SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the three month period ended November 30, 1993 or
Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act 1934
For the transition period from to
Commission file number: 0-17005
DEKALB Genetics Corporation
(Exact name of registrant as specified in its charter)
Delaware 36-3586793
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3100 Sycamore Road, DeKalb, Illinois 60115
(Address of principal executive offices) (Zip Code)
815-758-3461
(Registrant's telephone number,
including area code)
Indicate 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
Title of class Outstanding as of November 30, 1993
Class A Common, no par value 803,663
Class B Common, no par value 4,335,733
Exhibit index is located on page 2
Total number of pages 15
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DEKALB Genetics Corporation
INDEX
Page No.
Part I - Financial Information
Management's Discussion and Analysis of Results of
Operations and Financial Position 3-5
Condensed Consolidated Statements of Operations for
the three months ended November 30, 1993 and 1992 6
Condensed Consolidated Balance Sheets, November 30, 1993,
1992 and August 31, 1993 7
Condensed Consolidated Statements of Cash Flows
for the three months ended November 30, 1993 and 1992 8
Notes to Condensed Consolidated Financial Statements 9-11
Report of Independent Accountants 12
Part II - Other Information 13
EXHIBIT 11 - Computation of Net Earnings per Common and
Common Equivalent Share for the three months ended
November 30, 1993 and 1992 14
EXHIBIT 15 - Letter Re Unaudited Interim Financial Information 15
<PAGE>
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
and Financial Position
Net earnings for the first quarter of fiscal 1994 were $0.9 million ($.18 per
share) compared with $0.8 million ($.15 per share) in fiscal 1993. Compared
with fiscal 1993 first quarter, consolidated revenues were $7.1 million lower
in fiscal 1994 due largely to lower corn volume from Argentina. Poultry
revenues were $1.0 million below fiscal 1993. Offsetting these revenue
decreases were increased revenues from the swine ($2.5 million) and seed
($1.5 million) segments.
Current year earnings included $0.6 million ($.12 per share) of after-tax
benefit related to the curtailment of the defined benefit portion of the
company's retirement plans. Excluding that benefit and the cumulative effect
of adopting the new standard for accounting for income taxes, net earnings
were down $0.2 million ($.04 per share) primarily due to lower earnings in
Argentina offset partly by improved results from the swine business.
First Quarter Industry Segment Revenues and Earnings
In Millions
(Unaudited)
November November
Revenues 1993 1992
Seed $ 23.2 $ 31.8
Swine 13.0 10.5
Poultry 4.6 5.6
Total revenues $ 40.8 $ 47.9
Earnings
Seed $ 2.8 $ 3.5
Swine 1.8 0.7
Poultry (0.2) (0.2)
Total operations 4.4 4.0
General corporate expenses (0.6) (1.0)
Net interest expense (1.9) (1.8)
Earnings before income taxes and accounting change 1.9 1.2
Income tax provision 0.7 0.4
Earnings before cumulative effect
of accounting change 1.2 0.8
Cumulative effect of accounting change (0.3) -
Net Earnings $ 0.9 $ 0.8
Seed
Seed revenue and earnings in the first quarter were primarily the result of
southern hemisphere operations since the North American seed business and
other northern hemisphere operations do not report any material sales and
earnings until the second quarter.<PAGE>
<PAGE>
International Seed
International seed segment earnings decreased $0.9 million from prior year
first quarter. In Argentina, revenues were down 32% due to a combination
of lower hybrid corn planting intentions and weather-related planting
delays, resulting in lower volume. While a portion of DEKALB's sales
volume and revenues have been delayed until the second quarter, Argentine
full year earnings will be down significantly from last year's record
earnings as a result of lower hybrid corn planted acreage, together with
higher crop costs and fixed operating expenses. Hybrid corn acreage in
Argentina is now expected to decrease about 15% this year due in part to
the unfavorable weather conditions but the company expects to maintain its
leading corn market share.
