Monsanto Co. (NYSE:MON)

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Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

Monsanto Co., effective income tax rate (EITR) reconciliation

		Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
	U.S. federal statutory tax rate	35.00%	35.00%	35.00%	35.00%	35.00%	35.00%
	Effective tax rate	21.69%	34.91%	27.33%	28.17%	26.68%	30.15%

The analysis of the income tax profile reveals a consistent disparity between the U.S. federal statutory tax rate and the effective tax rate throughout the observed period. While the statutory rate remained constant, the effective rate exhibited significant volatility, generally remaining below the legal benchmark.

Statutory Tax Rate Stability: The U.S. federal statutory tax rate remained unchanged at 35.00% from August 31, 2012, through August 31, 2017, providing a stable baseline for evaluating tax efficiency.
Effective Tax Rate Trends: The effective tax rate fluctuated between a high of 34.91% in 2016 and a low of 21.69% in 2017. An initial decrease from 30.15% in 2012 to 26.68% in 2013 was followed by a period of relative stability, with rates oscillating between 27.33% and 28.17% through 2015.
Analysis of Rate Variance: A notable convergence toward the statutory rate occurred in 2016, where the effective rate reached 34.91%, representing the narrowest margin of variance in the six-year period. This was immediately followed by a sharp decline in 2017 to 21.69%, marking the widest divergence from the statutory rate and the lowest overall tax burden during the analyzed timeframe.

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Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

Monsanto Co., components of deferred tax assets and liabilities

US$ in millions

	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
Net operating loss and other carryforwards	608)	438)	323)	443)	455)	601)
Employee fringe benefits	311)	331)	305)	259)	335)	412)
Royalties	220)	189)	154)	129)	95)	106)
Restructuring and impairment reserves	127)	155)	242)	135)	130)	148)
Inventories	93)	91)	173)	106)	137)	132)
Allowance for doubtful accounts	85)	77)	72)	70)	46)	45)
Environmental and litigation reserves	82)	70)	69)	69)	99)	73)
Intangibles	—)	—)	—)	74)	71)	122)
Other	318)	407)	307)	350)	239)	225)
Deferred tax assets, gross	1,844)	1,758)	1,645)	1,635)	1,607)	1,864)
Valuation allowance	(394)	(346)	(68)	(63)	(47)	(50)
Deferred tax assets	1,450)	1,412)	1,577)	1,572)	1,560)	1,814)
Property, plant and equipment	(667)	(533)	(539)	(585)	(571)	(546)
Intangibles	(411)	(334)	(361)	(400)	(403)	(407)
Other	—)	—)	—)	(81)	(60)	(119)
Deferred tax liabilities	(1,078)	(867)	(900)	(1,066)	(1,034)	(1,072)
Net deferred tax assets (liabilities)	372)	545)	677)	506)	526)	742)

The net deferred tax asset position experienced an overall decline between 2012 and 2017, decreasing from 742 million USD to 372 million USD. While gross deferred tax assets remained relatively stable throughout the period, the net position was impacted by an increase in valuation allowances and fluctuations in deferred tax liabilities.

Components of Gross Deferred Tax Assets: Net operating loss and other carryforwards represented a significant component of the asset base, exhibiting a U-shaped trend; values decreased from 601 million USD in 2012 to a low of 323 million USD in 2015 before recovering to 608 million USD by 2017. Royalties showed a consistent upward trajectory, more than doubling from 106 million USD in 2012 to 220 million USD in 2017. Conversely, employee fringe benefits trended downward from 412 million USD to 311 million USD. Other notable assets, such as the allowance for doubtful accounts, showed steady growth from 45 million USD to 85 million USD over the six-year period.
Valuation Allowance Trends: A significant shift occurred in the valuation allowance between 2015 and 2016. For the first four years, the allowance remained relatively low, ranging from 47 million USD to 68 million USD. However, in 2016, the allowance increased sharply to 346 million USD, further rising to 394 million USD in 2017. This suggests a substantial increase in the estimated portion of deferred tax assets that may not be realized.
Deferred Tax Liabilities Analysis: The primary driver of deferred tax liabilities was property, plant, and equipment, which fluctuated between 533 million USD and 667 million USD, reaching its peak in 2017. Liabilities related to intangibles remained relatively consistent, oscillating between 334 million USD and 411 million USD. Total deferred tax liabilities reached a low of 867 million USD in 2016 before increasing to 1,078 million USD in 2017, contributing to the reduction of the net deferred tax asset position.

