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2002
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Dec. 31, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-16167
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MONSANTO COMPANY
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(Exact name of Registrant as specified in its charter)
DELAWARE 43-1878297
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 NORTH LINDBERGH BLVD., ST. LOUIS, MO 63167
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 694-1000
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Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock $0.01 par value New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES [ X ] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Act). YES [ X ] NO [ ]
State the aggregate market value of the voting stock held by
nonaffiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such stock, as of the
last business day of the registrant's most recently completed second fiscal
quarter: approximately $735 million. On that date, Pharmacia Corporation
(Pharmacia) owned 220 million shares, representing 84.2%, of the registrant's
voting stock, and was deemed an affiliate of the registrant. On August 13,
2002, Pharmacia distributed these shares to its shareowners.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date:
261,420,308 shares of Common Stock, $0.01 par value, outstanding at March 3,
2003.
Documents Incorporated by Reference
(1) Portions of Monsanto Company Annual Report to security holders for the
fiscal year ended December 31, 2002 (Part I and Part II of Form 10-K). (2)
Portions of Monsanto Company Notice of Annual Meeting and Proxy Statement
dated March 13, 2003 (Part III of Form 10-K).
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PART I
ITEM 1. BUSINESS.
Monsanto Company, together with its subsidiaries, is a global
provider of agricultural products and integrated solutions for farmers. We
make ROUNDUP herbicide and other herbicides. We produce leading seed brands,
including DEKALB and ASGROW, and we provide farmers and other seed companies
with biotechnology traits for insect protection and herbicide tolerance. Our
herbicides, seeds, and related biotechnology trait products can be combined
to provide growers with integrated solutions that improve productivity and
reduce the costs of farming. We also provide lawn-and-garden herbicide
products for the residential market and animal agricultural products focused
on improving dairy cow productivity and swine genetics.
Monsanto Company was incorporated in February 2000 under Delaware
law as a subsidiary of Pharmacia Corporation ("Pharmacia"), and is comprised
of the operations, assets and liabilities that were previously the
agricultural division of Pharmacia. On Sept. 1, 2000, the assets and
liabilities of the agricultural business were transferred from Pharmacia to
Monsanto, pursuant to the terms of a Separation Agreement dated as of that
date (the "Separation Agreement"). In October 2000, Monsanto sold
approximately 15 percent of its common stock at $20 per share in an initial
public offering. On Aug. 13, 2002, Pharmacia completed a spinoff of Monsanto
by distributing its entire ownership interest to Pharmacia shareowners by
means of a tax-free dividend.
"Monsanto" and the "Company," and "we," "our" and "us," are used
interchangeably to refer to Monsanto Company or to Monsanto Company and its
subsidiaries, as appropriate to the context. With respect to the time period
prior to Sept. 1, 2000, these terms also refer to the agricultural business
of Pharmacia. Unless otherwise indicated, trademarks owned or licensed by
Monsanto or its subsidiaries are shown in all capital letters. Unless
otherwise indicated, references to "ROUNDUP herbicides" mean ROUNDUP branded
and other branded glyphosate-based herbicides, excluding all lawn-and-garden
herbicides; references to "ROUNDUP and other glyphosate-based herbicides"
mean both branded and non-branded glyphosate-based herbicides, excluding all
lawn-and-garden herbicide products.
For 2002, Monsanto reported its business in two segments:
Agricultural Productivity, and Seeds and Genomics.
The following information, appearing in the Company's Annual Report
to shareowners for the year ended Dec. 31, 2002 (the "2002 Annual Report"),
is incorporated herein by reference: the segment descriptions appearing
under the headings "Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A") - Agricultural Productivity
Segment" and "MD&A - Seeds and Genomics Segment"; the segment information
appearing in "Notes to Consolidated Financial Statements - Note 21: Segment
and Geographic Data"; and the tabular information regarding net sales of
ROUNDUP and other glyphosate-based herbicides, appearing under the heading
"MD&A - Agricultural Productivity Segment". In the tabular information
incorporated by reference, all dollar amounts are in millions, unless
otherwise indicated.
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PRINCIPAL PRODUCTS
Monsanto's principal products for 2002, categorized by segments as
described above, include the following:
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AGRICULTURAL PRODUCTIVITY
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MAJOR PRODUCTS END-USE PRODUCTS AND APPLICATIONS
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ROUNDUP herbicide and other glyphosate-based Nonselective agricultural, industrial, ornamental and
herbicides turf applications
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HARNESS, DEGREE and GUARDIAN acetanilide-based Control of pre-emergent annual grass and small seeded
herbicides broadleaf weeds in corn
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Other selective herbicides, such as: LASSO Control of specific weeds in wheat, corn, grain sorghum,
acetanilide-based herbicides; LEADER, MONITOR, turf, cotton, sugarcane, rice, and barley; and control of
MAVERICK, SUNDANCE, OUTRIDER and APYROS sulfosulfuron specific weeds on roadsides
herbicides; PERMIT, MANAGE and SEMPRA halosulfuron
herbicides; and MACHETE butachlor herbicide
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Lawn-and-garden herbicides Residential lawn-and-garden applications
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POSILAC bovine somatotropin Increase efficiency of milk production in dairy cows
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MONSANTO CHOICE GENETICS swine Increase productivity and meat quality of swine genetics
genetics lines lines
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ENVIRO-CHEM engineering and construction management Processing plants for fertilizer producers, basic metals
services for processing plants using sulfuric acid; production, oil refining
proprietary equipment and air pollution control
systems
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Elemental Phosphorus Production of high quality food, pharmaceutical, and
agricultural phosphorus compounds
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SEEDS AND GENOMICS
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MAJOR PRODUCTS END-USE PRODUCTS AND APPLICATIONS
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ROUNDUP READY trait in soybeans, canola, Crops tolerant of ROUNDUP and other glyphosate-based
cotton and corn herbicides
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BOLLGARD trait in cotton; Crops protected against certain insect pests
YIELDGARD Corn Borer trait in corn
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BOLLGARD and ROUNDUP READY traits in cotton; Crops tolerant of ROUNDUP and other glyphosate-based
YIELDGARD Corn Borer and ROUNDUP READY traits in herbicides and protected against certain insect pests
corn
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AGROCERES, ASGROW, DEKALB and HARTZ branded seeds; Corn hybrids and foundation seed; soybean varieties and
HOLDEN'S FOUNDATION SEEDS; PBI and MONSOY foundation foundation seed; sunflower hybrids; sorghum grain hybrids
seed and forage hybrids; wheat varieties and foundation seed;
oilseed rape and canola varieties; barley varieties;
alfalfa varieties
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Products may be sold under different brand names in different
countries.
We are subject to extensive laws and regulations governing
pesticides, new plant varieties, biotechnology traits and food and feed
safety in the countries in which we manufacture or sell our products. In
virtually all countries, we must obtain regulatory approvals prior to
marketing our products.
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PRINCIPAL EQUITY AFFILIATES
In September 1998, we entered into an agreement (as amended from
time to time, the "Renessen Agreement"), to form the Renessen LLC joint
venture with Cargill, Incorporated ("Cargill") to develop and market
enhanced crops for the grain processing and animal feed industries. Renessen
began operations in January 1999 and has no specified term. We and Cargill
each have a 50 percent interest in Renessen. Renessen is managed by a
governance board on which we and Cargill have equal representation. With
respect to Renessen, we and Cargill (1) have committed to make equal
contributions to fund Renessen's approved business plan, (2) have granted
Renessen a world-wide, fully paid-up, non-exclusive, non-royalty-bearing
right and license to our and Cargill's respective patents and intellectual
property relevant to Renessen's activities in the grain processing and
animal feed industries, (3) receive rights to use intellectual property
developed by Renessen in other specified areas, and (4) receive preferential
rights to provide specified services to Renessen. This joint venture
combines our seed assets and technology capabilities with Cargill's global
grain processing, marketing and risk management infrastructure. Renessen's
products under development include seeds designed to enhance processing
efficiency and grain products designed to deliver better nutrition in animal
feed. Pursuant to the Renessen Agreement, we perform the bulk of Renessen's
research and development (R&D) activities. For 2002, we charged Renessen for
$47 million of R&D expenses. The expenses that were charged to Renessen are
not included in the $527 million of Research and Development Expenses
reflected in our Statement of Consolidated Operations. Our equity affiliate
expense related to Renessen was $41 million in each of 2002 and 2001, and
$31 million in 2000, which is reflected in Other Expense - Net in our
Statement of Consolidated Operations. See information regarding Renessen in
"Notes to Consolidated Financial Statements - Note 23: Equity Affiliates",
appearing in the 2002 Annual Report and incorporated herein by reference.
COMPETITION
The global markets for our products are highly competitive. We
expect competition to intensify as a result of continuing industry
consolidation, the expiration of our patent for glyphosate herbicide in the
United States, and continued expenditures by our competitors on the
development and commercialization of biotechnology traits.
Competitive success in crop protection products depends on price,
product performance, the quality of solutions offered to growers, market
coverage, and the quality of service to distributors and growers. We have
between five and ten major global competitors for our agricultural herbicide
products. Competition from local or regional companies may also be
significant. See information regarding "ROUNDUP Herbicide", under the
heading "MD&A - Outlook", appearing in the 2002 Annual Report and
incorporated herein by reference; and "Competition for ROUNDUP Herbicide",
appearing under the heading "Cautionary Statements Regarding Forward-Looking
Information", below.
Our lawn-and-garden herbicides compete on the basis of product
performance. We have fewer than five significant national competitors, and a
larger number of regional competitors, in the United States. We are the only
supplier of bovine somatotropin in the
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United States. The United States is our largest market for our lawn-and-
garden herbicides and our bovine somatotropin products.
Within the seeds business there are relatively few global
competitors; however, we compete with hundreds of local and regional
companies, to many of which we supply base germplasm and/or access to our
biotechnology traits. In certain countries we also compete with
government-owned seed companies, and may also compete with growers who use
seed saved from one year to the next. Product performance (in particular,
crop yield), customer service, intellectual property and price are important
determinants of market success. In addition, strong distributor and grower
relationships have been important in the United States and other countries.
Our traits compete directly with agricultural chemicals as well as
with traits developed by other companies. Other agrichemical and seed
marketers produce chemical and seed products that compete with our ROUNDUP
READY and insect-protected systems. Competition for the discovery of new
agricultural traits based on biotechnology and/or genomics is likely to come
from major global agrichemical companies, and also from academic
researchers, biotechnology boutiques and numerous firms that are
investigating gene function with principal focus on human applications. The
primary factors underlying the competitive success of traits are performance
and commercial viability, timeliness of introduction, value, governmental
approvals, public acceptance, and environmental characteristics.
CUSTOMERS; DISTRIBUTION OF PRODUCTS
We have a worldwide distribution and sales and marketing
organization that consolidates the sales forces of our crop protection and
seeds and traits operations. We sell our crop protection products, seeds and
traits to growers through distributors, independent retailers and dealers;
and, in some cases outside the United States, through joint ventures. We
also sell to growers and to agricultural cooperatives, as well as to other
major agricultural chemical producers. In addition, we license a broad
package of our germplasm and trait technologies to seed companies that do
business in the United States and certain international markets. The seed
companies pay a royalty to Monsanto for these traits and then market these
products to growers. In most cases, growers are required to sign a
technology agreement which acknowledges our patents and which ensures
appropriate stewardship of the traits. Depending on the type of trait and
the geographic location, these license agreements may also incur royalty
payments or trait fees from growers. We also market our germplasm and traits
directly to growers.
We sell and ship our POSILAC bovine somatotropin directly to dairy
farmers in the United States. Outside of the United States and Canada, we
rely on a single exclusive distributor for these products. We deliver our
swine genetics products directly to swine producers, who pay for the use of
the genetics in upfront fees and/or royalties.
We market our lawn-and-garden herbicide products through The Scotts
Company ("Scotts"). Scotts receives a commission for its services as our
agent based on a varying percentage of the earnings before interest and
taxes related to the lawn-and-garden herbicide business. Scotts also is
responsible for contributing annually to the expenses of
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this business. For additional information, see "MD&A - Agricultural
Productivity Segment -- Our Agreement with The Scotts Company", appearing in
the 2002 Annual Report and incorporated herein by reference.
