UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1997 Commission File No.: 0-11854
BIOTECHNICA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2344703
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4001 War Memorial Drive
Peoria, Illinois 61614
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (309) 681-0300
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.01 par value
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, and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
ammendment to this Form 10-K. X
At August 29, 1997, the Company had 104,055,577 shares (not including
39,160 treasury shares) of its Common Stock, $.01 par value, issued and
outstanding.
At August 29, 1997, the aggregate market value of the voting stock held
by non-affiliates of the registrant was $360,458.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement with respect to its 1997
Annual Meeting of Shareholders to be held on November 12, 1997: Part III.
FORWARD-LOOKING STATEMENTS
Certain statements incorporated by reference or made in this Report, including
those under the captions "Narrative Description of Business," "Competition,"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere are "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995, and are subject to the
safe harbor created by that Act. Such forward-looking statements include,
without limitation, the future availability and prices of raw materials, the
availability of capital on acceptable terms, the competitiveness of the
agricultural seed industry, the future availability and pricing of export
sales arrangements and other statements contained herein that are not
historical facts. Because such forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual results to
differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to, changes in general economic and business
conditions (including in the agricultural seed industry),
the Company's ability to recover its costs of goods sold in the pricing of its
products, the availability of capital on acceptable terms, the availability
of raw materials, actions of competitors and governmental entities, adverse
weather conditions, the future availability of export sale arrangements, the
support of the Company's parent and affiliates, changes in the Company's
business strategies and other factors.
PART I
ITEM 1. BUSINESS
Narrative Description of Business
The primary business of BioTechnica International, Inc., a Delaware corporation
formed in 1981 (the "Registrant," which together with its subsidiary, is
referred to herein as "BioTechnica" or the "Company"), is the production,
processing and sale of agricultural seeds. Corn, soybeans and alfalfa
comprise the Company's major product lines. During Fiscal 1997, sales of
corn, soybeans, alfalfa, and other agricultural products represented 63%,
26%, 5% and 6% of net sales, respectively. This compares to 60%, 31%, 4%,
and 5% of the Company's net sales during Fiscal 1996, and 52%, 26%, 6%, and
16% of the net sales for corn, soybeans, alfalfa, and other agricultural
products in Fiscal 1995. The Company's fiscal year begins on July 1 and
ends on June 30 of each respective year.
The Company contracts with independent farmer-growers for the production of
corn, soybeans, and wheat to be grown under Company supervision to meet
specific quality and marketability specifications. The Company then processes
and treats the delivered seed with appropriate fungicides and insecticides and
bags the products for sale. Because weather conditions can cause material
fluctuations in yields and seed quality, the Company's cost of goods sold is
highly dependent upon weather conditions in its growing areas. The Company
buys alfalfa and other seed products as finished goods from seed producers
based upon annually negotiated terms which fluctuate with growing conditions
and supply levels.
The Company sells its products throughout the Midwestern United States mainly
to farmer-dealers who in turn market the seed to farmers. Because of the
seasonal nature of the agricultural seed business, the Company's sales are
highly concentrated during the period beginning in December and running
through the spring planting season of each year. This heavy sales season is
followed by a period during which the dealers are generally allowed to return
unplanted seed to the Company. Reserves are made throughout the selling
season in anticipation of these returns. The Company issues settlement
statements to its dealers following the return period each year and generally
collects payments on annual sales during the summer or at harvest time in the
fall, although some payments are received at various times throughout the year
as induced by early payment discounts. Management believes these practices
and policies are typical of those of competitors in the seed industry.
The Company's foundation seed and other raw materials are generally available
and the Company is not dependent on a single supplier. The foundation seeds
needed to produce a particular hybrid or variety are typically available only
from the supplier holding patent rights to those genetics and supply may be
limited in some situations, depending on customer demand or growing conditions.
Seed product revenues were $20,085,000 for Fiscal 1997, including $2,977,000
in sales to affiliated companies, primarily in Europe. These sales to
affiliated companies are the result of annual production contracts for
specific corn varieties and are based on market price prior to planting
season each year. Total export sales, most of which are made to affiliated
companies, represent approximately 15% of revenues for Fiscal 1997, 9% of
revenues for Fiscal 1996, and 15% of revenues for Fiscal 1995. Sales to
affiliated companies are based solely on their respective needs. There is no
assurance that these levels of sales will be maintained in the future.
Government Regulation
The Company's business is subject to Federal, state and local regulations.
The Company is not aware of any material administrative, regulatory or judicial
actions, suits, demand letters, liens, notices of non-compliance or violations,
investigations or proceedings which will materially impact the Company.
Competition
The Company markets its products primarily in the Corn Belt Region of the
United States, comprised of approximately 12 Midwestern states from Colorado
to Ohio, and from Kentucky to the Canadian border. Competitors of the
Company consist of several very large seed companies and numerous smaller
operations throughout the Midwestern United States. The competitors of the
Company in these markets differentiate their products primarily based on price
and yield and other agronomic characteristics, as well as on seed quality,
brand name recognition, and customer service. The Company believes that its
products are competitively priced and offer similar agronomic characteristics,
yield performance, seed quality, and customer service as the products of its
major competitors in these areas.
The Company's alliance with Groupe Limagrain Holdings S.A. ("Limagrain"),
which through a majority-owned subsidiary, Limagrain Genetics Corp., a
Delaware corporation ("LG Corp."), holds 94% of the common stock of the
Company, allows the Company to position itself to compete with other large
seed companies on a more effective basis. Limagrain, together with its
affiliates ("the Limagrain Group"), being the third largest seed company in
the world, has extensive research capabilities and experience in the seed
industry in which the Company now shares. In particular, the germplasm
resources of the Limagrian Group are available to the Company.
The benefits of association with the Limagrain Group extend not only to the
technical side of the business, but also to the extensive management,
marketing, financial, and personnel resources and expertise of the Limagrain
Group throughout the world.
Customers
No single domestic customer represents more than 10% of the total revenues of
the Company for Fiscal 1997, 1996, or 1995.
Employees
The Company employed 114 people as of August 29, 1997, including 14 part-
time employees.
Nasdaq De-Listing
On April 16, 1997, the Company was informed by The Nasdaq Stock Market,
Inc. ("Nasdaq"), that the common stock of the Company would be de-listed from
the Nasdaq National Market System (the "NMS") effective April 17, 1997 for
failure to comply with the NMS's quantitative maintenance criteria. This
action by Nasdaq was taken subsequent to the filing of an appeal by the
Company to remain on the NMS dated March 31, 1997. The de-listing had no
immediate impact on the liquidity or financial resources of the Company.
Share Repurchases
From time to time the Company evaluates various alternatives available to it to
enhance the value of the common stock to the minority shareholders. These
alternatives include, but are not limited to, the repurchase of large blocks of
shares at a substantial discount. On June 6, 1997, the Company repurchased
and retired 11,324,051 shares of its common stock (approximately 9.8% of the
then-outstanding shares) from a shareholder for $0.016 per share. This price
per share was substantially below the then-current market price and net book
value per share. The effect of this repurchase was to increase proportionately
the percentage of common stock of the Company held by all shareholders by
9.8%, including LG Corp., whose ownership increased from 85% to 94%.
Majority Ownership by LG Corp.
LG Corp. acquired 98,277,178 shares of the common stock of the Company in a
series of transactions completed in March 1994. At that time, LG Corp. owned
aproximately 85% of the issued and oustanding common shares. LG Corp.
could have at any time, by means of a shareholder meeting, effected a cash-out
merger of the Company regardless of the vote of any other shareholder.
Subsequent to the share repurchase activity discussed above, LG Corp. now owns
approximately 94% of the issued and outstanding common shares. Under
Delaware law, LG Corp. potentially could effectuate such a merger without the
formality of a shareholder meeting. In either event, (i) since March 1994
LG Corp. has had the ability to force a buy out of the minority shareholders if
it desired, and (ii) the minority shareholders would have certain rights,
including appraisal rights. At the present time, the Company and LG Corp.
have had no discussions regarding such a merger.
Basis Of Presentation
For the years ended June 30, 1997 and 1996 ("Fiscal 1997" and "Fiscal 1996",
respectively), the financial statements contained herein present twelve months
of operations of the Company.
For the year ended June 30, 1995 ("Fiscal 1995"), the financial statements
contained herein present twelve months of operations of the Company. Results
for the Scott Seed Division of the Company, located in New Albany, IN, and
other properties sold during Fiscal 1995 are included up to the date of their
respective disposals.
Proforma statements have been prepared and are included in the Management
Discussion and Analysis section that compare full twelve-month operating cycles
for the Company as it exists today. In the Proforma Statements, the results of
the Scott Seed Division and other sold properties have been eliminated.
ITEM 2. PROPERTIES
The following table identifies the properties owned or leased by the Company
and its subsidiary as of June 30, 1997:
Approximate
Acreage Square Footage
Owned Owned Leased
Peoria, IL Corporate Headquarters 6,000
Prescott, WI Office/Warehouse 16,056
Mt. Pleasant, IA Office/Plant/Warehouse 19.0 64,000
Tekamah, NE Office/Plant/Warehouse 17.7 74,620
Decatur, IL Office/Plant/Warehouse 8.3 59,000
Windfall, IN Office/Plant/Warehouse 9.9 49,300
Elmwood, IL Office/Plant/Warehouse 40.5 122,577
Sunfield, MI Office/Warehouse 19,000
Conditioning facilities have peak usage only a few months of the year during
the fall harvest season of September and October. Weather conditions at
harvest time can shorten the time available for harvest, requiring more
capacity at these locations. During the fall harvest season, the Company's
production facilities run at full capacity. The Company believes it has
adequate conditioning/warehouse capacity for the effective operation of its
business.
ITEM 3. LEGAL PROCEEDINGS
As of August 29, 1997, there are no material pending legal proceedings to which
the Company is a party or of which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS
The common stock of the Company is traded on the Over-the-Counter Bulletin
Board under the symbol BIOT. (See "BUSINESS--NASDAQ DE-LISTING")
No dividends on common stock have been paid since the Company's inception
and the Company anticipates that for the foreseeable future any earnings that
would otherwise be available for the payment of dividends to the holders of
common stock will be retained to partially fund the Company's cash
requirements.
The Class A Preferred Stock of the Company (all of which is owned by LG Corp.)
pays a dividend of $.75 per share per year when declared by the Board of
Directors. No such dividend has been declared by the Board of Directors.
Pursuant to the terms and conditions of the Company's Class A Preferred Stock,
should any dividend be declared or paid on the common stock of the Company,
the holders of Class A Preferred Stock would be entitled to receive dividends
at a rate per share equal to that of the common stock.
Pursuant to the Company's line of credit arrangement with its principal bank
(the "Line of Credit"), the Company has agreed that the payment of dividends
in any fiscal year, if any, will not exceed the Company's net income
determined on a consolidated basis. If the Company is in default on any of
the terms of the Line of Credit, then the Company may not pay or declare any
dividends, other than dividends payable in stock of the Company.
