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Seeds and traits business contributes to strong results in third quarter and year-to-date for Monsanto Company

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St. Louis, Missouri
June 28, 2007

Source: http://monsanto.mediaroom.com/index.php?s=43&item=504

Monsanto sees increased use of its corn seeds and traits globally, company expects sixth consecutive year of branded corn market share gains in U.S.

The Monsanto Company has announced its third quarter and year-to-date results.

  ($ in millions)            Third        Third         Nine        Nine
                            Quarter      Quarter       Months      Months
                              2007         2006         2007        2006

  Net Sales by Segment
    Corn seed and traits      $891         $502       $2,443       $1,580
    Soybean seed and traits    325          311          868          933
    Vegetable and fruit seed   170          142          444          415
    All other crops seeds
     and traits                326          341          467          519
  TOTAL Seeds and
   Genomics                 $1,712       $1,296       $4,222       $3,447

    Roundup and other
     glyphosate-based
     herbicides               $757         $654       $1,936       $1,630
    All other agricultural
      productivity products    373          359          832          827
  TOTAL Agricultural
   Productivity             $1,130       $1,013       $2,768       $2,457

  TOTAL Net Sales           $2,842       $2,309       $6,990       $5,904

  Gross Profit              $1,503       $1,169       $3,633       $3,039

  Operating Expenses          $684         $614       $1,860       $1,686

  Interest Expense - Net        $1          $25           $7          $63
  Other Expense - Net          $12          $23          $32          $45

  Net Income                  $570         $334      $ 1,203         $833

  Diluted Earnings per Share
   (See note 1.)             $1.03        $0.60         $2.17        $1.51
  Items Affecting
   Comparability -
    EPS Impact
     Loss (Income) on
      Discontinued
      Operations            $(0.01)     $ (0.02)       $0.01       $(0.01)
  Diluted Earnings per
   Share from Ongoing
   Business (For the
   definition of ongoing
   EPS, see note 2.)         $1.02        $0.58        $2.18        $1.50

  Effective Tax Rate            29%          34%          30%          33%



  Comparison as a Percent
   of Net Sales:             Third        Third         Nine        Nine
                            Quarter      Quarter       Months      Months
                              2007         2006         2007        2006

  Gross profit                 53%          51%          52%          51%
  Selling, general and
   administrative expenses
   (SG&A)                      17%          19%          19%          20%
  Research and development
   expenses                     7%           8%           8%           9%
  Income before income taxes
   and minority interest       28%          22%          25%          21%
  Net income                   20%          14%          17%          14%

Comment from Monsanto Chairman, President and Chief Executive Officer Hugh Grant:

"The 2007 season is shaping up to be an extraordinary year for agriculture. We've been able to deliver strong results through this point of the year, and we expect that our gains will contribute to added momentum for our business through the end of the decade."

Market Conditions

The 2007 crop season is well under way throughout the Northern Hemisphere. In the United States, farmers planting corn, cotton and soybean worked with varied temperatures and conditions, including excessive dry and wet areas, as they worked to plant this season's crops. Currently, reports from the U.S. Department of Agriculture (USDA) note that the majority of corn, cotton and soybean varieties are facing good crop growing conditions with the vast majority of these crops already having emerged. Monsanto continues to see strong customer demand for its branded corn seed products in the U.S. corn seed market. The company is also seeing strong customer demand for its branded corn seed products in key countries in Europe particularly in Italy, France and Germany.

In the Southern Hemisphere, the harvest season is under way. The USDA's world production report suggests that corn farmers in Argentina and Brazil both experienced higher yields this season. Both countries are also expected to see higher production in soybeans as farmers expanded their planted crop areas. In India, Monsanto continues to see strong demand for its Bollgard insect-protected cotton technologies. In the 2007 season, Indian cotton farmers planted an estimated 13 to 14 million acres of Monsanto's cotton trait technologies, or up by approximately two-thirds from last year.

Operations Update

Monsanto reported record net sales of $2.8 billion for the third quarter of fiscal year 2007, which were 23 percent higher than sales in the same period in fiscal year 2006. Key drivers for the quarter were increased corn seed and traits revenues in the United States, as well as higher sales of Roundup and other glyphosate-based herbicides in the North America and Europe-Africa regions. Increased sales in the current quarter were partially offset by lower cotton trait revenues in the United States, as farmers reduced the number of acres planted to cotton.

