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 29, 1996
OR
- ------ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 Indentification No.
incorporation or organization)
700 Capital Square, 400 Locust, Des Moines, Iowa 50309
(Address of principal executive offices)
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 29, 1996
- ------------------------------ ------------------------------
Common Stock ($1.00 par value) 83,194,182
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets-- February 29, 1996,
August 31, 1995, and February 28, 1995........................ 3-4
Consolidated Condensed Statements Of Operations -- Three Months
and Six Months Ended February 29, 1996 and February 28, 1995.. 5
Consolidated Condensed Statements Of Cash Flows-- Six Months
Ended February 29, 1996 and February 28, 1995................. 6
Notes to Consolidated Condensed Financial Statements............ 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 8-12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................ 13
Signatures............................................................... 14
<PAGE>
PART I - FINANCIAL INFORMATION
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, in millions)
<TABLE>
<CAPTION>
February 29, August 31, February 28,
ASSETS 1996 1995 1995
----------- --------- -----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents........... $ 301 $ 84 $ 361
Accounts and notes receivable, net.. 223 209 201
Inventories:
Finished seed..................... 555 280 489
Unfinished seed................... 121 140 189
Other............................. 6 6 7
Prepaid expenses and other current
assets............................ 45 2 55
Deferred income taxes............... 67 49 76
-------- -------- --------
Total current assets.............. $ 1,318 $ 770 $ 1,378
LONG-TERM ASSETS........................ 97 41 37
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and allowances
February 29, 1996 - $469
August 31, 1995 - $447
February 28, 1995 - $424............ 493 472 458
INTANGIBLES............................. 45 10 11
-------- -------- --------
$ 1,953 $ 1,293 $ 1,884
======== ======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, in millions)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' February 29, August 31, February 28,
EQUITY 1996 1995 1995
----------- ---------- -----------
<S> <C> <C> <C>
CURRENT LIABILITIES
Short-term borrowings................. $ 27 $ 58 $ 34
Current maturities of long-term debt.. 9 53 52
Accounts payable, trade............... 190 58 261
Customer deposits..................... 663 -- 599
Accrued compensation.................. 35 45 32
Income taxes payable.................. 2 23 --
Other accruals........................ 51 43 39
-------- -------- --------
Total current liabilities........... $ 977 $ 280 $ 1,017
-------- -------- --------
LONG-TERM DEBT............................ $ 29 $ 18 $ 14
-------- -------- --------
DEFERRED ITEMS, primarily income taxes
and retirement benefits............... $ 92 $ 75 $ 81
-------- -------- --------
MINORITY INTEREST IN SUBSIDIARIES........ $ 6 $ 7 $ 8
-------- --------- --------
SHAREHOLDERS' EQUITY
Preferred stock, no par value......... $ -- $ -- $ --
Common stock, $1 par value............ 93 93 93
Additional paid-in capital............ 21 18 16
Retained earnings..................... 1,039 1,118 927
Unrealized gain on available-for-sale
securities, net..................... 18 -- --
Cumulative translation adjustment..... (2) 1 (1)
-------- -------- --------
$ 1,169 $ 1,230 $ 1,035
Less: Cost of common shares
acquired for the treasury........... (303) (303) (254)
Unearned compensation............... (17) (14) (17)
-------- -------- --------
$ 849 $ 913 $ 764
-------- -------- --------
$ 1,953 $ 1,293 $ 1.884
======== ======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited, in millions)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
February 29, February 28, February 29, February 28,
1996 1995 1996 1995
-------------------------- -------------------------
<S> <C> <C> <C> <C>
Net sales.......................... $ 281 $ 277 $ 373 $ 346
-------- -------- -------- --------
Operating costs and expenses:
Cost of goods sold............... $ 143 $ 142 $ 196 $ 182
Research and development......... 31 31 62 58
Selling.......................... 66 60 119 110
General and administrative....... 36 33 67 62
-------- -------- -------- --------
$ 276 $ 266 $ 444 $ 412
-------- -------- -------- --------
Operating income (loss)............ $ 5 $ 11 $ (71) $ (66)
Investment income.................... 5 5 9 9
Interest expense..................... (3) (4) (7) (7)
Net exchange gain (loss)............. 2 6 (1) 4
-------- -------- -------- --------
Income (loss) before income taxes.. $ 9 $ 18 $ (70) $ (60)
Provision for income taxes........... (3) (7) 27 23
Minority interest and other.......... (2) (2) (2) (2)
-------- -------- -------- --------
Net income (loss)................. $ 4 $ 9 $ (45) $ (39)
======== ======== ======== ========
Income (loss) per common share*...... $ .05 $ .11 $ (.54) $ (.46)
Dividends per common share*.......... $ .20 $ .17 $ .40 $ .34
Weighted average number of common