As of August 29, 1997 there were approximately 600 shareholders of record of
the Company's common stock, representing approximately 1,600 beneficial
owners. As of August 29, 1997, the closing price per share of common stock
was $0.0625.
Price range of common stock:
High Last Sale/Bid Quotation Low Last Sale/Bid Quotation
Quarter Ended
June 30, 1997 $0.25 $0.07
March 31, 1997 $0.375 $0.125
December 31, 1996 $0.50 $0.125
September 30, 1996 $0.75 $0.375
Quarter Ended
June 30, 1996 $0.875 $0.50
March 31, 1996 $1.125 $0.375
December 31, 1995 $0.9375 $0.3125
September 30, 1995 $1.875 $0.2812
The Source of Bid Quotations is a computerized on-line bid quotation service.
These quotations reflect inter-dealer prices, without retail markup, markdown,
or commission, and may not necessarily represent actual transactions.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth selected consolidated financial and operating
data for the Company and its predecessors for the periods and at the dates
indicated. The selected consolidated operating and financial data presented
below was derived from the Consolidated Financial Statements of the Company,
which were audited by KPMG Peat Marwick LLP, independent auditors. The table
should be read in conjunction with the Consolidated Financial Statements,
related notes, and other financial information.
On October 26, 1993, the Company entered into the Credit Enhancement and
Reorganization Agreement (the "Limagrain Agreement") with Limagrain and LG
Corp., which was amended on December 10, 1993. As a result of the Limagrain
Agreement, on March 7, 1994, Limagrain, through LG Corp., obtained voting
control of the Company (the "Limagrain Transaction").
As a result of the Limagrain Transaction, the Company (i) issued a total of
98,277,178 shares of voting common stock to LG Corp., (ii) received from LG
Corp. all of the issued and outstanding shares of Shissler Seed Company, Inc.
("Shissler"), which held the pre-existing United States seed corn production
and sales operations of Limagrain, and (iii) received the guarantee of
Limagrain and LG Corp. of the Line of Credit.
The exchange of shares described above has been accounted for as a purchase
of the Company by Shissler (a "reverse acquisition" because Shissler's parent,
LG Corp., owned in excess of 80% of the combined entity after the exchange.
After the reverse acquisition, the Company adopted a June 30 fiscal year to
conform to LG Corp.'s and Shissler's fiscal year.
The fiscal years ended June 30, 1994 through 1997 on the following table
reflect the reverse acquisition accounting of the Limagrain Transaction and
are not comparable with years prior to 1994 that represent Shissler only.
Fiscal 1994 contains twelve months of Shissler standing alone plus five
months of the Company as it was constituted prior to the Limagrain Transaction.
<TABLE>
For Years Ended June 30,
1997* 1996* 1995* 1994* 1993**
($000's, except per share data)
<CAPTION>
<S> <C> <C> <C> <C> <C>
Operations:
Net sales $ 20,085 $ 18,767 $ 23,961 $ 24,587 $ 8,239
Operating income (loss) (781) (2,594) (1,531) (477) 411
Net income (loss) $ (1,449) $ (2,685) $ (2,394) $ (832) $ 302
Net income (loss)
per common share: $ (0.02) $ (0.03) $ (0.02) $ (0.01) $ 0.00
Balance Sheet:
Total assets $ 33,436 $ 32,957 $ 34,502 $ 39,320 $ 9,925
Notes payable and
long-term debt 295 201 285 513 --
Due to affiliate
long-term 5,261 3,261 5,326 3,261 2,261
Shareholders' equity $ 14,475 $ 16,105 $ 16,790 $ 17,245 $ 6,657
*Post-acquisition
**Pre-acquisition
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Under the Line of Credit arrangement, the Company may borrow up to
$12,000,000 subject to the limitations of a borrowing base formula and other
limitations contained in the Line of Credit. Borrowings under the Line of
Credit are secured by the inventory and accounts receivable of the Company
and by the guarantees of Limagrain, LG Corp. and the Company's subsidiary.
Borrowings outstanding under the Line of Credit at June 30, 1997 and 1996
totaled $10,900,000 and $8,500,000, respectively. The Company has been in
compliance with, or received waivers for, all loan covenants.
Effective November 30, 1996, the Line of Credit was extended until December
31, 1997. Management expects that this Line of Credit will be renewed under
substantially the same conditions for one year at that time and that the
Company will have access to sufficient cash resources to meet the reasonably
foreseeable obligations of its continuing business operations. Management
believes there is a strong commitment by Limagrain to enable the Company to
obtain sufficient working capital to support the business. Management's
belief that Limagrain's support will continue is based on Limagrain's
commitment under the Line of Credit guarantee (which it has not had the legal
obligation to continue since November 1994) and the additional contribution
of $9,000,000 for Preferred Stock and the advance of $5,261,000 in long-term
borrowing over the last four years. Limagrain has no legal obligation to
provide additional funding for the Company.
Effective December 1, 1996, the Company borrowed $2,000,000 from LG Corp.
via two long-term notes for $1,000,000 each (one of which was subordinated to
the Line of Credit) at an interest rate of 5% per annum. At that time, the
interest rate on an existing long-term note to LG Corp. in the amount of
$3,261,000 was also adjusted to 5% per annum.
There is no assurance that LG Corp., or any other affiliate of Limagrain, will
continue to (i) guarantee the Line of Credit, (ii) loan funds to the Company,
or (iii) convert such loans to preferred stock. In addition, there is no
assurance that, without such guarantees, loans, and/or conversions, the
Company would be able to comply with the Line of Credit during seasonal
fluctuations in the Company's borrowing base and net tangible assets,
respectively.
Fiscal 1997
During Fiscal 1997, cash and cash equivalents increased by $13,000. The
Company has a policy of using excess cash to reduce the principal amount
outstanding under its Line of Credit. As of June 30, 1997, the Company had a
cash balance of $207,000.
Cash flow used in operations totaled $1,504,000 in Fiscal 1997. This consisted
of a net loss of $1,449,000, a non-operating gain on disposal of assets of
$13,000, an increase in inventory of $2,354,000, and a decrease in accounts
payable and accrued liabilities of $124,000 which were partially offset by
$1,453,000 in depreciation and amortization, an $896,000 decrease in accounts
receivable, and an $87,000 reduction in other current assets. The significant
increase in inventory resulted from (i) the rebuilding of inventory levels
after the decrease in Fiscal 1996 due to poor production yields, (ii) inventory
produced for new product introduction, and (iii) lower than anticipated
domestic sales in Fiscal 1997. The decrease in accounts receivable resulted
from (i) lower domestic sales, and (ii) higher levels of advance payments by
the Company's dealers.
Cash flow from investing activities used $535,000 of the Company's cash.
Capital expenditures totaled $600,000, with $507,000 of that amount relating to
the replacement of the Elmwood building destroyed by fire in August of 1995.
The remainder of capital expenditures were primarily for upgrades to the
Company's information system.
Cash flow provided by financing activities totaled $2,052,000. $2,000,000 in
short-term debt to affiliates was converted into long-term debt to LG Corp.
Borrowings under the Line of Credit increased by $2,400,000, primarily to cover
the increased level of inventory. Payments on long-term notes consumed
$107,000 in cash. In June 1997, the Company repurchased and retired
11,324,051 shares of common stock, which consumed $181,000 in cash.
Fiscal 1996
During Fiscal 1996, Cash and cash equivalents decreased by $205,000. As of
June 30, 1996, the Company had a cash balance of $194,000.
Cash flow used in operations totaled $1,074,000 in Fiscal 1996. This consisted
of a net loss of $2,685,000, a non-operating gain on disposal of assets of
$405,000, an increase in receivables of $186,000 and a decrease in accounts
payable and accrued liabilities of $178,000 which were partially offset by
$1,402,000 in depreciation and amortization, a $951,000 decrease in inventory
and a $27,000 reduction in other current assets. The non-operating gain
resulted primarily from the gain on the involuntary conversion of the grading
building at the Company's Elmwood, IL facility in August, 1995. The inventory
decrease resulted from lower than anticipated production yields on seed
produced during the year.
Cash flow from investing activities used $449,000 of the Company's cash.
Capital expenditures totaled $1,527,000 with $1,383,000 of that amount relating
to the replacement of the Elmwood building destroyed by fire in August of 1995.
These expenditures were partially funded by $1,078,000 in proceeds from asset
sales of which $1,029,000 is insurance proceeds from the replacement cost
insurance policy covering the building destroyed by fire. The net book value
of this building was $646,000. The resulting gain of $383,000 is classified
as part of gain on disposition of fixed assets. The Company entered into a
contract to replace this destroyed building with a new, modern grading and
bagging building with a total cost of $1,890,000. As of June 30, 1996,
$1,383,000 had been spent and is included in the construction in progress
account.
Cash flow provided by financing activities totaled $1,318,000. The issuance of
$2,000,000 in Class A Preferred Stock to LG Corp. and $2,175,000 increase in
short term debt to affiliates more than offset the $2,000,000 decrease in long-
term debt to LG Corp. (which resulted from the issuance of the Class A
Preferred Stock), the $700,000 decrease in the Line of Credit and the $92,000
decrease in long-term debt and notes payable.
Fiscal 1995
During Fiscal 1995, Cash and cash equivalents decreased by $742,000. As of
June 30, 1995, the Company had a cash balance of $399,000.
Cash flow used in operations totaled $176,000 in Fiscal 1995. This amount
consisted of net loss of $2,394,000 and a decrease in accounts payable and
accrued liabilities of $1,299,000 which were partially offset by $1,553,000 in
depreciation and amortization, a $852,000 decrease in receivables, a $415,000
decrease in inventory and a $697,000 decrease in other current assets.
Cash flow from investing activities provided the Company with $559,000 in
cash. Capital expenditures used $237,000 in cash but were offset by $647,000
in cash received from the sale of non-operating assets. A reduction in
long-term assets provided $149,000 in cash.
Cash flow used for financing activities amounted to $1,125,000. Borrowings
under the Line of Credit were decreased $4,600,000, long-term debt and notes
payable were reduced $377,000, and Class A common stock declined $61,000
from the repurchase of 6,054,751 shares from State Farm. These reductions in
debt and equity were partially funded by a $2,000,000 increase in equity from
the issuance of Preferred Stock to LG Corp. and a net $1,913,000 increase in
debt with LG Corp.
RESULTS OF OPERATIONS
As discussed in "ITEM 1. BUSINESS -- BASIS OF PRESENTATION," the
actual audited financial statements for Fiscal 1997, 1996, and 1995 are not
comparable in that Fiscal 1995 includes the results for the Scott Seed
business. Consequently, management has prepared the following unaudited
proforma financial statements in an attempt to depict more accurately changes
in the operations of the Company as it exists today.
The following is a discussion of significant trends represented in these
proforma financial statements.
Proforma Financial Statements
The following proforma consolidated statements of operations for the years
ended June 30, 1997, 1996, and 1995 reflect the combined results of the
Company and Shissler as if the Limagrain Transaction had been consummated
at the beginning of the years presented, and as if the Scott Seed business had
been sold at the beginning of the years presented. These statements present
the comparative operations of the Company as it existed on June 30, 1997.
