<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the
---- Securities Exchange Act of 1934
For the fiscal year ended August 31, 1998 or
---- Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act 1934
For the transition period from --- to ---
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Commission file number : 0-17005
DEKALB GENETICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3586793
--------------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3100 Sycamore Road, DeKalb, Illinois 60115 815-758-3461
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--
(Address of principal executive offices) (Registrant's
telephone
number,
including area
code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Class on which registered
-------------- ----------------------
Class B Common Stock, no par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, no par value
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:
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.------
The aggregate market value of all Common Stock held by non-
affiliates was $2,841,176,994 based upon the closing price on the
New York Stock Exchange on October 31, 1998. (The officers and
directors of the registrant are considered affiliates for
purposes of this calculation.)
As of October 31, 1998, 4,525,324 shares of the registrant's
Class A Common Stock and 30,115,467 shares of the registrant's
Class B Common Stock were outstanding.
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<PAGE>
Any forward looking statements, oral or written, are subject to
several risks and uncertainties that could cause actual results
to differ from those in the forward looking statements. Among
these factors are the Company's relative product performance and
competitive market position, weather conditions, commodity
prices, trade policies, market conditions, and results of pending
litigation.
PART I
ITEM 1. BUSINESS
(a) DEKALB Genetics Corporation (`DEKALB' or the `Company') is
engaged in the development of products of major importance to
two segments of modern agriculture--seed (corn, soybeans,
sorghum, alfalfa and sunflower) and hybrid swine breeding
stock. DEKALB operates two business segments, one through the
seed division of the Company (`DEKALB Seed') and one through
its wholly-owned subsidiary, DEKALB Swine Breeders, Inc.
(`DEKALB Swine').
DEKALB conducts major research and development programs on
those genetically determined traits which are of primary
importance to the producer's profitability. The Company
develops primary or inbred lines through a process of
observation, evaluation and selection for further breeding of
those plants or swine which exhibit improved performance in
certain traits. These primary or inbred lines, when mated or
crossed to other primary or inbred lines, will pass on to
their progeny the improved performance in those traits for
which the primary or inbred lines were selected.
Additionally, a fundamental genetic principle--called
heterosis, or hybrid vigor--is utilized. Heterosis occurs
when the progeny of genetically dissimilar parents have
certain performance characteristics which are superior to
those of either parent.
DEKALB uses these principles of genetic selection and
heterosis to provide products for the modern day agricultural
industry. The Company also develops production and management
techniques to complement the performance potential which
resides in the genetic composition of its products.
As part of its research and development, DEKALB uses
biotechnology to improve hybrid performance. For example,
using gene cloning and transformation techniques in the seed
business, researchers are able to incorporate genes from
various sources to create new, value-added traits such as
herbicide resistance, insect resistance, and improved
nutritional quality. Further, DNA marker techniques enable
researchers to correlate field performance with genetic makeup
thereby giving them an improved ability to breed for desired
product characteristics.
DEKALB is a Delaware corporation which was organized on June
15, 1988. It succeeded from the genetics businesses of DEKALB
Corporation which was originally founded in 1917. On May 8,
1998, the Company entered into an agreement and plan of merger<PAGE>
(the `Merger Agreement') with Monsanto Company (`Monsanto')
and Corn Acquisition Corporation, a wholy-owned subsidiary of
Monsanto (`the Purchaser'), pursuant to which, among other
things, Monsanto and the Purchaser have commenced a tender
offer (the `Offer') by the Purchaser to purchase all
outstanding shares of Class A and Class B Common Stock of the
Company (collectively, the `Shares'), at a purchase price of
$100.00 per Share, net to the seller in cash, without interest
thereon (the `Offer Price'), upon the terms and subject to the
conditions set forth in the Offer to Purchase dated May 15,
1998, as amended, and in the related Letter of Transmittal,
copies of which have been previously mailed to stockholders of
the Company and filed by Monsanto and the Purchaser with the
Securities and Exchange Commission (the `Commission'). The
Merger Agreement further provides that following the
consummation of the Offer and the satisfaction or waiver of
certain conditions, the Purchaser will be merged (the
`Merger') with and into the Company, with the Company
continuing as the surviving corporation. As of the effective
time of the Merger, each issued and outstanding Share (other
than Shares owned by the Company, Monsanto, the Purchaser or
their respective subsidiaries, which Shares will be cancelled,
and other than Shares, if any, held by stockholders who are
entitled to and who properly exercise appraisal rights under
Delaware law), will, by virtue of the Merger and without any
action by the holder thereof, be converted into the right to
receive from the surviving corporation in cash the price per
Share paid in the Offer. Pursuant to the Merger Agreement,
Monsanto and the Purchaser commenced the Offer on May 15,
1998. The Offer is currently scheduled to expire at 5:00
p.m., eastern standard time, on Monday, November 30, 1998,
unless Monsanto extends it.
(b) Industry Segment and Geographic Area Information is included
in Part II, Item 8, Footnotes R and N of the financial
statements.<PAGE>
<PAGE>
(c) The following narrative describes the businesses of each
segment and other general matters of the Company.
SEED
DEKALB Seed, headquartered in DeKalb, Illinois, engages in the
research and development of hybrid corn, varietal soybean, hybrid
sorghum, hybrid sorghum-sudangrass and hybrid sunflower seed.
The Company, directly or through its affiliates, contracts with
growers to produce the seeds of such plants and markets them
under the DEKALB brand. It also markets varietal alfalfa and
other forage mixtures.
RESEARCH AND DEVELOPMENT. Crop producers are very conscious of
product performance and respond to new, improved products. As a
research-based company, DEKALB commits significant resources
(approximately 16 percent of DEKALB Seed's consolidated worldwide
revenues in fiscal year 1998) to the research and development of
improved products. Total worldwide research and development
expenditures by DEKALB Seed were $70.3 million, $50.2 million and
$40.9 million for fiscal years 1998, 1997 and 1996, respectively.
DEKALB Seed operates an integrated, worldwide research and
development effort, conducted at 62 research locations and over
600 testing sites around the world, with 43 research locations
and 322 test sites in the United States and Canada. Worldwide,
it has 46 corn breeding programs, 12 sorghum breeding programs,
seven soybean breeding programs, and four sunflower breeding
programs. Throughout the world new hybrids and varieties are
evaluated annually, and in the United States and Canada alone
there are over one million performance test plots. DEKALB Seed`s
primary biotechnology research facility is located in Mystic,
Connecticut and includes laboratories, greenhouses and a general
office. Biotechnology research expenditures represented
approximately 25% of total seed research and development spending
for fiscal year 1998.
PRODUCTS. In fiscal year 1998, sales of hybrid corn seed
represented approximately 73 percent of DEKALB Seed's
consolidated worldwide revenues. Corn is the primary feed grain
grown in the United States and has a seed market value of
approximately $1.7 billion in the United States and $4.5
billion worldwide, the largest of any agricultural seed. Corn is
planted under a wide variety of conditions which affect its
growth and yield, including the length of the growing season
(which is primarily determined by latitude and altitude), water
availability, soil, climate and insect and disease challenges.
To respond to this variety of conditions, DEKALB Seed has
developed high yielding corn plants with different relative
characteristics in terms of maturity (the time from planting to
harvest), dry down (the time it takes for corn to dry to harvest
standards), grain quality, standability (the strength of roots
and stalks), insect, disease and herbicide resistance, plant and
ear height and tolerance to drought and other stresses.
Soybean acreage in the United States is third behind corn and
wheat acreage, and in fiscal year 1998 the sale of soybean seed
represented approximately 15 percent of DEKALB Seed's
consolidated worldwide revenues. DEKALB Seed has developed high-
yielding soybean varieties with characteristics differing on the
basis of maturity, tolerance to disease, seedling emergence,
herbicide resistance, standability of the plant, and resistance
to shattering (the premature opening of the bean pod).
DEKALB Seed produces both grain and forage types of hybrid
sorghum seed. In fiscal year 1998, sales of hybrid sorghum seed
represented approximately six percent of DEKALB Seed's
consolidated worldwide revenues. The grain sorghum product line
is planted by farmers to produce a high-quality feed grain,
approaching the value of corn. The DEKALB Seed research effort
continues to focus on developing hybrids which possess
consistently high yields, resistance to lodging and greenbug
attacks and drought tolerance, because more than 80 percent of
the crop is grown under semi-arid conditions.
DEKALB Seed is able to serve the requirements of several
sunflower seed markets through development of a range of hybrids.
These hybrids exhibit high yield, high oil content, a range of
maturities, standability and disease resistance. Currently,
sunflower seeds are marketed primarily in the United States,
Argentina, France, Spain, South Africa, and China. Sunflower
seed sales represented approximately four percent of DEKALB
Seed's consolidated worldwide revenues in 1998.
<PAGE>
Virtually all corn and sorghum seed planted in the United States
and practically all sunflower seed planted world-wide are
hybrids. Because the seeds (grain) produced by a hybrid do not
have the same genetic composition as the seed planted, customers
purchase nearly all of their corn, sorghum and sunflower seed
each year so as not to lose the full benefits of genetic
selection and heterosis. If customers hold back corn, sorghum or
most sunflower seed from their crop and plant it the next year,
yield and other positive attributes will be dramatically reduced.
Soybeans, on the other hand, are not hybrids. Customers
frequently retain and use a part of their crop as seed in the
year following harvest. Thus, there is a reduced market as well
as lower profit margin potential for commercial soybean seed.
The Plant Variety Protection Act, a law governing the use of
proprietary soybean varieties, limits the quantity of seed a
grower may retain and should help future prospects for capturing
the value of soybean research improvements.
DEKALB Seed also produces and sells SUDAX -Registered Trademark-
brand sorghum-sudangrass and sells alfalfa. SUDAX -Registered
Trademark- brand is a hybrid cross of sorghum and sudangrass,
producing a plant suitable for pasturing animals or multiple
cuttings for forage or hay. Alfalfa is used as animal feed,
primarily for dairy and feeder cattle. Alfalfa is a perennial, as
it will re-emerge for many seasons without additional seeding.
Seed production is subject to the risk of the environment. The
parental inbred lines which are used in production are more
sensitive to adverse conditions than are commercial hybrids grown
by producers. Weather is the biggest variable. Wet weather at
planting time, lack of moisture during the growing season, hot
weather at pollination time and frost before the crop is mature
can all adversely affect DEKALB Seed's supply and unit costs.
For these reasons, DEKALB Seed has its production facilities
spread geographically and frequently utilizes irrigation to
minimize some of these risks.
MARKETING. In the United States, DEKALB Seed markets seed from
coast to coast, through a large network of about 7,000
independent farmer-dealers, distributors and farm stores who
resell to producers.
There are approximately 300 companies engaged in the production
and marketing of agricultural seed, resulting in intense
competition. DEKALB Seed estimates that the top two -- Pioneer
Hi-Bred International, Inc. of Des Moines, Iowa and DEKALB Seed -
- accounted for over 54 percent of 1998 United States seed corn
sales, and that the next six companies have a combined market
share of over 26 percent. DEKALB Seed is the second largest
seller of corn seed with a market share of over 12 percent and is
one of the largest sellers of soybean and sorghum seed in the
United States. Competition for sales of seed to producers
involves factors such as relative product performance, price,
marketing and promotional programs, technical and informational
support, customer relationships and the effectiveness of the
sales force. DEKALB Seed management believes it competes
favorably with respect to all these factors.
INTERNATIONAL OPERATIONS. The international seed business has
risks and competition similar to the United States seed business,
plus the added risks of different political environments and
currency fluctuations. From its initial activities in 1959, the
international seed business of DEKALB Seed has expanded to most
areas of the world where corn, sorghum, soybean, alfalfa and
sunflower are grown.
DEKALB Seed, directly or indirectly, operates wholly-owned
subsidiaries in Argentina, Canada, Italy, and has a 49%-owned
affiliate in Mexico. In addition, foreign-based companies in
major agricultural markets have been licensed to produce and
market DEKALB seed. Thus, local production and marketing is
carried out in more than 20 countries worldwide. The agreements
with these foreign affiliates provide for the development,
production and sale of hybrids and varieties adapted to meet
local market preferences. International revenues through
consolidated subsidiaries totaled nearly $120 million in 1998.
In addition, it is estimated that DEKALB brand seed sales through
non-consolidated foreign affiliates and licensees totaled over
$130 million.
SEASONALITY. Production, sale and distribution of seed follows a
seasonal pattern. In North America, DEKALB Seed normally grows
its seed supply in the summer, and it is harvested, conditioned
and bagged in the months of September through January. The
dealers' sales effort takes place in the fall, and generally
about three-fourths of customer seed orders are placed by
December 1st. Deliveries of seed corn occur principally in the
late winter and spring, during the Company's second and third
fiscal quarters. Sales revenue is recognized upon shipment of
seed. Returns of unsold seed occur, in most cases, during the
fourth fiscal quarter. At the time sales are recorded, DEKALB
Seed provides for estimated returns based upon historical
experience and current weather conditions.
<PAGE>
During the past three years, approximately 55 percent and 45
percent of North American seed revenues were recorded in the
second and third fiscal quarters, respectively. Cash collections
also follow a seasonal pattern, as the majority of customers
remit cash in advance of their first due date in June in order to
earn discounts for early payment. Approximately two-thirds of
DEKALB Seed's cash outflow in North America occurs in the months
of December through April and includes payments to independent
farmers who contracted to produce DEKALB Seed products during the
prior summer.
The demand for seed reflects the demand for the crop's end use
including animal feed, industrial use and food consumption. The
cyclical nature of the business creates uncertainty from year to
year concerning the size of the market for seed. An inaccurate
estimate of seed needs can result in an undersupply of seed or an
oversupply of seed (which may create the need to write off
inventories).
PATENTS AND APPLICATIONS. Patents, trademarks, United States
Plant Variety Protection Act Certificates, foreign plant
registrations and licenses to use genetic material and
intellectual property are growing in importance, generally, to
the industry and to the business of DEKALB Seed. While no single
patent is currently of material importance to the Company's seed
business, the fact that a significant number of patents have been
issued to the Company in the area of biotechnology is considered
to be an important factor relating to the future ability to
commercialize genetically engineered products and to enable the
Company to enter into royalty generating license agreements with
third parties.
DEKALB Seed's policy is to fully protect its inventions,
discoveries and intellectual property. (See Item 3 - Legal
Proceedings.) DEKALB Seed has incurred and expects to continue
to incur legal expenses associated with the ongoing enforcement
of its patents.
SWINE
DEKALB Swine, headquartered in DeKalb, Illinois, engages in the
research and development of hybrid swine breeding stock and
markets such hybrid breeding swine and related management
services to hog producers in both domestic and international
markets.
RESEARCH AND DEVELOPMENT. Through genetic research and
development, male and female lines of swine have been developed
which are unique to DEKALB Swine. These DEKALB Swine lines
undergo continual genetic improvement through research which
includes an ongoing process of observation, testing, statistical
analysis and selection for further breeding of only those animals
exhibiting improvement in economically important traits.
DEKALB Swine's research and development expenditures were $6.8
million, $7.1 million and $6.7 million for fiscal years 1998,
1997 and 1996, respectively.
PRODUCTS AND PROGRAMS. Domestically, DEKALB Swine generates
breeding stock sales and license revenues from five principal
programs (Specific Cross -Registered Trademark- Program, hybrid
boar rotation, Custom Genetics -Registered Trademark- Program,
crossing farms, and artificial insemination centers) through
which it markets hybrid breeding swine and semen.
Internationally, DEKALB Swine licenses or sells primary lines to
third parties for the production of breeding stock in foreign
countries under trademark licenses and technical agreements.
DEKALB Swine's secondary product is market hogs, which are a by-
product of the production of breeding animals and represent about
50 percent of total revenues. Because DEKALB Swine produces a
consistent and high quality product, this market hog by-product
is generally sold by DEKALB Swine at a premium above major
slaughter market averages.
MARKETING. In the United States, DEKALB Swine sells breeding
stock to approximately 1,250 customers who fall into two broad
categories. First, larger hog producers represent a major market
for DEKALB Swine's products. As the number of hog producers has
declined by more than 50 percent over the past ten years to
approximately 139,000 hog farms, these larger producers represent
a growing share of hog production, and an increasing percentage
of DEKALB Swine's breeding stock sales. Larger producers
purchase boars or boar semen and either purchase gilts, or in
many cases, operate an in-house `crossing farm' and pay DEKALB
Swine fees by licensing DEKALB great-grandparent or grandparent
lines to produce their own grandparent or parent gilts.
<PAGE>
Second, DEKALB Swine's smaller customers primarily purchase
DEKALB Swine boars and generally retain gilts from their own
herds.
Internationally, DEKALB Swine currently licenses or sells swine
breeding stock to distributors in five foreign countries. Those
distributors sell offspring to several hundred local customers.
COMPETITION. In the United States, DEKALB Swine competes with
national and regional producers of hybrid swine breeding stock
and thousands of producers of purebred stock. DEKALB Swine
believes that it is one of the largest producers of hybrid
breeding stock in the United States.
The demand for swine breeding stock depends upon the supply of
hogs to be produced, which is determined by the profitability of
hog production, which, in turn, depends upon the supply and
demand for pork and pork products, as well as the cost of
production. The demand for DEKALB Swine breeding stock depends
upon customer acceptance and the ability to offer products and
services which are superior to the competition.
Breeding stock prices are influenced by the quality of the
breeding stock, by competition from other major hybrid and
purebred producers, and by market hog prices. On average, hybrid
breeding stock sells at a higher price than purebred swine.
In addition to price, competition for sales to hog producers
involves factors such as reproductive performance of the parent
hybrid boars and gilts, performance and quality of their market
hog offspring, technical knowledge and competence of the sales
force, service programs, and post-sale support. DEKALB Swine
management believes it competes favorably with respect to all
these factors.
The swine industry is a cyclical business that is heavily
influenced by producer profitability. Historically, hog
production has followed a three to five year expansion phase
followed by a similar contraction phase. At the peak of the
expansion phase, market hog prices are generally at a low and
unprofitable level. As hog production decreases, prices normally
begin to rise until expansion again begins to occur.
GENERAL
On August 31, 1998, DEKALB had approximately 2,000 employees.
Working capital requirements in the seed business arise out of
the need to carry newly produced inventories of seed (principally
corn), and payables to growers associated with growing that seed,
until receipts from the selling season are collected several
months later. DEKALB Seed, therefore, has significant working
capital requirements from January 1 to July 1 of each year
because approximately two-thirds of DEKALB Seed's cash flow for
expenses occurs in the months of December through April, although
final receipts are not received until June. It is anticipated
that such requirements will be met through cash generated from
operations and lines of credit for general corporate purposes.
DEKALB has available various credit facilities which include a
revolving line of credit. The revolving credit agreement provides
for a $50 million line of credit for general corporate purposes,
and has a required step-down to $20 million for one day during
each year.
DEKALB Swine's production and sales patterns are such that
working capital needs are relatively constant.
The operations of DEKALB are subject to various state and federal
environmental and safety laws, rules and regulations. Certain of
the facilities of DEKALB are also subject to state and federal
environmental protection laws, rules and regulations. Management
of DEKALB believes that the Company is in compliance, in all
material respects, with applicable environmental and safety laws,
rules and regulations, and that such compliance has not had any
material adverse effect on its operations or financial condition.
ITEM 2. PROPERTIES
In both its seed and swine businesses, DEKALB property consists
primarily of foundation genetic material and the property,
buildings and related equipment for research, production,
distribution and marketing.
<PAGE>
DEKALB Seed headquarters personnel occupy a 73,000 square foot
office building and DEKALB Swine headquarters personnel occupy a
11,000 square foot office building, both of which are located in
DeKalb, Illinois and are owned by the Company. In July 1996, an
additional 52,000 square foot facility near the headquarters in
DeKalb was purchased and is currently fully occupied. DEKALB
began a renovation of the larger facility in April, 1997 and
broke ground on a new 25,000 square foot training center adjacent
to the larger facility. DEKALB expects renovation and
construction to be completed by Summer 1999.
DEKALB Seed owns or leases 42 facilities in the United States and
20 outside of the United States at which research functions are
performed. Seed production and foundation locations in the
United States total 28 with nine outside the United States. In
addition, two seed warehouses are located in the United States.
DEKALB Seed owns or leases 11 sales offices, all in the United
States, and owns a biotechnology research facility in Mystic,
Connecticut.
DEKALB Swine owns 19 research, foundation and production farms
and 9 genetic evaluation stations. Fourteen of the farms, as
well as an office and modern feed mill, are located in Seward and
Meade Counties, Kansas and nearby Beaver and Texas Counties,
Oklahoma. Three farms are located near the corporate
headquarters in DeKalb, Illinois with two additional farms near
Lubbock, Texas.
DEKALB believes its facilities are adequate to serve its needs
and that if additional facilities are required as the business
expands, DEKALB will be able to acquire or lease such facilities
on reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are defendants in various
legal actions arising in the course of business activities.
Four of such cases involve patent related matters. On
October 1, 1996 Plant Genetics Systems, a Belgian company
that is a wholly-owned subsidiary of Hoechst Schering AgrEvo
Gmbh, filed a lawsuit against the Company in the federal
district court of Connecticut in which they allege that the
Company is infringing U.S. Patent No. 5,561,236. The patent
purports to be directed to certain genetically engineered
plants and cells that exhibit resistance to certain
herbicides. On October 22, 1996, two subsidiaries of
Mycogen Corporation filed a lawsuit against the Company and
two other defendants in the Federal District Court of
Wilmington, Delaware in which the allege that the defendants
are infringing U.S. Patents 5,567,600 and 5,567,862. These
patents purport to be directed to certain processes that
produce plants that exhibit certain insect resistance. On
February 3, 1998 a federal jury in Wilmington, Delaware
ruled that neither the company nor either of the other
defendants infringed these two patents. The parties are
in the process of filing post-trial motions. On January 21,
1997, Novartis Seeds, Inc. filed a lawsuit against the
Company in the federal district court of Delaware in which
they allege that the company is infringing U.S. Patent No.
5,595,733. On November 9, 1998, a federal jury in
Wilmington, Delaware ruled that the Company did not infringe
the patent and that the patent was not valid. That patent
purports to be directed to certain methods for protecting
certain plants against pest damage. On October 30, 1997
Rhone-Poulenc Agrochimie S.A. (`RPA') filed a lawsuit in the
federal district court in the Middle district of North
Carolina in which they allege that the Company
misappropriated certain RPA technology, is in breach of
certain agreements, is in violation of certain antitrust
laws and is infringing upon certain patents of RPA. All of
these claims relate to corn that is resistant to glyphosate
herbicide. On October 28, 1998, Pioneer Hi-Bred
International, Inc. filed a lawsuit in the federal district
court in the Southern District of Iowa claiming that the
Company misappropriated certain Pioneer corn germplasm. 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 up to five of
the Company's biotechnology related patents. The patents
involved are U.S. patent no. 5,484,956 covering fertile,
transgenic corn plants expressing genes encoding Bacillus
thuringiensis (Bt) insecticidal proteins, U.S. patent no.
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, U.S. patent nos. 5,538,880 and 5,538,877 directed to
methods of producing either herbicide-resistant or insect-
resistant transgenic corn and U.S. patent no. 5,550,318
directed to transgenic corn plants containing a bar or pat
gene. In each such case the Company has asked
<PAGE>
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 sued Beck's Hybrids, Inc. and
Countrymark Cooperative, Inc. on July 23, 1996 and filed
against several AgrEvo entities on August 27, 1996. All
lawsuits related to patent No. 5,550,318 have been stayed
pending resolution to an interference proceeding involving
that patent at the U.S. Patent and Trademark Office. 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
No matters were submitted to the vote of security holders during
the fourth quarter of fiscal 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
A.As of October 31, 1998 there were approximately 500 record
holders of Class A Common Stock and approximately 1,300 record
holders of Class B Common Stock. On June 16, 1997, DEKALB's
Class B Common Stock began trading on the New York Stock
Exchange under the symbol DKB. Previously Class B shares were
traded on the NASDAQ/NMS under the trading symbol SEEDB.
