SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended August 31, 1996
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 000-21788
DELTA AND PINE LAND COMPANY
(Exact name of registrant as specified in its charter)
Delaware 62-1040440
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
One Cotton Row, Scott, Mississippi 38772
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (601) 742-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.10 par value
(Title of Class)
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 the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Common Stock on October 31,
1996, as reported on the New York Stock Exchange, was approximately
$488,024,000. Shares of Common Stock held by each officer and director and by
each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
As of October 31, 1996, Registrant had outstanding 21,139,430 shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant incorporates by reference portions of the Delta and Pine Land Company
Proxy Statement for the annual meeting of Stockholders on February 27, 1997.
(Items 10, 11, 12 and 13 of Part III.)
<PAGE>
PART I
ITEM 1. BUSINESS
D&PL is primarily engaged in the breeding, production, conditioning and
marketing of proprietary varieties of cotton planting seed in the United States
and other cotton producing nations. D&PL also breeds, produces and distributes
soybean planting seed in the United States.
Since 1915, D&PL has bred, produced and/or marketed upland picker varieties
of cotton planting seed for cotton varieties that are grown primarily east of
Texas and in Arizona. The Company has used its extensive classical plant
breeding programs to develop a gene pool necessary for producing cotton
varieties with improved agronomic traits important to farmers, such as crop
yield, and to textile manufacturers, such as enhanced fiber characteristics.
In 1980, D&PL added soybean seed and in 1988 hybrid sorghum seed to its
product line. In 1988, D&PL also commenced distributing corn hybrids acquired
from others. In 1995, the Company sold its corn and sorghum business to Mycogen
Plant Science, Inc. ("Mycogen"). D&PL and Mycogen entered into a joint marketing
agreement whereby both companies will sell D&PL's remaining corn and sorghum
varieties through 1997. The two parties will exchange certain operating
facilities in the future upon the satisfactory completion of environmental site
assessments and remediation procedures as necessary.
In 1988, as a component of its long-term growth strategy, the Company began
to focus on the international marketing of its products, primarily cottonseed.
In foreign countries, cotton acreage is often planted with farmer-saved seed
which has not been delinted or treated and is of low overall quality. Management
believes that D&PL has an attractive opportunity to penetrate foreign markets
because of its widely adaptable, superior cotton varieties, technological
know-how in producing and conditioning high-quality seed and brand name
recognition. Furthermore, in many countries the Bollgard(TM) technology would be
effective and help farmers in those countries to control lepidopteran cotton
pests.
D&PL sells its products in foreign countries through (i) export sales, (ii)
direct in-country operations and to a lesser degree (iii) distributors or
licensees. The method varies and evolves, depending upon the Company's
assessment of the potential size and profitability of the market, governmental
policies, currency and credit risks, sophistication of the target country's
agricultural economy, and costs (as compared to risks) of commencing physical
operations in a particular country. To date, a majority of the Company's
international sales have resulted from exports of the Company's products rather
than direct in-country operations.
Acquisitions
In May, 1996, D&PL acquired Ellis Brothers Seed, Inc., Arizona Processing,
Inc. and Mississippi Seed, Inc. ( the "Sure Grow Companies") in exchange for
stock valued at approximately $70 million on the day of closing. D&PL exchanged
1.5 million unregistered shares of its common stock for all outstanding shares
of the three companies. The merger was accounted for as a pooling-of-interests.
The acquired companies will continue their current operations marketing of
upland picker cottonseed varieties under their existing brand, Sure Grow. The
Sure Grow breeding program will have immediate access to Monsanto Company's
("Monsanto") Bollgard and Roundup Ready(R) gene technologies.
In February, 1996, the Company acquired Hartz Cotton, Inc. from Monsanto,
which included inventories of cotton planting seed of Hartz upland picker
varieties, germplasm, breeding stocks, trademarks, trade names and other assets,
for approximately $6.0 million. The consideration consisted primarily of 450,000
shares of the Company's Series M Convertible Non-Voting Preferred Stock.
Since the 1940's, the Paymaster(Registered) and Lankart(Registered) upland
stripper cottonseed varieties have been developed for and marketed primarily in
the Texas High Plains. In 1994, D&PL acquired the Paymaster and Lankart cotton
planting seed business ("Paymaster"), for approximately $14.0 million. Although
the Paymaster varieties are planted on approximately 80% of the estimated 4.0 to
5.0 million cotton acres in the Texas High Plains, only a small portion of that
seed is actually sold by Paymaster. Farmer-saved seed and seed from other
sources accounted for up to 85% of the seed needed to plant the acreage in this
market area. Through 1996 the seed needed to plant the remaining acreage was
sold by Paymaster and its 12 sales associates through a certified seed program.
Under this program, Paymaster sold parent seed to its contract growers who
planted, produced and harvested the progeny of the parent seed, which Paymaster
then purchased from the growers. The progeny of the parent seed was then sold by
Paymaster to the sales associates who in turn delinted, conditioned, bagged and
sold it to others as certified seed. The sales associates paid a royalty to
Paymaster on certified seed sales. Beginning in fiscal 1997, unconditioned seed
will be supplied by Paymaster to contract delinters who will delint, condition
and bag the seed for a fee. The seed will then be sold by Paymaster through its
distributors and dealers.
The Company acquired in 1994 from the Supima Association of America
("Supima") certain planting seed inventory, the right to use the
Supima(Registered) trade name and trademark and the right to distribute Pima
extra-long (fiber-length) staple cotton varieties. D&PL also entered into a
research agreement with Supima's university collaborator that allows D&PL the
right of first refusal for any Pima varieties developed under this program which
D&PL partially funds. Pima seed will be produced, conditioned and marketed
directly by D&PL.
Biotechnology
The collaborative biotechnology licensing agreement executed with Monsanto
in 1992 and subsequently revised in 1993 and 1996, provides for the
commercialization of Monsanto's Bollgard ("Bacillus thuringiensis" or "Bt")
technology in D&PL's varieties. Bt is a bacterium found naturally in soil that
produces proteins toxic to certain lepidopteran larvae, the principal cotton
pests in many cotton growing areas. Monsanto created a transgenic cotton plant
by inserting Bt genes into cotton plant tissue. This transgenic plant tissue
causes the death of certain lepidopteran larvae that consume it. The gene and
related technology were patented or licensed from others by Monsanto and were
licensed to D&PL for use under the trade name Bollgard. In D&PL's primary
markets, the cost of insecticides is the largest single expenditure for many
cotton growers, exceeding the cost of seed. The insect resistant capabilities of
transgenic cotton containing the Bollgard gene may reduce the amount of
insecticide required to be applied by cotton growers using planting seed
containing the Bollgard gene. On October 31, 1995, Monsanto was notified that
the United States Environmental Protection Agency ("EPA") had completed its
registration of the Bollgard gene technology, thus clearing the way for
commercial sales of seed containing the Bollgard gene. In 1996, D&PL commenced
commercial sales of two NuCOTN varieties, which contained the Bollgard gene, in
accordance with the terms of the D&PL/Monsanto Bollgard Gene License and Seed
Services Agreement (the "Agreement"). This initial EPA registration expires on
January 1, 2001, at which time the EPA will reevaluate the effectiveness of the
insect resistance management plan and decide whether to convert the registration
to a non-expiring (and/or unconditional) registration.
D&PL is also developing transgenic cotton and transgenic soybean varieties
that are tolerant to Roundup(Registered) , a herbicide sold by Monsanto. In
1996, such Roundup Ready plants were approved by the Food and Drug
Administration, the USDA, and the EPA. In February, 1996, the Company and
Monsanto executed the Roundup Ready Gene License and Seed Services Agreement
which provides for the commercialization of Roundup Ready cottonseed. D&PL and
Monsanto are currently negotiating a commercialization agreement for Roundup
Ready soybean seed.
Since 1987, D&PL has conducted research using genes provided by DuPont to
develop cotton and soybean plants that are tolerant to certain DuPont ALS
(Registered) herbicides. Such plants would enable farmers to apply these
herbicides for weed control without significantly affecting the agronomics of
the cotton or soybean plants. Since soybean seed containing the ALS
herbicide-tolerant trait was not genetically engineered, sale of this seed does
not require government approval, although the herbicide to which they express
tolerance must be EPA approved. In February, 1996, DuPont and D&PL mutually
terminated the cotton commercialization agreement signed in 1994. The
termination of this agreement did not materially impact the Company's current
results of operations.
Commercial Seed
Seed of all commercial plant species is either varietal or hybrid. D&PL's
cotton and soybean seed are varietals and its sorghum and corn seed are hybrids.
Varietal plants can be reproduced from seed produced by a parent plant, with the
offspring exhibiting only minor genetic variations. The Plant Variety Protection
Act ("PVPA") of 1970, as amended in 1994, in essence prohibits, with limited
exceptions, purchasers of protected varieties from selling seed harvested from
these varieties. Some foreign countries provide similar protection.
Although cotton is a varietal and, therefore, can be grown from seed of
parent plants saved by the growers, most farmers in D&PL's primary domestic
markets purchase seed from commercial sources each season because cottonseed
requires delinting in order to be sown by modern planting equipment. Delinting
and conditioning may be done either by a seed company on its proprietary seed or
by independent delinters for farmers. Modern cotton farmers in upland picker
areas generally recognize the greater assurance of genetic purity, quality and
convenience that professionally grown and conditioned seed offers compared to
seed they might save.
In connection with its seed operations, the Company also farms
approximately 2,000 acres, primarily for production of cotton and soybean
foundation seed. The Company has annual agreements with various growers to
produce seed for cotton and soybeans. The growers plant seed purchased from the
Company and follow quality assurance procedures required for seed production. If
the grower adheres to established Company quality assurance standards throughout
the growing season and if the seed meets Company standards upon harvest, the
Company is obligated to purchase specified minimum quantities of seed, usually
in its first and second fiscal quarters, at prices equal to the commodity market
price of the seed plus a grower premium. The Company then conditions the seed
for sale.
The majority of the Company's sales are made early in the second fiscal
quarter through the beginning of the fourth fiscal quarter. Varying climatic
conditions can change the earnings pattern by affecting the quarter in which
seed is delivered, thereby shifting sales between quarters. Thus, seed
production, distribution and sales are seasonal and interim results will not
necessarily be indicative of the Company's results for a fiscal year.
Revenues from domestic seed sales are generally recognized when seed is
shipped. Revenues from Bollgard licensing fees are recognized based on the
number of acres estimated to be planted with such seed when the seed is shipped.
Domestically, the Company promotes its cottonseed directly to farmers and sells
cottonseed through distributors and dealers. All of the Company's domestic seed
products are subject to return or credit, which vary from year to year. The
annual level of returns and, ultimately, net sales are influenced by various
factors, principally commodity prices of other crops and weather conditions
occurring in the spring planting season during the Company's third and fourth
quarters. The Company provides for estimated returns as sales occur. To the
extent actual returns and actual acreage planted with seed containing the
Bollgard gene differ from estimates, adjustments to the Company's operating
results are recorded when such differences become known, typically in the
Company's fourth quarter. All significant returns occur or are accounted for by
fiscal year end. International revenues are recognized upon the date seed is
shipped or the date letters of credit are cleared, whichever is later.
