ST. LOUIS--(BUSINESS WIRE)--
Monsanto Company (NYSE: MON) today announced third-quarter results of
$1.90 earnings per share (EPS) on an as-reported basis and $1.93 on an
ongoing basis, led in part by continued momentum in soybean
technologies. The company remains focused on delivering on its
operational plan and key business milestones, while simultaneously
working with Bayer toward completion of the pending merger by the end of
the calendar year.

  Third Quarter   Nine Months
($ in millions, except per share amounts)   2017   2016   2017   2016
Net Sales by Segment    
Corn seed and traits $ 1,491 $ 1,592 $ 5,342 $ 5,024
Soybean seed and traits 896 693 2,358 1,913
Cotton seed and traits 338 285 562 370
Vegetable seeds 199 196 523 526
All other crops seeds and traits 208     441     381     590  
TOTAL Seeds and Genomics $ 3,132 $ 3,207 $ 9,166 $ 8,423
 
Agricultural productivity $ 1,098     $ 982     $ 2,788     $ 2,517  
TOTAL Agricultural Productivity $ 1,098 $ 982 $ 2,788 $ 2,517
                 
TOTAL Net Sales   $ 4,230     $ 4,189     $ 11,954     $ 10,940  
                 
Gross Profit   $ 2,386     $ 2,380     $ 6,597     $ 5,879  
                 
Operating Expenses   $ 1,222     $ 1,131     $ 3,322     $ 3,239  
Interest Expense – Net $ 83 $ 86 $ 285 $ 281
Other Expense (Income)– Net   $ 4     $ (35 )   $ (41 )   $ 160  
Net Income Attributable to Monsanto Company   $ 843     $ 717     $ 2,240     $ 1,527  
                 
Diluted Earnings per Share   $ 1.90     $ 1.63     $ 5.06     $ 3.40  
Items Affecting Comparability – EPS Impact (For definitions of
adjustments to EPS, see note 1.)
Restructuring Charges 0.02 (0.03 ) 0.50
Environmental and Litigation Matters (0.02 ) 0.02 0.02 0.04
Pending Bayer Transaction Related Costs 0.05 0.27
Argentine-Related Tax Matters 0.50 0.03 0.49
Income from Discontinued Operations           (0.03 )   (0.03 )
Diluted Earnings per Share from Ongoing Business (For the
definition of ongoing EPS, see note 1.)
  $ 1.93     $ 2.17     $ 5.32     $ 4.40  
Effective Tax Rate   21 %   40 %   26 %   32 %
 
           
    Third Quarter   Nine Months
Comparison as a Percent of Net Sales:   2017   2016   2017   2016
Gross profit 56%   57% 55%   54%
Selling, general and administrative expenses 19% 17% 17% 17%
Research and development expenses 10% 9% 10% 10%
Income from continuing operations before income taxes 25% 29% 25% 20%
  Net income attributable to Monsanto Company   20%   17%   19%   14%
 

"Our innovation leadership and commitment to our grower customers is
driving our growth, and the completion of the third quarter bolsters our
confidence in the full year," said Hugh Grant, Monsanto chairman and
chief executive officer. "I’m very pleased with what our teams have
accomplished this year, balancing meaningful progress on both delivering
the business and working to close the deal with Bayer."


Results of Operations

Net sales for the fiscal year 2017 third quarter were $4.23 billion
versus $4.19 billion in the prior year. Quarterly gross profit was $2.4
billion for the fiscal year 2017, nearly flat compared to the same
period in fiscal year 2016. For the first nine months of fiscal year
2017, net sales were approximately $12 billion versus $10.9 billion in
fiscal year 2016. Gross profit for the first nine months of fiscal year
2017 was $6.6 billion, up from $5.9 billion in the prior year period.

The company’s selling, general and administrative costs and
research-and-development expenses increased about eight percent
year-over-year, primarily because of the continued increase in the
accrual for incentives and the investment in the Climate business. The
company remains on-track with its target of $380 million in savings by
the end of the fiscal year across cost of goods and operating expenses,
as compared to a fiscal year 2015 base.

The company's fiscal year 2017 third quarter EPS on an as-reported basis
was $1.90 with ongoing EPS of $1.93. This is compared to as-reported EPS
of $1.63 and ongoing EPS of $2.17 in fiscal year 2016. In the first nine
months of fiscal year 2017, as-reported EPS was $5.06 and ongoing EPS
was $5.32, compared to $3.40 as-reported and $4.40 ongoing in the same
period of fiscal year 2016. (For a reconciliation of as-reported EPS to
ongoing EPS, see note 1).


Cash Flow

In the first nine months of fiscal year 2017, net cash provided by
operating activities was a source of approximately $690 million,
compared to $415 million in the same period in fiscal year 2016. Net
cash required by investing activities for the first nine months of
fiscal year 2017 was $752 million, versus $639 million for the prior
year. Net cash required by financing activities for the first nine
months of 2017 was approximately $4 million, compared to net cash
required of $2.2 billion for the same period last year. Free cash flow
for third quarter year-to-date is a use of cash of $158 million versus
the prior year use of cash of $251 million. This improvement reflects
the increase in operating cash flows from the first three quarters, as
compared to the prior year. (NOTE: our free cash flow metric reflects
the company's new definition of free cash flow, which conforms to the
more commonly used definition by publicly-traded companies of operating
cash flows less capital expenditures. For a reconciliation of free cash
flow, see note 1).