There is no established public trading market for Class A
shares.
<TABLE>
<CAPTION>
B. 1st 2nd 3rd 4th
Qtr. Qtr. Qtr. Qtr.
Common Stock Data*
<S> <C> <C> <C> <C>
1998
Dividends per share $ 0.035 $ 0.035 $ 0.035 $ 0.035
Market price range **
- Low $ 33.63 $25.25 $66.63 86.63
- High $ 47.13 $69.88 $95.88 $95.50
1997
Dividends per share $ 0.035 $ 0.035 $ 0.035 $ 0.035
Market price range **
- Low $ 16.63 $ 18.63 $25.50 $35.94
- High $ 21.25 $33.82 $35.57 $42.38
* All share numbers and prices have been adjusted to reflect the
two-for-one split of the Common Stock to holders of record
July 25, 1997.
** Market price range reflects closing daily prices.
</TABLE>
<TABLE>
ITEM 6 - SELECTED FINANCIAL DATA Years Ended August 31 -
(Dollars in millions, except per share amounts)
_________________________________________________
1998 1997 1996 1995 1994
_______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA
Revenues:
North American Seed $ 332.3 $295.2 $259.8 $ 199.9 $183.8
International Seed 120.8 99.6 80.6 72.1 63.7
Swine 49.1 56.6 47.1 47.4 52.7
________ ________ ________ ________ ________
Total Operating Revenues $ 502.2 $451.4 $387.5 $319.4 $300.2
Pre-Tax Earnings (Loss):
North American Seed $ 6.9 $ 38.3 $ 30.9 $ 22.3 $ 14.7
International Seed 32.8 20.0 10.0 7.6 8.0
Swine (5.0) 1.5 0.2 (0.9) 5.7
Interest, corporate and
other (19.5) (13.4) (13.0) (13.9) (13.2)
________ ________ ________ ________ ________
Earnings before income
taxes anddiscontinued
operations 15.2 46.4 28.1 15.1 15.2
Income tax provision 4.9 17.6 11.1 5.6 4.6
________ ________ ________ ________ ________
Earnings before
discontinued operations $ 10.3 $ 28.8 $ 17.0 $ 9.5 $ 10.6
Discontinued operations - - - 1.2 -
___________________________________________________________________________________
Net earnings $ 10.3 $ 28.8 $ 17.0 $ 10.7 $ 10.6
===================================================================================
PER SHARE DATA (5)
Basic earnings per share(1) $ 0.30 $ 0.84 $ 0.52 $ 0.34 $ 0.34
Diluted earnings per share $ 0.28 $ 0.81 $ 0.51 $ 0.34 $ 0.34
(2)
Dividends per share $ 0.14 $ 0.14 $ 0.137 $ 0.133 $ 0.133
___________________________________________________________________________________
FINANCIAL DATA
Return on average equity 5.1% 15.8% 11.5% 8.6% 9.0%
Current ratio 1.27 1.70 2.18 1.85 1.75
Working capital $ 64.1 $ 93.0 $102.7 $ 80.4 $ 68.9
Net property, plant and $ 237.8 $166.1 $119.5 $ 99.8 $ 95.7
equipment
Total Assets $ 590.8 $449.6 $363.3 $323.0 $315.2
Long-term debt $ 112.9 $ 90.0 $ 85.0 $ 85.0 $ 85.0
Total debt to 54.4% 38.8% 33.5% 50.3% 51.8%
capitalization
Shareholder's equity (3) $ 211.4 $196.1 $168.6 $126.3 $121.3
Book value per common share $ 6.10 $ 5.71 $ 4.94 $ 4.06 $ 3.93
_________________________________________________________________________________
GENERAL
Avg. shares outstanding for
basic earnings per share 34,577 34,251 32,516 30,981 30,849
(4)
Avg. shares outstanding for
diluted earnings per share 36,365 35,744 33,554 31,542 31,317
(4)
Number of employees 2,058 2,037 1,882 1,828 1,927
_________________________________________________________________________________
(1) Basic earnings per common share for fiscal 1994-1998 are calculated by
dividing net earnings by the average number of common shares outstanding during
those fiscal years.
(2) Diluted earnings per common share for fiscal 1994-1998 are calculated by
dividing net earnings by the average number of common and common equivalents
(stock options) shares outstanding during those fiscal years.
(3) Gains and losses resulting from translation (except in foreign countries
experiencing hyperinflation) are reflected as an adjustment to shareholders'
equity.
(4) Average shares outstanding are in thousands.
(5) Per share data was adjusted to reflect the two-for-one and three-for-one
stock splits to holders of record on July 25, 1997 and May 10, 1996,
respectively.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
_______________________________________________________________
RESULTS OF OPERATIONS
SUMMARY
-------
Net earnings for fiscal 1998 were $10.3 million ($0.28 per
share) compared with $28.8 million ($0.81 per share) in fiscal
1997. In North America, seed segment earnings decreased from
$38.3 million in 1997 to $6.9 million in 1998. Improved sales
volumes for both corn and soybeans and growing revenues from
third-party royalties were more than offset by increased corn
production costs, expanded sample seed usage and higher
operating expenses. In addition, Swine segment earnings
declined $6.5 million from fiscal 1997 to fiscal 1998,
primarily as a result of lower market hog prices.
International seed segment earnings improved 64 percent from
fiscal 1997 to fiscal 1998 due to significantly higher sales
volume and margin increases in Argentina and improved equity
earnings from Mexico.
During fiscal 1998, revenues increased 11 percent from $451.4
million in fiscal 1997 to $502.2 million. In North America,
revenues increased 13 percent due to higher corn volume and
specialty trait premiums, reflecting an improved product mix.
Higher soybean volumes and growing royalties from third
parties also contributed to the revenue improvement. In
Argentina, average corn selling prices increased due to a
significant portion of sales volume shifting to higher price
categories. In addition, fiscal 1998 Argentine corn volume
increased over 50 percent from the previous year, driving the
21 percent International segment revenue improvement. Swine
segment revenues decreased by 13 percent largely due to lower
market hog prices.
Net earnings for fiscal 1997 were $28.8 million ($0.81 per
share) compared with $17.0 million ($0.51 per share) in fiscal
1996. All three business segments reported higher
profitability compared with the prior year. In North America,
improved corn unit margins combined with higher soybean volume
resulted in a 24 percent improvement in earnings.
International seed segment earnings doubled from fiscal 1996 to
fiscal 1997 largely due to sales volume and margin increases in
Argentina and Mexico. In addition, Swine segment earnings
improved as a result of an increase in breeding stock sales
combined with higher market hog prices.
During fiscal 1997, revenues rose 16 percent ($451.4 million
versus $387.5 million) compared with fiscal 1996. The increase
combined a 24% increase in International revenues with a 14%
improvement in North American revenues as corn average selling
prices in North America and Argentina increased primarily due
to a significant portion of sales volume shifting to higher
price categories contributing to improved unit margins. (North
American soybean revenues increased 21% driven largely by a 15%
increase in sales volume.) Swine segment revenues increased as
a result of increased breeding stock sales accompanied by
higher market hog prices.
FOURTH QUARTER
The $14.5 million ($0.40 per share) net loss in the fourth
quarter of fiscal 1998 exceeded the prior year fourth quarter
loss of $2.7 million ($0.07 per share) by $11.8 million. North
American seed profitability decreased $12.3 million as final
results of promotional seed programs were provided by field
sales representatives. In addition, swine profitability
declined $2.7 million from net earnings of $1.4 million in the
fourth quarter of fiscal 1997 to a loss of $1.3 million in the
same period of fiscal 1998 primarily due to lower market hog
prices.
The net loss in the fourth quarter of fiscal 1997 of $2.7
million ($0.07 per share) was higher when compared with the
prior year fourth quarter loss of $1.2 million ($0.03 per
share); however, the sources differed from year to year. The
fiscal 1997 loss was largely due to corporate and
administrative expenses coupled with higher than expected corn
seed returns more than offsetting late season soybean sales.
The fiscal 1996 loss primarily reflected corporate and
administrative expenses. Losses are typical for DEKALB in the
fourth quarter because that period primarily reflects corporate
and interest expenses and adjustments related to estimated full
year seed returns and expenses recorded in the previous nine
months.
<PAGE>
<TABLE>
<CAPTION>
Full Year Industry Segment Revenues and Pre-Tax
Earnings
(in millions)
_______________________________________________________________
__
Years ended August 31<PAGE>
<S> <C> <C> <C>
Revenues 1998 1997 1996
-------- ----------- ---------- ---------
North American seed $ 332.3 $ 295.2 $ 259.8
International seed 120.8 99.6 80.6
Swine 49.1 56.6 47.1
__________ __________ ________
$ 502.2 $ 451.4 $ 387.5
========== ========== ========
Pre-tax Earnings
----------------
North American seed $ 6.9 $ 38.3 $ 30.9
International seed 32.8 20.0 10.0
Swine (5.0) 1.5 0.2
General Corporate (10.0) (8.5) (6.9)
Expenses
Interest Expense, Net (9.5) (4.9) (6.1)
___________ __________ ________
$ 15.2 $ 46.4 $ $28.1
========== ========== ========
</TABLE>
North American Seed
Segment earnings for North American seed decreased 82 percent
from $38.3 million in fiscal 1997 to $6.9 million in fiscal
1998. Revenues increased 13 percent over fiscal 1997 as
volumes for corn and soybeans rose 17 and 14 percent,
respectively, and third-party royalties more than doubled
compared to a year ago. The revenue improvement was more than
offset by higher corn production costs combined with
significant increases in research spending, litigation fees,
and selling and distribution expenses. High cost production in
the southern hemisphere was expanded to accommodate
introductory levels of Roundup Ready corn and Bt corn products
(Roundup Ready is a trademark of Monsanto Company).
Additional revenue growth was constrained by seed sampling O
programs directed to the launch of 300,000 Roundup Ready corn
and 400,000 Bt corn units. Management believes excellent
performance from these hybrids in fiscal 1998 leaves the
Company well positioned for future sales.
Corn revenues increased over ten percent in fiscal 1998
compared to fiscal 1997 due to volume improvements accompanied
by significantly higher revenues from specialty trait premiums.
However, primarily due to the expanded use of seed sampling
programs, the average corn selling price decreased by nearly 12
percent. DEKALB market share momentum has continued as the
Company added a point and a half share in fiscal 1998. Over
the past five years DEKALB gained more than four share points
in North America.
Revenues from third-party royalties rose in fiscal 1998 with
rising demand for DEKALB specialty trait products. Royalties
which depend on sales by third parties were accrued in the
second and third quarters consistent with the historical
pattern of industry sales.
Soybean revenues in fiscal 1998 increased nearly 14 percent
compared to fiscal 1997 on a sales volume increase of 14%. The
contribution of the soybean product line to segment earnings
has continued to climb over the past four years due to
increases in acreage, planting rate and market share. In
fiscal 1998, the demand for DEKALB varieties continued with
more than 40 percent of sales volume attributed to Roundup Ready
soybeans. However, sorghum volume declined 13 percent
from fiscal 1997 as dry weather in the western plains and the
panhandle, combined with economic conditions favoring corn and
soybeans, resulted in reduced planted acreage.
Segment earnings for North American seed increased 24 percent
from $30.9 million in fiscal 1996 to $38.3 million in fiscal
1997 as revenues increased 14 percent over fiscal 1996. Higher
selling prices for both corn and soybeans, together with
increased soybean volume and third-party royalties were major
factors for the increase.
Corn revenues in fiscal 1997 were over nine percent higher as
average corn selling prices increased over seven percent due to
favorable mix and price increases. Corn unit margins increased
over $5.00 per unit as a result of
<PAGE>
the higher net selling prices and lower production costs. In
addition, third party royalties were an increasing source of
revenues in fiscal 1997 as DEKALB specialty trait products made
their entrance into the North American corn market.
Compared with fiscal 1996, fiscal 1997 soybean revenues
increased 21 percent on a sales volume increase of nearly 15%.
Demand was strong for DEKALB varieties and was enhanced with
the introduction and acceptance of Roundup Ready soybeans.
In fiscal 1997, sorghum revenues and sales volume decreased
slightly from the 1996 levels when sorghum planted acreage
expanded 40 percent over fiscal 1995. In fiscal 1996, farmers
shifted to sorghum as a replacement for failed winter wheat
crops in combination with significantly better market prices,
which made sorghum production more profitable.
INTERNATIONAL SEED
International seed segment earnings increased 65 percent to
$32.8 million in fiscal 1998 from $20.0 million in fiscal 1997.
Significant corn volume improvement in Argentina was the main
reason for the earnings growth.
The improvement in segment earnings in fiscal 1998 was
primarily driven by a 50 percent corn volume increase in
Argentina, resulting in a 15 percentage point increase in the
Argentine market. DEKALB now has approximately 48 percent of
the Argentine corn seed market. Increased demand for single-
cross corn hybrids generated a volume mix shift to higher
priced products and
contributed to a $12.8 million profitability improvement in
Argentina. Earnings in Mexico and Argentina were up 26 and 19
percent, respectively.
International seed segment earnings rose $10.0 million during
fiscal 1997 to $20.0 million. Operations in Latin America were
primarily responsible for the significant earnings improvements
along with a return to profitability in Italy. Argentine
earnings improved $6.1 million from the previous year. Higher
corn margins were driven largely by a 40% increase in revenues,
as a result of increased sales volume of 17 percent accompanied
by higher average selling prices. Higher corn and sorghum
sales volumes generated improved earnings in Mexico ($4.3
million in fiscal 1997 compared with $1.5 million in fiscal
1996).
WORLD WIDE SEED
---------------
Patents, trademarks, United States Plant Variety Protection Act
Certificates, foreign plant registrations and licenses to use
genetic material and intellectual property are growing in
importance, to the seed industry in general and to the business<PAGE>
of DEKALB Seed. While no single patent is currently of
material importance to the Company's seed business, the fact
that a significant number of patents have been issued to the
Company in the area of biotechnology is considered to be an
important factor relating to the future ability to
commercialize genetically engineered products and to enable the
Company to enter into royalty generating license agreements
with third parties.
DEKALB Seed's policy is to fully protect its inventions,
discoveries and intellectual property. (See Item 3 - Legal
Proceedings.) DEKALB Seed has incurred and expects to continue
to incur legal expenses associated with the ongoing enforcement
of its patents.
Seed segment earnings will continue to be affected by a variety
of factors in both domestic and international markets including
the Company's relative product performance and competitive
market position, weather conditions, commodity prices and trade
policies.
SWINE
-----
Swine segment earnings decreased during fiscal 1998 from $1.5
million in 1997 to a loss of $5.0 million in fiscal 1998.
Revenues fell by 13 percent from $56.6 million in fiscal 1997
to $49.1 million in fiscal 1998 primarily due to lower market
hog prices and decreased royalty revenues. Top market hog
prices decreased 25 percent from $57 per hundred weight in
fiscal 1997 to $43 per hundred weight in fiscal 1998.
Increased demand for male genetics combined with lower
production costs were more than offset by the effect of lower
market hog prices. Production cost savings were possible due
to lower grain prices and efficient management practices.<PAGE>
<PAGE>
Swine segment earnings increased during fiscal 1997 to $1.5
million from $0.2 million in fiscal 1996, while revenues
increased 20 percent from $47.1 million in fiscal 1996 to $56.6
million in fiscal 1997. Strong demand for newly improved DEKALB
swine genetics resulted in breeding stock revenues increasing
18 percent on a 12 percent increase in volume. In addition, a
$16 per hundred weight improvement in top market hog prices led
to an 18 percent increase in market revenues on a five percent
increase in volume.
GENERAL
-------
General corporate expenses decreased $1.0 million in fiscal
1998 compared to fiscal 1997. Employee benefit program
expenses were lower after steadily rising during the previous
three years.
Net interest expense rose $5.1 million in fiscal 1998 as
borrowing needs grew for capital expansion and higher
production and operating expenses. Fiscal 1997 net interest
expense decreased $1.2 million from fiscal 1996 due to lower
average corporate borrowing requirements.
The effective tax rate decreased to 32% in fiscal 1998 from 38%
in fiscal 1997. The decrease is primarily related to the tax
effects of changes in the overall earnings mix and
international operations of the Company. In fiscal 1997, the
effective tax rate decreased to 38% from 39.5% in fiscal 1996,
primarily due to the effect of international operations and
research credits.
On January 31, 1996, DEKALB entered into a series of agreements
with Monsanto, including an agreement which provides the
framework 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. 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.
Monsanto purchased from DEKALB 0.5 million newly issued shares
of DEKALB Class A (voting) Common Stock at a price per share of
$10.83 and 2.8 million newly issued shares of Class B (non-
voting) Common Stock at a price per share of $10.83. 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
34.0 million from about 31.2 million.
Monsanto also acquired 10.4 million shares of DEKALB's publicly
traded Class B Common Stock in a separate cash tender offer at<PAGE>
a price of $11.83 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 $6.0 million, $3.0 million, and
$4.0 million from Monsanto in fiscal 1998, 1997 and 1996,
respectively. Total payments over the term of the agreement
are $18.2 million.
The Company adopted Financial Accounting Standards Board
Statement No. 121, `Accounting for the Impairment of Long Lived
Assets and for Long Lived Assets to Be Disposed Of,' in fiscal
1997. The new accounting standard had no impact on the
carrying value of the Company's long lived assets as of August
31, 1997 and 1998.
The Company also adopted Financial Accounting Standards Board
Statement No. 123, `Accounting for Stock-Based Compensation' in
fiscal 1997. Complete disclosure is contained in footnote Q to
the financial statements included under item 8.
The Company adopted the Financial Accounting Standards Board
issued Statement No. 128, `Earnings Per Share,' effective
February 28, 1998. Shares outstanding and per share amounts
have been restated for prior years.
In June 1997 the Financial Accounting Standards Board issued
Statement No. 130, `Reporting Comprehensive Income,' which
establishes standards for reporting of comprehensive income.
This pronouncement requires that all items recognized as
components of comprehensive income, as defined in the
pronouncement, be reported in<PAGE>
<PAGE>
a financial statement that is displayed with the same
prominence as other financial statements. Comprehensive income
included all changes in equity during a period except those
resulting from investments by owners and distributions to
owners. The financial statement presentation required under
Statement No. 130 is effective for all fiscal years beginning
after December 15, 1997. The Company had planned to adopt
Statement No. 130 in fiscal 1998, but due to the pending sale
of the Company, management decided to delay adoption. As of
August 31, 1998, the impact of adopting this pronouncement has
not been determined, however; the Company expects it will be
affected by it.
In June 1997 the Financial Accounting Standards Board issued
Statement No. 131, `Disclosures about Segments of an Enterprise
and Related Information,' which amends the requirements for a
public enterprise to report financial and descriptive
information about its reportable operating segments. Operating
segments, as defined in the pronouncement, are components of an
enterprise about which separate financial information is
available that is evaluated regularly by the Company's
managment in deciding how to allocate resources and in
accessing performance. The financial information is required to
be reported on the basis that is used internally for evaluating
segment performance and deciding how to allocate resources to
segments. The disclosures required by Statement No. 131 are
effective for all fiscal years beginning after December 15,
1997. The Company had planned to adopt Statement No. 131 in
fiscal 1998, but due to the pending sale of the Company,
management decided to delay adoption. This pronouncement will
have an affect on the Company's reporting in the subsequent
periods. However, as of August 31, 1998, the impact of this
pronouncement has not been determined.
In July 1998 the Financial Accounting Standards Board issued
Statement No. 133, `Accounting for Derivative Instruments and
for Hedging Activities,' which replaces existing pronouncements
and practices with a single, integrated accounting framework
for derivatives and hedging activities. The Company plans to
adopt Statement No. 133 in fiscal 1999. This pronouncement
will have an affect on the Company's reporting in the
subsequent periods. However, as of August 31, 1998, the impact
of this pronouncement has not been determined.
YEAR 2000
---------
The Year 2000 issue stems from two-digit storage, leap year
calculations, and special meaning dates that were written into
software applications, installed in hardware or as microchips
in various types of electronic equipment. Computer programs
that do not recognize the proper date could generate erroneous
data or cause systems to fail.
The Company established a project team to develop and implement
a plan to ensure that its systems are compliant with the<PAGE>
requirements to process transactions in the Year 2000. The
Company's project plan includes awareness, inventory,
assessment, remediation, testing and contingency planning. To
date, awareness, inventory and assessment activities are
underway on a worldwide basis, including all business
activities and locations. This information will be used to
identify the risk and issues, evaluate their significance and
determine remediation, testing and contingency planning.
Internal and external resources will be used as necessary to
complete the project. In addition to the Company's internal
analysis, when practicable the Company is contacting key
business partners to make certain that no interruption of
activities will occur.
Costs of addressing potential problems have not been material
to date and, based on information known to date, are not
currently expected to have a material adverse impact on
DEKALB's financial position, results of operation or cash flow
in future periods. Accordingly, management plans to devote
the resources it concludes are necessary to resolve all
significant Year 2000 issues.<PAGE>
<PAGE>
FINANCIAL POSITION
Management believes its operating cash flow and existing credit
facilities are sufficient to cover normal and expected working
capital needs, dividends, capital expenditures and debt
maturities.
Cash Flow
---------
Net cash flow used by operations was $50.1 million in fiscal
1998 compared to an inflow of cash of $3.5 million in fiscal
1997. Higher production costs resulting from a shift to winter
production in the southern hemisphere combined with higher
operating expenses were the main reasons for the increased
outflow.
During fiscal 1997, increased inventories and receivables,
caused by a larger seed corn production crop and higher sales,
brought about a decrease of $66.7 million in cash provided by
operations when compared to fiscal 1996.
The Company continues to invest in seed production facilities.
This resulted in cash outflows from investing activities to
increase $30.9 million in fiscal 1998 when compared with fiscal
1997. Net cash flow used by investing activities reflected the
continued upgrade and expansion of office facilities and seed
production plants in the U.S. and Argentina. These
expenditures resulted in increased borrowings during fiscal
1998 and 1997, while in fiscal 1996, cash from the sale of
equity allowed the Company to reduce its short-term debt.
CREDIT FACILITIES
-----------------
The Company has various credit facilities and available lines
of credit with several commercial banks, both domestic and
foreign. Committed credit lines include a $50 million
revolving credit facility and $15 million in credit facilities
for a 364 day period.
The revolving credit agreement provides credit for general
corporate purposes and is committed through December 31, 2003,
but may be extended annually for successive one year periods
with the consent of the lending banks. The line of credit
requires a step-down to $20.0 million for any one day during
each year. The agreement contains various restrictions on the
activities of the Company as to maintenance of tangible net
worth, amount and type of indebtedness, and the acquisition or
disposition of capital shares or assets of the Company and its
subsidiaries. At August 31, 1998, tangible net worth was
approximately $172.5 million, which meets these covenant
requirements.<PAGE>
DEKALB also has numerous uncommitted short term credit
facilities available and draws upon them periodically,
including during the twelve months ended August 31, 1998.
CAPITAL EXPENDITURES
--------------------
The Company continues to upgrade and expand seed production
plants and office facilities in the United States and
Argentina. Capital expenditures were $90.3 million in fiscal
1998, an increase of $30.9 million from the fiscal 1997
spending level of $59.4 million. During fiscal 1997, the
expansion of seed production and research facilities escalated
$28.7 million from the fiscal 1996 level of $30.7 million. In
fiscal 1999, the Company plans to continue significant capital
expenditures for expansion and renovation of its various
facilities.<PAGE>
<PAGE>
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
---------------------------------------------------------------
DERIVATIVES
DEKALB has contractual commitments with seed growers for
payments based on local market corn and soybean commodity
prices. To mitigate the impact of fluctuation in these
prices on inventory costs, the Company hedges these payments
by using Chicago Board of Trade corn and soybean futures
contracts. Growers not priced at the end of August are
normally priced by March, at which time the related futures
contracts are closed. The Company estimates the timing of
grower payment pricing to determine the futures maturities.
