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, 1994 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, 1994
Class A Common, no par value 790,700
Class B Common, no par value 4,360,221
Exhibit index is located on page 2
Total number of pages 14
<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
INDEX
Page No.
Part I - Financial Information (Unaudited except for the
Condensed Consolidated Balance Sheet as of August 31, 1994):
Management's Discussion and Analysis of Financial Condition
and Results of Operations 3-5
Condensed Consolidated Statements of Operations for the three
months ended November 30, 1994 and 1993 6
Condensed Consolidated Balance Sheets, November 30, 1994 and 1993
and August 31, 1994 7
Condensed Consolidated Statements of Cash Flows for the three
months ended November 30, 1994 and 1993 8
Notes to Condensed Consolidated Financial Statements 9-11
Part II - Other Information 12
EXHIBIT 11 - Computation of Net Earnings per Common and Common
Equivalent Share for the three months ended November 30, 1994 13
and 1993
EXHIBIT 27 - Financial Data Schedule 14
<PAGE>
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
and Financial Position
The Company incurred a net loss of $1.2 million ($.23 per share) in the first
quarter of fiscal 1995 compared with net earnings of $0.8 million ($.15 per
share) in fiscal 1994. Consolidated revenues were $8.4 million higher in
fiscal 1995, of which $7.3 million was largely due to increased corn sales
volume and selling prices in Argentina. North American seed and other
international seed revenues were $1.6 million and $1.0 million higher than
last year respectively, while swine and poultry revenues were $0.9 million and
$0.6 million lower, respectively.
The $2.0 million ($.38 per share) decline in fiscal 1995 after-tax earnings,
as compared to fiscal 1994, was largely attributable to lower market hog
prices in the swine segment. North American seed earnings were also lower in
fiscal 1995 due to a change in the timing of recognition of certain corporate
charges. This change will have no impact on full-year results.
Prior 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, and were reduced by $0.4 million ($.09 per share)
for the change in accounting for income taxes.
North American seed sales and net earnings are primarily realized in the
second and third fiscal quarters (December through May), and for that reason,
first quarter results should not be viewed as indicative of full year results.
Most expenses incurred in the first quarter related to the North American seed
business are deferred until later in the year when sales are recorded.
Quarterly Industry Segment Revenues and Earnings
In Millions
(Unaudited)
November November
1994 1993
Revenues
North American Seed $ 4.3 $ 2.7
International Seed 28.8 20.5
Swine 12.1 13.0
Poultry 4.0 4.6
Total revenues $ 49.2 $ 40.8
Earnings
North American Seed $ (0.3) $ 0.6
International Seed 2.9 2.8
Swine (0.9) 1.8
Poultry (0.3) (0.2)
Total operations 1.4 5.0
General corporate expenses (1.1) (1.2)
Net interest expense (2.1) (1.9)
Earnings before income taxes and accounting change (1.8) 1.9
Income tax provision (0.6) 0.7
Earnings before cumulative effect
of accounting change (1.2) 1.2
Cumulative effect of accounting change - (0.4)
Net Earnings $ (1.2) $ 0.8
<PAGE>
<PAGE>
Seed
Seed revenues 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 or
earnings until the second quarter.
International Seed
International seed segment earnings increased by $0.1 million from the prior
year first quarter. Earnings from Argentina were $0.4 million higher than
the prior year while European and other international seed earnings were
below the prior year. In Argentina, revenues in fiscal 1995 were 39 percent
higher than those in fiscal 1994. Unit sales of all products were above
those of the prior year which was partially caused by corn and sunflower
planted acreage increases of eight percent and 15 percent, respectively.
Results from international seed operations outside of Latin America are
largely in the northern hemisphere and will not generate any significant
earnings until the second quarter.
North American Seed
Early soybean shipments were greater than in fiscal 1994 and were primarily
responsible for the $1.6 million revenue increase over the prior year.
Earnings in the first quarter of fiscal 1994 were $0.9 million higher,
primarily because of a benefit resulting from the restatement of corporate
charges.
First quarter North American seed results are not representative of annual
results because significant seed shipment activity does not occur until the
second and third quarters.
Swine
Swine segment earnings were $2.7 million lower than the prior year. While
revenues from breeding stock were 12 percent higher, a fourteen-year low in
market hog prices caused market hog revenues to fall 32% and total revenues to
drop five percent below those reported in the first quarter of fiscal 1994.
The average market hog price received by DEKALB in the first quarter of fiscal
1995 was approximately $35.00/cwt. compared with $50.00/cwt. in the first
quarter of last year. Breeding stock volumes increased 28% over prior year
but this, combined with higher market animal volume, was not enough to offset
the drastic reduction in market hog prices. Operating expenses increased $0.5
million compared to fiscal 1994 which had a $0.4 million benefit from the
suspension of the defined benefit portion of the retirement plan.
<PAGE>
<PAGE>
Poultry
The first quarter loss of $0.3 million from the poultry segment was $0.1
million more than the prior year. Gross margins from domestic breeder and
commercial hatchery operations were both lower than a year ago.
