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KERRY PREETE
Vice President, U.S. Crop Production


Merrill Lynch Chemicals Conference
New York
March 15, 2005


         ...
Forward-Looking Statements




Certain statements contained in this presentation, such as statements concerning the compan...
Non-GAAP Financial Information




This presentation may use the non-GAAP financial measures of “free cash flow,” earnings...
OVERVIEW

 Monsanto Has Established Strategic Platforms in
 High-Value Crops

        SEED & TRAIT CROP PLATFORMS




    ...
OVERVIEW

 Biotechnology Adoption Reflects Trait Value, Independent
 of Commodity Prices

  MONSANTO U.S. BIOTECH ACRES VS...
MARKET LEADERSHIP

Growth Remains for Biotechnology, Particularly in Corn




                    KEY MARKET: UNITED STATE...
MARKET LEADERSHIP

Value of Soybean Weed Control Has Shifted to Seeds and
Roundup Ready Trait


  U.S. GROWER SOYBEAN SYST...
MARKET LEADERSHIP


   Vistive Is the First of a Family of Improved Oils for Food
   Uses                                 ...
INNOVATION - BREEDING

   Breeding Breakthrough Improves the Taste and
   Mouth-Feel of Soy-Based Foods
                  ...
MARKET LEADERSHIP


Monsanto Now Services Seed Market Through Three
Outlets




                          CORN
           ...
MARKET LEADERSHIP

Monsanto’s Germplasm Reach Has Grown
Through Branded and Broadly Licensed Seeds


2004 U.S. CORN MARKET...
MARKET LEADERSHIP

   Diversity of Corn Seed Breeding Is Driving Market Share
   Growth; Poised to Expand                 ...
MARKET LEADERSHIP


  Market Potential for Roundup Ready Corn Poised To
  Accelerate
                                     ...
MARKET LEADERSHIP

Corn Trait Mix Continues To Accelerate Toward Stacked
Platform



U.S. CORN TRAIT ACRES
               ...
MARKET LEADERSHIP

Triple-Stacked Corn Traits Fill a “Sweet Spot”
in U.S. Corn Market Needs




                          ...
INNOVATION - BIOTECHNOLOGY


    High Lysine Enhances Animal Feed, Shifts
    Value to Seed
                              ...
INNOVATION - BIOTECHNOLOGY

  Second-Generation YieldGard Corn Borer
  Controls More Insects
                             ...
INNOVATION - BIOTECHNOLOGY


  Drought Stress Tolerance To Be a Family of High-Value
  Traits in Multiple Crops
          ...
MARKET LEADERSHIP

Emergent and Cotton States Mirror Monsanto’s Market
Approach for Corn




                        BRAND...
MARKET LEADERSHIP


Emergent Has Held U.S. Market Share Over Last Six
Years; Clear Opportunity To Drive Growth



      U....
MARKET LEADERSHIP

   Molecular Breeding Used To Create New Source of
   Seed for U.S. Cotton Farmers
                    ...
INNOVATION - BIOTECHNOLOGY


   Added Flexibility Means Better Weed Control, Greater
   Value in Cotton
                  ...
MARKET LEADERSHIP

Cotton Market Already Has Shifted to Stacked Platform;
Emergent Can Accelerate that Trend



 U.S. MONS...
FINANCIAL GROWTH

Monsanto’s Seed and Trait Gross Profit Growth Driven First by
Strong Base Business, then by Pending Acqu...
FINANCIAL GROWTH



 Growth of Monsanto’s Ongoing Business Is
 Accelerating, Generating Significant Free Cash Flow


MONSA...
FINANCIAL GROWTH



Acquisitions of Seminis and Emergent Add to EPS and
Free Cash Flow Forecasts


MONSANTO PRO FORMA     ...
SUMMARY

 Monsanto Has Established Strategic Platforms in
 High-Value Crops

        SEED & TRAIT CROP PLATFORMS




     ...
Reconciliation of Non-GAAP Financial Measures



        Reconciliation of Free Cash Flow
                                ...
Reconciliation of Non-GAAP Financial Measures
Pro Forma Basis

