<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-Q/A
AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 12, 13, or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
DEKALB Genetics Corporation
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, exhibits or
other portions of its Quarterly Report for the three month period ended
November 30, 1996 on form 10-Q as set forth in the pages attached hereto:
Page
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Item 1. - Financial Statements
Condensed Consolidated Statements of Operations for
the three months ended November 30, 1996 and 1995 3
Condensed Consolidated Balance Sheets, November 30, 1996
and 1995 and August 31, 1996 4
Condensed Consolidated Statements of Cash Flows for the
three months ended Novebmer 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIGNATURE
Date: January 17, 1997 Thomas R. Rauman
------------------
(Signature)
Thomas R. Rauman
Vice President-Finance,
Chief Financial Officer
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DEKALB GENETICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1996 AND 1995
(DOLLARS IN MILLION EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
November November
1996 1995
-------- --------
<S> <C> <C>
Revenues $ 67.1 $ 50.1
Cost of revenues 38.9 28.4
--------- ---------
GROSS MARGIN 28.2 21.7
Selling expenses 9.7 7.5
Research and development cost 6.0 5.5
General and administrative expenses 8.2 6.2
---------- ---------
23.9 19.2
OPERATING EARNINGS 4.3 2.5
Interest expense, net of interest income
of $0.4 in 1996 and $0.2 in 1995 (1.3) (2.3)
Other income (expense), net 0.4 (0.4)
---------- ---------
Earnings (loss) before income taxes 3.4 (0.2)
Income tax provision (benefit) 1.3 (0.1)
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NET EARNINGS (LOSS) $ 2.1 $(0.1)
---------- ---------
---------- ---------
NET EARNINGS (LOSS) PER SHARE $ 0.12 $(0.01)
----------- ---------
----------- ---------
DIVIDENDS PER SHARE $ 0.07 $ 0.067
----------- --------
----------- --------
</TABLE>
The accompanying notes are an integral part of the financial
statements.
<PAGE>
DEKALB GENETICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1996 AND 1995 AND AUGUST 31, 1996
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
November November August
1996 1995 1996
-------- -------- -------
(Unaudited)
-------------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 0.1 $ 4.6 $ 23.3
Notes and accounts receivable,
net of allowance fo doubtful
accounts of $3.8 at November 30,
1996, $2.7 at November 30, 1995,
and $3.6 at August 31, 1996 51.1 48.5 54.6
Inventories (Note 2) 227.4 186.3 99.1
Deferred income taxes 8.2 4.7 8.2
Other current assets 29.0 19.8 4.8
-------- ------- -------
Total current assets 315.8 263.9 190.0
Investments in and advances to
related companies 4.6 3.3 5.0
Intangible assets 41.3 39.6 41.6
Other assets 8.1 5.1 7.2
Property, plant and equipment,
at cost 273.3 245.1 266.0
Less accumulated depreciation
and amortization (148.5) (141.5) (146.5)
-------- -------- --------
Net property, plant and
equipment 124.8 103.6 119.5
-------- -------- --------
Total assets $ 494.6 $ 415.5 $ 363.3
-------- -------- --------
-------- -------- --------
Current liabilities:
Notes payable $ 38.0 $ 69.8 $ -
Accounts payable, trade 107.5 74.8 13.6
Other accounts payable 5.0 4.5 34.1
Other current liabilities 64.9 39.4 39.6
-------- -------- --------
Total current liabilities 215.4 188.5 87.3
Deferred compensation and other
credits 6.9 5.7 7.1
Deferred income taxes 16.1 11.3 15.3
Long term debt, less current
maturities 85.0 85.0 85.0
Shareholders' equity:
Capital stock:
Common, Class A; no par value,
authorized 15,000,000 shares,
issued 2,408,888 at November 30, 1996
and 771,825 at November 30, 1995 0.2 0.1 0.2
Common, Class B; no par value,
non-voting, authorized 45,000,000 shares,
issued 14,892,283 at November 30, 1996
and 4,495,396 at November 30, 1995 1.5 0.4 1.5
Capital in excess of stated value 111.1 81.2 109.7
Retained earnings 64.6 51.2 63.7
Currency translation adjustments (3.8) (5.5) (4.1)
------- ------- -------
173.6 127.4 171.0
Less treasury stock, at cost (2.4) (2.4) (2.4)
------- ------- -------
Total shareholders' equity 171.2 125.0 168.6
------- ------- -------
Total liabilities and shareholder's
equity $ 494.6 $ 415.5 $ 363.3
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of the financial
statements.
<PAGE>
DEKALB GENETICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS CASH FLOWS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1996 AND 1995
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
November November
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 2.1 $(0.1)
Adjustments to reconcile net income
to net cash flow from operating activities:
Depreciation and amortization 3.1 2.7
Equity (earnings) loss, net of
dividends 0.9 0.1
Other 1.0 (0.1)
Changes in assets and liabilities:
Receivables 3.3 9.2
Inventories (128.3) (80.4)
Other current assets (24.4) (16.1)
Accounts payable 64.8 57.0
Accrued expenses 26.4 9.0
Other assets and liabilities (1.3) -
-------- -------
Net cash flow used by
operating activities $ (52.4) $ (18.7)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and
equipment (8.1) (6.1)
Proceeds from sale of property,
plant and equipment 0.1 0.2
Other - -
------- -------
Net cash flow used by
investing activities $ (8.0) $(5.9)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 38.0 27.0
Dividends paid (1.2) (1.0)
Other 0.7 0.2
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Net cash flow provided by
financing activities $ 37.5 $ 26.2
Net effect of exchange rates on cash (0.3) 0.1
------- -------
Net (decrease) increase in cash
and cash equivalents (23.2) 1.7
Cash and cash equivalents August 31 23.3 3.0
------- -------
Cash and cash equivalents at the end
of November $ 0.1 $ 4.7
------- -------
------- -------
Supplemental Cash Flow Information
Cash paid (refunded) during the
period for:
Income taxes $ 0.9 $(1.0)
Interest $ 1.2 $ 2.2
</TABLE>
The accompanying notes are an integral part of the financial
statements.