General
The effective tax rate decreased from 37 percent in the first quarter of
fiscal 1994 to 34 percent for the same period in fiscal 1995. A change in the
earnings mix and an increase in research and development tax credits were the
principal factors causing the decrease. For each interim period, the tax rate
is determined from an estimate of full year earnings and the resultant tax.
Fiscal 1994 ended with a tax benefit associated with international seed losses
incurred in prior years but not reflected until the second quarter of fiscal
1994.
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 $0.4 million ($.09 per share).
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 in fiscal 1994. Only the portion applicable to swine,
poultry and corporate had an impact on 1994 first quarter net earnings. Due
to the company's method of annualizing seed segment expenses to match
revenues, the seed segment portion was deferred to subsequent 1994 periods.
Financial Position
During the first quarter, the net cash outflow from operations of $31.2
million was $23.1 million greater than the prior year. Fiscal 1994 included
cash generated from an early cash discount program for seed customers and that
same program was not offered in the first quarter of fiscal 1995. In
addition, more cash was required in fiscal 1995 for significantly higher seed
production costs resulting from a larger seed crop.
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, 1997 and $20 million in
facilities available through November 26, 1995. These agreements contain
various restrictions on the activities of the Company as to maintenance of
working capital and tangible net worth, amount and type of indebtedness, and
the acquisition or disposition of capital shares or assets of the Company and
its subsidiaries.
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, 1994 and 1993
(Dollars in millions except per share amounts)
(Unaudited)
November November
1994 1993
<S> <C> <C>
Revenues $ 49.2 $ 40.8
Cost of revenues 29.3 21.5
GROSS MARGIN 19.9 19.3
Selling expenses 7.2 5.4
Research and development cost 6.1 5.3
General and administrative expense 5.9 4.2
19.2 14.9
OPERATING EARNINGS 0.7 4.4
Interest expense, net of interest income of
$0.1 in 1994 and 1993 (2.1) (1.9)
Other expense, net (0.4) (0.6)
Earnings before income taxes and cumulative effect
of accounting change (1.8) 1.9
Income tax provision (0.6) 0.7
Earnings before cumulative effect of accounting change (1.2) 1.2
Cumulative effect of accounting change - (0.4)
NET EARNINGS $ (1.2) $ 0.8
Earnings per share before cumulative
effect of accounting change $ (0.23) $ 0.24
Accounting change - (0.09)
NET EARNINGS PER SHARE $ (0.23) $ 0.15
DIVIDENDS PER SHARE $ 0.20 $ 0.20
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
DEKALB Genetics Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
November 30, 1994 and 1993 and August 31, 1994
(Dollars in millions)
November November August
1994 1993 1994
(Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ($0.5) $0.9 $6.2
Notes and accounts receivable, net of allowance for
doubtful accounts of $2.4 at November 30, 1994, $1.5 at
November 30, 1993, and $2.4 at August 31, 1994 47.3 34.8 47.5
Inventories (Note 2) 170.5 176.5 100.8
Deferred income taxes 4.7 5.4 4.7
Other current assets 21.9 15.5 4.8
Total current assets 243.9 233.1 164.0
Investments in and advances to related companies 9.0 8.1 8.9
Intangible assets 41.0 42.3 41.3
Other assets 3.8 7.8 4.2
Property, plant and equipment, at cost 248.1 235.2 246.0
Less accumulated depreciation and amortization (147.1) (140.4) (145.4)
Net property, plant and equipment 101.0 94.8 100.6
Total assets $398.7 $386.1 $319.0
Current liabilities:
Notes payable $73.5 $65.7 $45.1
Accounts payable, trade 65.9 61.5 7.0
Other accounts payable 5.0 15.5 13.4
Other current liabilities 32.1 26.0 29.6
Total current liabilities 176.5 168.7 95.1
Deferred compensation and other credits 5.6 5.6 5.4
Deferred income taxes 12.2 12.5 12.2
Long-term debt, less current maturities 85.0 85.1 85.0
Commitments and contingent liabilities (Note 4)
Shareholders' equity:
Capital stock:
Common, Class A; authorized 5,000,000 shares 0.1 0.1 0.1
Common, Class B; authorized 15,000,000 shares 0.4 0.4 0.4
Capital in excess of stated value 80.3 79.8 80.1
Retained earnings 43.5 39.0 45.8
Currency translation adjustments (Note 3) (2.5) (2.7) (2.7)
121.8 116.6 123.7
Less treasury stock, at cost (2.4) (2.4) (2.4)
Total shareholders' equity 119.4 114.2 121.3
Total liabilities and shareholders' equity $398.7 $386.1 $319.0
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
DEKALB Genetics Corporation
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended November 30, 1994 and 1993
(Dollars in millions)
(Unaudited)
November Novembe
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ($1.2) $0.8
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation and amortization 2.8 2.9
Equity earnings, net of dividends 0.3 0.7
Cumulative effect of accounting change - 0.4
Other 0.3 0.1
Changes in assets and liabilities:
Receivables (0.2) 2.1
Inventories (69.7) (58.3)
Other current assets (17.1) (12.1)
Accounts payable 50.5 64.7
Accrued expenses 4.3 (5.4)
Other assets and liabilities (1.2) (4.0)
Net cash flow from operating activities ($31.2) ($8.1)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (3.2) (4.1)
Proceeds from sale of property, plant and equipment 0.3 0.1
Other (0.4) -
Net cash flow from investing activities ($3.3) ($4.0)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuing debt 28.4 10.5
Dividends paid (1.0) (1.0)
Other 0.2 0.1
Net cash flow from financing activities $27.6 $9.6
Net effect of exchange rates on cash 0.2 (0.1)
Net decrease in cash and cash equivalents (6.7) (2.6)
Cash and cash equivalents August 31 6.2 3.5
Cash and cash equivalents at the end of November ($0.5) $0.9
Supplemental Cash Flow Information
Cash paid during the period for:
Income taxes $1.7 $1.0
Interest $2.1 $1.8
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 Company'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, 1993 is included herein as part of the condensed
consolidated financial statements.
