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Monsanto Becoming the best in what we do is a promise being kept. Annual Report 1984 0679779 TOWOLDMONOOI5276 I (IpiTalioriid lli^hli^hls (Dalian in million,, except per there} MiHiviiiti ( mil |idn > nnd Sub Net Sales Net Income Per Common Share: Net Income Dividends Shareowners' Equity Depredation, Depletion and Obsolescence Funds Provided from Operations Property, Plant and Equipment Additions Research and Development Expenses Percent of Lang-lbrm Debt to Ibta) Capitalization 1*84 56,6*1 t 43* $ S.42 2.25 46.43 $ 491 51,008 5 614 5 370 18 1983 56,299 5 402 5 4.89 2.075 44.83 $ 517 $ 948 $ 560 5 290 20% 1982 56,325 5 352 5 4.39 1.975 42.99 $ 439 5 880 5 673 $ 264 22% Iter shirt tmovnU for lit years reflect the 1984 two-for-ooe stock, split. Net income ift 1983 and 1982 includes extraordinary income items of 833 million and $23 million, respectively, Silks in Major Markets um Worldwide Soles (MM AfricaMiin %U363 20% Cm--ructioa ipd Home FurnWilnp $U$1 19% Capful Equipment SS75 13% IMtcd States um ti% Europe*Africa $968 m World I tononik \rlnitt Source: International Monetary Fund ut inflation-adjusted statistics using gross national product/gross domestic product data(1980=100). W uu 067*780 Monsanto at a t.lnine At Monsanto Company, more than 50,000 employees throughout the world are skilled in researching, manufacturing, and marketing more than 1,000 products, including chemical and agricultural products, man-made fibers, electronic materials, health care, process controls, fabricated products, and oil and gas. Monsanto has investments in 164 manufacturing plants, offshore oil and gas exploration sites, laboratories, and technical centers in 27 countries, and conducts business in more than 100 countries. able i if (Uni l iHs Letter lb Our Shareowners 2 Introduction 7 Life Sciences 8 Chemical Sciences 14 Engineered Materials and Products 20 Growth 26 Financial Report Contents 32 Shareowner Information 55 Officers 55 Board Of Directors 56 Monsanto trademarks in the Annual Report are identified by italics. Pharmaceuticals and Personal Products $863 13% P Canada Motor Vehicles Apparel $60? 9% W $495 7% P Latin America $292 4% . $360 5% Chemicals and Hydrocarbons $485 7% P Other Markets $752 12% P Asla-Perifk $573 9% Ibtal $6,691 100% $6,691 100% Uta America (Meiioo. Argentina) (Japan, Australia, Korea end MaUycia) 06 74761 TOWOLDMONOOI5278 Letter To Our Shareowners: On the cover of this year's Annual Report: "Becoming The Bes( In What IK Do IsA Promise Being Kept" Strong words -- a serious commitment. Much of what we did in 1984 moved us well in that direction. Some things did not. On balance, the results were decidedly positive. The U.S. economy provided a tremendous lift -- particularly in the first half -- but that gain was taken away, and then some, at the bottom line by the effects of the persistently strong U.S. dollar. But being best means consistently managing our way through the vagaries of these forces and continuing to do everything possible to set our business structures and contingency plans in place to avoid simply "coping." To a degree, we have reduced the cyclicality of our Company and are making steady moves to dampen these swings. This improvement must continue. Ilk one of the reasons we're building toward diversity with a three-part company of life sciences, chemical sciences and engineered products. Some of the highlights: Overall financial results were a real plus. Earnings from operations increased 30 percent over 1983; net income -- at $439 million -- was up significantly and return on shareowners' equity continued to improve. Now, a return on shareowners' equity of 12 percent -- about the middle of the pack in the chemical industry -- can hardly be characterized as "best," but it's moving up steadily Vfe know where we want to be on this important indicator and are putting the pieces in place to get there. Despite the battering our exports took from the strong dollar, our earnings .from outside the U.S. --exports plus local manufacturing -- increased by 74 percent over 1983 and accounted far 31 percent of corporate operating income. By comparison, U.S. earnings rose 14 percent. As with cyclicality, we are moving and must continue to move to dampen the effects of these inevitable currency cycles by balanced, worldwide product siting. In the meantime, a number of competitors' products have been imported into some of our traditional U.S. markets despite having fundamentally \t`l Silks SUB UJ* V`t IlK'IHIK MWM s.otm 4.001 0674782 inferior cost positions. Even a moderate softening of the dollar would set that playing field level again. The chemicals, plastics and fibers businesses of Monsanto turned in operating income of $321 million -- a 51 percent increase over 1983. It's nice to have the results to back up our repeated claims of the past few years that these are important assets -- perhaps even undervalued in the financial market's analysis of Monsanto. 33b have made a strong commitment to our customers and employees to renew these core businesses of Monsanto. 1984 demonstrated how valuable these businesses are despite the heavy media attention given to our biological efforts. Silicon wafers went into the black in 1984 as promised. It's been a long time coming. Wfe intend to keep this momentum going and to have silicon be a major income contributor for the Corporation. year and a nine percent product usage increase. The volume of Roundup was lower than we had hoped for primarily because of poor weather at the important use time. Vfe don't intend to continue to blame "weather." Wfe've taken major steps to widen the use conditions for Roundup so we can master "adverse weather." New mixtures and application methods are also extending its markets. Sales increases for Roundup are expected for 1985. FisherIs earnings were only fair. We put a lot of money in 1984 into PRoVOX control room instrumentation and acquisitions designed to broaden Fisher's offerings. Nearly $100 million of PRoVOX systems were sold this year -- just five years after its introduction -- with prospects for multiples of that in the coming years. We've demonstrated we can sell the system. The job in 1985 is to begin to turn the extraordinary sales increases into high profits. Wfe think we will. Agricultural products income increased by 10 percent, while absotbing $107 million of R&D, $29 million higher than 1983. After 15 years on the market. Lasso herbicide continued to demonstrate its farmer appeal and importance to American agriculture through strong volume movement. Roundup herbicide turned in a six percent sales volume increase for the calendar During the year we maintained our fine balance sheet -- a strong cash position and low debt. This is an asset with powerful potential as we look at future growth options. We also initiated a program to buy back up to six million of our shares, which we believe are currently undervalued in the marketplace. 1 Shim-tmiii'iV r<|iiil> rPcr Share) [Percent Return an Equity) $5o in UJt IX'; 0674783 We've been discussing the highlights the top players in biotechnology in the world -- -- the events -- of 1984. To understand their Monsanto -- appears to suffer only a market relevance to the assertion on the cover about "cost" for this research. Our goal is to turn "a promise being kept," it is important to these costs into products as quickly as is set out the agenda for the years ahead -- the feasible, for the benefit of mankind and for critical things that must happen. Call them continuing market value to our shareowners. "Corporate Imperatives." Exciting developments are under way. and we'll he reporting regularly on them. We're planning Ws must: on highly profitable biotechnology products -- Protect The Earnings Potential Of The Company's Two Most Important and sooner than many think. We have the necessary developmcrl and commercial structures in place tor the Franchises: Lasso And Roundup Herbicides agricultural aspects of biotechnology. We have In the case of Lasso, a series of stated on several occasions our desire to acquire improved products is expected to preserve its a pharmaceutical structure lo carry out that market position when patents on Lasso expire important element of the strategy. If we cannot later in the 1980s. They are now in advanced find a suitable acquisition in a reasonable period stages of the regulatory process. We believe the of time, we intend lo make alternative new product strategy is right. As usual, the best affiliations in order lo achieve the goal. of results will only come from flawless execution. Wfe control our own destiny on much of it: some Nurture Chemlcals/PlastlcsiFibers of it, like regulatory timing, we don't. So far, We've been putting a lot of resources overall, we're close to where we'd tike to be on into improving our customer marketing, carrying out our strategy for Lasso, trimming manufacturing costs, refurbishing The Environmental Protection Agency our plants and expanding R&D in these core has called for a regulatory review ofLasso businesses of Monsanto. It's paying off both in as it has done with a number of agricultural current earnings and in the largest array of new chemicals. W; believe the review wilt confirm products we've seen in these areas in 20 years. the safety and benefits of the product which IS years of farmer use have demonstrated. Continue lo fix lon fielum Businesses Roundup, too. has its non-market issues. For We still have several low-return busi the past two years we have been fighting off nesses even after getting out of some poor return attempts by othets to claim for themselves some businesses, with sales of about $2 billion, over of the benefits of this pioneering discovery by the past few years. While ihe drain is now a Monsanto scientists. Monsanto has won the trickle, being best means getting even the preliminary patent battles in the U.K., West below-average parts of Monsanto contributing Germany and New Zealand -- a trend which we at least our cost of capital employed in these fully expect to continue for the main issue: the businesses. Wfe're not there yet, but we have U.S. patent cases. In the marketplace, we're every reason to believe we can get the job done taking major steps to broaden use of Roundup beyond its current Tange of applications. There's Profitably Grow Silicon And FIsherS still a lot of growth left in Roundup. PSdVOX Instrumentation Systems There are enormous opportunities for Dim Biotechnology Into Businesses In growth in earnings in these businesses over the Agriculture, Nutrition And Health Care next several years. Fundamental market demand Interestingly, several of the biotech is good-- so turning these sales into solid nology start-up companies have produced earnings is entirely up lo us. We're very significant financial market value while one of optimistic. 0674784  Eierj Day, Earn The Right To Operate Thai right dimes from our customers and -- especially-for chemicals -- from [he general public. Wo have put increasing emphasis on customers -- I islening far better to their needs for new products or better performing versions of what they already buy. and then doing something about it. Much of industry has come hack to its proper external focus after too long a time looking inward at its own strategics. We are no exception. In the public arena we have taken steps to respond to concerns about chemicals and to take a leadership role. We have pledged to apply our cleanup standards of today to the waste materials disposed of yesterday and we're about that task. We've also pledged to let our neighbors around our plants know what we're making, the characteristics of those products and what our safely practices are. We will continue to seek ways to assure the public that Monsanto produces safe, useful products. Ensure An UnfetteredAction Orientation Throughout Monsanto The results outlined in this letter were not accomplished by a corporation -- they were accomplished by the collective efforts of our people. This is why we did so w-ell in IW4 -- and it's critically important that we remain a company of movement in the years ahead. Pl.irw are essential, but we'll continue to need fresh Richard J. Mahoney (leftJ, President end Chief Eiecuhve Officer, with Dr. Louis Fernandes, Chairmen of the Board. 0674785 ideas and people who are willing lo act on them, taking some risks in the process. Wfe have those people today. Our job is to maintain an environment that Will unleash their energies and imagination -- and let them get their job done. Continue Steady And Reliable Return On Shareowners'Equity Growth Monsanto answers to many publics. We've mentioned our customers, neighbors and the general public. We add. importantly, to that list, our owners -- whether employees, retirees, private individuals or institutions. When it comes to return on shareowners' equity -- our most important financial measure -- these various groups often have differing interests. They share the common goal of wishing to see a strong, stable company with a good total return. The time horizons, however, as with most com panies' shareowners, are often quite different -- we have shareowners interested in long-term appreciation willing to sacrifice short-tetm gains, as welt as a large group of shareowners whose interest is a quicker profit. The range of views in the financial community is illustrated by those who find current value in our positioning for the future -- as well as others who have adopted a "wait and see" attitude. Managements job, along with the Board of Directors, is to balance all of these interests. For example, biotechnology R&D may well deliver products in this decade -- but this and other areas of research are expensive, and selfsustaining profits probably can't be expected until the 1990s. Current earnings could be rapidly accelerated if we cut back our total R&D from present levels to just that percent which our industry averages. Vte could also cut many of our longer term marketing, manufacturing and environmental programs as well -- but we intend to be a leader and aim to preserve our future by steadily improving that future's earnings prospects. At the same time, we are mindful that the 1990s won't be here for five years and we must perform financially in the interim. We've learned that we con do both by seizing every opportunity from todayis businesses and acceler ating near-term new products -- while picking and funding the future programs with the same demanding dedication to value. Our intention is to become "the best in what we do" -- to make Monsanto a company which will be considered automatically whenever people talk about great business enterprises. This is the philosophy we operated by in 1984 and plan to continue in 1985 and beyond. President and Chief Executive Officer 0Dr. Louis Fernandez Chairman of the Board March 5, 1985 0674786 Introduction Monsanto repotted near-record earnings in 1984. That result is partial measurement for judging the Company's success in meeting its pledge for renewal, growth and excellence. More important, progress was reflected in a stronger mix of businesses, continued financial strength, more efficient operations and rejuvenated research and development. Sales for 1984 came from wellestablished businesses like herbicides, detergent materials, nylon carpet fibers, industrial chemicals and plastics, and from emerging products like silicon wafers, gas separations equipment, process control instruments and specialty polymer materials. This evolution toward high value products bom of sophisticated research and technology is under way across the Company. International businesses continued to grow in importance to the Company, and that emphasis will continue. During the year, Monsanto retained one