(R) Ultra herbicide, Roundup Ready(R) soybeans, Roundup Ready(R) canola, NewLeaf(R) insect-protected potatoes and Bollgard(R) insect-protected cotton. Monsanto's research and development (R&D) expenditures were $728 million in 1996, or 8 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 goals of most of these expenditures. Significant R&D efforts in existing product technologies and new product applications also continue across all business groups. Additionally, Monsanto's research program includes new technologies and proprietary information obtained through licensing and strategic acquisitions. As a result, Monsanto has many potential products in the R&D pipeline. Several of them should be commercialized in the next few years. 1996 Monsanto Annual Report 31 8 Review of Consolidated Results of Operations Prior Year Review Monsanto's operating results in 1995 were substantially higher than those 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 in 1994, 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 increase in international sales, however, was more than offset by declining U.S. sales of aspartame. As a result, net income for 1995 was $739 million, or $1.27 per share, compared with income of $622 million, or $1.06 per share, in 1994. Both years' results, however, were affected by unusual events. As described in the Notes to Financial Statements, Monsanto sold its worldwide styrenics plastics business and its shares in a styrenics plastics manufacturing joint venture in 1995. As a result of these transactions, Monsanto recorded an aftertax gain of $116 million, or $0.20 per share. The company also recognized an aftertax restructuring charge of $125 million, or $0.22 per share, in 1995, as well as an aftertax charge that totaled $25 million, or $0.04 per share, associated with the formation of the Flexsys L.P. joint venture. Other items that affected results in 1995 included the receipt of settlement payments from various insurers related to environmental and other insurance litigation. The combined effect of these settlements totaled $57 million aftertax, or $0.10 per share. In addition, Monsanto settled a lawsuit related to a contractual dispute concerning cleanup obligations at a Superfund site by paying $25 million aftertax, or $0.04 per share. The company also recorded approximately $13 million, or $0.02 per share, in favorable aftertax adjustments under certain sales rebate programs in the United States for product sales made in prior years. In December 1994, Monsanto recognized a net restructuring charge of $22 million aftertax, or $0.04 per share. 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 $0.04 per share, in interest on the settlement. 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 for Agricultural Products in 1995 increased 11 percent from those in 1994, to $2.4 billion, primarily because of a significant increase in worldwide sales volumes for Roundup(R) herbicide. Worldwide demand continued 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), a short-term treatment for insomnia. Lower sales for the family of Calan(R) calcium channel blockers 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. Operating income of $985 million in 1995 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 approximately $147 million, or 15 percent, in 1995. 32 1996 Monsanto Annual Report 9 Review of Consolidated Results of Operations 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. 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 for the Agricultural Products segment in 1995 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 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 significantly 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 and technological expenses increased in 1995, principally because of higher marketing expenses used to support higher sales, and inclusion of 10 months of operating expenses from the acquired Kelco business. 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" was principally the result of higher income from joint ventures and equity affiliates. Analysis of Change in Earnings per Share
Better (Worse) - ----------------------------------------------------------------------------------------- 1996 vs. 1995 vs. 1995 1994 - ----------------------------------------------------------------------------------------- Sales-Related Factors: Selling prices $(0.19) $ 0.16 Sales volumes and mix 0.83 0.35 - ----------------------------------------------------------------------------------------- Total Sales-Related Factors 0.64 0.51 - ----------------------------------------------------------------------------------------- Cost-Related Factors: Raw material and manufacturing costs 0.11 (0.21) Marketing, administrative and technological expenses (0.48) (0.13) Amortization of intangible assets (0.01) (0.01) - ----------------------------------------------------------------------------------------- Total Cost-Related Factors (0.38) (0.35) - ----------------------------------------------------------------------------------------- Other Factors: Change in shares outstanding (0.02) 0.01 Divestitures (0.01) -- Other expenses -- net -- 0.02 - ----------------------------------------------------------------------------------------- Total Other Factors (0.03) 0.03 - ----------------------------------------------------------------------------------------- Change in Earnings per Share Before Restructuring and Unusual Factors 0.23 0.19 Restructuring and unusual factors (0.86) 0.02 - ----------------------------------------------------------------------------------------- Change in Earnings per Share $(0.63) $ 0.21 - -----------------------------------------------------------------------------------------
1996 Monsanto Annual Report 33 10 Review of Consolidated Results of Operations Sales Volume Index [GRAPH] * The sales volume index increase in 1996 was led by a significant increase in worldwide sales volumes for Roundup(R) herbicide and by sales volume increases for key pharmaceuticals. The Agricultural Products segment is discussed on pages 35 - 37 and the Pharmaceuticals segment on pages 37 - 39. Selling Price Index [GRAPH] * The index of selling prices has remained relatively constant over the last several years. It decreased slightly in 1996, primarily because of the effect of lower selling prices for the Agricultural Products and Chemicals segments. The Agricultural Products segment is discussed on pages 35 - 37 and the Chemicals segment is discussed on pages 41 - 42. Raw Material Cost Index [GRAPH] * The raw material cost index declined slightly in 1996 and primarily affected the Chemicals segment. The Chemicals segment is discussed on pages 41 - 42. Segment Data
Operating Operating Net Sales Contribution Income (Loss) - ------------------------------------------------------ ------------------------------ -------------------------- 1996 1995 1994 1996 1995 1994 1996 1995 1994 - ------------------------------------------------------ ------------------------------ -------------------------- Agricultural Products $2,997 $2,441 $2,195 $ 701 $ 536 $ 502 $ 539 $516 $477 Pharmaceuticals 1,995 1,711 1,520 220 142 51 76 131 54 Food Ingredients 1,206 1,117 915 224 200 194 91 115 178 Chemicals 3,064 3,693 3,642 334 348 316 67 286 282 Corporate (68) (60) (63) (176) (63) (68) - ------------------------------------------------------ ------------------------------ -------------------------- Total $9,262 $8,962 $8,272 $1,411 $1,166 $1,000 $ 597 $985 $923 - ------------------------------------------------------ ------------------------------ -------------------------- Depreciation Total Assets Capital Expenditures and Amortization - ------------------------------------------------------ ------------------------------ -------------------------- 1996 1995 1994 1996 1995 1994 1996 1995 1994 - ------------------------------------------------------ ------------------------------ -------------------------- Agricultural Products $ 3,331 $ 2,571 $2,410 $259 $127 $104 $149 $135 $136 Pharmaceuticals 2,362 2,561 2,037 89 78 61 130 127 110 Food Ingredients 2,144 2,140 1,050 88 64 33 115 105 60 Chemicals 2,658 2,759 3,078 251 228 210 191 226 253 Corporate 696 580 316 5 3 1 5 5 2 - ------------------------------------------------------ ------------------------------ -------------------------- Total $11,191 $10,611 $8,891 $692 $500 $409 $590 $598 $561 - ------------------------------------------------------ ------------------------------ -------------------------- As of Jan. 1, 1996, the industrial business of the Food Ingredients segment was transferred to Chemicals and Chemicals' food phosphate business was transferred to Food Ingredients. In addition, a small business was transferred from Agricultural Products to Chemicals. Segment information for 1995 and 1994 has been reclassified to conform to the current presentation. Totals for the Chemicals segment in 1995 and 1994 include amounts for the plastics and rubber chemical businesses. 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 1996, 1995 and 1994 restructurings and other unusual items as follows: Income (Expense) - ---------------------------------------------------------------------------------------------- Segment 1996 1995 1994 - ---------------------------------------------------------------------------------------------- Agricultural Products $(144) $ (10) $ (16) Pharmaceuticals (125) 7 20 Food Ingredients (105) (69) (7) Chemicals (257) (50) (33) Corporate (108) (3) (4) - ---------------------------------------------------------------------------------------------- Total $(739) $(125) $(40) - ----------------------------------------------------------------------------------------------
34 1996 Monsanto Annual Report 11 Segment Data 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 when government regulations and competitive conditions permit. In addition, the current costs of replacing certain assets are estimated to be greater than their historical costs 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 are primarily investments in affiliates and a portion of the cash balance. The principal factors that accounted for the segments' performances in 1996 and 1995, along with the factors that are expected to affect operating results in the near term, are described on the following pages. 1996 Net Sales [GRAPH] Agricultural Products
1996 1995 1994 - ------------------------------------------------------------------------------------ Net Sales $2,997 $2,441 $2,195 Operating Contribution 701 536 502 Operating Income 539 516 477 Total Assets 3,331 2,571 2,410 Capital Expenditures 259 127 104 Depreciation and Amortization 149 135 136 - ------------------------------------------------------------------------------------ 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, producer and marketer of crop protection products and lawn-and-garden products. This group also develops and markets products enhanced by biotechnology. These products improve the efficiency of food production and preserve environmental quality for agricultural, industrial, turf and residential uses. More than half of the unit's herbicide net sales are made outside the United States. Weather conditions in agricultural markets worldwide affect sales volumes. Net sales for the Agricultural Products segment increased to a record $3 billion in 1996, 23 percent higher than sales in 1995. This increase is primarily the result of higher worldwide sales volumes for the family of Roundup(R) herbicides. Most world areas posted solid sales volume gains in 1996. The increased demand can be attributed to continued increases in conservation tillage practices, favorable weather conditions in key markets and an increase in planted acreage. 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 generic competition, especially in certain foreign markets, dampened selling prices modestly. Agricultural Products Net Sales [GRAPH] 1996 Monsanto Annual Report 35 12 Segment Data However, the effect of increased sales volumes on operating income exceeded the effect of lower selling prices. Higher sales volumes of Harness(R) herbicide also contributed to the 1996 sales increase. Net sales in 1996 benefited from higher sales of lawn-and-garden products and higher sales of Posilac(R) bovine somatotropin (BST). In addition, successful introductions of new products such as Roundup(R) Ultra herbicide, Roundup Ready(R) soybeans and Bollgard(R) insect-protected cotton helped fuel sales growth. Operating income increased from last year's level by 4 percent. However, operating income was affected by unusual items in both 1996 and 1995. In 1996, the unusual items included $144 million in charges for restructuring and other actions, principally related to the cost of work force reductions. In 1995, unusual items included $10 million in restructuring charges and other actions for facility closures and the cost of work force reductions. If unusual items in 1996 and 1995 were excluded, 1996 operating income for Agricultural Products would have increased $157 million, or 30 percent. In addition to the effect of sales volume increases, operating contribution and operating income in 1996 benefited from lower manufacturing costs. The effects of higher sales volumes and lower manufacturing costs were partially offset by higher marketing expenses that supported new product introductions and by higher biotechnology research and development spending. Agricultural Products Operating Measures [GRAPH] Prior Year Review Net sales for Agricultural Products in 1995 were 11 percent higher than net sales in 1994. Both operating contribution and operating income increased from 1994 levels, up 7 percent and 8 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 $10 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 the unusual items in 1995 and 1994 were excluded, 1995 operating income for Agricultural Products would have increased $33 million, or 7 percent. The increase in net sales was driven by significantly higher sales volumes of Roundup(R) herbicide. Demand for the family of Roundup(R) glyphosate-based products continued to be strong worldwide. It was 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 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 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 lawn-and-garden products. 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 designed to move product sales closer to the time of consumer demand effectively moved sales from 1995 into 1996. 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. 36 1996 Monsanto Annual Report 13 Segment Data 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 through the year 2000. Management expects the recent technological breakthroughs in manufacturing processes and formulation advancements, as well as rapidly expanding capacity to produce Roundup(R), to improve Monsanto's cost position and to help maintain its leadership position. New value-added formulations of Roundup(R), such as Roundup(R) Ultra and Roundup(R) Pro in the United States, and Roundup(R) Bioforce and Roundup(R) Geoforce in Europe and Australia, have been successfully introduced. Significant growth potential for Roundup(R) remains in conservation tillage applications worldwide, and the recent introduction of crops tolerant of Roundup(R) opens up major new growth opportunities. Four biotechnology-related plant sciences products -- Roundup Ready(R) soybeans and canola, and cotton and potatoes protected from certain insects -- were introduced on a limited basis in 1996. These products were developed either by Monsanto or in partnership with biotechnology and seed production companies. Market acceptance has been strong and volumes for each of these products are expected to increase in 1997. Roundup Ready(R) cotton and YieldGard(R) insect-protected corn products will be launched in 1997. It is expected that a significant number of new herbicides and biotechnology-related products currently in the research and development pipeline will be commercialized worldwide in the next few years. Monsanto is addressing issues of consumer acceptance for some of these products, particularly in Europe, and is involved in patent disputes with several parties. Posilac(R) bovine somatotropin (BST) experienced significant sales growth in 1996. The year also marked the completion of a two-year, post-approval monitoring program for Posilac(R), which resulted in a solid reaffirmation from the U.S. Food and Drug Administration of the product's safety as a dairy production enhancement tool. As discussed in the Notes to Financial Statements on page 52, Monsanto has reached separate agreements to acquire Holden's Foundation Seeds Inc., Corn States Hybrid Service Inc. and Corn States International S.a.r.l. These acquisitions are expected to close in 1997. In addition, the company acquired the Asgrow Agronomics seed business from Empresas La Moderna S.A. in February 1997. It is anticipated that one-time charges associated with acquired research will be recorded in conjunction with these acquisitions. Pharmaceuticals
