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.monsanto 10-11-06

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  • 1. FOURTH-QUARTER 2006 FINANCIAL RESULTS October 11, 2006 1
  • 2. Forward-Looking Statements Certain statements contained in this release are quot;forward-looking statements,quot; such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. 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: continued competition in seeds, traits and agricultural chemicals; the company's exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public acceptance of biotechnology products; the success of the company's research and development activities; the outcomes of major lawsuits, including proceedings related to Solutia Inc.; developments related to foreign currencies and economies; successful completion and operation of recent and proposed acquisitions; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company's estimates related to distribution inventory levels; the company's ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters and accidents on the agriculture business or the company's facilities; and other risks and factors detailed in the company's filings with the SEC. 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 update any forward-looking statements or any of the factors that may affect actual results. 2
  • 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 (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. Trademarks Trademarks owned by Monsanto Company and its wholly-owned subsidiaries are italicized in this presentation. Mavera™ is a trademark of Renessen. © 2006 Monsanto Company 3
  • 4. PERFORMANCE SUMMARY Fourth-Quarter and Full-Year 2006 Financial Summary Fourth Fourth Fiscal Fiscal Change Change Quarter Quarter Year Year 2006 2005 2006 2005 NET SALES $1,391M $1,274M 9% $7,344M $6,294M 17% GROSS $480M $493M (3)% $3,548M $3,004M 18% PROFIT NET $(144)M $(125)M (15)% $689M $255M 170% INCOME DILUTED EPS ON AS- $(0.27) $(0.23) (17)% $1.25 $0.47 166% REPORTED BASIS Note: EPS figures reflect the stock split effective July 28, 2006 4
  • 5. PERFORMANCE SUMMARY Items Included in Reported Earnings Fourth Quarter 2006: $(0.04) per share charge for tax on dividend repatriation $(0.01) per share loss on discontinued operations $(0.01) per share charge for accounting change Fourth Quarter 2005: $0.01 per share income on discontinued operations $0.01 per share tax benefit associated with certain liabilities in connection with the Solutia bankruptcy Note: EPS figures reflect the stock split effective July 28, 2006 5
  • 6. PERFORMANCE SUMMARY Items Included in Reported Earnings Full Year 2006: $(0.04) per share charge for tax on dividend repatriation $(0.01) per share loss on discontinued operations $(0.01) per share charge for accounting change Full Year 2005: $(0.45) per share in-process R&D write-off related to the Seminis and Stoneville acquisitions $(0.32) per share for Solutia-related charge $0.19 per share tax benefit from loss incurred on European wheat and barley business $(0.01) per share net restructuring charges $0.02 per share income on discontinued operations Note: EPS figures reflect the stock split effective July 28, 2006 6
