Document vBZ1xnVy8vkJr7g69ZeqbjzOE

The next Annual Meeting of the shareowners of the Company is to be held on Wednesday. March 25, 1959, at the Company's General Offices, 800 North Lindbergh Boulevard, St. Louis, Missouri. A formal notice of the meeting, together with a proxy statement and form of proxy, will be mailed to each shareowner. CONTENTS Page Message................................................................ 1 Classifications of Sales.....................................14 Shareowners' Net Interests....................... 15 Financial Review........................................... 20 Consolidated Financial Position .... 22 Consolidated Income.................................... 24 Consolidated Surplus.................................... 25 Accountants' Certificate..............................26 Source and Disposition of Funds .... 27 Petroleum Operating Data....................... 28 Directors and Officers . .. Inside back cover SHAREOWNERS OF RECORD 1958 Number Number of Share- of owners Shares Men.................................. 24,990 4,752,196 Women............................ 21,460 3,678,163 Joint Accounts............... 11,973 724,561 Charitable Institutions.. 265 179,961 Educational Institutions 114 131.892 Estates and Trusts....... 5,260 1,954,219 Insurance Companies.. 169 772,671 Brokers and Nominees; 1,126 8,989,736 All Others........................ 1,070 1,073,201 Total...................... 66,427 22,256,600 1957 Number Number of Share- of owners Shares 22,877 4,811,506 20,017 3,799,064 9,756 648,250 288 206,025 139 145,224 4,716 2,004,601 179 767,352 1,158 8,856,181 906 988,426 60,036 :22,226,629 1956________ Number Number of Share- of owners Shares 20,412 4,788,326 18,433 3,667,225 7,641 563,826 145 147,082 117 117,618 4,155 2,722,940 180 793,439 971 7,723,290 964 922,715 53,018 :21,446,461 ______ 1955 Number Number of Share- of owners Shares 16,702 4,536,291 15,149 3,627,534 5,147 465,640 154 133,830 105 126,631 3,730 2,634,281 168 780,424 1,767 7,738,397 694 955,917 43,616 :20,998,945 1954 Number Number of Share- of owners Shares 8,572 9,135 1,729 133 89 3,099 152 894 419 24,222 1,002,957 883,346 62,279 44,429 40,414 791,615 254,374 2,022,934 167,703 5,270,051 1954 Owning lOO shares or over Owning less than lOO shares I 1955 1956 1957 1958 I IIIII III II I I II III lilt I I I I I I I I IIIIII II1I I I I II I I I IIII IIIII 28 26 24 22 20 18 16 14 12 10 8 6 4 2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 33 40 NUMBER OF SHAREOWNERS (in thousands) MAR 000557 LAM016616 1 TO THE SHAREOWNERS Monsanto's 1958 performance, quarter by quarter, reversed last year's trend. The first quarter, traditionally our best in sales and earnings, was last year's best but 1958's poorest. Thereafter, each quarter this year reflected the nation's progressive recovery, and fourthquarter sales and earnings, which were last year's lowest, were 1958's highest. However, lower sales volumes in the year's earlier months and softening of some selling prices, notably those of plastics and refined petroleum products, were detrimental to a satisfactory year. Earnings were reduced, too, by a nine-week strike at our important Monsanto, Illinois, plant. On the other hand, some affiliated companies bettered their 1957 results. These and other factors are discussed more fully in sections which follow, for our product groups and our affiliated companies reacted uniformly in neither recession nor recovery. And in these discussions we must acknowledge, with regret, that we often have used names and terms which may be unintelligible to many readers. However, our products are chemicals and they have, in many cases, obscure uses; hence, there is no alternative but to describe our chemicals by their chemical names, their technical uses in technical terms. Monsanto shareowners' net interests were: Sales................................................. Income after taxes......................... Earnings per share......................... 195B $714,410,345 42,856,916 1.93 1957 $708,004,936 48,877,895 2.20 Increase Decrease $6,405,409 6,020,979 .27 These sales and earnings include not only those of the parent company but those of its domestic and foreign subsidiaries and one-half of the sales and earnings of 50 per centowned associated companies. Comparative balance sheets, complete income statements and other data of this consolidation appear on pages 16 to 19, inclusive. mak 0558 LAM016617 Sales of the parent company and its domestic and Canadian subsidiaries alone during 1958 were $547,955,647, a decrease of 3.4 per cent from sales of $567,116,091 in 1957. Earnings of this group alone were $34,549,517, equal to $1.55 a share in 1958, and $37,416,151 and $1.68 a share in 1957. Included are dividends and interest of $4,272,951 received in 1958 from investments in unconsolidated subsidi ary and associated companies. In 1957, such receipts were $1,873,176. CAPITAL INVESTMENT We continued to invest relatively large sums to create more efficient plants, facilities for new prod ucts and, in some cases, to provide expanded output. Such 1958 expenditures for the parent com pany, its subsidiaries and its proportionate 50 per cent share of such expenditures by associated companies totaled $72,604,000. Many projects were involved, none dominated; some are mentioned in the product group and associated company reviews which follow. Depreciation and depletion in 1958 were $60,559,000. In 1957, capital investment was $90,085,000, and depreciation and depletion, $53,331,000. Of the above expenditures, $42,588,000 was for the account of the parent company and its domestic and Canadian subsidiaries, including $8,032,000, the capitalized portion of Lion Oil's costs for devel opment of oil and gas properties. Of the balance, our unconsolidated subsidiaries accounted for $15,472,000. and our portion of the expenditures made by 50 per cent-owned associated companies was $14,544,000. In addition, $25,933,000 was invested in or ad vanced to subsidiary and affiliated companies by the parent company. MONSANTO'S OBJECTIVES Management's prime objective has been, and is, to better the return on the company's invested capital. The year's profits, however, do not reflect the economies, increased efficiencies and manufac turing cost improvements which were accomplished, as these were more than offset by heavy idle plant charges as we and the nation as a whole re duced inventories, by substantial increases in our wages and some salaries which followed the na tional pattern upward, by higher transportation rates and, above all, by substantial reductions in the selling prices of many products forced by highly competitive markets. Our efforts were aided by lower prices for some important raw materials, but their costs to us fell neither as far nor as fast as did our prices to our customers. Better returns remain management's prime concern. Further efficiencies and new technologies will be introduced, as will new products and new applications which we an ticipate will carry higher margins. Research also will continue to explore approaches toward achiev ing the objective. Some of the 1958 achievements are detailed in the product group reviews which follow. INORGANIC CHEMICALS Phosphorus and Phosphates Sales and profits of phosphorus and phosphate salts continued their steady growth. Since prices were stable, these achievements represent in creased tonnages and lower manufacturing costs. Demand for the principal products, such as sodium tripolyphosphate, tetra sodium pyrophos phate and calcium phosphates, remained strong; they enter detergent and food industries which were not affected by the recession. Major technological improvements, which helped defray continuing increases in labor and raw ma terial costs, were made in the phosphorus opera tions in Tennessee and Idaho. Construction of a new plant for sodium tripoly phosphate in Long Beach, California, is scheduled for completion early in 1959. g MAR 000559 LAM016618 Nitrogenous Products Lower consumption of nitrogenous chemicals, caused by adverse spring weather, reduced sales and earnings of this group slightly. However, greater sales of anhydrous ammonia and nitrogen solutions reflected the growing trend by the na tion's farmers to apply these products directly to the soil. In late fall, facilities for a much improved am monium nitrate began operating at both El Dorado, Arkansas, and Luling, Louisiana. The new form, developed in our laboratories, does not cake under ordinary storage conditions; its greater density cuts handling costs. A 100-ton-a-day urea plant came on stream at El Dorado; ammonia and carbon dioxide, raw ma terials for urea, are made at this location. This plant enables Monsanto to enlarge its services to agriculture. Urea is an important ingredient in mixed ruminant feeds, also. Furthermore, three operating divisions--Plastics, Organic and Inor ganic -- use urea in the manufacture of adhesives, textile finishes, binders for molding granulated wood, solid bleaches and other complex organic and inorganic products. Other Products Sulfuric acid facilities at Avon, California, were expanded. Operating economies were achieved at Everett, Massachusetts, in new alum facilities; the product is used in paper. Enlarged facilities for alkyl benzene, a basic prod uct in detergent manufacture, began operation in August. Research resulted in a new