<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 November 30,
1995 is included herein as part of the condensed consolidated
financial statements.
The Company declared a three-for-one stock split to holders of
record 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.
The results presented are unaudited (other than the Condensed
Consolidated Balance Sheet at August 31, 1996, 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 respect 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:
<TABLE>
<CAPTION>
November November August
1996 1995 1996
--------- --------- --------
<S> <C> <C> <C>
Commercial seed $ 212.2 $ 172.7 $ 86.0
Swine 9.5 7.6 9.6
Supplies and other 5.7 6.0 3.5
--------- --------- --------
$ 227.4 $ 186.3 $ 99.1
--------- --------- --------
--------- --------- --------
</TABLE>
3. 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.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(continued)
4. On January 31, 1996, the Company entered into a series of
agreements with Monsanto Company (Monsanto), including an agreement
which provides for a longterm 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 two
years. The two companies will share the royalties received from
third parties relating to the patents covered by such cross-
licensing agreements.
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
rose to over 17.0 million from about 15.6 million.
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 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.
As of November 30, 1996, Monsanto held 242,721 shares of Class A
and 6,566,355 share of Class B Common Stock. This represents ten
percent of the Class A voting shares and 45 percent of the Class
B non-voting shares.
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 holder of Class
A Stock.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net earnings for the first quarter of fiscal 1997 were $2.1 million
( $.12 per share) compared with a net loss of $0.1 million ($.01
per share) in the first quarter of fiscal 1996. Revenues increased
34% as sales activity in Argentina occurred earlier than in prior
years. A 53% increase in international seed revenues reflect, in part,
Argentine customer deposits of approximately $26 million held by DEKALB
at fiscal year end 1996 representing advance orders which were converted into
shipments in the first quarter of fiscal 1997. The increase in
international seed segment earnings was due to these early shipments in
Argentina combined with higher equity earnings from Mexico. In addition,
interest expense in the current year first quarter was $1.0 million less
than in the prior year first quarter due to lower corporate borrowing
requirements.
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)
<TABLE>
<CAPTION>
November November
1996 1995
--------- ---------
<S> <C> <C>
Revenues
North American Seed $ 5.1 $ 6.4
International Seed 48.1 31.5
Swine 13.9 12.2
--------- ---------
Total revenues 67.1 50.1
--------- ---------
--------- ---------
Earnings
North American Seed $ (0.2) $ (0.5)
International Seed 5.9 3.0
Swine 0.3 0.7
--------- ---------
Total operations 6.0 3.2
General corporate expenses (1.3) (1.1)
Net interest expense (1.3) (2.3)
--------- --------
Earnings before income taxes 3.4 (0.2)
Income tax provision 1.3 (0.1)
--------- --------
Net Earnings $ 2.1 $(0.1)
--------- --------
--------- --------
</TABLE>
Seed
- ----
Seed revenues and earnings in the first quarter are primarily the result of
Latin American operations because the North American seed business and other
northern hemisphere operations do not report any material sales or earnings
until the second quarter.
<PAGE>
International Seed
- ------------------
International seed segment earnings nearly doubled over the prior year first
quarter results. Operations in Argentina and Mexico were primarily
responsible for the improvement. Corn and sunflower sales volumes in Argentina
increased significantly over the prior year as good economic conditions,
together with greater demand for single-cross corn hybrids, generated higher
earnings in Argentina. In Mexico, higher corn and sorghum sales volumes
generated improved earnings from the Company's equity investment.
Results from international seed operations outside of Latin America are largely
in the northern hemisphere and will not generate any significant results until
the second quarter.
North American Seed
- -------------------
The variance in North Amercian seed revenues was primarily attributable to fewer
soybean shipments in the first quarter of fiscal 1997 while the net loss for
the quarter was not substantially different from a year ago. 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 revenues increased 14% over the prior year first quarter due to
higher market hog prices. The fiscal 1997 first quarter average market hog
price received by DEKALB was $56 per hundred weight compared with $46 per
hundred weight in the first quarter of fiscal 1996. Breeding stock and
market animal sales volumes were nearly comparable with the same period a year
ago. Swine segment profitability decreased $0.4 million from the same period
in fiscal 1996. Total gross margin was negatively affected by the impact of
high feed costs incurred during the spring and summer of 1996 and currently
charged through cost of goods sold.
General
- -------
The effective tax rate increased to 39% in the first quarter of fiscal 1997
from 37% in the same period of fiscal 1996. A change in the assumptions
related to research credits was the primary reason for the rate increase.
For each interim period, the tax rate is determined from an estimate of full
year earnings and the resultant tax.
Interest expense decreased $1.0 million in fiscal 1997 due to lower corporate
borrowing requirements.
Financial Position
- ------------------
During the first quarter, the net cash outflow from operations was $52.4 million
compared with $18.7 milliion in the prior year. Cash required for seed corn
production increased substantially due to a larger crop and higher commodity
prices.
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, 1999 and $6 million in facilities
available through May 28, 1997. 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.
