<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .
COMMISSION FILE NUMBER 000-26519
SEMINIS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 36-0769130
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
1905 LIRIO AVENUE, CALIFORNIA 93004
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 805-647-1572
NOT APPLICABLE
(FORMER NAME, ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT)
Indicate, by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of January 31, 2000, the Registrant had 13,750,000 registered shares of
Class A Common Stock, $0.01 par value per share, issued and outstanding, and
46,074,386 unregistered shares of Class B Common Stock, $0.01 par value per
share, issued and outstanding.
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<PAGE> 2
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Item 1. Financial Statements........................................ 3
Consolidated Balance Sheets as of December 31, 1999 and
September 30, 1999.......................................... 3
Consolidated Statements of Operations for the Three Months
Ended December 31, 1999 and 1998............................ 4
Consolidated Statements of Stockholders' Equity for the
Three Months Ended December 31, 1999........................ 5
Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 1999 and 1998............................ 6
Notes to Consolidated Financial Statements.................. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9
Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 13
Item 6. Exhibits and Reports on Form 8-K............................ 13
Signatures.................................................. 14
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SEMINIS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, SEPTEMBER 30,
1999 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Current assets
Cash and cash equivalents................................. $ 18,221 $ 19,068
Accounts receivable, net.................................. 146,371 171,283
Inventories............................................... 352,366 301,744
Refundable income taxes................................... 5,406 4,144
Prepaid expenses and other current assets................. 6,243 3,582
---------- ---------
Total current assets............................... 528,607 499,821
Property, plant and equipment, net.......................... 235,495 226,635
Intangible assets, net...................................... 247,938 242,275
Other assets................................................ 18,162 24,631
---------- ---------
$1,030,202 $ 993,362
========== =========
LIABILITIES, MANDATORILY REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY:
Current liabilities
Short-term borrowings..................................... $ 14,328 $ 6,591
Current maturities of long-term debt...................... 27,460 20,563
Accounts payable.......................................... 75,869 54,681
Accrued liabilities....................................... 80,572 68,811
---------- ---------
Total current liabilities.......................... 198,229 150,646
Long-term debt.............................................. 326,454 315,424
Deferred income taxes....................................... 20,182 30,453
Minority interest in subsidiaries........................... 1,120 1,124
---------- ---------
Total liabilities.................................. 545,985 497,647
---------- ---------
Commitments and contingencies
Mandatorily redeemable stock
Class B Redeemable Preferred Stock, $.01 par value; 25
shares authorized as of December 31, 1999 and September
30, 1999; 25 shares issued and outstanding as of
December 31, 1999 and September 30, 1999................ 25,000 25,000
---------- ---------
Total mandatorily redeemable stock................. 25,000 25,000
---------- ---------
Stockholders' equity
Class C Preferred Stock, $.01 par value; 6 shares
authorized as of December 31, 1999 and September 30,
1999; 5 shares issued and outstanding as of December 31,
1999 and 4 shares issued and outstanding as of September
30, 1999................................................ 1 1
Class A Common Stock, $.01 par value; 91,000 shares
authorized as of December 31, 1999 and September 30,
1999; 13,750 shares issued and outstanding as of
December 31, 1999 and September 30, 1999................ 138 138
Class B Common Stock, $.01 par value; 60,229 shares
authorized as of December 31, 1999 and September 30,
1999; 46,074 shares issued and outstanding as of
December 31, 1999 and September 30, 1999................ 461 461
Additional paid-in-capital................................ 641,496 640,357
Accumulated deficit....................................... (176,005) (155,299)
Accumulated other comprehensive loss...................... (6,874) (14,943)
---------- ---------
Total stockholders' equity......................... 459,217 470,715
---------- ---------
$1,030,202 $ 993,362
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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SEMINIS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
DECEMBER 31,
--------------------------
1999 1998
---------- ----------
(UNAUDITED)
<S> <C> <C>
Net sales................................................... $ 81,186 $ 84,861
Cost of goods sold.......................................... 30,850 31,851
-------- --------
Gross profit.............................................. 50,336 53,010
