UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
---
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended August 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
---
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
Commission File Number : 0-7908
PIONEER HI-BRED INTERNATIONAL, INC.
-----------------------------------
(Exact name of registrant as specified in its charter)
Iowa 42-0470520
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 Capital Square, 400 Locust, Des Moines, Iowa 50309
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (515) 248-4800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of class
-----------------------------
Common Stock ($1.00 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 (or for such shorter
period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
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 amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of
the Registrant as of October 14, 1994, was $2,589,072,000. As of October
14, 1994, 85,282,946 shares of the Registrant's Common Stock, $1.00 par
value, were outstanding.
-1-
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
1. Registrant incorporates by reference portions of the Pioneer Hi-
Bred International, Inc. Annual Shareholders' Report for the year ended
August 31, 1994. (Items 1 and 2 of Part I, Items 5, 6, 7 and 8 of Part
II.)
2. Registrant incorporates by reference portions of the Pioneer Hi-
Bred International, Inc. Proxy Statement for the annual meeting of
shareholders on February 28, 1995. (Items 10, 11, 12 and 13 of Part
III).
PART I
ITEM 1. BUSINESS
The description of business contained in the Annual Report to
Shareholders for the year ended August 31, 1994 is incorporated herein
by reference.
ITEM 2. PROPERTIES
The description of properties contained in the Annual Report to
Shareholders for the year ended August 31, 1994 is incorporated herein
by reference.
ITEM 3. LEGAL PROCEEDINGS
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market information for the Registrant's Common Stock contained in the
Annual Report to Shareholders for the year ended August 31, 1994 is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data contained in the Annual Report to
Shareholders for the year ended August 31, 1994 is incorporated herein
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and
results of operations contained in the Annual Report to Shareholders for
the year ended August 31, 1994 is incorporated herein by reference.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Registrant, together
with the report thereon of KPMG Peat Marwick LLP contained in the Annual
Report to Shareholders for the year ended August 31, 1994 are
incorporated herein by reference.
-2-
<PAGE>
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
Reference is made to registrant's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14(a) not later than
December 28, 1994; and the information responsive to the item is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to registrant's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14(a) not later than
December 28, 1994; and the information responsive to the item is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to registrant's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14(a) not later than
December 28, 1994; and the information responsive to the item is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to registrant's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14(a) not later than
December 28, 1994; and the information responsive to the item is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The consolidated financial statements of Pioneer Hi-Bred
International, Inc. and subsidiaries filed are listed on page 4.
(a) 2. Financial Statement Schedules
The financial statement schedules of Pioneer Hi-Bred
International, Inc. and subsidiaries filed are listed on page 4.
(a) 3. Exhibits
The exhibits to the Annual Report of Pioneer Hi-Bred
International, Inc. filed are listed on page 14.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the fourth quarter of the
year ended August 31, 1994.
-3-
<PAGE>
FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULES
OF
PIONEER HI-BRED INTERNATIONAL, INC.
FOR THE FISCAL YEAR ENDED AUGUST 31, 1994
INDEX
Financial Statements
The following consolidated financial statements of Pioneer Hi-Bred
International, Inc. and subsidiaries are incorporated by reference in
Part II, Item 8:
Independent Auditors' Report
Consolidated Balance Sheets - August 31, 1994 and 1993
Consolidated Statements of Income - years ended August 31, 1994, 1993
and 1992
Consolidated Statements of Shareholders' Equity -years ended August 31,
1994, 1993 and 1992
Consolidated Statements of Cash Flows- years ended August 31, 1994, 1993
and 1992
Notes to Consolidated Financial Statements
Page
Prior years Independent Auditors' Reports 5-6
Financial Statement Schedules
The following financial statement schedules of Pioneer Hi-Bred
International, Inc. and subsidiaries are submitted in response to Part
IV, Item 14:
Independent Auditors' Report 7
Schedule V - Property and Equipment 8
Schedule VI - Accumulated Depreciation of Property and Equipment 9
Schedule VII - Guarantees of Securities of Other Issuers 10
Schedule VIII - Valuation and Qualifying Accounts 11
Schedule IX - Short-Term Borrowings 12
Schedule X - Supplementary Income Statement Information 13
Exhibits to the Annual Report 14
All other financial statement schedules have been omitted as not
required, not applicable, or because all the data are included in the
financial statements.
-4-
<PAGE>
Independent Auditor's Report
TO THE SHAREHOLDERS
PIONEER HI-BRED INTERNATIONAL, INC.
DES MOINES, IOWA
Our audit of the consolidated financial statements of Pioneer Hi-Bred
International, Inc. and subsidiaries included schedules V, VI, VIII, IX,
and X contained herein, for the year ended August 31, 1992.
In our opinion, such schedules present fairly the information required
to be set forth therein in conformity with generally accepted accounting
principles.
McGladrey & Pullen
Des Moines, Iowa
October 22, 1992
-5-
<PAGE>
Independent Auditor's Report
TO THE SHAREHOLDERS
PIONEER HI-BRED INTERNATIONAL, INC.
DES MOINES, IOWA
We have audited the accompanying consolidated statements of income,
shareholders' equity, and cash flows of Pioneer Hi-Bred International,
Inc. and subsidiaries for the year ended August 31, 1992. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and
cash flows of Pioneer Hi-Bred International, Inc. and subsidiaries for
the year ended August 31, 1992, in conformity with generally accepted
accounting principles.
McGladrey & Pullen
Des Moines, Iowa
October 22, 1992
-6-
<PAGE>
Independent Auditors' Report
TO THE SHAREHOLDERS
PIONEER HI-BRED INTERNATIONAL, INC.
DES MOINES, IOWA
Under date of October 14, 1994, we reported on the consolidated balance
sheets of Pioneer Hi-Bred International, Inc. and subsidiaries as of
August 31, 1994, and 1993 and the related consolidated statements of
income, shareholders' equity, and cash flows for the years then ended,
as contained in the 1994 annual report to stockholders. These
consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the year
1994. In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related 1994 and 1993
financial statement schedules V, VI, VII, VIII, IX, and X. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set
forth therein.
KPMG Peat Marwick LLP
Des Moines, Iowa
October 14, 1994
-7-
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
SCHEDULE V-PROPERTY AND EQUIPMENT
(In thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E* Column F Column G
Balance At Cumulative Balance
Beginning Additions Transfers and Translation At End
Classification Of Period At Cost Retirements Other Changes Adjustment Of Period
Year ended August 31, 1994
Land and land
improvements $ 57,779 $ 1,251 $ 3,612 $ 3,212 $ 192 $ 58,822
Buildings 302,797 11,829 3,125 17,530 800 329,831
Machinery and
equipment 361,819 37,461 23,704 48,519 (165) 423,930
Construction in
progress 67,454 29,812 - - (67,799) 73 29,540
$ 789,849 $ 80,353 $ 30,441 $ 1,462 $ 900 $ 842,123
Year ended August 31, 1993:
Land and land
improvements $ 60,443 $ 1,797 $ 4,395 $ 363 $ (429) $ 57,779
Buildings 295,947 4,865 5,900 13,610 (5,725) 302,797
Machinery and
equipment 370,065 33,489 52,354 20,371 (9,752) 361,819
Construction in
progress 41,961 59,980 15 (34,270) (202) 67,454
$ 768,416 $100,131 $ 62,664 $ 74 $(16,108) $ 789,849
Year ended August 31, 1992:
Land and land
improvements $ 57,422 $ 2,703 $ 1,142 $ 618 $ 842 $ 60,443
Buildings 293,289 3,348 6,142 2,189 3,263 295,947
Machinery and
equipment 343,182 24,787 16,275 16,100 2,271 370,065
Construction in
progress 17,506 44,335 388 (19,407) (85) 41,961
$ 711,399 $ 75,173 $ 23,947 $ (500) $ 6,291 $ 768,416
Depreciation is computed using the straight-line method and the following lives:
Land improvements 5-40 years
Buildings 5-40 years
Machinery and equipment 2-40 years
*Column E includes an adjustment for plant closings of $(2,153), $(74), and $500 for the
years ended August 31, 1994, 1993, and 1992, respectively. For the year ended August 31,
1994, column E also includes the net change in property and equipment resulting from the
change in year end of the Company's international subsidiaries.
</TABLE>
-8-
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
SCHEDULE VI-ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
(In thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Column A Column B Column D Column E Column F* Column G Column H
Additions
Balance At Charged To Cumulative Balance
Beginning Costs And Translation At End
Description Of Period Expenses Retirements Transfers Adjustment Of Period
Year ended August 31, 1994:
Land
improvements $ 10,854 $ 2,128 $ 954 $ 56 $ (426) $ 11,658
Buildings 96,897 10,809 1,921 235 1,105 107,125
Machinery and
equipment 244,438 47,174 18,672 (35) 56 272,961
$352,189 $60,111 $21,547 $ 256 $ 735 $391,744
Year ended August 31, 1993:
Land
improvements $ 10,282 $ 1,404 $ 673 $ - - $ (159) $ 10,854
Buildings 90,796 9,690 1,759 (250) (1,580) 96,897
Machinery and
equipment 225,452 40,926 16,690 250 (5,500) 244,438
$326,530 $52,020 $19,122 $ - - $(7,239) $352,189
Year ended August 31, 1992:
Land
improvements $ 8,706 $ 1,621 $ 146 $ - - $ 101 $ 10,282
Buildings 79,917 12,253 1,642 16 252 90,796
Machinery and
equipment 200,117 37,870 13,919 (16) 1,400 225,452
$288,740 $51,744 $15,707 $ - - $ 1,753 $326,530
*Column F includes the net change in accumulated depreciation of property and equipment
resulting from the change in year end of the Company's international subsidiaries for the
year ended August 31, 1994.
</TABLE>
-9-
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
SCHEDULE VII-GUARANTEES OF SECURITIES OF OTHER ISSUERS
August 31, 1994
(In thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E Column F Column G
Amount owned Nature of any default
Name of issuer by person or Amount in by issuer of securities
of securities Title of each Total amount persons for treasury of guaranteed in principal,
guaranteed by class of guaranteed which state- issuer of interest, sinking fund
person for which securities and ment is securities Nature of or redemption provisions,
statement is filed guaranteed outstanding filed guaranteed guarantee or payment of dividends
Bankers Trust Letter of $ 23,000 - - - - Principal None
Company (debtor- Credit and interest
Village Court
Associates)
</TABLE>
-10-
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
SCHEDULE VIII-VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E
Additions
Balance At Charged To Balance
Beginning Costs And Deductions At End
Description Of Period Expenses (Recoveries)* Of Period
Allowance for Doubtful Accounts:
Year ended August 31, 1994 $18,573 $ 5,249 $ 3,267 $20,555
Year ended August 31, 1993 $24,771 $ 7,455 $13,653 $18,573
Year ended August 31, 1992 $24,041 $16,145 $15,415 $24,771
*Represents accounts charged off as uncollectible, net of recoveries of bad debts.
</TABLE>
-11-
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
SCHEDULE IX-SHORT-TERM BORROWINGS
(In thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
Maximum Average Weighted
Weighted Amount Amount Average
Balance At Average Outstanding Outstanding Interest Rate
Category of Aggregate End Interest During During During
Short-Term Borrowings Of Period Rate The Period The Period The Period
(A) (B) (C)
Year ended August 31, 1994:
Commercial paper $ - - - - $124,050 $ 26,679 3.33%
Banks 13,988 14.39% 40,088 36,532 11.14%
$13,988 $164,138 $ 63,211
Year ended August 31, 1993:
Commercial paper $ - - - - $190,037 $ 43,653 3.45%
Banks 64,029 10.61% 64,567 45,483 15.81%
$64,029 $254,604 $ 89,136
Year ended August 31, 1992:
Commercial paper $ - - - - $203,455 $ 6,417 5.14%
Banks 89,960 8.38% 49,400 47,141 3.83%
$89,960 $252,855 $103,558
(A) Domestic borrowings were entirely in commercial paper while all bank
notes were from foreign sources.
(B) Average amounts outstanding during the periods for commercial paper and
bank notes were computed on daily balances outstanding and month-end
balances outstanding, respectively.
(C) Weighted average interest rates during the periods were computed using
the weighted average of the outstanding balances during the year, without
giving effect to the compensating balances.
</TABLE>
-12-
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
SCHEDULE X-SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In thousands)
<TABLE>
<S> <C> <C> <C>
Column A Column B
Charged to Costs and Expenses
Item Year Ended August 31,
1994 1993 1992
Advertising costs $21,902 $22,580 $17,786
During the years ended August 31, 1994, 1993, and 1992, the Company did not have any material
amounts of maintenance and repairs, amortization of intangibles or other assets, taxes other
than payroll and income taxes, or royalties.
</TABLE>
-13-
<PAGE>
INDEX
Exhibits to Annual Report on Form 10-K
Year Ended August 31, 1994
PIONEER HI-BRED INTERNATIONAL, INC.