  • 7. STRATEGIC REVIEW Six Key Factors Drive Monsanto’s Future Growth Opportunities PERIOD : PERIOD : PERIOD : SEED & TRAITS ESTABLISHED CORN IS ON THE LEADING EDGE THE GAME CHANGES 2003 2004 2005 2006 2007 2008 2009 2010 Commercial viability of seeds With seeds-and-traits strategy Seed and trait growth comes from: penetration, and traits established; established, gross profit stacking and multi-generation traits, and Supporting infrastructure in opportunity expands in the United breeding enhancement; Corn defines the future place States and internationally with direction penetration, stacking, second- generation – even as competition becomes more significant GROSS PROFIT DRIVERS 1 Growth in the U.S. corn market is not over 2 Growth in international corn market share 3 Biotech traits are advancing internationally Cotton platform creates new opportunities for 4 growth 5 Seminis to capture additional gross margin Next-generation pipeline poised for enhanced 6 commercial delivery 7
  • 8. STRATEGIC REVIEW Demonstrated Product Leadership Translates to Recognized Brand Leadership MARKET RESEARCH: TOP 3 CITED SEED PURCHASE DRIVERS Based on a sample of 1,909 respondents representing farmers who use seed from the largest suppliers in the U.S. corn seed market1 RANKED ORDER OF FARMER RESPONSES OTHER NATIONAL Top 3 purchase CORN SEED drivers for farmers PROVIDER(S) buying DEKALB corn seed all relate Good Yield 35% Good Yield 41% 1 to performance Good Stand/ benefits – reflecting Top 2 of 3 Lower Cost 27% 16% 2 Strong Stalks 68% of the reasons purchase drivers cited related to price Discount/ Test Plot 10% 11% 3 Rebates Results MARKET SHARE PERFORMANCE The positive view by farmers of MARKET SHARE GAIN DEKALB’s brand 2005 to 2006 performance is reflected in its +3 points Asgrow and DEKALB brands market share growth year-to-year 1.Monsanto research; Survey question: “What one factor most influenced your decision to plant more acres of [brand] corn seed in 2006 than you did this past season in 2005? 8
  • 9. STRATEGIC REVIEW Corn Market Share Gains Still To Fully Reflect Power of Molecular Breeding Application 20% 6% 2006 BRANDED U.S. MOLECULAR-BREEDING HYBRIDS MARKET SHARE: 19% AS A PERCENT OF BRANDED UNITS SOLD IN COMMERCIAL 5% CORN PORTFOLIO IN COMMERCIAL CORN PORTFOLIO PERCENT OF BRANDED UNITS SOLD 15% 4% U.S. MARKET SHARE 3% 10% DEKALB AND ASGROW U.S. BRAND MARKET SHARE 2% 5% 1% 0% 0% 2001 2002 2003 2004 2005 2006 2007F 2008F CYCLE 1: CYCLE 2: CYCLE 3: PROGRESSION INTEGRATION OF APPLICATION OF MOLECULAR SELECTION POWER OF OF BREEDING GLOBAL GERMPLASM BREEDING TO SELECTION MOLECULAR BREEDING TECHNOLOGY IN THE • MOLECULAR BREEDING • ASSEMBLED 36 MAJOR CORN • PREDICTIVE COMBINATIONS COMMERCIAL IMPROVES GENETIC POTENTIAL BREEDING PROGRAMS IN 12 ALLOW MORE EFFICIENT PORTFOLIO BY 2X VERSUS CONVENTIONAL COUNTRIES BREEDING BREEDING • FIRST INTRA-COMPANY • MOLECULAR BREEDING • BY 2006, FIRST MOLECULAR CROSSES; BY CYCLE 3, >50% ACCELERATES TRAIT BREEDING HYBRIDS ENTER OF HYBRIDS IN THE U.S. INTEGRATION BY COMMERCIAL PORTFOLIO PORTFOLIO MADE THROUGH SHORTENING ‘BACKCROSSING’ INTRA-COMPANY CROSSES CYCLES 9
  • 10. STRATEGIC REVIEW Another Strong Year of Trait Adoption Moves Penetration of U.S. Corn Traits Toward 2010 Targets U.S. PENETRATION OF CORN TRAITS: 2006 PENETRATION OF CORN TRAITS IN 2006 AS A PERCENT OF 2010 TOTAL MARKET OPPORTUNITY1 YieldGard Corn Borer Roundup Ready Corn 2 YieldGard Rootworm Triple-Stack Acres 0% 20% 40% 60% 80% 100% 2010 2005 2006 OPPORTUNITY ACRES IN MILLIONS 32.1 32.3 50-60 U.S. YieldGard Corn Borer Acres 24.3 32.7 60 U.S. Roundup Ready Corn 2 Acres 4.1 10.0 25-30 U.S. YieldGard Rootworm Acres 1.3 6.0 25-30 U.S. Triple-Stack Acres 1. Percent of total market opportunity reflects the ratio of number of actual acres planted to total trait-acre opportunity identified for each particular trait 10