Generally, international sales are not subject to return.
Outlook
Domestic demand for D&PL's seed will continue to be affected by government
programs and, most importantly, by weather. Demand for seed is also influenced
by commodity prices and the demand for a crop's end-uses such as textiles,
animal feed, food and raw materials for industrial use. These factors along with
weather influence the cost and availability of seed for subsequent seasons.
Weather impacts crop yields, commodity prices and the planting decisions that
farmers make regarding both original planting commitments and, when necessary,
replanting levels.
In addition, the planting seed market is highly competitive and D&PL
varieties face competition from a number of seed companies, diversified chemical
companies, agricultural biotechnology companies, governmental agencies and
academic and scientific institutions. A number of chemical and biotechnology
companies have seed production and/or distribution capabilities to ensure market
access for new seed products. The Company's seed products may encounter
substantial competition from technological advances by others or products from
new market entrants. Many of the Company's competitors are, or are affiliated
with, large diversified companies that have substantially greater resources than
the Company.
Further growth in overall profitability will depend on weather conditions,
government policies in all countries where the Company sells products, commodity
prices, the Company's ability to successfully open new international markets,
the Company's ability to successfully continue the development of the Texas High
Plains market, the technology partners' ability to obtain timely government
approval for additional biotechnology products on which they and the Company are
working and the Company's ability to produce sufficient commercial quantities of
high quality planting seed of these products. Any delay in or inability to
capitalize on these projects may affect future profitability. Due to the varying
levels of agricultural and social development of the international markets in
which the Company operates and because of factors within the particular
international markets targeted by the Company, international profitability and
growth may be less stable than domestic profitability and growth have been in
the past.
See "Risks and Uncertainties" in Item 7.
ITEM 2. PROPERTIES
D&PL maintains facilities primarily used for research, delinting,
conditioning, storage and distribution. The Company's headquarters and other
facilities are located on 45 acres in Scott, Mississippi. This location is used
for corporate offices, quality assurance, research and greenhouse space,
delinting, conditioning and storage.
The Company's other cottonseed delinting, conditioning and storage
facilities are in: Centre, Alabama; Chandler, Arizona; Eloy, Arizona;
Hollandale, Mississippi; Shelby, Mississippi; Tunica, Mississippi; Aiken, Texas
and Lubbock, Texas. The Company has soybean processing plants in Harrisburg,
Arkansas and Centre, Alabama. The Company also owns cottonseed delinting
facilities in Narromine, New South Wales, Australia, and Groblersdal, South
Africa. The Company leases a site in Catamarca, Argentina on which a delinting
plant is situated.
Since 1979, through annual leases, the Company has leased farmland for
research, foundation seed production and grain storage from a former
stockholder. In fiscal 1995, the Company entered into a three year lease with
this former stockholder for approximately 2,000 acres near Scott, Mississippi,
for foundation seed production and seed multiplication purposes and 250 acres
for research purposes.
The Company's plant breeders conduct research at eight facilities in the
United States, three of which are owned by the Company and five of which are
leased. The Company also leases research facilities in Australia and Paraguay.
All owned properties are free of encumbrances except the Centre, Alabama site,
which was mortgaged prior to being acquired in the Sure Grow transaction.
Management believes that all of D&PL's facilities, including its
conditioning, storage and research facilities, are well maintained and generally
adequate to meet its needs for the foreseeable future. (See "Liquidity and
Capital Resources" in Item 7.)
<PAGE>
PRINCIPAL COMPANY LOCATIONS, AFFILIATES AND SUBSIDIARIES:
World Headquarters Operations Facilities
Scott, Mississippi, USA Scott, Mississippi, USA
Hollandale, Mississippi, USA
Research Centers Shelby, Mississippi, USA
Scott, Mississippi, USA Tunica, Mississippi, USA
Leland, Mississippi, USA Centre, Alabama, USA
Casa Grande, Arizona, USA Chandler, Arizona, USA
Chandler, Arizona, USA Eloy, Arizona, USA
Stuttgart, Arkansas, USA Harrisburg, Arkansas, USA
Hartsville, South Carolina, USA Aiken, Texas, USA
Aiken, Texas, USA Lubbock, Texas, USA
Lubbock, Texas, USA Catamarca, Argentina
Goondiwindi, Queensland, Australia Narromine, New South Wales, Australia
Asuncion, Paraguay Groblersdal, South Africa
Foreign Offices
Catamarca, Argentina
Narrabri, New South Wales, Australia
Beijing, China
Mexicali, Mexico
Mexico City, Mexico
Zoetermeer, The Netherlands
Asuncion, Paraquay
Groblersdal, South Africa
Adana, Turkey
Ankara, Turkey
ITEM 3. LEGAL PROCEEDINGS
The Company, Monsanto and other third parties were named as defendants by
Joe A. Scamardo, et al. in a lawsuit filed in the District Court of Burleson
County, Texas on August 29, 1996. On August 30, 1996, Tony Lambardo, et al.
filed suit in the District Court of Falls County, Texas and named, among
multiple defendants, D&PL and Monsanto. On November 6, 1996, this case was
removed to the United States District Court for the Western District of Texas,
Waco Division. On October 28, 1996, REN-DEN Farms, Inc., et al. filed suit and
named D&PL and Monsanto among various other defendants in the District Court of
Natchitoches Parish, Louisiana. On November 7, 1996, this case was removed to
the United States District Court for the Western Division of Louisiana,
Alexandria Division. The latter two suits request certification as a class
action. The plaintiffs allege, among other things, that D&PL's NuCOTN varieties,
which contain Monsanto's Bollgard gene, did not perform as these farmers had
anticipated and, in particular, did not fully protect their cotton crops from
certain lepidopteran insects. The plaintiffs seek unspecified monetary damages,
among other things. Pursuant to the terms of the Agreement between D&PL and
Monsanto, Monsanto has assumed responsibility for the defense of these claims
since vendee claims for failure of the Bollgard gene are subject to a duty of
defense by Monsanto and prorata indemnification under the Agreement. Under the
applicable indemnity provisions, defense costs and any liability to the
plaintiffs related to claims covered by the Agreement will be apportioned 71% to
Monsanto and 29% to D&PL. Some of the claims made in this litigation concerning
the quality of seed and seed coat treatments, not involving failure of
performance of the Bollgard gene or representations with respect thereto, may
not be within the scope of Monsanto's indemnity obligation. The Company would be
required to bear any damages relating to product defects, if any, not involving
a failure of the Bollgard gene to provide insect resistance. D&PL intends to
cooperate with Monsanto in its anticipated vigorous defense of these claims.
D&PL believes that these claims will be resolved without any material impact on
the Company's financial statements.
On October 22, 1996, Mycogen and Agrigenetics, Inc. filed a lawsuit in the
U. S. District Court for the District of Delaware naming D&PL, Monsanto and
DeKalb Genetics as defendants alleging that two of Mycogen's recently issued
patents have been infringed by the defendants by selling seed that contains the
Bollgard gene. The plaintiffs seek a preliminary and permanent injunction
enjoining D&PL and Monsanto from what they allege is an infringement of
Mycogen's two patents, monetary damages including treble damages, plus
reasonable attorneys fees. Pursuant to the terms of the Agreement, Monsanto is
required to defend D&PL against patent infringement claims and indemnify D&PL
against damages from any patent infringement claims. D&PL believes that the
resolution of the matter will not have a material impact on the Company or its
financial statements.
A corporation owned by the son of the Company's former Guatemalan
distributor sued in 1989 asserting that the Company violated an agreement with
it by granting to another entity an exclusive license in certain areas of
Central America and southern Mexico. The suit seeks damages of 5,300,000
Guatemalan quetzales (approximately $900,000 at current exchange rates) and an
injunction preventing the Company from distributing seed through any other
licensee in that region. The Guatemalan court, where this action is proceeding,
has twice declined to approve the injunction sought. Management believes that
the resolution of the matter will not have a material impact on the Company or
its financial statements. The Company continues to offer seed for sale in
Guatemala.
The Company is involved in various other claims arising in the normal
course of business. Management believes such matters will be resolved without
any material effect on the Company's financial position or its results of
operations.
On July 18, 1996, the United States Department of Justice, Antitrust
Division ("USDOJ"), served a Civil Investigative Demand ("CID") on D&PL seeking
information and documents in connection with its investigation of the
acquisition by D&PL of the stock of Arizona Processing, Inc., Ellis Brothers
Seed, Inc. and Mississippi Seed, Inc. The CID states that the USDOJ is
investigating whether this transaction may have violated the provisions of
Section 7 of the Clayton Act, 15 USC Section 18. D&PL is currently engaged in
responding to the CID and is committed to full cooperation with the USDOJ. At
the present time, the ultimate outcome of the investigation cannot be predicted.
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 1996.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
From June, 1993 through December 15, 1995, the stock of the Company was traded
on the NASDAQ National Market under the trading symbol COTN. On December 18,
1995, the Company's stock began trading on the New York Stock Exchange under the
trading symbol DLP. The range of closing prices for these shares for the last
two fiscal years, as reported by the respective markets, was as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Common Stock Data* 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
- ------------------ ------- ------- ------- -------
Market Price Range-Low 14 7/8 19 1/8 31 29/32 23 3/4
- High 20 1/8 31 5/16 48 3/4 43 1/2
1995
Market Price Range-Low 7 15/16 8 1/4 9 7/8 12 1/4
- High 9 1/2 10 3/16 13 7/16 17 9/16
* All prices have been adjusted to reflect the stock splits described below.
</TABLE>
In October 1995, the Board of Directors authorized a 4 for 3 stock split
effected in the form of a dividend, with no change in the par value per share,
distributed on December 15, 1995, to the stockholders of record on December 1,
1995. In March 1996, the Board of Directors authorized a 3 for 2 stock split for
common and preferred shares outstanding to be effected in the form of a
dividend, with no change in par value per share, distributed on April 15, 1996,
to stockholders of record on March 29, 1996. Both stock splits have been
reflected in the accompanying financial statements.
Dividends of $0.08 per share (after effect of stock splits) were paid in
1995 and dividends of $0.11 per share were paid in 1996. In the third quarter of
fiscal 1996, the Board of Directors changed the quarterly dividend rate from
$0.02 (after effect of stock splits) per share to $0.03 per share. It is
anticipated that quarterly dividends of $0.03 per share will continue to be paid
in the future, although the Board of Directors reviews this policy quarterly.
Aggregate dividends paid in 1995 were $1.5 million. Aggregate dividends paid in
1996 were $2.3 million and should approximate $2.3 million in 1997.
On October 31, 1996, there were approximately 4,000 shareholders of the
Company's 21,139,430 outstanding shares.