Fiscal Year 2017 Outlook

The company expects as-reported EPS to be at the high end of the range
of $4.09 to $4.55, and confirms EPS at the high end of the range of
$4.50 to $4.90 on an ongoing basis.

The Seed and Genomics segment gross profit is now expected to be up
high-single digits in terms of percentage for the year. For the
Agricultural Productivity segment, gross profit is still expected to be
in the range of $850 to $950 million as the segment continues to deliver
expected results.

Looking ahead to fourth quarter, the company expects to receive the
benefit of about $70 million in non-core asset sale gains from strategic
deals. Roughly half of these gains are expected to benefit the
Agricultural Productivity segment, and half are expected to benefit the
Seeds and Genomics segment. Both are expected to be recorded in other
income and are part of the company's ongoing strategic portfolio
management efforts.

For the full year, the company still expects these earnings to translate
to the high end of the range of $1.2 billion to $1.6 billion of free
cash flow, reflecting operating cash flow at the high end of the range
of $2.4 billion to $2.8 billion and capital expenditures of $1.2 billion
for fiscal year 2017. (For a reconciliation of free cash flow, see note
1.)

Total operating spend in 2017, excluding the pending Bayer transaction
related costs and restructuring charges, is still anticipated to
increase mid-single digits, as a percent, for the year.

   


Seeds and Genomics Segment Detail

         
($ in millions)   Net Sales   Gross Profit

(A)
Third Quarter   Nine Months Third Quarter   Nine Months
Seeds and Genomics   2017   2016   2017   2016   2017   2016   2017   2016
Corn seed and traits   $ 1,491     $ 1,592     $ 5,342     $ 5,024     $ 922     $ 976     $ 3,389     $ 3,063
Soybean seed and traits   896     693     2,358     1,913     588     391     1,667     1,220
Cotton seed and traits   338     285     562     370     268     205     418     248
Vegetable seeds   199     196     523     526     99     108     267     244
All other crops seeds and traits   208     441     381     590     138     369     191     430
TOTAL Seeds and Genomics   $ 3,132     $ 3,207     $ 9,166     $ 8,423     $ 2,015     $ 2,049     $ 5,932     $ 5,205
       

(A) Fiscal third quarter 2017 and 2016 seeds and genomics gross profit
includes a pretax restructuring charge totaling $14 million and $1
million, respectively, related to certain asset impairment charges,
primarily in the corn and cotton businesses, which is included in cost
of goods sold. For the nine months ended May 31, 2017 and May 31, 2016,
seeds and genomics gross profit includes a pretax restructuring charge
totaling $20 million and $53 million, respectively, related to certain
asset impairment charges, primarily in the corn and cotton businesses,
which is included in cost of goods sold.

       
($ in millions)   Earnings Before Interest & Taxes (EBIT)

 

  Third Quarter   Nine Months
Seeds and Genomics   2017   2016   2017   2016
EBIT (For a reconciliation of EBIT, see note 1.)
(A)
  $ 995     $ 1,094     $ 3,033     $ 2,258  
Items Affecting EBIT:    
EBIT from Restructuring Charges 1 (14 ) 7 (312 )
EBIT from Pending Bayer Transaction Related Costs (27 ) (162 )
EBIT from Argentine-Related Tax Matters   9         19      
 

(A) EBIT is defined as earnings before interest and taxes. Interest and
taxes are recorded on a total company basis. We do not record these
items at the segment level.

The Seeds and Genomics segment consists of the global seeds and
related traits business, biotechnology platforms and digital agriculture.

Net sales for the Seeds and Genomics segment in the first nine months of
fiscal year 2017 were approximately $9.2 billion, with segment sales for
the third quarter reaching $3.1 billion.

In soybeans, Monsanto has seen strong demand for the latest
technologies, with growth of approximately 30 percent in global gross
profit now expected for fiscal year 2017. U.S. growers have planted 20
million acres of Roundup Ready 2 Xtend® soybean varieties
across the country, and early season results underscore the efficacy of
the company's integrated crop system. In South America, strong
performance of INTACTA RR2 PROTM soybeans has led to record
market adoption. The technology is delivering a more than 4 bushel per
acre advantage on average over other soybean varieties, and total
planted acreage in South America now exceeds 50 million acres.

Monsanto's corn platform also continues to perform well. In the U.S.,
the company expects genetic share gains for fiscal year 2017 and sold
out of its DEKALB Disease Shield hybrids. In Europe, acres planted to
corn year-over-year were relatively flat, and the company saw modest
germplasm price-mix lift in local currency, along with anticipated
genetic share gains. Overall, the company expects its global corn
germplasm price-mix lift, in local currency, to be flat to up low-single
digits, as a percent, for the full year.

Meanwhile U.S. cotton growers had the ability to use dicamba herbicides
over-the-top and in-season this past quarter, in part driving the
adoption of Bollgard II® XtendFlex® cotton to more
than five million U.S. acres, well over the anticipated four million
acres. Monsanto also expects genetic share gains in cotton for the third
straight year.

Finally, all other crops seeds and traits gross profit declined
approximately $239 million due primarily to the absence of the benefit
from the alfalfa license in the prior year.

Climate FieldViewTM, the industry's leading platform for
digital agriculture, has now surpassed 35 million paid acres, exceeding
the original target of 25 million paid acres for fiscal year 2017. The
Climate Corporation continues to forge new partnerships to build a
unified digital system where farmers can access an interconnected set of
tools, services and data in a single interface. In May, the company
announced the integration of imagery from innovative aerial imagery
partners Ceres Imaging, TerrAvion and Agribotix, to deliver valuable,
high-resolution imagery to farmers through Climate FieldView. In
addition, Climate acquired Hydrobio, an agriculture software company
with unique, irrigation-focused data analytics capabilities.


