monsanto EU_TerryCrews_1110006

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monsanto EU_TerryCrews_1110006

  1. 1. TERRY CREWS CHIEF FINANCIAL OFFICER MONSANTO EUROPEAN INVESTOR DAY Nov. 10, 2006 1
  2. 2. OVERVIEW Monsanto’s Strategic and Financial Opportunity Lies In Seeds and Traits $3,000 FOCUS: 12-MONTH ROLLING GROSS PROFIT BY BUSINESS SEGMENT SEEDS & GENOMICS SEGMENT $2,500 AGRICULTURAL PRODUCTIVITY SEGMENT 12-MONTH ROLLING GROSS PROFIT SEEDS & GENOMICS CAGR: 36% $2,000 ($ IN MILLIONS) $1,500 $1,000 AGRICULTURAL KEY INFLECTION POINT: PRODUCTIVITY MID-2004, ROLLING GROSS CAGR: (5)% PROFIT FOR SEEDS & $500 GENOMICS BUSINESS SEGMENT SURPASSED AGRICULTURAL PRODUCTIVITY $0 03 03 03 03 4 04 04 4 05 05 5 05 06 06 06 6 00 0 00 00 20 20 20 20 20 20 20 20 20 20 20 20 20 2 2 2 1 3 4 1 2 4 1 2 3 4 2 2 3 4 3 1 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2
  3. 3. OVERVIEW Six Building Blocks Extend Leadership and Elevate Gross Margin Opportunity Through 2010 MONSANTO’S OPPORTUNITY GROSS MARGIN OPPORTUNITY Delta between 2006 current gross GROSS PROFIT AS A PERCENT OF SALES margin and a 51-53% trajectory 54% reflects continued growth opportunity for seeds and traits FACTOR VALUE1 GROSS MARGIN ‘PULL’ 52% HIGH U.S. corn International MEDIUM 50% corn Global biotech MEDIUM traits 48% LOW CURRENT LEVEL Cotton platform MEDIUM Seminis 46% HIGH R&D pipeline 44% 2003 2004 2005 2006 2007F 2008F 2009F 2010F 1. Increment to total gross profit in the period 2006-2010; Some categories will overlap. MEDIUM LOW HIGH >$250M $100M - $250M <$100M 3
  4. 4. U.S. CORN GROWTH Seed Market Share Gains Alone Yield Greater Profit Contributions U.S. MARKET SHARE VALUE SEED VALUE RANGE FOR ADDED ACRES IN DEKALB/ASGROW BRANDS HIGH-END U.S. Corn LOW-END RANGE RANGE MATURE, LOWER-VALUE SITUATION: NEW, HIGHER-VALUE HYBRIDS IN PORTFOLIO HYBRIDS IN PORTFOLIO • In 2006, Monsanto’s DEKALB MARKET FACTORS and Asgrow brands grew by 3 78.5M USDA Total Acres Planted (2006) market share points 780,000 acres Acre: Market Share Conversion • Over five years, comparable market share gain was 9 points PRICING FACTORS OUTLOOK: $32 $42 Average Seed Retail Price Per Acre • Gain of 1 market share point in U.S. adds approximately $10M $23.4M $32.8M Retail Value: Per Share Point to $15M to gross profit in seed COST FACTORS alone for DEKALB/Asgrow 40-45% 40-45% Assumed Industry-Standard Gross brands Margin GROSS PROFIT VALUE $12.80-$14.40 $16.80-$18.90 Average Gross Profit: Per Acre Average Gross Profit: $10M-$11M $13M-$15M Per Share Point MEDIUM 1. Average incremental value in gross profit opportunity for the seed value (excluding traits) of the addition of an acre in a Monsanto national brand: MEDIUM HIGH LOW >$20 $10 - $20 <$10 4
  5. 5. U.S. CORN GROWTH Each New Trait Stacks Additive Gross Margin to Upgrade Financial and Commercial Platform INCREASED MARGINS WITH STACKING VALUE PROGRESSION OF STACKED CORN TRAITS U.S. Corn 67% SITUATION: 4 68% TRAIT GROSS PROFIT VALUE PER ACRE 65% • Stacking corn traits on to our 66% 3.5 GROSS PROFIT PER ACRE AS A 63% PERCENTAGE OF NET SALES germplasm improves gross 64% profit contribution 3 61% • In 2006, Monsanto national 62% 2.5 (INDEXED) brands sold more stacked 60% traits than single traits 2 58% • In 2007, in our national brands, 1.5 Monsanto expects to sell more 56% triple stacks than singles 1 54% OUTLOOK: 0.5 52% • Addition of each stacked trait increases gross profit as a 0 50% SEED ONLY 1 TR A IT 2 TR A ITS 3 TR A ITS 4 TR A ITS percent of sales for each bag of seed sold GROSS PROFIT AS A PERCENT OF SALES For currently commercialized traits, the demand for triple- stack traits can double gross profit per acre over seed alone in DEKALB/Asgrow brands “4 trait” value assumed to be an average of the retail value of the three other first-generation traits 5