In addition, the Company, from time to time, hedges its
exposure to price fluctuations in grain used for swine feed.
Gains or losses on these hedge positions are included as a
component of the applicable year's inventory. At August 31,
1998 and 1997, the Company had corn and soybean futures
contracts outstanding with a contract market value of $28.8
million and $1.6 million, respectively. Margin deposits for
open futures and/or option contracts are recorded as other
current assets.
DEKALB sells market hogs, which are by-products from the
production of breeding animals, to independent processing
and packing firms at the premium to the major market
averages. The Company periodically hedges against the
exposure of price fluctuations in these markets by using
Chicago Mercantile Exchange hog futures contracts. At
August 31, 1998 the Company had hog futures contracts
outstanding with a contract market value of $0.1 million.
At August 31, 1997, the Company had no hog futures contracts
outstanding.
As of August 31, 1998 the net unrecognized loss on open
futures contracts was $5.0 million. As of August 31, 1997
the net unrecognized gain on open futures contracts was $0.1
million.
SENSITIVITY ANALYSIS
For commodity derivitave instruments held, the Company
utilizes a sensitivity analysis technique to evaluate the
effect that changes in the market value of commodities will
have on the Company's commodity derivative instruments. The
fair value of such positions is a summation of the fair
values calculated for each commodity by valuing each net
position at quoted futures prices at fiscal year-end.
Market risk is estimated as the potential loss in fair value
resulting from a hypothetical 10% adverse change in such
prices. At year-end, the potential change in fair value of
commodity derivative instruments, assuming a 10% adverse
change in the underlying commodity price, was $3.3 million.<PAGE>
VALUE AT RISK
These estimations are intended to measure the maximum amount
the Company could lose from adverse market movements in
interest rates and foreign exchange rates, given a specified
confidence level, over a given period of time. Loss is
defined in the value at risk estimation as fair market value
loss. As a result, foreign exchange gains or losses that
are charged directly to translation adjustments in common
stockholder equity are included in this estimate. The value
at risk estimation utilizes historical interest rates and
foreign exchange rates from the past year to estimate the
volatility and correlation of these rates in the future.
The model uses the variance-covariance statistical modeling
technique and includes all interst rate sensitive debt and
swaps, foreign exchange hedges and their corresponding
underlying exposures. The estimated value at risk amounts
shown below represent the potential loss the Company could
incur from adverse changes in either interest rates or
foreign exchange rates for a one-day period. These amounts
are not significant compared with the equity, earnings or
daily change in market capitalization of the Company.
AMOUNTS TIME CONFIDENCE
VALUE AT RISK (dollars in INTERVAL LEVEL
AMOUNT millions)
---------------------------------------------------------
Interest rates & FX $0.1 1 day 95%
The foreign exchange value at risk amount is principally
driven by the large amount of foreign currency-denominated
net assets the Company has deployed around the world,
including production facilities, inventory and short-term
net working capital. These assets are translated to U.S.
dollars at the current exchange rate. The change in the
value of the assets due to changing foreign exchange rates
is included as part of translation adjustment in common
stockholder's equity, and not part of income. However, the
foreign exchange value at risk amount includes the estimate
of the loss on these assets.
The amounts presented here from the value at risk model also
disregard the possibility that interest rates and foreign
exchange rates can move in the Company's favor. The
assumption within the value at risk model is that changes in
interest rates and foreign exchange rates are adverse. It
is highly unlikely that the Company would experience
continuous daily losses such as these over an extended
period of time. Rather, actual experience has demonstrated
that gains on certain days are offset by losses on other
days.<PAGE>
<PAGE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of DEKALB Genetics
Corporation:
We have audited the accompanying consolidated balance sheets of
DEKALB Genetics Corporation (a Delaware corporation) and
subsidiaries as of August 31, 1998 and 1997, and the related
consolidated statements of operations, cash flows and
shareholders' equity for each of the three years in the period
ended August 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
financial position of DEKALB Genetics Corporation and
subsidiaries as of August 31, 1998 and 1997, and the results of
its operations and its cash flows for each of the three years
in the period ended August 31, 1998 in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole.
The schedule listed in Item 14(a) (2) of this Form 10-K is
presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of
the basic consolidated financial statements and, in our
opinion, fairly states in all material respects the financial
data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 2, 1998
<TABLE>
<CAPTION>
DEKALB GENETICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
__________________________________________________________________________________
<S> <C> <C> <C> <C>
for the years ended August 31 -
in millions except per share
amounts 1998 1997 1996
__________________________________________________________________________________
Revenues $502.2 $451.4 $387.5
Cost of revenues 275.2 230.5 202.1
__________________________________________________________________________________
Gross Margin 227.0 220.9 $185.4
Selling expense 96.3 83.1 73.9
Research and development expense 77.1 57.3 47.6
General & administrative expense 29.3 33.2 31.1
__________________________________________________________________________________
202.7 173.6 152.6
Operating Earnings 24.3 47.3 32.8
Interest expense, net (9.5) (4.9) (6.1)
Other income, net 0.4 4.0 1.4
__________________________________________________________________________________
Earnings before income taxes 15.2 46.4 28.1
Income tax provision 4.9 17.6 11.1
NET EARNINGS $ 10.3 $ 28.8 $ 17.0
==================================================================================
BASIC EARNINGS PER SHARE $ 0.30 $ 0.84 $ 0.52
==================================================================================
DILUTED EARNINGS PER SHARE $ 0.28 $ 0.81 $ 0.51
==================================================================================
DIVIDENDS PER SHARE $ 0.14 $ 0.14 $ 0.137
==================================================================================
</TABLE>
The accompanying notes are an integral part of the financial
statements.<PAGE>
<PAGE>
<TABLE>
<CAPTION>
DEKALB GENETICS CORPORATION
CONSOLIDATED BALANCE SHEETS
_____________________________________________________________________________
at August 31 - in millions 1998 1997
______________________________________________________________________________
<S> <C> <C> <C>
ASSETS Current assets:
Cash and cash equivalents $ - $ 5.2
Receivables, net 69.5 67.5
Inventories 184.5 139.1
Deferred income taxes 14.6 6.9
Other current assets 28.7 7.8
__________________________________________ ________ ________
Total current assets $ 297.3 $ 226.5
__________________________________________ ________ ________
Investments and advances 7.5 7.2
Intangible assets, net 38.9 40.3
Other assets 9.3 9.5
Property, plant and equipment, net 237.8 166.1
__________________________________________ ________ ________
Total Assets $ 590.8 $ 449.6
========================================== ======== ========
Liabilities & Current liabilities:
Shareholders' Short-term debt $ 139.0 $ 34.5
Equity
Accounts payable, trade 9.1 15.6
Other accounts payable 35.8 37.3
Other current liabilities 49.2 46.1
__________________________________________ ________ ________
Total current liabilities $ 233.1 $ 133.5
__________________________________________ ________ ________
Deferred compensation and other credits 10.2 9.9
Deferred income taxes 23.2 20.1
Long-term debt 112.9 90.0
__________________________________________ ________ ________
Total long-term liabilities $ 146.3 $ 120.0
__________________________________________ ________ ________
Commitments and contingent liabilities
Shareholders' equity:
Capital stock:
Common, Class A; no par value,
authorized 15,000,000 shares issued
4,552,994 for 1998 and 4,698,392 for<PAGE>
1997 0.5 0.5
Common, Class B; no par value, non-
voting, authorized 45,000,000 shares
issued 30,087,593 for 1998 and
30,105,987 for 1997 3.0 3.0
Capital in excess of stated value 124.2 114.9
Retained earnings 91.4 85.9
Cumulative translation adjustment (6.1) (5.7)
__________________________________________ ________ ________
$ 213.0 $ 198.6
Less treasury stock, at cost: 287,182
and 443,206 shares of Class B in 1998
and 1997, respectively. (1.6) (2.5)
__________________________________________ ________ ________
Total shareholders' equity $ 211.4 $ 196.1<PAGE>
______________________________________________________________________________
Total Liabilities and Shareholders' $ 590.8 $ 449.6
Equity<PAGE>
==============================================================
The accompanying notes are an integral part of the financial statements.<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
DEKALB GENETICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
_______________________________________________________________________________
For the years ended
August 31 - in millions
________________________________
1998 1997 1996
____________________________________________ _______ _______ _______
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 10.3 $ 28.8 $ 17.0
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 15.5 13.8 11.3
(Gain) on sale of fixed assets 0.6 (0.6) (0.2)
Provision for losses on accounts
receivable 0.8 2.8 1.2
Provision for deferred income taxes (4.4) 6.0 1.8
Provision for inventory valuation 5.3 11.8 7.3
Equity (earnings) loss, net of dividends 0.8 (2.2) (1.7)
________ ________ ________
18.6 31.6 19.7
Changes in assets and liabilities:
Receivables (2.7) (15.3) 1.9
Other current assets (28.7) (2.2) (1.1)
Inventories (50.7) (51.8) (0.5)
Accounts payable (8.1) 5.3 25.2
Accrued expenses 1.8 5.6 8.2
Current taxes payable 1.3 3.2 1.8
Deferred income taxes 7.4 (1.2) (1.2)
Other assets and liabilities 0.7 (0.5) (0.8)
________ ________ ________
(79.0) (56.9) 33.5
Net cash flow (used) provided by operating
activities (50.1) 3.5 70.2
_______________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (90.3) (59.4) (30.7)
Proceeds from sale of property, plant and
equipment 2.7 1.9 0.4
Acquisitions and investments - -_ (3.2)
________ ________ ________
Net cash flow used by investing activities (87.6) (57.5) (33.5)
_______________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES<PAGE>
Proceeds from short-term borrowings 104.6 34.4 -
Proceeds from long-term borrowings 22.9 5.0 -
Principal payments made on debt - - (42.8)
Sale of equity 6.3 0.6 27.6
Dividends paid (4.8) (4.8) (4.3)
Other capital transactions 3.9 2.2 1.3
________ ________ ________
_ _ _
Net cash flow (used) provided by financing
activities 132.9 37.4 (18.2)
_______________________________________________________________________________
Net effect of exchange rates on cash (0.4) (1.5) 1.8
________ ________ ________
Net increase (decrease) in cash and cash
equivalents (5.2) (18.1) 20.3
Cash and cash equivalents, at the beginning
of the year 5.2 23.3 3.0
________ ________ ________
Cash and cash equivalents, at the end of
the year $ 0.0 $ 5.2 $ 23.3
===============================================================================
Note: Cash paid during the year for:
Income taxes $ 6.9 $ 8.4 $ 7.6
Interest $ 7.5 $ 7.3 $ 6.9<PAGE>
</TABLE>
g notes are an integral part of the financial statements.<PAGE>
<PAGE>
<TABLE>
<CAPTION>
DEKALB GENETICS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
____________________________________________________________________________________________
at August 31-in millions 1998 1997 1996
except shares in thousands ___________________ ___________________ ___________________
_
<S> <C> <C> <C> <C> <C> <C>
-------- -------- -------- -------- -------- --------
Dollars Shares Dollars Shares Dollars Shares
-------- -------- -------- -------- -------- --------
Class A Common Stock
Balance, beginning of year $ 0.5 4,698 $ 0.2 2,404 $ 0.1 773
Exchange Class A for Class B - (269) - (185) - (99)
Stock options exercised - 60 - 87 - 32
Employee 401(k) stock plan - 64 - 32 - 14
Sale of equity to Monsanto
Company - - - - - 81
Three-for-one stock split
effected in the form of a
200% stock dividend - - - - 0.1 1,603
Restricted Stock - - - 10 - -
Two-for-one stock split
effected in the form of a
100% stock dividend - - 0.3 2,350 - -
_______ _______ _______ _______ _______ _______
Balance, end of year $ 0.5 4,553 $ 0.5 4,698 $ 0.2 2,404
_____________________________________________________________________________________________
Class B Common Stock
Balance, beginning of year $ 3.0 30,106 $ 1.5 14,868 $ 0.4 4,485
Exchange Class A for Class B - 269 - 185 - 99
Sale of equity to Monsanto - - - 12 0.1 378
Company
Three-for-one stock split
effected in the - - - - 1.0 9,906
form of a 200% stock
dividend
Two-for-one stock split
effected in the form
of a 100% stock dividend - - 1.5 15,041 - -
Balance, end of year $ 3.0 30,375 $ 3.0 30,106 $ 1.5 14,868
_____________________________________________________________________________________________
Capital in Excess of Stated
Value
Balance, beginning of year $ 114.9 $ 109.7 $ 80.9
Sale of equity to Monsanto
Company 5.4 0.6 27.6
Stock options exercised 0.4 0.5 0.6
Non-qualified stock option<PAGE>
tax benefit 1.0 2.3 -
Employee 401(k) stock plan 2.8 1.5 0.5
Director Stock Option Plan 0.1 0.3 0.1
Authorized share increase (0.4) - -
Balance, end of year $ 124.2 $ 114.9 $ 109.7
_____________________________________________________________________________________________
Balance, beginning of year $ 85.9 $ 63.7 $ 52.3
Net Income 10.3 28.8 17.0
Cash dividends on common
stock ($0.14 per share in
1998, $0.14 per share in
1997, and $0.137 per share
in 1996) (4.8) (4.8) (4.5)
Three-for-one stock split
effected in the form of a
200% stock dividend - - (1.1)
Two-for-one stock split
effected in the form
of a 100% stock dividend - (1.8) -
Balance, end of year $ 91.4 $ 85.9 $ 63.7
_____________________________________________________________________________________________
Cumulative Translation
Adjustment
Balance, beginning of year $ (5.7) $ (4.1) (5.0)
Translation gain/(loss) (0.4) (1.6) 0.9
________ ________ ________
Balance, end of year $ (6.1) $ (5.7) (4.1)
_____________________________________________________________________________________________
Treasury Stock
Balance, beginning of year $ (2.5) (443) $ (2.4) (220) $ (2.4) (74)
Stock options exercised - - (0.1) (2)
Employee 401(k) stock plan - - 0.1 2
Three-for-one stock split
effected in the form of a
200% stock dividend - - - - - (146)
Two-for-one stock split
effected in the form -
of a 100% stock dividend - - (221) - -
Treasury stock repurchase (0.1) (2)
Sale of equity to Monsanto 0.9 156 - -
Company
Balance, end of year $ (1.6) (287) (2.5) (443) $ (2.4) (220)
_____________________________________________________________________________________________
Total shareholders' Equity $ 211.4 $ 196.1 $ 168.6<PAGE>
</TABLE>
================================================================================
he accompanying notes are an integral part of the financial statements.<PAGE>
<PAGE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES
-----------------------
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of the seed division (`DEKALB Seed') and DEKALB
Swine Breeders, Inc. (`DEKALB Swine'). The accounts of the DEKALB
subsidiary in Argentina are included on the basis of its May 31
fiscal year, which more properly reflects the growing season in that
country. Transactions between this date and the Company's fiscal
year-end are not considered material.
The Company's investments in related companies (owned 50% or less),
primarily in Mexico, are carried at cost plus equity in undistributed
net earnings and losses since dates of acquisition. Carrying values
approximate the Company's interest in the net assets of these related
companies.
INTANGIBLE ASSETS - Intangible assets consist primarily of the cost
of purchased businesses in excess of market value of net assets
acquired (goodwill). In accordance with company policy, DEKALB
assesses recoverability and impairment of goodwill on an annual
basis. DEKALB amortizes goodwill on a straight-line method over 40
years.
PROPERTY, PLANT AND EQUIPMENT - It is the policy of DEKALB to
capitalize expenditures for major renewals and betterments and to
charge to operating expenses the cost of current maintenance and
repairs. Provisions for depreciation have been computed principally
on the straight-line method, based on expected lives, for buildings
and equipment. Rates used for depreciation are determined separately
for individual plants and locations and are based principally on the
following expected lives: buildings - 12.5 to 33.5 years; equipment
- 4 to 12.5 years; other - 3 to 20 years; and leasehold improvements
- term of lease or useful life, whichever is shorter.
The cost and accumulated allowances for depreciation and amortization
relating to assets retired or otherwise disposed of are eliminated
from the respective accounts at the time of disposition. The
resulting gain or loss is included in `other income, net.'
INCOME TAXES - In accordance with SFAS 109, the Company accounts for
income taxes under the asset and liability method. The asset and
liability method is applied using enacted tax rates expected to apply
when temporary differences between financial and tax reporting are
realized. The amount of income tax expense recognized for a period
is the amount of income taxes currently payable or refundable, plus
or minus the change in aggregate deferred tax assets and liabilities.
The most significant of these differences are set forth in Note L.
At August 31 of each year presented, United States income taxes were
provided on undistributed earnings of non-U.S. subsidiaries.<PAGE>
FOREIGN CURRENCY TRANSLATION - Effective in fiscal 1995, the Company
no longer considered certain countries hyperinflationary for purposes
of applying 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
component of shareholders' equity.
STATEMENT OF CASH FLOWS - DEKALB classifies highly liquid investments
with original maturities of three months or less as cash and cash
equivalents.
CONCENTRATION OF CREDIT RISK - The Company's business activity is
primarily with dealers and distributors located in the United States
and certain foreign countries. When the Company grants credit, it is
primarily to customers whose ability to pay is dependent upon the
agribusiness economics prevailing in that specific area of the world.
No significant concentration of credit risk exists.
REVENUE RECOGNITION - The Company recognizes revenues upon shipment
of goods, with discounts and returned goods partially offsetting this
amount.<PAGE>
<PAGE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
RECLASSIFICATIONS - Certain expense reclassifications have been made
for segment comparability purposes. These reclassifications had no
effect on net earnings.
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
DEFERRED LICENSING COSTS - The Company defers direct costs associated
with company-owned swine licensed under the royalty program. Revenue
recognition under a third party licensing agreement occurs, in part,
at initiation of the license and, in future years, in the form of
royalties from selected progeny. The costs deferred are direct
costs, primarily feed and the labor to produce the swine. These
costs are amortized in proportion to the estimated revenue from the
license agreement. The average license period is 2.5 years. The
amount of costs deferred (net) in fiscal 1998, 1997, and 1996 was
$0.3 million, $2.3 million, and $3.0 million, respectively.
EARNINGS PER SHARE - Basic earnings per share of common stock are
calculated by dividing net earnings by the weighted average of common
shares outstanding during each fiscal year; 34,577,265, 34,250,522
and 32,515,743 in 1998, 1997 and 1996, respectively. Diluted
earnings per share of common stock are calculated by dividing net
earnings by the weighted average of common and common equivalent
(stock options) shares outstanding during each fiscal year;
36,364,767, 35,744,050 and 33,553,649 in 1998, 1997 and 1996,
respectively. During fiscal 1998 the Company adopted the Financial
Accounting Standards Board issued Statement No. 128, `Earnings Per
Share,' effective February 28, 1998. Shares outstanding and per
share amounts have been restated for prior years.
STOCK-BASED COMPENSATION - The Company continues to account for its
employee stock option plans using Accounting Principles Board Opinion
No. 25, `Accounting for Stock Issued to Employees,' which results in
no charge to earnings when options are issued at fair market value.
The Company has adopted the disclosure requirements of Financial
Accounting Standards Board Statement No. 123, Accounting for Stock-
Based Compensation.
NEW ACCOUNTING STANDARDS - The Company adopted Financial Accounting
Standards Board Statement No. 121, `Accounting for the Impairment of
Long Lived Assets and for Long Lived Assets to be Disposed Of,' in
fiscal 1997. The new accounting standard had no impact on the
carrying value of the Company's long lived assets as of August 31,
1997 and 1998.
During fiscal year 1997, the Financial Accounting Standards Board
issued Statement No. 128, `Earnings Per Share,' effective for both<PAGE>
interim and annual periods ending after December 15, 1997. The
standard simplifies the computation of earnings per share and will be
comparable to fully diluted earnings per share presently reflected
under APB Opinion No. 15. During fiscal 1998 the Company adopted the
Financial Accounting Standards Board issued Statement No. 128,
`Earnings Per Share,' effective February 28, 1998. Shares
outstanding and per share amounts have been restated for prior years.
In June 1997 the Financial Accounting Standards Board issued
Statement No. 130, `Reporting Comprehensive Income,' which
establishes standards for reporting of comprehensive income. This
pronouncement requires that all items be recognized as components of
comprehensive income, as defined in the pronouncement, be reported in
a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income included all
changes in equity during a period except those resulting from
investments by owners and distributions to owners. The financial
statement presentation required under Statement No. 130 is effective
for all fiscal year's beginning after December 15, 1997. The Company
had planned to adopt Statement No. 130 in fiscal 1998, but due to the
pending sale of the Company, management decided to delay adoption.
As of August 31, 1998, the impact of adopting this pronouncement has
not been determined, however; the Company expects it will be affected
by it.
In June 1997, the Financial Accounting Standards Board issued
Statement No. 131, `Disclosures about Segments of an Enterprise and
Related Information,' which amends the requirements for a public
enterprise to report financtial and descriptive information about its
reportable operating segments. Operating segments, as defined in the
pronouncement, are components of an enterprise about which separate
financial information is available that is evaluated regularly by the<PAGE>
<PAGE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
company in deciding how to allocate resources and in accessing
performance. The financial information is required to be reported on
the basis that is used internally for evaluating segment performance
and deciding how to allocate resources to segments. The disclosures
required by Statement No. 131 are effective for all fiscal years
beginning after December 15, 1997. The Company had planned to adopt
Statement No. 131 in fiscal 1998, but due to the pending sale of the
Company, management decided to delay adoption. This pronouncement
will have an affect on the Company's reporting in the subsequent
periods. However, as of August 31, 1998, the impact of this
pronouncement has not been determined.
In July 1998 the Financial Accounting Standards Board issued
Statement No. 133, `Accounting for Derivative Instruments and for
Hedging Activities,' which replaces existing pronouncements and
practices with a single, integrated accounting framework for
derivatives and hedging activities. The Company plans to adopt
Statement No. 133 in fiscal 1999. This pronouncement will have an
affect on the Company's reporting in the subsequent periods. However,
as of August 31, 1998, the impact of this pronouncement has not been
determined.<PAGE>
<PAGE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
B.STOCK SPLIT
.
During fiscal year 1997 the Company declared a two-for-one
stock split effected in the form of a stock dividend.
Shares were distributed on August 8, 1997 to holders of
record on July 25, 1997. The Company's annual cash dividend
was subsequently adjusted to 14 cents per share from 28
cents per share.
In fiscal 1996, the Company delared a three-for-one stock
split effected in the form of a stock dividend to holders of
record May 10, 1996 with shares being distributed on May 24,
1996. Following this split, the quarterly cash dividend was
increased five percent.
All share numbers and earnings per share information in this
document have been adjusted to reflect these stock splits.