-------- --------
Operating expenses
Research and development expenses......................... 15,754 14,198
Selling, general and administrative expenses.............. 49,412 49,972
Amortization of intangible assets......................... 7,426 6,732
-------- --------
Total operating expenses............................... 72,592 70,902
-------- --------
Loss from operations........................................ (22,256) (17,892)
-------- --------
Other income (expense)
Interest income........................................... 724 1,191
Interest expense.......................................... (7,423) (11,859)
Foreign currency gain..................................... 583 2,367
Minority interest......................................... 1 (320)
Other, net................................................ 289 52
-------- --------
(5,826) (8,569)
-------- --------
Loss before income taxes.................................... (28,082) (26,461)
Income tax benefit.......................................... 9,015 8,062
-------- --------
Net loss.................................................... (19,067) (18,399)
Preferred stock dividends................................... (1,639) (500)
Accretion of Old Class B Redeemable Common Stock............ -- (762)
-------- --------
Net loss available for common stockholders.................. $(20,706) $(19,661)
======== ========
Net loss available for common stockholders per common share,
basic and diluted......................................... $ (0.35) $ (0.53)
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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SEMINIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CLASS C CLASS A CLASS B
PREFERRED STOCK COMMON STOCK COMMON STOCK ADDITIONAL
--------------- --------------- --------------- PAID-IN ACCUMULATED
NUMBER AMOUNT NUMBER AMOUNT NUMBER AMOUNT CAPITAL DEFICIT
------ ------ ------ ------ ------ ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1999..................... 4 $1 13,750 $138 46,074 $461 $640,357 $(155,299)
Comprehensive loss
Net loss (Unaudited).......................... -- -- -- -- -- -- -- (19,067)
Translation adjustment (Unaudited)............ -- -- -- -- -- -- -- --
-- -- ------ ---- ------ ---- -------- ---------
Dividends on Redeemable Preferred Stock
(Unaudited)................................... -- -- -- -- -- -- -- (500)
Dividends on Class C Preferred Stock
(Unaudited)................................... 1 -- -- -- -- -- 1,139 (1,139)
-- -- ------ ---- ------ ---- -------- ---------
BALANCE, DECEMBER 31, 1999 (UNAUDITED).......... 5 $1 13,750 $138 46,074 $461 $641,496 $(176,005)
== == ====== ==== ====== ==== ======== =========
<CAPTION>
ACCUMULATED
OTHER TOTAL
COMPREHENSIVE STOCKHOLDERS'
LOSS EQUITY
------------- -------------
<S> <C> <C>
BALANCE, SEPTEMBER 30, 1999..................... $(14,943) $470,715
--------
Comprehensive loss
Net loss (Unaudited).......................... -- (19,067)
Translation adjustment (Unaudited)............ 8,069 8,069
-------- --------
(10,998)
Dividends on Redeemable Preferred Stock
(Unaudited)................................... -- (500)
Dividends on Class C Preferred Stock
(Unaudited)................................... -- --
-------- --------
BALANCE, DECEMBER 31, 1999 (UNAUDITED).......... $ (6,874) $459,217
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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SEMINIS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
DECEMBER 31,
--------------------------
1999 1998
---------- ----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(19,067) $(18,399)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 12,119 11,443
Deferred income tax benefit............................ (11,410) (2,788)
Provision for minority interest in subsidiaries........ (1) 320
Other.................................................. (1,126) (2,419)
Changes in assets and liabilities:
Accounts receivable.................................. 22,102 9,905
Inventories.......................................... (53,098) (37,920)
Prepaid expenses and other assets.................... 4,105 1,552
Refundable income taxes.............................. (1,225) (4,606)
Accounts payable..................................... 21,778 8,094
Other liabilities.................................... 11,561 (2,893)
-------- --------
Net cash used in operating activities.................. (14,262) (37,711)
-------- --------
Cash flows from investing activities:
Purchases of fixed and intangible assets.................. (14,546) (8,096)
Proceeds from disposition of assets....................... 891 252
Exercise of Hungnong put option........................... -- (8,673)
Agroceres acquisition, net of cash acquired............... -- (19,695)
Other..................................................... (110) (1,367)
-------- --------
Net cash used in investing activities.................. (13,765) (37,579)
-------- --------
Cash flows from financing activities:
Proceeds from long-term debt.............................. 26,372 57,965
Repayment of long-term debt............................... (6,506) (4,632)
Net short-term borrowings................................. 7,851 4,324
Class B Redeemable Preferred Stock dividends.............. (500) (500)
Issuance of Class C Preferred Stock....................... -- 10,000
-------- --------