The results presented are unaudited (other than the Condensed Consolidated
Balance Sheet at August 31, 1994, which is derived from the Company's
audited year-end balance sheet) but include, in the opinion of management,
all adjustments of a normal recurring nature necessary for a fair
statement of the results of operations and financial position for the
respective interim periods.
Certain costs and expenses incurred in the North American 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 North American 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 largely
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 or market (in millions), were as
follows:
November November August
1994 1993 1994
Restated
Commercial seed $158.1 $162.5 $ 88.1
Commercial poultry and swine 8.2 8.5 8.9
Supplies and other 4.2 5.5 3.8
$170.5 $176.5 $100.8
<PAGE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(continued)
During the third quarter of fiscal 1994, the Company changed the accounting
method of valuing its commercial seed inventories, previously valued using
the last-in, first-out (LIFO) method, to average cost. The change in
accounting method has been applied retroactively and financial information
for all periods presented has been restated to eliminate the effect of LIFO
on prior periods. In the first quarter of fiscal 1994, the restatement
impacted the balance sheet only as seed sales were negligible in this
period.
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 of consolidated subsidiaries 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
1994 1993
Balance at September 1 $(2.7) $(2.5)
Translation gain (loss) 0.2 (0.2)
Balance at end of May $(2.5) $(2.7)
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
hyperinflationary economies are also included in income.
4. The Company and its subsidiaries are defendants in various legal actions
arising in the course of business activities. In the opinion of
management, these actions will not result in a material adverse effect on
the Company's consolidated operations or 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 fiscal
1994 first quarter net earnings. Only the portion applicable to swine,
poultry and corporate had an impact on 1994 first quarter net earnings.
Due to the Company's method of annualizing seed segment expenses to match
expected revenues, the seed segment portion was deferred to subsequent 1994
periods.
<PAGE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(continued)
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.
The adoption of SFAS 109 resulted in the recognition of $0.4 million, $.09
per share, of deferred tax expense. This amount was included as a charge
to net earnings as the cumulative effect of change in accounting principle
in the first quarter of fiscal 1994.
7. Certain corporate expense reclassifications have been made for
comparability purposes. These restatements had no effect on net earnings.
<PAGE>
<PAGE>
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries are defendants in various legal actions
arising in the course of business activities. In the opinion of
management, these actions will not result in a material adverse effect on
the Company's consolidated operations or financial position.
Item 6. Exhibits and Reports on Form 8-K Page
(a) Exhibit 11 - Earnings Per Share Computation 13
(b) Reports on Form 8-K -
No Form 8-K was filed during the three months ended November 30, 1994.
SIGNATURE
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 12, 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, 1994 and 1993
November November
1994 1993
PRIMARY EARNINGS PER SHARE:
Shares
Average shares outstanding 5,148,324 5,138,953
Net average additional shares outstanding
assuming dilutive stock options exercised
and proceeds used to purchase treasury stock
at average market price 79,623 53,856
Average number of common and common
equivalent shares outstanding 5,227,947 5,192,809
Net Earnings
Net earnings for primary earnings per share $(1,183,000) $ 753,000
Primary Earnings Per Share $(.23) $0.15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Operations and the Consolidated Balance Sheets and is
qualified in it entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> NOV-30-1994
<CASH> (500)
<SECURITIES> 0
<RECEIVABLES> 47300
<ALLOWANCES> 2400
<INVENTORY> 170500
<CURRENT-ASSETS> 243900
<PP&E> 248100
<DEPRECIATION> 147100
<TOTAL-ASSETS> 398700
<CURRENT-LIABILITIES> 176500
<BONDS> 0
<COMMON> 500
0
0
<OTHER-SE> 118900
<TOTAL-LIABILITY-AND-EQUITY> 398700
<SALES> 49200
<TOTAL-REVENUES> 49200
<CGS> 29300
<TOTAL-COSTS> 7200
<OTHER-EXPENSES> 12000
<LOSS-PROVISION> 400
<INTEREST-EXPENSE> 2100
<INCOME-PRETAX> (1800)
<INCOME-TAX> (600)
<INCOME-CONTINUING> (1200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1200)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> 0
</TABLE>
