UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended November 30, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number : 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) 245-3500
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at December 27, 1993
Common Stock ($1.00 par value) 89,348,605
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PIONEER HI-BRED INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1 FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS-
NOVEMBER 30, 1993, AUGUST 31, 1993,
AND NOVEMBER 30, 1992 3-4
CONSOLIDATED CONDENSED STATEMENTS OF
OPERATIONS- 5
THREE MONTHS ENDED
NOVEMBER 30, 1993 AND 1992
CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS- 6
THREE MONTHS ENDED
NOVEMBER 30, 1993 AND 1992
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS 7-8
ITEM 2 MANAGEMENT'S DISCUSSION AND 9-13
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 6(a) EXHIBITS 14
ITEM 6(b) REPORTS ON FORM 8-k 15
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PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, in thousands)
<TABLE>
November 30, August 31, November 30,
ASSETS 1993 1993 1992
CURRENT ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 64,369 $ 91,976 $ 59,259
Accounts and notes receivable, net 111,410 196,063 145,783
Inventories:
Finished seed 338,555 229,550 328,922
Unfinished seed 253,909 149,299 336,697
Other 6,691 3,935 3,226
Prepaid expenses 6,867 3,979 9,437
Income taxes 3,738 - - 4,172
Deferred income taxes 54,362 42,180 49,356
Total current assets $ 839,901 $ 716,982 $ 936,852
LONG-TERM ASSETS 40,110 39,195 44,253
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and
allowances
November 30, 1993 $365,596
August 31, 1993 $356,479
November 30, 1992 $342,426 443,688 437,660 458,851
INTANGIBLES 25,807 27,527 26,642
$1,349,506 $1,221,364 $1,466,598
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
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PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, in thousands)
<TABLE>
November 30, August 31, November 30,
1993 1993 1992
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C> <C>
Short-term borrowings $ 160,118 $ 64,029 $ 225,397
Current maturities of long-term
debt 1,521 2,250 3,167
Accounts payable, trade 219,197 79,386 305,243
Accrued compensation 26,511 42,080 22,825
Income taxes payable - - 17,522 - -
Other accruals 47,054 55,846 29,849
Total current liabilities $ 454,401 $ 261,113 $ 586,481
LONG-TERM DEBT $ 65,730 $ 68,127 $ 78,057
DEFERRED ITEMS, primarily income taxes
and retirement benefits $ 59,438 $ 60,587 $ 60,756
MINORITY INTEREST IN SUBSIDIARIES $ 5,486 $ 6,098 $ 10,908
SHAREHOLDERS' EQUITY
Preferred stock, no par value $ - - $ - - $ - -
Common stock, $1 par value 92,694 92,694 92,694
Additional paid-in capital 12,962 12,962 14,249
Retained earnings 778,363 835,466 694,359
Cumulative translation adjustment (11,151) (6,982) 16,039
$ 872,868 $ 934,140 $ 817,341
Less: Cost of common shares
acquired for the treasury (98,534) (97,078) (78,991)
Unearned compensation (9,883) (11,623) (7,954)
$ 764,451 $ 825,439 $ 730,396
$1,349,506 $1,221,364 $1,466,598
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
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PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited, in thousands)
<TABLE>
Three Months Ended
November 30,
1993 1992
<S> <C> <C>
Net sales $ 66,668 $ 68,357
Operating costs and expenses:
Cost of goods sold $ 38,734 $ 35,431
Research and development 24,635 22,644
Selling 43,661 42,873
General and administrative 29,814 25,233
$136,844 $126,181
Operating (loss) $(70,176) $(57,824)
Investment income 3,579 3,475
Interest expense (3,216) (4,186)
Net exchange (loss) (2,340) (4,236)
(Loss) before items shown below $(72,153) $(62,771)
Provision for income taxes 28,162 23,497
Minority interest and other 141 467
(Loss) before cumulative effect
of accounting chnage $(43,850) $(38,807)
Cumulative effect of accounting change,
net of income taxes of $10,849 - - (16,969)
Net (loss) $(43,850) $(55,776)
(Loss) per common share:*
(Loss) before cumulative effect of
accounting change $ (.49) $ (.43)
Cumulative effect of accounting
change - - (.19)
Net (loss) $ (.49) $ (.62)
Weighted average number of
common shares outstanding 89,402 90,274
* Not in thousands
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
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PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
Three Months Ended
November 30,
1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net (loss) $ (43,850) $ (55,776)
Noncash items included in net loss:
Depreciation and amortization 16,442 14,054
Cumulative effect of accounting change - - 16,969
Other (108) (11,279)
Net change in assets and liabilities (72,179) (104,593)
Net cash used in operating