Net sales in the company's first nine months of fiscal year 2007 resulted in year-to-date sales of $7.0 billion, which were 18 percent higher compared with sales in the same period last year. Key contributors to the company's growth included higher U.S. corn seed and traits revenues, as well as higher sales of Roundup and other glyphosate-based herbicides globally. Sales in the first nine months were partially offset by lower soybean seed and trait revenues, as U.S. farmers reduced the number of acres planted in favor of corn. Results in the first three quarters also reflected lower cotton trait revenues, as the total number of acres planted in Australia and the United States were reduced compared with the prior year.

Monsanto's net income for the third quarter of fiscal year 2007 was 71 percent higher than net income in the same period last year. For the first nine months of fiscal year 2007, net income was 44 percent higher than net income in the same period last year.

Earnings per share (EPS) for the third quarter of fiscal year 2007 was $1.03 on an as-reported basis, and $1.02 on an ongoing basis. Earnings per share (EPS) for the first nine months of fiscal year 2007 was $2.17 on an as-reported basis, and $2.18 on an ongoing basis. EPS results for the third quarter and first three quarters reflects the effect of discontinued operations for the Stoneville® and NexGen® cottonseed businesses. (For a reconciliation of ongoing EPS, see note 2.)

Cash Flow

For the first nine months of fiscal year 2007, net cash provided by operating activities was $89 million, compared with $184 million in the same period in 2006. Net cash required by investing activities was $410 million for the first nine months of 2007, compared with net cash required of $408 million for the same period last year. As a result, free cash flow was a use of $321 million for the first nine months of fiscal year 2007, compared with a use of $224 million in the same period in fiscal year 2006. (For a reconciliation of free cash flow, see note 2.) Free cash flow in the first three quarters, when compared with free cash in the same period last year, reflected higher net income which was more than offset by higher working capital. Net cash required by financing activities was $204 million for the first nine months of 2007, compared with net cash provided of $294 million for the same period last year.

Outlook

Earlier this month, Monsanto announced that it was increasing its fiscal year 2007 ongoing earnings per share (EPS) guidance to $1.75 to $1.80 per share, up from its prior guidance of $1.60 to $1.65 per share on an ongoing basis. The company's ongoing EPS excludes the nonrecurring effect of the Stoneville and NexGen divestitures and the write-off of acquired in-process R&D associated with the acquisition of Delta and Pine Land Company (D&PL). On an as-reported basis, Monsanto expects EPS to be in the range of $1.36 to $1.54. (For a reconciliation of ongoing EPS, see note 2.)

The company expects that its free cash flow for fiscal year 2007 will now be in the range of a use of $250 million to a use of $200 million, compared with its previous guidance in the range of $875 million to $950 million. The company's free cash flow guidance for the 2007 fiscal year reflects the cash effect of Monsanto's $1.5 billion acquisition D&PL, net of cash acquired and debt assumed; as well as the receipt of $317 million for the sale of the Stoneville and NexGen cottonseed businesses. The company expects net cash provided by operating activities to be in the range of $1.71 billion to $1.76 billion, and net cash required by investing activities to be approximately $1.96 billion for fiscal year 2007. (For a reconciliation of free cash flow, see note 2.)

Monsanto's fourth quarter is largely influenced by its U.S. cotton and U.S. Roundup business. The company historically records a loss in the fourth quarter. This year, the company announced that earnings from its recent D&PL acquisition will also be consolidated into its results beginning in the fourth quarter. The company continues to expect that D&PL earnings will be moderately dilutive, as it historically has reported a loss in the fourth quarter.

Related News

As part of today's announcement, the company announced that it was revising its previously announced opportunities for its corn trait technologies in the United States. The company now estimates that:

  -- Glyphosate-tolerant corn has the potential to be grown on 80 million
     acres, up from its previous projection of 60 million acres;

  -- Corn Borer insect protection product has the potential to be grown on
     60 to 70 million acres, up from its previously announced range of 50 to
     60 million acres; and

  -- Rootworm insect protection product and higher-margin triple-trait corn
     technology now have the potential to be grown on 45 million acres, up
     from its previously announced range of 25 to 30 million acres.