of the strongest balance sheets in the chemical industry, giving the Company the financial strength, stability and borrowing power needed to accomplish its goals through internal growth and acquisitions. Cost reduction programs and process improvements, plus utilization rates averaging six percentage points higher than 1983, resulted in more efficient and profitable plant operations. This intense focus on asset management continues. In addition, the Company continued to strengthen previously troubled segments of its plastics, fibers and chemicals businesses through new product introductions, creative marketing and solid management. More work is under way to bolster remaining businesses that do not meet Monsanto^ standards for profitability Research and development accelerated during the year, with expenditures reaching record levels. These research programs support the Company Is strategies by developing products that build on the legacy of established technical knowledge while creating new products from new sciences. Facilities opened for increased research into herbicides, animal nutrition, silicon, instruments for the rubber industry and process valves and equipment. Dedication of a Life Sciences Research Center near St. Louis highlights the Company's commitment to biotechnology. Monsanto announced its new corporate strategy and direction two years ago. It pledged to increase shareowner value while building a company with major interests in three broad business areas: Life Sciences, where rapidly developing understanding of new sciences creates the potential for new products for agriculture, animal nutrition and human health. These efforts are supported by extensive research in biotechnology, where Monsanto is recognized as an industry leader. Chemical Sciences, where Monsanto's 84 years of experience and established strengths lead to new, high value fibers, plastics and chemicals. Emphasis in this area is on innovation, technology, customer service and efficiency. Engineered Materials and Products, where engineering, applications technology, high quality and specialized skills provide customers with finished goods and equipment for a wide range of industries. Monsanto expects rapid growth from these businesses. This report outlines Monsanto's progress. It shows a Company meeting its pledge to employees, customers and shareowners to be the best in what it does. 0674787 TOWOLDMONOOI5284 Lite Sciences Monsanto's interests in life sciences include agriculture. animal nutrition and human health. Within these areas there is a wide range of activity based on the Company's growing understanding of biological sciences* plant sciences and nutrition. Monsanto is developing new herbicides, plant growth regulators, agricultural seeds and nutrition products and is expanding its efforts in human health care. s 4 Chateau Meursaulf vineyard in the Burgundy region of France provides the setting for a meeting between a iocai agricultural products representative and a grower to discuss flreoeber herbicide, a new gfyphosafe mixture* TOWOLDMONOOI5285 TOWOLDMONOOI5286 One of the growing number of usee tor Roundup herbicide, a premier product, is in pasture renovation projects ip fields such as this one in the Netherlands. Agricultural Products 1984 to control weeds in French vineyards. Sales of agricultural products increased Another European development. StiitR in 1984 as U S. fanners substantially increased herbicide, offers grain fanners in the United planted acreage compared with 1983 when a Kingdom better control of annual weeds prior 10 short-lenn government program severely to planting. reduced plantings. Herbicide sales rebounded Sates of Rodeo herbicide, approved and remained the profit stalwart for Monsanto. by the U.S. Environmental Protection Agency Roundup herbicide, a premier product (EPA) for use in aquatic sites, increased around the world, increased sales volume in 40 percent during 1984. with additional rapid 1984 by sis percent despite unusual weather growth expected in 1985. conditions in important markets. These Lasso herbicide, primarily used to increased sales came in traditional markets control grassy weeds in com and soybeans, for control of perennial weeds, and from new, retained its market leadership during 1984. specialized uses in agriculture and industry. It is used by some 300,000 farmers in the These new uses involve the active ingredient United Stales. in Roundup or combinations of that active ingredient with other products that broaden markets and reduce costs. For example, Richochel herbicide, developed in Europe, was introduced during Lasso Micro-Tech herbicide is encapsulated in a tin,/ polymer thell from which II it released after application, allowing farmers improved storage, handling and performance in reduced tittago. 0674790 TOWOLDMONOOI5287 Lasso Mkro-Teilt herbicide will be available lo soybean growers in the United Slates in 1985. Through proprietary technology, Monsanto encapsulates the herbicide in a tiny polymer shell from which it is released after application. This formulation offers fanners excellent weed control, consistent results in conservation tillage systems and improved storage and handling. During 1984. registration of Lasso with EPA was reviewed as part of a federal program for all pesticides registered prior to 1978. Laboratory tests showed that test animals fed high levels of alachlor. the active ingredient in Lasso, daily during the greater part of their lives developed tumors, While there is no evidence that alachlor produces tumors in humans. EPA announced changes in November in authorized uses and handling methods for Lasso These changes will have a very small impact on markets for the herbicide. Additionally, in January 1985. EPA began a Special Review of Lasso. During the review. EPA will examine all health, safety and benefits data on Lasso, seek public comments and make a decision aboul the product's registration. That process is expected to lake a year or more, The Company is convinced that Lasso is safe when used according to label directions and that the Special Review will result in the products continued registration. A review process for Lasso also is under way in Canada, which is a small market for the product. Monsanto will enter a new market in 1985 with the introduction of Limit turf regulator. This product restricts the growth rale of grasses in the northern United States and will be available for hon-residential sites including office parks, shopping centers, cemeteries, parks and golf courses. Slower growth rates reduce the number of mowings and allow turf managers to redeploy scarce labor. Monsanto aggressively asserts its worldwide patent rights. For example, with litigation on Roundup the Company made substantial progress in 1984 in legal actions in the United States, the United Kingdom. West Germany and New Zealand. In 1985 Monsanto will bmgin cornmorciai production of Limit toft regulator that slows Ifie growth of coof-season grasses, thus reducing the need for fraquanl mowings. Nutrition Chemicals During 1984 Monsanto became a leading supplier of synthetic methionine supplementation in the U.S. poultry industry with its Alimei liquid feed supplement. Methionine is an amino acid essentia! for growth. A new plant for Alimei at Chocolate Bayou. Texas, began full scale manufacturing during the year on lime and within budget. Prices for the product, however, were adversely affected by lower cost imports into the United States from Western Europe. Alimei and MHA 067t|791 TOWOLDMONOOI5288 Quantum hard red winter wheals from HybrITech Seed Internallonil, Inc., are hybrids which increase yields ever current varieties. 12 feed supplements are the basis for Monsanto's nutrition chemicals businesses. Food phosphates, made in a wide variety of special forms for the food processing industry, remained solidly profilable during 1984 despile strong competition from imports into the U.S. During the year, Monsanto began construction of a new research facility for animal sciences on a 700-acre farm near St. Louis. Plant Science Hybrilcch Seed International. Inc., a Monsanto subsidiary, combines the strengths of traditional seed companies with the promise of new scientific breakthroughs using biotechnology. Built front two acquisitions, Hybrilcch eurrenlly focuses on the hybrid wheat and soybean seed markets. During 1984. the subsidiary introduced lour proprietary hybrid hard red wirier wheals under the Quantum trademark which exhibit increased yields over current varieties. Increased production is scheduled for 1985 to meet increasing demand. Four new proprietary lines of soybean seeds were sold under the I tart/ Seed Company name during 1984. with outstanding results. Hartz Seed was purchased in 1982 and has well established seed businesses. This year. HybriTcch announced that it will form a joint venture with The Cooperative de Pau, a leading French agricultural cooperative, to develop and market new wheat and barley seeds lor the Wesiem Kuropean market, While new seed products to dale have resulled front traditional breeding techniques. Monsanto's long-term strategy is to integrate these traditional efforts with new biotechnology 0679792 TOWOLDMONOOI5289 methods to develop seeds with greater yields, special quality traits, or with resistance to insects, disease and other environmental factors. Health Care During 1984, Monsanto continued to build the strengths necessary for a global pharmaceutical business. The Company purchased Continental Pharma. S,A,. a Belgian pharmaceutical company with markets in Europe and Asia. Its leading product is suloctidil, used to enhance peripheral and cerebral blood circulation. This acquisition not only provided established distribution and licensing skills, but also research and development programs which mesh well w ith Monsanto's United States efforts. Additional research is available to the Company through arrangements with Washington University. Oxford University and others. Monsanto will expand in the pharmaceutical industry through'internal development programs, acquisitions and joint ventures, where appropriate. Biotechnology is an important element in this effort as new techniques are developed to produce human health care products. The Company has assembled a notable staff of pharmaceutical professionals to implement this strategy At the laboratories of Continental Pharma in Belgium, researchers are investigating enxymes that might play a rota in the development of such inflammatory diseases as arthritis. The acquisition of Continental Pharma gave Monsanto access to new health care research activities. 0674791 Chemical Sciences Monsanto's basic chemical businesses reported strong sales and earnings during 1984. spurred by sharply improved economies during the first sis months in major markets such as the housing and automotive industries, The Company was in position to benefit from the economic recovery because of strategies focusing on businesses in which Monsanto has technological, marketing or cost advantages. Fibers and intermediates, industrial chemicals and polymer products are at the core of Monsanto. They provide substantial cash needed to fund the Company's growth and will remain a central element in the future as they move to develop additional products with higher value for customers. Continued cost reduction programs and strong customer service are additional strategic elements for these businesses. WALL WALL The novel credit program for Weaf-Daiwf carpet, becked by Monsanto, allows a family to charge itt carpet purchases at competitive rates white the retailer benefits from the easier, larger safes the Credit program makes possible. Jjrr M 0674794 TOWOLDMONOOI5291 Fibers and Intermediates Strong sales during 1984 sustained a dramatic business turnaround for the fibers and intermediates business. Mills introduced more carpets made from Monsanto nylon staple products in 1984 than those from any other fiber manufacturer. Marketing focused on customer needs was the catalyst behind this success. During the year, Monsanto continued support for its carpet program, in which the Company tests and guarantees Wear-Dated carpet made with Uhron nylon fiber. In addition, buyers of Wear-Dated carpet were given maintenance information kits and access to company experts through an "800" telephone number for advice on stain removal, ' Late in 1984. Monsanto introduced a novel credit program for Wear-Dated carpet. Carpel retailers have embraced the program, recognizing the benefits it offers their customers and its potential to increase sales. Apparel fiber businesses fared less well during the year, primarily due to intense competition from imports into the U.S. of both fiber and finished goods. In response, Monsanto is developing high value acrylic products with special properties and cost advantages, such as producer-dyed fiber, for the textile industry. In addition, new processes are being implemented at the Decatur plant which will yield a family of acrylic products with improved aesthetic properties and abrasion resistance and which will double machine productivity. Cost reduction programs across the chemical imermediates businesses helped increase earnings from the sales of both fibers and intermediates. For example, manufacturing efficiencies combined with improved export prices to provide significantly higher margins for acrylonitrile, an intermediate used to make fibers and plastics. Industrial Chemicals Sales increased across most product lines in industrial chemicals during 1984. but earnings were affected by soft prices toward year-end. imports and the strong U.S. dollar. The Company made substantial progress toward future growth through new capacity, process improvements, international investment and new product development. Construction projects underway during the year will double capacity for diphenyl oxide used in heat transfer fluids, surfactants and fire 0674796 Fite-retardant Skydroi hydraulic livid i$ used in aircraft hydraulic systems. retardants for plasties. Completion of these projects in 1985 will lengthen Monsanto's lead in these businesses, Process improvements at the Texas City. Texas, acetic acid plant expanded capacity by 75 million pounds, or 20 percent, lowering costs and helping the Company meet competition from imports. Acetic acid is used in textile operations and in making vinyl acetate resins and agricultural products. Additional technical improvements at the Pensacola, Florida, maleic anhydride plant highlighted a (lawless first year of operation at the 150-million-pound facility, More potential capacity is available at the plant as demand for maleic anhydride increases in the plastics and chemicals businesses. Other maleic anhydride plants in the United States. United Kingdom and Canada demonstrate Monsanto's leadership in maleic technology and production. Outside the United States, the Company moved to strengthen its profitable phosphate business through a new joint venture with Brazilian and Belgian companies to produce purified wet phosphoric acid, a phosphate feedstock. A new plant using the latest technology will be built in Brazil to supply Monsanto's phosphate plants there and to sell in Phosphates for rood ingredients and the laundry detergent industry are bagged for shipment to Customers 0674797 TOWOLDMONOOI5294 % other South American markets. Food grade and technical grade phosphates are used in many food and industrial products. Research and development spending has increased by approximately 100 percent in the past two years as the search for new products intensifies. A new phosphate fiber has the performance properties needed to replace asbestos in automotive brakes and gaskets, vinyl flooring, and other advanced composite products. This patented