Document 1042zM7aJ2b2zn8M57xD3BYmd

PLAINTIFF'S EXHIBIT MON-431 ItAIi 000970 1971 ANNUAL REPORT MONSANTO COMPANY LAMO17029 FINANCIAL HIGHLIGHTS (Dollars in millions, except per share) Net Sales............................................................ 1971 $2,087.1 1970 $1,971.6 Income: Before taxes and extraordinary charges___ After taxes: Before extraordinary charges.................... After extraordinary charges....................... $ 159.4 93.7 93.7 $ 112.9 77.9 66.6 Per Common Share: Primary earnings: Before extraordinary charges.................... Extraordinary charges................................ After extraordinary charges....................... Dividends paid............................................... Book value...................................................... $ 2.65 -- 2.65 1.80 37.16 $ 2.17 .34 1.83 1.80 36.27 Depreciation, Depletion, etc............................ - $ 186.9 $ 170.4CU Plant Additions and Replacements................ $ 205.2 $ 300.8 Employes............................................................ 59,271 62,940 Shareowners -- Common Shares.................... (1) Exclusive of $16.0 applicable to extraordinary charges. 110,490 121,399 Per Cent Increase Decrease 6 41 20 41 22 -- 45 -- 3 10 32 6 9 MAR 000971 The next annual meeting of the shareowners of the company is to be held at 2:30 p.m. Thurs day, March 23, 1972, at the company's General Offices, 800 N. Lindbergh Blvd., St. Louis County, Mo. A formal notice of the meeting, together with a proxy statement and form of proxy, is being mailed to each shareowner. LAM017030 TO THE SHAREOWNERS Earnings from operations rebounded sharply, rising 22 per cent -- from S2.17 per share in 1970 to S2.65 per share in 1971. Consolidated net sales, which increased by SI 15.5 million or 6 per cent to S2.09 billion, exceeded the S2 billion mark for the first time in the company's 70-year history. [ncome from operations was S93.7 million in 1971 and $77.9 million in 1970. However, an extraordinarycharge of SI 1.3 million in 1970 reduced that year's net income to S66.6 million or SI.83 per share. Nonrecurring charges and credits to income in 1971 were not significant. Despite weak spots in the world economy, Monsanto had 1971 sales increases in most product lines. Sales beyond U.S. borders, which amounted to $492 million in 1971, were 5 per cent above their year-earlier total of $467 million despite softening in Monsanto's European markets -- particularly those for nylon and Acrilan acrylic fiber, both of which were affected by industry price weakness. Products making strongest gains included herbi cides, man-made fibers, and plastics. On the other hand, notable sales declines occurred in detergent phosphates and silicon. Sales of phosphates fell off as the public, understandably confused by the varying viewpoints reported in the press, pondered the eutrophication problem -- which is caused by many products of nature and man, including phos phates. Declining demand for silicon reflected the combined effects of depressed sales of computers and microcircuits, two major markets for the prod uct, and better yields from the semiconductor material by Monsanto customers. Increasing sales obviously benefitted earnings. Several other factors also were major contributors to the profit advance. For example, a successful lowering of manufactur ing costs resulted in a saving of 35 cents per share. New production units employing improved tech nology and completed late in 1970 and early in 1971 helped appreciably in this achievement. In addition, important economies were instituted throughout the company's administrative, marketing and technological activities. A large part of the savings resulted from the elimination of programs of less certain long-term value and from attendant reductions in personnel. There also was a year-to-year decline in start-up costs, primarily reflecting fewer completions of new production units but also indicating that getting units into operation was less troublesome than in the prior year. The pattern of 1971 selling prices was not uniform among major product groups. Yet, the over-all price trend indicated a move toward stabilization. The full-year effect of 1970 price declines, how ever, was to push 1971 average prices lower. In fact, price erosion in 1970 w'as more damaging to 1971 results than were price reductions initiated in 1971. The product line hurt most by the carry over effect was fibers. Over-all, price declines cost the company 49 cents per share in 1971. The year-to-year increase in primary earnings of 48 cents a share is accounted for as follows: Year 1970 earnings before extraordinary charges of 34 cents a share............. Earnings a Share $2.17 Additional earnings resulting from: Change in sales volume and product mix.......... Lower manufacturing costs............................. Lower selling, adminis trative, and techno logical expenses.......... Lower start-up costs....... .... . $.58 .35 .33 .15 $1.41 Reduction in earnings caused by: Lower selling prices........ Higher raw material prices........................... .49 .13 .62 Increase in operating results.......................... .79 Other changes in earnings: Higher interest charges.. Lower investment tax credit plus other tax items............................ $.09 .27 .36 LAM017031 Higher income credits -- net................................ .05 .31 .48 Year 1971 earnings........... $2.65 Italics in the text of this Annual Report identify Monsanto's registered trademarks. MAR 000972 Monsanto's near-term outlook, like that of the entire chemical industry, depends heavily on the economy. Hopefully, an economic upswing will im prove the industry's supply-demand balance and bring about a more rational over-all price structure. In 1971, capital expenditures totalled S205.2 million--down significantly from the S300.8 million spent in 1970. Of the 1971 amount, S144.5 million or 70 per cent was spent in support of domestic opera tions. The balance was invested abroad, primarily in Europe. Major U.S. plant additions completed in 1971 included units to produce: oxo-alcohol and phthalic anhydride, both used by Monsanto in making plasticizers for a variety of flexible plastics; formal dehyde for the manufacture of Monsanto resins used in bonding, coating and industrial applications; and Lustran ABS plastics for the automotive, appliance and construction markets. In Belgium, a unit was completed to make polyvinyl butyral (PVB) resin for plastic sheet. U.S. additions scheduled for 1972 completion include units to make: styrene monomer for produc ing plastics, synthetic rubber and surface coatings; apparel-denier polyester filament; and Saflex PVB sheet, interlayer for laminated safety glass. Among European additions to be completed in 1972 are units to manufacture Saflex and Lustran, both in Belgium, and a plant to produce Acrilan acrylic fiber in West Germany. At the end of 1971, Monsanto's long-term debt of $574.0 million was $64.7 million below the yearearlier level. The decrease reflected a number of 1971 financing decisions. The company's domestic operations required no new financing in 1971. To provide greater flexibility, however, Monsanto negotiated a short-term credit facility with 16 U.S. banks in the total amount of $180 million. As a part of this program, the company retired approximately $90 million in bank notes that were scheduled to mature over the next several years. At the end of 1971, the full amount of the bank credit was available for Monsanto's use. It was necessary for the company's overseas subsidiaries to increase outstanding debt. In Belgium and West Germany, where long-term borrowing arrangements had been negotiated previously, subsid iaries made scheduled drawdowns under such loans. In addition, in July, a wholly owned subsidiary raised approximately $13 million through the public offering of a Swiss franc bond issue which was enthusiastically received. Despite the year-to-year reduction in outstanding long-term debt, interest expense rose from $32.7 million in 1970 to $38.9 million in 1971. This increase reflected the fact that the large domestic debt issue sold in mid-1970 was outstanding for all of 1971. Based on current projections, interest expense should not increase further in 1972. As currently projected, no new long-term financing should be required during 1972. The company will continue to draw down, however, under previously arranged loans in Europe to finance construction in Belgium and West Germany. Legislative and regulatory activity by government at all levels continued to have increasing impact on Monsanto's operations. The 1971 U.S. wage-price controls and dollar devaluation were among the broadest and most drastic economic moves in recent history. Their full effects on Monsanto are not yet evident. Over-all, however, they are expected to benefit the economy and, therefore, the company. Still, such actions tend to treat only symptoms. It may yet be necessary to come to grips with the basic problem of cost-push inflation, caused primarily by large wage increases unmatched by productivity increases and creating a ripple effect on the economy that benefits neither labor nor industry long-range. Monsanto has agreed with the U.S. Price Com mission that in 1972 the company will not raise its average domestic selling price more than 2 per cent above the base level set by the commission. The U.S. Revenue Act of 1971 restored the invest ment tax credit on purchases of new machinery and equipment, provided for further acceleration of depreciation and established guidelines for a new type of export incentive through the creation of domestic international sales corporations (DISC). These tax provisions should increase the level of capital expenditures by industry and serve as an added incentive for export business. If they succeed, they should improve the cost competitiveness of American industry and add to domestic employment. Monsanto, an important exporter, accordingly has established an export company in line with the new DISC provision. Environmental concerns understandably drew in creased attention in 1971. Responding to these concerns, which Monsanto of course shares, con tinued to require considerable amounts of capital and manpower. In 1971, the company pressed exhaustive testing of sodium nitrilotriacetate (NTA) in an effort to demonstrate its safety as a detergent 2 MAR 000973 LAM017032 builder. Monsanto continued its attempts to clarify for the public and for government agencies the relationship between detergent phosphates and eutrophication. The company also further reduced sales of products containing polychlorinated bi phenyl (PCB) as part of a continuing effort to keep potential contaminants out of the environment. Pollution abatement expenditures will accelerate as Monsanto does its part in meeting the require ments of a new federal law on air-pollution control and prepares to meet the standards of a federal water-quality bill which seems certain to be enacted in 1972. Meanwhile, the company continues to work for meaningful legislation and to question legislation that is emotionally or politically motivated. Although environmental matters are expected to make demands on the company for some time to come, the challenge of cleaning the environment also is expected to create certain opportunities for Monsanto or, more specifically, for wholly owned Monsanto Enviro-Chem Systems, Inc. As emphasis on recycling and resource recovery increases. Enviro-Chem's solid-waste disposal system attracts mounting interest. The system is amenable to existing recycling technology. Several municipalities are evaluating the practicability