              Reconciliation of Free Cash Flow Pro Forma
  ...
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monsanto 03-15-05

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Transcript of "monsanto 03-15-05"

  1. 1. KERRY PREETE Vice President, U.S. Crop Production Merrill Lynch Chemicals Conference New York March 15, 2005 1
  2. 2. Forward-Looking Statements Certain statements contained in this presentation, such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, currency impact, business and financial plans and other non-historical facts are quot;forward-looking statements.quot; These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company’s actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: the company's exposure to various contingencies, including those related to Solutia Inc., litigation, intellectual property, regulatory compliance (including seed quality), environmental contamination and antitrust; successful completion and operation of recent and proposed acquisitions; fluctuations in exchange rates and other developments related to foreign currencies and economies; increased generic and branded competition for the company's Roundup herbicide; the accuracy of the company’s estimates and projections, for example, those with respect to product returns and grower use of our products and related distribution inventory levels; the effect of weather conditions and commodity markets on the agriculture business; the success of the company’s research and development activities and the speed with which regulatory authorizations and product launches may be achieved; domestic and foreign social, legal and political developments, especially those relating to agricultural products developed through biotechnology; the company’s ability to successfully market new and existing products in new and existing domestic and international markets; the company’s ability to obtain payment for the products that it sells; the company's ability to achieve and maintain protection for its intellectual property; the effects of the company's accounting policies and changes in generally accepted accounting principles; the company's ability to fund its short-term financing needs; and other risks and factors detailed in the company's filings with the U.S. Securities and Exchange Commission. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this release. The company disclaims any current intention or obligation to revise or update any forward-looking statements or any of the factors that may affect actual results, whether as a result of new information, future events or otherwise. 2
  3. 3. Non-GAAP Financial Information This presentation may use the non-GAAP financial measures of “free cash flow,” earnings per share (EPS) on an ongoing basis, and Return on Capital (ROC). We define free cash flow as the total of cash flows from operating activities and investing activities. A non-GAAP EPS financial measure, which we refer to as on-going EPS excludes certain after-tax items that we do not consider part of ongoing operations, which are identified in the reconciliation. ROC means net income exclusive of after-tax interest expenses, divided by the average of the beginning year and ending year net capital employed, as defined in the reconciliation at the end of this presentation. Our presentation of non-GAAP financial measures is intended to supplement investors’ understanding of our operating performance. These non-GAAP financial measures