fiber is now undergoing extensive product safety and customer tests. In addition, customers are testing several high performance products for use in laundry detergents. Polymer Products Renewed strength in traditional markets, and success with new. high value products, resulted in an outstanding year for polymer products' businesses. Sales in the automotive, construction and home appliance industries led these businesses, with new products in electronics, telecommunications and custom molding providing added momentum. Samoprene thermoplastic rubber, a product that combines the properties of rubber with the manufacturing and cost efficiencies of plastic, continued its rapid growth during the year. Designers and engineers are finding new uses for Santoprene in applications where rubber was the traditional manufacturing material, particularly in the automotive, appliance and construction markets. Samoprene is a high value product in a traditional market which is receiving the necessary funding to spur additional growth. /Z Monsanto's tligll productivity Vydyne nylon resins find growing use rn electric*! end electronic connsdon, 067*798 Construction of two new manufacturing facilities has been announced, and sales, technical support and product development efforts are being increased. Lusinm AB5 and SAN thermoplastics, a versatile family of plastics with a broad range of applications, look full advantage of the upsurge in sales in the automotive and home appliance industries during 1984 and recorded improved sales and eamings. In addition, new higher value grades of Luitran were developed for strong, lightweight moldings for home computers, telecommunications equipment and other specialized markets. Cadon engineering thermoplastics, a line of styrene-maleic anhydride based terpolymers, gained further acceptance in multiple automotive applications requiring higher heat performance, and continued to grow in a variety of appliance applications. Saflex plastic interlayer for laminated automotive and architectural glass remained the industry leader in stronger markets, For example. European auto manufacturers continue to convert to windshields laminated with Sqffe.v. adding important new sales. Rapid growth of the uses of Saflex in architectural glass is extending Monsanto's industry leadership worldwide. Monsanto's rubber chemicals business again was the industry leader in worldwide sales in 1984. Monsanto is an international leader in developing innovative products which add performance and longevity to tires and industrial rubber products and cost efficiencies to manufacturing operations. Monsanto, o laodar In rubber chemicals and inatrumanls, developed the moving die rheometer te test the properties at rubber compounds. 0674799 Engineered Materials \nd Products Technological leadership and growth potential characterize the many businesses in Engineered Materials and Products. They include engineered products, Fisher Controls International. Inc., electronic materials and Monsanto Oil Company. Together, they represent skills in engineering, fabrication, manufacturing and marketing, backed by research and development, 21) Monsanto strengthened its position as a loading silicon supplier by Introducing MOS Epi waters for sophisticated electronic devices where high quality is essential. 0674800 TOWOLDMONOOI5297 TOWOLDMONOOI5298 Engineered Products Prism separators, a Monsanto technology that uses hollow fibers to recover valuable gases, nearly doubled sales in 1984 compared with 198.1. Developments in the hollow fiber technology now allow customers to separate hydrogen from waste gas streams, recover carbon dioxide in enhanced oil recovery, colled methane from landfill gas for use as fuel and separate nitrogen from air to blanket flammable materials aboard ships. New systems using Prism separators expanded the product line for small-scale, specialty separations. Markets for systems are opening outside the United Slates, including sales to the Peoples Republic of China, the Soviet Union, Korea. Japan and Norway. Plastic bottles capable of being filled with bol liquids were tested by consumers in 1984. These containers offer producers of fruit juices and processed foods a lightweight, unbreakable alternative to glass jars and bottles and metal cans for products that must be packaged while hot, This licensed technologybuilds on Monsanto's existing strengths in manufacturing and marketing plastic bottles. A Monsanto technician cheeks the hoJIow fibers used to recover or generate v*luobie pesos in Prism sepsfftorst The introduction of another application and the penetration of new geographic markets contributed to a near doubting of sales in 1984. Also during the year. Monsanto received United States regulatory clearance for its Cyrlc'Sttfe soft drink bottle. Potential markets tire being studied. Monsanto also introduced CUnttfNini energy-saving greenhouse film during 1MS4, offering customers the potential to save as much us 2U percent or more on heating fuel costs. Two advanced forms of A.s7ffj7Htf'siuilium surface -- the retractable "magic carpet" and the permeable drain through system -- tounJ growing acceptance during 19H4. A new drainage system for highways, airports and other sites is under development. Wydrainuy drain acts as a water collector and 0674602 conductor under paved surfaces, providing fasler draining, less potential for damage and reduced maintenance costs, Monsanto Enviro-Chem Systems. Inc., completed its first two projects using Company technology for cogenerating electricity from sulfuric acid plant excess steam, This, coupled w ith strengths in other markets, resulted in an overall improvement in income. The r'up<tc PR6VQX instrumentation systems have demenstreted strong International growth. In tho conlrot room of o new facility in Siuishii, Netherlands, the installation manager and a Fisher engineer review operational procedures lor the plant's PRbVOX system for monitoring and controlling production processes. dewatering system, which uses positive and negative electrical charges to speed up the settling of clay in phosphate mine ponds, was tested in 1984. Additional applications for this technology are being investigated. Fisher Controls International, Inc. Led by the conlinuihg growth of PRoVOX instrumentation systems, and improved control valve markets. Fisher increased sales in iy84 as capital spending began to rebound in most key markets. Fisher a worldwide leader in the development of control valves, measurement instrumentation and process controls. Sales in alt product categories improved in North America. Latin America, and Asia-Pacific, but European sale lagged as capital spending there remained depressed. Control valves, the heart of Fisher's business, advanced substantially during the year. During the past two years. Fisher has introduced an impressive array of new valves and accessories. These new units reflect the continuing Fisher emphasis on new product development and substantially surpass the 0674603 A technician at Advanced Micro Devices, (nc,. a customer in Austin, Texas, inspects devices that have been etched onto Monsanto's new staunch silicon wafer. M number of new products brought to the market by competitors, Fisher continues to have the most advanced technology in the valve industry, particularly for valves used in corrosive or other severe environments. Fisher further advanced its valve position in early 1985 by acquiring Posi-Seal International, Inc., a company which manufactures high performance rotary valves. Fisher's new electronic instrumentation research facility in Austin, Texas, was dedicated in 1984. This investment puts the company in position to accelerate the development of innovative measurement instrumentation and process control systems for existing and new plants around the world. In addition. Fisher purchased quartz technology rights during the year which will add substantial strength lo measurement instrumentation product development. PRi/VOX instrumentation is an all-digital control system for monitoring and controlling production processes in a wide range of industries. PRvVOX offers secure, efficient and flexible control and has been accepted rapidly bv customers since its market introduction in 1980. During 1984. Fisher announced plans to accelerate the growth of PRtWOX instrumentation and set a goal of tripling the size of this business during the next four years. During this time, the Company will invest more than SltK) million in research, development and fixed capital and wilt more than double stuff infrastructure in sales, product development, manufacturing and project management and field service. Electronic Materials Monsanto's electronic materials business recorded a profit in 1984. meeting a major Company goal. Past investments in research. O67'i0O4 TOWOLDMONOOI5301 manufacturing and quality control positioned the business for the turnaround. Sales of silicon wafers increased 84 percent compared with 1981 Monsanto strengthened its position as the leading silicon supplier by introducing MOS Epi wafers for sophisticated electronic devices where extremely high quality is essential. Using Monsanto technology, an ultra-pure layer of silicon is grown on the polished surface of a specially engineered silicon substrate. Initial sales of MOS Epi wafers have been encouraging, and the Company has announced an expansion program to increase production capacity. Increased demand for wafers resulted in more efficient use of manufacturing facilities, and cost reduction programs provided significant savings. Quality control programs at every location resulted in greater customer acceptance of shipped products. Manufacturers of semiconductor devices recognize the reliability and quality of Monsanto wafers and. with increasing frequency, are choosing Monsanto silicon. In order to strengthen Its position in worldwide markets, the Company began construction of new manufacturing and research facilities in the United Kingdom, a new manufacturing facility in Korea and announced plans for a manufacturing and research investment in Japan. All three facilities wilt be completed in 1986 and will make Monsanto a local supplier of silicon in these world areas. Monsanto Oil Company Monsanto Oil Company met its income goal for 1984 by offsetting declining sales with lower exploration expenses. The company made substantial progress .luring the year in evaluating promising projects with potential for future income growth. Continued emphasis on utilization of current and emerging exploration and production concepts and technologies has allowed Monsanto Oil Company to perform competitively in discovering and developing new reserves. Annual reserve additions have exceeded production for the ninth consecutive year. The company's strategy balances cash flow from current production in Canada, the Gulf of Mexico and 14 slates in the United Slates with expenditures for new exploration and development opportunities. A portion of the funds generated from current onshore production will be used to develop several attractive prospects in the Gulf of Mexico and the North Sea. The company is committed to the development of South Pass Block 75 and is moving toward development of Green Canyon Block 18, both located in the Gulf of Mexico, and Block 15/21 a of the Untied Kingdom sector of the North Sea. Monsanto's participation in these projects varies from 24 percent to 38 percent of the total interests. These potential developments are expected to contribute substantial income in the future. M - -I M|ipi Monsanto Company's offshore Jease acreage in (he Gull of Mesico includes interests in more than 30 blocks. 1 ^.1- (kill H-l Mvsk 0679005 (rowtli Programs unda w ay in MonsantoV. business groups, cngillL'ei'int! departments, product development projects and laboratories are the Company's fuune in action. This work to refine strategies, improve processes. move products to market and delve into new science will continue the Company's momentum to extend existing businesses and construct new ones tor future growth. Hxisting businesses are reviewed continually against Company benchmarks for profitability and return on capital. Plans are developed to improve businesses that fall short. Where that is impractical, the Company will act quickly to make corrections. Internationally, new markets arc being opened for today's products and for those of the future, through investment abroad and through exports. Acquisitions also arc a major option lor the luliire. These purchases can be used to extend product lines to complement internal growth. In health care, the Company is alert to possible major acquisitions-- or significant associations with other companies -- to build its pharmaceutical interests. Vailuie capital investments in the United Stales. liurope. Southeast Asia and Japan can provide earnings now. but also can identify new- technologies with commercial promise. During IUK4. for example. Monsanto invested in a start-up company that will market a Monsanto-pioneered technology for growing mammalian cells used in biotechnology research and in producing pharmaceutical products. The electron microscope revMfs the shape of phosphate fiber which makes this new developmental product valuable in reinforced composite materials. 0674806 TOWOLDMONOOI5303 TOWOLDMONOOI5304 Research and Development Research and development remain the hey dements for creatine the products and ptocesses lor the future. Spending on science tit Monsanto htts more than doubled during the past live years, totaling some S370 million in 14X4. reflecting the Company's move to more research-intensive businesses. In engineering and process improvements. Monsanto works to improve quality and reduce eosts. Success in developing new catalysts for chemical operations and in understanding new uses for electrochemistry' aie recognized Monsanto strengths. Technology also contributes to improved salety, A Monsanto system based on acoustic emissions detects cracks and potential failures in chemical storage tanks. This technology reduces animal nutrition and human health care. the potential for injury from leaks, and is " licensed for sale to other companies. Existing programs in biotechnology are moving forward. Research is on schedule tor Monsanto was built on an in-depth know ledge of how to manipulate molecules mcthionyl bovine somatotropin, a genetically engineered analog of a natural protein that that result in useful products. New science has is intended to increase efficiency and reduce broadened the types of molecules with which costs in milk production. Engineering work on JX the Company works and the methods by which manufacturing processes is under way. Also in that research is conducted. Historical strengths agriculture. Monsanto in 1984 began discussions in polymer, fibers, agricultural and industrial chemistry are now complemented by work in with the U.S. EPA regarding approval to field test genetically engineered soil bacteria which molecular biology, membrane separations and biotechnology. produce a naturally occurring insecticide. Products from this new technology hold In October. Monsanto dedicated its new valuable potential for aiding food and fiber Life Sciences Research Center near St. Louis. It production worldwide. In yet another is the single largest research investment in the agricultural area, the Company is using Company's history and underscores an enlarged biotechnology to accelerate traditional breeding commitment to biological sciences for agriculture. methods to develop new. superior crop seeds. Pilot scale development ol MSS Imetbionyl bovine somatotropin! -- an experimenter protein hormone which stimulates mil* production in dairy cows -- is under way. Monsanto plans to bring M8S, likely the Company's first biotechnology product, to the marketplace in the lata 1900s. 067*aoe TOWOLDMONOOI5305 Witfi 250 labors tones. 