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LAW DEPARTS FILE C0' / oi r? - ^r.v-r **" "V.- 1972 ANNUAL REPORT MONSANTO COMPANY LAM017061 Table of Contents Operational Highlights............................................................ 1 Letter to Shareowners........................................................... 2 Operating Summaries: Monsanto Industrial Chemicals Company................... 6 Monsanto Textiles Company............................................ 8 Monsanto Polymers & Petrochemicals Company.... 10 Monsanto Commercial Products Company.................. 12 International Division........................................................... 14 T echnology.............................................................................. 16 Financial Statements............................................................... 17 Summary of Significant Accounting Policies.................. 22 Accountants' Opinion..............................................................22 Notes to Financial Statements............................................. 23 Ten-Year Summary.................................................................. 26 Worldwide Interests................................................................. 28 Directors and Officers............................................................. 29 mar 001003 Annual Meeting The next annual meetihg Of the shareowners of Monsanto Company is to be held at 2:30 p.m. Thursday, April 26, 1973, at the com pany's General Offices, 800 N. Lindbergh Blvd., St. Louis County, Mo. A formal notice of the meeting, together with a proxy state ment and form of proxy, is being mailed to each shareowner along with the Annual Report and Review. Italics identify Monsanto's trademarks. LAM017062 Operational Highlights (Dollars in millions, except per share) Net Sales...................................................... Net Income................................................... Per Common Share: Primary Earnings....................................... Dividends Paid.......................................... Book Value................................................ Depreciation, Obsolescence and Depletion Plant Additions and Replacements............. Technological Expenses............................... Employes...................................................... Shareowners -- Common Shares................ 1972 $2,225.4 $ 122.0 1971 $2,087.1 $ 93.7 $ 3.49 1.80 39.05 $ 193.9 $ 168.3 $ 92.0 57,891 104,369 $ 2.65 1.80 37.16 $ 186.9 $ 205.2 $ 86.7 59,271 110,490 Operating Results by Lines of Business Lines of Business: Industrial Chemicals............................ Textiles................................................. Polymers & Petrochemicals................. Commercial Products........................... Sales and Operating Income............. Income Charges--Net.............................. Income Before Income Taxes.................. Provision for Income Taxes..................... Net Income.............................................. Net Sales 1972 $ 572.3 526.0 556.8 570.3 $2,225.4 Income $ 57.7 44.5 46.5 67.7 216.4 13.8 202.6 80.6 $122.0 Net Sales 1971 Income $ 544.3 479.7 531.4 531.7 $2,087.1 $ 49.5 40.5 30.3 57.6 177.9 18.5 159.4 65.7 $ 93.7 MAR 001004 LAIVI017063 To the Shareowners Monsanto achieved one of its most satisfactory years in 1972. Sales set new records, and net income rose substantially over that of 1971. Consolidated net sales were $2,225 billion, a 7 per cent increase over the $2,087 billion reported in 1971. Net income rose 30 per cent to $122.0 million in 1972. In 1971 net income was $93.7 million. Primary earnings a common share reached $3.49 in 1972, compared to $2.65 in 1971. 1972 Earnings Factors Monsanto's earnings improve ment can be attributed to higher sales volumes, improved product mix, penetration of new markets, growth of newer products and the continuing effectiveness of our cost control programs. As part of a long-term reassess ment, Monsanto has been divesting itself of products and businesses which are of marginal profit to the company, or which do not meet our long-range objectives. On Sept. 30, Monsanto sold its Lion Oil refining and marketing properties. As a regional refiner and marketer of petroleum products, we determined that Lion Oil would have required large capital expendi tures to improve and expand its position in the petroleum industry and particularly to meet new eco logical requirements. During the first nine months of 1972, Lion Oil had sales of $69.8 Net Sales (Dollars m Millions) million. The sale of this Lion Oil property resulted in after-tax income of $3.4 million. The company retained the oil and gas reserves formerly associated with Lion and continues active do mestic production and exploration programs. In addition, Monsanto is a partner in a number of petroleum exploration ventures outside of the United States and is participating in drilling programs in the Java Sea and the North Sea. While the divestment of marginal businesses must be a continuing program in any viable company, our efforts in this area have peaked for the present time. The vitality of the U.S. economy and the growing strength of eco nomic conditions worldwide were basic, positive influences on our sales success. Many key markets served by the company, such as agriculture, automotive, textiles, construction and consumer goods in general, grew at a brisk pace. Significantly, 1972 was the first full year of operation under our new organizational structure imple mented in September of 1971. Per formances of the four operating companies created at that time are covered in detail on pages 6 to 13 of this report. The improved flexibility and capability of the new organiza tion were major factors contributing to our success in 1972. 2 J 968 $115.6 1969 $109.4 MAR 001005 1970 $77.9 1971 $93.7 1972 $122.0 LAM017064 MAR 001006 As we reported previously, pro visions were made for projected cost overruns on several construction projects under way at wholly owned Monsanto Enviro-Chem Systems, Inc. For 1972, the overrun projection resulted in a total charge of $5.3 million against Monsanto's net income. Based on current projections, we believe that we have provided fully for all anticipated cost overruns at Enviro-Chem and know of no cur rent contract commitments of this subsidiary which would unfavorably affect Monsanto'sfuture net income. A second factor having a negative effect on earnings for 1972 was the write-off of the goodwill associated with the company's investment in Lansil Ltd., resulting in a $4.2 million reduction of net income. Lansil is engaged in the acetate fibers business in the United King dom. The current market uncer tainty for Lansil's cellulosic fibers product line resulted in a decision to reduce the value of this investment. An important measure of Mon santo's current and future earnings potential is the direction of its over all selling prices. These had declined steadily for a number of years. In 1972, however, the decline slowed markedly, and the outlook for future stabilization appears favorable. Prin cipal factors affecting the 1972 decline in selling prices were lower fiber prices in European markets and lower selling prices of some electronic products. Virtually all other product areas showed selling price stability. In the last quarter of 1972, average selling prices were higher, compared to the same period of 1971. Capital Expenditures In general, the level of capital spending in the chemical industry declined during the past two years, resulting in a balance between sup ply and demand for many major products. We are hopeful that this balance will continue to be main tained in the future. Monsanto's capital expenditures amounted to $168.3 million in 1972. This level was modest in comparison to expenditures of the three prior years, when our capital outlays averaged $242.0 million per year. In 1972 we focused our attention on the opportunities created in the heavy investment years by improv- President John W. Hanley ing the capabilities of new and expanded plants constructed during the earlier period. Capital expenditures for 1973 are projected to increase approximately 20 per cent over those of 1972. Approximately 78 per cent will be spent in the United States and 22 per cent in other countries. External Factors We have applauded the Nixon administration's efforts to control wages and prices under Phase I and Phase II, and we welcome the deci sion to make controls voluntary and more flexible under Phase III. We were able to meet all of the require ments imposed upon Monsanto under Phase II during 1972. We are hopeful that both business and labor will exercise judicious restraint LAM017065 To the Shareowners (cont.) MAR 001007 under the voluntary system en visioned under Phase III. The recent dollar devaluation and other changes in parity ratios of major currencies will have only a minor effect on the company's con solidated financial position in 1973. We fully expect the devaluation will stimulate our export sales and that the other resulting currency changes will have a positive effect on 1973 results. We are concerned about the world wide energy shortage, which directly affects our ability to obtain feed stocks for our petrochemical plants, as well as fuel for heating and cool ing. During 1972, we achieved addi tional access to world feedstocks for U.S. petrochemical production, as our allocations for imported petro leum were increased in proportion to our petrochemical exports. We expect our costs for feedstocks and for fuel will increase, and in some critical areas we are changing to alternate sources of supply. Ef fective long-term planning for feed stocks and fuel is heavily dependent on the U.S. government's energy policies. The environment continues to receive our active attention. We at tempt to anticipate the impact our products and processes will have on future generations, as related to the use of new products and new busi ness systems, before their com mercialization. We are also developing systems to protect our environment. Early in 1973, our Enviro-Chem subsidiary entered into an agreement to build a solid-waste disposal and resource recovery plant utilizing EnviroChem's Landgard process for the city of Baltimore. Scheduled for Primary Earnings a Share--1972................................................................ -1971........................................................................ Improvement--1972 over 1971.......................................................................... $3.49 2.65 $0.84 Analysis of Major Causal Factors Sales related factors: Change in sales volume and product mix...................................................... $1.56 Lower selling prices....................................................................................... (0.06) Total sales related factors........................................................ . 1.50 Cost related factors: Lower raw material prices...................................................... Higher manufacturing costs........................................................................... Higher nonmanufacturing costs....................................................................... Lower start-up costs .......................................................................................... Total cost related factors................................................................................. (0.63) (0.31) 0.02 (0.82) Other factors: Lower interest expense Higher income credits--net .... ...................................................... Lower tax rate. Other................ ................................................................................ Total other factors........................ Improvement--1972 over 1971....................................................... 