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Monsanto Company Reports Operating Results (10-Q/A)

November 14, 2011 | About:
10qk

10qk

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Monsanto Company (MON) filed Amended Quarterly Report for the period ended 2010-11-30.

Monsanto Co. has a market cap of $40.16 billion; its shares were traded at around $75.1 with a P/E ratio of 25.63 and P/S ratio of 3.4. The dividend yield of Monsanto Co. stocks is 1.6%. Monsanto Co. had an annual average earning growth of 22.5% over the past 10 years. GuruFocus rated Monsanto Co. the business predictability rank of 4.5-star.

Highlight of Business Operations:

Monsanto has an agreement in the United States to sell customer receivables up to a maximum of $500 million and to service such accounts. These receivables qualify for sales treatment under the Transfers and Servicing topic of the ASC and accordingly, the proceeds are included in net cash provided by operating activities in the Statements of Consolidated Cash Flows. The gross amount of receivables sold totaled $3 million and $2 million for the first three months of fiscal years 2011 and 2010, respectively. The agreement includes recourse provisions and thus a liability was established at the time of sale that approximates fair value based upon the companys historical collection experience with such receivables and a current assessment of credit exposure. The recourse liability recorded by Monsanto was $2 million as of Nov. 30, 2010, and Aug. 31, 2010. The maximum potential amount of future payments under the recourse provisions of the agreement was $7 million as of Nov. 30, 2010. The outstanding balance of the receivables sold was $138 million and $223 million as of Nov. 30, 2010, and Aug. 31, 2010, respectively. There were delinquent loans of $2 million and $3 million as of Nov. 30, 2010, and Aug. 31, 2010, respectively.

Monsanto owns a 19 percent interest in a seed supplier that produces, conditions, and distributes corn and soybean seeds. Monsanto is accounting for this investment as an equity method investment as Monsanto has the ability to exercise significant influence over the seed supplier. As of Nov. 30, 2010, and Aug. 31, 2010, this investment is recorded in other assets in the Condensed Statements of Consolidated Financial Position at $67 million and $65 million, respectively. Monsanto purchased $69 million and $19 million of inventory from the seed supplier for the three months ended Nov. 30, 2010, and Nov. 30, 2009, respectively. There were no sales of inventory to the seed supplier for both the three months ended Nov. 30, 2010, and Nov. 30, 2009. As of Nov. 30, 2010, and Aug. 31, 2010, the amount payable to the seed supplier was $33 million and $5 million, respectively, and is recorded in accounts payable in the Condensed Statements of Consolidated Financial Position. As of Nov. 30, 2010, there were no prepayments, while the prepayment as of Aug. 31, 2010, was $7 million, included in other current assets in the Condensed Statement of Consolidated Financial Position related to inventory delivered in fiscal year 2011.

In first quarter 2008, Monsanto entered into a corn herbicide tolerance and insect control trait technologies agreement with Pioneer Hi-Bred International, Inc., a wholly-owned subsidiary of E. I. du Pont de Nemours and Company. Among its provisions, the agreement modified certain existing corn license agreements between the parties, included provisions under which the parties agreed not to assert certain intellectual property rights against each other, and granted each party the right to use certain regulatory data of the other in order to develop additional products. As a result of the new agreement which requires fixed annual payments, the company recorded a receivable and deferred revenue of $635 million in first quarter 2008. Cumulative cash receipts will be $725 million over an eight-year period. Revenue of $20 million related to this agreement was recorded in the first three months of fiscal years 2011 and 2010. As of Nov. 30, 2010, and Aug. 31, 2010, the remaining receivable balance is $406 million and $470 million, respectively. The majority of this balance is included in long-term receivables, and the current portion is included in trade receivables. As of Nov. 30, 2010, and Aug. 31, 2010, the remaining deferred revenue balance is $377 million and $397 million, respectively. The majority of this balance is included in long-term deferred revenue, and the current portion is included in deferred revenues in the Condensed Statements of Consolidated Financial Position. The interest portion of this receivable is reported in interest income and totaled $4 million for the three months ended Nov. 30, 2010, and Nov. 30, 2009.

The effects of the adjustments relating to certain customer incentive programs to our previously issued unaudited Statements of Consolidated Operations for the three months ended Nov. 30, 2010, and Nov. 30, 2009, include increases in net sales of $6 million and $7 million, increases in income tax expense of $3 million and $3 million and increases in net income of $3 million and $4 million, respectively. The effects of the adjustments to our previously issued unaudited Condensed Statement of Consolidated Financial Position as of Nov. 30, 2010, and Aug. 31, 2010, include increases in deferred tax assets of $16 million and $18 million and increases in accrued marketing programs of $43 million and $48 million, respectively.

We have an agreement in the United States to sell customer receivables up to a maximum of $500 million and to service such accounts. These receivables qualify for sales treatment under the Transfers and Servicing topic of the ASC and, accordingly, the proceeds are included in net cash provided by operating activities in the Statements of Consolidated Cash Flows. The gross amount of receivables sold totaled $3 million and $2 million for the first three months of fiscal year 2011 and 2010, respectively. The agreement includes recourse provisions and thus a liability was established at the time of sale that approximates fair value based upon our historical collection experience with such receivables and a current assessment of credit exposure. The recourse liability recorded by us was $2 million as of Nov. 30, 2010, and Aug. 31, 2010. The maximum potential amount of future payments under the recourse provisions of the agreement was $7 million as of Nov. 30, 2010. The outstanding balance of the receivables sold was $138 million and $223 million as of Nov. 30, 2010, and Aug. 31, 2010, respectively. There were delinquent accounts of $2 million and $3 million as of Nov. 30, 2010, and Aug. 31, 2010, respectively.

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