<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington DC 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 nine month period ended May 31, 1996 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 Identification No.)
incorporation or organization)
3100 Sycamore Road, DeKalb, Illinois 60115
-------------------------------------------
(Address of principal executive offices)
815-758-3461
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(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
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Title of class Outstanding as of May 31, 1996
- --------------------------------------- ------------------------------
Class A Common, no par value 2,405,289
Class B Common, no par value 14,638,959
Exhibit index is located on page 2
Total number of pages 16
<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 nine
months ended May 31, 1996 and 1995 6
Condensed Consolidated Statements of Operations for the three
months ended May 31, 1996 and 1995 7
Condensed Consolidated Balance Sheets, May 31, 1996 and 1995
and August 31, 1995 8
Condensed Consolidated Statements of Cash Flows for the nine
months ended May 31, 1996 and 1995 9
Notes to Condensed Consolidated Financial Statements 10-12
Part II - Other Information 13-14
EXHIBIT 11 - Computation of Net Earnings per Common and Common 15-16
Equivalent Share for the nine months ended May 31, 1996 and 1995
and for the three months ended May 31, 1996 and 1995.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
Net earnings for the first nine months of fiscal 1996 were $18.2 million ($1.12
per share) compared with $11.9 million ($0.76 per share) in the same period of
the prior year. Earnings from continuing operations were $7.5 million higher (70
percent) in fiscal year 1996. The company declared a three-for-one stock split
to holders of record on May 10, 1996 with shares being distributed on May 24,
1996; thus, earnings per share and all other share amounts have been restated
to reflect a tripling in the number of shares outstanding.
North American seed earnings improved by 52 percent, reflecting higher corn and
soybean sales volumes attributed to increased planted acreage and growing
product demand. Corn unit margins were lower, however, due to increased unit
production costs. Higher earnings from the international seed segment were due
to higher corn and sunflower sales volumes in Argentina and the absence of
devaluation losses in Mexico as occurred in fiscal year 1995. Swine segment
earnings for fiscal 1996 improved $1.5 million over fiscal 1995. Market hog
prices rebounded significantly, but were partly offset by lower breeding stock
sales resulting from an unfavorable hog\corn price ratio for producers.
Consolidated revenues in fiscal 1996 were $367.4 million compared with $294.3
million the prior year, up 25%. Third quarter revenues exceeded prior year by
$32.1 million, up 31%. The main reasons for increased revenues, for both the
year-to-date and third quarter, were higher North American and Argentine corn
sales volumes and selling prices.
Fiscal year 1996 third quarter earnings from continuing operations were $5.0
million or 139 percent higher than the same period a year ago. Contributing to
the improvement were higher North American and Argentine corn volumes partly
offset by lower swine breeding stock volumes and higher corporate expenses.
<TABLE>
<CAPTION>
Quarterly Industry Segment Revenues and Earnings
------------------------------------------------
In Millions
-----------
(Unaudited)
-----------
Third Quarter Year-to-Date
May May May May
1996 1995 1996 1995
<S> <C> <C> <C> <C>
- ---
Revenues
- --------
North American Seed $105.5 $ 75.5 $254.6 $191.0
International Seed 20.9 17.6 78.6 67.7
Swine 10.6 11.8 34.2 35.6
Total revenues $137.0 $104.9 $367.4 $294.3
Earnings
- --------
North American Seed $ 15.6 $ 6.3 $ 31.0 $ 20.4
International Seed 2.4 2.9 9.6 8.3
Swine (0.6) (0.1) 0.1 (1.4)
Total operations 17.4 9.1 40.7 27.3
General corporate (1.9) (0.8) (5.1) (3.4)
expenses
Net interest expense (1.4) (2.4) (5.8) (6.7)
Earnings from
continuing operations
before income taxes 14.1 5.9 29.8 17.2
Income tax provision 5.5 2.3 11.6 6.5
Earnings from continuing 8.6 3.6 18.2 10.7
operations
Discontinued operations:
Gain/(Loss) from - 0.1 - (0.5)
operations, net of tax
Gain on disposition, - 1.7 - 1.7
net of tax
Net Earnings $ 8.6 $ 5.4 $ 18.2 $ 11.9
</TABLE>
<PAGE>
- ------
Seed
- ----
North American Seed
-------------------
North American seed segment earnings for the first nine months of fiscal 1996
were $10.6 million higher than a year ago. Revenues through May, 1996
increased $63.6 million or 33 percent from the same period of the prior year.