  • 11. STRATEGIC REVIEW With the Corn Trait Technology in Hand Today, There’s Opportunity to Double Penetration By End of Decade U.S. CORN TRAIT OPPORTUNITY FOCUS: OPPORTUNITY TOTAL MARKET OPPORTUNITY IN 2010 U.S. TRAIT ACRE OPPORTUNITY: CURRENT RELATIVE RETAIL VALUE PER ACRE YIELDGARD COMMERCIAL CORN ROOTWORM TRAITS 2006F: YIELDGARD Only 50% CORN BORER penetrated to date ROUNDUP READY CORN 60 40 50 30 10 20 U.S. TRAIT-ACRE OPPORTUNITY (ACRES IN MILLIONS) OPPORTUNITY DOUBLE SINGLE TRIPLE 20-25M ACRES STACKED ~10M ACRES 25-30M ACRES Above triple stack, Acres exclusively using Because YieldGard Rootworm remaining YieldGard Roundup Ready, which would has the lowest market Corn Borer forms include “refuge” acres opportunity of the 3 traits, its double-stack required for other acres using market potential is the proxy for opportunity insect-protected traits total potential for triple stack 11
  • 12. STRATEGIC REVIEW Monsanto’s Breeding Prowess Is Paving the Way for Market Share Growth Internationally SCORECARD GLOBAL BRANDED MARKET SHARE1 CHANGE FY2004 FY2005 FY2006 FRANCE (’04-’06) NORTH AMERICAN REGION 14% 16% 19% +5% • 7.1M CORN ACRES UNITED STATES2 14% 16% 19% +5% • LARGEST CORN MARKET IN EUROPE-AFRICA REGION 13% 15% 15% +2% EUROPE FRANCE 10% 14% 15% +5% DEKALB market share ITALY 14% 17% 21% +7% has grown 5 points HUNGARY 26% 30% 32% +6% over the last two years TURKEY 17% 23% 21% +4% For the first time ever, SOUTH AFRICA 38% 44% 50% +12% DEKALB is co-leading ASIA-PACIFIC REGION 35% 37% 32% -3% the French market INDIA 29% 34% 35% +6% LATIN AMERICA REGION 37% 38% 38% +1% MEXICO 58% 57% 61% +3% BRAZIL 35% 35% 34% -1% ARGENTINA 35% 37% 35% FLAT 1. Market share is for hybrid corn seed market only 2. U.S. market share is for Asgrow and DEKALB brands only; not inclusive of ASI companies 12
  • 13. STRATEGIC REVIEW Global Seed Business Creates Platform for Growth in Traits in Key Markets GROWTH TARGETS FOR SELECTED TRAITS PAST-YEAR CURRENT-YEAR END-OF-DECADE ACRES IN MILLIONS PLANTED ACRES PLANTED ACRES MARKET POTENTIAL (2005) (2006) (2010F) CORN 24.3 32.7 60 U.S. ROUNDUP READY CORN 2 ACRES 4.1 10.0 25-30 U.S. YIELDGARD ROOTWORM 1.3 6.0 25-30 U.S. TRIPLE-STACK ACRES COTTON N/A 2.1 10-15 U.S. ROUNDUP READY FLEX COTTON 3.1 8.4 10-15 INDIAN BOLLGARD COTTON 0.6 0.7 0.5-0.8 COTTON TRAITS IN AUSTRALIA SOYBEANS BRAZILIAN ROUNDUP READY 12.3 19.4 50 SOYBEANS1 1. Brazilian Roundup Ready soybean acres include acres representing both new-seed sales and point-of-delivery value sharing. 13
  • 14. STRATEGIC REVIEW Focus on Brazilian Roundup Ready Soybean System is to Encourage Further Penetration FOCUS: ROUNDUP READY SOYBEANS IN BRAZIL ACREAGE 2010 MARKET 2004 2005 2006 POTENTIAL 7.4M 12.3M 19M 50M VALUE CAPTURE Dual system in place for new seed sales and point-of-delivery value capture NORTH: PRIMARILY In FY2006, weighted average retail price was ~$3.50 per acre NEW SEED 40 MILLION For FY2007, Monsanto expects weighted average price to be PLANTED in the range of $2.50-$3.00 per acre SOYBEAN ACRES Final weighted price will depend on farmer enrollment in payment options (in order of lowest to highest): SOUTH: PRIMARILY Fresh seed with upfront payment SAVED SEED Fresh seed paid at harvest point-of-delivery 10 MILLION PLANTED Saved seed paid at harvest point-of-delivery: early SOYBEAN ACRES delivery Saved seed paid at harvest point-of-delivery: late delivery EARNINGS CONTRIBUTION 2007F 2006 2.5 to 5 cents 2.5 to 5 cents 14