shares outstanding.................. 83.5 84.7 83.5 84.7
* Not in millions
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
<TABLE>
<CAPTION>
Six Months Ended
February 29, February 28,
1996 1995
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)....................................... $ (45) $ (39)
Noncash items included in net (loss):
Depreciation and amortization.................. 36 34
Net change in assets and liabilities............. 448 323
------- --------
Net cash provided by operating activities...... $ 439 $ 318
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.............................. $ (54) $ (31)
Other............................................. (50) (1)
------- --------
Net cash used in investing activities........... $ (104) $ (32)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) proceeds on short-term borrowings.. $ (29) $ 21
Purchase of treasury stock........................ (33) (29)
Principal payments on long-term borrowings........ (52) (1)
------- --------
Net cash used in financing activities........... $ (115) $ (61)
------- --------
Effect of foreign currency exchange rate changes on
cash and cash equivalents......................... $ (3) $ 1
------- --------
Net increase in cash and cash equivalents........ $ 217 $ 226
Cash and cash equivalents, beginning................ 84 135
------- --------
CASH AND CASH EQUIVALENTS, ENDING................... $ 301 $ 361
======= ========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid for:
Interest........................................ $ 10 $ 9
======= ========
Income taxes.................................... $ 8 $ 24
======= ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
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 29, 1996 and February 28, 1995, and the results of
operations and cash flows for the six months ended February 29, 1996 and
February 28, 1995. Because of the seasonal nature of the Company's
business, the results of operations for the six months ended February 29,
1996, 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 29, 1996, such guarantees totaled approximately $23
million.
3. On December 13, 1995, the Company and Mycogen Corporation announced they had
signed an agreement in which Pioneer would make an investment in Mycogen and
the two companies would create a research collaboration. The investment by
Pioneer totaled $51 million, of which $30 million was for the purchase of
three million shares of Mycogen common stock and the remainder to fund the
research collaboration.
On January 23, 1996, the Company announced it had signed a research
collaboration with Human Genome Sciences. The investment by Pioneer totaled
$16 million, which will fund work performed under the collaboration.
4. Certain individual financial statement categories were reclassified for the
six months ended February 28, 1995, to conform with the presentation adopted
for the six months ended February 29, 1996.
<PAGE>
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, 1995.
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 29, 1996,
consisted of $27 million in direct borrowings from foreign banks.
During fiscal 1996, the Company has the following domestic lines of credit
available:
(in millions)
<TABLE>
<CAPTION>
Revolving Seasonal Total
<S> <C> <C> <C>
First quarter..................... $200 $100 $300
Second quarter.................... $200 $100 $300
Third quarter..................... $200 $ -- $200
Fourth quarter.................... $200 $ -- $200
</TABLE>
Cash and cash equivalents and current maturities of long-term debt at
February 29, 1996, decreased from a year earlier resulting primarily from the
repayment of the private medium-term note in February 1996.
At February 29, 1996, accounts and notes receivable increased due to
increased credit sales and additional sales in dealer areas compared to the same
period a year ago.
The purchase and increase in market value since the purchase date of Mycogen
Corporation common stock (see Note 3) accounts for virtually the entire increase
in long-term assets at February 29, 1996, compared to the prior year.
Property and equipment at February 29, 1996, increased over the same period
a year earlier mainly due to the construction of an office building in Johnston,
Iowa, and additional production capacity in Europe and Latin America.
<PAGE>
At February 29, 1996, intangibles and long-term debt increased from prior
year levels due to additional investments for research collaborations.
At February 29, 1996, accounts payable decreased from a year earlier
primarily due to lower production costs associated with the smaller crop
harvested in the fall of 1995 compared to the fall of 1994.
Customer deposits at February 29, 1996, increased from a year earlier due to
higher advance cash collections in the current year. The Company does not record
a sale until seed is delivered to the customer.
MATERIAL CHANGES IN RESULTS OF OPERATIONS:
Net loss for the six months ended February 29, 1996, was $45 million, or $
.54 per share compared to a net loss of $39 million, or $ .46 per share, for the
second quarter of fiscal 1995. 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.