and economic benefits of the system. At the same time, EnviroChem continues to focus its technological capabilities on a number of other systems for controlling pollu tion of air and water. T-'aced by extremely high imports of man-made fiber products, the U.S. government signed agree ments with Japan, Taiwan, Korea and Hong Kong to produce moderate slowing of import growth rates. Although limitations have not been set on imports of man-made filament, staple and tow, in fiber form, companies making textiles and apparel will benefit from these agreements, and Monsanto will benefit through the relief afforded its customers. In September, Monsanto restructured itself to provide a management approach it believes to be particularly well suited to achieving corporate growth and profit goals for the '70s. The restructur ing established four worldwide operating companies within Monsanto, each headed by a managing director who sits on the Board of Directors. The new operating units are: Monsanto Commercial Products Company, Monsanto Industrial Chemicals Company, Monsanto Polymers & Petrochemicals Company and Monsanto Textiles Company. The respective managing directors are: Vice Presidents Tom K. Smith Jr., C. Preston Cunning ham John K. fck and Louis Fernandez. All four arc former general managers of at least one Monsanto division. Mr. I ek has been a Monsanto director since 1969. I he others were elected to the board at the time of the reorganization, as was Vice President Anthony J. A. Bryan, general manager of the In ternational Division. Produel responsibilities were assigned to the new companies in a way designed to serve markets most efficiently ami elfeetivciy. Each operating company has a high degree of delegated line and staff authority, affording independence and flexibility in dealing with changing market situations. The new structure enables the companies to react quickly to day-to-day problems, leaving corporate management freer to concentrate on long-term planning. Additionally, as members of Monsanto's board, managing directors are elfeetive contributors to over-all planning. In 1971. a year in which the importance of the Auricullurul Division continued to increase, the division's general manager. Edmond S. Bauer, was elected a corporate vice president. Also in 1971, the company further strengthened its financial capabili ties Kenneth N. Kcrmcs, former assistant treasurer of General foods Corporation, was elected Monsanto's treasurer; and Richard C. O'Sullivan, former vice president and controller of Textron, Inc., was eleeled the company's controller. We especially want to stress our keen awareness of the ability, spirit, loyalty and dedication of our employes. Particularly during 1971, it was obvious tlial the men and women of Monsanto were a domimml asset. Thus, we arc eager to report to iw imim'nsc oridc wc have in our people. Sincerely, C'htiirnian of the Board /'resident St. Louis l eb. JX, 1972 lAMO 17033 MAR 000974 1971 OPERATIONAL HIGHLIGHTS To aid year-to-year comparisons, the traditional product groups have been retained in preparing the sales figures in the table at the bottom of this page. In the performance review that follows, however, products are discussed under the companies to which they were assigned in the 1971 Monsanto reorganization. In future years, product categories will be realigned for reporting purposes to reflect more accurately the new structure. MONSANTO COMMERCIAL PRODUCTS COMPANY Sales of products marketed by this basically enduser-oriented Monsanto company reached S511 million, representing a year-to-year increase of 6 per cent, even though the 1970 sales base includes certain operations since discontinued. Chemicals for agriculture, sales of which rose slightly, were major contributors to the year's improved earnings. The modest sales increase occurred despite the elimination of certain products, including diammonium phosphate fertilizer, and the disposal of certain agricultural product distribution centers no longer compatible with long-range objectives. Continuing operations showed sales gains, with advances in crop protection chemicals particularly gratifying. Sales in all product lines for agriculture increased, including those fertilizers marketed in both 1970 and 1971. Use of Lasso herbicide gained strongly among growers of corn, soybeans, peanuts and cotton. Expanded clearances, permitting its use in combina tion with other weed killers, broadened the product's versatility and application. Also helping 1971 sales of Lasso were increased corn acreage, favorable weather through most of the planting season, and expectations of high crop prices. Monsanto's capac ity to produce Lasso was expanded. Other crop protection chemicals with increased sales included Ramrod herbicide (for corn and sorghum), parathion insect killers and, in Latin America and the Asia-Pacific area, Machete herbicide (for rice). The global wheat glut of 1970 carried into 1971, limiting sales of Avadex and Avadex BW wild oat killers in Australia and Canada. But both products sold well in Europe, as did Lasso and Ramrod. Gains in Eastern Europe were especially strong. Looking to expanding European markets, Monsanto established both a herbicide granulation CONSOLIDATED SALES BY PRODUCT GROUPS (Dollars in millions) 1971 Plastics, Resins and Coatings........... .$ Man-Made Fibers................................... .. Products for Agriculture..................... .. Phosphates and Detergents.............. . Intermediates, Plasticizers and Functional Fluids............................. .. Electronics and Process Controls___ .. Petroleum Products............................ . Rubber and Oil Chemicals................. .. Food Ingredients and Fine Chemicals Textile and Paper Chemicals............. Heavy Chemicals................................ Other Products.................................... 486.7 479.7 202.7 183.9 173.2 125.0 116.3 107.2 58.8 52.6 31.5 69.5 Total........................................ ..$2,087.1 1970 $ 446.6 442.9 201.6 191.6 163.8 122.5 104.3 102.4 59.2 51.3 32.7 52.7 $1,971.6 Per Cent Increase Decrease 9.0% 8.3 .5 4.0 5.7 2.0 11.5 4.7 .7 2.5 3.7 31.9 5.9% Per Cent of Total 1971 1970 23.3% 23.0 9.7 8.8 22.6% 22.5 10.2 9.7 8.3 6.0 5.6 5.2 2.8 2.5 1.5 3.3 100.0% 8.3 6.2 5.3 5.2 3.0 2.6 1.7 2.7 100.0% MAR 000975 4 LAM017034 < unit and an agricultural testing laboratory in Belgium. Sales of hybrid breeding swine by wholly owned Farmers Hybrid Companies, Inc., were adversely affected by low pork prices at the farm level. Ex panding its genetic research to cattle, Farmers Hybrid bought acreage in Oklahoma for a 2,500head research herd. Fertilizer materials accounted for less than 2 per cent of consolidated corporate sales during the year. By design, Monsanto's fertilizer operations have been cut back significantly to dispose of substantial but relatively unprofitable sales volume. This stream lining of operations, including discontinuance of diammonium phosphate fertilizer production, along with cost reductions and increasing price stability, has resulted in an improved level of profitability. In fabricated plastic products, sales of bottles for such large-volume markets as household chemicals, toiletries and pharmaceuticals were near the 1970 level. Demand slipped in the first half but rose late in the year. Selling prices strengthened somewhat. Also in 1971, Monsanto opened a bottle plant in Lima, Ohio; expanded its line of stock bottles; and introduced a line of bottle closures that are difficult for small children to remove. Sales of vending cups, margarine tubs, meat trays and packaging materials continued to gain. Product introductions included colored trays for retail marketing of fish, poultry and red meats; and an improved insulated vending cup for drinks. Other fabricated plastic products showing yearto-year sales increases included polyethylene film for agriculture and construction; and Fome-Cor insulation board, used mainly as sub-roof and sidewall sheathing for mobile homes. Continued and substantial progress was made in developing the first effective plastic bottle for car bonated beverages. In August, The Coca-Cola Com pany concluded a favorable market test spanning more than a year, during which three million"Cokes" were sold in Monsanto's 10-ounce Lopac bottles. Further progress included Monsanto's development of a 32-ounce Lopac bottle, as well as bottles con siderably lighter than earlier products and having improved shatter resistance. Additional market testing by The Coca-Cola Company involving the new bottle is scheduled for 1972. In 1971, the nonpolluting burnability and the excellent recyclability of Lopac were conclusively demonstrated. Environmental considerations are paramount in Monsanto's testing and development of these plastic containers. MAR 000976 Sales of electronic products were 11 per cent below the 1970 level. This was primarily due to softness in computer and microelectronics markets, which hurt sales of silicon for semiconductors, integrated circuits and semiconductor memories. Achievement of better manufacturing yields from silicon by Monsanto customers also contributed to the decline. Sales of III-V electronic materials gained, however, as did sales of solid-state light emitters and related products. In 1971, Monsanto became the first company to introduce light-emitting diodes in colors other than red for use in the optoelectronics industry. Wholly owned Fisher Controls Company, Inc., moved its sophisticated process control valves and related equipment in record sales volume, despite the restraining influences of reduced capital spending in many of the industries it serves. In 1971, Fisher introduced a line of advanced digital control systems and saw its previously in troduced analog process controllers continue to gain new market acceptance. Addition of the two lines enhances Fisher's capability to provide electron ic control-loop systems to meet the needs of in dustry. Late in the year, Fisher began manufacturing analog and digital control equipment in the United Kingdom for marketing there and on the Continent. Monsanto Enviro-Chem Systems, Inc., another subsidiary, completed its second full year of opera tion with new gains. Sales of its Brink mist elimina tors rose substantially. Clients for its wastewater technical study services also increased in 1971. Also in 1971, Enviro-Chem received contracts to build sewage-treatment plants in East Hartford and Rocky Hill, Conn. Its pyrolysis system for disposing of solid wastes is being considered for installation by several municipalities. The subsidiary continued as a world leader in the design and construction of sulfuric acid plants. And sales of its replacement vanadium catalyst for acid manufacture were higher than ever. MONSANTO INDUSTRIAL CHEMICALS COMPANY Modest improvement in the U.S. economy failed to produce appreciably higher demand for industrial chemicals, Monsanto's sales of which rose only slightly to $546 million in 1971, from $540 million in 1970. Total sales of phosphates and detergents dipped 4 per cent. Although sales of phosphates for foods. LAM017035 5 COMPARATIVE CONSOLIDATED SALES, INCOME AND EARNINGS A SHARE, ON A QUARTERLY BASIS (Dollars in millions, except per share) Sales: First quarter............. Second quarter......... Third quarter............ Fourth quarter.......... 1971 $ 542.3 539.8 506.0 499.0 $2,087.1 1970 $ 512.7 523.4 466.9 468.6 $1,971.6 Per Cent Increase Decrease 5.8% 3.1 8.4 6.5 5.9 Income before extraordinary charges: First quarter............. $ 30.5 Second quarter......... Third quarter............ Fourth quarter.......... 30.5 16.6 16.1 Extraordinary charges... 