Page
Exhibit 11--Statement re: Computation of earnings per share 15
Exhibit 13--Annual Report to Shareholders for the fiscal year
ended August 31, 1994
Description of the Company's business incorporated by reference 16-17
Net sales and operating profit by product statement incorporated
by reference 18
Description of properties incorporated by reference 19
Market for the Registrant's common stock incorporated by reference 20
Selected financial data incorporated by reference 21
Management's discussion and analysis of financial condition and
results of operations incorporated by reference 22-36
Consolidated financial statements of the Registrant, together
with the report thereon incorporated by reference 37-51
Exhibit 21--Subsidiaries of Registrant 52-54
Exhibit 27--Financial data schedule 55
-14-
<PAGE>
<TABLE>
EXHIBIT 11
PIONEER HI-BRED INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Years Ended August 31,
1994 1993 1992 1991 1990
Number of shares of common
stock outstanding at
beginning of the period 89,442 90,274 90,829 92,772 94,713
Weighted average number of
shares of common stock
issued during the period 90 148 52 111 147
Weighted average number of
shares of common stock
purchased for the treasury
during the period (884) (308) (92) (1,992) (1,371)
Weighted average number of
shares of common stock
outstanding during the
period 88,648 90,114 90,789 90,891 93,489
Income before cumulative
effect of changes in
accounting principles $212,664 $137,453 $152,160 $104,177 $72,652
Income before cumulative
effect of changes in
accounting principles
per common share $ 2.40 $ 1.53 $ 1.68 $ 1.15 $ .78
Net income $212,664 $120,484 $152,160 $104,177 $72,652
Earnings per common share $ 2.40 $ 1.34 $ 1.68 $ 1.15 $ .78
The common stock equivalents have not entered into the earnings per share computations
because they would not have a dilutive effect.
</TABLE>
-15-
<PAGE>
EXHIBIT 13
The Company's Business
Pioneer Hi-Bred's business is the broad application of the science of
genetics. Pioneer was founded in 1926 to apply newly discovered genetic
techniques to hybridize corn. Today, the Company develops, produces, and
markets hybrids of corn, sorghum, sunflower, and vegetables and
varieties of soybean, alfalfa, wheat, and canola.
Hybrids, crosses of two or more unrelated inbred lines, can be
reproduced only by crossing the original parent lines. Thus, a grower
must purchase new seed each year to obtain the original hybrid.
Varietal crops, such as soybeans and wheat, will reproduce themselves
with little or no genetic variation. Growers can save grain from the
previous crop for planting. However, growers are becoming increasingly
aware of the advantages of purchasing "new" seed every year, although in
times of cash-flow crisis, they may tend to forgo those advantages.
Pioneer maintains the ownership of and controls the use of inbreds and
varieties through patents and the Plant Variety Protection Act of 1970.
Within the United States, this essentially prohibits other parties from
selling seed made from those inbreds and varieties until such protection
expires, usually well after the useful life of the seed. Outside of the
United States, the level of protection afforded varies from country to
country according to local law and international agreement. The Company
believes it is vital that the products developed by its research
programs remain proprietary. They must remain so in order to provide the
economic return necessary to support continued research and product
development and to generate an adequate return to its shareholders.
Pioneer also applies the science of genetics to the development of
microorganisms useful in crop and livestock production. The Company has
also established a business group to develop and market a range of
products and services designed to enhance the value of its core
products.
The Company's principal products are hybrid seed corn and soybean seed
which have accounted for approximately 89 percent of total net sales and
substantially 100 percent of operating profits over the last five years.
These products are expected to continue to play a dominant role in the
Company's results of operations for the foreseeable future.
The Company also sells various other products which provide the sales
organization with a full line of products to offer customers. The
contribution margin on sales of these products covers fixed costs which
would not disappear if the product lines were eliminated.
Approximately 73 percent of total 1994 sales were made within the United
States and Canada (the North America region) and 16 percent in Europe.
Our goal within developing nations is to aid the development of the
existing seed market and establish a business that can grow and prosper
as these economies develop.
Two significant factors determining the volume of seed sold and the
related profit are government policies and weather. Government policies
affect, among other things, crop acreage and commodity prices. Weather
can affect commodity prices, the Company's seed field yields, and
planting decisions made by farmers. Compared to hybrid seed, sales and
profits from non-hybrid seed are more heavily dependent on commodity
prices and face competition from farmer-saved seed. As a result, the
margins are narrower and contributions are subject to year-to-year
fluctuations.
-16-
<PAGE>
In North America, the majority of Pioneer(R) brand seed is marketed
through independent sales representatives, most of whom are also
farmers. In areas outside of the traditional Corn Belt, seed products
are often marketed through dealers and distributors who handle other
agricultural supplies. Pioneer products are marketed outside North
America through a network of subsidiaries, joint ventures, and
independent producer-distributors.
The hybrid seed corn industry is characterized by intense competition.
In 1994, Pioneer seed corn held an estimated market share of 44.9
percent in North America. The next six competitors held an estimated
combined market share of 25.1 percent with the closest competitor
holding approximately 8.5 percent. The remainder of the market is
divided among more than 300 companies selling regionally. The Company's
1994 purchased soybean seed market share is estimated at 16.4 percent,
placing it above the closest competitor's estimated 9.8 percent market
share.
Pioneer is the leading brand of hybrid seed corn in many European
countries. In France, which has the largest European market for seed
corn, Pioneer holds about a 27 percent market share. In Germany,
Hungary, Italy, and Austria, Pioneer has market shares of approximately
12, 41, 61, and 48 percent, respectively. In addition, Pioneer has seed
corn market shares of approximately 40 percent in Mexico and 14 percent
in Brazil.
Competition in the seed industry is based primarily on price and product
performance. The Company's objective is to produce products which
consistently out-perform the competition and so command a premium price.
The Company has been successful competing on that basis and expects to
continue to do so through its on-going investment in research and
development of proprietary products. The future success of the Company
depends heavily on the results of these research activities. Continued
improvement in the performance of the Company's products is necessary to
maintain profit margins and market share.
The Company's research and product development activities are directed
at products with significant market potentials. Pioneer believes it
possesses the largest single proprietary pool of germplasm in the world
from which to develop new hybrid and varietal seed products. The
majority of the Company's seed research is done through classical plant
breeding techniques. However, the use of biotechnology is expected to
have a significant impact on future results, both for Pioneer and the
seed industry at large. The Company's application of biotechnology is
focused on planned plant transformation as opposed to an experimental
approach where the objective is to achieve a major breakthrough largely
by chance.
In the production of its commercial seed, the Company generally provides
the parent seed stock, detasseling and rogueing labor, and certain other
production inputs. The balance of the labor, equipment, and inputs are
supplied by independent growers. The Company believes the availability
of growers, parent stock, and other inputs necessary to produce its
commercial seed is adequate for planned production levels.
The Company's Microbial Genetics Division produces and distributes
inoculants for silage, hay, and other forages, and direct-fed microbial
products for livestock. This business unit is focused on the research
and development of products containing naturally occurring
microorganisms. Microbial-based products are expected to continue to
have an important role in the Company's business as their use in
agriculture expands.
At August 31, 1994, the Company employed approximately 4,800 people
worldwide.
Because the seed business is highly seasonal, the Company's interim
results will not necessarily indicate the results for the full year.
Substantially all seed sales are made from late second quarter through
the end of the third quarter (December 1 through May 31) of the fiscal
year. Typically, the Company operates at a loss during the first and
fourth quarters. Varying climatic conditions can change the earnings
pattern between quarters. These conditions affect the delivery of seed
and can cause a shift in sales between quarters.
-17-
<PAGE>
<TABLE>
EXHIBIT 13
Consolidated Net Sales and Operating Profit (Loss) by Product
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Years Ended August 31, 1994 % 1993 % 1992 % 1991 % 1990 %
NET SALES:
Corn $ 1,185,349 80.2 $ 1,077,310 80.2 $ 1,012,841 80.3 $ 900,468 80.0 $ 761,239 78.9
Soybeans 127,468 8.6 116,553 8.7 109,408 8.7 105,306 9.4 94,039 9.8
Other 165,874 11.2 149,574 11.1 139,556 11.0 119,128 10.6 109,175 11.3
Total Net Sales $ 1,478,691 100.0 $ 1,343,437 100.0 $ 1,261,805 100.0 $1,124,902 100.0 $ 964,453 100.0
OPERATING PROFIT (LOSS):
Corn $ 383,447 32.3 $ 354,493 32.9 $ 316,826 31.3 $ 257,761 28.6 $ 194,070 25.5
Soybeans 7,508 5.9 7,329 6.3 7,571 6.9 1,577 1.5 779 0.1
Other (21,063)(12.7) (23,995)(16.0) (29,753)(21.3) (20,899)(17.5) (19,649)(18.0)
Restructuring and
Settlements 44,553 3.0 (53,585) (4.0) - - - - - - - - - - - -
Product Line Operating
Profit $ 414,445 28.0 $ 284,242 21.1 $ 294,644 23.3 $ 238,439 21.2 $ 175,200 8.2
Indirect General and
Administrative
Expense (68,194) (4.6) (59,058) (4.4) (51,688) (4.1) (49,983) (4.4) (43,323) (4.5)
Operating Income $ 346,251 23.4 $ 225,184 16.7 $ 242,956 19.2 $ 188,456 16.8 $ 131,877 13.7
Financial Income
(Expense) 2,391 0.2 (5,608) (0.4) (2,879) (0.2) (18,872) (1.7) (9,182) (1.0)
Income Before Items
Shown Below $ 348,642 23.6 $ 219,576 16.3 $ 240,077 19.0 $ 169,584 15.1 $ 122,695 12.7
Income Taxes (134,197) (9.1) (85,798) (6.4) (86,580) (6.9) (64,122) (5.7) (49,957) (5.2)
Minority Interest and
Other (1,781) (0.1) 3,675 (0.3) (1,337) (0.0) (1,285) (0.1) (86) (0.0)
Income Before Cumulative
Effect of Accounting
Change $ 212,664 14.4 $ 137,453 10.2 $ 152,160 12.1 $ 104,177 9.3 $ 72,652 7.5
Cumulative Effect
of Accounting
Change, Net - - - - (16,969) (1.2) - - - - - - - - - - - -
NET INCOME $ 212,664 14.4 $ 120,484 9.0 $ 152,160 12.1 $ 104,177 9.3 $ 72,652 7.5
Income Per Common Share:
Income Before
Cumulative Effect
of Accounting
Change $ 2.40 $ 1.53 $ 1.68 $ 1.15 $ .78
Cumulative Effect
Of Accounting
Change, Net - - (.19) - - - - - -
Net Income $ 2.40 $ 1.34 $ 1.68 $ 1.15 $ .78
Average Shares
Outstanding 88,648 90,114 90,789 90,891 93,489
(In North America, finance and human resource costs previously charged to corn operating
profit were reclassified to indirect general and administrative expense for the years 1990
through 1993 to be consistent with 1994's classification of those costs.)
</TABLE>
-18-
<PAGE>
EXHIBIT 13
Properties
Pioneer owns 24 commercial seed corn conditioning plants in North
America. These plants are located in Florida (1), Illinois (4), Indiana
(5), Iowa (8), Michigan (1), Nebraska (2), Texas (1), and Ontario,
Canada (2).
Seed corn, unlike commercial corn, must be harvested and dried before
freezing temperatures can limit germination potential. Because of this,
seed drying capacity is a critical factor. The dryers at the North
American plants have a total capacity of 2.0 million bushels and,
depending on factors such as seed moisture content, can be filled 11
times before fall weather presents a significant freeze risk.
At normal capacity, the husking and sorting units at the North American
plants can handle 57,940 bushels of ear corn per hour. In total, these
plants have the capacity to condition 15,100 units per hour. In a normal
year, seed conditioning is completed by early February. These plants
have the facilities to store 10.2 million bushels of bulk seed and 15.9
million units of bagged seed corn, including cold storage for 6.8
million units.
In North America, conditioning of other commercial Pioneer(R) brand seed
is performed at a total of 17 plants, six of which also condition corn.
Pioneer also owns interests in commercial production plants in 24
countries outside North America. Parent seed is conditioned at nine
locations in North America and at ten locations outside North America.
One of these facilities also conditions commercial Pioneer seed.
The Company's plant breeders conduct research at 50 stations in the U.S.
and Canada. Eight of these stations conduct research on more than one
crop. There are 30 stations which conduct research on corn and 20 which
conduct research on other seeds. In addition to these research efforts,
Pioneer conducts seed research at 49 locations throughout the rest of
the world.
Approximately 261,000 square feet of laboratory, greenhouse, and office
space located in Johnston, Iowa are also devoted to plant breeding,
biotechnology, and microbial product research. In 1995, ten additional
laboratories are planned for completion within the Johnston research
complex.
Additional research and production facilities for microbial products are
located at Company-owned properties in Durant, Iowa and Buxtehude,
Germany. A livestock nutrition center located in Sheldahl, Iowa is also
scheduled for completion in early fiscal 1995.
Pioneer also owns 3,164 acres of ranch and farmland in the United
States. Of this, 450 acres located in Johnston, Iowa are under
development. As properties are developed, they are either sold or
retained as equity projects.
Company properties, substantially all of which are owned, were subject
to aggregate encumbrances of $1 million on August 31, 1994. The Company
believes that all properties, including machinery, equipment, and
vehicles, are well maintained and suitable for their intended uses and
are adequately insured.
-19-
<PAGE>
EXHIBIT 13
Market for the Company's Common Stock and Related Security Holder
Matters
The Company's stock is traded on the National Association of Securities
Dealers National Market System. The range of closing prices for these
shares for the past two fiscal years, as reported by the National
Association of Securities Dealers, follows below:
<TABLE>
<S> <C> <C> <C> <C>
Fiscal 1994 Fiscal 1993
Quarter: High Low High Low
First 38 31 3/4 30 1/4 22 7/8
Second 39 3/4 35 1/4 27 3/4 25
Third 37 1/2 32 1/4 28 1/2 24 1/4
Fourth 35 3/4 29 3/4 33 24 7/8
</TABLE>
On August 31, 1994, there were approximately 3,500 accounts representing
approximately 20,000 shareholders of the Company's 86,214,489
outstanding shares.