  6. 6. INTERNATIONAL CORN GROWTH Gross Profit Value of Seed Internationally Varies, Yet Still Solid Contributor to Growth, Commercial Platform GERMPLASM VALUE: FRANCE SEED VALUE RANGE FOR ADDED ACRES IN DEKALB/ASGROW BRANDS International Corn SITUATION: • Primary value in international corn markets today is in the seed FRANCE • In France, DEKALB market share has grown 5 points over MARKET FACTORS 7.5M the last 3 years (3.0M Ha) Total Acres Planted (2006) OUTLOOK: 7,500 acres Acre: Market Share Conversion • For the first time ever, PRICING FACTORS DEKALB is co-leader of French $57 market Average Seed Retail Price Per Acre • Monsanto is targeting to grow share in each of the most COST FACTORS 40-45% valuable corn-growing Assumed Industry-Standard Gross Margin countries GROSS PROFIT VALUE $23-26 Average Gross Profit: Per Acre1 HIGH 1. Average incremental value in gross profit opportunity for the seed value (excluding traits) of the addition of an acre in a Monsanto-owned brand: MEDIUM HIGH LOW >$20 $10 - $20 <$10 6
  7. 7. GLOBAL BIOTECH TRAIT GROWTH Significant Growth Opportunity Lies in Expansion of Existing Commercial Biotech Traits Globally GLOBAL MARKET OPPORTUNITY MARKET OPPORTUNITY FOR BIOTECH TRAITS THROUGH 20101 Global Biotech Traits SITUATION: SOYBEANS COTTON CORN • Historically, most rapid BOLLGARD ROUNDUP ROUNDUP YIELDGARD ROUNDUP AND YIELDGARD adoption has been in the READY READY CORN READY BOLLGARD ROOTWORM CORN 2 BORER (FLEX) II U.S., also the most highly penetrated market United States 70M 10-15M 6-8M 60M 50-60M 25-30M • Penetration is moving globally, trait by trait, country Brazil 50M 3M 2M 20M 15M 5M by country Argentina 35M - - 5M 4M 1M OUTLOOK: • As is the case in the U.S., India - 10-15M 10-15M 3 – 5M 3 – 5M - largest category of Europe 1M - - 24M 8M 5M opportunity internationally is corn trait adoption Africa 0.2M 11M 10M 6M 4M - • Even where some traits – like 0.5M- 0.5M- Australia - - - - cotton – are penetrated, 0.8M 0.8M there’s still an upgrade 34.5- 28.5- 118- opportunity to second- Total Key 156.2M 84-96M 36-41M generation traits Markets 44.8M 35.8M 120M 2006 86% 39% 57% 29% 42% 26% Penetration 1. Market Opportunity reflects total acres where technology is applicable, not necessarily acres projected for penetration by 2010. 7
  8. 8. GLOBAL BIOTECH TRAIT GROWTH Emerging Markets Require Business Solutions to Balance Reward and Risk ROUNDUP READY SOYBEANS IN BRAZIL PROJECTED EPS CONTRIBUTIONS (2007 VS 2010) Global Biotech Traits SITUATION: $0.12 $0.09-$0.11 • Genetic footprint in corn seed $0.10 globally establishes platform for trait launches CONTRIBUTION TO EPS • Largest soybean market $0.08 outside U.S. is Brazil; Recent ($ PER SHARE) pricing action taken there to $0.06 $0.025-$0.05 promote penetration of new seed $0.04 • Cotton traits among most advanced globally, with $0.02 second-generation upgrades in 2007 in Australia and India $0.00 OUTLOOK: 2007F 2010F 2007 2008F 2009F 2010 • Corn traits outside U.S. have significant opportunity for ASSUMPTIONS ASSUMPTIONS penetration • Brazilian upside of 30M+ acres PRICING PRICING $2.50-$3.00/acre $2.50-$3.00/acre for Roundup Ready soybeans MARKET SIZE MARKET SIZE 50M 50M • Cotton holds dual opportunity of initial penetration into PENETRATION PENETRATION 45% 90% markets and upgrading to second-generation traits 8