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (In thousands, except percentages and per share amounts)
As Restated (1)
-----------------------------
YEAR ENDED AUGUST 31, 1992 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Results : (1)
Net sales and licensing fees $68,395 $77,605 $80,602 $98,950 $153,271
Gross profit 29,000 32,413 32,467 43,004 55,794
Operating income 13,771 15,618 13,000 19,160 25,764
Income before income taxes 12,458 13,767 12,186 17,661 23,729
Net income applicable to common shares 7,850 8,618 7,827 10,935 15,237
- -------------------------------------------------------------------------------------------------------------------
Balance Sheet Summary: (1)
Current assets $24,065 $23,979 $29,269 $36,296 $111,940
Current liabilities 20,194 17,634 18,833 24,695 75,966
Working capital 3,871 6,345 10,436 11,601 35,974
Property, plant and equipment, net 19,297 22,040 33,395 41,091 55,058
Total assets 45,561 50,958 72,394 87,542 179,660
Long-term debt 13,750 1,104 14,047 12,814 31,465
Stockholders' equity 11,172 31,593 38,024 47,860 69,341
- -------------------------------------------------------------------------------------------------------------------
Per Share Data: (1)
Operating income $0.72 $0.80 $0.62 $0.91 $1.19
Net income 0.41 0.44 0.38 0.52 0.70
Book value 0.58 1.63 1.82 2.27 3.19
Cash dividends - - 0.08 0.08 0.11
Weighted average number of shares
used in per share calculations - Primary (2) 19,149 19,405 20,849 21,116 21,708
- -------------------------------------------------------------------------------------------------------------------
Performance Ratios:
Gross margin (3) 42.4% 44.1% 40.3% 43.5% 36.4%
Return on average equity 57.6% 40.3% 23.7% 25.5% 26.1%
Return on total assets 17.2% 16.9% 10.8% 12.5% 8.5%
- -------------------------------------------------------------------------------------------------------------------
Other Data:
USDA acreage set-aside (4):
Upland cotton 10.0% 7.5% 11.0% 0% -
Corn 5.0% 10.0% 0% 7.5% -
Sorghum 5.0% 5.0% 0% 0% -
- -------------------------------------------------------------------------------------------------------------------
(1) Operating results, balance sheet and per share amounts for 1993, 1994 and
1995 have been restated to include the merger of the Sure Grow Companies,
accounted for as a pooling-of-interests. Amounts for 1992 have not been
restated due to the immaterial effect on the results.
(2) Weighted average number of shares data adjusted to reflect 4 for 3 and
3 for 2 stock splits and the issuance of 1,548,483 shares related to the
Sure Grow acquisition.
(3) The decline in gross margin in 1996 is the result of the method used
to account for Bollgard licensing fees licensed for the first time in
1996.
(4) As a result of The Federal Agricultural Improvement and Reform Act of
1996 ("Freedom to Farm Bill"), there are no longer crop set-asides.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Due to the successful introduction of the Company's NuCOTN varieties that
contain Monsanto's Bollgard technology, the Company reported record sales and
earnings per share despite the fact that domestic unit sales of cottonseed
declined 14.5% while acreage planted in cotton in the U.S. declined 16.4% from
1995 levels. International sales of cottonseed and domestic soybean unit sales
increased 55% and 35%, respectively. D&PL completed the formation and staffing
of the Technical Services Department which now has over 30 full time employees
compared to 13 just a year ago. D&PL also completed the acquisition of Hartz
Cotton, Inc. from Monsanto in February, 1996, and completed a merger on May 20,
1996 (in a stock exchange) valued at $70 million for the three companies that
own Sure Grow Seed, Inc., known collectively as "Sure Grow". In the Hartz
transaction (accounted for as a purchase), D&PL issued 450,000 shares of
convertible (after seven years unless certain events occur) Series M Preferred
Stock. D&PL issued 1.5 million shares of common stock to the shareholders of the
three companies that owned Sure Grow Seed, Inc., in a pooling-of-interests
transaction.
In October, 1995, the EPA completed its initial registration of the
Bollgard technology which is subject to expire on January 1, 2001, pending the
EPA's reevaluation of the insect resistance management plan. Both Monsanto and
D&PL are working with additional genes as part of the resistance management
strategy. The Company is also bulking up other transgenic varieties that are
insect resistant and herbicide tolerant.
In addition, the Company began the reorganization of its business among its
key operating units including Deltapine, Paymaster (which includes the stripper
varieties acquired in 1994 and the Hartz varieties acquired in 1996), Sure Grow
and International. Effective September 1, 1996, each unit will be responsible
for its own Sales, Marketing, Research and Field Agronomy while Operations,
Quality Assurance, Administration and Finance, Technical Services and Transgenic
Product Development will provide services to all operating units. In December
1995, in response to shareholder interest and to increase the Company's
visibility and attractiveness to a more diverse population of investors, D&PL
moved from NASDAQ and listed its shares on the New York Stock Exchange.
D&PL continued the implementation of its long-term international strategic
plans as well. In 1996, D&PL completed the construction of two smaller, yet cost
efficient delinting plants, one each in South Africa and Argentina which
initially will be used to provide winter nursery services to northern hemisphere
operations in order to accelerate the bulk up and ultimately the introduction of
new products by taking advantage of the southern hemisphere growing season. In
addition, these branches will evaluate and develop the cottonseed business in
their respective areas.
In 1996, D&PL terminated its agreement with its former distributor in
Australia and assembled its own fully staffed Sales and Marketing and Technical
Services teams. D&PL employees, for the first time, sold Deltapine varieties in
Australia for the 1996-1997 growing season, rather than relying on its
distributor. Subsequent to year end, the Company sold limited quantities of seed
containing Monsanto's Bt gene (marketed as Ingard(TM)) in Australia. Operating
results in Australia remain at unacceptable levels, and the organizational
changes will add further costs to that operation in the near term. Deltapine
Australia cotton varieties currently under development, along with two new
varieties recently introduced, must perform well to capture market share to
improve operating results.
D&M International, LLC, is a venture formed in 1995 through which D&PL and
Monsanto plan to introduce in combination D&PL's acid delinting technology and
Monsanto's Bollgard gene technology. D&PL is the managing member of D&M
International. In November 1996, D&M International's subsidiary, D&PL China Pte
Ltd. concluded negotiations for a joint venture with parties in Hebei Province,
one of the major cotton producing regions in the People's Republic of China. The
joint venture will be controlled by D&PL China Pte Ltd. The Company is currently
negotiating with potential venture partners in Zimbabwe, Brazil and Columbia and
is in exploratory discussions with potential partners in India, Uzbekistan and
Argentina. Prior joint venture negotiations in Turkey and Egypt reached an
impasse and have ceased.
Export sales to Mexico and Greece increased significantly again in 1996
over prior year levels. The Company is working closely with Monsanto developing
plans to export seed containing the Bollgard gene to several countries. The
International Division has strengthened by adding international brand managers
and technical service personnel to effectively develop the international markets
that have potential for both transgenic and non-transgenic seed.
Over a year ago the Company started a major capital improvement program to
more efficiently and effectively process and handle the Company's products. That
program is nearing completion and additional projects (expected to cost $13.0 to
$15.0 million in 1997) are underway. The major projects that will be completed
in fiscal 1997 include a new international and administrative office building at
the Company headquarters in Scott, Mississippi, the purchase and implementation
of a fully integrated process manufacturing system that will process data for
all functional areas of the Company, a major computer hardware upgrade,
automated packaging equipment at one location, as well as precision electronic
treating equipment at three of the delinting plants. In 1998, spending is
expected to return to about $5.0 to $7.0 million per year, exclusive of offshore
investments which will be financed in part by D&PL's technology and joint
venture partners where feasible.
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth selected income statement data of the Company
(1994 and 1995 restated for the Sure Grow merger), expressed as a percentage of
net sales, for the indicated periods:
<TABLE>
As Restated
YEAR ENDED AUGUST 31, 1994 1995 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated statement of income data:
Net sales and licensing fees 100.0% 100.0% 100.0%
Cost of sales 59.7% 56.5% 63.6%
- ---------------------------------------------------------------------------------------------------
Gross margin (1) 40.3% 43.5% 36.4%
- ---------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 6.8% 6.7% 6.4%
Selling 7.2% 7.7% 6.2%
General and administrative 10.2% 9.7% 6.1%
Unusual charges related to acquisitions - - 0.9%
- ---------------------------------------------------------------------------------------------------
24.2% 24.1% 19.6%
- ---------------------------------------------------------------------------------------------------
Operating income 16.1% 19.4% 16.8%
Interest, net (1.7%) (2.1%) (1.5%)
Other 0.7% 0.5% 0.2%
- ---------------------------------------------------------------------------------------------------
Income before income taxes 15.1% 17.8% 15.5%
Provision for income taxes (5.4%) (6.8%) (5.5%)
- ---------------------------------------------------------------------------------------------------
Net income 9.7% 11.0% 10.0 %
Dividends on preferred stock - - 0.02 %
- ---------------------------------------------------------------------------------------------------
Net income applicable to common shares 9.7% 11.0% 9.98 %
- ---------------------------------------------------------------------------------------------------
(1) The decline in gross margin results primarily from the method used
to account for Bollgard licensing fees licensed for the first time in
1996.
</TABLE>
NET SALES AND LICENSING FEES
In 1996, D&PL's consolidated net sales and licensing fees increased 55.0%
to $153.3 million, from 1995 sales of $98.9 million. This increase is primarily
the result of Bollgard licensing fees received from the first year of commercial
sales of NuCOTN. There was also an increase in soybean sales of 35% and an
increase in commercialization fees of $3.4 million in 1996 over the $1.2 million
received in 1995. The effects of these positive developments were partially
offset by a 14.5% decrease in domestic cottonseed unit sales resulting from a
16.4% reduction in the number of cotton acres planted to 14.0 million from 16.7
million. In 1996, the dynamics of the Freedom to Farm Bill coupled with higher
corn prices contributed to the decline in cotton acreage.
International sales increased to $12.6 million in 1996 from $7.1 million in
1995. Sales in Mexico, in 1996, increased $1.8 million as a result of the
Mexican government's favorable agricultural policy toward cotton, and the growth
of its textile industry as a result of the North American Free Trade Agreement.
In 1996, sales in Greece increased $1.9 million due to the continued success of
D&PL's cotton varieties in the northern growing areas of that country. Sales in
Turkey were essentially unchanged from 1995 levels.
D&PL's consolidated net sales and licensing fees increased 22.8% to $98.9
million in 1995, from 1994 net sales of $80.6 million. The increase is the
result of higher demand for cottonseed, the effect of which was partially offset
by the decrease in corn and sorghum sales due to a shift in acreage to cotton.
The increase in cottonseed units sold was due primarily to the USDA decrease in
1995 cotton acreage set aside to 0% from 11% the previous year, and to strong
market prices for cotton fiber, both of which resulted in an increase in planted
acreage to 16.7 million from 13.6 million. Cotton revenues also increased in
1995 due to higher commercialization fees related to herbicide tolerant cotton
and licensing fees earned from contract growers who produced seed of the NuCOTN
varieties. Soybean sales declined $1.0 million due to lower average selling
prices while the number of units sold was unchanged.