Monsanto also announced that its Board of Directors recently approved a three-year, $610 million capital investment for the company's U.S. corn production facilities. The investment plan includes expansions at nine existing corn production facilities, as well as two greenfield sites in the heart of the Corn Belt. This represents the largest reinvestment that Monsanto has made in its history as an ag company. Additional details related to the expansion have not been disclosed at this time.

                    Seeds and Genomics Segment Detail

  ($ in millions)       Net Sales                     Gross Profit

  Seeds and
   Genomics    Third   Third   Nine   Nine     Third   Third   Nine    Nine
              Quarter Quarter Months Months   Quarter Quarter Months  Months
                2007    2006   2007   2006     2007     2006   2007    2006
  Corn seed
   and traits   $891    $502  $2,443 $1,580    $530      $25  $1,543   $948
  Soybean seed
   and traits    325     311     868    933     203      203     581    655
  Vegetable and
   fruit seed    170     142     444    415      72       72     210    221
  All other crops
   seeds and
   traits        326     341     467    519     241      262     321    361
  TOTAL Seeds
   and
   Genomics   $1,712  $1,296  $4,222 $3,447  $1,046     $794  $2,655 $2,185



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

  Seeds and Genomics              Third       Third      Nine       Nine
                                 Quarter     Quarter    Months     Months
                                  2007         2006      2007       2006

  EBIT (For a reconciliation
   of EBIT, see note 2.)          $557         $393     $1,302     $1,027

  Unusual Items Affecting EBIT
    Income (Loss) on
     discontinued operations        $8          $19        $(5)       $11

The Seeds and Genomics segment consists of the company's global seeds and related traits business, and genetic technology platforms.

Sales for Monsanto's Seeds and Genomics segment were $1.7 billion for the third quarter of fiscal year 2007, or 32 percent higher than sales in the same period last year.

During the third quarter of fiscal year 2007, the company realized increased U.S. corn seed and traits revenue as strong customer demand for its branded corn seed products contributed to a sixth consecutive year of market share gains in the U.S. corn seed market. The increase could be as large as 4 or 5 percentage points, pending final returns, which would be the largest historical one-year gain for Monsanto brands in the corn seed market. Results in the quarter also benefited from higher corn seed sales internationally, particularly in the Europe-Africa region and Argentina.

Segment sales in the quarter were partially offset by lower cotton trait revenues in the United States, as farmers reduced the number of acres planted to cotton.

Sales for the segment were also higher for the first nine months of the 2007 fiscal year compared with sales in the same period last year. Sales for the first nine months were $4.2 billion, or 22 percent higher than sales in fiscal year 2006. The key drivers for growth in the third quarter were also the primary contributors to growth in the first three quarters of the fiscal year. Sales through the first nine months were partially offset by lower sales of soybean seeds and traits in the United States, as well as lower sales of cotton traits in Australia and the United States.

                 Agricultural Productivity Segment Detail

  ($ in millions)           Net Sales                   Gross Profit

  Agricultural    Third   Third   Nine   Nine   Third   Third   Nine   Nine
  Productivity   Quarter Quarter Months Months Quarter Quarter Months Months
                   2007    2006   2007   2006    2007    2006   2007    2006

  Roundup and
   other
   glyphosate-
   based
   herbicides      $757    $654 $1,936  $1,630   $286    $216   $635    $502
  All other
   agricultural
   productivity
   products         373     359    832     827    171     159    343     352
  TOTAL
   Agricultural
   Productivity  $1,130  $1,013 $2,768  $2,457   $457    $375   $978    $854



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

  Agricultural Productivity       Third       Third      Nine       Nine
                                 Quarter     Quarter    Months     Months
                                  2007         2006      2007       2006

  EBIT (For a reconciliation
   of EBIT, see note 2.)          $242         $147      $423       $280

  Unusual Items Affecting EBIT    None         None      None       None

The Agricultural Productivity segment consists primarily of crop protection products, the lawn-and-garden herbicide business, and the company's animal agricultural business.