<TABLE>
<S> <C> <C>
Cash Dividends Per Share 1994 1993
Quarter:
First $.14 $.12
Second $.14 $.12
Third $.14 $.12
Fourth $.17 $.14
</TABLE>
The stock of the Company became publicly traded in 1973 and quarterly
dividends have been paid continuously since that time. It is anticipated
that dividends will continue to be paid in the future. The Company's
stock is included in the Standard & Poor's Composite Stock Price Index.
-20-
<PAGE>
<TABLE>
EXHIBIT 13
Selected Financial Data
Consolidated Five-Year Financial History
(In thousands, except per share and statistical amounts)
<S> <C> <C> <C> <C> <C>
Years Ended August 31, 1994 1993 1992 1991 1990
Summary Operations:
Net Sales $ 1,478,691 $ 1,343,437 $ 1,261,805 $ 1,124,902 $ 964,453
Gross Profit $ 758,985 $ 700,267 $ 640,187 $ 549,308 $ 441,565
Restructuring and
Settlements $ 44,553 $ (53,585) $ - - $ - - $ - -
Income Before Taxes $ 346,861 $ 223,251 $ 238,740 $ 168,299 $ 122,609
Income Taxes (134,197) (85,798) (86,580) (64,122) (49,957)
Income Before Cumulative
Effect of Accounting
Change $ 212,664 $ 137,453 $ 152,160 $ 104,177 $ 72,652
Cumulative Effect of
Accounting Change, Net - - (16,969) - - - - - -
Net Income $ 212,664 $ 120,484 $ 152,160 $ 104,177 $ 72,652
Balance Sheet Summary:
Current Assets $ 742,301 $ 716,982 $ 702,862 $ 605,453 $ 538,405
Current Liabilities 232,016 261,113 285,793 294,532 293,948
Working Capital $ 510,285 $ 455,869 $ 417,069 $ 310,921 $ 244,457
Add:
Property & Other
Assets $ 902,863 $ 856,571 $ 839,604 $ 768,949 $ 720,750
Accumulated Depreciation 391,744 352,189 326,530 288,740 253,163
Net Property & Other
Assets $ 511,119 $ 504,382 $ 513,074 $ 480,209 $ 467,587
Less:
Long-Term Liabilities $ 133,117 $ 128,714 $ 119,008 $ 104,520 $ 58,580
Minority Interest in
Subsidiaries 7,237 6,098 11,637 5,919 4,411
$ 140,354 $ 134,812 $ 130,645 $ 110,439 $62,991
Shareholders' Equity $ 881,050 $ 825,439 $ 799,498 $ 680,691 $ 649,053
Total Assets $ 1,253,420 $ 1,221,364 $ 1,215,936 $ 1,085,662 $ 1,005,992
Dividends Declared $ 52,351 $ 45,049 $ 36,303 $ 35,197 $ 36,139
Average Shares Outstanding 88,648 90,114 90,789 90,891 93,489
Dollars Per Share:
Net Income $ 2.40 $ 1.34 $ 1.68 $ 1.15 $ .78
Income Before Cumulative
Effect of Accounting
Change $ 2.40 $ 1.53 $ 1.68 $ 1.15 $ .78
Dividends Declared $ .59 $ .50 $ .40 $ .39 $ .39
Shareholders' Equity $ 10.22 $ 9.23 $ 8.86 $ 7.51 $ 7.00
Other Statistics:
Gross Profit on Net Sales 51.3% 52.1% 50.7% 48.8% 45.8%
Return on Net Sales* 14.4% 10.2% 12.1% 9.3% 7.5%
Return on Ending Assets* 17.0% 11.2% 12.5% 9.6% 7.2%
Return on Ending Equity* 24.1% 16.7% 19.0% 15.3% 11.2%
Return on Average Equity* 24.9% 16.9% 20.6% 15.7% 11.4%
Dividends Declared as a %
of Net Income 24.6% 37.4% 23.9% 33.8% 49.7%
Number of Employees 4,847 4,807 5,016 4,829 4,601
*Based on income before cumulative effect of accounting change
</TABLE>
-21-
<PAGE>
EXHIBIT 13
Management's Discussion and Analysis of Financial Condition and Results
of Operations
<TABLE>
Sales by Region - 1994
(dollars in millions)
<S> <C> <C> <C> <C>
Corn Soybeans Other Total
North America $845.7 $124.3 $107.4 $1077.4
Europe $211.3 $ 2.9 $ 27.7 $ 241.9
Other Regions $128.4 $ .3 $ 30.7 $ 159.4
</TABLE>
<TABLE>
Earnings per Share Excluding Unusual Items
<S> <C>
1990 $ .78
1991 $1.15
1992 $1.68
1993 $1.83
1994 $2.11
</TABLE>
<TABLE>
Return on Ending Equity Excluding Unusual Items
<S> <C>
1990 11.2%
1991 15.3%
1992 19.0%
1993 19.1%
1994 21.2%
</TABLE>
<TABLE>
Return on Ending Assets and Return on Ending Equity
<S> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994
Return on Ending Assets 7.2% 9.6% 12.5% 11.2% 17.0%
Return on Ending Equity 11.2% 15.3% 19.0% 16.7% 24.1%
</TABLE>
-22-
<PAGE>
<TABLE>
North American Market Share
<S> <C>
1990 35.6%
1991 36.9%
1992 39.6%
1993 42.7%
1994 44.9%
</TABLE>
<TABLE>
Cash and Cash Equivalents by Country
(dollars in millions)
<S> <C>
U.S. $ 72.6
Brazil $ 14.9
Canada $ 11.7
Spain $ 8.1
Austria $ 7.0
Other $ 21.2
$ 135.5
</TABLE>
<TABLE>
Net Income and Annual Dividends
(dollars in millions)
<S> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994
Net Income $72.6 $104.2 $152.2 $120.5 $212.7
Dividends $36.1 $ 35.2 $ 36.3 $ 45.0 $ 52.4
</TABLE>
<TABLE>
Research and Product Development
(dollars in millions)
<S> <C>
1990 $ 72.6
1991 $ 78.5
1992 $ 92.2
1993 $ 105.2
1994 $ 113.7
</TABLE>
<TABLE>
Available Domestic Lines of Credit - 1994
(dollars in millions)
<S> <C> <C> <C> <C>
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Revolving $100 $100 $50 $50
Seasonal $ 75 $ 99 $ 0 $ 0
</TABLE>
-23-
<PAGE>
<TABLE>
Available Domestic Lines of Credit - 1995
(dollars in millions)
<S> <C> <C> <C> <C>
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Revolving $100 $100 $50 $50
Seasonal $ 24 $ 48 $ 0 $ 0
</TABLE>
<TABLE>
Short-term Borrowing Levels
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
1992 $119 $168 $226 $253 $239 $147 $57 $45 $48 $41 $37 $91
1993 $108 $179 $226 $254 $255 $ 98 $60 $61 $56 $44 $45 $61
1994 $ 82 $124 $157 $164 $163 $ 48 $45 $36 $29 $20 $15 $14
</TABLE>
-24-
<PAGE>
Results of Operations
Year Ended August 31, 1994, Compared to the Year Ended August 31, 1993
The Company achieved outstanding financial results in 1994, posting
record earnings and realizing a return on ending equity (ROE) in excess
of 20 percent. After-tax earnings were $212.7 million on sales of $1.479
billion, compared to 1993 earnings of $120.5 million on sales of $1.343
billion. That translates to earnings of $2.40 per share, a 79 percent
increase over 1993 earnings of $1.34 per share.
While a significant portion of this improvement is the result of higher
operating profits, each year was impacted by unusual events. Earnings in
1993 were reduced $.49 per share by unusual items. A restructuring of
the Company's business in Africa and the Middle East and a one-time
charge for retiree health benefit costs reduced 1993 earnings. This
reduction was partially offset by the collection of previously reserved
receivables. Excluding the net effect of these items, 1993 earnings
would have been $1.83 per share.
Earnings in l994 were positively affected by the settlement of a lawsuit
involving Holden Foundation Seeds, Inc., partially offset by additional
restructuring reserves. The net effect of these unusual events was to
increase pre-tax earnings $44.6 million, or $.29 per share after tax.
Without the net benefit of these items, 1994 earnings would have been
$2.11 per share, a 15 percent increase over 1993 adjusted earnings of
$1.83 per share.
The leading driver of the 15 percent profit improvement in 1994 was an
increase in the sales of Pioneer(R) brand hybrid seed corn. In North
America, more corn acres were planted in 1994 than a year earlier and a
higher percentage of those acres were planted with Pioneer(R) brand
products. Pioneer products continued to perform extremely well against
the competition in 1993 and intensive marketing and sales programs
effectively delivered that message to customers.
Financial results in West and Central Europe were comparable to those
reported for 1993. Operations in Hungary and Spain showed improvement,
largely due to lower inventory reserves. However, the strengthening of
the U.S. dollar against the Italian lira offset nearly half of these
gains in operating profits.
Elsewhere, Mexico operating results improved modestly while operating
profits in Central and South America nearly doubled over 1993.
Four years ago, management set a goal of reaching 20 percent ROE by
1995. ROE for 1994 reached 21.2 percent compared to 19.1 percent in
1993 when adjusted for the unusual events. Including the net effects of
those events, ROE reached 24.1 percent in 1994 and 16.7 percent in 1993.
The following factors contributed to the achievement of the ROE goal in
1994, and will be critical to the Company's ability to achieve its
profitability and growth goals in the years to come:
- - - Developing and producing high-quality low-cost products with
substantial performance advantages. Superior products that can
be produced at relatively low costs are essential to generating
the margins necessary to achieve targeted returns and fund growth.
- - - Aggressively positioning new products in the marketplace. The
ability to demonstrate the advantages of Pioneer products and
rapidly create demand should accelerate the return on our
investment in research and product development and maximize
product line margins and profitability.
-25-
<PAGE>
- - - Effectively managing product life cycle. Selecting products for
development which maximize product line performance in the
marketplace is key to the Company's ongoing success. Accurately
predicting the timing of new product introductions, unit sales
volumes, and related product retirements will reduce inventory
discard and obsolescence and improve return on investment
by allowing the business to operate at lower inventory levels.
- - - Effectively utilizing assets and managing fixed costs. Limiting
investments in assets which provide adequate returns and funding
programs and value-added activities which best support the
Company's business strategies should increase the amount of revenue
that flows to the bottom line.
Looking forward to 1995, continued effective performance in the above
key areas is expected to generate another increase in operating results.
The Company believes it can increase its seed corn market share again in
1995. Despite projections of decreased corn acreage in North America,
management believes unit sales of the Company's seed corn could be close
to the record levels of 1994. The Company expects an increase in North
America seed corn margins due to an increase in average sales price and
lower cost of sales.
In Europe overall, management expects 1995 results to be comparable to
those of 1994. It is too early for new product introductions and changes
being made to the distribution system to have much positive impact on
operations in France. Acreage reductions, due to Common Agricultural
Policy (CAP) programs, are expected to continue to put downward pressure
on corn acreage in Italy and France.
Results from Mexican operations are expected to fall under those of 1994
due to a reduction in corn acreage. Results in Central and South America
and Asia have been encouraging and are expected to show continued
growth.
Results in any given year can be significantly affected by weather,
government policies, and other conditions beyond the Company's control.
Therefore, year-to-year fluctuations can be expected.
Hybrid Seed Corn
<TABLE>
CORN NET SALES AND OPERATING PROFIT
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Increase Increase
1994 (Decrease) 1993 (Decrease) 1992
NET SALES:
North America $ 845,709 $ 108,432 14.7 % $ 737,277 $ 21,827 3.1 % $ 715,450
Europe 211,255 (22,694) (9.7)% 233,949 17,376 8.0 % 216,573
Other regions 128,385 22,301 21.0 % 106,084 25,266 31.3 % 80,818
Total net sales $1,185,349 $ 108,039 10.0 % $1,077,310 $ 64,469 6.4 % $1,012,841
OPERATING PROFIT:
North America $ 277,002 $ 24,295 9.6 % $ 252,707 $ 19,034 8.1 % $ 233,673
Europe 67,363 (10,027)(13.0)% 77,390 10,829 16.3 % 66,561
Other regions 39,082 14,686 60.2 % 24,396 7,804 47.0 % 16,592
Total operating
profit $ 383,447 $ 28,954 8.2 % $ 354,493 $ 37,667 11.8 % $ 316,826
North America
Acres 81,755 5,499 7.2 % 76,256 (6,270)(7.6)% 82,526
Unit Sales
(80,000-kernel
units) 11,762 1,405 13.6 % 10,357 127 1.2 % 10,230
</TABLE>
-26-
<PAGE>
North America
Operations in North America (U.S. and Canada) accounted for most of the
1994 improvement in annual worldwide seed corn operating results. All of
the primary factors affecting seed corn sales - planted corn acreage,
market share, and seed price - positively affected 1994 operating
profit.
Units delivered reached record levels for the fourth year in a row as
current year sales improved $108.4 million, or 14.7 percent, over the
prior year. The 13.6 percent increase in delivered units accounted for
$101 million of the sales improvement and $52 million of the operating
profit improvement. An increase in the average sales price accounted for
the remaining improvement in sales.
A change in the U.S. farm program for 1994 spurred a 7.2 percent
increase in acres planted to corn in North America. The Company's
ability to capitalize on this increase in acres was responsible for
approximately $56 million of the sales increase, or approximately
750,000 units, based on 1993 market share and the assumption that an
80,000-kernel unit of seed corn plants an average of 3.2 acres.