While it is still early, the Company is on track for another strong year in
1996. Seed corn acreage in North America is projected to rise over 1995 levels
which will have a positive effect on North American seed corn sales. An
anticipated increase in the average per-unit sales price of seed corn sold in
North America due to a change in mix to higher-priced better-performing premium
hybrids should also positively impact current year results. The 1996 list price
for all hybrids remained unchanged from 1995.
However, North American sales are difficult to predict because of
delays in passage of farm legislation and potential that farmers will plant more
acres to soybeans than they had earlier anticipated. As always, sales could be
affected by weather.
Seed corn operating results in North America will be impacted by higher
per-unit seed costs. Most of the additional per-unit costs are due to the
smaller crop harvested in the fall of 1995 compared to the previous year and
increased grower payments resulting from higher commodity costs.
Outside North America, most operations are on track for solid results in
fiscal 1996. Operations in Europe, Latin America, and Asia continue to show
solid overall results.
There are still a number of uncertainties that could affect the Company's
overall results, therefore, fluctuations in expected results are likely as more
information becomes available. Important factors that could cause actual results
to vary significantly from our expectations noted in forward looking statements
include weather, government programs, commodity prices, changes in corn acreage,
currency fluctuations, customer preferences, and management of costs.
<PAGE>
Six Months Ended February 29, 1996 compared to the Six Months Ended
February 28, 1995
Net Sales and Operating Profit (Loss)
(Unaudited, in millions)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
February 29,February 28, Increase/ February 29, February 28,Increase
1996 1995 (Decrease) 1996 1995 (Decrease)
---------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Corn................ $ 234 $ 236 $ (2) $ 273 $ 267 $ 6
Other............... 47 41 6 100 79 21
-------- -------- -------- -------- -------- --------
Total net sales....... $ 281 $ 277 $ 4 $ 373 $ 346 $ 27
-------- -------- -------- -------- -------- --------
Operating profit (loss):
Corn................ $ 34 $ 41 $ (7) $ (16) $ (10) $ (6)
Other............... (9) (11) 2 (15) (21) 6
-------- -------- -------- -------- -------- --------
Product line operating
profit (loss)..... $ 25 $ 30 $ (5) $ (31) $ (31) $ --
Indirect general and
administrative
expenses........ (20) (19) (1) (40) (35) (5)
-------- -------- -------- -------- -------- --------
Operating income
(loss).............. $ 5 $ 11 $ (6) $ (71) $ (66) $ (5)
-------- -------- -------- -------- -------- --------
Units delivered, North America:
Corn................ 1.543 1.407 .136 1.596 1.418 .178
</TABLE>
Operating loss for the first six months of fiscal 1996 increased $5 million
from the same period a year ago. Sales for the first six months of fiscal 1996
improved eight percent, however, increased investments in research and higher
selling and administrative costs offset the margin recognized on these sales.
SEED CORN
North America
Total current year seed corn operating profit decreased $6 million from the
same period a year ago, however, North American operations improved $2 million
during the first six months of 1996 compared to last year. Sales through second
quarter were approximately $16 million higher than the same period a year
earlier due to increased seed corn deliveries in 1996. The Company does not
record a sale until the customer takes delivery of the seed.
<PAGE>
Through second quarter, deliveries were running 12 percent ahead of 1995
levels, primarily due to higher hybrid seed corn deliveries is the southern
United States. Many southern farmers, who planted cotton in 1995, have decided
to plant corn for the 1996 growing season. For the six months ended February 29,
1996, cash collections from products already delivered and from deposits on
products to be delivered were running eight percent ahead of a year ago.
The average seed corn selling price per unit increased four percent for the
first six months of fiscal 1996, also contributing to the increase in sales for
the period. For the year, the average sales price per unit is expected to
increase approximately two percent. The mix of sales through second quarter
compared to the previous year is responsible for the higher year-to-date sales
price increase.
Current year per-unit seed costs increased which offset most of the sales
price improvement. Combined with the year-to-date increase in the average
selling price, seed corn gross profit as a percentage of sales has remained
comparable between the two periods.
Research expenses for corn increased $3 million, or eight percent, from
year-to-date levels a year ago. Expansion of biotechnology projects and trait
and technology development along with costs associated with closing research
stations were the primary factors in this increase.
The Company's commitment to research continues to provide customers with
value-added products. For 1996, 24 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 $4 million, or ten percent, from 1995 year-to-date levels. The
major components of this increase were higher costs associated with customer
incentives and increased personnel costs due to merit increases and training.