  9. 9. COTTON GROWTH Upgrade to Double-Double Stacks in Cotton Significantly Enhances Value Versus Seed Alone INCREASED U.S. COTTON TRAIT RETAIL VALUE EXAMPLE: VALUE PROGRESSION OF COTTON TRAITS IN NORTH DELTA REGION OF U.S. Cotton Platform 2 SITUATION: • Cotton trait platform is first to TRAIT RETAIL VALUE PER ACRE 1.50 move forward on complete 1.5 replacement of first-generation 1.17 traits with second-generation 1.00 upgrades (INDEXED) 1 • Roundup Ready Flex cotton launched in the U.S. in 2006; Will launch in Australia in 2007 0.5 OUTLOOK: • From the base of a single trait, move to second-generation 0 stack – ‘double-double’ – can SEED ONLY FIRST-GEN SINGLE FIRST-GEN DOUBLE-DOUBLE increase retail value by 50 STACKED percent ADDITIVE VALUE IN STACKS Each trait in a stacked combination adds functionality and value for the farmer. Second-generation stacks further enhance that added performance 9
  10. 10. SEMINIS GROWTH Seminis To Leverage Portfolio, Pricing and Molecular Breeding To Create New Growth SEMINIS VALUE NET PRESENT VALUE OF GROSS PROFIT BY PRODUCT TIERS Seminis PRODUCT RANKING SITUATION: WITHIN 25-CROP • In 2006, narrowed commercial PORTFOLIO: and research focus to 25 crops that generate the most profit FIRST TIER • Began application of breeding technology, with genome-wide Tomato marker platform for tomatoes Sweet Pepper and peppers; Melons, Hot Pepper watermelons and the brassica Onion ~50% family of cabbage, broccoli Melon and cauliflower next SECOND TIER OUTLOOK: THIRD TIER • Seminis gross profit as a percent of sales was in the FOURTH TIER 60% range and will continue to grow through price increases SEMINIS VALUE The top 5 crops in Seminis portfolio represent ~50% of the expected gross profit contribution going forward 10
  11. 11. PIPELINE Monsanto’s Pipeline Is Funded for Growth, but Focused on Return on Investment PIPELINE VALUE: TOP-TEN PROJECTS REFLECTING COMMERCIAL VALUE1 SOURCE OF VALUE PER ACRE CORE PHASE R&D Pipeline VALUE ACRE BASE MARKETS Renessen Corn Processing SITUATION: U.S 4 $10 - $30 20M Brazil System and Mavera™ High- Feed and fuel Europe Value Corn with Lysine2 In FY2006: U.S. • There was positive HIT Roundup RReady2Yield 3 Yield $10 - $30 155M Brazil movement – enhancement soybeans Argentina advancing phases or 3 U.S. Omega 3 soybeans >$30 5M Improved health adding to the pipeline – in 50 percent of the U.S. 3 YieldGard VT PRO $10 - $30 41M Brazil Insect protection pipeline projects 2nd-GEN YIELDGARD CORN BORER Europe • Three projects were U.S Water 2 HIT HIT designated as “HIT” Drought-tolerant corn $10 - $30 164M Brazil replacement and Europe yield projects reflecting 2 our confidence in Vistive III soybeans $10 - $30 12-15M U.S. Improved health their commercial U.S. track 2 Yield Higher yielding soybeans $10 - $30 155M Brazil enhancement Argentina 1. Top ten not presented in ranked order; Commercial 2 Brazil Insect-protected soybeans <$10 95M Yield value calculated by WITH ROUNDUP RREADY2YIELD Argentina penetration and retail value during three-year U.S. Water span at peak. 1 India Drought-tolerant cotton $10 - $30 36M replacement and Brazil 2. Value and acres are for yield Australia direct feed piece only and do not include value for U.S Nitrogen Renessen’s corn 1 Brazil Nitrogen utilization corn $10 - $30 164M replacement and processing system, which Europe is to be determined yield 11