26 state`OMhe>arl greenhouses, and 123 computer controlled growth chambers, the new tile Sciences Research Center gives Mens ante scientists one ol the most modern industry centers in the wortd tor research in During 1984. almost a third of total sales and income was generated in markets outside of the United States. Monsanto's international position is expected to strengthen in the future as world markets, especially those in Asia-Pacific, grow faster than those in the United States and other world areas. Monsanto conducts business in more than 100 countries and has 164 plants, laboratories and facilities in 27 countries, The the emerging science ol biotechnology. Company's assets outside the United States are approximately SI .5 billion -- one-fourth of Monsanto's worldwide total. Increasingly. Monsanto operates worldwide businesses. For example, in 1984. the Company announced plans for added silicon In health care, biotechnology is used to investigate new therapies tor human diseases. Collaborative research agreements with renowned universities bring together academic and industry scientists. At Washington University in St. Louis, production in Europe. Japan and Korea, a new production plant for Roundup herbicides in Brazil and technology improvements for making polystyrene in Argentina. Also the Company is finalizing a joint venture for producing wet phosphoric acid in Brazil. scientists are examining atrial peptides, natural hormones in heart muscle that may help control blood pressure. These collaborative efforts are supported by a major research thrust within Monsanto, In traditional businesses. Monsanto's legacy of chemical knowledge is being extended to produce new products. For example, a new laundry detergent material is being developed which has improved environmental properties. New nylon staple fiber under development will offer carpet buyers products with superior performance. Sophisticated use of chemistry, electron beams and ultraviolet light muy result in advanced polymers and polymeric films. New' markets for existing products are another priority. An eight-inch silicon wafer, offering customers substantial cost savings, is being introduced, New grades of Siiniiipirnc thermoplastic rubber broader markets in construction and autos. Monsanto International Thr npw S5 niiHicit' Frshtf Eiot irumr. Technology Cr-nt*'f Austin Tc-*..r'. pc-rmils ih* Monsanto has been an international manufacturer for more than six decades, from its first European investment in 192(1. to announcements in 1984 of new facilities in Asia-Pacific, Latin America and Europe. Company tr ;r <ji-kToi` doi/iJCipmcrii u< mt-dsufirrm.nl mstrwrrientntron and process control systems 0674609 TOWOLDMONOOI5306 Monsanto also is increasing international business by introducing products more rapidly abroad- During 1984. this strategy included introducing PROVOX process control equipment. Somaprenc thermoplastic rubber. Prism separators and silicon. Both international strategies -- more investment and faster commercialization -- are important factors in Monsanto's effort to assume a substantial role in the expanding economy of the Far Bast. Success in Japan will be enhanced not only by the Company's silicon investment there, but also by the Kawachi Research Station for agriculture, dedicated in 1984. In addition, a joint venture in Japan. Mitsubishi Monsanto Chemical, continues to provide Monsanto with opportunities for growth in existing and new businesses. Sales to the Peoples Republic of China, an important part of which are agricultural chemicals, are growing. Monsanto's relationship with China began in the 1920s as a marketer of saccharin. In Europe, cutremly the largest international market for Monsanto, much of the growth will come from business opportunities such as agricultural chemicals, rubber chemicals. Sqflex interlayer. Prism separators, detergent chemicals, and PRSVOX process control equipment. Special attention is also being given to expanding sales in the Soviet Union and elsewhere in Eastern Europe. Agricultural chemicals, rubber chemicals and Prism separators are leading products lor Monsanto in these markets. Corporate Citizenship Corporate citizenship at Monsanto is ii commitment to conduct its Worldwide businesses in an ethical, socially responsible wav. That means making beneficial products, demanding sate manufacturing, dealing with environmental problems, conserving natural resources, providing equal opportunity in hiring and advancement and responding to public concerns. During 1984, Monsanto joined with other chemical companies that manufactured Agent Orange, a defoliant used in the Vietnam War. to settle injury claims by armed forces veterans who alleged damaged health from exposure to the material. The Company remain" convinced that medical evidence doesn't support Through committee work, oompany'Sponsored conferencesr reports and publications. Monsanto's DtAl OGO protect provides a forum for policy debate aimed at the health of U S agriculture. 06 7*810 Shitring tut knowledge with high ichool science Bleu, Monsanto engineer typilim* thousands of Monsanto employees who take port In some type of voluntarism in their comm uni lias. the allegations of serious illness, but determined that it was advisable to settle the case and thereby eased the controversy and anguish surrounding the legal and medical issues. Also during the year. Monsanto incurred nearly $20 million expense as pan of a five-year voluntary program to survey and clean up hazardous waste sites that the Company formerly used. In another effort, the Company participated in forming Clean Sites. Inc., a cooperative venture between industry and environmental groups to speed the cieuning up of other hazardous waste sites. In a related activity, the Company supported legislation in the li.S. Congress to reauthorize a program which taxes industry to pay for stilt other cleanup activities. Monsanto's intention is to reduce the legal wrangling and blame-fixing surrounding hazardous waste sites and get about the job of cleaning them up. Late in 1984. a group of Monsanto senior executives were named to a special task force to review all the Company safety policies and procedures worldwide. Monsanto has extensive safety requirements at all its plants, and reported the safest year in its history but increased public concern about chemical safety prompted the Company to confirm the adequacy of its procedures. Recommendations from the task force will be put in place quickly. In corporate philanthropy . Monsanto approached its goal of providing two percent of pretax income to worthwhile community agencies and programs. Donations from the Company and from Monsanto Fund totaled more than $10 million. In addition, the Company actively supports employees who participate in community affairs. As part of its citizenship policy. Monsanto also becomes involved in other public dialogues on important issues. For example, the Company supports clear, effective regulation tor biotechnology which not only will allots important research to continue, hut also reassure the public that it is being done saleiy. Also. Monsanto is working to implement agricultural polieies which will build stable and profitable fanning operations. And. the Company supports the rigorous protection of patents, trademarks and other intellectual property around the world Strong property rights spur research and innovation. vl 0674611 I TOWOLDMONOOI5308 I-manual Report Contents Management Report 33 Independent Auditors' Opinion Statement of Consolidated Income 33 Consolidated Results of Operations 35 Operating Unit Segment Data 36 World Area Segment Data 38 Quarterly Data 40 Inflation-Adjusted Data 40 Research and Development 43 Statement of Consolidated financial hnitlon Review of Liquidity and Capital Resources 45 Statement of Changes In Consolidated financial Position Review of Sources and Uses of Funds 47 Statement of Consolidated Shareowners* Equity Notes lo Financial Statements Significant Accounting Policies 49 Basis of Consolidation 49 Principal Acquisitions and Divestitures 49 Depreciation 49 Supplemental Data 49 Currency Translation 50 Inventory Valuation 50 Oil and Gas Activities 50 Income Taxes 50 Earnings per Share 51 Pension Plans 51 Short-Term Debt and Credit Arrangements 51 Long-Term Debt 51 Commitments and Contingencies Capital Stock 52 52 Stock Option Plans 52 Segment Information Financial Summary 52 Unless otherwise indicated by the context, "Monsanto" means Monsanto Company and consolidated subsidiaries and ' 'the Company' ` means Monsanto Company only. AH doftars are in rnr//rri.v. except per share data. INet SaJtrk tin Millions) &.us s*,i sum *J M (In Millions) *J w u FbmK Provided Iren Opcntflm tin Millions) tuea >2 u a 0674612 TOWOLDMONOOI5309 Management Report Monsanto Company management is responsible for the fair presentation and consistency of all financial data included in this Annual Report. Where necessary, the data reflect management estimates. Management is also responsible for maintaining a system of internal accounting control to provide reasonable assurance chat assets are safeguarded against material loss from unauthorized use or disposition and that authorized transactions are properly recorded to permit the preparation of accurate financial data. Cost-benefit judgments are an important consideration in this regard. The effectiveness of internal controls is maintained by: (1) personnel selection and training: (2) division of responsibilities; (3) establishment and communication of policies: and (4) ongoing internal review programs and audits. As ratified by shareowner vote at the 1984 Annual Meeling. Deloitte Haskins & Sells was appointed to examine, and express an opinion as to the fair presentation of, the consolidated financial statements. This opinion appears below. Monsanto's Audit Committee, consisting of five non-employee directors, meets with Controllership, internal Audit and Deloitte Haskins & Sells personnel to review internal controls, financial repotting and accounting practices. Deloitte Haskins & Sells and internal auditots meet with the Committee, with and without management present, to discuss their examinations, the adequacy of internal controls and the quality of financial reporting. Richard J. Mahoney President and Chief Executive Officer Francis A. Siroble Senior Vice President and Chief Financial Officer February 22, 1985 Independent \udilorV Opinion To the Shareowners of Monsanto Company: We have examined the statement of consolidated financial position of Monsanto Company and Subsidiaries as of December 31, 1984 and 1983 and the related statements of consolidated income, shareowners' equity and changes in financial position for each of the three years in the period ended December3l, 1984. Our examinations were made in nccordance 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 consolidated financial statements present fairly the financial position of Monsanto Company and Subsidiaries at December 31, 1984 and 1983, and the results of their operations and changes in their financial position for each of the three years in the period ended December 31. 1984, in conformity with generally accepted accounting principles applied on a consistent basis. Saint Louis, Missouri February 22, 1985 0674813 | Htiiti mini tif ( (msolklttlct) Imomc (Dollars in millions, except per share! Net Sales Cost of goods sold Gross Profit Marketing and administrative expenses Technological expenses Operating Income Interest expense Interest income Other income -- net Income Before Income Dtxes and Extraordinary Items Income taxes Income Before Extraordinary Items Extraordinary Items: Tax benefits from utilization of ex-U.S. loss carryforwards Gain from exchange of debt for common shares Net income > IiiIKjmI I: < timplilit Jitil SubsirfijfK-s^ 1984 $d,691 4,846 1,845 722 446 1,168 677 OOO) 92 38 30 707 268 439 $ 439 1983 $6,299 4.738 1.561 681 359 1,040 521 (96) 73 72 49 570 201 369 33 $ 402 1982 S6.325 4,826 1.499 691 329 1.020 479 (82! 63 41 -1 "I 501 172 329 23 $ 352 M Earnings per Share: Before extraordinary items Extraordinary items After extraordinary items $ 5.42 $ 5.42 $ 4.48 0.41 $ 4.89 The Above statement should be read in conjunction with pages 49 through S3 of this report. $ 4.10 0.29 S 4.39 ko I iii;inii:il Slalistiis Nel Suits as Percent of Ibtnl Assets Nel Income ai a Percent of Net Sales 1984 185% 7% 1983 98* 6<Z wh: MU' 6* Percent Return on Average Shareowners1 Equity After extraordinary items 13% 11* iu<: Percent Return on Average Capital Employed* After extraordinary items 10% 10* 9r, 'Capit&i employed is the sum of shon-term debt, long-term debt and shareowners' equity. The beginning of ihc year and the end of the year capital employed are averaged and divided into net income after adding back the aftertax effect of imerev cost* TOWOLDMONOOI5311 ( oiisnlidalcd Result-. of Oprrjlions Net Income Benefits From Stronger Economy Net income for 1984 was $439 million.' a 9 percent increase over 1983 net income of $402 million. Earnings per share for 1984 were $5.42. compared to $4,$9 for the prior year, an increase of 11 percent. Monsanto had a powerful start in the first half of 1984. spurred in part by the most rapid economic expansion in the United States since the early 1950s and excellent sales of agricultural products. As the year progressed, however, market conditions weakened because of the economic slowdown in several industrial sectors and the persistent strength of the U.S, dollar, which brought increased international competition and lessened income from translation of ex-U.S. earnings into U.S. dollars. Higher Volume Incremes Sales Sales for 1984 increased 6 percent over the previous year. Sales volume improved 5 percent, net of divestitures, and 1984 selling prices increased 1 percent. Most operating segments had higher 1984 sales volume. The gross profit margin improved to 28 percent of sales versus 25 percent for the prior year. Over the past few years. Monsanto's comprehensive programs of asset management and cost reduction positioned Monsanto to take advantage of the economic upturn through improved operating efficiency. Manufacturing facilities operated at approximately 75 percent of facility utilisation. Raw material costs declined 2 percent. Substantial Increase In Research and Development Technological expenses in 1984 increased 24 percent over the prior year, as Monsanto's intensive research and development programs expanded. In 1984, R&D expenses increased to a record level and were 6 percent of sales, compared with 5 and 4 percent in 1983 and 1982, respectively. The 1984 increase was concentrated in expenditures directed toward emerging technologies. "Other income -- net" declined in 1984 mainly from reduced foreign currency gains, primarily in hyperinflationary countries. The 1984 effective tax rate was higher than 1983 because of increased taxable income and higher state income tax rates. Return on shareowners' equity improved to 12 percent for 1984, up from 11 percent in 1983. Sales for 1983 were essentially level with 1982. as a I percent sales volume increase, net of divestitures, was offset by lower selling prices. The 1983 volume improvement resulted from the strengthened United States economic climate. The United Slates government's Paymem-in-Kind (PIK) program adversely affected sales of agricultural herbicide products during the first half of 1983. Partially offsetting the 1983 overall volume improvement were the effects of the continuing depressed capital goods market, divested businesses and lower United States export sales as the U.S. dollar continued to be strong against other major currencies. Net income for 1983 was 14 percent above 1982's level. Higher sales volume with related improvement in plant facility utilization, along with lower manufacturing costs, increased 1983 results. Extraordinary tax benefits from prior years' ex-U.S. operating loss carryforwards increased 1983 net income by $33 million In 1982, net income benefited from a $23 million extraordinary gain on the exchange of outstanding debt for common shares. Also, in 1982. net income increased $43 million from non-replacemeni of lower cost inventories under the LIFO dast-in. first-out) inventory method. Analysis of Change in Earnings per Share -- Better (Worse) 1984 vs. 1983 vs 1983 m: Selling prices Sales volume and mix Raw material prices Other manufacturing costs Divestitures Marketing and administrative expenses Technological expenses S0.56 1.07 0.29 0.41 (0.10) (0.32) (0,68) SlO 62 1 li 0.11 o.w 111.Ill u.un id Operating Income 1.23 o.j: Interest expense Interest income Other income -- net Effective tax rate Extraordinary items Shares outstanding 1.0,03) 0.15 10.27) (0.23) 10.41) 0.09 iu i: 0 IN Li IS HXI.V o i: (0 Ui Change In earnings per share 5 0.53 & o su 0 *>74615 Operating l nil Sv^mi nt Data Agricultural Products Biological Sciences Fibers and Intermediates Industrial Chemicals Polymer Products Electronic Materials and Fabricated Products Fisher Controls Oil and Gas Corporate items and eliminations Tbtal consolidated \m *1,25* J*8 1,194 937 1,877 Net Saks 1983 1952 51.1*7 132 1.170 036 1.B30 *1,165 146 1,257 $10 1.786 519 355 357 537 52$ 588 203 241 216 $*,691 *6,299 56,325 1984 *438 (95) ?9 90 152 S 35 27 m 77 Operating Income (Lost) 1983 1982 $400 (541 55 8B 70 *441 (35) (21) 101 13 (66) 37 41 (50) $521 (64) 52 37 (45) *479 1984 *107 *6 . 