are not intended to replace net income (loss), cash flows, financial position, or comprehensive income (loss), as determined in accordance with accounting principles generally accepted in the United States. Furthermore, these non-GAAP financial measures may not be comparable to similar measures used by other companies. The non-GAAP financial measures used in this presentation are reconciled to the most directly comparable financial measures calculated and presented in accordance with GAAP, which can be found at the end of this presentation. Fiscal Year In this presentation, unless otherwise specified, references to Monsanto’s fiscal years refer to the 12-month period ending August 31. Trademarks Roundup, Roundup Ready, Bollgard, Bollgard II, YieldGard, Monsanto, Imagine, Vine Design, Asgrow, DEKALB, Monsanto Choice Genetics, Posilac, Processor Preferred, and Vistive are trademarks owned by Monsanto Company and its wholly-owned subsidiaries. 3
  4. 4. OVERVIEW Monsanto Has Established Strategic Platforms in High-Value Crops SEED & TRAIT CROP PLATFORMS SMALL-ACRE CROPS LARGE-ACRE CROPS CORN SOYBEANS COTTON VEGETABLE Branded Licensed Branded Branded Licensed Branded Licensed ASI ASI ASGROW EMERGENT* DEKALB SEMINIS* DEKALB ASGROW HOLDEN’S/ HOLDEN’S/ COTTON CORN CORN STATES STATES STATES AMERICAN AMERICAN SEEDS, INC. SEEDS, INC. BIOTECHNOLOGY R&D PLATFORMS MOLECULAR AND CONVENTIONAL BREEDING 4 *Pending
  5. 5. OVERVIEW Biotechnology Adoption Reflects Trait Value, Independent of Commodity Prices MONSANTO U.S. BIOTECH ACRES VS. AVERAGE MARKET PRICE $8.00 45 $3.00 80 11.5 $0.60 40 $7.00 70 $2.50 11 $0.50 35 $6.00 60 30 $2.00 10.5 $0.40 $5.00 50 25 $4.00 $1.50 40 10 $0.30 20 $3.00 30 15 $1.00 9.5 $0.20 $2.00 20 10 $0.50 9 $0.10 $1.00 10 5 $0.00 0 $0.00 0 8.5 $0.00 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 CORN BIOTECH SOYBEAN COTTON CORN PRICES SOYBEAN COTTON ACRES BIOTECH ACRES BIOTECH ACRES PRICES PRICES LEFT AXIS: ACRES (MILLIONS) RIGHT AXIS: $ PER ACRE Source: USDA and Monsanto estimates 5
  6. 6. MARKET LEADERSHIP Growth Remains for Biotechnology, Particularly in Corn KEY MARKET: UNITED STATES SOYBEANS COTTON CORN Roundup Roundup Bollgard Roundup YieldGard YieldGard Ready Ready I and II Ready Corn Root- Borer worm AVAILABLE 70M 10-15M 6-8M 50M 30M-40M 15-20M MARKET TRAIT 97% 68% 88% 34% 80% 9% PENETRATION BIOTECH ACRES PLANTED 2004 REMAINING AVAILABLE MARKET 6
  7. 7. MARKET LEADERSHIP Value of Soybean Weed Control Has Shifted to Seeds and Roundup Ready Trait U.S. GROWER SOYBEAN SYSTEM COST ROUNDUP READY TRAIT HERBICIDE HERBICIDE SEED COST $47 $43 $40 $ PER ACRE TRAIT VALUE 1999 1995 2004 CONVENTIONAL ROUNDUP READY Source: Monsanto and Doane Market Research 7
  8. 8. MARKET LEADERSHIP Vistive Is the First of a Family of Improved Oils for Food Uses KEY MARKET ACRES U.S. BRAZIL ARGENTINA Vistive 5M TBD TBD AVAILABLE MARKET Low Linolenic Soy CREATING VALUE 0% 0% 0% PERCENT PENETRATED First of a three-product step-change in oil profiles; launch in 2005 • Contract grown, value shared. Most oil already under contract with food companies Monsanto sells to growers, Oil to be in on-the-shelf consumer products in late 2005 processors pay grower premium OIL PROFILES ALONG THE THREE-STEP CHANGE IMPROVEMENT and royalty to Monsanto after LINOLENIC LINOLEIC OLEIC SATS harvest and 18:3 18:2 18:1 18:0 / 16:0 STANDARD crushing SOYBEAN • To be stacked with Mid-Oleic LOW LIN before full market penetration is MID OLEIC + LOW LIN achieved • 1 acre = ZERO SAT + approximately MID OLEIC + 500 lbs. of oil LOW LIN DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 8