Higher corn volume, reflecting an increase in planted acreage and greater
demand for DEKALB's corn product line, together with increased soybean volume
and higher prices for both products, were the main reasons for the improvement
in revenues.
Partly offsetting the revenue increases were higher unit corn costs and
greater operating expenses. Corn unit costs climbed more than $5.00 per unit
in fiscal 1996 as a result of adverse planting and growing conditions during
the 1995 summer production season, together with increased winter production
costs. The previous year's cost per unit benefited from an above-target crop
resulting from excellent growing conditions in the summer production of 1994.
DEKALB's expanded sales efforts and a continued emphasis on research and
development resulted in higher operating expenses in fiscal 1996.
Third quarter revenues were $30.0 million or 40% higher than the previous
year's third quarter revenues. Higher corn volumes and corn and soybean
prices were the main reasons for the increase. The $9.3 million third quarter
earnings increase included the receipt of $4.0 million revenues, the first
payment from Monsanto as part of the ten-year research collaboration
agreement, which was partly offset by $0.4 million of related expenses.
International Seed
-------------------
International seed segment earnings for the first nine months of fiscal year
1996 were $1.3 million higher than a year ago due to improved results in
Argentina and Mexico. Higher Argentine corn volume combined with increased
corn and sunflower margins per unit were the main reasons for the improvement.
Fiscal 1995 results included losses in Mexico due to the effects of
devaluation of the peso, which was not a factor in the first nine months of
fiscal 1996.
Revenues in the third quarter of fiscal year 1996 increased 19 percent from
the same period of the prior year. Higher revenues were largely attributable
to Argentine corn sales volume and price increases.
Swine
- -----
Swine segment earnings for the first nine months of fiscal year 1996 were
improved by $1.5 million compared with fiscal year 1995. Average market hog
prices in fiscal year 1996, which increased more than $8.00 per hundred-weight
from fiscal year 1995, contributed to the earnings improvement. Unfavorable
industry conditions have resulted in lower breeding stock sales volume.
<PAGE>
General
- -------
The increase in general corporate expenses over the prior year was largely the
result of enhanced employee benefits, and higher bonus accruals and consulting
expenses.
The company declared a three-for-one stock split to holders of record May 10,
1996 with shares being distributed May 24, 1996. Following the split, the
quarterly cash dividend was adjusted to seven cents per share, an increase of
five percent.
The stock split is reflected in the following discussion. All share numbers and
prices are stated on a post-split basis.
On January 31, 1996, DEKALB entered into a series of agreements with Monsanto
Company (Monsanto), including an agreement which provides for a long-term
research and development collaboration in the field of agricultural
biotechnology, particularly corn seed. DEKALB and Monsanto also entered into
cross-licensing agreements covering insect-resistant and herbicide-tolerant corn
products targeted to begin reaching the market over the next three years.
During the third quarter, DEKALB completed a sale of equity to Monsanto as part
of an Investment Agreement. Monsanto purchased from DEKALB 242,721 newly issued
shares of DEKALB Class A (voting) Common Stock at a price per share of $ 21.67
and 1,134,000 newly issued shares of Class B (non-voting) Common Stock at a
price per share of $21.67. As a result of the new stock issued to Monsanto, the
total number of outstanding shares of Common Stock of the Company rose to
approximately 17.0 million from about 15.6 million.
The cash received from Monsanto for the sale of equity served to strengthen
DEKALB's balance sheet. The cash infusion reduced the relationship of debt to
capital from 46 percent at the end of the second quarter to 37 percent for the
third quarter, which included a debt reduction of $14.3 million. DEKALB intends
to invest the additional cash in growth opportunities including research
programs and production facility upgrades.
Monsanto also acquired 5,171,214 shares of DEKALB's publicly traded Class B
Stock in a separate cash tender offer at a price of $23.67 per share. Upon
completion of the tender offer, Monsanto held ten percent of the Class A voting
shares and approximately 43 percent of the Class B non-voting shares.