Management estimates the Company posted a market share gain of
approximately two percentage points in 1994 - the result of hard-
working, dedicated sales representatives and employees producing and
selling a high-quality lineup of products and services. The market share
improvement represents approximately $40 million of the seed corn sales
improvement, or approximately 550,000 units.
The average sales price of Pioneer(R) brand seed corn within North
America increased one percent which improved 1994 operating results $7.4
million. This improvement was the result of an increase in the list
price of the Company's top-performing hybrids and a shift by customers
to higher-priced, higher-performing hybrids - hybrids which are more
profitable to the grower and to Pioneer.
Higher per-unit cost of sales reduced 1994 operating profit $17.1
million. Below average seed field yields, resulting from poor weather in
the spring and summer of 1993, and higher commodity costs increased the
per-unit cost of the 1993 crop. Lower provisions for inventory losses
partially offset the impact of higher seed costs. Provisions for
inventory reserves totaled $11 million in 1994 compared to $19 million
in 1993.
Research expenses for corn increased $3.4 million, or seven percent,
from 1993 levels. Planned growth in field testing and winter nursery
costs and additional costs related to technology acquisitions account
for most of the increase.
The Company's commitment to research continues to provide customers with
hybrids that out-perform the competition. For 1994, this investment
resulted in the introduction of eight new premium-priced grain hybrids
which out-yielded competitors by an average of 10.5 bushels per acre in
1993 on-farm trials. Also introduced in 1994 were three new waxy hybrids
and two elite herbicide-resistant hybrids. The release of these new
hybrids continues the steady flow of value-added hybrids into a product
lineup which consistently offers customers significant productivity
advantages over the competition.
Sales of the exceptional hybrid Pioneer 3394 reached 2.7 million units
in 1994, 23 percent of the Company's total North American seed corn unit
sales. This hybrid, for which significant sales began in 1991, has
exceeded the average yield of competing hybrids by up to 12 bushels per
acre over the past three years.
Fixed selling and general and administrative expenses for seed corn in
North America increased $13 million, a 14 percent increase from the
prior year. The major components of this increase were higher
compensation costs due to merit increases and additional sales personnel
to support the growth in the business, along with additional employee
related costs and increased marketing efforts. Variable selling costs
for seed corn (commission and shipping costs) as a percentage of sales
were comparable to the prior year.
-27-
<PAGE>
Europe
<TABLE>
EUROPEAN CORN NET SALES AND OPERATING PROFIT
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Increase Increase
1994 (Decrease) 1993 (Decrease) 1992
NET SALES:
Italy $ 72,552 $ (8,348) (10.3)% $ 80,900 $ (8,474) (9.5)% $ 89,374
France 27,336 (7,973) (22.6)% 35,309 (15) - - % 35,324
Germany 26,731 (1,780) (6.2)% 28,511 37 - - % 28,474
Hungary 20,177 1,884 10.3 % 18,293 15,785 629.3 % 2,508
Austria 17,066 (364) (2.1)% 17,430 (236) (1.3)% 17,666
Spain 11,910 2,880 31.9 % 9,030 (2,975)(24.8)% 12,005
Other 35,483 (8,993) 20.2 % 44,476 13,254 42.5 % 31,222
Total net sales $ 211,255 $ (22,694) (9.7)% $ 233,949 $ 17,376 8.0 % $ 216,573
Total operating
profit $ 67,363 $ (10,027) (13.0)% $ 77,390 $ 10,829 16.3 % $ 66,561
</TABLE>
The Company's European region includes the countries in West and Central
Europe, plus, the C.I.S. (the former USSR), Turkey, and Morocco. This
combined region showed a $10 million decrease in operating profit.
Excluding the C.I.S., operating profit for the region was essentially
unchanged from 1993 levels.
C.I.S. results in 1993 included unusual sales of seed and the benefit of
collections on previously written-off accounts receivable. In Turkey, a
25 percent decline in market size together with price decreases reduced
corn operating profit by $2 million from prior year results.
Current year operating results in West and Central Europe are
approximately $2 million higher than in 1993. Inventory reserve
provisions were $2.4 million in 1994, $12.6 million less than in 1993.
In addition, increased unit sales in Hungary and Spain positively
contributed to 1994 results. The strengthening of the U.S. dollar
against the Italian lira and reduced sales and operating results in
Italy, France, and Germany offset these improvements. The reduced sales
were, in part, the result of decreased corn acreage in West and Central
Europe primarily due to CAP programs.
Revenue and operating profit in Italy decreased from a year ago
primarily due to a smaller seed corn market and a weaker lira. On a
constant dollar basis, revenues and operating results decreased $4
million and $1 million, respectively. An estimated five percent decrease
in market size was the major factor for these decreases. The devaluation
of the lira reduced reported revenues and operating results an
additional $4 million and $3 million, respectively.
In France, operating results decreased approximately $3 million from
1993. CAP programs and a decline in market share combined to
significantly reduce 1994 sales. Late in 1994, the Company initiated
changes in the supply and distribution channels in France to provide a
greater degree of control over selling and marketing strategies and
practices within the country. These changes are expected to improve the
Company's ability to aggressively position Pioneer(R) brand products and
better manage product life cycles within the French market.
Operating profits in Germany decreased approximately $2 million from the
prior year principally due to a decline in sales price. Prices were
reduced in response to lower-priced seed being sold into Germany from
other European countries.
Hungarian operating results improved approximately $8 million from a
year ago on a $2 million increase in sales. The improvement in operating
results is largely attributable to lower inventory reserves and costs
incurred in 1993 to terminate old distribution arrangements. Unit price
increases and market share gains were the primary factors behind the
sales improvement.
-28-
<PAGE>
In 1994, operations in Spain rebounded after several years of drought to
post a $4 million improvement in operating profit over 1993. Better
weather conditions directly resulted in increased corn acreage and
higher unit sales. Lower provisions for inventory reserves of
approximately $1 million also contributed to the improvement in 1994
operating profit.
Other Regions
<TABLE>
OTHER REGIONS CORN NET SALES AND OPERATING PROFIT
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Increase Increase
1994 (Decrease) 1993 (Decrease) 1992
NET SALES:
Mexico $ 41,096 $ 3,092 8.1% $ 38,004 $ 15,579 69.5% $ 22,425
Brazil 35,998 9,316 34.9% 26,682 3,378 14.5% 23,304
Argentina 12,968 3,387 35.4% 9,581 4,082 74.2% 5,499
Other 38,323 6,506 20.4% 31,817 2,227 7.5% 29,590
Total net sales $ 128,385 $ 22,301 21.0% $ 106,084 $ 25,266 31.3% $ 80,818
Total operating
profit $ 39,082 $ 14,686 60.2% $ 24,396 $ 7,804 47.0% $ 16,592
</TABLE>
Mexico's seed corn operating profit was down slightly from 1993. Unit
sales increased on reduced acreage. However, higher provisions for
inventory reserves and increased selling costs offset the margins on
these sales.
In Central and South America, operating profits increased as a result of
higher selling prices and market share gains in Brazil and Argentina,
together with a market share gain in Chile. Operating profits in Brazil
rose approximately $5 million, and Argentina contributed nearly $3
million to the improvement in operating profits. In addition, Chile and
Argentina continue to significantly benefit the North American business
through off-season seed corn production. Off-season production supplied
796,000 80,000-kernel corn units to the Northern Hemisphere at a cost
lower than previous years. This allowed for improved margins while
supplying our customers with our highest demand products.
-29-
<PAGE>
Soybean Seed
<TABLE>
SOYBEAN NET SALES AND OPERATING PROFIT (LOSS)
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Increase Increase
1994 (Decrease) 1993 (Decrease) 1992
NET SALES:
North America $ 124,257 $ 10,858 9.6 % $ 113,399 $ 12,877 12.8 % $ 100,522
Europe 2,921 (86) (2.9)% 3,007 5,702 (65.5)% 8,709
Other regions 290 143 97.3 % 147 (30) (16.9)% 177
Total net sales $ 127,468 $ 10,915 9.4 % $ 116,553 $ 7,145 6.5 % $ 109,408
OPERATING PROFIT (LOSS):
North America $ 8,903 $ (534) (5.7)% $ 9,437 $ 2,703 40.1 % $ 6,734
Europe (1,380) 267 16.2 % (1,647) (3,300)(199.6)% 1,653
Other regions (15) 446 96.7 % (461) 355 43.5 % (816)
Total operating
profit $ 7,508 $ 179 2.4 % $ 7,329 $ (242) 3.2 % $ 7,571
North America
Acres 63,826 1,950 3.2 % 61,876 955 1.6 % 60,921
Unit sales
(50 lb. bag) 9,396 481 5.4 % 8,915 999 12.6 % 7,916
</TABLE>
Soybean seed is the Company's second largest product in terms of revenue
and operating profit. Operations in North America account for all of the
worldwide soybean seed operating profit.
In North America, an increase in the average sales price per-unit
improved operating results $4.5 million. Increased unit sales
contributed another $1 million to operating results. Higher commodity
prices increased the cost of seed produced in 1993 and in turn increased
1994 per-unit cost of goods sold. This reduced operating profits by $5.1
million. Fixed selling and general and administrative expenses for
soybean seed in North America increased $.9 million from the prior year.
Variable selling and marketing costs as a percentage of sales were
comparable between years.
Other Products
<TABLE>
OTHER PRODUCTS NET SALES, CONTRIBUTION, AND OPERATING (LOSS)
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Increase Increase
1994 (Decrease) 1993 (Decrease) 1992
NET SALES:
Alfalfa $ 32,219 $ 1,733 5.7 % $ 30,486 $ 5,187 20.5 % $ 25,299
Sorghum 22,921 (1,690)(6.9)% 24,611 (3,003) (10.9)% 27,614
Wheat 17,459 (198)(1.1)% 17,657 830 4.9 % 16,827
Sunflower 16,405 1,150 7.5 % 15,255 3,503 29.8 % 11,752
Microbial products 24,075 36 .1 % 24,039 3,576 17.5 % 20,463
Developing products 52,795 15,269 40.7 % 37,526 (75) (0.2)% 37,601
Total net sales $ 165,874 $ 16,300 10.9 % $ 149,574 $ 10,018 7.2 % $ 139,556
CONTRIBUTION:
Alfalfa $ 5,143 $ 1,402 $ 3,741 $ 7,520 $ (3,779)
Sorghum 6,427 (1,063) 7,490 (3,160) 10,650
Wheat 2,634 (740) 3,374 (632) 4,006
Sunflower (390) (862) 472 77 395
Microbial products 4,447 932 3,515 2,548 967
Developing
products (15,257) (1,418) (13,839) 198 (14,037)
Total
contribution $ 3,004 $ (1,749) $ 4,753 $ 6,551 $ (1,798)
Joint fixed costs (24,067) 4,681 (28,748) (793) (27,955)
Total operating
(loss) $ (21,063) $ 2,932 $ (23,995) $ 5,758 $ (29,753)
</TABLE>
-30-
<PAGE>
Other products sales continued to show improvement in 1994. On the
whole, these products generated positive contributions and, while they
did not cover all of the allocated costs, not all of these costs could
be eliminated in the event these products were discontinued.
These products contribute to the Company's profitability by providing
the sales organization a full line of seed products, significantly
aiding the sale of higher margin products. In addition, the Company's
investment in research for these products, totaling $29.7 million in
1994, adds to the store of genetic knowledge that can be applied across
all crops and is expected to provide future growth opportunities for
Pioneer.
Restructuring and Settlements
On July 13,1994, the U. S. Circuit Court of Appeals affirmed a prior
court's decision in the Company's lawsuit against Holden Foundation
Seeds, Inc., awarding Pioneer damages for lost profits from the
misappropriation of germplasm. In August, the Company received the
settlement plus interest totaling $52 million. The Company also incurred
$6.5 million of additional restructuring charges. The charges reflect
$3.5 million of costs incurred in 1994 to complete the divestment of the
Egyptian Edible Oil business and $3 million for other operations. The
Company believes that substantially all expenses related to the
restructuring of operations in Africa and the Middle East have been
incurred, and remaining reserves are not material.
Corporate Items
Indirect general and administrative expenses in 1994 increased $ 9.1
million, or 15 percent from 1993 levels. However, as a percent of sales
they have remained relatively flat. The major components of the increase
are compensation, information management costs, and other employee
related costs.
Indirect general and administrative expenses in 1993 increased $7.4
million, or 14 percent from 1992 levels. Additional legal expenses of
$1.5 million and increased contract services and compensation costs of
$1 million each were the most significant factors contributing to the
increase.
Net financial income totaled $2.4 million in 1994 compared to net
financial expense of $5.6 million in 1993. Higher cash receipts on
sales allowed the Company to increase investment income and reduce
interest expense. Interest expense was lowered by internal funding of
international operations.
In 1993, net financial expense increased $2.7 million. As the dollar
strengthened against foreign currencies, primarily the Italian lira,
additional net exchange losses were incurred in 1993 compared to 1992.
Partially offsetting this was higher investment income as a result of
increased cash collections on sales. Also, a $1 million gain on the
redemption of the Company's investment in preferred stock of Norand
Corporation is included in 1993 net financial expense.
The worldwide effective tax rate for 1994 was 38.5 percent compared to
39.1 percent in 1993 and 36.1 percent in 1992. The effective rate in
1994 decreased primarily due to the effect of taxes on foreign earnings.
The lower rate in 1992 was primarily the result of foreign-based tax
credits and export incentives.