45 35 41 25 19 32* $370 Research and Development I96J I9BI 5 78 41 41 22 40 S 65 33 39 18 44 24 2J 10 14 34* 5290 28` $264 Cmporate RAD expenses are allocated on a weighted average basis of investment to operating units in determining operating income (loss). Capita) Depreciation and Tbtal Assets Expenditures Obsolescence 1984 1983 1982 1984 1983 1982 1984 1983 1982 Agricultural Products Biological Sciences Fibers and Intermediates industrial Chemicals Polymer Products Electronic Materials and 36 Fabricated Products Fisher Controls Oil and Gas Nonoperating assets $1,215 339 992 892 1,179 $1,214 225 1.071 810 1.163 $1,049 141 LI50 777 1.135 437 406 433 515 4B7 418 578 543 549 226 508 425 * 67 75 83 90 85 74 25 107 8 S104 84 79 61 64 37 27 I0L 3 S 89 42 90 162 72 57 27 130 4 * 76 29 97 74 88 41 15 *9 2 $ 70 21 115 75 96 37 16 B5 2 $ 57 18 135 56 74 30 13 55 1 Tbud consolidated $6,373 S6.427 $6,077 $614 *560 $673 $491 *517 *439 The above data should be read in conjunction with the '`Segment Information" note to the financial statements on page 52. For 1984, the Company has realigned its financial reporting of Operating Unit Segments to belter reflect the future direction of the Company's operations. Nutrition chemicals, healthcare and the corporate biological research effort have been combined to form a new segment, Biological Sciences. Corporate biological research and health care were previously included in corporate staff expense and allocated to Operating Unit Segments. Biological research directly related to Agricultural Products is included as an expense of that segment. The Oil and Gas operations ate also presented as a separate segment. Agricultural Products Net Sales 19M 1933 1932 Herbicides end other grtcallunl chemicals $1,236 11,167 11,163 Sales and operating income in 1984 increased 8 and 10 percent, respectively. Sales volume of Roundup herbicide increased 6 percent, a slightly less than expected rate due to abnormal weather conditions in parts of the United States and Europe. Sales volume of Lasso herbicide also increased 6 percent year to year. The higher operating income from sates more than offset the increased research and new product development expenditures. In November 1984, the United States Environmental Protection Agency (EPA) announced that it will conduct a Special Review to determine whether Lasso herbicide may cause an unreasonable adverse effect on humans or the environment. Pending the results of the review. Monsanto and the EPA agreed to modifications In the use of Lasso, which do not significantly affect the majority of uses for Lasso. Monsanto's tests conclude that Lasso poses no unreasonable adverse effects to humans or the environment, and the Company believes that the EPA review will reach a similar conclusion. The Company expects no significant effect on operating results from this review. 0674816 TOWOLDMONOOI5313 Sales in 1983 increased slighlly from 1982, while operating income declined as a result of the 1983 P1K program. Biological Sciences Net Sales 1984 1983 1982 Human health care and nutrition products 8168 $152 SI46 Sales in 1984 increased, reflecting the acquisition of Continental Pharma in May 1984. Sales volume ofAlimel, an animal feed supplement, continued to grow, but selling prices remained depressed, largely because of the effects of the strong U.S. dollar and competition from ex-U.5. manufacturers. Operating losses, which have increased over the three-year period, are a result of significant biological research expenditures in both human health care and animal nutrition, along with facility start-up costs and expanded marketing efforts. Sales increased slighlly in 1983 versus 1982. Fibers and Intermediates Net Sftta \m Man-made fibers Tenlile intermediates $880 314 1983 $824 346 1982 mo 377 Sales in 1984 increased 2 percent, net of the 1983 nitrogen products divestiture. Operating income increased 44 percent over the prior year, reflecting the continued strong demand and improved pricing for nylon carpet fibers and chemical intermediates. Demand slowed and prices slipped, however, in the last quarter of 1984. Sales volume of branded nylon carpet fibers was particularly strong in 1984. Higher plant facility utilization also contributed to the higher earnings levels. Partially offsetting these improvements were higher costs of natural gas and the loss of income from the nitrogen products business. . Sales in 1983 were lower than 1982 due to divested businesses and lower selling prices, offset somewhat by higher sales volume. Operating income in 1983 increased over 1982 due to higher sales volume, lower costs and the elimination of 1982 divested business losses. The operating loss in 1982 included 835 million in obsolescence charges relating to divestitures, partially offset by a $20 million benefit from non-replacement of lower cost LIFO inventories. Industrial Chemicals Net Sales 1984 1983 1982 Detergent and fine chemicals Specially chemicals $628 309 $587 269 $552 258 Sales in 1984 increased 9 percent due to higher volumes for most products. Operating income was about the same in 1984 as compared with 1983, Improved efficiencies from higher plum facility utilization and reduced raw materials costs were offset by increased other manufacturing costs and research and development expenditures. Sales in 1983 were 6 percent higher than 1982. the principal increase being in detergent materials. Operating income declined in 1983 due to nonrecurring gains recognized in 1982. including a $23 million favorable impact of non replacement of lower cost LIFO inventories. Polymer Products Net Sales 1984 1983 Plastics Resin products Rubber chemicals and instruments S874 693 310 58tl9 279 S""5 '4: >4 A stronger worldwide economy pushed 1984 sales volume higher, especially sales to the automotive and housing industries. This increase more than offset the tost sales from divested and shutdown businesses. Operating income more than doubled in 1984, principally from sales volume gains in higher margin products and from improved plant facility utilization and diminution of 1983 divested business losses. Sales in 1983 increased slightly over the preceding year due to higher volume offset by lower selling prices and business divestments. Operating income improved in 1983 from belter manufacturing performance, offset in part by net charges of $24 million relating to various divestments and shutdowns of facilities. Operating income in 1982 included a $35 million favorable impact from non-replacement of lower cost LIFO inventories. Electronic Materials and Fabricated Products Net Sales 1984 1983 19*: lecironic*grade silicon wafers and engineered products $519 $355 535' Sales in 1984 increased 46 percent, largely due to higher volume and prices of silicon wafers and fabricated products, coupled with increased construction project activity in Monsanto EnvjrnChetn Systems, Inc. The year 1984 was a turning point for electronic materials, with silicon wafer sales increasing 84 percent. These factors, together with higher electronic materials plant facility utilization and lower raw materials costs, resulted in a $71 million profit improvement over 1983. 0679B17 Sales in 1983 were level with the prior year, with volume gains in electronic materials and fabricated products offset by decreased construction project activity in Enviro-Chem. Operating losses jn 1983 were essentially the same as the prior year. Fisher Controls Net Sales 1984 1983 1982 Valves, regulators and electronic process controls $537 $528 $588 Sales and operating income in 1984 were virtually the same as 1983. Improved operations in North and Latin America were offset by a one time acquisition-related technological expense and by continuing weak European performance, due to the adverse impact of the strong U.S. dollar and the depressed capital goods market. In 1983. sales were lower than the previous year as price increases did not offset lower volume. Operating income in 1983 was 29 percent lower than the preceding year, reflecting the depressed worldwide capital goods market. Oil ami Gas Net Sales 1984 1983 1983 Oil and gas $103 $24] $216 Reduced oil and gas volumes resulted in lower 1984 sales and operating income. Also affecting the year to year operating income comparison are lower exploration and production expenses in 1984. Sales and operating income were higher in 1983 as compared to 1982 due primarily to higher oil and gas volumes. Exploration efforts in 1964 were concentrated principally in the United States and United Kingdom North Sea, and current production was carried out primarily In the United States and Canada. Total spending for exploration amounted to $71 million, $55 million and $46 million for 1984, 1983 and 1982, respectively. Net Quantities of Developed and Undeveloped Proved Reserves 1984 Oil' Beginning of year Extensions and discoveries Production Other changes -- net 42 9 (4) (1) End of year 46 . 1983 38 7 (4) 1 42 1982 M <; [4j 38 Natural Gas' Beginning of year Extensions and discoveries Production Other changes -- net 587 19 (34) 6 End of year 578 607 28 [441 (41 587 46 i3Hi Combined -- Oil Equivalent End of year 142 140 13 Stated in millions of barrels. Stated in billions of cubic feet. Staled in millions of biurets iapproatmately sis thousand cubic feet of gas equals one barrel of oiJx Estimated future net cash flows data related to proved reserves follow. Future selling prices and costs were determined by using the actual 1984 year-end levels, with a 10 percent interest rale used for discounting. Standardized Measure of Discounted Future Net Cash Flows 198* 1983 I9H2 Future cash inflows Future production and development costs Future income tax expenses Future net cash flows Annual discount for estimated liming of cash flows S3,068 730 992 1,346 US $3,222 761 1,047 1,414 926 $3,491 736 1,190 1,565 1,113 Standardized measure of discounted future net cash flows $ 458 % 488 S 452 World \riy S< j>iiunl l);W:i United States Europe-Africa Canada Latin America Asia-Pacific Unallocated corporate items Affiliates' equity (income) loss included in individual world areas Tbtal consolidated 1984 $4,498 968 292 360 573 $6,601 1983 $4,243 943 274 305 534 Net Sales 1982 $4,086 1.092 244 353 550 $6,299 $6,325 1984 $518 93 61 22 55 (54) Operating Income (Loss) 1983 1982 $453 44 51 11 >7 (50) $44! 3? 29 [9! 19 I45l (IB) $677 (15) S52I 11 $479 0674618 As. required by generally accepted accounting principles, world area segment data (page 52> in the Notes to Financial Statements are prepared on an .''entity basis." This means sales and income of the legal entity are assigned to the area where the entity is located (e g., a sale from the U S. to Brazil is reported as a U.S. sale). However, Monsanto normally views its results on an "area basis" wherein sales and income are assigned to the customer location (e.g., a sale from U.S. to Brazil is reported as a Brazilian sale). The table on the preceding page summarizes Monsanto's "area basis" results. United States Approximately two-thirds of Monsanto's worldwide sales are to customers in the United States. Sales for 1984 were up 6 percent, net of divestitures. The stronger economic environment benefited most product lines, especially housing and automotive-related businesses. In addition, silicon wafer sales to the semiconductor industry increased substantially. Agricultural products sales benefited from the United States government's discontinuation of the 1983 PIK program which resulted in volume growth in Lasso and related products. Operating income in 1984 increased 14 percent. Sales volume improved along with belter plant facility utilization. However, the strong U.S. dollar resulted in greater import competition from ex-U,S. competitors, which in turn adversely affected selected products selling prices and profits. In addition, the Company incurred higher technological expense in support of the numerous growth programs. For 1983. sales increased 4 percent from 1982 due to the stronger economy partially offset by the 1983 PIK program. Operating income in 1983 increased 3 percent due to lower raw material costs and better plant facility utilization. Europe-Africa Sales in 1984 increased 3 percent over the preceding year as the European economic environment improved. Operating income more than doubled, benefiting from strong acrylonitrile and nylon intermediate profits. This increase in sales and operating income was accomplished despite the adverse effects of the strong U.S. dollar on the competitiveness of United Slates exports as well as the adverse translation effect on ex-U.S. currency denominated sales and income. Sales of Roundup herbicide increased in spite of abnormal weather conditions. Sales in 1983 decreased 14 percent as compared to 1982, reflecting the divestiture of the acrylic fibers business, reduced agricultural products sales due to drought and adverse economic conditions. Operating income for 1983 improved over 1982, however, due principally to the elimination of losses of the discontinued acrylic fibers business. Canada Sales in 1984 increased 7 percent, while operating income improved SI0 million. Monsanto benefited from good detergent products and crop chemicals sales. In addition, sales to the automotive industry grew. Sales and operating income increased in 1983. as compared to 1982. Latin America Sales in 1984 increased 18 percent and operating income doubled to S22 million. Results in Brazil improved, where agricultural products sales continued to grow. In addition. Monsanto's Mexican equity affiliate experienced higher profitability. Sales in 1983 decreased from the prior year, as Brazil suffered from recessioninduced conditions. Operating income in 1983 improved as higher earnings of a Mexican equity affiliate more than offset lower Brazilian results. Asia-Pacific This world area showed strong year to year sales and operating income gains, led by agricultural products sales volume growth throughout the area, higher United Stales exports of other products and improved operating income in Australia. These accomplishments were achieved despite the adverse effects of the strong U.S. dollar on the competitiveness of United States exports as well as the adverse translation effect on ex-U.S. currency denominated sales and income. Sales declined slightly in 1983 principally due to depressed United States exports resulting from the strong U.S. dollar. Operating income in 1983 was up 42 percent over 1982. due to improved results in Australia and increased earnings from a Japanese equity affiliate, A reconciliation of 1984 area basis sales and operating income to ex-U.S. entity basis sales and operating income (reflected in the Notes to Financial Statements) follows: Ex-U.S. entities U-$ exports Ex-U.S. affiliates' equity income Less: Inter-area eliminations Ex-U.S. entities' operating income on sales to U.S. Ex-U$. area basis U.S. area basis Affiliates' equity income included Ln ex-U.S. areas Unallocated corporate expenses Tout consolidated Net Saks 12,032 950 (7891 Operating Income 9252 25' 18 2,193 4,498 l64l i.u 518 $6,691 HXi l54i $677 Wet of allocated costs. 