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| EX-99.1 - PRESS RELEASE - MONSANTO CO /NEW/ | q2earnings.htm |
| 8-K - FORM 8-K - MONSANTO CO /NEW/ | form8-k.htm |
APRIL 5, 2018
SECOND QUARTER 2018
FINANCIAL RESULTS
Certain statements contained in this presentation 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 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 presentation. The company disclaims any
current intention or obligation to update any forward-looking statements or any of the factors that may affect actual
results.
Forward
Looking
Statements
© 2018 Monsanto Company 2
Fiscal Year
References to year, or to fiscal year, are on a
fiscal year basis and refer to the 12-month period
ending August 31.
Trademarks
Trademarks owned by Monsanto Company and its
wholly-owned subsidiaries are italicized in this
presentation. All other trademarks are the property
of their respective owners.
The information on unregistered pesticides in this presentation is for educational purposes and is not an offer to sell or use
any unregistered product mentioned in this presentation.
Non-GAAP
Financial
Information
3
This presentation may use the non-GAAP financial measures of earnings per share (EPS) on an ongoing basis,
gross profit on an ongoing basis, operating expenses on an ongoing basis and net income (loss) attributable to
Monsanto Company on an ongoing basis. Collectively, “Ongoing Financial Measures”.
A non-GAAP EPS financial measure, which we refer to as ongoing EPS, excludes certain after-tax items that we
do not consider part of ongoing operations, which are identified in the reconciliation. Earnings (loss) is intended
to mean net income (loss) attributable to Monsanto Company as presented in the Statements of Consolidated
Operations under GAAP. Ongoing gross profit and ongoing operating expenses exclude certain pretax items that
we do not consider part of ongoing operations, which are identified in the reconciliations. Ongoing net income
(loss) attributable to Monsanto Company is defined as net income (loss) attributable to Monsanto Company
excluding the cumulative after-tax impact of certain items 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.
Our presentation of non-GAAP financial measures is intended to supplement investors’ understanding of our
operating performance, not replace gross profit, operating expenses, other expenses, net, net income (loss)
attributable to Monsanto Company, diluted EPS, cash flows, financial position, or comprehensive income (loss),
as determined in accordance with GAAP. 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.
Financial Results: Fiscal 2018 Second Quarter
4
2018 FISCAL 2ND QUARTER 2017 FISCAL 2ND QUARTER CHANGE
As
Reported
Adjustments1 Ongoing1
As
Reported
Adjustments1 Ongoing1 As Reported Ongoing
NET SALES $5,019M - $5,019M $5,074M - $5,074M (1)% (1)%
GROSS PROFIT $2,966M $4M $2,970M $2,952M $6M $2,958M 0% 0%
OPERATING EXPENSES $1,070M $(35)M $1,035M $1,088M $(59)M $1,029M (2)% 1%
NET INCOME
ATTRIBUTABLE TO MONSANTO COMPANY
$1,459M $(25)M $1,434M $1,368M $41M $1,409M 7% 2%
DILUTED EPS $3.27 $(0.05) $3.22 $3.09 $0.10 $3.19 6% 1%
1. Adjustments and ongoing metrics defined at the front of this presentation and reconciled at the end of this presentation.
1. Adjustments and ongoing metrics defined at the front of this presentation and reconciled at the end of this presentation.