As discussed earlier, the Company now conducts business from seven service
centers strategically located throughout the corn growing area of the Midwest.
The Company produces and processes corn, soybean and wheat seeds at only
four locations (which are also service centers) in order to improve product
quality and increase efficiency. Quality testing is done at the Company's
Elmwood, Illinois facility in order to assure uniform quality of products.
<TABLE>
Results of Operations (Proforma)
BIOTECHNICA INTERNATIONAL, INC.
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - Excludes Scott Seed)
(in thousands of dollars)
<CAPTION>
<S> <C> <C> <C>
12 months Ended June 30,
1997 1996 1995
NET SALES:
Domestic $ 17,004 $ 17,151 $ 16,988
Export 3,081 1,616 3,527
20,085 18,767 20,515
COST OF GOODS SOLD: 12,319 12,990 12,628
Gross margin 7,766 5,777 7,887
OPERATING EXPENSES:
Sales and marketing 4,163 4,203 4,122
Warehouse and distribution 1,316 1,196 1,630
General and administrative 2,569 2,473 3,061
Amortization of goodwill 499 499 479
8,547 8,371 9,292
Operating loss (781) (2,594) (1,405)
OTHER INCOME (EXPENSE):
Interest expense (880) (832) (1,065)
Gain on disposition of fixed assets 13 405 0
Other 208 321 211
Net loss before taxes $ (1,440) $(2,700) $(2,259)
</TABLE>
FISCAL 1997 COMPARED TO PROFORMA FISCAL 1996
Domestic Sales
The Company had domestic seed sales in Fiscal 1997 of $17,004,000,
compared to $17,151,000 in Fiscal 1996. Both domestic corn and soybean
sales volumes decreased due to competitive pressures. However, these
decreases were almost entirely offset by increases in selling prices of the
products. The Company is introducing new products into its lineup to reflect
the trends in American agriculture toward genetically-modified seeds. In
Fiscal 1997, the Company sold limited quantities of Roundup Ready(tm) Soybeans
and Liberty Link(tm) Corn. In Fiscal 1997 and future years, the Company expects
to market larger quantities of these products, as well as other new products as
they become available.
During Fiscal 1997, the Company experienced a significant increase in alfalfa
sales, principally in the northern parts of its marketing area. This resulted
from better alfalfa planting conditions in the spring than in the previous
several years.
Export Sales
Export sales for Fiscal 1997 showed an increase compared to Fiscal 1996.
Fiscal 1997 sales were $3,081,000, compared to Fiscal 1996 sales of
$1,616,000. Of these amounts, sales to affiliates amounted to $2,977,000 and
$1,489,000, respectively. Since most export sales are based on annually
negotiated production contracts - negotiated at current market rates by
management of the Company and a representative of the respective affiliate -
the fluctuations in sales were the result of changes in production yields from
year to year and changes in demand by affiliated companies in Europe.
Typically, high export sales to Europe in one year translate into lower sales in
the following year, as the affiliates have a larger carryover inventory to sell.
(See "ITEM 1. BUSINESS--NARRATIVE DESCRIPTION OF BUSINESS.") There is no
assurance that the Company and the Limagrain affiliates will continue to reach
agreement on such export sales arrangements in the future and, if no such
agreement is reached, there would be a negative impact upon the Company's
sales and profit margins.
Cost of Goods Sold
Cost of goods sold was significantly lower in Fiscal 1997 than in Fiscal 1996 by
$671,000. This resulted primarily from lower production costs caused by higher
production volumes and the better growing conditions during the Summer of
1996, resulting in a lower cost per unit. These lower costs per unit
accounted for approximately $1,000,000 in lower costs. The remainder of the
change was related primarily to volume changes.
Warehouse and Distribution
Warehouse and distribution costs were $1,316,000 in Fiscal 1997, compared to
$1,196,000 in Fiscal 1996. This increase resulted from operating improvements
and additional costs at the Company's warehouses. An additional factor was
cost of returning a significant quantity of wheat seed that was not planted by
our customers in Fall 1996.
Sales and Marketing
Sales and marketing costs were $4,163,000 in Fiscal 1997, compared to
$4,203,000 in Fiscal 1996. This decrease was related to the decrease in sales
volume and the Company's efforts to keep costs under control.
General and Administrative
General and Administrative costs were $2,569,000 in Fiscal 1997, compared to
$2,473,000 in Fiscal 1996.
Interest Expense
Interest expense was higher in Fiscal 1997 than in Fiscal 1996 by $48,000. This
increase was generated primarily by the higher borrowings to support the higher
inventory level and capital expenditures. This was partially offset by a
reduced interest rate on intercompany borrowings.
Net Loss Before Taxes
Proforma net loss before taxes shows an improvement for Fiscal 1997
compared to Fiscal 1996 of $1,260,000.
FISCAL 1996 COMPARED TO PROFORMA FISCAL 1995
Domestic Sales
The Company had domestic seed sales in Fiscal 1996 of $17,151,000,
compared to $16,988,000 in Fiscal 1995. Due primarily to the changes in the
Federal government's farm programs, acreage devoted to corn and soybeans
increased by approximately 8% in the Company's marketing area. Corn sales
increased by almost that rate, indicating that the Company was able to maintain
its market share in spite of major availability problems for many of its
premier, newly-introduced hybrids. This increase was offset by a decrease in
alfalfa sales. Late snow cover across the Dairy Belt region of Minnesota,
Wisconsin, and Michigan, where the Company sells most of its alfalfa, resulted
in low planting of spring alfalfa. In addition, the growing conditions during
the summer of 1995 resulted in smaller soybean seeds being produced. Since
soybean seeds are sold in 50 pound bags, there were more seeds per bag. This
resulted in fewer bags required to plant the same number of acres compared to
the prior year. Domestic net sales changes were:
Proforma Fiscal 1995 $16,988
Increase in Domestic Corn 939
Decrease in Alfalfa (380)
Decrease in Soybeans (440)
Other 44
Proforma Fiscal 1996 $17,151
Export Sales
Export sales for Fiscal 1996 showed a decrease compared to Fiscal 1995.
Fiscal 1996 sales were $1,616,000, compared to Fiscal 1995 sales of
$3,527,000. Of these amounts, sales to affiliates amounted to $1,489,000 and
$3,089,000, respectively. Since most export sales are based on annually
negotiated production contracts - negotiated at arms-length by management of
the Company and a representative of the respective affiliate - the decrease in
sales was the result of disappointing production yields during the Fall of 1994
and lower demand by affiliated companies in Europe. Typically, high export
sales to Europe in one year translate into lower sales in the following year,
as the affiliates have a larger carryover inventory to sell. (See "ITEM 1.
BUSINESS--NARRATIVE DESCRIPTION OF BUSINESS.") There is no
assurance that the Company and the Limagrain affiliates will continue to reach
agreement on such export sales arrangements in the future and, in such event,
there would be a negative impact upon the Company's sales and profit margins.
Cost of Goods Sold
Cost of goods sold was $12,990,000 in Fiscal 1996, compared to $12,628,000 in
Fiscal 1995. This increase of $362,000 resulted primarily from high production
costs caused by the poor growing conditions during the Summer of 1995. This
resulted in lower yields and higher costs per unit. These higher costs per
unit accounted for approximately $1,200,000 in higher costs. This cost
increase offset partially by the lower overall sales volume.
Warehouse and Distribution
Warehouse and distribution costs were $1,196,000 in Fiscal 1996, compared to
$1,630,000 in Fiscal 1995. This reduction resulted from organizational
efficiencies at the Company's warehouses and improved management of freight
and other distribution costs.
Sales and Marketing
Sales and marketing costs were $4,203,000 in Fiscal 1996, compared to
$4,122,000 in Fiscal 1995. Sales and marketing costs were relatively stable
due to a relatively constant sales volume.
General and Administrative
A significant goal of the Company for Fiscal 1996 was the reduction of general
and administrative expenses. These costs were reduced by $588,000. Included
in that amount was a reduction of general and administrative costs of $150,000
resulting from the expiration or repurchase of incentive stock options.
Additionally, Fiscal 1995 costs included administrative costs associated with
the reorganization, redirection, and divestment efforts of the Company.
Interest Expense
Interest expense was lower in Fiscal 1996 than in Fiscal 1995 by $233,000.
This was generated primarily by reduced interest rates and lower borrowings
from affiliates subsequent to the conversion of $2,000,000 in long-term debt
into Preferred Stock as described above.
Gain on Disposition of Fixed Assets
The increase in gain on disposition of fixed assets resulted primarily from the
recognition of the $383,000 gain on the involuntary conversion of the Grading
Building at Elmwood due to fire in August, 1995.
Net Loss Before Taxes
Proforma net loss before taxes shows a deterioration for Fiscal 1996 compared
to Fiscal 1995 of $441,000.