  9. 9. INNOVATION - BREEDING Breeding Breakthrough Improves the Taste and Mouth-Feel of Soy-Based Foods KEY MARKET ACRES U.S. BRAZIL ARGENTINA Improved-Protein <1M TBD TBD AVAILABLE MARKET Soybeans for Food CREATING VALUE 0% 0% 0% PERCENT PENETRATED Created through breeding • Contract grown, technologies value shared. Monsanto sells Improves taste and mouth- to growers, feel processors pay grower premium Consumer applications in and royalty to beverages and meat Monsanto after alternatives harvest and crushing Developed with molecular markers and analytical • Small acres, but high value per screenings to accelerate acre breeding Produced in high-yielding varieties for testing DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 9
  10. 10. MARKET LEADERSHIP Monsanto Now Services Seed Market Through Three Outlets CORN American Seeds Licensed Branded Inc. INDEPENDENT SEED CO. 10
  11. 11. MARKET LEADERSHIP Monsanto’s Germplasm Reach Has Grown Through Branded and Broadly Licensed Seeds 2004 U.S. CORN MARKET SHARE DEKALB AND ASGROW BRANDS 49% AMERICAN SEEDS 50% HOLDEN’S/CORN STATES LICENSEES 40% 33% 30% 20% 14% 10% 4% Branded 4% Growth in 3 Years 0% SYNGENTA* MONSANTO AND PIONEER MYCOGEN LICENSEES * Syngenta pro forma for acquisition of Advanta and Golden Harvest 11
  12. 12. MARKET LEADERSHIP Diversity of Corn Seed Breeding Is Driving Market Share Growth; Poised to Expand U.S. KEY MARKET ACRES BRAZIL ARGENTINA BRAND LICENSED ASI Corn 80M 30M 6M AVAILABLE MARKET CREATING VALUE Breeding 14% 33% 2% 35% 49% PERCENT PENETRATED Late 1990s: Acquired 36 major corn breeding programs • Value measured in market share (12 countries X average of 3 companies per country) gains; Today: Over 60% of corn hybrids represent new products Monsanto’s U.S. branded seed over three-year period gained 4 points Monsanto’s elite corn germplasm out-yielded competitors’ in 3 years germplasm across 2004 field trials • Elite, high- yielding 2004 U.S. CORN YIELD GAINS germplasm refreshes MONSANTO BRANDED COMPETITORS product portfolio 220 BUSHELS PER ACRE at the high end 210 of pricing 200 • Highest priced 190 branded 180 conventional 170 hybrid averages 160 $100/unit or 150 $36/acre 95 100 105 110 115 RELATIVE MATURITY (DAYS) DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 12
  13. 13. MARKET LEADERSHIP Market Potential for Roundup Ready Corn Poised To Accelerate KEY MARKET AREAS U.S. ARGENTINA Roundup Ready TARGET MARKET 50M 5M Corn CREATING VALUE PERCENT PENETRATED 32% <1% Current forecast of 20M acres of Roundup Ready corn in • 2005 U.S. trait 2005 U.S. season fee of $8-$10 per With European import approval for single trait, U.S. market acre in Monsanto potential is now 50M acres branded seed for Production plans under way to accelerate growth in 2006 single trait • Grower profits U.S. ROUNDUP READY CORN ACREAGE GROWTH average of $12 25 per acre on yield gains alone; 20 additional cost MILLIONS OF ACRES savings on labor, fuel and 15 equipment • Provides grower 10 greater flexibility in 5 weed control 0 1998 1999 2000 2001 2002 2003 2004 2005F DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 13
  14. 14. MARKET LEADERSHIP Corn Trait Mix Continues To Accelerate Toward Stacked Platform U.S. CORN TRAIT ACRES YIELDGARD CORN BORER STACKED TRAITS ROUNDUP READY CORN OR YIELDGARD 50 SINGLE TRAIT ROOTWORM SINGLE TRAIT 40 ACRES (MILLIONS) 30 20 10 0 1998 1999 2000 2001 2002 2003 2004 2005F Source: Monsanto estimates 14