Financial Results: Fiscal 2018 Second Quarter Year-to-Date
5
2018 FISCAL FIRST HALF 2017 FISCAL FIRST HALF CHANGE
As
Reported
Adjustments1 Ongoing1
As
Reported
Adjustments1 Ongoing1 As Reported Ongoing
NET SALES $7,677M - $7,677M $7,724M - $7,724M (1)% (1)%
GROSS PROFIT $4,278M $17M $4,295M $4,211M $7M $4,218M 2% 2%
OPERATING EXPENSES $2,140M $(75)M $2,065M $2,100M $(124)M $1,976M 2% 5%
NET INCOME
ATTRIBUTABLE TO MONSANTO COMPANY
$1,628M $(11)M $1,617M $1,397M $103M $1,500M 17% 8%
DILUTED EPS $3.65 $(0.02) $3.63 $3.16 $0.23 $3.39 16% 7%
Bayer and Monsanto to Create Global Leader in Agriculture1
Combination creates a leader in life science with a balanced portfolio
Path to Completion
6
Q1 FY17
Sep-Nov
Q2 FY17
Dec-Feb
Q3-Q4 FY17
Mar-Aug
Q1-Mar FY18
Sep-Mar
Regulatory approvals received from
almost two-thirds of the relevant
authorities, including the EU
Commission, CIFIUS in the U.S.,
CADE in Brazil and MOFCOM in
China
Expected
transaction
closure is
within
calendar Q2
of 2018 and
the time
contemplated
by the
agreement
Filings with regulatory agencies
December 13,
2016
Monsanto
shareowners
approve
transaction; 99% of
votes cast vote in
favor of merger
agreement
September 14, 2016
Signing of merger
agreement between
Bayer and Monsanto
Transaction
Summary
• All-cash consideration of
$128 per Monsanto share
• Reverse break-up fee of
$2 billion
• Transaction approved by
Monsanto’s shareowners
1. The acquisition is subject to customary closing conditions including receipt of required regulatory approvals.
0
2
4
6
8
10
12
14
16
18
20
2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Trendline Actual
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25
30
35
40
45
50
55
60
2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Trendline Actual
Global Population and Income Growth Fuel Long-Term
Demand Trends in Corn and Soybeans
7
Meeting trendline demand requires >2-fold increase in corn yield rate of gain and >4-fold increase in soybean
yield rate of gain by 2050
B
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CAGR=3.4%
CAGR=2.8%
Corn Long-Term Demand Trends1
CAGR=4.1%
CAGR=3.6%
Soybeans Long-Term Demand Trends1
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1. USDA historical data for actual and trendline – WASDE March 2018. Trendline based on avg. growth from 2011-2016, per USDA.
~1.3B BU incremental
demand in ‘17/’18 would
require >14M acres at
constant global yields
~ 515M BU incremental
demand in ‘17/’18 would
require ~13M acres at
constant global yields
Bayer, Monsanto Combination1 to Create Global Leader in Ag
Combination accelerates innovation and integrated solutions and expands benefits to new crops, geographies
Increases Innovation
Accelerates pace of innovation and efficiency
of R & D
Benefits Society and Consumers
Supports the sustainable production of
improved harvests on each acre
Benefits Farmers
Enables farmers to be more productive,
profitable and sustainable through broadly
licensed tools expected to provide additional
competitive offerings and choices
8 1. The acquisition is subject to customary closing conditions, including receipt of required regulatory approvals.
EXPECTED BENEFITS:
Monsanto Chesterfield Research Facility
• Monsanto’s newly expanded Chesterfield MO Research facility and largest yield
testing location
• Bayer plans to locate the combined company’s Global Seeds & Traits and North
America commercial headquarters in St. Louis
Soybean Gross Profit Growth Drivers
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Global Soybean Gross Profit Foundation: $1.9 billion FY17 from >200M1
soybean acres globally containing at least one Monsanto technology
Annual Germplasm Upgrade
Weed Control: Roundup Ready 2 Xtend soybeans, Future generations of herbicide tolerance weed
control systems
Insect Control: Current and next generations of Intacta RR2 PRO soybeans
1. Monsanto internal estimate 9
NEAR-TERM LONGER-TERM 2021+
Innovation across seeds, traits, crop protection, biologicals and digital ag expected to drive gross profit growth
2018 Outlook
Climate FieldView Digital Agriculture Platform
Next -Gen Seed Applied Products: Biologicals, Acceleron Seed
Applied Solutions Upgrades, NemaStrike Technology
• Delivered 17% growth in
soybean gross profit in the first
half of FY18 from strong start in
South America
• Intacta RR2 PRO soybeans
reached 60M acres in FY18,
from >50M acre base in South
America in FY17
• Roundup Ready 2 Xtend
soybeans expected to reach 40M
acres in second year of full