Europe, Mexico, and Latin America
Operating results outside North America decreased approximately $8 million.
European operations account for $2 million of the total decrease. On a constant
dollar basis, European operations decreased $3 million compared to 1995, mostly
due to fewer unit sales.
Total year-to-date European seed corn sales decreased $7 million from the
same period a year earlier. Fewer unit sales was a significant factor in this
decrease, however, a higher average per-unit selling price for the region helped
offset some of this decrease.
Earlier delivery of seed in Germany improved total year-to-date regional
sales $5 million from 1995 levels, while Austria sales decreased $7 million due
to the delay of seed sales resulting from unusually poor weather conditions
during the early part of their sales season. Year-to-date seed corn sales in
France decreased $5 million and Hungary sales decreased $2 million from those
reported a year ago. It is still too soon to predict annual unit sales for these
operations as it is early in their sales season.
<PAGE>
Italy sales improved $2 million from those reported a year ago mainly the
result of an increase in the per-unit sales price. Total seed corn sales for
Italy were positively impacted in 1995 by additional units sold during a second
sales season. It is uncertain whether similar sales will occur again in 1996.
Cost of goods sold for Europe were reduced as a result of the decrease in
units sold for the first six months of fiscal 1996. Combined with an increase in
the per-unit cost of seed corn, cost of goods sold for the region decreased $4
million.
The effect of the U.S. dollar weakening against European currencies accounts
for most of the remaining change in European operating profit from a year ago,
positively impacting current year operations $1 million.
Mexico's current year operating profit decreased $5 million from the same
period a year ago. Decreased seed corn acreage in Northeast and Northwest Mexico
resulting from drought reduced unit sales. Also contributing to the decrease was
the effect of the devaluation of the Mexican peso.
Operating profits in Latin America decreased $1 million from the prior year
due mainly to higher cost of goods sold and higher fixed selling and general and
administrative expenses
OTHER PRODUCTS
Other products' 1996 year-to-date operating results increased operating
profit by $6 million. The majority of this increase is due to higher unit sales
of wheat in North America. An attractive commodity price and excellent growing
conditions resulted in a 16 percent acreage increase. Combined with excellent
product performance, these factors resulted in a 26 percent increase in
year-to-date units sold compared to the same period a year ago.
INDIRECT GENERAL AND ADMINISTRATIVE EXPENSES
Current year indirect general and administrative expenses increased $5
million, or 14 percent, over 1995 levels. Adopting Financial Accounting Standard
No. 116 "Accounting for Contributions Made and Contributions Received" during
the first quarter of fiscal 1996 accounted for $3 million of the increase.
NET FINANCIAL AND TAXES
Net exchange gain decreased $5 million through second quarter of fiscal 1996
compared to the same period a year earlier principally due to net gains on
hedging intercompany transactions with Mexico recorded in the prior year not
present through second quarter in fiscal 1996.
The estimated fiscal 1996 world-wide effective tax rate reflected in the
second quarter is 38 percent - the same as was reflected in second quarter of
fiscal 1995. The actual world-wide effective tax rate was reduced to 36.5
percent at the end of fiscal 1995 due to a reduction in taxes on foreign
earnings.
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
a. Exhibits
Financial Data Schedule (Exhibit 27).
b. Reports on Form 8-K
No reports on Form 8-K were filed with the Commission during the
three months ended February 29, 1995.
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
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)
By /s/CHARLES S. JOHNSON
CHARLES S. JOHNSON
President and Chief Executive Officer
and Director
By /s/JERRY L. CHICOINE
JERRY L. CHICOINE
Senior Vice President, Chief Financial Office
and Corporate Secretary to the Board
Dated: April 11, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 32
<SECURITIES> 269
<RECEIVABLES> 242
<ALLOWANCES> 19
<INVENTORY> 682
<CURRENT-ASSETS> 1318
<PP&E> 952
<DEPRECIATION> 459
<TOTAL-ASSETS> 1953
<CURRENT-LIABILITIES> 977
<BONDS> 0
0
0
<COMMON> 93
<OTHER-SE> 756
<TOTAL-LIABILITY-AND-EQUITY> 1953
<SALES> 373
<TOTAL-REVENUES> 373
<CGS> 258
<TOTAL-COSTS> 258
<OTHER-EXPENSES> 186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> (72)
<INCOME-TAX> 27
<INCOME-CONTINUING> (45)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45)
<EPS-PRIMARY> (0.54)
<EPS-DILUTED> (0.54)
</TABLE>