  15. 15. MARKET LEADERSHIP Triple-Stacked Corn Traits Fill a “Sweet Spot” in U.S. Corn Market Needs YIELDGARD ROOTWORM YIELDGARD CORN BORER ROUNDUP READY CORE ACRES INSURANCE ACRES INSURANCE ACRES INSURANCE VALUE WITH PRICE VALUE REFLECTS BROAD INSURANCE VALUE WITH PRICE ELASTICITY TECHNOLOGY FIT ELASTICITY 15
  16. 16. INNOVATION - BIOTECHNOLOGY High Lysine Enhances Animal Feed, Shifts Value to Seed KEY MARKET ACRES U.S. BRAZIL ARGENTINA High-Lysine Corn: First 4M 1M 4M AVAILABLE MARKET and Second Generation CREATING VALUE 0% 0% 0% PERCENT PENETRATED Lower cost of lysine animal feed ration • Market value for feed-grade Improved amino acid balance; increased total energy lysine is roughly $1 billion High lysine corn mixed with feed proportionately to replace annually lysine in feeding system • Value shared Two-product step-change in lysine content with Cargill through 50/50 LYSINE TOTALS IN TESTING Renessen joint First-Generation High-Lysine Corn venture Target: 1,000 PPM 0 4,000 Parts per million (PPM) Second-Generation High-Lysine Corn Target: 4,000 PPM 0 4,000 Parts per million (PPM) DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 16
  17. 17. INNOVATION - BIOTECHNOLOGY Second-Generation YieldGard Corn Borer Controls More Insects KEY MARKET ACRES U.S. BRAZIL ARGENTINA Second-Generation 30-40M 15M 4M AVAILABLE MARKET YieldGard Corn Borer CREATING VALUE 0% 0% 0% PERCENT PENETRATED Broad control solution for fall armyworm and corn earworm • Value reflects for global expansion enhanced insect control and Durability solution for insect resistance management insect resistance Excellent control in high infestation levels management. Lifts value of CORN EARWORM FEEDING DAMAGE IN TRIALS YieldGard Corn Borer trait. 12 EAR DAMAGE (CM) 10 8 6 4 2 0 YIELDGARD CONTROL 2ND-GENERATION YIELDGARD CORN CORN BORER EVENTS BORER COMPETING PRODUCT DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 17
  18. 18. INNOVATION - BIOTECHNOLOGY Drought Stress Tolerance To Be a Family of High-Value Traits in Multiple Crops KEY MARKET ACRES U.S. BRAZIL ARGENTINA Drought-Tolerant TBD TBD TBD AVAILABLE MARKET Corn CREATING VALUE 0% 0% 0% PERCENT PENETRATED Yield protection on all acres against water deficits • Pricing will Yield enhancement through improved water use on drought- reflect yield prone acres and cost savings on irrigated acres gains in all three markets; value Two gene leads obtained positive results with more than one of higher yields transformed event shared with farmer YIELD INCREASE IN TWO GENE TRIALS • Stacking with weed and insect 3 EVENTS: GENE 1 3 EVENTS: GENE 2 18 control 30 16 enhances the 14 25 margin YIELD INCREASE 12 opportunity 20 10 • Irrigation 15 8 currently costs 6 (BU/AC) 10 $50 to $100 per 4 acre 5 2 0 0 EVENT 3 EVENT 1 EVENT 2 EVENT 3 EVENT 1 EVENT 2 GERMPLASM 1 GERMPLASM 2 DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 18
  19. 19. MARKET LEADERSHIP Emergent and Cotton States Mirror Monsanto’s Market Approach for Corn BRANDED PLATFORM DEKALB EMERGENT ASGROW •Access to quality germplasm •Brand recognition in important markets •Seed and trait share growth LICENSING PLATFORM COTTON • Growth through seed breeding HOLDEN’S enhancements STATES • Trait value capture through enhanced marketing channels • Rapid penetration of future technology advances 19
