<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 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: 0-15881
-------
MYCOGEN CORPORATION
------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-3802654
- ------------------------------------------ -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5501 Oberlin Drive, San Diego, California 92121
- ------------------------------------------ ------------------------
(Address of principal executive offices) (Zip Code)
(619) 453-8030
----------------------------------------------------
(Registrant's telephone number, including area code)
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
--- ---
19,311,380 shares of Common Stock were outstanding as of May 9, 1995.
1
<PAGE>
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Mycogen Corporation
Interim Consolidated Condensed Statements of Operations
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1994
------- -------
(Unaudited)
<S> <C> <C>
Net operating revenues:
Unrelated parties........................ $51,158 $51,656
Related party............................ - 1,068
Contract and other revenues:
Unrelated parties........................ 969 1,201
Related party............................ 604 848
------- -------
Total revenues....................... 52,731 54,773
------- -------
Costs and expenses:
Cost of operating revenues............... 30,515 30,673
Selling, general and administrative...... 8,905 8,561
Research and development................. 4,744 4,252
Amortization of intangible assets........ 555 489
------- -------
Total costs and expenses............... 44,719 43,975
------- -------
Operating income .......................... 8,012 10,798
Interest income and expense, net......... 153 599
Exchange gain (loss)..................... 138 26
------- -------
Net income................................. 8,303 11,423
Dividends on preferred stock............... (375) (357)
------- -------
Net income applicable to common shares..... $ 7,928 $11,066
======= =======
Net income per common share:
Primary.................................. $ .41 $ .58
======= =======
Assuming full dilution................... $ .39 $ .55
======= =======
Weighted average number of shares:
Primary.................................. 19,205 19,036
======= =======
Assuming full dilution................... 21,330 20,810
======= =======
</TABLE>
See accompanying Notes to Interim Consolidated Condensed Financial Statements.
2
<PAGE>
Mycogen Corporation
Consolidated Condensed Balance Sheets
(Dollars in thousands, except par value data)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
Assets (Unaudited) (Note)
----------- ------------
<S> <C> <C>
Current assets:
Cash, cash equivalents and securities available-for-sale...... $ 22,543 $ 36,055
Accounts and notes receivable, net of allowances.............. 40,295 11,369
Inventories................................................... 40,257 51,697
Prepaid expenses.............................................. 853 1,241
-------- --------
Total current assets........................................ 103,948 100,362
Net property, plant and equipment............................... 50,341 48,069
Net intangible assets........................................... 17,648 17,961
Other assets.................................................... 13,012 8,714
-------- --------
Total assets.................................................... $184,949 $175,106
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings......................................... $ 10,560 $ 2,000
Accounts payable.............................................. 6,057 12,377
Deferred revenues............................................. 9,856 12,898
Other current liabilities..................................... 7,295 7,209
--------- ---------
Total current liabilities................................... 33,768 34,484
Long-term liabilities........................................... 3,492 3,534
Minority interest............................................... 21,406 21,406
Stockholders' equity:
Senior convertible cumulative preferred stock:
Series A preferred stock, $.001 par value, 6,777 shares
authorized; 3,036 and 2,999 shares issued to a related
party and outstanding at March 31, 1995 and December 31,
1994, respectively; aggregate liquidation preference,
$30,368 and $29,993 respectively............................ - -
Common stock, $.001 par value, 40,000,000 shares authorized;
19,305,713 and 19,108,489 shares issued and outstanding at
March 31, 1995 and December 31, 1994, respectively.......... 19 19
Additional paid in capital.................................... 215,726 213,428
Deficit....................................................... (89,462) (97,765)
-------- --------
Total stockholders' equity.................................. 126,283 115,682
-------- --------
Total liabilities and stockholders' equity...................... $184,949 $175,106
======== ========
</TABLE>
Note: The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date.
See accompanying Notes to Interim Consolidated Condensed Financial Statements.