-31-
<PAGE>
Other Items
During the first quarter of 1994, the Company changed the year end of
its international subsidiaries from June to August to match that of the
Company's. The effect of this change, a net loss of $.7 million, was
recorded as a reduction in retained earnings. Because of the change in
the reporting periods of the subsidiaries, a greater portion of sales
and profits are likely to be reported in the third and fourth quarters
with a corresponding decrease in sales and profits being reported in the
first and second quarters.
Year Ended August 31, 1993, Compared to the Year Ended August 31, 1992
Hybrid Seed Corn
North America
North American seed corn operating profit increased $19.0 million, or
8.1 percent, from prior year levels. Seed corn sales in North America
improved 3.1 percent over 1992 levels, and represented a major part of
the change. This was a significant accomplishment considering 1993 North
American acreage decreased 7.6 percent from a year earlier and the
Company did not raise the 1993 list prices of its top-performing
hybrids.
Record levels of unit sales were posted for the third year in a row.
Growth in 1993 seed corn market share more than offset the impact of
fewer acres planted to corn resulting in a 1.2 percent increase in unit
sales, or $9 million in sales. A focused marketing and sales force
continued to do an excellent job demonstrating the superior value of the
Company's products to its customers.
Although the Company did not raise the list prices of its top-performing
hybrids in 1993, the average sales price of seed sold in North America
increased slightly. The rise was the result of higher-priced premium
hybrids making up a larger percentage of 1993 unit sales. The increase
added $12.8 million, or $1.24 per unit, to the overall North American
seed corn sales improvement.
The Company's seed corn market share increased to 42.8 percent in 1993.
The performance advantage of Pioneer(R) brand products and a coordinated
sales and marketing effort were the driving forces behind the market
share improvement.
Lower per-unit cost of goods sold also contributed to the improved
operating results. Above-average 1992 seed field yields and lower levels
of winter production helped reduce the average per-unit cost of sales by
$2.47 or nine percent. The decrease in per-unit costs pushed operating
profit higher by approximately $25.1 million, despite increased
inventory reserve provisions taken in 1993. Provisions for inventory
losses totaled $19 million in 1993 compared to $11 million in 1992.
Research expenses for corn increased $14.4 million, or 37.5 percent from
1992 levels. Planned additional costs related to technology acquisitions
and increased winter nursery and biotechnology expenditures made up most
of the increase.
Corn selling and marketing expenses, excluding variable costs, increased
$2.1 million, or three percent from prior year levels, due to higher
customer incentives and advertising costs. Variable selling expenses
(commissions and shipping costs) as a percentage of sales were
comparable between years.
-32-
<PAGE>
Europe
Revenues in Italy decreased from prior year levels due to the impact of
the increase in the value of the dollar against the lira. The weaker
lira had the effect of reducing revenues $22.6 million. On a constant
dollar basis, revenues in Italy increased $14.1 million. This was
attributed to a two point gain in market share and an increase in acres
planted to corn of approximately eight percent. The increase in acres
planted to corn was the result of unfavorable soybean subsidies
following the Italian government's implementation of CAP and unfavorable
wheat planting conditions.
In France, 1993 corn unit sales decreased six percent primarily due to a
reduction in acres planted as a result of CAP set-aside programs. Market
share also was lower in France. Although unit sales decreased, sales
dollars remained comparable between years as a result of a change in the
mix of import sales versus service charge income received on local
production.
Spain sales decreased in 1993 as the impact of CAP and several years of
drought reduced the seed corn market. In Hungary, first year sales by a
newly formed Hungarian subsidiary added $15.8 million to the sales
improvement. Unusual sales of seed destined for the C.I.S. contributed
$15 million to the remaining increase.
Operating profit in West and Central Europe decreased $10.7 million in
1993, or 14 percent from 1992. Although first year sales in Hungary
offset sales decreases in other European countries, the same did not
hold true for operating results. Seed corn sales in Hungary produced low
margins, which is not uncommon for Central European operations, and
additional costs were incurred to start up the operation. An increase in
provisions for seed corn inventory reserves also contributed to the
decrease in European operating results. These totaled $15 million in
1993 compared to $8.4 million in 1992.
The improvement in other countries is due to recoveries of trade
accounts previously written off in the C.I.S. and margins on unusual
sales which produced 1993 operating profit of approximately $9 million.
Net bad debt recoveries reflected in corn were $4.9 million compared to
bad debt expense of $11.3 million in 1992.
Other Regions
Sales in Mexico improved sharply in 1993, as revenues increased $15.6
million to $38 million. Market share growth was the primary driver for
this improvement.
In the remaining regions, seed corn revenues totaled $68 million, an
improvement of $9.7 million, or 17 percent. Higher sales in Argentina
and Brazil resulting from unit and sales price increases are responsible
for a majority of the improvement.
Seed corn operating profit in other regions increased $7.8 million from
1992. Improved sales in Mexico resulting from additional unit sales
contributed $9.2 million to the improvement.
Soybean Seed
North America
Sales of soybean seed in North America improved $12.9 million compared
to 1992. Soybean unit sales increased 12.6 percent accounting for the
improvement. The Company's share of the 1993 purchased soybean seed
market increased .5 points, to 15.4 percent.
-33-
<PAGE>
Outstanding performance of Pioneer(R) brand soybean varieties and strong
marketing and sales programs played a big role in the market share gain
and sales growth. A shift in acreage from corn to soybeans due to wet
weather in the spring along with improved availability of key varieties
contributed to improved soybean seed sales.
Operating profit improved $2.7 million in 1993, or 40 percent, due to
increased unit sales and lower per-unit costs which are primarily driven
by soybean commodity prices.
Europe and other regions
The majority of the remaining soybean seed sales are located in Italy.
Sales in Italy decreased $5.6 million from 1992. A change in subsidies
is believed to have resulted in a shift in acreage from soybeans to
corn, reducing soybean unit sales. As a result, soybean operating profit
in Italy decreased $3.2 million compared to 1992.
Other Products
Sales of other products increased $10 million from 1992 levels. Sales
gains in the alfalfa product line as well as improved sunflower and
microbial product sales in 1993 more than offset a decrease in sorghum
sales.
Unit sales of alfalfa in North America soared in 1993 as seeding was
needed to replace alfalfa stands lost due to extensive winter kill over
the past year and prices were reduced on older varieties. The decrease
in 1993 sorghum sales is primarily due to drought conditions.
Sunflower sales were higher in 1993 mostly due to unusual sales to the
C.I.S.
Microbial product sales increased 17.5 percent from 1992 levels to post
revenue gains totaling $3.6 million. Wet weather in the fall of 1992
caused customers to produce more silage. This combined with strong
marketing efforts increased sales of plant inoculant, which represented
a majority of the total microbial product sales improvement.
Operating loss of other products was $5.8 million lower than 1992
results. Alfalfa contribution improved $7.5 million from a year earlier
principally due to a $6.4 million provision for excess alfalfa inventory
in 1992 not necessary in 1993. Microbial products improved from 1992
results posting a $3.5 million contribution on increased sales.
Partially offsetting these improvements was a $3.2 million decrease in
sorghum contribution due to the reduction in sales.
Restructuring In Africa and the Middle East
Operating results for 1993 include $53.6 million in provisions for costs
associated with restructuring operations in Africa and the Middle East.
The Company recorded reserves on accounts receivable, inventory, and
long-term assets and provided for the estimated costs of either closing
or downsizing most of the operations in this region. During 1993, it
became apparent that many of the market potentials in the region did not
justify the Company's level of investment. As a result, the Company
restructured the operations to bring the level of investment and support
costs in line with the near-term potential of these markets. These
charges included writing off 100 percent of the Company's investment in
an Egyptian sunflower oilseed processing facility. Ongoing emphasis will
focus on key markets in Egypt, Turkey, and southern Africa with less
effort and investment made in the remainder of the region.
-34-
<PAGE>
Liquidity and Capital Resources
Due to the seasonal nature of the agricultural seed business, the
Company generates most of its cash from operations during the second and
third quarters of the fiscal year. Cash generated during this time is
used to pay the commercial paper and accounts payable which are the
Company's primary sources of credit during the first and fourth quarters
of the fiscal year. Any excess funds available are invested, primarily
in short-term commercial paper.
Historically, the Company has financed growth through earnings. Cash
provided by operating activities was $331 million in 1994, compared to
$176 million and $174 million in 1993 and 1992, respectively.
Collections on increased sales were largely responsible for the high
levels of cash provided by operating activities for all three years. In
1994, cash flow was favorably impacted by the settlement and collection
of damages on the Holden lawsuit.
Most of the Company's financing is done through the issuance of
commercial paper in the U.S., backed by revolving and seasonal lines of
credit. In addition, foreign lines of credit and direct borrowing
agreements are relied upon to support overseas financing needs.
Short-term debt at August 31, 1994, totaled $14 million, a $50 million
decrease from 1993 and $76 million lower than 1992. Record levels of
cash receipts reduced the Company's need to borrow short-term funds over
the prior years. As a result, 1994 short-term domestic investments
peaked at $326 million compared to $212 million and $160 million in 1993
and 1992, respectively.
Short-term investments are made through a limited number of reputable
institutions pre-approved by Pioneer after evaluation of investment
procedures and credit quality. Pioneer invests in only high-quality
short-term securities, primarily commercial paper. Individual securities
must meet credit quality standards, and the portfolios are monitored to
ensure diversification among issuers.
The Company believes the domestic lines of credit available in 1995 are
sufficient to meet domestic borrowing needs. The revolving line of
credit agreements expire August, 1995. Prior to expiration, borrowings
under the revolving lines can be converted to a four-year term loan at
the Company's option.
The Company also has a $100 million private medium-term note program of
which $50 million was available as of August 31, 1994. The medium-term
note matures in February, 1996.
At year end, cash and cash equivalents totaled $135 million, up from $92
million at August 31, 1993. It is the Company's objective to repatriate
funds outside the U.S. not required as operating capital or to fund
asset purchases.
Capital expenditures, including business and technology acquisitions,
were $79 million in 1994 compared to $107 million in 1993 and $90
million in 1992. There were no significant new business or technology
acquisitions in 1994. In 1993 and 1992, these acquisitions totaled $7
million and $15 million, respectively. In 1993, total expenditures
increased principally due to production capacity expansion and
additional research. Capital expenditures for 1995 are expected to
approximate $95 million, and will be funded through earnings.
Dividends paid in June of 1994 increased to $.17 per share, up 21
percent from the $.14 per share dividend paid the prior three quarters.
The Company's dividend policy is to annually pay out 40 percent of a
four-year rolling average of earnings.
During 1994, 3.3 million shares of the Company's stock were repurchased
at a total cost of $113.4 million. On June 16, 1994, the Board of
Directors authorized the repurchase of an additional five million shares
of the Company's stock. At August 31, 1994, authorized shares remaining
to be purchased totaled 3.5 million.
-35-
<PAGE>
Effects of Inflation
Inflation typically is not a major factor in the Company's operations.
The cost of seed products is largely influenced by seed field yields and
commodity prices which are not impacted by inflation. Costs normally
impacted by inflation-wages, transportation, and energy-are a relatively
small part of the total operations.
Research and Product Development
At August 31, 1994, the Company employed a total of 978 people directly
and indirectly in research and development activities. Of these, 323
scientists performed research in the agricultural seed area and eight in
microbial cultures. Of the 323 people performing research in
agricultural seeds, 87 are employed outside of North America and 101 are
scientists whose efforts are focused on biotechnology research. Total
research expenditures for 1994 were $113.7 million. Of this amount,
$19.9 million was spent on trait and technology research, primarily
biotechnology, compared to $16.4 million in 1993 and $12.6 million in
1992. During the three fiscal years ended August 31, 1994, the Company
expended the following amounts on research and product development:
<TABLE>
(In thousands)
<S> <C> <C> <C>
Years Ended August 31, 1994 1993 1992
Seed Corn $ 75,417 $ 70,436 $ 57,131
Soybean Seed 8,510 8,491 7,448
Other Products 29,740 26,263 27,592
Total $ 113,667 $ 105,190 $ 92,171
</TABLE>
Planned growth in field testing and winter nursery costs and additional
costs related to technology acquisitions made up most of the increase
from 1993. The investment in research has increased yearly since 1973,
supporting the Company's commitment to improving products through
research and product development.
-36-
<PAGE>
Independent Auditors' Report
To the Shareholders
Pioneer Hi-Bred International, Inc.
Des Moines, Iowa
We have audited the accompanying consolidated balance sheets of Pioneer
Hi-Bred International, Inc. and subsidiaries as of August 31, 1994 and
1993, and the related consolidated statements of income, shareholders'
equity, and cash flows for the years then ended. 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. The consolidated statements of
income, shareholders' equity, and cash flows of Pioneer Hi-Bred
International, Inc. and subsidiaries for the year ended August 31, 1992,
were audited by other auditors whose report thereon dated October 22,
1992, expressed an unqualified opinion on these statements.
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 1994 and 1993 consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Pioneer Hi-Bred International, Inc. and
subsidiaries as of August 31, 1994 and 1993, and the results of their
operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
As discussed in Note 5 to the consolidated financial statements, the
Company changed its method of accounting for other postretirement
benefits in 1993.