International sales increased to $7.1 million in 1995 from $2.9 million in
1994. Sales in Mexico and Greece increased in 1995, while sales in Australia and
Turkey were essentially unchanged from 1994 levels.
D&PL consolidated net sales and licensing fees increased 3.8% to $80.6
million in 1994 from $77.6 million in 1993. The increase in sales is primarily
the result of increased cottonseed sales and royalties. Although the USDA
increased the 1994 cotton acreage set aside to 11.0% from 7.5% the previous
year, due to strong market prices for cotton, the USDA statistics indicated an
increase in total cotton acres planted.
GROSS PROFIT
D&PL's consolidated gross profit increased 29.8% in 1996 to $55.8 million
from $43.0 million in 1995. This increase is primarily attributable to NuCOTN
sales and the related Bollgard licensing fees. Gross margin decreased to 36.4%
in 1996 from 43.5% in 1995. The decline in gross margin (expressed as a
percentage of sales) results from recording the Bollgard licensing fees charged
to the grower as a component of sales, net of estimated distributor and dealer
commissions, coupled with recording the 71% due to D&PL's technology partner as
a component of cost of sales with the residual 29% included as gross profit.
D&PL's consolidated gross profit increased 32.4% in 1995 to $43.0 million
from $32.5 million in 1994. Gross margin increased to 43.5% in 1995 from 40.3%
in 1994. The higher gross margin resulted from higher levels of cottonseed sales
and fewer sales of other crops which resulted from the shift in acreage to
cotton. In addition, due to higher volumes processed, the cost of goods
manufactured in 1995 decreased by 5.0% from 1994.
D&PL's consolidated gross profit remained flat at $32.5 million in 1994
from $32.4 million in 1993. Gross margin decreased to 40.3% in 1994 from 41.8%
in 1993, as a result of higher bulk seed and seed treatment costs, the effect of
which was partially offset by a 6.5% selling price increase.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased 47.7% to $9.8 million in 1996
from $6.6 million in 1995. The increase in research and development costs was
primarily the result of the addition of the Hartz research program, added
Technical Service Department costs and additional transgenic costs with the
balance attributable primarily to international activities.
In 1995, research and development expenses increased 20.7% to $6.6 million
from $5.5 million in 1994. The initial expansion of the Technical Services
Department, the addition of cotton research programs for Paymaster and Pima
varieties, and the increased emphasis on international research activities in
Paraguay and Australia all contributed to the overall increase in research
expense. These increased research costs were partially offset by the savings
recognized through the termination of the hybrid cotton research and sorghum
research programs and the closure of the San Joaquin cotton research facility.
Research and development expenses increased 19.6% in 1994 to $5.5 million
from $4.6 million in 1993. In 1994, the Company formed a Transgenic Product
Development Team which became responsible for all transgenic planting seed
development, including NuCOTN varieties and herbicide-tolerant products.
Further, the Company strengthened its Technical Service Department which gathers
research data on all of its crops to be used to provide farmers agronomic data.
SELLING EXPENSES
Selling expenses increased 24.0% to $9.4 million in 1996 from $7.6 million
in 1995. The increase was primarily due to the addition of a telemarketing
department and development and maintenance of a farmer database, the formation
and/or expansion of sales and marketing departments in Australia and at
Paymaster and in the international division.
In 1995, selling expenses increased 30.8% to $7.6 million as compared to
$5.8 million in 1994. This increase was primarily due to the implementation of a
new sales incentive program.
Selling expenses for 1994 increased slightly to $5.8 million from $5.7
million in 1993. In 1994, the Company maintained an aggressive marketing program
while holding costs relatively flat.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for 1996 decreased by 2.0% to $9.4
million as compared to $9.6 million in 1995.
General and administrative expenses for 1995 increased 17.8% to $9.6
million as compared to $8.1 million in 1994. This expected increase was caused
by increased international business development activities, higher depreciation
expense, the reorganization of the Paymaster business and higher insurance
costs.
General and administrative expenses for 1994 were $8.1 million, a 19.1%
increase over 1993 expenses of $6.8 million. The increased costs are primarily
related to the costs of being a publicly-traded company, travel and professional
fees incurred to develop international and domestic markets and additional
administrative costs related to Australia, Mexico and Turkey.
UNUSUAL CHARGES RELATED TO ACQUISITIONS
In connection with the merger with the Sure Grow Companies and the
acquisition of Hartz Cotton, Inc., the Company recorded one-time charges of
approximately $1.4 million during fiscal 1996 for transaction costs. These costs
primarily include expenses for professional fees related to the acquisitions as
well as legal costs incurred in connection with the U. S. Department of
Justice's review of the Sure Grow transaction and are presented as "Unusual
Charges Related to Acquisitions" on the accompanying Consolidated Statements of
Income.
INTEREST EXPENSE
Interest expense increased 20.0% to $2.4 million in 1996 from $2.0 million
in 1995 due primarily to higher average outstanding borrowings. In 1995 interest
expense increased 42.9% to $2.0 million compared to $1.4 million in 1994. This
increase was due primarily to higher average outstanding borrowings and higher
interest rates. Interest expense decreased 33.3% to $1.4 million in 1994 from
$2.1 million in 1993. The 1994 decrease resulted from lower average outstanding
borrowings throughout the year until May, when D&PL acquired Paymaster,
partially offset by slightly higher interest rates experienced in the latter
portion of the year.
OTHER
In 1996, other income was comprised primarily of gains on sales of fixed
assets and accounts payable discounts received for early payments. In 1995, the
Company established additional reserves of approximately $2.7 million for its
remaining corn and sorghum inventories. Also, the Company sold certain corn and
sorghum assets and recognized a gain of approximately $1.6 million. In addition,
the Company received an insurance settlement of approximately $1.1 million
associated with an ice storm in 1994.
NET INCOME AND EARNINGS PER SHARE
Net income applicable to common shares increased by 39.4% in 1996 to $15.2
million from $10.9 million in 1995, and increased by 94.9% from 1994 net income
of $7.8 million. Primary earnings per share were $0.70, $0.52, and $0.38 in
1996, 1995 and 1994, respectively. The number of shares deemed outstanding for
those periods increased because of additional shares issued as a result of stock
options exercised pursuant to the 1993 Stock Option Plan and additional options
granted pursuant to the 1995 Long-Term Incentive Plan.
LIQUIDITY AND CAPITAL RESOURCES
The seasonal nature of the Company's business significantly impacts cash
flow and working capital requirements. The Company maintains credit facilities,
uses early payments by customers and uses cash from operations to fund working
capital needs. For more than 15 years D&PL has borrowed on a short-term basis to
meet seasonal working capital needs.
D&PL purchases seed from contract growers in its first and second fiscal
quarters. Seed conditioning, treating and packaging commence late in the first
fiscal quarter and continue through the third fiscal quarter. Seasonal
borrowings normally commence in the first fiscal quarter and peak in the third
fiscal quarter. Loan repayments normally begin in the middle of the third fiscal
quarter and are typically completed early in the fourth fiscal quarter. D&PL
also offers distributors, dealers and farmers financial incentives to make early
payments. In fiscal 1996, D&PL received approximately $6.5 million in early
payments. To the extent D&PL attracts early payments from customers, bank
borrowings under the credit facility are reduced.
In November 1995, the Company and a financial institution entered into a
new loan agreement that replaced the existing facility. The new agreement (as
did the agreement it replaced) provided a base commitment of $15.0 million and a
seasonal commitment of $35.0 million. In March 1996, the bank approved an
additional seasonal facility of $15.0 million. In June 1996, the base commitment
was increased to $30.0 million and the seasonal commitment was reduced to $20.0
million to accommodate the anticipated changes in borrowings related to the
acquisition of Sure Grow. No changes were made to the additional seasonal
facility. The base commitment is a long-term loan that may be borrowed upon at
any time and is due January 1, 1999. Both the seasonal commitment and the
additional seasonal commitment are working capital loans that may be drawn upon
from September 1 through June 30 of each fiscal year and expire January 1, 1999.
Commencing in January 1997 and in each January thereafter, the facilities are
renewable for another three year term. Each commitment offers variable and fixed
interest rate options and requires the Company to pay facility and/or commitment
fees and to comply with certain financial covenants. See Note 4 of the Notes to
Consolidated Financial Statements.
Capital expenditures were $16.0 million, $10.7 million and $3.7 million in
fiscal 1996, 1995 and 1994, respectively. The 1996 and 1994 expenditures exclude
acquisitions which aggregated $2.2 million and $14.3 million, respectively. The
increases were the result of the Company continuing to facilitate growth in its
traditional and transgenic seed products. This investment strategy included the
commencement in 1995 of a special $13.0 million upgrade of D&PL's bulk seed
stabilization, storage, handling and processing facilities at three of its
cottonseed plants. In addition, a cottonseed processing plant acquired in the
Paymaster acquisition has been technologically upgraded. Further projects are
planned for 1997 including a new fully integrated computer system, a new
international and administrative office building and further expansion of
facilities in Australia and South Africa. Management believes that capital
expenditures will approximate $13.0 to $15.0 million in 1997, excluding expected
capital expenditures for foreign joint ventures which will be funded by cash
from operations, borrowings or investments from joint venture partners, as
necessary.
Cash provided from operations, early payments from customers and borrowings
under the loan agreement should be sufficient to meet the Company's 1997 working
capital needs.
RISKS AND UNCERTAINTIES
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
products, technical developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include the following:
Domestic demand for D&PL's seed will continue to be affected by programs of
various governments, by U.S. government export enhancement programs and,
most importantly, by weather. Demand for seed is also influenced by
commodity prices and the demand for a crop's end-uses such as textiles,
animal feed, food and raw materials for industrial use. These factors,
along with weather, influence the cost and availability of seed for
subsequent seasons. Weather impacts crop yields, commodity prices and the
planting decisions that farmers make regarding both original planting
commitments and, when necessary, replanting levels.
Further growth in profitability will depend on weather conditions,
government policies in all countries where the Company sells products,
commodity prices, the Company's ability to successfully open new
international markets, the Company's ability to successfully develop the
Texas High Plains market, D&PL's technology partners' ability to obtain
timely government approval for additional biotechnology products on which
they and the Company are working and the Company's ability to produce
sufficient commercial quantities of high quality planting seed of these
products. Any delay in or inability to capitalize on these projects may
affect future profitability. Due to the varying levels of agricultural and
social development of the international markets in which D&PL operates and
because of factors within the particular international markets targeted by
the Company, international profitability and growth may take longer and be
less stable than domestic profitability has been in the past.
