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 February 28, 1995
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) 248-4800
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 March 27, 1995
Common Stock ($1.00 par value) 84,622,951
<PAGE> 1
PIONEER HI-BRED INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1 FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS-
FEBRUARY 28, 1995, AUGUST 31, 1994,
AND FEBRUARY 28, 1994 3-4
CONSOLIDATED CONDENSED STATEMENTS OF
OPERATIONS- 5
THREE MONTHS AND SIX MONTHS ENDED
FEBRUARY 28, 1995 AND FEBRUARY 28,
1994
CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS- 6
SIX MONTHS ENDED
FEBRUARY 28, 1995 AND FEBRUARY 28,
1994
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS 7
ITEM 2 MANAGEMENT'S DISCUSSION AND 8-12
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 13
<PAGE> 2
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, in millions)
<TABLE>
February 28, August 31, February 28,
ASSETS 1995 1994 1994
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 361 $ 135 $ 377
Accounts and notes receivable, net 201 193 188
Inventories:
Finished seed 489 164 500
Unfinished seed 189 190 62
Other 7 5 5
Prepaid expenses and other current
assets 55 3 39
Deferred income taxes 76 52 77
Total current assets $1,378 $ 742 $1,248
LONG-TERM ASSETS 37 38 38
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and
allowances
February 28, 1995 $410
August 31, 1994 $397
February 28, 1994 $370 450 450 444
INTANGIBLES 19 23 24
$1,884 $1,253 $1,754
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE> 3
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, in millions)
<TABLE>
February 28, August 31, February 28,
1995 1994 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES
Short-term borrowings $ 34 $ 14 $ 48
Current maturities of long-term debt 52 1 1
Accounts payable, trade 261 80 121
Customer deposits 599 - 587
Accrued compensation 32 54 30
Income taxes payable - 31 19
Other 39 52 52
Total current liabilities $1,017 $ 232 $ 858
LONG-TERM DEBT $ 14 $ 66 $ 66
DEFERRED ITEMS, primarily income
taxes and retirement benefits $ 81 $ 67 $ 60
MINORITY INTEREST IN SUBSIDIARIES $ 8 $ 7 $ 6
SHAREHOLDERS' EQUITY
Preferred stock, no par value $ - $ - $ -
Common stock, $1 par value 93 93 93
Additional paid-in capital 16 15 14
Retained earnings 927 995 782
Cumulative translation adjustment (1) (3) (11)
$1,035 $1,100 $ 878
Less: Cost of common shares
acquired for the treasury (254) (207) (99)
Unearned compensation (17) (12) (15)
$ 764 $ 881 $ 764
$1,884 $1,253 $1,754
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE> 4
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited, in millions)
<TABLE>
Three Months Ended Six Months Ended
February 28, February 28,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $ 277 $ 250 $ 346 $ 317
Operating costs and expenses:
Cost of goods sold $ 142 $ 110 $ 182 $ 149
Research and development 31 27 58 51
Selling 60 55 110 99
General and administrative 33 29 62 54
Restructuring and settlements - (1) - 4
$ 266 $ 220 $ 412 $ 357
Operating income (loss) $ 11 30 $ (66) $ (40)
Investment income 5 4 9 7
Interest expense (4) (6) (7) (9)
Net exchange gain (loss) 6 - 4 (2)
Income (loss) before items
below $ 18 $ 28 $ (60) $ (44)
Provision for income taxes (7) (11) 23 17
Minority interest and other (2) - (2) -
Net income (loss) $ 9 $ 17 $ (39) $ (27)
Income (loss) per common share* $ .11 $ .19 $(.46) $(.30)
Dividends per common share* $ .17 $ .14 $ .34 .28
Weighted average number of
common shares outstanding 85 89 85 89
</TABLE>
* Not in millions
See Notes to Consolidated Condensed Financial Statements.