type alkyl ben zene which was introduced successfully during 1958. ACL-85 and ACL-70, chlorine carriers for use in dry bleaches and heavy duty scouring powders, in troduced last year, continued to be well accepted. Expansion of manufacturing facilities is under way and two new products in this field now are eing test marketed. Production of quartz microtubing, so small that a 50-foot length is required to hold a drop of water, was initiated; it is useful for recovering helium from natural gas. ORGANIC CHEMICALS Monsanto's hundreds of organic chemicals in clude the company's oldest products, as well as many of its newest. Because they are consumed by almost every major industry, organics are not very vulnerable to sharp declines in one or more groups of them. Hence, our organic sales almost equalled last year's record levels. Lower profits, however, were the consequence of competitive pricing and of the prolonged strike at Monsanto, Illinois. Research remained vigorous. Paper Chemicals The raw materials position of Mersize, a forti fied rosin size which gives water-resistance to paper and paperboard, was strengthened by the start-up of a new tall oil distillation unit at Nitro, West Virginia. The plant is jointly owned with Em ery Industries, Inc., which will share its output. Filtered Rosin Products Company of Baxley, Geor gia, was acquired to insure a gum rosin source. Mersize production will be augmented by plants being erected at Seattle, Washington and Nitro, West Virginia. Agricultural Chemicals Monsanto's dominant position in phosphate in secticides--widely used in cotton, alfalfa, orchard and field crops -- was reinforced by a new and expanded plant at Anniston, Alabama; manufactur ing economies permitted substantial price reduc tions. Enlarged and modernized laboratory and green house facilities for agricultural chemicals research were opened at the 288-acre General Offices' loca tion in St. Louis County. Marketing of Monsanto-brand farm chemicals, MAR 000560 LAM016619 introduced in 1956, was extended nation-wide. Plasticizers While sales matched 1957's levels, margins were lower--competitive pressure again. To our line of more than 70 plasticizers--largest in the industry--three new ones were added: Santicizer 409, a polymeric plasticizer, gives per manent flexibility to vinyl plastic; Santicizer 165 improves properties of plastics at low cost; DNODA gives plastics low-temperature flexibility. Mod-Epox, which makes liquid epoxy resins easier to use, cuts costs some 20 per cent, and enhances properties of the resins for electronics and other industries, was introduced. Santonox provides polyethylene with resistance to high temperatures; it was submitted to the Food and Drug Administra tion for clearance of its use in polyethylene food containers. At Everett, Massachusetts, plasticizer facilities were expanded again. Functional Fluids and Petroleum Additives Sales did not equal last year's because of lower lubricant production and aggressive competition. Skydrol fire-resistant hy lraulic fluid has logged over one billion fireless flight miles in reciprocating engined aircraft, and a companion product, Sky drol 500, is standard for all U. S. turbojet air liners and optional for several foreign turbojets. Coolanol-45 gained ground as a coolant-dielectric for electronic equipment important to air defense and space exploration. OS-81, the first fire-resistant turbine lubricant, was used successfully in a major gas turbine application. Certain hydrocarbons proved effective as cool ant-moderators for a nuclear power reactor in Atomic Energy Commission tests completed at mid year. To broaden our group of petroleum additives, we introduced Santopoid 23-RI, which became firmly established as an additive for new multi purpose gear lubricants, including those for the new, controlled limited-slip axles. Custom-made gasoline additives were marketed in substantially increased volume. Research facilities both for functional fluids and petroleum additives are being enlarged. Fine Chemicals Increased sales of bacteriostats for deodorant soaps and detergents required an expanded plant. Fundamental data obtained by our scientists was instrumental in creating a larger market for MHA, a synthetic protein supplement for poultry feeds. Manufacturing capacity will be augmented by a new unit at Nitro, West Virginia. Process improve ments and growing demand permitted a price re duction which should broaden the market for MHA. Intermediates Sales of intermediates--compounds halfway be tween raw materials and such varied end products as pharmaceuticals, dyes, paints and pesticides-- were reduced because of the strike at Monsanto, Illinois, where many are made. Expansion of a unit for para-nitrochlorobenzene, used in making pharmaceuticals, dyestuffs and other products, is nearing completion. Resin Materials Rapidly growing use of polyvinyl acetate surface coatings doubled sales of dibutyl maleate and di butyl fumarate. A new fumaric acid plant is under construction. Enlarged capacity for bisphenol "A", ingredient of epoxy resins for producing tough moldings for surface coating and adhesives, has been completed. Rubber Chemicals Sales dropped as the rubber industry reflected decreased automobile production. However, re placement tires compensated in part. Facilities for Santoflex-GP, a new anti-degradantj MAR 000561 LAM016620 5 # INDEX OF HOURLY WAGES, HOURLY WAGES PRICES OF RAW MATERIALS AND SELLING PRICES PRICES OF RAW MATERIALS 1947-1949=100 SELLING PRICES 200 200 190 180 170 160 150 140 130 120 110 100 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 and anti-ozonant for tires and mechanical goods, came on stream. Sales of Santojlex-DD, a general purpose anti-oxidant and stabilizer for synthetic rubber, achieved high levels. PETROLEUM OPERATIONS Reduced crude oil production and depressed prices of refined petroleum products caused an unsatisfactory year both for our Lion Oil Division and for the oil industry as a whole. Several factors affected the American petroleum industry unfavorably: The recession lessened de mand; high inventories of crude and refined prod ucts, backed up and swollen by large imports, depressed markets. The over-supply resulted in stringent state restrictions on amounts of oil per mitted to be taken from domestic wells; production (allowables in Texas, for instance, dropped from 173 days in 1957 to 122 days in 1958. In other states pipe line proration curtailed production. Depressed prices more than offset modest increases in sales of the El Dorado refinery and station markets. During the latter part of the year there was some improvement in heating oil and kerosene prices, and improved demand resulted in increased crude oil production allowables. Lion continued its search for oil and gas reserves here and abroad. Exploration expenditures for 1958 were $11,765,858. Exploration was rewarding in Venezuela, where 11 successful wells were completed in a 2000-acre Lake Maracaibo concession in which Monsanto holds a 15 per cent interest. Fifteen successful completions were achieved in Canada, where an expansion of our activity is planned. Drilling con tinued on a 900,000-acre Bolivian concession, in MAR 000562 LAM016621 which Lion holds a 25 per cent interest. Explora tion continued in Sicily, although several conces sions have been abandoned after a succession of dry holes. Within our borders, successful exploratory wells were completed in Oklahoma, Texas and New Mex ico. In December, important oil and gas discoveries were made in La Platte County, Colorado; in Mata gorda County, Texas; in Bienville Parish, Louisana, and in Simpson County, Mississippi. The company has substantial acreage holdings under and in the immediate vicinity of each discovery well. Additions to oil and gas reserves in 1958 ex ceeded the year's withdrawals. A catalytic reformer now on stream at the El Dorado refinery places Lion in position to meet anticipated demands for even higher octane motor fuels. An expansion of the refinery, scheduled for completion in 1960, is under way; its rated daily thruput will increase from 29,000 to 33,000 barrels. Operating economies will result and, as part of Lion's program for channeling its products toward chemicals, the addition will provide for the pro duction of propylene tetramer, which is used by our Inorganic Chemicals Division--the first im portant step in our program to create our own hydrocarbon infrastructure. Expansion of station marketing is being directed toward the construction of outlets with high vol ume potential. In order to achieve better returns on existing stations, unprofitable outlets are being eliminated and changes are being made to increase the sales of others. PLASTICS The plastics industry has become most competi tive. New manufacturers, attracted by its growth, have brought in fresh capacity; imports captured some markets and some large plastic consumers, striving to offset low margins, elected to manu facture their own plastics. These developments forced price reductions, lower volume, reduced earnings. Important technological improvements offset, only partially, shrinking margins. The heightened competition put severe pressure on research, engineering and product development groups. New materials were produced for a grow ing spectrum of specialized end uses; new markets were developed. Forty-seven new types were introduced