Document 5kBM2ZXy5x3gG6d1J7E7k7v20

1968 ANNUAL REPORT MONSANTO COMPANY OSW 020696 STLCOPCB4006005 FINANCIAL HIGHLIGHTS (Dollars in Millions. Except Per Share Figures) Earnings a Share.......................................................... Cash Dividends a Share.............................................. Stock Dividend.............................................................. 1968 $ 3.30 1.65 -- 1967 . $ 3.19(2) 1.60 2% Income: Net sales.................................................................. Interest, dividends, etc......................................... Costs of Doing Business: Raw materials, fuel, supplies, etc....................... Wages and salaries to employes......................... Depreciation, depletion, etc................................. Taxes (income, property, etc.)............................. Interest expense.................................................... Minority interests in subsidiaries........................ Net Income.................................................................... Cash Dividends Paid.................................................... Retained for Future Growth........................................ $1,792.9 17.1 1,810.0 949.9 433.0 172.8 123.2 20.6 1.7 1.701.2 108.8 54.0 $ 54.8 $1,637.5 25.2(2) 1,662.7 868.1 398.6 162.9 104.0 22.0 2.0 1.557.6 105.1(2) 51.4 $ 53.7 Per Cent of Sales: Gross profit............................................................ Selling and administrative expenses.................. Research, development, patent, engineering.. Net income............................................................ 26.1% 10.0 4.8 6.1 25.8% 9.9 5.1 6.4 Plant Additions and Replacements......................... $ 132.9 $ 160.4 Long Term Debt (Exclusive of Current Maturities) Shareowners' Equity........................................ ......... Equity to debt ratio............................................... $ 432.9 1,125.8 2.60 $ 451.4 1,078.6 2.39 Common Shares (In Millions)................................... 33.0 33.0 Book Value a Common Share................................... $ 34.11 $ 32.72 Working Capital.......................................................... $ 495.6 $ 411.2 Current Assets to Current Liabilities Ratio........... 2.85 2.66 Employes...................................................................... 59,849 58,889 Shareowners............................................................... 111,538 (1) Restated to reflect acquisitions in 1968. Sea note on page 17. (2) Includes $6.4 million, or 19 cents a share, from sale of interest in Mobay Chemical Company. 111,363 DSW 020697 STLCOPCB4006006 TO THE SHAREOWNERS Monsanto achieved a profit turnaround in 1968. Net income from operations advanced 10 per cent beyond the 1967 level after two years of declining earnings. The year-to-year increase in earnings of 11 cents a share is accounted for as follows: The gain came mainly from a 10 per cent sales increase, with man-made fibers leading the way. New production economies and lower raw material prices also helped profits. Earnings a Share Year 1967 earnings....................... $3.19 Consolidated 1968 sales totaled $1,792,938,000. Income from operations was $108,825,000 or $3.30 a share on 33,008,920 shares outstanding. Compa rable 1967 earnings were $3.00 a share on 32,962,005 shares. An extraordinary profit from the sale of Monsanto's interest in Mobay Chemical Company increased 1967's total earnings to $3.19 a share. Factors whose combined influence brought about the year-to-year change in Monsanto's earnings are listed in the next column. Man-made fibers spearheaded the 1968 sales advance as all but one of the company's 11 product groups gained. The single exception was in products for agriculture, revenues from which were reduced by depressed ammonia prices and by prior-year herbicide inventory buildups on the part of dealers. Sales outside the United States rose 13 per cent to $410 million. Price erosion, which particularly affected ammonia and many plastics, was again the major challenge to profitability. Indeed, an over-all decline in selling prices deprived the company of more than $21 mil lion in after-tax income. Yet, there was general price firmness in man-made fibers, which account for about 29 per cent of the company's sales. Administrative, marketing and technological ex penses rose in 1968, as greater sums were invested in research, development and other activities to sustain Monsanto's strong competitive position and nurture the company's growth. Deduct -- Extraordinary item -- Sale of investment in Mobay... ,19 Earnings exclusive of extraordi nary item................................... 3.00 Additional earnings resulting from: Higher sales volume.............. $1.09 Manufacturing cost savings.. .31 Lower raw material prices___ .08 $ 1.48 Reduction in eamings caused by: Lower selling prices.....................66 Higher selling, administrative, research and development expenses............................. .29 .95 Increase in operating results....... .53 Other reductions in eamings: Higher income taxes.................... 21 Higher income charges............ -02 Year 1968 earnings....................... -23 -30 $3.30 Italic* In tha taxt of thl* Annual Raport Identify Monaanto'* registered trademark*. DSW 020698 STLCOPCB4006007 The company regards the federal surtax on income as a necessary step to curb inflation. Nonetheless, the new tax means a heavy financial burden. In 1968, its effect was to reduce net income by S7.3 million or 22 cents a share. Hopefully, economic conditions will warrant early rescinding of the surtax. The company's 1968 capital expenditures at home and abroad totaled SI32,899,000, compared to S 160,389,000 in 1967. This was a 17 per cent decrease. Late in the year, an upturn in spending signaled a return to a higher rate of expansion in 1969. Major capital additions completed in 1968 in cluded units to produce polystyrene plastic (in Canada), phenol (in Australia), ABS plastics (in Addyston, Ohio) and nitrilotriacetate, a new deter gent builder (in Alvin, Tex.). New U.S. plants, Monsanto's 45th and 46th, began operating in St. Louis County, Mo., and in Cupertino, Calif. The first makes plastic bottles; the second manufactures light-emitting diodes and lasers. A marketing and research facility to serve the rubber industry was completed late in the year in Akron, Ohio. Major expansions begun or announced in 1968 will increase Monsanto's capacity to produce acrylonitrile (in England); high-density polyethylene plastic, methanol and acetic acid (in Texas City, Tex.); sulfuric acid (in Mexico and in Everett, Mass.); Acrilan acrylic fiber and polyester fiber (in Decatur, Ala.). The latter product will be made especially for reinforcing tires and will supplement the company's already strong position as a supplier of nylon yarn for that use. Intensified efforts to improve profit levels led to decisions to shut down a number of production units yielding unsatisfactory returns on investment. Among the facilities involved were those for color ing and compounding thermoplastics (in Kenilworth, N.J.) and units making a dye intermediate (in Everett), ammonia (in El Dorado, Ark.) and vinyl chloride monomer (in Texas City). Although the obsolete ammonia unit at El Dorado is being phased out, Monsanto will continue as a major supplier of ammonia from modern units at two other locations. And although the company stopped making vinyl chloride monomer in the United States at year's end, manufacture of polyvinyl chloride plastics from purchased monomer continues. The year's advances in promising new business areas included progress in devising ways to curb pollution of air and water. For example, the com pany has developed a process to remove sulfur dioxide from the stack gas of coal-fired power plants. In October. Monsanto began commercializing the process, which converts noxious gas to marketable sulfuric acid. The move followed more than a year of successful prototype operation at Metropolitan Edison Company's power-generating station in Portland, Pa. Monsanto Biodize Systems, Inc., a subsidiary formed late in 1967, develops and markets processes to clean municipal and industrial waste waters. Pro totype plants which that company set up in 1968 removed more than 90 per cent of organic pollutants from water. At year's end, two full-scale water treating units were being readied. Administrative and legislative actions by the U.S. government increasingly affect Monsanto's business. For example, the second of five tariff-cutting steps toward a 50 per cent reduction in all U.S. chemical and fiber tariffs has just taken effect. Thus, Monsanto's largest and best market, the United States, has become more accessible to countries having economic systems which foster low-price exports. At the same time, Monsanto's domestic products have not been given reciprocal access to foreign markets. Fast growth of the market for man-made fibers enhanced Monsanto's 1968 profit performance. But imports of man-made fibers, both as such and in the form of apparel and textiles made by low-cost labor, continued their sharp rise. The new adminis tration in Washington will therefore be urged by makers of textiles, apparel and fiber to seek for all fibers and fiber products the quota treatment cotton products already have. The U.S. textiles industry has 40 per cent of its costs in