Agricultural Productivity Segment Detail

         

($ in millions)

  Net Sales   Gross Profit

(A)

 

Third Quarter   Nine Months   Third Quarter   Nine Months
    2017   2016   2017   2016   2017   2016   2017   2016
Agricultural productivity   $ 1,098     $ 982     $ 2,788     $ 2,517     $ 371     $ 331     $ 665     $ 674
TOTAL Agricultural Productivity   $ 1,098     $ 982     $ 2,788     $ 2,517     $ 371     $ 331     $ 665     $ 674
       

(A) The nine months ended May 31, 2017, agricultural productivity gross
profit includes a pretax restructuring charge totaling $1 million,
related to certain asset impairment charges which is included in cost of
goods sold.

   
($ in millions)   Earnings Before Interest & Taxes (EBIT)

 

Third Quarter   Nine Months
Agricultural Productivity   2017   2016   2017   2016
EBIT (For a reconciliation of EBIT, see note 1.)
(A)
  $ 160     $ 187     $ 292     $ 253  
Items Affecting EBIT:    
EBIT from Restructuring Charges 2 (2 ) 2 (31 )
EBIT from Environmental and Litigation Matters 6 (16 ) (11 ) (28 )
EBIT from SEC Settlement Matters 4
EBIT from Pending Bayer Transaction Related Costs (5 ) (29 )
EBIT from Argentine-Related Tax Matters 2 3
EBIT from Discontinued Operations           21     24  
 

(A) EBIT is defined as earnings before interest and taxes. Interest and
taxes are recorded on a total company basis. We do not record these
items at the segment level.

The Agricultural Productivity segment consists of the crop
protection products and lawn-and-garden herbicide products.

Net sales for the Agricultural Productivity segment in the first nine
months of fiscal 2017 were approximately $2.8 billion, with third
quarter 2017 net sales for the segment hitting $1.1 billion, up slightly
from the same periods last year.

Agricultural Productivity gross profit increased approximately 12
percent for the third quarter, due to improvements in pricing and
volumes for glyphosate-based herbicides and continued sales of XtendiMax®
dicamba-based herbicide.

Webcast Information

In conjunction with this announcement, Monsanto will hold a brief
conference call at 8:30 a.m. Central Time (9:30 a.m. Eastern Time)
today. The call will focus on these results, future expectations and
product performance. The call also will include a discussion of
strategic initiatives and other matters related to the company’s
business, including the pending merger with Bayer.

Presentation slides and a simultaneous audio webcast of the conference
call may be accessed by visiting the company’s website at
https://monsanto.com/investors/reports/

or
http://services.choruscall.com/links/mon170628B4Fan3Fi.html
.
Visitors may need to download Windows Media PlayerTM prior to
listening to the webcast. Following the live broadcast, a replay of the
webcast will be available on the Monsanto website for three weeks.
Monsanto publishes details on upcoming webcasts on this website in both
the Presentation and Financial Reports section and the Investor Events
section. The site includes a calendar of upcoming investor events,
details on accessing scheduled webcasts and information from previous
investor events.

About Monsanto Company

Monsanto is committed to bringing a broad range of solutions to help
nourish our growing world. We produce seeds for fruits, vegetables and
key crops - such as corn, soybeans, and cotton - that help farmers have
better harvests while using water and other important resources more
efficiently. We work to find sustainable solutions for soil health, help
farmers use data to improve farming practices and conserve natural
resources, and provide crop protection products to minimize damage from
pests and disease. Through programs and partnerships, we collaborate
with farmers, researchers, nonprofit organizations, universities and
others to help tackle some of the world’s biggest challenges. To learn
more about Monsanto, our commitments and our more than 20,000 dedicated
employees, please visit
monsanto.com
.
Follow our business on Twitter® at
twitter.com/MonsantoCo
.



Cautionary Statements Regarding
Forward-Looking Information:


Certain statements contained in this release are “forward-looking
statements,” 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,
as well as the pending transaction with Bayer Aktiengesellschaft
(“Bayer”). 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:
risks
related to the pending transaction between the company and Bayer,
including the risk that the regulatory approvals required for the
transaction may not be obtained on the anticipated terms or time frame
or at all, the risk that the other conditions to the completion of the
transaction may not be satisfied, the risk that disruptions or
uncertainties related to the pending transaction could adversely affect
the company’s business, financial performance and/or relationships with
third parties, and the risk that certain contractual restrictions during
the pendency of the transaction could adversely affect the company’s
ability to pursue business opportunities or strategic transactions;
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 understanding and
acceptance of our biotechnology and other agricultural products; the
success of the company's research and development activities; the
outcomes of major lawsuits, including potential litigation related to
the pending transaction with Bayer; developments related to foreign
currencies and economies; fluctuations in commodity prices; compliance
with regulations affecting our manufacturing; the accuracy of the
company's estimates related to distribution inventory levels; the
increases in levels of indebtedness, continued availability of capital
and financing and rating agency actions; 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,
accidents, and security breaches, including cybersecurity incidents, on
the agriculture business or the company's facilities; and other risks
and factors detailed in the company's most recent periodic report to 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.

Notes to editors: Monsanto and the Vine Design, INTACTA RR2 PRO, Roundup
Ready 2 Xtend, Bollgard II XtendFlex, Xtendimax, DEKALB Disease Shield
and FieldView are trademarks of Monsanto Company and its wholly-owned
subsidiaries. All other trademarks are the property of their respective
owners.

