<PAGE>
UNITED STATES
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, 1995 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, 1995
- ---------------------------- -----------------------------------
Class A Common, no par value 771,825
Class B Common, no par value 4,422,195
Exhibit index is located on page 2
Total number of pages 12
<PAGE>
DEKALB GENETICS CORPORATION
INDEX
Page No.
--------
Part I - Financial Information (Unaudited except for the
Condensed Consolidated Balance Sheet as of August 31, 1995):
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, 1995 and 1994 6
Condensed Consolidated Balance Sheets, November 30, 1995 and 1994
and August 31, 1995 7
Condensed Consolidated Statements of Cash Flows for the three
months ended November 30, 1995 and 1994 8
Notes to Condensed Consolidated Financial Statements 9-10
Part II - Other Information 11
EXHIBIT 11 - Computation of Net Earnings per Common and Common
Equivalent Share for the three months ended November 30, 1995 12
and 1994
-2-
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
and Financial Position
----------------------
DEKALB Genetics Corporation incurred a net loss of $0.1 million ($.02 per share)
in the first quarter of fiscal 1996 compared with a net loss of $1.2 million
($.23 per share) in the first quarter of fiscal 1995. Consolidated revenues
were $4.9 million higher in fiscal 1996. A $2.7 million international seed
revenue increase was largely attributable to higher corn and sunflower revenues
in Argentina. The remainder was due to soybean sales in North America.
Included in prior year net earnings was an after-tax loss of $0.3 million ($0.05
per share) for the operation of the discontinued poultry business.
The $0.8 million ($.16 per share) improvement in fiscal 1996 after-tax earnings
from continuing operations, as compared to fiscal 1995, was largely due to a
combination of higher market hog prices and lower swine unit production costs
partially offset by lower swine breeding stock volume. North American seed
earnings were lower in fiscal 1996 due to increased operating expenses.
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 which are incurred in the first quarter and 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
1995 1994
-------- -------
Revenues
- --------
North American seed $ 6.4 $ 4.3
International seed 31.5 28.8
Swine 12.2 12.1
------- -------
Total revenues $ 50.1 $ 45.2
======= =======
Earnings
- --------
North American seed $ (0.5) $ (0.2)
International seed 3.0 2.9
Swine 0.7 (0.9)
------- --------
Total operations 3.2 1.8
General corporate expenses (1.1) (1.2)
Net interest expense (2.3) (2.1)
-------- --------
Earnings from continuing operations
before income taxes (0.2) (1.5)
Income tax provision (0.1) (0.6)
-------- --------
Earnings from continuing operations (0.1) (0.9)
Discontinued operations -- (0.3)
-------- --------
Net Earnings $ (0.1) $ (1.2)
======== ========
-3-
<PAGE>
- ------
Seed
- ----
Seed revenues and earnings in the first quarter were primarily the result of
southern hemisphere operations because 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 slightly over the prior year
first quarter. Earnings from Argentina were $0.5 million higher partly offset
by lower export earnings. Argentine revenues in fiscal 1996 were seven
percent higher than those in fiscal 1995. The increase was due to higher
average corn and sunflower selling prices and improved sunflower sales volume.
Corn sales volume during this initial fiscal period was down slightly due to
delayed planting; however, corn sales are expected to be higher for the full
year.
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 in the first quarter of fiscal 1996 and
were primarily responsible for the $2.1 million revenue increase over the
prior year. Earnings in fiscal 1996 were $0.3 million lower, however,
primarily due to higher operating expenses.
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 $1.6 million higher than the prior year although
revenues were nearly flat when compared to the first quarter of fiscal 1995.
Market hog revenues increased 63 percent reflecting a 31 percent price increase
from the fourteen-year low in market hog prices experienced during the prior
year. Fiscal year 1996 first quarter average market hog prices were
approximately $46.00 per hundred weight compared with $35.00 per hundred weight
in fiscal year 1995. Offsetting the benefit from higher market hog prices were
significantly lower breeding stock sales volumes. Breeding stock volumes
decreased from prior year due to soft demand reflecting unfavorable industry
economics.
Higher first quarter earnings in the swine segment were primarily achieved by
lower cost of sales despite higher feed costs.