We support our products in all global markets with a sales and
product development organization that educates growers about our newest
products, innovative farming practices and the integration of new products
with existing ones. We seek to build strong partnerships with our customers,
and we have signed multiyear contracts and supply agreements with many of
our larger customers. We also use marketing programs to promote our
products.
While no single customer represents more than 10 percent of our
consolidated net sales, our three largest U.S. agricultural distributors and
their affiliates represented, in aggregate, 18 percent of our worldwide net
sales in 2002, and 27 percent of our net sales in the United States. One
major U.S. distributor and its affiliates represented approximately 10
percent of the net sales for our Agricultural Productivity segment in 2002.
EMPLOYEE RELATIONS
As of Dec. 31, 2002, Monsanto had approximately 13,700 employees
worldwide. Satisfactory relations have prevailed between Monsanto and its
employees.
ENVIRONMENTAL MATTERS
Our operations are subject to environmental laws and regulations in
the jurisdictions in which we operate. Some of these laws restrict the
amount and type of pollutants that can be released from our operations into
the environment. Other laws, such as the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq.
("Superfund"), can impose liability for the entire cost of cleanup upon any
former or current site owners or operators or parties who sent waste to
these sites, without regard to fault or the lawfulness of the original
disposal activity. These laws and regulations may be amended from time to
time and become increasingly stringent. We are dedicated to long-term
environmental protection and compliance programs that reduce and monitor
emissions of hazardous materials into the environment, as well as to the
remediation of identified existing environmental concerns. Consistent with a
consent order with the State of Idaho, we have embarked on a multi-year
project to design and install state-of-the-art air emission control
equipment at the P4 Production facility at Soda Springs, Idaho. While the
costs of compliance with environmental laws and regulations cannot be
predicted with certainty, we do not expect such costs to have a material
adverse effect on our earnings or competitive position. Because of our
investment in the Soda Springs project, our capital expenditures for
environmental control facilities will be higher than usual in the next few
years. Current estimates indicate that total Company-wide capital
expenditures for environmental compliance will be approximately $11 to $12
million in 2003, $29 to $33 million in 2004, and $24 to $31 million in 2005.
In addition to potential liability for our own manufacturing
locations and off-site disposal and formulation facilities, under the terms
of the Separation Agreement we agreed to indemnify Pharmacia for any
liability it may have for environmental remediation
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or other environmental responsibilities primarily related to Pharmacia's
former agricultural or chemical businesses. This includes, but is not
limited to, environmental liabilities that Solutia Inc. ("Solutia"), the
former chemicals business of Pharmacia, assumed from Pharmacia in connection
with its spinoff on Sept. 1, 1997, to the extent that Solutia fails to pay,
perform or discharge those liabilities. See "Business - Relationships Among
Monsanto Company, Pharmacia Corporation and Solutia Inc.," below, for
additional information relating to Solutia.
See information regarding remediation of waste disposal sites and
reserves for remediation, appearing in "Notes to Consolidated Financial
Statements - Note 20: Commitments and Contingencies", appearing in the 2002
Annual Report and incorporated herein by reference. For information
regarding certain environmental proceedings, see "Legal Proceedings," below.
INTERNATIONAL OPERATIONS
See information regarding "Operations Outside the United States",
appearing under the heading "Cautionary Statements Regarding Forward-Looking
Information", below; and information in "Notes to Consolidated Financial
Statements - Note 21: Segment and Geographic Data", appearing in the 2002
Annual Report and incorporated herein by reference.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS
Monsanto has a broad portfolio of patents in the United States and
many foreign countries which provide intellectual property protection for
its products and processes. Plant Variety Protection Act Certificates in the
United States, and equivalent plant breeders' rights in other countries, as
well as variety registrations in countries that require registration, are
also significant to the Seeds and Genomics segment. Monsanto routinely
obtains patents and/or plant variety protection for its commercial varietal
products and for the parents of its commercial hybrid products, and
routinely obtains registration for its commercial products in registration
countries.
Patents protecting the active ingredient in ROUNDUP herbicide
expired in the United States in 2000, and have expired in all other
countries. Monsanto has several patents on its glyphosate formulations and
manufacturing processes in the United States and other countries, some of
which will not expire until 2015 and beyond. Monsanto's insect protection
traits (including YIELDGARD Corn Borer and YIELDGARD Corn Rootworm traits in
corn seed and BOLLGARD trait in cotton seed) are protected by patents which
extend until at least 2011. Based on patent applications filed in 2001 and
2002, it is anticipated that the BOLLGARD II insect protection trait will be
patent-protected in the United States, and in other geographies in which
patent protection is sought, through 2022. Monsanto's herbicide tolerance
traits (ROUNDUP READY traits in cotton seed, corn seed, canola seed and
soybean seed) are protected by patents which extend until at least 2014.
POSILAC bovine somatotropin is protected by a United States patent that
expires in 2008, and by corresponding patents in other countries, most of
which expire in 2005. Other patents protect various aspects of bovine
somatotropin manufacture in the United States and expire at varying dates
ending March 2012; corresponding patents in other countries have varying
terms.
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Monsanto also holds licenses from other parties relating to certain
products and processes. The Company has obtained perpetual licenses to
chemicals for HARNESS herbicide and to chemicals for MAVERICK herbicide, and
to manufacturing technology for POSILAC bovine somatotropin. Monsanto has
also in-licensed gene transformation technology for producing transformed
plant products, including ROUNDUP READY soybean and ROUNDUP READY corn
products; this license lasts until the licensor's patent expires, after
which no license will be required to use the patented technology. Monsanto
also has a license to chemicals for its halosulfuron herbicides, including
PERMIT, MANAGE and SEMPRA; the license expires in 2004 but is automatically
extended unless terminated. In addition, Monsanto has obtained various
licenses in order to protect certain of its technologies used in the
production of ROUNDUP READY seeds, and certain of its technologies relating
to pipeline products, from claims of infringement of patents of others.
These licenses last for the lifetimes of the applicable patents, after which
no licenses will be required to use the respective patented technologies.
The Company holds numerous licenses in connection with its genomics program,
for example: a perpetual license to certain genomics technologies for use in
the areas of plant agriculture and dairy cattle; perpetual licenses to
classes of proprietary genes for the development of commercial traits in
crops, to patents expiring from 2018 to 2026; perpetual licenses to
functional characterizations of the Company's proprietary genes; perpetual
licenses to certain genomics sequences; and certain genomics technologies.
Monsanto owns a considerable number of established trademarks in
many countries under which it markets its products. The Company owns
trademark registrations and files trademark applications for the names and
many of the designs used on its branded products. Important Company
trademarks include ROUNDUP (for herbicide products), ROUNDUP READY, BOLLGARD
and YIELDGARD (for traits), DEKALB and ASGROW (for agricultural seeds) and
POSILAC (for dairy productivity products).
P4 Production, LLC, an entity 99 percent owned by, and operated by,
Monsanto ("P4 Production"), holds (directly or by assignment) numerous
phosphate leases, which were issued on behalf of or granted by the United
States, the State of Idaho and private parties. None of these leases taken
individually is material, although the leases in the aggregate are
significant because elemental phosphorus is a key raw material for the
production of glyphosate herbicide. The phosphate leases have varying terms,
with leases obtained from the United States being of indefinite duration
subject to the modification of lease terms at twenty-year intervals.
A considerable number of Monsanto's patents and licenses are
currently the subject of litigation; see "Legal Proceedings" below.
RAW MATERIALS AND ENERGY RESOURCES
We are a significant purchaser of a variety of basic and
intermediate raw materials. Our major raw materials and energy requirements
are typically purchased through long-term contracts. We are not dependent on
any one outside supplier for a significant amount of any raw material
requirements, but certain important raw materials are obtained from a few
major suppliers. Additional capacity exists for all major raw materials
either from different suppliers or from alternate manufacturing locations.
Catalyst are used in various
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intermediate steps in the production of glyphosate. These are produced by
two major catalyst manufacturers using our proprietary technology at various
sites globally. Additional capacity exists from different suppliers or from
alternate manufacturing locations.
Energy is available as required but pricing is subject to market
fluctuations from time to time. We engage in hedging transactions to protect
our cost position for natural gas.
We purchase most of our global supply of elemental phosphorus, a
key raw material for the production of ROUNDUP herbicide, from P4
Production, which, as noted above, is 99 percent owned by, and operated by,
Monsanto. We buy additional elemental phosphorus from the global market.
Biochemie GmbH, a wholly owned subsidiary of Novartis located in
Kundl, Austria, is the only supplier of POSILAC bovine somatotropin sold by
Monsanto. Monsanto is in the process of obtaining FDA approval of a new
manufacturing facility in Augusta, Georgia. After approval, POSILAC will be
produced at both facilities.
We produce directly, or contract with third parties for the
production of, corn seed, soybean seed, oilseed rape varieties, wheat seed,
sunflower seed and sorghum seed in growing locations throughout the world.
The availability and cost of seed primarily depends on seed yields, weather
conditions, grower contract terms, commodity prices and global supply and
demand. We manage commodity price fluctuations through the use of futures
contracts and other hedging mechanisms. We attempt to minimize the risks
related to weather by producing seed at multiple growing locations, where
practical.
In general, where we have limited sources of raw materials or
fuels, we have developed contingency plans to minimize the effect of any
interruption or reduction in supply. These include supplier inventories,
consigned inventories, dedicated excess manufacturing capacity, substitute
materials and approved alternate sources of supply. While temporary
shortages of raw materials may occasionally occur, these items are generally
sufficiently available to cover current and projected requirements. Global
sourcing strategies for key materials help ensure that new capacity is
installed by our suppliers in time to meet our requirements at competitive
prices. However, to some extent availability and price are subject to
unscheduled plant interruptions caused by shortages of energy and
petrochemical supplies.
RESEARCH AND DEVELOPMENT
Monsanto's expenses for research and development were $527 million,
$560 million, and $588 million, for 2002, 2001, and 2000, respectively.
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SEASONALITY AND WORKING CAPITAL
Inventories of finished goods, goods in process and raw materials
are maintained to meet customer requirements and Monsanto's scheduled
production. Consistent with the nature of the seed industry, Monsanto
generally produces in one growing season the seed inventories it expects to
sell in the following season. Accordingly, year-end inventory levels
relative to sales in the seed business are higher than those in Monsanto's
crop protection products business. In general, Monsanto does not manufacture
its products against a backlog of firm orders; production is geared
primarily to the level of incoming orders and to projections of future
demand. For other information on seasonality and working capital practices,
see information under the heading "Financial Condition, Liquidity and
Capital Resources", appearing in the 2002 Annual Report and incorporated
herein by reference.
LEGAL PROCEEDINGS
This portion of the Annual Report on Form 10-K describes material
legal proceedings that we are defending or prosecuting. These include
proceedings to which we are party in our own name, as well as proceedings to
which Pharmacia Corporation is a named party, but for which we have assumed
responsibility pursuant to the Separation Agreement between ourselves and
Pharmacia, effective Sept. 1, 2000 as amended. Under that agreement, we
assumed responsibility for legal proceedings primarily related to the
agricultural business that Pharmacia transferred to us on that date. As a
result, although Pharmacia may remain the named defendant or plaintiff in
some of these cases, we manage and are responsible for the litigation. In
the proceedings where Pharmacia is the named defendant, we will indemnify
Pharmacia for costs, expenses and any judgments or settlements; and in the
proceedings where Pharmacia is the named plaintiff, we will pay the fees and
costs of, and receive any benefits from, the litigation. In the following
discussion, we use the phrase "the former Monsanto Company" to refer to
Pharmacia prior to the date of the Separation Agreement. We are also
involved in other legal proceedings, not described in this section, which
arise in the ordinary course of our business. While the results of
litigation cannot be predicted with certainty, we do not believe that the
resolution of the proceedings that we are defending or prosecuting, either
individually or taken as a whole, will have a material adverse effect on our
financial position, profitability or liquidity. We have meritorious legal
arguments and will continue to represent our interests vigorously in all of
these proceedings.
The discussion of our legal proceedings in this section does not
include proceedings relating to liabilities that Solutia assumed from
Pharmacia pursuant to a Distribution Agreement (as amended, the
"Distribution Agreement"), in connection with Pharmacia's spinoff of its
chemical businesses to Solutia on Sept. 1, 1997 (the "Solutia Spinoff").