labor. For U.S. petrochemical producers, on the other hand, the big cost item is raw materials. U.S. liquid feedstocks are about 50 per cent more expensive than those used by overseas competitors. This is due to the government's oil-import limi tations, which are designed to maintain adequate domestic oil exploration and production. To keep Monsanto internationally competitive in petro chemical manufacture, Monsanto and other petro chemical producers seek full access to petroleum feedstocks at world prices. The severity of the U.S. balance-of-payments DSW 020699 STLCOPCB4006008 position caused President Johnson to announce a far-reaching corrective program on Jan. 1, 1968. That program includes measures to control both the outflow of U.S. investment funds and the re patriation of foreign earnings to the United States. Monsanto has not had to curtail overseas expansion in order to comply with government guidelines. But future expansion abroad will require the com pany to raise some capital in local foreign markets. As a responsible corporate citizen, Monsanto has become increasingly concerned with the nation's urgent social problems. At U.S. locations, the com pany and its employes have both initiated and cooperated in programs to ease these problems. In the years ahead, Monsanto, along with other com panies, will almost certainly be called upon to accept even greater social responsibility. In October, 1968, the Board of Directors dis continued the annual 2 per cent stock dividend. At the same time, the board boosted the quarterly cash dividend to 45 cents a share, five cents higher than the 40-cent quarterly rate established in 1965. Monsanto was sorrowed in 1968 when death ended the distinguished career of Edgar Monsanto Queeny at the age of 70. Son of Monsanto's founder, Mr. Queeny served the company as president from 1928 to 1943 and as board chairman from 1943 to 1960. He was a director from 1919 until his death. Mr. Queeny's contributions went far beyond Monsanto. He was known as a heroic advocate of free enterprise, an economist, an author and a great humanitarian. Mr. Queeny, who had many business innovations to his credit, had a strong personal interest in Monsanto's shareowner communications and did much to make them more meaningful. The death of Senior Vice President John L. Christian was another great loss to Monsanto. Mr. Christian, who was 57, had been a Monsanto director since 1960. He was elected vice president in 1951 and senior vice president in 1966. Best known as a manufacturing man, Mr. Christian was dedicated to making Monsanto's operations efficient and pro ductive. His deep imprint on the company endures. Vice President Robert K. Mueller, a Monsanto director since 1961, chose early retirement in 1968 to pursue other business interests. He had served Monsanto well. After more than three years of distinguished service as chairman of the Board of Directors, Edward A. O'Neal decided to step down from that position in July. At the same time, he indicated he plans early retirement in 1969, after which he has agreed to continue as a director. Mr. O'Neal's action triggered a number of re assignments. For example, the board elected the signators of this letter to their present positions and elected Vice President John L. Gillis a senior vice president. Other executive changes are discussed on page 11. They include the election of three group vice presi dents. The men in these newly created positions add top-level managerial strength to Monsanto. Many occurrences caused 1968 to be a year of transition. But 1968 was also a year of achievement. It was made so by the skill, hard work and dedicated loyalty of Monsanto employes everywhere. We are most grateful. Sincerely, Chairman of the Board St. Louis February 24, 1969 President The next annual meeting of the shareowners of the company is to be held at 10 a.m. Thursday, March 27, 1969, at the company's General Offices, 800 N. Lindbergh Blvd., St. Louis County, Mo. A formal notice of the meeting, together with a proxy statement and form of proxy, is being mailed to each shareowner. OSW 020700 STLCOPCB4006009 4 1968 OPERATIONAL HIGHLIGHTS Most of Monsanto's activities relate in some way to the manufacture and sale of products. Therefore the year's more significant developments are dis cussed here primarily in terms of products and product uses. Information is classified according to Monsanto's 11 product groups and treated on a worldwide basis. MAN-MADE FIBERS Sales of man-made fibers rose 21 per cent to record high levels. All three Monsanto fibers -- acrylic, nylon and polyester -- shared in the yearto-year gain. Acrylic and nylon prices were firm. But polyester prices softened late in the year as industry capacity began moving ahead of demand. U.S. sales of Acrilan acrylic fiber benefitted from sharp growth in the market for indoor-outdoor carpeting. Monsanto's acrylic entered another big market in 1968 when the U.S. government approved using this type of fiber in making sandbags. Acrilan CONSOLIDATED 1968 SALES BY PRODUCT GROUPS PER CENT OF TOTAL Man-Made Fibers..................... Plastics, Resins and Coatings. Intermediates, Plasticizers and Functional Fluids.................. Phosphates and Detergents... Products for Agriculture.......... 29.2 23.0 9.2 9.2 8.8 Rubber and Oil Chemicals....... Petroleum Products................. 6.3 5.4 Food Ingredients and Fine Chemicals.............................. Textile and Paper Chemicals.. Heavy Chemicals...................... 2.8 2.5 2.0 Other Products......................... 1.6 PER CENT INCREASE (DECREASE) over ------ -------------1967 1963 21 68 8 40 8 55 6 29 (13) 90 10 35 4 15 6 32 27 23 14 50 100.0 10 50 is highly qualified for both applications because of its excellent resistance to sunlight and moisture. European sales of Acrilan, after a slow 1968 start, gained momentum. As the year ended, sales were at capacity level, with knitwear showing particular strength among end uses. In Israel, production and sales of Acrilan were at record levels, and capacity was increased. Domestic capacity to produce Acrilan is being boosted to 225 million pounds annually. Comple tion of the expansion is scheduled for late 1969 in Decatur, Ala. There was resurgent demand for Blue "C" nylon in textile applications. Growth was largely in yam for texturing. Late in the year, Monsanto introduced a nylon with improved antistatic and moisture "wicking" properties for use in such garments as cling-free intimate apparel, hosiery and uniforms. Monsanto sold more nylon carpet fibers than in any prior year. In December, the company an nounced development of Cadon nylon for carpeting. Cadon, now under test in customer mills, has im proved antistatic and soil-resistant properties. Sales of nylon for tire reinforcement approxi mated year-earlier levels. In 1968, Monsanto intro duced a nylon yam with improved strength for use in truck and bus tires. In Europe, rising nylon sales taxed the capacities of both Monsanto's nylon plants. With supply and demand in closer balance, prices were restored some what from 1967 lows. Monsanto entered the nylon carpet yam market with production at the Luxem bourg plant early in the year. Blue "C" polyester for apparel was produced at capacity level through most of 1968. The company's plans to make and market polyester for tire cord were announced in October. A unit to produce 60 million pounds of yam yearly for that use is being built in Decatur. Monsanto will thus complement its present sales of nylon to tire makers. In 1968, the Wear-Dated guarantee program con tinued to gain momentum in many world areas. QSW 020701 STLCOPCB4006010 3 Since the program began, 125 million garments, representing a retail gross of S750 million, have been sold. Also in 1968, Monsanto sold wholly owned Fabric Services, Inc,, a dyeing and finishing operation in Orangeburg, S.C., to Greenwood Mills, Inc., of Greenwood, S.C. Fabric Services was no longer compatible with Monsanto's business objectives. PLASTICS, RESINS AND COATINGS Sales of plastics and related products advanced 8 per cent in returning to traditional growth rates. There was strengthening in the plastics industry's major domestic markets. European, Canadian, Mexican and Far Eastern markets also expanded. In a number of areas, but principally in thermo plastic polymers, prices appeared to be stabilizing at year's end. In 1968, the quantity of plastics used in producing the average automobile rose to about 82 pounds. Sales of an improved form of Lustran ABS plastic to auto and appliance makers rose sharply. Added capacity to support the increased demand for Lustran was installed in Addyston, Ohio. A unit to produce Lustrex polystyrene came on stream in Montreal, Canada. Capacity for the same product was expanded in Long Beach, Calif. Lustrex is being used increasingly for molding wood-grained furniture components, a potentially large end use. Traditional, large end uses include packaging, toys, housewares and appliances. In 1968, capacity to produce styrene monomer for the manufacture of Lustran and Lustrex was ex panded in Australia and in Texas City, Tex. Sales of polyvinyl chloride (PVC) were especially strong in developing overseas nations. Expansions of PVC capacity were begun by member companies in Japan and Mexico. New Monsanto formulations of PVC include one for the production of clear bottles. After the resin was