during the year. Included were a high-impact sheet extru sion grade Lustrex polystyrene, which can be formed into a variety of strong, lightweight and colorful products; a static-dissipating Lustrex for dust-prone products such as display signs; and a low-stress oriented transparent styrene sheet which promises to capture a good share of the fast expanding, "see-it-before-you-buy" packaging market. The application of Ultron vinyl film as a sur face laminate to replace printed felt-base products in low-cost floor coverings upgraded 'such cover ings by utilizing the decorative assets and wearresistance of printed vinyl film. Fome-Cor, a sand wich board made of foamed styrene surfaced with kraft paper and developed jointly by Monsanto and St. Regis Paper Company, can be fabricated into containers which are competitive with speci alty cartons and boxes. These lightweight, durable, moisture-resistant containers are being used for cut flowers, fresh fruits and vegetables; an expand ing market is foreseen. Good progress was made in polyethylene; the Texas City facilities operated profitably and addi tions are under way. Our product range was broadened to include all important high quality types. Bags fabricated of Monsanto Polyethylene, with superior moisture and insect resistance, have been introduced as shipping containers for a variety of industrial and agricultural products, including some of Monsanto's. An improved Opalon vinyl plastisol is finding^^ mar 000563 1-A/VJ076622 wide usage in metal coating, fibers and fabrics for both decoration and protection. A new, stable, water-borne phenolic liquid resin for shell molding was introduced to foundries. A high-temperature phenolic resin was developed for aircraft rockets and missiles. Lytron emulsions, based on styrene latex, found new uses in paint, paper and shoe industries. Acrylonitrile is used as a raw material for syn thetic fibers. Its production was expanded, costs were reduced. It was moved overseas in tankships and domestically in barges. The new plant at Trenton, Michigan, for Saflex vinyl butyral--which imparts shatter-resist ance to laminated safety glass--was utilized fully for the first time during the fall surge in auto motive production. RESEARCH Some $23.4 millions were invested in research, development, patent work and basic engineering for our own account; in 1957, such investment was $22.7 millions. Of the sum spent this year for research, 24 per cent was for new product research; 34 per cent for exploratory research; and 42 per cent for improve ment of present products. New product research is effort aimed at bringing a discovery to commercial fruition once a specific new product for a foresee able use can be delineated. Exploratory research is aimed at uncovering basic new information such as new chemical reactions, new compounds, new uses and new technologies. Ideally, results of explora tory research can be patented, helping to insure opportunity to recover costs of innovation and to achieve greater profitability. In 1958, Monsanto was granted 269 U.S. patents and 273 foreign patents. Because our products are marketed in a highly competitive environment, it also is in the field of "improvement of present products and processes" that both research and engineering manifest them selves as major counter-measures to reduced profit margins faced by virtually every successful new chemical as it suffers the profit erosion almost in evitable in our industry. Alert research anticipates product maturity by technological improvements which lower costs and enhance quality. Then ap plication research seeks new markets previously denied because of former costs. Responsibility for exploratory and fundamental research is the principal function of the Research and Engineering Division at its locations in St. Louis, Everett, Massachusetts, and Dayton, Ohio. This division's objective is the creation and appli cation of new technology to our operations; in this function it works closely with the manufacturing divisions searching for new. products, new proc esses, new engineering techniques. The Research and Engineering Division also has been instrumental in the adaptation of systems engineering principles to our processes and in the application of large digital and analog computers to complex technical problems. A large manufac turing unit, already highly instrumented, soon will be placed under direct, on-line computer control. The electronic computer will observe continually the process instruments, make numerous calcula tions and adjust the controls to achieve maximum capacity at minimum cost. This unit will be, to the best of our knowledge, the world's first truly "auto mated" chemical plant. Last year we announced the establishment in Zurich, Switzerland, of a laboratory to conduct ex ploratory research. This facility, staffed by Euro pean scientists under the guidance of an experi enced Monsanto research director, is operating satisfactorily and promises to justify the venture. We continue to operate Mound Laboratory at Miamisburg, Ohio, where contract research and production are carried on for the Atomic Energy Commission; our Everett, Massachusetts, labora- MAR 000564 LAM016623 8 GROSS ADDITIONS TO PROPERTY AND DEPRECIATION (in S millions) 'Depreciation includes: depreciation, obsolescence, amortization and depletion. 1955-1958 include Lion Oil. 1949 1950 1351 1952 1953 1954 1955 1956 1957 1958 tory is being devoted almost exclusively to contract research for the U. S. government. Research is the most dynamic aspect of the chemical industry. Dollar investment is but one measure of Monsanto's imperative absorption in it. During the past five years, while the company's total employment increased 25 per cent, technical personnel increased 35 per cent; and technical personnel in research increased 44 per cent. OVERSEAS To give our shareowners a fuller grasp of Mon santo's operations in two hemispheres, the accom panying pictorial Annual Review covers our manu facturing activities in 11 foreign countries. Greater sales by affiliated foreign companies more than offset a decline in our exports. The latter reflected increasing self-sufficiencies of many for eign countries as plants built by our affiliates and others provided not only for the internal require ments of these countries but, in many cases, export surpluses as well. Combined earnings of those foreign operations included in the world-wide consolidation decreased slightly because of extreme competition in world markets and a somewhat slower industrial pace which prevailed in many large nations. The establishment of the European Common Market by France, West Germany, Italy, Belgium, Holland and Luxembourg dominates the politicoeconomic unfoldments of our time. The creation of supranational authorities and the gradual abolish ment of tariffs among these nations, together with the erection of a common exterior tariff wall, will influence and affect the development and econo mies of all nations outside this portentous com munity. Implementation of the Common Market has begun; tariffs of member nations were cut 10( MAR 000565 LAM016624 9 per cent and import quotas liberalized at the beginning of 1959. Advent of the European Free Trade Area, which was projected to include the Common Market, with as many as 11 other European nations, has been postponed by the inability of Britain and France to agree upon terms. While it still looms as a possi bility, the prevailing ambivalence exhibited by these nations points, at this writing, toward a somewhat fugitive middleground. Monsanto has been keenly aware of these de velopments and of the desire of many nations to become chemically self-sufficient. It is now in posi tion to reap some advantage from these rather swift changes in our groaning world. Our opera tions in United Kingdom date from 1920; now Monsanto Chemicals Limited has 4200 employes. Its plants are in Newport, on the Bristol Channel, and in Ruabon, North Wales. This company, in which we hold two-thirds of the common equity, makes a variety of organic chemicals, plastics, pharmaceuticals, fine, heavy and industrial chemi cals; its new polyethylene plant at Fawley, near Southhampton, began operating in January, 1959. It owns a one-third interest in a styrene monomer plant near Edinburgh. Monsanto Chemicals Limited's sales and earnings fell short of those of 1957, as credit stringency, reflecting the British government's anti-inflation drive, reduced the pace of British industry. Of importance to our shareowners, also, is our position in the European Common Market. In northern Italy, locally produced natural gas is available at a price low for Europe, and Near East ern oil costs less at Italian ports than Texas crude at the wellheads. These resources are significant, as more than one-fourth of all chemicals produced in United States derive from petroleum or natural gas. We now hold 40 per cent of the equity in Sicedison S.p.A., an important Italian chemical company which has two substantial plants in northern Italy --in Mantova in the Po Valley, and in Porto Marghera, which is the industrial suburb of Venice. Already a diversified manufacturer of organic and inorganic chemicals, plastics and petrochemicals, Sicedison in 1958 began producing ethylene, pro pylene and propylene tetramer, products with which Monsanto has had ample experience. Under construction are plants