Under the Distribution Agreement, Solutia assumed and agreed to indemnify
Pharmacia for certain liabilities related to those chemicals businesses, and
Solutia is responsible for litigation relating to the liabilities that it
assumed. For example, Solutia is responsible for litigation currently
pending in state and federal courts in Alabama brought by several thousand
plaintiffs, alleging damages arising from exposure to polychlorinated
biphenyls ("PCB's"), which were discharged from an Anniston, Alabama, plant
site that was formerly owned by Pharmacia and that was transferred to
Solutia as part of the Solutia Spinoff. The PCB litigation includes but is
not limited to the Abernathy litigation described in
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"Business - Relationships Among Monsanto Company, Pharmacia Corporation and
Solutia Inc.," below. Solutia is also responsible for the Commonwealth of
Pennsylvania litigation, which is described in that same section. Solutia is
managing these lawsuits and must indemnify Pharmacia for any liabilities
that Pharmacia incurs. Under the Separation Agreement, we must indemnify
Pharmacia for any losses relating to, arising out of or due to Solutia's
failure to pay or discharge such liabilities when due or required to be
paid, performed or discharged, or to indemnify Pharmacia therefor. Under the
Distribution Agreement, Solutia is required to indemnify us for any
liabilities that we incur in connection with this litigation. See "Business
- - Relationships Among Monsanto Company, Pharmacia Corporation and Solutia
Inc.," below, for additional information relating to Solutia.
PATENT AND COMMERCIAL PROCEEDINGS
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On May 19, 1995, Mycogen Plant Science Inc. ("MPS") filed suit
against the former Monsanto Company in the United States District Court in
California alleging infringement of its patent involving synthetic Bt genes,
and seeking unspecified damages and injunctive relief. Monsanto prevailed on
summary judgment in dismissing all claims. On May 30, 2001, the United
States Court of Appeals for the Federal Circuit affirmed the summary
judgment finding that current products of Monsanto do not infringe the MPS
patent. The appellate court also determined that certain factual issues
prevented complete entry of summary judgment on the issue of prior invention
by Monsanto and remanded the matter to District Court. Monsanto is defending
the litigation on the basis of patent invalidity, prior invention and other
defenses including collateral estoppel. We believe that a prior judgment won
by the former Monsanto Company against MPS, in United States District Court
in Delaware, is dispositive of all claims asserted by MPS.
Monsanto is also involved in interference proceedings against MPS
in the United States Patent and Trademark Office to determine the first
party to invent certain inventions related to Bt technology. Under United
States law, patents issue to the first to invent, not the first to file for
a patent on, a subject invention. If two or more parties seek patent
protection on the same invention, as is the case with our Bt technology, the
United States Patent and Trademark Office must hold interference proceedings
to identify the party who first invented the particular invention in
dispute. In prior litigation between the parties Monsanto has been
determined to be the prior inventor of patent claims associated with
synthetic Bt technology.
On Nov. 20, 1997, Aventis CropScience S.A. (formerly Rhone Poulenc
Agrochimie S.A., now Bayer CropScience AG) ("Bayer") filed suit in United
States District Court in North Carolina against the former Monsanto Company
and DEKALB Genetics Corporation (subsequently acquired by us) ("DEKALB
Genetics"), alleging that because DEKALB Genetics had failed to disclose a
research report involving the testing of plants to determine glyphosate
tolerance, Bayer had been induced by fraud to enter into a 1994 license
agreement relating to technology incorporated into a specific type of
herbicide-tolerant corn. Jury trial of the fraud claims ended April 22,
1999, with a verdict against DEKALB Genetics for $15 million in actual
damages and $50 million in punitive damages. The district court had dismissed
the former Monsanto Company from trial prior to verdict, on the legal basis
that it was a bona fide licensee of the corn technology. DEKALB Genetics
appealed the jury verdict regarding the
10
damage award, and Bayer appealed the finding that the former Monsanto
Company was a bona fide licensee. On Nov. 22, 2001, the United States Court
of Appeals for the Federal Circuit upheld the judgments against DEKALB
Genetics with respect to damages, and against Bayer with respect to the bona
fide licensee issue. On March 26, 2002, the Court of Appeals for the Federal
Circuit declined rehearing on the damage award, and reversed its decision on
the bona fide licensee issue. DEKALB Genetics has paid the monetary
judgments. Monsanto and DEKALB Genetics have filed certiorari petitions with
the United States Supreme Court to overturn the appellate rulings. DEKALB's
petition regarding the damage award has been held by the Court since
September 2002, pending decision on an unrelated case involving punitive
damages. In December 2002, the Court referred Monsanto's petition to the
Office of the Solicitor General for the United States for comment.
On Nov. 13, 2001, Chemical Products Technologies, Inc. ("CPT,
Inc.") initiated a lawsuit in the United States District Court for the
District of South Carolina, Florence Division, against Monsanto. CPT, Inc.
sought damages arising out of alleged violations of Section 1 of the Sherman
Act (antitrust), the Lanham Act and the South Carolina Unfair Trade
Practices Act. On that same date, Monsanto filed a lawsuit in the United
States District Court for the Eastern District of Missouri against Chemical
Products Technologies, LLC, Zetachem USA, Zetachem PTY Ltd., and Hide
Company, LLC d/b/a The Hide Group, alleging infringement of Monsanto's
"process patents," which cover unique two-step processes for making
glyphosate herbicide from glyphosate intermediate. In December 2002, both
lawsuits were dismissed in light of an agreement between the companies which
included the dismissal of the lawsuits and permitted CPT, Inc. to market
certain products under license rights extended by Monsanto.
On July 25, 2002, Syngenta Biotechnology, Inc. ("SBI") filed a suit
against Monsanto and Delta and Pine Land Company ("Delta and Pine Land") in
the United States District Court for Delaware alleging infringement of a
patent issued in April 2000, under which SBI is a licensee, and which
allegedly relates to certain agro-transformed cotton technology products.
SBI seeks injunctive relief and monetary damages. Monsanto moved on Jan. 15,
2002, to dismiss the suit on the basis that the patent owner, Washington
University, was not a party. Monsanto has substantial defenses to the claims,
including non-infringement and invalidity of the patent.
Also, on July 25, 2002, Syngenta Seeds, Inc. ("SSI") filed a suit
against Monsanto, DEKALB Genetics, Pioneer Hi-Bred International, Inc., and
Dow Agrosciences, L.L.C., MPS and Agrigenetics, Inc., collectively d.b.a.
Mycogen Seeds, in the United States District Court for Delaware alleging
infringement of three patents issued between June 2000 and June 2002. The
patents allegedly pertain to insect resistant transgenic corn. SSI seeks
injunctive relief and monetary damages. The defendants have substantial
defenses to the claims, including non-infringement, non-enforceability of
the patents due to inequitable conduct before the United States Patent Office
during the procurement of the patents, and invalidity of the various patents.
11
On Dec. 4, 2000, Monsanto Company filed suit in the U.S. District
Court for the Eastern District of Missouri, for a declaratory judgment
against Aventis CropScience S.A. (now Bayer CropScience AG) ("Bayer"), to
invalidate four patents that had been assigned to Bayer by Plant Genetics
Systems, N.V. ("PGS"). Monsanto licensees of the MON810 event used in
YIELDGARD corn had been sued by Bayer in another jurisdiction for purported
infringement of the patents, and Monsanto successfully obtained jurisdiction
to challenge the patents in advance of any case involving its licensees.
Monsanto maintained that the patents, which involve claims to truncated Bt
technology, were invalid and not infringed by MON810 in YIELDGARD corn.
Bayer counterclaimed to request royalties for prior sales of YIELDGARD corn
and injunctive relief. On Dec. 27, 2002, Monsanto's motion for summary
judgment was granted, via multiple grants of summary judgment establishing
non-infringement, unenforceability of the patents due to inequitable conduct
before the United States Patent Office during the procurement of the
patents, and invalidity of the patents on the basis of collateral estoppel
and other grounds. Bayer has filed a notice of appeal from the judgment.
Monsanto has requested award of its substantial legal fees in this matter in
light of the finding of inequitable conduct against Bayer.
On Jan. 10, 2003, in the wake of Monsanto's successful dismissal of
all patent claims by Bayer against the MON810 corn event, Bayer BioScience
N.V. ("Bayer BioScience") filed a new lawsuit in the U.S. District Court for
the District of Delaware contending that a patent assigned to it by PGS and
Bayer was infringed by Monsanto's development and potential future sale of
corn protected from corn rootworm. Monsanto filed suit the same day in the
U.S. District Court for the Eastern District of Missouri to declare the patent
invalid, non-infringed and unenforceable due to inequitable conduct before
the Patent Office during the procurement of the patent. Monsanto has sought
transfer and consolidation of the suits in the Eastern District of Missouri.
Monsanto is defending several purported class action lawsuits which
allege that, beginning in 1988, Monsanto and the former Monsanto Company
conspired with competitors, through a series of negotiations and legal
settlements, to fix the price of glyphosate-based herbicides and paraquat-based
herbicides at prices higher than the market would otherwise bear. These lawsuits
all seek money damages. The following two cases are currently pending in United
States District Court for the Eastern District of Missouri, and were filed
alleging claims on behalf of all direct purchasers of glyphosate-based
herbicides or paraquat-based herbicides in the United States from March 1, 1988
to the present: (i) a suit filed by S&M Farm Supply, Inc. on Nov. 21, 2001, in
United States District Court for the Northern District of California; and (ii) a
suit filed by Orange Cove Ag-Chem and Sidehill Citrus Grove, Inc., on March 11,
2002, in United States District Court for the Eastern District of California.
These lawsuits were transferred to the United States District Court for the
Eastern District of Missouri, as a result of motions by Monsanto. We are at the
conclusion of the first phase of discovery in both of these cases, and Monsanto
has moved to dismiss prior to class certification determination. In addition,
various purported class action lawsuits alleging the same facts have been filed
by individuals, and are pending in state courts.
GROWER LAWSUITS
---------------
On Dec. 14, 1999, a class action lawsuit claiming unspecified
damages was filed against the former Monsanto Company in the United States
District Court for the District of Columbia by six farmers purporting to
represent a class composed of purchasers of genetically modified soybean and
corn seed and growers of non-genetically modified soybean and corn seed. The
complaint alleges that we violated various antitrust laws and unspecified
international laws through our patent license agreements, breached an
implied warranty of merchantability and violated unspecified consumer fraud
and deceptive business practices laws in connection with the sale of
genetically modified seed. The plaintiffs seek declaratory and injunctive
relief in addition to antitrust, treble, compensatory and punitive damages
and attorneys' fees. On Feb. 14, 2000, a class action lawsuit claiming
unspecified damages was filed against the former Monsanto Company in the
United States District Court for the Southern District of Illinois by five
farmers purporting to represent various classes of farmers. The complaint
alleges claims virtually identical to those in the preceding case. Both of
these lawsuits have been transferred to and consolidated in the United
States District Court for the Eastern District of Missouri. In March 2001,
plaintiffs amended their complaint to add Pioneer, Syngenta Seeds, Inc.,
Syngenta Crop Protection, and Aventis as defendants, and to allege a
conspiracy among all defendants to fix seed prices in the United States in
violation of federal antitrust laws.
12
Monsanto vigorously denies any liability in this case, denies that it has
breached any legal obligations or engaged in any anti-competitive
activities. Our licensed seed sales are authorized under United States
patent law.
PROCEEDINGS RELATED TO DELTA AND PINE LAND COMPANY
--------------------------------------------------
On Jan. 18, 2000, Delta and Pine Land reinstituted a suit against
the former Monsanto Company in the Circuit Court of the First Judicial
District of Bolivar County, Mississippi, seeking unspecified compensatory
damages for lost stock market value of not less than $1 billion, as well as
punitive damages, resulting from alleged failure to exercise reasonable
efforts to complete a merger between the two companies. On Feb. 14, 2001,
Delta and Pine Land amended its complaint, to add an allegation that the
former Monsanto Company tortiously interfered with Delta and Pine Land's
prospective business relations by feigning interest in the merger so as to
keep Delta and Pine Land from pursuing transactions with other entities. We
have substantial defenses to this litigation and the claimed damages,
including: our payment of approximately $83 million to Delta and Pine Land
as a break-up fee; Delta and Pine Land's contemporaneous disclosures that it
was unaffected by the failed merger; and representations by the U.S.