  20. 20. MARKET LEADERSHIP Emergent Has Held U.S. Market Share Over Last Six Years; Clear Opportunity To Drive Growth U.S. COTTON SEED MARKET SHARE 100% 80% 60% 40% 20% 0% 1999 2000 2001 2002 2003 2004 EMERGENT FIBERMAX PHYTOGEN DELTA & PINE LAND OTHERS Source: USDA, based on planted acres 20
  21. 21. MARKET LEADERSHIP Molecular Breeding Used To Create New Source of Seed for U.S. Cotton Farmers KEY MARKET AREAS U.S. TARGET MARKET 7M-8M Cotton States CREATING VALUE PERCENT PENETRATED 0% Germplasm licensed from third parties and developed through • Rapid and broad molecular breeding by Monsanto introduction of Seed production under way for commercialization in 2006 traits and future innovations Cotton States launching exclusively on a second-generation trait • Licensing fee platform reflects value of 2004 COTTON STATES FIELD TRIALS top quality germplasm, 1,600 separate from value of trait 1,500 • Cotton seed LBS. LINT/ACRE currently sells 1,400 for average of $20 per acre 1,300 1,200 COTTON STATES COMPETITIVE VARIETIES VARIETIES DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 21
  22. 22. INNOVATION - BIOTECHNOLOGY Added Flexibility Means Better Weed Control, Greater Value in Cotton KEY MARKET ACRES U.S. AUSTRALIA Roundup Ready AVAILABLE MARKET 10-15M 0.5-0.8M Flex Cotton CREATING VALUE 0% 0% PERCENT PENETRATED Expanded window of over-the-top application for more • Value reflects “flexible” weed control greater convenience and Increased grower convenience enhanced weed Reduced need for specialized spray equipment control; lifts the value of the 8 cotton seed companies currently breeding trait into Roundup Ready varieties trait • Roundup Ready Flex Cotton will be available only stacked with Bollgard II, which also should boost Bollgard II adoption DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 22
  23. 23. MARKET LEADERSHIP Cotton Market Already Has Shifted to Stacked Platform; Emergent Can Accelerate that Trend U.S. MONSANTO COTTON TRAIT ACRES 15 BOLLGARD & ROUNDUP READY STACKED BOLLGARD II 12 ACRES (MILLIONS) 9 6 3 0 1998 1999 2000 2001 2002 2003 2004 2005F Source: Monsanto estimates 23
  24. 24. FINANCIAL GROWTH Monsanto’s Seed and Trait Gross Profit Growth Driven First by Strong Base Business, then by Pending Acquisitions GROSS PROFIT 2003 2004 2005F PRO FORMA* $2.9 BILLION $2.3 BILLION $2.6 BILLION 48% Gross Profit/Net Sales 47% Gross Profit/Net Sales 47% Gross Profit/Net Sales 23% 28% 30% 47% 61% 53% 16% 19% 23% ROUNDUP AND OTHER GLYPHOSATE-BASED SEEDS AND TRAITS HERBICIDES ALL OTHER AG PRODUCTIVITY 24 * Includes Seminis and Emergent estimates
  25. 25. FINANCIAL GROWTH Growth of Monsanto’s Ongoing Business Is Accelerating, Generating Significant Free Cash Flow MONSANTO ONGOING EPS MONSANTO FREE CASH FLOW BEFORE ACQUISITIONS BEFORE ACQUISITIONS 15% $3.00 growth $1,200 15% growth $2.50 $1,000 $700-$800M $ MILLIONS $2.00 $800 $1.50 $600 $1.00 $400 $0.50 $200 $0.00 $0 2003 2004 2005F 2006F 2007F 2003 2004 2005F 2006F 2007F 25
  26. 26. FINANCIAL GROWTH Acquisitions of Seminis and Emergent Add to EPS and Free Cash Flow Forecasts MONSANTO PRO FORMA MONSANTO PRO FORMA FREE EPS FORECAST CASH FLOW FORECAST $3.50 20%-25% $1,500 growth $3.00 $825-$925M 17% $1,000 growth $2.50 $ MILLIONS $2.00 $500 $1.50 $0 $1.00 2003 2004 2005F 2006F 2007F $0.50 ($500) $0.00 2003 2004 2005F 2006F 2007F ($1,000) Impact of Seminis and Emergent acquisitions 26
