monsanto 02_18_09


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monsanto 02_18_09

  2. 2. Forward-Looking Statements Certain statements contained in this presentation are quot;forward-looking statements,quot; such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company's actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: continued competition in seeds, traits and agricultural chemicals; the company's exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public acceptance of biotechnology products; the success of the company's research and development activities; the outcomes of major lawsuits; developments related to foreign currencies and economies; successful operation of recent acquisitions; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company's estimates related to distribution inventory levels; the company's ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters and accidents on the agriculture business or the company's facilities; and other risks and factors detailed in the company's 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. 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. © 2009 Monsanto Company 2
  3. 3. Non-GAAP Financial Information This presentation may use the non-GAAP financial measures of “free cash flow,” earnings per share (EPS) on an ongoing basis and Return on Capital (ROC). We define free cash flow as the total of cash flows from operating activities and investing activities. A non-GAAP EPS financial measure, which we refer to as ongoing EPS, excludes certain after-tax items that we do not consider part of ongoing operations, which are identified in the reconciliation. ROC means net income (without the effect of certain items) exclusive of after-tax interest expenses, divided by the average of the beginning year and ending year net capital employed, as defined in the reconciliation. Our presentation of non-GAAP financial measures is intended to supplement investors’ understanding of our operating performance, not replace net income (loss), 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. With respect to the time period prior to Sept. 1, 2000, references to Monsanto in this presentation also refer to the agricultural business of Pharmacia. 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. 3
  4. 4. Five-Year Plan to More Than Double Gross Profit by 2012 Centered On Seeds and Traits Platform 2012 GROWTH RANGE GROSS PROFIT COMMITMENT: 2003-2012F Gross profit targeted to more than double from 2007 $9.5- baseline through 2012 $9.75B SEEDS & GENOMICS GROSS PROFIT $10,000 STRATEGIC PLAYBOOK AG PRODUCTIVITY GROSS PROFIT All growth is organic, from $7.3- base business and pipeline $7.5B $8,000 GROSS PROFIT (in millions) U.S. Corn International Corn Soybeans ~2.25X Cotton $6,000 2007 Vegetables BASELINE R&D Pipeline $4.2B Earnings continue to $4.40- $4,000 translate into operating cash, $4.50 and value created for ONGOING shareowners through EPS $2,000 combination of acquisitions, share repurchases and dividends $0 2003 2004 2005 2006 2007 2008 2009F 2012F BASELINE 4