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Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

Monsanto Co., deferred tax assets and liabilities, classification

US$ in millions

	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
Current deferred tax assets	—)	—)	743)	635)	579)	534)
Noncurrent deferred tax assets	564)	613)	277)	450)	454)	551)
Current deferred tax liabilities	—)	—)	3)	70)	38)	30)
Noncurrent deferred tax liabilities	192)	68)	340)	509)	469)	313)

The financial data indicates a consistent net deferred tax asset position throughout the reported period, as total deferred tax assets generally exceed total deferred tax liabilities. There is a notable shift in the composition and valuation of these accounts, particularly between 2014 and 2017.

Deferred Tax Assets (DTA) Trends: Current deferred tax assets exhibited a steady upward trajectory from 2012 to 2015, increasing from 534 million US$ to 743 million US$. Noncurrent deferred tax assets displayed greater volatility; a downward trend was observed from 2012 through 2015, reaching a low of 277 million US$, followed by a significant increase to 613 million US$ in 2016 and a slight moderation to 564 million US$ in 2017.
Deferred Tax Liabilities (DTL) Trends: Current deferred tax liabilities remained relatively low, peaking at 70 million US$ in 2014 before dropping sharply to 3 million US$ in 2015. Noncurrent deferred tax liabilities rose from 313 million US$ in 2012 to a peak of 509 million US$ in 2014. Subsequently, a substantial reduction occurred, with the balance falling to 68 million US$ by 2016, before increasing to 192 million US$ in 2017.
Net Position and Classification Analysis: A significant contraction in total deferred tax liabilities is evident between 2014 and 2016, coinciding with a resurgence in noncurrent deferred tax assets. This suggests a material change in the company's tax position, potentially stemming from the realization of tax benefits, changes in tax legislation, or the settlement of deferred obligations. The overall trend reflects an increasing reliance on noncurrent tax assets to offset long-term liabilities in the later years of the sequence.

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Monsanto Co., Financial Data: Reported vs. Adjusted

Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

Monsanto Co., adjustments to financial statements

US$ in millions

	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
Adjustment to Current Assets
Current assets (as reported)	8,651)	8,157)	10,625)	9,675)	10,077)	9,658)
Less: Current deferred tax assets, net	—)	—)	743)	635)	579)	534)
Current assets (adjusted)	8,651)	8,157)	9,882)	9,040)	9,498)	9,124)
Adjustment to Total Assets
Total assets (as reported)	21,333)	19,736)	21,920)	21,981)	20,664)	20,224)
Less: Current deferred tax assets, net	—)	—)	743)	635)	579)	534)
Less: Noncurrent deferred tax assets, net	564)	613)	277)	450)	454)	551)
Total assets (adjusted)	20,769)	19,123)	20,900)	20,896)	19,631)	19,139)
Adjustment to Current Liabilities
Current liabilities (as reported)	6,398)	6,729)	5,177)	5,112)	4,336)	4,221)
Less: Current deferred tax liabilities, net	—)	—)	3)	70)	38)	30)
Current liabilities (adjusted)	6,398)	6,729)	5,174)	5,042)	4,298)	4,191)
Adjustment to Total Liabilities
Total liabilities (as reported)	14,875)	15,191)	14,915)	14,067)	7,936)	8,188)
Less: Current deferred tax liabilities, net	—)	—)	3)	70)	38)	30)
Less: Noncurrent deferred tax liabilities, net	192)	68)	340)	509)	469)	313)
Total liabilities (adjusted)	14,683)	15,123)	14,572)	13,488)	7,429)	7,845)
Adjustment to Total Monsanto Company Shareowners’ Equity
Total Monsanto Company shareowners’ equity (as reported)	6,438)	4,534)	6,990)	7,875)	12,559)	11,833)
Less: Net deferred tax assets (liabilities)	372)	545)	677)	506)	526)	742)
Total Monsanto Company shareowners’ equity (adjusted)	6,066)	3,989)	6,313)	7,369)	12,033)	11,091)
Adjustment to Net Income Attributable To Monsanto Company
Net income attributable to Monsanto Company (as reported)	2,260)	1,336)	2,314)	2,740)	2,482)	2,045)
Add: Deferred income tax expense (benefit)	46)	28)	(288)	(45)	126)	241)
Net income attributable to Monsanto Company (adjusted)	2,306)	1,364)	2,026)	2,695)	2,608)	2,286)

The removal of deferred taxes results in a systematic reduction of reported asset and liability values across the analyzed period. This adjustment provides a modified financial perspective by excluding the long-term tax implications and accounting timing differences typically captured in deferred tax accounts, thereby isolating the immediate financial position.