1996 1995 1994 - ------------------------------------------------------------------------------------- Net Sales $1,995 $1,711 $1,520 Operating Contribution 220 142 51 Operating Income 76 131 54 Total Assets 2,362 2,561 2,037 Capital Expenditures 89 78 61 Depreciation and Amortization 130 127 110 - ------------------------------------------------------------------------------------- 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 increased 17 percent to a record $2 billion. The sales growth was fueled by higher sales volumes, led by strong performances from Daypro(R) and Arthrotec(R) arthritis treatments and Ambien(R), a short-term treatment for insomnia. In 1996, sales of these products increased 39 percent from sales in the prior year. In total, these key products contributed approximately $660 million to 1996 net sales. Sales and earnings growth also benefited from the women's health care product lines acquired from Syntex in September 1995. The 1996 net sales increase for Pharmaceuticals was partially offset by lower sales for the family of Calan(R) calcium channel blockers. Sales in 1995 included the effect of approximately $20 million in favorable adjustments under certain sales rebate programs in the United States for product sold in prior years. Pharmaceuticals Net Sales [GRAPH] 1996 Monsanto Annual Report 37 14 Segment Data Operating income for Pharmaceuticals decreased from the 1995 results by 42 percent. However, operating results in 1996 and 1995 were affected by unusual items. Operating income in 1996 includes $125 million in restructuring and other actions, principally related to the cost of work force reductions and facility rationalizations. Operating income in 1995 included a $13 million charge for restructuring, principally related to work force reductions and other actions. Operating results in 1995 also reflected the aforementioned $20 million in favorable sales adjustments. If the effect of these unusual items was excluded, operating income would have been $201 million in 1996 and $124 million in 1995. The significant improvement in operating income and operating contribution was primarily the result of higher sales volumes. Increased expenditures for marketing and product development costs were offset, in part, by higher cost-sharing payments from alliances and licensing agreements. Searle's investment in research and development (R&D) continues to be significant. R&D expenditures, before cost-sharing payments from alliances, were 22 percent and 21 percent of the segment's net sales in 1996 and 1995, respectively. Future R&D spending is also expected to be significant. Searle will continue to seek R&D collaborations. Such agreements should allow Searle to share development costs, accelerate product development and enhance market penetration. This investment reflects the segment's commitment to securing a continuing stream of new products. Pharmaceuticals Operating Measures [GRAPH] Prior Year Review Net sales for the Pharmaceuticals segment in 1995 were $1.7 billion, or 13 percent higher than net sales in 1994. This strong increase was driven by higher sales volumes, principally from key products, such as Daypro(R) and Arthrotec(R) arthritis treatments, and Ambien(R), a short-term treatment for insomnia. Each of these products had double-digit increases in net sales vs. those in 1994. 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 acquired from Syntex. In addition, the sales increase 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 for the family of Calan(R) calcium channel blockers. 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 work force 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 work force 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 was excluded, operating income would have been $124 million in 1995 and $34 million in 1994. The significant improvement in operating income came primarily 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. 38 1996 Monsanto Annual Report 15 Segment Data Pharmaceuticals Outlook Ambien(R), a short-term treatment for insomnia, continues as the leader in the hypnotic market. Direct-to-patient promotion should continue to build growth in this high potential market. Ambien(R) is licensed to a joint venture of which Searle is a general partner. The joint venture partner has the right to purchase all or part of Searle's interest in the venture beginning in December 1999. Sales of Daypro(R), Searle's leading treatment for arthritis, should also continue to grow. In addition, the exclusivity of Daypro(R) was extended for two years, through late 1999. Arthrotec(R) arthritis treatment was launched in Italy and several other markets in Europe and Asia during 1996. A new drug application for Arthrotec(R) is also pending with the U.S. Food and Drug Administration (FDA). Covera-HS(TM), Searle's new verapamil product, was introduced in the United States in 1996. This product is designed to provide peak protection from hypertension and angina at the time of day when patients are most vulnerable to rises in blood pressure and heart rate, which differentiates it from other calcium channel blockers and anti-hypertensive drugs. Canadian approval is expected for Covera-HS(TM) in 1997, and registration submissions in 25 other countries are under way. In the United States, generic competition and continuing controversy following the results of a study about the use of calcium channel blockers may continue to negatively affect the sales of all calcium channel blockers, including Searle's Calan(R) and Covera-HS(TM). Searle has a number of compounds in various stages of development. Drugs being developed for the treatment of cardiovascular conditions include xemilofiban and orbofiban, anti-platelet agents to inhibit the clotting of blood vessels; tissue factor pathway inhibitor (TFPI) to treat sepsis; and eplerenone to treat congestive heart failure, high blood pressure and the complications of kidney disease. Searle's participation in the arthritis market potentially could increase with the development of Xopane(R), a fast-acting formulation of Daypro(R); Condrotec(R), which combines an ulcer preventive drug with an anti-inflammatory drug; and celecoxib products that selectively treat arthritis and pain without gastrointestinal side effects. Also in development are three adjunctive therapies for the oncology market. These compounds -- daniplestim, myelopoietin and promegapoietin -- are being developed to stimulate the replenishment of white blood cells and platelets in chemotherapy patients. Food Ingredients
1996 1995 1994 - ------------------------------------------------------------------------------------ Net Sales $1,206 $1,117 $ 915 Operating Contribution 224 200 194 Operating Income 91 115 178 Total Assets 2,144 2,140 1,050 Capital Expenditures 88 64 33 Depreciation and Amortization 115 105 60 - ------------------------------------------------------------------------------------ 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) and Canderel(R) tabletop sweeteners. It also develops, produces and markets alginates, biogums and other food ingredients. In 1996, net sales for Food Ingredients increased 8 percent from the prior year's net sales. Results in 1996 include a full year of sales from the Kelco business that was acquired in February 1995. The sales increase was primarily the result of higher sales of NutraSweet(R) brand sweetener, the company's trademark aspartame product, and higher sales volumes of tabletop sweeteners. Higher sales of tabletop sweeteners were driven by increased spending on advertising and promotion. The majority of the volume increment for tabletop sweeteners came from international markets. Higher sales volumes of biogum products also contributed to the sales increase. Operating income decreased from last year's level by 21 percent. Certain unusual items affected earnings in both years. In 1996, operating income included restructuring and other charges of $105 million, principally for the cost of work force reductions and facility rationalizations. Operating income in 1995 was reduced by $69 million in restructuring charges, primarily to exit a production facility and to effect work force reductions. If these unusual items were excluded, operating results for Food Ingredients would have increased moderately, primarily because of higher sales and lower Food Ingredients Operating Measures [GRAPH] 1996 Monsanto Annual Report 39 16 Segment Data manufacturing costs. The effect of higher sales and lower manufacturing costs was partially offset by higher advertising and promotion costs for tabletop sweeteners, higher administrative expenses associated with growth initiatives, and other costs. Operating contribution increased 12 percent from 1995 because of these factors. Prior Year Review In 1995, Food Ingredients' net sales were up $202 million, or 22 percent, from sales in 1994. Results in 1995 included sales from the acquired Kelco business. Without these sales, net sales for Food Ingredients would have declined from those in 1994, 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 came from international markets that the Food Ingredients segment aggressively pursued. 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 benefited from strong sales of biogum products. Operating contribution in 1995 for Food Ingredients increased significantly from the segment's contribution in 1994, primarily because of the addition of Kelco. Operating income declined significantly from 1994's results. 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 would have been essentially even with operating income in 1994. The effects of the additional Kelco income, the benefit of higher sales of tabletop sweeteners, and manufacturing efficiencies were offset by lower aspartame sales and higher operating expenses. 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 this 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, because the worldwide supply is tight, its sourcing continues to be an area of focus. 40 1996 Monsanto Annual Report 17 Segment Data Chemicals
1996 1995 1994 - ------------------------------------------------------------------------------------ Net Sales $3,064 $3,693 $3,642 Operating Contribution 334 348 316 Operating Income 67 286 282 Total Assets 2,658 2,759 3,078 Capital Expenditures 251 228 210 Depreciation and Amortization 191 226 253 - ------------------------------------------------------------------------------------ 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 high-performance chemical-based materials -- including nylon and acrylic fibers, Saflex(R) plastic interlayer, phosphorus and its derivatives, and specialty chemicals. These materials are used by customers to make consumer, household, automotive and industrial products. Chemicals Net Sales [GRAPH] Chemicals' net sales decreased $629 million in 1996, and operating income decreased by $219 million from 1995 results. However, as further discussed in the Notes to Financial Statements, net sales and operating results for the prior year included amounts from the styrenics plastics business that was divested at the end of 1995 and from the rubber chemicals business that became part of the Flexsys L.P. joint venture in May 1995. Sales and operating results for these businesses are no longer included in consolidated totals. If the sales from these businesses were excluded in 1995, Chemicals' sales in 1996 would have increased 6 percent from those in 1995. Most business units included in the Chemicals segment posted sales gains in 1996 from prior-year amounts. The sales increases for these units can be attributed primarily to higher sales volumes and to an improved sales mix. Net sales for fibers products increased moderately, primarily because of higher sales volumes of nylon and acrylic fibers. Nylon fiber sales were considerably higher than sales last year because of higher demand in the carpet industry. Increased demand in U.S. markets and higher export sales, particularly in China, drove the sales volume growth for acrylic fibers. A decline in average selling prices partially offset the increase in nylon and acrylic fiber sales. Sales of specialty products in 1996 were down slightly from those in 1995, principally because lower average selling prices offset the effect of slightly higher sales volumes. Net sales of performance materials increased moderately from sales in 1995 on the strength of higher average selling prices, higher sales volumes and an improved sales mix. Higher sales volumes, partially offset by lower average selling prices, resulted in a modest increase in the net sales of Saflex(R) plastic interlayer in 1996. Operating contribution and operating income for the Chemicals segment decreased in 1996 from those in 1995. A number of unusual items affected profitability in both years. Operating income in 1996 included a net charge of $257 million for restructuring and other actions, primarily for the costs of work force reductions, asset write-offs and facility rationalizations. Operating income in 1995 was reduced by $50 million in restructuring charges, principally related to employment reductions and the costs to close several facilities. If the unusual items in 1996 and 1995 and the effects of divested businesses were excluded, 1996 operating income for the Chemicals segment would have been up slightly from the comparable amounts in 1995. Chemicals Operating Measures [GRAPH] The positive effect of higher sales volumes and lower raw material costs on operating contribution and operating income was offset by lower average selling prices, by significantly higher spending on growth initiatives, and by higher manufacturing costs. The manufacturing cost increase was principally associated with maintenance downtime and capacity expansion projects. Worldwide competitive pressures continue to limit the Chemicals segment's pricing flexibility. Prior Year Review Chemicals' net sales increased slightly in 1995. Operating contribution increased 10 percent and operating income increased 1 percent from 1994 results. However, net sales and operating results for the first four months of 1995 and for all of 1994 include the results from the company's rubber chemicals business. 