  • 15. STRATEGIC REVIEW Most Significant Near-Term Opportunity in Cotton Is Upgrading to Second-Generation Traits U.S. PENETRATION OF COTTON TRAITS: 2006 PENETRATION OF COTTON TRAITS IN 2006 AS FOCUS: ROUNDUP READY FLEX A PERCENT OF 2010 TOTAL MARKET OPPORTUNITY1 FIRST GENERATION Launched in 2006 on 2.1 million Bollgard acres Roundup 75 percent of Ready Roundup Ready Flex is in the ‘double- SECOND GENERATION double’ stack with second-generation Bollgard II Bollgard II Roundup Ready Flex 0% 20% 40% 60% 80% 100% 1. Percent of total market opportunity reflects the ratio of number of actual acres planted to total trait-acre opportunity identified for each particular trait 15
  • 16. STRATEGIC REVIEW Seminis To Leverage Portfolio, Pricing and Molecular Breeding To Create New Growth SEMINIS VALUE CREATION STAGED OPPORTUNITIES FOR INCREASING BUSINESS VALUE Significant use of molecular VALUE CREATION OPPORTUNITY markers in commercially relevant breeding Aggressively make hybrid conversions in strategic crops Identify and implement opportunities to price products to value Target crops: Sweet Corn Melons Broccoli Assemble Genetic Tomatoes Watermelons Cauliflower Maps for Key Crops Peppers Cabbage Tomato Pea Cauliflower Carrot Eggplant Focus on 20 – 25 Hot and Sweet Pepper Squash Watermelon Cabbage Pumpkin most-profitable key Cucumber Spinach Chinese Cabbage Okra Lettuce Garden Bean Broccoli Dry Bean Gourd Radish crops Onion Melon Leek Fennel Sweet Corn 2005 2006 2007 2008 2009 2010 OPERATIONAL EXCELLENCE NEW VALUE CREATION PIPELINE ADVANCEMENT Monsanto Seminis Seminis accretive Commercialize first acquires Seminis modestly to FY2007 EPS in hybrids developed accretive to range of $0.10- by molecular FY2006 EPS $0.125 breeding 16
  • 17. STRATEGIC REVIEW Reflecting HIT Status, Roundup RReady2Yield Soybeans Is Targeted for Most Significant Commercial Trait Launch KEY MARKET ACRES U.S. BRAZIL ARGENTINA Roundup RReady2Yield AVAILABLE MARKET 70M 50M 35M Soybeans CREATING VALUE PERCENT PENETRATED 0% 0% 0% LAUNCH ACRES OF U.S. TRAITS PRODUCT CONCEPT 3 HISTORICAL COMMERCIALIZED TRAITS (1996-2006) 2.5 HIT Project ACRES (IN MILLIONS) Roundup RReady2Yield soybeans AVERAGE 2 DISCOVERY PHASE I PHASE II PHASE III PHASE IV HISTORIC TRAIT LAUNCH: 1.5 1.2M ACRES 1 • Roundup RReady2Yield is the second-generation of Monsanto’s popular herbicide-tolerant platform in 0.5 soybeans 0 VALUE CONSIDERATIONS SOYBEAN COTTON CORN TRAITS TRAITS TRAITS • Value is additive, with target of up to 5 bushel-per- Target acreage for Roundup RReady2Yield acre yield improvement over comparable Roundup Ready soybeans commercial launch is expected to be a multiple above historical acreages in launch years • Value created through yield gains will be shared with farmer and value chain as has been Monsanto’s ROUNDUP RREADY2YIELD: COMMERCIAL MILESTONES practice STARTING POINT • Market opportunity for Roundup RReady2Yield U.S. REGULATORY APPROVAL soybeans recognizes competition from other traits SEASON 1 LAUNCH YEAR RETAIL Medium (>$10/acre to <$30/acre) GLOBAL REGULATORY CLEARANCES VALUE/ACRE: TOTAL ACRE PRE-COMMERCIAL USER- COMMERCIAL LAUNCH High (>20M acres) OPPORTUNITY: RELIABILITY TRIALS 17