for plasticizers, fluorine de rivatives, expanded acrylonitrile capacity and several other products. Near Milan, a substantial research laboratory is nearing completion. Sicedison's sales have been climbing steadily and, despite heavy start-up expenses, its income has in creased. We expect to subscribe to our proportion of new shares which this company will issue soon. In France, jointly owned Societe Monsanto-Boussois set new sales records. Expansion of its plant, now in progress, will provide additional capacity and permit manufacture of products new to the French market. To help insure availability of raw materials, Monsanto-Boussois procured an interest in Ethyl-Synthese, presently France's only styrene monomer producer. Monsanto Canada Limited, a wholly-owned sub sidiary, experienced market problems related to ours but, while its sales were less than in 1957, its income was a little greater. Earnings of Mitsubishi-Monsanto Chemical Com pany Limited, the jointly owned Japanese com pany, were affected adversely by low internal prices, but the outlook is improving. Capacity for newer types of polystyrene is being erected and economies in the production both of polystyrene and vinyl sheeting materials are projected by new technologies. Monsanto Chemicals (Australia) Limited, in which our direct and indirect interest is some 77 per cent, achieved new highs both in sales and in come. Through purchase of the complementary facilities of Beetle Elliott Pty. Ltd., Monsanto (Australia) almost doubled its physical plant. It MAR 000566 LAM016625 is one of Australia's largest producers of industrial, pharmaceutical and plastic products; its expecta tions are linked to the nation's current industrial boom. Monsanto Mexicana S.A., a wholly-owned sub sidiary, experienced record sales and income. It is constructing plants for high-grade phosphoric acid and for sodium tripolyphosphate, the latter for the local detergent industry. Wholly-owned Monsanto Argentina S.A.I.C. had a very successful year, but in dollars its profits suffered attrition from peso inflation. It is now building plants for vinyl compounds and the plasticizers required for them, and it is scheduled to manufacture soon phthalic anhydride, a raw ma terial for plasticizers. Vinyl resin, the other major raw material required for vinyl compounds, will be manufactured in a plant now under construction at Mendoza, which lies at the foothills of the Andes, by Monsanto-Andes S.A.I.C., a newly-formed part nership with Carbometal S.A., Argentina's largest producer of calcium carbide. Monsanto-Andes also will produce chlorine for its own use and caustic soda for the market. In Spain, our affiliate, Etino-Quimica S.A., in which we hold 25 per cent interest, began operation of a unit which added new products to its vinyl resin line; also on stream was a new polystyrene plant producing diversified forms of this plastic. Monsanto has, also, small minority interests in another French company -- Societe des Produits Chimiques Coignet-France--a producer of phos phorus and its derivatives; in Sweden, in Belgium, and is co-owner, with our British affiliate, of Mon santo Chemicals of India Private Ltd. The gross assets of companies outside United States in which Monsanto holds, directly or indi rectly, 40 per cent or more of the equities, approxi mate $250,000,000. A substantial part of these assets --more than 70 per cent--is in Great Britain and Western Europe. As is customary in many foreign countries, these companies operate with a high ratio of debentures, preference stock and overdrafts to common equity. After providing for such senior securities, our portions of the net book values approximate $60,000,000. 50 PER CENT-OWNED DOMESTIC ASSOCIATED COMPANIES The Chemstrand Corporation's quarterly sales and earnings paralleled Monsanto's, as the textile industry usually heralds changes in the nation's economy. Chemstrand's upsurge began in April and culminated in record fourth quarter sales and earnings of both nylon and Acrilan acrylic fibers. This year, as last, Chemstrand has issued its own Annual Report--a copy of which, for shareowners, was enclosed in the envelope which contained this Report. As disclosed in Chemstrand's Report, con solidated earnings were $18,355,000. In 1957, they were $18,813,000. In December, Chemstrand paid its first dividend to its owners, Monsanto and American Viscose Corporation. Monsanto received $2,500,000, the net of which, after providing for intercorporate dividend tax, was $2,305,000 In addition, Chemstrand retired $2,500,000 of sub ordinated notes held by us and an equal quantity held by Viscose. Mobay Chemical Company passed a milestone in the fall; a long-delayed profit breakthrough was achieved. Operating profits were realized during the fourth quarter, but they were insufficient to offset the year's early losses and write-offs attrib utable more properly to prior years. The volume of urethane foams used by auto motive, furniture and other industries expanded as an increasing number of fabricating companies found them satisfactory and economical. In addi tion, these foams have emerged as versatile engi neering materials in such diverse applications as insulation in hulls of nuclear submarines, one- *** 000567 LAM016626 celled refrigerated transport units, cushioning in jet airliners and protective packaging for missiles. In the third quarter, Mobay reduced sharply the price of its key product, tolylene diisocyanate, and, during the fourth quarter, it announced the devel opment of a greatly simplified system for the pro duction of polyether foams -- which reduces the costs and complexity of producing these foams. The lower price, coupled with this simplified sys tem, is expected to accelerate urethane's growth. In anticipation, Mobay completed a sizeable expan sion of its facilities. Tough, castable urethane elastomers, marketed under our partner's (Farbenfabriken Bayer A.G.) trademark, Vulkollan, have created widespread interest. The transition of Vulkollan from develop mental to commercial status occurred in a number of applications in the automotive, shoe and materials-handling industries. Vulkollan looms as an important partner to Mobay's foaming materials. Shawinigan Resins Corporation's sales were slowed by customer inventory reductions and low automotive output. Its vinyl butyral resin, which is converted by Monsanto into Saflex film for lami nating safety glass, is necessarily sensitive to fluc tuations in the auto industry. With the new Trenton, Michigan, plant, which came on stream in the latter part of 1957, now operating efficiently, Shawinigan offers Monsanto and other customers two sources of supply. Sale of Shawinigan's polyvinyl alcohol, Gelvatol, is steadily increasing from the new plant at Springfield, Massachusetts. This product finds applications in surface-coatings, adhesives, textile sizing, paper coatings and film. In addition to domestic competition, Gelvatol has been meeting aggressive competition from imports. Neverthe less, Shawinigan's sales of the product increased, although at lower prices. Two new polyvinyl ace^^tate emulsions were introduced--one for low-cost, high-quality interior paints, the other a base for water-dispersed gloss paints. Shawinigan made a modest profit. Plax Corporation increased its sales and earn ings slightly. Polyethylene squeeze bottles con tinued to invade markets formerly served exclu sively by metal and glass containers. Economical multicolor printing was achieved; Plax now offers up to four-color offset printing on containers at prices competitive with those of paper or foil labels. To broaden markets for Polyflex -- a biaxially oriented polystyrene sheeting--Plax introduced a thin gauge film competitive with cellophane in such applications as packaging overwrap, gluesealed bags, envelope and carton windows. ANTI-TRUST MATTERS In last year's report we advised that Lever Brothers Company had purchased the trademark and franchise to market the non-sudsing detergent all, which we had developed and marketed for several years successfully, but without commen surate profit. In July, the Department of Justice filed a civil suit against both Lever and Monsanto, alleging that the transaction may lessen competition inasmuch as with all and its other products Lever may obtain a decisive advantage over other detergent pro ducers. Both Lever and ourselves will defend the arrangement which benefits both companies and which, we believe, is not disadvantageous to con sumers of the product or to other detergent producers. Monsanto is also one of the defendants in a suit brought by the Department of Justice against 29 companies engaged in marketing crude oil and petroleum products--the Department alleging con spiracies in fixing prices. Monsanto, with all other defendants, will contest the allegation. MAX 000568 LAM016627 PERSONNEL Of our 25 plants in United States and Canada, hourly paid production and maintenance employes are represented by locals of international labor unions in all but eight locations, which remain unorganized. Our relationships with all our em ployes are good to very good and, as a result of an intensive program, they are improving constantly. At all unionized locations, save one, expiring con tracts were renewed, after appropriate bargaining. At the exception--Monsanto, Illinois--employes were on strike for nine weeks, the issue