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monsanto 04-11-05

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    monsanto 04-11-05 monsanto 04-11-05 Presentation Transcript

    • Investor Meetings April and May 2005 1
    • 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, the outcome of contingencies 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 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
    • 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 (without the effect of certain items) 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. 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 and are italicized the first time they appear in this presentation. 3
    • 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
    • FINANCIAL GROWTH Seed and Trait Gross Profit Growth Driven First by Strong Base Business, Then by 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 5 * Includes Seminis and Emergent estimates
    • FINANCIAL GROWTH Acquisitions of Seminis and Emergent Add to EPS and Free Cash Flow Forecasts MONSANTO ONGOING EPS MONSANTO FREE CASH FLOW FORECAST FORECAST $3.50 $1,500 $3.00 $1,000 $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) Effect of Seminis and Emergent acquisitions 6
    • MARKET LEADERSHIP Monsanto Raises Bar for Leadership in Global Seeds with Addition of Emergent and Seminis 2003 SEED AND TRAIT REVENUE $3,000 MONSANTO $2,500 SEMINIS EMERGENT $2,000 $ MILLIONS $1,500 $1,000 $500 $0 KWS SAKATA MONSANTO BAYER SYNGENTA DELTA & PRO FORMA LIMAGRAIN PINE LAND DOW DUPONT TAKII Sources: Phillips McDougall, Monsanto reports, news releases Calendar year for all companies but Monsanto and Seminis Syngenta pro forma for acquisition of Advanta and Golden Harvest 7
    • MARKET LEADERSHIP Market Potential for Biotech Traits Highlights Continued Growth Opportunity TOTAL AVAILABLE MARKET IN ACRES SOYBEANS COTTON CORN KEY Roundup Roundup Bollgard I Roundup YieldGard YieldGard MARKETS Ready Ready and II Ready Corn Root- Borer worm United 70M 10-15M 6-8M 50M 30M-40M 15-20M States 50M - - 20M 15M 5M Brazil 30M - - 5M 4M 1M Argentina - - 10-15M - - - India 0.5M- 0.5M- - - - - Australia 0.8M 0.8M 71% 66% 35% 22% 57% 7% BIOTECH ACRES PLANTED 2004 REMAINING AVAILABLE MARKET 9 8
    • 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 9
    • MARKET LEADERSHIP Brazil Can Accelerate Growth Potential for Roundup Ready Soybeans BRAZIL VALUE CAPTURE FISCAL YEAR 2005 40 MILLION • SOUTHERN STATES HAVE GRAIN-BASED PLANTED VALUE-CAPTURE SYSTEM IN PLACE SOYBEAN • DROUGHT EXPECTED TO REDUCE ACRES HARVEST TO 3M-3.5M METRIC TONS • ROUNDUP READY SOYBEAN FEE FOR SALE OF NEW CURRENT HARVEST WILL BE 1 PERCENT ROUNDUP READY OF GRAIN VALUE IN SOUTHERN REGION SOYBEAN VARIETIES NEEDED FISCAL YEAR 2006 TO PENETRATE THIS AREA • PASSAGE OF BILL IN 2005 PERMITS SALE OF NEW VARIETIES AND EXPANDS VARIETIES MARKET OVER THREE-TO-FOUR YEARS FROM ARGENTINA ADAPTED TO • AVAILABLE SEED FOR SALE AND PRICE THIS AREA FOR NEXT SEASON STILL TO BE 10 MILLION DETERMINED PLANTED SOYBEAN ACRES 10
    • MARKET LEADERSHIP Vistive First of a Trio 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 Oil to be in on-the-shelf consumer products in late 2005 to growers, 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 11
    • MARKET LEADERSHIP Monsanto Now Reaches Corn Market Through Three Channels 2004 U.S. CORN MARKET SHARE DEKALB AND ASGROW BRANDS 49% 50% AMERICAN SEEDS 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 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 80M Corn 30M 6M AVAILABLE MARKET CREATING VALUE Breeding 14% 32% 3% 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; U.S. Today: Over 60% of corn hybrids represent new products branded seed share projected introduced over three-year period for 4th year of 1+ point gain 2004 U.S. CORN YIELD GAINS • Elite, high- Monsanto Branded Competitors yielding germplasm 220 BUSHELS PER ACRE refreshes 210 product portfolio 200 at high end of pricing 190 • Highest priced 180 branded 170 conventional 160 hybrid averages $100/unit or 150 95 100 105 110 115 $36/acre RELATIVE MATURITY (DAYS) DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 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 more than 20M acres of Roundup Ready • 2005 U.S. trait corn in 2005 U.S. season fee of $8-$10 per With European import approval for single trait, U.S. market acre in Monsanto potential 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, plus greater 10 flexibility in weed control 5 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 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 15
    • MARKET LEADERSHIP Stacked Traits in Corn Continue To Accelerate Because of U.S. Grower Demand U.S. STACKED CORN TRAITS Percent of total corn trait units sold that are stacked Branded Seed 100 Licensed Seed 80 60 40 20 0 Stacked traits are being driven by grower needs 2002 2003 2004 2005F 2006F 16
    • 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 17
    • 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