Department of Justice that the merger would have been opposed by the agency.
Trial has been set for January 2004.
AGENT ORANGE
------------
Various manufacturers of herbicides used by the U.S. armed services
during the Vietnam war, including the former Monsanto Company, have been
parties to lawsuits filed on behalf of veterans and others alleging injury
from exposure to the herbicides. In the United States this litigation has
been assigned to Judge Weinstein of the United States District Court for the
Eastern District of New York, as part of In re "Agent Orange" Product
Liability Litigation, MDL 381, a multidistrict litigation proceeding
established in 1977 to coordinate Agent Orange-related litigation in the
United States (the "MDL"). In 1984, a settlement in the MDL proceeding
concluded all class action litigation filed on behalf of U.S. and certain
other groups of plaintiffs. However, various other claims by veterans or
civilians alleging personal injury from exposure to herbicides used in
Vietnam have been filed since that settlement. Two suits filed by individual
U.S. veterans contesting the denial of their claims subsequent to the class
action settlement have been consolidated in the MDL and were dismissed by
the District Court. In an opinion dated Nov. 30, 2001, the United States
Court of Appeals for the Second Circuit vacated the District Court's
dismissal and remanded the cases for further proceedings. On Nov. 4, 2002,
the manufacturers' petition for writ of certiorari was granted by the U.S.
Supreme Court. Oral argument was held on Feb. 26, 2003. All proceedings in
the litigation have been stayed pending the final decision by the U.S.
Supreme Court.
In October 1999, approximately 13,800 Korean veterans of the
Vietnam war filed against Dow Chemical Company and the former Monsanto
Company in Seoul, South Korea, alleging that they were exposed to herbicides
and suffered injuries as a result. The suit involves three separate
complaints which were filed and are being handled collectively in Seoul
District Court. The complaints fail to assert any specific causes of action
but seek damages of 300 million won (approximately $250,000) per plaintiff.
Other ancillary actions
13
are also pending in Korea, including a request for provisional relief
pending resolution of the main action. On May 23, 2002, the Seoul District
Court ruled in favor of the manufacturers and dismissed all claims of the
petitioners on the basis of lack of causation and statutes of limitations.
Petitioners have filed an appeal de novo and have requested the waiver of
certain legal conditions ordinarily associated with the pursuit of any
appeal. The court has declined to grant the full procedural relief sought by
petitioners to facilitate their appeal and petitioners have filed a motion
to appeal this procedural matter.
ACTIVITIES OF FOREIGN AFFILIATES
--------------------------------
During an internal audit and follow-up review conducted by
management and outside counsel, management learned of certain books and
records and compliance irregularities involving the Company's Indonesian
affiliate companies and certain of their foreign national employees. The
employment of the foreign nationals has been terminated. On Nov. 12, 2002,
the Company notified the United States Securities and Exchange Commission of
this matter and will continue to cooperate with the Commission's staff with
respect to any review of this matter. For the years ended Dec. 31, 2002 and
2001 the net combined revenues of the Company's Indonesian operations were
less than 0.8 percent of total Company revenues, and their net income (loss)
for these two years was $4 million and ($10 million), respectively,
excluding restructuring charges of approximately $5 million in each of the
years. Neither the commercial impact nor any action resulting from these
matters is expected to have a material adverse effect on our financial
position, profitability or liquidity.
ENVIRONMENTAL PROCEEDINGS
-------------------------
On March 7, 2000, the United States Department of Justice filed
suit on behalf of the Environmental Protection Agency ("EPA") in United
States District Court for the District of Wyoming against the former Monsanto
Company, Solutia and P4 Production seeking civil penalties for alleged
violations of Wyoming's environmental laws and regulations, and of an air
permit issued in 1994 by the Wyoming Department of Environmental Quality.
The permit had been issued for a coal coking facility in Rock Springs,
Wyoming, that is currently owned by P4 Production. The United States sought
civil penalties of up to $25,000 per day (or $27,500 per day for violations
occurring after Jan. 30, 1997) for the air violations, and immediate
compliance with the air permit. The companies have already paid a $200,000
fine covering the same Clean Air Act violations pursuant to a consent decree
entered in the First Judicial District Court in Laramie County, Wyoming, on
June 25, 1999. Pursuant to an agreement in principle to settle the suit that
was filed by the United States, the parties intend to file a Stipulation of
Judgment with the court which will settle the case, without admitting
liability, upon the payment of a civil penalty of $800,000. Monsanto and
Solutia will each pay approximately one half of the penalty.
Since the late 1990's, the EPA has focused attention on the
presence of dioxin in the Kanawha River in West Virginia. As part of its
efforts in this regard, the EPA is conducting preliminary assessments at
over twenty sites identified as potential sources of dioxin in the Kanawha
River. Among these sites are three landfills - the Heizer Creek landfill,
the Poca Strip Mine landfill, and the Manila Creek landfill - that the
former
14
Monsanto Company used in the late 1950s to dispose of plant waste from its
former Nitro, West Virginia, manufacturing location. Through the preliminary
assessment work, the EPA identified an elevated dioxin level in one soil
sample taken at the Heizer Creek landfill, and notified the former Monsanto
Company of its potential liability at that landfill. Pursuant to a Sept.
1999 consent order with the EPA, the former Monsanto Company and (after
Sept. 1, 2000) Monsanto prepared and submitted to the EPA an Engineering
Evaluation/Cost Analysis (EE/CA) Report, which contained an investigation of
the dioxin contamination at the Heizer Creek landfill, a risk assessment, an
evaluation of remedial action options, and our recommended remedy. The cost
to implement the recommended remedy was estimated at $1.5 million, and funds
were reserved for this amount. The EPA has published and solicited comments
on its decision that the EE/CA Report's recommended remedy was protective of
human health and the environment and is now developing responses to the
public comments. As of this time, the EPA has not identified elevated dioxin
levels at the Poca Strip Mine or Manila Creek landfills. Also with regard to
the EPA's focus on dioxin in the Kanawha River, in May 2002, the EPA sent
Monsanto a "notice of potential liability and offer to negotiate for removal
action" regarding the Kanawha River Sediment Site in Putnam County, West
Virginia. The EPA has asked Monsanto to conduct investigations associated
with the elevated dioxin levels that the EPA found in sediments located in
certain areas of the Kanawha River. We anticipate negotiating a consent
order with the EPA to address the requested work. At this point, the degree,
if any, to which Monsanto will ultimately be responsible for any costs
associated with this matter is unclear.
OTHER INFORMATION
The Company has been advised by the United States Department of
Justice Antitrust Division that it is conducting an inquiry regarding
possible anticompetitive conduct in the glyphosate-based herbicide industry.
In that regard, the Government recently issued civil process to Monsanto
requesting information regarding our glyphosate business. The Company is
cooperating in this inquiry.
RELATIONSHIPS AMONG MONSANTO COMPANY, PHARMACIA CORPORATION AND SOLUTIA INC.
Prior to Sept. 1, 1997, a corporation that was then known as
Monsanto Company ("Former Monsanto") operated an agricultural products
business (the "Ag Business"), a pharmaceuticals and nutrition business (the
"Pharmaceuticals Business") and a chemical products business (the "Chemicals
Business"). Former Monsanto is today known as Pharmacia Corporation
("Pharmacia") and operates only the Pharmaceuticals Business. Our business
consists of the operations, assets and liabilities that were previously the
Ag Business. Solutia Inc. ("Solutia") comprises the operations, assets and
liabilities that were previously the Chemicals Business. The following table
sets forth a chronology of events that resulted in the formation of
Monsanto, Pharmacia and Solutia as three separate, distinct and unaffiliated
corporations and provides a brief background on the relationships among
these three corporations.
15
---------------------------------------------------------------------------
DATE OF EVENT DESCRIPTION OF EVENT
===========================================================================
Sept. 1, 1997 o Pharmacia (then known as Monsanto
Company) entered into a Distribution
Agreement with Solutia related to the
transfer of the operations, assets and
liabilities of the Chemical Business from
Pharmacia (then known as Monsanto Company) to
Solutia.
o Pursuant to the Distribution Agreement,
Solutia assumed and agreed to indemnify
Pharmacia (then known as Monsanto Company)
for certain liabilities related to the
Chemicals Business.
---------------------------------------------------------------------------
Dec. 19, 1999 o Pharmacia (then known as Monsanto
Company) entered into an agreement with
Pharmacia & Upjohn, Inc. ("PNU") relating to
a merger (the "Merger").
---------------------------------------------------------------------------
Feb. 9, 2000 o We were incorporated in Delaware as a
wholly-owned subsidiary of Pharmacia (then
known as Monsanto Company) under the name
"Monsanto Ag Company."
---------------------------------------------------------------------------
Mar. 31, 2000 o Effective date of the Merger.
o In connection with the Merger, (1) PNU became
a wholly-owned subsidiary of Former Monsanto
(now Pharmacia); (2) Former Monsanto changed
its name from "Monsanto Company" to
"Pharmacia Corporation"; and (3) we changed
our name from "Monsanto Ag Company" to
"Monsanto Company."
---------------------------------------------------------------------------
Sept. 1, 2000 o We entered into a Separation Agreement with
Pharmacia related to the transfer of the
operations, assets and liabilities of the Ag
Business from Pharmacia to us.
o Pursuant to the Separation Agreement, we
agreed to indemnify Pharmacia for any
liabilities primarily related to the Ag
Business or the Chemicals Business, including
any liabilities assumed by Solutia pursuant
to the Sept. 1, 1997 Distribution Agreement,
to the extent that Solutia fails to pay,
perform or discharge those liabilities.
---------------------------------------------------------------------------
Oct. 23, 2000 o We completed an initial public offering in
which we sold approximately 15 percent of the
shares of our common stock to the public.
Pharmacia continued to own 220 million shares
of our common stock.
---------------------------------------------------------------------------
Jul. 1, 2002 o We, Pharmacia and Solutia entered into an
agreement to provide that Solutia will
indemnify us for the same liabilities for
which it had agreed to indemnify Pharmacia
under the Sept. 1, 1997 Distribution
Agreement, and to clarify the parties' rights
and obligations.
o We and Pharmacia entered into an agreement to
clarify our respective rights and obligations
relating to our indemnification obligations
under the Sept. 1, 2000 Separation Agreement.
o We, Pharmacia and Solutia entered into the
Abernathy Agreement regarding the Abernathy
litigation described below.
---------------------------------------------------------------------------
16
---------------------------------------------------------------------------
DATE OF EVENT DESCRIPTION OF EVENT
===========================================================================
Aug. 13, 2002 o Pharmacia distributed the 220 million shares
of our common stock that it owned to its
shareowners via a tax-free stock dividend
(the "Monsanto Spinoff").
o As a result of the Monsanto Spinoff,
Pharmacia no longer owns any equity interest
in Monsanto.
---------------------------------------------------------------------------
Nov. 15, 2002 o We, Pharmacia and Solutia entered into the
Pennsylvania Agreement regarding the
Pennsylvania litigation described below.
---------------------------------------------------------------------------
The liabilities for which we have agreed to indemnify Pharmacia,
pursuant to the Sept. 1, 2000, Separation Agreement, include litigation,
environmental, retiree and all other Pharmacia liabilities that were assumed
by Solutia pursuant to the Sept. 1, 1997, Distribution Agreement. These
include liabilities that were Pharmacia liabilities prior to the Sept. 1,
1997, spinoff of Solutia, and from which Pharmacia could not be released,
either by operation of law, because of the unavailability of third-party
consents, or otherwise. They include, for example, liabilities relating to
litigation currently pending in state and federal court in Alabama, and in
state court in Pennsylvania, referred to in Item 1 - Legal Proceedings and
discussed below. In addition, Solutia assumed any liability that Pharmacia
had with respect to certain unfunded post-retirement benefits for Pharmacia
employees and former Pharmacia employees who were assigned to Solutia in
connection with its spinoff. To the extent that Solutia encounters material
liquidity or other financial constraints, the risk that it would be unable
to pay, perform or discharge its assumed liabilities or to satisfy its
indemnity obligations to Pharmacia, and that we would be called upon to do
so, would increase.
