Monument Circle Acquisition Corp (MON)

[DewDiligence]

Monsanto Reports FY2Q11 Results

[Results for the fiscal quarter ending 2/28/11 were uneventful and in-line with prior guidance; however, investors were evidently expecting MON to *raise* EPS guidance for the fiscal year and, when this didn’t happen, the stock sold off about 5%.

As I’ve previously noted, many investors seem to think there’s a direct relationship between crop prices and MON’s seed prices; there isn’t, at least in the short run, but sky-high crop prices are presumably the reason investors expected more from this quarter than they got. Nonetheless, even after the recent sell-off, the stock is doing ok when you consider that it’s up more than 50% from its mid-2010 low.

There are no further annotations in this PR because it’s all self-explanatory and consistent with the prior non-GAAP EPS guidance of $2.72-2.82 for the fiscal year and 13-17% average annual EPS growth during the next 5 years.

I’ve included image files below for some, but not all, of the financial tables in the PR; among those included are the reconciliations from non-GAAP to GAAP. Webcast slides (17 pages) are at: http://www.monsanto.com/investors/Documents/2011/04-06-11.pdf .]

http://monsanto.mediaroom.com/index.php?s=43&item=938

›Company Confirms Full-Year Ongoing Earnings Per Share Guidance, Raises Free Cash Flow Expectation

April 6, 2011, 8:00 am EDT

ST. LOUIS, April 6, 2011 /PRNewswire/ -- With half its fiscal year complete, Monsanto Company (NYSE: MON ) today said a solid sales season for its U.S. seeds and traits business and disciplined approach to spending have positioned the company to realize its mid-teens earnings growth opportunity this year and set a strong foundation for coming seasons. In reporting its earnings results for the quarter ending Feb. 28, 2011, the company highlighted performance tracking with projections in both the seeds and genomics and agricultural productivity segments that affirms its full-year ongoing earnings per share guidance. The company also increased its free cash flow guidance for the full-year, driven by better than expected working-capital management and a strong economic climate in agriculture.





"We came into this year with an operational plan built around creating value for our customers," said Hugh Grant, chairman, president and chief executive officer for Monsanto. "It was a plan that was designed for balanced growth – across crops, across geographies and through a combination of mix and volume improvements. We exist to serve our farmer customers, and it is rewarding to see this plan is resonating with them. Given the tempo of the year, we are where we should be, and we have the right pieces and the right execution to feel very good that mid-teens earnings growth in 2011 is on track."

Results of Operations

Net sales increased $239 million, or 6 percent, in the three-month comparison driven by volume in both the seeds and genomics and agricultural productivity segments. Net income in the second quarter was $1 billion.

Gross profit rose 10 percent in the quarter to $2.3 billion, with margins higher due to cost improvements. For the first six months, gross profit is up 10 percent or $288 million.

Operating expenses were up $2 million in the second quarter compared to the prior year. In the three-month comparison, selling, general and administrative (SG&A) expenses decreased 2 percent. R&D expenses increased as the company continues to manage more projects in advanced pipeline phases.

Earnings per share (EPS) for the second quarter was $1.88 on an as-reported basis, and $1.87 on an ongoing basis. EPS for the first six months of fiscal year 2011 was $1.88 on an as-reported basis, and $1.89 on an ongoing basis. (For a reconciliation of EPS to ongoing EPS see page 1).

Cash Flow

The second quarter saw a continuation of the strong start to the year. For the first half of fiscal year 2011, cash flow from operations was a source of $1.4 billion compared to $256 million in the first half last year. Net cash required by investing activities for the first half of fiscal year 2011 was $524 million, compared to $345 million for the same period of fiscal year 2010.

Net cash required by financing activities for the first half of 2011 was $668 million, compared to net cash required of $259 million for the same period of fiscal year 2010. The company continues to make progress on its current $1 billion, three-year share repurchase authorization, spending $114 million on repurchases in the second quarter for a total purchase of $381 million for the first half of the fiscal year.

Free cash flow was a source of $917 million for the first half of fiscal year 2011, compared to a use of $89 million for the first half of fiscal year 2010. (For a reconciliation of free cash flow, see note 1.)

Outlook

The company affirmed its previously announced ongoing EPS guidance and raised its full-year free cash flow guidance for fiscal year 2011 to the range of $900 million to $1.1 billion. The company expects net cash provided by operating activities to be $1.8 billion to $2.1 billion, and net cash required by investing activities to be approximately $900 million to $1 billion for fiscal year 2011. (For a reconciliation of free cash flow, see note 1.)

The company confirmed full-year 2011 ongoing EPS guidance is in the range of $2.72 to $2.82. Full-year 2011 EPS guidance on an as-reported basis is in the range of $2.66 to $2.79. (For a reconciliation of EPS, see note 1.)



The Seeds and Genomics segment consists of the company's global seeds and related traits business.

In total, sales for Monsanto's Seeds and Genomics segment in the second quarter of fiscal 2011 increased 5 percent or $173 million, driven by global unit volume growth and a mix upgrade in the United States.

While it's early in the season, the company indicated sales are pacing to meet the mid-teens millions of U.S. acres it had expected for both its Genuity® Roundup Ready 2 Yield® soybeans and the Genuity® reduced refuge corn family this year. This brings a positive mix improvement across Monsanto's U.S. soybean and corn portfolios.

Globally, the company saw higher branded corn sales in Brazil, the United States and Europe in the quarter. In U.S. corn, the company has made significant product and pricing strategy moves, identifying lead products in each of the major geographies while making all products available across areas to meet farmers' needs. Genuity® SmartStax®, which provides the broadest spectrum of insect and weed control, is receiving strong interest in heavy rootworm areas of the Northern Corn Belt. Genuity® VT Triple PRO® and Genuity® VT Double PRO® are complementing the Genuity® SmartStax® build-out, with Genuity® VT Triple PRO® generating strong interest in the South as Genuity® VT Double PRO® does the same in areas with an established doubles market.

The cotton business also is performing well this year, with mix and volume improvements led by second-generation trait offerings and continued breeding gains. The company maintained a positive outlook for vegetables, with the gross profit decline attributed primarily to sales mix timing, which is expected to normalize over the rest of the year.




The Agricultural Productivity segment consists of the crop protection products and lawn-and-garden herbicide products.

Over the last year, the company has made fundamental changes in the crop protection business in particular as it relates to Roundup® and other glyphosate-based herbicides. With this quarter, the structural changes made to this segment are now reflected in the company's financial statements.

In our Agricultural Productivity reportable segment, the company has consolidated the Roundup® and other glyphosate-based herbicides, selective chemistry and lawn-and-garden businesses. The company made this change because the Agricultural Productivity segment now is managed as one business, and the ongoing operations of that business reflect the restructuring that is now complete.

Sales in the second quarter of fiscal 2011 for Monsanto's Agricultural Productivity segment increased 10 percent, with gross profit improvement as well as a function of volume and cost improvements primarily related to production efficiencies following the restructuring.


NOTE 1 (Reconciliation tables)


Reconciliation of EBIT to Net Income (Loss):





Reconciliation of EPS to Ongoing [non-GAAP] EPS:




Reconciliation of Free Cash Flow: Free cash flow represents the total of cash flows from operating activities and investing activities, as reflected in the Statements of Consolidated Cash Flows presented in this release. With respect to the fiscal year 2011 free cash flow guidance, Monsanto does not include any estimates or projections of Net Cash Provided (Required) by Financing Activities because in order to prepare any such estimate or projection, Monsanto would need to rely on market factors and conditions that are outside of its control.