0.03 0.05 0.09 (0.01) 0.16 $0.84 Quarterly Results (Dollars in millions, except per share) First............................ Second....................... Third.......................... Fourth........................ YEAR............................. Net Sales 1972 1971 $ 615.0 564.8 522.8 522.8 $ 542.3 539.8 506.0 499.0 $2,225.4 $2,087.1 Net Income 1972 1971 $ 47.5 31.8 18.8 23.9 $30.5 30.5 16.6 16.1 $122.0 $93.7 Primary Earnings Per Share 1972 1971 $1.38 0.91 0.52 0.68 $0.87 0.88 0.46 0.44 $3.49 $2.65 4 LAM017066 The Board of Directors wishes specifically to identify for Monsanto shareowners what it regards as a major accomplishment of 1972, namely: the election, effective Nov. 1. of John W. Hanley as president, chief executive officer and member of the board. The leadership qualities of our new president are very much in evidence as the company plans for a future of growth and profitability. For the Board of Directors -- Charles H. Sommer, Chairman operation in 1974, the plant will dispose of 1,000 tons of municipal waste daily while generating usable energy and recovering ferrous met als and glassy aggregates as salable products. Currently, Monsanto and other U.S. companies with manufacturing operations in other countries are facing the threat of major legislation, the Burke-Hartke Bill, which would significantly affect our operations. The bill provides for punitive taxes on earnings from operations outside of the United States, limits the use of technology in other countries, and establishes a strict system of quotas on imports. We are engaged in a strong, industry-wide program to demon strate to Congress the very positive contributions made to the U.S. economy by our international oper ations. Monsanto had a net export balance of more than $150.0 million in 1972. It is our estimate that the jobs of more than 4,200 production, ad ministrative and clerical employes in the United States are dependent on our operations in other countries or on exports. A large portion of our exports involves intermediate prod ucts which are shipped to our own plants around the world for further processing. Major Operating Costs (Dollars in millions) 1972 Raw Materials Purchased. Wages and Salaries............ Employe Benefits................ Energy and Other Utilities................................ $553.5 562.3 83.2 110.0 1971 $540.4 527.2 73.0 98.1 Outlook Encouraging The outlook for 1973 is encourag ing. Based on the health of the U.S. economy, the growing vigor of worldwide economies, and the more favorable balance between supply and demand in the chemical industry, we anticipate another year of improvement for Monsanto. We expect to benefit from higher sales volume and higher capacity utilization; from continued improve ment in selling prices; from the ongoing effectiveness of our cost controls, and from the further turn around of some of our lower profit product lines. The negatives of inflation, higher raw material and labor costs, and the increasing investment required to meet ecological needs are facts of business life. While these factors concern us, we do not believe they will offset our strengths. Monsanto's financial position at the end of 1972 remained strong. As now projected, the company does not plan any equity financing or any significant debt financing during 1973. New Board Members A number of changes have oc curred on the Board of Directors. After many years of significant con tributions, James S. Rockefeller and David R. Calhoun reached manda tory retirement age. In July, Edward L. Palmer, chairman of the executive committee of First National City Corporation and a director of both the holding company and its princi pal subsidiary, First National City Bank of New York, was elected to the board. In January, 1973, Francis E. Reese, a Monsanto vice president, was elected a director, replacing Anthony J. A. Bryan, who resigned as an officer and director of the com pany. Mr. Reese is general manager of the International Division. During 1972, FI. Harold Bible, a director and vice president-administration, was elected a senior vice president. As Monsanto adapts to the re quirements and demands of a new era, we find a single constant stands out as a commanding asset: the determination, inventiveness, loyal ty and spirit of the men and women of Monsanto. Our success is the sum of their efforts, and our pride in their accomplishments deserves special mention to our shareowners. Sincerely, Chairman of the Board President St. Louis March 7, 1973 MAR 001008 ---------------- 5 LAM017067 Monsanto Industrial Chemicals Company Monsanto Industrial Chemicals Company's 1972 sales increased to $572.3 million in 1972, a 5 per cent gain over the $544.3 million re corded in 1971. Operating income reached $57.7 million, a 17 per cent gain over 1971's $49.5 million. Sales gains paralleled the strong growth of major industries served in the United States and other world markets. Particularly heavy demand came from the automotive and construction industries. The improvement in operating income was attributed to higher sales, price stability--especially for large volume chemicals--and effec tive cost control programs. Demand for chemicals used in rubber and vinyl products reached unprecedented levels. Rubberchemical and plasticizer sales worldwide set new records. During 1972, a Monsanto sub sidiary began construction of a new rubber chemicals plant in Argentina to serve the growing rubber market there. Scheduled for completion early in 1973, the unit will enable Monsanto to serve the rubber in dustry from plants in eight countries. Governmental requirements and consumer preferences created in creased demand for specialty plasti cizers with fire resistant properties. Production capacity for Monsanto's fire resistant additive, Phosgard 2XC-20, was doubled during 1972. The product is used in flexible poly urethane foam for 1973 model auto mobile and truck seat cushions. Sales of process chemicals grew significantly during 1972. Selling prices of these products improved and reached more traditional levels. Plant expansions were completed for increased production of ONA (ortho-nitroaniline), PNA (para-nitroaniline) and benzyl chloride. Research efforts to identify a safe phosphate substitute for detergents received high priority. Two studies on the biodegradability of sodium nitrilotriacetate (NTA) were con cluded, adding to the accumulation of knowledge that continues to show NTA can be used safely as a partial substitute for phosphates in de tergents. Monsanto received contracts dur ing 1972 to supply limited quantities of NTA to the Canadian detergent market, where the product's use is approved. A proprietary bacteriostat for bar soaps, TCC, had substantial sales increases during 1972, and capacity was increased to meet the new demand. Monsanto is cooperating closely with the U.S. government in safety testing bacteriostats. As a result of research and expan sion into fragrance, food ingredient and pharmaceutical intermediate markets, a new aroma chemicals plant was completed, as was an expansion of Monsanto's vanil lin plant. Phase-out of polychlorinated bi phenyl (PCB) products, except for use in closed-system electrical equipment, was completed. New replacement products were intro duced. To meet demand for other prod ucts, plant expansions were under way at Luiing, La., for increased production of ACL chlorine com pounds, cyanuric acid and EMA resins. Production capacity for De quest deflocculating and sequester ing agent was increased at the Everett, Mass., plant. The growth of the paper industry during 1972 led to increased sales of paper chemicals. A new wetstrength resin, Santo-Res 23, was introduced. Paper chemicals are used to impart wet strength and water resistance to paper products. During 1972, recently completed plant modernization programs be gan to return intended benefits in higher volumes and lower unit costs. Internal needs for essential raw material chemicals were met, and participation in some chemical com modity markets was profitable. The strength of the chemical industry, and the improved balance of supply and demand, should continue to benefit Monsanto. 6 MAR 001009 LAM017068 Businesses Rubber and Specialty Chemicals Major Products Accelerators Antidegradants Test instruments Latex binders Process and hydraulic fluids Dielectrics Bleaching compounds Fire chemicals Specialty resins Process Chemicals Vanillin Aspirin Food ingredients Flavors Aromatic organics Inorganic industrial chemicals Resin raw materials General purpose and specialty plasticizers Phosphates and Detergents Phosphate builders Surfactants Bacteriostats MAR 001010 Product Applications Processing and preserving tires and other rubber products. Test instruments for the rubber processing industry. Carpet backing. Adhesive for wall covering and packaging. Heat-transfer systems. Industrial and aircraft fire retardant systems. Encapsulant solvents for carbonless paper. Trans former and capacitor fire retardant fluids. Swimming pool chlorina tion, laundry bleaches, sanitizing agents. Fire extinguishers, fire retardant coatings, wildfire control. Liquid detergents, photo graphic film, thickening agent in textile print paste. Pharmaceuticals and food processing. 1972 Highlights Strong growth in all world markets except Europe. With completion of new plant in Argentina, the rubber industry will be served from facilities in eight countries. Broad base of applications developed. Record sales with new formulations. New facilities for carbonless paper solvents brought on-stream. Excellent sales and manufacturing volume. New plant in Luting, La., neared completion. Market demand continued to increase for all applications. Sales and manufacturing volume reached record levels. Construction of new plant in Luling, La., begun. Vanillin expansion completed. Record aspirin sales. Prices, demand strong for food ingredients. Chemical processes, polyester and coatings production, detergents, fertilizers, gasoline and oil additives. Used in polyvinyl chloride products such as vinyl wall coverings, floorings, wire and cable insulation, film and sheeting, food packaging, medical and dairy equipment. Household and industrial detergents and soaps. Selling prices stabilized and turned upward. Plant output significantly higher. Expansions completed on ONA, PNA and benzyl chloride. Plasticizer sales up in unprecedented vinyl chloride growth worldwide. Flame retardant additive capacity expanded. Polymeric plasticizer gained acceptance in food, medical and dairy uses. Good demand. Strong technical and marketing base provided strength in transition to new detergent materials. LAM017069 7 Monsanto Textiles Company MAR 001 Oil Monsanto Textiles Company's sales reached $526.0 million in 1972, 10 per cent above the $479.7 million of 1971. Operating income of $44.5 million was 10 per cent over the previous year's $40.5 million. Sales and operating income gains were worldwide. U.S. apparel and carpet markets improved over 1971, reflecting the growing strength of the textiles segment of the domestic economy. European sales of man made fibers were also higher. Selling prices were depressed in Europe during 1972, but firmed at year-end as demand for fibers increased. Record levels of residential and commercial construction activity, coupled with increased purchases of consumerdurablegoods, stimulated carpet sales. To meet demand, carpet nylon capacity was increased by 25 million pounds, with another 25 million pound increase scheduled for 1973. The nylon carpet market is expected to continue its growth in 1973. Bolstering the market for carpet fibers late in 1972 was the high price of wool, worldwide, which created an opportunity for Monsanto to further penetrate market areas particularly suited for Acrilan