ACCOUNTING STANDARDS
Statement of Financial Accounting Standard No. 128, "Earnings Per Share" was
issued in February 1997 and is effective for Fiscal 1998. Management
continues to assess the effects of the provisions of this Statement on the
financial condition and results of operations of the Company, and has
determined that it will have an immaterial effect on Earnings per Share.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets at June 30, 1997 and 1996
Consolidated Statements of Operations for the years
ended June 30, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years
ended June 30, 1997, 1996 and 1995
Consolidated Statements of Changes in Shareholders'
Equity for the years ended June 30, 1997, 1996
and 1995
Notes to Consolidated Financial Statements
All schedules have been omitted because the required information is not
applicable or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or the notes thereto.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
BioTechnica International, Inc.:
We have audited the consolidated financial statements of BioTechnica
International, Inc. and subsidiary (the "Company") as listed in the
accompanying index. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of BioTechnica
International, Inc. and subsidiary as of June 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 30, 1997, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Indianapolis, IN
July 17, 1997
<TABLE>
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
June 30, June 30,
ASSETS 1997 1996
<CAPTION>
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 207 $ 194
Accounts receivable, less allowance for
doubtful accounts of $97 in 1997 and
$90 in 1996 7,068 7,964
Inventories 8,330 5,976
Prepaid expenses and other current assets 130 153
Total current assets 15,735 14,287
Net property, plant and equipment 9,316 9,722
Goodwill and other assets, net 8,385 8,948
Total assets $ 33,436 $32,957
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit $ 10,900 $ 8,500
Current portion of long-term debt 31 107
Accounts payable 690 1,013
Accrued liabilities 1,669 1,595
Due to affiliates 115 2,175
Total current liabilities 13,405 13,390
Long-term debt -- 31
Due to affiliates 5,261 3,261
Other noncurrent liabilities 295 170
Total liabilities $ 18,961 $16,852
Shareholders' equity:
Preferred stock, Class A, 900,000 shares
outstanding $ 9 $ 9
Common stock, 104,094,737 and 115,418,788
shares outstanding at June 30, 1997 and
June 30, 1996, respectively 1,041 1,154
Additional paid-in capital 20,823 20,891
Accumulated deficit (7,303) (5,854)
Treasury stock (95) (95)
Total shareholders' equity $ 14,475 $16,105
Commitments (note 12)
Total liabilities and shareholders'
equity $ 33,436 $32,957
See accompanying notes to consolidated financial statement
</TABLE>
<TABLE>
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of dollars, except per share amounts)
Years Ended June 30,
1997 1996 1995
<CAPTION>
<S> <C> <C> <C>
Net sales:
Domestic $17,004 $ 17,151 $ 20,434
Export-Affiliates 2,977 1,489 3,089
Export-Other 104 127 438
20,085 18,767 23,961
Cost of goods sold 12,319 12,990 15,432
Gross margin 7,766 5,777 8,529
Operating expenses:
Sales and marketing 4,163 4,203 4,293
Warehouse and distribution 1,316 1,196 2,043
General and administrative 2,569 2,473 3,245
Amortization of goodwill 499 499 479
8,547 8,371 10,060
Operating loss (781) (2,594) (1,531)
Other income (expense):
Interest expense (880) (832) (1,068)
Gain on disposition of fixed
assets 13 405 --
Other 208 321 272
Net loss before income taxes (1,440) (2,700) (2,327)
Income tax expense (benefit) 9 (15) 67
Net loss $ (1,449) $ (2,685) $ (2,394)
Net loss per common share $ (.02) $ (0.03) $ (0.02)
Weighted average shares
outstanding 114,635,033 115,379,628 121,385,00
See accompanying notes to consolidated financial statement
</TABLE>
<TABLE>
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
Years Ended June 30,
1997 1996 1995
<CAPTION>
<S> <C> <C> <C>
Cash Flow from Operating Activities:
Net loss $ (1,449) $ (2,685) $ (2,394)
Adjustments to reconcile net loss
to net cash used in
operating activities:
Depreciation 954 903 1,074
Amortization 499 499 479
Gain on disposition
of fixed assets (13) (405) --
Changes in assets and liabilities:
Accounts receivable 896 (186) 852
Inventories (2,354) 951 415
Other assets 87 27 697
Accounts payable and accrued
liabilities (124) (178) (1,299)
Net cash used in operating
activities (1,504) (1,074) (176)
Cash Flow from Investing Activities:
Acquisition of property, plant
and equipment (600) (1,527) (237)
Proceeds from asset sales 65 1,078 647
Other -- -- 149
Net cash provided by (used in)
investing activities (535) (449) 559
Cash Flow from Financing Activities:
Net borrowing (repayment) under
line of credit 2,400 (700) (4,600)
Proceeds (payment) of long-term
debt to affiliates 2,000 (2,065) 2,066
Proceeds (payment) of short-term
debt to affiliates (2,060) 2,175 (153)
Payments on long-term debt and
notes payable (107) (92) (377)
Repurchase of common stock (181) -- (61)
Issuance of Class A Preferred Stock -- 2,000 2,000
Net cash provided by (used in)
financing activities 2,052 1,318 (1,125)
Net increase (decrease) in
cash and cash equivalents 13 (205) (742)
Cash and cash equivalents at
beginning of year $ 194 $ 399 $ 1,141
Cash and cash equivalents at
end of year $ 207 $ 194 $ 399
See accompanying notes to consolidated financial statement
</TABLE>
<TABLE>
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands of dollars, except share data)
Preferred Stock Common Stock
Class A Non-Voting Common Stock Class A Non-Voting
Shares Par Value Shares Par Value Shares Par Value
<CAPTION>
<S> <C> <C><C> <C> <C> <C>
Balance June 30,
1994 500,000 $5 105,912,919 $1,059 10,753,087 $108
Issuance of
Preferred Stock 200,000 2 -- -- -- --
Conversion of
Class A & B Shares -- -- 9,505,869 95 (4,698,336) (47)
Repurchase of
Class A Shares -- -- -- -- (6,054,751) (61)
Net loss for Fiscal
1995 -- -- -- -- -- --
Balance June 30,
1995 700,000 $ 7 115,418,788 $1,154 -- $ --
Issuance of
Preferrd Stock 200,000 2 -- -- -- --
Net loss for Fiscal
1996 -- -- -- -- -- --
Balance June 30,
1996 900,000 $ 9 115,418,788 $1,154 -- $ --
Repurchase of
common shares -- -- (11,324,051) (113) -- --
Net loss for Fiscal
1997 -- -- -- -- -- --
Balance June 30,
1997 900,000 $9 104,094,737 $1,041 -- $ --
(Continued)
See accompanying notes to consolidated financial statement
</TABLE>
<TABLE>
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands of dollars, except share data)
Common Stock
Class B Non-Voting Additional Accumulated
Shares Par Value Paid-In Capital Deficit)
<CAPTION>
<S> <C> <C> <C> <C>
Balance June 30,
1994 4,807,533 $48 $16,895 $(775)
Issuance of
Preferred Stock -- -- 1,998 --
Conversion of Class
A & B Shares (4,807,533) (48) -- --
Repurchase of
Class A Shares -- -- -- --
Net loss for Fiscal
1995 -- -- -- (2,394)
Balance June 30,
1995 -- $ -- $18,893 $(3,169)
Issuance of
Preferred Stock -- -- 1,998 --
Net loss for Fiscal
1996 -- -- -- (2,685)
Balance June 30,
1996 -- $ -- $20,891 $(5,854)
Repurchase of
common shares -- -- 68 --
Net loss for Fiscal
1997 -- -- -- (1,449)
Balance June 30,
1997 -- $ -- $20,823 $(7,303)
(Continued)
See accompanying notes to consolidated financial statement
</TABLE>
<TABLE>
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands of dollars, except share data)
Total
Treasury Stock Shareholders'
Shares Par Value Equity
<CAPTION>
<S> <C> <C> <C>
Balance June 30,
1994 (39,160) $(95) $17,245
Issuance of
Preferred Stock -- -- 2,000
Conversion of
Class A & B Shares -- -- --
Repurchase of
Class A Shares -- -- (61)
Net loss for Fiscal
1995 -- -- (2,394)
Balance June 30,
1995 (39,160) $(95) $ 16,790
Issuance of
Preferred Stock -- -- 2,000
Net loss for Fiscal
1996 -- -- (2,685)
Balance June 30,
1996 (39,160) $(95) $ 16,105
Repurchase of
common shares -- -- (181)
Net loss for Fiscal
1997 -- -- (1,449)
Balance June 30,
1997 (39,160) $(95) $ 14,475
See accompanying notes to consolidated financial statements
</TABLE>
BIOTECHNICA INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Business
BioTechnica International, Inc. and its subsidiary, LG Seeds, Inc. (the
"Company"), sells corn, soybean, alfalfa and other agricultural seed to dealers,
distributors and farmers through its seed operations. The Company operates in a
twelve-state region centered in the Midwestern United States. Sales are
generally made on open account to customers. Because of the geographic
concentration of the Company's customers in the Midwest, it is significantly
dependent upon the weather and market conditions in its market areas. In
addition, industry sales levels are dependent upon factors resulting from
governmental agriculture policies and farm programs.
As of June 30, 1997, approximately 94% of the common stock and 100% of the
Preferred Stock of the Company is owned by Limagrain Genetics Corporation
("LG Corp."). LG Corp., in turn, is controlled by Groupe Limagrain Holding
("Limagrain") of Chappes, France.
B. Basis of Presentation
The consolidated balance sheets and statements of operations as of June 30,
1997 and 1996, and for the years then ended, include the Company and its
wholly owned subsidiary, LG Seeds, Inc. The statement of operations for the
year ended June 30, 1995 includes the results of the Scott Seed Division and
other properties sold during Fiscal 1995 are included up to the date of
their respective disposal. Scott Seed Division sales in Fiscal 1995
aggregated approximately $3,446,000.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and related
disclosures at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
All significant intercompany transactions have been eliminated in consolidation.
C. Revenue Recognition
Sales of seed products are recorded upon shipment, reduced by a reserve for
estimated returns and discounts.
D. Research and Development Costs
Although the Company has no significant internal research and development
effort, it has access to research conducted by LG Corp. and other Limagrain
affiliates. The cost of this expertise is paid to LG Corp. in the form of
royalties on products sold.
E. Advertising
The Company expenses all advertising in the period incurred. Advertising
expenses for Fiscal 1997, 1996, and 1995 were $133,000, $80,000, and $167,000,
respectively.
F. Cash and Cash Equivalents
Cash and cash equivalents consist of cash in banks and short-term investments
with original maturities of three months or less.
G. Inventories
Inventories consist primarily of seed products and supplies. Seed product
inventory is valued at the lower of average cost by crop year or market.
Supply inventory is valued at the lower of cost (using the first-in, first-out
method) or market. Gains or losses, if any, on commodity hedging transactions
are included as a component of inventory.
H. Derivatives
The Company has contractual commitments with seed growers for payments based on
the local commodity prices for soybeans and wheat. To mitigate the impact of
fluctuations in commodity prices on inventory costs, the Company attempts from
time to time to hedge these commitments by using Chicago Board of Trade futures
contracts for the respective crops. The Company matches these futures
contracts to its purchases of inventory, closing out the futures contracts
as payments are made to the seed growers. There were no significant open
futures contracts at either June 30, 1997 or 1996.
I. Property, Plant and Equipment
Property, plant and equipment are recorded at cost and are depreciated using
the straight-line method over the estimated useful lives of the assets.
Depreciable lives for asset classes are:
Land improvements 15 years
Buildings and improvements 15 to 32 years
Machinery and equipment 7 to 20 years
Office equipment and computers 3 to 5 years
J. Goodwill
Goodwill is being amortized using the straight-line method over a period of
20 years. The Company evaluates the existence of goodwill impairment on the
basis of whether the goodwill is fully recoverable from projected,
undiscounted net cash flows.
K. Income Taxes
The Company utilizes the asset and liability method of accounting for income
taxes whereby deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
The Company files a Federal consolidated tax return with other corporations
controlled by LG Corp. The related tax sharing agreement provides that
consolidated Federal income tax is allocated among profitable companies.
Companies with operating losses receive benefits in the future by effectively
offsetting taxable income against prior operating losses.
L. Loss Per Common Share
Loss per common share is computed based on the weighted average of all classes
of common shares outstanding during the period after taking into account the
amount of cumulative Preferred Stock dividends, whether or not declared.
M. Fair Value of Financial Instruments
Carrying amounts of cash, accounts receivable, accounts payable, accrued
liabilities, and due to affiliates-current, approximate fair value because of
the short maturity of these financial instruments. The Company's borrowings
under its Line of Credit are at variable interest rates tied to market rates
and, accordingly, the Company considers the fair value to be the same as
the carrying value. The estimated fair value of Due to Affiliates-non-current,
based on borrowing rates currently available to the Company on bank loans
with similar terms and maturities would be $5,070,000.