93.7 -- Net income........... $ 93.7 $ 33.0 27.7 11.0 6.2 77.9 11.3 $ 66.6 7.6% 10.1 50.9 159.7 20.3 -- 40.7 Primary earnings a share: Before extraordinary charges: First quarter.......... $.87 Second quarter...... .88 Third quarter......... .46 Fourth quarter....... .44 $ .95 .79 .28 .15 Extraordinary charges. 2.65 2.17 ,34"> $2.65 $1.83 (1) By quarters -- First, 5 cents; fourth, 29 cents. COMPUTATION OF EARNINGS A COMMON SHARE (In millions, except per share) 1971 Common shares: Issued.................................................. 33.1 Held in treasury.............................................. 3 Outstanding.......................................... 32.8 Income before extraordinary charges........... $93.7 Dividends on preferred shares.................... 6.4 Available for common shares...................... 87.3 1970 33.1 .3 32.8 $77.9 6.4 71.5 Adjusted to primary basis: Common shares..................................... 33.3 Income before extraordinary charges........ $88.1 Earnings a share.................................... 2.65 33.3 $72.3 2.17 Adjusted to fully diluted basis: Common shares.................................... Income before extraordinary charges........ Earnings a share................................... 36.2 $95.1 2.63 36.2 $79.2 2.17"> (1) Fully diluted earnings a share for 1970, because of the anti dilution provision of Opinion Number 15 of the Accounting Prin ciples Board, are shown in an amount not in excess of primary earnings a share. MAR 000977 dentifrices and industrial uses rose, these gains were more than offset by a 10 per cent decline in sales of detergent phosphates. To maintain its place as a major supplier to the detergent industry, Monsanto seeks effective new synthetic raw materials for laundry detergents and bar soaps. In 1971, Monsanto, in conjunction with detergent manufacturers, continued its extensive testing to qualify sodium nitrilotriacetate (NTA) as an acceptable detergent raw material. The product has been withdrawn from the market pending tests to determine its complete safety. All studies com pleted by Monsanto show NTA to be biologically and environmentally safe as an effective partial substitute for detergent phosphates. As a result of these and other tests, Monsanto hopes all doubt about the safety of NTA will be removed and the product will be cleared by the U.S. government for detergent use. Meanwhile, Monsanto believes phosphates are the safest -- especially for human beings -- and the most effective detergent builders available. The company is convinced that eutrophication will not be measur ably reduced by removal of phosphates from de tergents. The company also believes the problem is limited geographically and can be solved best with known technology in sewage-treatment plants. Monsanto completed a multimillion-dollar unit to make phosphoric acid for a variety of industrial uses in 1971. The replacement unit, most modern of its kind anywhere, implements the latest tech nology in production capability and pollution control. Demand for ACL chlorine-carrying compounds for treating swimming pools remained strong. ACL is also used in laundry bleaches, dishwashing com pounds and sanitizing agents. Sales of intermediates, plasticizers and functional fluids were up 6 per cent. Plasticizer selling prices continued soft, although sales rose. Vinyl chloride production, upon which much of Monsanto's plasticizer business depends, was relatively slow in early 1971 but turned sharply upward late in the year, indicating a resumption of more normal growth rates. Used to impart flexibility, fire-resistance and other desirable properties to plastics, Monsanto's plasti cizers continue as pacesetters in their field. New government regulations requiring fire-safe materials in automobiles and certain home furnishings are expected to help increase sales of specialty plasticizers such as Monsanto's phosphate esters. Two phosphate ester plants which went on-stream late in 1970 will LAM017036 help satisfy the expected new demand. A new unit for producing Santicizer 711 plasticizer was brought on-stream in early 1971. This largest ester unit in the United States, along with another new unit to produce linear oxo-alcohol raw materials and a new phthalic anhydride unit started up in late 1970, solidifies Monsanto's position as a leading plasticizer manufacturer. Monsanto continued phasing out certain products containing polychlorinated biphenyl (PCB). This voluntary program was in response to concern over PCB's persistence in the environment and its possible effect on certain ecosystems. In certain closed-system electrical transformers and capacitors -- components essential to power dis tribution -- no acceptable replacement is presently known. PCB products afford unique dielectric properties and an especially effective technique for protecting against fire and explosion due to possible failures in this type of equipment. The search for suitable alternate products for all current PCB applications is a high-priority Monsanto undertaking. Sales of rubber chemicals rose. Significant growth in the European rubber industry in early 1971 and an economic upturn in the United States late in the year were primary reasons for the over-all improvement. At year's end, rubber chemicals expansions neared completion in Australia and the United Kingdom. A multimillion-dollar expansion in Belgium made Monsanto the first major supplier to produce ac celerators and antidegradants for tire making both on the Continent and in the United Kingdom. The company now serves the tire industry from plants in seven countries. Sales of food ingredients and fine chemicals gained slightly. In 1971, demand for vanillin as a food ingredient rose. Use of vanillin in pharmaceutical production declined, however, as major customers worked off large inventories. The fragrance market still grows. In 1971, con struction began on a new aroma chemicals plant to provide Monsanto Flavor/Essence, Inc. (the subsidiary formerly called George Lueders & Co., Inc.) with greater fragrance capacity. Late in the year, Monsanto researchers achieved a technical breakthrough by duplicating natural processes for preparing two amino acids by direct chemical synthesis. Such acids are used in fragrances, flavors, pharmaceuticals and nutrients. In the textile and paper chemicals market, Monsanto introduced a durable fire-retardant system MAR 000978 for paper, cotton, rayon and other cellulosic ma terials. The system can be applied to the manufacture of carpets and rugs. Procedures are being developed to extend its use to children's nightwear. Monsanto also introduced a new family of latex binders based on ethylene and vinyl chloride. Such binders have applications in textiles, wall coverings, paper, paints, printing inks and industrial finishes. MONSANTO POLYMERS & PETROCHEMICALS COMPANY Sales of products marketed by this operating unit increased 8 per cent to $531 million. Gains were worldwide despite some softness in European markets late in the year. Strong gains in plastics and resins led the way to a 9 per cent over-all sales increase in the plastics product group, which also includes the fabricated products discussed earlier. Recovery of plastics growth in the United States and continued high consumption levels elsewhere helped total per formance. Prices were relatively stable. Demand for Lustran ABS plastic was up sharply. Sales of the tough, specialized plastic to makers of automobiles and appliances gained especially well. Increased 1971 housing starts and favorable new building codes helped boost use of ABS pipe. And Lustran solidified its position of leadership in plated plastic components. To meet swelling demand, Monsanto expanded its ABS capacity in the United States. A Japanese associate also increased its ABS capacity in 1971. Meanwhile, in Belgium, work continued on a unit that in 1972 will start producing ABS at an annual rate of up to 110 million pounds. Sales of Lustrex polystyrene -- used mainly in packages, housewares and' appliances -- also rose. Expansions in Argentina and France lifted MAJOR OPERATING COSTS (Dollars in millions) 1971 1970 Raw Materials-Purchased...........$563.0 $503.9 Wages and Salaries.................... 527.2 518.7 Employe Benefits...................... 73.0 71.3 Energy and Other Utilities.......... 94.5 86.9 LAM017037 7 Monsanto's total polystyrene capacity to almost one billion pounds a year. A new affiliate in Israel began work on that country's first polystyrene plant. Completion is scheduled for late in 1972. Polyethylene sales were close to the year-earlier level. New high-density grades of the plastic for producing housewares, shipping containers and packaging film were introduced. Sales of nylon plastic rose substantially, due primarily to its increased use in automotive parts. A unique, fire-retardant nylon molding resin was developed to meet increasingly stringent require ments of the appliance and electronics fields. Sales of Saflex polyvinyl butyral (PVB) sheet, used in laminated safety glass, rose as North American auto makers had a strong year-to-year improvement and experienced no major strikes. A domestic replacement unit to make PVB sheet neared com pletion at year's end. In Belgium, work continued on a 60 per cent expansion of PVB sheet capacity, and a unit to produce PVB resins came on-stream. Sales of resins for a variety of industrial uses increased. Rising domestic housing starts helped sales of phenolic resins for bonding plywood and thermal insulation. Acrylic multipolymer resins continued to be well accepted in adhesives and reprographic applications. Over-all demand for surface coating resins was higher as sales of styrene allyl alcohol for industrial coatings gained. A new unit to make the specialized resin is scheduled for 1972 start-up. Despite softness in markets for petrochemicals, sales of these basic products stayed about the same. Smooth operation of several production units in stalled in 1970 contributed to increased product availability and improved costs in 1971. Sales of methanol and acetic acid were up sharply OPERATING MARGINS As a Per Cent of Sales 1971 1970 Gross Profit............................. ..22.7% 22.6% Selling and Administrative Expenses............................. ..10.0 11.1 Technological Expenses......... ..4.1 5.0 Income Before Extraordinary Charges: Before income taxes........... ...7.6 After income taxes.............. ...4.5 5.7 4.0 MAR 000979 as new manufacturing units in Texas City completed their first full year of operation. The products are used in the production of resins, fibers and chemicals. An expanded phenol unit also operated for its first full year near Alvin, Tex. And a unit capable of turning out 150 million pounds of formaldehyde annually underwent successful start-up there. Sales of phenol -- used to make resins, pharma ceuticals and other products -- increased con siderably. In Spain, a unit was installed to supply ethylene dichloride for expanded vinyl chloride production there. These projects of a 50 per cent owned associate company represent Spain's first production of petro chemical-based vinyl chloride, used to make vinyl plastics. Sales of styrene monomer approximated their 1970 level. Work continued on Monsanto's new monomer unit in Texas City, which is to have a capacity of 1.3 billion pounds annually. When completed early in 1972, this unit will replace an older one with annual capacity of 800 million pounds. Late in the year, an affiliate in the United Kingdom put on-stream a new styrene monomer unit based on improved Monsanto technology. Sales of acrylonitrile, used chiefly to make fibers and plastics, increased. A