Net cash provided by financing activities.............. 27,217 67,157
-------- --------
Effect of exchange rate changes on cash and cash
equivalents............................................... (37) 856
-------- --------
Decrease in cash and cash equivalents....................... (847) (7,277)
Cash and cash equivalents, beginning of period.............. 19,068 28,895
-------- --------
Cash and cash equivalents, end of period.................... $ 18,221 $ 21,618
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
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SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Seminis, Inc. ("Seminis" or the "Company") is the largest developer,
producer and marketer of vegetable and fruit seeds in the world. The Company is
a majority-owned subsidiary of Savia, S.A. de C.V. ("Savia") and effectively
began operations when it purchased Asgrow Seed Company in December 1994.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its majority controlled and owned subsidiaries. Investments in
unconsolidated entities, representing ownership interests between 20% and 50%,
are accounted for using the equity method of accounting. All material
intercompany transactions and balances have been eliminated in consolidation.
Certain reclassifications have been made to prior periods to conform to the
current quarter presentation.
Seminis generally operates on a thirteen week calendar closing on the
Friday closest to the natural calendar quarter, except for the fiscal year end
which closes on September 30. For convenience, all quarters are described by
their natural calendar dates.
The unaudited consolidated financial statements included herein reflect all
adjustments (consisting only of normal recurring adjustments) that the Company
considers necessary for a fair presentation of the results of operations for the
interim periods covered and of the financial condition of the Company at the
date of the interim balance sheet. The Company's business is subject to seasonal
fluctuation and, therefore, the results of operations for periods less than one
year are not necessarily indicative of results which may be expected for any
other interim period or for the fiscal year as a whole.
Supplementary Cash Flow Information
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-------------------
1999 1998
------ -------
(UNAUDITED)
<S> <C> <C>
Cash paid for interest...................................... $8,040 $11,685
Cash paid (refunded) for income taxes....................... 3,620 (668)
Supplemental non-cash transactions
Issuance of preferred stock in payment of Class C
Preferred Stock dividends.............................. 1,139 --
</TABLE>
Loss per Common Share
Net loss per common share has been computed pursuant to the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings per Share." Basic
loss per common share is computed by dividing net loss available to common
stockholders by the average number of common shares outstanding during each
period. Net loss available to common stockholders represents reported net loss
less preferred dividends and, in fiscal year 1999, accretion of redemption value
for Old Class B Redeemable Common Stock. Diluted net loss per common share
reflects the potential dilution that could occur if dilutive securities and
other contracts were exercised or converted into common stock or resulted in the
issuance of common stock. The following table
7
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SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
provides a reconciliation of net loss and sets forth the computation for basic
and diluted net loss per share available for common stockholders.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
NUMERATOR FOR BASIC AND DILUTED:
Net loss.................................................... $(19,067) $(18,399)
Preferred stock dividends................................... (1,639) (500)
Accretion of Old Class B Redeemable Common Stock............ -- (762)
-------- --------
Net loss available to common stockholders.............. $(20,706) $(19,661)
======== ========
DENOMINATOR -- SHARES:
Weighted average common shares outstanding (basic).......... 59,824 37,386
Add potential common shares:
Old Class B Redeemable Common Stock....................... -- 6,772
Exercisable stock options................................. 67 --
Less antidilutive effect of potential common shares......... (67) (6,772)
-------- --------
Weighted average common shares outstanding (diluted)... 59,824 37,386
======== ========
NET LOSS PER COMMON SHARE:
Basic and diluted......................................... $ (0.35) $ (0.53)
======== ========
</TABLE>
NOTE 2 -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
Seed....................................................... $308,436 $257,774
Unharvested crop growing costs............................. 26,665 28,504
Supplies................................................... 17,265 15,466
-------- --------
$352,366 $301,744
======== ========
</TABLE>
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto of the Company included
elsewhere herein. The following discussion and analysis contains certain
"forward-looking statements" which are subject to certain risks, uncertainties
and contingencies which could cause Seminis' actual business, results of
operations or financial condition to differ materially from those expressed in,
or implied by, such statements.