2. INVENTORIES
Inventories at June 30, 1997 and 1996 are as follows:
(in thousands of dollars)
1997 1996
Finished seed $ 4,666 $ 3,599
Unfinished seed 2,955 1,630
Supplies and other 709 747
Total inventories $ 8,330 $ 5,976
"Finished seed" consists of bagged product, ready for sale, net of reserves
for obsolescence. "Unfinished seed" consists of bulk product not yet bagged
and the cost associated with the seed crop planted in the spring of the
applicable fiscal year. "Supplies and other" consists of foundation seed,
unused bags, pallets and other supply items.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30, 1997 and 1996 are as follows:
(in thousands of dollars)
1997 1996
Land and improvements $ 768 $ 793
Buildings and improvements 8,185 7,395
Machinery and equipment 5,312 4,186
Construction in progress 52 1,437
$14,317 $13,811
Less accumulated depreciation (5,001) (4,089)
Net property, plant and
equipment $ 9,316 $ 9,722
4. FIRE AT ELMWOOD, ILLINOIS PRODUCTION FACILITY
During Fiscal 1996, fire destroyed the building used for the treating and
grading of corn and soybeans at the Company's Elmwood, Illinois facility. The
Company received $1,029,000 in insurance proceeds as a result of this fire.
The net book value of this building was $646,000. The resulting gain of
$383,000 is classified as part of gain on disposition of fixed assets in
Fiscal 1996.
The Company then entered into a contract to replace this destroyed building
with a new, modern grading and bagging building. The entire cost of
reconstruction was $1,890,000.
5. GOODWILL AND OTHER ASSETS
Goodwill and other assets consist of the following:
(in thousands of dollars)
1997 1996
Goodwill $9,966 $9,966
Amortization of goodwill (1,674) (1,175)
Net goodwill $8,292 $8,791
Deposits and other 93 157
TOTAL $8,385 $8,948
6. LINE OF CREDIT AND NOTE PAYABLE
The Company has a revolving credit arrangement with its principal bank ("Line
of Credit") whereby the Company can borrow up to $12,000,000 based on a
borrowing base formula and subject to certain limitations in availability.
This Line of Credit, which expires December 31, 1997, bears interest (at the
Company's option) based upon (i) the Bank Prime Loan rate, (ii) the
London Interbank Offered Rate ("LIBOR") index or (iii) the Bank Offered Rate.
Borrowings under this Line of Credit are secured by the inventory and
accounts receivable of the Company and its subsidiary and by the guarantees
of Limagrain and LG Corp. The maximum and average amounts outstanding under
this Line of Credit during the year ended June 30, 1997 were $11,400,000 and
$8,492,308, respectively. The weighted average interest rate during Fiscal
1997 was 6.79%.
The Company also has a note payable to a non-affiliate of $31,000 at June 30,
1997. This note bears interest at an annual rate of 9% and is payable through
September 1997.
7. DUE TO AFFILIATES
As of June 30, 1997, the Company had borrowed a total of $5,261,000 from LG
Corp., of which $4,261,000 was subordinated to its bank Line of Credit. This
amount is due July 1, 1999 and accrues interest at a rate of 5% payable
annually. In addition, the Company owes $115,000 to affiliates for current
items.
As of June 30, 1996, the Company had borrowed $3,261,000 from LG Corp., which
was subordinated to its Line of Credit. This amount was scheduled to be due
July 1, 1998 (but was renegotiated in Fiscal 1997) and accrued interest at a
rate of LIBOR plus .4375%. The Company also had a long-term unsubordinated
note in the amount of $2,000,000 with an affiliate that was renegotiated and
transferred to LG Corp. during Fiscal 1997. In addition, the Company
owed $175,000 to affiliates for current items.
8. CAPITAL STOCK
Authorized shares of stock include: 150,000,000 shares of common stock;
11,100,000 shares of Class A common; 11,100,000 shares of Class B common; and
2,000,000 shares of Class A Preferred.
On December 1, 1994, LG Corp. converted the $4,000,000 advanced to the Company
into (i) a long-term note for $2,000,000 bearing interest at LIBOR plus 1.15%,
and (ii) $2,000,000 in Class A Preferred Stock of the Company.
On November 30, 1994, State Farm Automobile Insurance Company ("State Farm")
converted 4,698,336 shares of Class A common stock and 4,807,533 shares of
Class B common stock of the Company into 9,505,869 shares of common stock.
This conversion was available to State Farm at its option under the conditions
of the Class A and Class B common stock. This transaction had no effect on
the net outstanding, fully diluted shares of the Company, or on the relative
equity of any shareholder.
On June 26, 1995, State Farm sold 6,054,751 shares of Class A common stock
back to the Company at par value (i.e., $0.01 per share). This represented
approximately 5% of the outstanding shares of the Company. The price of
$0.01 was substantially below the then-current market price and the net book
value per share. The result of this transaction was to increase the
equity position of all remaining shareholders by approximately 5%.
On November 30, 1995, the Company retired the long-term note of $2,000,000
described above in exchange for $2,000,000 of the Company's Class A Preferred
Stock.
On June 6, 1997, the Company repurchased and retired 11,324,051 shares of its
common stock from a shareholder at $0.016 per share. This common stock
represented approximately 9.8% of the total common stock. The price of
$0.016 per share was substantially below the then-current market price and
net book value per share.
As of June 30, 1997, there were only two classes of stock issued and
outstanding: common stock and Class A Preferred Stock.
The Class A Preferred Stock of the Company (all of which is owned by
LG Corp.) pays a dividend of $.75 per share per year when declared by the
Board of Directors. No such dividend has been declared by the Board of
Directors. Pursuant to the terms and conditions of the Company's Class A
Preferred Stock, should any dividend be declared or paid on the common
stock of the Company, the holders of Class A Preferred Stock would be entitled
to receive dividends at a rate per share equal to that of the common stock.
As of June 30, 1997 and 1996, the cumulative amount of undeclared dividends
on the Class A Preferred Stock was $1,750,000 and $1,075,000, respectively.
9. STOCK OPTION PLAN
The Company has reserved 1,500,000 shares of common stock for issuance under
an incentive stock option plan. During Fiscal 1996, all outstanding options
were either (i) repurchased by the Company or (ii) determined to have
expired. The cancellation of these options resulted in a reduction of
compensation expense of $150,000 during Fiscal 1996. As of June 30, 1997 and
1996, there were no options outstanding.
10. RETIREMENT PLAN
The Company participates in a 401(k) savings retirement plan sponsored by an
affiliate. The plan covers substantially all full-time employees of the
Company with at least one year of service. Vesting occurs over a five-year
period at 20% per year. Employees may contribute up to the lesser of 15% of
their salary or an amount determined annually by Federal income tax
regulations. Discretionary Company contributions consist of a basic amount
for all covered employees and a potential matching contribution for a portion
of employee contributions.
Company contributions under the plan were $177,064, $82,145, and $0 for Fiscal
1997, Fiscal 1996, and Fiscal 1995, respectively.
11. INCOME TAXES
On June 30, 1997 and 1996, the Company had pre-acquisition net operating loss
carryforwards of approximately $1,496,000 and $1,632,000, respectively, which
expire at a rate of $136,000 per year through 2008. The Company had
post-acquisition net operating loss carryforwards of approximately $13,332,000
and $12,593,000 on June 30, 1997 and 1996, respectively, which expire through
2011.
The components of income tax expense (benefits) are as follows:
(thousands of dollars)
1997 1996 1995
Federal $ -- $(28) $ 28
State 9 13 39
Total $ 9 $(15) $ 67
The actual income tax benefit differed from the expected income tax benefit
(computed by applying the applicable U.S. Federal corporate income tax rate
of 34% to loss before income taxes) as follows:
(thousands of dollars)
1997 1996 1995
Computed "expected" tax benefit $(490) $(933) $(814)
Amortization of goodwill 170 170 163
State income taxes, net of
Federal benefit 6 9 25
Alternative minimum tax -- (28) 28
Other 72 (172) (163)
Net operating loss carryforward 251 939 828
Total $ 9 $ (15) $ 67
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at June 30, 1997 and
1996 are presented below.
(in thousands of dollars)
1997 1996
Deferred tax assets:
Net operating loss carryforward
(Pre-acquisition) $ 583 $ 636
Net operating loss carryforward
(Post-acquisition) 5,199 4,911
Allowance for doubtful accounts 38 35
Allowance for inventory valuation 121 74
Accrued compensation, sales allowances
and other expenses 295 336
Total gross deferred tax assets $6,236 $5,992
Less: valuation allowance (5,623) (5,324)
Total deferred tax assets $ 613 $ 668
Deferred tax liability:
Difference between net value of fixed
assets for book and tax purposes $ (613) $ (668)
Net deferred tax assets $ -- $ --
The change in the deferred tax valuation allowance was an increase of $299,000
in Fiscal 1997 compared to an increase of $1,017,000 in Fiscal 1996, and an
increase of $3,172,000 in Fiscal 1995.
At June 30, 1997, the amount of valuation allowance, which if realized would
result in a reduction of goodwill, aggregated $583,000.
12. COMMITMENTS
The Company leases office space and certain equipment under non-cancelable
operating leases which expire through 2002. Rental expenses charged to
operations were $614,321, $465,000 and $476,000 for the years ended June 30,
1997, 1996 and 1995, respectively. Future annual minimum rentals are $189,189,
$161,733, $118,735, $66,000, and $22,000, for Fiscal 1998 through 2002,
respectively.
13. RELATED PARTIES
The Company has access to the research conducted by LG Corp. The cost of this
research is paid to LG Corp. as royalties on corn units sold. Costs incurred
were approximately $71,000, $94,000 and $81,000 for Fiscal 1997, 1996 and
1995, respectively. In addition, the Company accrued or paid $44,000, $50,000
and $35,000 to LG Corp. for royalties on soybean genetics for Fiscal 1997,
1996 and 1995, respectively.
The Company has agreements with affiliated companies that provide for certain
administrative and management services. Combined costs incurred under these
agreements were $300,000, $320,000 and $320,000 for Fiscal 1997, 1996 and 1995,
respectively. Fees for these arrangements are negotiated annually by
management and approved by the Board of Directors.
The Company sells seed to various affiliated companies in Europe primarily
under production contracts. These contracts are negotiated annually and are
based on market pricing and quantities determined by the affiliates'
requirements. Export sales to affiliates amounted to $2,977,000 for Fiscal
1997, $1,489,000 for Fiscal 1996 and $3,089,000 for Fiscal 1995.
During Fiscal 1996, the Company repurchased 70,000 stock options from officers
and directors for $3,400. The repurchase of the options, with exercise prices
between $1.31 and $3.50 per share, resulted in a reduction of approximately
$66,000 in long-term liabilities. The net result was a reduction of general
and administrative expenses of $62,000.
14. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest aggregated approximately $880,000, $728,000, and
$687,000 for Fiscal 1997, 1996, and 1995, respectively.
In connection with the sale of various assets during Fiscal 1995, the Company
received cash of $647,000 and non-operating receivables of $722,000. The net
book value of assets sold was $1,780,000.