system launch, from a base of
>20M acres in FY17
FY14 FY15 FY16 FY17 FY18
First generation expected to rapidly penetrate 100M acre opportunity; second generation already in Phase 4
10
INTACTA RR2 PRO: South America
Technology Adoption Rate Key Metrics
• Penetrated more than 50M acres in
FY17; and reached 60M acres in FY18
• Next-generation Intacta 2 Xtend
soybeans approved for planting in Brazil
with expected commercial launch in
2021
• 2017 was fourth year of an average of
>4 BU/AC yield advantage in South
America
• Licensed technology to DuPont;
technology licensed to germplasm
providers with >90% share in South
America
3M
ACRES
15M
ACRES
35M
ACRES
>50M
ACRES
Intacta RR2 PRO Soybeans: Consistent Trait Performance
Provides Strong Foundation for Growth
60M
ACRES
Roundup Ready 2 Xtend Soybeans: Reaches >20M Acres in
2017 and On-Track to Reach 40M Acres in 2018
11
Record U.S. ramp of Roundup Ready 2 Xtend soybeans on path to nearly doubling in 2018
• Branded order mix and sales support estimate to reach
40M acres of Roundup Ready 2 Xtend soybeans in
2018
• Plans to improve customer success in 2018 include:
• Enhanced training
• Distribution of compliant spray nozzles at no cost
• Launch of a spray app to help applicators with record
keeping and to avoid problematic weather
• Establishment of a hotline for easy access on best
practices
• Offering of additional incentives on residual
herbicides and drift-reducing agents through our
Roundup Ready PLUS program, when using
XtendiMax Herbicide with VaporGrip Technology
• Results from system trials showcase excellent performance and weed
control of Roundup Ready 2 Xtend soybean crop system vs. LibertyLink®
soybean system, with 5.7 BU/AC average yield advantage in FY17.
• Soybean growers surveyed, who applied XtendiMax Herbicide with
VaporGrip Technology, reported 97% weed control satisfaction.
2018: Expect to Reach 40M U.S. Acres 2017: Record Ramp to >20M U.S. Acres
Roundup Ready 2 Xtend Soybeans
Greenville, MS June 2017
Roundup Ready 2 Xtend Soybean Crop System
2017 Yield Advantage vs. LibertyLink® System1:
50
52
54
56
58
60
62
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(B
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)
Roundup Ready
Xtend
Crop System2
LibertyLink®
System3
1. 2017 Monsanto Systems Trials. (27 locations in 2017 reporting yield data) Data as of November
13, 2017. 2. Roundup Ready Xtend Crop System = Roundup Ready 2 Xtend soybeans treated
with dicamba, glyphosate and various residual herbicides 3.LibertyLink® System = LibertyLink®
soybeans treated with Liberty® herbicide and various residual herbicides
+5.7 BU/AC
Corn Gross Profit Growth Drivers
Innovation across seeds, traits, crop protection, biologicals and digital ag expected to drive gross profit growth
Global Corn Gross Profit Foundation: ~$4.0 billion in FY17 from >140M1 corn acres
globally containing at least one Monsanto technology
Annual Germplasm Upgrade
Insect control: Trecepta, SmartStax PRO corn2
Next-Gen Seed Applied Products: Biologicals – Acceleron B-360
ST3, NemaStrike Technology
Climate FieldView Digital Agriculture Platform
NEAR-TERM LONGER-TERM 2021+
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Weed Control: Future generations of
herbicide tolerance weed control systems
2018 Outlook
1. Monsanto internal estimate 2.Pending regulatory approvals 3. Also includes Acceleron B-300 SAT. Product to be branded as Acceleron B-360-ST and subject to regulatory approvals.
• Gross profit declined 11% in the
first half of FY18 due mostly to
volumes from timing shifts and
an expected decline in acres
planted in the U.S., plus a
decline in acres planted in Brazil
• Persistent low commodity prices
challenges germplasm price mix
lift in local currency, despite
introduction of new hybrids
globally
• Anticipate holding global genetic
share with new and existing
hybrids
Complementary Crops Gross Profit Growth Drivers
Innovation across seeds, traits, crop protection and digital ag further strengthens leading share position
A
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Cotton, Vegetable and Other Crops Gross Profit Foundation:
~$1.1 billion FY17
Cotton: Annual Germplasm Upgrades
Canola, Wheat, Sorghum
Annual Germplasm Upgrades, TruFlex Canola with Roundup Ready
technology
Vegetables: Annual Germplasm Upgrades; Disease Resistance Packages
Mid-Single
Digits Gross
Profit CAGR
FY17F to
FY21F1
13
NEAR-TERM LONGER-TERM 2021+
Cotton: New Trait Introductions: Bollgard II XtendFlex, Bollgard 3 XtendFlex, Cotton