   

Monsanto Company

Selected Financial Information

(Dollars in millions, except per share amounts)

Unaudited

 
Statements of Consolidated Operations Three Months Ended Nine Months Ended
    May 31, 2017   May 31, 2016   May 31, 2017   May 31, 2016
Net Sales $ 4,230   $ 4,189 $ 11,954   $ 10,940
Cost of goods sold 1,844     1,809     5,357     5,061  
Gross Profit 2,386 2,380 6,597 5,879
Operating Expenses:
Selling, general and administrative expenses 789 729 2,031 1,858
Research and development expenses 417 387 1,168 1,091
Restructuring charges (17 ) 15 (30 ) 290
Pending Bayer transaction related costs 33         153      
Total Operating Expenses 1,222 1,131 3,322 3,239
Income from Operations 1,164 1,249 3,275 2,640
Interest expense 100 100 338 332
Interest income (17 ) (14 ) (53 ) (51 )
Other expense (income), net 4     (35 )   (41 )   160  
Income from Continuing Operations Before Income Taxes 1,077 1,198 3,031 2,199
Income tax provision 230     483     796     696  
Income from Continuing Operations Including Portion Attributable
to Noncontrolling Interest
$ 847     $ 715     $ 2,235     $ 1,503  
Discontinued Operations:
Income from operations of discontinued business 21 24
Income tax provision         8     9  
Income from Discontinued Operations         13     15  
Net Income $ 847     $ 715     $ 2,248     $ 1,518  
Less: Net income (loss) attributable to noncontrolling interest 4     (2 )   8     (9 )
Net Income Attributable to Monsanto Company $ 843     $ 717     $ 2,240     $ 1,527  
 
Basic Earnings per Share Attributable to Monsanto Company:
Income from continuing operations $ 1.92 $ 1.64 $ 5.08 $ 3.40
Income from discontinued operations         0.03     0.03  
Net Income Attributable to Monsanto Company $ 1.92     $ 1.64     $ 5.11     $ 3.43  
 
Diluted Earnings per Share Attributable to Monsanto Company:
Income from continuing operations $ 1.90 $ 1.63 $ 5.03 $ 3.37
Income from discontinued operations         0.03     0.03  
Net Income Attributable to Monsanto Company $ 1.90     $ 1.63     $ 5.06     $ 3.40  
 
Weighted Average Shares Outstanding:
Basic 439.1 437.1 438.6 444.2
Diluted   443.4   440.3   443.0   448.2
 

   

Monsanto Company

Selected Financial Information

(Dollars in millions)

Unaudited

 
 
Statements of Consolidated Financial Position As of As of
    May 31, 2017   Aug. 31, 2016
Assets
Current Assets:
Cash and cash equivalents (variable interest entity restricted -
2017: $58 and 2016: $122)
$ 1,614 $ 1,676
Short-term investments 6 60
Trade receivables, net (variable interest entity restricted - 2017:
$56 and 2016: $7)
3,913 1,926
Miscellaneous receivables 763 755
Inventory, net 3,189 3,241
Assets held for sale 302 272
Other current assets 231     227
Total Current Assets 10,018 8,157
Property, Plant and Equipment, net 5,500 5,231
Goodwill 4,032 4,020
Other Intangible Assets, Net 1,045 1,125
Noncurrent Deferred Tax Assets 534 613
Long-Term Receivables, Net 117 101
Other Assets 512     489
Total Assets $ 21,758     $ 19,736
Liabilities and Shareowners’ Equity
Current Liabilities:
Short-term debt, including current portion of long-term debt
(variable interest entity restricted - 2017: $0 and 2016: $113)
$ 2,611 $ 1,587
Accounts payable 753 1,006
Income taxes payable 243 41
Accrued compensation and benefits 366 239
Accrued marketing programs 1,455 1,650
Deferred revenue 545 568
Grower production accruals 68 47
Dividends payable 237
Customer payable 37 123
Restructuring reserves 67 227
Miscellaneous short-term accruals 813     1,004
Total Current Liabilities 6,958 6,729
Long-Term Debt (variable interest entity restricted - 2017: $98 and
2016: $0)
7,246 7,453
Postretirement Liabilities 316 371
Long-Term Deferred Revenue 24 35
Noncurrent Deferred Tax Liabilities 122 68
Long-Term Portion of Environmental and Litigation Liabilities 213 200
Long-Term Restructuring Reserves 10 17
Other Liabilities 321 318
Monsanto Shareowners’ Equity 6,532 4,534
Noncontrolling Interest 16     11
Total Shareowners’ Equity 6,548     4,545
Total Liabilities and Shareowners’ Equity $ 21,758     $ 19,736
 

 

Monsanto Company

Selected Financial Information

(Dollars in millions)