15. LIQUIDITY
The Company has incurred net operating losses and negative cash flow from
operations for Fiscal 1997, 1996, and 1995. The Company's current line of
credit expires on December 31, 1997, at which time management expects to
renew this credit facility.
Management believes that the Company will begin to generate positive cash flows
through continued improvement of operating results. In the event that
additional financial support is required, management believes there is a
strong commitment by Limagrain to enable the Company to obtain sufficient
working capital to support the business. Management's belief that Limagrain's
support will continue is based on Limagrain's commitment under the Line of
Credit guarantee, the additional contribution of $9,000,000 for Preferred
Stock, and the advance of $5,261,000 in long-term borrowing.
16. OTHER INCOME AND EXPENSE
Included in other income and expense for Fiscal 1996 is $94,000 of gain on the
disposal of AgriBioTech, Inc. common stock received during Fiscal 1995 by the
Company as part of the proceeds from the disposal of its Scott Seed Company
operations. Also included therein are $95,000, $68,000, and $133,000 in
finance charge income on customer accounts for Fiscal 1997, 1996, and 1995,
respectively.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "INFORMATION ABOUT EXECUTIVE
OFFICERS" and "PROPOSAL 1: ELECTION OF DIRECTORS" in the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on November 12,
1997 (the "1997 Proxy Statement") is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the captions "EXECUTIVE COMPENSATION,"
"PROPOSAL 1: ELECTION OF DIRECTORS," "REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION," and "STOCK PERFORMANCE
GRAPH" in the Company's 1997 Proxy Statement are incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information set forth under the captions "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS" and "SECURITY OWNERSHIP OF MANAGEMENT" in the Company's
1997 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "CERTAIN RELATIONSHIPS AND OTHER
RELATED TRANSACTIONS" in the Company's 1997 Proxy Statement is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
1. Financial Statements. See Item 8 for the financial statements of
the Company filed as part hereof.
2. Financial Statement Schedule. All schedules have been omitted
because the required information is not applicable or not present in
amounts sufficient to require submission of the schedule, or because
the information required is included in the consolidated financial
statements or the notes thereto.
3. Exhibits. The exhibits listed in the following index are incorporated
herein by reference.
Exhibit No. Description of Exhibit
2.1 Credit Enhancement and Reorganization Agreement among the
Company, Groupe Limagrain Holding S.A., and Limagrain Genetics Corp.
dated as of October 26, 1993 (incorporated by reference to Exhibit
2.1 to Form 8-K filed with the Commission November 10, 1993,
File No. 0-11854).
2.2 Amendment to Credit Enhancement and Reorganization Agreement dated
December 10, 1993, among the Company, Groupe Limagrain Holding S.A.,
and Limagrain Genetics Corp. (incorporated by reference to Exhibit
1 to Form 8-K filed with the Commission December 16, 1993, File
No. 0-11854).
3.1 Amended and Restated Certificate of Incorporation dated March 7,
1994, of the Company, as amended on June 28, 1994 (incorporated by
reference to Exhibit 3.1 to Form 10-K filed with the Commission on
October 13, 1994, File No. 0-11854).
3.2 By-laws of the Company, as amended on October 29, 1983, May 7, 1987
and May 18, 1994 (incorporated by reference to Exhibit 3.2 to Form
10-K filed with the Commission on October 13, 1994, File No. 0-11854).
4.1 Specimen Certificate of Common Stock of the Company (incorporated by
reference to Exhibit 4(A) to the Company's Annual Report on Form
10-K filed with the Commission on March 31, 1986, File No. 0-11854).
4.8 Specimen Certificate of Class A Preferred Stock of the Company
(incorporated by reference to Exhibit 4.8 to Form 10-K filed with
the Commission on October 13, 1994, File No. 0-11854).
4.9 Certificate of Designations (incorporated by reference to Exhibit
4.9 to Form 10-K filed with the Commission on October 13, 1994, File
No. 0-11854).
10.1 The Company's 1982 Incentive Stock Option Plan adopted on July 30,
1982, as amended on January 31, 1987, on May 7, 1987, and on May 11,
1989 (incorporated by reference to Exhibit 10.1 to Form 10-K filed
with the Commission on March 29, 1990, File No. 0-11854).
10.2 The Company's 1992 Stock Incentive Plan adopted on May 7, 1992, as
amended on May 18, 1994 (incorporated by reference to Exhibit 10.2
to Form 10-K filed with the Commission on October 13, 1994, File
No. 0-11854).
10.3 Secured Revolving Credit Agreement dated October 26, 1993, between
Harris Trust and Savings Bank and the Company (incorporated by
reference to Exhibit 10.31 to Form 10-K filed with the Commission on
November 15, 1993, File No. 0-11854).
10.11 Eighth Amendment to Secured Revolving Credit Agreement and Fifth
Amendment to Secured Revolving Credit Note between Harris Trust and
Savings Bank and the Company dated as of November 27, 1996.*
10.13 Debt Subordination Agreement between Harris Trust and Savings Bank
and the Company dated June 29, 1994 (incorporated by reference to
Exhibit 10.42 to Form 10-K filed with the Commission on October 13,
1994, File No. 0-11854).
10.14 Debt Restructuring Agreement by and among Limagrain Genetics Corp.,
Shissler Seed Co., Inc., Limagrain Holding S.A. and the Company
dated June 29, 1994 (incorporated by reference to Exhibit 10.43 to
Form 10-K filed with the Commission October 13, 1994, File
No. 0-11854).
10.17 Remuneration Individuelle Sur Objectifs Cadres Associes (Individual
Compensation and Performance Objectives for Associate Level Employees)
for Bruno Carette dated October 4, 1995, amended February 9, 1996.*/**
10.19 Letter Amendment to Consulting Agreement between the Company and Ralph
W.F. Hardy dated November 27, 1996.*
10.27 Three promissory notes issued to LG Corp. by the Company dated
April 22, 1997.*
10.29 Service Agreement between LG Seeds, Inc. and Limagrain Genetics
International dated July 1, 1994 (incorporated by reference to
Exhibit 10.29 to Form 10-K filed with theCommission September 22,
1995, File No. 0-11854).
10.30 Amendment 3 to Exhibit A, dated July 1, 1997, to Service Agreement
between LG Seeds, Inc. and Limagrain Genetics International dated
July 1, 1994.*
10.31 Biotechnology Service Agreement between LG Seeds, Inc. and BIOCEM S.A.
dated July 1, 1994 (incorporated by reference to Exhibit 10.30 to
Form 10-K filed with the Commission on September 22, 1995, File
No. 0-11854).
10.32 Amendment 3 to Exhibit A dated July 1, 1997 to Biotechnology Service
Agreement between LG Seeds, Inc. and BIOCEM S.A. dated July 1, 1994.*
10.33 Service Agreement between LG Seeds, Inc. and Groupe Limagrain Holding
S.A. dated July 1, 1996.*
10.34 Amendment 2 to Exhibit A dated July 1, 1997 to Service Agreement
between LG Seeds, Inc. and Groupe Limagrain Holding dated July 1,
1996.*
10.35 Tax Allocation Agreement among the Limagrain Affiliated U.S.
corporations filing a consolidated tax return with Limagrain Genetics
Corporation (incorporated by reference to Exhibit 10.32 to Form
10-K filed with the Commission September 22, 1995, File No. 0-11854).
21.00 Subsidiaries of the Company.*
(b) Reports on Form 8-K.
Current report on Form 8-K, dated April 17, 1997, File Number 0-11854,
was filed in connection with the delisting of the Company's common
stock from the NASDAQ-NMS.
(*)Filed herewith.
(**)Management contract filed pursuant to Item 14(c) of Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BIOTECHNICA INTERNATIONAL, INC.
By: /s/Serge Lebreton
Serge Lebreton
Chairman, Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
Signature Title Date
/s/ Serge Lebreton Chairman of the Board, September 12, 1997
Serge Lebreton Director
/s/ Bruno Carette President, Chief Executive September 12, 1997
Bruno Carette Officer, Director
/s/ Claude Agier Director September 12, 1997
Claude Agier
/s/ George R. Allbritten Director September 12, 1997
George R. Allbritten
/s/ Ralph W.F. Hardy Director September 12, 1997
Ralph W.F. Hardy
/s/ Claude Lescoffit Director September 12, 1997
Claude Lescoffit
/s/ Laurent Petoton Director September 12, 1997
Laurent Petoton
/s/ Edward M. Germain Chief Financial Officer and September 12, 1997
Edward M. Germain Chief Accounting Officer
CORPORATE INFORMATION
SHAREHOLDER REFERENCE EXECUTIVE OFFICERS
CORPORATE HEADQUARTERS Bruno Carette
BioTechnica International, Inc. President and Chief Executive Officer
4001 War Memorial Drive
Peoria, IL 61614 Edward M. Germain
(309) 681-0300 Vice President, Secretary, Treasurer,
and Chief Financial Officer
OPERATING SUBSIDIARY
LG Seeds, Inc. Larry D. Rieffel
4001 War Memorial Drive Vice President, Production and
Peoria, IL 61614 Logistics
Jacqui Doublier
Marketing and Product Development
Manager
TRANSFER AGENTS
American Stock Transfer & Roger Bonsack
Trust Company National Sales Manager
40 Wall Street
New York, NY 10005 Barbara A. Wittig
(212) 936-5100 Human Resources, Training and Internal
Communications Manager
AUDITORS
KPMG Peat Marwick L.L.P. BOARD OF DIRECTORS
Indianapolis, IN
Serge Lebreton
COUNSEL Chairman of the Board
Shook, Hardy & Bacon L.L.P.
Kansas City, MO 64105 Bruno Carette
Chief Executive Officer
SEC FORM 10-K George R. Allbritten
A copy of the Company's annual report
to the Securities and Exchange Claude Agier
Commission on Form 10-K is available
without charge upon written request Ralph W.F. Hardy
to:
Shareholder Relations Claude Lescoffit
BioTechnica International, Inc.
4001 War Memorial Drive Laurent Petoton
Peoria, IL 61614
ANNUAL MEETING
The annual meeting of shareholders will
be held at 10:00 A.M. on Tuesday,
November 12, 1997 at The Signature Inn,
4112 North Brandywine, Peoria, IL.
EXHIBIT 10.11
BIOTECHNICA INTERNATIONAL, INC.
EIGHTH AMENDMENT TO SECURED REVOLVING CREDIT AGREEMENT
AND FIFTH AMENDMENT TO SECURED REVOLVING CREDIT NOTE
Harris Trust and Savings Bank
Chicago, Illinois
Gentlemen:
Reference is hereby made to that certain Secured Revolving credit Agreement
dated as of October 26, 1993, as amended (the "CREDIT AGREEMENT") between
the undersigned, BioTechnica International, Inc., a Delaware corporation
(the "COMPANY") and you (the "BANK"). All capitalized terms used herein
without definition shall have the same meanings herein as such terms have
in the Credit Agreement.
The Company has requested that the Bank make certain amendments to the
Credit Agreement and the Bank is willing to do so under the terms and
conditions set forth in this Amendment.