  12. 12. FINANCIAL FOCUS 2007 Is First Step Toward Gross Profit Targets in 2010 MONSANTO’S OPPORTUNITY GROSS MARGIN OPPORTUNITY Delta between 2006 current gross GROSS PROFIT AS A PERCENT OF SALES margin and a 51-53% trajectory 54% reflects continued growth opportunity for seeds and traits FACTOR VALUE1 GROSS MARGIN ‘PULL’ 52% HIGH U.S. corn International MEDIUM 50% corn Global biotech MEDIUM traits 48% LOW CURRENT LEVEL Cotton platform MEDIUM Seminis 46% HIGH R&D pipeline 44% 2003 2004 2005 2006 2007F 2008F 2009F 2010F 1. Increment to total gross profit in the period 2006-2010; Some categories will overlap. MEDIUM LOW HIGH >$250M $100M - $250M <$100M 12
  13. 13. FINANCIAL FOCUS Gross Profit Mix Shows Power of Seeds and Traits, Especially as Traits Expand ONGOING FREE CASH EPS FLOW 2007F $1.50-$1.57 $875M - $950M GROSS PROFIT PERFORMANCE BY SEGMENT 2003-2007F Gross Profit by Segment $4,000 SITUATION: $3,500 • From 2005 to 2006, gross profit grew 18%; Gross profit from $3,000 Seeds & Genomics grew 24% IN MILLIONS $2,500 OUTLOOK: 2007F $2,000 ~$2.8B SEEDS & GENOMICS $1,500 ROUNDUP AND OTHER ~$600M GLYPHOSATE- $1,000 BASED HERBICIDES ALL OTHER AG $500 ~$400M PRODUCTIVITY $0 2003 2004 2005 2006 2007F ROUNDUP AND OTHER GLYPHOSATE- SEEDS & GENOMICS BASED HERBICIDES ALL OTHER AGRICULTURAL PRODUCTIVITY 13
  14. 14. FINANCIAL FOCUS R&D and SG&A Spend Balances Growth with Focus ONGOING FREE CASH EPS FLOW 2007F $1.50-$1.57 $875M - $950M SG&A AS A PERCENT OF SALES 2004-2007F 25 SG&A and R&D LOW 20% as Percent of Sales RANGE 20 SITUATION: 15 • Seeds and traits are high- service businesses, but that 10 service is highly rewarded in the marketplace 5 • R&D as a percent of sales remains in 10 percent range 0 • R&D expense includes 2004 2005 2006 2007F milestone payments and other R&D AS A PERCENT OF SALES expenses related to third-party 12 2004-2007F agreements • Renessen joint venture 10% RANGE included in Other Expense, 8 approximately $35M investment annually OUTLOOK: 4 2007F 21%-21.5% SG&A % SALES ~10% R&D % SALES 0 2004 2005 2006 2007F 14
  15. 15. FINANCIAL FOCUS Earnings Should Continue to Translate to Free Cash Flow ONGOING FREE CASH EPS FLOW 2007F $1.50-$1.57 $875M - $950M Free Cash Flow FREE CASH FLOW PERFORMANCE 2004-2007F SITUATION: • In 2005, Monsanto used $1,500 $1,600 roughly $1.5 billion of cash for acquisitions, including Seminis, Emergent and ASI • 2006 free cash also covered a $1,200 $1,049 one-time payment for a $999 $875 - $950 IN MILLIONS licensing agreement with University of California and a $800 contingent payment related to Seminis acquisition OUTLOOK: 2007F $400 $875-$950M FREE CASH FLOW $70 $0 2004 2005 2006 2007F FREE CASH FLOW PERFORMANCE 2005 FREE CASH USED FOR AND FORECAST ACQUISITIONS 15
  16. 16. FINANCIAL FOCUS Working Capital Improvements Have Helped Fund Key Acquisitions ONGOING FREE CASH EPS FLOW 2007F $1.50-$1.57 $875M - $950M SOURCES OF CASH USES OF CASH Free Cash Flow CUMULATIVE: 2004-2006 CUMULATIVE: 2004-2006 SITUATION: ACQUISITIONS WORKING CAPITAL • From 2004-2006, Monsanto CAPITAL EXPENDITURES NET INCOME generated $1.3B from TECHNOLOGY AND OTHER INVESTMENTS working capital • During the same period, $1.8B was spent on acquisitions OUTLOOK: 2007F $860M $1.8B $1.3B $1.2B $875-$950M FREE CASH FLOW $270M CASH GENERATION AND USES Between 2004 and 2006, much of the cash generated from working capital improvements was used to fund key acquisitions 16