Unaudited

 
Statements of Consolidated Cash Flows Nine Months Ended
    May 31, 2017   May 31, 2016
Operating Activities:  
Net Income $ 2,248 $ 1,518
Adjustments to reconcile cash provided by operating activities:
Items that did not require (provide) cash:
Depreciation and amortization 549 542
Bad-debt expense 61 81
Stock-based compensation expense 94 88
Excess tax benefits from stock-based compensation (6 ) (13 )
Deferred income taxes 83 168
Restructuring impairments 40 119
Equity affiliate expense, net 6 6
Net gain on sale of a business or other assets (88 ) (31 )
Other items 80 141
Changes in assets and liabilities that (required) provided cash, net
of acquisitions:
Trade receivables, net (2,062 ) (1,755 )
Inventory, net 14 (6 )
Deferred revenue (35 ) 61
Accounts payable and other accrued liabilities (129 ) (588 )
Restructuring, net (165 ) 90
Pension contributions (31 ) (47 )
Other items, net   31     41  
Net Cash Provided by Operating Activities   690     415  
Cash Flows Provided (Required) by Investing Activities:
Maturities of short-term investments 52 35
Capital expenditures (848 ) (666 )
Acquisition of businesses, net of cash acquired (11 ) (2 )
Technology and other investments (46 ) (43 )
Other investments and property disposal proceeds   101     37  
Net Cash Required by Investing Activities   (752 )   (639 )
Cash Flows Provided (Required) by Financing Activities:
Net change in financing with less than 90-day maturities 514 1,942
Short-term debt proceeds 63 46
Short-term debt reductions (12 ) (252 )
Long-term debt proceeds 600 9
Long-term debt reductions (517 ) (305 )
Debt issuance costs (2 )
Treasury stock purchases (3,001 )
Stock option exercises 78 66
Excess tax benefits from stock-based compensation 6 13
Tax withholding on restricted stock and restricted stock units (18 ) (22 )
Dividend payments (712 ) (727 )
Payments to noncontrolling interests   (4 )   (2 )
Net Cash Required by Financing Activities   (4 )   (2,233 )
Effect of Exchange Rate Changes on Cash and Cash Equivalents 4 (39 )
Net Decrease in Cash and Cash Equivalents (62 ) (2,496 )
Cash and Cash Equivalents at Beginning of Period   1,676     3,701  
Cash and Cash Equivalents at End of Period   $ 1,614     $ 1,205  
 

Monsanto Company

Non-GAAP Financial Information
(Dollars in millions, except per share amounts)
Unaudited

1. This press release uses the non-GAAP financial measures of
gross profit, operating expenses, net income (loss) attributable to
Monsanto Company and diluted earnings per share (EPS), each on an
ongoing basis (collectively, “Ongoing Financial Measures”), and EBIT and
free cash flow. The Ongoing Financial Measures and EBIT are intended to
supplement investor's understanding of our operating performance. The
free cash flow measure is intended to supplement investor's
understanding of our liquidity. They are different from and not intended
to replace gross profit, operating expenses, other expense, net, net
income (loss) attributable to Monsanto Company, diluted EPS, cash flows,
financial position or comprehensive income, and they are not measures of
financial performance as determined in accordance with U.S. generally
accepted accounting principles (GAAP). These non-GAAP financial measures
may not be comparable to similar measures used by other companies.

Our Ongoing Financial Measures exclude certain items that we do not
consider part of ongoing operations. We believe that our Ongoing
Financial Measures presented with these adjustments are useful to
investors as they best reflect our ongoing performance and business
operations during the periods presented and are also useful to investors
for comparative purposes. In addition, management uses the Ongoing
Financial Measures as a guide in its budgeting and long-range planning
processes, and the ongoing EPS financial measure is used as a guide in
determining incentive compensation.

EBIT is defined as earnings (loss) before interest and taxes. Earnings
(loss) is intended to mean net income (loss) attributable to Monsanto
Company as presented in the Statements of Consolidated Operations under
GAAP. EBIT is an operating performance measure for our two business
segments. We believe that EBIT is useful to investors and management to
demonstrate the operational profitability of our segments by excluding
interest and taxes, which are generally accounted for across the entire
company on a consolidated basis. EBIT is also one of the measures used
by management to determine resource allocations within the company.

We define free cash flow as the total of net cash provided or required
by operating activities less capital expenditures. Prior to the second
quarter of fiscal year 2017, we defined free cash flow as the total of
net cash provided or required by operating activities and net cash
provided or required by investing activities. As this definition varies
from other more common definitions of free cash flow, we determined it
was appropriate to redefine free cash flow to conform to one of the more
typical definitions beginning with the second quarter for fiscal year
2017. The prior period calculations of free cash flow have been restated
to conform to the new presentation. Free cash flow does not represent
the residual cash flow available for discretionary expenditures. We
believe that free cash flow is an important liquidity measure for the
company and that it is useful to investors and management as a measure
of the ability of our business to generate cash. Once business needs and
obligations are met, this cash can be used to reinvest in the company
for future growth or to return to our shareowners through dividend
payments or share repurchases.

The following tables reconcile GAAP as-reported financial measures to
Non-GAAP financial measures.


Reconciliation of GAAP As-Reported to Selected
Non-GAAP Financial Measures:

     
  Three Months Ended
May 31, 2017
(in millions) GAAP As Reported   Adjustments

(A)
  Ongoing Basis
Net Sales $ 4,230 $ $ 4,230
Gross Profit 2,386 14 2,400
Operating Expenses(B) 1,222 (9 ) 1,213
Net Income Attributable to Monsanto Company 843 14 857
Diluted Earnings per Share   1.90     0.03     1.93
 
     
  Nine Months Ended
May 31, 2017
(in millions) GAAP As Reported   Adjustments

(A)
  Ongoing Basis
Net Sales $ 11,954 $ $ 11,954
Gross Profit 6,597 21 6,618
Operating Expenses(B) 3,322 (133 ) 3,189
Net Income Attributable to Monsanto Company 2,240 117 2,357
Diluted Earnings per Share   5.06     0.26     5.32
 


(A)



In the three months and nine months
ended May 31, 2017, select GAAP measures have been adjusted to an
ongoing basis by eliminating the impact of restructuring charges,
environmental and litigation matters, pending Bayer transaction related
costs, Argentine-related tax matters and income from discontinued
operations. See separate reconciliations of each measure below.