<PAGE> 5
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
<TABLE>
Six Months Ended
February 28,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(39) $(27)
Noncash items included in net (loss):
Depreciation and amortization 34 33
Other (11) (38)
Net change in assets and liabilities 334 383
Net cash provided by operating activities $318 $351
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments received on notes receivable $ 4 $ 7
Disbursements for notes receivable (2) (3)
Capital expenditures (31) (33)
Other (3) (1)
Net cash used in investing activities $(32) $(30)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (payments) on short-term borrowings $ 21 $ (8)
Purchase of treasury stock (52) (5)
Dividends paid (29) (25)
Other (1) (1)
Net cash used in financing activities $(61) $(39)
Effect of foreign currency exchange rate
changes on cash and cash equivalents $ 1 $ (1)
Effect of change in year-end of the
Company's international subsidiaries
on cash and cash equivalents $ - $ 4
Net increase in cash and cash equivalents $226 $285
Cash and cash equivalents, beginning 135 92
CASH AND CASH EQUIVALENTS, ENDING $361 $377
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 9 $ 11
Income taxes $ 24 $ 21
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE> 6
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
February 28, 1995 and 1994, and the results of operations
and cash flows for the six months ended February 28, 1995
and 1994. Because of the seasonal nature of the Company's
business, the results of operations for the six months ended
February 28, 1995, are not indicative of the results to be
expected for the full year.
2. The Company has guaranteed the repayment of principal and
interest on certain obligations of Village Court Associates,
an affiliated real estate venture. At February 28, 1995,
such guarantees totaled approximately $23 million.
3. Certain individual financial statement categories were
reclassified for the six months ended February 28, 1994 to
conform with the presentation adopted for the six months
ended February 28, 1995.
<PAGE> 7
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, 1994.
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.
Short-term debt at February 28, 1995, consisted of $34 million in
direct short-term borrowings from foreign banks.
During fiscal 1995, the Company has available the following domestic
lines of credit:
(in millions)
<TABLE>
Revolving Seasonal Total
<S> <C> <C> <C>
First quarter $100 $ 74 $174
Second quarter $100 $118 $218
Third quarter $ 50 none $ 50
Fourth quarter $ 50 none $ 50
</TABLE>
The Company also has a $100 million private medium-term note program
of which $50 million was outstanding as of February 28, 1995. The
medium-term note matures in February, 1996.
February 28, 1995, seed inventories and accounts payable are higher
than the previous year due to the above-average yields harvested in
the fall of 1994 compared to the fall of 1993.
Higher advance commissions through February 28, 1995, account for the
increase in prepaid expenses and other current assets over the prior
year.
The Company repurchased $52 million of its stock during the six months
ended February 28, 1995. At February 28, 1995, authorized shares
remaining to be repurchased totaled 1.8 million.
<PAGE> 8
MATERIAL CHANGES IN RESULTS OF OPERATIONS:
Net loss for the six months ended February 28, 1995, was $39 million,
or $.46 per share, compared to a net loss of $27 million, or $.30 per
share, for the same period a year ago. Due to the seasonality of the
seed business, single quarter 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.
Net Sales and Operating Profit (Loss)
(Unaudited, in millions)
<TABLE>
Quarter Ended Six Months Ended
February 28, Increase/ February 28, Increase/
1995 1994 (Decrease) 1995 1994 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Corn $236 $210 $ 26 $267 $236 $ 31
Other 41 40 1 79 81 (2)
Total net sales $277 $250 $ 27 $346 $317 $ 29
Operating profit (loss):
Corn $ 42 $ 59 $(17) $ (8) $ 15 $(23)
Other (12) (15) 3 (23) (22) (1)
Restructuring and
settlements - 1 (1) - (4) 4
Product line operating
profit (loss) $ 30 $ 45 $(15) $(31) $(11) $(20)
Indirect general and
administrative expenses (19) (15) (4) (35) (29) (6)
Operating income (loss) $ 11 $ 30 $(19) $(66) $(40) $(26)
Units delivered, North America:
Corn 1.407 1.567 (.160) 1.418 1.585 (.167)
</TABLE>
Operating results for the second quarter and first six months of
fiscal 1995 decreased from the same period a year ago principally due
to lower seed corn units delivered and increased research and
development costs. Unit sales decreased in North America primarily as
a result of reduced corn acreage. Several European countries also
experienced lower seed corn sales primarily the result of the timing
of seed deliveries. Lower unit sales in Mexico through second quarter
are due to reduced corn acreage. Research and development costs
increased due to planned expansion in laboratory research.