-4-
<PAGE>
General
- -------
The effective tax rate increased from 35 percent in the first quarter of fiscal
1995 to 37 percent for the same period in fiscal 1996. Fluctuations in Mexican
equity earnings was the principle factor causing the increase. For each interim
period, the tax rate is determined from an estimate of full year earnings and
the resultant tax.
The company sold its poultry business segment in the third quarter of fiscal
year 1995 and prior year results have been restated to reflect that business as
discontinued operations.
Financial Position
- ------------------
During the first quarter, the net cash outflow from operations of $18.7 million
was $12.8 million less than the prior year. The receipt of foreign royalty
payments earlier in fiscal year 1996 than in fiscal year 1995 contributed to the
improvement.
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, 1998 and $15 million in facilities
available through November, 1996. 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, other potential sources of funds,
and existing lines of credit are sufficient to cover normal and expected working
capital needs, capital expenditures, dividends and debt maturities.
-5-
<TABLE>
<CAPTION>
DEKALB GENETICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1995
AND 1994
(DOLLARS IN MILLIONS EXCEPT PER SHARE
AMOUNTS)
(UNAUDITED)
November November
1995 1994
<C> <C> <C>
Revenues 50.1 45.2
$
$
Cost of revenues 28.4 26.9
GROSS 21.7 18.3
MARGIN
Selling 7.5 6.4
expenses
Research and development 5.2 5.0
cost
General and administrative 6.0 5.8
expense
18.7 17.2
OPERATING 3.0 1.1
EARNINGS
Interest expense, net of
interest income of
$0.1 (2.3) (2.1)
in 1995.
Other expense, net (0.9) (0.5)
Earnings (loss) from continuing
operations before
income (0.2) (1.5)
taxes
Income tax (0.1) (0.6)
provision
Earnings (loss) from (0.1) (0.9)
continuing operations
Discontinued (0.3)
operations -
NET $ (0.1) $ (1.2)
EARNINGS
(LOSS)
Earnings per share from
continuing operations (0.02) (0.18)
$
$
Discontinued
operations - (0.05)
NET EARNINGS PER $ (0.02) $
SHARE (0.23)
DIVIDENDS PER SHARE $ 0.20 $ 0.20
<FN>
The accompanying notes are an integral part of the
financial statements.
</FN>
</TABLE>
-6-
<TABLE>
<CAPTION>
DEKALB GENETICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1995 AND 1994 AND AUGUST 31, 1995
(DOLLARS IN MILLIONS)
November November August
1995 1994 1995
(Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $4.6 ($0.5) $3.0
Notes and accounts receivable, net
of allowance for
doubtful accounts of $2.7 at
November 30, 1995, $2.0 at
November 30, 1994, and $2.7 at 48.5 44.4 57.6
August 31, 1995
Inventories (Note 2) 186.3 169.0 106.0
Deferred income taxes 4.7 4.7 4.7
Other current assets 19.8 23.8 3.7
Total current assets 263.9 241.4 175.0
Investments in and advances to related 3.3 7.8 3.9
companies
Intangible assets 39.6 41.0 40.0
Other assets 5.1 8.6 4.3
Property, plant and equipment, at cost 245.1 233.1 240.0
Less accumulated depreciation and (141.5) (136.8) (140.2)
amortization
Net property, plant and 103.6 96.3 99.8
equipment
Total assets $415.5 $395.1 $323.0
Current liabilities:
Notes payable $69.8 $73.6 $42.8
Accounts payable, trade 74.8 65.3 6.7
Other accounts payable 4.5 4.5 15.6
Other current liabilities 39.4 30.6 29.5
Total current liabilities 188.5 174.0 94.6
Deferred compensation and other 5.7 5.6 5.8
credits
Deferred income taxes 11.3 11.1 11.3
Long-term debt, less current 85.0 85.0 85.0
maturities
Commitments and contingent liabilities
(Note 4)
Shareholders' equity:
Capital stock:
Common, Class A; authorized 0.1 0.1 0.1
5,000,000 shares
Common, Class B; authorized 0.4 0.4 0.4
15,000,000 shares
Capital in excess of stated value 81.2 80.3 80.9
Retained earnings 51.2 43.5 52.3
Currency translation adjustments (5.5) (2.5) (5.0)
(Note 3)
127.4 121.8 128.7
Less treasury stock, at cost (2.4) (2.4) (2.4)
Total shareholders' equity 125.0 119.4 126.3
Total liabilities and shareholders' $415.5 $395.1 $323.0
equity
<FN>
The accompanying notes are an
integral part of the financial statements.