Solutia is defending itself and Pharmacia in connection with
Sabrina Abernathy, et al. v. Monsanto Company, et al., currently pending in
state court in Alabama. Solutia requested that Pharmacia commit to posting
any appeal bond that may be required to stay execution of any judgment in
this litigation pending an appeal. On July 1, 2002, we, Pharmacia and
Solutia entered into an agreement (the "Abernathy Agreement"), providing
that, if Solutia does not post a bond sufficient to stay the execution of
any judgment in the litigation pending an appeal, Pharmacia will post such a
bond if it is able to do so on commercially reasonable terms. The Abernathy
Agreement also specifies which party or parties would control any decisions
regarding settlement of the Abernathy litigation, depending upon whether or
not collateral must be provided to secure the bond and, if so, which party
provides it. We have no obligation to post an appeal bond or provide any
related collateral with respect to the Abernathy litigation. Under the
Abernathy Agreement, the continued defense of the Abernathy litigation and
the prosecution of any appeal will continue to be managed by Solutia, at
Solutia's expense.
Solutia is defending itself and Pharmacia in a property damage suit
in connection with Commonwealth of Pennsylvania, Department of General
Services, et al. v. United States Mineral Products, et al., currently
pending in state court in Pennsylvania. The trial court entered judgment on
Oct. 17, 2002, in the amount of $59.5 million and Solutia has filed an
appeal with the Pennsylvania Supreme Court. Under Pennsylvania law, a bond
in the amount of 120 percent of the judgment, or $71.4 million in this case,
must be posted in
17
order to stay execution of the judgment pending appeal of the judgment.
Pharmacia and Solutia requested Monsanto's assistance to facilitate the
posting of an appeal bond in this action. On Nov. 15, 2002, pursuant to an
agreement with Pharmacia and Solutia dated that same date (the "Pennsylvania
Agreement"), we posted the required appeal bond. Because the issuing surety
required that we collateralize a portion of the appeal bond, we initially
provided $25 million in cash collateral, which was subsequently replaced
with a $25 million letter of credit. On Nov. 15, 2002, Solutia delivered a
letter of credit to us in the amount of $20 million, in order to secure a
portion of our obligations in connection with the bond. Solutia also paid
all of our out-of-pocket expenses in connection with obtaining the bond.
Because we provided the collateral required to secure the appeal bond, the
Pennsylvania Agreement gave us control of all decisions regarding settlement
of this matter.
The Pennsylvania Agreement required that Solutia obtain a release
of all of our obligations with respect to this appeal bond, and either
secure a replacement bond or settle the litigation, within fifteen business
days of the closing of an asset sale having an aggregate value of $100
million or greater (the "Release Conditions"). The Release Conditions were
triggered on Jan. 31, 2003, when Solutia announced that it had closed the
sale of its resins, additives and adhesives businesses for $500 million
cash. On March 3, 2003, we, Pharmacia and Solutia entered into an amendment
to the Pennsylvania Agreement, pursuant to which we agreed to extend the
time for satisfying the Release Conditions until Nov. 30, 2003 (the
"Extension Period"). Pursuant to this amendment, Solutia delivered to us an
additional letter of credit in the amount of $39.9 million as additional
security for our obligations in connection with the appeal bond and paid all
of our out-of-pocket expenses incurred in connection with the amendment.
Pharmacia and we also agreed to return control of all decisions regarding
settlement of this matter to Solutia during the Extension Period. As a result
of the amendment, we are the beneficiary of two letters of credit in the
aggregate amount of $59.9 million, which secure a portion of our obligations
in connection with the posting of the appeal bond. We do not believe that
the appeal bond that we posted in November 2002 will have a material adverse
effect on our financial position, profitability or liquidity.
AVAILABLE INFORMATION
Our Internet website address is http://www.monsanto.com. We make
copies of the following reports available free of charge through our
Internet website, as soon as reasonably practicable after they have been
filed with or furnished to the Securities and Exchange Commission pursuant
to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934: our
annual report on Form 10-K; quarterly reports on Form 10-Q; current reports
on Form 8-K; and amendments to those reports. Information on our website
does not constitute part of this Report.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
Under the Private Securities Litigation Reform Act of 1995,
companies are provided with a "safe harbor" for making forward-looking
statements about the potential risks and rewards of their strategies. We
believe it is in the best interest of our shareowners to use these
provisions in discussing future events. However, we are not required to, and
you
18
should not rely on us to, revise or update these statements or any factors
that may affect actual results, whether as a result of new information,
future events or otherwise. In addition, you should not place undue reliance
on our forward-looking statements, which are current only as of the date of
this filing. Forward-looking statements include: statements about our
business plans; statements about the potential for the development,
regulatory approval, and public acceptance of our products; estimates of
future financial performance; predictions of national or international
economic, political or market conditions; statements regarding other factors
that could affect our future operations or financial position; and other
statements that are not matters of historical fact. Such statements often
include the words "believes," "expects," "anticipates," "intends," "plans,"
"estimates," "will," or similar expressions.
Our ability to achieve our goals depends on many known and unknown
risks and uncertainties, including changes in general economic and business
conditions. These factors could cause our actual performance and results to
differ materially from those described or implied in forward-looking
statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below.
COMPETITION FOR ROUNDUP HERBICIDE: ROUNDUP herbicide is a major
product line. Patents protecting ROUNDUP herbicides in several countries
expired in 1991, and compound per se patent protection for the active
ingredient in ROUNDUP herbicides expired in the United States in 2000. As a
result, ROUNDUP herbicides will continue to face increasing competition in
the future, including in the United States. In order to compete in this
environment, we rely on a combination of (1) marketing and logistics
strategies, including new and improved formulations, (2) pricing strategy,
and (3) decreased production costs.
Marketing and Logistics Strategy: We intend to respond to
increasing competition by encouraging new uses (especially conservation
tillage), by providing unique formulations and services, and by offering
integrated seed and biotechnology solutions. The success of our ROUNDUP
marketing and logistics strategies will depend on the continued expansion of
conservation tillage practices and of ROUNDUP READY seed acreage, on our
ability to develop services and marketing programs that are attractive to
our customers, and on the continued success of our unique logistics and
distribution systems and practices.
Pricing Strategy: Historically, we have reduced the average net
sales price of ROUNDUP herbicides in selected markets in order to increase
volumes, to penetrate new markets, and to compete effectively. In addition
to reduced list prices, price reductions may include discounts, rebates or
other promotional strategies, as well as the development of new and
lower-cost formulations for specific uses. However, there can be no
guarantee that price reductions will stimulate enough volume growth to
offset the price reductions and increase revenues. In the past, price
reductions have not always stimulated volume growth and, where volumes have
increased, the increases have not always been adequate to offset the price
reductions and to increase revenues.
Production Cost Decreases: We also believe that technological
innovations and increased volumes will lead to efficiencies that will reduce
the production cost of glyphosate. As part of this strategy, we have entered
into agreements to supply glyphosate
19
to other herbicide producers. Such cost reductions will depend on realizing
such increased volumes and technological innovations. Our ability to achieve
our anticipated cost reductions will also depend upon input costs, such as
raw materials and energy, remaining within our anticipated ranges.
DEVELOPMENT AND INTRODUCTION OF NEW PRODUCTS: Our ability to
develop and introduce new products to market, particularly new agricultural
biotechnology products, will depend on, among other things, the availability
of sufficient financial resources to fund research and development needs;
the success of our research and development efforts; our ability to gain and
maintain acceptance through the chain of commerce (for example, from
farmers, processors, food companies, and consumers); our ability to obtain
regulatory approvals; the demonstrated effectiveness of our products; our
ability to produce new products on a large scale and to market them
economically; our ability to develop, purchase or license required
technology; and the existence of sufficient distribution channels.
GOVERNMENT REGULATION: The field testing, production, import,
marketing and use of our products, particularly our seed biotechnology
products, are subject to extensive regulation and numerous government
approvals. Government regulations, regulatory systems, and the politics
which influence them vary widely among jurisdictions. Obtaining necessary
regulatory approval is time consuming and costly, and there can be no
guarantee of the timing or success in obtaining approvals. For example,
China's regulatory system is developing and unpredictable, resulting in
continuing uncertainty about import of major U.S. crops such as soybeans
containing biotechnology traits. If crops grown from seeds developed through
biotechnology are not yet approved for import into certain markets, growers
in other countries may be restricted from introducing or selling their
grain. In addition, because there are markets that have not approved some
products, some companies in the grain and food industries have sought to
establish supplies of non-genetically-modified crops, or have refused to
purchase crops grown from seeds developed through biotechnology. Resulting
concerns about trade and marketability of these products may deter farmers
from planting them and can result in grower opposition to the introduction
of new biotechnology products or approved traits in a new crop even in
countries where planting and consumption may be fully approved.
In addition to delaying or preventing the sale or import of our
products, regulatory authorities can order recalls, and prohibit, or place
limits or conditions on, the planting of seeds containing biotechnology
traits. Although weed resistance to various herbicides has occurred and is
managed through proper use, stewardship and alternative weed control
methods, government agencies could choose to restrict the use of herbicides
and herbicide-tolerant crops, such as glyphosate and glyphosate-tolerant
crops, in response to claims that increased use of the herbicide increases
the potential for the development of weed resistance. Legislation or
regulation may also require the tracking of biotechnology products and the
labeling of food or feed products with ingredients grown from seeds
containing biotechnology traits. In addition, international agreements, such
as the Cartagena Biosafety Protocol which is in the process of ratification,
may also affect the treatment of biotechnology products.
PUBLIC ACCEPTANCE: The commercial success of agricultural and food
products developed through biotechnology will depend in part on public
acceptance of their
20
development, cultivation, distribution and consumption. Biotechnology has
enjoyed and continues to enjoy substantial support from the scientific
community, regulatory agencies, governmental officials, and grower
communities around the world. However, public attitudes can be influenced by
claims that genetically modified plant products are unsafe for consumption
or that they pose unknown risks to the environment or to traditional social
or economic practices, even if such claims are not based on scientific
studies. These public attitudes can influence regulatory and legislative
decisions about seed biotechnology, and they may also result in refusal to
purchase products derived from biotechnology even where they are approved.
The development, introduction and sale of our products have been, and may in
the future be, delayed or impaired because of adverse public perception
regarding the safety of our products and the potential effects of these
products on other plants, animals, human health and the environment. We
continue to work with consumers and customers to encourage understanding of
modern biotechnology, crop protection, and agricultural biotechnology
products.
ADVENTITIOUS PRESENCE OF BIOTECHNOLOGY TRAITS: Because the global
acceptance and regulation of biotechnology-derived agricultural products is
not consistent or harmonized, the detection of unintended trace amounts
(adventitious presence) of biotechnology traits in precommercial seed, seed
varieties, or the grain and products produced can negatively affect our
business or results of operations. The detection of adventitious presence
can result in the withdrawal of seed lots from sale, or in governmental
regulatory compliance actions such as crop destruction or product recalls.
Some growers of organic and conventional nonbiotechnology crops have claimed
that the adventitious presence of biotechnology traits in their crops will
cause them commercial harm. Concerns about the adventitious presence of
biotechnology traits could lead to more stringent regulation, which may
include: requirements for labeling and traceability; financial protection
such as surety bonds, liability or insurance; and/or restrictions or
moratoria on testing, planting or use of biotechnology traits. Concern about
unintended biotechnology traits in grain or food has led to consumer
concerns about the integrity of the food supply chain from the farm to the
finished product. In addition, concerns have been expressed about the
potential for adventitious presence of proteins in food, resulting from the
development and production of pharmaceutical proteins in food-crop plants.
Monsanto's Protein Technologies business is one of several businesses
engaged in this research.
Together with other seed companies, biotechnology providers and
industry associations, we are actively seeking sound, science-based rules
and regulatory interpretations that would clarify the legal status of trace
adventitious amounts of biotechnology traits in seed, grain and food,
together with rigorous regulation that will prevent the presence of traits
intended not to be in food or feed. This may involve the establishment of
approval processes or threshold levels for the adventitious presence of
biotechnology traits intended to be in food and feed, and standardized
sampling and testing methods for all traits. Although we believe that
thresholds for traits intended to be in food and feed crops are already
implicit in existing seed quality and other laws, the establishment of
appropriate regulations would provide the basis for recognition and
acceptance of the adventitious presence of biotechnology traits. In the
United States, the USDA and FDA are already coordinating to strengthen the
regulation and confinement of traits intended not to be present in food or
feed.