approved by the U.S. Food and Drug Administration for packaging foods and pharmaceuticals, Monsanto incorporated the product in a number of new containers. An obsolete Texas City unit producing vinyl chloride monomer was shut down at year's end. Production of PVC, from purchased monomer, continues. In Texas City, Monsanto began adding 100 million pounds to annual capacity for high-density poly ethylene. The addition will lift capacity to 180 million pounds a year. Blow-molded bottles are a major outlet for the plastic. Also in Texas City, the company is building units for producing methanol and acetic acid, the latter by a new, low-cost process that resulted from Monsanto's research in catalytic systems. These units, which are to be operating in 1970, will have annual capacities of 100 million gallons and 300 million pounds, respectively. Acetic acid goes into polyvinyl acetate and other products. Methanol is a raw material for formaldehyde and, ultimately, phenolic resins for adhesives, coatings and other uses. In 1968, Saflex polyvinyl butyral sold in record volume. The plastic is used primarily as interlayer in laminated safety glass. Big 1968 demand for the Monsanto product resulted from the high production level of the world automotive industry, easily the major customer for safety glass. Expansions in Springfield, Mass., and Trenton, Mich., added ca pacity to make resin for producing Saflex. Monsanto's 1968 headway in the construction market was partly attributable to pickup in housing starts and home renovation. Company products used in building include paint intermediates, resins for drywall construction and thermal insulation, plastic siding, polyethylene film, and pipe. Sales of products made from plastics by member companies in Canada, Mexico, Spain and the United Kingdom were greater than in 1967. The Canadian company introduced high-style, plasticcoated fabrics for upholstery and footwear. Monsanto's position as a supplier of plastic pack ages continued to improve in 1968. In August, a new plant began producing plastic bottles in St. Louis. Additional supermarket chains adopted the com pany's clear meat tray as a standard package. Expansion of meat-tray production was scheduled for 1969. In 1968, two new models joined Monsanto's line of plastic vending cups. Prices of plastic packages, particularly blownware, strengthened somewhat during the year. QSW 020702 STLCOPCB4006011 COMPARATIVE CONSOLIDATED SALES, INCOME AND EARNINGS A SHARE, ON A QUARTERLY BASIS SALES: 1968 1967(1) (In Thousands) First quarter... $ 433,922 $ 423,329 Second quarter 466,224 423,372 Third quarter.. 437,015 384,667 Fourth quarter. 455,777 406,114 $1,792,938 $1,637,482 Per Cent Increase Oacraasa 2.5 10.1 13.6 12.2 9.5 INCOME: First quarter... $ Second quarter Third quarter.. Fourth quarter. 27,692 $ 31,667 24,100 25,366 38,218 27,622 16,507 22,744 $ 108,825 $ 105,091 27J 14.6 46.0 11.5 3.6 EARNINGS A SHARE: 1968 First quarter........................ .......... $ .84 Second quarter................... .................96 Third quarter....................... .................73 Fourth quarter.................... .................77 $3.30 1967(1) $1.16 .83 .51 .69 $3.19 SHARES OUTSTANDING DECEMBER 31: 1968....................................................... 33,008,920 1967....................................................... 32,962,005 (1) Restated to reflect acquisitions in 1968. See note on page 17. (2) includes profit on sale of investment, net of applicable income tax, of $6,394,000, equivalent to 19 cants a share. INTERMEDIATES, PLASTICIZERS AND FUNCTIONAL FLUIDS The group bettered its 1967 sales performance by 8 per cent. Monsanto is a major supplier of intermediates used in making paints, polyester resins, and dye stuffs. In 1968, rising worldwide demand for these intermediates allowed some prices to increase to more reasonable levels. At the same time, more efficient processes and new production economies were instituted or planned to improve the profit performances of such intermedi ates as phenol, adipic acid, maleic anhydride, fumaric acid and nitroanilines. A similar program was undertaken to help buoy plasticizer profits. Monsanto's position in plasti cizers, which impart flexibility and other desirable properties to plastics, is a strong one. In 1968, the company laid plans to exploit that position through a new and more efficient network of production units. Fire-retardant plasticizers for the construction, automotive and textiles industries were singled out for special emphasis. Construction was begun on units to make phosphate esters for such plasticizers in Sauget, 111., and in Bridgeport, N.J. Sales of fire-resistant hydraulic fluids rose sharply in 1968. Overseas markets were especially strong. In many countries, the coal-mining industry has adopted safety measures which include use of Pydraul fire-resistant hydraulic fluid in mining equipment. Skydrol fire-resistant hydraulic fluid for aircraft held its strong position in the worldwide airline industry despite intensified competition. Therminol heat-transfer fluid found new uses in ocean-going freighters, institutional buildings, food preparation and chemical processing in 1968. Capacity to produce askarel dielectric fluids for transformers and capacitors was increased at two U.S. plants and one in the United Kingdom. Con struction of another unit to produce askarel got under way in Japan. PHOSPHATES AND DETERGENTS There was a 6 per cent increase in sales of phos phates, detergent actives and related products. Said to be the most significant detergent news in 20 years was the 1968 introduction and enthusiastic DSW 020703 STLCOPCB4006012 7 acceptance of. detergent enzymes in the United States. Monsanto offered the first such enzyme pro duced domestically and is now a leading enzyme supplier. The company is readying new enzymes for 1969 introduction. Sodium tripolyphosphate, the principal detergent builder, and other detergent phosphates moved in record volume in 1968. Sales of dentifrice phos phates rose, with exports showing special strength. At times, there was difficulty in producing enough phosphorus to meet demands for the element's derivatives. To satisfy increasing demand for biodegradable alkylbenzene, Monsanto expanded the unit pro ducing that vital detergent active near Alvin, Tex. At the same location, the company completed a production unit for nitrilotriacetate (NTA), a new chemical used in combination with sodium phos phate to improve detergent performance. Commer cial shipments of NTA had begun by year's end. After two years of unsatisfactory operation, the world's largest furnace for phosphorus production ran well throughout 1968. The big furnace is at Monsanto's plant in Soda Springs, Idaho. A number of specialty products turned in strong sales gains. Among such products were Phos-Chek fire retardants, used in formulating paints and quenching forest fires. Also among them were Dequest organophosphorus sequestering agents, which found a range of new applications that included washing bottles and descaling industrial boilers. PRODUCTS FOR AGRICULTURE After many years of uninterrupted growth, the group's sales decreased 13 per cent There were two principal causes. One was price weakness in fertilizers. The other was cutbacks in purchases of Ramrod weed killer by dealers who had overstocked in 1967. Industry overcapacity in plant foods brought about severe price declines that held sales well below 1967 levels. Monsanto decided to shut down obsolete units producing ammonia, urea, and nitrogen solu tions in El Dorado, Ark. Ramrod received new clearances from the U.S. Department of Agriculture qualifying the herbicide MONSANTO'S DIVISIONS In 1968, the company had these nine divisions: Agricultural Division, Hydrocarbons & Poly mers Division, Inorganic Chemicals Division, International Division, New Enterprise Divi sion, Organic Chemicals Division, Packaging Division, Plastic Products & Resins Division and Textiles Division. for all com and sorghum crops. After dealer inven tories were worked off, sales of the product returned to normal levels. World demand for other Monsanto crop-protec tion chemicals rose. Avadex wild-oat killer for use with small-grain crops moved ahead strongly, and capacity to make the product was increased in Nitro, W.Va. There was a pickup in demand for Rogue herbicide, which controls grassy weeds in rice. But dollar sales were held back by lower prices. In 1968, Monsanto received a U.S. patent on propanil, the chemical which is the active herbicidal component of Rogue. One of six suits the company filed to enforce that patent has been settled out of court; the others are unresolved. Meanwhile, the 1967 priority-of-invention award Monsanto received in connection with its application for a herbicide use patent for Rogue is being contested in the courts by one competitor. Overseas in 1968, Monsanto introduced Lazo weed killer to protect com and cotton. One of the product's several advantages is that it does not have to be worked into the soil. Furthermore, there is no chemical buildup to interfere with crop rotation. Domestic marketing of the product to growers of com and soybeans began early in 1969. U.S. sales are under Monsanto's Lasso trademark. Being readied for 1969 marketing was a weed killer that combines Ramrod selective herbicide with atrazine for use on com and sorghum crops. The