</FN>
</TABLE>
-7-
<TABLE>
<CAPTION>
DEKALB GENETICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1995 AND 1994
(DOLLARS IN MILLIONS)
(UNAUDITED)
November November
1995 1994
<S> <C> <C>
CASH FLOWS OPERATING ACTIVITIES
Net ($0.1) ($1.2)
earnings
Adjustments to reconcile net
income to net cash
flow from operating
activities:
Depreciation and 2.7 2.7
amortization
Equity earnings, net 0.1 0.2
of dividends
Other (0.1) 0.3
Changes in assets and
liabilities:
9.2 (0.3)
Receivables
(80.4) (69.6)
Inventories
Other (16.1) (17.1)
current assets
Accounts 57.0 50.3
payable
Accrued 9.0 4.6
expenses
Other assets and (1.4)
liabilities -
Net cash flow from operating (18.7) (31.5)
activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of property, plant (6.1) (3.0)
and equipment
Proceeds from sale of 0.2 0.1
property, plant and equipment
Other (0.1)
-
Net cash flow from investing ($5.9) ($3.0)
activities
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from short- 27.0 28.4
term borrowings
Dividends (1.0) (1.0)
paid
Other 0.2 0.2
Net cash flow from financing $26.2 $27.6
activities
Net effect of exchange rates 0.1 0.2
on cash
Net increase (decrease) in 1.7 (6.7)
cash and cash equivalents
Cash and cash equivalents 3.0 6.2
August 31
Cash and cash equivalents at $4.7 ($0.5)
the end of November
Supplemental Cash Flow
Information
Cash paid (refunded) during
the period for:
Income taxes ($1.0) $1.7
Interest $2.2 $2.1
<FN>
The accompanying notes
are an integral part of the financial statements.
</FN>
</TABLE>
-8-
<PAGE>
(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, 1994 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, 1995, 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:
NovemberNovember August
1995 1994 1995
------ ------ -----
Commercial seed $172.7 $157.7 $ 95.3
Swine 7.6 7.2 7.6
Supplies and other 6.0 4.1 3.1
------ ------ ------
$186.3 $169.0 $106.0
====== ====== ======
-9-
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
-----------
(continued)
3.Foreign-currency assets and liabilities 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
-------- --------
1995 1994
------ ------
Balance at September 1 $(5.0) $(2.7)
Translation gain (loss) (0.5) 0.2
------- -----
Balance at end of November $(5.5) $(2.5)
====== ======
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.
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.On April 28, 1995, the Company sold its poultry operation to Central Farm of
America, Inc., an affiliate of Toshoku, Ltd., for $12.5 million in cash.
Accordingly, the poultry business is reported as a discontinued operation and
the consolidated financial statements for the first quarter of fiscal year
1995 were reclassified to report separately the net assets and operating
results of the business. The Company's operating results for the prior year
have been restated to reflect continuing operations.
-10-
<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 12
(b) Reports on Form 8-K -
No Form 8-K was filed during the three months ended November 30, 1995.
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 16, 1996 Thomas R. Rauman
-----------------------
(Signature)
Thomas R. Rauman
Vice President-Finance,
Chief Financial Officer
-11-
<PAGE> EXHIBIT 11
----------
COMPUTATION OF NET EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
For the three months ended November 30, 1995 and 1994
November November
1995 1994
-------- -------
PRIMARY EARNINGS PER SHARE:
Shares
------
Average shares outstanding 5,189,265 5,148,324
Net average additional shares outstanding
assuming dilutive stock options exercised
and proceeds used to purchase treasury stock
at average market price 137,767 79,610
--------- ----------
Average number of common and common
equivalent shares outstanding 5,327,032 5,227,934
========== ==========
Net Earnings
------------
Net earnings for primary earnings per share$ (96,000)$(1,183,000)
=======================
Primary Earnings Per Share $(0.02) $(0.23)
======= =======