21
INTELLECTUAL PROPERTY: We have devoted significant resources to
obtaining and maintaining our intellectual property rights, which are
material to our business. We rely on a combination of patents, copyrights,
trademarks and trade secrets, confidentiality provisions, Plant Variety
Protection Act registrations, and licensing arrangements to establish and
protect our intellectual property. We seek to preserve our intellectual
property rights and to operate without infringing the proprietary rights of
third parties. Intellectual property positions are extremely important
within the agricultural biotechnology industry.
There is some uncertainty about the value of available patent
protection in certain countries outside the United States, and patent
protection may not be available in some countries. For example, we do not
have patent protection for our ROUNDUP READY soybean traits in Argentina.
Moreover, the patent positions of biotechnology companies involve complex
legal and factual questions. Rapid technological advances and the number of
companies performing such research can create an uncertain environment.
Patent applications in the United States may be kept confidential, or if
published like those outside the United States, published 18 months after
filing. Accordingly, competitors may be issued patents from time to time
without any prior warning to us. That could decrease or eliminate the value
of similar technologies that we are developing. Because of this rapid pace
of change, some of our products may unknowingly rely on key technologies
that are patent-protected by others. If that should occur, we must obtain
licenses to such technologies to continue to use them.
Certain of our seed germplasm and other genetic material, patents,
and licenses are currently the subject of litigation, and additional future
litigation is anticipated. Although the outcome of such litigation cannot be
predicted with certainty, we will continue to defend and litigate our
positions vigorously. We believe that we have meritorious defenses and
claims in the pending suits.
TECHNOLOGICAL CHANGE AND COMPETITION: A number of companies are
engaged in plant biotechnology research. Technological advances by others
could render our products less competitive. In addition, the ability to be
first to market a new product can result in a significant competitive
advantage. We believe that competition will intensify, not only from
agricultural biotechnology firms, but also from major agrichemical, seed and
food companies with biotechnology laboratories. Some of our agricultural
competitors have substantially greater financial and marketing resources
than we do.
WEATHER AND NATURAL DISASTERS: Our business is subject to weather
conditions and natural disasters that affect commodity prices, seed yields,
and grower decisions about purchases of seeds, traits and herbicides. The
occurrence of adverse weather conditions or natural disasters in major
markets can have a material adverse effect on our sales and profitability.
In addition, natural disasters affecting our manufacturing facilities, our
major suppliers or our major customers could have a material adverse effect
on our financial results.
PLANTING DECISIONS: In order to successfully market our products,
we must anticipate the planting decisions that growers will make for future
crop seasons. Market
22
and economic conditions affect growers' decisions about the types and
amounts of crops to plant and may negatively affect sales of our herbicide,
seed and biotechnology products. Failure to accurately predict the grower
demand for specific products may also result in unanticipated returns, which
could have a material adverse effect on our profitability.
NEED FOR SHORT-TERM FINANCING: Like many other agricultural
companies, we regularly extend credit to our customers in certain areas of
the world to enable them to acquire agricultural chemicals and seeds at the
beginning of their growing seasons. Our credit practices, combined with the
seasonality of our sales, make us dependent on our ability to obtain
short-term financing to fund our cash flow requirements, our ability to
collect customer receivables when due, and our ability to repatriate funds
from ex-U.S. operations. Our need for short-term financing typically peaks
in the second quarter. Downgrades in our credit rating or other limitations
on our ability to access short-term financing, including our ability to
refinance our short-term debt as it becomes due, would increase our interest
costs and adversely affect our sales and our profitability.
LITIGATION AND CONTINGENCIES: We are involved in numerous major
lawsuits regarding contract disputes, intellectual property issues,
biotechnology issues, antitrust allegations, and other matters. Adverse
outcomes could subject us to substantial damages or limit our ability to
sell our products. In addition, in connection with the separation of our
businesses from those of Pharmacia Corporation on Sept. 1, 2000, and
pursuant to a Separation Agreement entered into on that date and
subsequently amended, we assumed, and agreed to indemnify Pharmacia for, any
liabilities primarily related to Pharmacia's former agricultural or chemical
businesses. Under the Separation Agreement, as amended, we agreed to
indemnify Pharmacia for any liabilities that Solutia, Inc. (Solutia) had
assumed from Pharmacia in connection with the spinoff of Solutia on Sept. 1,
1997, to the extent that Solutia fails to pay, perform or discharge those
liabilities. This indemnification obligation applies to litigation,
environmental, retiree and all other Pharmacia liabilities that were assumed
by Solutia. To the extent that Solutia encounters material liquidity or
other financial constraints, the risk that it would be unable to pay,
perform or discharge its assumed liabilities or to satisfy its indemnity
obligations to Pharmacia, and that we would be called upon to do so, would
increase.
DISTRIBUTION OF PRODUCTS: In order to successfully market our
products, we must estimate growers' needs, and successfully match the level
of product at our distributors to those needs. If distributors do not have
enough inventory of our products at the right time, our current sales will
suffer. On the other hand, high product inventory levels at our distributors
may cause revenues to suffer materially in future periods as these
distributor inventories are worked down. Distributors may also elect to
reduce their inventory levels from current levels, which could have a
material adverse effect on our sales volumes. High product inventories at
our distributors also increases the risk of obsolescence and product returns
with respect to our seed products.
COST MANAGEMENT: Our ability to meet our short- and long-term
objectives requires that we manage our costs successfully, without adversely
affecting our performance. Changing business conditions or practices may
require us to reduce costs to remain competitive. If we are unable to
identify cost savings opportunities and successfully reduce costs and
maintain cost reductions, our profitability will be affected.
23
Our profitability will also be affected to the extent that we incur cost
increases, such as increased costs of raw materials or energy, which we are
not able to manage or to offset through price increases in our products.
ACCOUNTING POLICIES AND ESTIMATES: In accordance with generally
accepted accounting principles, we adopt certain accounting policies, such
as policies related to the timing of revenue recognition and other policies
described in our financial statements. Changes to these policies may affect
future results. There may also be changes to generally accepted accounting
principles, which may require adjustments to financial statements for prior
periods and changes to the company's accounting policies and financial
results prospectively. In addition, we must use certain estimates, judgments
and assumptions in order to prepare our financial statements. For example,
we must estimate matters such as: collectibility of receivables; levels of
returns; future obsolescence of inventories; realization of deferred tax
assets; asset impairment; valuation of pension and other postretirement
assets and liabilities; and the probability and amount of other future
liabilities. If actual experience differs from our estimates, adjustments
will need to be made to financial statements for future periods, which may
affect revenues and profitability. Finally, changes in our business
practices may result in changes to the way we account for transactions, and
may affect comparability between periods.
OPERATIONS OUTSIDE THE UNITED STATES: Sales outside the United
States make up a substantial portion of our revenues, and we intend to
continue to actively explore international sales opportunities. In addition,
we engage in manufacturing, seed production, sales, and/or research and
development in many parts of the world. Although we have operations in
virtually every region, our ex-U.S. sales are principally in Argentina,
Brazil, Canada, France and Mexico. Accordingly, developments in those parts
of the world generally have a more significant effect on our operations than
developments in other places. Operations outside the United States are
potentially subject to a number of unique risks and limitations, including,
among others, fluctuations in currency values and foreign-currency exchange
rates; exchange control regulations; changes in a specific country's or
region's political or economic conditions; weather conditions; import and
trade restrictions; import or export licensing requirements and trade
policy; unexpected changes in regulatory requirements; restrictions on the
ability to repatriate funds; and other potentially detrimental domestic and
foreign governmental practices or policies affecting U.S. companies doing
business abroad. Acts of terror or war may impair our ability to operate in
particular countries or regions, and may impede the flow of goods and
services between countries. Weakened economies may cause future sales to
decrease because customers may purchase fewer goods in general, and also
because imported products could become more expensive for customers to
purchase in their local currency. Changes in exchange rates may affect our
earnings, the book value of our assets outside the United States, and our
equity.
ITEM 2. PROPERTIES.
Our general offices are located in St. Louis County, Missouri. We
also lease additional research facilities in St. Louis County. These office
and research facilities are principal properties. We and our subsidiaries
own or lease manufacturing facilities,
24
laboratories, seed production and other agricultural facilities, office
space, warehouses and other land parcels in North America, South America,
Europe, Asia, Australia and Africa.
The Agricultural Productivity segment has principal chemicals
manufacturing facilities at the following locations: Alvin, Texas; Antwerp,
Belgium; Augusta, Georgia; Camacari, Brazil; Luling, Louisiana; Muscatine,
Iowa; Sao Jose dos Campos, Brazil; Soda Springs, Idaho; Texas City, Texas;
and Zarate, Argentina. Most of these properties are owned in fee. However,
we lease the land underlying the facilities that we own in Alvin, Texas and
in Texas City, Texas. In addition, we lease the manufacturing facility at
Augusta, Georgia, with an option to buy, pursuant to an industrial revenue
bond financing.
Principal properties used by the Seeds and Genomics segment include
seed conditioning plants at: Constantine, Michigan; Grinnell, Iowa; Kearney,
Nebraska; and Uberlandia, Brazil. The Seeds and Genomics segment also uses
seed foundation and production facilities at various locations; breeding
facilities; and genomics and other research laboratories.
Our principal properties are suitable and adequate for their use.
Utilization of these facilities may vary with seasonal, economic and other
business conditions, but none of the principal properties is substantially
idle, with the exception of the manufacturing facility at Texas City, Texas.
This is one of the facilities that manufactures a key raw material for
glyphosate herbicide, and was built in order to utilize by-product from a
neighboring plant owned by another company. However, the neighboring plant
is currently idle, and therefore currently not supplying the by-product. The
facilities generally have sufficient capacity for existing needs and
expected near-term growth, and expansion projects are undertaken as
necessary to meet future needs. In certain instances, we have granted leases
on portions of sites not required for current operations.
ITEM 3. LEGAL PROCEEDINGS.
For information concerning certain legal proceedings involving
Monsanto, see "Business - Environmental Matters," "Business - Legal
Proceedings" and "Business - Cautionary Statements Regarding Forward-Looking
Information" appearing in Item 1 of this Report and incorporated herein
by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the security holders during the fourth
quarter of 2002.
EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding executive officers is contained in Item 10 of
Part III of this Report (General Instruction G) and is incorporated herein
by reference.
25
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The following information appearing in the 2002 Annual Report is
incorporated herein by reference: information appearing under the heading
"Shareowner Matters"; and information regarding Common Stock Price and
Dividends per Share appearing in "Notes to Consolidated Financial Statements
- - Note 26: Quarterly Data (Unaudited)". For information regarding securities
authorized for issuance under equity compensation plans, see "Item 12 -
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters".
ITEM 6. SELECTED FINANCIAL DATA.