relating to introduction of procedures for reduction in costs. The union ultimately agreed to accept the majority of the company's procedures. Throughout the company, personnel develop ment has been receiving increased emphasis. In addition to on-the-job training, a Tuition Payment Program assists both hourly and salaried personnel who study job-related subjects at local evening classes. Extensive management training is pro vided to employes with such responsibilities. The Academic Leave Program, designed to afford our scientists and technologists opportunities to up-date their formal education, permits selected personnel to attend universities for graduate work. Management training provides similar leaves for other individuals to attend recognized graduate schools of business administration. Last spring, 125 key personnel attended the second term of Monsanto's own Advanced Manage ment School at Excelsior Springs, Missouri, where three-week courses were administered by univer sity professors. The enthusiasm of the enrollees for the courses and their better understanding of our business and objectives amply justified the school's cost. Occasionally, educational leaves are granted to groups, such as the group of engineers which com pleted a one-year systems engineering course established by Monsanto at St. Louis University. An additional group is now enrolled in this course. The Key Scientist and Technologist Advancement Plan encourages personnel with exceptional crea tive gifts to follow their scientific leanings at will. We report with gratitude that the recession, despite its effect on various elements of our busi ness, caused virtually no dislocation of our loyal and capable people. Our personnel represent not only human ties, often of long standing, but a large investment in training and experience. It was Mon santo's philosophy, as we entered the recession, that it would be shortsighted to part with trained, efficient employes who were in such short supply in the immediate past and who might be needed again in the immediate future. Recovery is not yet complete, but our staff has been maintained almost intact. The company experienced an excellent safety record. A frequency of .67 lost-time accidents per million man hours is the best ever achieved by Monsanto. In March, the Board of Directors elected Vice Presidents John L. Gillis of St. Louis and T. M. Martin of El Dorado, Arkansas, to the company's Executive Committee, expanding its membership to seven. The Board also elected Irving C. Smith of St. Louis a vice president; to succeed Martin, H. Harold Bible of El Dorado was elected a vice president and general manager of the Lion Oil Division and, to succeed Smith, E. J. Cunning ham of St. Louis was elected controller. To succeed E. D. Toland Jr., who resigned, P. J. Dowd of St. Louis was elected treasurer in September. Vice President Smith also was appointed chair man of a newly established Corporate Planning Group, which assists the Executive Committee in appraising appropriation forecasts, and has the im portant task of coordinating and consolidating long-range plans. It is with profound regret that we report thed MAR 000569 LAM016628 deaths of one of our directors and of Monsanto's first employe; the former, Dr. Ernest O. Lawrence; the latter, Dr. Louis Veillon. Dr. Lawrence, a Monsanto Board member and Professor of Physics and Director of the University of California's Radiation Laboratory, died August 28 at Palo Alto, California. Dr. Lawrence's career was a distinguished one; the Nobel Prize in Physics was but one of his many awards. Your Board mem bers, who had come to know him intimately and respect him, will miss his guidance and his service. We join Dr. Lawrence's countrymen in acknowl edging his legacy; we share their sorrow at his passing. Dr. Louis Veillon died, at 84, in Switzerland--the land of his birth, to which he had retired. He came to the United States in 1901 to help the late John Francis Queeny when he founded Monsanto. Dr. Veillon built the company's first plant, contrib uting manual labor in its construction, as well as planning its form. When this country's small organic chemical in dustry was cut off by World War I from German intermediates upon which it depended, Dr. Veillon was one of fhe leaders in the overnight building of an integrated American chemical industry. He, like Dr. Lawrence, finds our nation in his debt. In December, the Board elected Herbert Hoover Jr. of Los Angeles, California, to its membership. Mr. Hoover, who has served in many important posts, including that of Under-Secretary of State, brings to the company valuable knowledge and wide contacts gained by his long experience, espe cially in foreign affairs. He will prove most helpful in guiding our course in today's many-problemed, violent but wondrous world. Even though this report has been winnowed of less important matters, its length is indicative of Monsanto management's endeavor to maintain a close rapport with the company's owners, its en deavor to keep them informed of all aspects of the business. The accompanying Annual Review is an effort to portray pictorially the contents of this largely technical and financial document. And so that shareowners may be informed currently of our fortunes and new products and development, the scope of quarterly reports has been enlarged recently; other supplementary information accom panies our quarterly dividends. Monsanto Magazine, which translates our com pany's products and processes into topical stories and pictures, is being sent to all shareowners who have indicated they would like to receive it. If you have not done so, a note to one of us will place your name among the addressees. We consider communications with you, the owners of Monsanto, a most important part of our responsibilities. All communications from any of you which are addressed to either of us receive personal attention and reply. We are glad to re ceive your suggestions or comments regarding any aspect of your business; we solicit them. Sincerely, St. Louis, Missouri February 11, 1959 MAR 000570 Chairman of the Board AjLLSTHem-cci -- President LAMO16629 PARENT COMPANY, DOMESTIC AND CANADIAN SUBSIDIARIES SALES BY PRODUCT GROUPS 1958 % Plastics, Synthetic Resins and Surface Coatings.................... ................... 28.4 Phosphate Products and Detergents........................................ ................... 16.9 Intermediates and Plasticizers................................................... ................... 13.7 Petroleum Products--Net of purchases.................................... ................... 10.8 Wood Preservatives and Agricultural Chemicals..................... ................... 9.1 Rubber and Oil Chemicals........................................................... ................... 6.6 Textile and Paper Chemicals...................................................... ................... 6.0 Pharmaceuticals, Flavors and Condiments.............................. ................... 4.5 Heavy Chemicals........................................................................... ................... 3.3 Other............................................................................................... .................................7 100.0 1957 % 30.2 16.6 13.3 10.1 10.0 6.7 5.2 4.1 3.1 .7 100.0 1953 % 32.2 21.2 15.5 -- 4.0 10.4 2.2 5.9 5.4 3.2 100.0 P A RENT C O M PA N Y SALES TO PUBLIC AND C O N S U M IN G 1 N D U S T R 1 E S Soap and Detergent.................................. Petroleum................................................... Agriculture.................................................. Plastics and Resins................................... Rubber........................................................ Textile.......................................................... Metal............................................................ Public-Service station sales, all, etc....... Paper and Printing.................................... Paint, Varnish and Printing Ink.............. Stone, Glass and Vitreous Product........ Pharmaceutical.......................................... Food............................................................. Lumber and Timber.................................. Color and Dyestuff.................................... ... Iron, Steel and Related Product............. Transportation Equipment....................... Non-ferrous Metal............................... Other................................................... 1958 Position % of Total l 13.24 2 11.53 3 10.02 4 9.70 5 7.92 6 6.00 7 5.77 8 4.98 9 4.80 10 4.66 11 4.65 12 3.49 13 3.04 14 2.53 15 .1.76 16 ,. .1-38 17 ; .87 . 