new acrylonitrile plant in the United Kingdom helped extend Monsanto's market penetration there. In 1971. raw materials for petrochemical manu facture continued to be much more costly to U.S. producers than to producers in other countries. Re cent proposals by the U.S. government for new petro chemical feedstock import rules recognize this inequity. If adopted, these rules will enhance Monsanto's competitive position in many world markets. Demand for petroleum products stayed strong as sales increased 12 per cent. U.S. sales of gasoline increased substantially in 1971, although 1970 price boosts on retail products gave ground late in the year. Conversion of most Lion service stations to regional, independent-style market ing was completed. This style of operation, which is popular with price-oriented consumers, helped expand gasoline sales through branded outlets. Although production of crude oil and natural gas declined somewhat, higher prices increased sales revenue. Exploration for hydrocarbon reserves con tinued in several world areas. A deep well completed late in the year in west Texas added to Monsanto's natural gas reserves. However, combined oil and gas reserves declined slightly. LAM017038 MONSANTO TEXTILES COMPANY Monsanto's sales of man-made fibers amounted to S480 million, 8 per cent above the 1970 level. The improvement reflected recovery in apparel and carpet markets. Gains were particularly strong in apparel, where a sharp upturn in consumption of synthetic textiles enabled Monsanto to achieve a 19 per cent year-to-year increase in pound shipments of fiber for apparel manufacture. Domestic price erosion again had an adverse effect, as price cuts that occurred late in 1970 restricted year-to-year improvement. Yet, the 1971 trend was toward price stability. Acceptance of new fashions and restored buying confidence brought stability to markets for women's wear. Simultaneously, there was increasing accept ance of new men's fashions, particularly in leisure wear and knits. Sales of Monsanto's nylon yarns benefitted in 1971 from major gains in markets for lingerie and women's knitted outerwear. The company's position in the women's hosiery and pantyhose market was enhanced by a new textured nylon sold under Monsanto's Actionwear trademark. Acrilaii acrylic fiber gained additional popularity in the rapidly growing area of single-knit and double-knit apparel fabrics, and in yarns for hand knitting. New Acri/an fibers were well received for use in the manufacture of synthetic furs. The company's Spectran polyester fiber won increased acceptance in the men's half-hose market. And blends of Spectran and Acrilan showed considerable promise for use in double knits. Accelerated housing starts, along with improving consumer confidence, resulted in sales gains for all carpet fibers. Nylon benefitted especially from im proved market conditions, while Acrilan continued to be the preferred acrylic fiber for floor coverings. Developmental work on Cadon nylon staple fiber for durable, antistatic carpets was successfully com pleted. Cadon could become significant commercially in 1972 and beyond. In 1971, Monsanto introduced improved Acrilan acrylic carpet fibers having better flame-retardant properties in compliance with new government flammability standards. And to strengthen Monsanto's long-term position with respect to other flammability regulations covering an increasing number of textile products, the company developed a special mod- $2.00 UJ < I (0 CC UJ CL (0 (D Z z a: < ui UJ 0 z < 1 o 1967 EARNINGS PER SHARE - $2.96 1968 1969 1970 1971 EARNINGS PER SHARE - $2.65 'Before extraordinary items MAR 000980 LAM017039 9 acrylic fiber. Tests of this new fiber indicate flameretardant properties superior to those of competitive products. Potential commercial applications include children's sleepwear, blankets and drapery fabrics. The highly successful Wear-Dated program, under which the quality of apparel and certain home furnishings made from Monsanto's fibers is guaran teed, entered its second decade. The guarantee program, broadest in the textiles industry, has proven an effective precursor to company involve ment in the growing consumerism movement. In 1970, Monsanto established itself as a supplier of Elura modacrylic fiber to several manufacturers of quality hairpieces. In 1971, following a period of spectacular growth, U.S. wig sales fell off sharply. Increased imports of wigs and wig fibers from the Far East, coupled with the declining demand, adversely affected efforts to sell substantial quantities of Elura during the year. Demand for Monsanto's high-tenacity nylon tire yarn stayed strong, as nylon continued to be the preferred reinforcing material in tires for trucks, airplanes and farm vehicles. As polyester was used increasingly in automobile tires, Monsanto's new polyester tire yarn unit began supplying material to several major tire companies. There was major progress in developing advanced technology for producing nylon and polyester fila ment yarns at the plant being built in the Sand Mountain area of Alabama. Start-up there early in 1972 will mark Monsanto's first manufacture of polyester filament for apparel, fastest growing of all man-made fibers. Capacity for Acrilan was expanded in Northern Ireland. Construction began on a plant to make Acrilan in Lingen, West Germany. Scheduled for completion in late 1972, the latter unit will serve the expanding needs of the Common Market. Domestically, a unit to produce textured nylon hosiery yarn was installed at Pensacola, Fla. RESEARCH AND DEVELOPMENT In line with the company's over-all program to reduce nonmanufacturing costs, research and de velopment projects throughout Monsanto were scrutinized, and efforts were concentrated on those projects most likely to pay off in new products, new processes and improved operation of those businesses which best fit corporate objectives. The preceding discussion of operating-company activities repeatedly highlights the results of some of this effort. Expenditures for technological activities, including MA^ 000981 such activities conducted by the operating companies themselves, totalled $86.7 million in 1971, compared to $98.1 million in 1970. The 1971 figure represents 4.1 per cent of sales, compared to 5.0 per cent for the previous year. During the year, 507 U.S. patents were received, plus 1,084 from other countries. The Corporate Research Department (CRD) de voted its efforts primarily to those areas which were of interest to one or more existing businesses, but at a more fundamental level than that engaged in by the operating companies. In the area of pollution control, Monsanto's auto exhaust catalyst system is a joint effort of CRD and the New Enterprise Division (NED), which directs the company's growth into new fields. The catalyst is one of several contenders for the job of meeting exhaust standards set by the U.S. Environmental Protection Agency. NED also concentrated on three other major areas of opportunity in 1971 : man-made surfaces for sports and general use; nonwoven fabrics, and steel and other metal fibers. The division's AstroTurf recreational surfaces are already well known in the United States, Canada and Europe. In 1971, a sales force was established to increase retail penetration of the product line in 1972. Planned for 20 key areas was a " 'Round-theHome" promotional campaign aimed at the do-ityourself market. Monsanto's nonwoven fabric, Cerex spunbonded nylon, penetrated new markets in 1971. Upward price movements in cotton and jute, with which Cerex competes, are expected to benefit sales of the Monsanto product in 1972. Technical progress on Spunwire steel fiber con tinued. Concentration was on the tire market, in which large-volume use of steel by 1975 seems assured. Monsanto hopes its product will be a prime candidate for application to this field. Additionally, the New Enterprise Division sup ports long-range business development programs and includes a group building a store of basic knowledge in the area of life sciences, another field which could offer new opportunities. Technological problems of concern to both Monsanto and the U.S. government received major attention. The pollution control group at the Dayton. Ohio, laboratory of wholly owned Monsanto Re search Corporation (MRC) was in fact commended by the government for its field evaluation of instru ments for monitoring emissions from power-plant stacks. LAM017040 a * ( Additionally, in cooperation with Monsanto Enviro-Chem Systems, Inc. (also wholly owned), the research subsidiary provided baseline information on pollutant emissions in several industries, and developed new, sensitive pollution measuring tech niques and instruments. Monsanto's electronics technology was further advanced by cooperative research work by MRC in Dayton and the parent company in St. Louis. Methods were developed for producing highly refined semiconductor materials. And high-per formance solid-state devices were built for use in radars, light-emitting displays and spacecraft systems. MRC continued operating Mound Laboratory at Miamisburg, Ohio, for the U.S. Atomic Energy Commission. Components such as timers, trans ducers, detonators and radioisotopic-fueled heat sources are manufactured there. Heat sources made at Mound and launched with Apollos 14 and 15 provided power for the scientific equipment which astronauts left on the moon in 1971. And a new heat source containing a ceramic fuel form of plutonium-238 was processed for the Jupiter flyby mission scheduled for launch early in 1972. The company's engineering department continued to manage the bulk of Monsanto's capital additions program. Faced with continuing inflation and sharply rising construction costs, Monsanto con tinued to focus its engineering technology on making optimum use of capital to achieve improved manu facturing processes designed to operate at minimum cost. BUSINESS ABROAD Overseas sales increased 5 per cent despite eco nomic slowdown in Europe, where sales of $270 million were up only slightly. Larger sales increases occurred in Canada, Latin America and the AsiaPacific area. In Europe, modest gains failed to offset rising production costs and declining selling prices, es pecially in a soft fiber market. Monsanto's capital expenditures abroad amounted to $60.7 million in 1971. In Mexico, Monsanto Mexicana S.A. was merged with Resistol S.A., a Mexican chemical producer, to form Industrias Resistol S.A. The merger and resultant distribution of equities in the new company achieved Mexicanization of the former Monsanto subsidiary in compliance with Mexico's policy of limiting non-Mexican ownership of certain types of companies. Monsanto's equity in the new company is about 36 per cent. Although economic and political uncertainties pervade the international scene, the long-term out look for growth of Monsanto's businesses is favor able. Currency revaluations and export incentives should make U.S. exports more competitive. And considering the company's well established position in Europe, the emergence of an enlarged European OPERATIONS OUTSIDE THE UNITED STATES (Dollars in millions) 1971 Europe.......................................................... .................... Canada and Latin America......................... .................... Pacific and other........................................ .................... Total................................................ .................... Fibers........................................................... .................... Plastics, Resins and Coatings.................... ................ Chemicals and other.................................. .................... Total................................................ .................. Exports from the United States................. .................... Manufactured outside the United States. ................. Total................................................ ...................... $270 153 69 $492 $126 168 198 $492 $120 372 $492 Sales 1970 $265 138 64 $467 $119 154 194 $467 $120 347 $467 Gross Plant Property 1971 1970 $376 44 34 $454 $219 103 132 $454 $327 57 33 $417 $195 102 120 $417 MAR 000982 LAM017041 11 Economic Community should create additional commercial opportunities for Monsanto there. To help take advantage of existing and anticipated opportunities abroad, Monsanto's European activi ties have been reorganized in line with 1971 's corporate restructuring. International operations are now structured to serve world markets with a broad line of products, some made locally and others exported from the United States. The company's overseas manufacture continues to be sold primarily into overseas markets. This arrangement enables maximum participation in the international marketplace, while cushioning Monsanto's earnings against the effects of cyclical fluctuations among national economies. MONSANTO'S PROGRAM TO CONTROL POLLUTION In 1971, Monsanto pressed forward with con tinuing programs to combat pollution at its U.S. plants. In the United States, a total of S34.7 million was spent to control pollution. Of this amount, $12.3 million went for capital projects and $22.4 million went for operation and maintenance. Addi tional amounts were spent for pollution abatement overseas. Monsanto has a long-term commitment to help clean the environment. During the next three years, the company plans to spend $60 million on capital investments for pollution-control projects, excluding operating costs. Many new federal, state and local laws and regula tions concerning manufacturing's effects on the environment were under public discussion in 1971. Monsanto representatives continue to support pollution-control proposals that are technologically feasible and responsive to real needs. In situations where suggested laws are of questionable merit, more realistic measures are sought. In 1971, Monsanto strengthened its procedures to evaluate the environmental impact of new manu facturing processes, new products, and significant new end uses of traditional products. Positive assessments were established as prerequisites for utilization or commercialization. In a continuing effort to enhance profitability, Monsanto disposed of certain businesses and elim inated certain activities of marginal long-term value. One result was a year-to-year reduction in personnel of approximately 6 per cent. Monsanto had 59,271 employes on Dec. 31, 1971, compared to 62,940 employes a year earlier. While endeavoring to relocate employes within the company, Monsanto also organized an effective placement program to assist terminated personnel in finding positions with other organizations. More than 50 per cent of the professional employes avail ing themselves of this special program were placed with other companies during the year. Recruiting on college campuses was modified in line with reduced needs for new manpower. At the same time, Monsanto continued to maintain favor able relations with colleges and universities by providing financial support for qualified students, faculty members and departmental operations. In response to employe needs and the competitive requirements of the labor market, Monsanto in stituted new or revised employe benefit programs at several domestic and overseas locations. No provision for employes' bonus was made in 1971, nor were any bonus awards made for the year. This was also true for 1970. The company's bonus plan is based on levels of profitability which require a stated return on invested capital before any amount is set aside for bonuses. The 1970 and 1971 profit ability levels were not high enough to generate a bonus reserve. Twelve labor contracts were negotiated in the year. Work stoppages occurred in only two cases, the more serious of which was a 15-day strike at the Carondelet plant in St. Louis. Six of the new con tracts are for three-year terms; two are for two years; and the others are one-year agreements. Continuing emphasis on accident prevention helped minimize the rate of disabling injuries to Monsanto employes worldwide. At the companCs domestic locations, the frequency of disabling in juries was less than one-tenth the U.S. chemical industry average, as reported by the Bureau of Labor Statistics. MAR 000983 12 LAM017042 M ONSArv T C A, N V i ES STATEMENT OF CONSOLIDATED INCOME (Dollars in millions, except per share) Net Sales............................................................................. Year 1971_____ $2,087.1 Cost of Goods Sold............................................................. 1,614.3 Gross Profit......................................................................... 472.8 Less: Selling and administrative expenses............................. Technological expenses.................................................. Operating Profit.................................................................. 208.2 86.7 294.9 177.9 Income Charges (Credits): Interest expense.............................................................. Other -- net.................................................................... Income Before Income Taxes........................................... 38.9 (20.4) 18.5 159.4 Provision for Income Taxes: Current............................................................................. Deferred (credit).............................................................. Income Before Extraordinary Charges........................... Extraordinary Charges -- Net, Less Applicable Income Taxes of $10.6................................................................ 69.4 (3.7) 65.7 93.7 -- Net Income......................................................................... $ 93.7 Earnings a Common Share Based on Weighted Average Number of Shares Outstanding: Primary: Before extraordinary charges.................................. After extraordinary charges..................................... Fully diluted: Before extraordinary charges.................................. After extraordinary charges..................................... $2.65 2.65 2.63 2.63 The above statement should be read in conjunction with pages 17 through 20 of this report. Year 1970 $1,971.6 1,526.4 445.2 increase Decrease $ 115.5 87.9 27.6 218.9 98.1 317.0 128.2 10.7 11.4 22.1 49.7 32.7 (17.4) 15.3 112.9 6.2 3.0 3.2 46.5 35.4 (.4) 35.0 77.9 11.3 $ 66.6 34.0 3.3 30.7 15.8 11.3 $ 27.1 LAM017043 $2.17 1.83 $.48 .82 2.17 1.83 MAR 000984 .46 .80 13 MONSANTO COMPAN STATEMENT OF CONSOLIDATED FINANCIAL POSITION {Dollars in millions, except per share) ASSETS Current Assets: Cash........................................................................................ Marketable securities, at cost which approximates market Receivables, less allowances................................................ Inventories.............................................................................. Investments and Miscellaneous Assets, at Cost or Less: Investment in and advances to associates......................... Miscellaneous investments and receivables....................... Property, Plant and Equipment, at Cost: Land........................................................................................ Buildings................................................................................. Machinery and equipment.................................................... Phosphate deposits............................................................... Oil and gas properties........................................................... Less accumulated depreciation and depletion, etc........... Net property................................................................. Deferred Charges..................................................................... LIABILITIES Current Liabilities: Accounts payable and accruals........................................................... Income taxes......................................................................................... Current portion of long-term debt....................................................... Long-Term Debt -- Less Current Portion Above................................. Other Liabilities and Deferred Credits: Deferred income taxes......................................................................... Miscellaneous....................................................................................... Minority Interests in Subsidiary Companies..................... ............ Shareowners' Equity: Preferred stock -- authorized, 10,000,000 shares without par value, issuable in series; outstanding, 2,320,410 shares in 1971 and 2,313,910 shares in 1970....................................................... Common stock -- authorized, 50,000,000 shares, par value $2 each; issued, 33,155,500 shares in 1971 and 33,088,362 shares in 1970............................................................................................... Paid-in surplus...................................................................................... Retained earnings................................................................................ Less common stock in treasury, at cost (306,543 shares in 1971 and 301,741 shares in 1970).......................................................... The above statement should be read in conjunction with pages 1 7 through 20 of this report. 14 MAR 000985 December 31, 1971 $ 34.2 40.4 402.9 395.4 872.9 16.0 54.1 70.1 32.4 408.4 2,172.5 12.1 109.7 2,735.1 1,564.8 1,170.3 40.2 $2,153.5 $ 247.2 63.3 15.8 326.3 558.2 27.5 12.9 40.4 2.9 5.2 66.3 586.5 580.2 1,238.2 12.5 1,225.7 $2,153.5 December 31. 1970 $ 28.9 50.9 383.1 392.1 855.0 15.0 64.5 79.5 30.5 397.2 2,083.5 12.1 113.4 2,636.7 1,466.8 1,169.9 40.3 $2,144.7 $ 249.5 18.2 49.4 317.1 589.3 31.2 10.4 41.6 2.5 5.2 66.2 583.5 551.6 1,206.5 12.3 1,194.2 $2,144.7 LAM017044 STATEMENT OF CHANGES IN CONSOLIDATED FINANCIAL POSITION (Dollars in millions) Source of Working Capital: Income before extraordinary items..................................................................... Add -- Expenses not requiring outlay of working capital: Depreciation, depletion, etc........................................................................... Working capital provided from operations, exclusive of extraordinary items.. Extraordinary charges -- net, net of tax.............................................................. Add -- Expenses not requiring outlay of working capital: Obsolescence.................................................................................................. Working capital provided from extraordinary charges....................................... New financing: 9Vs% sinking fund debentures......................................................................... 6V2%--8V2% bank loan...................................................................................... Foreign subsidiaries........................................................................................... Revaluation of debt of foreign subsidiaries incurred prior to 1971................. Refinancing of 4%% promissory notes............................................................... Property disposals, etc.......................................................................................... Decrease in investments and miscellaneous assets......................................... Shares issued under option plans....................................................................... Application of Working Capital: Plant additions and replacements...................................................................... Dividends on preferred shares............................................................................. Dividends on common shares.............................................................................. Reduction in long-term debt................................................................................ Increase (decrease) in deferred charges............................................................. Decrease in other liabilities.................................................................................. Purchase of treasury shares................................................................................ Net Increase in Working Capital............................................................................ Year 1971 $ 93.7 186.9 280.6 11.4 11.1 36.8 5.8 5.0 17.9 9.4 3.1 381.1 205.2 6.4 58.7 101.2 (.1) .8 .2 372.4 $ 8.7 Year 1970 $ 77.9 170.4 248.3 (11.3) 16.0 4.7 138.6 3.0 33.5 10.0 15.9 9.1 .2 463.3 300.8 6.4 58.6 49.8 12.1 2.1 5.1 434.9 $ 28.4 Changes in Elements of Working Capital: Increase (decrease) in current assets: Cash and marketable securities....................................................................... $ (5.2) $ 27.2 Net receivables.................................................................................................. 19.8 (7.2) Inventories................................................................................................................. 3.3 18.2 17.9 38.2 (Increase) decrease in current liabilities: Accounts payable and accruals.............................................................................. 2.3 (9.2) Income taxes...................................................................................................... (45.1) 21.8 Current portion of long-term debt.......................... . 33.6 (22.4) LAM017045 (9.2) (9.8) Net Increase in Working Capital........................................................................... $ 8.7 $ 28.4 The above statement should be read in conjunction with pages 17 through 20 of this report. MAR 000986 MONSANTO COMPANY AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED PAID-IN SURPLUS AND RETAINED EARNINGS (,Dollars in millions, except per share) PAID-IN SURPLUS Balance at Beginning of Year....................................................................... Addition: Excess of amounts received over the stated or par value of shares of capital stock issued under stock option plans: Preferred stock -- stated value $2.24 each: 6,500 shares in 1971 and 11,100 shares in 1970........................ Common stock -- par value $2 each: 67,138 shares in 1971..................................................................... Balance at End of Year.................................................................................. $583.5 $583.3 .2 2.8 3.0 $586.5 .2 _____ .2 $583.5 R ETA I NED EARNINGS Balance at Beginning of Year....................................................................... Addition -- Net Income for the Year............................................................ Deduction: Dividends on capital stock of parent company: Preferred -- at the annual rate of $2.75 a share................................ Common -- $1.80 a share...................................................................... Balance at End of Year................................................................................. The above statements should be read in conjunction with pages 17 through 20 ol this report. HAR 000987 16 $551.6 93.7 645.3 $550.0 66.6 616.6 6.4 58.7 65.1 $580.2 6.4 58.6 65.0 $551.6 LAM017046 .'.C VATEV.ENTS (Dollars in millions, except per share) Basis of Consolidation, etc. The accompanying financial statements consoli date all domestic and foreign subsidiaries in which Monsanto Company (the "Company") directly or indirectly has more than a 50 per cent interest. In the consolidation of foreign subsidiaries, foreign assets and liabilities have been translated to United States dollars at approximate quoted year-end rates, except that fixed assets have been translated at approximate rates prevailing on the dates they were acquired, and depreciation computed at applicable rates on the resulting dollar amounts; capital stocks have been translated at approximate quoted rates when issued. Income and expense items during the respective years, other than provision for deprecia tion, have been translated at approximate quoted rates in effect prior to the devaluation of the United States dollar in December 1971. A net loss of $0.2 arising from exchange differences and the translation of foreign currencies at December 31, 1971 has been charged to a reserve for foreign operations. No provision has been made for income taxes on unremitted earnings of foreign subsidiaries since, in most instances, any U.S. income taxes payable on dividends which may be received from foreign sub sidiaries would be substantially offset by foreign tax credits. Company adopted the guideline lives established for machinery and equipment by the United States Treasury Department in 1962, and the Asset De preciation Range System class lives in 1971, as pro vided by the Revenue Act of 1971. In addition, there are other timing differences which affect taxable income and enter into the determination of pretax accounting income in different periods. Net income is not affected by such differences since an amount equivalent to their tax effect is either charged or credited, as the case may be, to income through the provision for deferred taxes. Effective January 1, 1972, the Company changed its policy of computing depreciation on most new assets acquired after that date from the sum of the years digits method to the straight line method. Accelerated depreciation will be continued for income tax purposes. It is estimated that as a result of this change in policy, net income for the year 1972 will be increased by approximately $4.7, or 14 cents a share. It is anticipated that the change will have a greater effect upon earnings in subsequent years. Doubtful Accounts and Allowances The reserves for doubtful accounts and allow ances were $15.6 at December 31, 1971 and $15.9 at the end of 1970. Depreciation, Obsolescence, Depletion Charges against income were1. Depreciation, amortization of leasehold improvements and abandoned leaseholds................ .. Obsolescence.................................... Depletion........................................... 1971 $167.4 14.7 4.8 Total............................................ .. $186.9 Account charged Cost of goods sold............................... .. Other accounts..................................... $172.8 14.1 Total............................................. .. $186.9 1970 $155.9 10.5 n> 4.0 $170.4 u> $155.7 n> 14.7 $170.4 u> (1) Excludes approximately $16.0 attributable to NTA facilities and discontinuance of certain product lines referred to under "Extra ordinary Items -- Net." The use of the sum of the years digits method by the Company for computing depreciation on most new assets acquired since 1954 was continued in 1971. The excess of depreciation provided by this method over straight line depreciation was $18.3 in 1971 and $17.4 in 1970. For income tax purposes only, the Earnings a Common Share The primary earnings a share of common stock are based on the weighted average number of com mon shares outstanding in each year plus the number of shares issuable upon the conversion of the con vertible loan stock of Monsanto Textiles Limited and the exercise of outstanding stock options. Net income used in this computation is after deduction of dividends on the $2.75 Preferred Stock but before deduction of interest (less tax) on the convertible loan stock of Monsanto Textiles Limited. The fully diluted earnings a share are based on the number of shares used in the determination of primary earnings, plus the number of common shares issuable upon conversion of the $2.75 Pre ferred Stock and upon conversion of the debentures of Monsanto International Finance Company. Net income used in this computation is before deduction of dividends on the $2.75 Preferred Stock and before MAR 000988 LAM017047 17 MAR 000989 deduction of interest (less tax) on the convertible loan stock of Monsanto Textiles Limited and on the debentures of Monsanto International Finance Company. Equity in 50 Per Cent-Owned Companies The equity in the unaudited 1971 net income of 50 per cent-owned companies was $1.6 compared with $1.3 in 1970. Dividends of $0.7 were received from these companies in 1971 and $0.5 in 1970 and in cluded in other income credits. The equity in the unaudited net assets of such companies at Decem ber 31, 1971 was $20.4 which exceeded the carrying value of the investment therein of $16.0 by $4.4. Equity in Foreign Subsidiaries The Company's equity in the net income of foreign subsidiaries was $17.3 in 1971 and $20.5 in 1970. The Company's equity in the net assets of such companies at December 31, 1971 and 1970 was $274.0 and $261.8, respectively. Extraordinary Items --Net The extraordinary net charge of $11.3 in 1970 resulted from provisions for potential losses arising from federal government action causing the discon tinuance of the use of sodium nitrilotriacetate (NTA) in detergents, and losses incurred, or anticipated to be incurred, in the discontinuance of other product lines including certain portions of the Company's agricultural chemicals and electronic test and meas urements businesses. The charge is net of credits of $1.1 from income tax benefits relating to loss carry forwards of certain foreign subsidiaries, and credits from other items aggregating $0.6. Income Taxes The Company's federal income tax returns have been examined and closed for all years through 1966, and the returns for the years 1967 and 1968 are presently under examination by the Internal Revenue Service. It is believed that adequate provision has been made in the accounts for any additional taxes that may be assessed. The investment tax credit, authorized under the Revenue Act of 1964 and terminated by the Tax Reform Act of 1969, was reinstated in 1971 on equip ment acquired since August 15, 1971 or ordered since April 1, 1971. The current law provides for a credit against federal income taxes equal to 7 per cent of qualifying expenditures for machinery and equip ment placed in service subsequent to the law's effective dates. The Company has consistently fol lowed the practice of reducing its provision for current income taxes by the full amount of its invest ment tax credits, which aggregated $1.1 in 1971 and $9.8 in 1970. inventory Valuation Inventories are stated at the lower of cost or market, determined generally on the first-in, first-out basis. Annual rate of turnover was 4.1 in 1971 and 4.0 in 1970. Leases The Company and its subsidiaries have a large number of lease agreements covering the use of transportation and other equipment, certain land and buildings, and retail outlets. The approximate average annual rentals payable for leases having a remaining life of three years or more are summarized as follows : Leases Expiring in: Annual Rentals Payable 1974-1978.......................................$ 4.0 1979-1983......................................... 2.7 1984-1988.......................................... 1.3 1989-1993.......................................... 1.5 1994-1998......................................... 