acrylic fiber. During the year, home furnishings was established as an independent business group, separate from car pets, in recognition that this market is expected to grow significantly in the future. Annual consumption of man-made fibers for draperies, pillows, blan kets, area rugs, upholstery and other similar uses is nearing the two-billion-pound mark. Industry projections indicate consumption will reach three billion pounds annually by 1980. The industrial fibers business was strong, with production at high levels at year-end to meet heavy requirements from the tire industry. Demand for nylon tire cord strength ened during 1972, as an all-time truck tire sales record was set. Other tire markets -- farm, replacement and off-the-road equipment -- also experienced higher sales. Uses of nylon for seat belts, camping equip ment and sewing thread were at record levels. Monsanto's modacrylic fiber for Elura wigs had sales exceeding expectations. More importantly, the product, which was first introduced in 1970, has established a leading position for itself as the premium quality fiber for wigs. One of several bright spots in the apparel field was the year-long consumer preference for knitted outerwear and a corresponding de mand for Acrilan fiber. Actionwear textured nylon yarn sales to the hosiery trade also increased over 1971, as this product gained greater commercial acceptability. Monvelle biconstituent nylon and spandex hosiery yarn was test mar keted in Japan, Germany and the United States during 1972. Early reports have been optimistic, and successful commercialization of this product is expected in 1973. Mon velle combines sheerness with the properties of a support hose. The fiber is an industry first. Initial sales of SEF modacrylic fiber for apparel, developed during 1971, also exceeded expectations. The first man-made fiber to meet government standards concerning flammability in children's sleepwear, SEF maintains the soft quality of Acrilanwhile meeting stringent federal safety regulations. The com ing extension of government flam mability standards for sleepwear in sizes 7x-14x suggests further po tential for this Monsanto fiber. The performance of other new Acrilan products also was encour aging. This was especially true in the pile fabric area and in the rapidly growing hand-knitting yarn business. Monsanto's Wear-Dated program celebrated its 10th anniversary during 1972. As the program moves into its second decade, the WearDated guarantee now encompasses more than 300 identifiable products made with Monsanto fibers in the United States. These products ac count -for approximately $1 billion annually at retail sales outlets. The Wear-Dated guarantee, intro duced long before "consumerism" was a national issue, has been extended since 1962 to cover every category of apparel. The program today operates in 22 countries around the world. Factors contributing to increased European sales were higher produc tion resulting from debottlenecking of facilities at the Coleraine, North ern Ireland, acrylic plant, and the successful start-up of the 35-millionpound-a-year Lingen, West Ger many, acrylic plant. 8 LAM017070 In addition to start-up of the Lingen plant, 1972 saw the Sand Mountain plant in northern Alabama begin production, as its first units were installed on schedule. This plant, incorporating advanced tech nology for producing nylon and polyester filament yarns, fits Mon santo's plans for entry into the market for apparel polyester. The establishment of import quotas for man-made fibers from Japan, Hong Kong, Taiwan and Korea brought about a reduction of fiber imports from those countries during 1972. Imports of man-made fibers from other countries, how ever, were not under quota, and shipments increased. General growth of the textiles industry, which is expected to con tinue in 1973, helped to stabilize prices for synthetic fibers. While there were some increases, U.S. prices still remained below earlier levels., With, demand for acrylics and nylon still strong in the United States and improving in Europe, pricing in general is expected to remain firm in the months ahead. Business Man-Made Fibers Major Products Acrylic staple Modacrylic fibers Nylon fibers Polyester MAR 001012 Product Applications 1972 Highlights Carpets, rugs, blankets, draperies and upholstery. Sweaters, skirts, dresses, babies' garments, ski suits, slacks, sports and work clothing. Demand strong in U.S., improving in Europe. Start-up of Lingen, W. Germany, plant. Debottle necking of Coleraine, N. Ireland, plant. High price of wool offered opportunity in specialty carpet areas traditionally closed to Acritan. Strong demand from knitted outerwear market. Sales in home furnishings area increased. Premium quality fibers for wigs, draperies and curtains, simulated fur, industrial fabrics, scatter rugs and carpets. Elura wigs established leading position as premium product. Sales of SEF fibers exceeded expectations. Carpeting, upholstery, bed spreads, hosiery, stretch fabrics, raincoats, dresses, lingerie, blouses, windbreakers, thread, sails, conveyor belts, tire cord, safety belts, tarpaulins, ropes, nets, parachutes. Strong total demand in U.S., improving in Europe. Carpet nylon capacity increased reflecting healthy state of building industry. Tire yarn business strong. Demand for other industrial fibers at all time high. Actionwear sales to hosiery trade up. Test marketing of Monvelte hosiery yarn successful in Japan, Germany and U.S. Cadon nylon products developed carpet market interest. Durable press suits, shirts, slacks, dresses, blouses, lingerie, draperies, rope, tire cord, fish nets. Fiberfill for pillows, comforters, sleeping bags, skiwear. First units of Sand Mountain plant installed, marking entry into apparel polyester filament field. SpeclranjAcritan blends introduced to several markets. Both filament and staple demand shoued strength. LAM017071 q Monsanto Polymers & Petrochemicals Company Sales of Monsanto Polymers & Demand for Lustrex polystyrene, glass, was expanded in Ghent, Petrochemicals Company reached manufactured by Monsanto in 10 Belgium. A new plant in Springfield, $556.8 million in 1972, compared nations, increased in packaging and Mass., also started Saflex produc to $531.4 million recorded in 1971. appliance uses. Construction of tion, replacing an older and smaller Operating income was $46.5 million Israel's first polystyrene plant by a unit. Use of laminated safety glass in 1972 and $30.3 million in 1971. Monsanto affiliate neared comple in auto windshields continued to Nine months operating results of tion, and construction on a plant in grow. The ability of Saflex to sup Lion Oil marketing and refining Australia for expandable polystyrene press sound continues to create operations, which were sold on was scheduled for completion in interest in architectural markets, Sept. 30, are included in the 1972 1973. where laminated windows reduce totals. Packaging demand also helped noise pollution. A healthy U.S. economy was the dominant factor in sales increases for all product lines. Every major market expanded. Automotive pro duction was at record levels. The upsurge in the construction industry resulted in higher sales to housing and consumer goods markets. In creased consumer spending con tributed to growth in packaging. Higher sales volumes, together with excellent manufacturing opera tions at worldwide plant locations, improve sales of polyethylene. Highdensity grades of the plastic are used to make bottles, shipping trays and pails in the United States. Packaging film is the principal mar ket for low-density polyethylene in the United Kingdom. Monsanto decided to end its U.S. role in polyvinyl chloride (PVC) plastics. Although PVC business in other nations is large, the company's share of the U.S. market is small. In addition, manufacture of the raw Sales of specialty resins increased substantially. Production of pheno lic resins, used to bond mineral fibers into insulation, was near capacity. Demand for melamines and ureas for industrial coatings led to a plant expansion in Springfield, Mass. Markets for adhesive resins, used for pressure-sensitive tapes and reproduction paper, were strong in the United States and Europe, and a 50 percent expansion was begun. led to improved operating income. Market demand for plastics was strong. Use of Lustran ABS plastic for drain, waste and vent pipe was at a record high, and penetration con tinued into appliance markets, par ticularly refrigerators. Expansions were scheduled to maintain leader ship in ABS engineering plastic. A new plant in Antwerp, Belgium, with annual capacity of 110 million pounds, began production at mid year. Final phases of another ex pansion, in Addyston, Ohio, were under way. Facilities in Sarnia, On tario, Canada, were purchased from material, vinyl chloride monomer, was ended in 1968. Early in 1973, Monsanto licensed its U.S. PVC technology and initiated plans to close some production units. Monsanto expanded its role in engineering plastics with the intro duction of a unique, mineral-reinforced grade of Vydyne nylon resin. Reinforced nylon from a new unit in Springfield, Mass., is now used in automotive and industrial parts pre viously made from metal or other engineering plastics. Capacity for production of basic Vydyne nylon was more than doubled at Pen sacola, Fla. Two new resins were introduced for developmental marketing. Montac hot-melt adhesive was under test in the assembly of cans, automo biles and electrical equipment. In the paper industry, plastic pig ments based on polystyrene par. tides were tested to replace in organic pigments. Petrochemical markets demon strated considerable improvement over 1971. Plastics growth expanded the movement of ethylene and phenol, absorbing surplus capacity in the industry. Strong demand by the rubber industry was reflected in styrene and butadiene sales. The Polymer Corporation, and in During 1972, capacity for the Growth in the fiber industry aided stallation of a new ABS plant was production of Saflex polyvinyl buty- marketing of acrylonitrile in the scheduled for completion in 1973. ral sheet, used to make laminated United States and Europe. 