combination provides the broadest spectrum of weed control of any com herbicide available. This product at year's end was awaiting label clearances for U.S. marketing. Niran insect killer sold well as growers of cotton and other crops increased their demand for the Monsanto product. OSW 020704 STLCOPCB4006013 RUBBER AND OIL CHEMICALS Total sales of the group were up 10 per cent. Sales of chemicals to improve rubber products were well ahead of year-earlier levels as the predicted 1968 slowdown because of 1967 tire-inventory build up did not materialize. Some key products were in short supply even though many Monsanto produc tion units ran at rates exceeding design capacities. In response to continuing strong demand for Monsanto's products by the rubber and tire indus tries, the company planned production increases in several countries. At year's end, Monsanto's new international research and marketing center in Akron, Ohio, was being readied for occupancy. Marketing, research and technical-service resources in rubber chemicals are being concentrated there. In 1968, plans were completed for a substantial increase in worldwide sales of the company's rubber testing instruments. Sales of petroleum additives were above yearearlier levels. Gains were due largely to an increase in domestic volume, particularly in the area of new products to satisfy the rigorous lubricating require ments of diesel engines. Sales are expected to in crease in Europe when additives are available from Monsanto's new units in Newport, England, which began production late in 1968. The additives plant built by Monsanto's associate company in Japan operated successfully during the year. PETROLEUM PRODUCTS Sales of natural gas, crude oil and refinery products exceeded their 1967 total by 4 per cent. Markets for gasolines, diesel fuels and asphalts remained strong. Price declines were minimal. The refinery in El Dorado, Ark., operated at capacity. Sales of crude oil and natural gas increased. Participation in 66 new wells gave Monsanto a net gain of 38 wells. Near the end of the year, an initial well was drilled in the Dutch North Sea by an exploration group in which Monsanto has a one-third interest. Results were unfavorable. The group scheduled additional North Sea drillings for 1969. FOOD INGREDIENTS AND FINE CHEMICALS Sales of this group advanced 6 per cent. Although sales of bulk aspirin rose, world aspirin consumption fell short of 1966's peak level. At the same time, rising exports to world markets helped produce an outstanding sales gain for TCC bacteriostat, used in deodorant bar soaps and other products. Lactic acid, a food-grade intermediate and acidulant, achieved its greatest sales to date. Construction begun at year's end will add 50 per cent to the ca pacity of Monsanto's lactic acid unit in Texas City. Sales of vanillin products recovered somewhat from 1967 levels despite lower prices caused by import competition. George Lueders & Company, acquired early in 1968 as a nucleus for Monsanto's growth in the flavor and fragrance business, formulated plans to expand its role as a supplier of ingredients for cos metics and for premixed and precooked foods. TEXTILE AND PAPER CHEMICALS Sales of chemicals for the manufacture of textiles and paper shot ahead 27 per cent. Most of the thrust came from acrylonitrile, a raw material which was in heavy demand by makers of nylon and acrylic fibers. In 1968, construction of a major acrylonitrile production unit got under way in the United King dom. Due for completion early in 1970, the unit will add 200 million pounds to the company's yearly capacity. At its plant in Alvin, Tex., Monsanto increased domestic acrylonitrile capacity in 1968. Also in 1968, manufacture of tall oil was increased in Nitro, W.Va. Tall oil rosin is basic to production of Monsanto's Mersize sizing agents to make paper stronger and more water-resistant. Scripset surface additives, used in a Monsantodeveloped alkaline paper-sizing system, were intro duced and well received in Japan and the United Kingdom. Pentachlorophenol, an important wood preserva tive in this group, made a sharp sales increase. HEAVY CHEMICALS Sales of heavy chemicals topped year-earlier records by 14 per cent. The gain was spearheaded by two basic chemicals, salt and sulfuric acid, both of which showed unusual sales strength. Production of salt on Cote Blanche Island, La., increased substantially. Sales of sulfuric acid from three U.S. plants and the plant in Lecheria, Mexico, were sharply higher. DSW 020705 STLCOPCB4006014 9 66 67 68 A major expansion of the Lecheria acid unit was scheduled for 1969 completion. Meanwhile, the acid unit in Everett, Mass., was being replaced by a more modern one. OTHER PRODUCTS The diversified products discussed in this section represent developmental businesses of the New Enterprise Division. In 1968, Monsanto continued as a major inde pendent supplier of semiconductor materials, includ ing silicon, to makers of transistors, rectifiers and solid-state microcircuits. Growing demand and prod uct excellence helped expand the company's sales in this area. Twenty new electronic instruments for testing and measuring were added to the company's product line as sales to industry and to government agencies rose. Monsanto's pioneering solid-state materials, which emit light when supplied with electric energy, were introduced commercially from a new plant in Cupertino, Calif. The company's unique technology for casting polymer-based composites was developed further during the year. Prime effort went into demonstrating to key customers the performance of components made by Monsanto. As a result of this program, the company commercialized a new wear-resistant, easyto-maintain flooring system; flexible ceramic floor and wall panels; and custom-made parts. Five additional stadium installations of AstroTurf recreational surface were completed in 1968. These were at the University of Alabama, Boston Uni versity, Hofstra University, the University of Wash ington, and Atwood Stadium in Flint, Mich. By year's end, a large number of orders had been re ceived for 1969 installations. Meanwhile, golf sur faces also continued to gain in popularity. In 1968, Monsanto announced that Puma protein beverage was ready for market. The first franchised bottling operation was scheduled for 1969 startup in Latin America. Additional bottling operations were planned there and in the Far East. Late in the year, Monsanto introduced a series of new enzymes to speed chemical reactions. The products have processing applications in the textiles, paper, baking and leather industries. DSW 020706 STLCOPCB4006015 GROSS ADDITIONS TO PROPERTY AND DEPRECIATION Property Additions Depreciation, Obsolescence, Amortization and Depletion ! i 1959................................... I 1960................................... i 1961................................... : 1962................................... ! 1963................................... 1964................................... 1965................................... : 1966................................... I 1967................................... 1968................................... (Millions of Dollars) 76.9 76.4 121.3 79.1 153.8 86.9 168.9 97.7 114.7 114.7 218.1 120.3 295.3 133.5 211.0 152.4 160.4 162.9 132.9 172.8 BUSINESS ABROAD Outside the United States, record sales produced record earnings. The year was marked by major improvement in the European fiber market, strong performances by member companies overseas and rising export sales. Monsanto's worldwide marketing program is di rected by area groups for Africa-India, Asia-Pacific, Australia, Canada, Europe, Japan and Latin America. The 1968 openings of sales offices in Bangkok, Johannesburg, Manila, Santo Domingo and Stock holm brought the overseas total to 41. To assist the world need for greater food pro duction, Monsanto is devoting increasing emphasis to the spread of its products and technology in the agricultural field. Other major growth areas abroad will be in man-made fibers and in specialty products and systems. RESEARCH AND DEVELOPMENT In 1968, as in previous years, many new products and processes originated in Monsanto research and development laboratories. The company succeeded in commercializing 68 basic new products and up grading many other existing products. Also in 1968, Monsanto received 454 U.S. patents and 1,364 patents in other countries. Expenditures for research, development, patent work and basic engineering totaled $86.3 million, compared to $84.2 million in 1967. The Central Research Department seeks better ways to make existing products and investigates areas of basic science which are pertinent to the company's operations. The department's present work includes investigations of new catalysts, electro chemistry, organic and organophosphorus chemistry. As an example, work in the department's catalyst section led to the process that will be used to make acetic acid in Texas City, Tex. The new process, carried out at very low pressures and mild tempera tures, leads to high yields of easily purified product. Monsanto continued its research program with Washington University (in St. Louis) for the U.S. Department of Defense. Out of the program have come significant findings in the field of reinforced composite materials. Some of this basic work may be commercialized through Monsanto's New Enter prise