  5. 5. Even as Roundup Supply and Demand Comes into Balance, Seeds and Traits Is Fundamental Driver of Growth SEEDS & GENOMICS GROSS PROFIT Roundup and Other ROUNDUP AND OTHER GLYPHOSATE-BASED HERBICIDES GROSS PROFIT Glyphosate-Based $10,000 Herbicides $9,000 GROSS PROFIT (in millions) ~18% CAGR $7.3B- FY2009 Forecast $7.5B $8,000 Gross Profit $2.4B-$2.5B $7,000 Target $4.5B- $6,000 Branded Price $4.6B (per equivalent > $20 $5,000 gallon) $4,000 FY2012 Forecast $3,000 Gross Profit $1.9B $2,000 $2.4B- Target $1.9B ~ -8% CAGR $2.5B $1,000 Branded Price (per equivalent $16-$18 $0 gallon) 2009F 2012F By 2012, Seeds and Genomics will grow at a CAGR of ~18%, representing nearly 4x the gross profit contribution of the Roundup business 5
  6. 6. Monsanto’s Growth Lies In Creating New Value for Growers; Yield From Seed Is Most Important On-Farm Decision U.S. CORN PRODUCTION COSTS PER ACRE 2006 2008 OPERATING COSTS1 SEED 21% 21% CHEMICALS 11% 9% 39% FERTILIZER 47% SEED (INCLUDING TRAITS) FERTILIZERS & SOIL AVERAGE YIELD AVERAGE YIELD 149 bu/acre 153 bu/acre REVENUES REVENUES CONDITIONERS GROSS GROSS PRICE PER PRICE PER FUEL & POWER COSTS $3.04 $3.65 – $4.15 BUSHEL BUSHEL CHEMICALS GROSS REVENUE GROSS REVENUE $453/acre ~$597/acre CUSTOM OPERATIONS & SEED + SEED + $67/acre $89/acre CHEMICALS TECHNICAL SERVICE CHEMICALS OTHER COSTS TOTAL COSTS TOTAL FERTILIZER $80/acre FERTILIZER $140/acre A 1% yield increase OTHER $59/acre OTHER $72/acre improves returns by roughly OVERHEAD $204/acre OVERHEAD $4.50/acre to $6.00/acre $230/acre NET RETURN $43/acre NET RETURN ~$66/acre 6 1Excludes overhead costs, including hired labor and opportunity cost of land. Source: USDA and CBOT
  7. 7. Seed Platforms Targeted to Increase Size of Genetic Footprint Globally Through 2012 U.S. 2012 2008 SHARE TARGETS EU27 25.5% 30-34% 2008 SHARE 2012 TARGETS DEKALB 10.5% ~15% 12% 16-20% ASI CORN 20% 24-28% Asgrow 9% 10-12% ASI INDIA 2008 SHARE 2012 TARGETS 41% ~50% Deltapine 36% 40-44% CORN 5% 12% COTTON LA - NORTH 2008 SHARE 2012 TARGETS 62-66% 58% CORN BRAZIL 2008 SHARE 2012 TARGETS 40% 44-48% CORN ARGENTINA 2008 SHARE 2012 TARGETS 21% 31% COTTON 46% 50-54% CORN Share for row crops provided reflects sales volume for Monsanto brands divided by total planted acres in respective geography. Corn represents hybrid corn share in each respective market. Source for Deltapine share in the U.S. is dmrkynetic 2008 new certified seed share estimates. 7
  8. 8. Significant Growth Opportunity Still Exists in Expansion of Biotech Traits Globally SOYBEANS COTTON CORN INTERNATIONAL MARKET OPPORTUNITY MARKET OPPORTUNITY FOR BIOTECH TRAITS THROUGH 20101 ROUNDUP ROUNDUP BOLLGARD ROUNDUP ROUNDUP YIELDGARD YIELDGARD READY READY AND READY SMARTSTAX READY CORN BORER ROOTWORM BOLLGARD II CORN 2 2 YIELD (FLEX) U.S. 65-75M 45-55M 10-12M 6-8M 80M 60-70M 45-55M 50-65M 74-98%1 2008 Penetration 97% 0% 63-75% 86% 64-75% 55-67% 0% SOYBEANS COTTON CORN ROUNDUP ROUNDUP BOLLGARD ROUNDUP ROUNDUP YIELDGARD YIELDGARD READY READY AND READY SMARTSTAX READY CORN BORER ROOTWORM International BOLLGARD II CORN 2 2 YIELD (FLEX) 45-50M2 50-60M 3M 2M 15-20M 15-20M 5M 15-20M Brazil 40M - - - 9M 7M 5M 5-7M Argentina - - 15-20M 18-20M 6M 6M - 5-6M India 1M - - - 24M 8M 5M 15-20M Europe (EU27) 0.2M - .15M .15M 6M 4M - 4M South Africa - - - - - - 0.5M-0.8M 0.5M-0.8M Australia 91-101M 45-50M 19-24M 21-23M 60-65M 40-45M 15M 44-57M Total International 77-86%1 66-74% 0% 3-4% 3% 20-23% 0% 0% 2008 Penetration Note: Market opportunity reflects total acres where technology is applicable, not necessarily acres projected for penetration by 2010. 1Primarily Bollgard penetration; opportunity to expand to second generation technology. Ready 2 Yield is planned to be launched in Brazil as a stack with insect-protected soybeans. 2Roundup 8