10 MAR 001013 LAM017072 Monsanto expanded its position in styrene monomer with the start up of a new plant in Texas City, Tex. With annual capacity of 1.3 billion pounds, the plant is geared to sup ply growing U.S. demand. Styrene plants using Monsanto-licensed technology also began production in Japan and the United Kingdom. On Sept. 30, the sale of the petro leum marketing and refining proper ties of Lion Oil was completed. The assets sold included a 37,500barrel-per-day refinery at El Dorado, Ark., an associated crude oil gather ing and pipeline system and service stations in the mid-South. Monsanto continued an active oil and gas exploration program. Total reserves of oil and gas in creased during the year. The search for natural gas in the United States was intensified, and new gas re serves were discovered in the Gulf of Mexico, Oklahoma and New Mexico. Participation in offshore explora tion, along with other companies, continued. A part interest in a Dutch North Sea concession was sold to finance activity elsewhere. Monsanto is the operator for another group which received two exploration li censes in the U.K. North Sea. Plans call for initial drilling there in 1973. In the Java Sea off Indonesia, oil and gas were recovered during one test. Further evaluation is planned to confirm the potential of this find. The gains recorded in 1972 were not solely a result of the improved economy. They reflect investment and commercial decisions initiated earlier. This business strategy is expected to continue to yield further market and profit growth. Businesses Plastic Materials Petrochemicals Petroleum Products MAR 001014 Major Products ABS Nylon Polyethylene Polystyrene PVB sheet Melamines Phenolics Ureas Vinyl acetates Acetic acid Acrylonitrile Butadiene Ethylene Methanol Phenol Propylene Styrene monomer Crude oils Natural gas Asphalts Burner oils Diesel fuels Gasolines Product Applications 1972 Highlights Appliance housings and parts. Automotive interiors, body parts. Pipe for construction. Furniture, plastic packaging. Strong growth in thermoplastics. ABS plant com pleted in Belgium. ABS expansions under way in Ohio and Canada. Israeli polystyrene plant neared completion. Australian expansion begun. Basic nylon facilities expanded in Florida. Engineering plastics line broadened with mineral-reinforced nylon. Laminated glass for automotive windshields, buildings. Increased auto, architectural use. Capacity expanded in Belgium. New facility in Massachusetts replaced older unit there. Appliance enamels, auto coatings, house paints. Insulation, plywood, particleboard for building. Adhesives for packaging. Sales increased substantially. Melamine/urea expan sion completed, and expansion begun on polyvinyl acetate copolymer in Massachusetts. Plastics and resins, man-made fibers, synthetic rubber, organic chemicals. Internal use and sales expanded. Manufacturing efficiencies contributed to income. New styrene monomer plant began operation in Texas. Licensed styrene plants started up in Japan and the United Kingdom. Raw material for refineries, petrochemicals. Home heating, industrial power. Engine fuels, building heat, industrial power, road paving. Successful U.S. drilling increased total reserves. Gas sales up, oil production down slightly. Java Sea test recovered hydrocarbons. License granted for exploration in North Sea. U.S. demand for fuels brought sales increase. Arkansas refinery and related marketing properties sold at end of third quarter. LAM017073 li Monsanto Commercial Products Company MAR 001015 Monsanto Commercial Products Company had record sales and operating income in 1972. Sales reached $570.3 million for the year, compared to $531.7 million in 1971. Operating income rose 18 per cent to $67.7 million. In 1971 operating income was $57.6 million. Agricultural chemicals recorded the strongest sales gains and were major contributors to improved op erating income. Crop protection products led the advance. Sales of Lasso herbicide, which controls most annual grasses and some broadleaf weeds in corn, soybeans, peanuts and cotton, increased sharply. During 1972, the U.S. Environmental Protection Agency granted an additional clear ance for Lasso for use on sweet corn. Domestic der .and was also strong for other crop protection products, including Ramrod herbicide used in corn and sorghum. Outside of the United States, sales gains were made by Avadex and Avadex BW wild oat herbicides, and by Machete herbicide, which controls grassy weeds in rice. A substantial increase in cotton acreage planted in the United States, and in Central America, led to im proved sales of parathion for use in controlling insects. Fertilizer op erations also improved. Two developmental products, Polaris plant growth regulator for sugarcane, and Roundup, a post emergence herbicide for a number of uses, showed excellent results in extensive field tests conducted dur ing 1972. Polaris increases the yield of raw sugar by improving the sucrose content of sugarcane. Roundup controls a broad spectrum of undesirable annual and perennial grasses and broadleaf weeds. Commercialization of these de velopmental products is not ex pected until full field testing is completed and the necessary clear ances are granted by appropriate government agencies. Sales of fabricated plastic prod ucts were strong. Consumer pref erence for plastic containers created increased demand for blow-molded bottles in large volume markets such as household chemicals, toiletries, cosmetics and pharmaceuticals. Polyethylene film sales increased for specialty applications, such as disposable diapers, as well as for agricultural, industrial and construc tion uses. Facilities for increased production capacity were under con struction in 1972. Fome-Cor sheathing board con tinued as a preferred material for use in the subroofs and sidewalls of mobile homes, and sales rose signif icantly over those of 1971. To meet demand for urethane foam used as seat cushioning ma terial in automobiles and furniture, capacity was under expansion at the company's Woodbridge, Ontario, Canada, plant. Progress continued in develop ment of the Lopac container system for carbonated beverages. Tests conducted in 1972 gave positive evaluations of the container's en vironmental acceptability and its performance in filling, shelf life and distribution. Expanded test market ing is planned for 1973. Sales of wholly owned Fisher Con trols Company, Inc., were near the 1971 level. Demand for the sub sidiary's valves, regulators and in struments used to control the flow of gases and liquids was lower than anticipated. - Fisher's performance was hindered by reduced capital spending in most of the major processing industries served by the company. During the year, Fisher's oper ations were expanded when a new manufacturing facility to serve South American markets began operation in Argentina. Growth in the electronics industry stimulated sales of electronic prod ucts in 1972. Demand for Monsanto's silicon, lll-V materials and opto electronic devices was high. Depressed silicon prices began to strengthen late in the year. To meet new customer requirements, the product line was expanded to in clude a three-inch-diameter polished silicon wafer. A substantial gain was made by lll-V materials used in the manu facture of optoelectronic products. Demand for Monsanto's optoelec tronic devices, such as light-emitting diodes, solid-state displays, digital readouts and optically coupled switches, reached a new level. The 1972 performance of Monsanto Enviro-Chem Systems, Inc., did not meet expectations. This was due primarily to cost overruns on several construction projects, discussed earlier in this report, and to lower volume of new business m engineering and construction con 12 LAM017074 tract-service operations. In EnviroChem's product areas, gains were made by Brink mist eliminators and vanadium catalysts, used in acid manufacture. The market for Brink mist eliminators was expanded to include use by textile and pulp and paper industries. At year-end, Enviro-Chem entered into an agreement with the city of Baltimore, Md., to build a plant utilizing the company's Landgard solid-waste disposal and resource recovery process. Scheduled for operation by the city in 1974, the unit will dispose of 1,000 tons of municipal waste daily, while re covering ferrous metals and glassy aggregates as salable products. Steam generated from the heat of the Landgard pyrolysis process will be sold by the city to the Baltimore Gas and Electric Company as an energy source. Monsanto Commercial Products Company is in a strong position to meet increases in demand fore casted for its products in 1973. Businesses Products for Agriculture Plastic Products Process Controls and Electronics Chemical and Environmental Systems Major Products Herbicides Insecticide Fertilizer materials Animal feed supplements Blasting agents Bottles, film, sheet and trays Fome-Cor board Urethane foam Valves, regulators and controllers Electronic instrumentation Silicon III-V materials Optoelectronic devices Engineering and con struction contract services Brink mist eliminators Vanadium catalysts Landgard process Product Applications 1972 Highlights Weed and insect control, and soil fertilization. Quality improvement for poultry and pork producers. Mining and engineering explosives. Continued strong performance. High volume, good product mix, generally favorable market conditions for crop protection products. Herbicide uses broadened. Good gains in markets outside the U.S. Experimental products for new markets met de velopment expectations. Packaging of food, house hold and other products. Polyethylene film for agri cultural, construction, in dustrial and specialty uses. Strong market growth for plastic packaging con tinued. Bottle prices stable, but food film and sheet packaging prices under pressure. Fome-Cor sheathing for mobile home construction. Foam for automobile and furniture cushions. Markets for Fome-Cor and urethane foam strong. New production capacity under way for embossed polyethylene film and urethane foam. Chemical process, power, oil and gas. pulp and paper industries for flow control of liquids and gases. Market demand soft. Static new' plant activity in markets served. Year-end order backlog strong. New plant in Argentina. U.S. and European interest in electronic instrumentation line gained. Components for semicon ductors. Optoelectronic devices for computer, cal culator, electronics, air craft and automobile industries. Strong market demand. Silicon prices strengthened at year-end. New products extended applications. Chemical process, power, textile, pulp and paper industries. Municipal environmental control. Cost overruns and lower volume of engineering and construction services depressed performance. Sales of Brink mist eliminators at new high. First saie of Landgard solid waste disposal and recovery process. MAR 001016 LAM017075 13 International Division As a multinational corporation, Monsanto faces numerous oppor tunities and challenges associated with meeting the varied social, in dividual and industrial needs of the many nations in the world. These needs range from the most basic requirements in developing areas to the highly complex demands of a United States or European Economic Community (EEC). In a period of rising concern in products more competitive in world markets. Capacity at some existing plants was expanded, and new plants came on-stream. Over-all ca pacity utilization was high. Exports from the United States were particularly strong during 1972, increasing to $155.5 million. This was a 30 per cent gain over export sales of $119.8 million reported in 1971, with strength in most product lines. During 1972, the United Kingdom, Ireland and Denmark joined the EEC, bringing the alliance total to nine nations. The EEC has a population slightly larger than that of the United States and accounts for 45 per cent of the world's international trade. Monsanto's long-range planning has been based upon this enlargement of the EEC, and the company ex pects to benefit from evolving new business opportunities. many countries over individual na tional interests, Monsanto is well positioned and dedicated to making a positive contribution to the socie ties and economies in which the company does business. Exports were also stimulated by the creation of a Domestic Inter national Sales Corporation (DISC) subsidiary. DISC subsidiaries were authorized under the U.S. Revenue Act of 1971 to improve the cost Monsanto's sales in Canada and Latin America were $151.1 million in 1972, a 14 per cent increase over a comparable $132.9 million re ported in 1971. The $132.9 million excludes $20.5 million of sales of For 1972, Monsanto's sales abroad, made up of exports of U.S. produced products and sales of products manufactured outside of the United States, reached a record $551.5 million--a 12 percent gain overthe $492.6 million reported for 1971. Because Monsanto's op erating companies have worldwide responsibility for product lines, these sales and the attendant op erating income have already been reported in the operating company sections. Summary of Sales Abroad (Dollars in millions) 1972 Exports from the United States......................$155.5 Manufactured outside the United States.......... ... 396.0 Total............................... ...