Impact on Asset Valuation: Reported total assets consistently exceeded adjusted total assets from 2012 through 2017. The variance was most significant between 2012 and 2015, after which the gap narrowed. By 2016 and 2017, reported and adjusted current assets converged to identical values, suggesting that deferred tax assets were no longer classified as current assets in the latter part of the period.
Liability and Equity Adjustments: Adjusted total liabilities were consistently lower than reported total liabilities, indicating the removal of deferred tax liability obligations. Despite the reduction in liabilities, adjusted shareowners' equity remained consistently lower than reported equity. This demonstrates that the removal of deferred tax assets had a greater downward impact on the balance sheet than the removal of deferred tax liabilities, leading to a net reduction in the equity base.
Net Income Variability: The relationship between reported and adjusted net income fluctuated over the six-year period. Adjusted net income was higher than reported net income in 2012, 2013, 2016, and 2017. Conversely, in 2014 and 2015, reported net income exceeded adjusted figures. These fluctuations indicate that the impact of deferred tax adjustments on profitability varied annually based on the specific tax effects recognized in those periods.
Structural Balance Sheet Trends: A significant shift in the capital structure is observed starting in 2014, characterized by a sharp increase in total liabilities and a corresponding decline in shareowners' equity. This trend persists in both reported and adjusted figures, confirming that the underlying financial volatility and increase in leverage were independent of the deferred tax adjustments.

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Monsanto Co., Financial Ratios: Reported vs. Adjusted

Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

Monsanto Co., adjusted financial ratios

	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
Current Ratio
Reported current ratio	1.35	1.21	2.05	1.89	2.32	2.29
Adjusted current ratio	1.35	1.21	1.91	1.79	2.21	2.18
Net Profit Margin
Reported net profit margin	15.44%	9.89%	15.43%	17.28%	16.70%	15.14%
Adjusted net profit margin	15.75%	10.10%	13.51%	17.00%	17.55%	16.93%
Total Asset Turnover
Reported total asset turnover	0.69	0.68	0.68	0.72	0.72	0.67
Adjusted total asset turnover	0.70	0.71	0.72	0.76	0.76	0.71
Financial Leverage
Reported financial leverage	3.31	4.35	3.14	2.79	1.65	1.71
Adjusted financial leverage	3.42	4.79	3.31	2.84	1.63	1.73
Return on Equity (ROE)
Reported ROE	35.10%	29.47%	33.10%	34.79%	19.76%	17.28%
Adjusted ROE	38.02%	34.19%	32.09%	36.57%	21.67%	20.61%
Return on Assets (ROA)
Reported ROA	10.59%	6.77%	10.56%	12.47%	12.01%	10.11%
Adjusted ROA	11.10%	7.13%	9.69%	12.90%	13.29%	11.94%

An analysis of the financial ratios from 2012 to 2017 reveals a consistent divergence between reported figures and adjusted figures following the removal of deferred taxes. The adjustments generally suggest that deferred tax accounts exerted a stabilizing effect on reported balance sheet metrics while slightly suppressing returns on equity and assets.