OVERVIEW
Seminis is the largest developer, producer and marketer of vegetable and
fruit seeds in the world. Seminis produces more than 60 species and 8,000
distinct varieties of vegetable and fruit seeds. Seminis has established a
worldwide presence and global distribution network that spans 120 countries with
70 research stations in 19 countries and production sites in 32 countries.
Seminis is a majority owned subsidiary of Savia, S.A. de C. V. ("Savia").
In order to achieve its position as the premier vegetable and fruit seed
company, Seminis has completed nine acquisitions since its formation in 1994 and
has incurred significant expenses related to the development of its
infrastructure, including its human resource capability, information systems and
brand marketing teams, and its research and development capability. Seminis
expenses its investments in research and development and in the creation of its
worldwide sales capability. The comparability of Seminis' results of operations
from year to year has also been affected by the impact of acquisition accounting
under purchase accounting principles, interest expense attributable to
acquisition financing and exposure to foreign currency fluctuations.
RESULTS OF OPERATIONS
The table below sets forth Seminis' results of operations data expressed as
a percentage of net sales.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 31,
---------------
1999 1998
----- -----
(UNAUDITED)
<S> <C> <C>
Net sales................................................... 100.0% 100.0%
----- -----
Gross profit................................................ 62.0 62.5
Research and development expenses........................... 19.4 16.8
Selling, general and administrative expenses................ 60.9 58.9
Amortization of intangible assets........................... 9.1 7.9
----- -----
Loss from operations........................................ (27.4) (21.1)
Interest expense, net....................................... (8.3) (12.6)
Other non-operating income, net............................. 1.1 2.5
----- -----
Loss from continuing operations before income taxes......... (34.6) (31.2)
Income tax benefit.......................................... 11.1 9.5
----- -----
Net loss.................................................... (23.5)% (21.7)%
===== =====
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED WITH THREE MONTHS ENDED
DECEMBER 31, 1998
Net Sales
Net sales decreased 4.3% to $81.2 million for the three months ended
December 31, 1999 from $84.9 million for the three months ended December 31,
1998. The decrease is primarily due to the effect of currency fluctuations. The
Euro weakened during the first quarter of fiscal year 2000 and was weaker
overall compared to the first quarter of fiscal year 1999. In constant dollars,
sales decreased 1.7% to $82.0 million for the first quarter of fiscal year 2000
from $83.4 million for the first quarter of fiscal year 1999. Geographically,
sales decreased slightly in the Far East due to weaker demand and weather
problems which affected the timing of shipments in the first quarter of fiscal
year 2000 compared to the first quarter of fiscal
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year 1999. The Company's business is subject to seasonal fluctuations and,
therefore, the sales for the first quarter of a fiscal year are not necessarily
indicative of those to be expected in any other interim period or for a fiscal
year as a whole.
Gross Profit
Gross profit decreased 5.0% to $50.3 million for the three months ended
December 31, 1999 from $53.0 million for the three months ended December 31,
1998. Gross margin decreased to 62.0% for the three months ended December 31,
1999 from 62.5 % for the three months ended December 31, 1998. The slight
decrease in gross margin was partially due to the weaker European currency. The
Company's seed purchases are usually made in U.S. dollars, thus in instances
when the Euro is weaker, gross margin is negatively impacted. Increased
inventory reserve provisions in the first quarter of fiscal year 2000 also
contributed to the slight decrease in gross margin.