North American Seed
In the North American seed segment, early soybean shipments and fall
alfalfa sales were both greater than in fiscal 1993 causing seed revenues
to be $1.0 million over the prior year when a late harvest impacted early
soybean shipments. Gross margin from these products was $0.3 million
higher in fiscal 1994 as the result of the increased revenues. The
incremental margin was partly offset by higher selling and research
expenses. Corn shipments begin in the second quarter.
Swine
Swine segment earnings were $1.1 million higher than fiscal 1993 earnings with
increases coming equally from breeding stock and market hog sales. Higher
feed costs and a product mix shift towards higher cost direct sales products
were more than offset by higher revenues. Operating expenses were equal to
the prior year, reflecting in part a benefit resulting from the suspension of
the defined benefit portion of the company's retirement plans.
Poultry
Poultry segment earnings were equal to the prior year. Lower domestic and
export parent volume and lower grandparent volume were partially offset by
reduced research expenses and improved commercial operations in both breeders
and hatcheries. Operating expenses were below the prior year, largely due to
a benefit resulting from the suspension of the defined benefit portion of the
company's retirement plans.
General
In October 1993, the Board of Directors approved management's suspension of
the defined benefit portion of the company's retirement plans. This
curtailment created a one-time after-tax benefit of $0.6 million to first
quarter net earnings. Only the portion applicable to swine, poultry and
corporate had an impact on first quarter net earnings. Due to the company's
method of annualizing seed segment expenses to match expected revenues, the
seed segment portion has been deferred.
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<PAGE>
The effective tax rate increased from 35% in the first quarter of fiscal 1993
to 37% in the same period of fiscal 1994. For each interim period, the tax
rate is determined from an estimate of full year earnings and the resultant
tax. Fiscal 1993 ended with a tax benefit which was primarily attributable to
lower earnings and a benefit associated with international seed losses
incurred in that year and prior years, but realized in the fourth quarter of
fiscal 1993.
The first quarter fiscal 1994 net earnings reflected the adoption of Statement
of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for
Income Taxes". The cumulative effect of this accounting change was an after-
tax charge to net earnings of $0.3 million, which was recorded in the current
fiscal quarter.
Financial Position
During the first quarter, the net cash outflow from operations of $8.3 million
was $23.9 million less than the comparable figure for the prior year. This
was due largely to significantly lower inventory acquisition costs resulting
from smaller crop production, and the generation of receipts from an early
cash discount program which was not offered in the same period last year.
Cash requirements for the first quarter were provided by earnings and existing
short-term credit facilities. Committed credit lines include a $50 million
revolving credit facility through December 31, 1995 and a $15 million facility
available through November 29, 1994. The revolving credit facility limits
total borrowings by establishing limits on certain balance sheet values and
ratios. The most restrictive of these covenants requires the company to
maintain tangible net worth greater than $65.0 million and at November 30,
1993, tangible net worth was $71.2 million. The company also has numerous
uncommitted credit facilities available and draws upon them periodically,
including during this first quarter.
Management believes its operating cash flow and existing lines of credit are
sufficient to cover normal and expected working capital needs, capital
expenditures, dividends and debt maturities.