Liquidity Analysis: The reported current ratio exhibited a general downward trend, declining from 2.29 in 2012 to 1.35 by 2017, with a notable sharp decrease occurring in 2016. The adjusted current ratio followed a nearly identical trajectory, although it remained slightly lower than the reported ratio between 2012 and 2015. By 2016 and 2017, the reported and adjusted ratios converged completely at 1.21 and 1.35, respectively, indicating that deferred tax items ceased to influence short-term liquidity measurements in the final two years of the period.
Profitability and Return Metrics: Net profit margins showed volatility, with a significant dip in 2016. Adjusted net profit margins were generally higher than reported margins in the early period (2012-2013) and the final year (2017), suggesting that deferred tax adjustments positively impacted bottom-line efficiency. Return on Equity (ROE) experienced substantial growth, rising from a reported 17.28% in 2012 to 35.10% in 2017. Adjusted ROE was consistently higher than reported ROE across the entire period, peaking at 38.02% in 2017, which indicates that the removal of deferred taxes reduced the equity base and thereby amplified the return.; Return on Assets (ROA) fluctuated, mirroring the trend of the net profit margin with a decline in 2016. Adjusted ROA was higher than reported ROA in most years, particularly between 2012 and 2014, although the variance narrowed significantly by 2016.
Operational Efficiency and Solvency: Total asset turnover remained relatively stable, hovering between 0.67 and 0.72 on a reported basis. Adjusted total asset turnover was consistently higher than the reported figures, indicating that deferred tax assets likely inflated the reported asset base, thereby understating the efficiency of asset utilization.; Financial leverage showed a marked increase, rising from 1.71 in 2012 to a peak of 4.35 in 2016 before moderating to 3.31 in 2017. Adjusted financial leverage was consistently higher than reported leverage throughout the period. This suggests that the removal of deferred taxes increased the perceived risk profile and capital intensity of the balance sheet.

Overall, the removal of deferred taxes results in a systemic increase in return ratios (ROE, ROA) and asset efficiency (turnover), while simultaneously increasing the measured financial leverage. This pattern indicates that the deferred tax positions functioned as a buffer on the reported balance sheet, moderating both the volatility of returns and the appearance of leverage.

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Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Current assets	8,651)	8,157)	10,625)	9,675)	10,077)	9,658)
Current liabilities	6,398)	6,729)	5,177)	5,112)	4,336)	4,221)
Liquidity Ratio
Current ratio¹	1.35	1.21	2.05	1.89	2.32	2.29
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted current assets	8,651)	8,157)	9,882)	9,040)	9,498)	9,124)
Adjusted current liabilities	6,398)	6,729)	5,174)	5,042)	4,298)	4,191)
Liquidity Ratio
Adjusted current ratio²	1.35	1.21	1.91	1.79	2.21	2.18

2017 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= 8,651 ÷ 6,398 = 1.35

² Adjusted current ratio = Adjusted current assets ÷ Adjusted current liabilities
= 8,651 ÷ 6,398 = 1.35

The liquidity position of the entity exhibits a significant downward trend over the observed six-year period, characterized by a contraction in current assets and a simultaneous increase in current liabilities. This convergence resulted in a substantial reduction in the current ratio, indicating a diminished capacity to cover short-term obligations with short-term assets.

Current Assets Analysis: Reported current assets remained relatively stable between 2012 and 2015, peaking at 10,625 million USD in 2015. However, a sharp decline occurred in 2016, where assets fell to 8,157 million USD, representing a decrease of approximately 23% from the previous year's peak. A marginal recovery was observed in 2017, with assets rising to 8,651 million USD. Adjusted current assets mirrored this trajectory, although they remained lower than reported figures from 2012 to 2015, converging completely with reported values in 2016 and 2017.
Current Liabilities Analysis: Current liabilities demonstrated a consistent upward trajectory for most of the period. From 2012 to 2016, reported current liabilities increased from 4,221 million USD to a peak of 6,729 million USD. This represents a growth of approximately 59% over four years. A slight reduction was noted in 2017, with liabilities decreasing to 6,398 million USD. Adjusted current liabilities followed a nearly identical path, with minor variances occurring only prior to 2016.
Current Ratio Interpretation: The reported current ratio peaked in 2013 at 2.32 before experiencing a volatile decline, reaching a low of 1.21 in 2016. The adjusted current ratio followed the same pattern, starting at 2.18 in 2012 and reaching its minimum of 1.21 in 2016. The gap between reported and adjusted ratios was most prominent between 2012 and 2015, suggesting that specific adjustments to assets and liabilities had a measurable impact on liquidity metrics during those years. By 2016 and 2017, the reported and adjusted ratios became identical, indicating that no adjustments were necessary or applied to the current accounts in the final two years of the period.