Research and Development Expenses
Research and development expenses increased 11.0% to $15.8 million for the
three months ended December 31, 1999 from $14.2 million for the three months
ended December 31, 1998. This increase was primarily due to a $1.1 million
charge related to Seminis' research incentive program. The incentive program,
which began in the second quarter of fiscal year 1999, is part of Seminis'
continuing efforts to attract and retain industry leading breeders and research
personnel. The final payment of approximately $1.0 million associated with the
program will be made in the second quarter of fiscal year 2000.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses decreased 1.1% to $49.4
million for the three months ended December 31, 1999 from $50.0 million for the
three months ended December 31, 1998. Selling, general and administrative
expenses decreased partially due to the weaker European currency and partially
due to lower personnel costs. In an effort to control costs and optimize labor
efficiency the Company suspended hiring and replacing several positions during
the quarter. Personnel costs, including travel expenses, account for
approximately 65% of total selling, general and administrative expense.
Amortization of Intangible Assets
Amortization of intangible assets increased 10.3% to $7.4 million for the
three months ended December 31, 1999 from $6.7 million for the three months
ended December 31, 1998. This increase was primarily due to amortization of
goodwill and intangible assets relating to the additional 25% acquisition of
Hungnong Seed Co., Ltd., a South Korean subsidiary, in August of 1999. In
addition, the Korean Won strengthened in the three months ended December 31,
1999 compared to the three months ended December 31, 1998, resulting in
additional amortization being recorded in U.S. dollars. Finally, in the three
months ended December 31, 1999, the Company recorded amortization as a result of
the purchase of the seedless watermelon germplasm of Barham Seeds, Inc. in July
1999.
Interest Expense, Net
Interest expense, net, decreased 37.2% to $6.7 million for the three months
ended December 31, 1999 from $10.7 million for the three months ended December
31, 1998. Both the refinancing of Seminis' credit agreements during fiscal year
1999 and the repayment of debt using the proceeds from the Company's initial
public offering to repay indebtedness, resulted in a lower average debt balance
for the three months ended December 31, 1999 compared to the same period in
fiscal year 1999.
Other Non-Operating Income, Net
Seminis had other non-operating income, net, of $0.9 million for the three
months ended December 31, 1999 as compared to other non-operating income, net,
of $2.1 million for the three months ended
10
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December 31, 1998. Other non-operating income, net, for the three months ended
December 31, 1999 includes a foreign currency gain of $0.6 million and other
income of $0.3 million primarily relating to the sale of fixed assets. The
foreign currency gain is primarily due to a gain on an intercompany loan to
Hungnong which was slightly offset by a net foreign currency loss recorded by
SVS Holland B.V. ("SVS Holland"), a subsidiary of Seminis, on its loan
denominated in U.S. dollars. Other non-operating income, net, for the three
months ended December 31, 1998 includes a foreign currency gain of $2.4 million
related to the Hungnong intercompany loan and a minority interest provision of
$0.3 million related to the 25% minority interest in Hungnong.
Income Tax Benefit
Income tax benefit increased 11.8% to $9.0 million for the three months
ended December 31, 1999 from $8.1 million for the three months ended December
31, 1998. The increase in the income tax benefit was a result of the mix of
income worldwide.
Net Loss
Net loss was $19.1 million for the three months ended December 31, 1999 as
compared to net loss of $18.4 million for the three months ended December 31,
1998. This change was due primarily to lower sales and a lower gross margin for
the three months ended December 31, 1999 compared to the same period in fiscal
year 1999.
Seasonality
The seed business is highly seasonal. Generally, net sales are highest in
the second fiscal quarter due to increased demand from northern hemisphere
growers who plant seed in the early spring. Seminis recorded 37.2% of its fiscal
year 1999 net sales during its second fiscal quarter. Seminis has historically
operated at a loss during the first and third fiscal quarters due to lower sales
during such quarters. Seminis' results in any particular quarter should not be
considered indicative of those to be expected for a full year.