Additionally, DEKALB received $4.0 million from Monsanto during March, 1996, the
first payment under the companies' collaboration agreement, which calls for
total payments of $19.5 million over the term of the agreement.
Financial Position
- ------------------
During the first nine months of fiscal 1996, net cash flow from operations
increased $38.8 million compared to the same period a year ago. Successful
early cash discount programs in the North American seed business generated
substantially greater amounts of cash during the current fiscal year. Cash
outflow for investing activities was higher in the first nine months of fiscal
year 1996 due to expenditures for capital improvements for Argentine and North
American seed production facilities and investments in seed related intellectual
property.
Cash requirements for the first nine months were provided by earnings and
existing short-term credit facilities. Committed credit lines include a $50
million revolving credit facility through December 31, 1998 and a $10 million
facility available through November 26, 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.
<PAGE>
<TABLE>
<CAPTION>
DEKALB GENETICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MAY 31, 1996 AND 1995
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
May May
1996 1995
<S> <C> <C>
Revenues $367.4 $294.3
Cost of revenues 192.0 148.5
GROSS MARGIN 175.4 145.8
Selling expenses 70.0 60.9
Research and development cost 44.4 38.3
General and administrative expense 25.7 20.9
140.1 120.1
OPERATING EARNINGS 35.3 25.7
Interest expense, net of interest income of $0.6 in 1996
and $0.3 in 1995 (5.8) (6.7)
Other income (expense), net 0.3 (1.8)
Earnings from continuing operations before income taxes 29.8 17.2
Income tax provision 11.6 6.5
Earnings from continuing operations 18.2 10.7
Discontinued operations:
Loss from operations, net of tax - (0.5)
Gain on disposition, net of tax - 1.7
NET EARNINGS $ 18.2 $ 11.9
Earnings per share from continuing operations $ 1.12 $ 0.68
Discontinued operations - 0.08
NET EARNINGS PER SHARE $ 1.12 $ 0.76
DIVIDENDS PER SHARE $ 0.203 $ 0.20
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DEKALB GENETICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MAY 31, 1996 AND 1995
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
May May
1996 1995
<S> <C> <C>
Revenues $137.0 $104.9
Cost of revenues 68.4 50.6
GROSS MARGIN 68.6 54.3
Selling expenses 26.8 24.7
Research and development cost 17.5 14.7
General and administrative expense 9.7 7.1
54.0 46.5
OPERATING EARNINGS 14.6 7.8
Interest expense, net of interest income of $0.3 in 1996
and $0.1 in 1995 (1.4) (2.4)
Other income, net 0.9 0.5
Earnings from continuing operations before income taxes 14.1 5.9
Income tax provision 5.5 2.3
Earnings from continuing operations 8.6 3.6
Discontinued operations:
Earnings from operations, net of tax - 0.1
Gain on disposition, net or tax - 1.7
NET EARNINGS $ 8.6 $ 5.4
Earnings per share from continuing operations $ 0.51 $ 0.23
Discontinued operations - 0.11
NET EARNINGS PER SHARE $ 0.51 $ 0.34
DIVIDENDS PER SHARE $ 0.07 $ 0.067
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DEKALB GENETICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
MAY 31, 1996 AND 1995 AND AUGUST 31, 1995
(DOLLARS IN MILLIONS)
May May August
1996 1995 1995
(Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1.7 ($ 2.5) $ 3.0
Notes and accounts receivable, net of allowance for
doubtful accounts of $4.2 at May 31, 1996, $2.4 at
May 31, 1995, and $2.7 at August 31, 1995 139.0 109.8 57.6
Inventories (Note 2) 69.2 89.6 106.0
Deferred income taxes 4.7 4.3 4.7
Other current assets 6.0 4.0 3.7
Total current assets 220.6 205.2 175.0
Investments in and advances to related companies 3.8 2.9 3.9
Intangible assets 42.2 40.3 40.0
Other assets 6.2 3.6 4.3
Property, plant and equipment, at cost 252.5 237.5 240.0
Less accumulated depreciation and amortization (144.9) (139.7) (140.2)
Net property, plant and equipment 107.6 97.8 99.8
Total assets $380.4 $349.8 $323.0
Current liabilities:
Notes payable $ 14.3 $ 59.7 $ 42.8
Accounts payable, trade 5.7 3.4 6.7