Lygus Seed Applied Products: NemaStrike Technology
COTTON TRIALS
LUBBOCK, TX 2017
• Excellent performance on yield and fiber quality for
Bollgard II XtendFlex
• High grower demand; expect nearly 8M acres in
FY18 in the U.S.; >6M acres penetrated in FY17
• Grew nearly 13 share points1 across our U.S. cotton
brands and licensees in FY17
Bollgard II XtendFlex
Cotton System
Dow’s Enlist® Cotton
System
1. Per internal estimates.
• Penetrated 120M acres with Climate FieldView Platform in
FY17
• 25 Platform Partners:
• Imagery, Soil Testing, Financial Decision-Making, Other:
U.S. - Veris Technology, Ceres Imaging, TerrAvion, Agribotix (+pilot in
Brazil), Conservis, Deveron UAS Corp., AgWorks, DroneDeploy,
MyAgData, Sentera, AgReliant, SkyMatics
Brazil - Farmbox, Aegro, IBRA Laboratory
• Connectivity: John Deere, Agrian, SSI–Agvance Mapping, Echelon,
FieldAlytics, FS Advanced Information Services, MapShots-Ag Studio,
SST Summit, AGCO, CNH
• In discussions with several additional potential technology providers
Climate FieldView Platform Continues Commitment to Deliver Open, Digital
Ag Ecosystem of Tools to Optimize Farm Management Decisions
14
Innovation leadership and open infrastructure enables platform expansion opportunities
C L I M AT E F I E L D V I E W P L AT F O R M
PLATFORM ADOPTION
• Penetrated >35M paid acres in the U.S. in
FY17; expect 50M paid acres globally in FY18
• Selling through 6 strategic retail partnerships
enabling 3,000+ trusted advisors
• Expanding in Canada, Europe and Brazil and
planning expansions in Argentina, Australia and
South Africa
CLIMATE FIELDVIEW SERVICES
Geographic and Acre Expansion Driving Climate FieldView
Platform Growth in the Americas and Europe
Climate builds upon industry leading U.S. footprint by expanding into meaningful geographies
• Commercial launch May 2017,
reaching nearly 1.4M acres in first
year
• 3 new platform partners added
December 2017
Product features:
• Climate FieldView data connectivity,
data visualization and ability to
analyze effectiveness of planting
decisions and remote monitoring
Brazil
120M acres opportunity
Europe
195M acres opportunity
• NEW: Expansion of Climate FieldView Platform in
Germany, France and Ukraine in FY18
• Acquired VitalFields platform, which operates in 7
countries within Europe, and HydroBio in FY17
Product features:
• VitalFields platform provides simplified tracking and
reporting of all crop inputs to ensure compliance with
European Union environmental standards
• Climate FieldView platform provides data connectivity,
data visualization and ability to analyze effectiveness
of planting decisions and remote monitoring
Canada
55M acres opportunity
• Platform availability in Eastern
Canada beginning in winter 2016
and in FY18 for Western Canada
Product features:
• Climate FieldView platform
provides data connectivity, data
visualization and ability to analyze
effectiveness of planting decisions
and remote monitoring
• Deveron provides advanced aerial
imagery data and analytics
15
Driving Value through Greater Efficiency:
Expected to Yield Annual Savings of $500 Million in 2018
16
Using business analytics aligned with strategic objectives to enhance commercial success & optimize cost structure
Restructuring and cost savings initiatives:
$500M
TOTAL EXPECTED ANNUAL
SAVINGS IN FY18F
Restructuring Expense:
~$890M to $955M
FY15-FY18F Four strategic commercial hubs
Modernize and optimize IT and supply chain networks
Accelerate use of data and analytics to speed up R&D cycle
Global R&D centers of excellence
1
2
3
4
NON-GAAP
F I N A N C I A L I N F O R M A T I O N
Reconciliation of Non-GAAP Financial Measures
18
RECONCILIATION OF ONGOING EPS
See slides 20-21 at the end of the presentation for discussion of reconciling items.