  9. 9. Corn Gross Profit in FY2009 Targeted to Grow 25 Percent; Margins Up 300 Basis Points CORN SEED & TRAITS CORN SEED AND TRAITS SEGMENT 2009 UPDATES GROSS PROFIT PROGRESSION ► Target to increase gross profit by more than 25% ► Target to increase gross margins by 300 basis points ► On track to deliver 1 – 2 share points in DEKALB $ in millions $4,500- $4,600 brand and 1 point gain in American Seeds in U.S. $2,800 ► Branded triple mix expected to increase to 70% $2,174 $1,721 in U.S. 2012 MILESTONE TARGETS Advanced lead drought-tolerant corn project to 2007 2008 2009F 2012F Phase 4 GLOBAL GROSS PROFIT SPLIT Advanced SmartStax to Phase 4, commercial launch expected in 2010 ► Grow U.S. DEKALB corn share to 30-34 share 30% points; grow American Seeds to ~15 share points 30% U.S. Intl. 70% 70% 2012F 2008 9
  10. 10. Consistent Yield Advantage Has Led to Eight Consecutive Years of Share Gains 2008 FINAL U.S. COMPETITIVE CORN YIELD COMPARISON: DEKALB 12 DEKALB ANNUAL YIELD ADVANTAGE GEOGRAPHY: U.S. (APPROXIMATE DIFFERENCES) DEKALB THREE -YEAR ROLLING Grow 1 – 2 2009 YIELD ADVANTAGE 10 OBJECTIVE: Share Points 9.6 2008 PERFORMANCE UPDATE BUSHELS/ACRE 8.8 8 • In 2008, in > 15,300 8.4 8.4 8.3 8.2 7.8 7.1 comparisons, DEKALB 6 out-yields competitive best by 9.6 bu/acre on average 4 • DEKALB’s overall 3-year average yield advantage 2 continues to improve each year 0 2005 2006 2007 2008 Source: Annual yield advantage calculated each year by comparing leading DEKALB volume products within each RM zone to national competitor products within 2 RM days. 2008 data as of November 23, 2008. Weighted average calculated to 15% moisture. >230,000 comparisons represented in the four years of rolling averages. 10
  11. 11. DEKALB on Path to Nearly Triple Share Through 2012 DEKALB U.S. CORN SHARE EVOLUTION: 2001-2009F U.S. CORN 30% 27% - 28% DEKALB Brand Share STATUS 25% • DEKALB earned 3 points 26% in 2008 for total share of 23% 25.5%, doubling its share 20% in 5 years 20% • On track to deliver 1 – 2 15% 16% share points in DEKALB 14% in FY2009 13% 12% 10% Outlook to 2012: 10% • Grow U.S. DEKALB corn share to 30-34 share 5% points 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009F YIELD CREATION CREATION + PRESERVATION 2001-2004 2005 FORWARD Combining germplasm library and breeding Availability of stacked biotech traits now capability, focus was on boosting the inherent preserves a greater percentage of genetic genetic potential in the seed potential • Molecular breeding becomes new standard • DEKALB brand’s continued strong yield for Monsanto breeders performance is earning increasing trial and adoption from farmers who’ve • Primary growth initially comes from existing historically purchased other brands customers expanding acres planted to DEKALB seed 11