Other accounts payable 26.9 7.2 15.6
Other current liabilities 61.1 52.6 29.5
Total current liabilities 108.0 122.9 94.6
Deferred compensation and other credits 6.3 5.6 5.8
Deferred income taxes 11.2 9.0 11.3
Long-term debt, less current maturities 85.0 85.0 85.0
Commitments and contingent liabilities (Note 4)
Shareholders' equity:
Capital stock:
Common, Class A; authorized 15,000,000 shares 0.2 0.1 0.1
Common, Class B; authorized 45,000,000 shares 1.5 0.4 0.4
Capital in excess of stated value 109.6 80.8 80.9
Retained earnings 66.0 54.5 52.3
Currency translation adjustments (Note 3) (5.0) (6.0) (5.0)
172.3 129.8 128.7
Less treasury stock, at cost (2.4) (2.5) (2.4)
Total shareholders' equity 169.9 127.3 126.3
Total liabilities and shareholders' equity $380.4 $349.8 $323.0
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DEKALB GENETICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MAY 31, 1996 AND MAY 31, 1995
(DOLLARS IN MILLIONS)
(UNAUDITED)
May May
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $18.2 $11.9
Net earnings
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation and amortization 8.2 8.2
Equity (earnings) loss, net of dividends (0.6) 1.7
Other 7.4 11.0
Changes in assets and liabilities:
Receivables (82.6) (66.0)
Inventories 30.0 (1.2)
Other current assets (2.3) 0.6
Accounts payable 10.2 (9.0)
Accrued expenses 25.4 18.7
Other assets and liabilities 3.1 2.3
Net cash flow from operating activities $17.0 ($21.8)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (13.4) (9.7)
Proceeds from sale of property, plant and equipment 0.4 0.8
Other (3.2) 10.0
Net cash flow from investing activities ($16.2) $ 1.1
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuing debt - 14.6
Principal payments made on short term debt (28.5) -
Dividends paid (3.1) (3.1)
Sale of equity 27.7 -
Other 1.1 0.5
Net cash flow from financing activities ($ 2.8) $12.0
Net effect of exchange rates on cash 0.7 -
Net decrease in cash and cash equivalents (1.3) (8.7)
Cash and cash equivalents August 31 3.0 6.2
Cash and cash equivalents at the end of May $ 1.7 ($ 2.5)
Supplemental Cash Flow Information
Cash paid during the period for:
Income taxes $ 4.2 $ 5.0
Interest $ 6.9 $ 6.7
<FN>
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 Report
on Form 10-K. In order to facilitate a better comparison of the highly
seasonal seed operations of the Company, a Condensed Consolidated Balance
Sheet at August 31, 1995 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.
2. Inventories, valued at the lower of cost or market (in millions), were as
follows:
<TABLE>
<CAPTION>
May May August
1996 1995 1995
<S> <C> <C> <C>
Commercial seed $ 54.6 $ 78.6 $ 95.3
Swine 8.9 7.8 7.6
Supplies and other 5.7 3.2 3.1
$ 69.2 $ 89.6 $ 106.0
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
-----------
(continued)
3.Effective in fiscal 1995, the Company accounts for translation of foreign
currency in countries formerly considered hyperinflationary in accordance
with Statement of Financial Accounting Standards No. 52 (SFAS No. 52),
"Foreign Currency Translation." 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:
<TABLE>
<CAPTION>
(In millions)
-------------
May May
1996 1995
<S> <C> <C>
Balance at September 1 ($5.0) ($2.7)
Translation (loss) - (3.3)
Balance at end of May ($5.0) ($6.0)
</TABLE>
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. Additional information in
Part II, Other Information, Item 1 - Legal Proceedings.
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 have been 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.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
-----------
(continued)
6.On January 31, 1996, the Company entered into a series of agreements with
Monsanto Company (Monsanto), including an agreement which provides for a
long-term research and development collaboration with Monsanto in the field
of agricultural biotechnology, particularly corn seed. DEKALB and Monsanto
also entered into cross-licensing agreements covering insect-resistant and
herbicide-tolerant corn products targeted to reach the market over the next
three years.