activities $ (99,695) $(140,625)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures $ (21,124) $ (30,068)
Other 2,889 4,847
Net cash used in investing
activities $ (18,235) $ (25,221)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds on short-term borrowings $ 100,595 $ 135,412
Dividends paid (12,517) (10,833)
Other (1,325) 4,295
Net cash provided by financing
activities $ 86,753 $ 128,874
Effect of foreign currency exchange rate
changes on cash and cash equivalents $ (868) $ (1,360)
Effect of change in year-end of the
Company's international subsidiaries on
cash and cash equivalents $ 4,438 $ - -
Net decrease in cash and cash
equivalents $ (27,607) $ (38,332)
Cash and cash equivalents, beginning 91,976 97,591
CASH AND CASH EQUIVALENTS, ENDING $ 64,369 $ 59,259
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 5,759 $ 7,699
Income taxes $ 8,549 $ 18,592
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
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PIONEER HI-BRED INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments (consisting of only normal recurring accruals)
necessary to fairly present the financial position as of
November 30, 1993 and 1992, and the results of operations and
cash flows for the three months ended November 30, 1993 and
1992. Because of the seasonal nature of the Company's
business, the results of operations for the three months
ended November 30, 1993, are not indicative of the results to
be expected for the full year.
2. The Company is involved in litigation and disputes which are
normal to its business, including litigation related to the
operations and sale of its former subsidiary, Norand
Corporation. In February 1992, the Company filed suit
against Bob Groulx, a dealer in field seeds in the vicinity
of Munger, Michigan, alleging that Mr. Groulx has engaged in
(1) tortious interference with the Company's business
relationships with its sales representatives, (2) trademark
infringement, (3) federal statutory unfair competition, and
(4) common law unfair competition. In March, 1992, Mr. Groulx
filed an answer and countercomplaint which asserted that
Pioneer had violated federal and Michigan antitrust statutes
and committed various commercial torts. A related case
alleging violation of federal and Michigan antitrust
statutes, interference with contractual relations and
wrongful discharge has been filed by a former Pioneer sales
representative. The Company has moved for summary judgment
in the Groulx case and has been granted a motion to dismiss
the antitrust claims in the related case. The Company
believes these claims are without merit.
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Although the outcome of the above matters cannot be predicted
with certainty, trial counsel for the Company and management
do not believe that their disposition will have a materially
adverse effect on the consolidated financial position and
results of operations of the Company.
The Company has guaranteed the repayment of principal and
interest on certain obligations of Village Court Associates,
an affiliated real estate venture. At November 30, 1993,
such guarantees totaled approximately $23 million.
On February 5, 1981, the Company initiated litigation in the
Federal District Court for the Southern District of Iowa
against Holden Foundation Seeds, Inc. alleging that the named
defendants had improperly obtained and used one of the
Company's proprietary lines of corn breeding material. On
October 30, 1987, a judgment was entered against Holden
Foundation Seeds, Inc. on the issue of liability. On
December 30, 1991, the court entered a judgment against
Holden in the sum of $46.7 million plus interest from
December 30, 1991. On September 23, 1992, the court issued
its final order in the case. Both parties have appealed. The
Company has not recognized any benefit in the financial
statements related to this judgment.
3. During the first quarter of fiscal 1994, the Company changed
the reporting year-end of its international subsidiaries from
June to August to have the subsidiaries' accounting period
match the Company's. The effect of this change, a net loss
of $.7 million, was recorded as a reduction in retained
earnings.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
the attached unaudited condensed consolidated financial
statements and notes, and with the Company's audited financial
statements and notes for the fiscal year ended August 31, 1993.
MATERIAL CHANGES IN FINANCIAL CONDITION:
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 meet the cash needs of the period and
to pay the commercial paper and accounts payable which are the
Company's primary sources of financing during the first and
fourth quarters of the fiscal year. Any excess funds are
invested, primarily in short-term commercial paper.