  17. 17. FINANCIAL FOCUS Working Capital Discipline Sustained Even as Business Expands ONGOING FREE CASH EPS FLOW 2007F $1.50-$1.57 $875M - $950M RECEIVABLES AS A PERCENT OF SALES 2004-2007F Receivables & Inventories 40% as Percent of Sales 30% SITUATION: • Receivables as percent of 20% sales have declined from 47 percent in 2003 to just under 20 percent in 2006, even with 10% addition of acquisitions • Credit policies in Brazil and 0% Argentina remain disciplined, 2004 2005 2006 2007F preference for receivables that INVENTORIES AS A PERCENT OF SALES are securitized 2004-2007F 30% • As a result, receivables as percent of sales dropped in both Brazil and Argentina in 20% 2006 OUTLOOK: • Inventories as percent of sales 10% have increased because of acquisitions but should drop modestly going forward 0% 2004 2005 2006 2007F 17
  18. 18. FINANCIAL FOCUS Investing Cash Targeted for Bolt-On Acquisitions, Technology Investments, Seed Production ONGOING FREE CASH EPS FLOW 2007F $1.50-$1.57 $875M - $950M CAPITAL AND TECHNOLOGY EXPENDITURES Investing Cash 2004-2007F SITUATION: $400 • Investing cash primarily used $350 for bolt-on acquisitions to bolster seed positions in all $300 crops globally IN MILLIONS $250 OUTLOOK: $200 • Capital expenditures of approximately $400M in 2007, $150 with primary investments in new or expanded seed $100 production $50 • Technology investments $0 expected to continue in $100M range 2004 2005 2006 2007F TECHNOLOGY CAPITAL 18
  19. 19. FINANCIAL FOCUS Consistent Commitment to Return Additional Value through Dividends, Share Repurchases ONGOING FREE CASH EPS FLOW 2007F $1.50-$1.57 $875M - $950M USES OF CASH Uses of Cash CUMULATIVE: 2004-20061 SITUATION: • From 2004-2006, Monsanto has generated a cumulative total of approximately $4.6B in cash ACQUISITIONS • $800 million, four-year share repurchase program announced end SHARE REPURCHASE & DIVIDENDS of October 2005 $120 million of shares repurchased DEBT REPAYMENT through end of FY 2006 CAPITAL EXPENDITURES • Dividend payments Dividend yield as of 8/31/06: 0.84% CASH ACCUMULATION FY 2006 GAAP pay-out ratio: 30.5% OUTLOOK: • Monsanto will continue to explore options for returning value to shareowners, including: • Continued strategic seed USES OF CASH acquisitions Between 2004 and 2006, 75% of the cash generated was • Continued technology investments either returned to shareowners or re-invested in the growth • Share repurchase programs of the business • Dividends 1. Net of approximately $400M in pension contributions 19
  20. 20. FINANCIAL FOCUS Return on Capital Has Leapfrogged Original Targets, Still Can Significantly Improve ONGOING FREE CASH EPS FLOW 2007F $1.50-$1.57 $875M - $950M Return on Capital RETURN ON CAPITAL 12% 2003-2006 SITUATION: 10% • ROC in 2006 of 11.2 percent surpassed original projections 8% of an ROC target in 2007 of 10.5 percent • ROC in 2007 will be dependent 6% on timing of closing of potential Delta and Pine Land 4% acquisition OUTLOOK: 2% • Exclusive of acquisition effect, target of another 100-basis- 0% point improvement 2003 2004 2005 2006 ROC IMPROVEMENT From 2003 to 2007, ROC has the potential to double 20
  21. 21. SUMMARY Focus, Discipline and Leadership Translate to Continued Growth FY2007 GUIDANCE EARNINGS PER SHARE GROWTH PROGRESSION OF ONGOING EPS (2003-2007F) $1.50-$1.57 Earnings Per 15%-20% GROWTH FROM 2006 YEAR-END Share1 2007 EPS GUIDANCE: PERFORMANCE $1.60 15-20% GROWTH $875M-$950M Free Cash Flow $1.40 $1.50-$1.57 SG&A as a % Of 21%-21.5% Sales $1.31 $1.20 R&D as a % Of ~10% Sales $1.00 Capital $350-$400M $1.04 Expenditures $0.80 Roundup and All Other Glyphosate- ~$600M $0.79 Based Herbicides $0.71 $0.60 Gross Profit 2003 2004 2005 2006 2007F All Other Ag ~$400M 12% GROWTH 31% GROWTH 26% GROWTH Productivity Gross Profit Seeds & Traits ~$2.8B Gross Profit 1. EPS figures reflect the stock split effective July 28, 2006 21