<PAGE>
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
Financial Statements Page(s)
The following consolidated financial statements of Delta and Pine Land Company
and subsidiaries are submitted in response to Part II, Item 8:
Report of Independent Public Accountants......................................20
Consolidated Statements of Income - for each of the three years in the
period ended August 31, 1996.................................................21
Consolidated Balance Sheets - August 31, 1995 and 1996........................22
Consolidated Statements of Cash Flows - for each of the three years in the
period ended August 31, 1996.................................................23
Consolidated Statements of Stockholders' Equity - for each of the three years
in the period ended August 31, 1996........................................ .24
Notes to Consolidated Financial Statements....................................25
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO DELTA AND PINE LAND COMPANY:
We have audited the accompanying consolidated balance sheets of DELTA AND
PINE LAND COMPANY (a Delaware corporation) and subsidiaries as of August 31,
1995 and 1996, and the related consolidated statements of income, cash flows and
stockholders' equity for each of the three years in the period ended August 31,
1996. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Delta and Pine Land Company
and subsidiaries as of August 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
August 31, 1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Memphis, Tennessee,
October 11, 1996
<PAGE>
MANAGEMENT'S REPORT:
The Company is responsible for preparing the financial statements and
related information appearing in this report. Management believes that the
financial statements present fairly the Company's financial position, its
results of operations and its cash flows in conformity with generally accepted
accounting principles. In preparing its financial statements, the Company is
required to include amounts based on estimates and judgments that it believes
are reasonable under the circumstances.
The Company maintains accounting and other systems designed to provide
reasonable assurance that financial records are reliable for purposes of
preparing financial statements and that assets are properly accounted for and
safeguarded. Compliance with these systems and controls is reviewed by executive
management and the accounting staff. Limitations exist in any internal control
system, recognizing that the system's cost should not exceed the benefits
derived.
The Board of Directors pursues its responsibility for the Company's
financial statements through its Audit Committee, which is composed solely of
directors who are not Company officers or employees. The Audit Committee meets
from time-to-time with the independent public accountants and management. The
independent public accountants have direct access to the Audit Committee, with
and without the presence of management representatives.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
- -------------------------------------------------------------------------------------------------------------------
As Restated
----------------------
FOR THE YEARS ENDED AUGUST 31, 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES AND LICENSING FEES $80,602 $98,950 $153,271
COST OF SALES 48,135 55,946 97,477
- -------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 32,467 43,004 55,794
- -------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Research and development 5,496 6,631 9,794
Selling 5,819 7,611 9,435
General and administrative 8,152 9,602 9,383
Unusual charges related to acquisitions - - 1,418
- -------------------------------------------------------------------------------------------------------------------
19,467 23,844 30,030
- -------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 13,000 19,160 25,764
INTEREST EXPENSE, net (1,366) (2,038) (2,418)
OTHER 552 539 383
- -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 12,186 17,661 23,729
PROVISION FOR INCOME TAXES (4,359) (6,726) (8,453)
- -------------------------------------------------------------------------------------------------------------------
NET INCOME 7,827 10,935 15,276
DIVIDENDS ON PREFERRED STOCK - - (39)
- -------------------------------------------------------------------------------------------------------------------
NET INCOME APPLICABLE TO COMMON SHARES $7,827 $10,935 $15,237
- -------------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE - PRIMARY $ 0.38 $ 0.52 $ 0.70
- -------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN PER SHARE CALCULATIONS - PRIMARY 20,849 21,116 21,708
- -------------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE - FULLY DILUTED $ 0.38 $ 0.52 $ 0.69
- -------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN PER SHARE CALCULATIONS - FULLY DILUTED 20,849 21,144 22,086
- -------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS AS OF AUGUST 31,
- -------------------------------------------------------------------------------------------------------------------
(In thousands, except share amounts)
- -------------------------------------------------------------------------------------------------------------------
As Restated
ASSETS 1995 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,192 $ 560
Receivables, net of allowance of $219 and $379 5,252 66,650
Inventories 20,168 41,460
Prepaid expenses 1,159 1,363
Deferred income taxes 1,525 1,907
- -------------------------------------------------------------------------------------------------------------------
Total current assets 36,296 111,940
- -------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, net 41,091 55,058
NOTES RECEIVABLE FROM EMPLOYEES 833 629
EXCESS OF COST OVER NET ASSETS OF
BUSINESSES ACQUIRED, net of accumulated amortization of $47 and $149 1,463 4,950
INTANGIBLES, net of accumulated amortization of $438 and $576 3,236 3,214
OTHER ASSETS 4,623 3,869
- -------------------------------------------------------------------------------------------------------------------
$87,542 $179,660
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Notes payable $ 650 $ 2,595
Accounts payable 6,142 14,954
Accrued expenses 11,746 55,079
Income taxes payable 6,157 3,338
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 24,695 75,966
- -------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 12,814 31,465
DEFERRED INCOME TAXES 2,173 2,888
COMMITMENTS AND CONTINGENCIES (Notes 7 and 11)
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.10 per share; 2,000,000 shares authorized:
Series A Junior Participating Preferred, par value $0.10 per share;
241,787 shares authorized; no shares issued or outstanding - -
Series M Convertible Non-Voting Preferred, par value $0.10 per share;
600,000 shares authorized; 450,000 shares issued and outstanding - 45
Common stock, par value $0.10 per share; 50,000,000 shares
authorized; 20,855,655 and 21,129,630 shares issued and outstanding 2,086 2,113
Capital in excess of par value 12,626 22,424
Retained earnings 32,751 45,004
Cumulative foreign currency translation adjustments 397 (245)
- -------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 47,860 69,341
- -------------------------------------------------------------------------------------------------------------------
$87,542 $179,660
- -------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------------
(In thousands)
- --------------------------------------------------------------------------------------------------
As Restated
- --------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31, 1994 1995 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,827 $ 10,935 $ 15,276
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 2,544 3,150 4,026
Loss on disposition of business unit, net - 1,183 -
(Decrease) increase in deferred income taxes (70) 103 (220)
Decrease (increase) in notes receivable 55 105 (61)
Changes in current assets and liabilities:
Receivables 3,467 (1,846) (62,161)
Inventories (4,378) (2,391) (20,984)
Prepaid expenses (374) 34 (207)
Accounts payable 1,317 413 6,828
Accrued expenses (2,037) 3,103 43,675
Income taxes payable 1,187 2,143 (3,283)
(Increase) decrease in intangible and other assets (263) - 382
Other, net (576) - -
- ------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 8,699 16,932 (16,729)
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,701) (10,674) (15,960)
Proceeds from the sale of property and equipment 199 1,460 44
Acquisitions of businesses (14,298) - (1,035)
(Purchase) sale of investments (221) (555) 563
Other, net (129) 140 -
- ------------------------------------------------------------------------------------------------------
Net cash used in investing activities (18,150) (9,629) (16,388)
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of short-term debt (11,250) (24,025) (30,133)
Payments of long-term debt (3,795) (3,854) (11,300)
Dividends paid (1,544) (1,544) (2,332)
Proceeds from long-term debt 15,089 3,575 32,433
Proceeds from short-term debt 11,250 24,025 32,190
Proceeds from exercise of stock options
and tax benefit of stock option exercises - 55 4,984
Other, net 10 205 -
- ------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 9,760 (1,563) 25,842
- ------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 309 5,740 (7,275)
CASH AND CASH EQUIVALENTS, beginning of year 2,143 2,452 8,192
NET DECREASE IN CASH IN TRANSITION PERIOD (Notes 1 and 12) - - (357)
- -------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year $ 2,452 $ 8,192 $ 560
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of capitalized interest $ 1,500 $ 1,900 $ 2,400
Income taxes paid $ 3,200 $ 3,900 $ 9,400
- -------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED AUGUST 31, 1994, 1995 AND 1996
- -----------------------------------------------------------------------------------------------------------------
(In thousands, except share data)
- -----------------------------------------------------------------------------------------------------------------
Cumulative
Foreign
Capital in Currency
Preferred Common Excess of Retained Translation
Stock Stock Par Value Earnings Adjustments
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at August 31, 1993 (As Restated)$ - $ 2,085 $ 12,571 $ 17,077 $ (140)
Cash dividends, $0.08 per share - - - (1,544) -
Net income - - - 7,827 -
Foreign currency translation adjustment - - - - 148
- -------------------------------------------------------------------------------------------------------------------
Balance at August 31, 1994 (As Restated) - 2,085 12,571 23,360 8
Cash dividends, $0.08 per share - - - (1,544) -
Net income - - - 10,935 -
Exercise of stock options and tax benefit
of stock option exercises - 1 55 - -
Foreign currency translation adjustment - - - - 389
- -------------------------------------------------------------------------------------------------------------------
Balance at August 31, 1995 (As Restated) - 2,086 12,626 32,751 397
Cash dividends, $0.11 per share - - - (2,332) -
Net income - - - 15,276 -
Exercise of stock options and tax benefit
of stock option exercises - 27 4,957 - -
Series M Convertible preferred stock issuance 45 - 4,841 - -
Net loss applicable to transition
period (Notes 1 and 12) - - - (691) -
Foreign currency translation adjustment - - - - (642)
- -------------------------------------------------------------------------------------------------------------------
Balance at August 31, 1996 $ 45 $ 2,113 $ 22,424 $ 45,004 $ (245)
- -------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Delta and Pine Land Company and subsidiaries (the "Company") breed,
produce, condition and market cotton and soybean planting seed. In connection
with its seed operations, the Company farms approximately 2,000 acres, largely
for the production of cotton and soybean foundation seed. That land is leased
from a former stockholder on terms and at rates that management believes to be
prevailing.
The Company has annual agreements with various growers to produce seed for
cotton and soybeans. The growers plant seed purchased from the Company and
follow quality assurance procedures required for seed production. If the grower
adheres to established Company quality assurance standards throughout the
growing season and if the seed meets Company quality standards upon harvest, the
Company is obligated to purchase specified minimum quantities of seed at prices
equal to the commodity market price of the seed, plus a grower premium. The
Company then conditions the seed for sale as planting seed.
Basis of Presentation
The accompanying financial statements include the accounts of Delta and
Pine Land Company and its subsidiaries. The reported results for 1994 and 1995
(as restated) and 1996 include the results of operations of Arizona Processing,
Inc., Ellis Brothers Seed, Inc. and Mississippi Seed, Inc. (the "Sure Grow
Companies" or "Sure Grow"), with which the Company merged in May 1996 in a
pooling-of-interests transaction. The acquired companies were on a fiscal year
ending June 30. As of August 31, 1996, the fiscal year end of the acquired
companies was changed to August 31. The net loss in the two-month transition
period from July 1, 1996 to August 31, 1996 is shown as a single line in the
Consolidated Statements of Stockholders' Equity. Significant intercompany
accounts and transactions have been eliminated in consolidation.
In connection with the acquisition of the Sure Grow Companies and Hartz
Cotton, Inc., (See Note 12), the Company recorded anticipated nonrecurring
charges of approximately $1.4 million for transaction costs. These costs
primarily include professional fees (including costs related to the U.S.
Department of Justice review of the Sure Grow acquisition) and are presented as
"Unusual Charges Related to Acquisitions" on the accompanying Consolidated
Statements of Income.
