monsanto-2012-annual-report

MONSANTO COMPANY 2012 FORM 10-K
Overview of Financial Performance (2012 compared
with 2011)
The following section discusses the significant components of
our results of operations that affected the comparison of fiscal
year 2012 with fiscal year 2011.
Net sales increased 14 percent in 2012 from 2011. Our Seeds
and Genomics segment net sales improved 14 percent, and our
Agricultural Productivity segment net sales improved 15 percent.
The following table presents the percentage changes in 2012
worldwide net sales by segment compared with net sales in
2011, including the effect that volume, price, currency and
acquisitions had on these percentage changes:
2012 Percentage Change in Net Sales vs. 2011
Impact of
Volume Price Currency Subtotal Acquisitions (1) Net Change
Seeds and Genomics
Segment
Agricultural Productivity
7% 10% (3)% 14% — 14%
Segment 17% 2% (4)% 15% — 15%
Total Monsanto Company 10% 7% (3)% 14% — 14%
(1) See Note 4 — Business Combinations — and “Financial Condition, Liquidity and
Capital Resources” in MD&A for details of our acquisitions in fiscal years 2012 and
2011. In this presentation, acquisitions are segregated for one year from the
acquisition date.
For a more detailed discussion of the factors affecting the net
sales comparison, see the “Seeds and Genomics Segment” and
the “Agricultural Productivity Segment” sections.
Gross profit increased 16 percent, or $966 million. Total
company gross profit as a percent of net sales increased
one percentage point to 52 percent in 2012. Gross profit as a
percent of net sales for the Seeds and Genomics segment
remained consistent at 62 percent in the 12-month comparison.
Gross profit as a percent of net sales for the Agricultural
Productivity segment increased three percentage points to
27 percent in the 12-month comparison. See the “Seeds and
Genomics Segment” and “Agricultural Productivity Segment”
sections of MD&A for details.
Operating expenses increased nine percent, or $320 million,
in 2012 from 2011. Selling, general and administrative (SG&A)
expenses increased nine percent primarily because of higher
spending for marketing and administrative functions as well
as higher incentive compensation. R&D expenses increased
nine percent due to an increased investment in our product
pipeline and identified intangible impairments of $63 million. See
Note 16 — Fair Value Measurements — for further information.
As a percent of net sales, SG&A and R&D expenses decreased
one percentage point to 18 percent and 11 percent of net sales,
respectively, in 2012.
Interest expense increased 18 percent, or $29 million, in 2012
primarily due to increased customer financing activities, as well
as interest expense related to our April 2011 bond issuance.
Other expense — net was $46 million in 2012, compared with
$40 million in 2011. The current year balance is due to a legal
settlement for claims related to a previously owned chemical
plant located in Nitro, West Virginia.
Income tax provision for 2012 increased to $901 million, an
increase of $184 million from 2011 primarily as a result of the
increase in pretax income from continuing operations. The
effective tax rate remained consistent at 30 percent in fiscal year
2012 and 2011. Fiscal year 2012 included several tax adjustments
resulting in a tax benefit of $47 million. The majority of this
benefit resulted from the favorable resolution of tax matters,
including legacy matters of $62 million, the expiration of statutes
in various jurisdictions, and favorable adjustments from the filing
of tax returns, partially offset by deferred tax adjustments and
tax reserves established in multiple jurisdictions. Fiscal year
2011 included several tax adjustments resulting in a tax benefit of
$17 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 these tax adjustments, our effective
tax rate for fiscal year 2012 would have been higher than the
2011 rate primarily driven by a shift in our earnings mix to
higher tax rate jurisdictions.
Overview of Financial Performance (2011 compared
with 2010)
The following section discusses the significant components of
our results of operations that affected the comparison of fiscal
year 2011 with fiscal year 2010.
Net sales increased 13 percent in 2011 from 2010. Our Seeds
and Genomics segment net sales improved 13 percent, and our
Agricultural Productivity segment net sales improved 13 percent.
The following table presents the percentage changes in 2011
worldwide net sales by segment compared with net sales in
2010, including the effect that volume, price, currency and
acquisitions had on these percentage changes:
2011 Percentage Change in Net Sales vs. 2010
Impact of
Volume Price Currency Subtotal Acquisitions (1) Net Change
Seeds and Genomics
Segment
Agricultural Productivity
8% 3% 2% 13% — 13%
Segment 5% 6% 2% 13% — 13%
Total Monsanto Company 7% 4% 2% 13% — 13%
(1) See Note 4 — Business Combinations — for details of our acquisitions in fiscal
years 2011 and 2010 and “Financial Condition, Liquidity and Capital Resources” in
MD&A for fiscal year 2011. In this presentation, acquisitions are segregated for one
year from the acquisition date.
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