<PAGE> 9
Year-to-year comparisons of sales and expenses were also impacted by a
change in the structure of the Company's operations in France. During
the fourth quarter of fiscal 1994, the Company purchased 65 percent of
the entity which handles the distribution and marketing of Pioneer(R)
brand products in France. This purchase brought the Company's
ownership of this entity to 100 percent. Beginning in fiscal 1995 the
revenues and expenses of this distribution entity are fully
consolidated in the Company's financial statements. As a result, year-
to-date sales increased $48 million and expenses increased $46 million
compared to the same period last year.
SEED CORN
North America
Operations within North America account for approximately $14 million
of the year-to-date seed corn operating profit decrease. Lower seed
corn deliveries compared to the prior year was the primary driver
affecting North American operations. Through second quarter,
deliveries are running 10.5 percent behind 1994, primarily due to
reduced corn acreage. As a result, sales are $11 million lower than a
year ago and operating results are approximately $6 million lower.
For the six months ended February 28, 1995, seed corn units invoiced,
including those not yet delivered, have decreased to 10.3 million
units, or 4 percent, from the same period last year. Cash collected
for the same period has increased $10 million to $745 million, in part
due to an increase in the average selling price of Pioneer(R) brand
hybrids of approximately 4 percent in 1995.
On an annual basis, corn unit sales could be 3 percent to 4 percent
below 1994 levels. A change in the U.S. farm program requires farmers
participating in the 1995 feed grain program to keep their corn acres
at 92.5 percent or less of their historical corn acreage base, down
from 100 percent in 1994. As a result, it is estimated that total
1995 seed corn acreage will decrease approximately 5 percent from
1994. In addition to this, some farmers in the South are switching
acreage to cotton as a result of higher prices which will have an
impact on seed corn unit sales volume. Through the first six months
of 1995, sales to customers in the South account for approximately 50
percent of total units delivered. On an annual basis, they typically
will contribute less than 10 percent of total unit sales. Finally,
aggressive sales programs and discounting by competitors aimed at
reducing their high inventory levels is also putting pressure on unit
sales. Our exceptional sales and marketing force is continuing to
provide information to customers on the value of purchasing Pioneer(R)
brand seed. As a result, management expects to hold or have a modest
gain in market share.
Research expenses for corn increased $5 million, or 20 percent, from
year-to-date levels a year ago. Planned growth in winter nursery
costs and expansion of laboratory research and development projects
account for most of the increase. On an annual basis, research costs
are expected to increase 12 percent.
<PAGE> 10
The Company's commitment to research continues to provide customers
with value-added products. For 1995, 17 new seed corn hybrids were
released. These new releases add to the Company's ability to provide
products which deliver higher and more consistent profits to our
customers.
Fixed selling and general and administrative expenses for seed corn in
North America increased $3 million, or 8 percent, from 1994 year-to-
date levels. The major components of this increase were planned
increases in advertising expenses and personnel costs and earlier
timing of certain expenses.
Management believes the Company is on track to post another
outstanding year. In North America, Pioneer(R) brand hybrids once
again performed very well compared to the competition. On-farm yield
comparisons in the fall of 1994 showed that Pioneer hybrids continued
to out-yield the average competitor, even under conditions that were
favorable across much of the corn belt. Higher yields from the 1994
crop and excellent winter production activities in Argentina and Chile
will improve the variable cost per unit. In conjunction with a higher
per unit sales price, these factors will positively impact current
year results.
Other Regions
Operating results outside North America decreased approximately $9
million. European operations account for $5 million of the total
decrease. On a constant dollar basis, European operating profits
decreased $10 million compared to 1994, mostly due to fewer unit
sales. Italy's operating profit decreased $5 million primarily due to
the timing of current year seed corn deliveries compared to 1994.
Operating results in France decreased $2 million due to fewer unit
sales. In Germany, the timing of deliveries reduced operating profit
$2 million. The effect of the U.S. dollar weakening against European
currencies positively impacted current year operating profit $5
million.
Mexico's operating profit decreased $11 million. Decreased seed corn
acreage in Northern Mexico resulting from NAFTA, drought, and subsidy
reductions reduced unit sales. Also contributing to the decrease was
the effect of the devaluation of the Mexican peso.
Operations in Asia and Central and South America provided positive
results to operating profit over 1994 levels. For the current year,
Asia's operating profit improved $5 million. Higher selling prices in
the Philippines accounted for $1 million of the increase, while lower
seed writedowns in the region and reduced regional administrative
costs account for most of the remaining improvement. Central and
South American operating profit improved $2 million, almost entirely
due to operations in Argentina. This improvement is the result of
increased unit sales and higher selling price along with lower per
unit costs.