KPMG Peat Marwick LLP
Des Moines, Iowa
October 14, 1994
-37-
<PAGE>
EXHIBIT 13
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<S> <C> <C> <C>
Years Ended August 31, 1994 1993 1992
Net sales $ 1,478,691 $ 1,343,437 $ 1,261,805
Operating costs and expenses:
Cost of goods sold $ 606,039 $ 537,980 $ 529,447
Research and development 113,667 105,190 92,171
Selling 334,712 308,065 297,371
General and administrative 122,575 113,433 99,860
Restructuring and settlements (44,553) 53,585 - -
$ 1,132,440 $ 1,118,253 $ 1,018,849
Operating income $ 346,251 $ 225,184 $ 242,956
Investment income 19,084 17,137 12,423
Interest expense (11,253) (17,752) (16,509)
Net exchange gain (loss) (5,440) (4,993) 1,207
Income before items below $ 348,642 $ 219,576 $ 240,077
Provision for income taxes (134,197) (85,798) (86,580)
Minority interest and other (1,781) 3,675 (1,337)
Income before cumulative effect
of accounting change $ 212,664 $ 137,453 $ 152,160
Cumulative effect of accounting change,
net of income taxes of $10,849 - - (16,969) - -
Net income $ 212,664 $ 120,484 $ 152,160
Income per common share:
Income before cumulative effect
of accounting change $ 2.40 $ 1.53 $ 1.68
Cumulative effect of accounting
change, net - - (.19) - -
Net income $ 2.40 $ 1.34 $ 1.68
Average shares outstanding 88,648 90,114 90,789
See Notes to Consolidated Financial Statements.
</TABLE>
-38-
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<S> <C> <C> <C>
Years Ended August 31, 1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 212,664 $ 120,484 $ 152,160
Noncash items included in net income:
Depreciation 60,111 52,020 51,744
Amortization 14,762 13,050 9,880
Restructuring of operations 3,000 38,123 - -
Cumulative effect of accounting change - - 16,969 - -
Provision for doubtful accounts 5,249 7,455 16,145
Loss on disposal of assets 1,531 1,306 480
Foreign currency exchange losses 3,660 4,756 1,382
Other noncash items (7,617) (6,536) (8,263)
Change in assets and liabilities, net:
Receivables (30,720) (26,568) (4,935)
Inventories 25,525 (64,293) (11,540)
Accounts payable and accrued
expenses 23,263 15,341 (22,063)
Income taxes payable 12,292 (4,774) (8,558)
Other assets and liabilities 7,394 8,176 (2,116)
Net cash provided by operating
activities $ 331,114 $ 175,509 $ 174,316
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets $ 6,014 $ 31,843 $ 8,472
Payments received on notes receivable 8,985 12,197 11,802
Disbursements for notes receivable (6,445) (10,430) (10,946)
Capital expenditures (78,826) (99,926) (74,853)
Purchase of subsidiaries, net of cash
and cash equivalents acquired - - - - (2,763)
Other, net (7,870) (4,900) (14,324)
Net cash used in investing
activities $ (78,142) $ (71,216) $ (82,612)
CASH FLOWS FROM FINANCING ACTIVITIES
Net short-term payments $ (46,581) $ (18,988) $ (4,102)
Proceeds from long-term borrowings 3,659 1,178 5,722
Principal payments on long-term
borrowings (5,155) (7,603) (2,679)
Purchase of common stock (113,381) (25,830) (16,711)
Cash dividends paid (52,350) (45,049) (36,303)
Net cash used in financing
activities $ (213,808) $ (96,292) $ (54,073)
Effect of foreign currency exchange rate
changes on cash and cash
equivalents $ (124) $ (13,616) $ (2,419)
Effect of change in year-end of the
Company's international subsidiaries
on cash and cash equivalents $ 4,438 $ - - $ - -
Net increase (decrease) in cash
and cash equivalents $ 43,478 $ (5,615) $ 35,212
Cash and cash equivalents, beginning 91,976 97,591 62,379
CASH AND CASH EQUIVALENTS, ENDING $ 135,454 $ 91,976 $ 97,591
See Notes to Consolidated Financial Statements.
</TABLE>
-39-
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
(In thousands)
<S> <C> <C>
ASSETS August 31, 1994 1993
CURRENT ASSETS
Cash and cash equivalents $ 135,454 $ 91,976
Receivables:
Trade 160,700 160,839
Other 32,024 35,224
Inventories 358,752 382,784
Prepaid expenses 3,205 3,979
Deferred income taxes 52,166 42,180
Total current assets $ 742,301 $ 716,982
LONG-TERM ASSETS $ 38,065 $ 39,195
PROPERTY AND EQUIPMENT
Land and land improvements $ 58,822 $ 57,779
Buildings 329,831 302,797
Machinery and equipment 423,930 361,819
Construction in progress 29,540 67,454
$ 842,123 $ 789,849
Less accumulated depreciation 391,744 352,189
$ 450,379 $ 437,660
INTANGIBLES $ 22,675 $ 27,527
$1,253,420 $1,221,364
See Notes to Consolidated Financial Statements.
</TABLE>
-40-
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY August 31, 1994 1993
CURRENT LIABILITIES
Short-term borrowings $ 13,988 $ 64,029
Current maturities of long-term debt 1,199 2,250
Accounts payable, trade 79,530 79,386
Accrued compensation 54,008 42,080
Income taxes payable 31,174 17,522
Other 52,117 55,846
Total current liabilities $ 232,016 $ 261,113
LONG-TERM DEBT $ 65,569 $ 68,127
DEFERRED ITEMS, primarily income taxes
and retirement benefits $ 67,548 $ 60,587
CONTINGENCIES
MINORITY INTEREST IN SUBSIDIARIES $ 7,237 $ 6,098
SHAREHOLDERS' EQUITY
Capital stock:
Preferred, authorized 10,000,000 shares;
issued none $ - - $ - -
Common, $1 par value; authorized
150,000,000 shares; issued
92,693,578 shares 92,694 92,694
Additional paid-in capital 15,339 12,962
Retained earnings 995,044 835,466
Cumulative translation adjustment (2,836) (6,982)
$1,100,241 $ 934,140
Less:
Cost of common shares acquired for the
treasury, 1994-6,479,089 shares;
1993-3,251,225 shares (207,025) (97,078)
Unearned compensation (12,166) (11,623)
$ 881,050 $ 825,439
$1,253,420 $1,221,364
See Notes to Consolidated Financial Statements.
</TABLE>
-41-
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<S> <C> <C> <C>
Years Ended August 31, 1994 1993 1992
COMMON STOCK
Balance, beginning $ 92,694 $ 92,694 $ 32,085
Issuance of 60,608,972 shares in
connection with a three-for-one
stock split effected in the form
of a 200% stock dividend - - - - 60,609
Balance, ending $ 92,694 $ 92,694 $ 92,694
ADDITIONAL PAID-IN CAPITAL
Balance, beginning $ 12,962 $ 14,249 $ 11,492
Common stock issued from treasury for
restricted stock plan 1,356 (1,287) 2,757
Tax benefits related to restricted
stock plan 1,021 - - - -
Balance, ending $ 15,339 $ 12,962 $ 14,249
RETAINED EARNINGS
Balance, beginning $ 835,466 $ 760,031 704,783
Net income 212,664 120,484 152,160
Change in reporting period of
international subsidiaries (735) - - - -
Cash dividends on common stock (1994
$.59 per share; 1993 $.50 per share;
1992 $.40 per share) (52,351) (45,049) (36,303)
Three-for-one stock split effected in
the form of a 200% stock dividend - - - - (60,609)
Balance, ending $ 995,044 $ 835,466 $ 760,031
CUMULATIVE TRANSLATION ADJUSTMENT
Balance, beginning $ (6,982) $ 20,001 $ 3,112
Current translation adjustment 4,146 (26,983) (16,889)
Balance, ending $ (2,836) $ (6,982) $ 20,001
TREASURY STOCK
Balance, beginning $ (97,078) $ (78,978) $ (65,222)
Purchase of common stock for the
treasury (1994-3,325,200 shares;
1993-1,056,000 shares;
1992-639,000 shares) (113,381) (25,830) (16,711)
Common stock issued for restricted
stock plan, net of forfeitures
(1994-97,336 shares; 1993-223,895
shares; 1992-84,750 shares) 3,434 7,730 2,955
Balance, ending $ (207,025) $ (97,078) $ (78,978)
UNEARNED COMPENSATION
Balance, beginning $ (11,623) $ (8,499) $ (5,559)
Net additions of common stock to
restricted stock plan (4,790) (6,656) (5,712)
Amortization of unearned compensation 4,247 3,532 2,772
Balance, ending $ (12,166) $ (11,623) $ (8,499)
TOTAL SHAREHOLDERS' EQUITY AT YEAR END $ 881,050 $ 825,439 $ 799,498
See Notes to Consolidated Financial Statements.
</TABLE>
-42-
<PAGE>
Notes to Consolidated Financial Statements
Note 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business:
The Company's business is the broad application of the science of
genetics. Pioneer was founded in 1926 to apply newly-discovered
genetic techniques to hybridize corn. Today, the Company develops,
produces, and markets hybrids of corn, sorghum, sunflower, and
vegetables; varieties of soybean, alfalfa, wheat, and canola; and
microorganisms useful in crop and livestock production.
Consolidation policy:
The consolidated financial statements include the accounts of the
Company and all of its subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation.
Cash equivalents:
The Company considers all liquid investments with a maturity at
purchase of three months or less to be cash equivalents.
Receivables:
Receivables are stated net of an allowance for doubtful accounts
of $20.6 million and $18.6 million at August 31, 1994 and 1993,
respectively.
Inventories:
Inventories are valued at the lower of cost (first-in, first-out
method) or market. Gains or losses on commodity hedging
transactions are included as a component of inventory.
Property and equipment:
Property and equipment is recorded at cost, net of an allowance
for loss on plant closings of $5.0 million and $4.3 million at
August 31, 1994 and 1993, respectively. Depreciation is computed
primarily by the straight-line method over estimated service
lives, two to forty years.
Intangibles:
Intangible assets are stated at amortized cost and are being
amortized by the straight-line method over one- to twenty-year
periods, with the weighted-average amortization period
approximating 6.7 years for the year ended August 31, 1994.
Accumulated amortization of $31.2 million and $23.5 million at
August 31, 1994 and 1993, respectively, have been netted against
these assets.
Disclosures about fair value of financial instruments:
The Company estimated the fair value of its financial instruments
by discounting the expected future cash flows using the current
interest rates which would apply to each class of financial
instruments, except for foreign currency contracts for which
quotes from brokers were used.
-43-
<PAGE>
The fair value of cash equivalents, notes receivable, short-term
borrowings, and foreign currency contracts approximates carrying
value. The fair value of long-term debt is approximately $69.1
million compared to its carrying value of $66.8 million.
Basis of accounting:
Subsidiary and asset acquisitions are accounted for by the
purchase method.
Translation of foreign currencies and foreign exchange hedging:
All assets and liabilities in the balance sheets of foreign
subsidiaries whose functional currency is other than the U.S.
dollar are translated at year end exchange rates. Translation
gains and losses are not included in determining net income but
are accumulated as a separate component of shareholders' equity.
For subsidiaries considered to be operating in highly inflationary
countries and for certain other subsidiaries, the U.S. dollar is
the functional currency and translation gains and losses are
included in determining net income. Foreign currency transaction
gains and losses are included in determining net income. The
Company uses a combination of forward foreign exchange contracts
and foreign currency option contracts to hedge open foreign
denominated payables and receivables and also to hedge firm sales
and purchase commitments with its foreign subsidiaries. Realized
and unrealized gains and losses are deferred and recognized as the
related transactions are settled.
Income taxes:
Income taxes are computed in accordance with SFAS No. 109.
Deferred income taxes have been provided on temporary differences
in the financial statement and income tax bases of certain assets
and liabilities.
Deferred income taxes have not been provided on the undistributed
earnings or the cumulative translation adjustment of the foreign
subsidiaries because the Company intends to reinvest such
undistributed earnings indefinitely or to repatriate them only to
the extent that no additional income tax liability is created. The
cumulative amount of the undistributed net income and translation
adjustment of such subsidiaries is approximately $123 million at
August 31, 1994. The Company files consolidated U.S. Federal
income tax returns with its domestic subsidiaries; therefore, no
deferred income taxes have been provided on the undistributed
earnings of those subsidiaries.
Pension plans:
The Company's domestic and Canadian operations have defined
benefit pension plans covering substantially all their employees.
The plans provide benefits that are based on average monthly
earnings of the employees. The funding policy is to contribute
annually an amount to fund pension cost as actuarially determined
by an independent pension consulting firm.
Deferred executive compensation and supplemental retirement benefit
plans:
The estimated liability for the deferred executive compensation
and supplemental retirement benefit plans is being accrued over
the expected remaining years of active employment.
Restricted stock plans:
The Company amortizes as compensation costs the cost of stock
acquired for the restricted stock plans by the straight-line
method over the five-year restriction period.
-44-
<PAGE>
Note 2. INVENTORIES
<TABLE>
The composition of inventories is as follows:
(In thousands)
<S> <C> <C>
August 31, 1994 1993
Finished seed $ 164,034 $ 229,550
Unfinished seed 190,070 149,299
Supplies and other 4,648 3,935
$ 358,752 $ 382,784
</TABLE>
Unfinished seed represents the Company's cost of parent seed,
detasseling and rogueing labor, and certain other production costs
incurred by the Company to produce its seed supply. Much of the
balance of the labor, equipment, and production costs associated
with planting, growing, and harvesting the seed is supplied by
independent growers, who contract specific acreage for the
production of seed for the Company. The compensation of the
independent growers is determined based upon yield, contracted
acreage, and commodity prices. The commitment for grower
compensation is accrued as seed is delivered to the Company. Accrued
grower compensation was $18.8 million and $3.9 million at August 31,
1994 and 1993, respectively.
Note 3. CURRENT BORROWINGS, LINES OF CREDIT, AND LONG-TERM DEBT
At August 31, 1994, the Company had domestic lines of credit
totaling $50 million available to be used as support for the
issuance of the Company's commercial paper. During the year,
additional lines of credit were available to meet peak borrowing
requirements. At August 31, 1994, no commercial paper was
outstanding.