During the third quarter of fiscal 1996, DEKALB completed a sale of equity to
Monsanto as part of an Investment Agreement. The three-for-one stock split
to shareholders of record on May 10, 1996 is reflected in the following share
and price information. Monsanto purchased from DEKALB 242,721 newly issued
shares of DEKALB Class A (voting) Common Stock at a price per share of $21.67
and 1,134,000 newly issued shares of Class B (non-voting) Common Stock at a
price per share of $21.67. As a result of the new stock issued to Monsanto,
the total number of outstanding shares of Common Stock of the Company has
risen to over 17.0 million from about 15.6 million.
Monsanto also acquired 5,171,214 shares of DEKALB's publicly traded Class B
Common Stock in a separate cash tender offer at a price of $23.67 per share.
Upon completion of the tender offer, Monsanto held ten percent of the Class A
voting shares and approximately 43 percent of the Class B non-voting shares.
Additionally, DEKALB received $4.0 million from Monsanto in March, 1996, the
first payment under the companies' collaboration agreement, which calls for
total payments of $19.5 million over the term of the agreement.
The Investment Agreement, among other things: (i) provides Monsanto with the
right, for one year after the closing under the Investment Agreement (the
``Closing''), to purchase in the stock market additional Class B Stock so long
as the total Common Stock owned by Monsanto does not exceed 40% of the Common
Stock outstanding at such time, (ii) restricts the ability of Monsanto to
transfer securities of DEKALB; (iii) provides DEKALB under specified
circumstances with a right of first refusal in respect of certain proposed
transfers by Monsanto of securities of DEKALB; (iv) limits for ten years,
subject to certain exceptions, the ability of Monsanto to acquire additional
securities of DEKALB; (v) requires DEKALB to provide notice to Monsanto of
certain transactions in order to provide Monsanto with the opportunity to
propose an alternative transaction to DEKALB; and (vi) prohibits Monsanto
from engaging in specified activities.
Pursuant to the Investment Agreement, Robert T. Fraley, president of the
Ceregen unit at Monsanto Co., was named to the board of directors of DEKALB
Genetics Corporation at the April, 1996 board of directors meeting.
The Investment Agreement also provides that Monsanto may nominate for
election in January, 1997 an additional member to DEKALB's Board. DEKALB is
obligated to support any such nominations made in accordance with the terms
of the Investment Agreement. The Investment Agreement further provides that,
during any period in which Monsanto is entitled to nominate one or more
members to DEKALB's Board, DEKALB will use all reasonable efforts to assure
that there be at least three members of its Board who are independent of
DEKALB, Monsanto and certain large holders of Class A Stock.
7.Certain other expenses have been reclassified to operating expenses. These
reclassifications had no effect on net earnings.
<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.
The company is also the plaintiff in various legal actions. The most
significant of these actions have been filed by the Company in federal
district court in the Northern District of Illinois and allege infringement
of one or two of the Company's biotechnology related patents. The patents
involved are U.S. Patent #5,484,956 covering fertile, transgenic corn
plants expressing genes encoding Bacillus thuringiensis (Bt) insecticidal
proteins and U.S. patent #5,489,520 covering the microprojectile method for
producing fertile, transgenic corn plants covering a bar or pat gene, as
well as the production and breeding of progeny of such plants. In each
such case the Company has asked the Court to determine that infringement
has occurred, to enjoin further infringement and to award unspecified
compensatory and exemplary damages. Lawsuits were initially filed on April
30, 1996 against Pioneer Hi-Bred International, Inc., Mycogen Corporation
(and two of its subsidiaries) and Ciba-Geigy Corporation. A similar
lawsuit was filed against Northrup King Co. on June 10, 1996. In addition,
the Company and two subsidiaries of Mycogen are parties to a declaratory
judgment action filed by the Mycogen subsidiaries in San Diego, California
on April 30, 1996 regarding the same issues involved in the Company's
action against Mycogen. The declaratory judgment action is being
transferred to federal district court in the Northern District of Illinois.
There can be no assurance that the Company will prevail in any of the
actions described in this paragraph.