<TABLE>
CAPTION
<PAGE>
C. STATEMENT OF OPERATIONS DATA
for the years ended August 31 - 1998 1997 1996
in millions
<S> <C> <C> <C>
(1) Interest Expense, Net
Interest expense $(12.6) $ (7.5) $ (8.3)
Interest income 3.1 2.6 2.2
________ ________ ________
Interest Expense, net $ (9.5) $ (4.9) $ (6.1)<PAGE>
=============================================================
for the years ended August 31 - 1998 1997 1996
in millions
(2) Other Income, Net
Equity in net earnings of $ 4.7 $ 4.0 $ 1.7
related companies
Gain(Loss) on sale of fixed (0.6) 0.6 0.2
assets
All others, net (3.7) (0.6) (0.5)
_____________________________________________________________
Other income, net $ 0.4 $ 4.0 $ 1.4
=============================================================
for the years ended August 31 - 1998 1997 1996
in millions
(3) Research and Development
Expense
DEKALB Seed $ 70.3 $ 50.2 $ 40.9
DEKALB Swine 6.8 7.1 6.7
Research and development $ 77.1 $ 57.3 $ 47.6
expense
=============================================================<PAGE>
/TABLE
<PAGE>
<PAGE>
<TABLE>
CAPTION
<PAGE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
<S> <C> <C>
D.RECEIVABLES
at August 31 - in millions 1998 1997
_____________________________________________________________
Trade accounts and notes $ 66.1 $ 64.9
Employees 1.8 2.1
Related companies 0.7 0.2
Other 8.2 5.6
$ 76.8 $ 72.8
Less allowance for doubtful accounts 7.3 5.3
Receivables, net $ 69.5 $ 67.5
=============================================================
E.INVENTORIES
at August 31 - in millions 1998 1997
_____________________________________________________________
At lower of cost or market:
Commercial seed-average cost $ 168.8 $ 124.5
Commercial swine-average cost 9.3 10.0
Supplies and other-principally first-in,
first-out 6.4 4.6
_______ _______
Inventories $ 184.5 $ 139.1
=============================================================<PAGE>
/TABLE
<PAGE>
<PAGE>
<TABLE>
CAPTION
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
_____________________________________________________________
F.PROPERTY, PLANT AND EQUIPMENT, NET (AT COST)
<S> <C> <C>
at August 31 - in millions 1998 1997
_____________________________________________________________
Land $ 9.5 $ 9.6
Buildings 124.3 97.7
Equipment 150.2 156.0
Other 36.0 11.9
Construction in progress 72.1 45.9
_____________________________________________________________
392.1 321.1
Less accumulated depreciation and
amortization 154.3 155.0
_____________________________________________________________
Property, plant and equipment, net $237.8 $166.1<PAGE>
=============================================================<PAGE>
<PAGE>
G.OTHER CURRENT LIABILITIES
at August 31 - in millions 1998 1997
_____________________________________________________________
Current income taxes $ 4.1 $ 2.9
Payroll 9.9 8.4
Vacation 3.4 3.2
Pensions and other credits 0.5 3.3
Insurance 1.8 2.5
Taxes, other than income 3.4 3.5
Production costs 10.4 10.8
Other 15.7 11.5
_____________________________________________________________
Other current liabilities $49.2 $46.1<PAGE>
/TABLE
<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
______________________________________________________________
H.FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
During 1995, the Company adopted Statement of Financial
Accounting Standards No. 119, `Disclosures About Derivative
Financial Instruments and Fair Value of Financial
Instruments'. This statement in conjunction with Statement
of Financial Accounting Standards No. 107, `Disclosures
About Fair Value of Financial Instruments' requires certain
disclosures about the fair value of financial instruments,
including derivative financial instruments for which it is
practicable to estimate fair value.
The following methods and assumptions were used to estimate
the fair market value of each class of financial instrument.
TRADE ACCOUNTS AND NOTES RECEIVABLE
The carrying amount of the Company's trade accounts and
notes receivable approximates market value.
SHORT-TERM AND LONG-TERM DEBT
Short-term debt represents borrowings against lines of
credit with various banks. The weighted average interest
rate on short-term borrowings for fiscal 1998 was
approximately 6.0%. At August 31, 1998, committed lines of
credit available to DEKALB included a $50 million revolving
credit agreement and $15 million in credit facilities for a
364 day period.
The revolving credit agreement provides credit for general
purposes and is committed through December 31, 2003, but may
be extended annually for successive one year periods with
the consent of the lending banks. The line of credit
requires a step-down to $20.0 million for any one day during
each year. The agreement contains various restrictions on
the activities of the Company as to minimum tangible net
worth, amount and type of indebtedness and the acquisition
or disposition of capital shares or assets of the Company
and its subsidiaries. At August 31, 1998, tangible net
worth was approximately $172.5 million, which meets these
covenant requirements. The Company pays a commitment fee of
1/10 of 1% for the active portion of its line of credit.
The base amount of $20.0 million is available throughout the
year. An additional $30.0 million available for seasonal
needs during six months of the year beginning as early as
October 31, of any year but no later than December 31 of the
same year. The available line of credit at August 31, 1998
was entirely unused.<PAGE>
The $15 million in credit facilities carry a 5 basis point
fee on the unused portion of the commitment. The line was
fully utilized in fiscal 1998 and, therefore, no fees were
required.
The carrying amount of the Company's long-term debt and all
the Company's short-term debt approximates market value
because rates on those debt agreements are variable and are
set periodically based on current rates during the year.
Exceptions would be the $20 million long-term loan which has
a fixed rate of 7.15%, two $5 million long-term loans which
have fixed rates of 7.56% and 6.98%, respectively, two $10
million long-term loans with fixed rates of 6.93% and 6.5%,
respectively, a $4 million long-term loan with a fixed rate
of 10.25% and a $5 million long-term loan with a fixed rate
of 10.5%. The Company estimated the market value of its
long-term debt by utilizing a discounted cash flow
methodology.<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
H.FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES (CONTINUED)
SWAP AGREEMENTS
The Company has entered into interest rate swap agreements with
third parties to manage interest rate movements on the majority
of its variable rate term debt. At August 31, 1998, the Company had
swap agreements with an aggregate notional principal amount of $40
million and an average interest rate of 6.0 percent, maturing in
fiscal 2003. Any interest rate differential on these swap agreements
is recognized in interest expense, net over the terms of the
agreements. The interest expense related to swap agreements was
$0.1 million for years 1998, 1997 and 1996. The Company is exposed
to credit loss in the event of nonperformance by the other parties
to the agreements. However, the Company does not anticipate
nonperformance by any of those parties. The Company estimated the
market value of its interest rate swap agreements by utilizing a
discounted cash flow methodology.
DERIVATIVES
DEKALB has contractual commitments with seed growers for
payments based on local market corn and soybean commodity
prices. To mitigate the impact of fluctuation in these
prices on inventory costs, the Company hedges these payments
by using Chicago Board of Trade corn and soybean futures
contracts. Growers not priced at the end of August are
normally priced by March, at which time the related futures
contracts are closed. The Company estimates the timing of
grower payment pricing to determine the futures maturities.
In addition, the Company, from time to time, hedges its
exposure to price fluctuations in grain used for swine feed.
Gains or losses on these hedge positions are included as a
component of the applicable year's inventory. At August 31,
1998 and 1997, the Company had corn and soybean futures
contracts outstanding with a contract market value of $28.8
million and $1.6 million, respectively. Margin deposits for
open futures and/or option contracts are recorded as other
current assets.
DEKALB sells market hogs, which are by-products from the
production of breeding animals, to independent processing
and packing firms at the premium to the major market
averages. The Company periodically hedges against the
exposure of price fluctuations in these markets by using
Chicago Mercantile Exchange hog futures contracts. At
August 31, 1998 the Company had hog futures contracts
outstanding with a contract market value of $0.1 million.
At August 31, 1997, the Company had no hog futures contracts
outstanding.
As of August 31, 1998 the net unrecognized loss on open
futures contracts was $5.0 million. As of August 31, 1997
the net unrecognized gain on open futures contracts was $0.1
million.
The Company reviews potential foreign currency risks on an on-going
basis and is party to forward contracts in the management of its
foreign currency exposure related to royalty income and export
sales. In order to reduce its exposure to foreign currency
fluctuation related to royalty payments from its French licensee
and export receipts from its Italian subsidiary, the Company
utilizes foreign currency forward contracts with maturities that
mirror the anticipated receipts and payments in October and
November. At August 31, 1998 and 1997, the Company had French
franc forward contracts outstanding with an aggregate contract
market value of $4.4 million and $6.3 million, respectively, and
Italian lira forward contracts outstanding with an aggregate
contract market value of $4.9 million and $5.8 million,
respectively. Other foreign currency transactions occur in the
Argentine peso and Canadian dollar, although there were no foreign
currency contracts outstanding for those currencies at year end.
The Company had an unrealized gain of $0.2 million in fiscal 1998
and $1.5 million in fiscal 1997 related to the aggregate of all
foreign currency contracts.
The fair value of cash equivalents, receivables, short-term
borrowings, long-term debt, and interest rate swaps approximates
carrying value at August 31, 1998.
<PAGE>
<TABLE>
CAPTION
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
__________________________________________________________________
I.LONG-TERM DEBT
1998 1997
at August 31 - in millions
__________________________________________________________________
<S> <C> <C>
Term loans, variable rates, due $ 55.0 $ 50.0
2000-2003
Term loans, 7.15% fixed rate, due from 20.0 20.0
1999-2007
Term loan, 7.56% fixed rate, due from 5.0 5.0
1999-2005
Term loan, 6.98% fixed rate, due from 5.0 5.0
1999-2006
Term loan, 6.93% fixed rate, due 2003 10.0 10.0
Term loan, 6.50% fixed rate, due 2003 10.0 -
Term loan, 10.25% fixed rate, due 2000 4.0 -
Term loan, 10.50% fixed rate, due 2000 5.0 -
__________________________________________________________________
114.0 90.0
Less current maturities 1.1 -
__________________________________________________________________
Net long-term debt $ 112.9 $ 90.0
==================================================================<PAGE>
</TABLE>
The variable rate term loan agreements allow the Company to
borrow at rates based on the London Interbank Offer Rate on
Eurodollar deposits (LIBOR). At August 31, 1998, interest on
the variable rate term loans was at a rate of approximately
6.0%.
All of the term loans contain similar restrictive covenants.
The most restrictive of these covenants requires the maintenance
of a minimum tangible net worth. At August 31, 1998, the
Company is in compliance with all the debt covenants.
Aggregate maturities for the years ending August 31, 2000
through 2002 are $10.4 million, $4.3 million, and $15.3 million,
respectively. The remaining $82.9 million matures between 2003
and 2007. There are long-term debt maturities of $1.1 million
in 1999.
J.SAVINGS AND INVESTMENT PLAN
Effective September 1, 1995, the Company provides to each full
and part-time employee a guaranteed contribution to the Savings
and Investment Plan (401(k)). For fiscal 1996, the contribution
was one percent of each employee's compensation covered by the
Plan. Beginning in fiscal 1997, the Company's guaranteed
compensation-based contribution is equal to two percent of each
employee's pay.
Additionally, each full and part-time DEKALB employee can
voluntarily contribute to the Savings and Investment Plan. The
plan provides for DEKALB to match a minimum of $.50 for every
dollar contributed by employees, to the extent employees
contribute up to 6% of their salaries. Additional discretionary
awards may also be contributed when warranted by results of
operations. DEKALB's contributions charged to expense under
this plan were $2.0 million, $3.8 million, and $3.9 million for
the years ended August 31, 1998, 1997, 1996, respectively.<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
K.COMMITMENTS AND CONTINGENT LIABILITIES.
DEKALB is a defendant in various legal actions arising in
the course of business activities. In the opinion of the
Company's management, these actions will not result in a
material adverse effect on DEKALB's consolidated results of
operations or financial position. Additional information is
in Part I, Item 3 - Legal Proceedings in this Form 10-K.
DEKALB is self-insured against property losses on the
majority of its operating facilities.
DEKALB's total rental and lease expense for fiscal years
1998, 1997 and 1996 was $15.7 million, $9.7 million and $6.7
million, respectively.<PAGE>
<PAGE>
<TABLE>
CAPTION
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
______________________________________________________________
L.INCOME TAX
______________________________________________________________
for the year ended August 31
- in millions 1998 1997 1996
___________________________________________________________
<S> <C> <C> <C>
Current provision:
Federal $ (0.3) $ 4.4 $ 5.9
State (0.5) 1.4 1.1
Foreign 10.1 5.8 2.3
____________________________________________________________
$ 9.3 $ 11.6 $ 9.3
____________________________________________________________
Deferred provision:
Federal (1.9) 5.1 $ 1.9
State (1.1) 1.1 (0.4)
Foreign (1.4) (0.2) 0.3
____________________________________________________________
$ (4.4) $ 6.0 $ 1.8
____________________________________________________________
Total income tax provision $ 4.9 $ 17.6 $ 11.1
============================================================
The significant components of the company's deferred tax
assets and deferred tax liabilities are presented below:
for the year ended August 31
- in millions 1998 1997
____________________________________________________
Deferred tax assets:
Research Expenditures $ 5.8 $ 4.9
Benefit Plans 3.9 2.8
Inventory 11.3 4.8
Other 7.7 5.2
____________________________________________________
Total Gross Deferred Tax
Assets $ 28.7 $ 17.7
Valuation Allowance (2.8) (0.8)
____________________________________________________
Gross Deferred Tax Assets $ 25.9 $ 16.9
____________________________________________________
Deferred tax liabilities:
Purchase Price Allocations (10.2) (10.2)
Undistributed Foreign Earnings (4.7) (4.8)
Depreciation (12.9) (6.9)
Other (6.7) (8.2)
___________________________________________________
Gross Deferred Tax<PAGE>
Liabilities $(34.5) $(30.1)
Net Deferred Tax Liability $ (8.6) $(13.2)<PAGE>
===================================================<PAGE>
</TABLE>
The net deferred tax liability disclosed above equals the
deferred tax on the balance sheet. The footnote disclosure
classified the components as assets or liabilities while the
balance sheet discloses the current and long-term portion of
those two classifications. The valuation allowance relates
to those deferred tax assets that may not be fully realized.
Total tax provisions (benefits) resulted in amounts
differing from those based on the statutory federal income
tax rates. The reasons for these differences are:
TABLE
<PAGE>
___________________________________________________________
<S> <C> <C> <C>
for the years ended August 31 - 1998 1997 1996
in millions
U.S. statutory rate $ 5.3 $ 16.2 $ 9.9
State and local taxes (1.1) 1.7 1.0
International operations (0.3) (0.3) (0.1)
Qualified export activity - (0.1) (0.1)
Research credits (2.1) (0.7) -
Other 3.1 0.8 0.4
___________________________________________________________
Income tax provision $ 4.9 $ 17.6 $ 11.1
===========================================================
The domestic and foreign components of earnings before taxes
of consolidated companies were as follows:
___________________________________________________________
for the years ended August 31
- in millions 1998 1997 1996
___________________________________________________________
U.S. $ (5.2) $ 35.8 $ 25.3
Argentina 19.0 8.3 2.3
Other Non-U.S. 1.4 2.3 0.5
Total earnings before taxes $ 15.2 $ 46.4 $ 28.1
============================================================<PAGE>
/TABLE
<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
_______________________________________________________________
M.QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results
of operations for the years ended August 31, 1998 and 1997.
DEKALB's North American seed operations comprise a significant
portion of its business. DEKALB generally delivers only a
minor portion of North American seed in the first quarter,
delivers more than half in the second quarter, and
substantially all the seed is delivered by the end of the
third quarter. The Company defers first quarter expenses and
anticipates fourth quarter expenses and matches these expenses
against second and third quarter revenues. Third quarter
results also reflect estimates of seed product returns.
Consequently, fourth quarter earnings include adjustments for
those earlier estimates.
The total of four quarters' earnings per share might not equal
the earnings per share for the year due to the application of
the treasury stock method and market price changes.
<TABLE>
<CAPTION>
_________________________________________________________________<PAGE>
in millions except per
share amounts - three
months ended the last
day of Nov Feb May Aug
______________________________________________________________
<S> <C> <C> <C>
1998
Revenues $ 62.8 $213.8 $219.9 $ 5.7
Cost of Revenues 34.1 106.5 124.2 10.4
Net earnings 2.7 19.3 2.8 (14.5)
Basic earnings per
share 0.08 0.56 0.08 (0.42)
Diluted earnings per
share $ 0.08 $ 0.53 $ 0.08 $(0.40)
==============================================================
1997
Revenues $ 67.1 $192.3 $178.6 $13.4
Cost of Revenues 38.9 93.4 89.0 9.2
Net earnings 2.1 16.3 13.1 (2.7)
Basic earnings per
share 0.06 0.48 0.38 (0.08)
Diluted earnings per
share $ 0.06 $ 0.46 $ 0.36 $(0.07)
==============================================================<PAGE>
/TABLE
<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
_________________________________________________________________
N.OPERATION BY GEOGRAPHIC AREA
Information on DEKALB's operations by geographic area for
fiscal years 1998, 1997 and 1996 is shown below. Operating
earnings are equal to total revenues less expenses of the
geographic areas, excluding interest and general corporate
expenses. Transfers of products between geographic areas are
at prices approximating those charged to unaffiliated customers
and are not material to any geographic area.
<TABLE>
<CAPTION>
__________________________________________________________
August 31 - in millions 1998 1997 1996
__________________________________________________________
<S> <C> <C> <C>
Revenues
United States $ 372.8 $ 343.6 $ 300.9
Argentina 87.3 67.3 49.8
Other Non-U.S. 42.1 40.5 36.8
__________________________________________________________
$ 502.2 $ 451.4 $ 387.5
==========================================================
Operating Earnings
United States $ 0.4 $ 38.2 $ 30.1
Argentina 24.6 11.7 5.6
Other Non-U.S. 5.0 5.9 3.7
__________________________________________________________
$ 30.0 $ 55.8 $ 39.4
==========================================================
Equity in Earnings
Other Non-U.S. $ 4.7 $ 4.0 $ 1.7
==========================================================
Identifiable Assets
United States $ 452.1 $ 332.4 $ 256.8
Argentina 120.1 86.0 77.7
Other Non-U.S. 18.6 31.2 28.8
__________________________________________________________
$ 590.8 $ 449.6 $ 363.3
==========================================================
</TABLE>
Consolidated net assets included approximately $69.6 million
at August 31, 1998 and $55.8 million at August 31, 1997,
located in countries other than the United States.<PAGE>
Consolidated net earnings included approximate earnings of
$22.3 million in fiscal year 1998 and $13.7 million in fiscal
year 1997 from these countries.<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
O. PENSION PLANS
Prior to fiscal 1994, the Company provided employees a
noncontributory pension plan covering substantially all
domestic employees who met age and service requirements.
Benefits provided under this pension plan are based primarily
on each employee's career earnings up until the suspension of
the plan on October 1, 1993. Plan assets consist primarily
of stocks and U.S. government securities. At the time of
suspension, the Company recognized a pre-tax curtailment
benefit of $3.7 million.
In addition, DEKALB has a supplemental noncontributory
pension plan covering certain management employees, which is
not funded. Benefits are based mainly on each participant's
years of service, final average compensation, and estimated
benefits received from certain other benefit plans. This
plan was suspended in fiscal 1994 and reinstated in fiscal
1997. During fiscal 1998 the Company recorded an expense of
$0.2 million.
The components of total estimated pension income (expense)
for the two plans are as follows:
<TABLE>
CAPTION
<PAGE>
______________________________________________________________
August 31 - in millions
1998 1997 1996
______________________________________________________________
<S> <C> <C> <C>
Service Cost - benefits earned $ 0.2 $ 0.1 $ -
during the year
Interest cost on projected benefit 1.0 0.9 0.7
obligations
Actual return on plan assets (0.3) (2.4) (1.2)
Net amortization and deferral (0.6) 1.6 0.3
______________________________________________________________
Net Pension Income (Expense) $ 0.3 $ 0.2 $(0.2)
==============================================================<PAGE>
/TABLE
<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
_________________________________________________________________
O.PENSION PLANS (CONTINUED)
Actuarial assumptions for August 31, 1998 are a discount rate
of 7.00% and a return on plan assets of 8.5%. Assumptions for
August 31, 1997 are a discount rate of 7.25% and a return on
plan assets of 8.5%.
A reconciliation of the funded status to accrued pension
expense is as follows:
<TABLE>
CAPTION
<PAGE>
Funded Plan Unfunded Plan
August 31 - in millions 1998 1997 1998 1997
______________________________________________________________
<S> <C> <C> <C> <C>
Actuarial present value
of benefits based on
service to date and
present
pay levels:
Vested $ 8.4 $ 7.6 $ 1.8 $ 1.9
Nonvested 0.7 0.9 0.1 -
______________________________________________________________
Accumulated benefit
obligation 9.1 8.5 1.9 1.9
Additional amounts
related to projected
pay increases - - 3.7 3.2
______________________________________________________________
Projected benefit
obligation 9.1 8.5 5.6 5.1
Plan assets at fair
market value 8.7 9.6 - -
______________________________________________________________
Plan assets less than
projected benefit
obligation (0.4) 1.1 (5.6) (5.1)
Unrecognized loss
from experience 2.7 1.1 4.5 4.2
Unrecognized net
transition asset (2.0) (2.3) - -
______________________________________________________________
Accrued pension expense
included in the
Consolidated Balance
Sheet $ 0.3 $(0.1) $(1.1) $(0.9)
==============================================================<PAGE>
</TABLE>
The Company has obligations under termination indemnification
plans in several foreign countries, but does not have any
foreign defined benefit pension plans as defined in Financial
Accounting Standard No. 87.<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
_______________________________________________________________
P.INFORMATION ON RELATED COMPANIES
The following is summarized financial information for DEKALB's
less than 50 percent owned operations:
<TABLE>
CAPTION
<PAGE>
Balance Sheets
at August 31 - in millions 1998 1997
_______________________________________________
<S> <C> <C>
ASSETS
Current assets $ 17.7 $ 17.7
Non-current assets 2.6 2.6
_______________________________________________
Total Assets $ 20.3 $ 20.3
===============================================
LIABILITIES
Current liabilities $ 3.9 $ 3.6
Non-current liabilities 2.9 3.1
_______________________________________________
Total Liabilities $ 6.8 $ 6.7
===============================================<PAGE>
</TABLE>
<TABLE>
CAPTION
<PAGE>
Summary of Earnings
_________________________________________________________
for the years ended
August 31 - in millions 1998 1997 1996
_________________________________________________________
<S> <C> <C> <C>
Revenues $ 25.8 $ 23.3 $ 15.5
=========================================================
Gross Profit $ 14.3 $ 12.9 $ 7.1
=========================================================
Net Earnings $ 9.3 $ 8.1 $ 3.4
=========================================================
DEKALB's Equity in Net
Earnings $ 4.7 $ 4.0 $ 1.7
=========================================================<PAGE>
</TABLE>
DEKALB's investments in related companies are carried at
cost plus equity in undistributed net earnings and losses
since dates of acquisition. Carrying values approximate
DEKALB's interest in the net assets of these related
companies. Dividends received from related companies
were $3.9 million in fiscal year 1998 and $1.8 million in
fiscal year 1997. No dividends were received in fiscal
year 1996.<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
______________________________________________________________
____
Q.INCENTIVE PLANS
In August, 1988, the Company initially adopted a Long-Term
Incentive Plan which provided for the awarding of stock
appreciation rights (SARs), restricted stock and incentive
and nonqualified options to purchase Class A or Class B
Common Stock of the Company. The Company's Stock Option
Committee may make awards of SARs, restricted stock or stock
options to certain officers and key employees of the
Company. All stock options may be granted at no less than
fair market value of the Company's stock at the date of
grant and are exercisable within periods specified by the
Stock Option Committee.
The following share information reflects the two-for-one and
the three-for-one stock splits.