0674619 Ounrkrlv Datn Pint Quarter Second Quarter Third Quarter Fourth Quarter Ihtal Year Net Sides 1984 1983 SI,731 1.483 $1,801 1.612 $1,599 1,553 f1,559 1,651 16,691 6.299 Gross Profit 1984 526 534 410 375 1.845 1983 370 417 378 396 1.561 Income Before Extraordinary Items 1984 175 145 78 41 439 1983 99 105 99 66 369 Net Income 1984 175 145 78 1983 101 114 115 41 439 72 402 Earning* per Share Before Extraordinary Items 1984 2.13 1.77 0.97 0,55 5.42 1983 1.21 1,27 1.21 0.79 4.48 After Extraordinary Items 1984 2,13 1,77 0.97 0.55 5.42 1983 1,24 1.38 1.40 0.87 4.89 Agricultural products sales are traditionally concentrated in the first half of the year and are generally more profitable than sales of other segments. Sales and profit improvement in the first half of 1984 resulted from the favorable agricultural products environment and continued improvement in worldwide economic conditions. However, the United States economy moderated somewhat during the last half of 1984 and the strengthening of the U.S. dollar increased import and price competition. There were no major nonrecurring or unusual items in 1984. The 1983 items increasing (decreasing) earnings per share were as follows: 40 1983 Extraordinary tax benefits from loss carryforwards Change in accounting estimate of Bnnuai effective tax rale Net Losses from facilities shut down or sold Ibtnl First Quarter $0,03 (0.06) $(0-03) Second Quarter SON (0.09) (0.07) $(0.05) Third Quarter SO. 19 0.15 (0.02) $0.32 Fburth Quarter $0.08 (0-14) $(0.06) Tbtel Year $ 0.41 (0.23) SO.18 I n flat ion Adjusted Data Historical Year Ended December 31,1984 Cost Current Cost Net sales Cost of goods sold, excluding depreciation Depreciation expense All other expenses -- net Income taxes $6,691 4,397 449 1,138 268 $6,691 4,400 587 1,138 268 Net income $ 439 S 298 Current cost amounts shown above attempt to measure the effect of inflation on cost of goods sold and depreciation. Other historical amounts, including income taxes, are not adjusted for inflation to arrive at current cost net income. All current cost amounts are stated in average 1984 dollars using the U.S. Consumer Price Index (the ``translate-reslate" method). lufl.ilitni- Niljiislnl hiciirm(In Millions) (Avenge 19$4 IMImJ 0674820 TOWOLDMONOOI5317 The 1984 increase in current cost of inventories and property, plant and equipment was $204 million. At December 31, 1984, the current cost of inventory and property, plant and equipment (net of accumulated depreciation) was $1,271 million and $4,051 million stated in yearend 1984 dollars. - The current cost of inventories was estimated using the FIFO (first-in, first-out) Selected Financial Data inventory method. Cost of goods sold on a current cost basis was approximated using the LIFO method, or similar techniques. The current cost of property, plant and equipment was estimated generally by using construction and equipment indexes. Current cost accumulated depreciation and related expenses were estimated using the same overall method and lives as used on a historical cost basis. Historical cost, os reported1: Net soles Income -- Before extraordinary items -- Per share Ibtal assets Long-term debt Dividends per common share Current cost (overage 1984 dollars): Net sales Income (loss) -- Before extraordinary items -- ftr share Purchasing power gain on monetary items Increase in specific prices of inventory and property over (under) increase caused by general inflation Aggregate foreign currency adjustment, net of taxes Net assets 1984 $6,691 439 5.42 6,373 824 2.25 $6,691 298 3,68 32 1 (143) 4,677 1983 $6,299 369 4.48 6,427 937 2.075 $6,567 279 3.39 30 (2343 (103) 4,853 1982 $6,325 329 4.10 6,077 1,003 1.975 $6,807 102 1.28 36 (235) (177) 5,038 L981 $6,948 445 5.75 6,069 1,110 1.875 $7,935 263 3.39 112 (13) 5,573 L980 $6,574 149 2.05 5,796 1.371 1.775 $8,288 (III (0.151 170 (324) 5.L24 Other data (average 1984 dollars): Dividends per common share Ycar-cnd common stock price Average consumer price Index S 2.26 43.39 311.1 $ 2.17 53.94 298,4 $ 2.13 40.57 289,1 $ 2 16 38.75 272.4 $ 2.26 41,32 246.8 'In 1982, the requirements of Statement of Financial Accounting Standards No. 52. ''Foreign Currency Translation," were adopted. Comparisons of investment levels are providing sufficient funds for growth-oriented (including capital expenditures, and research and investments. As discussed below, a comparison other growth-oriented investments) are distorted of Monsanto's inflation-adjusted funds provided by inflation. Inflation-adjusted data may be useful from operations and funds used for investment in evaluating whether total investment levels, in expenditures indicates that the Company has "real dollars," have increased. In addition, such generated sufficient cash to fund a significant data may be useful in evaluating, on a broad portion of those growth-related investments. financial basis, whether current profitability levels IbUI Investment 1984 1983 1982 1981 1980 Capital expenditures Investments R&D expenditures V 6L4 94 370 $ 560 208 290 $ 673 II 264 $ 668 2 233 781 64 208 Ibtal (historical cost) $1,078 $1,058 $ 948 S 903 $1,053 Ibtal (average 1984 dollars) $1,078 $1,103 11,020 $1,031 1.327 Ibtal Investment Remains High, But Components Have Changed Monsanto's "total investment" level -- capital expenditures, investments (acquisitions, venture capital, etc.), and research and development expenditures -- remains high, but the underlying components of investment have changed. In recent years, expenditures for research 0674821 and development and investments have increased while traditional capita! expenditures have moderated. This trend is consistent with the strategy shift from certain commodity and capital intensive businesses to selected high technology, specialty products with a higher value added component. This 'Total investment" includes expenditures to: (1) maintain the existing earnings Investment Analysis base, and (2) increase future income levels. Monsanto considers its current cost depreciation and estimated "maintenance" research and development costs for existing businesses to approximate the amount of investment needed to maintain existing earnings levels. The remaining investment may be considered as new growth investment. , 1904 1903 1982 1981 1980 Investment to maintain existing earnings base New growth investment $ 694 304 $ 673 430 S 693 327 1 713 318 S 691 636 Ibtal (average 1904 dollars! $1,070 SI .103 S1,020 51,031 SI.327 (Avenge 1984 Dollars -- In Millions I fttO Discretionary Cash Flow Is Sufficient to Fund Significant Portion of Growth-Related Investments Jn recent years, Monsanto has generated sufficient discretionary cash flow to fund all or a significant portion of the growth-oriented investments. "Discretionary cash flow" is defined as cash flow from operations (after wording capital changes), before research and development expenditures, less dividends, debt repayments and investment to maintain the existing earnings base. Discretionary Cash Flow Historical cool 1904 $309 1983 $489 1982 $245 1981 $171 1980 206 Average 1904 dollars $309 510 $264 $195 $260 Discretionary cash flow as a percent of new growth Investment (average 1904 dollars) Monsanto's cost reduction and asset management programs, coupled with the pruning of unprofitable businesses, have been significant cash flow contributors. Proceeds from the sale of assets have also contributed funds for growth. In addition, Monsanto's strong financial position provides substantial unused debt and equity capacity for funding future investment requirements. 80% 119% 81% 61% 41% Company Has Demonstrated Ability to Fund Future Growth Management believes that Monsanto has demonstrated its ability to generate sufficient earnings and cash flow to provide for real future growth beyond that required to maintain its existing earnings base, including inflation-adjusted replacement capital requirements. 0674822 Research and Development directed toward these emerging technologies, in addition, substantial research efforts continue in traditional areas of strength, such as agricultural chemistry, catalysis, polymer science, industrial chemicals, chemical engineering systems and applications research. - J'fKJ K A (> Ht BusiiU'st 4tva (Percent of Total Expensehj R&D Efforts Expand to Support New Business Direction Research and development expenses are costs aimed at developing new. or improving existing, products and processes. Monsanto's strategy not only is to develop new markets from emerging technologies, but also to take advantage of traditional market opportunities with new products and processes while maintaining advantages in existing markets. The growth in research and development expense is evidence of Monsanto's commitment to the strategy of developing new markets from emerging technologies. In 1984, R&D expenses increased lo a record level and were 6 percent of sales, compared to 5 and 4 percent in 1983 and 1982, respectively. Monsanto has intensive and growing R&D programs in biotechnology, plant biology, animal nutrition, human health care, molecular technology and electronic materials. The Company's efforts in plant biology, animal nutrition and human health care are supplemented through research agreements with several leading universities and other research institutions. For 1984, 40 percent of the R&D expenditures were Cwvwlc Cidaiad Cbwkai Lift- During 1984, Monsanto opened its new Si 50 million Life Sciences Research Center in St. Louis County. Missouri. The new Center will eventually employ approximately 1,200 people and will concentrate on biotechnology and life sciences research, focusing on three major areas: agriculture, animal nutrition and human health care. 0674823 StulcmcrK of Consolidated F inancial Position [Dollars in millions, except per shaiel Assets . Current Assets: Cash, time deposits and certificates of deposit Short-term securities, at cost which approximates market Trade receivables, net of allowances of $49 in 1984 and $44 in 1983 Miscellaneous receivables and prepaid expenses Inventories Investments and Other Assets: Investments in affiliates Other assets Propert); Plant and Equipment, at Cost; Land Buildings Machinery and equipment Mineral rights and oil and gas properties Construction-in-progress Less accumulated depreciation Ibtal Assets Liabilities and Shareowners' Equity Current Liabilities: Accounts payable Wages and commissions Income and other taxes Miscellaneous accruals Short-term debt Long-Urm Debt Deferred Credits and Other Liabilities; Deferred income taxes Other liabilities Shareowners' Equity; Common stock -- authorized, 200,000,000 shares, par value $2: issued, 82,197,097 shares in 1984 and 40.977,448 shares in 1983 Additional contributed capital Accumulated currency adjustment Reinvested earnings Less treasure stock, at cost (3,916,071 shares in 1984 and 56,152 shares in 1983) Ibtal Liabilities and Shareowners' Equity The above statement should be read in conjunction with pages 49 through S3 of this repon. It f H UlipJH A! December 31 1984 1983 $ 149 310 1,078 221 839 2,597 $ 164 493 1.115 205 778 2,755 119 113 283 275 402 388 81 732 5,094 765 147 6,919 3,545 3,374 $6,373 74 667 4,938 716 244 6,639 3,355 3,284 $6,427 $ 497 110 69 249 277 1,202 824 661 52 713 164 855 (319) 3,110 3,810 176 3,634 16,373 $ 500 108 104 255 253 1,220 937 558 45 603 82 936 (200) 2,853 3.671 4 3,667 $6,427 0674824 TOWOLDMONOOI5321 kffvk-n of l iquidity and ( apilal Rcsoiiiks Monsanto Maintains Strong Financial Position Monsanto maintained its strong financial position in 1984, with assets of $6.4 billion and shareowners' equity of $3.6 billion. Working Capital Position Remains Solid The cuirent ratio (current assets divided by current liabilities), an indicator of liquidity, was 2.2:1 at year-end 1984, compared to 2.3:1 at year-end 1983. Management believes a current ratio of 2.0:1 is desirable. Working capital (current assets minus current liabilities) was $1,395 million at year-end 1984, compared to $1,535 million at the end of 1983. Inventories and receivables remained well managed and in tine with current business needs. The Company has available various short term bank facilities, which are discussed further in the "Short-Tbrm Debt and Credit Arrangements" note to the financial statements (page 51). Short-term debt includes bank borrowings and $111 million of bank overdrafts at year-end 1984. Significant Financing Capacity Available The long-term debt to total capitalization ratio was 18 percent in 1984 as compared to 20 and 22 percent in 1983 and 1982, respectively. Management believes that the long-term debt to total capitalization ratio normally should not exceed 33 percent. As Monsanto's present ratio is significantly less than 33 percent, the Company has significant additional borrowing capacity available. The interest coverage ratio (times interest earned), excluding extraordinary items and the effect of capitalized interest, was 6.9 in 1984, compared to 5.3 and 4.6 in 1983 and 1982, respectively. The Company has made extensive use of pollution control and industrial development bonds to finance qualified projects. Pollution control and industrial developmentbond obligations were 31 percent of all outstanding long-term debt at year-end 1984. lb a limited extent, Monsanto has used other forms of financing, principally lease arrangements and joint venture arrangements involving take-or-pay contracts, when the effective interest cost is attractive or the nature of the capital project requires their use. Monsanto's assets are generally free from lien and not used to collateralize debt. Accordingly, these assets represent an additional source of borrowing capacity. Through its Monsanto Oil Company subsidiary, the Company owns oil and gas reserves with current market values in excess of the cost included in the accompanying financial statements. These oil and gas reserves and the undeveloped acreage represent valuable assets that also could be used to increase total debt capacity. (For more information on Oil and Gas, see page 38.) Common Stock Split Two-For-One Daring 1984, the Company had a two- for-one common stock split. This resulted in $82 million of Additional Contributed Capital being reclassified to Common Stock in the Statement of Consolidated Financial Position. Also, the authorized common shares were increased to 200 million. Although there are no present commitments fra these newly authorized shares, they do give the Company flexibility relating to possible future financing programs, acquisitions and other uses. Also, in 1984, the Company redeemed the outstanding $2.75 Cumulative Convertible Preferred Stock at $73 per share. Effective August 1984, the Company expanded its common stock repurchase program and announced that up to 6 million shares of Monsanto common stock will be repurchased over a 17-month period. The continued strengthening of the U.S. dollar, as compared to Monsanto^ major ex-U.S. currencies, resulted in the accumulated currency adjustment account increasing to $319 million at year-end 1984. Currency adjustments are accumulated in this account until the related ex-U.S. investment is sold or liquidated. hvi Statistics Working Capital (Current assets Less curtent liabilities) Current Ratio (Cuirent assets divided by current liabilities) Percent of Loag.lfcrm Debt to Tbtal Capitalization* Percent of Long-Ifcrta DeM to Ibta) Shareowners4 Equity 'Total capitalization is the sum of long-term debt plus shareowners' equity. 