Division. In October, wholly owned Monsanto Research S.A. moved into new laboratories in Zurich. That company, a part of the Central Research Department network, serves as a valuable interface with European science. Reports on research programs and other activities constantly feed back to Monsanto's U.S. research centers and help keep company scientists current with progress being made in Europe. Monsanto Research Corporation, also wholly owned, continued developing technology of prime concern to health and national defense and of po tential interest to Monsanto's commercial efforts. Particularly noteworthy at the laboratory in Dayton, Ohio, was the development of a process for bonding graphite reinforcements to resinous ma terials for possible use in aerospace and commercial aviation. Major research effort went into the area of en vironmental control as part of Monsanto's over-all work on pollution abatement. Projects included additional research on removing sulfur dioxide from stack gases and development of instruments to detect and measure noxious oxides in the atmosphere. Monsanto Research Corporation continues to operate the U.S. Atomic Energy Commission's Mound Laboratory in Miamisburg, Ohio. In addi tion to key assignments in the AEC weapons pro gram, the laboratory does extensive research and production on radioactive heat sources to pro duce electricity for applications as varied as nav igational satellites and cardiac pacemakers. The laboratory also separates carbon-13 and stable iso topes of noble gases, for use in biological, cryogenic, physical and nuclear research. It is the nation's sole supplier of these isotopes. OSH 020707 STLCOPCB4006016 PERSONNEL A number of management changes occurred in 1968. Most of them came at the same time as the top-level changes described on page 3. These vice presidents were elected to the newly created group vice presidencies: John R. Eck, James D. Mahoney and Tom K.. Smith Jr. Mr. Mahoney also continues as general manager of the Textiles Division. Vice President H. Harold Bible was given re sponsibility for corporate administration. At the same time, Mr. Bible and Vice President Edwin J. Putzell Jr., general counsel and corporate secretary, were made members of the Corporate Development Committee. Vice President Francis E. Reese succeeded Mr. Bible as general manager of the Hydrocarbons & Polymers Division. Anthony J. A. Bryan succeeded Mr. Reese as general manager of the International Division. Dr. Louis Fernandez succeeded Mr. Eck as general manager of the Inorganic Chemicals Division. Howard L. Minckler succeeded Mr. Smith as general manager of the Organic Chemicals Division. Lewis F. Steinbach was elected controller. In 1968, programs to speed the development of employes with outstanding ability were again em phasized. More than 1,200 key managerial and pro fessional employes were involved. Monsanto employes achieved the best safety record in the company's history. At the same time, property loss was at the lowest level in recent years. Labor relations were favorable in 1968. Nine labor contracts were negotiated. Five are three-year contracts; four will run two years. A strike at Trenton, Mich., which occurred during contract negotiations there, lasted 13 days. In cooperation with the National Alliance of Businessmen, Monsanto more than met its commit ment to hire disadvantaged youth for the summer. Meanwhile, the company continued its program for hiring and upgrading the unemployed and under employed. Employment of so-called minority groups rose more than 10 per cent in the year. SHAREOWNERS OF RECORD 1968 Men........................... Number of Share owners 36,605 Number of Shares 4,834,)?? Women...................... 32,963 3,897,063 Joint Accounts............ 24,929 1,326,692 Charitable Institutions.. 451 181,040 Educational Institutions. 125 139,198 Estates and Trusts...... 12,644 1,726,361 Insurance Companies.. 184 1,207,856 Brokers and Nominees. 2,041 18,649,909 All Others.................. 1,596 1,046,024 Total................ 111,538 33,008,920 1967 Number of Share owners 1^094" Number of Shares 5,004,713 32,811 3,961,870 24,541 1,282,708 511 200,787 147 202,529 12,363 1,771,876 228 1,317,139 1,999 18,186,175 1,669 1,034,208 111.363 32,962,005 _____ 1966 Number of Share owners 32,301 Number of Shares 4,583,590 29,983 3,837,791 19,030 952,801 508 206,202 143 208,153 10,429 1,795,397 267 1,279,902 1,900 18,429,055 1,377 1,015,932 95,938 32,308.823 1965 Number of Share owners 32,084 Number of Shares 4,610,890 29,211 3,872,397 18,431 897,004 488 204,768 128 197,391 9,770 1,723,319 270 1,322,827 1,800 17,853,952 1,356 951,809 93,538 31,634,357 1964 Number of Share owners Number of Shares 30,446 4,691,300 28,328 3.850.305 17,770 909,442 480 204,432 136 130.164 9,384 1,669.731 236 1,196,581 1,685 16,629.555 1,368 1.517.317 89,833 30.859.927 1963. 63 par cant of Monaanto aharaownara natd fawar tnan 100 anaraa. DSW 020708 STLCOPCB4006017 12 MONSANTO COMPANY STATEMENT OF CONSOLIDATED FINANCIAL ASSETS Current Assets: Cash.......................................................................................... Marketable securities, at cost which approximates market Net receivables......................................................................... Inventories................................................................................ 1968 1967 (In Thousands) 24,806 $ 23,317 88,850 31.272 335,925 313,901 313,062 762,643 290,522 659,012 Investments and Miscellaneous Assets, at Cost or Less: Investment in and advances to associates.................... Miscellaneous investments and receivables.................. 12,190 67,729 79,919 11.859 66,853 78.712 Property, Plant and Equipment, at Cost.................................................... Less accumulated depreciation and depletion, etc................................ Net property...................................................................................... 2,306,874 1,282,680 1,024,194 2,259.596 1,182,390 1.077,206 Deferred Charges 28,498 33,788 The above statement should be read in conjunction with pages 17, 18 and 19 of this report. $1,895,254 $1,848,718 DSW 020709 STLCOPCB4006018 AND SUBSIDIARIES POSITION AT DECEMBER 31, 1968 AND 1967 LIABILITIES Current Liabilities: Accounts payable and accruals................................................................. Income taxes............................................................................................... Current portion of long term debt (less $1,000,000 debentures in treasury in 1968)................................................................................. 1968 1967 (In Thousands) $ 207,663 47,651 $ 187,173 50,585 11,834 267,148 10,063 247,821 Notes, Debentures, etc.--Less Current Portion Above 432,880 451,377 Other Liabilities and Deferred Credits: Deferred income taxes......................... Miscellaneous........................................ Minority Interests in Subsidiary Companies 36,593 8,759 45,352 24,070 38,394 9,437 47,831 23,013 Shareowners' Equity: Common shares--authorized, 50,000,000 shares, par value $2 each; outstanding, 33,008,920 shares in 1968 and 32,962,005 shares in 1967................................................................................................... Paid-in surplus............................................................................................. Retained earnings....................................................................................... 66,018 579,304 480,482 1,125,804 $1,895,254 65,924 581,134 431,618 1,078,676 $1,848,718 DSW 020710 STLCOPCB4006019 MONSANTO COMPANY STATEMENT OF CONSOLIDATED INCOME 1968 1967 (In Thousands) DIneccrereaasse* Net Sales............................................................... $1,792,938 $1,637,482 $155,456 Cost of Goods Sold.............................................. 1,324,595 1,214,561 110,034 Gross Profit.......................................................... 468,343 422,921 45,422 Less: Selling and administrative expenses.............. Research, development, patent and engineering expenses................................... Operating Profit................................................... Income Charges--Net......................................... Income Before Income Taxes.......................... , 179,611 86,281 265,892 202,451 11,519 190,932 162,779 84,224 247,003 175,918 10,445 165,473 16,832 2,057 18,889 26,533 1,074 25,459 Provision for Income Taxes: Current............................................................. Deferred (credit).............................................. Income Before Extraordinary item................. 83,908 (1,801) 82,107 108,825 70,238 (3,462) 66,776 98,697 13,670 1,661 15,331 10,128 Extraordinary Gain on Sale of Investment, Less Applicable Income Tax of $2,131,000 Net Income................................ 