<TABLE>
CAPTION
<PAGE>
1998 1997 1996
_________ _________ _________
Class A Class A Class A
__________ _________ _________
<S> <C> <C> <C>
Shares under option
at beginning of year 1,623,114 1,517,136 1,422,924
Activity:
Granted 372,550 267,000 343,800
Exercised (239,382)
(25,523) (133,122)
Canceled (10,206)
(2,134) (27,900) __________
__________ __________
Shares under option
at end of year 1,968,007 1,623,114 1,517,136
========== ========== ==========
Shares available for
future grants as of
August 31 1,530,792 1,622,914 2,140,308
Shares vested and
exercisable as of
August 31 1,315,361 1,043,514 917,934
Price range of $4.46 - $ 0.33 - $ 4.40 -
options exercised $30.38 $ 8.04 $ 6.25
Price range of
shares under option $0.33 - $ 0.33 - $ 0.33 -
at end of year $30.38 $30.38 $ 8.04<PAGE>
</TABLE>
In fiscal 1991, the shareholders also approved a Director
Stock Option Plan which gives outside directors an election
to receive options to purchase Class A Common Stock (which
options have a discounted exercise price) in lieu of annual
retainer and meeting fees. The 25% discount in the exercise
price, multiplied by the number of shares subject to the
option, equals the annual retainer and meeting fees the
directors would have received. Total expense for the
Director Stock Option Plan was $0.1 million in each of the
fiscal years 1998, 1997 and 1996.
<TABLE>
CAPTION
<PAGE>
1998 1997 1996
_________ _________ _________
Class A Class A Class A
__________ _________ _________
<S> <C> <C> <C>
Shares under option
at beginning of
year 390,138 390,166 323,472
Activity:
Granted 23,379 20,972 69,678
Exercised (34,495) (21,000) (2,984)
Canceled (273) - -
__________ __________ __________
Shares under option
at end of year 378,749 390,138 390,166
========== ========== =========
Shares available for
future grants as of
August 31 86,688 109,774 130,746
Shares vested as of
August 31 378,749 390,138 390,166
Shares exercisable
as of August 31 355,370 369,166 320,488
Price range of $ 3.35 - $ 3.35 -
options exercised $ 6.03 $ 3.38 $ 4.19
Price range of
shares under option $ 3.35 - $ 3.35 - $ 3.35 -
at end of year $22.03 $22.03 $ 6.03<PAGE>
/TABLE
<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
______________________________________________________________
____
Q.INCENTIVE PLANS (CONTINUED)
The Company applies APB 25 and related interpretations in
accounting for its plans. Accordingly, no compensation cost
has been recognized for stock options granted under the
August 1998 Long Term Incentive Plan. If compensation costs
for stock options had been determined based on the fair
value at the grant dates for awards under these plans
consistent with the method of SFAS 123, the Company's net
earnings and net earnings per share would have been reduced
to the pro forma amounts indicated as follows:
<TABLE>
CAPTION
<PAGE>
1998 1997
_________ _________
<S> <C> <C>
Net Earnings:
($ in millions)
As Reported $ 10.3 $ 28.8
Pro Forma $ 7.8 $ 27.6
Basic Earnings Per
Share:
As Reported $ 0.30 $ 0.84
Pro Forma $ 0.23 $ 0.81
Diluted earnings per
share
As reported $ 0.28 $ 0.81
Pro forma $ 0.21 $ 0.77<PAGE>
</TABLE>
In accordance with SFAS 123, the fair value approach to
valuing stock options used for pro forma presentation has
not been applied to stock options granted prior to
September 1, 1995. The compensation cost calculated under
the fair value approach is recognized over the vesting
period of the stock options.
The weighted average fair value of options granted was
$18.59 per share and $17.20 per share during 1998 and
1997, respectively. The fair value is estimated on the
date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions used for
grants in 1998 and 1997, respectively: dividend yield of
0.2% and 0.4%; expected volatility of 45.4% and 32.8%;
risk-free interest rates of 5.3% and 6.5%; and an expected
life of seven years.<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
R.INDUSTRY SEGMENT
The following industry segment information summarized
DEKALB's operations as of and for the years ended August 31,
1998, 1997, and 1996.
Operating earnings are total sales and revenues less
operating expenses of the segments, excluding interest, and
general corporate allocations.
No customer accounted for 10 percent or more of total
operating revenues.<PAGE>
<PAGE>
<TABLE>
<CAPTION>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
_________________________________________________________________
R. INDUSTRY SEGMENT (CONTINUED)<PAGE>
August 31 - in millions 1998 1997 1996
____________________________________________________________
<S> <C> <C> <C>
Revenues
_____________________________
Seed (1) $ 453.1 $ 394.8 340.4
Swine 49.1 56.6 47.1
________ ________ ________
$ 502.2 $ 451.4 $ 387.5
======= ======= =======
Earnings (Loss) Before
Income Taxes
_____________________________
Seed:
Operating earnings $ 35.0 $ 54.3 $ 39.2
Equity in net earnings
of related companies 4.7 4.0 1.7
________ ________ ________
$ 39.7 $ 58.3 $ 40.9
Swine (5.0) 1.5 0.2
________ ________ ________
Total Operations $ 34.7 $ 59.8 $ 41.1
General corporate expenses (10.0) (8.5) (6.9)
Net interest expense (9.5) (4.9) (6.1)
________ ________ ________
$ 15.2 $ 46.4 $ 28.1
======= ======= =======
Identifiable Assets
_____________________________
Seed $ 561.2 $ 413.1 $ 329.8
Swine 29.4 36.1 32.7
Discontinued Operations 0.2 0.4 0.8
________ ________ ________
________ ________ ________
$ 590.8 $ 449.6 $ 363.3
======= ======= =======
Depreciation and Amortization
Expense
_____________________________
Seed $ 13.3 $ 11.6 $ 9.1<PAGE>
Swine 2.2 2.2 2.2
________ ________ ________
$ 15.5 $ 13.8 $ 11.3
Property Additions
_____________________________
Seed $ 88.3 $ 57.6 $ 28.5
Swine 2.0 1.8 2.2
________ ________ ________
$ 90.3 $ 59.4 $ 30.7
======= ======= =======<PAGE>
</TABLE>
(1) Consolidated revenues do not include approximately $135
million in fiscal year 1998, $155 million in fiscal year
1997 and $145 million in fiscal year 1996 of DEKALB seed
sold under royalty agreements with non-consolidated
affiliates and licensees or recognized by equity companies.
(Footnote P).<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
_________________________________________________________________
S.DISCONTINUED OPERATIONS
On April 28, 1995, the Company sold its poultry operations to
Central Farm of America, Inc., an affiliate of Toshoku, Ltd.,
for $12.5 million 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 prior years
have been restated to reflect continuing operations.
Net earnings from discontinued operations in fiscal 1995
included an operating loss of $0.5 million, net of $0.5
million tax benefit and a net gain on the sale of $1.7
million, net of $0.5 million tax expense. Revenues for
discontinued operations were $12.1 million for the eight
months of fiscal 1995. Net assets of the discontinued
operations at August 31, 1998 amounted to $0.2 million.<PAGE>
<PAGE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
T.Monsanto Transaction
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. The two companies 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 two-for-one stock split to shareholders of
record on July 25, 1997, and the three-for-one stock split
to shareholders of record on May 10, 1996 are reflected in
the following share and price information. During fiscal
1996, Monsanto purchased from DEKALB 0.5 million newly
issued shares of DEKALB Class A (voting) Common Stock at a
price per share of $ 10.83 and 2.8 million newly issued
shares of Class B (non-voting) Common Stock at a price per
share of $10.83. 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 34.0 million from about
31.2 million.
During fiscal 1996, Monsanto also acquired 10.4 million
shares of DEKALB's publicly traded Class B Common Stock in a
separate cash tender offer at a price of $11.83 per share.
Upon completion of the tender offer, Monsanto held 10
percent of the Class A voting shares and approximately 43
percent of the Class B non-voting shares. As of August 31,
1997, Monsanto held 0.5 million shares of Class A and 13.2
million shares of Class B Common Stock. This represents
approximately 10 percent of Class A and 44 percent of Class
B non-voting shares. In accordance with the Investment
Agreement, Monsanto acquired an additional 0.2 million
shares of DEKALB's publicly traded Class B Common Stock at
$40.38 per share during fiscal 1998. As of August 31, 1998,
Monsanto held 0.5 million shares of Class A and 13.3 million
shares of Class B Common Stock representing approximately
eleven percent of Class A voting shares and 44 percent of
Class B non-voting shares.
Additionally, DEKALB received $4.0 million from Monsanto in
March, 1996, $3.0 million in February, 1997, $3.0 million in
January, 1998, and $3.0 million in March, 1998. These<PAGE>
payments represent the first four installments under the
companies' collaboration agreement, which calls for total
payments of $18.2 million over the term of the agreement.
On May 11, 1998, DEKALB announced that it had entered into
an Agreement with Monsanto Company providing for Monsanto to
acquire all of the shares of DEKALB capital stock that it
did not already own. Pursuant to the agreement, on May
15,1998, Monsanto commenced a cash tender offer for all of
the common stock of DEKALB at $100 net per share. The
second step of the transaction will be a merger in which any
remaining stock of DEKALB will be exchanged for cash at the
same price per share paid in the tender offer. If the
tender offer is not completed by May 9, 1999, the offer
price will increase by 50 cents per share on the tenth day
of each month, starting on May 10.
The tender offer is conditioned on the expiration of the
Hart-Scott-Rodino Act waiting period and other customary
conditions. On June 3, 1998, DEKALB and Monsanto announced
that they received requests for additional information and
other documentary materials from the U.S. Department of
Justice under the Hart-Scott-Rodino Act. Monsanto is required
to extend the tender offer pending satisfaction of the
Hart-Scott-Rodino Act waiting period and the other conditions
to the offer, but in no event beyond November 9, 1999, unless
the offer is earlier terminated in accordance with the terms of
the merger agreement.<PAGE>
As of November 30, 1998, Monsanto and the Antitrust Division of
the U.S. Department of Justice have concluded extensive
discussions regarding Monsanto's proposed acquisition of DEKALB
Genetics Corporation. Monsanto officials believe they have
resolved all issues raised by the Division, and, as a result,
intend to close the tender offer for the outstanding shares of
DEKALB Class A and Class B Common Stock, in accordance with the
terms previously announced.
Monsanto's tender offer for all the outstanding shares of Class A
and Class B Common Stock of DEKALB at a purchase price of $100 in
cash per share expires at 5 p.m. ET, on Monday, November 30, 1998,
unless extended.
<PAGE>
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
_________________________________________________________________
None.
PART III
ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
___________________________________________________________
Set forth below is the name, age and principal occupation of each
director of the Company for the past five years.
<TABLE>
CAPTION
<PAGE>
Name and Principal Occupation Age Director Since
<S> <C> <C>
Dr. Charles J. Arntzen................ 57 August 1, 1990
Dr. Arntzen is President and
Chief Executive Officer of the
Boyce Thompson Institute for
Plant Research, Inc. He was
Manager, Plant Biotechnology
Program, Institute of Biosciences
and Technology of Texas A & M
University until he assumed his
present position in August 1995.
He also serves on the University
of Chicago's Board of Governors
for the Argonne National
Laboratory. Dr. Arntzen is
Chairman of the Audit Committee.
Allan Aves............................ 67 August 29, 1988
Mr. Aves is a farmer and is a
director of the Illinois Farm
Bureau, the former President and
a director of the DeKalb County
Farm Bureau and the former
President and Chairman of the
Board of the American Soybean
Association. He is a member of
the Audit Committee.
Bruce P. Bickner...................... 55 June 15, 1988
Mr. Bickner is Chairman and Chief
Executive Officer of the Company.
He is a director of Castle
BancGroup, Inc. and NICOR Inc.
Mr. Bickner is a member of the
Executive Committee.
Dr. Robert T. Fraley.................. 45 April 16, 1996
Dr. Fraley is Co-President, Ag
Sector of Monsanto, one of five
sectors of Monsanto specializing
in Life Sciences. Until he
assumed his present position in
March 1997, he was President of
Ceregen, a unit of Monsanto
Company that develops chemical,
biotechnology and seed products
for agriculture. He was Group
Vice President and General
Manager of the New Products<PAGE>
Division of Monsanto Company
until January 1995. Dr. Fraley
is a member of the Executive
Committee.
Tod R. Hamachek....................... 52
Mr. Hamachek is Chairman and June 1, 1992
Chief Executive Officer of
Penwest Pharmaceuticals Co., a
pharmaceutical company
specializing in the development
and distribution of drug delivery
systems and inactive ingredients
used to manufacture oral dose
pharmaceutical tablets. He was
President and Chief Executive
Officer of PENFORD Corporation
until he assumed his present
position in September 1998. He
is a director of PENFORD
Corporation, Northwest Natural
Gas Company and The Seattle Times
Company. Mr. Hamachek is a
member of the Compensation
Committee.
Paul H. 62 October 13, 1992
Hatfield..............................
Mr. Hatfield is Chairman of
Hatfield Capital Group, a private
investment company. He was
Chairman, President and Chief
Executive Officer of Petrolite
Corporation from November 1995
until July 1997. He was Chairman
of Hatfield Capital Group from
February 1995 until November
1995. He was Vice-President of
Ralston Purina Company and
President and Chief Executive
Officer of Protein Technologies
International until February
1995. He is a director of
PENFORD Corporation and Solutia
Inc. Mr, Hatfield is a member of
the Audit Committee.
Virginia Roberts Holt................. 43 January 16, 1996
Mrs. Holt was President of
Charles A. Lowe & Associates, an
audiology practice, until May
1997.
Douglas C. Roberts.................... 46 August 29, 1988<PAGE>
Mr. Roberts is a Private
Investor. He held the position
of Vice President, Strategic
Projects of the Company from May
1998 until July 1998 when he
retired from the Company. He was
Vice President, Marketing of the
Company from February until May
1998. He held the position of
Director, U.S. Business Units of
the Company's seed division until
February 1995. Mr. Roberts is a
member of the Executive
Committee.
John T.Roberts........................ 40 July 1, 1993
Mr. Roberts is a Private
Investor. He was Chief Financial
Officer and Treasurer of Quest
Environmental Resources
Corporation until July 1997. Mr.
Roberts is a member of the
Compensation Committee.
Richard O. Ryan...................... 56 June 15, 1988
Mr. Ryan is President and Chief
Operating Officer of the Company.
Mr. Ryan is a member of the
Executive Committee.
H. Blair White....................... 71 August 29, 1988
Mr. White is Of Counsel to Sidley
& Austin, a law firm that
provides legal services to the
Company. Mr. White is Chairman of
the Compensation Committee and of
the Executive Committee.
William M. 41 January 13, 1997
Ziegler..............................
Mr. Ziegler is Special Projects
Director in the Ag Sector of
Monsanto. He was Special
Projects Director of Ceregen, a
unit of Monsanto that develops
chemical, biotechnology and seed
products for agriculture until he
assumed his present position in
March 1997. He was Business
Director, Corn and Soybeans of
Ceregen until November 1996.<PAGE>
/TABLE
<PAGE>
<PAGE>
The Merger Agreement provides that, promptly after the Purchaser
purchases Shares pursuant to the Offer, the Purchaser will be
entitled to designate up to such number of directors for the
Company, rounded up to the next highest whole number, as will
make the percentage of the Company's directors so designated by
the Purchaser (the `Monsanto Designees') equal to the aggregate
voting power of the shares of Class A Common Stock held by
Monsanto or any of its subsidiaries. The name, age and principal
occupation of each of the individuals that Monsanto may select to
be the Monsanto Designees has been previously mailed to all
stockholders of the Company and filed by the Company with the
Commission.
The names, ages, and positions of the executive officers of the
Company, with their business experience during the past five
years, are shown below. Corporate officers are elected annually
by the Board of Directors.
Age
Bruce P. Bickner...........................................55
Mr. Bickner is Chairman and Chief Executive Officer of the
Company. He is a director of Castle BancGroup, Inc. and
NICOR, Inc.
Richard T. Crowder.........................................59
Mr. Crowder is Senior Vice President, International of the
Company. He was Executive Vice President and General
Manager of Armour Swift Eckridge from July, 1992 until
October, 1994 when he assumed his present position.
Janis M. Felver............................................51
Ms. Felver is Vice President and Chief Accounting Officer of
the Company. She was Controller and Chief Accounting
Officer until she assumed her present postion in January
1997. She was Assistant Controller of the Company until
January 1995.
Catherine J. Mackey........................................43
Ms. Mackey is Vice President, Research of the Company. She
served as Director, Discovery Research of the Company until
September 1995.
John H. Pfund..............................................51
Mr. Pfund is Vice President, Research of the Company. He
was Research Director of the Company until he assumed his
present position in September 1995. He was Associate
Director of Research of the Company until November 1994.
Richard O. Ryan............................................56
Mr. Ryan is President and Chief Operating Officer of the
Company.<PAGE>
John H. Witmer, Jr.........................................58
Mr. Witmer is Senior Vice President, General Counsel and
Secretary of the Company.
Each officer of DEKALB has been elected to serve as such
until the next annual election of officers of DEKALB or
until his or her successor is elected.<PAGE>
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors and officers of the Company and persons having 10
percent or more beneficial ownership of the Company's stock are
required under Section 16 of the Securities Exchange Act of 1934
to report to the Commission their transactions in, and beneficial
ownership of, the Company's Class A Common Stock, Class B Common
Stock and other equity securities of the Company. Reports
received by the Company during the last fiscal year indicate that
Monsanto, an owner of at least 10 percent of the Company's stock,
filed one late report relating to one transaction.<PAGE>
ITEM: 11 EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth current and long-term compensation for each of
the last three fiscal years of the Chief Executive Officer and each of the
other executive officers whose salary and bonus for the fiscal year 1998
exceeded the disclosure threshold established by the Commission (collectively,
the `Named Executive Officers'):<PAGE>
<TABLE>
Long Term
Annual Compensation Compensation
____________________________ ____________________
<S> <C> <C> <C> <C> <C> <C> <c
Name and Other Awards Payouts
Principal Position Annual
at August 31, 1998 Compen- Number of All Other
Securities Perfor- Compensation
Year Salary Bonus sation Underlying mance
Options(2) Unit (3)
(1) Payouts
Bruce P. Bickner. . . . . 1998 $349,231 $ 67,865 $21,170 32,000 $ 0 $43,439
Chairman and Chief 1997 328,654 341,250 17,448 30,000 93,800 65,160
Executive Officer 1996 294,231 379,688 11,140 28,200 0 52,346
Richard O. Ryan . . . . 1998 $264,423 $ 42,750 $11,510 25,000 $ 0 $26,089
President and Chief 1997 249,616 226,875 14,547 18,800 56,000 43,101
Operating Officer 1996 239,423 276,094 6,836 48,000 0 31,103
Richard T. Crowder .. . 1998 $249,039 $202,500 $ 9,770 18,000 $ 0 $26,545
Senior Vice President, 1997 224,615 192,500 10,120 13,600 17,500 34,869
International. 1996 214,635 136,000 0 42,000 0 25,253
John H. Witmer, Jr. . . . 1998 $170,000 $20,000 $9,055 7,000 $ 0 $13,371
Senior Vice President 1997 169,809 78,375 5,200 6,000 23,800 20,621
& General Counsel 1996 164,080 77,125 1,235 6,000 0 15,992
Catherine J. Mackey . . . 1998 $158,269 $40,313 $10,670 12,000 $ 0 $10,819
Vice President, Research 1997 139,616 54,375 11,041 8,000 15,400 170
1996 129,127 65,000 0 18,600 0 12,716
</TABLE>
<TABLE>
<S> <C>
(1) Other Annual Compensation for fiscal 1998 arose from the following sources: Taxable
income for executive car participants (Mr. Bickner - $1,671, Mr. Ryan - $7,562, Mr.
Crowder - $8,270, Ms. Mackey - $6,495); Personal use of company airplane (Mr.
Bickner - $11,931, Mr. Ryan - $1,048, Mr. Witmer - $3,705); Financial Planning (Mr.
Bickner - $4,800, Mr. Ryan - $2,900, Mr. Crowder - $1,500, Mr. Witmer - $5,350, Ms.
Mackey - $4,175); and reimbursement to Mr. Bickner for income taxes related to
benefit plan of $2,768.
(2) No restricted stock or stock appreciation rights (SARs) were awarded to the Named
Executive Officers during fiscal 1996, 1997 or 1998.
(3) All Other Compensation for fiscal 1998 arose from the following sources: Company
contributions to the Company's Deferred Compensation Plan (Mr. Bickner -
$26,501, Mr. Ryan - $16,565, Mr. Crowder - $14,149, Mr. Witmer - $4,419 and Ms.
Mackey - $2,632); Company contributions to the Company's Savings and Investment
Plan (Mr. Bickner - $8,000, Mr. Ryan - $8,000, Mr. Crowder - $8,000, Mr. Witmer
- $8,000 and Ms. Mackey - $8,000); and reimbursement for life insurance
premiums (Mr. Bickner - $8,938, Mr. Ryan - $1,524, Mr. Crowder - $1,396, Mr.
Witmer - $952 and Ms. Mackey - $187); and Company payment to Mr. Crowder of
$3,000 for spouse international travel benefit.<PAGE>
<PAGE>
</TABLE>
<PAGE>
STOCK OPTION DURING 1998 FISCAL YEAR
The following table sets forth the number of shares of Class A
Common Stock that were granted subject to options during fiscal
1998 to each Named Executive Officer receiving such a grant:
<TABLE>
CAPTION
<PAGE>
Individual Grants
<S> <C> <C> <C> <C> <C>
Percentage
of
Number of Total Exerci
Securities Shares se Expiratio Grant
Underlying Granted to Price n Date
Options Employees Per
Name Granted(1) in Fiscal Share Date Present
1998 Value
(2)(3)
Bruce P. 32,000 14.1% $26.69 01/20/08 $547,520
Bickner
Richard 25,000 11.0% $26.69 01/20/08 $427,750
O. Ryan
Richard 18,000 7.9% $26.69 01/20/08 $307,980
T.
Crowder
John H. 7,000 3.1% $26.69 01/20/08 $119,770
Witmer,
Jr.
Catherine 12,000 5.3% $26.69 01/20/08 $205,320
J. Mackey<PAGE>
</TABLE>
(1) These options to purchase Class A Common Stock of the
Company were granted under the Company's Long-Term Incentive
Plan (LTIP) at an exercise price of 100 percent of fair
market value on the date of grant. The options are
exercisable over a period of not more than ten years from
the date of grant. The stock option grants were made
effective January 20, 1998. Vesting is over a three-year
period from the date of grant, with one-third of the options
vesting on January 20, 1999, one-third vesting on January
20, 2000, and the final one-third vesting on January 20,
2001.
(2) Grant date present value is based on a Black-Scholes option
pricing model adapted for use in valuing executive stock
options. In calculating the grant present values set forth
in the table, a factor of 40% has been assigned to the
volatility of the common stock, the annual dividend
assumption is $0.14 per share, the interest rate has been
fixed at 8.00% and the exercise of options has been assumed
to occur at the end of the actual option term of ten years.
There is no assurance that these assumptions will prove to
be true in the future. Consequently, the actual value, if
any, an executive may realize will depend on the common
stock price on the date the option is exercised, so that
there is no assurance the value realized by an executive
will be at or near the value estimated by the Black-Scholes
model.
(3) Upon the consummation of the Offer, any options then
outstanding will be cancelled in consideration for a cash
payment from the Company for each such option equal to (i)
the product of (a) the number of Shares subject or related
to such option and (b) the excess, if any, of the Offer
Price over the per Share exercise price of such option,
minus (ii) all applicable federal, state, and local
withholding taxes. See `Employment and Severance Agreements
with Certain Executive Officers - Stock Options.'<PAGE>
<PAGE>
AGGREGATED OPTION EXERCISES DURING FISCAL 1998 AND FISCAL 1998
YEAR-END
OPTION VALUES
The following table sets forth the number of shares of Class A
and Class B Common Stock that were purchased pursuant to options
exercised, and the number and value of shares subject to
unexercised options at August 31, 1998, for each of the Named
Executive Officers:
<TABLE>
CAPTION
<PAGE>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options Held at Options at
Acquired Value August 31, 1998(1) August 31, 1998(2)
Name on Realized Exercisable Unexercisable Exercisable Unexercisable
Exercise (2)
<S> <C> <C> <C> <C> <C> <C>
Bruce P. -0- -0- 351,294 61,406 $29,178,357 $3,780,150
Bickner
Richard -0- -0- 200,364 53,436 $16,431,390 $3,451,930
O. Ryan
Richard -0- -0- 62,628 40,972 $4,914,098 $2,680,752
T.