Sales for Monsanto's Agricultural Productivity segment were $1.1 billion for the third quarter of fiscal year 2007, or 12 percent higher compared with sales in the same period last year. Results in the quarter benefited from higher sales of Roundup and other glyphosate-based herbicides in the United States, the Europe-Africa region and Canada.

Sales for the segment were higher for the first three quarters of the 2007 fiscal year compared with sales in the same period last year. Segment sales through the first nine months were $2.8 billion or 13 percent higher than sales in the same period in fiscal year 2006. Results through the first three quarters benefited from higher sales of Roundup and other glyphosate-based herbicides globally, primarily in Brazil, the United States, the Europe-Africa region, Canada and Argentina.

Preliminary Trait Acreage Report

As part of today's announcement, Monsanto also published a preliminary report on the company's biotech trait acreage for fiscal year 2007. This report is available on Monsanto's web site.

Monsanto Company (NYSE: MON) is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality. For more information on Monsanto, see http://www.monsanto.com/.

Bollgard, Roundup, Roundup Ready and YieldGard are registered trademarks owned by Monsanto Company and its wholly owned subsidiaries. All other trademarks are the property of their respective owners.

References to Roundup herbicides in this release mean Roundup branded herbicides, excluding lawn-and-garden herbicide products, and references to "Roundup and other glyphosate-based herbicides" exclude all lawn-and-garden herbicides.

                             Monsanto Company
                      Selected Financial Information
             (Dollars in millions, except per share amounts)
                                Unaudited

  Statements of        Three Months  Three Months  Nine Months   Nine Months
   Consolidated           Ended         Ended        Ended         Ended
   Operations             May 31        May 31       May 31        May 31
                          2007          2006         2007          2006

  Net Sales              $ 2,842      $ 2,309       $ 6,990      $ 5,904
  Cost of Goods Sold       1,339        1,140         3,357        2,865
  Gross Profit             1,503        1,169         3,633        3,039
  Operating Expenses:
    Selling, General and
     Administrative
     Expenses                487          429         1,299        1,167
    Research and
     Development Expenses    190          187           554          521
    Acquired In-Process
     Research and Development  7           --             7           --
    Restructuring Reversals   --           (2)           --           (2)
  Total Operating Expenses   684          614         1,860        1,686
  Income From Operations     819          555         1,773        1,353
  Interest Expense            29           35            96          100
  Interest Income            (28)         (10)          (89)         (37)
  Solutia-Related Expenses     4            7            23           20
  Other Expense (Income)
   - Net                       8           16             9           25
  Income Before Income Taxes
   and Minority Interest     806          507         1,734        1,245
  Income Tax Provision       231          174           521          407
  Minority Interest Expense
   (Income)                   10           11             7           12
  Net Income from
   Continuing Operations    $565         $322       $ 1,206         $826
  Discontinued Operations:
    Income (Loss) from
     Operations of
     Discontinued
     Businesses                8           19            (5)          11
    Income Tax Expense
     (Benefit)                 3            7            (2)           4
  Income (Loss) on
   Discontinued Operations     5           12            (3)           7
  Net Income                $570         $334       $ 1,203         $833
  EBIT (see note 2)         $799         $540       $ 1,725      $ 1,307
  Basic Earnings per Share
   (see note 1):
    Income from Continuing
     Operations            $1.04        $0.60         $2.22        $1.53
    Income (Loss) from
     Discontinued
     Operations             0.01         0.02         (0.01)        0.01
  Net Income               $1.05        $0.62         $2.21        $1.54
  Diluted Earnings per
   Share (see note 1):
    Income from
     Continuing
     Operations            $1.02        $0.58         $2.18        $1.50
    Income (Loss)
     from Discontinued
     Operations             0.01         0.02         (0.01)        0.01
  Net Income               $1.03        $0.60         $2.17        $1.51
  Weighted Average Shares
   Outstanding
   (see note 1):
    Basic                  544.4        541.6         543.7        539.2
    Diluted                555.2        552.3         554.4        551.0