<TABLE>
<CAPTION>
DEKALB Genetics Corporation
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended November 30, 1993 and 1992
(Dollars in millions except per share amounts)
(Unaudited)
November November
1993 1992
<S> <C> <C>
Revenues:
Operating revenues 39.1 47.2
Royalty income 1.7 0.7
40.8 47.9
Cost and Expenses:
Cost of operating revenues 21.5 23.8
Selling expenses 5.4 7.3
Research and development cost 5.3 5.9
General and administrative expense 4.2 7.4
36.4 44.4
Operating Earnings 4.4 3.5
Interest expense, net of interest income of
$0.6 in 1993 and $0.2 in 1992 (1.9) (1.8)
Other income, net (0.6) (0.5)
Earnings before income taxes 1.9 1.2
Income tax provision 0.7 0.4
Earnings before cumulative effect of accou$ 1.2 $ 0.8
Cumulative effect of accounting change (0.3) -
NET EARNINGS $ 0.9 $ 0.8
PRIMARY NET EARNINGS PER SHARE $ 0.18 $ 0.15
DIVIDENDS PER SHARE $ 0.20 $ 0.20
<FN>
The accompanying notes are an integ
</TABLE>
<TABLE>
<CAPTION>
DEKALB Genetics Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
November 30, 1993, 1992 and August 31, 1993
(Dollars in millions)
Novemb Novemb Aug
1993 1992 1
(Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents 0.9 5.3 3.5
Notes and accounts receivable, net of allowance for
doubtful accounts of $1.5 at November 30, 1993
$1.8 at November 30, 1992 and $1.6 at 34.8 39.0 36.8
Inventories (Note 2) 174.8 176.8 116.5
Deferred income taxes 6.2 7.0 6.4
Other current assets 15.6 22.4 3.4
Total current assets 232.3 250.5 166.6
Investments in and advances to related com 8.1 7.5 9.1
Intangible assets 42.3 43.5 42.6
Other assets 7.7 4.6 4.8
Property, plant and equipment, at cost 235.2 229.3 232.1
Less accumulated depreciation and amort(140.4) (137.2) (138.8)
Net property, plant and equipment 94.8 92.1 93.3
Total assets 385.2 398.2 316.4
Current liabilities:
Notes payable 65.7 59.3 55.1
Accounts payable, trade 61.5 65.6 6.8
Other accounts payable 15.5 3.8 5.5
Other current liabilities 26.0 40.6 32.6
Total current liabilities 168.7 169.3 100.0
Deferred compensation and other credits 5.6 6.4 5.8
Deferred income taxes 12.5 18.1 11.7
Long-term debt, less current maturities 85.1 91.2 85.2
Commitments and contingent liabilities (Note 4)
Shareholders' equity:
Capital stock:
Common, Class A; authorized 5,000,000 0.1 0.1 0.1
Common, Class B; authorized 15,000,000 0.4 0.4 0.4
Capital in excess of stated value 79.8 79.5 79.9
Retained earnings 38.1 39.0 38.2
Currency translation adjustments (Note 3 (2.7) (3.4) (2.5)
115.7 115.6 116.1
Less treasury stock, at cost (2.4) (2.4) (2.4)
Total shareholders' equity 113.3 113.2 113.7
Total liabilities and shareholders' equi 385.2 398.2 316.4
<FN>
The accompanying notes are an inte
</TABLE>
<TABLE>
<CAPTION>
DEKALB Genetics Corporation
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended November 30
(Dollars in millions)
(Unaudited)
November November
1993 1992
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 0.9 0.8
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation and amortization 2.9 2.7
Interest on zero coupon note - 1.1
Equity earnings, net of dividends 0.7 1.5
Other 0.1 0.3
Cumulative effect of accounting change 0.3 -
Changes in assets and liabilities:
Receivables 2.1 (2.5)
Inventories (58.1) (78.5)
Other current assets (12.1) (16.7)
Accounts payable 64.7 52.2
Accrued expenses (5.4) 11.8
Other assets and liabilities (4.4) (4.9)
Net cash flow from operating activities $ (8.3) (32.2)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (4.1) (3.4)
Proceeds from sale of property, plant and equipme 0.1 0.1
Other (0.1) (2.0)
Net cash flow from investing activities $ (4.1) (5.3)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuing debt 10.5 33.1
Dividends paid (1.0) (1.0)
Other 0.1 0.1
Net cash flow from financing activities $ 9.6 32.2
Net effect of exchange rates on cash 0.2 1.2
Net increase in cash and cash equivalents (2.6) (4.1)
Cash and cash equivalents, beginning of period 3.5 9.4
Cash and cash equivalents, end of period $ 0.9 5.3
Supplemental Cash Flow Information
Cash paid during the period for:
Income taxes $ 1.0 0.7
Interest $ 1.8 0.9
<FN>
The accompanying notes are an integral
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein are presented in
accordance with the requirements of Form 10-Q and consequently do not
include all of the disclosures normally required by generally accepted
accounting principles or those normally made in the registrant's annual
Form 10-K filing. In order to facilitate a better comparison of the
highly seasonal seed operations of the company, a Condensed Consolidated
Balance Sheet at November 30, 1992, is included herein as part of the
condensed consolidated financial statements.