Crowder
John H. -0- -0- 120,600 13,000 $10,078,519 $ 801,330
Witmer,
Jr.
Catherine -0- -0- 41,502 23,498 $ 3,286,527 $1,503,183
J. Mackey<PAGE>
</TABLE>
(1) No employee of the Company holds any SARs relating to Class
A or Class B Common Stock.
(2) Market value of underlying securities at exercise or year-
end, minus the exercise price. Market value is based on the
$86.63 per share closing price on the New York Stock
Exchange of the Class B Common Stock on August 31, 1998.<PAGE>
ESTIMATED ANNUAL RETIREMENT BENEFITS FOR YEARS OF SERVICE
The following table sets forth the estimated annual retirement
benefits payable upon retirement pursuant to the Company's
retirement plans for the indicated levels of remuneration and
years of service for each Named Executive Officer:
Years of Service
<TABLE>
<CAPTION>
FINAL
AVERAGE
COMPENSAT 5 10 15 20
ION
<S> <C> <C> <C> <C>
$150,000 $22,500 $45,000 $67,500 $90,000
$175,000 $ $26,250 $52,500 $78,750 $105,000
$200,000 $30,000 $60,000 $90,000 $120,000
$225,000 $33,750 $67,500 $101,250 $135,000
$250,000 $37,500 $75,000 $112,500 $150,000
$275,000 $41,250 $82,500 $123,750 $165,000
$300,000 $45,000 $90,000 $135,000 $180,000
$325,000 $48,750 $97,500 $146,250 $195,000
$350,000 $52,500 $105,000 $157,500 $210,000
$375,000 $56,250 $112,500 $168,750 $225,000
$400,000 $60,000 $120,000 $180,000 $240,000
$425,000 $63,750 $127,500 $191,250 $255,000
$450,000 $67,500 $135,000 $202,500 $270,000
$475,000 $71,250 $142,500 $213,750 $285,000
$500,000 $75,000 $150,000 $225,000 $300,000
$525,000 $78,750 $157,500 $236,250 $315,000
$550,000 $82,500 $165,000 $247,500 $330,000
$575,000 $86,250 $172,500 $258,750 $345,000
$600,000 $90,000 $180,000 $270,000 $360,000
$625,000 $93,750 $187,500 $281,250 $375,000
$650,000 $97,500 $195,000 $292,500 $390,000
$675,000 $101,250 $202,500 $303,750 $405,000
$700,000 $105,000 $210,000 $315,000 $420,000
$725,000 $108,750 $217,500 $326,250 $435,000
$750,000 $112,500 $225,000 $337,500 $450,000<PAGE>
</TABLE>
The credited years of service for each of the following
Named Executive Officers is:
Bruce P. Bickner 20
Richard O. Ryan 16
John H. Witmer, Jr. 17
Catherine J. Mackey 12
The benefits are calculated by determining the average annualized
earnings (i.e., salary and bonus) of the applicable 36 months and
multiplying this by the number of years of service (up to a
maximum of 20 years) times three percent. These benefits will be
reduced by social security benefits, the benefit from the regular
match of the defined contribution plan (starting on the date the
defined benefit plan for executives was modified), qualified
pension plan benefits and benefits from a profit sharing plan
previously provided by the Company. The benefit table assumes
that the participant will retire at age 65. If the participant
retires at an earlier age, the benefit will be reduced by five
percent for every year retirement takes place before age 65.
Mr. Crowder is not eligible for the above retirement benefit.
The Company has guaranteed that his annual retirement benefit
starting at age 65 (from Social Security, the Company's qualified
retirement plans (excluding<PAGE>
<PAGE>
the Company's 401(k) plan as it was in effect in September 1994)
and the Company's non-qualified retirement plans) will equal or
exceed an amount equal to two percent times his years of service
times his average annual compensation during his last thirty-six
months of employment. At August 31, 1998, Mr. Crowder's years of
credited service were three.
EMPLOYMENT AND SEVERANCE AGREEMENTS WITH CERTAIN EXECUTIVE
OFFICERS
The Company has entered into written employment agreements with
all of the Named Executive Officers. Each employment agreement
provides for a one-year term and is subject to successive one-
year extensions unless notice of termination is given. The
employment agreements provide for the following base salaries for
fiscal 1999 to be paid to the executive officers: Mr. Bickner
($350,000), Mr. Ryan ($297,000), Mr. Crowder ($275,000), Mr.
Witmer ($170,000), and Ms. Mackey ($172,000). Those executive
officers will have Company performance-related bonus
opportunities which have been set for a target bonus of $350,000;
$233,000; $150,000; $93,000; and $78,000 respectively, which
could be exceeded if performance merits. Each employment
agreement provides that if the executive officer is terminated
prior to the expiration of the term of the agreement, such
executive officer will also be entitled to termination pay equal
to 24 months' base salary and target bonus in the case of Messrs.
Bickner, Ryan, and Crowder, 27 months' base salary and target
bonus in the case of Ms. Mackey, 12 months' base salary and
target bonus in the case of Mr. Witmer. Each employment
agreement also specifically states that the officer wil be
entitled to receive Gross-Up Payments (as defined below) in
respect of Excise Taxes (as defined below). For a description of
Excise Taxes and the Company's policy with respect to Gross-Up
Payments generally, see `Parachute Payment Reimbursement Policy'
below. Messrs. Bickner, Ryan, Crowder, and Ms. Mackey are
subject to noncompetition limitations for periods of time
equaling the length of their termination pay and are also subject
to nonsolicitation limitations for a period of three years
following their termination
Pursuant to the Merger Agreement, Monsanto has agreed to honor,
or cause to be honored by the Company and its Subsidiaries, all
employment agreements with the persons who are directors,
officers and employees of the Company and its subsidiaries.
Severance Pay Plan. On May 5, 1998, the Board of Directors
approved the DEKALB Genetics Corporation Severance Pay Plan,
which provides severance benefits for each employee, including
each executive officer, of the Company and its subsidiaries
(excluding seasonal and temporary employees and employees of
foreign subsidiaries of the Company) whose employment is<PAGE>
terminated by the Company without `cause' (as such term is
defined in the Merger Agreement) after the consummation of the
Offer. For employees of the Company who have five or more years
of service with the Company, including all but one of its
executive officers, such benefits include a lump sum cash payment
equal to two weeks of `weekly compensation' (defined in such plan
to include base salary and target bonus) for each year of
service, but not more than 52, nor less than 20, weeks of weekly
compensation (not less than 26 weeks in the case of employees
with the title of president or vice president). For employees
with fewer than five years of service, including one executive
officer, such benefits include a lump sum cash payment equal to
16 weeks of weekly compensation (26 weeks in the case of
employees with titles of president or vice president). Each of
the Named Executive Officers has a title of president or vice
president. In addition to such lump sum cash payment, each
covered employee would be entitled to four weeks notice prior to
any such termination of employment and to receive outplacement
services commensurate with such employee's position. Such plan
also provides that it may not be amended for a period of 12
months following consummation of the Offer.
Parachute Payment Reimbursement Policy. On May 5, 1998, the
Board of Directors approved the DEKALB Genetics Corporation
Policy and Procedure Regarding Reimbursement of Employees for
Parachute Payment Taxes and Expenses. Such policy and procedure
provides that in the event it is determined that any payment or
distribution by, or any other amount resulting from,
compensation, benefits or any other remuneration provided by, the
Company, the surviving corporation in the Merger or any of their
subsidiaries to or for the benefit of any employee or former
employee of the Company or any of its subsidiaries (which would
include any person employed immediately before the consummation
of the Offer) (a `Payment') is or will be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the `Code'), or any interest or<PAGE>
<PAGE>
penalties or expenses (including any attorneys fees or other
professional expenses incurred in challenging the application of
any such tax) are incurred by such person with respect to such
excise tax (such excise tax, together with any such interest and
penalties and expenses, are hereinafter collectively referred to
as the `Excise Tax'), then such person shall be entitled to
receive from the Company or the surviving corporation in the
Merger, an additional payment (a `Gross-Up Payment') in an amount
such that after payment by such person of all taxes (including
any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, such person retains an amount
of the Gross-Up Payment equal to the expenses and the Excise Tax
imposed upon the Payments.
Special Contribution to Certain Retirement Plans. On May 5,
1998, the Board of Directors approved amendments to the DEKALB
Genetics Corporation Savings and Investment Plan (the `401(k)
Plan') and to the DEKALB Genetics Corporation Deferred
Compensation Plan (the `Deferred Compensation Plan'). The effect
of such amendments, among other things, is that the Company will
make a special credit to the account of each employee of the
Company, including each of its executive officers, who is
eligible to participate in the 401(k) Plan on the date of the
consummation of the Offer and on the date which is 120 days
following the consummation of the Offer or whose employment is
terminated by the Company without `cause' (as defined in the
Merger Agreement) during such 120-day period. Each credit will
be made to the employee's 401(k) Plan account to the extent
permitted by the 401(k) Plan and applicable regulations and to
the extent not permitted thereby will, in the case of certain
management and highly compensated employees, be made to the
Deferred Compensation Plan. The amount of each credit will be
equal to two percent of the employee's `compensation' (defined in
the 401(k) Plan to include, among other things, base salary and
bonus) for the plan year in which such 120-day anniversary of the
consummation of the Offer or such earlier termination occurs and,
to the extent that such employee was not employed by the Company
for such entire plan year, such credit will be equal to two
percent of the compensation that the employee would have earned
had such employee been employed by the Company for such entire
plan year, subject, in the case of the 401(k) Plan, to the terms
thereof and applicable regulations. Such credits to the 401(k)
Plan will be accompanied by Company contributions of like
amounts.
Stock Options. The Long-Term Incentive Plan Administrative
Committee of the Board of Directors has taken action in
accordance with the terms of the DEKALB Genetics Corporation
Long-Term Incentive Plan to accelerate the exercisability of
options granted thereunder which are not yet exercisable,
including options granted to executive officers of the Company,<PAGE>
so that all such options will be exercisable immediately prior to
the consummation of the Offer. In addition, the Board of
Directors has taken action to provide that, upon consummation of
the Offer, all unexercised options granted under such plan and
all unexercised options granted to directors under the DEKALB
Genetics Corporation Director Stock Option Plan, including
options granted to directors thereunder which are unexercisable
at that time, will be cancelled in consideration for a cash
payment from the Company for each such option equal to (i) the
product of (a) the number of Shares subject or related to such
option and (b) the excess of the Offer Price over the per Share
exercise price of such option, minus (ii) all applicable federal,
state and local withholding taxes.
Vesting of Benefits. On May 5, 1998, the Board of Directors
approved amendments to the DEKALB Genetics Corporation Pension
Plan (the `Pension Plan'), the DEKALB Genetics Corporation
Executive Retirement Plan (the `Executive Retirement Plan'), the
401(k) Plan and the Deferred Compensation Plan which provide,
among other things, that the employees, including the executive
officers, of the Company participating in such plans will become
fully vested in their benefits thereunder. Such vesting will
occur under the Pension Plan, the Executive Retirement Plan and
the Deferred Compensation Plan upon the consummation of the Offer
and under the 401(k) Plan on the date which is 120 days
thereafter, provided that the participant is then employed or the
employment of such participant has been terminated without cause
after the consummation of the Offer and prior to the date which
is 120 days thereafter. In addition, the amendment to the
Executive Retirement Plan deleted a provision thereof requiring
the forfeiture of a participant's benefits upon the termination
of such participant's employment by the Company for cause.
Retiree Health Benefits. On May 5, 1998, the Board of Directors
approved the DEKALB Genetics Corporation Retiree Health Care Plan
(the `Retiree Health Care Plan') which guarantees that medical
benefits provided by the Company, together with those provided by
the health care plan operated by the Employees' Mutual Welfare<PAGE>
<PAGE>
Association (the `EMWA Plan'), to former or current employees who
are, or within the 12-month period following the consummation of
the Offer become, eligible to receive such benefits under the
EMWA Plan as retirees (including those who would be eligible but
for not having terminated employment), and to certain other
current and former employees of the Company, including in each
case executive officers of the Company, and the dependents of
such former and current employees, will continue to be provided
at least generally at the same level of benefits as provided by
the EMWA Plan as of the date of adoption of the Retiree Health
Care Plan.
COMPENSATION OF DIRECTORS
Director who are not employees of the Company or nominees of
Monsanto pursuant to the Invesment Agreement, dated as of January
31, 1996, by and between Monsanto and the Company (the
`Investment Agreement'), are paid $14,000 annually, plus $1,000
per day for attending meetings at the request of the Board of
Directors, meetings of committees fo the Board of Directors, or
other meetings at the request of the Company, plus expenses for
attending such meetings. An additional fee of $1,000 annually is
paid to each of the Chairmen of the Eecutive, Audit and
Compensation Committees. Monsanto Designees will not be
compensated for services as directors of the Company but will be
entitled to reimbursement of their expenses.
Pursuant to the DEKALB Genetics Corporation Director Stock Option
Plan (the `Director Plan'), directors who are not officers or
employees of the Company or nominees of Monsanto may elect to
receive options to purchase shares of Class A Common Stock of the
Company in lieu of cash compensation (`Director Options'). The
number of shares of Class A Common Stock subject to each Director
Option shall be equal to the nearest number of whole shares
determined by dividing the amount of the Annual Retainer and
Meeting Fees by 25 percent of the Fair Market Value (as defined
below) of a share of Class A Common Stock on the date of the
annual meeting of stockholders of the Company. For purposes of
the Director Plan, the `Annual Retainer' is equal to the amount
the director will be entitled to receive for serving as a
director in the relevant year and the 'Meeting Fees' are equal to
the amounts the director will be entitled to receive for
attendance at all regularly scheduled meetings of the Board of
Directors or any committee of the Board of Directors of which he
is a member in the relevant year. If a director does not attend
such a Board of Directors or committee meeting (including
non-attendance because any meeting was not held), the director
will forfeit that portion of the Director Options related to the
Meeting Fees for that meeting. The per share exercise price of
the Class A Common Stock subject to each Director Option will be
75 percent of the Fair Market Value of a share of Class A Common
Stock on the date prior to the date such Director Option was
granted. Under the Director Plan, the `Fair Market Value' of a<PAGE>
share of Class A Common Stock is the last price per share at
which a share of the Company's Class B Common Stock is sold in
the regular way on the New York Stock Exchange on the day prior
to the day each Director Option is granted, or, in the absence of
any reported sales on such day, the first preceding day on which
there were such sales.
COMPENSATION COMMITTEE INTELOCKS AND INSIDER PARTICIPATION
H. Blair White, a director of the Company, is Of Counsel to the
law firm of Sidley & Austin. Sidley & Austin provided legal
services to the Company during the past year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of October 30, 1998 the
beneficial ownership of the Class A and Class B Common Stock of
the Company (including shares as to which a right to acquire
ownership exists (e.g., through the exercise of stock options)
within the meaning of Rule 13d-3(d)(1) under the Securities
Exchange Act of 1934) of each director and director nominee, each
Named Executive Officer (as defined below) and all directors and
executive officers as a group.<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of Common Stock Owned
Beneficially and Percentages of Each Class
Outstanding on October 30, 1998 (1)
<S> <C> <C> <C> <C>
Class A % Class B %
Dr. Charles J. Arntzen(2) 38,985 0.854 - -
Allan Aves(3) 82,877 1.799 - -
Bruce P. Bickner(4) 365,088 7.486 - -
Richard T. Crowder(5) 62,533 1.363 - -
Dr. Robert T. Fraley(17) - - - -
Tod R. Hamachek(6) 49,654 1.085 - -
Paul H. Hatfield(7) 65,018 1.416 - -
Virginia Roberts 2,753,369 (16) 65,020 0.216
Holt(8)(9)(17)
Catherine J. Mackey (10) 41,467 0.908 - -
Douglas C. 2,753,369 (16) 71,870 0.239
Roberts(9)(11)(17)
John T. 2,753,369 (16) 57,446 0.191
Roberts(9)(12)(17)
Richard O. Ryan(13) 209,386 4.431 25,100 0.083
H. Blair White 61,942 1.369 - -
John H. Witmer, Jr.(14) 123,600 2.660 - -
William M. Ziegler(17) - - - -
All of the above and all
other executive officers
as a group (17 3,769,604(16) 66.566(16) 219,736 0.730
persons)(15)<PAGE>
</TABLE>
(1) The Securities and Exchange Commission defines the
beneficial owner of a security as including any person who
has sole or shared voting or investment power with respect
to such security. Unless otherwise noted, the named
individual has sole voting and investment power with respect
to the shares of Class A (voting) Common Stock and sole
investment power with respect to the shares of Class B (non-
voting) Common Stock listed.
(2) 39,258 shares of Class A Common Stock subject to options
which may be acquired on or prior to December 29, 1998.
(3) Includes 81,977 shares of Class A Common Stock subject to
options which may be acquired on or prior to December 29,
1998.
(4) Includes 351,300 shares of Class A Common Stock subject to
options which may be acquired on or prior to December 29,
1998. 79,300 of such shares subject to options are held in
a family limited partnership in which Mr. Bickner is the
general partner and 13,988 shares of Class A Common Stock
are held in the Bickner Family Foundation in which Mr.
Bickner is the president.
(5) 62,533 shares of Class A Common Stock subject to options
which may be acquired on or prior to December 29, 1998.
(6) 49,654 shares of Class A Common Stock subject to options
which may be acquired on or prior to December 29, 1998.
(7) 65,018 shares of Class A Common Stock subject to options
which may be acquired on or prior to December 29, 1998.
(8) The number of shares of Class A Common Stock reported
represents (i) 2,671,650 shares of Class A Common Stock held
pursuant to a Voting Trust Agreement of which Virginia
Roberts Holt is a Voting<PAGE>
<PAGE>
Trustee, plus (ii) 81,719 shares of Class A Common Stock
subject to options granted to Virginia Roberts Holt, Douglas
C. Roberts or John T. Roberts which may be acquired on or
prior to December 29, 1998 (12,950 of which shares relate to
options granted to Virginia Roberts Holt). All of such
shares are also reported in this table as being beneficially
owned by Douglas C. Roberts and John T. Roberts. Of the
2,671,650 shares of Class A Common Stock held pursuant to
the Voting Trust Agreement, 860,216 shares are represented
by a Trust Certificate held by Virginia Roberts Holt.
Included are 443,184 shares of Class A Common Stock which
(together with 52,760 shares of Class B Common Stock) are
held in trusts for the benefit of the children of Virginia
Roberts Holt of which she or her spouse is the trustee. The
provisions of such Voting Trust Agreement and related
agreements are described under `Certain Shareholder
Agreements' under Item 13. The shares of Class B Common
Stock listed above include 7,570 shares of Class B Common
Stock held by her spouse.
(9) Douglas C. Roberts, John T. Roberts and Virginia Roberts
Holt are brothers and sister.
(10) 41,467 shares of Class A Common Stock subject to options
which may be acquired on or prior to December 29, 1998.
(11) The number of shares of Class A Common Stock reported
represents (i) 2,671,650 shares of Class A Common Stock held
pursuant to a Voting Trust Agreement of which Douglas C.
Roberts is a Voting Trustee, plus (ii) 81,719 shares of
Class A Common Stock subject to options granted to Virginia
Roberts Holt, Douglas C. Roberts or John T. Roberts which
may be acquired on or prior to December 29, 1998 (23,933 of
which shares relate to options granted to Douglas C.
Roberts). All of such shares are also reported in this
table as being beneficially owned by Virginia Roberts Holt
and John T. Roberts. Of the 2,671,650 shares of Class A
Common Stock held pursuant to the Voting Trust Agreement,
836,322 shares are represented by a Trust Certificate held
by Douglas C. Roberts. Included are 135,708 shares of Class
A Common Stock which (together with 19,902 shares of Class B
Common Stock) are held in trusts for the benefit of the
children of Douglas C. Roberts of which he or his spouse is
the trustee. The provisions of such Voting Trust Agreement
and related agreements are described under `Certain
Shareholder Agreements' under Item 13. The shares of Class
B Common Stock listed above include 3,370 shares of Class B
Common Stock held by his spouse.
(12) The number of shares of Class A Common Stock reported
represents (i) 2,671,650 shares of Class A Common Stock held
pursuant to a Voting Trust Agreement of which John T.
Roberts is a Voting Trustee, plus (ii) 81,719 shares of<PAGE>
Class A Common Stock subject to options granted to Virginia
Roberts Holt, Douglas C. Roberts or John T. Roberts which
may be acquired on or prior to December 29, 1998 (44,836 of
which shares relate to options granted to John T. Roberts).
All of such shares are also reported in this table as being
beneficially owned by Virginia Roberts Holt and Douglas C.
Roberts. Of the 2,671,650 shares of Class A Common Stock
held pursuant to the Voting Trust Agreement, 846,678 shares
are represented by a Trust Certificate held by John T.
Roberts. Included are 312,194 shares of Class A Common
Stock which (together with 42,306 shares of Class B Common
Stock) are held in trusts for the benefit of the children of
John T. Roberts of which he or his spouse is the trustee.
The provisions of such Voting Trust Agreement and related
agreements are described under `Certain Shareholder
Agreements' under Item 13. The shares of Class B Common
Stock listed above include 7,570 shares of Class B Common
Stock held by his spouse.
(13) Includes 200,267 shares of Class A Common Stock subject to
options which may be acquired on or prior to December 29,
1998. 7,200 shares of Class A Common Stock and 25,100
shares of Class B Common Stock are held in the S. Orville
Ryan Family Foundation of which Mr. Ryan is the President.
(14) Includes 120,600 shares of Class A Common Stock subject to
options which may be acquired on or prior to December 29,
1998.
(15) Includes 1,137,639 shares of Class A Common Stock subject to
options which may be acquired on or before December 29,
1998.<PAGE>
<PAGE>
(16) As shown in footnotes 8, 11 and 12 and as described under
`Certain Shareholder Agreements' under Item 13, Douglas C.
Roberts, John T. Roberts and Virginia Roberts Holt share
voting power with respect to 2,671,650 shares of Class A
Common Stock. Accordingly, such shares (which represent
59.038% of the outstanding shares of Class A Common Stock on
October 30, 1998) are accounted for in this table at three
different places. So that the actual impact of their
ownership can be better understood, such multiple counting
has been eliminated in the total number reported as
beneficially owned by all directors and executive officers.
The dispositive power and economic benefits of each of them
with respect to such shares, as a percent of the total
outstanding shares of Class A Common Stock, is Douglas C.
Roberts (18.910%), John T. Roberts (19.507%) and Virginia
Roberts Holt (19.240%).
(17) Mssrs. Fraley and Ziegler are employees of Monsanto. By
virtue of the 1998 Stockholders Agreement described under
`Certain Shareholder Agreements: under Item 13, Monsanto may
be deemed to be the beneficial owner of 2,671,650 shares of
the Class A Common Stock beneficially owned by Douglas C.
Roberts, John T. Roberts and Virginia Roberts Holt. Monsanto
disclaims beneficial ownership of any shares of Class A
Common Stock beneficially owned by Douglas C. Roberts, John
T. Roberts and Virginia Roberts Holt relating to options to
purchase such shares. For purposes of this filing, Mssrs.