The following tabular information and related footnotes, appearing
under the heading "Selected Financial Data (Unaudited)" in the 2002 Annual
Report is incorporated herein by reference: information regarding Net sales,
Net income (loss), Diluted Earnings (Loss) per Share and per Pro Forma
Share, Total assets, Long-term debt, and Dividends per share.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The information appearing under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
appearing in the 2002 Annual Report, is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information appearing under the heading "MD&A - Market Risk
Management" in the 2002 Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following information, appearing in the 2002 Annual Report, is
incorporated herein by reference: (a) the consolidated financial statements
of Monsanto, appearing under the headings "Statement of Consolidated
Operations", "Statement of Consolidated Financial Position", "Statement of
Consolidated Cash Flows", "Statement of Consolidated Shareowners' Equity",
and "Statement of Consolidated Comprehensive Income (Loss)"; (b) the Notes
to Consolidated Financial Statements; and (c) the Independent Auditors'
Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following information appearing in the Monsanto Company Notice
of Annual Meeting and Proxy Statement dated March 13, 2003 (the "2003 Proxy
Statement"), is incorporated herein by reference: information appearing
under the heading "Information Regarding Board of Directors and Committees",
regarding the Composition of Board of Directors, and biographical
information regarding nominees for election to the Board of Directors; and
information appearing under the heading "Certain Other Information Regarding
Management - Section 16(a) Beneficial Ownership Reporting Compliance". The
following information with respect to the Executive Officers of the Company
on March 1, 2003, is included pursuant to Instruction 3 of Item 401(b) of
Regulation S-K:
Year First
Became an
Present Position Executive
Name--Age with Registrant Officer Other Business Experience since Jan. 1, 1998*
--------- --------------- ------- ---------------------------------------------
Frank V. AtLee III, 62 Chairman of the Board, Chief 2002 President-American Cyanamid Company and
Executive Officer and President Chairman-Cyanamid International, 1993-1/95;
Chairman-Monsanto Company, 2000; present
position, since 12/02
Donald K. Bandler, 55 Senior Vice President, Government 2002 Special Assistant to the President and Senior
Affairs Director for European Affairs-National Security
Council, 8/97-12/98; Special Assistant to the
President and Counselor to the National
Security Advisor-National Security Council,
1/99-5/99; U.S. Ambassador to the Republic of
Cyprus, 8/99-7/02; present position, since 9/02
Charles W. Burson, 58 Executive Vice President, 2001 Counsel to the Vice President of the United
Secretary, General Counsel States, 1997-1999; Assistant to the President
and Chief of Staff and Counselor to the Vice
President, the White House, Office of the Vice
President, 1999-2001; present position, 4/01
Carl M. Casale, 41 Vice President, North America 2000 Co-Lead, U.S. Markets-Pharmacia Corporation,
7/97-8/99; Vice President, North America-
Pharmacia Corporation, 9/99-6/00; present
position, 6/00
27
Year First
Became an
Present Position Executive
Name--Age with Registrant Officer Other Business Experience since Jan. 1, 1998*
--------- --------------- ------- ---------------------------------------------
Richard B. Clark, 50 Vice President and Controller 2001 Controller, Integrated Financial Services-
Pharmacia Corporation, 1997-1998; Vice
President and Controller-Pharmacia Corporation,
1999-2000; Vice President, Financial Shared
Services-Pharmacia Corporation, 2000-2001;
present position, 2001
Terrell K. Crews, 47 Executive Vice President and Chief 2000 General Auditor-Pharmacia Corporation,
Financial Officer 6/97-12/98; Global Finance Lead, Global Seed
Group-Pharmacia Corporation, 12/98-7/99; Chief
Financial Officer, Agricultural Sector-
Pharmacia Corporation, 7/99-2/00; Chief
Financial Officer-Monsanto Company, 2/00-8/00,
present position, 8/00
Robert T. Fraley, 50 Executive Vice President and Chief 2000 Co-President, Agricultural Sector-Pharmacia
Technology Officer Corporation, 1997; Vice President and Chief
Technology Officer-Monsanto Company, 2/00-8/00;
present position, 8/00
Hugh Grant, 44 Executive Vice President and Chief 2000 Co-President, Agricultural Sector-Pharmacia
Operating Officer Corporation, 1998; Vice President and Chief
Operating Officer-Monsanto Company, 2/00-8/00;
present position, 8/00
Janet M. Holloway, 48 Chief Information Officer 2000 Co-Lead, Information Technology, Agricultural
Sector-Pharmacia Corporation, 1997-1999; Chief
Information Officer-Pharmacia Corporation,
1999-2000; present position, 8/00
Mark J. Leidy, 47 Vice President, Manufacturing 2001 Director of Manufacturing, ROUNDUP-Pharmacia
Corporation, 1996-1998; Director of
Manufacturing, Global Seed Supply-Monsanto
Company, 1998-2000; present position, 2/01
Cheryl P. Morley, 48 President of Animal Agricultural 2000 President, Animal Agricultural Group-Pharmacia
Group Corporation, 1997-2000; present position, 8/00
28
Year First
Became an
Present Position Executive
Name--Age with Registrant Officer Other Business Experience since Jan. 1, 1998*
--------- --------------- ------- ---------------------------------------------
John M. Murabito, 43 Senior Vice President, Human 2000 Human Resources Operations Team Leader-
Resources Pharmacia Corporation, 1997-1998; Human
Resources Team Leader, Agricultural and
Nutrition Sectors-Pharmacia Corporation,
1998-3/00; Global Human Resources Leader-
Monsanto Company, 3/00-6/00; Vice President,
Human Resources-Monsanto Company, 6/00-8/00;
present position, 8/00
Robert A. Paley, 54 Vice President and Treasurer 2002 Director of Asia/Pacific Monsanto Company
Entities-Monsanto Company, 1997-2000; Assistant
Treasurer-Monsanto Company, 2000-2002; present
position since 9/02
Sarah Hull Smith, 41 Senior Vice President, Public 2001 Senior Vice President and Partner, Fleishman
Affairs Hillard, Inc., 1991-1/01; present position, 1/01
Gerald A. Steiner, 42 Vice President, Strategy 2001 Director, Global Chemistry Strategy-Pharmacia
Corporation, 1996-1998; General Manager,
Europe/Africa Ag Business-Pharmacia
Corporation, 1998-2000; Senior Vice President,
Ag & Pharma Discovery Services-Celera Genomics,
2000; present position, 2001
* Prior to Sept. 1, 2000, the businesses of the current Monsanto Company
were the agricultural division of Pharmacia Corporation.
ITEM 11. EXECUTIVE COMPENSATION.
The following information, appearing under the following headings
on the pages indicated of the 2003 Proxy Statement, is incorporated herein
by reference: "Information Regarding Board of Directors and Committees -
Compensation of Directors"; "Information Regarding Board of Directors and
Committees - Other Compensation Arrangements"; "Information Regarding Board
of Directors and Committees - Compensation Committee Interlocks and Insider
Participation"; "Approval of Amendments to the Monsanto Company Long-Term
Incentive Plan (formerly known as the Monsanto 2000 Management Incentive
Plan)(Proxy Item No. 3)"; "Executive Compensation"; and "Certain
Agreements".
29
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
Information appearing in the 2003 Proxy Statement, under the
headings "Stock Ownership of Management and Certain Beneficial Owners" and
"Equity Compensation Plan Information", is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The following information, appearing under the following headings
of the 2003 Proxy Statement, is incorporated herein by reference:
"Information Regarding Board of Directors and Committees - Other
Compensation Arrangements"; "Arrangements Between Monsanto and Pharmacia";
"Certain Other Information Regarding Management - Transactions and
Relationships"; "Certain Other Information Regarding Management -
Indebtedness"; and "Appendix D - Summary Description of Agreements Between
Monsanto and Pharmacia".
ITEM 14. CONTROLS AND PROCEDURES.
We maintain a comprehensive set of disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934 ("Exchange Act") and internal controls designed to
ensure that information required to be disclosed in our filings under the
Exchange Act is recorded, processed, summarized and reported accurately and
within the time periods specified in the SEC's rules and forms. As of Feb.
28, 2003 (the "Evaluation Date"), an evaluation was carried out under the
supervision and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and procedures. Based
upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that, as of the Evaluation Date, the design and operation
of these disclosure controls and procedures were effective to provide
reasonable assurance of the achievement of the objectives described above.
Subsequent to the Evaluation Date, there were no significant
changes in internal controls or other factors that could significantly
affect internal controls, including any corrective actions with regard to
significant deficiencies and material weaknesses.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this Report:
1. The following financial statements appearing in the 2002
Annual Report: "Statement of Consolidated Operations";
"Statement of Consolidated Financial Position"; "Statement
of Consolidated Cash Flows"; "Statement of Consolidated
Shareowners' Equity"; and "Statement of Consolidated
30
Comprehensive Income (Loss)" (see Exhibit 13 under
paragraph (a)(3) of this Item 14).
2. Financial Statement Schedules
None required
3. Exhibits--See the Exhibit Index to this Report. For a
listing of all management contracts and compensatory plans
or arrangements required to be filed as exhibits to this
Form 10-K, see the Exhibits listed under Exhibit No. 10,
items 10.15 through 10.27 of the Exhibit Index. The
following Exhibits listed in the Exhibit Index are filed
with this Report:
10 8.1. Amendment to Protocol Agreement dated March 3,
2002, among Pharmacia Corporation, Solutia Inc.
and Monsanto Company, amending the Pennsylvania
Agreement.
15. Monsanto Non-Employee Director Equity Incentive
Compensation Plan, amended Dec. 18, 2002 and
effective as of Sept. 19, 2002.
16.1. Excerpt of a resolution adopted by the
People and Compensation Committee of the Monsanto
Company Board of Directors on Feb. 19, 2002,
amending and restating the Monsanto 2000
Management Incentive Plan.
17. 2003 Annual Incentive Plan Summary, as
approved by the People and Compensation Committee
of the Monsanto Company Board of Directors on
Dec. 17, 2002.
20. Form of Change-of-Control Employment Security
Agreement, as amended effective Dec. 18, 2002.
22.1. Amendment to Letter Agreement with Frank V.
AtLee III, effective as of Dec. 18, 2002.
23. Severance and Consulting Agreement and
General Release between Monsanto Company and
Hendrik A. Verfaillie, effective as of Feb. 20,
2003.
13 The Company's 2002 Annual Report to shareowners
(The electronic submission includes only the
financial report section of the 2002 Annual
Report to shareowners. Only those portions
expressly incorporated by reference into this
Form 10-K are deemed to be "filed".)
21 Subsidiaries of the registrant
23 Consent of Independent Auditors
31
24 1. Powers of Attorney submitted by Frank V. AtLee
III, Michael Kantor, Gwendolyn S. King, Sharon R.
Long, C. Steven McMillan, William U. Parfet,
Robert J. Stevens, Terrell K. Crews and Richard
B. Clark
2. Power of Attorney submitted by George Poste
3. Certified copy of Board resolution authorizing
Form 10-K filing utilizing powers of attorney
99 Computation of Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K during the quarter ended Dec. 31, 2002:
The Company furnished a report on Form 8-K (Item 9) on Oct. 30,
2002, pursuant to Regulation FD, providing (i) a press release
announcing Monsanto Company's third quarter 2002 financial and
operating results, (ii) third quarter 2002 unaudited supplemental
data, and (iii) a slide presentation to accompany the Company's
webcast financial results conference call.
The Company furnished a report on Form 8-K (Item 9) on Nov. 15,
2002, pursuant to Regulation FD, relating to certifications signed
by the Chief Executive Officer and Chief Financial Officer of
Monsanto Company, pursuant to 18 U.S.C. 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, which were
submitted to the Securities and Exchange Commission in connection
with the filing of Monsanto Company's Quarterly Report on Form 10-Q
for the quarterly period ended Sept. 30, 2002.
The Company filed a report on Form 8-K (Item 5) on Nov. 18, 2002,
providing a Protocol Agreement dated Nov. 15, 2002, among Pharmacia
Corporation, Solutia Inc. and Monsanto Company, which set forth
certain agreements relating to an appeal bond in connection with a
property damage suit pending in Pennsylvania state court against
Pharmacia Corporation, which is being defended by Solutia Inc.
The Company furnished a report on Form 8-K (Item 9) on Dec. 4,
2002, pursuant to Regulation FD, relating to a press release and
slide presentation prepared for use in a speech given by the
Company's Chief Financial Officer at the Salomon Smith Barney 13th
Annual Chemical Conference on Dec. 4, 2002.
The Company furnished a report on Form 8-K (Item 9) on Dec. 10,
2002, pursuant to Regulation FD, relating to a slide presentation
prepared for use by the Company's Chief Technology Officer as a
participant on a conference call for clients of The Buckingham
Research Group on Dec. 11, 2002.
The Company filed a report on Form 8-K (Item 5) on Dec. 18, 2002,
providing a press release announcing that the Company's Chief
Executive Officer, Hendrik A. Verfaillie, submitted his resignation
as chief executive officer, president and director of the Company,
effective immediately.
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized.
MONSANTO COMPANY
-----------------------------------
(Registrant)
By: /s/ Richard B. Clark
--------------------------------
Richard B. Clark
Vice President and Controller
(Principal Accounting Officer)
Date: March 13, 2003
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* Chairman of the Board, Chief March 13, 2003
-------------------- Executive Officer, and President
(Frank V. AtLee III) (Principal Executive Officer)
* Director March 13, 2003
---------------------
(Michael Kantor)
* Director March 13, 2003
---------------------
(Gwendolyn S. King)
* Director March 13, 2003
--------------------
(Sharon R. Long)
* Director March 13, 2003
--------------------
(C. Steven McMillan)
* Director March 13, 2003
--------------------
(William U. Parfet)
* Director March 13, 2003
--------------------
(George Poste)
* Director March 13, 2003
--------------------
(Robert J. Stevens)
33
* Executive Vice President, Chief March 13, 2003
---------------------- Financial Officer (Principal
(Terrell K. Crews) Financial Officer)
/s/ Richard B. Clark Vice President and Controller March 13, 2003
------------------------ (Principal Accounting Officer)
(Richard B. Clark)
* Charles W. Burson, by signing his name hereto, does sign this document on
behalf of the above noted individuals, pursuant to powers of attorney duly
executed by such individuals which have been filed as an Exhibit to this
Report.