The results presented (other than the Condensed Consolidated Balance Sheet
at August 31, 1993) are unaudited but include, in the opinion of manage-
ment, all adjustments of a normal recurring nature necessary for a fair
statement of the results of operations for the respective interim periods.
Certain costs and expenses incurred in the U.S. and international seed
businesses are charged against income as sales are recognized for interim
reporting purposes. The company believes this method more closely matches
revenues with expenses and results in more comparability of reporting
periods within the year. Since there are only minor U.S. seed sales
recorded in the first and fourth quarters, this method defers first
quarter expenses related to sales which will occur later in the year,
primarily in the second quarter; it also anticipates expenses incurred in
the fourth quarter, primarily in the third quarter. Southern hemisphere
international seed sales occur primarily in the first and second quarters
and this same method anticipates future expenses from the third and fourth
quarters and matches them against the first and second quarter revenues.
The seed operations of the company comprise a substantial portion of the
company's business each year. The first quarter results as presented
should not be considered indicative of the results to be expected for the
entire year.
2. Inventories, valued at the lower of cost (principally LIFO and actual
cost) or market, were as follows:
(In millions)
November November August
1993 1992 1993
Commercial seed $160.8 $164.3 $104.7
Commercial poultry and swine 8.5 6.8 7.7
Supplies and other 5.5 5.7 4.1
$174.8 $176.8 $116.5
<PAGE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
3. Foreign-currency assets and liabilities, except for operations in
economies historically experiencing hyperinflation, are translated into
their U.S. dollar equivalents based on rates of exchange prevailing at the
end of the respective period. Translation adjustments resulting from
translating foreign currency financial statements into their U.S. dollar
equivalents are reported separately and accumulated in a separate
component of stockholders' equity. The following summarizes the activity
in the translation adjustment account:
(In millions)
November November
1993 1992
Balance at September 1 $ (2.5) $ (1.2)
Translation loss (0.2) (2.2)
Balance at end of November $ (2.7) $ (3.4)
Aggregate exchange gains and losses arising from the translation of foreign
currency transactions in other than the functional currency of the
particular entity are included in income. Translation gains or losses in
historically hyperinflationary economies are also included in income.
4. The company and its subsidiaries are defendants in various legal actions
arising in the course of their business activities. In the opinion of
management, these actions will not result in a material adverse effect on
the company's consolidated financial position.
Most potential property losses are self-insured.
5. In October 1993, the Board of Directors approved management's suspension of
the defined benefit portion of the company's retirement plans. This
curtailment created a one-time after-tax benefit of $0.6 million to first
quarter net earnings. Only the portion applicable to swine, poultry and
corporate had an impact on first quarter net earnings. Due to the
company's method of annualizing seed segment expenses to match expected
revenues, the seed segment portion has been deferred.
6. Effective September 1, 1993, the company changed its method of accounting
for income taxes by adopting the provisions of Statement of Financial
Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes".
SFAS 109 requires a change from the deferred method of accounting for
income taxes under APB Opinion 11 to the asset and liability method of
accounting for income taxes. Under the asset and liability method,
deferred tax assets and liabilities are recognized for the expected future
tax consequences attributable to differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates
expected to apply in the years in which the temporary differences are
expected to reverse. As permitted by SFAS 109, the company has elected not
to restate the financial statements of prior years.<PAGE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The adoption of SFAS 109 resulted in the recognition of $0.3 million, or
$.05 per share, of deferred federal tax expense. This amount is included
as a charge to net income as the cumulative effect of change in accounting
principle.
The significant components of the company's deferred tax assets and
deferred tax liabilities as of November 30, 1993 are presented below (in
millions):
Deferred tax assets:
Research Expenditures $ 6.5
Deferred Compensation Plans 3.6
Inventory Valuation 3.2
Other Deductible Temporary Differences 4.8
Total Gross Deferred Tax Assets $18.1
Valuation Allowance (0.8)
Gross Deferred Tax Assets $ 17.3
Deferred Tax Liabilities:
Purchase Price Allocations $ (8.8)
Undistributed Foreign Earnings (6.3)
Accelerated Tax Depreciation (6.0)
Other Taxable Temporary Differences (2.5)
Gross Deferred Tax Liabilities $(23.6)
Net Deferred Tax Liability $ (6.3)
The net deferred tax liability disclosed above equals the net deferred tax
presentation on the balance sheet. The footnote disclosure classifies the
components as assets or liabilities while the balance sheet discloses the
current and long-term portion of those two classifications.