  • Fiscal third quarter 2017 included a pretax net reversal of previously
    recognized restructuring charge totaling $3 million ($0.01 a share),
    or after-tax less than $1 million (less than $0.01 a share), of which
    $20 million related to certain asset impairment charges and a $23
    million net reversal of previously recognized expense related to
    various other operating activities. The nine months ended May 31,
    2017, included a pretax net reversal of previously recognized
    restructuring charge totaling $9 million ($0.02 a share), or after-tax
    $11 million ($0.03 a share), of which $39 million related to certain
    asset impairment charges and a $48 million net reversal of previously
    recognized expense related to various other operating activities. For
    the three months ended May 31, 2017, $14 million of expense and $17
    million of a net reversal of previously recognized expense are
    included in cost of goods sold and restructuring charges,
    respectively. For the nine months ended May 31, 2017, $21 million of
    expense and $30 million of a net reversal of previously recognized
    expense are included in cost of goods sold and restructuring charges,
    respectively. The restructuring charges relate to the 2015
    Restructuring Plan. Implementation of the 2015 Restructuring Plan is
    expected to be completed by the end of fiscal year 2018.
  • Fiscal third quarter 2017 included a pretax net reversal of previously
    recognized charges of $6 million ($0.02 a share), or after-tax $4
    million ($0.02 a share). The nine months ended May 31, 2017, included
    charges of $11 million ($0.03 a share), or after-tax $7 million ($0.02
    a share) for legacy litigation matters arising under indemnities from
    the 2000 Pharmacia Separation Agreement that are not considered a part
    of ongoing operations. The pretax charges were recorded in selling,
    general and administrative expenses.
  • The three and nine months ended May 31, 2017, included pretax charges
    of $32 million ($0.07 a share), or after-tax $20 million ($0.05 a
    share), and $190 million ($0.43 a share), or after-tax $119 million
    ($0.27 a share), respectively, for expenses incurred associated with
    the merger agreement for the acquisition of Monsanto by Bayer
    Aktiengesellschaft entered into on Sep. 14, 2016. The pretax charges
    in the three months ended May 31, 2017 were recorded in operating
    expenses of $32 million. The pretax charges in the nine months ended
    May 31, 2017 were recorded in operating expenses of $152 million and
    other expense (income), net of $38 million.
  • The three months ended May 31, 2017, included a net reversal of
    charges related to Argentine-related tax matters of $2 million (less
    than $0.01 a share). The nine months ended May 31, 2017, included
    charges related to Argentine-related tax matters of $15 million ($0.03
    a share). Due to losses generated in Argentina in recent years as well
    as recent uncertainties around the Argentina business, the company
    evaluated the recoverability of various items on the Statement of
    Consolidated Financial Position related to the Argentina business and
    determined an allowance against certain assets was necessary. This
    resulted in a translation gain recorded in other expense (income), net
    of $11 million and a net charge against tax expense of $9 million for
    the three months ended May 31, 2017, and it resulted in a translation
    gain recorded in other expense (income), net of $22 million and a net
    charge against tax expense of $37 million for the nine months ended
    May 31, 2017.
  • The company reports annual earn-out payments received as a result of
    the 2008 divestment of the Dairy Business as discontinued operations.
    The nine months ended May 31, 2017, included pretax income from
    discontinued operations of $21 million ($0.05 a share), or after-tax
    $13 million ($0.03 a share).


(B)
Operating expenses include selling, general and
administrative expenses, research and development expenses,
restructuring charges and pending Bayer transaction related costs.

     
  Three Months Ended
May 31, 2016
(in millions) GAAP As Reported   Adjustments

(A)
  Ongoing Basis
Net Sales $ 4,189 $ $ 4,189
Gross Profit 2,380 1 2,381
Operating Expenses(B) 1,131 (31 ) 1,100
Net Income Attributable to Monsanto Company 717 238 955
Diluted Earnings per Share   1.63     0.54     2.17
 
     
  Nine Months Ended
May 31, 2016
(in millions) GAAP As Reported   Adjustments

(A)
  Ongoing Basis
Net Sales $ 10,940 $ $ 10,940
Gross Profit 5,879 53 5,932
Operating Expenses(B) 3,239 (314 ) 2,925
Net Income Attributable to Monsanto Company 1,527 444 1,971
Diluted Earnings per Share   3.40     1.00     4.40
 


(A)



In the three months and nine months
ended May 31, 2016, select GAAP measures have been adjusted to an
ongoing basis by eliminating the impact of restructuring charges,
environmental and litigation matters, SEC settlement matters,
Argentine-related tax matters and income from discontinued operations.