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 1996 Monsanto Annual Report 41 18 Segment Data rubber chemicals businesses. Operations for Flexsys commenced on May 1, 1995. As a result, sales and operating results for the company's rubber chemicals business are no longer included in consolidated totals. If the sales from this business 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 the 1994 amounts. The sales increases for these units can be attributed primarily to higher average selling prices and to an improved sales mix. 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 in 1994 as the carpet industry experienced lower consumer demand in 1995. Nylon intermediate sales in 1995 increased significantly from sales in 1994, 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 the increase was 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 those in 1994, 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. Operating contribution and operating income for the Chemicals segment increased in 1995 from those in 1994. A number of unusual items affected profitability in both years. Operating income in 1995 included a net charge of $50 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 work force reductions and costs to close several facilities. If these unusual items were excluded, operating income for Chemicals would have increased by 7 percent from operating income in 1994. 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 limited the Chemicals segment's ability to recover the increased raw material costs fully through increased selling prices. Chemicals Outlook As discussed on page 29, the company intends to spin off its chemical businesses to shareowners in 1997. The spinoff is subject to several conditions, including shareowner approval. The company has filed a request for a ruling from the U.S. Internal Revenue Service that the spinoff would be free from federal income taxes. Upon receipt of shareowner approval, the results from these businesses will be reported as a discontinued operation. 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 these businesses 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 somewhat lower raw material costs for the chemical businesses 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 by capitalizing on growth opportunities. These 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. 42 1996 Monsanto Annual Report 19 Geographic Data
Net Sales to Operating Unaffiliated Customers Income (Loss) Total Assets - -------------------------------------------------------- -------------------------- ------------------------------ 1996 1995 1994 1996 1995 1994 1996 1995 1994 - -------------------------------------------------------- -------------------------- ------------------------------ United States $5,940 $5,631 $5,376 $ 491 $721 $507 $ 7,965 $ 7,181 $5,844 Europe-Africa 1,760 1,891 1,653 184 240 340 1,881 1,927 1,947 Asia-Pacific 636 662 552 61 39 39 619 702 586 Canada 345 364 318 18 17 37 145 161 135 Latin America 581 414 373 45 63 65 654 372 300 Interarea Eliminations (26) (32) 3 (769) (312) (237) Corporate (176) (63) (68) 696 580 316 - -------------------------------------------------------- -------------------------- ------------------------------ Total $9,262 $8,962 $8,272 $ 597 $985 $923 $11,191 $10,611 $8,891 - -------------------------------------------------------- -------------------------- ------------------------------
The data above are prepared on an "entity basis," which means that net sales, operating income and assets of each legal entity are assigned to the geographic area where that 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:
1996 1995 1994 - ------------------------------------------------------------------------- World area shipped from: United States $ 968 $ 878 $ 682 Europe-Africa 257 293 248 Asia-Pacific 31 36 5 Canada 33 61 44 Latin America 1 2 2 Interarea Eliminations (1,290) (1,270) (981) - ------------------------------------------------------------------------- Total $ -- $ -- $ -- - -------------------------------------------------------------------------
Following is a reconciliation of foreign operating income and total assets to the net income and net assets of consolidated foreign subsidiaries:
1996 1995 1994 - ------------------------------------------------------------------------- Operating income $ 308 $ 359 $ 481 Interest and other income (expense) -- net (53) (32) (33) Income taxes (88) (112) (133) - ------------------------------------------------------------------------- Net Income of Consolidated Foreign Subsidiaries $ 167 $ 215 $ 315 - ------------------------------------------------------------------------- Total operating assets $3,299 $3,162 $2,968 Total liabilities 1,209 873 1,088 - ------------------------------------------------------------------------- Net Assets of Consolidated Foreign Subsidiaries $2,090 $2,289 $1,880 - -------------------------------------------------------------------------
The operating income reported 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 $557 million for 1996, $550 million for 1995, and $399 million for 1994. Sales and operating income for the geographic segments do not include financial results from 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 1996 follows:
Monsanto's Share - ------------------------------------------------------------------------- Net Income Sales (Loss) - ------------------------------------------------------------------------- United States $253 $(35) Europe-Africa 378 5 Asia-Pacific 40 1 Latin America 131 5 - ------------------------------------------------------------------------- Geographic area operating income was affected by the 1996, 1995 and 1994 restructurings and other unusual items as follows: Income (Expense) - ------------------------------------------------------------------------- 1996 1995 1994 - ------------------------------------------------------------------------- United States $(438) $ (64) $(105) Europe-Africa (130) (4) 69 Asia-Pacific (21) (40) (11) Canada (14) (13) 2 Latin America (28) (1) 9 Corporate (108) (3) (4) - ------------------------------------------------------------------------- Total $(739) $(125) $ (40) - -------------------------------------------------------------------------
1996 Monsanto Annual Report 43 20 Statement of Consolidated Financial Position
(Dollars in millions, except per share) As of Dec. 31, - ---------------------------------------------------------------------------------------------------------------- ASSETS 1996 1995 - ---------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents $ 166 $ 297 Trade receivables, net of allowances of $53 in 1996 and $57 in 1995 1,930 1,629 Miscellaneous receivables and prepaid expenses 382 596 Deferred income tax benefit 386 415 Inventories 1,476 1,368 - ---------------------------------------------------------------------------------------------------------------- Total Current Assets 4,340 4,305 - ---------------------------------------------------------------------------------------------------------------- Property, Plant and Equipment: Land 136 118 Buildings 1,229 1,231 Machinery and equipment 5,800 5,549 Construction in progress 423 339 - ---------------------------------------------------------------------------------------------------------------- Total property, plant and equipment 7,588 7,237 Less accumulated depreciation 4,575 4,405 - ---------------------------------------------------------------------------------------------------------------- Net Property, Plant and Equipment 3,013 2,832 - ---------------------------------------------------------------------------------------------------------------- Investments in Affiliates 652 544 Intangible Assets, net of accumulated amortization of $807 in 1996 and $638 in 1995 2,165 1,964 Other Assets 1,021 966 - ---------------------------------------------------------------------------------------------------------------- Total Assets $11,191 $10,611 - ---------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREOWNERS' EQUITY - ---------------------------------------------------------------------------------------------------------------- Current Liabilities: Accounts payable $ 715 $ 648 Wages and benefits 623 456 Income and other taxes 20 240 Restructuring reserves 350 163 Miscellaneous accruals 1,039 940 Short-term debt 654 365 - ---------------------------------------------------------------------------------------------------------------- Total Current Liabilities 3,401 2,812 - ---------------------------------------------------------------------------------------------------------------- Long-Term Debt 1,608 1,667 Deferred Income Taxes 50 85 Postretirement Liabilities 1,508 1,415 Other Liabilities 934 900 Shareowners' Equity: Common stock (authorized: 850,000,000 shares, par value $2) Issued: 821,970,970 shares in 1996 and 164,394,194 in 1995 1,644 329 Additional contributed capital 65 902 Treasury stock, at cost (237,594,831 shares in 1996 and 48,923,899 shares in 1995) (2,661) (2,550) Reserve for ESOP debt retirement (174) (181) Unrealized investment holding gain 11 34 Accumulated currency adjustment 10 101 Reinvested earnings 4,795 5,097 - ---------------------------------------------------------------------------------------------------------------- Total Shareowners' Equity 3,690 3,732 - ---------------------------------------------------------------------------------------------------------------- Total Liabilities and Shareowners' Equity $11,191 $10,611 - ---------------------------------------------------------------------------------------------------------------- The above statement should be read in conjunction with pages 50-61 of this report. ESOP stands for Employee Stock Ownership Plan.
44 1996 Monsanto Annual Report 21 Review of Changes in Financial Position Financial Position Remains Strong Monsanto's financial position remained strong in 1996, as evidenced by the company's current "A" debt rating. Financial resources were adequate to support existing businesses and to fund new business opportunities. At the end of 1996, working capital was $554 million lower than working capital at the end of 1995. Trade receivables at year-end 1996 increased compared with those at the prior year-end, primarily because of higher sales levels for the Agricultural Products and Pharmaceuticals segments. In addition, the increase in receivables can be attributed to sales and marketing program changes in these segments. Such changes drove the increase in the "Trade Receivables - Day Sales Outstanding" statistic in 1996. Inventories at year-end 1996 increased, primarily because of higher inventories in the Agricultural Products segment. These increases were more than offset by lower cash and cash equivalent balances, increased restructuring reserve balances, higher accrued liabilities, and higher short-term debt levels. The amount of net property, plant and equipment was higher than the amount at the end of 1995, as $692 million in capital additions and the effects of acquisitions exceeded 1996 depreciation expense and divestitures. Total deferred tax benefits, both current and noncurrent, of $644 million at year-end 1996 are primarily related to U.S. operations, which generally have a strong earnings history. As discussed in the Notes to Financial Statements, the increase in "Investments in Affiliates" was principally the result of the equity position taken in DeKalb Genetics Corp. and the increase in "Intangible Assets" was primarily attributable to the acquisition of the plant-biotechnology assets of Agracetus. As further discussed in the Notes to Financial Statements, the company announced agreements to acquire Holden's Foundation Seeds Inc., Corn States Hybrid Service Inc. and Corn States International S.a.r.l. The total cost of these acquisitions will be up to $1.02 billion, and they are expected to close in 1997. The company also acquired the Asgrow Agronomics seed business from Empresas La Moderna S.A., for $240 million in February 1997. These acquisitions will be financed initially with the proceeds of commercial paper borrowings. These investments are expected to have a dilutive effect on net income in 1997. 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 pages 54-55. These credit facilities give Monsanto the financing flexibility to 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. Monsanto's commitments and contingencies are described in the Notes to Financial Statements beginning on page 59.
Key Financial Statistics 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------- Return on Shareowners' Equity (ROE) 10.4% 22.1% 21.4% (Net income divided by average shareowners' equity) Current Ratio (Current assets divided by current liabilities) 1.3 1.5 1.6 Trade Receivables -- Days Sales Outstanding 83 71 67 (Fourth-quarter trade receivables divided by fourth-quarter net sales times 30 days) Inventory Turnover Ratio (Cost of goods sold divided by inventory) 3.3 3.7 3.9 Interest Coverage 3.8 6.4 7.3 (Income before interest expense and income taxes divided by total interest cost) Cash Provided by Operations/Total Debt 53% 41% 76% Total Debt/Total Capitalization 38% 35% 37% - ------------------------------------------------------------------------------------------------------------- The decrease in the current ratio in 1996 was primarily because of higher current liability balances related to restructuring reserves and the reclassification of long-term incentive compensation accruals related to the company's three-year incentive plan, which ended in 1996. If the effects of the plastics business were excluded from the 1995 statistic, the inventory turnover ratio would have been virtually the same in 1996 and 1995. If the effects of the restructuring and other special charges were excluded, the interest coverage ratio would have been 7.7 in 1996. Total capitalization is the sum of short-term debt, long-term debt and shareowners' equity.