3
<PAGE>
Mycogen Corporation
Interim Consolidated Condensed Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1994
-------- --------
(Unaudited)
<S> <C> <C>
Operating activities:
Net income................................................... $ 8,303 $ 11,423
Items which did not use cash:
Depreciation .............................................. 1,106 1,347
Amortization of intangible assets.......................... 555 489
Other expense not requiring cash........................... 128 90
Changes in operating assets and liabilities:
Accounts and notes receivable.............................. (28,754) (36,173)
Inventories................................................ 11,440 13,943
Prepaid expenses........................................... 388 (332)
Accounts payable........................................... (6,320) (4,215)
Deferred revenues.......................................... (3,042) 2,349
Other current liabilities.................................. 133 2,215
-------- --------
Cash used in operating activities........................ (16,063) (8,864)
-------- --------
Investing activities:
Proceeds from sales of available-for-sale securities......... 1,103 15,753
Proceeds from maturities of available-for-sale securities.... 4,193 5,342
Purchases of available-for-sale securities................... - (4,809)
Capital expenditures......................................... (3,264) (1,578)
Prepaid contract manufacturing............................... (3,009) (279)
Change in intangibles and other assets....................... (181) (418)
-------- --------
Cash provided by (used in) investing activities.......... (1,158) 14,011
-------- --------
Financing activities:
Net change in short-term borrowings.......................... 8,560 (10,100)
Payments on long-term borrowings............................. (89) -
Proceeds from sale of common stock........................... 110 118
-------- --------
Cash provided by (used in) financing activities............ 8,581 (9,982)
-------- --------
Effect of exchange rate changes on cash and cash equivalents... 229 344
-------- --------
Decrease in cash and cash equivalents.......................... (8,411) (4,491)
Cash and cash equivalents at beginning of period............... 9,475 9,120
-------- --------
Cash and cash equivalents at end of period..................... 1,064 4,629
Securities available-for-sale.................................. 21,479 33,427
-------- --------
Cash, cash equivalents and securities available-for-sale
at end of period.............................................. $ 22,543 $ 38,056
======== ========
</TABLE>
See accompanying Notes to Interim Consolidated Condensed Financial Statements.
4
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (continued).
Mycogen Corporation
-------------------
Notes to Interim Consolidated Condensed Financial Statements
Note 1. General
- ----------------
The accompanying financial statements include the accounts of Mycogen
Corporation, its wholly-owned subsidiaries and majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The interim financial statements have been prepared by the
Company, without audit, according to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (which include only normal recurring
adjustments) necessary to state fairly the financial position, results of
operations and cash flows as of and for the periods indicated.
It is suggested that these financial statements be read in conjunction with the
financial statements and the notes thereto included in the Annual Report and
Form 10-K of the Company for the fiscal year ended December 31, 1994.
The Company has elected to change its fiscal year end from December 31 to August
31. A Form 10-Q will be filed for the quarter ending June 30, 1995 and a Form
10-K will be filed for the eight-month transition period ending August 31, 1995.
The Company's business is highly seasonal. Operating revenues are expected to
be concentrated principally in the quarters ending March 31 and June 30 as a
result of the North American agricultural growing season. Consequently,
operating revenues and results of operations for the three months ended March
31, 1995 are not indicative of operating revenues and results to be expected for
a full fiscal year.
Certain prior year amounts have been reclassified to conform to the 1995
presentation.
Note 2. Supplemental Schedule of Non-Cash Investing and Financing Activities
- -----------------------------------------------------------------------------
Non-cash investing and financing activities for the three months ended March 31,
are as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
-------- ------
<S> <C> <C>
Dividends on preferred stock $ 375 $ 357
======== ======
Issuance of Company stock for business acquisition $ 1,350 $ --
======== ======
</TABLE>
5
<PAGE>
Note 3. Inventories
- --------------------
Inventories are comprised of:
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 1995 1994
---------- ------------
<S> <C> <C>
Raw materials and supplies $ 6,112 $ 4,323
Work in process 4,793 8,834
Finished goods 29,352 38,540
---------- -----------
Total $ 40,257 $ 51,697
========== ===========
</TABLE>
Note 4. Accumulated Depreciation and Amortization
- -------------------------------------------------
Accumulated depreciation of property, plant and equipment was $15.0 million and
$13.8 million at March 31, 1995 and December 31, 1994, respectively.
Accumulated amortization of intangible assets was $6.4 and $5.8 million at March
31, 1995 and December 31, 1994, respectively.
Note 5. Income Taxes
- ---------------------
No provision for income tax is recognized for the three months ended March 31,
1995 since the Company anticipates that the effective tax rate for the eight
months ending August 31, 1995 will be zero due to the available net operating
loss carryforwards.
Note 6. Net Income Per Common Share
- ------------------------------------
Net income per common share for the quarters ended March 31, 1995 and 1994 is
determined by deducting dividends on preferred stock from net income and
dividing the net result by the weighted average number of common shares
outstanding during the respective period. The dilutive effect of common shares
issuable under stock options was less than 3% and was not included in the
computation of primary earnings per share.
Net income per common share assuming full dilution includes common shares
issuable upon the exercise of stock options and the conversion of preferred
stock into common stock. The computation also excludes the effect of preferred
stock dividends.
6
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
SEASONALITY
As a result of the seasonality of the Company's business, revenues, expenses and
income for the three months ended March 31 are not indicative of the revenues,
expenses and income to be expected for a full fiscal year.