                             Monsanto Company
                      Selected Financial Information
                          (Dollars in millions)
                                Unaudited


  Condensed Statements of Consolidated
   Financial Position                               As of         As of
                                                May 31, 2007   Aug. 31, 2006
  Assets

  Current Assets:
    Cash and Cash Equivalents                        $994        $1,460
    Short-Term Investments                             --            22
    Trade Receivables - Net of Allowances of
     $326 and $298, Respectively                    3,414         1,455
    Miscellaneous Receivables                         422           344
    Deferred Tax Assets                               389           390
    Inventories                                     1,664         1,688
    Assets of Discontinued Operations                  58             6
    Other Current Assets                               68            96
  Total Current Assets                              7,009         5,461

  Property, Plant and Equipment - Net of
   Accumulated Depreciation of $3,221 and
   $2,999, respectively                             2,467         2,418
  Goodwill                                          1,530         1,522
  Other Intangible Assets - Net                     1,155         1,229
  Noncurrent Deferred Tax Assets                      693           625
  Noncurrent Assets of Discontinued Operations        130            --
  Other Assets                                        488           473
  Total Assets                                    $13,472       $11,728

  Liabilities and Shareowners' Equity

  Current Liabilities:
    Short-Term Debt, Including Current
     Portion of Long-Term Debt                       $561           $28
    Accounts Payable                                  493           514
    Income Taxes Payable                              364           234
    Accrued Compensation and Benefits                 287           295
    Accrued Marketing Programs                        591           494
    Deferred Revenues                                  90           120
    Grower Accruals                                    57            26
    Liabilities of Discontinued Operations             24             2
    Miscellaneous Short-Term Accruals                 654           566
  Total Current Liabilities                         3,121         2,279

  Long-Term Debt                                    1,150         1,639
  Postretirement Liabilities                          576           600
  Long-Term Portion of Solutia-Related Reserve        121           155
  Noncurrent Liabilities of Discontinued Operations     5            --
  Other Liabilities                                   569           530
  Shareowners' Equity                               7,930         6,525
  Total Liabilities and Shareowners' Equity       $13,472       $11,728

  Debt to Capital Ratio:                               18%           20%



                             Monsanto Company
                      Selected Financial Information
                          (Dollars in millions)
                                Unaudited

  Statements of Consolidated Cash Flows           Nine Months   Nine Months
                                                     Ended         Ended
                                                  May 31, 2007  May 31, 2006

  Operating Activities:
    Net Income                                        $1,203           $833
    Adjustments to Reconcile Cash Provided
     by Operations:
    Items That Did Not Require (Provide) Cash:
      Depreciation and Amortization Expense              386            386
      Bad-Debt Expense                                    29             40
      Stock-Based Compensation Expense                    54             47
      Excess Tax Benefits from Stock-Based Compensation  (49)           (81)
      Deferred Income Taxes                              (10)           159
      Equity Affiliate Expense - Net                      30             21
      Acquired In-Process Research and Development         7             --
      Other Items                                         (1)            30

    Changes in Assets and Liabilities That Provided
    (Required) Cash, Net of Acquisitions:
      Trade Receivables                               (1,969)        (1,368)
      Inventories                                         91            (51)
      Accounts Payable and Other Accrued Liabilities     421            176
      PCB Litigation Settlement Proceeds                  21             21
      Solutia-Related Payments                           (28)           (23)
      Other Items                                        (96)            (6)
  Net Cash Provided by Operating Activities               89            184

  Cash Flows Provided (Required) by
   Investing Activities:
     Purchases of Short-Term Investments                  --            (21)
     Maturities of Short-Term Investments                 22            150
     Capital Expenditures                               (297)          (234)
     Acquisitions of Businesses, Net of Cash Acquired   (125)          (185)
     Technology and Other Investments                    (35)          (128)
     Other Investments and Property Disposal Proceeds     25             10
  Net Cash Required by Investing Activities             (410)          (408)