<PAGE> 11
For the year, management expects operating profit from regions outside
North America to be comparable to 1994. A reduction in corn subsidies
and water restrictions are expected to reduce corn acreage in Mexico
with a corresponding reduction in unit sales of approximately 30
percent. This, in conjunction with the devaluation of the Mexican
peso, is expected to reduce operating results for Mexico to about half
of that in 1994. This could be offset by operations in the remaining
regions outside North America. With the U.S. dollar weaker compared
to European currencies, operating profit in Europe should improve over
prior year levels. Operating profit in Central and South America and
Asia is expected to improve over 1994 results due to increased unit
sales.
OTHER PRODUCTS
Other products' 1995 year-to-date operating results were comparable to
the prior year. Other products include soybean, alfalfa, sorghum,
wheat, sunflower, microbial products, and developing products - all of
which reflected minimal change from 1994 year-to-date results.
RESTRUCTURING AND SETTLEMENTS
Year-to-date 1994 included a $4 million charge related to
restructuring the Company's operations in Africa and the Middle East.
Management does not expect to incur any additional restructuring
charges for this region in 1995.
INDIRECT GENERAL AND ADMINISTRATIVE EXPENSES
Current year indirect general and administrative expenses increased $6
million, or 20 percent, over 1994 levels. Normal merit and personnel
cost increases and increased charitable contributions account for
approximately $3 million of the increase. The remainder is
attributable to the increased emphasis on worldwide process and
product management activities.
NET FINANCIAL AND TAXES
Net interest income for the first six months of fiscal 1995 increased
$4 million compared to the same period a year ago resulting from a $2
million increase in investment income and a $2 million decrease in
interest expense. Investment income improved principally due to
higher interest rates earned on investments. Interest expense
decreased due to lower levels of external borrowings by international
subsidiaries.
Net exchange gain increased $6 million through the second quarter of
fiscal 1995 compared to the same period a year earlier principally due
to translation gains resulting from devaluation of the Mexican peso
and net gains on hedging intercompany transactions with Mexico.
The estimated fiscal 1995 world-wide effective tax rate reflected in
the second quarter is 38 percent. The actual world-wide effective tax
rate for fiscal 1994 was 38.5 percent.
<PAGE> 12
PIONEER HI-BRED INTERNATIONAL, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed with the Commission
during the three months ended February 28, 1995. The
Exhibits filed as part of this report are listed below.
Exhibit 4 - Instruments defining the rights of
security holders, including indentures.
On March 14, 1995 a Form 8-A was
filed with the Commission amending
the Company's Shareholder Rights
Plan and is incorported herein by
reference
Exhibit 27 - Financial data schedule
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 April 13, 1995 ____________________________________
THOMAS N. URBAN, CHAIRMAN OF THE
BOARD OF DIRECTORS AND CHIEF EXECUTIVE
OFFICER
Date April 13, 1995 ______________________________________
JERRY L. CHICOINE, SENIOR VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND CORPORATE
SECRETARY
<PAGE> 13
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> AUG-31-1995 AUG-31-1994
<PERIOD-END> FEB-28-1995 FEB-28-1994
<CASH> 14 28
<SECURITIES> 347 349
<RECEIVABLES> 221 198
<ALLOWANCES> 20 10
<INVENTORY> 685 567
<CURRENT-ASSETS> 1,378 1,248
<PP&E> 860 814
<DEPRECIATION> 410 370
<TOTAL-ASSETS> 1,884 1,754
<CURRENT-LIABILITIES> 1,017 858
<BONDS> 0 0
<COMMON> 93 93
0 0
0 0
<OTHER-SE> 671 671
<TOTAL-LIABILITY-AND-EQUITY> 1,884 1,754
<SALES> 346 317
<TOTAL-REVENUES> 346 317
<CGS> 240 200
<TOTAL-COSTS> 240 200
<OTHER-EXPENSES> 172 157
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7 9
<INCOME-PRETAX> (62) (44)
<INCOME-TAX> 23 17
<INCOME-CONTINUING> (39) (27)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (39) (27)
<EPS-PRIMARY> (.46) (.30)
<EPS-DILUTED> (.46) (.30)
</TABLE>