In addition, the Company's foreign subsidiaries have lines of credit
and direct borrowing agreements totaling $149.7 million,
substantially all of which are unsecured. At August 31, 1994,
short-term borrowings of $14 million were outstanding under these
lines of credit at varying interest rates.
The Company has in place a $100 million private medium-term note
program of which $50 million is outstanding as of August 31, 1994.
The note is unsecured and bears interest at 8.5 percent with payment
due in 1996.
The remaining long-term debt at August 31, 1994, bears interest at
varying rates and requires annual principal payments through 2000.
The maturities of long-term debt for the next five fiscal years, in
millions, are as follows: $1.2; $52.4; $7.8; $3.0; and $2.4.
Note 4. INCOME TAXES
<TABLE>
The provision for income taxes is based on income before income taxes as follows:
(In thousands)
<S> <C> <C> <C>
Years Ended August 31, 1994 1993 1992
United States $ 271,631 $ 215,748 $ 183,731
Foreign 77,011 3,828 56,346
$ 348,642 $ 219,576 $ 240,077
</TABLE>
-45-
<PAGE>
<TABLE>
The provision for income taxes is composed of the following components:
(In thousands)
<S> <C> <C> <C>
August 31, 1994 1993 1992
Current:
Federal $ 100,906 $ 58,440 $ 62,170
State 15,499 9,880 10,737
Foreign 29,047 25,369 21,890
$ 145,452 $ 93,689 $ 94,797
Deferred:
Federal $ (12,439) $ (6,199) $ (8,222)
State (2,007) (1,242) (1,395)
Foreign 3,191 (450) 1,400
$ (11,255) $ (7,891) $ (8,217)
$ 134,197 $ 85,798 $ 86,580
</TABLE>
<TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at August 31, 1994 and 1993, are presented below:
(In thousands)
<S> <C> <C>
August 31, 1994 1993
Deferred tax assets:
Allowance for doubtful accounts $ 5,640 $ 3,705
Inventories 25,011 18,994
Benefits/compensation 27,791 22,552
Deferred profit 9,629 7,552
Net operating loss carryforwards 8,912 10,597
Other carryforwards 1,492 5,102
Other 10,547 9,561
Total gross deferred tax asset $ 89,022 $ 78,063
Less valuation allowance (11,554) (14,468)
Total deferred tax asset $ 77,468 $ 63,595
Deferred tax liabilities:
Property and equipment $ (38,686) $ (39,312)
Other (2,017) (1,571)
Total deferred tax liability $ (40,703) $ (40,883)
Net deferred tax asset $ 36,765 $ 22,712
</TABLE>
The net change in the total valuation allowance for the years ended
August 31, 1994 and 1993, was a decrease of $2.9 million and an
increase of $8.3 million, respectively. The net operating loss
carryforwards result from various international subsidiaries. The
expiration of these net operating losses range from 1996 to
indefinite. Utilization of these losses is dependent upon earnings
generated in the respective subsidiaries. A valuation allowance for
the losses has been set up where appropriate.
Following is a reconciliation of the statutory U.S. Federal income
tax rate to the Company's actual worldwide effective income tax
rate:
<TABLE>
<S> <C> <C> <C>
Years Ended August 31, 1994 1993 1992
Statutory U.S. Federal income tax rate 35.0% 34.7% 34.0%
State income taxes, net of Federal income
tax benefit 2.5 2.6 2.6
Effect of taxes on foreign earnings 1.8 6.7 2.1
Foreign Sales Corporation (1.1) (1.5) (1.6)
Other 0.3 (3.4) (1.0)
Actual effective income tax rate 38.5% 39.1% 36.1%
</TABLE>
-46-
<PAGE>
Note 5. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Pension plans:
The components of U.S. and Canadian pension cost expensed for the
years ended August 31, 1994, 1993, and 1992, consisted of the
following:
<TABLE>
(In thousands)
<S> <C> <C> <C>
1994 1993 1992
Service cost $ 6,398 $ 5,031 $ 4,440
Interest cost on projected
benefit obligation 9,633 8,889 8,056
Actual return on plan assets (11,368) (10,183) (9,314)
Net amortization and deferral (1,283) (1,268) (1,247)
Pension expense $ 3,380 $ 2,469 $ 1,935
</TABLE>
<TABLE>
The following table sets forth the plans' funded status as of
June 30, 1994 and 1993, respectively:
(In thousands)
<S> <C> <C>
1994 1993
Actuarial present value of benefit obligations:
Vested benefit obligation $ 88,266 $ 80,462
Accumulated benefit obligation $ 93,921 $ 85,817
Plan assets at fair value,
primarily stocks and bonds $ 130,837 $ 128,746
Projected benefit obligation 133,958 127,269
Plan assets in excess of (less than)
projected benefit obligation $ (3,121) $ 1,477
Unrecognized net loss 19,781 13,985
Unrecognized prior service cost 4,456 5,248
Unrecognized transition asset, net
(recognized over 16 years) (11,818) (13,502)
Pension asset $ 9,298 $ 7,208
</TABLE>
Plan assets include common stock of the Company of $8.4 million
and $7.1 million at June 30, 1994 and 1993, respectively.
In determining the present value of benefit obligations, a
discount rate of 8.0 percent was used in 1994 and 1993. The
expected long-term rate of return on plan assets used was 9.0
percent and the assumed rate of increase in compensation levels
used was 6.5 percent in both years.
Other Postretirement Benefits:
The Company provides certain medical and life insurance benefits
to qualifying U.S. and Canadian retirees. During the second
quarter of fiscal 1993, the Company adopted Financial Accounting
Standards Board Statement No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The Company recorded
the transition obligation as the cumulative effect of an
accounting change.
-47-
<PAGE>
<TABLE>
The Company's other postretirement benefits cost for the years ended
August 31, 1994 and 1993, consist of the following components:
(In thousands)
<S> <C> <C>
1994 1993
Service cost - benefits earned during
the year $ 1,834 $ 1,421
Interest cost on accumulated
postretirement benefit obligation 2,727 2,321
Return on assets - - - -
Net amortization and deferral 956 27,821
Other postretirement benefits cost $ 5,517 $ 31,563
The plans' funded status at August 31, 1994 and 1993, was as follows:
(In thousands)
1994 1993
Accumulated postretirement benefit obligation:
Retirees $ 8,061 $ 7,356
Other fully eligible plan participants 6,820 6,037
Other active plan participants 23,122 19,556
$ 38,003 $ 32,949
Plans' assets at fair value - - - -
Accumulated postretirement benefit
obligation in excess of plans' assets $ 38,003 $ 32,949
Unrecognized net loss 3,519 2,856
Accrued postretirement benefits cost $ 34,484 $ 30,093
</TABLE>
For 1994 and 1993, the discount rate used in determining the
accumulated postretirement benefit obligation was eight percent. An
11 percent annual rate of increase in the per capita cost of covered
health care benefits was assumed for 1994. This rate was assumed to
decrease gradually to six percent in year 2004 and remain at that
level thereafter. A one-percentage-point increase in the assumed
health care cost trend rates would increase the accumulated
postretirement benefit obligation as of August 31, 1994, by
approximately $5.6 million and the total of the service and interest
cost components of net postretirement health care cost for the year
then ended, by approximately $.9 million.
Note 6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS
OF CREDIT RISK
In connection with normal foreign denominated transactions, the
Company had, at August 31, 1994, certain forward contracts and
options for the sale and purchase of various currencies totaling
$96.8 million, and $3.4 million, respectively, maturing from
September, 1994, to July, 1995.
The Company's financial instruments subject to credit risk are
primarily trade accounts receivable and cash and cash equivalents.
Generally, the Company does not require collateral or other security
to support customer receivables. The Company had the following
significant concentrations of financial instruments subject to
credit risk:
<TABLE>
(In thousands)
<S> <C> <C>
August 31, 1994 1993
United States $ 162,839 $ 104,436
Italy $ 46,762 $ 64,481
Central Europe and C.I.S. $ 5,037 $ 11,023
</TABLE>
-48-
<PAGE>
Within the United States, the majority of the Company's business is
conducted with individual farm operators located throughout the
country. The majority of the Company's business in Italy is
transacted with distributors and cooperatives. In Central Europe and
the Commonwealth of Independent States (C.I.S.), the Company
conducts business primarily with government-sponsored companies and
agencies.
Note 7. RESTRUCTURING AND SETTLEMENTS
On July 13, 1994, the U.S. Circuit Court of Appeals affirmed a prior
court's decision in the Company's lawsuit against Holden Foundation
Seeds, Inc., awarding Pioneer damages for lost profits from the
misappropriation of germplasm. In 1994, the Company received the
settlement plus interest totaling approximately $52 million. The
Company also incurred $6.5 million of additional restructuring
charges. The charges reflect $3.5 million of costs incurred in 1994
to complete the divestment of the Egyptian Edible Oil business and
$3 million for the other operations.
Operating results in 1993 include $53.6 million in provisions for
costs associated with restructuring operations in Africa and the
Middle East. The Company recorded reserves on accounts receivable,
inventory, and long-term assets and provided for the estimated costs
of either closing or redefining most of the operations in this
region. These charges included writing off 100 percent of the
Company's investment in its Egyptian Edible Oil business.
Note 8. RESTRICTED STOCK PLANS
The Company has a restricted stock plans under which 977,850 shares
of the Company's common stock are held by the Company for key
employees. Such stock is subject to an agreement requiring
forfeiture by the employee in the event of termination of employment
within five years of the date of grant other than as a result of
retirement, death, or disability. The maximum number of shares
authorized for grant under these plans is 5,250,000 shares of which
1,868,094 had been granted as of August 31, 1994.
Note 9. VOTING RIGHTS OF COMMON STOCK AND STOCK REPURCHASES
Each share of common stock is entitled to five votes per share if
the share has been beneficially owned continuously by the same
person for a period of 36 consecutive months preceding the record
date for the relevant shareholders' meeting. All other shares are
entitled to one vote per share.
On June 16, 1994, the Board of Directors authorized the repurchase
of an additional five million shares of the Company's stock. At
August 31, 1994, authorized shares remaining to be purchased totaled
3.5 million.
-49-
<PAGE>
Note 10. GEOGRAPHIC DATA
<TABLE>
Certain financial information concerning the Company's domestic and
foreign operations is as follows:
(In thousands)
<S> <C> <C> <C>
Years Ended August 31, 1994 1993 1992
Net sales (by source):
United States $ 1,269,694 $ 1,092,097 $ 1,015,349
Europe 227,533 258,849 235,400
Other 211,996 206,632 192,189
Total sales $ 1,709,223 $ 1,557,578 $ 1,442,938
Less intergeographical sales,
primarily United States 230,532 214,141 181,133
$ 1,478,691 $ 1,343,437 $ 1,261,805
Operating profit (by source):
United States $ 341,202 $ 271,082 $ 233,379
Europe 30,615 20,160 38,527
Other 42,628 (7,000) 22,738
$ 414,445 $ 284,242 $ 294,644
Indirect general and
administrative expense (68,194) (59,058) (51,688)
$ 346,251 $ 225,184 $ 242,956
Identifiable assets at August 31:
United States $ 668,330 $ 671,020 $ 591,425
Europe 179,416 186,654 214,433
Other 219,013 231,363 250,025
$ 1,066,759 $ 1,089,037 $ 1,055,883
Corporate 186,661 132,327 160,053
$ 1,253,420 $ 1,221,364 $ 1,215,936
</TABLE>
Note: Included in United States sales are export sales to
unconsolidated customers in Europe of $14.6, $22.9, and $8.8
million in 1994, 1993, and 1992, respectively, and sales to
unconsolidated customers in other countries of $3.0, $2.2, and
$1.3 million in 1994, 1993, and 1992, respectively.
Included in United States operating profit are profits on
sales to unconsolidated customers in Europe (netted with
related expenses) of $36.7, $49.4, and $28.0 million in 1994,
1993, and 1992, respectively and profits on sales to
unconsolidated customers in other countries (netted with
related expenses) of $5.4, $(14.4), and $(1.8)million in 1994,
1993, and 1992, respectively.
Note 11. UNAUDITED QUARTERLY FINANCIAL DATA
<TABLE>
Summarized unaudited quarterly financial data for 1994 is as follows:
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Three Months Ended November 30 February 28 May 31 August 31
Net sales $ 66,668 $ 250,038 $ 1,038,502 $ 123,483
Gross profit $ 3,299 $ 113,228 $ 616,434 $ 26,024
Net income (loss) $ (43,850) $ 16,153 $ 260,327 $ (19,966)
Net income (loss) per
common share (1) $ (0.49) $ 0.18 $ 2.94 $ (0.23)
Cash dividends per
common share (1) $ 0.14 $ 0.14 $ 0.14 $ 0.17
</TABLE>
-50-
<PAGE>
<TABLE>
Summarized unaudited quarterly financial data for 1993 is as follows:
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Three Months Ended November 30 February 28 May 31 August 31
Net sales $ 68,357 $ 156,650 $ 930,916 $ 187,514
Gross profit $ 10,282 $ 53,114 $ 576,156 $ 60,715
Net income (loss) before
cumulative effect of
accounting change $ (38,807) $ (15,204) $ 228,626 $ (37,162)
Net income (loss) $ (55,776) $ (15,204) $ 228,626 $ (37,162)
Net income (loss) per
common share before
cumulative effect
of accounting
change (1) $ (.43) $ (.17) $ 2.53 $ (.42)
Net income (loss) per
common share (1) $ (.62) $ (.17) $ 2.53 $ (.42)
Cash dividends per
common share (1) $ .12 $ .12 $ .12 $ .14
(1) As a result of rounding, the total of the four quarters' earnings and
cash dividends per share may not equal the earnings and cash dividends
per share for the year.