7. In fiscal 1994, the company classified royalty income as revenues rather
than non-operating income. Prior years have been restated to conform with
the current year presentation. In addition, certain other
reclassifications have been made for comparable purposes. The restatements
had no effect on net earnings.
<PAGE>
<PAGE>
<AUDIT REPORT>
Report of Independent Accountants
Board of Directors
DEKALB Genetics Corporation
We have made a review of the condensed consolidated balance sheets of DEKALB
Genetics Corporation as of November 30, 1993 and 1992, and the related
condensed consolidated statements of operations and cash flows for the
three-month periods then ended in accordance with standards established by the
American Institute of Certified Public Accountants.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical review procedures to financial data, and
making inquiries of persons responsible for financial and accounting matters.
It is substantially less in scope than an audit made in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the consolidated financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of August 31, 1993, and the
related consolidated statements of operations and cash flows for the year then
ended (not presented herein), and in our report dated October 12, 1993, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of August 31, 1993 is fairly presented, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
COOPERS & LYBRAND
Chicago, Illinois
January 11, 1994
/AUDIT REPORT
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<PAGE>
Part II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Computation of Net Earnings per Common and Common Equivalent
Share
Exhibit 15 - Letter Re Unaudited Interim Financial Information
(b) Reports on Form 8-K -
No Form 8-K was filed 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.
DEKALB Genetics Corporation
Date: January 7, 1994 Thomas R. Rauman
(Signature)
Thomas R. Rauman
Vice President Finance,
Chief Financial Officer
<PAGE>
<PAGE>
EXHIBIT 11
COMPUTATION OF NET EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
For the three months ended November 30, 1993 and 1992
November November
1993 1992
PRIMARY EARNINGS PER SHARE:
Shares
Average shares outstanding 5,138,953 5,123,466
Net average additional shares outstanding
assuming dilutive stock options exercised
and proceeds used to purchase treasury stock
at average market price 53,856 60,481
Average number of common and common
equivalent shares outstanding 5,192,809 5,183,947
Net Earnings
Net earnings for primary earnings per share $ 912,000 $ 777,000
Primary Earnings Per Share $0.18 $0.15
FULLY DILUTED EARNINGS PER SHARE: (a)
Shares
Average shares outstanding 5,123,466
Net average additional shares outstanding
assuming dilutive stock options exercised
and proceeds used to purchase treasury stock
at greater of closing or average market price 62,060
Weighted average shares assuming conversion
of zero-coupon note 1,191,185
Fully Diluted 6,376,711
Net Earnings
Net Earnings $ 777,000
Add interest on zero-coupon note,
net of tax effect 675,000
Net earnings for fully diluted earnings
per share $1,452,000
Fully Diluted Earnings per Share $0.23(b)
(a) Fully diluted earnings per share was not required in fiscal 1994.
(b) This information was not presented on the Statement of Operations
since the impact in the first quarter was anti-dilutive.
<PAGE>
<PAGE>
EXHIBIT 15
Securities & Exchange Commission
Washington, D.C. 20549
We are aware that our report dated January 11, 1994, on our review of the
interim financial information of DEKALB Genetics Corporation as of November
30, 1993 and 1992, and the three-month periods then ended, included in this
Form 10-Q, is incorporated by reference into the Registration Statement No.
33-24875, No. 33-33305 and No. 33-39986 on Form S-8. Pursuant to Rule 436(c)
under the Securities Act of 1933, this report should not be considered a part
of the registration statements prepared or certified by us within the meaning
of Sections 7 and 11 of that Act.
COOPERS & LYBRAND
Chicago, Illinois
January 12, 1994