1996 Monsanto Annual Report 45 22 Statement of Consolidated Cash Flow
(Dollars in millions) 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS - -------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income $ 385 $ 739 $ 622 Add income taxes 155 348 273 - -------------------------------------------------------------------------------------------------------------------- Income before income taxes 540 1,087 895 Adjustments to reconcile to Cash Provided by Operations: Income tax payments (308) (335) (196) Items that did not use cash: Depreciation and amortization 590 598 561 Restructuring expenses and other special charges -- net 632 156 40 Other 113 (6) 43 Working capital changes that provided (used) cash: Accounts receivable (267) (36) (88) Inventories (66) (198) 15 Accounts payable and accrued liabilities (74) (198) (125) Other 41 (67) 74 Nonoperating pretax gains from asset disposals (9) (125) (11) Other items 11 (53) 92 - -------------------------------------------------------------------------------------------------------------------- Total Cash Provided by Operations 1,203 823 1,300 - -------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Property, plant and equipment purchases (692) (500) (409) Acquisition of Kelco and pharmaceutical product line (1,296) Acquisition and investment payments (750) (197) (185) Investment and property disposal proceeds 187 128 202 Proceeds from sale of styrenics plastics business 580 - -------------------------------------------------------------------------------------------------------------------- Cash Used in Investing Activities (1,255) (1,285) (392) - -------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Net change in short-term financing 297 53 89 Long-term debt proceeds 122 658 49 Long-term debt reductions (177) (403) (152) Treasury stock purchases (253) (478) Dividend payments (343) (306) (289) Common stock issued under employee stock plans 142 194 82 Other financing activities 133 56 25 - -------------------------------------------------------------------------------------------------------------------- Cash Provided by (Used in) Financing Activities (79) 252 (674) - -------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (131) (210) 234 CASH AND CASH EQUIVALENTS: Beginning of year 297 507 273 - -------------------------------------------------------------------------------------------------------------------- End of year $ 166 $ 297 $ 507 - -------------------------------------------------------------------------------------------------------------------- The above statement should be read in conjunction with pages 50 - 61 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 $190 million, $189 million and $129 million in 1996, 1995 and 1994, respectively.
46 1996 Monsanto Annual Report 23 Review of Cash Flow Cash Flow Remains Strong Cash provided by operations of $1.2 billion was strong in 1996, increasing from last year's level of $823 million. The change was primarily due to higher net income before restructuring and other special charges and lower working capital levels. Working capital as a percent of net sales was 10 percent compared with 17 percent last year. Monsanto's operations have historically generated sufficient cash to fund existing businesses and growth-related research and investments. Investment and property disposal proceeds in 1996 were $187 million, primarily related to nonstrategic investments and asset sales associated with restructuring actions. Investment and property disposals in 1995 generated more than $700 million in cash, principally related to the sale of the styrenics plastics business. The principal proceeds in 1994 were 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 was earmarked to prefund certain 1996 capital expenditures. The balance of the sale proceeds was used to reduce short-term debt. Cash Provided by Operations [GRAPH] Major uses of cash in 1996, 1995 and 1994 included dividends and capital expenditures. Treasury stock purchases were made in 1996 and 1994. The equity investment in DeKalb Genetics Corp., the investment in Calgene Inc. and the acquisition of the plant-biotechnology assets of Agracetus were also major uses of cash in 1996. Major investments in 1995 included the acquisition of the Kelco business and the Syntex pharmaceutical product line. Monsanto's capital expenditures, which focused on improved technology, capacity expansions and environmental projects, totaled $692 million in 1996. Business redesign efforts and productivity enhancements were successful in increasing effective capacity at many facilities, thereby reducing the need for additional capital expenditures. 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 reduces 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. 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 1996 were approximately $48 million for environmental capital projects and approximately $203 million for the management of environmental programs, including the operation and maintenance of facilities for environmental control. Monsanto estimates that during 1997 and 1998 approximately $40 million to $50 million per year will be spent on additional capital projects for environmental protection. Monsanto intermittently receives notices from the U.S. Environmental Protection Agency (EPA) alleging that it is a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), commonly known as Superfund. In 1996, Monsanto received three such notices. For many of Monsanto's notices, it has resolved disputes, entered partial and complete consent decrees, and executed administrative orders with EPA settling a portion or all of Monsanto's liability. Monsanto's policy is to accrue costs for remediation of waste disposal sites in the accounting period in which the responsibility is established and the cost is estimable. 1996 Monsanto Annual Report 47 24 Review of Cash Flow Monsanto's estimates of its liabilities for Superfund sites, which are based on evaluations of currently available facts with respect to each site, 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 for Superfund sites of $58 million as of Dec. 31, 1996. 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 $34 million of the accrued amount. Monsanto's estimate of its Superfund liability is affected by several uncertainties. These include, but are 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) 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 based upon existing technology and other currently available information. These potential future expenses may be incurred over the next 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 36 of these sites. Monsanto has an accrued liability of $72 million as of Dec. 31, 1996, 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. These include, but are not limited to, the extent of Monsanto's involvement, and the method and extent of remediation. Because of these uncertainties, potential future expenses could be as much as $50 million for these sites based upon existing technology and other currently available information. Four sites in this category account for $43 million of the accrued amount and for substantially all of the potential future expenses. Monsanto spent $43 million in 1996 for remediation of Superfund and other waste disposal sites. Most of these expenditures were related to the Chemicals segment. Similar or greater 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 $19 million in 1996 for remediation of these facilities and has an accrued liability of $45 million as of Dec. 31, 1996, for these sites. Uncertainties related to these costs include evolving government regulations, the method and extent of remediation, and future changes in technology. Monsanto's estimated closure costs for these facilities are approximately $75 million based upon existing technology and other currently available information. Although the ultimate costs and results of remediation of waste disposal sites cannot be predicted with certainty, Monsanto's liquidity, financial position and profitability are not expected to be materially affected. Treasury Stock Purchased in 1996 Monsanto's board of directors authorized in October 1992 the purchase of 60 million shares of Monsanto common stock, of which 17 million shares have been purchased. This is in addition to the authority granted to purchase shares for compensation and benefit programs. In the first half of 1996, Monsanto purchased a total of 8.2 million shares at a cost of $253 million. Dividend Increased for 24th Consecutive Year Monsanto has paid quarterly dividends on its common shares without interruption or reduction since 1928, and has increased the dividend per share in each of the past 24 years. Dividend payout for 1996 was 29 percent of cash provided by operations. Monsanto's dividend policy has reflected a desired long-term payout percentage based on the company's expectations of future growth and profitability levels. In any given year, additional consideration has been 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. 28, 1997, was 57,479. The high and low common stock prices on that date were $36-7/8 and $35-7/8. 48 1996 Monsanto Annual Report 25 Statement of Consolidated Shareowners' Equity
(Dollars in millions, except per share) 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------------- COMMON STOCK: Balance, Jan. 1 $ 329 $ 329 $ 329 Par value of stock issued in five-for-one stock split 1,315 - ---------------------------------------------------------------------------------------------------------------------- Balance, Dec. 31 $ 1,644 $ 329 $ 329 - ---------------------------------------------------------------------------------------------------------------------- ADDITIONAL CONTRIBUTED CAPITAL: Balance, Jan. 1 $ 902 $ 849 $ 826 Employee stock plans and ESOP 133 53 23 Par value of stock issued in five-for-one stock split (970) - ---------------------------------------------------------------------------------------------------------------------- Balance, Dec. 31 $ 65 $ 902 $ 849 - ---------------------------------------------------------------------------------------------------------------------- TREASURY STOCK: Balance, Jan. 1 $(2,550) $(2,744) $(2,348) Shares purchased (8,244,500 shares in 1996 and 30,850,080 shares in 1994) (253) (478) Net shares issued under employee stock plans (15,269,164 shares in 1996; 19,675,660 shares in 1995; and 8,647,650 shares in 1994) 142 194 82 - ---------------------------------------------------------------------------------------------------------------------- Balance, Dec. 31 $(2,661) $(2,550) $(2,744) - ---------------------------------------------------------------------------------------------------------------------- RESERVE FOR ESOP DEBT RETIREMENT: Balance, Jan. 1 $ (181) $ (199) $ (218) Allocation of ESOP shares 7 18 19 - ---------------------------------------------------------------------------------------------------------------------- Balance, Dec. 31 $ (174) $ (181) $ (199) - ---------------------------------------------------------------------------------------------------------------------- UNREALIZED INVESTMENT HOLDING GAIN: Balance, Jan. 1 $ 34 $ 19 $ 15 Net change in market value (23) 15 4 - ---------------------------------------------------------------------------------------------------------------------- Balance, Dec. 31 $ 11 $ 34 $ 19 - ---------------------------------------------------------------------------------------------------------------------- ACCUMULATED CURRENCY ADJUSTMENT: Balance, Jan. 1 $ 101 $ 33 $ (59) Translation adjustments (91) 68 92 - ---------------------------------------------------------------------------------------------------------------------- Balance, Dec. 31 $ 10 $ 101 $ 33 - ---------------------------------------------------------------------------------------------------------------------- REINVESTED EARNINGS: Balance, Jan. 1 $ 5,097 $ 4,661 $ 4,325 Net income 385 739 622 Dividends (net of ESOP tax benefits) (342) (303) (286) Par value of stock issued in five-for-one stock split (345) - ---------------------------------------------------------------------------------------------------------------------- Balance, Dec. 31 $ 4,795 $ 5,097 $ 4,661 - ---------------------------------------------------------------------------------------------------------------------- The above statement should be read in conjunction with pages 50 - 61 of this report. ESOP stands for Employee Stock Ownership Plan. Adjusted for the 1996 five-for-one common stock split. Key Financial Statistics 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------------- Stock Price High $ 43-1/4 $ 25 $ 17-3/8 Low 23 13-3/4 13-3/8 Year-End 38-7/8 24-1/2 14-1/8 - ---------------------------------------------------------------------------------------------------------------------- Per Share Dividends .588 .540 .494 Shareowners' Equity 6.31 6.46 5.29 - ---------------------------------------------------------------------------------------------------------------------- Average Daily Share Trading Volume (thousands of shares) 1,052 1,710 1,880 - ---------------------------------------------------------------------------------------------------------------------- Based on daily reported high and low stock prices.