</TABLE>
<TABLE>
Note 12. SUPPLEMENTAL CASH FLOW INFORMATION
Certain financial information concerning the Consolidated Statements of
Cash Flows is as follows:
(In thousands)
<S> <C> <C> <C>
Years Ended August 31, 1994 1993 1992
Cash payments:
Interest $ 13,069 $ 18,502 $ 14,627
Income taxes $ 144,922 $ 113,787 $ 100,771
</TABLE>
-51-
<PAGE>
EXHIBIT 21
PIONEER HI-BRED INTERNATIONAL, INC.
SUBSIDIARIES OF REGISTRANT
The following are all of the subsidiaries of the Registrant, and are
included in its audited consolidated financial statements filed with its
Annual Report on Form 10-K for the fiscal year ended August 31, 1994.
Each subsidiary listed is wholly-owned by the Registrant and/or one of
the Registrant's wholly owned subsidiaries, except as otherwise
indicated.
Subsidiary Place of Incorporation
Subsidiaries of the Registrant:
The Advantage Corp. U.S.A.
Green Meadows, Ltd. U.S.A.
Microbial Environmental Services, Inc. U.S.A.
PHI Communications Company, Inc. U.S.A.
PHI Financial Services, Inc. U.S.A.
PHI Insurance Co. U.S.A.
PHI Insurance Services, Inc. U.S.A.
PHI Mexico, SA de CV Mexico
Pioneer Hi-Bred Australia, Pty. Ltd. Australia
Pioneer Hi-Bred Limited Canada
Pioneer Hi-Bred Production, Ltd. Canada
Pioneer Hi-Bred Puerto Rico, Inc. U.S.A.
Pioneer Overseas Corporation U.S.A.
Pioneer Overseas Corporation Philippines Philippines
Pioneer Overseas Corporation (Thailand) Ltd. Thailand
Pioneer Sementes Ltda. Brazil
Pioneer Trading Ltd. (51%) Turks & Caicos
Pioneer Vegetable Genetics, Inc. U.S.A.
Semillas Pioneer Chile Ltda. Chile
Semillas Pioneer, S.A. Spain
-52-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Subsidiary Place of Incorporation
Subsidiaries of Pioneer Overseas Corporation, a wholly
owned subsidiary of the Registrant:
Agri-Genetic Realty, Inc. (30%) Philippines
Ethiopian Pioneer Hi-Bred Seeds, Inc. (70%) Ethiopia
Grainfield Co., Ltd. (35%) Thailand
Hibridos Pioneer de Mexicanos S.A. de C.V. Mexico
Lesotho American Hi-Bred Seeds (Pty.) Limited (70%) Lesotho
MISR Pioneer Seeds Company S.A.E. (75.5%) Egypt
PHI Biogene, Ltd. (40%) India
PHI Genetics (Proprietary) Limited South Africa
Pioneer Argentina, S.A. Argentina
Pioneer Egypt, Inc. U.S.A.
Pioneer France Mais France
Pioneer Genetiques S.A. France
Pioneer Hi-Bred Agricultural Technologies, Inc. (80%) Philippines
Pioneer Hi-Bred Europe, Inc. U.S.A.
Pioneer Hi-Bred FSC Limited Jamaica
Pioneer Hi-Bred Italia S.p.A. Italy
Pioneer Hi-Bred Japan Co., Ltd. (52%) Japan
Pioneer Hi-Bred Korea, Inc. U.S.A.
Pioneer Hi-Bred Magyarorszag Kft. Hungary
Pioneer Hi-Bred Nederland B.V. Netherlands
Pioneer Hi-Bred S.A.R.L. France
Pioneer Hi-Bred Seed Argo SAL Romania
Pioneer Hi-Bred Seed Nigeria Ltd. (70%) Nigeria
Pioneer Hi-Bred Sementes De Portugal, S.A. Portugal
Pioneer Hi-Bred Thailand Co., Ltd. (95%) Thailand
Pioneer Seed Company (Zimbabwe) (Pvt.) Ltd. (95%) Zimbabwe
Pioneer Holding Company Limited (67%) Turks & Caicos
Pioneer Overseas Research Corporation U.S.A.
Pioneer Saaten GmbH Austria
Pioneer Saaten GmbH Germany
Pioneer Seeds, Inc. U.S.A.
Pioneer Seed Holding Nederland B.V. Netherlands
Pioneer Semena Holding GmbH Austria
Pioneer Sjeme D.O.O. Croatia
Pioneer (Sudan) Seed Company Limited (65%) Sudan
Pioneer (Sudan) Research Company Limited Sudan
P.T. Pioneer Hibrida Indonesia (82%) Indonesia
Pioneer Tohumculuk A.S. Turkey
Semillas Hibridas Pioneer S.A. (75%) Colombia
Semillas Pioneer Colombia, S.A. (98.5%) Colombia
Semillas Pioneer de Venezuela C.A. Venezuela
Swazi-American (PHI) Seeds, Ltd. (70%) Swaziland
-53-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Subsidiary Place of Incorporation
Subsidiaries of Green Meadows, Ltd.,
a wholly owned subsidiary of the Registrant:
Green Meadows Development Board U.S.A.
Iowa India Investments Company Limited U.S.A.
Village Court, Inc. U.S.A.
Subsidiary of PHI Insurance Services, Inc.,
a wholly owned subsidiary of the Registrant:
Pioneer Insurance Services, Inc. - An
Insurance Agency U.S.A.
Subsidiary of Pioneer France Mais, a
wholly owned subsidiary of Pioneer Overseas
Corporation:
S.I.C.A. France Mais S.A. (98.25%) France
Subsidiary of Pioneer Hi-Bred Europe, Inc., a
wholly owned subsidiary of Pioneer
Overseas Corporation:
Pioneer Hi-Bred (U.K.) Limited United Kingdom
Subsidiary of Pioneer Holding Company Limited,
a 67% owned subsidiary of Pioneer
Overseas Corporation:
Pioneer Pakistan Seed (Pvt.) Limited (80%) Pakistan
Subsidiary of Pioneer Seed Holding Nederland B.V.,
a wholly owned subsidiary of
Pioneer Overseas Corporation:
Hellaseed S.A. (51%) Greece
PHI Hi-Bred (Proprietary) Limited South Africa
Pioneer Hi-Bred Slovakia SRO Slovakia
Subsidiary of Pioneer Seeds, Inc., a wholly
owned subsidiary of Pioneer Overseas
Corporation:
Pioneer Maghreb S.A. Morocco
Subsidiary of Pioneer Semena holding GmbH, a
wholly owned subsidiary of Pioneer
Overseas Corporation and Pioneer Seeds, Inc.:
Zarya Semena (47.5%) C.I.S.
Subsidiary of Pioneer Sementes Ltda., a wholly
owned subsidiary of the Registrant and
Pioneer Overseas Corporation:
Empreendimentos Agricolas Pioneer Ltda. (40%) Brazil
Subsidiary of Pioneer Vegetable Genetics, Inc.,
a wholly owned subsidiary of the Registrant:
Pioneer Vegetable Genetics, Ltd. Israel
-54-
<PAGE>
<TABLE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
<S> <C> <C> <C> <C>
REGULATION STATEMENT CAPTION 1994 1993 1992
YEAR YEAR YEAR
5-02(1) Cash and cash equivalents 135,454 91,976 97,591
5-02(3)(a)(1) Accounts and notes receivable, net 192,724 196,063 216,038
5-02(6)(a)(1) Inventory 358,752 382,784 343,409
5-02(9) Total current assets 742,301 716,982 702,862
5-02(13) Property, plant, and equipment 842,123 789,849 768,416
5-02(14) Accumulated depreciation 391,744 352,189 326,530
5-02(18) Total assets 1,253,420 1,221,364 1,215,936
5-02(21) Total current liabilities 232,016 261,113 285,793
5-02(22) Long-term debt 65,569 68,127 73,920
5-02(30) Common stock 92,694 92,694 92,694
5-02(31) Other shareholder's equity 788,356 732,745 706,804
5-03(b)(1)(a) Net sales 1,478,691 1,343,437 1,261,805
5-03(b)(2)(a) Cost of goods sold and research 719,706 643,170 621,618
5-03(b)(3) Restructuring and settlements (44,553) 53,585 - -
5-03(b)(4) Selling and general and
administrative 457,287 421,498 397,231
5-03(b)(8) Financial income (expense), net 2,391 (5,608) (2,879)
5-03(b)(10) Income before taxes and other
items 348,642 219,576 240,077
5-03(b)(11) Income tax expense (134,197) (85,798) (86,580)
5-03(b)(14) Income/loss continuing operations 212,664 137,453 152,160
5-03(b)(18) Cumulative effect of accounting
change - - (16,969) - -
5-03(b)(19) Net income 212,664 120,484 152,160
5-03(b)(20) Earnings per share 2.40 1.34 1.68
</TABLE>
-55-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report or
amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized.
(REGISTRANT) PIONEER HI-BRED INTERNATIONAL, INC.
(NAME AND TITLE) Thomas N. Urban, Chairman of the Board of Directors
and President
DATE November 23, 1994
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 Registrant and in the capacities and on the dates indicated.
(NAME AND TITLE) Thomas N. Urban, Chairman of the Board of Directors
and President
DATE November 23, 1994
(NAME AND TITLE) Charles S. Johnson, Executive Vice President and
Director
DATE November 23, 1994
(NAME AND TITLE) Jerry L. Chicoine, Senior Vice President, Chief
Financial Officer and Corporate Secretary
DATE November 23, 1994
(NAME AND TITLE) Robert P. Seifert, Senior Vice President and Director
DATE November 23, 1994
(NAME AND TITLE) Dwight G. Dollison, Treasurer
DATE November 23, 1994
(NAME AND TITLE) Brian G. Hart, Controller
DATE November 23, 1994
(NAME AND TITLE) C. Robert Brenton, Director
DATE November 23, 1994
(NAME AND TITLE) Pedro M. Cuatrecasas, Director
DATE November 23, 1994
-56-
<PAGE>
(NAME AND TITLE) Ray A. Goldberg, Director
DATE November3, 1994
(NAME AND TITLE) Fred S. Hubbell, Director
DATE November 23, 1994
(NAME AND TITLE) F. Warren McFarlan, Director
DATE November 23, 1994
(NAME AND TITLE) Owen J. Newlin, Director
DATE November 23, 1994
(NAME AND TITLE) Virginia Walbot, Director
DATE November 23, 1994
(NAME AND TITLE) H. Scott Wallace, Director
DATE November 23, 1994
(NAME AND TITLE) Fred W. Weitz, Director
DATE November 23, 1994
(NAME AND TITLE) Herman H.F. Wijffels, Director
DATE November 23, 1994
(NAME AND TITLE) Nancy Y. Bekavac, Director
DATE November 23, 1994
(NAME AND TITLE) Luiz Kaufmann, Director
DATE November 23, 1994
-57-
<PAGE>
APPENDIX TO MANAGEMENT'S DISCUSSION AND ANALYSIS
The table titled "Sales by Region" appears in the Management's
Discussion and Analysis of the Annual Report to Shareholders in the form
of a bar graph.
The table titled "Earning per Share Excluding Unusual Items" appears in
the Management Discussion and Analysis of the Annual Report to
Shareholders in the form of a bar graph.
The table titled "Return on Ending Equity Excluding Unusual Items"
appears in the Management's Discussion and Analysis of the Annual Report
to Shareholders in the form of a bar graph.
The table titled "Return on Ending Assets and Return on Ending Equity"
appears in the Management's Discussion and Analysis of the Annual Report
to Shareholders in the form of a line graph.
The table titled "North American Market Share" appears in the
Management's Discussion and Analysis of the Annual Report to
Shareholders in the form of a bar graph.
The table titled "Cash and Cash Equivalents by Country" appears in the
Management's Discussion and Analysis of the Annual Report to
Shareholders in the form a bar graph.
The table titled "Net Income and Annual Dividends" appears in the
Management's Discussion and Analysis of the Annual Report to
Shareholders in the form of a line graph.
The table titled "Research and Product Development" appears in the
Management's Discussion and Analysis of the Annual Report to
Shareholders in the form of a bar graph.
The table titled "Available Domestic Lines of Credit - 1994" appears in
the Management's Discussion and Analysis of the Annual Report to
Shareholders in the form of a bar graph.
The table titled "Available Domestic Lines of Credit - 1995" appears in
the Management's Discussion and Analysis of the Annual Report to
Shareholders in the form of a bar graph.
The table titled "Short-term Borrowing Levels" appears in the
Management's Discussion and Analysis of the Annual Report to
Shareholders in the form of a line graph.
A photo with the caption "It's an old farm home and still occupied by
some members of the Von Stein family near Jenera, Ohio. Dennis and Dean
Von Stein, the two in the middle, received a sales and service call from
Sales Representative Jay Bosse (L) and Pioneer Agronomist Sandy Thomas
early one fall morning" appears in the Management's Discussion and
Analysis of the Annual Report to Shareholders.
A photo with the caption "Sergo Suderie, a farmer from Martes-Tolosane,
France, discusses agronomic techniques with Pioneer External Relations
Coordinator Arnaud de Castelbajac under an obviously French umbrella"
appears in the Management's Discussion and Analysis of the Annual Report
to Shareholders.
-58-
