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, 1994
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 December 27, 1994
Common Stock ($1.00 par value) 84,534,812
<PAGE> 1
PIONEER HI-BRED INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1 FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS-
NOVEMBER 30, 1994, AUGUST 31, 1994,
AND NOVEMBER 30, 1993 3-4
CONSOLIDATED CONDENSED STATEMENTS OF
OPERATIONS- 5
THREE MONTHS ENDED
NOVEMBER 30, 1994 AND 1993
CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS- 6
THREE MONTHS ENDED
NOVEMBER 30, 1994 AND 1993
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS 7
ITEM 2 MANAGEMENT'S DISCUSSION AND 8-10
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 11
<PAGE> 2
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, in millions)
<TABLE>
November 30, August 31, November 30,
ASSETS 1994 1994 1993
<S>
CURRENT ASSETS <C> <C> <C>
Cash and cash equivalents $ 67 $ 135 $ 64
Accounts and notes receivable, net 146 193 111
Inventories:
Finished seed 367 164 339
Unfinished seed 339 190 254
Other 6 5 7
Prepaid expenses and other current
assets 13 3 11
Deferred income taxes 62 52 54
Total current assets $1,000 $ 742 $ 840
LONG-TERM ASSETS 38 38 40
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and
allowances
November 30, 1994 $401
August 31, 1994 $397
November 30, 1993 $366 451 450 444
INTANGIBLES 21 23 26
$1,510 $1,253 $1,350
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE> 3
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, in millions)
<TABLE>
November 30, August 31, November 30,
1994 1994 1993
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES
Short-term borrowings $ 199 $ 14 $ 160
Current maturities of long-term debt 1 1 1
Accounts payable, trade 324 80 219
Accrued compensation 28 54 27
Income taxes payable - 31 -
Other accruals 37 52 47
Total current liabilities $ 589 $ 232 $ 454
LONG-TERM DEBT $ 65 $ 66 $ 66
DEFERRED ITEMS, primarily income taxes
and retirement benefits $ 78 $ 67 $ 59
MINORITY INTEREST IN SUBSIDIARIES $ 6 $ 7 $ 6
SHAREHOLDERS' EQUITY
Preferred stock, no par value $ - $ - $ -
Common stock, $1 par value 93 93 93
Additional paid-in capital 15 15 13
Retained earnings 932 995 778
Cumulative translation adjustment (1) (3) (11)
$1,039 $1,100 $ 873
Less: Cost of common shares
acquired for the treasury (257) (207) (98)
Unearned compensation (10) (12) (10)
$ 772 $ 881 $ 765
$1,510 $1,253 $1,350
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE> 4
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited, in millions)
<TABLE>
Three Months Ended
November 30,
1994 1993
<S> <C> <C>
Net sales $ 69 $ 67
Operating costs and expenses:
Cost of goods sold $ 40 $ 39
Research and development 27 24
Selling 50 44
General and administrative 29 25
Restructuring and settlements - 5
$ 146 $ 137
Operating (loss) $ (77) $ (70)
Investment income 4 3
Interest expense (3) (3)
Net exchange (loss) (2) (2)
(Loss) before income taxes $ (78) $ (72)
Provision for income taxes 30 28
Net (loss) $ (48) $ (44)
(Loss) per common share* $ (.57) $ (.49)
Weighted average number of
common shares outstanding 85 89
* Not in millions
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE> 5
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
<TABLE>
Three Months Ended
November 30,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (48) $ (44)
Noncash items included in net loss:
Depreciation and amortization 17 16
Restructuring of operations - 5
Other 3 -
Net change in assets and liabilities (144) (77)
Net cash used in operating
activities $(172) $(100)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments received on notes receivable $ 3 $ 6
Disbursements for notes receivable (1) (2)
Capital expenditures (15) (21)
Other (3) (1)
Net cash used in investing
activities $ (16) $ (18)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds on short-term borrowings $ 185 $ 101
Purchase of treasury stock (49) (1)
Dividends paid (15) (13)
Other (1) -
Net cash provided by financing
activities $ 120 $ 87
Effect of foreign currency exchange rate
changes on cash and cash equivalents $ - $ (1)
Effect of change in year-end of the
Company's international subsidiaries on
cash and cash equivalents $ - $ 4
Net decrease in cash and cash
equivalents $ (68) $ (28)
Cash and cash equivalents, beginning $ 135 $ 92
CASH AND CASH EQUIVALENTS, ENDING $ 67 $ 64
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 7 $ 6
Income taxes $ 10 $ 9
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<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
November 30, 1994 and 1993, and the results of operations and
cash flows for the three months ended November 30, 1994 and
1993. Because of the seasonal nature of the Company's
business, the results of operations for the three months
ended November 30, 1994, 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 November 30, 1994,
such guarantees totaled approximately $23 million.
<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. The Company also has a $100 million private
medium-term note program of which $50 million is available as of
November 30, 1994. Short-term debt at November 30, 1994,
consisted of $168 million in domestic commercial paper and $31
million in direct short-term borrowings from foreign banks.
Long-term debt at November 30, 1994, consisted principally of $50
million in medium-term notes maturing in February, 1996.
During fiscal 1995, the Company has the following domestic lines of
of credit available:
<TABLE>
<S> <C> <C> <C>
Quarter: Revolving Seasonal Total
First $100 $ 74 $174
Second $100 $118 $218
Third $ 50 $ - $ 50
Fourth $ 50 $ - $ 50
</TABLE>
At November 30, 1994, accounts and notes receivable increased
from a year earlier primarily due to higher prior year sales and an
increase in sales on credit.
Seed inventories, short-term borrowings, and accounts payable at
November 30, 1994, are higher than the same point in time a year ago
primarily due to higher production costs associated with the larger
production crop harvested in the fall of 1994 compared to the fall of
1993.