SUMMARY STATEMENTS OF OPERATIONS
The following table presents selected data in the Interim Consolidated Condensed
Statements of Operations as a percentage of net operating revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
(Dollars in thousands) 1995 1994
--------------- ---------------
<S> <C> <C> <C> <C>
Net operating revenues $51,158 100.0% $52,724 100.0%
Cost of operating revenues 30,515 59.6% 30,673 58.2%
--------------- ---------------
Gross margin $20,643 40.4% $22,051 41.8%
</TABLE>
RESULTS OF OPERATIONS
NET OPERATING REVENUES, COST OF OPERATING REVENUES AND GROSS MARGIN
Net operating revenues for the three months ended March 31, 1995 decreased
slightly to $51.2 million from $52.7 million for the same period in 1994.
Domestic seed revenues were $2.8 million lower due mainly to lower soybean and
sunflower sales volume. These declines were partially offset by higher
international revenues.
Gross margins totaled $20.6 million for the three months ended March 31,
1995, compared to $22.1 million for the same period in 1994. As a percentage of
net operating revenues, gross margins decreased from 41.8% to 40.4% due mainly a
less favorable sales mix in international and biopesticide divisions.
The Company anticipates a negative impact on its crop protection business
as a result of severe flooding in California's Salinas Valley.
CONTRACT AND OTHER REVENUES
Contract and other revenues decreased to $1.6 million for the three months ended
March 31, 1995 from $2.0 million for the same period in 1994 due primarily to a
reduction in the annual funding from Lubrizol.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $.3 million to $8.9
million for the three months ended March 31, 1995, from $8.6 million for the
same period in 1994. The increase is due mainly to higher sales and marketing
efforts in Europe and severance costs.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased to $4.7 million for the three months
ended March 31, 1995, from $4.3 million for the same period in 1994. The
increase is due to primarily to higher commercial development efforts in Europe
and South America.
7
<PAGE>
INTEREST INCOME AND EXPENSE, NET
Interest income and expense, net decreased to $.2 million for the three months
ended March 31, 1995, from $.6 million for the same period in 1994 due primarily
to lower cash balances available for investment, higher levels of borrowing and
higher interest rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and short-term investments decreased
by $13.5 million to $22.5 million during the three months ended March 31, 1995.
This decrease was due primarily to prepaid contract manufacturing costs of $3.0
million, the purchase of land and buildings for $2.5 million, other capital
expenditures which totaled $.8 million and cash used in operations of $16.1
million primarily for working capital needs, which are highly seasonal. Higher
accounts receivable and lower accounts payable and deferred revenues were
somewhat offset by lower inventory. Payments for seed inventories are
principally made during December through March while cash from seed sales is
received mainly during July through September. The exact timing of payments for
seed inventories and collections for seed sales are influenced by farmer's
economic conditions and the Company's and competitors discount programs. This
decrease was offset by net proceeds from the Company's line of credit facility
totaling $8.6 million. The Company has a $25 million bank line of credit
facility to fund portions of its seasonal working capital needs, of which $14.4
million was unused at March 31, 1995.
The Company is committed to an exclusive manufacturing agreement whereby
the Company has agreed to pay for the actual cost of constructing a new
manufacturing facility which will be owned by the manufacturer. The Company has
made payments totaling $9.7 million through March 1995 and will pay an
additional $.6 million during the second quarter of 1995 to the manufacturer for
the completion of the facility. During the first quarter of 1995 the Company
purchased certain land and buildings at its headquarters, a portion of which the
Company had previously leased, totaling $2.5 million. The purchase of the land
and buildings was financed with a $2.5 million seven-year note payable to a bank
obtained in December 1994. Other capital expenditures are expected to approach
$4.0 million for the eight months ended August 31, 1995. It is anticipated that
the payments for the completion of the manufacturing facility, the remainder of
the improvements to the acquired buildings and other capital expenditures will
be funded with existing cash.
Dividends on the Series A preferred stock are cumulative and are payable
quarterly to Lubrizol in additional shares of preferred stock. Starting in
December 1997 and thereafter, the dividends are payable in cash. Also, the
Company has agreed to purchase the remaining ownership interest of MPS from
Lubrizol for additional Common Stock or, after November 2000, for cash at a
price between $21.4 million and $26.3 million. The Company plans to pursue an
acquisition strategy to complement existing technologies. It is anticipated
that any acquisitions would be financed with existing cash, stock or debt.