Cash Equivalents
Cash equivalents include overnight repurchase agreements and other short-term
investments having an original maturity of less than three months.
<PAGE>
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and amortization
are provided for financial reporting purposes using the straight-line method
over the estimated useful lives of the assets. Accelerated methods are used for
income tax purposes. The estimated useful lives of the various classes of
property, in years, are as follows:
Land improvements 5-20
Buildings and improvements 10-35
Machinery and equipment 3-15
Germplasm, breeder and
foundation seed 10-40
<PAGE>
- -------------------------------------------------------------------------------
The germplasm, breeder and foundation seed was purchased as part of the
Paymaster and Hartz acquisitions and includes amounts for specifically
identified varieties and for breeding stocks. The amounts associated with
specific varieties are amortized over the expected commercial life of those
varieties. Breeding stocks are amortized over 40 years.
- -------------------------------------------------------------------------------
Intangible Assets and Deferred Charges
Intangible assets consist of trademarks, patents and other intangible
assets and are being amortized using the straight-line method over 5 to 40
years. Excess of cost over net assets of businesses acquired are being amortized
using the straight-line method over 40 years. Organization costs for foreign
ventures are deferred and are amortized over five years.
Foreign Currency Translation
Financial statements of foreign operations where the local currency is the
functional currency are translated using exchange rates in effect at period end
for assets and liabilities and average exchange rates during the period for
results of operations. Financial statements of foreign entities in
highly-inflationary economies are translated as though the functional currency
is United States currency. Translation adjustments are reported as a separate
component of stockholders' equity. Gains and losses from foreign transactions
are included in earnings.
Income Taxes
The Company uses the liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using enacted tax rates and laws.
<PAGE>
Fair Value of Financial Instruments
The fair value of the Company's financial instruments at August 31, 1996
approximates their carrying value.
Revenue Recognition
Domestic revenues from the sale of planting seed, less estimated reserves
for returns, are recognized when the seed is shipped. International revenues are
recognized upon the later of either when the seed is shipped or when letters of
credit are cleared. Revenues from farm operations are recognized at the time
crops are harvested and sold. Costs incurred in producing crops are included as
inventory until these two events occur. Revenues from commercialization
agreements and royalties are recognized when earned and are included in net
sales and royalties. Revenues from Bollgard licensing fees (net of estimated
distributor and dealer commissions) are recognized based on the number of acres
estimated to be planted with such seed when such seed is shipped and are
recorded as net sales. Payments due to licensors of technology are recorded as
cost of sales.
Research and Development
All research and development costs incurred to breed and produce experimental
seed are expensed. Costs incurred to produce sufficient quantities of planting
seed needed for commercialization are carried as inventory until such seed is
sold. Cotton lint and other by-products of transgenic seed production are also
carried as inventory until sold.
Reclassifications
Certain 1994 and 1995 balances have been reclassified to conform to the 1996
presentation.
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 income and expenses during the reporting period. Actual
results could differ from those estimates.
Implementation of Financial Accounting Standards
SFAS No. 116, "Accounting for Contributions Received and Contributions Made," is
effective for fiscal years beginning after December 15, 1994. Although the
Company periodically makes contributions to universities and other non-profit
organizations, the Company's consolidated financial statements are not
significantly affected by this statement.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of" was issued, effective for fiscal years beginning after
December 15, 1995. The Company currently has no impaired assets and, therefore,
was not affected by this statement.
SFAS No. 123, "Accounting for Stock-Based Compensation", was issued effective
for fiscal years beginning December 15, 1995. Under this standard, companies may
continue to use the intrinsic value methodology prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", or
may apply a fair value methodology used in SFAS No. 123. The Company anticipates
continuing to account for stock-based compensation using the intrinsic method,
therefore, SFAS No. 123 will not have an impact on the Company's reported
results of operations or financial position. The Company plans to adopt the
disclosure requirements of SFAS No. 123 effective in fiscal 1997.
2. INVENTORIES
Inventories at August 31, consisted of the following:
(As Restated)
1995 1996
Finished goods $17,534,000 $28,634,000
Raw materials 3,975,000 13,367,000
Growing crops 731,000 579,000
Supplies 750,000 814,000
22,990,000 43,394,000
Less reserves (2,822,000) (1,934,000)
$20,168,000 $41,460,000
Substantially all finished goods and raw material inventory is valued at the
lower of average cost or market. Growing crops and supplies are recorded at
cost.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at August 31, consisted of the following:
(As Restated)
1995 1996
- --------------------------------------------------------------------------------
Land and improvements $ 3,349,000 $ 3,881,000
Buildings and improvements 16,943,000 24,877,000
Machinery and equipment 23,056,000 31,409,000
Germplasm, breeder and foundation seed 8,000,000 9,500,000
Construction in progress 6,494,000 5,840,000
- --------------------------------------------------------------------------------
57,842,000 75,507,000
Less accumulated depreciation (16,751,000) (20,449,000)
- --------------------------------------------------------------------------------
$ 41,091,000 $ 55,058,000
<PAGE>
4. NOTES PAYABLE AND LONG-TERM DEBT
In October 1994, the Company renewed its loan agreement with a bank to
provide a base commitment of $15.0 million and a seasonal commitment of $35.0
million, both expiring in 1997. The base commitment was a long-term loan that
could be borrowed upon at any time. The seasonal commitment could be drawn upon
from September through June of each fiscal year. Each of the two facilities
permitted the Company to select between fixed and variable interest rate
options, to specify what portion of each loan was covered by a specific interest
rate option and the applicable funding period for which the interest rate option
was to apply. In 1995, the Company and the bank negotiated new terms which
reduced the interest rates charged. The combined average interest rates paid
were 5.0% and 7.0% in 1994 and 1995, respectively. The Company paid a commitment
fee of 1/5 of 1% per annum on the unused portion of the seasonal commitment and
a commitment fee of 1/4 of 1% per annum on the unused portion of the base
commitment.
In November 1995, the Company and another financial institution entered
into a new loan agreement that replaced the existing facility. The new agreement
provided a base commitment of $15.0 million and a seasonal commitment of $35.0
million. In March 1996, the bank approved an additional seasonal facility of
$15.0 million. In June 1996, the base commitment was increased to $30.0 million
and the seasonal commitment was reduced to $20.0 million to accommodate the
anticipated changes in borrowings related to the acquisition of Sure Grow. No
changes were made to the additional seasonal facility. The base commitment is a
long-term loan that may be borrowed upon at any time and is due January 1, 1999.
Both the seasonal commitment and the additional seasonal commitment are working
capital loans that may be drawn upon from September 1 through June 30 of each
fiscal year and expire January 1, 1999. Commencing in January 1997 and in each
January thereafter, the facilities are renewable for another three year term.
Each commitment offers variable and fixed interest rate options and requires the
Company to pay facility and/or commitment fees and to comply with certain
financial covenants. The combined average interest rate for 1996 was 6.5%.
The financial covenants under the new loan agreement require the Company
to: (a) maintain minimum tangible net worth in an amount not less than $20.0
million increased by 50% of net income each fiscal year; (b) not allow the ratio
of total liabilities to tangible net worth to exceed 1.5 to 1; and (c) maintain
a cash flow coverage ratio of at least 2 to 1. At August 31, 1996, the Company's
ratio of total liabilities to tangible net worth was 1.9 to 1.0, which exceeds
the permitted ratio. The bank waived compliance with this covenant.
5. ACCRUED EXPENSES
Accrued expenses at August 31, consisted of the following:
(As Restated)
1995 1996
- ---------------------------------------------------------------------------
Sales returns and allowances $5,464,000 $5,650,000
Payroll 2,073,000 2,004,000
Bollgard licensing expenses - 43,403,000
Other accrued expenses 4,209,000 4,022,000
- ---------------------------------------------------------------------------
$11,746,000 $55,079,000
6. INCOME TAXES
The provisions for income taxes for the years ended August 31, consisted of the
following:
(As Restated)
----------------------------
1994 1995 1996
- --------------------------------------------------------------------------------
Current-
Federal $3,845,000 $5,734,000 $7,520,000
State 593,000 889,000 1,153,000
Deferred (79,000) 103,000 (220,000)
$4,359,000 $6,726,000 $8,453,000
The differences between the statutory Federal income tax rate and the
effective rate are as follows: (As Restated)
--------------------
1994 1995 1996
- --------------------------------------------------------------------------------
Statutory rate 34.2% 34.4% 35.0%
Increases in tax resulting from:
State taxes, net of federal
tax benefit 3.1 3.1 3.1
Other (1.5) 0.6 (2.5)
- --------------------------------------------------------------------------------
Effective rate 35.8% 38.1% 35.6%
The components of deferred income taxes at August 31, are as follows:
Deferred tax assets: As Restated)
------------
1995 1996
---------- -----------
Inventory $ 1,090,000 $ 1,293,000
Charitable contributions - 769,000
Compensation 210,000 278,000
Self-insurance and other reserves 289,000 324,000
Other 174,000 126,000
------------ ------------
1,763,000 2,790,000
----------- -----------
Deferred tax liabilities:
Property (1,511,000) (2,679,000)
Pension (445,000) (280,000)
Other (455,000) (812,000)
---------- -----------
(2,411,000) (3,771,000)
------------ -----------
Net deferred income taxes $ (648,000) $ (981,000)
============ ============
<PAGE>
7. LEASES
The Company leases real estate and machinery and equipment used in its
operations. Substantially all rent expense is recorded as cost of sales. The
Company has no capital leases. Future minimum rental payments after 1996 under
operating leases with initial or remaining noncancellable terms in excess of one
year are as follows:
1997 $ 440,000
1998 $ 173,000
1999 $ 134,000
2000 $ 104,000
2001 $ 91,000
The Company annually leases farmland and related facilities from a former
stockholder (See Note 1). Rent expense for the years ended August 31, consisted
of the following:
1994 1995 1996
- --------------------------------------------------------------------------------
Rent paid to former stockholder $ 293,000 $ 258,000 $ 281,000
Other rents 1,269,000 1,030,000 1,101,000
- --------------------------------------------------------------------------------
$1,562,000 $1,288,000 $1,382,000
- --------------------------------------------------------------------------------
8. EMPLOYEE BENEFIT PLANS
Defined Benefit Plan -
Substantially all full-time employees are covered by a noncontributory
defined benefit plan (the "Plan"). Benefits are paid to employees, or their
beneficiaries, upon retirement, death or disability based on their final average
compensation over the highest consecutive five years. Plan assets consist
primarily of U.S. government securities and common stock. The Company's funding
policy is to make contributions to the Plan that are at least equal to the
minimum amounts required to be funded in accordance with the provisions of
ERISA.
Effective January 15, 1992, the Company adopted a Supplemental Executive
Retirement Plan (the "SERP"), which will pay supplemental pension benefits to
certain employees whose benefits from the Plan were decreased as a result of
certain changes made to the Plan. The benefits from the SERP will be paid in
addition to any benefits the participants may receive under the Plan and will be
paid from Company assets, not Plan assets. The annual cost of the SERP for each
of 1994, 1995 and 1996 approximated $100,000. In May, 1995, the Company funded
$250,000 to an irrevocable trust established to make payments to the
participants. The SERP's unfunded accumulated benefit obligation at June 30,
1995 and 1996 was $119,000 and $216,000, respectively.