  12. 12. SmartStax Raises the Bar as Most Durable, Complete and Easy to Use On-Farm Package for Weed and Pest Control 2007 & 2008 SmartStax EFFICACY TRIALS NEW: R&D Pipeline 1.5 Node Injury Scale 0-3 SmartStax Corn ADVANCED STATUS: 1.0 Phase 4 CRW Root Damage Ratings PROJECT CONCEPT: 0.5 SmartStax combines the following herbicide-tolerant and insect-protection 0.0 traits for the most complete control: YieldGard VT Roundup Herculex® • YieldGard VT Rootworm with SmartStax Rootworm Ready Corn Rootworm 6.0 Roundup Ready Corn 2 and Damaged Area (cm2) with Roundup YieldGard VT PRO Ready Corn 2 5.0 • Herculex® I and Herculex® RW 4.0 • Liberty Link® 3.0 VALUE: Corn Earworm Damage 2.0 LAUNCH-COUNTRY 55-65M 1.0 ACRES1: 0.0 2020 VALUE2: >$500M Roundup Herculex® SmartStax YieldGard VT Ready Corn Corn Borer WHOLE-FARM YIELD IMPROVEMENT Triple PRO ESTIMATES: The second-generation YieldGard corn borer trait, a key SmartStax component, demonstrates incremental yield benefit IMPROVED CONSISTENCY FOR 1 PRIMARY AND SECONDARY of 4 percent over first-generation corn borer traits in 1. Acre opportunity reflects acres where technology fits at PESTS3 Monsanto's current 2007 market share in respective crops preliminary data from 2 years of comparisons 2. 2 2020 value reflects gross sales opportunity in launch REDUCED REFUGE4 Fewer damaged kernels from earworm drives yield country in year 2020 advantage TOTAL: 5-10% 1Acre opportunity reflects acres where technology fits at Monsanto's current 2007 market share in respective crops 22020 value reflects gross sales opportunity in launch country in year 2020 Herculex® is a registered trademark of Dow Agrosciences LLC 12 3As compared to YieldGard VT Triple 4Subject to EPA approval Liberty Link® is a registered trademark of Bayer CropScience AG
  13. 13. Increasing Biotech Penetration in Brazil and Argentina Sets Stage for Significant Contributions to Gross Profit LATIN AMERICA NORTH LATIN AMERICAN CORN 5-YEAR CURRENT OUTLOOK OUTLOOK: #1 position in all key countries SEED SHARE: SEED & TRAIT TRENDS THROUGH 2012 7-8M HYBRID ACRES: MEXICO Approved YieldGard Corn Borer with #1 POSITION Roundup Ready Corn 2 in Colombia and BIOTECH STATUS: Honduras December 2008 approval gained for experimental trials in El Salvador • Integration of Cristiani; Expand seed footprint for pending FY2009 OUTLOOK trait introductions BRAZIL 5-YEAR CURRENT OUTLOOK BRAZIL 40% SEED SHARE: #1 POSITION 25-27M HYBRID ACRES: 1st commercial trait in FY2009 BIOTECH STATUS: Received approval for Roundup Ready Corn 2 • Targeted share gain: 1-2 points FY2009 OUTLOOK: ARGENTINA • 1.5-2M acre launch of YieldGard Corn Borer #1 POSITION ARGENTINA CURRENT 5-YEAR OUTLOOK 46% SEED SHARE: 8-10M HYBRID ACRES: BIOTECH STATUS: Double-stack corn approved • Targeted share gain: 1-2 points FY2009 OUTLOOK: • 2M-plus acre launch of YieldGard Corn Borer with Roundup Ready Corn 2 13
  14. 14. Soybean Platform to Cross $1 Billion in Gross Profit in 2012; 70 Percent Growth from FY2009 SOY SEED AND TRAITS SEGMENT SOYBEAN SEED & TRAITS 2009 UPDATES GROSS PROFIT PROGRESSION ► On track to gain 1 share point in Asgrow brand ► Controlled commercial release of Roundup $ in millions Ready 2 Yield soybeans on 1.5M acres ~$1,200 ► Roundup Ready soybean in Brazil appears to $725 ~$700 $588 be on track to approach 60% penetration mark 2012 MILESTONE TARGETS ► Large-scale launch of Roundup Ready 2 Yield 2007 2008 2009F 2012F in 2010; target market of 45-55M acres1 GLOBAL GROSS PROFIT SPLIT ► Grow Asgrow brand to 25 share points in the U.S. by 2012 ► Increase Brazil Roundup Ready soybean 15% penetration to 80 percent by 2012 in 20% anticipation of launch of insect-protected Roundup Ready 2 Yield soybeans U.S. Intl. 80% 85% 2012F 2008 1Target market defined as acres where technology is applicable, not necessarily a projection of acres penetrated by 2012. 14