The Company repurchased $49 million of its stock during the three
months ended November 30, 1994. At November 30, 1994, authorized shares
remaining to be repurchased totaled 2 million.
<PAGE> 8
MATERIAL CHANGES IN RESULTS OF OPERATIONS:
Net loss for the three months ended November 30, 1994, was
$48 million, or $.57 per share, compared to a net loss of $44
million, or $.49 per share, for the first quarter of fiscal 1994.
Last year's results included $5 million in restructuring and
settlement costs which are not present in this year's numbers.
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.
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 the average Pioneer(R)
brand hybrid out yielded the average competitor by 5.6 bushels per acres.
Another strong sales year is expected in North America and early sales
orders support that. As of January 3, 1995, sales orders are three
and a half percent ahead of last year. Overall, operating profit
is expected to increase in North America in 1995 compared to 1994. In
total, the Company's operations outside North America are expected to
be comparable to last year.
This year's higher first quarter loss was due to increased
fixed costs. These were partially offset by an increase in operating
profit in South America and Asia resulting from increased sales.
Fixed costs are approximately $12 million higher than last year
due to increases in research and selling expenses and due to 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. Therefore,
while operating profit in total for France is expected to remain
comparable to last year, reported revenues and expenses will both
increase. Since France's selling season is in the spring, revenues were
not recorded during the first quarter, however, one quarter of the year's
operating expenses for this new entity were reflected. This accounted
for approximately $4 million of the increase in first quarter's selling
and marketing costs.
Net sales through the first quarter of fiscal 1995 increased
$2 million to $69 million. First quarter seed corn sales, generated
almost entirely outside of North America and Europe, increased $5
million to $31 million. South American sales increased $7 million as a
result of increased unit sales and price in Brazil, Argentina, and Chile.
In Asia, sales increased $2 million due to higher unit sales in several
countries. Seed corn sales in Mexico decreased $3 million due to a
reduction in corn acreage in northern Mexico resulting from a reduction in
corn subsidies and irrigation restrictions. Other products revenues
decreased $3 million to $38 million primarily due to lower specialty plant
product sales.
<PAGE> 9
For the year, the Company expects sales and operating profits in
South America and Asia to be higher than last year. Mexico's results
for 1995 are expected to be lower than 1994 due to the reduction in corn
acreage and the peso devaluation. European operating results for 1995
are expected to be comparable to 1994. In North America, management
believes seed corn unit sales could be close to the record 11.8 million
in 1994 despite an anticipated decrease in corn acreage for the 1995
planting season. The acreage decrease is expected due to the announced
change in the U.S. feed grains program set-aside from zero to 7.5 percent.
Management expects the continued strong performance of Pioneer(R) brand
products to help increase market share again in 1995.
The Company expects 1995 seed corn margins in North America to
increase due to an increase in the average sales price of seed corn and
lower cost of sales. The list price of most of the Company's hybrids
increased $1.50 to $2.00 per unit. In addition management expects to sell
a larger portion of the Company's higher-performing, higher-priced
hybrids. Combined, this is expected to increase the average sales price
four to five percent. Seed corn cost of sales are expected to be
approximately three percent lower than 1994, on a per unit basis,
primarily due to excellent seed field yields on the large 1994 crop and
lower commodity costs.
Research expense increased $3 million, or 13 percent over the first
quarter of 1994. This is in line with the Company's expected 11 percent
increase in research expenses for 1995.
Selling and general and administrative expenses for the first
three months of fiscal 1995 increased $10 million over the same period
a year earlier. As previously mentioned, the change in operations in
France accounts for $4 million of this increase. In North America,
selling and marketing expenses increased $2 million in part due to
planned increases in advertising expenses and personnel costs and in
part due to the earlier timing of certain expenses. Indirect general
and administrative expenses were $2 million higher than last year due
to normal merit and personnel cost increases and an increase in
charitable contributions.
Last year's first quarter included a $5 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.
The estimated fiscal 1995 world-wide effective tax rate reflected
in the first quarter is 38 percent. The actual world-wide effective
tax rate for fiscal 1994 was 38.5 percent.
<PAGE> 10
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 November 30, 1994. The
Exhibits filed as part of this report are listed below.
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 January 12, 1995
THOMAS N. URBAN, CHAIRMAN OF THE
BOARD OF DIRECTORS AND PRESIDENT
Date January 12, 1995
JERRY L. CHICOINE, SENIOR VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND CORPORATE
SECRETARY
<PAGE> 11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> QTR-1 QTR-1
<FISCAL-YEAR-END> AUG-31-1995 AUG-31-1994
<PERIOD-END> NOV-30-1994 NOV-30-1993
<CASH> 67 64
<SECURITIES> 0 0
<RECEIVABLES> 165 124
<ALLOWANCES> 20 13
<INVENTORY> 712 600
<CURRENT-ASSETS> 1,000 840
<PP&E> 852 810
<DEPRECIATION> 401 366
<TOTAL-ASSETS> 1,510 1,350
<CURRENT-LIABILITIES> 589 454
<BONDS> 0 0
<COMMON> 93 93
0 0
0 0
<OTHER-SE> 679 672
<TOTAL-LIABILITY-AND-EQUITY> 1,510 1,350
<SALES> 69 67
<TOTAL-REVENUES> 69 67
<CGS> 67 63
<TOTAL-COSTS> 67 63
<OTHER-EXPENSES> 79 74
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3 3
<INCOME-PRETAX> (78) (72)
<INCOME-TAX> 30 28
<INCOME-CONTINUING> (48) (44)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (48) (44)
<EPS-PRIMARY> (.57) (.49)
<EPS-DILUTED> (.57) (.49)
</TABLE>