  • 18. STRATEGIC REVIEW Monsanto Has a Window of Opportunity to Extend Its Leadership in Seeds and Traits Industry 2006 Status Outlook Opportunity (2010) 1 Growth in the U.S. corn market is not over Continued gains of 1-2 points Grow U.S. corn market share +3 points in 2006 per year Current commercial corn traits Accelerate trait penetration Triple stacks grew by >300% are less than 50% penetrated 2 Growth in international corn market share Maintained or grew share in Latin Gains of 1-2 points per year Grow ex-U.S. corn market share America and Europe worldwide 3 Biotech traits are advancing internationally Increase penetration of Roundup Penetration grew by >50% in 2006 50M acre market Ready soybeans in Brazil Increase cotton traits in India Bollgard penetration +160% in 2006 10-15M acre market 4 Cotton platform creates new opportunities for growth Portfolio flipped to second-gen Increase second-generation traits Roundup Ready Flex: 2.1M acres ‘double-double’ traits 5 Seminis to capture additional gross margin Prioritized commercial portfolio, Change commercial mentality to Additional opportunity: capture focusing on 25 most-profitable gross profit focus more value created crops Apply molecular markers to drive Genetic mapping: 8 core products Beginning molecular breeding new products 6 Next-generation pipeline poised for enhanced commercial delivery “HIT” projects create new Advance “HIT” projects 3 “HIT” projects identified standard for launch of pipeline projects 18
  • 19. FINANCIAL FOCUS 2006 Performance Reflects Strength of Seeds and Traits Business FY2006: ORIGINAL PROJECTIONS AND YEAR-END PERFORMANCE YEAR-END ORIGINAL PROJECTIONS1 PERFORMANCE $1.18-$1.25 $1.31 ONGOING EARNINGS PER SHARE UP TO 20% GROWTH 26% GROWTH 2 FROM 2005 FROM 2005 $825M - $900M $1,049M FREE CASH FLOW ~22% 22% SG&A AS A % OF SALES ~10% 10% R&D AS A % OF SALES ~$350M $370M CAPITAL EXPENDITURES ROUNDUP AND ALL OTHER ~$600M $648M GLYPHOSATE-BASED HERBICIDES GROSS PROFIT ALL OTHER AG PRODUCTIVITY ~$400M $438M GROSS PROFIT ~$2.3B $2.46B SEEDS & TRAITS GROSS PROFIT 1. Financial guidance provided at Monsanto’s Biennial Investor Day, Nov. 10, 2005 2. EPS figures reflect the stock split effective July 28, 2006 19
  • 20. FINANCIAL FOCUS 2007 Opportunity Reflects Organic Growth As Seeds and Traits Momentum Continues FY2007: ORIGINAL AND UPDATED PROJECTIONS FY2007 CURRENT ORIGINAL PROJECTIONS1 GUIDANCE $1.41-$1.50 $1.50-$1.57 20% GROWTH FROM 15%-20% GROWTH EARNINGS PER SHARE2 FROM 2006 YEAR-END ORIGINAL 2006 PERFORMANCE PROJECTION $875M-$950M FREE CASH FLOW $875M - $950M 21%-21.5% SG&A AS A % OF SALES ~21% ~10% R&D AS A % OF SALES ~10% $350-$400M CAPITAL EXPENDITURES $350M - $400M ROUNDUP AND ALL OTHER ~$600M GLYPHOSATE-BASED HERBICIDES ~$600M GROSS PROFIT ALL OTHER AG PRODUCTIVITY ~$400M ~$400M GROSS PROFIT $2.8B SEEDS & TRAITS GROSS PROFIT ~$2.6B 1. Financial guidance provided at Monsanto’s Biennial Investor Day, Nov. 10, 2005 2. EPS figures reflect the stock split effective July 28, 2006 20