18 - .73 - Ar*'> ,2.93 V t^iop.oo:% 1957 Position % of Total 4 9.17 1 11.17 6 8.06 2 10.56 3 10.12 8 5.75 7 5.85 5 8.34 11 3.52 10 4.00 9 5.45 12 3.45 13 3.17 14 2.49 17 1.37 15 1.98 16 1.44 18 1.11 3.00 100.00 1956 Position % of Total 6 7.48 4 9.70 5 7.90 2 10.79 3 9.71 10 3.90 7 6.38 1 12.40 12 3.59 9 4.08 8 6.09 11 3.60 13 3.56 14 2.82 17 1.06 15 1.49 16 1.24 18 .87 3.34 i100.00 _ MAR 000571 LAM016630 15 < SHAREOWNERS' NET INTERESTS, WORLD-WIDE As mentioned in previous reports, Monsanto's shareowners' true assets and true earnings include all assets and earnings of foreign subsidiaries and portions of other companies' assets and profits which are not given full effect in normal consolida tions. To present such overall equities, the follow ing pages contain consolidated financial statements and other data respecting the Company and its domestic and foreign subsidiaries, together with that portion of the assets, liabilities, sales, income, employes, additions to property and other data, which are represented by our 50 per cent owner ship in associated companies. These consolidations include our proportionate 50 per cent interests in The Chemstrand Corpora tion, Mobay Chemical Company, Plax Corporation, Shawinigan Resins Corporation, Monsanto Boussois (France), Mitsubishi Monsanto (Japan), and the following active subsidiaries: Monsanto Export Company Monsanto Overseas S.A. (Panama) Monsanto Argentina S.A.I.C. Monsanto Andes S.A.I.C. Monsanto Research S.A. Monsanto Canada Limited and subsidiary Monsanto Mexicana S.A. Monsanto Chemicals Limited and British subsidiaries Monsanto Chemicals (Australia) Limited and subsidiary . .......... Monsanto Chemicals of India Private Ltd. Subsidiaries participating in oil and gas exploration in Canada, Bolivia, Venezuela and Sicily. In years when such enterprises suffered losses, income taxes were reduced in the statements by the amounts they would have been reduced had our portions of the operations been integral parts of the parent company. Conversely, when such companies became profitable, no reduction was made in the income taxes shown in the consolida tion because tax credit had been taken in prior years. All the companies operated profitably in 1958 with the exception of Mobay, Mitsubishi Mon santo and some oil and gas exploration subsidiaries. All earnings of the consolidated subsidiaries and associated companies are available for dividends with the exception of Chemstrand, whose dividends are limited to the terms of its indenture and to a loan agreement, and in some foreign countries dividends are subject to exchange controls. How ever, assuming that our share of all such earnings had been received as dividends, we have included in each year's income taxes a provision for addi tional income and corporate dividend tax which we estimate would have been payable. All dollar amounts are stated in millions except those relating to book values, per share earnings, dividends per share and capital per employe. For eign currencies have been converted to U.S. dollars at exchange rates prevailing at each year's end, except long term debt, capital stock, and property and related reserves, which have been converted at approximate rates in effect at dates of issuance or acquisition. i. MAR 000572 LAM016631 16 SHAREOWNERS' IN PARENT COMPANY, DOMESTIC 50% OWNED ASSO Consolidating Only That Percentage of Associated Companies (In millions) ASSETS Current Assets: Cash..................................... Marketable securities........ Receivables, less reserves Inventories.......................... Investments, etc, 1958 1957 1956 1955 1954 10 YEARS AGO 1948 25 YEARS AGO 1933 $ 37.0 38.8 106.5 117.7 $300.0 $ 36.7 24.5 88.5 122.6 $272.3 $ 32.9 21.7 86.1 113.9 $254.6 $ 59.3 24.4 72.4 100.0 $256.1 $ 43.9 4.9 50.5 75.0 $174.3 $ 15.9 7.0 20.4 40.2 $ 83.5 $ 2.0 .3 1.7 3.2 $ 7.2 $ 32.1 $ 14.4 $ 7.9 $ 6.4 $ 4.0 $ 2.3 $ 1.4 Property: Land..................................................... Buildings............................................. Machinery and equipment............... Phosphate deposits.......................... Producing oil and gas properties... Undeveloped oil and gas leaseholds Less depreciation, depletion, etc... Net property............................. $ 12.7 138.2 604.2 6.2 74.9 12.8 $849.0 338.2 $510.8 $ 11.8 128.7 561.4 6.1 67.7 19.7 $795.4 289.7 $505.7 $ 11.5 114.5 505.7 5.9 64.6 15.1 $717.3 248.8 $468.5 $ 10.7 98.0 455.6 5.6 59.5 10.4 $639.8 219.1 $420.7 $ 7.2 78.3 341.0 5.0 $431.5 134.6 $296.9 $ 4.0 37.0 125.2 1.4 $167.6 55.4 $112.2 $ 1.2 3.3 9.6 $14.1 4.9 $ 9.2 Deferred Charges.................................... $ 14.7 $857.6 $ 12.7 $805.1 $ 7.2 $738.2 $ 7.0 $690.2 $ 5.8 $481.0 $ 1.9 $199.9 $ -1 $17.9 See explanation, page 15. MAR 000573 LAM016632 i NET INTE R E ST S AND FOREIGN SUBSIDIARIES AND CIATED COMPANIES which is Represented by Monsanto Shareowners' Equity 17 tin millions) LIABILITIES Current Liabilities: Accounts payable and accruals...... Income taxes less tax notes............ Sinking funds and notes payable... Employes' bonus awards.................. Debentures, etc........................................ Income Debentures................................. Other Liabilities: Deferred income taxes..................... Pensions, etc...................................... Employes' bonus--unawarded........ Capital Stock and Surplus: Minority interests in subsidiaries... Preference shares............................. Common shares................................. Paid-in surplus................................... Earned surplus.................................. % 1958 1957 1956 1955 1954 10 YEARS AGO 1948 25 YEARS AGO 1933 $ 66.9 33.0 13.0 2.0 $114.9 $129.9 $116.0 $ 64.8 31.3 6.6 3.3 $106.0 $133.7 $ 91.0 $ 59.1 25.5 6.0 3.0 $ 93.6 $123.9 $ 91.0 $ 51.5 13.2 3.1 3.1 $ 70.9 $130.4 $ 91.0 $ 37.6 1.8 2.2 $ 41.6 $ 95.8 $ 66.0 $ 16.0 8.8 .3 $ 25.1 $ 30.5 $ 1.9 .5 $ 2.4 $ 1.0 $ 25.7 2.0 1.2 $ 28.9 $ 22.7 2.8 1.1 $ 26.6 $ 16.2 4.2 1.2 $ 21.6 $ 10.2 4.4 .9 $ 15.5 $ 5.0 5.2 .7 $ 10.9 $ 6.9 $ 6.9 $ .5 $ -5 $ 9.2 10.2 44.5 190.2 213.8 $467.9 $857.6 $ 9.9 10.2 44.5 188.6 194.6 $447.8 $805.1 $ 7.9 10.2 42.9 165.9 181.2 $408.1 $738.2 $ 7.5 10.2 42.0 151.4 171.3 $382.4 $690.2 $ 8.6 26.0 26.4 102.6 103.1 $266.7 $481.0 $ 4.5 39.1 21.4 32.2 40.2 $137.4 $199.9 $ 4.3 5.4 4.3 $14.0 $17.9 000574 LAM016633 18 SHAREOWNERS IN PARENT COMPANY, SUBS Consolidating Only That Percentage of Associated Companie (In millions except per share earnings) Income: Net sales............................................. Other.................................................... 1958 $714.4 5.5 $719.9 1957 1956 $708.0 6.1 $653.8 3.7 $714.1 $657.5 1955 1954 10 YEARS AGO 1948 25 YEARS AGO 1933 $630.4 2.5 $407.6 2.5 $181.9 3.2 $15.5 .2 $632.9 $410.1 $185.1 $15.7 Deductions: Cost of goods sold............................. Selling, administrative, research... Provision for employes' bonus........ Income charges................................. Minority interests.............................. $531.3 90.9 .2 14.6 .9 $515.0 87.4 1.2 14.4 1.0 $467.7 88.1 1.4 11.5 .9 $434.9 83.0 2.2 11.4 1.0 $291.6 62.1 .6 8.2 1.0 $130.0 21.6 2.3 .7 $10.9 1.9 .3 $637.9 $619.0 $569.6 $532.5 $363.5 $154.6 $13.1 Income Before Income Taxes............... Provision for Income Taxes................. Net Income............................................... Per Common Share1'1............................ $ 82.0 39.1 $ 42.9 $ 1.93 $ 95.1 46.2 $ 48.9 $ 2.20 $ 87.9 42.1 $ 45.8 $ 2.13 $100.4 50.1 $ 50.3 $ 2.37 $ 46.6 21.4 $ 30.5 11.8 $ 25.2 $ 1.56 $ 18.7 $ 1.36 $ 2.6 .4 $ 2.2 $ .29 See explanation, page 15. (1) Adjusted for splits. MAR 000575 LAM016634 19 net interests diaries and associates which is Represented by Monsanto Shareowners' Equity (In millions except where italicized) Depreciation, depletion, etc.................. 1958 $ 60.6 1957 $ 53.3 1956 $ 46.8 1955 $ 44.7 1954 10 YEARS AGO 1948 25 YEARS AGO 1933 $ 30.8 $ 8.0 $ .8 Book value a share1'1............................ S20.15 S19.24 S18.18 S17.37 S14.68 S7.31 51.80 Gross additions to property.................. $ 72.6 $ 90.1 $ 98.7 $ 61.8 $ 53.3 $ 41.8 $ 1.0 Employes121 ............................................. 30,.306 30.011 27,547 26,621 21,608 15,543 2,637 Net working capital................................. $185.1 $166.3 $161.0 $185.2 $132.7 $ 58.4 $ 4.8 Employed capital13*................................ $713.8 $672.5 $623.0 $603.8 $428.5 $167.9 $15.0 Employed capital per employe............. 5.23,553 522.408 S22,616 S22,6S1 S19.831 510,802 55,688 Parent company: Cash dividends on common shares $ 22.2 $ 21.5 $ 21.0 $ 20.3 $ 13.1 $ 8.5 $ .9 Per common share1'1.................. SI.00 SI.00 SI. (Xt 5 .92 5 .83 S .67 5 .11 Preference shares outstanding....... 150,000 330,669 Common shares outstanding1'* .... ^ Number of shareowners................... 22.3 66,427 22.2 60,036 21.4 53,018 21.0 43,616 15.8 "> 1 7 12.8 15,186 7.8 3,696 (1) Adjusted for splits. (2) Excluding employes of government plants. (3) Net worth and long term debt. MAR 000576 LAM016635 FINANCIAL REVIEW Consolidated financial statements of the parent company and its domestic and Canadian subsidiaries alone are presented on pages 22 through 25 and should be read in conjunction with the following com ments and explanations. Comparative sales and income of the companies in this consolidation were: (In Thousands) 1958 1957 Sales: First quarter................................. ... Second quarter............................ ... Third quarter............................... ... Fourth quarter............................. ... $127,475 137,571 138,020 144,890 .$151,285 145,861 139,644 130,326 $547,956 $567,116 Per Cent Increase Decrease 15.7 5.7 1.2 11.2 3.4 Income: First quarter................................. ... Second quarter............................ Third quarter............................... Fourth quarter............................. $ 6,066 6,933 7,959 13,592 $ 34,550 $ 11,534 10,630 8,810 6,442 $ 37,416 47.4 34.8 9.7 111.0 7.7 Per share earnings were: 1958 First quarter................................. Second quarter............................ Third quarter............................... Fourth quarter............................. $ .27 .31 .36 .61 $1.55 Shares outstanding December 31.. ...22,256,600 1957 $ .52 .48 .39 .29 $1.68 22,226,629 Equity in the unaudited 1958 net income of unconsolidated subsidiaries was approximately $3,109,000 and of 50 per cent owned companies, $9,314,000. Dividends of $3,563,738 were received from these companies in 1958 and have been included in the parent's income. MAR 000577 LAM016636 ! 21 <# Equity in the unaudited net assets of unconsolidated subsidiaries was............. $30,803,000 And in 50% owned companies was........... 68,759,000 Totaling.................................................. $99,562,000 Which exceeded our carrying value of....... 57,638,000 By...................................................................... $41,924,000 Charges against income for depreciation, obsoles cence and depletion totaled $45,068,748, of which $42,451,789 was depreciation and obsolescence, and $2,616,959 depletion of mines and wells. In 1957, such charges were $40,334,821 and $2,329,946. Depreciation in excess of normal provided by the sum of the years digits method of computing depreciation on recent property additions increased from $5,530,643 in 1957 to $6,533,635. Repair and maintenance charges included in operating expenses were $37,719,105 in 1958 and $37,409,728 in 1957. Inventories are valued substantially at the lower of cost or market. Valuation of approximately onefifth has been determined on the last-in, first-out basis. Annual rates of inventory turnover were 4.7 in 1958 and 4.6 in 1957. Reserves for doubtful accounts were $1,277,208 in 1958 and $1,089,563 in 1957. The company issued in March and sold at par $25 millions of 4*4 per cent income debentures. The series matures in 50 years; a sinking fund be gins in 30 years. The interest on these debentures, as well as on the $91 millions of 3% per cent income debentures sold in 1952 and 1955, is cumulative but payable only if earned. The May 1, 1959 and 1960, sinking fund payments on the 2.65% debentures were anticipated by the purchase of $2 millions of these debentures. The usual, annual $1.00 a share cash dividend was paid. The two per cent year-end stock divi dend, which was paid 1955 to 1957 inclusive, was omitted this year because of reduced earnings dur ing the earlier quarters. There are considerable ^^differences of opinion among shareowners regard ing the desirability of small, annual stock divi dends. However, if the current recovery in earn ings continues, the Board will institute a shareowner survey to assist it in reconsidering, next fall, the policy of paying year-end stock dividends. Earnings in 1958 were insufficient to accumulate any funds for employe bonuses, and none was paid. However, 120 new stock options were granted in 1958, for 176,310 shares, to key employes immedi ately below top management level. Monsanto has two stock option plans in effect: the Plan authorized by shareowners in 1951 for key employes and the Employes' Stock Plan, author ized by shareowners in 1956 for hourly and salaried employes, except participants of the preceding plan. The status of the authorized shares of each and the changes occurring during the year were: Stock Option Plan Options outstanding 1/1/58 526,092 Unoptioned 1/1/58.................. 222,889 Optioned during year............... 176,310 Exercised during year.............. 29,866 Unexercised options expired 13,762 Options outstanding 12/31/58 658,774 Unoptioned 12/31/58............. 60,341 Employes' Stock Plan 241,356 -- -- 105 62,194 179,057 -- Under the Stock Option Plan, 224 options are outstanding, at prices ranging from $27.17 to $45.06 a share, the prices having been adjusted for the 1955 three-for-one split and the 1955, 1956 and 1957 stock dividends of two per cent each. Under the Employes' Stock Plan, 400,000 shares were allotted to employes at $38.50 a share, being 95 per cent of the New York Stock Exchange average price on September 7, 1956, the date on which the plan be came effective. No officers, directors or others par ticipating in the 1951 Plan were eligible for the Employes' Stock Plan. At the year end, 5,007 options were outstanding. MAR 000578 LAM016637 22 PARENT COMPANY, DOMES^ CONSOLIDATED FINANCIAL POSITIOT ASSETS Current Assets: Cash............................. Marketable securities Net receivables.......... Inventories.................. 1958 1957 $ 20,264,731 $ 24,335,109 35,496,872 14,137,196 79,620,295 67,969,876 84,921,615 94,513,502 $220,303,513 $200,955,683 Investments and Miscellaneous Assets: Investment in and advances to subsidiaries.............................................. Investment in and advances to associates................................................. Common shares held for bonus awards..................................................... Miscellaneous investments and receivables.............................................. $ 13,946,354 $ 9,663,925 43,691,192 45,666,192 763,937 1,132,998 25,558,653 3,702,430 $ 83,960,136 $ 60,165,545 Property, Plant and Equipment.......................................................................... $626,844,713 $605,000,889 Less accumulated depreciation and depletion.......................................... 275,787,068 242,032,099 Net property........................................................................................... $351,057,645 $362,968,790 $ 6,979,285 The above statement should be read In conjunction with pages 20 and 21 of this report. MAR 000579 $631,069,303. LAM016638 CANADIAN SUBSIDIARIES 23 AT DECEMBER 31, 1958 AND 1957 LIABILITIES Current Liabilities: Accounts payable and accruals.................................................... Income taxes (less $1,981,648 government securities in 1957).. Sinking fund payments (less $1,000,000 debentures in treasury) Employes' bonus awards............................................................... Debentures, Bonds--Less Current Portion Above: 3%% Debentures, due 1968................................................................ 2.65% Debentures, due 1971 (less $1,000,000 in treasury in 1958) 3%% Debentures, due 1972................................................................ Canadian subsidiary's bonds............................................................... Income Debentures: 33/4%, due 2002. 4M%, due 2008. Other Liabilities: Deferred income taxes........... Pensions.................................... Employes' bonus--unawarded Capital Stock and Surplus: Common shares--authorized, 25,000,000 shares, par value $2 each; reserved for stock options, 837,831 shares in 1958 and 767,448 shares in 1957; outstanding, 22,256,600 shares in 1958 and 22,226,629 shares in 1957...................................................................... Surplus: Paid-in.......................................................................................................... Earned.......................................................................................................... 1958 $ 51,117,509 18,027,514 1,790,000 1,917,853 $ 72,852,876 $ 15,000,000 26,000,000 12,500,000 540,000 $ 54,040,000 $ 91,000,000 25,000,000 $116,000,000 $ 15,754,317 1,660,854 692,215 $ 18,107,386 $ 44,513,200 180,406,603 178,172,197 $403,092,000 $664,092,262 1957 $ 49,911,494 19,348,258 1,790,000 3,183,987 $ 74,233,739 $ 16,250,000 28,000,000 13,000,000 660,000 $ 57,910,000 $ 91,000,000 $ 91,000,000 $ 14,825,317 2,519,582 692,215 $ 18,037,114 $ 44,453,258 179,594,503 165,840,689 $389,888,450 $631,069,303 000580 LAM016639 24 PARENT COMPANY, DOMES CONSOLIDATED INCOME Income: Net sales........................................................................... Dividends from subsidiary and associated companies Other.................................................................................. 1958 $547,955,647 . ;.:.3,563,738 4,735,332 1957 $567,116,091 1,193,176 6,162,122 Increase Decrease t 19,160,444 2,370,562 1,426,790 Deductions: Cost of goods sold............................................................ Selling, administrative and research expenses.......... Provision for employes' bonus...................................... Interest expense.............................................................. Other.................................................................................. $556,254,717 $422,265,756 66,962,098 6,272,363 3,152,983 $574,471,389 $426,030,409 69,888,182 943,940 5,415,570 4,915,137 S 18,216,672 S 3,764,653 2,926,084 943,940 856,793 1,762,154 Income Before Provision for Income Taxes..................... $498,653,200 $ 57,601,517 $507,193,238 $ 67,278,151 S 8,540,038 s 9,676,634 Provision for Income Taxes: Current.............................................................................. $ 22,123,000 $ 25,886,000 Deferred............................................................................ Net Income............................................................................. ____929,000 3,976,000 $ 23,052,000 5 $ 29,862,000 : $ 34,549,517! $ 37,416,151 $ 3,763,000 3,047,000 $ 6,810,000 $ 2,866,634 ( The above statement should be read in conjunction with pages 20 and 21 of this report. mar 000581 UAW1016640 CONSOLIDATED SURPLUS PAID-IN SURPLUS Balance at Beginning of Year........................................................................... 1958 $179,594,503 1957 $157,328,247 Additions: Excess of approximate market value of common capital stock distributed as a stock dividend over the par value thereof............... Excess of approximate market value over the par value of common capital stock issued for a 50 per cent interest in Plax Corporation Excess of amounts received over the par value of common capital stock issued under stock option plans.................................................. 