$551.5 1971 $119.8 372.8 $492.6 A number of factors contributed to higher sales for 1972. Economic conditions improved worldwide. Cur rency revaluations that resulted competitiveness of U.S. products in world markets, stimulate domes tic employment and help the U.S. balance of payments. Sales Abroad by World Area (Dollars in millions) 1972 Europe....................................... .$320.2 Canada and Latin America. . 151.1 Pacific and Other................... . 80.2 Total................................... .$551.5 1971 $270.0 153.4 69.2 $492.6 In Europe, Monsanto's sales in creased 19 per cent over those of 1971. Selling prices, while weak early in 1972, began firming at midyear. Sales gains were led by products for agriculture and by man-made fibers. Inflation remains a serious prob lem in Europe, particularly in the United Kingdom where wage and price controls were established dur ing 1972. Other European countries are utilizing various means to halt inflation, including control of in the former subsidiary, Monsanto Mexicana S.A., which was merged with Resistol S.A. in 1971, creating an affiliate company, Industrias Resistol S.A. Canadian sales, stimulated by strong markets for agricultural prod ucts in western Canada, were led by crop protection chemicals. Sales of synthetic fibers and plastics were also major contributors to improved 1972 results. In Latin America, plastics, rubber chemicals, phosphate products and chemicals for agriculture were strong performers. Mexico, Argentina, Bra zil and Central America represent the major Monsanto market areas in this region. Despite continued high rates of inflation, operations in Argentina were successful, and product lines were expanded with the installation of a facility for the manufacture of rubber chemicals. from the Smithsonian Agreement of terest rates and credit, and adjust In the Asia-Pacific area, sales of December, 1971, made American ment of monetary policies. $80.2 million were led by fibers and 14 MAR 001017 LAMO17076 agricultural and rubber chemicals. In 1971 sales were $69.2 million. The company has partial owner ship in major affiliated companies in Spain, Japan and Mexico. Monsanto's Spanish affiliate, Aiscondel S.A., experienced the best year in its history in 1972, helped by the rapid economic expansion in Spain. Aiscondel maintains its posi tion as a major plastics producer and plastics fabricator. Excess capacity in the Japanese chemical industry led to low prices early in 1972. Prices began firming late in the year. Monsanto's affiliate, Mitsubishi Monsanto Chemical Company, achieved record sales in 1972, and the improvement is ex pected to continue into 1973. The year 1972 was the first full year of operation of Industrias Resistol S.A. The strengthening Mexican economy and cooperation among the component organiza tions of the newly formed company led to an outstanding performance for the year. Expansion and diversi fication programs currently under way are expected to lead to further growth in Mexico. Other key events in 1972 were the trade agreement that was reached between the United States and the U.S.S.R. and the opening of trade with the People's Republic of China. These two highly popu lated market areas offer Monsanto expanded opportunities for future commercial relationships. Business programs have been designed to adapt to these developments, and we are hopeful that future years will bring significantly expanded busi ness relations with both countries. For 1972, Monsanto had capital expenditures of $54.1 million in areas outside of the United States. This constituted approximately 32 per cent of total worldwide capital expenditures for the year. Capital Expenditures Abroad (Dollars in millions) 1972 Europe................................. Canada and Latin America............... ............ 5.5 Pacific and Other. . . ........... 1.5 Total....................... ............$54.1 1971 $56.3 3.3 1.1 $60.7 At the end of 1972, Monsanto's gross investment in plant and prop erty outside of the United States was $489.3 million--up $35.3 mil lion from 1971. Gross Plant and Property Investment Abroad (Dollars in millions) Year-End 1972 1971 Europe............................. ..........$414.4 Canada and Latin America............ .......... 41.8 Pacific and Other........ .......... 33.1 Total.......................... ..........$489.3 $376.3 44.3 33.4 $454.0 Consolidated Sales by Product Groups (Dollars in millions) Industrial Chemicals: Rubber and Specialty Chemicals Process Chemicals. Phosphates and Detergents . ..................... Textiles: Man-Made Fibers ... Polymers & Petrochemicals: Plastic Materials . . Petrochemicals . . Petroleum Products Commercial Products: Products for Agriculture ... Plastic Products .. Process Controls and Electronics Chemical and Environmental Systems . Other Products . . Sales from Continuing Operations . Sales from Discontinued Lion Oil Operations . Total........................................ .. MAR 001018 1972 1971 Per Cent Increase (Decrease) Per Cent of Total 1972 1971 $ 255.6 $ 245.5 160.0 142.8 156.7 156.0 4.1% 12,0 0.4 11.9% 7.4 7.3 12.3% 7.1 7.8 526.0 479.7 9.7 24.4 24 0 346.5 112.7 27.8 310.4 106.3 27.5 11.6 6.0 1.1 16.1 5.2 1.3 15.5 5.3 14 222.3 144.4 137.3 39.9 26.4 2,155.6 69.8 $2,225.4 199.7 134.8 125.0 52.8 19.4 1,999.9 87.2 $2,087.1 11.3 7.1 9.8 (24.4) 36.1 7.8 (20.0) 6.6% 10.3 6.7 6.4 1.8 1.2 100.0% 10 0 67 6.3 26 i0 100 0% LAM017077 Technology Monsanto's technological pro grams have three basic goals: im provement of existing products and processes; redesign of existing prod ucts to penetrate new markets; development of new processes and product systems. The major portion of the $92.0 million spent for technology in 1972 was in the first two categories and took place within the four Monsanto operating companies. Representa tive of the innovations reported in other sections of this report, and stemming from Monsanto's over-all technological capabilities, were: Monvelle biconstituent fibers for hosiery, Polaris plant growth regu lator, Roundup herbicide, specialty plasticizers with flame resistant properties, Vydyne mineral-rein forced nylon plastics, and digital and analog control systems. In the development of new pro cesses and product systems, Monsanto concentrates on those areas where it has proven tech nological capabilities, or where the end product can serve markets familiar to the company. While the development of new systems is costly, the potential for significant impact on future sales and earnings is high. A number of promising new busi nesses were in varying stages of commercialization in 1972 by the company's New Enterprise Division, which researches, develops and markets items outside the main stream of Monsanto's fouroperating companies. Sales of Monsanto's Cerex spunbonded nylon fabric increased sharply in 1972 for a number of industrial end-uses. Production ca pacity was expanded. The company foresees a major marketing oppor tunity in the area of nonwoven fabrics, a rapidly growing segment of the textiles industry. An AstroTurf resilient track-basketball-tennis surface was added to the well known line of AstroTurf syn thetic recreational and landscaping surfaces in 1972. Monsanto now offers a full line of athletic surfaces. Sales and operating income of Cerex and AstroTurf product lines are reflected in the operating results of Monsanto Commercial Products Company. In addition to the New Enterprise Division's activities, the Corporate Research Department and the Cor porate Engineering Department per form exploratory research and funda mental engineering to improve the technical excellence of existing busi ness groups and to support new Monsanto business ventures. In 1972 Monsanto made major additions to its store of funda mental knowledge in catalysis, poly mers and electrochemistry--three areas in which the company is partic ularly expert at effecting changes on the molecular level. As one measure of its scientific and technological effectiveness, Monsanto last year received 472 U.S. patents and 1,068 patents outside the United States. Monsanto continues to pioneer in computer applications. Last year the company redesigned its U.S. and European computer networks to bring the capabilities of large ma chines to dozens of Monsanto lo cations. The U.S. network, centered in St. Louis, now processes four times as many remote jobs as it did a year and a half ago, with no increase in computer cost. The European network, centered on a large scale computer in Brussels, was installed with relative ease, utilizing Monsanto developed tech nology. Environmental research continues to receive strong emphasis. At Dayton, Ohio, Monsanto Research Corporation (MRC), a Monsanto sub sidiary, developed a sophisticated measuring device to detect pol lutants in flowing rivers at levels not previously possible on a practical basis. The first instruments pro duced were purchased by the En vironmental Protection Agency. MRC continued to operate Mound Laboratory at Miamisburg, Ohio, for the U.S. Atomic Energy Commission. As part of its work in support of government programs, the labora tory separates and distributes stable gaseous isotopes and carbon-13 for use in research worldwide. The laboratory also develops and fab ricates radioactive power sources for space, terrestrial and medical programs. MAR 001019 LAM017078 Monsanto Company and Subsidiaries Statement of Consolidated Income (Dollars in millions, except per share) Net Sales......................................................................................................... $2,225.4 $2,087.1 Cost of Goods Sold.......................................................................................... 1,696.3 1,614.3 Gross Profit..................................................................................................... 529.1 472.8 Less: Marketing and administrative expenses..................................................... Technological expenses............................................................................... Operating Income........................................................................................... Income Charges (Credits): Interest expense.......................................................................................... Other-net.................................................................................................. Income Before Income Taxes............................................................................. 220.7 92.0 312.7 216.4 37.2 (23.4) 13.8 202.6 208.2 86.7 294.9 177.9 38.9 (20.4) 18.5 159.4 Provision for Income Taxes: Current............................................................................................ ............ Deferred (credit)........................................................................................... Net Income..................................................................................................... 80.9 (.3) 80.6 $ 122.0 69.4 (3.7) 65.7 $ 93.7 Earnings a Common Share Based on Weighted Average Number of Shares Outstanding: Primary...................................................................................................... Fully diluted.............................................................................................. $3.49 3.40 $2.65 2.63 The above statement should be read in conjunction with pages 22 through 25 of this report. LAM017079 MAR 001020 17 Monsanto Company and Subsidiaries Statement ot Consolidated Financial Position (Dollars in millions, except per share) ASSETS December 31, 1972 December 31, 1971 Current Assets: Cash............................................................................................................... Marketable securities, at cost which approximates market........................ Receivables, net of allowances of $18.0 in 1972 and $15.6 in 1971......... Inventories..................................................................................................... $ 34.6 160.1 400.2 394.3 989.2 $ 34.2 40.4 402.9 395.4 872.9 Investments and Miscellaneous Assets: Investments in affiliates -- at equity in 1972.............................................. Miscellaneous investments and receivables -- at cost or less.................... 41.3 39.4 --- 80.7 25.1 45.0 70.1 Property, Plant and Equipment, at Cost: Land............................................................................................................... Buildings........................................................................................................ Machinery and equipment............................................................................ Mineral rights and related properties........................................................... Less accumulated depreciation anddepletion, etc...................................... Net property............................................................................................... Deferred Charges............................................................................................. The above statement should be read in conjunction with pages 22 through 25 of this report. 30.1 414.3 2,197.2 123.4 2,765.0 1,631.7 1,133.3 33.7 $2,236.9 32.4 408.4 2,172.5 121.8 2,735.1 1,564.8 1,170.3 40.2 $2,153.5 18 MAR 001021 LAM017080 LIABILITIES AND SHAREOWNERS' EQUITY December 31, 1972 December 31, 1971 Current Liabilities: Accounts payable and accruals..................................................................... Income taxes................................................................................................. Current portion of long-term debt................................................................ Long-Term Debt--Less Current Portion Above............................................... $ 263.1 36.2 12.6 311.9 576.2 Other Liabilities and Deferred Credits: Deferred income taxes................................................................................... Miscellaneous................................................................................................ Minority Interests in Subsidiary Companies............................... 27.2 24.8 52.0 3.0 Shareowners' Equity: Preferred stock--authorized, 10,000,000 shares without par value, issuable in series; outstanding, 2,321,610 shares in 1972 and 2,320,410 shares in 1971....................................................................................................... Common stock -- authorized, 50,000,000 shares, par value $2 each; issued, 33,308,988shares in 1972 and 33,155,500 shares in 1971........ Paid-in surplus............................................................................................... Retained earnings......................................................................................... Less common stock in treasury, at cost (307,033 shares in 1972 and 306,543 shares in 1971)........................................................................... 5.2 66.6 593.0 641.5 1,306.3 12.5 1,293.8 $2,236.9 $ 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 MAR 001022 LAM017081 19 Monsanto Company and Subsidiaries Statement of Changes in Consolidated Financial Position (Dollars in millions) Source of Working Capital: Operations: Income......................................................................................................... Depreciation, obsolescence and depletion................................................. Working capital from operations.............................................................. Outside financing............................................................................................ Property disposals........................................................................................... Other--net....................................................................................................... Application of Working Capital: Capital expenditures....................................................................................... Dividends......................................................................................................... Debt reduction................................................................................................. Net Increase in Working Capital....................................................................... Year 1972 Year 1971 $122.0 193.9 315.9 41.4 11.4 19.2 387.9 $ 93.7 186.9 280.6 64.3 17.9 11.6 374.4 168.3 65.5 23.4 257.2 $130.7 205.2 65.1 95.4 365.7 $ 8.7 Changes in Elements of Working Capital: Increase (decrease) in current assets: Cash and marketable securities.................................................................. $120.1 $ (5.2) Net receivables................................................................................................... (2.7) 19.8 Inventories.......................................................................................................... (1.1) 3.3 116.3 17.9 (Increase) decrease in current liabilities: Accounts payable and accruals................................................................... Income taxes............................................................................................... Current portion of long-term debt....................................................................... (15.9) 27.1 3.2 2.3 (45.1) 33.6 14.4 (9.2) Net Increase in Working Capital...................................................................... $130.7 $ 8.7 The above statement should be read in conjunction with pages 22 through 25 of this report. 20 LAM017082 MAR 001023 Monsanto Company and Subsidiaries Statements of Consolidated Paid-In Surplus and Retained Earnings (Dollars in millions, except per share) Paid-In Surplus Year 1972 Balance at Beginning of Year................................................................................. $586.5 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: 1,200 shares in 1972 and 6,500 shares in 1971...................................... Common stock--par value $2 each: 152,628 shares in 1972 and 67,138 shares in 1971................................ Balance at End of Year........................................................................................... .1 6.4 6.5 $593.0 Year 1971 $583.5 .2 2.8 3.0 $586.5 Retained Earnings Balance at Beginning of Year: As previously reported........................................................................................ Adjustment for certain affiliates from cost to equity......................................... As restated..................................................................................... $580.2 4.8 585.0 $551.6 551.6 Addition--Net income for the year........................................................................ 122.0 707.0 Deduction: Dividends on capital stock of parent company: Preferred--$2.75 a share................................................................................. Common--$1.80 a share.................................................................................. 6.4 59.1 65.5 Balance at End of Year........................................................................................... $641.5 93.7 645.3 6.4 58.7 65.1 $580.2 The above stalements should be read in conjunction with pages 22 through 25 of this report. MAR 001024 LAM017083 21 Summary of Significant Accounting Policies Basis of Consolidation The consolidated financial state ments include Monsanto Company (the Company) and all its domestic and foreign subsidiaries in which it has more than a 50 per cent interest. All significant intercompany trans actions have been eliminated. Foreign currency assets and liabil ities are translated into United States dollars at approximate yearend rates, except that fixed assets are translated at exchange rates prevailing at the dates acquired. Income and expense items are translated at approximate average rates in effect during the year, except depreciation which is cal culated at the approximate rates prevailing when the fixed assets were acquired. Year-end currency exchange and translation gains and losses are recorded in a reserve for foreign operations. Losses in excess of the reserve balance are charged to in come currently. Investments in the common stock of certain affiliates considered joint ventures, in which the Company has 20 per cent but not more than 50 per cent interest, are accounted for by the equity method. Construction Contracts Monsanto Enviro-Chem Systems, Inc., a subsidiary, reports income on its long-term contracts on the percentage-of-completion basis. Losses on such contracts are re ported in the period first recognized. Depreciation and Depletion The Company, with minor excep tions, uses the sum of the years digits method of computing depre ciation on most domestic assets placed in service in the period 1955--1971 and the straight line method on assets placed in service effective January 1, 1972. Most foreign subsidiaries compute de preciation by use of the straight line method. Depreciation rates are based on the estimated useful lives of the individual assets. Deprecia tion and depletion of mineral rights and related properties are by the unit of production method based upon estimated recoverable reserves. Income Taxes The Company follows the practice of reducing its provision for current income taxes by the full amount of its investment tax credits. Accelerated methods of depre ciation are used for income tax pur poses. Deferred income taxes are provided for amounts which affect financial and taxable income in different periods. Inventory Valuation Inventories are stated at the lower of cost or market, determined gen erally on the first-in, first-out basis. Pension Plans Pension costs include charges applicable to current service and amortization of unfunded prior serv ice costs, wherever applicable, gen erally over periods ranging from 15 to 30 years. It is the policy to fund pension costs accrued. Technological Expenses Research,-development, and en gineering expenditures are charged to costs as incurred. Accountants' Opinion HASKINS & SELLS CERTIFIED PUBLIC ACCOUNTANTS Monsanto Company: TEN BROADWAY SAINT LOUIS 63102 We have examined the accompanying consolidated financial statements (pages 17 through 25) of Monsanto Company and Subsidiaries for the years ended December 31, 1972 and 1971. 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, 1972 and 1971 and the results of their operations and changes in their financial position for the years then ended, in conformity with generally accepted accounting principles applied, except for the change in depreciation method, in which we concur, explained on page 23 in the notes to financial statements, on a consistent basis. February 16, 1973 22 MAR 001025 LAM017084 Notes to Financial Statements (Dollars in millions, except per share) Depreciation, Obsolescence, Depletion 1972 Charges against income: Depreciation and amortization............... Obsolescence................ Depletion........................ $168.4 21.7 3.8 $193.9 1971 $167.4 14.7 4.8 $186.9 Effective January 1, 1972, the Company changed from the sum of the years digits method to the straight tine method of computing depreciation for financial statement purposes on domestic assets placed in service on or after that date. The reason for the change in policy was the desire to conform with prevailing industry practice. The change re sulted in reduced depreciation charges of $5.0 and an increase in net income of $2.6, or 8 cents a share for the year. It is estimated that the cumulative effect of the change in method will have a greater impact upon earnings in subsequent years. The Company continued the use of the sum of the years digits method of computing depreciation on most domestic assets placed in service prior to 1972. The excess of depreciation provided by this meth od over straight line depreciation on such assets was $13.0 in 1972 and $18.3 in 1971. Earnings a Common Share Primary earnings a common share are based on the weighted average number of common shares out standing in each year plus shares issuable upon the conversion of convertible loan stock of Monsanto Textiles Limited and the exercise of employe stock options. Net income used in this computation is after deduction of dividends on the $2.75 Preferred Stock but before deduc tion of interest (less tax) on the convertible loan stock. Fully diluted earnings a common share are based on the number of shares used in the determination of primary earnings, plus common shares issuable upon conversion of the $2.75 Preferred Stock and the convertible debentures of Monsanto International Finance Company. Net income used in this computation is before deduction of dividends on the preferred stock and before de duction of interest (less tax) on the convertible loan stock and the convertible debentures. Employes' Bonus The provision for employes' bonus under the Company's Bonus Plan was $2.5 in 1972. On February 16, 1973, bonus awards aggregating $2.0 were made to 18 directors and officers and 251 other employes. The level of net income in 1971 did not allow a bonus provision and bonuses were not awarded. Equity in Affiliates and Foreign Subsidiaries Effective January 1, 1972, the Company changed from the cost to the equity method of reporting its investments in the common stock of certain affiliates considered cor porate joint ventures. Retained earn ings as of January 1, 1972, have been credited with the Company's equity in the undistributed earnings of these affiliates as of that date. 1971 results have not been restated since the change to the equity method had no material effect on the results as previously reported. The Company's equity in the un audited net income of these com panies totaled $4.6 and is included in other income in 1972, and com pares with equity in net income of $1.3 in 1971. Dividends of $0.7 were received and recorded as other income in 1971. The Company's equity in the net income of foreign subsidiaries was $17.2 in 1972 and $17.3 in 1971. The Company's equity in the net assets of these companies at December 31, 1972 and 1971, was $303.9 and $274.0, respectively. Consolidated retained earnings at December31, 1972. include $140.0 of the undistributed earnings of these subsidiaries and corporate joint ventures. The remittance of these earnings has been indefinitely postponed as the companies have reinvested a substantial portion thereof, or have plans for reinvest ment of these earnings in their operations. Consequently, no pro vision has been made for U.S. income taxes on these undistributed earnings. Any tax on dividends which may be received will be sub stantially offset by foreign tax credits. Goodwill Write-Off During 1972, the Company wrote off the remaining goodwill asso ciated with its investment in Lansil Limited, in the United Kingdom, resulting in a $4.2 reduction of net income. The current market uncer tainty of Lansil's cellulosic fibers product line resulted in a decision to reduce the value of this investment. Income Taxes Investment tax credits totaled $7.3 in 1972 and $1.1 in 1971. The provision for current income taxes has been reduced by the full amount of such credits. The Company utilizes guideline lives and the Asset Depreciation Range System class lives for ma chinery and equipment in comput ing depreciation for income tax purposes. Legal Proceedings The Company and its subsidiaries are defendants in a number of law suits. 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 oftheCompanyand its consolidated subsidiaries. Liabilities -- Contingent and Commitments The Company and its subsidiaries were contingently liable as guar antors of bank loans and for customers' receivables discounted aggregating approximately $22.8 at December 31, 1972, and $21.5 at the end of 1971. MAR 001026 LA A/JO 7 7085 23 Notes to Financial Statements (cont.) Long-Term Debt The long-term debt of the Company and its subsidiaries at December 31, 1972 and 1971, exclusive of current maturities, and repayable in U.S. dollars, except where indicated, was as follows: Parent Company: 6;'2%--8V2% bank loan due 1975/1985 (West German Mark) (a) 4%% promissory notes due 1993............................................................ 9'/8% sinking fund debentures due 2000............................................ 3%% income debentures due 2002........................................................ 414% income debentures due 2008........................................................ Monsanto International Finance Company: 4`/2% guaranteed sinking fund debentures due 1985 (b).............. Monsanto International N.V. (Netherlands Antilles subsidiary): 8%% guaranteed sinking fund debentures due 1985..................... 5`/2% guaranteed bonds due 1987 (Swiss Franc).............................. Monsanto Textiles Limited (British subsidiary) (Pound Sterling): Guaranteed bank loans (1% over bank rate) due 1973/1974.... 5% guaranteed loan stock due 1982/1986 (c)................................... 5% guaranteed loan stock due 1992/1997......................................... 614% guaranteed loan stock due 1992/1997..................................... Monsanto (Suisse) S.A. (Swiss subsidiary) (Swiss Franc): 6%% guaranteed sinking fund debentures due 1985..................... 61/2% guaranteed sinking fund debentures due 1986..................... Monsanto Europe S.A. (Belgian subsidiary) (Belgian Franc) (d): 9% guaranteed bank loan due 1974/1986.......................................... 8.6% guaranteed bank loan due 1975/1983...................................... Other...................................................................................................................... Total (e)....................................................................................................... 1972 $ 16.0 90.7 150.0 91.0 50.0 1971 $ 14.1 100.0 150.0 91.0 50.0 25.0 25.0 18.6 20.8 20.0 -- 5.7 25.3 3.5 3.5 12.5 28.1 3.9 3.9 7.8 13.0 7.8 13.0 21.5 11.0 22.8 $576.2 17.9 4.4 16.6 $558.2 NOTES: (a) Interest on this bank loan is reduced by a West German Government subsidy (expiring in 1974) equal to a percentage of construction costs for which the loan is used. (b) These debentures are guaranteed by Monsanto Company and are currently con vertible into Monsanto common stock at $89 a share, subject to adjustment under certain conditions. (c) This loan stock is guaranteed by Monsanto Company and is convertible into Monsanto 4%% promissory notes.................................... 9Va% sinking fund debentures.................... 4V2% guaranteed sinking fund debentures Bank loans (Monsanto Textiles Limited)... Bank loans (Monsanto Europe S.A.)............ Other...................................................................... . common stock at the rate of one share per 22 18s. 4d. (approximately 22 pounds 92 new pence) ($54 at current exchange rate), subject to adjustment under certain con ditions. (d) Interest on these bank loans is reduced by fovernment subsidies of 2.4% (expiring in 973) on the 9% loan and 2% (expiring in 1974) on the 8.6% loan. (e) Maturities and sinking fund requirements on long-term debt for the five years ending December 31. 1977, are as follows: 1973 $ 4.7 -- -- 5.7 -- 2.2 $12.6 1974 $ 4.7 -- -- 5.7 1.7 2.8 $14.9 1975 $ 4.7 -- -- -- 2.9 4.0 $11.6 1976 $ 4.7 6.0 2.5 -- 2.9 6.2 $22.3 1977 $ 4.7 6.0 2.5 -- 2.9 4.1 $20.2 MAR 001027 Pension Plans The Company and its subsidiaries have several pension plans covering substantially all employes. Following a review in 1971 of certain hourly and salaried pen sion plans, the Company adopted a revised formula for evaluating as sets in such pension plans and in creased the assumed rate of return on such assets from 4% to bVz%, a level deemed to be more realistic. The effect was to reduce materially the annual cost of funding the pen sion plans. These two changes, however, were offset by two actions which added materially to such annual costs. They were the reduc tion in the amortization period of certain unfunded past service costs and amendments to certain pension plans in 1971 providing increased benefits to employes. The net im pact on earnings of the above changes was not material in both 1971 and 1972. The total provision for pension costs for the years 1972 and 1971, was approximately $35.9 and $36.3, respectively. The market value of assets in the related pension funds exceeded the actuarialiy computed value of vested -benefits for plans of the Company and certain domestic subsidiaries as of December 31, 1972. Preferred Stock The outstanding preferred stock is stated at $2.24 a share and has a cumulative dividend of $2.75 a share. It is convertible at any time into Company common stock at the initial rate of 1.12 shares of common for each share of pre ferred, subject to adjustment in certain events under antidilution provisions. The stock may be re deemed at the Company's option any time on or after August 12, 1974, at $73 a share, which amount is also the voluntary liquidation preference. The involuntary liquida tion preference is $35 a share, or an aggregate of $81.3 in 1972 and $81.2 in 1971. 24 LAM017086 Project Cost Overruns The Company anticipates cost overruns on several projects being constructed by its subsidiary, Monsanto Enviro-Chem Systems, Inc. All anticipated cost overruns were fully recognized and had the effect of reducing net income by $5.3 in 1972. Repairs Repairs and maintenance charges were $135.7 in 1972 and $127.8 in 1971. Revolving Bank Credit Agreement On November 1, 1971, the Com pany arranged for total domestic short-term bank credit facilities of $180.0. These arrangements, made with sixteen banks, provided for $125.0 under a Revolving Credit Agreement plus a $55.0 Line of Credit. All loans under these agree ments are to bear interest related to the prime commercial rate of the agent bank. On March 31, 1972, the over-all credit facility was reduced to $120.0. Of the reduced amount, $60.0 was covered by a Revolving Credit Agree ment and $60.0 by a Line of Credit. The participant banks and the in terest rate arrangements remained unchanged. No borrowings have been made under either of these loan agreements. Sale of Lion Oil Properties The Company sold its petroleum marketing and refining properties in September, 1972. This resulted in a gain, after applicable taxes, of $3.4. The results of these discontinued operations, excluding allocated cor porate charges, included in the accompanying statement of con solidated income are as follows: Net sales.............. Operating income Nine Months 1972 $69.8 5.5 Year 1971 $87.2 4.9 Shares in Treasury The Company held 307,033 shares of its common stock in treasury for general corporate purposes at De cember 31, 1972. The Company also held 61,938 shares of its com mon stock for specific purposes which are included in Miscellaneous Investments in the accompanying statement of financial position at December 31, 1972. Shares Reserved At December 31, 1972, there were 8,900 shares of $2.75 Preferred Stock reserved for stock options, and 4,319,351 shares of common stock were reserved for the following purposes: Conversion of $2.75 Preferred Stock................................................ Stock option plans.......................... Conversion of convertible loan stock of Monsanto Textiles Limited............................................ Conversion of debentures of Monsanto International Finance Company........................ Total............................................. Shares 2,600,203 967,838 470,412 280,898 4,319,351 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: Outstanding 1/1/72.................................... ....................... Unoptioned 1/1/72..................................... ....................... Optioned during year.................................. ....................... Exercised during year.................................. ....................... Expired during year...................................... ....................... Terminated during year.............................. ....................... Outstanding 12/31/72............................... ....................... Unoptioned 12/31/72................................ ....................... 1969 Plan 756,300 189,112 164,050 88,378 3,500 21,397 807,075 49,959 1964 Plan 156,910 -- _ 58,205 -- 575 98,130 -- 1960 Plan 9,_823 _ 6,045 1,072 __ 2,706 -- Linder the above plans, 841 op tions were outstanding at prices ranging from $31.25 to $58.38 a share, or a weighted average of $48.78 a share. The status of the authorized shares of $2.75 Preferred Stock for the stock option plan for employes of the former Fisher Governor Com pany and the changes occurring during the year were: Outstanding 1/1/72.............................. Exercised during year........................... Terminated during year....................... Outstanding 12/31/72......................... 10,400 1.200 300 S.900 Under this plan, 29 options were outstanding, at prices of $46.00 and $46.50 a share, or a weighted average of $46.47 a share. LAM017087 MAR 001028 Monsanto Company and Subsidiaries Ten-Year Summary (In millions, except per share and where italicized) 1972 Operating Results Net sales................................................................ .............. Gross profit............................................................ .............. Per cent of net sales.......................................... .............. Operating income.................................................. .............. Income before extraordinary items....................... .............. Extraordinary charges (credits) -- net................... .............. Net income............................................................ .............. Per cent of net sales.......................................... .............. Earnings a common share: Primary: Before extraordinary items............................. .............. After extraordinary items................................ .............. Fully diluted: Before extraordinary items............................. .............. After extraordinary items................................ .............. $2,225.4 529.1 23.8(; 216.4 122.0 -- 122.0 $3.49 3.49 3.40 3.40 1971 1970 $2,087.1 472.8 22.79c 177.9 93.7 -- ,,.... 93.7 4.5% $1,971.6 445.2 22.6% 128.2 77.9 11.3 66.6 3.4%c $2.65 2.65 2.63 2.63 $2.17 1.83 2.17 1.83 Financial Position Working capital............................ ............ Property, plant and equipment -- gross................. ............ Property, plant and equipment -- ne-':.................... ............ Total assets.................................. ............ Long-term debt............................. ............ Shareowners' equity.................... ............ $ 677.3 2,765.0 1,133.3 2,236.9 576.2 1,293.8 $ 546.6 2,735.1 1,170.3 2,153.5 558.2 1,225.7 $ 537.9 2,636.7 1,169.9 2,144.7 589.3 1,194.2 Other Data Depreciation, obsolescence and depletion................ ........ Capital expenditures................................................... ......... Employes..................................................................... ........ Shareowners: Common................................................................... .......... Preferred................................................................... ........ Common shares........................................................... ........ Per common share: Dividends.................................................................. ........ Book value................................................................ ........ (1) Excludes $16.0 applicable to extraordinary charges. $193.9 168.3 57,891 104,369 3,939 33.3 $ 1.80 39.05 26 MAR 001029 $186.9 205.2 59,271 110,490 3,897 33.1 $ 1.80 37.16 $170.4' 300.8 62,940 121,399 3,941 33.1 $ 1.80 36.27 LAM017088 1969 1968 1967 1966 1965 1964 1963 $1,938.8 513.5 26.5< ; 190.9 109.4 (6.7) 116.1 6.or; $1,865.1 497.2 7(5.7'.;. 213.7 115.6 -- 115.6 6.r- $1,705.3 449.5 26.4C; 185.7 105.3 (6.4) 111.7 <5.<5r; $1,679.0 459.8 27.4r; 211.0 120.4 -- 120.4 7.2r", $1,526.5 452.8 29.7r; 219.4 130.0 -- 130.0 8.5C $1,407.9 439.2 31.2r; 226.2 120.6 -- 120.6 8.6ci $1,237.9 360.9 29.2C< 174.1 87.7 -- 87.7 7.rl $3.08 3.28 3.03 3.21 $3.26 3.26 3.20 3.20 $2.96 3.15 2.92 3.10 $3.48 3.48 3.40 3.40 $3.86 3.86 3.73 3.73 $3.65 3.65 3.56 3.56 $2.67 2.67 2.65 2.65 $ 509.5 2,470.8 1,071.4 2,012.2 454.0 1,204.7 $ 519.7 2,344.6 1,046.5 1,956.7 472.8 1,154.4 $ 433.9 2,293.1 1,097.6 1,907.5 492.4 1,103.0 $ 396.2 2,167.0 1,105.0 1,905.9 520.3 1,044.4 $ 364.2 1,982.3 1,046.9 1,814.5 500.8 975.1 $ 306.6 1,715.1 883.5 1,561.4 378.6 884.8 $ 325.1 1,536.4 787.3 1,443.5 385.9 795.3 $163.7 219.9 64,604 118,156 3,621 33.1 $ 1.80 36.25 $174.3 135.0 62,815 111,538 33.1 $ 1.65 34.74 $165.2 166.4 62,073 111,363 33.0 $ 1.60 33.31 $154.0 219.6 60,697 95,938 32.3 $ 1.60 32.17 $134.8 299.1 58,817 93,538 31.6 $ 1.45 30.67 $121.4 219.7 54,376 89,833 30.9 $ 1.25 28.51 $115.6 115.5 49,883 80,608 30.0 $ 1.20 26.37 MAR 001030 LAM017089 27 Worldwide Interests Included among Monsanto's mem ber companies around the world are those appearing in the following list. Per cent ownerships are noted par enthetically. In addition, there are a number of other member compa nies not listed, many of which have been established for marketing or investment purposes. North America UNITED STATES Farmers Hybrid Companies, Inc. (100%) is a producer of hybrid breeding swine and seed corn. Fisher Controls Company, Inc. (100%) manu factures and markets process measurement and control equipment. Monsanto Enviro-Chem Systems, Inc. (100%) develops and markets engineered chemical facilities and pollution-abatement systems. Monsanto Flavor/Essence, Inc. (100%) manu factures essential oils, aroma chemicals, flavors and fragrances. Monsanto International Finance Company (100%) obtains funds abroad to help finance overseas expansion. Monsanto Research Corporation (100%) con ducts research for government agencies and for Monsanto; produces nuclear sources; operates a government-owned laboratory for the Atomic Energy Commission. United Systems Corporation (100%) manu factures electronic test and measurement instruments. CANADA Monsanto Canada Ltd. (100%) manufactures chemicals and plastics. Plax Canada Ltd. (50%) produces plastic blownware. Europe and Middle East BELGIUM Monsanto Europe S.A. (100%) manufactures plastics and chemicals in Belgium and con ducts marketing activities throughout Europe. FRANCE Societe Monsanto (100%) manufactures plastics. ISRAEL Israel Chemical Fibres Ltd. (60%) manu factures Acrilan acrylic fiber. LUXEMBOURG Monsanto Cie S.A. (100%) manufactures nylon 6,6 yarns. SPAIN Aiscondel S.A. (50%) makes consumer plastic products. A subsidiary produces chemicals and plastics. SWITZERLAND Monsanto (Suisse) S.A. (100%) markets Monsanto products throughout Switzerland. UNITED KINGDOM Lansil Ltd. (100%) produces bleached cotton linters, acetate flake and yarn, textile fabrics and carpet underlay. Monsanto Chemicals Ltd. (100%) manu factures chemicals and plastics. Subsidiaries and affiliates produce other chemicals and plastic products. Monsanto Textiles Ltd. (100%) manufactures Acrilan acrylic fiber, acrylonitrile and nylon 6,6 yarns. WEST GERMANY Monsanto (Deutschland) GmbH (100%) manufactures Acrilan acrylic fiber and mar kets Monsanto products. Latin America ARGENTINA Monsanto Argentina S.A.I.C. (100%) manu factures plastics and chemicals. COLOMBIA Fabrica de Hilazas Vanylon S.A. (49%) produces nylon 6 yarns. MEXICO Industrias Resistol S.A. (37%) produces chemicals and plastics. Compania Industrial de Plasticos S.A. (100%) fabricates plastic consumer products. NETHERLANDS ANTILLES Monsanto International N.V. (100%) obtains funds abroad to assist in financing the operations of Monsanto Company and its subsidiaries. PANAMA Chemstrand Overseas S.A. (100%) and Monsanto Overseas S.A. (100%) hold invest ments outside the United States. Asia and Australia AUSTRALIA Australian Petrochemicals Ltd. (55%) manu factures chemicals. Monsanto Australia Ltd. (100%) makes chemicals and plastics. Associate companies produce fluorocarbons and synthetic latex products. HONG KONG Monsanto Far East Ltd. (100%) supervises marketing of Monsanto products in the AsiaPacific area outside Japan and Australia. JAPAN Mitsubishi Monsanto Chemical Company (50%) manufactures chemicals and plastics. Western Region ROV L. BRANDENBURGER 28 Regional Vice Presidents Eastern Region Richard T. Clark North Central Region Daniel J. Murphy Governmental Affairs Sam Pickard MAR 001031 LAM017090 Directors and Officers Board of Directors Officers Charles H. Sommer, Chairman.........................St. Louis John W. Hanley -- President and Chief Executive Officer Dillon Anderson............................................... Houston Charles H. Sommer.................... Chairman of the Board H. Harold Bible.................................................St. Louis H. Harold Bible............................ Senior Vice President 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 John W. Hanley................................................ St. Louis James J. Kerley............................................... St. Louis John L. Gillis.................................Senior Vice President Edmond S. Bauer....................................................VicePresiden General Manager, Agricultural Division, Monsanto Commercial Products Company James E. Crawford Jr.............................................. VicePresiden General Manager, Fabricated Products Division, Monsanto Commercial Products Company C. Preston Cunningham......................................... VicePresiden Managing Director, Monsanto Industrial Chemicals Company Jean Mayer......................................................Boston Patrick J. Dowd......... Vice President -- Special Projects Edward A. O'Neal..................................................... St.LouiJsohn R. Eck............................................................. VicePresiden Managing Director, Edward L. Palmer.................................................. NewYork Monsanto Polymers & Petrochemicals Company Francis E. Reese..................................................... St.LouiLsouis Fernandez..................................................... VicePresiden Tom K. Smith Jr..................................................... St.Louis Managing Director, Monte C. ThrodahL.C..................................... St. Louis Monsanto Textiles Company James J. Kerley.....................Wee President --Finance Earle G. Wheeler............................Martinsburg, W. Va. Edwin J. Putzell Jr.................................................. VicePresiden Secretary and General Counsel Francis E. Reese..................................................... VicePresiden General Manager, International Division 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 Tom K. Smith Jr...................................................... VicePresiden Managing Director, Monsanto Commercial Products Company Monte C. Throdahl...........Vice President -- Technology Kenneth N. Kermes....................................... Treasurer Richard C. O'Sullivan..................................... Controller Printed in U.S.A. MAR 001032 March 7, 1973 LAM017091 29 MONSANTO COMPANY/800 N. LINDBERGH BLVD.. ST. LOUIS. MISSOURI 63166 MAR 001033 LAM017092