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Monsanto Company Reports Operating Results (10-Q)

June 29, 2012 | About:
10qk

10qk

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Monsanto Company (MON) filed Quarterly Report for the period ended 2012-05-31.

Monsanto Company has a market cap of $41.85 billion; its shares were traded at around $81.81 with a P/E ratio of 22.1 and P/S ratio of 3.5. The dividend yield of Monsanto Company stocks is 1.5%. Monsanto Company had an annual average earning growth of 19.9% over the past 10 years. GuruFocus rated Monsanto Company the business predictability rank of 4-star.

Highlight of Business Operations:

Consolidated Operating Results Net sales increased $611 million, or 17 percent, in the three-month comparison and $1,831 million, or 19 percent, in the nine-month comparison. This improvement was a result of increased sales of corn seed and traits in the United States, Brazil, Europe, and Latin America, increased cotton seed and traits net sales primarily in Australia, as well as increased Agricultural Productivity net sales due to increased volume. Net income attributable to Monsanto Company in the first nine months of 2012 was $4.21 per share, compared with $3.17 per share in the first nine months of 2011.

Financial Condition, Liquidity, and Capital Resources In the first nine months of 2012, net cash provided by operating activities was $853 million, compared with $944 million in the prior-year period. This decrease was primarily due to accounts payable and other accrued liabilities, partially offset by improved earnings. Net cash required by investing activities was $542 million in first nine months of 2012 compared with $707 million in first nine months of 2011, primarily due to increased maturities of short-term investments in the current period. As a result, free cash flow improved to $311 million for the nine months ended May 31, 2012, compared with $237 million for the nine months ended May 31, 2011. For a more detailed discussion of the factors affecting the free cash flow comparison, see the Cash Flow section of the Financial Condition, Liquidity, and Capital Resources section in this MD&A.

Income tax provision was $971 million in the first nine months of 2012, an increase of $257 million from the prior-year comparable period primarily as a result of the increase in pretax income from continuing operations. The effective tax rate increased to 30 percent from 29 percent in the prior period. The first nine months of 2012 included several discrete tax adjustments resulting in a tax benefit of $65 million. The majority of this benefit resulted from the favorable resolution of tax matters, including legacy matters of $62 million, and the expiration of statutes in various jurisdictions, partially offset by deferred tax adjustments and tax reserves established in multiple jurisdictions. The first nine months of 2011 included several discrete tax adjustments resulting in a tax benefit of $21 million. The majority of this benefit resulted from the retroactive extension of the R&D credit pursuant to the enactment of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, favorable return-to-provision true-up adjustments, and the expiration of statutes in several jurisdictions, partially offset by deferred tax adjustments. Without the discrete items, our effective tax rate for the first nine months of 2012 would have still been higher than the 2011 rate, primarily driven by a shift in our projected earnings mix to higher tax rate jurisdictions.

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 $325 million and $3 million for the first nine months of fiscal years 2012 and 2011, respectively. The agreement includes recourse provisions and thus a liability is established at the time of sale that approximates fair value based upon our historical collection experience and a current assessment of credit exposure. The recourse liability recorded by us was $1 million as of May 31, 2012. There was no recourse liability recorded by us as of Aug. 31, 2011. The maximum potential amount of future payments under the recourse provisions of the agreement was $7 million as of May 31, 2012. The outstanding balance of the receivables sold was $111 million and $3 million as of May 31, 2012, and Aug. 31, 2011, respectively. There were delinquent accounts of $2 million and $3 million as of May 31, 2012, and Aug. 31, 2011, respectively.

We sell accounts receivable in the United States and European regions, both with and without recourse. These sales 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 amounts of accounts receivable sold totaled $5 million for the first nine months of fiscal years 2012 and 2011. The liability for the guarantees for sales with recourse is recorded at an amount that approximates fair value, based on our historical collection experience for the customers associated with the sale of the receivables and a current assessment of credit exposure. There was no liability balance as of May 31, 2012, or Aug. 31, 2011. There was no maximum potential amount of future payments under the recourse provisions of the agreements as of May 31, 2012. The outstanding balance of receivables sold was $4 million and $55 million as of May 31, 2012, and Aug. 31, 2011, respectively. There were no delinquent loans as of May 31, 2012, or Aug. 31, 2011.

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