  27. 27. SUMMARY Monsanto Has Established Strategic Platforms in High-Value Crops SEED & TRAIT CROP PLATFORMS SMALL-ACRE CROPS LARGE-ACRE CROPS CORN SOYBEANS COTTON VEGETABLE Branded Licensed Branded Branded Licensed Branded Licensed ASI ASI ASGROW EMERGENT* DEKALB SEMINIS* DEKALB ASGROW HOLDEN’S/ HOLDEN’S/ COTTON CORN CORN STATES STATES STATES AMERICAN AMERICAN SEEDS, INC. SEEDS, INC. BIOTECHNOLOGY R&D PLATFORMS MOLECULAR AND CONVENTIONAL BREEDING 27 *Pending
  28. 28. Reconciliation of Non-GAAP Financial Measures Reconciliation of Free Cash Flow 12 Months Ended Fiscal Year 2006 12 Months Ended Fiscal Year 2007 Fiscal Year 2005 $ Millions Aug. 31, 2003 Target Aug. 31, 2004 Target Target Net Cash Provided (Required) by Operations $1,100 $1,200 $1,261 $1,128 $1,000-$1,100 Net Cash Provided (Required) by Investing Activities $(482) $(300) $(300) $(400) $(262) Free Cash Flow $700-$800 $800 $800 $999 $646 Net Cash Provided (Required) by Financing Activities N/A N/A N/A $(243) $(502) Net Increase (Decrease) in Cash and Cash Equivalents N/A N/A $756 $144 N/A Reconciliation of Non-GAAP EPS $ per share 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended Aug. 31, 2006 Aug. 31, 2003 Aug. 31, 2004 Aug. 31, 2005 Aug. 31, 2007 Net Income (Loss) $0.26 $0.99 $0.71-$0.93 $2.13 - $2.30 $2.45 - $2.65 -- -- -- $0.05 -- Cumulative Effect of Change in Accounting Principle $2.45 - $2.65 Income (Loss) Before Cumulative Effect of Accounting Change $0.99 $2.13 - $2.30 $0.31 $0.71-$0.93 -- -- $0.36 -- Restructuring Charges -- Net $0.10 -- 2004 Discontinued Operations and Related $0.02 -- -- $0.05 Restructurings-- Net -- -- Goodwill Impairment Charge for Global Wheat $0.24 -- -- Business -- -- -- -- Estimated Purchase Accounting Adjustments $0.78 -- $0.85 - -- -- -- Tax Benefit on Loss from Sale of European Wheat and -- $(0.39) Barley Business -- -- -- $0.96 $0.68 Solutia-Related Charge $1.42 $2.45 - $2.65 Net Income (Loss) from Ongoing Business $1.61 $1.85 - $2.00 $2.13 - $2.30 28
  29. 29. Reconciliation of Non-GAAP Financial Measures Pro Forma Basis Reconciliation of Free Cash Flow Pro Forma 12 Months Ended Fiscal Year 2007 Fiscal Year 2006 12 Months Ended Fiscal Year 2005 $ Millions Aug. 31, 2003 Target Pro Forma Target Pro Forma Aug. 31, 2004 Target Net Cash Provided (Required) by Operations $1,125-$1,200 $1,200 $1,261 $1,128 $1,125-$1,225 Net Cash Provided (Required) by Investing Activities $(482) $(300) $(300) $(2,100) $(262) Free Cash Flow $825-$925 $825-$900 $(900) $999 $646 Net Cash Provided (Required) by Financing Activities N/A N/A N/A $(243) $(502) Net Increase (Decrease) in Cash and Cash Equivalents N/A N/A $756 $144 N/A Reconciliation of Non-GAAP EPS Pro Forma 12 Months Ended 12 Months Ended $ per share Aug. 31, 2007 12 Months Ended 12 Months Ended 12 Months Ended Aug. 31, 2006 Pro Forma Aug. 31, 2003 Aug. 31, 2004 Aug. 31, 2005 Pro Forma Net Income (Loss) $0.26 $0.99 $0.71-$0.93 $2.16 - $2.34 $2.59 - $2.93 -- -- -- $0.05 -- Cumulative Effect of Change in Accounting Principle $2.59 - $2.93 Income (Loss) Before Cumulative Effect of Accounting Change $0.99 $2.16 - $2.34 $0.31 $0.71-$0.93 -- -- $0.36 -- Restructuring Charges -- Net $0.10 -- 2004 Discontinued Operations and Related $0.02 -- -- $0.05 Restructurings-- Net -- -- Goodwill Impairment Charge for Global Wheat $0.24 -- -- Business -- -- -- -- Estimated Purchase Accounting Adjustments $0.78 -- $0.85 - -- -- -- Tax Benefit on Loss from Sale of European Wheat and -- $(0.39) Barley Business -- -- -- $0.96 $0.68 Solutia-Related Charge $1.42 $2.59 - $2.93 Net Income (Loss) from Ongoing Business $1.61 $1.85 - $2.00 $2.16 - $2.34 29
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