6,394 $ 108,825 $ 105,091 6,394 $ 3,734 Earnings a Common Share (1): Before extraordinary item... Including extraordinary item. $3.30 3.30 (1) Based on shares outstanding at end of year-- 33,008,920 in 1968 and 32,962,005 in 1967. The a Dove statement should be read in conjunction with pages 17, 18 and 19 of this report. $3.00 3.19 $.30 .11 DSW 020711 STLCOPCB4006020 AND SUBSIDIARIES ,3 STATEMENTS OF CONSOLIDATED PAID-IN SURPLUS AND RETAINED EARNINGS PAID-IN SURPLUS Balance at Beginning of Year: As previously reported.................................................................................... Adjustment--see note on page 17............................................................... As restated...................................................................................................... Additions: Excess of approximate market value of common capital stock distributed as a stock dividend over the par value thereof......................................... Excess of amounts received over the par value of common capital stock issued under stock option plans................................................................ Deduction: Pro-rata portion of excess of cost over par value of 199,412 shares of common capital stock in treasury, issued to effect the acquisition, in pooling of interests transactions, of equities in two subsidiary companies (see Retained Earnings below)................................................................... Balance at End of Year...................................................................................... RETAINED EARNINGS Balance at Beginning of Year: As previously reported.................................................................................... Adjustment--See note on page 17............................................................... As restated....................................................................................................... Addition--Net Income for the Year.................................................................. Deductions: Dividends on capital stock of parent company: Cash--$1.65 a share in 1968 and $1.60 a share in 1967....................... Stock--2%.................................................................................................... Dividend of subsidiary prior to acquisition................................................... Pro-rata portion of excess of cost over par value of 199,412 shares of common capital stock in treasury, issued to effect the acquisition, in pooling of interests transactions, of equities in two subsidiary companies (see Paid-in Surplus above)........................................................................ Balance at End of Year...................................................................................... The above statements should be read in conjunction with pages 17,18 and 19 of this report. 1968 1967 (In Thousands) $580,533 601 581,134 1,636 582,770 $550,842 601 551,443 29,440 251 581,134 3,466 $579,304 $581,134 $428,408 3,210 431,618 108,825 540,443 54,032 ................ 54,032 $406,134 2,477 408,611 105,091 513,702 51,347 30,732 82,079 5 5,929 59,961 $480-482 82,084 $431,618 DSW 020712 STLCOPCB4006021 16 MONSANTO COMPANY AND SUBSIDIARIES CONSOLIDATED SOURCE AND APPLICATION OF FUNDS (In Thousands) TOTAL 1968 1967 1966 1965 1964 Source of Funds: From operations: Net income................................................ Non-cash charges to income: Depreciation, depletion, etc.................. Deferred income taxes.......................... Goodwill write-off.................................... $ 565,635 741,967 12,072 6,075 1,325,749 $108,825 172,818 1,801 279,842 $105,091 162,909 3,462 264,538 $113,058 152,399 1,247 6,075 270,285 $123,404 133,530 6,534 263,468 $115,257 120,311 12,048 247,616 Outside financing: 4l/2%-4%% promissory notes................... 4V2% sinking fund debentures................. Foreign subsidiaries.................................. Common shares issued under options....... Other -- net................................................... 100,000 25,000 42,858 24,507 21,777 1,600 1,730 9,091 265 3,823 25,000 5,206 2.305 3,905 75,000 25,000 32,776 8,099 3,723 3,276 12,108 1,235 1,539,891 292.263 268,626 306,701 408,066 264,235 Application of Funds: Dividends on common shares..................... Dividends of subsidiary prior to acquisition. Plant additions and replacements.............. Investment in affiliated companies............. Retirement of debt.................................................... Increase in working capital.................... Increase--decrease in cash and securities 238,301 68 1,017,706 15,397 81,795 198,799 12,175 $1,539,891 54,032 132,899 931 18,326 27,008 59,067 $292,263 51,347 5 160,389 31,692 44,245 19,052 $268,626 50,507 29 210,998 9,963 52,913 17,709 $306,701 44,809 17 295,288 1,126 11,396 44,735 10,695 $408,066 37,606 17 218,132 13,340 10,418 29,898 45,176 $264,235 (1) Exclusive of cssh and weurrtiaa and currant portion of long tarm dabt. The years 1964 through 1967 hava baan raatatad at daacrlbad on pagaa 17 and 18 of tha Financial Review. Italics indicats doduction. DSW 020713 STLCOPCB4006022 FINANCIAL REVIEW Basis of Consolidation, etc. The accompanying financial statements consolidate all domestic and foreign subsidiaries in which Monsanto Company directly or indirectly has more than a 50 per cent interest. During 1968, the company acquired equities in two subsidiary companies in exchange for 199,412 shares of Monsanto treasury stock. These trans actions were accounted for as pooling of interests and, accordingly, the consolidated financial state ments for 1968 include the operations of the acquired companies for the entire year. The financial state ments for the preceding year have been restated on a comparable basis. Depreciation, Obsolescence, Depletion Charges against income for depreciation, obso lescence and depletion amounted to $172,818,000, of which $169,217,000 was depreciation and obso lescence, and $3,601,000 depletion. In 1967, such charges were $158,888,000 and $4,021,000. The use of the sum of the years digits method for computing depreciation on most of new assets ac quired since 1954 was continued in 1968. The excess of depreciation provided by this method over straight line depreciation was $22,925,000 in 1968 and $23,545,000 in 1967. For income tax purposes only, the company in 1962 adopted the guideline lives established for machinery and equipment by the United States Treasury Department. In addition, there are other timing differences which affect tax able income and enter into the determination of pretax accounting income in different periods. Net income is not affected by such differences since an amount equivalent to their tax effect is either charged or credited, as the case may be, to income through the provision for deferred taxes. Doubtful Accounts and Allowances The reserves for doubtful accounts and allowances were $14,348,000 at December 31, 1968 and $14,017,000 at the end of 1967. Employes' Bonus The provision for employes' bonus in 1968 was $3,134,000, compared with Si,200,000 in 1967. On February 4, 1969, bonus awards aggregating $3,985,200 were made to 893 officers and employes. No bonus awards were granted for 1967. Equity in Associates The equity in the unaudited 1968 net income of 50 per cent-owned companies was $1,371,000 compared with $1,517,000 in 1967. Dividends of $501,000 were received from these companies in 1968 and $553,000 in 1967. The equity in the un audited net assets of such companies at December 31, 1968 was $12,464,000, which exceeded the carry ing value of the investment therein of $12,190,000 by $274,000. Incoma Taxes The company's Federal income tax returns have been examined and closed for ail years through 1959. Examinations by the Internal Revenue Service of returns for the years 1960 through 1963 have been largely completed, and returns for the years 1964 and 1965 are presently under examination. It is believed that adequate provision has been made in the accounts for any additional taxes that may be assessed. The Revenue Act of 1964 provides for a credit against Federal income taxes equal to approximately 7 per cent of expenditures for machinery and equip ment purchased and placed in service during the year. The reduction in income tax provision for 1968 resulting from this credit was $4,816,000 which compares with a credit of $6,969,000 in 1967. inventory Valuation Inventories are stated at the lower of cost or market, determined generally on the first-in, firstout basis. Annual rate of turnover was 4.4 in 1968 and 4.3 in 1967. QSW 020714 STLCOPCB4006023 Leases The company has a number of lease agreements covering the use of transportation and other equip ment, certain buildings, and retail outlets, which are generally cancellable without penalty. For the most part, the agreements are short term, with a few extending up to 20 years. The annual rental for all leases amounts to approximately 529,428,000. Legal Proceedings The company and its subsidiaries are defendants in a number of lawsuits and patent infringement actions. While the results of litigation cannot be predicted, management, based upon advice of com pany counsel, believes that the final outcome of such litigation will not materially adversely affect the financial position or operations of Monsanto and its consolidated subsidiaries. Liabilities -- Contingent The company and its subsidiaries were contin gently liable as guarantors of bank loans and for customers' receivables discounted aggregating ap proximately 513,000,000 at December 31, 1968 and $10,200,000 at the end of 1967. Long Term Debt The long term debt of the company and its sub sidiaries at December 31, 1968 and 1967, exclusive of current maturities, was as follows: Parent company: *Vi% 4%%_promi*sory not**, du :$70/1975................................................... 