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Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Monsanto Company	2,260)	1,336)	2,314)	2,740)	2,482)	2,045)
Net sales	14,640)	13,502)	15,001)	15,855)	14,861)	13,504)
Profitability Ratio
Net profit margin¹	15.44%	9.89%	15.43%	17.28%	16.70%	15.14%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Monsanto Company	2,306)	1,364)	2,026)	2,695)	2,608)	2,286)
Net sales	14,640)	13,502)	15,001)	15,855)	14,861)	13,504)
Profitability Ratio
Adjusted net profit margin²	15.75%	10.10%	13.51%	17.00%	17.55%	16.93%

2017 Calculations

¹ Net profit margin = 100 × Net income attributable to Monsanto Company ÷ Net sales
= 100 × 2,260 ÷ 14,640 = 15.44%

² Adjusted net profit margin = 100 × Adjusted net income attributable to Monsanto Company ÷ Net sales
= 100 × 2,306 ÷ 14,640 = 15.75%

The financial performance between 2012 and 2017 is characterized by a period of initial expansion, a significant contraction peaking in 2016, and a subsequent recovery in 2017.

Net Income Trajectory: Reported net income grew from US$ 2,045 million in 2012 to a peak of US$ 2,740 million in 2014. A downward trend followed, with income falling to US$ 1,336 million in 2016, before rebounding to US$ 2,260 million in 2017. Adjusted net income followed a similar trajectory, reaching its zenith in 2014 at US$ 2,695 million and its lowest point in 2016 at US$ 1,364 million.
Reported Net Profit Margin Trends: The reported net profit margin exhibited steady growth from 15.14% in 2012 to 17.28% in 2014. This was followed by a sharp decline, resulting in a period low of 9.89% in 2016. By 2017, the margin returned to a level of 15.44%, nearly matching the 2012 starting point.
Adjusted Net Profit Margin Analysis: The adjusted net profit margin peaked early in the period at 17.55% in 2013. A significant contraction was observed from 2014 through 2016, where the margin dropped from 17.00% to 10.10%. A strong recovery occurred in 2017, with the adjusted margin rising to 15.75%.
Comparison of Reported and Adjusted Metrics: Variances between reported and adjusted figures indicate the impact of non-recurring items. In 2012 and 2013, adjusted margins were higher than reported margins, suggesting the impact of one-time charges. In 2014 and 2015, this trend reversed, with reported margins exceeding adjusted margins. In 2016, the convergence of reported (9.89%) and adjusted (10.10%) margins suggests that the profitability decline was primarily driven by factors reflected in both reporting methods.

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Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Net sales	14,640)	13,502)	15,001)	15,855)	14,861)	13,504)
Total assets	21,333)	19,736)	21,920)	21,981)	20,664)	20,224)
Activity Ratio
Total asset turnover¹	0.69	0.68	0.68	0.72	0.72	0.67
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Net sales	14,640)	13,502)	15,001)	15,855)	14,861)	13,504)
Adjusted total assets	20,769)	19,123)	20,900)	20,896)	19,631)	19,139)
Activity Ratio
Adjusted total asset turnover²	0.70	0.71	0.72	0.76	0.76	0.71

2017 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= 14,640 ÷ 21,333 = 0.69

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 14,640 ÷ 20,769 = 0.70

An analysis of asset utilization metrics from 2012 to 2017 reveals a period of increasing operational efficiency that peaked mid-cycle, followed by a gradual decline and subsequent stabilization. There is a consistent variance between reported and adjusted figures, with adjusted metrics reflecting a higher rate of efficiency across the entire period.

Total Asset Trends: Reported total assets experienced growth from US$ 20,224 million in 2012 to a peak of US$ 21,981 million in 2014. A contraction is observed in 2016, where assets decreased to US$ 19,736 million, before recovering to US$ 21,333 million by 2017. Adjusted total assets mirrored this trajectory, remaining consistently lower than reported assets, which indicates the exclusion of specific asset components to determine adjusted efficiency.
Asset Turnover Performance: The reported total asset turnover ratio rose from 0.67 in 2012 to 0.72 in 2013 and 2014, after which it stabilized between 0.68 and 0.69. The adjusted total asset turnover followed a similar trend but maintained higher values, peaking at 0.76 during the 2013-2014 period. A gradual downward trend in the adjusted ratio is evident from 2014 through 2017, ending at 0.70.
Comparative Efficiency Insights: A consistent positive spread is maintained between the adjusted and reported turnover ratios, typically ranging between 0.03 and 0.04. This suggests that the adjustments made to the total asset base consistently present a more favorable view of the company's ability to generate revenue from its assets. While the asset base fluctuated, the peak efficiency occurred in 2013 and 2014, with a moderate decline in turnover performance observed in the final three years of the analyzed period.