  22. 22. Reconciliation of Non-GAAP Financial Measures Reconciliation of Free Cash Flow Fiscal Year 2007 Fiscal Year Fiscal Year Fiscal Year $ Millions Forecast 2006 2005 2004 Net Cash Provided (Required) by Operating Activities $1,375-$1,450 $1,674 $1,737 $1,261 Net Cash Provided (Required) by Investing Activities $(500) $(625) $(1,667) $(262) Free Cash Flow $875-$950 $1,049 $70 $999 Net Cash Provided (Required) by Financing Activities N/A $(117) $(582) $(243) Effect of Exchange Rate Changes on Cash and Cash Equivalents -- $3 -- -- Net Increase (Decrease) in Cash and Cash Equivalents N/A $935 $(512) $756 Reconciliation of Non-GAAP EPS Fiscal Year Fiscal Year Fiscal Year Fiscal Year $ per share 2006 2005 2004 2003 Net Income (Loss) per Share $1.25 $0.47 $0.50 $0.13 Cumulative Effect of Change in Accounting Principle $0.01 -- -- $0.02 Diluted Earnings (Loss) per Share Before Effect of $1.26 $0.47 $0.50 $0.15 Accounting Change Tax Charge on Repatriated Earnings $0.04 -- -- -- Seminis and Stoneville In-Process R&D -- $0.45 -- -- Solutia-Related Charge -- $0.32 -- -- Tax Benefit on Loss from European Wheat and -- $(0.19) -- -- Barley Business Restructuring Charges -- Net -- $0.01 $0.18 $0.05 Loss (Income) on Discontinued Operations $0.01 $(0.02) -- $0.04 Impairment of Goodwill -- -- $0.12 -- PCB Litigation Settlement Expense – Net -- -- -- $0.48 Diluted Earnings (Loss) per Share from Ongoing Business $1.31 $1.04 $0.80 $0.72 Note: EPS figures reflect the stock split effective July 28, 2006 22
  23. 23. Reconciliation of Non-GAAP Financial Measures Reconciliation of Return on Capital 12 Months 12 Months 12 Months 12 Months $ Millions Total Monsanto Company and Subsidiaries: Ended Ended Ended Ended Aug. 31, 2006 Aug. 31, 2005 Aug. 31, 2004 Aug. 31, 2003 Operating Profit After-tax (excluding certain items) $767 $612 $464 $413 Average Capital 6,827 6,256 6,068 6,774 Return on Capital 11.2% 9.8% 7.6% 6.1% Operating Profit After-tax (excluding certain items): Net Income $689 $255 $267 $68 Adjustment for certain items, after-tax: In-Process R&D Write-Off Related to the Seminis and Stoneville -- 248 -- -- Acquisitions Solutia-Related Charge -- 175 -- -- Tax Benefit on Loss from European Wheat and Barley Business -- (106) -- -- Restructuring Charges (Reversals) – Net (1) 6 98 24 Impairment of Goodwill -- -- 64 -- Tax Charge on Repatriated Earnings 21 -- -- -- Cumulative Effect of Accounting Change 6 -- -- 12 PCB Litigation Settlement Expense – Net -- -- -- 252 (Income) Loss on Discontinued Operations 3 (12) (1) 18 Interest Expense – Net 79 75 57 63 Tax on Interest Expense – Net (30) (29) (21) (24) Operating Profit After-tax (excluding certain items) $767 $612 $464 $413 As of Aug. 31, As of Aug. 31, As of Aug. 31, As of Aug. 31, 2006 2005 2004 2003 Average Capital: Short-Term and Long-Term Debt $1,667 $1,584 $1,368 $1,422 Shareowners’ Equity 6,525 5,613 5,258 5,156 Cash and Cash Equivalents (1,460) (525) (1,037) (281) Cash for Operations 125 125 125 125 Total Capital 6,857 6,797 5,714 6,422 Prior Period Capital 6,797 5,714 6,422 7,125 Average Capital $6,827 $6,256 $6,068 $6,774 23

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