The Company anticipates that its current cash position, funds from its
existing line of credit, interest income and revenue from operations and
collaborative agreements will be sufficient to finance working capital and
capital requirements for the immediate future. However, the Company's capital
requirements may vary as a result of competitive and technological developments,
the timing of regulatory approval for new products and the terms and conditions
of any future strategic transactions. If such requirements change, the Company
may need to raise additional capital.
8
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
a) The annual meeting of stockholders was held on April 20, 1995.
b) Not required.
c) The following Board of Directors were elected to serve until the next
Annual Meeting and until their successors are elected and qualified:
<TABLE>
<CAPTION>
Number of Votes Cast
Affirmative Negative
----------- --------
<S> <C> <C>
Thomas J. Cable 17,040,847 379,293
Jerry D. Caulder 17,039,706 380,434
George R. Hill 17,052,147 367,993
David H. Rammler 17,041,897 378,243
A. John Speziale 17,045,582 374,558
</TABLE>
The proposal to amend the Company's 1993 Stock Option Plan to increase
the number of shares of Common Stock reserved for issuance by
1,000,000 shares was approved by 10,284,941 affirmative votes vs.
4,314,981 negative votes vs. 210,249 abstentions vs. 2,609,119 broker
non-votes.
The proposal to amend the Company's 1990 Restricted Stock Issuance
Plan to increase the number of shares of Common Stock reserved for
issuance by 150,000 shares was approved by 10,565,514 affirmative
votes vs. 4,028,033 negative votes vs. 222,261 abstentions vs.
2,603,627 broker non-votes.
The proposal to reincorporate the Company from Delaware to California
was approved by 14,187,694 affirmative votes vs. 412,195 negative
votes vs. 214,919 abstentions vs. 2,603,627 broker non-votes.
The proposal to ratify the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending December 31,
1995 was approved by 17,365,647 affirmative votes vs. 26,190 negative
votes vs. 26,598 abstentions.
d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
Exhibit 11 - Statements re Computation of Per Share Earnings. See
Exhibit 11 attached hereto.
Exhibit 27 - Financial Data Schedule. See Exhibit 27 attached
hereto.
9
<PAGE>
b) Reports on Form 8-K
A current report on Form 8-K was filed on May 2, 1995 for the change
in the Company's fiscal year end from December 31 to August 31.
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.
Mycogen Corporation
-------------------
(Registrant)
Date: May 11, 1995 /s/ James A. Baumker
--------------- -----------------------
James A. Baumker
Controller and Chief
Accounting Officer
Date: May 11, 1995 /s/ Carlton J. Eibl
--------------- ----------------------
Carlton J. Eibl
Executive Vice President
Finance and Legal
10
<PAGE>
Mycogen Corporation
Exhibit 11
Statements re Computation of Per Share Earnings
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1994
------- -------
<S> <C> <C>
Net income....................................... $ 8,303 $11,423
Dividends on preferred stock..................... (375) (357)
------- -------
Net income applicable to common shares........... 7,928 11,066
Adjustment for dividends on preferred stock...... 375 357(1)
------- -------
Net income for computation assuming
full dilution.................................. $ 8,303 $11,423
======= =======
Weighted average number of shares outstanding:
Average common shares for computation
of primary net income per common share......... 19,205 19,036
Stock option equivalent shares................... 454 178(1)(2)
Conversion of preferred shares................... 1,671 1,596(1)
------- -------
Average shares for computation of net income
per common share assuming full dilution........ 21,330 20,810
======= =======
Net income per common share:
Primary........................................ $ .41 $ .58
======= =======
Assuming full dilution......................... $ .39 $ .55
======= =======
</TABLE>
(1) Additional shares from stock option equivalents and the conversion of
preferred stock and respective adjustments for period stock dividends were
not included in the calculation assuming full dilution where the effect was
antidilutive or the dilution was less than 3%.
(2) Additional shares from stock option equivalents were not included in the
calculation of primary net income per common share where the dilutive effect
was less than 3%.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,064
<SECURITIES> 21,479
<RECEIVABLES> 40,295
<ALLOWANCES> 0
<INVENTORY> 40,257
<CURRENT-ASSETS> 103,948
<PP&E> 65,385
<DEPRECIATION> 15,044
<TOTAL-ASSETS> 184,949
<CURRENT-LIABILITIES> 33,768
<BONDS> 0
<COMMON> 19
0
0
<OTHER-SE> 215,726
<TOTAL-LIABILITY-AND-EQUITY> 126,283
<SALES> 51,158
<TOTAL-REVENUES> 52,731
<CGS> 30,515
<TOTAL-COSTS> 30,515
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,303
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,303
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,303
<EPS-PRIMARY> .41
<EPS-DILUTED> .39
</TABLE>