  Cash Flows Provided (Required) by
   Financing Activities:
     Net Change in Financing With Less Than
      90-Day Maturities                                  265            448
    Short-Term Debt Proceeds                              --              6
    Short-Term Debt Reductions                            (8)           (26)
    Long-Term Debt Proceeds                                4              4
    Long-Term Debt Reductions                           (277)           (78)
    Payments on Other Financing                           (4)            (5)
    Treasury Stock Purchases                            (101)           (87)
    Stock Option Exercises                                59            105
    Excess Tax Benefits From Stock-Based Compensation     49             81
    Dividend Payments                                   (191)          (154)
  Net Cash Provided (Required) by Financing Activities  (204)           294
  Effect of Exchange Rate Changes on Cash and
   Cash Equivalents                                       59             --
  Net Increase (Decrease) in Cash and Cash Equivalents  (466)            70
  Cash and Cash Equivalents at Beginning of Period     1,460            525
  Cash and Cash Equivalents at End of Period           $ 994           $595



                             Monsanto Company
                      Selected Financial Information
                          (Dollars in millions)
                                Unaudited

  1. All earnings per share figures have been adjusted to reflect the
     company's two-for-one stock split which was paid on July 28, 2006, in
     the form of a 100 percent stock dividend.

  2. EBIT, Ongoing EPS and Free Cash Flow:  The presentations of EBIT,
     ongoing EPS and free cash flow are not intended to replace net income
     (loss), cash flows, financial position or comprehensive income (loss),
     and they are not measures of financial performance as determined in
     accordance with generally accepted accounting principles (GAAP) in the
     United States. The following tables reconcile EBIT, ongoing EPS and
     free cash flow to the respective most directly comparable financial
     measure calculated in accordance with GAAP.

     Reconciliation of EBIT to Net Income (Loss):  EBIT is defined as
     earnings (loss) before interest and taxes. Earnings (loss) is intended
     to mean net income (loss) 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
     (loss).



                                    Three Months Ended    Nine Months Ended
                                          May 31,              May 31,
                                       2007    2006        2007      2006

  EBIT - Seeds and Genomics Segment    $557    $393       $1,302    $1,027
  EBIT - Agricultural Productivity
   Segment                              242     147          423       280
  EBIT - Total (A)                      799     540        1,725     1,307
  Interest Expense - Net                  1      25            7        63
  Income Tax Provision (B)              228     181          515       411
  Net Income                           $570    $334       $1,203      $833

  (A) Includes income (loss) from discontinued operations.
  (B) Includes the income tax benefit on minority interest expense and the
      income tax provision (benefit) from 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.

                                  Three       Three       Nine        Nine
                   Fiscal Year    Months      Months      Months      Months
                      2007        Ended       Ended       Ended       Ended
                     Target       May 31      May 31      May 31      May 31
                                  2007        2006        2007        2006
  Diluted
   Earnings
   per Share       $1.36-$1.54    $1.03       $0.60       $2.17      $1.51
  Loss (Income)
   on Discontinued

Operations $0.01. $(0.01) $(0.02) $0.01 $(0.01) . In-Process R&D

Write-Off Related to the Delta & Pine Land Acquisition     $0.25-$0.38 
Diluted Earnings per share from  

Ongoing Basis $1.75-$1.80 $1.02 $0.58 $2.18 $1.50 .

     Reconciliation of Free Cash Flow: Free cash flow represents the total
     of cash flows from operating activities and investing activities, as
     reflected in the Statements of Consolidated Cash Flows presented in
     this release. With respect to the fiscal year 2007 free cash flow
     target, 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      Nine Months Ended
                                             2007               May 31,
                                            Target          2007       2006
  Net Cash Provided by Operating
   Activities                          $1,710 - $1,760       $89       $184
  Net Cash Required by Investing
   Activities                              (1,960)          (410)      (408)
  Free Cash Flow                       $(250) - $(200)      (321)      (224)
  Net Cash Provided (Required) by
   Financing Activities                      N/A            (204)       294
  Effect of Exchange Rate Changes
   on Cash and Cash Equivalents              N/A              59         --
  Net Increase (Decrease) in Cash
   and Cash Equivalents                      N/A            (466)        70
  Cash and Cash Equivalents
   Beginning of Period                       N/A           1,460        525
  Cash and Cash Equivalents at
   End of Period                             N/A           $ 994       $595
 

 

 

 

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