2.65% dabanturas, dua 1971........................ 3H% sinking fund dabanturas, dua 1972... 3^% promissory notas, dua 1972................ 4V$% notas, dua 1976..................................... 4*4% promissory notas. dua 1993................ 3V*% incoma dabanturas. dua 2002............ 4*4% mcoma dabanturas, dua 2008............ 1968 1967 (In Thousands) *100,000 17.000 7,500 15.712 2.920 100.000 91.000 50.000 *100.000 18,000 8.000 21.512 3.120 100,000 91.000 50,000 Monsanto international Finance Company: 4U% guaranteed sinking fund dabanturas, dua 1985......................................................... 25.000 25,000 Monsanto Chamieals Limitad (English subsidiary): 6% dabanturas, dua 1977/1982................... 5% dabanturas. dua 1982.............................. 5,867 6,922 6,071 7.132 Monsanto Taxtilas Umrtad (English subsidiary): Sank loans (ft% ovar bank rata) dua 1969 (saa nota baiow)............................................ 4,174 10,805 Monsanto Cia S.A. (A Luxambourg subsidiary): 4V% bank loans dua 1969/1971................. 4>a% bank loan dua 1969............................... 4,008 -- 6,012 3,000 Monsanto Maxicana S.A.: 10.5% bank loan dua 1969/1973................. 1.280 -- Othar subsidiaries................................................ 1,497 1.72S Total *432.880 *451.377 Nota: New bank loans wars negotiated in August 1968 by Monsanto Textilas Limited for 10.000.000 (*24.000,000 at tha currant ax* change rata), baanng interest at 1% ovar tha Unitad Kingdom bank rata. The loans srs rapayabia during tha yaars 1970 through 1974. Monsanto International Finance Company Debentures The $25 million of 4H per cent Sinking Fund Debentures due 1985 of Monsanto International Finance Company, which are fully guaranteed by Monsanto Company, are currently convertible into Monsanto Common Stock at $89 a share, subject to further adjustment under certain conditions. Pension Plans The company and its subsidiaries have several pension plans covering substantially all of their employes, including certain employes in foreign countries. The total pension expense for the years 1968 and 1967 was approximately $27,277,000 and $26,324,000, respectively. The expense includes, as to certain of the plans, amortization of prior service cost generally over a period of 30 years. It is the policy to fund pension cost accrued. The actuarially computed value of vested benefits for the plans of the parent company and certain domestic subsidi aries as of December 31, 1968 was approximately equal to the related pension funds. Pro Forma Earnings The reduction in earnings a common share which would result from the complete conversion of de bentures of Monsanto International Finance Com pany and the exercise of all outstanding stock options would be approximately 6 cents. Rapairs Repairs and maintenance charges included in operating expenses were $111,715,000 in 1968 and $102,857,000 in 1967. Restatement of 1967 Accounts In addition to the restatement of accounts de scribed under "Basis of Consolidation, etc.," de ferred income taxes of $12,533,000 which in 1967 were included in deferred charges, have been netted against deferred income taxes shown under other liabilities, to conform with Opinion Number 11 of the Accounting Principles Board, which became effective January 1, 1968. Sale of Investment The gain in 1967 of $6,394,000, net of tax, from the sale of investment was realized on the disposal of a 50 per cent ownership in Mobay Chemical Company. The purchasers were Farbenfabriken Bayer A. G. interests, which owned the other half interest in Mobay. DSW 020715 STLCOPCB4006024 19 Shares Reserved At December 31, 1968, there were 744,352 shares of common stock reserved for stock option plans, and 280,898 shares reserved for conversion of deben tures of Monsanto International Finance Company. Stock Options The status of the authorized shares of the stock option plans for key employes and the changes occurring during the year were: Outstanding 1/1/68.............. Unoptioned 1/1/68 . . . .. Optioned during year.............. . ... Exercised during year . .. . Terminated during year. . . . .. Outstanding 12/31/68 . . . ... . Unoptioned 12/31/68.............. . . 1951 Plan 20,948 -- - 20,948 - 1960 Plan 181,325 -- 25.967 10 155,348 - 1964 Plan 447.101 141.903 162.100 -- 27,895 581.306 7.698 Under the two remaining key plans, 517 options were outstanding, at prices, after adjustment for stock dividends, ranging from $33.57 to $97.18 a share. ACCOUNTANTS' OPINION HASKINS & SELLS CERTIFIED PUBLIC ACCOUNTANTS Monsanto Company: SIB OLIVE STREET SAINT LOUIS 63101 We have examined the accompanying consolidated financial statements (pages 12 through 19) of Monsanto Company and its subsidiary companies for the year ended December 31, 1968. 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 financial position of Monsanto Company and its subsidiaries at December 31, 1968 and the results of their operations and source and application of their funds for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. February 6, 1969 DSW 020716 STLCOPCB4006025 MONSANTO COMPANY HISTORICAL STATEMENT OF (In millions) ASSETS 1968 Current Assets: Cash..................................................... $ 24.8 Marketable securities.......................... 88.9 Net receivables.................................... 335.9 Inventories........................................... 313.1 762.7 1966 1965 $ 23.3 $ 27.8 $ 33.2 $ 27.9 31.3 45.9 58.2 52.8 313.9 299.0 267.7 240.1 290.5 280.1 260.4 216.3 659.0 652.8 619.5 537.1 10 YEARS 25 YEARS AGO AGO 1958 1943 $ 36.4 48.0 113.8 121.5 319.7 $13.2 1.0 9.0 12.9 36.1 Investments, etc..................................... 79.9 78.7 86.6 87.0 85.5 56.7 3.5 Property: Land..................................................... Buildings.............................................. Machinery and equipment................. Phosphate deposits............................ Producing oil and gas properties....... Undeveloped oil and gas leaseholds. Accumulated depreciation, etc........... Accumulated depletion....................... 34.3 354.0 1.791.4 11.6 107.2 8.4 IJ37.7 45.0 Net property................................ 1,024.2 33.6 349.6 1,755.3 11.4 102.4 7.3 1,140.2 42.2 1,077.2 32.4 325.7 1,663.1 10.6 100.0 7.4 1,010.8 40.0 1,088.4 27.8 289.9 1,529.6 10.0 97.9 7.6 886.9 38.8 1,037.1 27.8 262.7 1,295.7 9.8 94.7 8.2 786.0 36.6 876.3 12.7 157.7 678.7 6.2 74.9 12.8 338.8 24.4 579.8 2.4 14.1 49.9 1.0 30.3 .2 36.9 Deferred Charges................................... 28.5 $1,895.3 33.8 28.1 31.9 28.1 9.3 $1,848.7 $1,855.9 $1,775.5 $1,527.0 $965.5 .5 $77.0 (1) Attar deduction of tax notat of $13.1 million. Italics indicate deduction. Tha years 1964 through 1967 have been restated as described on pagea 17 and 18 of the Financial Review. DSW 020717 STLCOPCB4006026 AND SUBSIDIARIES 21 CONSOLIDATED FINANCIAL POSITION (in millions) LIABILITIES Currant Liabilities: 1968 Accounts payable and accruals......... $ 207.6 Income taxes....................................... 47.7 Current portion of long term debt___ 11.8 267.1 1967 1966 1965 1964 $ 187.1 $ 194.5 $ 198.6 $ 155.8 50.6 62.2 60.0 75.9 10.1 17.2 9.8 10.5 247.8 273.9 268.4 242.2 10 YEARS AGO 1958 $ 74.8 35.7 13.2 123.7 25 YEARS AGO 1943 $ 7.6 (1>1.4 9.0 Notes, Debentures, etc.......................... 432.9 451.4 480.4 467.5 345.5 295.8 - Other Liabilities and Deferred Credits: Deferred income taxes........................ Miscellaneous...................................... 36.6 8.8 45.4 38.4 9.5 47.9 41.9 7.2 49.1 43.1 9.8 52.9 36.6 3.4 40.0 30.3 3.5 33.8 4.3 4.3 Minority Interests in Subsidiaries....... 24.1 23.0 27.9 26.8 25.7 20.4 2.5 Shareowners' Equity: Preference shares............................... Common shares.................................. Paid-in surplus..................................... Retained earnings............................... -- 66.0 579.3 480.5 1,125.8 $1,895.3 -- 65.9 581.1 431.6 -- 64.6 551.4 408.6 63.3 524.6 372.0 -- 61.7 466.6 345.3 1,078.6 1,024.6 959.9 873.6 $1,848.7 $1,855.9 $1,775.5 $1,527.0 51.6 195.1 245.1 491.8 $965.5 21.0 12.4 11.5 16.3 61.2 $77.0 DSW 020718 STLCOPCB4006027 22 MONSANTO C O M PA N Y HISTORICAL STATEMENT OF CONSOLIDATED INCOME (in millions except per share earnings) 1968 1967 1966 1965 1964 10 YEARS 25 YEARS AGO AGO 1958 1943 Net Salat................................................. $1,792.9 $1,637.5 $1,617.0 $1,473.2 $1,362.8 Cost of Goods Sold................................. 1,324.6 1,214.6 1,183.2 1,043.2 943.0 Gross Profit............................................. 468.3 422.9 433.8 430.0 419.8 $772.2 557.6 214.6 $90.4 66.3 24.1 Lass: Selling and administrative.................. Research, development, patent and engineering....................................... 179.6 86.3 265.9 162.8 84.2 247.0 157.8 76.0 233.8 150.4 69.9 220.3 135.2 66.8 202.0 Operating Profit..................................... 202.4 175.9 200.0 209.7 217.8 Income Charges -- Net.......................... 11.5 1.9 8.3 6.5 3.3 Income Before Income Taxes............... 190.9 174.0 191.7 203.2 214.5 Provision for Income Taxes.................. 82.1 68.9 78.6 79.8 99.2 Net Income.............................................. $ 108.8 $ 105.1 $ 113.1 $ 123.4 $ 115.3 66.9 30.8 97.7 116.9 15.6 101.3 48.6 $ 52.7 5.5 2.2 7.7 16.4 (9) 17.3 12.0 $ 5.3 Per Common Share: Adjusted for splits............................... $ Adjusted for splits and stock divi dends ................................................ 