  • 21. FINANCIAL OUTLOOK Six Drivers Set Up Seeds and Traits for Further Acceleration into the Next Decade FOCUS: BUSINESS OPPORTUNITY FOCUS: FINANCIAL TARGET Six drivers are expected to provide a positive pull on gross profit with higher- Monsanto sees a path to cross the 50% mark for gross margin, higher-growth opportunity. That profit as a percent of sales in the next few years and pull disproportionately benefits Seeds & moving toward a 51% to 53% target by the end of 2010 Genomics segment, but also has a positive effect on the gross-profit-to-net- GROSS PROFIT AS A PERCENT OF SALES sales ratio for the company. 54% GROSS PROFIT DRIVERS 52% TARGET OF UP TO Growth in the U.S. corn market is not 1 51% - 53% GROSS over 50% PROFIT BY 2010 Growth in international corn market 2 48% share Biotech traits are advancing 3 46% internationally 44% Cotton platform creates new 4 opportunities for growth 42% Seminis to capture additional gross 5 2003 2004 2005 2006 2010F margin Next-generation pipeline poised for 6 enhanced commercial delivery 21
  • 22. Reconciliation of Non-GAAP Financial Measures Reconciliation of Free Cash Flow Fiscal Year 2007 Fiscal Year Fiscal Year $ Millions Forecast 2006 2005 Net Cash Provided (Required) by Operating Activities $1,375-$1,450 $1,674 $1,737 Net Cash Provided (Required) by Investing Activities $(500) $(625) $(1,667) Free Cash Flow $875-$950 $1,049 $70 Net Cash Provided (Required) by Financing Activities N/A $(117) $(582) Net Increase (Decrease) in Cash and Cash Equivalents N/A $935 $(512) Reconciliation of Non-GAAP EPS Fiscal Year Fiscal Year Fourth Quarter Fourth Quarter $ per share 2006 2005 Fiscal Year 2006 Fiscal Year 2005 Net Income per Share $1.25 $0.47 $(0.27) $(0.23) Cumulative Effect of Change in Accounting Principle $0.01 -- -- $0.01 Diluted Earnings (Loss) per Share Before Effect of $1.26 $0.47 $(0.26) $(0.23) Accounting Change Tax Charge on Repatriated Earnings $0.04 -- -- $0.04 Seminis and Stoneville In-Process R&D -- -- $0.45 -- Solutia-Related Charge and Tax Benefit -- $0.32 -- $(0.01) Tax Benefit on Loss from European Wheat and -- $(0.19) -- -- Barley Business Restructuring Charges -- Net -- -- $0.01 -- Loss (Income) on Discontinued Operations $0.01 $(0.01) $(0.02) $0.01 Diluted Earnings (Loss) per Share from Ongoing Business $1.31 $(0.21) $(0.25) $1.04 Note: EPS figures reflect the stock split effective July 28, 2006 22
  • 23. Reconciliation of Non-GAAP Financial Measures Reconciliation of Seminis Gross Profit Fiscal Year Fiscal Year 2006 2005 As Inventory Step-Up As As Inventory Step-Up As $ Millions Reported Charged to COGS Adjusted Reported Charged to COGS Adjusted Vegetable and Fruit Seed Sales $569 $569 $226 $226 Vegetable and Fruit Seed Cost of Goods Sold $273 $50 $223 $113 $19 $94 Vegetable and Fruit Seed Gross Profit $296 $346 $113 $132 Vegetable and Fruit Seed Gross Profit Percent of Sales 52.0% 60.8% 50.0% 58.4% 23
  • 24. Reconciliation of Non-GAAP Financial Measures Reconciliation of Return on Capital $ Millions 12 Months Total Monsanto Company and Subsidiaries: Ended Aug. 31, 2006 Operating Profit After-tax (excluding certain items) $767 Average Capital 6,833 Return on Capital 11.2% Operating Profit After-tax (excluding certain items): Net Income $689 Adjustment for certain items, after-tax: Tax Charge on Repatriated Earnings 21 Cumulative Effect of Accounting Change 6 Restructuring Reversal (1) Loss on Discontinued Operations 3 Interest Expense – Net 79 Tax on Interest Expense – Net (at 38% tax rate) (30) Operating Profit After-tax (excluding certain items) $767 As of Aug. 31, 2006 Average Capital: Short-Term and Long-Term Debt $1,667 Shareowners’ Equity 6,536 Cash and Cash Equivalents (1,460) Cash for Operations 125 Total Capital 6,868 Prior Period Capital 6,797 Average Capital $6,833 24