Fiscal 2nd Quarter Fiscal First Half
$ Per share 2018 2017 2018 2017
Diluted Earnings per Share $3.27 $3.09 $3.65 $3.16
Restructuring Charges (a) ($0.03) $0.03 ($0.01) $(0.02)
Environmental and Litigation Matters (b) $0.02 $0.02 $0.04 $0.02
Pending Bayer Transaction Related Costs(c) $0.04 $0.04 $0.07 $0.22
Argentine-Related Tax Matters (e) ($0.23) $0.02 ($0.26) $0.04
Impact of Income Tax Legislation (f) $0.15 -- $0.15 --
Income from Discontinued Operations (d) -- ($0.01) ($0.01) ($0.03)
Diluted EPS from Ongoing Business $3.22 $3.19 $3.63 $3.39
Fiscal 2nd Quarter Fiscal First Half
$ Millions 2018 2017 2018 2017
Operating Expenses (GAAP) $1,070 $1,088 $2,140 $2,100
Restructuring Charges $1 $(23) $(3) $13 (a)
Environmental and Litigation Matters $(11) $(9) $(27) $(17) (b)
Pending Bayer Transaction Related Costs $(25) $(27) $(45) $(120) (c)
Ongoing Operating Expenses $1,035 $1,029 $2,065 $1,976
Reconciliation of Non-GAAP Financial Measures
19
Fiscal 2nd Quarter Fiscal First Half
$ Millions 2018 2017 2018 2017
Gross Profit (GAAP) $2,966 $2,952 $4,278 $4,211
Restructuring Charges $4 $6 $17 $7 (a)
Ongoing Gross Profit $2,970 $2,958 $4,295 $4,218
Fiscal 2nd Quarter Fiscal First Half
$ Millions 2017 2016 2017 2016
Net Income Attributable to Monsanto Co. (GAAP) $1,459 $1,368 $1,628 $1,397
Pretax Restructuring Charges $3 $29 $20 $(6) (a)
Pretax Environmental and Litigation Matters $11 $9 $27 $17 (b)
Pretax Pending Bayer Transaction Related Costs $25 $27 $45 $158 (c)
Income Tax Benefit (1) $(23) $(28) $(44) $(70)
Argentine-Related Tax Matters (2) $(105) $7 $(122) $17 (e)
Impact of Income Tax Legislation $66 - $66 - (f)
Income from Discontinued Operations $(2) $(3) $(3) $(13) (d)
Ongoing Net Income Attributable to Monsanto Co. $1,434 $1,409 $1,617 $1,500
RECONCILIATION OF ONGOING OPERATING EXPENSES RECONCILIATION OF ONGOING
GROSS PROFIT
RECONCILIATION OF ONGOING NET INCOME Attributable to Monsanto Company
See slide 20-21 at the end of the presentation for discussion of reconciling items. 1. Income tax impact of non-GAAP adjustments is the summation of the calculation of income tax (benefit) charge related to each non-GAAP non-income tax adjustment.
Income tax charge is calculated using the actual tax rate in effect during the period for the locality of the related non-GAAP adjustment. 2. Item includes a translation gain recorded in other income, net of $38 million for the three and six months ended Feb.
28, 2018 and a net reversal of previously recognized charges against tax expense of $67 million and $84 million, respectively, for the three and six months ended Feb. 28, 2018. Item includes a translation loss recorded in other income, net of $7 million
and an immaterial net reversal of previously recognized charges against tax expense for the three months ended Feb. 28, 2017, and it resulted in a translation gain recorded in other income, net of $11 million and a net charge against tax expense of $28
million for the six months ended Feb. 28, 2017.
Reconciliation of Non-GAAP Financial Measures
20
DEFINITION OF ONGOING ADJUSTMENTS
(a) Restructuring Charges: Fiscal second quarter 2018 and 2017 included pretax charges totaling $3 million ($0.01 a share), or after-tax a net reversal
of $12 million ($0.03 a share), and pretax charges totaling $29 million ($0.07 a share), or after-tax $14 million ($0.03 a share), respectively. The six
months ended Feb. 28, 2018 and Feb 28, 2017, included pretax charges totaling $20 million ($0.05 a share), or after-tax a net reversal of $3 million ($0.01
a share), and a pretax net reversal of previously recognized restructuring charges totaling $6 million ($0.01 a share), or after-tax $11 million ($0.02 a
share). For the three months ended Feb. 28, 2018, $4 million of expense and $1 million of a net reversal of previously recognized expense are included in
cost of goods sold and restructuring charges, respectively. For the three months ended Feb. 28, 2017, $6 million and $23 million of expense are included
in cost of goods sold and restructuring charges, respectively. For the six months ended Feb. 28, 2018, $17 million and $3 million of expense are included
in cost of goods sold and restructuring charges, respectively. For the six months ended Feb. 28, 2017, $7 million of expense and $13 million of net
reversal of previously recognized expense are included in cost of goods sold and restructuring charges, respectively.