  15. 15. Roundup Ready 2 Yield Soybeans First in Series of Yield-Enhancing Traits FINAL ROUNDUP READY 2 YIELD SOYBEANS VERSUS COMMERCIAL CHECKS NEW: COMPARISONS TO COMMERCIAL ROUNDUP READY SOYBEANS – 2 YEAR SUMMARY 60 VALUE PROPOSITION COMPETITORS’ PRODUCT WITH ROUNDUP READY 2 YIELD ROUNDUP READY TRAIT YIELD IMPROVEMENT ON 55 AVERAGE YIELDS IN ~3.8 bu/ac 55.5 GROUPS 2 & 3: Bushels per Acre 55.2 54.5 INCREMENTAL YIELD 50 51.7 VALUE TO FARMER 51.4 ~$38/ac (VERSUS ROUNDUP 49.9 READY): 45 PRICING SEAMLESS PRICE FOR FIRST-GENERATION $49-$52 40 ROUNDUP READY SEED (PER ACRE)1: SEAMLESS PRICE FOR 35 $69-$72 ROUNDUP READY 2 YIELD SEED (PER ACRE)1: 2 3 Overall RELATIVE MATURITIES: COMPARISONS: >1,000 >2,900 >3,900 APPROXIMATE BUSHELS PER ACRE ADVANTAGE FOR 4.6 3.8 3.8 ROUNDUP READY 2 YIELD: PERCENT YIELD ADVANTAGE 9.1% 7.3% 7.4% FOR ROUNDUP READY 2 YIELD1: Two year summary (2007-2008) of head-to-head comparisons between all Roundup Ready 2 Yield products available for sale in 2009 vs. national competitor Roundup Ready products. Final data as of December 9, 2008. 15 1Reflects seamless price to the farmer, including trait value, germplasm value and value provided by the seed treatment.
  16. 16. Technology Investment Has Fueled Gross Profit Progression for Seeds and Traits Research And $4,500 Development SEEDS & GENOMICS GROSS PROFIT $4,000 GEOGRAPHY Global TOTAL COMPANY RESEARCH & DEVELOPMENT1 $3,500 Maximize return OBJECTIVE: on investment $3,000 IN MILLIONS 2009 STATUS 2001 – 2008 28% CAGR $2,500 • Monsanto spends more $2,000 on seed and biotech R&D than any other 2001 – 2008 $1,500 company 9% CAGR • >90% of R&D spend is $1,000 for seeds-and-traits, $500 split roughly 50/50 between breeding and $0 biotechnology 2001 2002 2003 2004 2005 2006 2007 2008 • For 2009, R&D spend expected to be 9.5%-10% of sales, or more than $1 billion 1Total R&D does not include IP R&D from acquisitions 16
  17. 17. As SmartStax and Roundup Ready 2 Yield Launch, Four New Game-Changing Products Extend Lead into the Next Decade 2012 TO END OF DECADE Drought 2nd Nitrogen- Higher Tolerant Corn Utilization Yielding Generation Family1 Corn Family1 Soybeans1 Drought1 • Advanced to Phase IV • Phase I Project • Advanced to Phase III • Phase II project • First dry-land drought • Consistent yield benefit • Built upon yield platform • 9% yield advantage in product submitted for after two years of testing of Roundup Ready 2 2008 in water-stressed FDA approval Yield environments • 8% yield benefit at lower • 5 years of testing • Lead events 1 & 2 • Currently selecting nitrogen levels exceeded 6%-10% yield experienced average commercial event for improvement target yields of 7.4% and 6.7%, broad-acre application respectively SUPERIOR, NE - FIELD TRIALS – 2007 FARM PROGRESS SHOW – 2007 Dayton, Iowa -- 2008 Transgenic Control WITH GENE CONTROL HYBRID (94 BU/AC) (76 BU/AC) 17 1Part of the Monsanto-BASF Yield and Stress R&D Collaboration