<PAGE>
The measurement of Plan and SERP assets and obligations was performed as of June
30. The following sets forth the Plan's and SERP's funded status and amounts
recognized in the Company's financial statements as of August 31(1995 amounts
have been restated to combine the information for the Plan and the SERP):
1995 1996
- --------------------------------------------------------------------------------
Actuarial present value of accumulated
benefit obligation,including vested
benefits of $4,927,000 in 1995 and
$5,714,000 in 1996 $5,417,000 $5,847,000
- --------------------------------------------------------------------------------
Plan assets at fair value $6,417,000 $7,237,000
Projected benefit obligations for
service rendered to date (5,782,000) (6,239,000)
- --------------------------------------------------------------------------------
Plan assets in excess of projected
benefit obligation 635,000 998,000
Unrecognized prior service cost 68,000 65,000
Unrecognized net gain (230,000) (900,000)
Unrecognized net obligation 792,000 673,000
- --------------------------------------------------------------------------------
Prepaid pension expense $1,265,000 $ 836,000
- --------------------------------------------------------------------------------
Net periodic pension expense and Company contributions for the years ended
August 31, were as follows (1994 and 1995 amounts have been restated to combine
the information for the Plan and the SERP):
1994 1995 1996
- --------------------------------------------------------------------------------
Service cost $ 391,000 $ 425,000 $ 462,000
Interest cost on projected benefit
obligation 295,000 362,000 401,000
Actual return on assets (177,000) (1,035,000) (1,064,000)
Amortization of transitional obligation 119,000 119,000 119,000
Net unrecognized loss (gain) and
amortization (290,000) 566,000 511,000
- --------------------------------------------------------------------------------
Net periodic pension expense $ 338,000 $ 437,000 $ 429,000
- --------------------------------------------------------------------------------
Company contributions $ 279,000 $ 250,000 $ -
- --------------------------------------------------------------------------------
The actuarial present value of the projected benefit obligation was determined
using a weighted-average interest rate of 7% in 1995 and 7.5% in 1996, with
assumed salary increases of 4% in 1995 and 1996. The expected long-term rate of
return on assets was 9% in both 1995 and 1996. Prior service cost is amortized
over 15 years.
Defined Contribution Plan -
D&PL sponsors a defined contribution plan under Section 401(k) of the Internal
Revenue Code which covers substantially all full-time employees of the Company.
The Company, at its option, may elect to make matching contributions to the
Plan. No matching contributions were made in 1994, 1995 or 1996.
<PAGE>
9. MAJOR CUSTOMERS, EXPORT SALES AND FOREIGN OPERATIONS
In fiscal 1994, 1995, and 1996 sales to two customers comprised more than 10% of
total sales. The approximate amount of annual sales to each of the two customers
were as follows:
(As Restated)
--------------------------
Customer 1994 1995 1996
- -------------------------------------------------------------------------------
A $12,700,000 $14,700,000 $22,400,000
B 8,500,000 10,500,000 16,200,000
International sales (including export sales) approximated $2,900,000, $7,100,000
and $12,600,00 in 1994, 1995 and 1996, respectively. Sales and operating income
attributable to the Company's subsidiaries in Mexico and Australia were not
material.
10. RELATED PARTY TRANSACTIONS
A partner of a law firm that represents the Company is also a stockholder and
serves as corporate secretary. The Company paid legal fees to that firm of
approximately $350,000, $300,000 and $575,000 in 1994, 1995 and 1996,
respectively.
During 1994, 1995 and 1996, a director of the Company provided consulting
services associated with the development and negotiation on behalf of the
Company of certain international joint ventures. Such fees approximated
$100,000, $10,000 and $6,000 in 1994, 1995 and 1996, respectively.
In 1993, D&PL loaned certain officers and employees $170,000 to exercise
Southwide, Inc., (D&PL's now liquidated parent) stock options. These notes
receivable bore interest at prime, were due in June 1996 and were collateralized
by the D&PL common stock received by the optionee in the liquidation of
Southwide, Inc. At August 31, 1996, these notes receivable had been paid in
full.
11. COMMITMENTS AND CONTINGENCIES
The Company, Monsanto and other third parties were named as defendants in
two lawsuits filed in Texas in August, 1996. A third lawsuit was filed in
October 1996 in Louisiana. Two of these suits request that they be certified as
a class action. The plaintiffs allege, among other things, that D&PL's NuCOTN
varieties, which contain Monsanto's Bollgard gene, did not perform as these
farmers has anticipated and, in particular, did not fully protect their cotton
crops from certain lepidopteran insects. Pursuant to the terms of the Agreement
between D&PL and Monsanto, Monsanto has assumed responsibility for the defense
of these claims since vendee claims for failure of the Bollgard gene are subject
to a duty of defense by Monsanto and prorata indemnification under the
Agreement. Under the applicable indemnity provisions, defense costs and any
liability to the plaintiffs related to claims covered by the Agreement will be
apportioned 71% to Monsanto and 29% to D&PL. Some of the claims made in this
litigation concerning the quality of seed and seed coat treatments, not
involving failure of performance of the Bollgard gene or representations with
respect thereof, may not be within the scope of Monsanto's indemnity obligation.
The Company would be required to bear any damages relating to product defects,
if any, not involving a failure of the Bollgard gene to provide insect
resistance. D&PL intends to cooperate with Monsanto in its anticipated vigorous
defense of these claims. D&PL believes that these claims will be resolved
without any material impact on the Company's financial statements.
In October 1996, Mycogen and Agrigenetics, Inc. filed a lawsuit naming
D&PL, Monsanto and DeKalb Genetics as defendants alleging that two of Mycogen's
recently issued patents have been infringed by the defendants by selling seed
that contains the Bollgard gene. Pursuant to the terms of the Agreement,
Monsanto is required to defend D&PL against patent infringement claims and
indemnify D&PL against damages from any patent infringement claims. D&PL
believes that the resolution of the matter will not have a material impact on
the Company or its financial statements.
A corporation owned by the son of the Company's former Guatemalan
distributor sued in 1989 asserting that the Company violated an agreement with
it by granting to another entity an exclusive license in certain areas of
Central America and southern Mexico. The suit seeks damages of 5,300,000
Guatemalan quetzales (approximately $900,000 at current exchange rates) and an
injunction preventing the Company from distributing seed through any other
licensee in that region. The Guatemalan court, where this action is proceeding,
has twice declined to approve the injunction sought. Management believes that
the resolution of the matter will not have a material impact on the Company or
its financial statements. The Company continues to offer seed for sale in
Guatemala.
The Company is involved in various other claims arising in the normal
course of business. Management believes such matters are without merit and will
be resolved without any material effect on the Company's financial position or
its results of operations.
On July 18, 1996, the United States Department of Justice, Antitrust
Division ("USDOJ"), served a Civil Investigative Demand ("CID") on D&PL seeking
information and documents in connection with its investigation of the
acquisition by D&PL of the stock of Arizona Processing, Inc., Ellis Brothers
Seed, Inc. and Mississippi Seed, Inc. The CID states that the USDOJ is
investigating whether this transaction may have violated the provisions of
Section 7 of the Clayton Act, 15 USC Section 18. D&PL is currently engaged in
responding to the CID and is committed to full cooperation with the USDOJ. At
the present time, the ultimate outcome of the investigation cannot be predicted.
The Company has noncancellable contracts outstanding for various capital
improvement projects which will be completed in 1997. At August 31, 1996,
amounts to be paid under such contracts approximates $5,100,000.
12. MERGERS AND ACQUISITIONS
In February, 1996, the Company acquired Hartz Cotton, Inc. from Monsanto,
which included cotton planting seed inventories, germplasm, breeding stocks,
trademarks, trade names and other assets, for approximately $6.0 million. The
consideration consisted primarily of 450,000 shares of the Company's Series M
Convertible Non-Voting Preferred Stock. Pro forma financial data is not
presented because the impact of this acquisition (accounted for as a purchase)
was not material to the Company's results of operations for any period
presented.
The Company merged with the Sure Grow Companies in May 1996 in a
pooling-of-interests transaction valued at approximately $70.0 million. D&PL
exchanged approximately 1.5 million unregistered shares of its common stock for
all outstanding shares of the Sure Grow Companies. The acquired companies were
on a fiscal year ending June 30. As of August 31, 1996, the fiscal year ends of
the acquired companies were changed to August 31. The following summarizes
income statement data of the Sure Grow Companies for the period beginning July
1, 1996 and ending August 31, 1996:
Sales $ 574,000
Cost of sales (1,043,000)
Operating expenses (207,000)
Other (15,000)
--------------
Net loss $ (691,000)
============
The combined net loss of $ (691,000) in the transition period is included
as a separate item in the accompanying Consolidated Statements of Stockholders'
Equity. The net change in cash during the transition period was a decrease of $
357,000 and this amount is included as a single item in the accompanying
Consolidated Statements of Cash Flows.
13. STOCKHOLDERS' EQUITY
Preferred Stock
The Board of Directors of the Company is authorized, subject to certain
limitations prescribed by law, without further stockholder approval, to issue up
to an aggregate of 2,000,000 shares of Preferred Stock, in one or more series,
and to determine or alter the designations, preferences, rights and any
qualifications, limitations or restrictions on the shares of each such series
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption (including sinking fund provisions), redemption
price or prices, liquidation preferences and the number of shares constituting
any series or designations of such series.
In August, 1996, the Board of Directors adopted a Stockholder Rights Plan
and declared a dividend of one preferred stock purchase right ("right") for each
outstanding share of the Company's Common Stock. Similar rights have been, and
generally will be, issued in respect of Common Stock subsequently issued. Each
right becomes exercisable, upon the occurrence of certain events, for one
one-hundredth of a share of Series A Junior Participating Preferred Stock, $0.10
par value, at a purchase price of $175 per one one-hundredth of a Preferred
Share, subject to adjustment. In the event that the Company is acquired in a
merger or other business combination transaction not approved by the Board of
Directors, each holder of a right shall have the right to receive that number of
shares of common stock of the surviving company which would have a market value
of two times the exercise price of the right. Under the Stockholder Rights Plan,
241,787 shares of Series A Junior Participating Preferred Stock have been
reserved. The rights currently are not exercisable and will be exercisable only
if a person or group acquires beneficial ownership of 15% or more of the
Company's outstanding shares of Common Stock. The rights, which expire on August
30, 2006, are redeemable in whole, but not in part, at the Company's option at
any time for a price of $0.01 per right.