1996 Monsanto Annual Report 49 26 Notes to Financial Statements Where applicable, per share amounts and the number of shares have been restated to reflect the May 1996 five-for-one common stock split effected in the form of a stock dividend. 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 1996 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. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and that affect revenues and expenses during the period reported. Estimates are adjusted when necessary to reflect actual experience. Significant estimates are used when accounting for restructuring reserves, environmental reserves, self-insurance reserves, employee benefit plans, asset impairments, and contingencies. 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, 1996, Monsanto had currency forward contracts to purchase $102 million and to sell $226 million and purchased currency option contracts to sell $87 million of other currencies, principally the Belgian franc, Japanese yen, German mark, Brazilian real and British pound sterling. Gains and losses on contracts that are designated and effective as hedges are deferred and are included in the recorded value of the transaction being hedged. Net deferred hedging losses as of Dec. 31, 1996, 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 1996, the board of directors approved a plan to spin off the company's chemical businesses to the shareowners. Under the spinoff, each Monsanto shareowner will receive a pro rata share of the voting common stock of the chemical businesses in a special dividend. The chemical businesses will become a separately traded, publicly held company. The spinoff is subject to several conditions, including shareowner approval. The company has filed a request for a ruling from the U.S. Internal Revenue Service that this transaction would be free from federal income taxes. Upon receipt of shareowner approval, the results from these businesses will be reported as a discontinued operation. In December 1996, the company recorded pretax restructuring and other special charges totaling $716 million ($500 million aftertax) to cover the exit costs incurred to separate the chemical businesses prior to shareowner approval; and the costs associated with the closure or rationalization of certain facilities, asset 50 1996 Monsanto Annual Report 27 Notes to Financial Statements write-offs, and work force reductions. Approximately 2,500 positions are expected to be eliminated by these actions. Included in these charges were aftertax amounts for asset impairments totaling $73 million. These write-offs were necessary primarily because of excess production capacity. Asset values were written down to their discounted cash values, using appropriate discount rates. 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 covered the costs of work force reductions, business consolidations, facility closures, and the exit from nonstrategic businesses and facilities. This plan was substantially completed by the end of 1996 and reduced employment by approximately 470 people. 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 reducing the work force by approximately 120 people and for special termination benefits for approximately 300 people who transferred from Monsanto to the joint venture. The charge for these actions was recorded in the first quarter of 1995. 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. The components of the pretax expense (income) related to the restructuring programs and the other actions were:
1996 1995 1994 - ------------------------------------------------------------------------------------- Cost of employee reductions $412 $ 62 $ 68 Shutdown and consolidation of various facilities and departments 90 107 (25) Asset impairments 107 Insurance-related settlement (income) (92) Litigation settlement 41 Joint venture integration costs 40 Exit costs 84 Other costs (income) 23 (20) (22) Gains on business sales (189) (14) - ------------------------------------------------------------------------------------- Total $716 $ (51) $ 7 - -------------------------------------------------------------------------------------
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, 1996, was $810 million. It is earmarked primarily for work force reduction costs, asset impairments, and the costs associated with the shutdown and consolidation of various facilities and departments. Management believes that the balance of these reserves as of Dec. 31, 1996, is adequate for completion of those activities. Restructuring actions during the last three years have reduced these liabilities by approximately $600 million. Approximately two-thirds of these reductions were recorded for write-offs and expenditures related to the termination or sale of nonstrategic products and facilities. The remaining reductions were primarily related to the cost of work force reduction programs, most of which have been completed. 1996 Monsanto Annual Report 51 28 Notes to Financial Statements 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:
1996 1995 1994 - ------------------------------------------------------------------------------------------- Net sales $ (20) Cost of goods sold $ 84 (11) Amortization of intangible assets 23 Restructuring expenses and other special charges -- net 632 156 $ 40 - ------------------------------------------------------------------------------------------- Decrease in operating income 739 125 40 Interest income (33) Gain on sale of styrenics plastics business (189) Other (income) expense -- net (23) 13 - ------------------------------------------------------------------------------------------- Total decrease (increase) in income before income taxes $716 $ (51) $ 7 - ------------------------------------------------------------------------------------------- In 1996, other expense included reversals of restructuring reserves that were no longer required, Monsanto's share of 1996 restructuring actions undertaken by the Flexsys joint venture, and minority interest associated with restructuring and other unusual items recorded by Calgene Inc. In 1995, other expense reflected Monsanto's share of 1995 restructuring actions undertaken by the Flexsys joint venture.
Net income decreased by $500 million, or $0.84 per share, in 1996; was increased by $11 million, or $0.02 per share, in 1995; and was reduced by $1 million, or less than $0.01 per share, in 1994 because of these restructurings and unusual items. Principal Acquisitions and Divestitures In February 1997, the company acquired the Asgrow Agronomics seed business from Empresas La Moderna S.A. for $240 million. In January 1997, Monsanto announced that it had reached separate agreements to acquire Holden's Foundation Seeds Inc., the world's leading foundation seed corn company, and Corn States Hybrid Service Inc. and Corn States International S.a.r.l., the exclusive worldwide marketing and sales representatives for Holden's products. The total costs of these acquisitions will be up to $1.02 billion. It is anticipated that one-time charges associated with acquired research will be recorded in conjunction with these acquisitions. In March 1996, Monsanto acquired significant equity positions in Calgene Inc. and DeKalb Genetics Corp. In November 1996, Monsanto acquired a controlling interest in Calgene. This gave Monsanto the right to nominate five of the nine authorized directors on Calgene's board. The combined investment in these plant-science businesses totaled approximately $340 million. In May 1996, Monsanto acquired the plant-science assets of Agracetus from W.R. Grace & Co. for approximately $150 million. In December 1995, Monsanto sold its worldwide styrenics plastics business. In a separate but related transaction, Monsanto sold 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 aftertax 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 February 1995, Monsanto completed its acquisition of the worldwide business of Kelco, the specialty chemicals division of Merck & Co. Inc., for approximately $1.062 billion. The acquisition included total assets with a fair value of $1.172 billion and liabilities of $110 million. The excess of the purchase price over the estimated fair value of 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 year ended Dec. 31, 1994, would not have been significantly different if the acquisition had occurred at the beginning of that year. 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 since that date has been reflected in "Other income (expense) -- net" in the Statement of Consolidated Income. Certain integration costs that were incurred by Monsanto upon the formation of the joint venture are more fully described in "Restructuring and Other Actions." 52 1996 Monsanto Annual Report 29 Notes to Financial Statements Depreciation and Amortization
1996 1995 1994 - ------------------------------------------------------------------------------------------- Depreciation $434 $459 $442 Amortization of intangible assets 128 119 81 Obsolescence 28 20 38 - ------------------------------------------------------------------------------------------- Total $590 $598 $561 - -------------------------------------------------------------------------------------------
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. In 1996, total amortization of intangible assets reflected in the Statement of Consolidated Income includes $23 million of charges for asset impairments. Intangible assets are recorded at cost less accumulated amortization. The components of intangible assets and their estimated remaining useful lives were:
Estimated Remaining Life 1996 1995 - ------------------------------------------------------------------------------------------- Goodwill 24 $1,517 $1,370 Patents 7 70 81 Other intangible assets 12 578 513 - ------------------------------------------------------------------------------------------- Total $2,165 $1,964 - ------------------------------------------------------------------------------------------- Weighted average, in years, as of Dec. 31, 1996.
Goodwill and other intangible assets increased in 1996, primarily because of the Calgene and Agracetus acquisitions. 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 classified as available-for-sale securities, and 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:
1996 1995 - ------------------------------------------------------------------------------------------- Aggregate fair value $80 $163 Gross unrealized holding: Gains 31 63 Losses 11 7 - -------------------------------------------------------------------------------------------
In 1996, proceeds and realized gains from sales of available-for-sale securities were $80 million and $33 million, respectively. Debt securities held are recorded at amortized cost, because the company has the ability and intent to hold these securities to their maturity date. Most of these securities mature in less than five years. As of Dec. 31, 1996 and 1995, the total amortized cost of these securities was $150 million and $272 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, 1996) is determined by using the last-in, first-out (LIFO) method, which generally reflects the effects of inflation or deflation on cost of goods sold sooner than other inventory cost methods. The cost of other inventories generally is determined by using the first-in, first-out (FIFO) method. The components of inventories were:
1996 1995 - ------------------------------------------------------------------------------------------- Finished goods $ 888 $ 874 Goods in process 334 305 Raw materials and supplies 461 434 - ------------------------------------------------------------------------------------------- Inventories, at FIFO cost 1,683 1,613 Excess of FIFO over LIFO cost (207) (245) - ------------------------------------------------------------------------------------------- Total $1,476 $1,368 - -------------------------------------------------------------------------------------------
Inventories at FIFO approximate current cost. The effect of 1995 LIFO inventory liquidations was primarily related to the sale of the styrenics plastics business and totaled $24 million. It was included in the gain on the sale of the styrenics plastics business. 1996 Monsanto Annual Report 53 30 Notes to Financial Statements Income Taxes The components of income before income taxes were:
1996 1995 1994 - ------------------------------------------------------------------------------------------- United States $285 $ 760 $447 Outside United States 255 327 448 - ------------------------------------------------------------------------------------------- Total $540 $1,087 $895 - -------------------------------------------------------------------------------------------
The components of income tax expense charged to operations were:
1996 1995 1994 - ------------------------------------------------------------------------------------------- Current: U.S. federal $ 61 $ 288 $118 U.S. state 17 19 17 Outside United States 122 121 94 - ------------------------------------------------------------------------------------------- 200 428 229 - ------------------------------------------------------------------------------------------- Deferred: U.S. federal (4) (80) 2 U.S. state (7) 9 3 Outside United States (34) (9) 39 - ------------------------------------------------------------------------------------------- (45) (80) 44 - ------------------------------------------------------------------------------------------- Total $155 $ 348 $273 - -------------------------------------------------------------------------------------------
Factors causing Monsanto's effective tax rate to differ from the U.S. federal statutory rate were:
1996 1995 1994 - ------------------------------------------------------------------------------------------- U.S. federal statutory rate 35% 35% 35% Benefits attributable to: U.S. export earnings (7) (2) (1) Puerto Rican operations (4) (2) (2) Higher (lower) ex-U.S. rates -- -- -- Nondeductible goodwill 2 1 1 Nondeductible exit costs 6 Valuation allowances -- 1 (1) U.S. state income taxes 1 2 1 Other (4) (3) (2) - ------------------------------------------------------------------------------------------- Effective income tax rate 29% 32% 31% - -------------------------------------------------------------------------------------------
Deferred income tax balances were related to:
1996 1995 Asset Liability Asset Liability - ---------------------------------------------------------------------------------------------------------- Property $(384) $ 35 $(388) $39 Postretirement benefits 539 6 508 7 Restructuring reserves 254 (19) 130 (3) Environmental liabilities 54 65 Inventory 44 38 Other 305 28 312 42 Valuation allowances (168) (90) - ---------------------------------------------------------------------------------------------------------- Total $ 644 $ 50 $ 575 $85 - ----------------------------------------------------------------------------------------------------------
The balance in valuation allowances includes $107 million for Calgene as of Dec. 31, 1996, primarily related to net operating loss carryforwards. Monsanto cannot utilize these deferred tax assets as Calgene is not included in the company's consolidated tax return in 1996. Income taxes and remittance taxes have not been recorded on $1.1 billion 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 $139 million. Short-Term Debt and Credit Arrangements Short-term debt was:
1996 1995 - ------------------------------------------------------------------------------- Notes payable to banks $129 $ 61 Commercial paper 332 93 Bank overdrafts 112 113 Current portion of long-term debt 81 98 - ------------------------------------------------------------------------------- Total $654 $365 - ------------------------------------------------------------------------------- Weighted average interest rates of notes payable as of Dec. 31: Banks 7.7% 7.0% Commercial paper 5.5% 5.8% - ------------------------------------------------------------------------------- Includes the effect of notes in certain countries where local inflation results in high interest rates.