19*4 $1,395 Z.2 16% 23% 1983 $1,535 2.3 202 262 Q67482S Statement <if (hangc\ in ('onsniidiilod l iitanciaJ Position \i..i.s4nnf impan> am? snimdidrio. (Dollars in millions) Sources (Uses) of Funds 1984 1983 1982 Operations; Income before extraordinary items Charges not using (credits not providing) funds: Depreciation, depletion and obsolescence Deferred income taxes Olber > 439 491 103 (25) $369 517 71 (9) $ 329 439 85 27 Funds provided from operations, before changes In working capital and extraordinary items 1,008 948 880 Investment and Other transactions: Extraordinary tax benefits from utilization of ex-US loss carryforwards Working capital changes: Trade receivables Inventories Other current assets Accounts payable and accrued liabilities Short-term debt 33 37 (39) (3) (1) 46 49 (16) (65) 38 (42) 147 (69) 24 122 (44) Total working capital changes Foreign currency adjustments on working capital Property, plant and equipment additions Proceeds from property disposals Acquisitions and investments Other (58) (58) (614) 39 (94) 60 211 (47) (560) 39 (208) 49 (29) (60) (673) 31 (11) 34 (725) (483) (708) Financial Transactions: Long-term financing Long-term debt reduction Extraordinary gain from exchange of debt for common shares Issuance of common stock Treasury slock purchases Dividends 12 (127) _ (184) (182) 49 (87) -- (14) (170) 38 (149) 23 75 (13) (158) (4*1) (222) (184) Increase (Decrease) In Funds (198) $ 243 $ (12) Increase (Decrease) in Elements of Funds: Cash, time deposits and certificates of deposit Short-term securities Increase (Decrease) in Funds % (15) (183) $ (198) The above swerneni should be read in conjunction with pages 49 through 53 of this report, $ 21 222 $ 243 $ (66) 54 % (12) 0674826 Rttifw of Sources and ( scv of Lunds Monsanto's 1984-1982 sources and uses of In 1984, $94 million was spent on funds are shown in the Statement of Changes in acquisitions and other investments, principally Consolidated Financial Position on the preceding to purchase Continental Pharma, a Belgian page, pharmaceutical company, and to invest in various Monsanto finished 1984 in a good cash venture capital opportunities. The principal 1983 and short-term securities position -- at $459 million acquisition was the minority-interest in Fisher after funding some sizable commitments in the Controls. form of the note repayment on the 1983 purchase of Fisher Control's minority interest, new investments and the common stock repurchase Dividends Increase for 12th Consecutive Year The Company has paid dividends on its common shares without interruption or reduction program. These payments, however, resulted in the 1984 year-end cash and short-term securities since 1928 and has increased the dividend in each of the past twelve years. Dividend payout for 1984 position being $198 million below the prior was 41 percent of net income. The Company's year-end. dividend policy reflects a desired longterm payout percentage based on Monsanto's expectation of future growth and profitability levels. In any individual year, additional consideration is given to expected financial position and results, working and fixed capital needs, scheduled debt repayments and economic conditions, including inflation. As mentioned in the Review of Liquidity and Capital Resources (page 45), the Company expanded its common stock repurchase program. During 1984, the Company repurchased approximately 4 million shares of its common stock for a total cost of $184 million. These repurchases reduced the average common shares outstanding, resulting in a $0.10 increase in earnings per share. Monsanto's common stock is traded Funds Provided front Operations Increase Funds provided from operations were higher in 1964 as a result of improved earnings performance. Agricultural Products, Fibers and intermediates and Polymer Products were principally on the New York Stock Exchange. The number of common shareowners of record as of February 22, 1985, was 71,085 and the high and low common stock prices on that date were $4414 and $4394. significant cash flow contributors. Expenditures for property, plant and equipment in 1984, including capitalized interest, increased to $614 million. The more significant 1964 expenditures were for the new Lire Sciences Research Center in St. Louis County, Missouri, continued capital requirements in oil and gas, and various environmental projects. In recent years, capital expenditures generally have been financed by cash horn operations. At December 31,1984, Monsanto had purchase orders and contracts outstanding of approximately $178 million in connection with uncompleted properly additions and commitments for investments in affiliates. 0674627 Statement of ( on so! idat ed Shareowners' l.quity (Dollars in millions, except per share) MmtvainIII f Common Stock: Balance. January 1 New shares issued (138,117, 11,289 and 988,075 shares in 1984-1962, respectively) Par value of stock issued in two-for-one stock split Balance, December 31 1984 $ 82 82 $ 164 1983 S 82 $ 82 Additional Contributed Capitol: Balance, January 1 New shares issued Par value of stock issued in two-for-one stock split Other- Balance, December 31 $ 936 __ (82) t $ 855 $ 931 5 $ 936 Accumulated Currency Adjustment: Balance, January 1 Initial translation adjustment for SEAS No. 52 TVanslaiion adjustments Income taxes Transferred to net income Balance, December 31 Reinvested Earnings: Balance, January 1 Deferred tax adjustment for SEAS No. 52 Net income Preferred dividends ($2.06 per share in 1984, $2,75 per share in 1983 and 1982) Common dividends (S2.25, $2,075 and $1,975 per share for 1984-1982, respectively) Balance, December 31 Common Stock In Treasury: Balance, January 1 Shares purchased (4.053,300, 159,570 and 171,940 shares in 1984-1982, respectively) Conversion of convertible securities and issuances under employee stock plans (349,837,471,966 and 313,192 shares in 1984-1982, respectively) Balance, December 31 $ (200) (121) 2 $ 019) $2,853 439 (182) $3,110 $ (4) (184) 12 $ (176) $ (122) (84) 6 $ (200) $2,621 402 (170) $2,853 $ (22) (14) 32 $ (4) The Above slatemenl should be read in conjunction with pages 49 through S3 of this, report. 1982 $ 80 $ 82 $ 853 73 5 $ 931 $ (161 din 9 (4) $ (122) $2,423 4 352 (158) $2,621 $ (26| (13) 17 $ (22) I hi> fin;irui;d Slutivtic*s-< ommoii Mock Data Stock Price Per Common Shore; High Low Dividends Shareowners' Equity 1984 $53% 40% 1.25 44.43 1983 $58% 37% 2.075 44.83 1 1982 $44'-: 28',* 1.975 42.99 0674626 TOWOLDMONOOI5325 NoIla tn I inmu-iiil SliiU*nunf\ Where applicable, per share amounts and the number of common shares have been restated to reflect the June 1984 two-for-one common slock split. Significant Accounting Policies The Company's significant accounting policies are italicized in the following Notes to Financial Statements. Basis of Consolidation The consolidatedfinancial statements include the Company and its majority-owned subsidiaries intercompany transactions have been eliminated in consolidation. Companies in which Monsanto has an ownership interest between 20 and SO percent are included in ' investments in affiliates' ' in the Statement of Consolidated Financial Position and Monsanto's share of these companies' income or loss is included in ' 'Other income -- net" in the Statement of Consolidated Income. Principal Acquisitions and Divestitures In May 1984, Monsanto acquired Continental Pharma, S. A., which has pharmaceutical manufacturing and research facilities in Belgium. Its products are marketed principally in Europe and Asia. In July 1983, Monsanto purchased for $178 million Ihe interest of Hie General Electric Company p.l.c. (GEC) in Fisher Controls International, Inc. (FCI1). This increased the Companyk ownership in FC1I to 100 percent from the previous 66'/> percent. The excess purchase price above FCll's net assets attributable to GEC's interest was $81 million, which is being amortized on a straight-line basis over 20 years. In June 1983, Monsanto sold the European acrylic fibers business to Monteftbre, a subsidiary of Montedison (Italy). The pretax loss provision of $20 million ($18 million, or $0.23 per share, net of tax) was established in 1982 and was included in cost of goods sold as obsolescence expense. This business was part of the Fibers and Intermediates operating unit and had 1982 sales of approximately $139 million. In June 1983, Monsanto acquired at net book value Monttfibrek SO percent interest in Polyamide Intermediates Limited (PIL). a nylon intermediates joint venture in the United Kingdom. This resulted in Monsanto unli, < nm|jin and Sub\iditriiA having sole ownership in PIL, whose operations are reported as part of the Fibers and Intermediates operating unit. Had Monsanto owned 100 percent of Continental Pharma, FCII and PiL since January 1. 1983, Monsanto's net income would not have changed significantly Depreciation 1984 1983 198? Depreciation, depletion and obsolescence: Depreciation and depletion Obsolescence (including gains and Losses from divestitures) $449 42 $456 61 $396 43 Tbtal depredation, depletion and obsolescence $491 SSI? $43y The cost ofplant and equipment is depreciated using the straight-line method over weighted average periods of23 years for buildings and 12 years for machinery and equipment. Supplemental Data 1984 Row material and encrey costa Employee compensation and benefits Income and other taxte Rent expense $2,522 1.689 482 80 Tfcchnoktgkal expenses: Research and development Engineering, commercial development and patent 370 76 Ibtal technological expenses 446 Interest expense: Total interest costs incurred Less capitalized interest 117 17 Net Interest expense 180 Equity In affiliates' Income ()!] 18 Foreign currency gains (losses) -- Including equity in affiliates' currency gains and losses 2 1983 $2,345 1.687 368 83 290 69 359 126 30 96 15 5 mi $2,435 1.736 394 78 264 65 329 128 46 82 1h i 1 >i Gb7AB29 Currency Translation In accordance with Statement of Financial Accounting Standards No. 52, most ofMonsanto's ex-U S. operations' financial statements are trans lated into U S. dollars using current exchange rales. Unreaiiced currency adjustments in the Statement of Consolidated Financial Position are accumulated in shareowners' equity. Thefinancial statements ofex-U.S. operations that operate in hyperinfialionaty economies, including Brasil. Mexico and Argentina, are translated at either current or historical exchange rates, as appropriate, and currency adjustments are included in net income. Major currency exposures are the British pound sterling and Belgian franc. Other important currencies include the German mark, French franc, Canadian dollar, Australian dollar, Japanese yen and Mexican peso. Currency restrictions are not expected to have a significant effect on Monsanto's cash flow, liquidity or capital resources. Foreign currency translation gains on long-term debt in hyperinflationary countries in 1983 and 1982 have been reclassified from ' `Cost of goods sold" to ``Other income -- net" to be consistent with the classification for 1984, Inventory Valuation Inventories are slated at cost or market, whichever is less. Actual cost is usedfor raw materials and supplies, and standard cost, which approximates actual cost, is usedforfinished goods and goods in process. Standard cost includes direct labor, raw material and manufacturing overhead based on practical capacity. The cost ofsubstantially all U.S. inventories is determined by the last-in, first-out lUFOi method, generally reflecting the effects ofinflation on cost of goods sold sooner than other inventory cost methods. The cost ofother inventories (approximately 25 percent of all inventories) is generally determined by the first-in, first-out IFIFO I method. Inventories at December 31, 1984 and 1983 would have been S432 million and $453 million, respectively, higher than reported if the FIFO basis of inventory valuation (which approximates current cost) had been used for all inventories. Monsanto's LIFO inventory policies make it impractical to identify inventories by classification (i.e., finished goods, goods in process, raw materials and supplies). The liquidation of lower cost inventory "tiers" under the LIFO method increased 1982 earnings approximately $83 million before taxes. OU and Gas Activities Oil and gas exploration andproduction activities are accountedfor using the successful efforts method. Income Taxes The components of income before income taxes were: TbUl us. Ex-U.S 19W $442 265 $707- 1983 $419 151 5570 m: S425 76 S501 The components of income tax expense were; Current: Federal Stale Ex-US Deferred: Federal State Ex-U.S. Hut effect of Iocs carryforward Ttrtal 1984 $ 72 21 149 72 3 44 119 $268 iwj SIM 6 45 154 11 4 <11 14 IWU 5 53 H 39 1 INI 72 4 l4l ?: 33 S20I 5172 The sources of timing differences in the recognition of revenue and expense for tax and financial statement purposes and the tax effect of each were: 1984 1983 1982 Depreciation, depletion and obsolescence Intangible drilling and development costa Interest capitalization Other TbUl $ 92 11 -- 16 $119 5 19 (31 8 (10) 5 14 5 49 19 18 M4> 5 72 Factors causing the effective tax rale to differ from (he statutory rate were; 1984 1983 1982 Federal statutory rale 46* 46* 46* Investment and RAD tax credits (5) (6) INI Lower ex-lLS. tax rates (3) (11 -- Benefits attributable to DISC earnings Other (2) (3) (3) 2 (1) s Effective income tax rate 38* 35* 34* Investment tax credits are recorded as a reduction o/ income tax expense in the year they reduce the federal income lax liability. Investment tax creditsfor 1984-1982 were $30 million, $26 million and $53 million, respectively. Income taxes have not been provided on $472 million cf undistributed turnings of 0674830 subsidiaries either because any taxes On dividends include an investment return of 7.5 percent used would be offset substantially by foreign tax credits in determining the actuarial present values. The or because Monsanto intends to indefinitely actuarial assumptions also include an overall reinvest those earnings average salary increase of 6.5 percent for the Earnings per Share Earnings per share were computed using the weighted average number of common and common equivalent shares outstanding each year, adjusted for the two-for-one slock split (80.909,755. 82,215,156 and 79.950,996 in 1984 1982, respectively). Common share equivalents salaried employees plan. The actuarial present value of additional projected benefits from future salary increases for the U.S. salaried employees plan at December 31, 1984 Was approximately $280 million. Accumulated plan benefits included in the above table for these major U.S. plans were approximately $1,617 million at December 31, 1984. (535,979. 563.622 and 319,716 in 1984-1982, Short-Thrm Debt and Credit Arrangements respectively) consist primarily of common stock issuable upon exercise of outstanding stock options. 