1. AMENDMENTS.
Upon your acceptance hereof in the space provided for that purpose below, and
the satisfaction of the conditions precedent set forth in Section 3 hereof,
the Credit Agreement shall be and hereby is amended as follows:
1.1. Section 1.1(a) of the Credit Agreement shall be amended by replacing
the date "December 1, 1996" appearing therein with the date "December 31, 1997".
1.2. Section 1.3(b) of the Credit Agreement shall be amended by replacing
the phrase "three-quarters of one percent (0.75%)" with the phrase
"one percent (1%)".
1.3. The definition of the term "Tangible Net Worth" contained in Section 4
of the Credit Agreement shall be amended to read as follows:
"TANGIBLE NET WORTH" shall mean the excess of the total assets minus the
total liabilities (other than liabilities consisting of indebtedness for
borrowed money of the Company which is expressly subordinated to the prior
payment in full of the Company's indebtedness, obligations and liabilities
to the Bank pursuant to written subordination provisions acceptable to the
Bank) of the Company and its Subsidiaries and minus the total amount of all
intangible assets of the Company and its Subsidiaries (including, without
limitation, unamortized debt discount and expense, deferred charges and
goodwill), all as determined on a consolidated basis in accordance with
generally accepted accounting principles consistently applied."
1.4. Section 7.9 of the Credit Agreement shall be amended to read as follows:
7.9. TANGIBLE NET WORTH. The Company will maintain Tangible Net Worth in an
amount not less than (1) $7,000,000 on the last day of each fiscal year of the
Company, and (b) $6,000,000 at all other times."
1.5. Section 7.11 of the Credit Agreement shall be amended by deleting the
word "and" appearing at the end of subsection (i) thereof, by replacing the
period appearing at the end of subsection (j) with the phrase "; and" and by
adding the following provision thereto as subsection 7.11(k):
"(k) indebtedness of the Company to Akin Corporation Seed Company in an
aggregate principal amount not to exceed $5,000,000 at any time."
1.6. Exhibit A to the Credit Agreement and the Revolving Note of the Company
payable to the order of Harris Trust and Savings Bank (the "Note") shall each
be amended by replacing the date "December 1, 1996" appearing in the first
paragraph therein with the date "December 31, 1997".
1.7. The Bank shall type the following legend on its Note:
"This Note has been amended pursuant to the terms of an Eighth Amendment to
Secured Revolving Credit Agreement and Fifth Amendment to Secured Revolving
Credit Note dated as of November ___, 1996, including an extension of the
maturity date hereof, to which reference is hereby made for a statement of
terms thereof."
1.8. As soon as available, but in any event no later than December 31, 1996,
the Company shall deliver to the Bank such resolutions of the Company's board
of director authorizing the execution and delivery of this Amendment by the
Company and the performance by the Company of the terms hereof and such
opinions of counsel to the Company as the Bank may request. The Company and
the Bank agree that the Company's failure to comply with this Section 1.8
shall constitute an Event of Default under Section 8.1 of the Credit Agreement.
2. WAIVER.
Upon satisfaction of the conditions precedent set forth in Section 3 hereof:
2.1. The Bank hereby waives non-compliance by the Company with Section 7.8
of the Credit Agreement from November 1, 1996 through January 31, 1997.
2.2. The waiver contained in Section 2.1 of this Amendment is limited to
matters set forth in that Section, and the Company agrees that it remains
obligated to comply with the terms of the Credit Agreement and the other Loan
Documents, including Section 7.8 of the Credit Agreement, and that the Bank
shall not be obligated in the future to waive any provision of the Credit
Agreement or the other Loan Documents.
3. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all of
the following conditions precedent:
3.1. The Company and the Bank shall have executed and delivered this
Amendment.
3.2. Each of the representations and warranties set forth in Section 5 of
the Credit Agreement shall be true and correct.
3.3. The Company shall be in full compliance with all of the terms and
conditions of the Credit Agreement and no Event of Default or Potential
Default shall have occurred and be continuing thereunder or shall result
after giving effect to this Amendment.
3.4. All legal matters incident to the execution and delivery hereof and
the instruments and documents contemplated hereby shall be satisfactory to
the Bank.
3.5. Each of Genetics and each Guarantor Subsidiary shall have executed and
delivered to the Bank its acknowledgment in the form set forth below.
4. REPRESENTATIONS.
In order to induce the Bank to execute and deliver this Amendment, the
Company hereby represents to the Bank that as of the date hereof, each of the
representations and warranties set forth in Section 5 of the Credit Agreement
are and shall be and remain true and correct (except that the representations
contained in Section 5.4 shall be deemed to refer to the most recent financial
statements of the Company delivered to the Bank) and the Company is in full
compliance with all of the terms and conditions of the Credit Agreement and
no Potential Default or Event of Default has occurred and is continuing
thereunder or shall result after giving effect to this Amendment.
5. MISCELLANEOUS.
5.1. The Company has heretofore executed and delivered to the Bank that
certain Security Agreement Re: Accounts Receivable, General Intangibles and
Inventory dated as of October 26, 1993 (the "SECURITY AGREEMENT") and the
Company hereby agrees that notwithstanding the execution and delivery of this
Amendment, the Security Agreement shall be and remain in full force and effect
and that any rights and remedies of the Bank thereunder, obligations of the
Company thereunder and any liens and security interests created or provided for
thereunder shall be and remain in full force and effect and shall not be
affected, impaired or discharged thereby. Nothing herein contained shall in
any manner affect or impair the priority of the liens and security interests
created and provided for by the Security Agreement as to the indebtedness
which would be secured thereby prior to giving effect to this Amendment.
5.2. Except as specifically amended herein, the Credit Agreement and the Note
shall continue in full force and effect in accordance with its original
terms. Reference to this specific Amendment need not be made in any note,
document, letter, certificate, the Credit Agreement itself, the Note or any
communication issued or made pursuant to or with respect to the Credit
Agreement or the Note, any reference in any of such to the Credit Agreement
or the Note being sufficient to refer to the Credit Agreement or the Note as
amended hereby.
5.3. The Company agrees to pay on demand all costs and expenses of or
incurred by the Bank in connection with the negotiation, preparation,
execution and delivery of this Amendment, including the fees and expenses of
counsel for the Bank.
5.4. This Amendment may be executed in any number of counterparts, and by
the different parties on different counterparts, all of which taken together
shall constitute one and the same agreement. Any of the parties hereto may
execute this Amendment by signing any such counterpart and each of such
counterparts shall for all purposes be deemed to be an original.
This Amendment shall be governed by the internal laws of the State of Illinois.
Dated as of November 27, 1996.
BIOTECHNICA INTERNATIONAL, INC.
By /s/ Bruno Carette
Its President-COO
Accepted and agreed to as of the date and year last above written.
HARRIS TRUST AND SAVINGS BANK
By: /s/ Brian J. Moeller
Its Vice President
EXHIBIT 10.17
EXECUTIVE COMPENSATION AGREEMENT
1996/97
EXECUTIVE: B. CARETTE MANAGER: E. ROUGIER
The EXECUTIVE compensation plan is based on two components:
-- a salary, aligned with market information
-- a bonus linked to the accomplishments of specific, quantifiable
objectives
The agreement between the EXECUTIVE and his MANAGER determines the salary and
objectives for the year ended June 30, 1997 ("Fiscal 1997").
At the end of this period, the parties concerned will decide on the
continuation of the process.
I. SALARY
Starting July 1, 1996, the EXECUTIVE'S annual gross salary will be
$105,000.
It will be in effect for a period of 12 months, except in the event of
a change in job function.
II. BONUS
For the period from July 1, 1996 to June 30, 1997, the objectives and
relevant bonuses for the EXECUTIVE are noted hereafter.
1. Improvement of CAF of BioTechnica/LG Seeds for Fiscal 1997
-- If CAF is equal to or less than $1,000,000, bonus will be $0
-- If CAF is greater than $1,000,000, bonus will be:
$7,500 x CAF 96/97 - $1,000,000
700
2. Improvement of CAF of the Limagrain Field Seeds Division for Fiscal
1997
-- If CAF is below 80,000KF, bonus will be $0
-- If CAF is greater than 80,000KF, bonus will be:
$7,500 x CAF 96/97 - 80,000KF
8,000
with a maximum of $15,000
NOTE: CAF is a French accounting measurement of cash generated by operations.
It is equal to net income plus depreciation and amortization, adjusted by
changes in inventory reserves, accounts receivable reserves, and gain or loss
on disposal of fixed assets.
Payment of these bonuses is conditional upon the completion of the objectives
as determined by the MANAGER and the EXECUTIVE for Fiscal 1997. Each
objective will be analyzed separately during a meeting between the EXECUTIVE
and his MANAGER.
If the Groupe Limagrain net income for 96/97 is lower than 68,000KF, the
above calculated amounts will be divided by two.
I understand and agree with the compensation plan as outlined above. I have
retained a signed copy of this agreement for my records.
Executed in Duplicate
/s/ E. ROUGIER /s/ B. CARETTE
MANAGER EXECUTIVE
Dated: November 27, 1996
EXHIBIT 10.19
Dr. Ralph W.F. Hardy
330 The Parkway
Ithaca, NY 14850
Dear Dr. Hardy:
By this letter agreement, BioTechnica would like to amend your Consulting
Agreement dated January 8, 1996, as follows:
2. Term; Payment Upon Termination
(a) The term of this Agreement shall commence on January 1, 1997, and shall
terminate on the earlier of the death of the Consultant or on December 31,
1997 (the "Expiration Date").
If the provisions of this letter are in accordance with your understanding,
please sign and return one of the enclosed copies.
Very truly yours,
/s/ Bruno Carette
President and Chief Operating Officer
Acknowledged and Agreed by:
/s/ Ralph W.F. Hardy Dec. 4, 1996
Ralph W.F. Hardy Date
EXHIBIT 10.27
NOTE BTI-6
BIOTECHNICA INTERNATIONAL, INC.
Promissory Note
For value received, BioTechnica International, Inc., a Delaware corporation,
promises to pay to Limagrain Genetics Corp., a Delaware corporation, the sum
of Three Million, Two Hundred Sixty Thousand, Eight Hundred and forty-six
U.S. Dollars ($3,260,846).
This note replaces and cancels NOTE BTI-0, dated June 30, 1996, in the same
face amount. By acceptance of this note, the previous note is considered
canceled.
The indebtedness evidenced by this note is subordinated to any and all
indebtedness, obligations, and liabilities of BioTechnica International,
Inc., hereof to Harris Trust and Savings Bank in the manner and to the
extent set forth in that certain Subordination Agreement with said Bank dated
June 29, 1994, to which reference is hereby made of a more full statement
thereof.
This note covers the period July 1, 1996 through July 1, 1999. This note
will be due and payable on July 1, 1999.
The interest rate for each period (July 1 through June 30 of the following
year) will be at a rate of five percent per annum (5%).
Interest will be made annually to Limagrain Genetics Corp. on June 20 prior
to the end of each annual period.