812,100 12,159,266 9,587,500 519,490 Balance at End of Year....................................................................................... $180,406,603 $179,594,503 EARNED SURPLUS Balance at Beginning of Year........................................................................... Add--Net Income for the Year......................................................................... $165,840,689 34,549,517 $162,972,790 37,416,151 Deductions: Dividends on common capital stock: Cash--at the rate of $1 a share............................................................. Stock--2%.................................................................................................. $200,390,206 $200,388,941 $ 22,218,009 $ 21,517,354 13,030,898 Balance at End of Year...................................................................................... The above statement should be read in conjunction with pages 20 and 21 of this report. $ 22,218,009 $178,172,197 .. $ 34,548,252 $165,840,689 MAR 000582 LAM016641 26 ACCOUNTANTS' CERTIFICATE HASKINS a SELLS CERTIFIED PUBLIC ACCOUNTANTS BOATMEN'S BANK BUILDING SAINT LOUIS 2 Monsanto Chemical Company: We have examined the statement of consolidated financial position of Monsanto Chemical Company and its domestic and Canadian subsidiary companies as of December 31, 1958 and the related statements of consolidated income and surplus for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying statement of consolidated financial position and statements of consolidated income and surplus (pages 22 through 25) present fairly the financial position of Monsanto Chemical Company and its domestic and Canadian subsidiaries at December 31, 1958 and the results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. January 27, 1959. mar 000583 LAM016642 PARENT COMPANY, DOMESTIC AND CANADIAN SUBSIDIARIE SOURCE AND DISPOSITION OF FUNDS (In Thousands) 27 Source of Funds: Net income................................................... Lion Oil balance at beginning of year-- r Provisions for: Depreciation, etc.................................... If - Deferred income taxes.............. ......... V Sale of 4V4% income debentures.... ; - Sale of 3%% income debentures............ Common stock issued under options.... Other--net.............. .................................... i Disposition of Funds: Dividends paid: Preference.............................................. Common................................................. ; I Redemption of preference stock: 1; Parent company.................................... f Canadian subsidiary............................. i Plant additions and replacements.......... ij. Investment in affiliated companies......... Sinking fund payments............................ Increase-- decrease in working capital*1' VC- - . TOTAL $176,482 10,389 184,497 14,504 25,000 25,000 4,909 9,467 $450,248 $ 1,178 98,218 $ 99,396 15,600 850 252,689 43,620 11,120 11,899 $435,174 1958 1957 $ 34,550 $37,416 45,069 : 929 25,000 42,665 3,976 872 6,417 $112,837 558 28 $84,643 $ 22,218 $ 22,218 $21,517 $21,517 42,588 23,433 3,870 3,439 $ 95,548 54,404 6,316 2,750 665 $84,322 1956 1955 1954 $38,646 $ 42,170 10,389 $23,700 38,449 4,769 ; 35,029 . 4,830 ; 23,285 799 3,602 , 25,000 2,680 981 7,567 $86,265 $121,079 : $45,424 $20,992 $20,992 $ 601 20,343 $ 20,944 $ 577 13,148 $13,725 69,239 553 2,750 3,105 $95,533 15,600 850 45,156 7,173 1,750 11,661 $103,134 41,302 7,251 5,641 $56,637 Increase--Decrease in Cash and Securities $ 15,074 $ 17,289 $ 321 S 9,268 $ 17,945 S 11,213 |X. Italics indicate decrease. >g Cl Exclusive of cash and securities. MAR 000584 I.AM016643 28 PETROLEUM OPERATING DATA Expenditures for Exploration.................. Portion Capitalized.............................. Portion Expensed................................ Leaseholds Expired and Abandoned__ Number of Producing Wells (net)........... Natural Gas Produced--Net MCF111....... Liquefied Pet. Gas Produced--Bbls....... Gross Crude Oil Produced--Barrels...... Net Crude Oil Produced--Barrels.......... Average Crude Price Per Barrel121......... Domestic Undeveloped Acreage............ Domestic Producing Acreage................. Crude Oil Run to Stills--Barrels............. Daily Average Crude Oil Runs--Barrels Refinery Production--Barrels................. Station Sales--Gallons............................. Refined Oil Sales--Gallons131................... 1958 $11,765,858 $ 8,031,826 $ 3,734,032 $ 4,038,948 1,157 21,161,443 733,306 8,050,160 7,103,196 $2.90 1,301,657 79,203 10,392,687 28,473 11,375,494 114,177,697 478,416,598 1957 $15,647,840 $11,401,163 $ 4,246,677 $ 2,654,890 1,141 21,456,156 884,804 8,568,035 7,502,654 $2.98 2,392,507 78,141 10,527,774 28,843 11,347,931 111,562,216 455,120,546 1956 $20,175,034 $14,656,754 $ 5,518,280 $ 1,452,725 1,098 20,906,875 994,517 9,322,559 8,163,161 $2.75 2,250,591 71,800 8,393,703 22,934 8,943,546 116,057,474 372,239,287 1955 $13,245,034 $ 9,452,742 $ 3,792,292 $ 964,766 1,062 18,622,567 744,160 9,415,719 8,244,486 $2.74 1,808,552 66,144 9,294,844 25,465 10,180,126 109,476,394 411,997,884 1954 $11,095,306 $ 8,983,860 $ 2,111,446 $ 1,242,397 937 14,490,875 662,875 8,333,034 7,296,572 $2.77 1,466,878 56,041 8,853,248 24,255 9,557.350 104,445.456 376,151.644 |l) Excludes gas returned to formations. 121 At end of year. 13) Includes station sales. MAR 000585 LAM016644 DIRECTORS, OFFICERS AND COMMITTEES BOARD OF DIRECTORS OFFICERS Edgar M. Queeny, Chairman.......................................... St.LouisEdgar M. Queeny...........Chairman, Board, of Directors Thomas H. Barton.................................El Dorado, Ark. Charles Allen Thomas..................................... President Charles S. Cheston..................................... Philadelphia Francis J. Curtis............................................................VicePresident Francis J. Curtis.............................................................. St.LouisJohn L. Gillis.................................................................. VicePresident Fredrick M. Eaton........................................................ NewYork Carroll A. Hochwalt...................................................VicePresident John L. Gillis.......................................................................St.LouisTrueman M. Martin........................................................VicePresident Carroll A. Hochwalt..................................................... St.LouisWilliam W. Schneider...................................................VicePresident Herbert Hoover Jr............................. Los Angeles Felix N. Williams..........................................................VicePresident Trueman M. Martin.............................. El Dorado, Ark. William W. Schneider..................................................... St.LouisH. Harold Bible..............................................................VicePresident Charles Allen Thomas................................................... St.LouisJ. L. Christian.................................................................. VicePresident Felix N. Williams............................................................ St.LouisR. K. Mueller.................................................................. VicePresident Howard K. Nason............................................................ VicePresident Irving C. Smith................................................................ VicePresident EXECUTIVE COMMITTEE Charles H. Sommer....................................................... VicePresident Charles Allen Thomas, Chairman John L. Gillis Edgar M. Queeny J. Russell Wilson..........................................................VicePresident Marshall E. Young........................................................VicePresident Carroll A. Hochwalt Trueman M. Martin William W. Schneider Felix N. Williams Edwin J. Cunningham........................................ Controller Edwin J. Putzell Jr.............................................. Secretary Patrick J. Dowd...................................................Treasurer FINANCE COMMITTEE Charles S. Cheston, Chairman Thomas H. Barton Edgar M. Queeny Fredrick M. Eaton William W. Schneider Charles Allen Thomas Transfer Agent Guaranty Trust Company of New York Alfred W. Long........... Walter C. Thilking. . Earl J. Wipfler........... Charles E. Caspari Jr. Jeff Davis...................... John N. Ehlers............. Franklin C. Rehfeld .. John F. Martin............. J. Robert Matlock. ... Rolla H. Stocke........... .Assistant Controller . Assistant Controller . Assistant Controller . Assistant Secretary . Assistant Secretary .Assistant Secretary . Assistant Secretary .Assistant Treasurer .Assistant Treasurer . Assistant Treasurer Registrar The Chase Manhattan Bank Regional Vice Presidents Roy L. Brandenburger Edward W. Gamble Jr. Victor E. Williams mar 000586 LAM016645 M O N S A N T O C H E M IC A L C O M P A N Y ST. L O U IS , M IS S O U R I 8 41 LAM016646