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Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Total assets	21,333)	19,736)	21,920)	21,981)	20,664)	20,224)
Total Monsanto Company shareowners’ equity	6,438)	4,534)	6,990)	7,875)	12,559)	11,833)
Solvency Ratio
Financial leverage¹	3.31	4.35	3.14	2.79	1.65	1.71
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets	20,769)	19,123)	20,900)	20,896)	19,631)	19,139)
Adjusted total Monsanto Company shareowners’ equity	6,066)	3,989)	6,313)	7,369)	12,033)	11,091)
Solvency Ratio
Adjusted financial leverage²	3.42	4.79	3.31	2.84	1.63	1.73

2017 Calculations

¹ Financial leverage = Total assets ÷ Total Monsanto Company shareowners’ equity
= 21,333 ÷ 6,438 = 3.31

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Monsanto Company shareowners’ equity
= 20,769 ÷ 6,066 = 3.42

An analysis of the financial position between 2012 and 2017 reveals a significant shift in the capital structure, characterized by a substantial decrease in shareowners' equity and a corresponding increase in financial leverage, despite relatively stable total assets.

Shareowners' Equity Trends: Reported shareowners' equity remained stable between 2012 and 2013, peaking at 12,559 million USD. A sharp contraction began in 2014, with equity declining steadily to a low of 4,534 million USD by August 31, 2016. A partial recovery occurred in 2017, with reported equity rising to 6,438 million USD.
Financial Leverage Evolution: Financial leverage exhibited a strong upward trend that inversely mirrored the decline in equity. The reported leverage ratio increased from 1.71 in 2012 to a peak of 4.35 in 2016. The adjusted financial leverage followed a similar trajectory but reached a more elevated peak of 4.79 in 2016, indicating a heightened risk profile when adjustments are applied.
Asset Stability and Impact: Total assets showed minimal volatility over the six-year period, fluctuating within a range of approximately 19,736 million USD to 21,981 million USD. The stability of the asset base during a period of diminishing equity contributed directly to the acceleration of leverage ratios between 2014 and 2016.
Analysis of Adjusted Metrics: The variance between reported and adjusted figures became more pronounced as the company's financial leverage increased. While the difference in leverage ratios was marginal in 2012 and 2013, the gap widened significantly by 2016, where adjusted leverage exceeded reported leverage by 0.44 points. This suggests that the underlying adjustments had a compounding effect on the leverage ratio during the period of maximum equity depletion.

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Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Monsanto Company	2,260)	1,336)	2,314)	2,740)	2,482)	2,045)
Total Monsanto Company shareowners’ equity	6,438)	4,534)	6,990)	7,875)	12,559)	11,833)
Profitability Ratio
ROE¹	35.10%	29.47%	33.10%	34.79%	19.76%	17.28%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Monsanto Company	2,306)	1,364)	2,026)	2,695)	2,608)	2,286)
Adjusted total Monsanto Company shareowners’ equity	6,066)	3,989)	6,313)	7,369)	12,033)	11,091)
Profitability Ratio
Adjusted ROE²	38.02%	34.19%	32.09%	36.57%	21.67%	20.61%

2017 Calculations

¹ ROE = 100 × Net income attributable to Monsanto Company ÷ Total Monsanto Company shareowners’ equity
= 100 × 2,260 ÷ 6,438 = 35.10%

² Adjusted ROE = 100 × Adjusted net income attributable to Monsanto Company ÷ Adjusted total Monsanto Company shareowners’ equity
= 100 × 2,306 ÷ 6,066 = 38.02%

An analysis of the financial performance from August 31, 2012, to August 31, 2017, reveals a significant expansion in return on equity, driven primarily by a substantial reduction in the shareowners' equity base rather than a linear increase in net income.