    • MARKET LEADERSHIP Emergent Genetics Poised for Growth in U.S. and Indian Cotton Markets 1 UNITED STATES U.S. COTTON SEED MARKET: $279M 12% U.S. BRANDS 52% D&PL EMERGENT 24% FIBERMAX OTHERS 12% 2 INDIA INDIAN HYBRID SEED MARKET: $120M 23% 21% INDIAN BRANDS NUZIWEEDU EMERGENT ANKUR MAHYCO 10% RASI OTHERS 24% 8% PUBLIC HYBRIDS 8% 6% 1 2 USDA and Emergent Genetics estimates Industry and Monsanto estimates 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 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 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 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 stacked only 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 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 24
    • MARKET LEADERSHIP Seminis Provides Ready-Made, Leading Position in Untapped Seed Segment for Monsanto SEMINIS INTERNATIONAL BRANDS 2003 VEGETABLE SEED SALES 500 400 $ MILLIONS 300 200 100 0 O II TA IS ZA IN N TA EJ K N IN A TA A N EN A B R K U M ZW G SA N SE G A N M K SY LI IJ R Source: Seminis estimates Calendar year 25
    • MARKET LEADERSHIP Seminis Has Largest, Most Diverse Germplasm Pool in Vegetable Industry LATIN EUROPE- ASIA KEY MARKET POSITION NAFTA AMERICA AFRICA PACIFIC Vegetable 1 1 1 1 MARKET POSITION Breeding CREATING VALUE Germplasm investment nearly double that of closest competitor • Seminis branded seed recognized Vegetable seed germplasm is proprietary, scarce globally: Royal 75% of R&D devoted to breeding Sluis, Petoseed, Bruinsma, and Between 20%-25% of commercial products come from new Asgrow hybrids introduced in prior two years Vegetable • Breeding valued VEGETABLE FRESHNESS INDEX for quality, taste, health 25% benefits, disease control 20% • New seeds have 15% greatest pricing opportunity 10% 5% 0% 2002 2003 2004 2005F DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 26
    • INNOVATION - BREEDING Molecular Breeding Can Be Applied to Seminis’ Sweet Corn Breeding Programs KEY MARKET POSITION WORLDWIDE Knowledge Transfer MARKET POSITION 4 to Sweet Corn CREATING VALUE Immediate access to broad • Breeding corn germplasm base knowledge transfer Corn genotyping increases capabilities applicable potential new across all corn germplasm product including sweet corn offerings Enables efficient selection • Molecular breeding speeds for disease and quality creation of new traits using marker- hybrids assisted selection • Accelerated genetic gains have potential to translate to market share gains, higher market value DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Early Development Adv. Development Pre-Launch 27
    • INNOVATION Pipeline Is Valued Across Market Opportunities and Crops PRICING VALUE MATRIX 4 3 2 HIGH PER-ACRE ($11-$100+) OMEGA-3 SOYBEANS BOLLGARD II COTTON (AUSTRALIA) IMPROVED-PROTEIN SOYBEANS FOR FOOD PROCESSOR PREFERRED ELITE GERMPLASM BOLLGARD II COTTON BOLLGARD II COTTON (INDIA) ROUNDUP ROUNDUP READY + FLEX COTTON YIELDGARD READY ROUNDUP READY 2ND GENERATION ROOTWORM SOYBEANS + FLEX COTTON HIGH-LYSINE CORN (AUSTRALIA) 2ND GENERATION ROUNDUP IMPROVED-ENERGY CORN III READY SOYBEANS HIGHER-YIELDING CORN SMALL-ACRE (0-10 MILION)1 LARGE-ACRE (11-100 MILLION+)1 DROUGHT ROUNDUP READY CORN TOLERANT COTTON LOW PER-ACRE ($0-$10)2 VISTIVE ZERO SATURATED FAT + MID- IMPROVED-PROTEIN OLEIC + LOW-LINOLENIC SOYBEANS HIGHER- SOYBEANS FOR FEED YIELDING YIELDGARD CORN BORER VISTIVE MID-OLEIC + LOW- SOYBEANS LINOLENIC SOYBEANS VISTIVE SOYBEANS DROUGHT TOLERANT IMPROVED-OIL CORN SOYBEANS FOR PROCESSING HIGH-LYSINE CORN DROUGHT TOLERANT 1 2 SOYBEANS Pipeline projects denoted in white text and represent global value; Commercial products denoted in gold and are U.S.-only, unless otherwise indicated. 1. “Acre Potential” represents the maximum acre penetration by the trait individually and as a stacked trait in the three-year span during its peak. 2. “Per-Acre” premium represents the per-acre average value in the three-year span during the trait penetration peak. 28
    • 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 29
    • 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 $1,125-$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 $ per share Fiscal Year 2005 12 Months Ended 12 Months Ended Fiscal Year 2007 Fiscal Year 2006 Aug. 31, 2004 Target Target Target Aug. 31, 2003 Net Income (Loss) $2.81-$2.93 $2.34 $0.85-$0.97 $0.99 $0.26 -- -- $0.05 -- -- Cumulative Effect of Change in Accounting Principle $0.31 Income (Loss) Before Cumulative Effect of Accounting Change -- $0.99 -- $0.85-$0.97 Estimated In-Process R&D and other Purchase Accounting -- $0.78 - $0.85 -- -- -- Adjustments -- -- -- $0.67 -- Solutia-Related Charge -- -- -- Tax Benefit on Loss from European Wheat and -- $(0.39) Barley Business $0.10 $0.36 -- $0.03 Restructuring Charges -- Net -- $0.05 (Income) Loss on Discontinued Operations and -- $(0.01) -- -- Related Restructuring -- -- Impairment of Goodwill -- -- $0.24 -- -- -- -- PCB Litigation Settlement Expense -- Net $0.96 $2.81-$2.93 $1.42 $2.34 $2.00 - $2.05 Net Income (Loss) from Ongoing Business $1.59 30