3.30 $ 3.30 3.19 $ 3.19 3.50 $ 3.43 3.90 $ 3.75 3.73 3.52 The years 1964 through 1967 hava been restated as described on page 17 of the Financial Review. $ 2.04 1.72 $ .39 .31 DSM 020719 STLCOPCB4006028 AND SUBSIDIARIES OTHER DATA (In millions except where italicized) 1968 1967 1966 1965 1964 10 YEARS 25 YEARS AGO AGO 1958 1943 Plant additions and replacements........ $ 132.9 $ 160.4 $ 211.0 $295.3 $218.1 $ 81.4 $ 3.7 Depreciation, depletion, etc................... $ 172.8 $ 162.9 $ 152.4 $133.5 $120.3 $ 67.1 $ 6.6 Dividends a common shared................ S1.65 S1.60 S1.60 $1.45 S1.25 51.00 5.25 Book value a common shared).............. $34.11 $32.72 531.71 S30J4 S28.31 S19.06 53.60 Common shares*1).................................. 33.0 33.0 32.3 31.6 30.9 25.8 11.2 Preference shares................................... -- -- ---- Working capital....................................... $ 495.6 $ 411.2 $ 378.9 $351.1 -- -- 210,000 $294.9 $196.0 $27.1 Long term debt (loss current maturities)..................................................... $ 432.9 $ 451.4 $ 480.4 $467.5 $345.5 $295.8 -- Shareowners' equity............................... $1,125.8 $1,078.6 $1,024.6 $959.9 Employes*2)............................................. 59,849 58,889 57,737 56J17 Shareowners........................................... 111J38 111J63 95J38 93J38 $873.6 $491.8 $61.2 52J72 33,272 11,341 89,833 66,427 10,331 (1) Adjusted for splits. (2) Includes Monsanto employes In plants operated tor U.S. Oovammant (1,802 In 1968). Tha years 1964 ttirougn 1967 Kava baan rastatad as datcnbad on page 17 of tna Financial Review. DSW 020720 STLCOPCB4006029 MONSANTO'S WORLDWIDE INTERESTS This list of Monsanto's principal equities beyond U. S. borders gives some indication of the scope of the company's operations. Per cent ownerships, in some cases rounded to the nearest whole number, are shown parenthetically. NORTH AMERICA CANADA: Monsanto Canada Ltd. (100%) manufactures chemi cals and plastics raw materials. Plax Canada Ltd. (50%) produces plastic blownware. MEXICO: Monsanto Mexlcana S.A. (100%) produces chemi cals, plastics raw materials and building products. A subsidiary makes plastic consumer products. CENTRAL AND SOUTH AMERICA ARGENTINA: Monsanto Argentina S.A.I.C. (100%) manufac tures chemicals and plastics raw materials. COLOMBIA: Fabrics da Hiiazas Vanylon S.A. (49%) produces nylon 6 yarns. PANAMA: Monsanto Overseas S.A. (100%) handles certain investments and licensing outside the United States. PUERTO RICO: Chemstrand Overseas S.A. (100%) markets man-made fibers in areas other than Europe; handles certain investments outside the United States. VENEZUELA: Monsanto Venezuela, Inc. (100%) produces petroleum. EUROPE AND MIDDLE EAST BELGIUM: Monsanto Europe S.A. (100%) supervises invest ments and marketing activities throughout Europe; produces plastics and chemicals. FRANCE: Societe Monsanto (100%) makes plastics raw ma terials and plastic containers. ISRAEL: Israel Chemical Fibres Ltd. (60%) manufactures Acrilan acrylic fiber. LUXEMBOURG: Monsanto Cie S.A. (100%) manufactures nylon 6,6 yarns. SPAIN: Alscondel S.A. (50%) makes consumer products of plastics. A subsidiary produces chemicals and plastics raw materials. UNITED KINGDOM: Lansil Ltd. (100%) produces acetate flake and yarn, textile fabrics and apparel. Monsanto Chemicals Ltd. (67%) manufactures chemicals, plastics and plastics raw materials. Major subsidiaries produce plastics for construction and packaging. Monsanto Textiles Ltd. (100%) manufactures Acrilan acrylic fiber and nylon 6,6 yarns. Monsanto International Finance Company (100%) was es tablished to obtain funds for expansion, primarily in the United Kingdom and Continental Europe. Regional Vice Presidents Western Region Roy L. Brandenburger Eastern Region Richard T. Clark Southern Region M. R. Dalton North Central Region Daniel J. Murphy Governmental Affairs Sam Pickard ASIA AND AUSTRALIA AUSTRALIA: Australian Petrochemicals Ltd. (55%) manu factures raw material for plastics and rubber. Monsanto Chemicals (Australia) Ltd. (85%) makes chemicals and plastics raw materials. An associate produces fluoro carbons. HONG KONG: Monsanto Far East Ltd. (100%) supervises marketing of chemicals and plastics in the Asia-Pacific area outside Japan and Australia. JAPAN: Mitsubishi Monsanto Chemical Company (50%) manu factures chemicals, plastics and plastics raw materials. Monsanto's participation in international commerce and trade Is further revealed in this listing of companies engaged in various activities on a more modest scale than those listed above. Omitted entirely are almost 100 sales agencies repre senting Monsanto in most parts of the world. Lomond Ltd. -- Hong Kong Monoil Indonesia, Inc. -- Indonesia Monoil Netherlands, Inc.-- The Netherlands Monoil UK, Inc.-- United Kingdom Monsanto Agricola de Nicaragua S.A. -- Nicaragua Monsanto Centroamerica (El Salvador) S.A. -- El Salvador Monsanto Centroamerica (Guatemala) S.A. -- Guatemala Monsanto Chemicals of India Private Ltd. -- India Monsanto Chile Comercia! e Industrial Ltda. -- Chile Monsanto Comercio e Industria Ltda. -- Brazil Monsanto (Deutschland) GmbH -- West Germany Monsanto Export Co. -- Dominican Republic Monsanto GmbH -- Austria Monsanto Italiana S.p.A. -- Italy Monsanto Japan Ltd. -- Japan Monsanto (Nicaragua) S.A. -- Nicaragua Monsanto N.V. -- The Netherlands Monsanto Oils Ltd. -- Canada Monsanto Philippines, Inc. -- Philippines Monsanto Research S.A. -- Switzerland Monsanto (Scandinavia) A.B. -- Sweden Monsanto South Africa (Pty.) Ltd. -- South Africa Monsanto (Suisse) S.A. -- Switzerland Monsanto Thailand Ltd. -- Thailand Monsanto (Venezuela) C.A. -- Venezuela Monsel Electronic Instruments Ltd. -- Israel Sidaplax N.V. -- Belgium Sinteticos Slowak S.A. -- Uruguay DSW 020721 STLCOPCB4006030 DIRECTORS AND OFFICERS BOARD OF DIRECTORS OFFICERS Charles H. Sommer, Chairman...................................... St.Louis Edward J. Bock...............................................President Dillon Anderson...........................................Houston and Chief Executive Officer Charles H. Sommer....................Chairman of the Board Edward J. Bock.......................................................St.Louis John L. Gillis...............................Senior Vice President David R. Calhoun...................................................... St.Louis Monte C. Throdahl................................Vice President Fredrick M. Eaton.................................................NewYork John L. Gillis.............................................................. St.Louis John R. Eck.................................. Group Vice President Herbert Hoover Jr..................................... Los Angeles James D. Mahoney........................Group Vice President Edward A. O'Neal......................................................St.Louis Tom K. Smith Jr............................ Group Vice President James S. Rockefeller............................................... NewYork Charles Allen Thomas............................................... St.Louis H. Harold Bible....................................... Vice President Monte C. Throdahl....................................................St.Louis William H. Bromley.................................Vice President James E. Crawford Jr...............................Vice President CORPORATE DEVELOPMENT COMMITTEE Patrick J. Dowd...................................... Vice President Finis Morgan............................................ Vice President Edward J. Bock, Chairman Edwin J. Putzell Jr..................................Vice President H. Harold Bible Edwin J. Putzell Jr. John L. Gillis Charles H. Sommer Monte C. Throdahl Francis E. Reese....................................................... VicePresident Robert R. Rumer...................................................... VicePresident J. Russell Wilson..................................................... VicePresident EXECUTIVE COMMITTEE Edward J. Bock, Chairman John L. Gillis Edward A. O'Neal Charles H. Sommer Transfer Agente Morgan Guaranty Trust Company of New York The Boatmen's National Bank of St. Louis Registrar? The Chase Manhattan Bank (National Association) St. Louis Union Trust Company PRINTED IN U.S.A. Lewis F. Steinbach.......................................... Controller Edwin J. Putzell Jr......................................... Secretary Patrick J. Dowd.............................................. Treasurer Jack W. Mueller..............................Assistant Controller Francis A. Stroblb...........................Assistant Controller Walter C. Thilking.........................Assistant Controller Rodney Harris Jr.............................. Assistant Secretary C. Brent Holleran........................... Assistant Secretary Franklin C. Rehfeld........................Assistant Secretary Lewis L. Baseler............................... Assistant Treasurer Norvell G. Jones.............................. Assistant Treasurer J. Robert Matlock.......................... Assistant Treasurer Walter J. Naber Jr........................... Assistant Treasurer Thomas M. Rasmussen...................... Assistant Treasurer Fb. 24, 1969 DSW 020722 STLCOPCB4006031 MONSANTO COMPANYj800 N. LINDBERGH BLVD., ST. LOUIS. MISSOURI 63166 DSW 020723 STLCOPCB4006032