  • Fiscal third quarter 2016 included a pretax restructuring charge
    totaling $16 million ($0.04 a share), or after-tax $9 million ($0.02 a
    share), of which $15 million related to certain asset impairment
    charges and $1 million related to various other operating charges. The
    nine months ended May 31, 2016 included a pretax restructuring charge
    totaling $343 million ($0.76 a share), or after-tax $225 million
    ($0.50 a share), of which $119 million related to certain asset
    impairment charges and $224 million related to various other operating
    charges. For the three months ended May 31, 2016, expenses of $1
    million and $15 million were included in cost of goods sold and
    restructuring charges, respectively. For the nine months ended May 31,
    2016, expenses of $53 million and $290 million were included in cost
    of goods sold and restructuring charges, respectively. The
    restructuring charges relate to the 2015 Restructuring Plan.
    Implementation of the 2015 Restructuring Plan is expected to be
    completed by the end of fiscal year 2018.
  • The three and nine months ended May 31, 2016, included pretax charges
    of $16 million ($0.03 a share), or after-tax $10 million ($0.02 a
    share), and $28 million ($0.06 a share), or after-tax $17 million
    ($0.04 a share), respectively, in selling, general and administrative
    expenses for legacy litigation matters arising under indemnities from
    the 2000 Pharmacia Separation Agreement that are not considered a part
    of ongoing operations. The pretax charges were recorded in selling,
    general and administrative expenses.
  • The nine months ended May 31, 2016, included pretax income of $4
    million ($0.01 a share), or after-tax $2 million (less than $0.01 a
    share), in selling, general and administrative expenses in connection
    with the previously disclosed SEC action.
  • Fiscal third quarter 2016 included a net tax charge of $219 million,
    or $0.50 a share. The nine months ended May 31, 2016, included a net
    tax charge of $219 million, or $0.49 a share. Due to losses generated
    in Argentina in the current year as well as recent uncertainties
    around the Argentina business, the company evaluated the
    recoverability of various items on the Statement of Consolidated
    Financial Position related to the Argentina business and determined an
    allowance against certain assets was necessary, which resulted in the
    net charge to tax expense.
  • The company reports annual earn-out payments received as a result of
    the 2008 divestment of the Dairy Business as discontinued operations.
    The nine months ended May 31, 2016 included pretax income from
    discontinued operations of $24 million ($0.05 a share), or after-tax
    $15 million ($0.03 a share).


(B)
Operating expenses include selling, general and
administrative, research and development expenses and restructuring
charges.


Reconciliation of EBIT to Net Income:
 EBIT
is defined as earnings before interest and taxes. Earnings is intended
to mean net income attributable to Monsanto Company as presented in the
Statements of Consolidated Operations under GAAP. The following table
reconciles EBIT to the most directly comparable financial measure, which
is net income attributable to Monsanto Company.

         
  Three Months Ended   Nine Months Ended
(in millions) May 31, 2017   May 31, 2016   May 31, 2017   May 31, 2016
EBIT – Seeds and Genomics Segment $ 995   $ 1,094 $ 3,033   $ 2,258
EBIT – Agricultural Productivity Segment 160     187     292     253
EBIT– Total 1,155 1,281 3,325 2,511
Interest Expense – Net 83 86 285 281
Income Tax Provision
(A)
229     478     800     703
Net Income Attributable to Monsanto Company   $ 843     $ 717     $ 2,240     $ 1,527
 


(A)
Includes the income tax provision from continuing
operations, the income tax provision on noncontrolling interest, and the
income tax provision on discontinued operations.


Reconciliation of EPS to Ongoing EPS:

Ongoing EPS is calculated excluding certain after-tax items which
Monsanto does not consider part of ongoing operations.

             
 

Fiscal Year

2017

  Three Months Ended   Nine Months Ended
Guidance May 31, 2017   May 31, 2016 May 31, 2017   May 31, 2016
Diluted Earnings per Share $4.09-$4.55 $ 1.90 $ 1.63 $ 5.06 $ 3.40
Restructuring Charges
(A)
$0.02-$0.03 0.02 (0.03 ) 0.50
Environmental and Litigation Matters
(B)
$0.02-$0.03 (0.02 ) 0.02 0.02 0.04
Pending Bayer Transaction Related Costs
(C)
$0.27-$0.31 0.05 0.27
Argentine-Related Tax Matters
(D)
$0.06-$0.08 0.50 0.03 0.49
Income from Discontinued Operations
(E)
$(0.02)-$(0.04)           (0.03 )   (0.03 )
Diluted Earnings per Share from Ongoing Business   $4.50-$4.90   $ 1.93     $ 2.17     $ 5.32     $ 4.40  
 


(A)
The three and nine months ended May 31, 2017, above
represent pretax net reversals of previous recognized restructuring
charges per share totaling $0.01 a share and $0.02 a share,
respectively. The three and nine months ended May 31, 2016, above
represent pretax restructuring charges per share totaling $0.04 a share
and $0.76 a share, respectively. The fiscal year 2017 guidance above
represents pretax restructuring charges of $0.03 to $0.04 a share. The
restructuring charges relate to the 2015 Restructuring Plan.
Implementation of the 2015 Restructuring Plan is expected to be
completed by the end of fiscal year 2018.


(B)
The three and nine months ended May 31, 2017, above
represent pretax net reversal of previously recognized environmental and
litigation matters charges per share totaling $0.02 a share and pretax
environmental and litigation matters charges per share totaling $0.03 a
share, respectively. The three and nine months ended May 31, 2016, above
represent pretax environmental and litigation matters charges per share
totaling $0.03 a share and $0.06 a share, respectively. The fiscal year
2017 guidance above represents pretax environmental and litigation
matters charges per share of $0.03 to $0.04 a share. The charges relate
to legacy litigation matters arising under indemnities from the 2000
Pharmacia Separation Agreement that are not considered a part of ongoing
operations.


(C)
The three and nine months ended May 31, 2017, above
represent pretax pending Bayer transaction related costs per share
totaling $0.07 a share and $0.43 a share, respectively. The fiscal year
2017 guidance above represents pretax pending Bayer transaction related
costs of $0.43 to $0.49 a share.