Fraley and Ziegler expressly disclaim beneficial ownership
of any shares of Class A Common Stock beneficially owned by
Monsanto.<PAGE>
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of October 30, 1998 the
beneficial ownership of the Company's Class A Common Stock of
each person known by the Company to own beneficially more than
five percent of such class of securities and the percentage of
all shares of Class A Common Stock that such number of shares
represents:
<TABLE>
CAPTION
<PAGE>
Percentage of
Outstanding
Shares of
Shares Owned Class A
Name and Address Beneficially Common Stock
(1)
<S> <C> <C>
John T. Roberts
Virginia Roberts Holt
Douglas C. Roberts
Charles C. Roberts
Mary R. Roberts
c/o Douglas C. Roberts 2,753,369(2) 59.764%
P.O. Box 218
Sycamore, IL 60178
Monsanto Corporation (3) 485,442 10.727%
800 North Lindbergh
Blvd.
St. Louis, Missouri
63167
Bruce P. Bickner (4) 365,088 7.486%
11702 Deerpath Road
Sycamore, Illinois 60178<PAGE>
</TABLE>
(1) The Securities and Exchange Commission defines the
beneficial owner of a security as including any person who
has sole or shared voting or investment power with respect
to such security.
(2) Charles C. Roberts and Mary R. Roberts are husband and wife
and are the father and mother of John T. Roberts, Virginia
Roberts Holt and Douglas C. Roberts. The shares reported
represent shares held pursuant to a Voting Trust Agreement
of which each of them is a Voting Trustee, plus shares
subject to options held by them, which shares may be
acquired on or prior to December 29, 1998. See Notes 8, 11
and 12 under `SECURITY OWNERSHIP OF MANAGEMENT.' The
provisions of such Voting Trust Agreement and related
agreements are described under `Certain Shareholder
Agreements.'
(3) By virtue of the 1998 Stockholders Agreement described under
`Certain Shareholder Agreements' under Item 13, Monsanto may
be deemed to be the beneficial owner of 2,671,650 shares of
Class A Common Stock beneficially owned by Douglas C.
Roberts, John T. Roberts and Virginia Roberts Holt. Without
considering such shares, Monsanto beneficially owns 485,442
shares of Class A Common Stock representing 10.727% of the
shares of Class A Common Stock outstanding as of October 30,
1998. Monsanto disclaims beneficial ownership of any shares
of Class A Common Stock beneficially owned by Douglas C.
Roberts, John T. Roberts and Virginia Roberts Holt relating
to options to purchase such shares. The provisions of the
1998 Stockholders Agreement are described in `Certain
Shareholder Agreements' under Item 13
(4) See Note 4 under `SECURITY OWNERSHIP OF MANAGEMENT.'<PAGE>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS
On May 8, 1998, the Company entered into the Merger Agreement
with Monsanto and the Purchaser, pursuant to which, among other
things, the Purchaser commenced the Offer to acquire all of the
Class A Common Stock and all of the Class B Common Stock of the
Company for the Offer Price per Share. The Merger Agreement
further provides that following the consummation of the Offer and
the satisfaction or waiver of certain conditions, the Purchaser
will be merged with and into the Company with the Company
continuing as the surviving corporation. As of the effective
time of the Merger each issued and outstanding Share (other than
Shares owned by the Company, Monsanto, the Purchaser or their
respective subsidiaries, which Shares will be canceled and other
than Shares, if any, held by stockholders who are entitled to and
who properly exercise appraisal rights under Delaware law), will,
by virtue of the Merger and without any action by the holder
thereof, be converted into the right to receive from the
surviving corporation in cash the price per Share paid in the
Offer.
On January 31, 1996, the Company entered into a series of
agreements with Monsanto, including an Investment Agreement and a
collaboration agreement which provides for a long-term research
and development collaboration with Monsanto in the field of
agricultural biotechnology, particularly corn seed. The Company
and Monsanto also entered into cross-licensing agreements
covering insect-resistant and herbicide-tolerant corn products
targeted to reach the market over the next few years.
The Investment Agreement provides that if the Company issues new
shares of its Class A Common Stock or Class B Common Stock
pursuant to any of the Company's employee benefit plans, Monsanto
may purchase from the Company a sufficient number of shares to
maintain its permitted percentage ownership of Class A Common
Stock and Class B Common Stock. During the second quarter of
fiscal 1997 and the first quarter of fiscal 1998, the Company
completed two sales of equity to Monsanto pursuant to such
provisions. Monsanto purchased from the Company 24,102 (after
taking into account the two-for-one stock split that was made to
shareholders of record on July 25, 1997) and 156,024 newly issued
shares of Class B Common Stock at aggregate prices of $590,725
and $6,299,957 respectively. As provided in the Investment
Agreement, the price for the shares was based upon a specified
twenty-day average closing price on the applicable securities
exchange for the Class B Common Stock.
The collaboration agreement between the Company and Monsanto has
an initial term of ten years and includes a series of cash<PAGE>
payments from Monsanto to the Company originally aggregating
$19,500,000 over the initial term. In 1998, the collaboration
agreement was amended to accelerate the payments into earlier
years and to reduce the aggregate amount to $18,500,000. The
amendment did not materially change the net present value of the
payments, however. During fiscal 1998, Monsanto paid $6,000,000
to the Company under the collaboration agreement.
As part of the cross license agreements entered into between
Monsanto and the Company, each party has an obligation to share
with the other certain royalties and technology fees it receives
that are related to seed corn that contains the applicable insect
resistance or herbicide tolerance. The Company estimates a net
payment from Monsanto of approximately $3,300,000 under the
licenses for sales during fiscal 1998.
The Company sold soybean products for which the Company collected
a royalty or technology fee on behalf of Monsanto from the
ultimate purchaser of the products, but was not entitled to share
the net proceeds with Monsanto. For sales during fiscal 1998,
the Company paid Monsanto approximately $11,000,000 for such
products, net of certain service fees the Company was permitted
to retain. The Company and subsidiaries of Monsanto also
purchased germplasm, seed and specialty corn products from each
other. The Company paid Monsanto a net of approximately
$1,800,000 as a result thereof. The Company believes that the
terms of each of the agreements pursuant to which such payments
were made were at least comparable to the terms Monsanto and the
Company provided to other seed companies, as the case may be.
Also, in an effort to increase available supplies of certain
seeds to farmers in fiscal 1998, Monsanto paid to the Company
approximately $5,750,000 to help cover the Company's incremental
winter production costs.<PAGE>
<PAGE>
CERTAIN SHAREHOLDER AGREEMENTS
The following describes certain provision of (i) a Voting Trust
Agreement (the `Voting Trust Agreement') among each of Douglas C.
Roberts, Virginia Roberts Holt, John T. Roberts, Charles C.
Roberts and Mary R. Roberts (the `Voting Trustees'), individually
and as trustees of trusts created for the benefit of their
spouses or children (the Voting Trustees and such trust being
referred to as the `Shareholders'), (ii) a Roberts Family
Shareholder Agreement among the Shareholders, (iii) a
Stockholders' Agreement (the `Monsanto Stockholders' Agreement')
among the Shareholders and Monsanto and (iv) a Stockholders
Agreement (the `1998 Stockholders Agreement') among Monsanto and
the Shareholders entered into in connection with Merger
Agreement. The following descriptions are only a summary of
certain provisions of such agreements and are qualified in their
entirety by reference to the agreements themselves which are
incorporated herein by reference and a copy or form of which has
been filed with the Commission.
VOTING TRUST AGREEMENT
Pursuant to the terms of the Voting Trust Agreement, the shares
of Class A Common Stock listed above under `Security Ownership of
Management' as being beneficially owned by the Voting Trustees
were transferred to the Voting Trustees for deposit pursuant to
the Voting Trust Agreement, and the Voting Trustees issued trust
certificates (`Trust Certificates') in respect of such shares.
The Voting Trust Agreement provides that any Shareholder who
subsequently acquires any shares of Class A Common Stock of the
Company will deposit such shares with the Voting Trustees to be
held pursuant to the Voting Trust Agreement (any shares deposited
with the Voting Trustees pursuant to the Voting Trust Agreement
are referred to as `Subject Shares').
The Voting Trust Agreement provides that the Voting Trustees have
full right and power to vote all Subject Shares upon all matters
submitted to a vote or consent of shareholders of the Company and
that the Voting Trustees will vote all Subject Shares as a unit
in accordance with the determination of a majority of the Voting
Trustees, except that with respect to the Investment Agreement
Matters (as defined herein under `__ Monsanto Stockholders'
Agreement') or business combinations (as defined in the Monsanto
Stockholders' Agreement) involving the Company (`Company Business
Combinations'), the Voting Trustees will vote in accordance with
the instructions of holders of Trust Certificates or, if no
instructions are given, in accordance with the recommendation of
the Board of Directors of the Company.
All dividends or distributions upon the Subject Shares will be
paid by the Voting Trustees to the holders of Trust Certificates
ratably based on the number of Subject Shares reflected on the<PAGE>
Trust Certificates except that any dividend or distribution of
voting stock of the Company will be deposited pursuant to the
Voting Trust Agreement.
The Voting Trustees have no power to sell or otherwise dispose of
any Subject Shares, except that the Voting Trustees are required
to tender or exchange Subject Shares in accordance with the terms
of any tender or exchange offer if (i) the Voting Trustees are so
instructed by the holder of the Trust Certificate for such
Subject Shares and (ii) such tender or exchange offer, if
consumated, would result in the beneficial ownership by a group
or person of all of the shares of Class A and Class B Common
Stock and the Company has previously published its position or
recommendation with respect to such tender or exchange offer
pursuant to applicable rules under the Securities Exchange Act of
1934 (any such tender or exchange offer pursuant to applicable
rules under the Securities Exchange Act of 1934 (any such tender
or exchange offer described in this clause (ii) being referred to
as a `Qualifying Tender Offer').
The Voting Trust Agreement will terminate with repect to any
Subject Share on the earliest to occur of (i) the withdrawal of
such Subject Shares in accordance with the provisions of the
Roberts Family Shareholder Agreement, (ii) the written agreement
of all Voting Trustees and (iii) when the voting of such Subject
Share ceases to be vested in the Voting Trustees.
ROBERTS FAMILY SHAREHOLDER AGREEMENT<PAGE>
<PAGE>
The Roberts Family Shareholder Agreement provides that no
Shareholder will sell, withdraw from the Voting Trust Agreement
or otherwise dispose of any interest in Subject Shares, except as
provided in the Roberts Family Shareholder Agreement. Each
Shareholder has agreed not to sell, convey, transfer, assign or
otherwise dispose of (`transfer') any interest in any Class A
Common Stock or other voting common or voting preferred stock of
the Company, any option, warrant or other right to acquire Class
A Common Stock or such other voting stock (collectively, `Company
Voting Stock'), unless such Shareholder has withdrawn the Subject
Shares from the Voting Trust Agreement after compliance with the
procedures described in the following paragraph.
Any Shareholder desiring to withdraw Subject Shares from the
Voting Trust Agreement must give written notice to the other
Shareholders, each of whom will then have an option to purchase
his or her pro rata portion of such Subject Shares at a market
price based on a thirty day average of the daily closing prices
for the Class B Common Stock on the New York Stock Exchange (or,
if there is no such daily market price, an appraised value for
such Subject Shares). If such other Shareholders have not
elected to acquire all of such Subject Shares, then each
Shareholder who elected to acquire Subject Shares will have a
further option to purchase his or her pro rata portion of the
Subject Shares which such other Shareholders have not elected to
acquire. Any Subject Shares not acquired by such other
Shareholders after such further option may be withdrawn from the
Voting Trust Agreement and will no longer be subject to the
Roberts Family Shareholder Agreement.
The Roberts Family Shareholder Agreement provides that the
restrictions on transfer therein will not apply to certain
permitted transfers (`Permitted Transfers') specified therein,
including (i) certain pledges of Company Voting Stock, (ii) a
transfer of Company Voting Stock to other Shareholders or their
spouses, descendants or certain other trusts or other entities,
(iii) any exchange, conversion or transfer of Company Voting
Stock in connection with a Company Business Combination, other
than any agreement to transfer prior to the Company's execution
of an agreement with respect to such Company Business Combination
or (iv) any tender or exchange in accordance with the terms of a
Qualifying Tender Offer.
The Roberts Family Shareholder Agreement will terminate on
January 31, 2006.
MONSANTO SHAREHOLDERS' AGREEEMENT
The Monsanto Stockholders' Agreement was entered into in
connection with a series of agreemnts between the Company and
Monsanto described above under `Certain Transactions,' including
the Investment Agreement.<PAGE>
The Investment Agreement provides, among other things, that (i)
Monsanto was entitled to nominate one member to the Company's
Board of Directors (pursuant to such provision Robert T. Fraley
was appointed to the Board on April 16, 1996) and that Monsanto
could nominate for election at the Company's 1997 annual meeting
of stockholders, an additional member (pursuant to such provision
Wiliam M. Ziegler was elected) to the Company's Board (any such
nominee or nominees being referred to as `Monsanto Nominees'),
(ii) the By-Laws of the Company were amended to (a) state that
the primary business of the Company is the research-based
production, marketing, licensing and sale of agronomic seed,
including both technology related thereto and products derived
therefrom, (b) state that the use of voting securities by the
Company to facilitate strategic collaborations is in the
Company's best interests (but as to any one strategic
collaboration the maximum amount of voting securities of the
Company to be issued to any individual, entity or group will not
exceed 10% of the voting securities of the Company then
outstanding) and (c) prohibit the Company from acquiring any
business or assets outside of such primary business that would
constitute a substantial part (as defined in the Investment
Agreement) of the Company provided that such By-Law amendments
permit the Company to change its primary business, issue voting
securities to facilitate a strategic collaboration or acquire any
business outside of such primary business unless three of the
members of the Board vote against the resolution relating to such
change or transaction (such By-Law provisions described in this
clause (ii) being referred to as the `By-Law Provisions') and
(iii) while Monsanto beneficially owns either 5% of the Class A
Common Stock or 20% of the Class B Common Stock, if the Company
proposes to issue for cash (subject to specified limitations) any
shares of Common Stock, securities convertible into such shares
or options, warrants or rights to acquire such shares (`Equity'),
Monsanto will have the right to purchase all or any portion of
its pro rata share of such Equity on the terms set forth in the
Investment Agreement (the provisions described in this clause
(iii) being referred to as the `Equity Purchase Provisions' and
the provisions described in clauses (i), (ii) and (iii) being
referred to as the `Investment Agreement Matters').<PAGE>
<PAGE>
Pursuant to the Merger Agreement, the Comapny has agreed that the
By-Law Provisions will be eliminated in their entirety
immediately upon the acquisition of Shares in the Offer.
The Monsanto Stockholders' Agreement provides that each
Shareholder will use best efforts to attend each stockholder
meeting for purposes of establishing a quorum and will vote all
of its shares of any voting stock of the Company (`Voting Stock')
in favor of any Monsanto Nominee recommended by the Board of
Directors of the Company provided that such Monsanto Nominee is
reasonably satisfactory to the Company. In addition, the
Monsanto Stockholders' Agreement provides that each Shareholder
will not, without the consent of Monsanto initiate any action
what would result in the amendment of the By-Law Provisions and
that each Shareholder will vote its Voting Stock in favor of any
proposed amendment to the Company's certificate of incorporation
to increase the Comany's authorized capital stock, which
amendment is required in order for the Company to comply with the
Equity Purchase Provisions.
The Monsanto Stockholders' Agreement provides that except for
certain permitted transfers, no Shareholder may transfer any
interest in its Voting Stock except as provided by the Monsanto
Stockholders' Agreement, and that, with limited exceptions, no
Shareholder will convert any Class A Common Stock to Class B
Common Stock until such time as such Shareholder has entered into
a binding agreement to sell or convey such Class B Common Stock
to a third party.
If any Shareholder desires to transfer any interest in its Voting
Stock (other than certain permitted transfers) such Shareholder
will make a written offer to Monsanto (a `Shareholder Offer') to
purchase such Voting Stock and Monsanto will have the option to
purchase all but not less than all of such Voting Stock for the
price and upon the terms upon which such Shareholder proposes to
transfer such Voting Stock. If Monsanto rejects the Shareholder
Offer, Monsanto has the exclusive right for a period of time to
propose alternative terms for such purchase. If Monsanto does not
accept the Shareholder Offer and Monsanto and such Shareholder
have not otherwise reached an agreement regarding such purchase
within such time period, then such Shareholder may offer and sell
such Voting Stock to any person or entity on terms that are at
least as favorable to such Shareholder as those set forth in the
Shareholder Offer or those offered by Monsanto in any
counteroffer.
In the event of any involuntary transfer of any Voting Stock
(other than certain permitted transfers), Monsanto will have an
exclusive option to purchase all but not less than all of the
Voting Stock subject to the involuntary transfer in cash at a
purchase price (i) based on a thirty day average of the daily
closing prices for the Class B Common Stock on the New York Stock
Exchange or (ii) if the Voting Stock is not Class A Common Stock<PAGE>
or if the Class B Common Stock is not publicly traded, based on
the fair market value thereof determined by an investment banking
firm.
The Monsanto Stockholders' Agreement is effective until the
earlier of (i) the termination of the collaboration agreement
entered into between the Company and Monsanto (except if it is
terminated by reason of a material breach thereof by the Company
or by reason of a governmental decree caused by voluntary action
of the Company), (ii) Monsanto owning less than 5% of the
outstanding Class A Common Stock or less than 50% of the highest
percent of the outstanding Common Stock beneficially owned by
Monsanto after completion of any purchases in the market of Class
B Common Stock by Monsanto as permitted under the Investment
Agreement during the one year period after the March 8, 1996
closing under the Investment Agreement (the `Closing'), (iii) the
termination of the Investment Agreement or (iv) the eleventh
anniversary of the Closing or any subsequent anniversary of such
Closing upon notice by Monsanto or a majority in interest of the
Voting Stock by persons who are then Shareholders.
1998 STOCKHOLDERS AGREEMENT
Concurrently with the execution and delivery of the Merger
Agreement, and as a condition to Monsanto's willingness to enter
into the Merger Agreement, Monsanto and the Shareholders entered
into the 1998 Stockholders Agreement with the Voting Trustees,
individually and in his or her capacity as such Voting Trustee
under the Voting Trust Agreement, and the registered holders of
trust certificates, individually and in his or her capacity as
such registered holder (the `Registered Holders').<PAGE>
<PAGE>
Voting and Tender. Contemporaneously with the execution and
delivery of the 1998 Stockholders Agreement, each Registered
Holder provided certain written instructions to the Voting
Trustees (the `Voting and Tendering Instructions'). The Voting
and Tendering Instructions instruct the Voting Trustees, in
accordance with the provisions of the Voting Trust Agreement, to
take the following actions on behalf of the Registered Holders:
(a) at any duly noticed meeting of the stockholders of the
Company called to vote upon the Merger Agreement and the
transactions contemplated thereby or at any adjournment thereof
(or in any other circumstances under which a vote, consent or
approval with respect to the Merger Agreement and the
transactions contemplated thereby is sought), to vote all of the
2,671,650 Shares of Class A Common Stock held of record by the
Voting Trustees pursuant to the Voting Trust Agreement (the
`Voting Trust Shares') in favor of the approval and adoption of
the Merger Agreement and the transactions contemplated thereby;
(b) to be present (in person or by proxy) at any duly noticed
meeting of the stockholders of the Company or at any adjournment
thereof (or in any other circumstances under which vote, consent
to approval is sought) with respect to any Business Combination
(as such term is defined in the 1998 Stockholders Agreement)
other than the Merger and to vote (or cause to be voted) all of
the Voting Trust Shares against any such Business Combination;
and (c) to tender as soon as practicable (and in any event not
later than two business days prior to the first scheduled
expiration date of the Offer) all of the Voting Trust Shares
pursuant to the Offer and not to withdraw such tendered shares.
The Voting and Tendering Instructions are irrevocable.
Pursuant to the 1998 Stockholders Agreement, the Voting Trustees
and Registered Holders have agreed, among other things, that so
long as the 1998 Stockholders Agreement is in effect, the Voting
Trustees will cast such votes, consents or other approvals and
take or cause such actions in accordance with the Voting and
Tendering Instructions. In addition, pursuant to the 1998
Stockholders Agreement, the Voting Trustees have agreed not to
take any action inconsistent with the Voting and Tendering
Instructions, and each Registered Holder has agreed not to take
any action that would amend or nullify the Voting and Tendering
Instructions or in any way restrict or limit the performance of
such Registered Holder's obligations under the 1998 Stockholders
Agreement or the consummation of the transactions contemplated by
the Merger Agreement.
The 1998 Stockholders Agreement further provides for, among other
things, during the term of the 1998 Stockholders Agreement: (i)
restrictions on the transfer of any Voting Trust Shares or the
taking of certain actions with respect to such Voting Trust
Shares, other than pursuant to the Offer, the Merger or the 1998
Stockholders Agreement; (ii) the prompt deposit of Shares
acquired upon exercise of options held by certain of the
Registered Holders (the `Voting Trust Option Shares') into the<PAGE>
trust governed by the Voting Trust Agreement such that,
thereafter, the Voting Trust Option Shares shall be deemed Voting
Trust Shares for purposes of the 1998 Stockholders Agreement;
(iii) with respect to certain other agreements governing the
relationship among the Voting Trustees and the Registered Holders
(as such agreements are collectively defined in the 1998
Stockholders Agreement, the `Family Shareholder Agreements'),
further assurances by the Voting Trustees and the Registered
Holders to amend the Family Shareholder Agreements to the extent
necessary (and not to otherwise amend such Family Shareholder
Agreements) so that each Registered Holder and Voting Trustee can
fully perform its obligations under the 1998 Stockholders
Agreement; and (iv) the taking of certain actions by the Voting
Trustees and Registered Holders in order to effectuate the terms
of the 1998 Stockholders Agreement. The 1998 Stockholders
Agreement also provides, among other things, for the making of
certain representations by each of the Registered Holders, the
Voting Trustees and Monsanto.
Irrevocable Proxy. The Voting Trustees have also granted to
Monsanto an irrevocable proxy to vote the Voting Trust Shares in
favor of the adoption of the Merger Agreement and the
transactions contemplated thereby and against (i) actions or
proposals that could reasonably be expected to result in (x) any
material breach of the Merger Agreement or (y) any of the closing
conditions set forth in the Merger Agreement not being fulfilled,
(ii) any Business Combination (other than the Merger and the
transactions contemplated by the Merger Agreement) and (iii)
other extraordinary corporate transactions which would prevent or
delay the Merger or the transactions contemplated by the Merger
Agreement.
No Solicitation. The Voting Trustees and the Registered Holders
have agreed in the 1998 Stockholders Agreement not to (a)
solicit, initiate or knowingly encourage the submission of any
Takeover Proposal (as such term is defined in the 1998
Stockholders Agreement) or (b) participate in any discussions or
negotiations<PAGE>
<PAGE>
regarding, or furnish to any person information with respect to,
or take any action that could reasonably be expected to lead to,
any Takeover Proposal.