Item 4. Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
A special meeting of stockholders of the Company was held on Tuesday, May 21,
1996 to consider a proposed amendment to the Company's Restated Certificate of
Incorporation to, among other things, effect a three-for-one split of the
Company's Class A Common Stock and the Company's Class B Common Stock.
674,165 shares of Class A Common Stock were cast in favor of the amendment,
- -0- votes were cast against and there were 35 abstentions. 3,920,661 shares of
Class B Common Stock were cast in favor of the amendment, 940 votes were cast
against and there were 6,782 abstentions.
<PAGE>
- ------
Item 6. Exhibits and Reports on Form 8-K Page
- ----------------------------------------------- ----
(a) Exhibit 11 -
Computation of Net Earnings per Common and Common Equivalent Shares
for the nine months ended May 31, 1996 and 1995 and for the three
months ended May 31, 1996 and 1995. 15-16
(b) Reports on Form 8-K - In a report filed on Form 8-K dated March 12, 1996,
the Company reported that DEKALB Genetics and Monsanto completed equity sale
as part of a long-term research collaboration.
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: July 11, 1996 Thomas R. Rauman
-------------- -----------------------
(Signature)
Thomas R. Rauman
Vice President-Finance,
Chief Financial Officer
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
----------
COMPUTATION OF NET EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
For the nine months ended May 31, 1996 and 1995
May May
1996 1995
<S> <C> <C>
PRIMARY EARNINGS PER SHARE:
Shares
------
Average shares outstanding 16,020,515 15,473,192
Net average additional shares outstanding
assuming dilutive stock options exercised
and proceeds used to purchase treasury stock
at average market price 161,661 82,784
Average number of common and common
equivalent shares outstanding 16,182,176 15,555,976
Net Earnings
------------
Net earnings for primary earnings per share $18,172,000 $11,886,000
Primary Earnings Per Share $1.12 $0.76
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
----------
COMPUTATION OF NET EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
For the three months ended May 31, 1996 and 1995
May May
1996 1995
<S> <C> <C>
PRIMARY EARNINGS PER SHARE:
Shares
------
Average shares outstanding 16,690,225 15,509,051
Net average additional shares outstanding
assuming dilutive stock options exercised
and proceeds used to purchase treasury stock
at average market price 189,626 96,521
Average number of common and common
equivalent shares outstanding 16,879,851 15,605,573
Net Earnings
------------
Net earnings for primary earnings per share $8,581,000 $5,351,000
Primary Earnings Per Share $0.51 $0.34
</TABLE>
<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 its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 1700
<SECURITIES> 0
<RECEIVABLES> 143200
<ALLOWANCES> 4200
<INVENTORY> 69200
<CURRENT-ASSETS> 220600
<PP&E> 252500
<DEPRECIATION> 144900
<TOTAL-ASSETS> 380400
<CURRENT-LIABILITIES> 108000
<BONDS> 0
0
0
<COMMON> 1700
<OTHER-SE> 168200
<TOTAL-LIABILITY-AND-EQUITY> 380400
<SALES> 367400
<TOTAL-REVENUES> 367400
<CGS> 192000
<TOTAL-COSTS> 192000
<OTHER-EXPENSES> 139800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5800
<INCOME-PRETAX> 29800
<INCOME-TAX> 11600
<INCOME-CONTINUING> 18200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18200
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 0
</TABLE>
<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 its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> MAY-31-1995
<CASH> (2500)
<SECURITIES> 0
<RECEIVABLES> 112200
<ALLOWANCES> 2400
<INVENTORY> 89600
<CURRENT-ASSETS> 205200
<PP&E> 237500
<DEPRECIATION> 139700
<TOTAL-ASSETS> 349800
<CURRENT-LIABILITIES> 122900
<BONDS> 0
0
0
<COMMON> 500
<OTHER-SE> 126800
<TOTAL-LIABILITY-AND-EQUITY> 349800
<SALES> 294300
<TOTAL-REVENUES> 294300
<CGS> 148500
<TOTAL-COSTS> 148500
<OTHER-EXPENSES> 121900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6700
<INCOME-PRETAX> 17200
<INCOME-TAX> 6500
<INCOME-CONTINUING> 10700
<DISCONTINUED> 1200
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11900
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0
</TABLE>