(D)
Item includes a translation gain recorded in other
expense (income), net of $11 million and a net charge against tax
expense of $9 million for the three months ended May 31, 2017, and it
includes a translation gain recorded in other expense (income), net of
$22 million and a net charge against tax expense of $37 million for the
nine months ended May 31, 2017. The three and nine months ended May 31
2016, above represent a net charge against tax expense of $219 million.


(E)
The nine months ended May 31, 2017, and May 31,
2016, above represent pretax income from discontinued operations per
share totaling $0.05 a share, respectively. The fiscal year 2017
guidance above represents pretax income from discontinued operations of
$0.03 to $0.06 a share.


Reconciliation of Gross Profit to Ongoing Gross
Profit:

Ongoing gross profit is calculated excluding certain
pre-tax items which Monsanto does not consider part of ongoing
operations.

         

 

  Three Months Ended   Nine Months Ended
(in millions) May 31, 2017   May 31, 2016   May 31, 2017   May 31, 2016
Gross Profit – Seeds and Genomics Segment $ 2,015   $ 2,049 $ 5,932   $ 5,205
Gross Profit – Agricultural Productivity Segment 371     331     665     674
Gross Profit– Total 2,386 2,380 6,597 5,879
Restructuring Charges 14     1     21     53
Ongoing Gross Profit   $ 2,400     $ 2,381     $ 6,618     $ 5,932
 


Reconciliation of Operating Expenses to Ongoing
Operating Expenses:

Ongoing operating expenses are calculated
excluding certain pre-tax items which Monsanto does not consider part of
ongoing operations.

         

 

  Three Months Ended   Nine Months Ended
(in millions) May 31, 2017   May 31, 2016   May 31, 2017   May 31, 2016
Operating Expenses $ 1,222   $ 1,131 $ 3,322   $ 3,239
Restructuring Charges 17 (15 ) 30 (290 )
Environmental and Litigation Matters 6 (16 ) (11 ) (28 )
SEC Settlement Matters 4
Pending Bayer Transaction Related Costs (32 )       (152 )    
Ongoing Operating Expenses   $ 1,213     $ 1,100     $ 3,189     $ 2,925  
 


Reconciliation of Net Income Attributable to
Monsanto Company to Ongoing Net Income Attributable to Monsanto Company:


Ongoing net income attributable to Monsanto Company is defined as net
income attributable to Monsanto Company excluding the cumulative
after-tax impact of certain items we do not consider part of ongoing
operations.

         

 

  Three Months Ended   Nine Months Ended
(in millions) May 31, 2017   May 31, 2016   May 31, 2017   May 31, 2016
Net Income Attributable to Monsanto Company $ 843   $ 717   $ 2,240   $ 1,527
Pretax Restructuring Charges (3 ) 16 (9 ) 343
Pretax Environmental and Litigation Matters (6 ) 16 11 28
Pretax SEC Settlement Matters (4 )
Pretax Pending Bayer Transaction Related Costs 32 190
Income Tax Benefit
(A)
(7 ) (13 ) (77 ) (127 )
Argentine-Related Tax Matters
(B)
(2 ) 219 15 219
Income from Discontinued Operations, Net of Tax
(C)
        (13 )   (15 )
Ongoing Net Income Attributable to Monsanto Company   $ 857     $ 955     $ 2,357     $ 1,971  
 


(A)
Income tax impact of non-GAAP adjustments is the
summation of the calculation income tax (benefit) charge related to each
non-GAAP non-income tax impact adjustment. Income tax charge is
calculated using the actual tax in effect during the period for the
locality of the related non-GAAP adjustment. Item includes all non-GAAP
adjustments except for Argentine-Related Tax Matters and Income from
Discontinued Operations.


(B)
Item includes a translation gain recorded in other
expense (income), net of $11 million and a net charge against tax
expense of $9 million for the three months ended May 31, 2017, and it
includes a translation gain recorded in other expense (income), net of
$22 million and a net charge against tax expense of $37 million for the
nine months ended May 31, 2017. The three and nine months ended May 31
2016, above represent a net charge against tax expense of $219 million.


(C)
The nine months ended May 31, 2017, and May 31,
2016, included pretax income from discontinued operations of $21 million
and $24 million, respectively.


Reconciliation of Free Cash Flow:
 Free
cash flow represents the total of net cash provided or required by
operating activities less capital expenditures, as reflected in the
Statements of Consolidated Cash Flows presented in this release. With
respect to the fiscal year 2017 free cash flow guidance, Monsanto does
not include any estimates or projections of Net Cash Provided (Required)
by Financing Activities because in order to prepare any such estimate or
projection, Monsanto would need to rely on market factors and conditions
that are outside of its control.

           

 

 

Fiscal Year 2017

  Nine Months Ended

 

    Guidance   May 31, 2017   May 31, 2016
Net Cash Provided by Operating Activities $ 2,400-2,800 $ 690   $ 415
Net Cash Required by Investing Activities (900-1,000) (752 ) (639 )
Net Cash Required by Financing Activities N/A (4 ) (2,233 )
Effect of Exchange Rate Changes on Cash and Cash Equivalents   N/A   4     (39 )
Net Decrease in Cash and Cash Equivalents     N/A   $ (62 )   $ (2,496 )
 
           

 

  Fiscal Year 2017   Nine Months Ended

 

    Guidance   May 31, 2017   May 31, 2016
Net Cash Provided by Operating Activities $ 2,400-2,800 $ 690   $ 415
Capital expenditures (1,200 )   (848 )   (666 )
Free Cash Flow   $ 1,200-1,600   $ (158 )   $ (251 )