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. The Company also has a $100 million private
medium-term note program of which $50 million is available as of
November 30, 1993. Short-term debt at November 30, 1993,
consisted of $123 million in domestic commercial paper and $37.1
million in direct short-term borrowings from foreign banks. As of
November 30, 1993, the Company had available domestic lines of
credit totaling $175 million consisting of a $100 million
revolving line of credit and $75 million in seasonal lines of
credit. The maximum available during the year is $199 million in
the second quarter consisting of $100 million revolving lines and
$99 million seasonal. The minimum available is a $50 million
revolving line of credit during the fourth quarter. Long-term
debt at November 30, 1993, consisted principally of $50 million
in medium-term notes maturing in February, 1996.
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<PAGE>
At November 30, 1993, accounts and notes receivable decreased
from a year earlier due to a change in year-end of the Company's
international subsidiaries.
Seed inventories are lower at November 30, 1993, compared to
November 30, 1992, due to fewer acres planted and lower yields.
Prior year inventories were higher resulting from a record number
of seed corn acres planted during 1992 in North America which
produced yields 145 percent higher than the 1993 crop.
Short-term borrowings and accounts payable at November 30,
1993, are lower than the same point in time a year ago primarily
due to lower production costs associated with the smaller
production crop harvested in the fall of 1993 compared to the
fall of 1992.
Other accruals increased from November 30, 1992, levels due
to accruals associated with the restructuring of operations in
Africa and the Middle East.
Additional purchases of the Company's stock represent the
increase in treasury stock at November 30, 1993, from a year
earlier. To date, of the 5.3 million shares authorized for
purchase by the Board of Directors, 3.5 million have been
repurchased.
MATERIAL CHANGES IN RESULTS OF OPERATIONS:
Net loss for the three months ended November 30, 1993, was
$43.9 million, down from the net loss of $55.8 million reported
for the first quarter of fiscal 1993. On a per-share basis, net
loss for the period ended November 30, 1993, was $.49 compared to
a per-share net loss of $.62 for the same period a year earlier.
Net loss for the first three months of fiscal 1993 includes the
cumulative effect of adopting Financial Accounting Standard 106
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(FAS106) which had the effect of reducing fiscal 1993 results
$.19 per share. Excluding the effect of this accounting change,
per-share net loss for the first three months of fiscal 1993 was
$.43 per-share compared to a net loss of $.49 per-share for the
current period. The main factors responsible for the larger
current period loss were increased fixed costs and additional
costs related to the restructuring of operations in Africa and
the Middle East. These increases were partially offset by lower
net financial expense.
Net sales through first quarter of fiscal 1994 reached $66.7
million, a decrease from net sales of $68.4 million for the same
period a year ago. First quarter seed corn sales are almost
entirely generated in regions outside North America and Europe
and totaled $26.1 million, a $5.6 million decrease from a year
earlier. Seed corn sales in South Africa increased $2.1 as a
result of unit sales increases due to initial sales from a new
subsidiary. However, reported sales decreased in total due to
the change in fiscal year-end for the Company's international
subsidiaries from June 30 to August 31.
Certain operations in the Southern Hemisphere record a large
portion of their sales in July and August. Fiscal 1993's first
quarter included July and August for our international
subsidiaries, while in fiscal 1994 this period will fall in the
fourth quarter.
Although net sales for the current period are below fiscal
1993 levels for the first quarter, annual seed corn revenues are
expected to grow in almost all regions. The likelihood of more
normal weather in the central United States together with the
announced change in the U.S. farm program set-aside from 10
percent to zero is expected to result in more North American corn
acres planted in fiscal 1994. In Europe, 1994 acreage is
expected to stabilize following implementation of the Common
Agricultural Policy (CAP) while continued sales growth in 1994 is
expected in Mexico. Results from Central and South America and
Asia are expected to show modest growth in 1994.