Monsanto had aggregate short-term loan facilities of $450 million, under which loans totaling $129 million were outstanding as of Dec. 31, 1996. Interest on these loans is related to various bank rates. Monsanto has a $1 billion credit facility, expiring in 2001, which allows the company to request that lenders increase their commitments up to an aggregate of $1.6 billion. There were no borrowings under this credit facility as of Dec. 31, 1996. This facility is used to support the issuance of commercial paper. Interest on amounts borrowed under this agreement is expected to 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. 54 1996 Monsanto Annual Report 31 Notes to Financial Statements Long-Term Debt Long-term debt (exclusive of current maturities) was:
1996 1995 - ------------------------------------------------------------------------------- Industrial revenue bond obligations, average rate in 1996 of 5.24%, due 1998 to 2028 $ 338 $ 335 Medium-term notes, rates in 1996 ranging from 8.55% to 9%, due 1998 to 2005 145 185 Commercial paper 325 425 6% notes due 2000 150 150 7.09% and 8.13% amortizing ESOP notes and debentures due 2000 and 2006, guaranteed by the company 138 150 8-7/8% debentures due 2009 99 99 5.6% yen note due 2016 88 8.7% debentures due 2021 100 100 8.2% debentures due 2025 150 150 Other 75 73 - ------------------------------------------------------------------------------- Total $1,608 $1,667 - ------------------------------------------------------------------------------- $150 million swapped to an effective rate of 8.6 percent through February 1996. ESOP stands for Employee Stock Ownership Plan.
Maturities and sinking-fund requirements on long-term debt are $81 million in 1997, $81 million in 1998, $77 million in 1999, $207 million in 2000, and $50 million in 2001. Commercial paper balances of $325 million and $425 million as of Dec. 31, 1996 and 1995, respectively, have been classified as long-term debt. Monsanto has the ability and intent to renew these obligations beyond 1997. 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, 1996, Monsanto was party to interest-rate swap agreements with an aggregate notional principal amount of $165 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. Fair Values of Financial Instruments The estimated fair values of Monsanto's financial instruments were:
1996 1995 - ---------------------------------------------------------------------------------------------------- Recorded Fair Recorded Fair Amount Value Amount Value - ---------------------------------------------------------------------------------------------------- Assets: Investments in securities and other assets $ 210 $ 229 $ 378 $ 433 Liabilities: Currency swaps -- 1 1 4 Interest-rate swaps 1 12 5 19 Long-term debt 1,608 1,681 1,667 1,781 - ----------------------------------------------------------------------------------------------------
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, 1996. 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 were:
1996 1995 1994 - ------------------------------------------------------------------------------- Service cost for benefits earned during the year $ 83 $ 70 $ 75 Interest cost on benefit obligation 287 291 269 Assumed return on plan assets (322) (326) (317) Amortization of unrecognized net (gain) loss 9 (25) (12) - ------------------------------------------------------------------------------- Total $ 57 $ 10 $ 15 - ------------------------------------------------------------------------------- Actual returns (losses) on plan assets were $558 million, $671 million and $(142) million in 1996, 1995 and 1994, respectively.
1996 Monsanto Annual Report 55 32 Notes to Financial Statements 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:
1996 1995 1994 - ------------------------------------------------------------------------------- Discount rate 7.50% 7.25% 8.50% 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% 4.50% 5.00% - -------------------------------------------------------------------------------
The funded status of Monsanto's pension plans at year-end was:
1996 1995 - ------------------------------------------------------------------------------- Plan assets at fair value $3,817 $3,690 - ------------------------------------------------------------------------------- Actuarial present value of plan benefits: Vested $3,495 $3,457 Nonvested 154 145 - ------------------------------------------------------------------------------- Accumulated benefit obligation 3,649 3,602 Effect of projected future salary increases 377 385 - ------------------------------------------------------------------------------- Projected benefit obligation $4,026 $3,987 - ------------------------------------------------------------------------------- Deficiency of plan assets over projected benefit obligation $ (209) $ (297) Less: Unrecognized initial net gain 94 119 Unrecognized prior service costs (264) (192) Unrecognized subsequent net gain (loss) 241 (5) - ------------------------------------------------------------------------------- Accrued net pension liability $ 280 $ 219 - ------------------------------------------------------------------------------- Included $228 million in 1996 and $204 million in 1995 for unfunded plans. Included $138 million in 1996 and $152 million in 1995 for unfunded plans.
The accrued net pension liability was included in: Postretirement liabilities $348 $277 Less other assets (68) (58) - ------------------------------------------------------------------------------- Accrued net pension liability $280 $219 - -------------------------------------------------------------------------------
Included in the preceding table are plan assets and projected benefit obligations for the principal U.S. plans of approximately $3.327 billion and $3.264 billion, respectively, as of Dec. 31, 1996. Plan assets consist principally of common stocks and U.S. government and corporate obligations. Contributions to these plans were neither required nor made in 1996, 1995 and 1994 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:
1996 1995 1994 - ------------------------------------------------------------------------------- Service cost for benefits earned during the year $ 25 $ 21 $ 23 Interest cost on benefit obligation 88 94 87 Amortization of unrecognized net (gain) loss 2 (2) 7 - ------------------------------------------------------------------------------- Total $115 $113 $117 - -------------------------------------------------------------------------------
Postretirement costs are determined by using the preceding year-end rate assumptions. Assumptions used as of Dec. 31 for the principal plans were:
1996 1995 1994 - ------------------------------------------------------------------------------- Discount rate 7.50% 7.25% 8.50% Initial trend rate for health care costs 8.00% 9.00% 11.50% Ultimate trend rate for health care costs 5.00% 5.00% 5.50% - ------------------------------------------------------------------------------- The initial trend rate for health care costs declines by 1 percent per year to 5 percent for years after the year 2001.
A 1 percent increase in the assumed trend rate for health care costs would have increased the cost of 1996 postretirement health care benefits by $4 million and the accumulated benefit obligation by $48 million as of Dec. 31, 1996. 56 1996 Monsanto Annual Report 33 Notes to Financial Statements As of Dec. 31, the status of Monsanto's postretirement health care and life insurance benefit plans, and employee disability benefit plans was:
1996 1995 - ------------------------------------------------------------------------------- Accumulated benefit obligation: Retirees $ 938 $1,006 Eligible active employees 60 52 Other active employees 251 213 - ------------------------------------------------------------------------------- Total $1,249 $1,271 - ------------------------------------------------------------------------------- Unrecognized benefits from prior service 27 34 Unrecognized subsequent net loss (28) (81) - ------------------------------------------------------------------------------- Accrued liability $1,248 $1,224 - ------------------------------------------------------------------------------- The accrued liability was included in: Miscellaneous accruals $ 88 $ 86 Postretirement liabilities 1,160 1,138 - ------------------------------------------------------------------------------- Accrued liability $1,248 $1,224 - -------------------------------------------------------------------------------
The assumptions used to compute the accumulated benefit obligation of the principal plans were changed as of Dec. 31, 1996. That resulted in a decrease of approximately $28 million in the obligation. Employee Savings Plans For some employee savings plans, employee contributions are matched in part by Monsanto. The value of these contributions for such plans was $30 million in each of the years 1996, 1995 and 1994. Monsanto has established an Employee Stock Ownership Plan (ESOP), which holds 18.6 million shares of Monsanto common stock as of Dec. 31, 1996. 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. A portion of the ESOP shares is allocated each year to employee savings accounts as matching contributions. In 1996, 752,515 shares were allocated to participants under the plan, leaving 12,623,080 unallocated shares as of Dec. 31, 1996. 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. Dividends on the common stock owned by the ESOP are being used to repay the ESOP borrowings, which totaled $180 million as of Dec. 31, 1996.
1996 1995 1994 - ------------------------------------------------------------------------------- Total ESOP expense $17 $26 $29 Interest portion of total ESOP expense 14 16 17 Cash contribution 16 18 19 Dividends paid on ESOP shares held 11 10 9 - -------------------------------------------------------------------------------
Stock Option Plans Effective Jan. 1, 1996, Monsanto adopted Statement of Financial Accounting Standard (SFAS) No. 123, "Accounting for Stock-Based Compensation." As permitted by the standard, the company has elected to continue following the guidance of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," for measurement and recognition of stock-based transactions with employees. Accordingly, no compensation cost has been recognized for the company's option plans. Had the determination of compensation cost for these plans been based on the fair value at the grant dates for awards under these plans, consistent with the method of SFAS No. 123, the company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:
1996 1995 - ------------------------------------------------------------------------------- Net income: As reported $ 385 $ 739 Pro forma 305 721 Earnings per share: As reported $0.64 $1.27 Pro forma 0.52 1.24 - -------------------------------------------------------------------------------
The resulting compensation expense may not be representative of compensation expense to be incurred on a pro forma basis in future years. The company has two fixed option plans. Under the Management Incentive Plan of 1996, the company may grant options to key officers and management employees for up to 46,250,000 shares of common stock. Under this plan, the exercise price of each option equals not less than the fair market value of the company's stock on the date of grant, and an option's maximum term is 10 years. Options are granted at the discretion of the board of directors' Executive Compensation and Development Committee (the committee) or its delegate. Options generally vest upon the earlier of the achievement of business performance targets or upon the ninth anniversary of the option grant date. Options granted to senior management vest upon the attainment of pre-established 1996 Monsanto Annual Report 57 34 Notes to Financial Statements prices within specified time periods. Under the company's Shared Success Stock Option Plan, the majority of regular full-time and regular part-time employees of the company have been granted options on 200 shares of common stock. The maximum number of shares for which stock options may be granted under this plan totals 13,500,000. Approximately 5,246,200 options, which vest in April 1999, are outstanding under this plan. Under this plan, the exercise price of each option is determined by the committee and generally equals the market price of the company's stock on the date of grant. An option's maximum term is 10 years. The fair value of each option grant is estimated on the date of grant by using the Black-Scholes option-pricing model. The following weighted-average assumptions were used for grants in 1996 and 1995:
1996 1995 - ------------------------------------------------------------------------------- Expected dividend yield 1.5% 3.0% Expected volatility 25.0% 20.0% Risk-free interest rates 6.0% 7.1% Expected option lives (years) 4.0 4.5 - -------------------------------------------------------------------------------
A summary of the status of the company's stock option plans for the three-year period ended Dec. 31, 1996, follows:
Outstanding ------------------------------------- Weighted- Exercisable Average Shares Shares Exercise Price - ----------------------------------------------------------------------------------- Dec. 31, 1993 28,620,625 66,313,025 $10.74 - ----------------------------------------------------------------------------------- 1994: Granted 12,896,470 15.55 Exercised (9,106,225) 9.83 Expired (1,559,370) 10.02 - ----------------------------------------------------------------------------------- Dec. 31, 1994 35,842,995 68,543,900 11.75 - ----------------------------------------------------------------------------------- 1995: Granted 7,278,725 16.01 Exercised (20,135,570) 10.83 Expired (417,745) 14.12 - ----------------------------------------------------------------------------------- Dec. 31, 1995 45,383,790 55,269,310 12.63 - ----------------------------------------------------------------------------------- 1996: Granted 25,004,150 33.38 Exercised (16,327,617) 11.93 Expired (801,605) 22.59 - ----------------------------------------------------------------------------------- Dec. 31, 1996 38,362,943 63,144,238 20.90 - -----------------------------------------------------------------------------------
The weighted-average fair values of options granted during 1996 and 1995 were $6.43 and $3.99, respectively. The following tables summarize information about stock options outstanding as of Dec. 31, 1996:
Options Outstanding - -------------------------------------------------------------------------------------------------- Weighted-Average Weighted- Range of Remaining Average Exercise Prices Shares Contractual Life Exercise Price - -------------------------------------------------------------------------------------------------- $ 6 to 9 2,556,640 1.6 years $ 8.42 10 to 14 21,777,088 5.3 11.57 15 to 18 14,114,885 7.5 15.70 20 to 29 6,326,575 9.1 26.96 30 to 36 11,817,050 9.3 31.84 40 to 55 6,552,000 9.4 42.39 - -------------------------------------------------------------------------------------------------- $ 6 to 55 63,144,238 7.2 $20.90 - -------------------------------------------------------------------------------------------------- Options Exercisable - -------------------------------------------------------------------------------------------------- Weighted- Range of Average Exercise Prices Shares Exercise Price - -------------------------------------------------------------------------------------------------- $ 6 to 9 2,556,640 $ 8.42 10 to 14 21,672,088 11.56 15 to 18 14,074,715 15.70 20 to 29 59,500 20.38 - -------------------------------------------------------------------------------------------------- $ 6 to 55 38,362,943 $12.88 - --------------------------------------------------------------------------------------------------