Net Income Trends: Reported net income demonstrated volatility over the six-year period, peaking at 2,740 million USD in 2014 before experiencing a sharp decline to 1,336 million USD in 2016. A recovery followed in 2017, with income rising to 2,260 million USD. Adjusted net income followed a similar trajectory, although it remained consistently higher than reported figures in most years, suggesting that non-recurring items or specific tax adjustments periodically impacted reported profitability.
Equity Base Contraction: A pronounced downward trend in shareowners' equity is observed beginning after August 31, 2013. Reported equity decreased from 12,559 million USD in 2013 to 4,534 million USD in 2016, representing a contraction of approximately 63.9%. While there was a partial recovery to 6,438 million USD in 2017, the equity base remained significantly lower than 2012-2013 levels. Adjusted equity mirrored this decline, reaching a low of 3,989 million USD in 2016.
Return on Equity (ROE) Analysis: Both reported and adjusted ROE exhibited a strong upward trend. Reported ROE increased from 17.28% in 2012 to 35.10% in 2017. Adjusted ROE showed a similar progression, starting at 20.61% in 2012 and reaching 38.02% by 2017. The most significant acceleration occurred between 2013 and 2014, where reported ROE jumped from 19.76% to 34.79%. This escalation is attributable to the simultaneous reduction in the equity denominator and the relative stability of net income during that specific window.
Reported versus Adjusted Metrics: A consistent gap exists between reported and adjusted ROE, with adjusted figures generally reflecting a higher rate of return. For instance, in 2017, the adjusted ROE of 38.02% exceeded the reported ROE of 35.10%. This indicates that the adjustments made to net income and equity consistently result in a more favorable presentation of the company's efficiency in generating profits from shareholders' investments.

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Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Monsanto Company	2,260)	1,336)	2,314)	2,740)	2,482)	2,045)
Total assets	21,333)	19,736)	21,920)	21,981)	20,664)	20,224)
Profitability Ratio
ROA¹	10.59%	6.77%	10.56%	12.47%	12.01%	10.11%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Monsanto Company	2,306)	1,364)	2,026)	2,695)	2,608)	2,286)
Adjusted total assets	20,769)	19,123)	20,900)	20,896)	19,631)	19,139)
Profitability Ratio
Adjusted ROA²	11.10%	7.13%	9.69%	12.90%	13.29%	11.94%

2017 Calculations

¹ ROA = 100 × Net income attributable to Monsanto Company ÷ Total assets
= 100 × 2,260 ÷ 21,333 = 10.59%

² Adjusted ROA = 100 × Adjusted net income attributable to Monsanto Company ÷ Adjusted total assets
= 100 × 2,306 ÷ 20,769 = 11.10%

The financial performance from 2012 to 2017 is characterized by a period of growth and efficiency peaking in 2014, followed by a significant contraction in 2016 and a subsequent recovery in 2017.

Net Income Trends: Reported net income exhibited an upward trajectory from 2012 to 2014, rising from US$ 2,045 million to a peak of US$ 2,740 million. A sharp decline occurred between 2014 and 2016, with income reaching a period low of US$ 1,336 million before rebounding to US$ 2,260 million in 2017. Adjusted net income generally tracked this movement, though it provided a higher valuation of earnings in the final year of the period compared to reported figures.
Asset Base Evaluation: Total assets remained relatively stable, with reported assets fluctuating between US$ 19,736 million and US$ 21,981 million. A consistent variance is noted between reported and adjusted total assets, with adjusted assets remaining lower than reported assets across all six years. This indicates a systemic adjustment to the asset base that consistently alters the denominator in return on assets calculations.
Return on Assets (ROA) Analysis: Reported ROA peaked at 12.47% in 2014 before falling to a period low of 6.77% in 2016. Adjusted ROA followed a similar trend but maintained higher values in most years, peaking at 13.29% in 2013. The variance between reported and adjusted ROA highlights the impact of non-recurring items or accounting adjustments on perceived efficiency. During the 2016 downturn, the adjusted ROA of 7.13% provided a slightly more favorable view of performance than the reported 6.77%.

The recovery observed in 2017 demonstrates a return to pre-2015 profitability levels, with adjusted ROA rising back to 11.10%, signaling a restoration of asset utilization efficiency after the 2016 trough.

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