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<TABLE>
Other Products Net Sales
(In thousands)
<S> <C> <C>
Three Months
Ended
November 30,
1993 1992
Wheat $ 16,462 $ 15,384
Microbial products 8,331 8,289
Other 15,806 13,001
$ 40,599 $ 36,674
</TABLE>
In total, other products sales improved $3.9 million for the
period ended November 30, 1993, compared to the same period a
year ago. Modest improvement in wheat and specialty plant
product sales represent the bulk of the increase in other product
sales. Additional wheat sales in Europe and Africa and the Middle
East represent the majority of the total wheat sales increase as
a result of the change in year-end for the Company's
international subsidiaries. A $2.8 million increase in specialty
plant product sales accounts for the remaining increase in other
products revenue.
Research expenses increased $2.0 million, or 9 percent, over
last year's first quarter. Increased compensation costs due to
additional personnel and additional amortization related to
technology acquisitions were the main components of the increase.
Research expenses are expected to increase approximately 9
percent on an annual basis.
Selling and general and administrative expenses for the first
three months of fiscal 1994, excluding variable costs, increased
$7.5 million over the same period a year earlier. Increased
compensation costs due to normal merit increases and additional
personnel and an additional $4.7 million charge related to
restructuring the Company's operations in Africa and the Middle
East represent the majority of the increase. Variable costs
(commission and shipping costs) as a percentage of sales were
comparable between periods.
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Net interest expense for the quarter ended November 30, 1993,
decreased $1.1 million from the same period a year ago. Lower
average borrowings is the primary factor behind this decrease.
Net exchange loss decreased $1.9 million through first
quarter of fiscal 1993 compared to the same period a year earlier
principally due to lower exchange losses in Europe.
The estimated fiscal 1994 world-wide effective tax rate
reflected in the first quarter is 39.1 percent. The actual
world-wide effective tax rate for fiscal 1993 was also 39.1
percent.
Due to the seasonality of the seed business, single quarter
results are seldom indicative of year-end results and quarter-to-
quarter comparisons are not always meaningful. Accordingly, such
comparisons are not emphasized. Typically, most of the Company's
revenue and operating profit is generated in the third quarter.
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<ARTICLE> 5
<MULTIPLIER> 1,000
<TABLE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
<S> <C> <C> <C> <C> <C>
REGULATION STATEMENT CAPTION QTR - 1 QTR - 1 3 - MOS 3 - MOS
1994 1993 1994 1993
5-02(1) Cash and cash equivalents 64369 59259
5-02(3)(a)(1) Accounts and notes receivable, net 111410 145783
5-02(6) Inventory 599155 668845
5-02(9) Total current assets 839901 936852
5-02(13) Property, plant, and equipment 809284 801277
5-02(14) Accumulated depreciation 365596 342426
5-02(18) Total assets 1349506 1466598
5-02(21) Total current liabilities 454401 586481
5-02(22) Long-term debt 65730 78057
5-02(30) Common stock 92694 92694
5-02(31) Other shareholder's equity 671757 637702
5-02(32) Total liabilities and shareholder's equity 1349506 1466598
5-03(b)(1)(a) Net sales 66668 68357 66668 68357
5-03(b)(2)(a) Cost of goods sold and research 63369 58075 63369 58075
5-03(b)(3) Selling and general and administrative 73475 68106 73475 68106
5-03(b)(3) Restructuring of operations - - - - - - - -
5-03(b)(8) Financial income (expense), net (1977) (4947) (1977) (4947)
5-03(b)(10) Income/(loss) before taxes and other items (72153) (62771) (72153) (62771)
5-03(b)(11) Income tax (expense) benefit 28162 23497 28162 23497
5-03(b)(14) Income/(loss) continuing operations (43850) (38807) (43850) (38807)
5-03(b)(18) Cumulative effect of accounting change - - (16969) - - (16969)
5-03(b)(19) Net income/(loss) (43850) (55776) (43850) (55776)
5-03(b)(20) Earnings (loss) per share (.49) (.62) (.49) (.62)
</TABLE>
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PIONEER HI-BRED INTERNATIONAL, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K.
No reports on Form 8-K were filed with the Commission
during the three months ended November 30, 1993.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PIONEER HI-BRED INTERNATIONAL, INC.
(Registrant)
Date
THOMAS N. URBAN, CHAIRMAN OF THE
BOARD AND PRESIDENT
Date
JERRY L. CHICOINE, SENIOR VICE
PRESIDENT AND CHIEF
FINANCIAL OFFICER
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