  18. 18. Strong Cash Position Creates Opportunity to Bolster Strategic Position and Drive Differentiation Through Innovation USES OF CASH CUMULATIVE: 2005-2008 Fiscal Years SHARE REPURCHASES 10% OF CASH USED • Completed 4-year $800M share-repurchase program and began previously announced 3-year $800M authorization in December 2008 DIVIDENDS 12% OF CASH USED $906 • From 2002-2008, Monsanto’s Board of Directors has raised the dividend seven times for a total increase of 300 percent. $1,058 TECHNOLOGY SPENDING 4% OF CASH USED $307 • Over $300M spent to expand technology partnership network $4,485 ACQUISITIONS 51% OF CASH USED $2,078 • American Seeds • Delta & Pine Land (2007) (2004-2007) • Agroeste (2007) • Seminis (2005) • De Ruiter and Cristiani (2008) $ in millions CAPITAL SPENDING 24% OF CASH USED • Spent $918M in 2008, 60% for new or expanding seed facilities 18
  19. 19. FY2009 Guidance Supports 20 Percent Plus EPS Growth Rate 2009F EARNINGS $4.40-$4.50 ONGOING EARNINGS PER SHARE ~20-24% GROWTH FROM 2008 Seeds & Genomics Gross Profit $4.5-$4.6B Corn Seed & Traits Gross Profit ~$2.8B Soybean Seed & Traits Gross Profit ~$700M Cotton Seed & Traits Gross Profit ~$300M Vegetable Seeds Gross Profit ~$500M All Other Seed & Traits Gross Profit ~$200M Roundup and All Other Glyphosate-based Herbicides Gross Profit $2.4-2.5B All Other Ag Productivity Gross Profit ~$400M CASH MANAGEMENT AND SPENDING FREE CASH FLOW >$1.8B Operating Cash >$3B Capital Expenditures ~$1B SG&A as a Percent of Sales 19% Range R&D as a Percent of Sales (excluding acquired IPR&D) 9.5%-10% Range 19
  20. 20. Monsanto’s Growth Opportunity Lies at the Intersection of Demand, Innovation and Execution Monsanto’s Simple Philosophy on Opportunity: More demand requires more YIELD More yield requires more INNOVATION More innovation delivers more GROWTH 20
  21. 21. Reconciliation of Non-GAAP Financial Measures Reconciliation of Free Cash Flow Fiscal Year Fiscal Year Fiscal Year First First $ Millions 2009 Forecast 2008 2007 Quarter 2009 Quarter 2008 Net Cash Provided (Required) by Operations $3,000 $2,799 $1,854 $114 $996 Net Cash Provided (Required) by Investing Activities (1,200) (2,027) (1,911) $10 (256) Free Cash Flow $1,800 $772 $(57) $740 $124 Net Cash Provided (Required) by Financing Activities N/A (102) (583) (47) (258) Effect of Exchange Rate Changes on Cash and Cash Equivalents N/A 77 46 (137) 58 Net Increase (Decrease) in Cash and Cash Equivalents N/A $747 $(594) $751 $(271) Reconciliation of Non-GAAP EPS First First Fiscal Year Fiscal Year Fiscal Year $ per share 2009 Forecast 2008 2007 Quarter 2009 Quarter 2008 TBD1 $3.62 $1.79 $1.00 $0.46 Diluted Earnings (Loss) per Share Solutia Claim Settlement -- ($0.23) -- -- -- Loss (Income) on Discontinued Operations ($0.02) ($0.04) ($0.15) ($0.02) ($0.01) In-Process R & D Write-Off Related to the De Ruiter Acquisition -- $0.29 -- -- -- In-Process R & D Write-Off Related to the Delta & Pine Land -- -- $0.34 -- -- (D&PL) Acquisition In-Process R & D Write-Off Related to the Aly Participacoes TBD1 -- -- -- -- Ltda. Acquisition Diluted Earnings (Loss) per Share from Ongoing Business $4.40-$4.50 $3.64 $1.98 $0.98 $0.45 1The company is not able to provide a reconciliation to reported EPS guidance for fiscal year 2009 at this time, as it is still evaluating purchase accounting adjustments related to its recent acquisition of the Brazilian sugar cane business Aly Participacoes Ltda. Such adjustments are dependent upon the completion of valuations of certain intangible 21 assets, including in-process R&D which requires immediate expense recognition and it is expected to be significant.