1984 my Earnings per share assuming full dilution were not Notes payable: Banks S 43 $ >: different significantly from the primary amounts. Others 7> Pension Plans Bank overdrafts 111 m: Most Monsanto employees are covered by Current portion of long-term debt 123 noncontributory pension plans. Upon retirement, many Monsanto employees are also provided other benefits, principally medical and life insurance. Pension costs arefunded as accrued and include current service and amortisation ofunfundedprior service costs generally over periods of !0 to 30 sears Other postretiremens benefits are not currentlyfunded and ore expensed as incurred. Pension expense for all plans was $116 million, S131 million and $136 million in 1984-1982, respectively. The 1984 decrease in pension expense reflects higher investment returns and reduced numbers of employees. Pension expense was 7 percent of total compen sation in 1984 and 8 percent in 1983 and 1982. The 1984-1982 expense recorded for other postretirement benefits was 518 million. $13 million and $8 million, respectively. Estimated benefit and asset information Total $277 Monsanto has available $300 million in U.S. and Eurocurrency Revolving Credit Agreements. The U.S. agreement ($200 million) is effective through 1989. with interest rates generally at or below prevailing prime interest rates. The $100 million Eurocurrency agreements are subject to reductions beginning in 1986 and terminating in 1987. Interest rates under these agreements are at a margin above the London or Luxembourg interbank offered rates. No borrowings were made under the above credit facilities through February 22,1985. In addition, certain ex-U.S. subsidiaries have aggregate short-term loan facilities of $266 million, under which loans totaling $43 million were outstanding at December 31. 1984. Interest on these loans is related to various ex-U.S. bank rates. at year-end for Monsanto^ pension plans is pre sented below. Net assets of the pension trusts were measured at market value and accumulated Long-Tferm Debt Long-term debt (exclusive of current maturities): benefits were estimated from actuarial valuations, 1984 lUK.t principally using the entry age normal actuarial cost method. 1984 1983 Actwirtil pratut value of accumulated plan benefits: Vested Nonvested 1,554 184 $1,463 17B Industrial development bond obligations, weighted average interest rate of 7^. due 1986 to 2021 8$ notes due 198$ 4V*% promissory notes due 1993 sinking fund debentures due 1997 sinking fund debentures due 2000 3m% income debentures due 2002 $252 39 67 127 77 5M7 im 44 ip 127 77 IbUl $1,738 $1,041 income debentures due 2006 50 Si Net assets available for benefits $2,074 $1,958 U.S. salaried and hourly employees are covered by two principal plans. The funding and company cost assumptions for these plans 8V% sinking fund debentures due 2008 Capitalized lease obligations Other Tbtnl 169 5 38 $824 1W 7 4M $937 0674831 Mammies and sinking fund requirements options were granted and 106.568 options, granted on long-term debt are $123 million. $23 million. at prices ranging from $24.97 to $44,03 per share, $22 million, $18 million and $16 million for were exercised. 1985-1989. respectively. Slock appreciation rights (SARs) are Covenants of certain loan agreements authorized to be granted under both the 1974 restrict maximum borrowings and dividend and 1984 Plans, including retroactive grants for payments. It is not anticipated that additional unexereised options. At December 31. 1984. future borrowings will be affected by these SARs related to options for 805,1-38 shares were restrictions, and none of the Company's reinvested outstanding: of these, 390,526 were exercisable. earnings were restricted as to dividend payments at During 1984, SARs related to options for 565,941 December 31, 1984. shares were granted and 12.836 were exercised. Commitments and Contingencies Segment Information Commitments in connection with Certain operating unit segment data uncompleted additions to properly and investments for 1984-1982 appear on page 36 and are integral in affiliates were approximately $178 million at parts of the accompanying financial statements. December 31, 1984. Monsanto was contingently The principal product lines included in each liable as guarantor of bank loans and for operating unit are shown in this segment data, discounted customers' receivables totaling the principal unusual charge included in the approximately $60 million at December 31, 1984. Operating Unit and World Area Segment Data Monsanto is a patty to a number of is discussed in the "Principal Acquisitions and lawsuits, which it is vigorously defending, arising Divestitures" note to the financial statements. The in the normal course of business. Certain of these liquidation of lower cost inventory "tiers" under actions seek damages in very large amounts. the UFO method increased 1982 operating income While the results of litigation cannot be predicted by $20 million, $27 million and $35 million for with certainty, management believes, based upon Fibers and Intermediates, Industrial Chemicals and the advice of Company counsel, that the final Polymer Products, respectively outcome of such litigation will not have a material Total sales between operating units adverse effect on Monsanto k consolidated fmade on a market price basis) were $304 million. financial position. $297 million and $311 million in 1984-1982. Capital Slock respectively. These sales were significant for At December 31. 1984, there were Industrial Chemicals ($142 million, $140 million 39,070 common shares reserved for conversion and $151 million in 1984-1982, respectively) of convertible securities and 6,015,830 common and Fibers and Intermediates ($116 million, shares reserved for employee stock options, $101 million and $91 million in 1984-1982. The Company called for the redemption respectively). Inter-area sales, which are sales of all of the outstanding $2.75 Cumulative from one Monsanto location to another Monsanto Convertible Preferred Stock at $73 per share location in a different world area, also were made effective October 15,1984. Prior la the redemption on a market price basis. date, preferred stock shareowners had the option Certain corporate expenses, primarily of converting each share of preferred stock held those related to the overall management of the into 2.24 sbares of common stock. Company, were not allocated to the operating Stock Option Plans units or world areas. Interest expense, interest At December 31, 1984, there were income and other income -- net, as shown in the 2,756,830 shares under options outstanding for the Statement of Consolidated Income, are the only Company's 1974 and 1984 Management Incentive reconciling items between operating income Plans at prices ranging from $24.25 to $57.59. and income before income taxes. Nonoperating Options for 1,525.360 shares were exercisable assets principally include investments, and a at December 31, 1984. During 1984. 1,800,699 portion of cash, time deposits and certificates of deposit, and short-term securities. 0674632 Net sales by entities in each world area were: UiufTiliated Customers United States Europe-Africa Canada Latin America Asia-Pacific Eliminations 1984 $4,914 948 278 203 351 1983 S4.596 924 259 192 328 1982 4.483 1,079 227 221 315 Ibtal consolidated 56.691 6.299 S6.325 Operating income and total assets by entities in each world area were: Operating Income (Lot!) United States Eutope-Africa Canada Latin America Asia-Pacific Eliminations Corporate expenses Nonoperating assets 1984 S 477 192 25 4 31 2 (54) 1983 S 434 137 24 (41 15 (35) (50) I9B2 458 39 5 3 11 8 (45> Tbtal consolidated S 677 S 521 Following is a reconciliation of ex-U.S. operating income and lota! assets to the Company's equity in the net income and net assets of consolidated ex-U.S. subsidiaries: S 479 Operating income interest expense Interest income Other income -- net Income taxes (including extraordinary tax benefits of Joss carryforwards) Net Income of consolidated ex-U.S. subsidiaries Ibul operating assets Ibul liabilities Nal assets of coosoHdaled ex-U.S. subsidiaries Inter-Area (Belween Monsanto Entities* 1084 1983 1982 5 534 207 9 6 33 1789) . S 526 188 6 4 25 (749) 467 I0K ) 2 21 (61M i $-- S- - 1984 15,088 772 105 178 257 (253) 226 16,373 Total Assets 1983 mi SS.1IG 696 92 ISO 203 (362) S4.71 1 790 XI 166 n: l2Wi 508 6,427 425 6.(177 1984 % 252 (53) 36 29 1108) $ 156 $1<3J2 519 S 793 1983 172 165) 28 36 (45) S 126 $1,171 470 701 1982 5ft (711) 17 61 (35i $ 31 st.jtw 44(1 s 764 0674833 TOWOLDMONOOI5330 1 1 inuneLil Summary (Dollars in millions, except per share) Operating Results Net Sales Operating Income Net Income As a Percent of Net Sales As a Percent of Average Shareowners' Equity As a Percent of Average Capital Employed Earnings per Share1 Year-end Financial Position Ibtal Assets Working Capital Property. Plant & Equipment: Gross Net Long-linn Debt Shareowners' Equity Current Ratio Percent of Long-Term Debt to Ibtal Capitalization Other Data Property, Plant & Equipment Additions Depreciation, Depletion and Obsolescence Interest Expense Research and Development Expense Income Taxes Stock Price:' High Low PriceiEamings Ratio on Year-pud Stock price Per Common Share:' Dividends Shareowners' Equity Common Shareowners Common Shares Outstanding (in millions)' Employees 1984 $6,691 677 8 439 7*. 12% 10% t 5.42 86,373 1,395 $6,91* 3,374 8 824 3,634 2.2 18% 8 614 491 100 370 268 8 53% 40% 8 8 2.25 46.43 71,343 78 50,754 1983* $6,299 521 $ 402 6% 11% 10% $ 4.89 $6,427 1,535 $6,639 3,284 $ 937 3,667 2.3 20% $ 560 517 96 290 201 8 58% 37% 11 $2,075 44.83 69,787 82 48,835 MtHiuiiiti ( tiniiunt and SuhisiHiiriH 1982** 1981 1980 $6,325 479 $ 352 6% $6,948 702 $ 445 6% $6,574 2IQ $ 149 2% 10% 9% $ 4.39 $6,077 1,503 $6,530 3,313 $1,003 3,490 2.6 22% 15% 11% $ 5.75 $6,069 1,486 $6,218 3.184 $1,110 3.330 2.4 25% 5% 5% $ 2.05 $5,796 1,226 $6,074 3.109 $1,371 2.808 2.1 33% $ 673 439 82 264 172 $ 44% 28M 9 $1,975 4299 75.943 81 52.199 $ 668 263 101 233 248 $ 43-% 29% 6 $1,875 42.18 79,029 79 57.391 $ 781 547 112 208 57 $ 35 % 21% 17 $1,775 38.82 82.441 72 61,836 'Per share amounts and shares outstanding have been restated to reflect the June 1984 iwo-for-one common stock splil. 'Net income for 1983 includes extraordinary tax benefits of S33 million, or 50 41 per share, from the utilization of ex-U.S. loss carryforwards. income for 1982 includes an extraordinary gain of S23 million, or $0.29 per share, from an exchange of debt for common shares. In 1982. the requirements of Statement of Financial Accounting Standards No. $2. "Foreign Currency Translation " were adopted. 0*74634 TOWOLDMONOOI5331 Sliari'oiitier Information Annual Meeting The next Annual Meeting of the shareowners of Monsanto Company will be held at 1:45 p.m., Friday, April 26.1985, in K Building al the Company's General Offices, 800 N. Lindbergh Blvd., St. Louis, Missouri. A formal notice of the meeting, together with a proxy statement is being mailed to each shareowner. 10-K Report, Corporate Data Book and Investor News A copy of Monsanto Company^ 1984 Form 10-K Report filed with the Securities and Exchange Commission; 1984 Corporate Data Book, which contains additional information relating to Monsanto; and investor News can be obtained by writing to: Investor Relations Department Monsanto Company 800 N. Lindbergh Blvd. St. Louis, Missouri 63167 Stock Symbol: MTC Transfer Agent and Registrar The Firs! National Bank of Boston Quarterly Common Stock Data Stock Price High Low 19*4 First Second Third fourth $53*4 49 51 46*4 $41V, 42 4144 4044 1983 First Second niird Fourth $46*4 47 $8tt 58'A $37*4 39*4 42*4 50*4 Dividend $0,525 0.575 0.575 0.575 $0.50 0.525 0.525 0.525 Officers President and Chief Executive Officer Richard J. Mahoney Chairman of the Board Dr. Louis Fernandez Executive Vice Presidents Francis J. Fitzgerald Earle H. Harbison. Jr, Nicholas L. Reding Senior Vice Presidents Robert L. Bern Harold J CoTbert Dr. Howard A. SchneLderman Senior Vice President and Chief Financial Officer Francis A. Stroble Senior Vice President, Secretary and General Counsel Richard W. Duesenberg Group Vice Presidents Robert E. Burke Thomas L, Gossage Robert G. Potter Donald H. Swan Vice Presidents Dr. Constantine B. Anagnostopoulos Eart N. Brasfield Leonard A. Cohn Stewart D. Daniels Richard U. DeSchuticr Charles A. Faden Dr. S- Alien Heininger John F. Hussey" Martin J. Roller Thomas H. Lafferre Dr. Joseph T. Nolan James H. Senger David L. Sliney Vice President and Controller Lawrence B, Skaioff Effective May 1.1985 Board of Directors Or. Louis Fernandez. Chairman Ur. Donald Carroll C. R Dahl Richard I. Fricks* ' John W. Hiinlcs Howard M Love Richard J. Mahoney Ur. Joan Maser Buck Mickel Edward L. Palmer Dr. John B. Slaughter Admiral Siansficld Turner Margaret Bush Wilson Richard W'. Ducsenherg. Secretary Advisor)' Directors Rohen L. Berra Harold J Corbett Francis J. Fitzgerald Earle H Harbixon. Jr. Nicholas L. Reding Dr. Howard A. Schncidemian Francis A. Struble Committees or The Board Audit Ur- Jean Miner Buck Mickef Edward L. Palmer Ur. John B. Slaughter Margaret Bush Wiliam Corporate Social Responsibility Dt Louis Fernandez Dr Jean Mayer Admiral Stunsfield Turner Margaret Bosh Wilson Executive Ur. Louis Fernandez John W'. Hanley Richard J Mahoney Margaret Bush Wihon Lxeculivc Cunpenttllon and Development Richard I Frick Howard M. Lose Buck Mickel Finance Ur. Donald C. Carroll C. R. Dahl John W', Hanley Richard J Mahoney Edward L- PaInter Nominating C.R Dahl How ard M. Love Buck Mickel Pension and Savings Funds Ur. Donald C Carroll Dr. Louis Fernandez Richard |. Fricke Admiral Stansfiefd Turner Richard J. Mahoney Si. Louis President and duel Esevuti'.c Officer Monsanto Companx John W. Hanley North Palm Beach. Florida Rclired Chairman of (he Board and Chief Executive Officer Monsanio Company -If Dr, Louis Fernandez St. Louis Chairman of Ihe Board Monsanto Company Howard M. Love Pittsburgh Chairman of ihe Board and Chief Executive Officer National InleTgroyp, Inc. 0674636 TOWOLDMONOOI5333 Dr. Donald Ci Carroll Philadelphia ProfosMir of Management I'mvuiMK iif Pennsylvania Inn leave J*ifci3-K5j Chairman C(i\V Data Scrvii'ON. Jne. Chairman Imitiunicim Corporalion C- Raimond Dahl Sun Francisco Retired Chairman of <hc Board Crown Zollcrhach Corporation Richard 1. \ rkWc Montpelier. Wmi.ini Chairman .md Clnel lA^uti-- ^ Notional Lite Insiiian,., CMO|MIO Dr. Jean Mayer Medford. Massachusetts President Tufts Universiiv Buck Mickel GrocnvjHc. South Carolina President Fluor Corporation and Chairman of the Board Daniel International Corporation ta subsidiary of Fluor fnmr'irurionl Eduard I.. Palmer Vw. V*rh Retired Chairman ot tlv fcAeeutoe Commute.. Citicorp and Citibank. N A 067463? TOWOLDMONOOI5334 Dr, John H, Slaughter College Purk. Maryland Chancellor University of Maryland at College Paik 58 Harold J. Corbel! Senior Vice President Advisory Director Admiral Stansfleld Turner L'.S. Navy: Relired McLean, Virginia Lecturer and Writer Margaret Bush Wilson St. Lour, Aitomey Wilson. Smith and Sesrnour Francis J. Fitzgerald Executive N ice President Advisory Director Earle H. Hurbison, Jr. Executive Vice President Advisory Director 067SB38 TOWOLDMONOOI5335 Richard \\. Duettfnberg Senior S kv Providem Sel1 rei;irk and Gvnciji fountel Senior Vice President's hidnwj\ |- Rees., and MomeC Thrndahl retired dm me 1VM from the Bojrd and iMm ihc Company Boih men pros iJed clour guidance and vnind aduceou'r ihc vears that nude a la-siinjj and .un ik.nil contribution to che Bojni> delik'niu-iis. We are grateful lor iheirhjrd nik and dedicated service. jnd we skish them well dunneihctf aclue reliiviiient'- Richard J Mahnri'. v * Robert I.. Berra Senior Vice President Advisur;. Liir^Clor Dr Umi- FernanJj/ 0674639 TOWOLDMONOOI5336 Monsanto Monsanto Company SOI) North Lindbergh Boulevard Si. Louis. Missouri 63167 J J 0674840 TOWOLDMONOOI5337