/s/ Charles W. Burson
----------------------------------------
Charles W. Burson
Attorney-in-Fact
34
CERTIFICATIONS
I, Frank V. AtLee III, Chairman of the Board, Chief Executive Officer and
President of Monsanto Company, certify that:
1. I have reviewed this annual report on Form 10-K of Monsanto Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 13, 2003
/s/ Frank V. AtLee III
- --------------------------------------------
Frank V. AtLee III
Chairman of the Board, Chief Executive Officer and President, Monsanto Company
CERTIFICATIONS (continued)
I, Terrell K. Crews, Executive Vice President and Chief Financial Officer
of Monsanto Company, certify that:
1. I have reviewed this annual report on Form 10-K of Monsanto Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 13, 2003
/s/ Terrell K. Crews
- ---------------------------------------
Terrell K. Crews
Executive Vice President and Chief Financial Officer, Monsanto Company
EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of
Item 601 of Regulation S-K.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2 1. Separation Agreement, dated as of Sept. 1,
2000, by and between Monsanto Company and
Pharmacia Corporation (incorporated herein by
reference to Exhibit 2.1 of the Company's
Amendment No. 2 to Registration Statement on Form
S-1, filed Sept. 22, 2000, File No. 333-36956).
2. First Amendment to Separation Agreement, dated
as of July 1, 2002, by and between Pharmacia
Corporation and Monsanto Company (incorporated
herein by reference to Exhibit 99.2 of the
Company's Report on Form 8-K, filed July 30,
2002, File No. 1-16167).
3 1. Amended and Restated Certificate of
Incorporation of the Company (incorporated herein
by reference to Exhibit 3.1 of the Company's
Amendment No. 1 to Registration Statement on Form
S-1, filed Aug. 30, 2000, File No. 333-36956).
2. Amended and Restated By-Laws of the Company
effective Sept. 19, 2002 (incorporated herein by
reference to Exhibit 3.2 of the Company's Form
10-Q for the quarter ended Sept. 30, 2002,
File No. 1-16167).
4 Form of Indenture between Monsanto Company and
The Bank of New York, as Trustee (incorporated
herein by reference to Exhibit 4.1 of the
Company's Registration Statement on Form S-3,
filed May 17, 2002, File No. 333-88542).
9 Omitted--Inapplicable
10 1. Tax Sharing Agreement, dated as of July 19,
2002, by and between Monsanto Company and
Pharmacia Corporation (incorporated herein by
reference to Exhibit 10.4 of the Company's Form
10-Q for the period ended June 30, 2002,
File No. 1-16167).
2. Employee Benefits and Compensation Allocation
Agreement between Pharmacia Corporation and
Monsanto Company, dated as of Sept. 1, 2000
(incorporated herein by reference to Exhibit 10.7
of the Company's Amendment No. 2 to Registration
Statement on Form S-1, filed Sept. 22, 2000, File
No. 333-36956).
2.1. Amendment to the Employee Benefits and
Compensation Allocation Agreement between
Pharmacia Corporation and Monsanto
Company, dated as of Sept. 1, 2000 (incorporated
herein by reference to Exhibit 2.1 of the Company's
Form 10-K for the period ended Dec. 31, 2001,
File No. 1-16167).
3. Intellectual Property Transfer Agreement,
dated as of Sept. 1, 2000, by and between
Monsanto Company and Pharmacia Corporation
(incorporated herein by reference to Exhibit 10.8
of the Company's Amendment No. 2 to Registration
Statement on Form S-1, filed Sept. 22, 2000, File
No. 333-36956).
4. Services Agreement, dated as of Sept. 1, 2000,
by and between Monsanto Company and Pharmacia
Corporation (incorporated herein by reference to
Exhibit 10.9 of the Company's Amendment No. 2 to
Registration Statement on Form S-1, filed Sept.
22, 2000, File No. 333-36956).
5. Corporate Agreement, dated as of Sept. 1,
2000, by and between Monsanto Company and
Pharmacia Corporation (incorporated herein by
reference to Exhibit 10.10 of the Company's
Amendment No. 2 to Registration Statement on Form
S-1, filed Sept. 22, 2000, File No. 333-36956).
6. Distribution Agreement by and between
Pharmacia Corporation (f/k/a Monsanto Company)
and Solutia Inc., as of Sept. 1, 1997
(incorporated herein by reference to Exhibit 2.1
of the Form 8-K filed by Pharmacia Corporation
(f/k/a Monsanto Company) on Sept. 16, 1997, File
No. 1-2516).
6.1. Amendment to Distribution Agreement, dated as
of July 1, 2002, among Pharmacia Corporation,
Solutia Inc. and Monsanto Company (incorporated
herein by reference to Exhibit 99.1 of the
Company's Report on Form 8-K, filed July 30,
2002, File No. 1-16167).
7. Protocol Agreement, dated as of July 1, 2002,
among Pharmacia Corporation, Solutia Inc. and
Monsanto Company, relating to litigation in
Alabama (incorporated herein by reference to
Exhibit 99.3 of the Company's Report on Form 8-K,
filed July 30, 2002, File No. 1-16167).
8. Protocol Agreement dated Nov. 15, 2002, among
Pharmacia Corporation, Solutia Inc. and Monsanto
Company (the "Pennsylvania Agreement")
(incorporated herein by reference to Exhibit 99.1
of the Company's Report on Form 8-K, filed Nov. 18,
2002, File No. 1-16167).
8.1. Amendment to Protocol Agreement dated March
3, 2002, among Pharmacia Corporation, Solutia
Inc. and Monsanto Company, amending the
Pennsylvania Agreement.
9. U.S. $150,000,000 Promissory Note Issued by
Monsanto Company to Pharmacia Corporation, dated
Aug. 13, 2002 (incorporated herein by reference to
Exhibit 10.5 of the Company's Form 10-Q for the
period ended June 30, 2002, File No. 1-16167).
10. Letter Agreement between Monsanto Company and
Pharmacia Corporation, effective Aug. 13, 2002
(incorporated herein by reference to Exhibit 10.6
of the Company's Form 10-Q for the period ended
June 30, 2002, File No. 1-16167).
11. Creve Coeur Campus Lease by and between
Monsanto Company and Pharmacia Corporation, dated
as of Sept. 1, 2000 (incorporated herein by
reference to Exhibit 10.22 of the Company's Form
10-K for the period ended Dec. 31, 2001,
File No. 1-16167).
12. Chesterfield Village Campus Lease by and
between Pharmacia Corporation and Monsanto
Company, dated as of Sept. 1, 2000 (incorporated
herein by reference to Exhibit 10.23 of the
Company's Form 10-K for the period ended Dec. 31,
2001, File No. 1-16167).
13. 364-Day Credit Agreement dated July 17, 2002
(incorporated herein by reference to Exhibit 10.1
of the Company's Form 10-Q for the period ended
June 30, 2002, File No. 1-16167).
14. Five Year Credit Agreement (incorporated
herein by reference to Exhibit 10.12 of the
Company's Amendment No. 1 to Registration
Statement on Form S-1, filed Aug. 30, 2000, File
No. 333-36956).
15. Monsanto Non-Employee Director Equity Incentive
Compensation Plan, amended Dec. 18, 2002 and
effective as of Sept. 19, 2002.
16. Amended and Restated Monsanto 2000 Management
Incentive Plan (Amended and Restated as of Aug.
13, 2002) (incorporated herein by reference to
Exhibit 10.8 of the Company's Form 10-Q for the
period ended Sept. 30, 2002, File No. 1-16167).
16.1. Excerpt of a resolution adopted by the People
and Compensation Committee of the Monsanto
Company Board of Directors on Feb. 19, 2002,
amending and restating the Monsanto 2000
Management Incentive Plan.
17. 2003 Annual Incentive Plan Summary, as
approved by the People and Compensation Committee
of the Monsanto Company Board of Directors on
Dec. 17, 2002.
18. Annual Incentive Program for certain
executive officers (incorporated herein by
reference to the description appearing under the
sub-heading "Annual Incentive Program" on pages
10 through 11
of the Monsanto Company Notice of Annual Meeting
and Proxy Statement dated March 16, 2001).
19. Executive (Split Dollar) Life Insurance
Program of Pharmacia Corporation (f/k/a Monsanto
Company) (incorporated herein by reference to
Exhibit 10.11 of the Company's Form 10-K for the
period ended Dec. 31, 2000, File No. 1-16167).
19.1. Excerpt of a resolution adopted by the People
and Compensation Committee of the Monsanto
Company Board of Directors on Sept. 18, 2002,
terminating Split-Dollar Life Insurance
arrangements for certain key executives
(incorporated herein by reference to Exhibit
10.11.1 of the Company's Form 10-Q for the
quarter ended Sept. 30, 2002, File No. 1-16167).
20. Form of Change-of-Control Employment Security
Agreement, as amended effective Dec. 18, 2002.
21. Form of Phantom Share Agreement (incorporated
herein by reference to Exhibit 10.3 of the
Company's Amendment No. 2 to Registration
Statement on Form S-1, filed Sept. 22, 2000, File
No. 333-36956).
22. Letter Agreement with Frank V. AtLee III
(incorporated herein by reference to Exhibit 10.4
of the Company's Amendment No. 1 to Registration
Statement on Form S-1, filed Aug. 30, 2000, File
No. 333-36956)
22.1. Amendment to Letter Agreement with Frank V.
AtLee III, effective as of Dec. 18, 2002.
23. Severance and Consulting Agreement and
General Release between Monsanto Company and
Hendrik A. Verfaillie, effective as of Feb. 20,
2003.
24. Supplemental Retirement Plan Letter Agreement
regarding Charles W. Burson, dated April 7, 2001
(incorporated herein by reference to Exhibit
10.20 of the Company's Form 10-K for the period
ended Dec. 31, 2001, File No. 1-16167).
25. Supplemental Retirement Plan Letter Agreement
regarding Steven L. Engelberg, dated April 22,
1994 (incorporated herein by reference to Exhibit
10.19 of the Company's Form 10-K for the period
ended Dec. 31, 2000, File No. 1-16167).
26. Form of Employment Agreement for Executive
Officers (incorporated herein by reference to
Exhibit 10.7 of the Pharmacia Corporation (f/k/a
Monsanto Company) Form 10-Q for the quarter ended
Sept. 30, 1997, File No. 1-2516).
27. Amendment to Vesting Schedule of Previously
Approved Supplemental Retirement Benefits,
approved by the People Committee of Pharmacia
Corporation (f/k/a Monsanto Company), Oct. 23,
1997 (incorporated herein by reference to Exhibit
10.20 of the Company's Form 10-K for the period
ended Dec. 31, 2000, File No. 1-16167).
11 Omitted - Inapplicable; see "Note 18: Earnings
(Loss) per Share and per Pro Forma Share"
appearing in the 2002 Annual Report.
12 Omitted - Inapplicable
13 The Company's 2002 Annual Report to shareowners
(The electronic submission includes only the
financial report section of the 2002 Annual
Report to shareowners. Only those portions
expressly incorporated by reference into this
Form 10-K are deemed to be "filed".)
16 Omitted - Inapplicable
18 Omitted - Inapplicable
21 Subsidiaries of the registrant
22 Omitted - Inapplicable
23 Consent of Independent Auditors
24 1. Powers of Attorney submitted by Frank V. AtLee
III, Michael Kantor, Gwendolyn S. King, Sharon R.
Long, C. Steven McMillan, William U. Parfet,
Robert J. Stevens, Terrell K. Crews and Richard
B. Clark
2. Power of Attorney submitted by George Poste
3. Certified copy of Board resolution authorizing
Form 10-K filing utilizing powers of attorney
99 Computation of Ratio of Earnings to Fixed Charges
- -------------
Only Exhibits Nos. 21, 23 and 99 have been included in the printed copy of
this Report.