3.2 $12.7 Legal Proceedings The Company and its subsidiaries are defendants in a number of lawsuits. While the results of litigation cannot be predicted, management, based upon advice of Company counsel, believes that the final outcome of such litigation will not have a material adverse effect on the financial position or operations of Monsanto and its consolidated subsidiaries. Liabilities --Contingent and Commitments The Company and its subsidiaries were con tingently liable as guarantors of bank loans and for customers' receivables discounted aggregating ap proximately $21.5 at December 31, 1971 and $15.5 at the end of 1970. There were commitments in connection with un completed additions to property aggregating approx imately $45.8 at December 31, 1971 and $64.4 at the end of 1970. Long-Term Debt The long-term debt of the Company and its sub 18 LAM017048 MAR 000990 sidiaries at December 31, 1971 and 1970, exclusive of current maturities, was as follows: 1971 1970 Parent Company: 434% promissory notes due 1972/1975... 3%% sinking fund debentures due 1972.. 3Vz% promissory notes due 1972.............. Promissory notes due 1975-1976............. 6V2%-8`/2% bank loan due 1975/1985(a).. 4%%-6% bank loan due 1976.................... 4Vi% notes due 1976................................... 4%% promissory notes due 1993.............. 914% sinking fund debentures due 2000.. 3%% income debentures due 2002.......... 4'4% income debentures due 2008.......... Monsanto International Finance Company: 414% guaranteed sinking fund debentures due 1985 (b)............................................... -- -- -- -- $ 14.1 2.3 100.0 150.0 91.0 50.0 25.0 $ 65.0 6.5 4.1 10.0 3.0 4.6 2.5 100.0 138.6 91.0 50.0 25.0 Monsanto International N.V. (Netherlands Antilles subsidiary): 8%% guaranteed sinking fund deben tures due 1985 ....................................... 20.0 20.0 Monsanto Textiles Limited (English subsidiary): Guaranteed bank loans (1% over bank rate) due 1972/1974................................ 5% guaranteed loan stock due 1982/1986 (c)........................................... 5% guaranteed loan stock due1992/1997 614% guaranteed loan stock due 1992/1997 ................................................. 12.5 28.1 3.9 3.9 15.4 25.9 3.6 3.6 Monsanto Chemicals Limited (English subsidiary): 6% debentures due 1977/1982................. 5.6 5.4 5% debentures due 1982............................ 6.8 6.5 Monsanto (Suisse) S.A. (Swiss subsidiary): 634% guaranteed sinking fund debentures due 1985..................................................... 6V'2% guaranteed sinking fund debentures due 1986..................................................... 7.8 13.0 6.9 -- Monsanto Europe S.A. (Belgian subsidiary): 9% guaranteed bank loan due 1974/1979 (d).......................................... 22.3 -- Other foreign subsidiaries............................... 1.9 1.7 Total....................................................... $558.2 $589.3 Notes: (a) Interest on the 6Vfe% -- Bl/i% bank loan is reduced by a West German government subsidy equal to a percentage of construction costs for which the loan is used. (b) The 4V2% sinking fund debentures due 1985 of Monsanto International Finance Company, which are fully guaranteed by Monsanto Company, are currently convertible into Monsanto common stock at $89 a share, subject to further adjustment under certain conditions. (c) The 5% loan stock due 1982/1986 of Monsanto Textiles Limited, which is fully guaranteed by Monsanto Company, is convertible into Monsanto common stock beginning in 1972 at the initial conversion price of $60 a share, subject to adjustment under certain conditions. (d) Interest on the 9% bank loan is reduced by a government sub sidy of approximately 2.4% for a three-year period. (e) Maturities and sinking fund requirements on long-term debt for the five years ending December 31. 1976 are as follows: 1972 1973 1974 1975 1976 3%% sinking fund debentures $ 6.5 3*4% promissory notes........... 4.1 434% promissory notes (1993) $ 4.7 $ 4.7 914% sinking fund debentures Bank loans (MTL)..................... 4.2 6.2 6.2 Bank loans (Monsanto Europe) 1.7 Other........................................... 1.0 2.5 2.5 $4.7 $ 4.7 6.0 1.7 1.7 3.2 7.9 Total..............................$15.8 $13.4 $15.1 $9.6 $20.3 Pension Plans The Company and its subsidiaries have several pension plans covering substantially all of their employes, including certain employes in foreign countries. The Company's Salaried and Hourly-Paid Em ployes' Pension Plans were amended for 1971 to provide increased benefits to employes. In addition, on recommendation of its independent actuarial con sultants, the Company increased the assumed rate of future earnings of the related pension funds, adopted a formula for valuing assets of such pension funds, and reduced the period for amortization of certain unfunded past service costs. While the individual impact of the increase in benefits and the revised actuarial assumption was significant, the net effect of these changes was not material in relation to the Company's net income. The total provision for pension costs for the years 1971 and 1970 was approximately $36.3 and $31.8, respectively. The provisions include, as to certain of the plans, amortization of unfunded actuarial lia bility generally over periods ranging from 15 to 30 years. It is the policy to fund pension costs accrued. The market value of assets in the related pension funds exceeded the actuarially computed value of vested benefits for plans of the Company and cer tain domestic subsidiaries as of December 31, 1971. Preferred Stock The outstanding preferred stock is stated at $2.24 a share and has a cumulative dividend of $2.75 a share. The involuntary liquidation preference is $35 a share, or an aggregate of $81.2 in 1971 and $81.0 in 1970. It is convertible at any time into Company common stock at the initial rate of 1.12 shares of common for each share of preferred, subject to ad justment in certain events under antidilution pro visions. It may be . redeemed at the Company's option at any time on or after August 12, 1974 at $73 a share, which amount is also the voluntary liquidation preference. Repairs Repairs and maintenance charges included in operating expenses were $127.8 in 1971 and $127.6 in 1970. Revolving Bank Credit Agreement A seven-year revolving credit agreement was executed on November 1, 1971, allowing the Com pany to borrow up to $125.0 from a group of 16 banks. Loans under this agreement will bear interest related to the prime commercial rate of the agent bank. Amounts outstanding on November 1, 1975 are required to be repaid through the period ending LAM017049 1Q OOOg9J November 1, 1978. No borrowings were outstanding on December 31, 1971 under this agreement. Lines of credit totaling $55.0 were also arranged with the same banking institutions. Shares in Treasury In addition to the 306,543 shares of common stock available for general corporate purposes at December 31, 1971, the Company held 131,655 shares of its common stock for specific purposes which were carried in Miscellaneous Investments in the accompanying statement of financial position at December 31, 1971. Shares Reserved At December 31, 1971, there were 10,400 shares of $2.75 Preferred Stock reserved for stock options, and 4,474,822 shares of common stock were reserved for the following purposes: Shares Conversion of $2.75 Preferred Stock....................... Stock option plans........................................................ Conversion of convertible loan stock of Monsanto Textiles Limited......................................................... Conversion of debentures of Monsanto Interna tional Finance Company.......................................... 2,598,859 1,123,793 471,272 280,898 Total.................................................................. 4,474,822 Stock Options The status of the authorized common shares for the stock option plans for key employes and the changes occurring during the year were: 1969 Plan 1964 Plan 1960 Plan Outstanding 1/1/71.......................... 781.050 200,663 75,835 Unoptioned 1/1/71............................168,950 -- -- Optioned during year........................ 27,000 -- -- Exercised during year..................... 4,588 28.392 34,158 Expired during year............................. -- 9,361 31,376 Terminated during year................... 47,162 6,000 478 Outstanding 12/31/71.....................756,300 156,910 9,823 Unoptioned 12/31/71....................... 189,112 -- -- Under the above three key plans, 808 options were outstanding at prices ranging from $31.25 to $58.56 a share, or a weighted average of $47.34 a share. The status of the authorized shares of $2.75 Pre ferred Stock for the stock option plans for employes of the former Fisher Governor Company and the changes occurring during the year were: Outstanding 1/1/71............................................................... 16,900 Exercised during year........................................................... 6,500 Outstanding 12/31/71.......................................................... 10,400 Under these plans, 36 options were outstanding, at prices of $46.00 and $46.50 a share, or a weighted average of $46.45 a share. ACCOUNTANTS' OPINION HASKIN S & SELLS CERTIFIED PUBLIC ACCOUNTANTS Monsanto Company: TEN BROADWAY SAINT LOUIS 63102 We have examined the accompanying consolidated financial statements (pages 13 through 20) of Monsanto Company and Subsidiaries for the years ended December 31, 1971 and 1970. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, such financial statements present fairly the consolidated financial position of Monsanto Company and Subsidiaries at December 31, 1971 and 1970 and the results of their operations and changes in their financial position for the years then ended, in conformity with generally accepted accounting principles consistently applied. < 20 LAM017050 MONSANTO COMPANY AND SUBSIDIARIES HISTORICAL STATEMENT OF CONSOLIDATED INCOME (Dollars in millions, except per share) 1971 1970 1969 1968 1967 Net Sales............................... ............ $2,087.1 $1,971.6 $1,938.8 $1,865.1 $1,705.3 Cost of Goods Sold............... ............ 1,614.3 1,526.4 1,425.3 1,367.9 1,255.8 Gross Profit.......................... ............ 472.8 445.2 513.5 497.2 449.5 Less: Selling and administrative expenses..................................... Technological expenses................ 208.2 86.7 294.9 218.9 98.1 317.0 221.1 101.5 322.6 197.2 86.3 283.5 179.6 84.2 263.8 Operating Profit................................ Income Charges -- Net..................... 177.9 18.5 128.2 15.3 190.9 8.1 213.7 10.2 185.7 8.9 Income Before Income Taxes.......... Provision for Income Taxes.............. 159.4 65.7 112.9 35.0 182.8 73.4 203.5 87.9 176.8 71.5 Income Before Extraordinary Items. 93.7 77.9 109.4 115.6 105.3 Extraordinary Charges (Credits)-- Net.................................................... -- 11.3 (6.7) -- (6.4) Net Income......................................... $ 93.7 $ 66.6 $ 116.1 $ 115.6 $ 111.7 Earnings a Common Share: Primary: Before extraordinary items......... Including extraordinary items... Fully diluted: Before extraordinary items........ Including extraordinary items... $2.65 2.65 2.63 2.63 $2.17 1.83 2.17 1.83 $3.08 3.28 3.03 3.21 $3.26 3.26 3.20 3.20 $2.96 3.15 2.92 3.10 10 YEARS AGO 1961 $932.9 672.9 260.0 84.7 46.7 131.4 128.6 1.5 127.1 58.4 68.7 _ $ 68.7 $2.45 2.45 2.45 2.45 MAR 000992 LAM017051 21 HISTORICAL STATEMENT OF CONSOLIDATED FINANCIAL POSITION (In millions) Current Assets: Cash and marketable securities.... Net receivables............................. . Inventories..................................... Investments, etc............................... ASSETS 1971 1970 $ 74.6 $ 79.8 402.9 383.1 395.4 392.1 872.9 855.0 70.1 79.5 1969 $ 52.6 390.3 373.9 816.8 95.8 1968 1967 $ 115.0 $ 57.0 347.8 . . 