In the event of default, BioTechnica International, Inc. agrees to pay all
costs of collection and reasonable attorneys' fees to the extent permitted by
law. This note will be governed under the laws of the State of Illinois.
Signed under seal this 22nd day of April, 1997.
BIOTECHNICA INTERNATIONAL, INC. LIMAGRAIN GENETICS CORP.
/s/ Bruno Carette /s/ Emmanuel Rougier
by Bruno Carette, President and COO by Emmanuel Rougier, President and COO
NOTE BTI-7
BIOTECHNICA INTERNATIONAL, INC.
Promissory Note
(Non-Subordinated)
For value received, BioTechnica International, Inc., a Delaware corporation,
promises to pay to Limagrain Genetics Corp., a Delaware corporation, the sum
of One Million U.S. Dollars ($1,000,000).
This note replaces and cancels NOTE BTI-4, dated December 1, 1996, in the
same face amount. By acceptance of this note, the previous note is
considered canceled.
The interest rate is five percent per annum (5%). Interest accrued through
June 30, 1997 will be paid to Limagrain Genetics Corp. on June 20, 1997.
Interest accrued through July 1, 1998 will be paid to Limagrain Genetics Corp.
on June 20, 1998. Interest accrued through July 1, 1999 will be paid to
Limagrain Genetics Corp. on June 20, 1999.
The term of the note will be for a period of thirty-one (31) months from
December 1, 1996 to July 1, 1999.
Early payments against principal are allowed upon the mutual agreement of
BioTechnica International, Inc. and Limagrain Genetics Corp. In such case,
the interest cost will be calculated through the date of the prepayment.
In the event of default, BioTechnica International, Inc. agrees to pay all
costs of collection and reasonable attorneys' fees to the extent permitted by
law. This note will be governed under the laws of the State of Illinois.
Signed under seal this 22nd day of April, 1997.
BIOTECHNICA INTERNATIONAL, INC. LIMAGRAIN GENETICS CORP.
/s/ Bruno Carette /s/ Emmanuel Rougier
by Bruno Carette, President and COO by Emmanuel Rougier, President and COO
NOTE BTI-8
BIOTECHNICA INTERNATIONAL, INC.
Promissory Note
(Subordinated)
For value received, BioTechnica International, Inc., a Delaware corporation,
promises to pay to Limagrain Genetics Corp., a Delaware corporation, the sum
of One Million U.S. Dollars ($1,000,000).
This note replaces and cancels NOTE BTI-5, dated December 1, 1996, in the same
face amount. By acceptance of this note, the previous note is considered
canceled.
The indebtedness evidenced by this note is subordinated to any and all
indebtedness, obligations, and liabilities of BioTechnica International, Inc.,
hereof to Harris Trust and Savings Bank in the manner and to the extent set
forth in that certain Subordination Agreement with said bank dated June 29,
1994, to which reference is hereby made of a more full statement thereof.
The interest rate is five percent per annum (5%). Interest accrued through
June 30, 1997 will be paid to Limagrain Genetics Corp. on June 20, 1997.
Interest accrued through July 1, 1998 will be paid to Limagrain Genetics Corp.
on June 20, 1998. Interest accrued through July 1, 1999 will be paid to
Limagrain Genetics Corp. on June 20, 1999.
The term of the note will be for a period of thirty-one (31) months from
December 1, 1996 to July 1, 1999.
Early payments against principal are allowed upon the mutual agreement of
BioTechnica International, Inc. and Limagrain Genetics Corp. In such case,
the interest cost will be calculated through the date of the prepayment.
In the event of default, BioTechnica International, Inc. agrees to pay all
costs of collection and reasonable attorneys' fees to the extent permitted
by law. This note will be governed under the laws of the State of Illinois.
Signed under seal this 22nd day of April, 1997.
BIOTECHNICA INTERNATIONAL, INC. LIMAGRAIN GENETICS CORP.
/s/ Bruno Carette /s/ Emmanuel Rougier
by Bruno Carette, President and COO by Emmanuel Rougier, President and COO
EXHIBIT 10.30
AMENDMENT 3 TO EXHIBIT A
LIMAGRAIN GENETICS INTERNATIONAL SERVICE AGREEMENT
EXHIBIT A to LIMAGRAIN GENETICS INTERNATIONAL SERVICE AGREEMENT dated July 1,
1994, by and between LIMAGRAIN GENETICS INTERNATIONAL and LG SEEDS, INC., is
hereby amended as follows:
For the one-year period beginning on July 1, 1997, LG Seeds, Inc. agrees to
pay a fee (the "Annual Fee") of $200,000 for services rendered under the
Agreement.
All other terms and conditions remain the same.
LIMAGRAIN GENETICS
LG SEEDS, INC. INTERNATIONAL S.A.
/s/ B. Carette /s/ C. Lescoffit
B. Carette C. Lescoffit
President and Chief Operating Officer Chief Executive Officer
EXHIBIT 10.32
AMENDMENT 3 TO EXHIBIT A
BIOTECHNOLOGY SERVICE AGREEMENT
EXHIBIT A to BIOTECHNOLOGY SERVICE AGREEMENT dated July 1, 1994, by and between
BIOCEM S.A. and LG SEEDS, INC., is hereby amended as follows:
For the one-year period beginning on July 1, 1997, LG Seeds, Inc. agrees to
pay a fee (the "Annual Fee") of $50,000 for services rendered under the
Agreement.
All other terms and conditions remain the same.
LG SEEDS, INC. BIOCEM S.A.
/s/ B. CARETTE /s/
B. CARETTE
President and Chief Operating Officer Chief Executive Officer
EXHIBIT 10.33
GROUPE LIMAGRAIN HOLDING SERVICE AGREEMENT
THIS SERVICE AGREEMENT (the "Agreement") is made as of this 1st day of July,
1996, by and between LG SEEDS, INC., 4001 North War Memorial Drive, Peoria,
IL 61614, a Delaware corporation (the "Company"), and GROUPE LIMAGRAIN
HOLDING, BP1, 63720 Chappes, France, a company organized under the laws of
France and registered in Riom, France under the Commercial Registration
Number B394892996.
WHEREAS, Groupe Limagrain Holding has certain expertise in the fields of
organization and control, finance and development, and human resources and
communication (the "Services");
WHEREAS, the provision of the Services by Groupe Limagrain Holding to the
Company would be of great value to the Company;
NOW, THEREFORE, in consideration of the above and the mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
1. Provision of Services. Limagrain agrees to provide the following
specific Services to the Company (collectively, the "Specific Services");
- -- With respect to strategic planning and development, Groupe Limagrain
Holding shall assist the Company, as the Company may request from time to
time, to do the following:
-- monitor the economic environment and the economic performance of the
competition;
-- analyze the economic performance of the Company in regard to the
changing environment;
-- provide the results of the monitoring and analysis performed
pursuant to (i) and (ii) above to the Company and advise Company
management in regard to business decisions; and
-- assist in the annual development of the Company's "10-year Plan,"
which Plan is the basis for the long-term strategy of the Company.
- -- With respect to human resources and benefits, Limagrain shall assist
the Company, as the Company may request form time to time, to do the
following:
-- provide services to (1) evaluate human resource needs, (2) help manage
career evaluation for employees, and (3) evaluate potential
opportunities within Groupe Limagrain ;
-- provide support to design training programs for employees; and
-- provide support for evaluation and administration of the benefit
plans.
- -- With respect to financing, Groupe Limagrain Holding shall assist the
Company, as the Company may request from time to time, to do the following:
-- provide support to analyze the Company's financial structure and to
adapt the Company's financial structure as necessary;
-- provide support for the Company's relationship with its bankers;
and
-- provide support to assist in the management of the Company's
short-term cash requirements.
- -- With respect to audit and financial control, Groupe Limagrain Holding shall
assist the Company, as the Company may request from time to time, to do
the following:
-- provide support in the Company's negotiation with auditors; and
-- conduct internal audits to evaluate the internal controls of the
Company and to determine the accuracy of information and the adequacy
of procedures.
- -- With respect to communication, Groupe Limagrain Holding shall provide
support to assist the Company in its communications regarding the
Company's affiliation with one of the largest seed companies in the world.
2. Board of Directors. Groupe Limagrain Holding shall pay the expenses of the
Directors it nominates to serve as members of the Company's Board of
Directors, and such Directors shall receive no remuneration from the
Company whatsoever.
3. Fees, Term and Termination. For the one-year period beginning on the
date of this Agreement, the Company agrees to pay Groupe Limagrain
Holding for the Specific Services provided to the Company in an amount
equal to the annual dollar amount set forth on Exhibit A attached hereto
(the "Annual Fee"). Either party may terminate this Agreement at the
end of such one-year period, and at the end of any subsequent one-year
period, upon thirty (30) days advance written notice.
If the Agreement is not so terminated, then the Agreement shall automatically
renew for a one-year period. Upon such automatic renewal, the parties agree
to negotiate in good faith the Annual Fee to be paid by the Company to Groupe
Limagrain Holding and to update Exhibit A accordingly. If the parties cannot
mutually agree on such Annual Fee within thirty (30) days, then
the Agreement shall be automatically renewed upon the same terms as the
preceding year. The Company shall pay the Annual Fee to Groupe Limagrain
Holding in four (4) quarterly installments on the last business day of each
fiscal quarter.
4. Entire Agreement. This Agreement, together with Exhibit A (as it may be
amended from time to time), which shall be incorporated herein by reference,
embodies the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and understandings relating thereto.
5. Assignment. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. No party hereto may assign any of its rights hereunder without the
prior written consent of the other party hereto.
6. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois. Except as otherwise
expressly provided herein, no provision hereof may be waived, amended or
otherwise modified except by a written agreement signed by each party hereto.
The headings of this Agreement are for purposes of reference only and shall
not limit or otherwise affect the meaning hereof. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
LG SEEDS, INC.
LG SEEDS INC.
By: /s/ Bruno Carette
Name: Bruno Carette
Title: President - COO
GROUPE LIMAGRAIN HOLDING
By: /s/ Alain Catala
Name: Alain Catala
Title: Chief Executive Officer
EXHIBIT 10.34
AMENDMENT 2 TO EXHIBIT A
GROUPE LIMAGRAIN HOLDING SERVICE AGREEMENT
EXHIBIT A to GROUPE LIMAGRAIN HOLDING SERVICE AGREEMENT dated July 1, 1996, by
and between GROUPE LIMAGRAIN HOLDING and LG SEEDS INC., is hereby amended as
follows:
For the one-year period beginning on July 1, 1997, LG SEEDS, INC. agrees to
pay a fee (the "Annual Fee") of $150,000 USD for services rendered under the
Agreement.
All other terms and conditions remain the same.
LG SEEDS, INC. GROUPE LIMAGRAIN HOLDING
/s/ BRUNO CARETTE /s/ ALAIN CATALA
BRUNO CARETTE ALAIN CATALA
President and Chief Operating Officer Chief Executive Officer
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
at June 30, 1997
% Ownership
LG Seeds, Inc. 100%
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