(b) Environmental and Litigation Matters: Fiscal second quarter 2018 and 2017 included pretax charges of $11 million ($0.03 a share), or after-tax $9
million ($0.02 a share), and $9 million ($0.02 a share), or after-tax $6 million ($0.02 a share), respectively, for legacy litigation matters. The six months
ended Feb. 28, 2018 and Feb 28, 2017, included pretax charges of $27 million ($0.06 a share), or after-tax $19 million ($0.04 a share), and $17 million
($0.04 a share), or after-tax $11 million ($0.02 a share), respectively. The pretax charges in all periods were recorded in selling, general and
administrative expenses.
(c) Pending Bayer Transaction Related Costs: Item represents expenses incurred in connection with the pending merger agreement with Bayer Fiscal
second quarter 2018 and 2017 included pretax charges of $25 million ($0.06 a share), or after-tax $19 million ($0.04 a share), and $27 million ($0.06 a
share), or after-tax $17 million ($0.04 a share), respectively. The six months ended Feb. 28, 2018 and Feb 28, 2017, included pretax charges of $45
million ($0.10 a share), or after-tax $32 million ($0.07 a share), and $158 million ($0.36 a share), or after-tax $99 million ($0.22 a share), respectively. The
pretax charges in the three months ended Feb. 28, 2018, and Feb. 28, 2017, were recorded in operating expenses of $25 million and $27 million,
respectively. The pretax charges in the six months ended Feb. 28, 2018, and Feb. 28, 2017, were recorded in operating expenses of $45 million and $120
million, respectively, and other income, net of $38 million for the six months ended Feb. 28, 2017.
Reconciliation of Non-GAAP Financial Measures
21
DEFINITION OF ONGOING ADJUSTMENTS
(d) Income from Discontinued Operations: The company reports annual earn-out payments received as a result of the 2008 divestment of the Dairy
Business as discontinued operations. The three months ended Feb. 28, 2018, and Feb. 28, 2017, included pretax income from discontinued operations of
$2 million (less than $0.01 a share), or after-tax $2 million (less than $0.01 a share), and $5 million ($0.01 a share), or after-tax $3 million ($0.01 a share),
respectively. The six months ended Feb. 28, 2018, and Feb. 28, 2017, included pretax income from discontinued operations of $4 million ($0.01 a share),
or after-tax $3 million ($0.01 a share), and $21 million ($0.05 a share), or after-tax $13 million ($0.03 a share), respectively.
(e) Argentine-Related Tax Matters: 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 in the third quarter of fiscal year 2016. The three months ended Feb. 28, 2018, and Feb.
28, 2017, included a net reversal of charges related to Argentine-related tax matters of $105 million ($0.23 a share), and a net charge of $7 million ($0.02
a share), respectively. The six months ended Feb. 28, 2018, and Feb. 28, 2017, included a net reversal of charges related to Argentine-related tax matters
of $122 million ($0.26 a share), and a net charge of $17 million ($0.04 a share), respectively. This resulted in a translation gain recorded in other income,
net of $38 million and a net reversal of previously recognized charges against tax expense of $67 million for the three months ended Feb. 28, 2018; and it
resulted in a translation loss recorded in other income, net of $7 million and an immaterial net reversal of previously recognized charges against tax
expense for the three months ended Feb. 28, 2017. For the six months ended Feb. 28, 2018, it resulted in a translation gain recorded in other income, net
of $38 million and a net reversal of previously recognized charges against tax expense of $84 million. For the six months ended Feb. 28, 2017, it resulted
in a translation gain recorded in other income, net of $11 million and a net charge against tax expense of $28 million.
(f) Impact of Income Tax Legislation: The three and six months ended Feb. 28, 2018, include $66 million of charges recorded within the income tax
provision line item from the impact of new income tax legislation in various countries in which Monsanto operates.