In February 1994, Monsanto established a grantor trust and contributed 12.5 million shares of Monsanto common stock to be used to satisfy compensation and benefit arrangements and obligations, including issuance of shares upon the exercise of certain stock options. Shares held by the grantor trust are included in earnings per share calculations only after they are transferred to employees. Earnings Per Share Earnings per share were computed using the weighted average number of common shares and common share equivalents outstanding each year (598,865,032 in 1996; 580,639,360 in 1995; and 584,924,800 in 1994). Common share equivalents (17,659,844 in 1996; 13,391,325 in 1995; and 11,996,225 in 1994) 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. 58 1996 Monsanto Annual Report 35 Notes to Financial Statements Capital Stock As of Dec. 31, 1996, there were 41,407,595 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 two subsequent stock splits, for every 10 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 10 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 10 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 one share-for-every-10-rights basis. At any time prior to the acquisition of such a 20 percent position, the company can redeem each right for $0.001. 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 $90 million as of Dec. 31, 1996. Excluding the ESOP notes and debentures, Monsanto was contingently liable as a guarantor for bank loans and for discounted customers' receivables totaling approximately $172 million and $388 million as of Dec. 31, 1996 and 1995, respectively. Future minimum payments under noncancelable operating leases and unconditional inventory purchases are $161 million for 1997, $122 million for 1998, $78 million for 1999, $29 million for 2000, $20 million for 2001, and $56 million thereafter. The more significant concentrations in Monsanto's trade receivables at year-end were:
1996 1995 - ------------------------------------------------------------------------------------- U.S. agricultural product distributors $361 $257 European agricultural product distributors 156 117 Pharmaceutical distributors worldwide 399 357 Customers in the former Soviet Union 46 21 - -------------------------------------------------------------------------------------
Management does not anticipate losses on its trade receivables in excess of established allowances. Costs for remediation of waste disposal sites are accrued in the accounting period in which the responsibility is established and when the cost is estimable. Monsanto's Statement of Consolidated Financial Position included accrued liabilities of $175 million and $210 million as of Dec. 31, 1996 and 1995, respectively, for the remediation of identified waste disposal sites. Expenditures related to remediation activities were $62 million in 1996, $74 million in 1995, and $65 million in 1994. Monsanto's future remediation expenses for waste disposal sites are affected by a number of uncertainties, including, but not limited to, the method and extent of remediation, the percentage of material attributable to Monsanto at the sites relative to that attributable to other parties, and the financial capabilities of the other potentially responsible parties (PRPs). Because of the uncertainties associated with remediation activities, Monsanto's potential future expenses to remediate these sites could approximate an additional $60 million. 1996 Monsanto Annual Report 59 36 Notes to Financial Statements Postclosure and remediation costs for hazardous and other waste facilities at operating locations are accrued over the estimated life of the facility as part of its anticipated closure cost. Monsanto's estimated closure costs for these facilities could reach approximately $75 million based upon existing technology and currently available information. Uncertainties related to these costs include evolving government standards, the method and extent of remediation, and future changes in technology. In October 1996, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities," which is effective for Monsanto in 1997. SOP 96-1 establishes authoritative guidance regarding the recognition, measurement and disclosure of environmental remediation liabilities. The preliminary estimate of the one-time charge resulting from the adoption of this statement is in the range of $20 million to $25 million aftertax. 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. Although the results of litigation cannot be predicted with certainty, management's belief, based upon the advice of company counsel, is that the final outcome of such litigation will not have a material adverse effect on Monsanto's consolidated financial position, profitability or liquidity in any one year, as applicable. Supplemental Data Supplemental income statement data were:
1996 1995 1994 - ------------------------------------------------------------------------------------------- Raw material and energy costs $2,178 $2,265 $2,375 Employee compensation and benefits 2,184 2,283 2,193 Current income and other taxes 491 681 477 Rent expense 140 133 124 - ------------------------------------------------------------------------------------------- Technological expenses: Research and development 728 658 609 Engineering, commercial development and patent 60 55 65 - ------------------------------------------------------------------------------------------- Total technological expenses 788 713 674 - ------------------------------------------------------------------------------------------- Interest expense: Total interest cost 185 201 141 Less capitalized interest (14) (11) (10) - ------------------------------------------------------------------------------------------- Net interest expense 171 190 131 - ------------------------------------------------------------------------------------------- Currency losses including equity in affiliates' currency gains and losses 8 9 23 - -------------------------------------------------------------------------------------------
Segment Information Certain segment data and geographic data for 1996, 1995 and 1994 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. 60 1996 Monsanto Annual Report 37 Notes to Financial Statements Quarterly Data -- Unaudited
First Second Third Fourth Total Quarter Quarter Quarter Quarter Year - ---------------------------------------------------------------------------------------------------------- Net Sales - ---------------------------------------------------------------------------------------------------------- 1996 $2,304 $2,579 $2,176 $2,203 $9,262 1995 2,318 2,482 2,048 2,114 8,962 1994 2,001 2,269 1,912 2,090 8,272 - ---------------------------------------------------------------------------------------------------------- Gross Profit - ---------------------------------------------------------------------------------------------------------- 1996 1,117 1,283 1,028 916 4,344 1995 994 1,124 868 867 3,853 1994 893 1,045 733 827 3,498 - ---------------------------------------------------------------------------------------------------------- Operating Income (Loss) - ---------------------------------------------------------------------------------------------------------- 1996 405 512 281 (601) 597 1995 361 445 224 (45) 985 1994 319 397 131 76 923 - ---------------------------------------------------------------------------------------------------------- Net Income (Loss) - ---------------------------------------------------------------------------------------------------------- 1996 260 365 170 (410) 385 1995 229 290 140 80 739 1994 194 258 116 54 622 - ---------------------------------------------------------------------------------------------------------- Earnings (Loss) per Share - ---------------------------------------------------------------------------------------------------------- 1996 0.43 0.62 0.28 (0.69) 0.64 1995 0.40 0.51 0.23 0.13 1.27 1994 0.33 0.44 0.19 0.10 1.06 - ---------------------------------------------------------------------------------------------------------- Dividends per Share - ---------------------------------------------------------------------------------------------------------- 1996 0.138 0.150 0.150 0.150 0.588 1995 0.126 0.138 0.138 0.138 0.540 1994 0.116 0.126 0.126 0.126 0.494 - ---------------------------------------------------------------------------------------------------------- Common Stock Price - ---------------------------------------------------------------------------------------------------------- 1996 - ---------------------------------------------------------------------------------------------------------- High 31-3/4 34-1/2 37-7/8 43-1/4 43-1/4 Low 23 28-1/8 26-1/8 36-1/2 23 - ---------------------------------------------------------------------------------------------------------- 1995 - ---------------------------------------------------------------------------------------------------------- High 16-1/8 18-1/4 20-7/8 25 25 Low 13-5/8 15-7/8 18 19-1/2 13-3/4 - ---------------------------------------------------------------------------------------------------------- 1994 - ---------------------------------------------------------------------------------------------------------- High 16-1/4 16-3/4 17-3/8 16-1/8 17-3/8 Low 14-1/2 14-3/4 15 13-3/8 13-3/8 - ----------------------------------------------------------------------------------------------------------
Historically, Monsanto's net income is higher during the first half of the year, primarily because of the concentration of generally more profitable sales of the Agricultural Products segment during that part of the year. Net income for the fourth quarter of 1996 included an aftertax charge of $500 million, or $0.84 per share, associated with the exit from the company's chemical businesses, the proposed spinoff and other unusual items. Net income in the first quarter of 1995 included an aftertax gain of $25 million, or $0.04 per share, for insurance-related settlement payments and an aftertax charge of $25 million, or $0.04 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 $0.06 per share, for the receipt of settlement payments related to environmental insurance litigation, and an aftertax charge of $25 million, or $0.04 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 $0.02 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 $0.22 per share, for restructuring actions and an aftertax gain of $116 million, or $0.20 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 $0.04 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 $0.09 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 $0.06 per share, from the reversal of excess restructuring reserves from prior years. 1996 Monsanto Annual Report 61 38 Financial Summary
(Dollars in millions, except per share) 1996 1995 1994 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------- Operating Results Net Sales $ 9,262 $ 8,962 $ 8,272 $ 7,902 $ 7,763 $ 7,936 Gross Profit 4,344 3,853 3,498 3,338 3,053 3,417 As a Percent of Sales 47% 43% 42% 42% 39% 43% Operating Income 597 985 923 810 58 475 As a Percent of Net Sales 6% 11% 11% 10% 1% 6% Income (Loss) from Continuing Operations 385 739 622 494 (126) 238 As a Percent of Net Sales 4% 8% 8% 6% (2)% 3% Income from Discontinued Operations 578 58 Cumulative Effect of Accounting Changes (540) Net Income (Loss) 385 739 622 494 (88) 296 Return on Shareowners' Equity 10.4% 22.1% 21.4% 16.9% (2.6)% 7.6% - ---------------------------------------------------------------------------------------------------------------------------- Earnings per Share Income (Loss) from Continuing Operations $ 0.64 $ 1.27 $ 1.06 $ 0.82 $ (0.20) $ 0.37 Net Income (Loss) 0.64 1.27 1.06 0.82 (0.14) 0.47 - ---------------------------------------------------------------------------------------------------------------------------- Year-End Financial Position Total Assets $11,191 $10,611 $ 8,891 $ 8,640 $ 9,085 $ 9,227 Working Capital 939 1,493 1,448 1,377 1,512 1,536 - ---------------------------------------------------------------------------------------------------------------------------- Property, Plant and Equipment: Gross $ 7,588 $ 7,237 $ 7,555 $ 7,382 $ 7,602 $ 7,510 Net 3,013 2,832 2,817 2,802 3,005 3,191 - ---------------------------------------------------------------------------------------------------------------------------- Long-Term Debt $ 1,608 $ 1,667 $ 1,405 $ 1,502 $ 1,423 $ 1,871 Shareowners' Equity 3,690 3,732 2,948 2,855 3,005 3,654 - ---------------------------------------------------------------------------------------------------------------------------- Current Ratio 1.3 1.5 1.6 1.6 1.6 1.7 Percent of Total Debt to Total Capitalization 38% 35% 37% 38% 36% 38% - ---------------------------------------------------------------------------------------------------------------------------- Other Data Property, Plant and Equipment Purchases $ 692 $ 500 $ 409 $ 437 $ 586 $ 554 Depreciation and Amortization 590 598 561 572 765 714 Interest Expense 171 190 131 129 169 166 Research and Development Expenses 728 658 609 626 651 610 Income Taxes 155 348 273 235 (48) 116 Cash Provided by Continuing Operations 1,203 823 1,300 1,022 912 1,180 - ---------------------------------------------------------------------------------------------------------------------------- Stock Price:<7> High $ 43-1/4 $ 25 $ 17-3/8 $ 15 $ 14-1/4 $ 15-1/4 Low 23 13-3/4 13-3/8 9-7/8 9-7/8 9-1/4 Year-End 38-7/8 24-1/2 14-1/8 14-3/4 11-5/8 13-5/8 Price/Earnings Ratio on Year-End Stock Price 60 19 13 18 -- 29 - ---------------------------------------------------------------------------------------------------------------------------- Five-Year Market Return to Shareowners 334% 298% 139% 198% 147% 182% - ---------------------------------------------------------------------------------------------------------------------------- Per Share: Dividends $ 0.588 $ 0.540 $ 0.494 $ 0.460 $ 0.440 $ 0.409 Shareowners' Equity 6.31 6.46 5.29 4.92 4.99 5.94 - ---------------------------------------------------------------------------------------------------------------------------- Shareowners (year-end) 54,828 50,745 53,694 56,601 60,074 60,152 - ---------------------------------------------------------------------------------------------------------------------------- Shares Outstanding (year-end, in millions) 584 575 560 580 600 615 - ---------------------------------------------------------------------------------------------------------------------------- Employees (year-end) 28,000 28,500 29,400 30,000 33,800 39,300 - ---------------------------------------------------------------------------------------------------------------------------- Net income for 1996 included restructuring and other special charges of $500 million, or $0.84 per share, associated with the exit from the company's chemical businesses, the proposed spinoff, and other unusual items. Net income for 1995 included net restructuring expenses and other unusual items of $105 million, or $0.18 per share, and the gain on the sale of the styrenics plastics business of $116 million, or $0.20 per share. Net income for 1994 included a net aftertax loss for restructuring and other unusual items of $1 million, or less than $0.01 per share. Net income for 1993 included a net aftertax gain for restructuring and other unusual items of $15 million, or $0.02 per share. Loss from continuing operations and net loss for 1992 included a net aftertax loss for restructuring and other unusual items of $472 million, or $0.76 per share. Net income for 1991 included net restructuring expenses of $325 million, or $0.51 per share. Per share amounts and shares outstanding were restated to reflect the May 1996 five-for-one stock split. Assumes reinvestment of quarterly dividends.