Termination. The 1998 Stockholders Agreement will terminate at
the effective time of the Merger. In addition, the 1998
Stockholders Agreement may be terminated: (a) by mutual written
consent of Monsanto and a majority of the Voting Trustees; (b) by
Monsanto if (i) the Merger Agreement has terminated in accordance
with its terms or (ii) in the event that (x) any of the
representations and warranties of the Voting Trustees or the
Registered Holders in the 1998 Stockholders Agreement shall not
be true and correct in all material respects or (y) any of the
Voting Trustees or the Registered Holders shall have failed to
perform in any material respect any material covenant to be
performed by any Voting Trustee or Registered Holder under the
1998 Stockholders Agreement and in the case of (x) or (y) such
untruth or incorrectness or such failure cannot be or has not
been cured within thirty days after notice thereof; or (c) by a
majority of the Voting Trustees, if none of the Voting Trustees
or Registered Holders are in violation of their respective
obligations under the 1998 Stockholders Agreement and (i)
Monsanto or the Purchaser shall not have completed payment for
all Shares tendered pursuant to the Offer and not withdrawn by
the Outside Date (as defined in the Merger Agreement) for the
Offer pursuant to the Merger Agreement, (ii) in the event that
(x) any of the representations and warranties of Monsanto in the
1998 Stockholders Agreement shall not be true and correct in all
material respects or (y) Monsanto shall have failed to perform in
any material respect any material covenant to be performed by it
under the 1998 Stockholders Agreement and in the case of (x) or
(y) such untruth or incorrectness or such failure cannot be or
has not been cured within thirty days after notice thereof, (iii)
subject to the compliance by the Company with its obligations
under the best efforts provisions of the Merger Agreement, any
Governmental Entity (as defined in the Merger Agreement) has
issued an order enjoining or prohibiting the Offer or the
consummation of the transactions contemplated by the 1998
Stockholders Agreement or the Merger Agreement and such order has
become final and nonappealable, and (iv) the Merger Agreement has
terminated in accordance with its terms.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) (1)
Financial<PAGE>
Statements
The following financial statements of
DEKALB Genetics Corporation are
included in Part II, Item 8:
Page
Report of Independent Public 17
Accountants
Consolidated Statements of Operations
for the years ended August 31, 1998, 18
1997 and 1996
Consolidated Balance Sheets at August 19
31, 1998 and 1997
Consolidated Statements of Cash Flows
for the years ended August 31, 1998, 20
1997 and 1996
Consolidated Statements of
Shareholders' Equity for the years 21
ended August 31, 1998, 1997 and 1996
Notes to Consolidated Financial 22-43
Statements
(a) (2)
Financial
Statement
Schedules
Schedule VIII - Valuation and 68
Qualifying Account<PAGE>
<PAGE>
PART IV
(a) (3) Page
Exhibits
2A Agreement and Plan of Merger dated as of *
May 8, 1998 among Monsanto, the
Purchaser and the Company [Incorporated
by reference to Exhibit 1 to the
Company's Schedule 14D-9 as filed with
the Commission on May 15, 1998 (the
`1998 Schedule 14D-9')]
2B Stockholders Agreement dated as of May *
8, 1998 between Monsanto and certain
stockholders of the Company.
[Incorporated by reference to Exhibit 2
to the 1998 Schedule 14D-9]
3A Restated Certificate of Incorporation of *
DEKALB Genetics Corporation
[Incorporated by reference to Exhibit 3A
to Form 10-K filed October 10, 1997
(File No. 0-17005)]
3B By-Laws of DEKALB Genetics Corporation *
[Attached as Exhibit B to Information
Statement contained in Form 8 Amendment
(Amendment No. 3) dated August 18, 1988,
amending Form 10 Registration Statement
of the Company dated June 17, 1988 (File
No. 0-17005)]
4A Form of Class A Common Stock Certificate *
[Incorporated by reference to Exhibit 4A
to Form 8 Amendment (Amendment No. 1)
dated August 3, 1988, amending Form 10
Registration Statement of the Company
dated June 17, 1988 (File No. 0-17005)]
4B Form of Class B Common Stock Certificate *
[Incorporated by reference to Exhibit 4B
to Form 8 Amendment (Amendment No. 1)
dated August 3, 1988, amending Form 10
Registration Statement of the Company
dated June 17, 1988 (File No. 0-17005)
4C Revolving Credit Agreement between
DEKALB Genetics Corporation and the *
banks listed therein. [Incorporated by
reference to Exhibit 4C to Form 10-K
filed October 10, 1997 (File No. 0-<PAGE>
17005)]
Other instruments with respect to long-
term debt of the Registrant are not
filed because the total amount of
securities authorized under each such
instrument does not exceed 10% of the
total assets of the Registrant and its
subsidiaries on a consolidated basis and
the Company agrees to provide a copy to
the Commission upon request.
10A DEKALB Genetics Corporation Long-Term *
Incentive Plan [Incorporated by
reference to Exhibit 4A to Form S-8
Registration Statement No. 33-24875]**
10B Form of Indemnification Agreements *
[Attached as Exhibit D to Information
Statement contained in Form 8 Amendment
(Amendment No. 3) Dated August 18, 1988,
amending Form 10 Registration Statement
of the Company dated June 17, 1988 (File
No. 0-17005)]**
10C DEKALB Genetics Corporation Savings and *
Investment Plan [Incorporated by
reference to Exhibit 4.3 to Form S-8
(File No. 33-33305) dated February 1,
1990]**<PAGE>
<PAGE>
(a) (3)
Exhibits Page
continued
10D DEKALB Genetics Corporation Pension *
Plan**
10E Form of Long-Term Incentive Plan *
Agreement [Incorporated by reference to
Exhibit 4B to Form S-8 Registration
Statement (Registration No. 33-24875)]**
10F Director Stock Option Plan *
[Incorporated by reference to Exhibit
4.3 to Form S-8 Registration Statement
(Registration No. 33-39986)]**
10G Employment Agreement between DEKALB *
Genetics Corporation and Bruce P.
Bickner dated September 1, 1994
[Incorporated by reference to Exhibit
10a to Form 10-Q filed April 12, 1995
(File No. 0-17005)]**
10H Employment Agreement between DEKALB *
Genetics Corporation and Richard O. Ryan
dated September 1, 1994 [Incorporated by
reference to exhibit 10B to Form 10-Q
filed April 12, 1995 (File No. 0-
17005)]**
10I Employment Agreement between DEKALB *
Genetics Corporation and John H. Witmer,
Jr. dated September 1, 1994
[Incorporated by reference to Exhibit
10C to Form 10-Q filed April 12, 1995
(File No. 0-17005)]**
10J Employment Agreement between DEKALB *
Genetics Corporation and Richard T.
Crowder dated October 26, 1994
[Incorporated by reference to Exhibit
10J to Form 10-K filed October 12, 1995
(File No. 0-17005)]**
10K Employment Agreement between DEKALB
Genetics Corporation and Catherine 69-
Mackey dated September 1, 1997 71
10L DEKALB Genetics Corporation Retiree *
Health Care Plan. [Incorporated by
reference to Exhibit 4 to the 1998<PAGE>
Schedule 14D-9]**
10M DEKALB Genetics Corporation Severance *
Pay Plan. [Incorporated by reference to
Exhibit 5 to the 1998 Schedule 14D-9]**
10N DEKALB Genetics Corporation Policy and *
Procedure Regarding Reimbursement of
Employees for Parachute Payment Taxes
and Expenses. [Incorporated by
reference to Exhibit 6 to the 1998
Schedule 14D-9]**
10O Fifth Amendment to the DEKALB Genetics *
Corporation Savings and Investment Plan.
[Incorporated by reference to Exhibit 7
to the 1998 Schedule 14D-9]**
10P Second Amendment to the DEKALB Genetics *
Corporation Deferred Compensation Plan.
[Incorporated by reference to Exhibit 8
to the 1998 Schedule 14D-9]**
10Q Second Amendment to the DEKALB Genetics *
Corporation Pension Plan. [Incorporated
by reference to Exhibit 9 to the 1998
Schedule 14D-9]**
10R Second Amendment to the DEKALB Genetics *
Executive Retirement Plan.
[Incorporated by reference to Exhibit 10
to the 1998 Schedule 14D-9]**<PAGE>
<PAGE>
(a) (3)
Exhibits Page
continued
11 Computation of Earnings Per Share 72
21 Subsidiaries of DEKALB Genetics 73
Corporation
23 Consent of Independent Public 74
Accountants - Arthur Andersen LLP
27 Financial Data Schedule
* Document has heretofore been filed with
the Commission and is incorporated by
reference.
** Document is a management contract or
compensating plan or arrangement.
(b) Reports on Form 8-K - No Form 8-K was
filed during the three months ended
August 31, 1998.<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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: November 30, 1998 By: Bruce P. Bickner
Bruce P. Bickner
Chairman, Chief
Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities on this 30th
day of November, 1998.
Signature Title
Richard O. Ryan President, Chief
Richard O. Ryan Operating Officer
and Director
Janis M. Felver Vice President and
Janis M. Felver Chief Accounting Officer
DIRECTORS
Charles J. Arntzen Allan Aves
Charles J. Arntzen Allan Aves
Robert T. Fraley Tod R. Hamachek
Robert T. Fraley Tod R. Hamachek
Paul H. Hatfield Virginia R. Holt
Paul H. Hatfield Virginia R. Holt
Douglas C. Roberts John T. Roberts
Douglas C. Roberts John T. Roberts
H. Blair White
H. Blair White William M. Ziegler
<PAGE>
<TABLE>
DEKALB Genetics Corporation
SCHEDULE VIII - VALUATION and QUALIFYING ACCOUNT
years ended August 31, 1998, 1997 and 1996
(Dollars in thousands)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
<S> <C> <C> <C> <C>
Balance at Charged to Charged to Balance
Beginning Costs and Other at
Description of Period Expenses Accounts Deductions End
Of
Period
Year ended August 31,
1998:
Deducted in the
balance sheet
from the assets to
which they
apply: $5,294 $ 2,550 $ 0 $ 546 (a) $ 7,298
Allowance for
doubtful accounts
and notes
receivable
Inventory reserve $18,878 $21,622 $ 0 $ 8,679 $31,821
Year ended August 31,
1997:
Deducted in the
balance sheet
from the assets to
which they
apply: $ 3,581 $ 2,761 $ 0 $ 1,048 (a) $ 5,294
Allowance for
doubtful accounts
and notes<PAGE>
receivable
Inventory reserve $13,915 $11,825 $ 0 $ 6,862 $18,878
Year ended August 31,
1996:
Deducted in the
balance sheet
from the assets to
which they
apply: $ 2,713 $ 1,233 $ 0 $ 365 $ 3,581
(a)
Allowance for
doubtful accounts
and notes
receivable
Inventory reserve $14,342 $7,379 $0 $7,806 $13,915<PAGE>
Notes:
(a) Uncollectible items written off, less recoveries of items
previously written off.<PAGE>
/TABLE
<PAGE>
<PAGE>
EXHIBIT 10K
Employment Agreement between DEKALB Genetics Corporation and
Catherine Mackey
1. This Agreement is effective September 1, 1997 and shall
remain in effect until August 31, 1998 unless extended as
provided in Paragraph 3.
2 Employee is Catherine J. Mackey. The Company is DEKALB
Genetics Corporation and its subsidiaries and affiliates.
3. Employee shall be employed by the Company until the
anniversary of the effective date of this Agreement and until
each subsequent anniversary of such effective date except
that either Employee or the Company may terminate such
employment as of any particular such anniversary by providing
the other party written notice thereof prior to such
anniversary.
4. Employee shall work for the Company in an executive capacity.
5. Employee shall perform the duties assigned by the Company
(`Duties') at such locations(s) as the Company reasonably
requires.
6. Employee shall devote full efforts during normal business
hours to Duties, and the Company shall receive all of the
benefits related to Duties.
7. Employee's annual compensation is described in Exhibit A. If
the Exhibit is not updated prior to an anniversary date, the
terms of the Exhibit shall continue until a new written
Exhibit is agreed to by the parties.
8. If Employee dies or becomes disabled and cannot perform
Employee's Duties with reasonable accommodation, Employee or
employee's estate shall receive an annual performance bonus
equal to the target annual performance bonus in effect at the
Employee's death or date of disability, prorated for the
portion of the year up to the date of such death or
disability.
9. The Company will pay Employee's travel and other business
expenses, consistent with company policies and as supported
by appropriate documentation.
10.Other than in the normal course of Duties with the Company,
Employee will not at any time, during or after employment by
the Company, disclose any non-public information relating to
the Company. Employee agrees to treat as confidential all
such information, whether written or otherwise, including but
not limited to, information regarding financial reports,<PAGE>
employees, customers, products, costs, prices, services,
research programs, patents, equipment, systems, production
procedures, operations, potential acquisitions, new location
plans, prospective and executed contracts and other business
arrangements.
11.Upon termination of employment, Employee will return to the
Company all assets and all books, records, lists and other
written materials, including information in computers or
computer disks, whether furnished by the Company or prepared
by the Employee, which contain any information relating to
the Company's business.
12.Employee shall make full and prompt written disclosure to the
Company of any business opportunity of which Employee becomes
aware and which relates to the business of the Company.
13.All inventions, discoveries, ideas, improvements and designs
made or conceived by Employee, and copyrights to all
software, writings or other materials prepared by Employee,
in each case solely or with others, while employed by the
Company, during or after working hours, which are related to
the actual or anticipated business of the Company, belong
exclusively to the Company. Employee shall make full and<PAGE>
<PAGE>
prompt written disclosure to the Company of the above. At
the request and expense of the Company, either before or
after termination of employment, Employee shall execute a
written assignment of and shall assist in acquiring and
maintaining patent or other proprietary information
protection of the Company's rights to such inventions, ideas,
improvements, designs or copyrights.
14.For three years after employment, Employee will not, in any
way or capacity, solicit any officer, director, employee or
other individual who is affiliated with the Company:
A. to leave employment or any position with the Company,
B. to compete with the business of the Company, or
C. to violate the terms of any agreement with the Company.
15.For 18 months following termination of Employee's employment
with Company for any reason whatsoever, Employee will not, in
any way or capacity, participate in or have any employment,
consultant, financial, management or other interest in any
business enterprise anywhere that engages in or plans to
engage in (either at the time of Employee's termination
and/or during the 18-month period following such termination)
significant or substantial competition with any business
conducted by the Company involving the producing,
distributing or marketing of hybrid or specialized
agricultural seeds or conducting or administering any
research activities relating to hybrid or specialized
agricultural seeds.
16.During the period set forth in paragraph 15, the Company
shall (except in the case of Employee's termination on
account of death or inability to perform Duties due to
disability) and without regard to other amounts payable under
this agreement pay Employee one-twelfth of Employee's annual
base salary and one-twelfth of employee's target annual
performance bonus (both at the rate in effect on Employee's
termination date) for every one month during the period set
forth in paragraph 15. The Company shall not, however, be
obligated to make such payments during any period of time
that Employee is in breach of paragraph 15 of this Agreement.
Notwithstanding the foregoing, in the event the Company
terminates the Employee without cause, the payments due each
month under this paragraph shall increase by fifty percent.
Paragraphs 15 and 16 of this Agreement shall remain in effect
throughout Employee's employment by the Company without
regard to whether this Agreement is otherwise terminated at
an earlier date.
17.Payments by the Company to Employee pursuant to paragraph 16
shall be in addition to the Company's severance policy under<PAGE>
change of control. Payments pursuant to paragraph 16 shall
not, however, be in lieu of any compensation due Employee for
Company's breach of this Agreement (e.g. the Company'
obligation to make salary and bonus payments in the event of
the Company's termination of Employee without cause during
the term of this Agreement or any annual extension thereof).
The Company agrees to be liable for, reimburse Employee for,
and advance Employee amounts for taxes required to be paid by
Employee under Section 4999 of the Internal Revenue Code of
1986, as amended, due to compensation, fringe benefits and
other remuneration provided by the Company to the Employee
(`Remuneration'), and any interest and penalties with respect
to such taxes (such taxes, interest and penalties, `Excise
Tax') and to provide the Employee with an additional payment
(a `Gross-Up Payment') in an amount such that after payment
by the Employee of all taxes (including any interest or
penalty imposed with respect to such taxes), including
without limitation any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Employee retains an
amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Remuneration. The Company agrees to pay all
such amounts pursuant to, and all other amounts with respect
thereto provided by and pursuant to, the terms of the
Company's policies and procedures in effect at the time of
the change of ownership or effective control of the Company
pursuant to which such Excise Tax may become payable.
18.Employee agrees that (a) both the duration and geographic
scope of paragraph 15 are necessary to reasonably and
adequately protect the Company's businesses, and (b) the
compensation provided in paragraph 16 will adequately
compensate Employee during transition to new employment or
other status.<PAGE>
<PAGE>
19.Employee will not begin employment with another employer
without first giving at least thirty days notice to the
Company. Prior to accepting any new employment, Employee
shall inform his new employer of the existence of this
Agreement and provide a copy hereof to such new employer.
20.Except as otherwise provided in this Agreement, Employee's
rights under any employee benefit plan shall not be affected
by this Agreement.
21.Employee has received a copy of both the DEKALB Antitrust
Compliance Policy and the DEKALB Business Conduct Standards.
Employee will adhere to the policies and principles contained
therein, and will require all employees reporting to Employee
to adhere to those policies and principles.
22.The Company shall have the right, at its own expense and for
its own benefit, to take out life insurance on Employee in
such amount or amounts as it shall see fit, and Employee
agrees to cooperate with the Company in obtaining such
insurance.
23.The Beneficiary Designation form attached hereto as Exhibit B
is a part of this Agreement. In the event of Employee's
death when no beneficiary designation is in effect, the
Company shall make payment of any amounts to which Employee
was entitled to Employee's personal representative, heirs,
devisees or legatees. Employee may change Exhibit B at any
time, by provided an amended version to the Personnel
Department.
24.Without limiting the rights of the Company to pursue all
other legal and equitable rights available to the Company, it
is agreed that: (a) the Duties performed by Employee are of
a special, unique, unusual and extraordinary character which
give them a peculiar value, and the loss of such performance
cannot be reasonably and adequately compensated in damages in
an action at law, and (b) remedies other than injunctive
relief cannot fully compensate the Company for violation of
Paragraphs 10 through 19, of this Agreement; accordingly, the
Company shall be entitled to injunctive relief to prevent
violations of such paragraphs or continuing violations
thereof. All of Employee's and Company's covenants in and
obligations under Paragraphs 10 through 19, this Agreement
shall continue in effect notwithstanding termination of
Employee's employment under any circumstances whatsoever.
25.If in any proceeding a term, geographic or other restriction,
covenant or promise contained herein is found to be
unreasonable, unlawful or otherwise invalid and for that
reason unenforceable, then such term, geographic or other
restriction, covenant or promise shall automatically be<PAGE>
deemed modified to the extent necessary to make it
enforceable.
26.This Agreement shall be binding upon the company, its
successors and assigns and upon Employee, Employee's heirs,
executors and administrators. This Agreement may be assigned
by the Company or transferred by operation of law. Employee
agrees that if the Company is sold or Employee is transferred
to a subsidiary or affiliate, or from one subsidiary or
affiliate to another, all terms and conditions of this
Agreement shall remain in force as if it initially had been
made with that purchaser, subsidiary or affiliate.
27.Notices contemplated by this Agreement shall be effective
when delivered in writing to the Company at 3100 Sycamore
Road, DeKalb, IL 60115, ATTN: General Counsel or to
Employee at 62 Maritime Drive, Mystic, CT or 14-1 Matson
Ridge, Old Lyme, CT 06371.
28.This Agreement, including Exhibits A, B and C as they may be
amended from time to time, all confidentiality agreements and
all invention assignment agreements signed by Employee during
any employment with the Company, contain the entire agreement
between the parties hereto with respect to the transactions
contemplated herein; together they supersede all prior
negotiations and other agreements, both oral and written,
between the parties and they cannot be modified except by an
instrument in writing signed by both parties.<PAGE>
<PAGE>
<TABLE>
CAPTION
<PAGE>
EXHIBIT 11
DEKALB Genetics Corporation
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
years ended August 31, 1998, 1997 and 1996
(Dollars in thousands except per share amounts)
<S> <C> <C> <C>
1998 1997 1996
BASIC EARNINGS PER SHARE:
Average shares 34,577,265 34,250,522 32,515,743
outstanding*
Net earnings for basic
earnings per share
computation $ 10,328 $ 28,781 $ 17,025
Basic earnings per share* $ 0.30 $ 0.84 $ 0.52
DILUTED EARNINGS PER SHARE:
Average shares 34,577,265 34,250,522 32,515,743
outstanding*
Net average additional
shares outstanding
assuming dilutive options
exercised
and proceeds used to
purchase treasury
stock at average market 1,787,502 1,493,528 1,037,906
price*
Average number of common
and common
equivalent shares 36,364,767 35,744,050 33,553,649
outstanding<PAGE>
Net earnings for diluted
earnings per share
computation $ 10,328 $ 28,781 $ 17,025
Diluted earnings per $ 0.28 $ 0.81 $ 0.51
share*<PAGE>
</TABLE>
*Earnings per share and all share amounts have been adjusted to
reflect the two-for-one split of the Common Stock to holders of
record July 25, 1997 and the three-for-one split of the Common
Stock to holders of record May 10, 1996.<PAGE>
<PAGE>
EXHIBIT 21
Subsidiaries of DEKALB Genetics Corporation
The following table sets forth principal subsidiaries of the
registrant and indicates as to each such subsidiary the state or
other jurisdiction under the laws of which it was organized and
the percentage of voting securities thereof owned by the
registrant.
Percentage of
Jurisdiction Voting
of Securities
Incorporation Owned by the
Registrant
DEKALB Swine Breeders, Inc. Delaware 100%
DEKALB Argentina S.A. Argentina 100%
DEKALB Canada Inc. Ontario 100%
DEKALB Italia S.p.A. Italy 100%
The foregoing list does not name certain subsidiaries of
subsidiaries and certain companies reported on the equity basis
as in the aggregate they are not considered significant.
No financial statements are filed for companies in which the
registrant recognizes equity in undistributed earnings because
all such companies in the aggregate are not considered
significant.<PAGE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated October 2, 1998, included in
this Form 10-K, into the DEKALB Genetics Corporation's previously
filed Registration Statement File Numbers 33-24875, 33-33305 and
33-39986.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 30, 1998
<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> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> AUG-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 76800
<ALLOWANCES> 7300
<INVENTORY> 184500
<CURRENT-ASSETS> 297300
<PP&E> 392100
<DEPRECIATION> 154300
<TOTAL-ASSETS> 590800
<CURRENT-LIABILITIES> 233100
<BONDS> 0
0
0
<COMMON> 3500
<OTHER-SE> 207900
<TOTAL-LIABILITY-AND-EQUITY> 590800
<SALES> 478300
<TOTAL-REVENUES> 502200
<CGS> 275200
<TOTAL-COSTS> 275200
<OTHER-EXPENSES> 202700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9500
<INCOME-PRETAX> 15200
<INCOME-TAX> 4900
<INCOME-CONTINUING> 10300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10300
<EPS-PRIMARY> .30
<EPS-DILUTED> .28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
DEKALB Genetics Corporation
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
years ended August 31, 1998, 1997 and 1996
(Dollars in thousands except per share amounts)
<S> <C> <C> <C>
1998 1997 1996
BASIC EARNINGS PER SHARE:
Average shares 34,577,265 34,250,522 32,515,743
outstanding*
Net earnings for basic
earnings per share
computation $ 10,328 $ 28,781 $ 17,025
Basic earnings per share* $ 0.30 $ 0.84 $ 0.52
DILUTED EARNINGS PER SHARE:
Average shares 34,577,265 34,250,522 32,515,743
outstanding*
Net average additional
shares outstanding
assuming dilutive options
exercised
and proceeds used to
purchase treasury
stock at average market 1,787,502 1,493,528 1,037,906
price*
Average number of common
and common<PAGE>
equivalent shares 36,364,767 35,744,050 33,553,649
outstanding
Net earnings for diluted
earnings per share
computation $ 10,328 $ 28,781 $ 17,025
Diluted earnings per $ 0.28 $ 0.81 $ 0.51
share*
</TABLE>
*Earnings per share and all share amounts have been adjusted to
reflect the two-for-one split of the Common Stock to holders of
record July 25, 1997 and the three-for-one split of the Common
Stock to holders of record May 10, 1996.<PAGE>