324.5 336.8 313.4 799.6 694.9 80.0 78.9 10 YEARS AGO 1961 $ 47.5 152.7 154.5 354.7 90.5 Property: Land............................................... . Buildings........................................ . Machinery and equipment............ Phosphate deposits....................... Oil and gas properties................... Accumulated depreciation, depletion, etc............................... Net property..................... . Deferred Charges............................ . 32.4 408.4 2,172.5 12.1 109.7 1,564.8 1,170.3 40.2 $2,153.5 30.5 397.2 2,083.5 12.1 113.4 1,466.8 1,169.9 40.3 $2,144.7 30.3 381.6 1,933.4 11.8 113.7 1,399.4 1,071.4 28.2 $2,012.2 35.8 368.9 1,812.7 11.6 115.6 1,298.1 1,046.5 30.6 $1,956.7 34.7 364.0 1,773.3 11.4 109.7 1,195.5 1,097.6 36.1 $1,907.5 23.4 195.0 907.0 8.5 91.0 544.1 680.8 16.3 $1,142.3 Current Liabilities: Accounts payable and accruals... Income taxes................................... Current portion of long-term debt.. Long-Term Debt................................ LIABILITIES $ 247.2 $ 249.5 $ 63.3 18.2 15.8 49.4 326.3 317.1 558.2 589.3 240.3 40.0 27.0 307.3 454.0 $ 217.7 49.3 12.9 279.9 472.8 $ 197.6 $ 109.3 52.2 48.8 11.2 9.2 261.0 167.3 492.4 269.2 Other Liabilities and Deferred Credits............................ 40.4 41.6 43.1 46.9 49.1 31.5 Minority Interests in Subsidiaries.. 2.9 2.5 3.1 2.7 2.0 23.1 Shareowners' Equity: Preferred stock............................... Common stock................................ Paid-in surplus................................ Retained earnings.......................... Treasury stock................................ Italics indicate deduction. 5.2 66.3 586.5 580.2 12.5 1,225.7 $2,153.5 5.2 66.2 583.5 551.6 12.3 1,194.2 $2,144.7 5.2 66.2 583.3 550.0 -- 1,204.7 $2,012.2 5.1 66.2 583.7 499.4 -- 1,154.4 $1,956.7 5.1 65.9 585.2 446.8 -- 1,103.0 $1,907.5 _ 56.0 323.1 272.1 -- 651.2 $1,142.3 MAR 000993 LAM017052 ^ND SUBSIDIARIES OTHER DATA (In millions, except where italicized) 1971 1970 Plant additions and replacements. $ 205.2 $ 300.8 1969 1968 1967 $ 219.9 $ 135.0 $ 166.4 10 YEARS AGO 1961 $153.8 Depreciation, depletion, etc.......... $ 186.9 $ 170.4(1) $ 163.7 $ 174.3 $ 165.2 $ 86.9 Dividends a common share........... SI.80 S1.80 $1.80 $1.65 $1.60 $1.00 Book value a common share......... $37.16 $36.27 $36.25 $34.74 $33.31 $23.24 Common shares.............................. 33.1 33.1 33.1 33.0 33.0 28.0 Preferred shares............................. 2.3 2.3 2.3 2.3 2.3 -- Working capital............................... $ 546.6 $ 537.9 $ 509.5 $ 519.7 $ 433.9 $187.4 Long-term debt (less current maturities)............. $ 558.2 $ 589.3 $ 454.0 $ 472.8 $ 492.4 $269.2 Shareowners' equity....................... $1,225.7 $1,194.2 $1,204.7 $1,154.4 $1,103.0 $651.2 Employes <2).................................... 59,271 62,940 64,604 62,815 62,073 38,621 Shareowners: Common....................................... Preferred...................................... 110,490 3,897 121,399 3,941 118,156 3,621 (1) Excludes $16.0 applicable to extraordinary charges. (2) Includes Monsanto employes in plantoperated for U. S, Government (1.775 in 1971). 111,538 111,363 82,203 mar 000994 LAM017053 23 BOARD OF DIRECTORS Charles H. Sommer Chairman Edward J. Bock President and Chief Executive Officer Dillon Anderson Partner, Baker & Bolts, Houston mar 000995 H. Harold Bible Vice President -- Administration 24 LAM017054 Anthony J. A. Bryan Vice President General Manager, International Division David R. Calhoun Chairman, St. Louis Union Trust Company Fredrick M. Eaton . -d'-Z Partner, Shearman & Sterling, New York * C. Preston Cunningham Vice President Managing Director, Monsanto Industrial Chemicals Company MAR 000996 John R. Eck Vice President Managing Director, Monsanto Polymers & Petrochemicals Company Louis Fernandez Vice President Managing Director, Monsanto Textiles Company J. W. Fisher Chairman, Fisher Controls Company, Inc., Marshalltown, Iowa James J. Kerley Vice President -- Finance John L. Gillis Senior Vice President Jean Mayer Professor of Sutrition, Harvard University 26 mar 000997 LAM017056 Edward A. O'Neal Former Chairman, Monsanto Company James S. Rockefeller Former Chairman, Firs! National City Bank, New York Tom K. Smith Jr. Vice President Managing Director, Monsanto Commercial Products Company Earle G. Wheeler Former Chairman, U.S. Joint Chiefs of Staff Monte C. Throdahl Vice President -- Technology MAR 000998 LAM017057 27 MONSANTO'S WORLDWIDE INTERESTS Included among Monsanto's member companies around the world are those appearing in the following list. Per cent ownerships are noted parenthetically. In addition, there are a number of smaller member companies, many of which have been established for marketing or investment purposes. PANAMA: Chemstrand Overseas S.A. (.100%) and Monsanto Overseas S.A. (100%) hold certain invest ments outside the United States. VENEZUELA: Monsanto Venezuela, Inc. (100%) pro duces petroleum. NORTH AMERICA UNITED STATES: Farmers Hybrid Companies, Inc. (100%) is a producer of hybrid breeding swine and seed corn. It also conducts research in animal genetics, including cattle. Fisher Controls Company, Inc. (100%) manufactures and markets process measurement and control equip ment. Monsanto Enviro-Chem Systems, Inc. (100%) develops and markets engineered chemical and pollution-abate ment systems. Monsanto Flavor/Essence, Inc. (100%) manufactures essential oils, flavors and fragrances. Monsanto International Finance Company (100%) was formed to obtain funds abroad to help finance overseas expansion. Monsanto Research Corporation (100%) conducts research for government agencies and for Monsanto; produces nuclear sources; operates a governmentowned laboratory for the Atomic Energy Commission. CANADA: Monsanto Canada Ltd. (100%) manufactures chemicals and plastics. Plax Canada Ltd. (50%) oroduces plastic blownware. LATIN AMERICA ARGENTINA: Monsanto Argentina S.A.I.C. (100%) manufactures plastics. COLOMBIA: Fabrica de Hilazas Vanylon S.A. (49%) produces nylon 6 yarns. MEXICO: Industries Resistol S.A. (36%) produces chemicals and plastics. Compania Industrial de Plasticos S.A. (100%) fabri cates plastic consumer products. NETHERLANDS ANTILLES: Monsanto International N.V. (100%) was formed to obtain funds abroad to assist in financing the operations of Monsanto Company and its subsidiaries. EUROPE AND MIDDLE EAST BELGIUM: Monsanto Europe S.A. (100%) manu factures plastics and chemicals in Belgium and con ducts marketing activities throughout Europe. FRANCE: Societe Monsanto (100%) manufactures plastics. ISRAEL: Israel Chemical Fibres Ltd. (60%) manufac tures Acriian acrylic fiber. LUXEMBOURG: Monsanto Cie S.A. (100%) manu factures nylon 6,6 yarns. SPAIN: Aiscondel S.A. (50%) makes consumer plastic products. A subsidiary produces chemicals and plastics. UNITED KINGDOM: Lansil Ltd. (100%) produces bleached cotton linters, acetate flake and yarn, textile fabrics and carpet underlay. Monsanto Chemicals Ltd. (100%) manufactures chemicals and plastics. A major subsidiary produces plastic products for construction and home-decoration markets. Monsanto Textiles Ltd. (100%) manufactures Acriian acrylic fiber and nylon 6,6 yarns. WEST GERMANY: Monsanto (Deutschland) GmbH (100%) markets Monsanto products throughout West Germany. ASIA AND AUSTRALIA AUSTRALIA: Australian Petrochemicals Ltd. (55%) manufactures raw material for rubber and plastics. Monsanto Australia Ltd. (100%) makes chemicals and plastics. Associate companies produce fluorocarbons and synthetic latex products. HONG KONG: Monsanto Far East Ltd. (100%) super vises marketing of Monsanto products in the AsiaPacific area outside Japan and Australia. JAPAN: Mitsubishi Monsanto Chemical Company (50%) manufactures chemicals and plastics. Western Region Roy L. Brandenburger Regional Vice Presidents Eastern Region Richard T. Clark North Central Region Daniel J. Murphy MAR 000999 Governmental Affairs Sam Pickard LAM017058 MONSANTO COMPANYj800 N. LINDBERGH BLVD.. ST. LOUIS. MISSOURI 63166 MAR 001001 LAM017059 DIRECTORS AND OFFICERS BOARD OF DIRECTORS Charles H. Sommer, Chairman........................ St. Louis Dillon Anderson..............................................Houston H. Harold Bible............................................... St. Louis Edward J. Bock................................................St. Louis Anthony J. A. Bryan.......................................St. Louis David R. Calhoun............................................St. Louis C. Preston Cunningham.................................. St. Louis Fredrick M. Eaton........................................ New York John R. Eck.......................................................St. Louis Louis Fernandez...............................................St. Louis J. W. Fisher.................................... Marshalltown, Iowa John L. Gillis....................................................St. Louis James J. Kerley..................................................St. Louis Jean Mayer........................................................Boston Edward A. O'Neal........................................... St. Louis James S. Rockefeller......................................New York Tom K. Smith Jr.................................................St. Louis Monte C. Throdahl......................................... St. Louis Earle G. Wheeler........................Martinsburg, W. Va. OFFICERS Edward J. Bock. .President and Chief Executive Officer Charles H. Sommer................... Chairman of the Board John L. Gillis........................... . Senior Vice President Edmond S. Bauer...................... ..............Vice President H. Harold Bible....................... ..............Vice President Anthony J. A. Bryan............... ....... . Vice President James E. Crawford Jr.............. ..............Vice President C. Preston Cunningham.......... ..............Vice President Patrick J. Dowd....................... ..............Vice President John R. Eck............................... ..............Vice President Louis Fernandez....................... ..............Vice President James J. Kerley......................... ..............Vice President Edwin J. Putzell Jr................. ..............Vice President Francis E. Reese....................... ............. Vice President Tom K. Smith Jr.......................... ...........Vice President Monte C. Throdahl................. . ............ Vice President Richard C. O'Sullivan................................. Controller Edwin J. Putzell Jr........................................Secretary Kenneth N. Kermes........................................ Treasurer Transfer Agents Morgan Guaranty Trust Company of New York The Boatmen's National Bank of St. Louis Registrars The Chase Manhattan Bank (National Association) St. Louis Union Trust Company Printed in U.S.A. Jack W. Mueller........................... Assistant Controller Walter C. Thilking....................... Assistant Controller Robert P. Ziomek............................ Assistant Controller William A. Blase............................. Assistant Secretary rODney Harris.................................. Assistant Secretary __ C. Brent Holleran......................... Assistant Secretary ^-0BERT Matlock......................... Assistant Treasurer Robert B. Perkovich.........................Assistant Treasurer Thomas M. Rasmussen...................... Assistant Treasurer Feb. 18, 1972 MAR 001000 LAM017060