Liquidity and Capital Resources
Seminis has historically relied on commercial bank borrowings to finance
its operations and internal infrastructure, on commercial bank borrowings and
equity investments by its stockholders to finance its acquisition and internal
investment programs and loans from Savia to finance working capital
requirements.
Net cash used in operating activities decreased to $14.3 million in the
first three months of fiscal year 2000 from $37.7 million for the comparable
period in fiscal year 1999 mainly due to a decrease in accounts receivable as a
result of lower sales in the first quarter of fiscal year 2000 compared to the
first quarter of fiscal year 1999. Other changes in working capital included an
increase in accounts payable due to the Company's seasonal build-up of
inventories.
Net cash used in investing activities decreased to $13.8 million for the
quarter ended December 31, 1999 compared to $37.6 million for the quarter ended
December 31, 1998. The change is due to the decrease in other investing
activities which were a result of the acquisition of Agroceres and the
additional 5% purchase of Hungnong from minority shareholders in December 1998.
The Company did not make any acquisitions during the three months ended December
31, 1999. The decrease in net cash used in investing activities was slightly
offset by capital expenditures increasing to $11.9 million for the three months
ended December 31, 1999 from $7.7 million for the same period in fiscal year
1999 as a result of increased investment in Seminis' new operating facility and
headquarters.
Seminis' total indebtedness as of December 31, 1999 was $368.2 million, of
which $332.8 million was borrowings under the current credit agreement, $10.7
million was borrowings by the South Korean subsidiaries and $24.7 million was
borrowings primarily by other foreign subsidiaries.
Seminis believes that existing cash balances and available borrowings under
its credit agreement will be sufficient to meet anticipated cash requirements
for the foreseeable future based on Seminis' current level of operations. There
can be no assurance that additional capital beyond the amounts currently
forecasted by
11
<PAGE> 12
Seminis will not be required or that any such required additional capital will
be available on reasonable terms, if at all, at such time as required by
Seminis.
Except for the SVS Holland debt described below, Seminis' exposure to
foreign currency fluctuations is primarily foreign currency gains or losses that
occur from intercompany loans and receivables between Seminis Vegetable Seeds,
Inc., the Company's main U.S. operating subsidiary, and its foreign
subsidiaries. In the first quarter of fiscal year 2000, Seminis recorded gains
on its intercompany loans and receivables with its Brazilian and Korean
subsidiaries. SVS Holland, whose functional currency is the Dutch Guilder, owes
approximately $45.4 million in U.S. dollar denominated debt. SVS Holland hedged
the majority of its debt position during the first quarter of fiscal year 2000
through forward foreign exchange contracts. In late December 1999, SVS Holland
terminated its foreign forward exchange contracts, and, as a result, SVS
Holland, on December 31, 1999, had an unhedged U.S. dollar liability of
approximately $45.4 million.
Impact of Year 2000 Issue
The Year 2000 issue involves the potential for system and processing
failures of date-related information resulting from computer-controlled systems
using two digits rather than four to define the applicable year. Any computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000.
Seminis has not experienced any system failures or miscalculations causing
disruptions of operations as a result of the Year 2000 issue. During fiscal year
1999, Seminis installed a new corporate-wide management information system in
its efforts to become Year 2000 compliant. The Company spent approximately $24.2
million to become Year 2000 compliant.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk disclosures set forth in the 1999 Form 10-K have not
changed significantly through the first quarter ended December 31, 1999.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved from time to time as a defendant in various
lawsuits arising in the normal course of business. Seminis believes that no
current claims, individually or in the aggregate, will have a material adverse
effect on Seminis' business, results of operations or financial condition.
Since our 1999 Form 10-K filed December 28, 1999 there have been no
material changes in legal proceedings discussed in such Form 10-K.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K for the quarter ended
December 31, 1999.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 11, 2000 SEMINIS, INC.
/s/ ALEJANDRO RODRIGUEZ GRAUE
--------------------------------------
Alejandro Rodriguez Graue
President
(Principal Executive Officer)
/s/ OCTAVIO HERNANDEZ
--------------------------------------
Octavio Hernandez
Chief Financial Officer
(Principal Financial Officer)
14
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