62 1996 Monsanto Annual Report 39 APPENDIX 1. In Exhibit 13 to the printed Form 10-K, the following bar graphs appear, all depicting data for 1994, 1995 and 1996: 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, "Pharmaceuticals Net Sales"; on page 38, "Pharmaceuticals Operating Measures"; on page 39, "Food Ingredients Operating Measures"; on page 41, "Chemicals Net Sales" and "Chemicals Operating Measures"; and on page 47, "Cash Provided by Operations". On page 35, a pie-chart graph entitled "1996 Net Sales" appears, depicting a percentage breakdown of Monsanto's 1996 net sales by segment. 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 indicated by special type. EX-21 4 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, 1996, except for unnamed subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.
Percentage of Voting Power Owned by Monsanto ------------- G. D. Searle & Co. (Delaware Corporation)............................................................... 100 Monsanto Europe, S.A. (Belgian Corporation)............................................................. 100 Monsanto International Holdings, Inc. (Delaware Corporation).............................................................................. 100 Monsanto International Sales Company, Inc. (Virgin Islands Corporation)........................................................................ 100 Monsanto p.l.c. (United Kingdom Corporation)............................................................ 100
24 EX-23.1 5 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, 33-53367, 333-02783, 333-02961 and 333-02963) and on Form S-3 (No. 33-60189) of our opinions dated February 28, 1997, appearing in and incorporated by reference in this annual report on Form 10-K of Monsanto Company for the year ended December 31, 1996. /S/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Saint Louis, Missouri March 24, 1997 ------------------------ EX-23.2 6 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 1996 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, 33-53367, 333-02783, 333-02961 and 333-02963) 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. /S/ R. WILLIAM IDE III R. WILLIAM IDE III General Counsel Monsanto Company Saint Louis, Missouri March 24, 1997 25 EX-24.1 7 POWER OF ATTORNEY 1 EXHIBIT 24.1 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Joan T. Bok, of Boston, Commonwealth of Massachusetts, Director of Monsanto Company (the "Company"), a Delaware corporation with its general offices in the County of St. Louis, Missouri, do by these presents make, constitute and appoint R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Registration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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 14th day of January, 1997. JOAN T. BOK -------------------------------- COMMONWEALTH OF MASSACHUSETTS ) ) SS COUNTY OF SUFFOLK ) On this 14th day of January, 1997, 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. MAHTOWIN MUNRO -------------------------------- Notary Public My Commission Expires: --------------------------------------------- Mahtowin Munro, Notary Public Commonwealth of Massachusetts U.S.A. Commission expires May 20, 1999 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 R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Registration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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 8th day of January, 1997. ROBERT M. HEYSSEL -------------------------------- STATE OF DELAWARE ) ) SS COUNTY OF SUSSEX ) On this 8th day of January, 1997, 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. R. RICHARD THOMAS -------------------------------- Notary Public My Commission Expires: 1-15-98 --------------------------------------------- R. Richard Thomas, Notary Public, Delaware Appointed 1-15-94 Term 4 Years 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 R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Registration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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 per sonally present and executing any of said documents. Witness my hand this 7th day of January, 1997. R. B. HOFFMAN -------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 7th day of January, 1997, 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. BEVERLY A. OHM -------------------------------- Notary Public My Commission Expires: 2/12/98 --------------------------------------------- 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 R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Registration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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 per sonally present and executing any of said documents. Witness my hand this 8th day of January, 1997. MICHAEL R. HOGAN -------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 8th day of January, 1997, 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 R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Registration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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 per sonally present and executing any of said documents. Witness my hand this 22nd day of January, 1997. GWENDOLYN S. KING ------------------------------- COMMONWEALTH OF PENNSYLVANIA ) ) SS COUNTY OF PHILADELPHIA ) On this 22nd day of January, 1997, 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 --------------------------------------------- Notary 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 R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Regis tration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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 15th day of January, 1997. PHILIP LEDER ------------------------------- COMMONWEALTH OF MASSACHUSETTS ) ) SS COUNTY OF SUFFOLK ) On this 15th day of January, 1997, 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. TERI BRODERICK ------------------------------- Notary Public My Commission Expires: 5/22/03 --------------------------------------------- 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 R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Regis tration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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 8th day of January, 1997. H. M. LOVE ------------------------------- Howard M. Love COMMONWEALTH OF PENNSYLVANIA ) ) SS COUNTY OF ALLEGHENY ) On this 8th day of January, 1997, 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, 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 R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Registration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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 24th day of January, 1997. FRANK A. METZ, JR. ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 24th day of January, 1997, 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. BEVERLY A. OHM ------------------------------- Notary Public My Commission Expires: 2/12/98 ------------------------------------------------- 9 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 R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Regis tration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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 24th day of January, 1997. J. F. M. PETERS ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 24th day of January, 1997, 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: 2/12/98 ------------------------------------------------- 10 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 R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Regis tration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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, 1997. NICHOLAS L. REDING ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 17th day of January, 1997, 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. 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 11 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 R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Registration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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 19th day of February, 1997. JOHN S. REED ------------------------------- STATE OF NEW YORK ) ) SS COUNTY OF NEW YORK ) On this 19th day of February, 1997, 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, 1998 12 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, John E. Robson, of San Francisco, 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 R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Registration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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 24th day of January, 1997. JOHN E. ROBSON ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 24th day of January, 1997, before me personally appeared John R. Robson, 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 -------------------------------------------- 13 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, William D. Ruckelshaus, of Medina, State of Washington, 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 R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Regis tration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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 8th day of January, 1997. WILLIAM D. RUCKELSHAUS ------------------------------- STATE OF WASHINGTON ) ) SS COUNTY OF KING ) On this 8th day of January, 1997, 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. DIANE L. HODGSON ------------------------------ Notary Public My Commission Expires: 11/12/97 ------------------------------------------------ 14 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That I, Robert B. Shapiro, of St. Louis County, State of Missouri, Principal Executive Office 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 R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Registration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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 per sonally present and executing any of said documents. Witness my hand this 13th day of January, 1997. R. B. SHAPIRO ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 13th day of January, 1997, 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. 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 15 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 R. WILLIAM IDE, III and KARL R. BARNICKOL, 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) the Registration Statement on Form S-8 and any Amendments thereto to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), covering the registration of additional securities of the Company to be issued under the Monsanto Company ERISA Parity Savings and Investment Plan and under the Monsanto Management Incentive Plan of 1996; (ii) any Amendments to Registration Statement No. 33-60189 on Form S-3, which has previously been filed with the Commission under the Act; and any Amendments to Registration Statements Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963, 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; (iii) 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 (iv) 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 or compensation 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 24th day of January, 1997. JOHN B. SLAUGHTER ------------------------------- STATE OF MISSOURI ) ) SS COUNTY OF ST. LOUIS ) On this 24th day of January, 1997, 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. BEVERLY A. OHM ------------------------------- Notary Public My Commission Expires: 2/12/98 -------------------------------------------- EX-24.2 8 CERTIFICATE AUTHORIZING FORM 10-K FILING 1 EXHIBIT 24.2 MONSANTO COMPANY CERTIFICATE ----------- I, Sonya M. Davis, 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 28, 1997, 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 R. William Ide, III and Sonya M. Davis 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 12th day of March, 1997. /s/ Sonya M. Davis --------------------------------- Sonya M. Davis Assistant Secretary SEAL EX-27 9 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, 1996, AND THE STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF DECEMBER 31, 1996. SUCH INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 1,000,000 12-MOS DEC-31-1996 DEC-31-1996 166 0 1,930 0 1,476 4,340 7,588 4,575 11,191 3,401 1,608 1,644 0 0 2,046 11,191 9,262 9,262 4,918 4,918 0 0 171 540 155 385 0 0 0 385 0.64 0 Reported net of allowances of $53
EX-99 10 COMPUTATION OF RATIOS 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, ---------------------------------------------- 1996 1995 1994 1993 1992 ---- ------ ------ ----- ----- Income (loss) from continuing operations before provision for income taxes.................................... $540 $1,087 $ 895 $ 729 $(174) Add Fixed charges........................................... 232 245 182 184 231 Less capitalized interest............................... (14) (11) (10) (12) (16) Dividends from affiliated companies..................... 14 9 2 5 5 Less equity income (add equity loss) of affiliated companies...................................... 24 (17) (21) (20) (1) ---- ------ ------ ----- ----- Income as adjusted.................................. $796 $1,313 $1,048 $ 886 $ 45 ==== ====== ====== ===== ===== Fixed charges Interest expense............................................ $171 $ 190 $ 131 $ 129 $ 169 Capitalized interest........................................ 14 11 10 12 16 Portion of rents representative of interest factor.................................................... 47 44 41 43 46 ---- ------ ------ ----- ----- Fixed charges....................................... $232 $ 245 $ 182 $ 184 $ 231 ==== ====== ====== ===== ===== Ratio of earnings to fixed charges.............................. 3.43 5.36 5.76 4.82 0.19 ==== ====== ====== ===== ===== The ratio of earnings to fixed charges was significantly affected by restructuring and other unusual items of $716 million and $699 million in 1996 and 1992, respectively. Excluding these restructurings and other unusual items, the ratio of earnings to fixed charges would have been 6.52 and 3.22 for those years, respectively. The effect of restructuring and other unusual items for the years 1993, 1994, and 1995 did not significantly affect the ratio.
26 -----END PRIVACY-ENHANCED MESSAGE-----