The Company issued 450,000 shares (after effect of stock split) of Series M
Convertible Non-voting Preferred Stock in February, 1996, as consideration for
the purchase of Hartz Cotton, Inc. from Monsanto. The holders of Series M
Preferred Stock are entitled to receive dividends at the same rate per share as
is paid from time to time on each share of the Common Stock of the Company, and
no more, when and as declared by the Board of Directors. In the event of any
liquidation, dissolution or winding up of the Company, either voluntary or
involuntary, the holders of Series M Preferred Stock shall be entitled to
receive, prior to and in preference to any distribution to holders of Common
Stock or any other class of security of the Company, $24.775 per share of Series
M Preferred Stock. The Series M Preferred Stock is convertible beginning upon
the seventh anniversary of the date on which the Series M Preferred Stock was
issued or the occurrence of other specified events, whichever occurs first.
Stock Option Plans
In April, 1993, the Board of Directors and stockholders approved the 1993
Stock Option Plan. Options to purchase up to 1,440,000 shares (after effect of
stock splits) of Common Stock were authorized at an option price not less than
the market price on the date of grant.
On October 17, 1995, the Company's Board of Directors adopted the 1995
Long-Term Incentive Plan (the "Incentive Plan") pursuant to which stock options,
stock appreciation rights, restricted shares of Common Stock and performance
units may be awarded to officers, key employees and directors. Under the
Incentive Plan, 1,440,000 shares of Common Stock of the Company are available
for grant. Shares subject to options and awards which expire unexercised are
available for new option grants and awards. The Company's stockholders ratified
the adoption of the Incentive Plan at the 1996 annual meeting. Future members of
the Board of Directors receive automatic grants upon being named to the Board.
Such options are exercisable ratably over five years commencing after one year
from the date of grant.
<PAGE>
Stock Options Number of Shares Price Range
- --------------------------------------------------------------------------------
Outstanding at August 31, 1993 - -
Granted 1,155,000(a) 8 5/16 - 8 13/16
Exercised - -
Lapsed or canceled - -
- --------------------------------------------------------------------------------
Outstanding at August 31, 1994 1,155,000 8 5/16 - 8 13/16
Granted - -
Exercised (6,600) 8 5/16 - 8 13/16
Lapsed or canceled - -
- --------------------------------------------------------------------------------
Outstanding at August 31, 1995 1,148,400 8 5/16 - 8 13/16
Granted 427,499 19 - 28 1/16
Exercised (274,350) 8 5/16 - 8 13/16
Lapsed or canceled (20,600) 8 5/16 - 19
- --------------------------------------------------------------------------------
Outstanding at August 31, 1996 1,280,949 8 5/16 - 28 1/16
- --------------------------------------------------------------------------------
(a) Includes options for 180,000 shares (after effect of stock splits) granted
to the members of the Board of Directors in June 1994 subject to final
stockholder approval at the 1995 Annual Meeting. Prior to such grant, holders of
a majority of shares approved an Amendment to the 1993 Stock Option Plan that
provided for an automatic grant of options for 30,000 shares (after effect of
stock splits) to each current and all future members of the Board of Directors.
This Amendment was formally approved at the 1995 annual stockholders meeting.
Common Stock
In October 1995, the Board of Directors authorized a 4 for 3 stock split
effected in the form of a dividend, with no change in the par value per share,
distributed on December 15, 1995 to the stockholders of record on December 1,
1995. In March 1996, the Board of Directors authorized a 3 for 2 stock split for
common and preferred shares outstanding to be effected in the form of a
dividend, with no change in par value per share, distributed on April 15, 1996
to stockholders of record on March 29, 1996. Both stock splits have been
reflected in the accompanying financial statements.
14. UNAUDITED QUARTERLY FINANCIAL DATA
All of the Company's domestic seed products are subject to return or
credits, which vary from year to year. The annual level of returns and
ultimately net sales and net income are influenced by various factors,
principally weather conditions occurring in the spring planting season (spanning
the Company's third and fourth fiscal quarters). The Company provides for
estimated returns as sales are made. To the extent actual returns and actual
acreage planted with seed containing the Bollgard gene differ from estimates,
adjustments to the Company's operating results are recorded when such
differences become known. All significant returns occur or are accounted for by
fiscal year end. Generally, international sales are not subject to return.
Substantially all Company sales are concentrated in the second and third fiscal
quarters. As a result, the Company generally incurs losses in the first and
fourth quarters. Management believes that such seasonality is common throughout
the seed industry.
<PAGE>
<TABLE>
<CAPTION>
Summarized unaudited quarterly financial data is as follows:
(In thousands, except per share data)
- ----------------------------------------------------------------------------------------------------------------------------
Fiscal 1994: Three months ended (As Restated)
-----------------------------------------------------------------
November 30 February 28 May 31 August 31
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales and licensing fees ................................. $ 1,346 $ 32,218 $ 44,894 $ 2,144
Gross profit .................................................. (32) 12,387 20,250 (138)
Net income (loss) ............................................. (2,583) 4,197 9,201 (2,988)
Net income (loss) per share-primary(1) ........................ (0.12) 0.20 0.44 (0.14)
Weighted average number of shares
used in quarterly per share calculations-primary(2) ........ 20,849 20,849 20,849 20,849
Net income (loss) per share-fully diluted(1) .................. (0.12) 0.20 0.44 (0.14)
Weighted average number of shares
used in quarterly per share calculations-fully diluted(2) 20,849 20,849 20,849 20,849
- ----------------------------------------------------------------------------------------------------------------------------
Fiscal 1995: Three months ended (As Restated)
---------------------------------------------------------------
November 30 February 28 May 31 August 31
- ----------------------------------------------------------------------------------------------------------------------------
Net sales and licensing fees .................................. $ 2,295 $ 46,049 $ 49,189 $ 1,417
Gross profit .................................................. 544 20,249 22,182 29
Net income (loss) ............................................. (3,370) 8,418 9,278 (3,391)
Net income (loss) per share-primary(1) ........................ (0.16) 0.40 0.44 (0.16)
Weighted average number of shares
used in quarterly per share calculations-primary(2) ........ 20,849 20,849 21,148 20,854
Net income (loss) per share-fully diluted(1) .................. (0.16) 0.40 0.44 (0.16)
Weighted average number of shares
used in quarterly per share calculations-fully diluted(2) 20,849 21,031 21,230 20,854
- ----------------------------------------------------------------------------------------------------------------------------
Fiscal 1996: Three months ended (As Restated)
----------------------------
November 30 February 29 May 31 August 31
- ----------------------------------------------------------------------------------------------------------------------------
Net sales and licensing fees .................................. $ 5,326 $ 63,404 $ 82,650 $ 1,891
Gross profit .................................................. 298 24,868 29,735 893
Net income (loss) applicable to
common shares ............................................ (3,740) 10,404 13,353 (4,780)
Net income (loss) per share-primary(1) ........................ (0.18) 0.48 0.61 (0.23)
Weighted average number of shares
used in quarterly per share calculations -primary(2) ....... 20,861 21,696 21,996 21,068
Net income (loss) per share-fully diluted(1) .................. (0.18) 0.47 0.59 (0.23)
Weighted average number of shares used
in quarterly per share calculations-fully diluted(2) ....... 20,861 22,000 22,546 21,068
(1)The sum of the quarterly net income (loss) per share amounts may not
equal the annual amount reported since per share amounts are
computed independently for each quarter, whereas annual earnings per
share are based on the annual weighted average shares deemed
outstanding.
(2) After adjustment for the stock splits declared in October 1995 and
in March 1996 and the issuance of 1,548,483 shares related to the
Sure Grow acquisition.
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to registrant's definitive proxy statement to be filed with
the Commission pursuant to Regulation 14(a) not later than December 29, 1996;
the information responsive to the foregoing items 10 - 13 is incorporated herein
by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements - the following consolidated financial
statements of Delta and Pine Land Company and subsidiaries are
submitted in response to Part II, Item 8:
Report of Independent Public Accountants
Consolidated Statements of Income - for each of the three
years in the period ended August 31, 1996
Consolidated Balance Sheets - August 31, 1995 and 1996
Consolidated Statements of Cash Flows - for each of the three
years in the period ended August 31, 1996
Consolidated Statements of Stockholders' Equity - for each of
the three years in the period ended August 31, 1996
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedule - the following financial
statement schedule of Delta and Pine Land Company and
subsidiaries are submitted in response to Part IV, Item 14:
Report of Independent Public Accountants....................43
Schedule II - Consolidated Valuation and Qualifying Accounts44
All other schedules have been omitted as not required, not
applicable or because all the data is included in the
financial statements.
(a) 3. Exhibits
The exhibits to the Annual Report of the Delta and Pine Land Company filed
herewith are listed on Page 45.
(b) 4. Reports on Form 8-K
During the fourth quarter of 1996, the Company filed the following
reports on Form 8-K:
(i) Current Report on Form 8-K dated May 20, 1996 (filed June 4,
1996) reporting information required to be reported under Item 2,
Acquisition or Disposition of Assets, for the Company's acquisition
of the Sure Grow Companies.
(ii) Current Report on Form 8-K/A dated May 20, 1996 (filed August
5, 1996) reporting information required to be reported under Item
7(a), Financial statements of businesses to be acquired and (b) Pro
forma financial information. The report included the following
financial statements of Sure Grow Companies combined:
Accountant's Compilation Report
Consolidated Balance Sheet - May 31, 1996
Consolidated Statement of Income for the nine months ended May
31, 1996
Consolidated Statement of Cash Flows for the nine months ended
May 31, 1996
<PAGE>
Independent Auditor's Report Combined Balance Sheets - August 31, 1995 and
June 30, 1995
Combined Income Statements for the years ended August 31, 1995 and June 30, 1995
Combined Statements of Retained Earnings for the years ended August 31,
1995 and June 30, 1995.
Combined Statements of Cash for the years ended August 31, 1995 and June 30,
1995 Notes to the Financial Statements
Independent Auditor's Report
Combined Balance Sheets - August 31, 1994 and June 30, 1994
Combined Income Statements for the years ended August 31, 1994 and June 30,1994
Combined Statements of Retained Earnings for the years ended August 31, 1994
and June 30, 1994.
Combined Statements of Cash for the years ended August 31, 1994 and June 30,1994
Notes to the Financial Statements
The report included the following pro forma financial information:
a) Delta and Pine Land Company Pro Forma Consolidated
Balance Sheets (Unaudited) - August 31, 1995 and May 31, 1996
b) Delta and Pine Land Company Consolidated Statements of Operations
(Unaudited) for the Years Ended August 31, 1993, 1994 and 1995 and
for the Nine Months Ended May 31, 1996
c) Notes to Pro Forma Consolidated Financial Statements (Unaudited)
(iii) Current Report on Form 8-K dated September 3, 1996 (filed September 3,
1996) reporting information required to be reported under Item 5, Other Events,
relating to the adoption of a Shareholder Rights Plan.
<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 on November 27, 1996.
DELTA AND PINE LAND COMPANY
(Registrant)
/s/ Roger D. Malkin
By: Roger D. Malkin, Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Roger D. Malkin
- -------------------- Chairmand of the Board
Roger D. Malkin and Chief Executive Officer
(Principal Executive Officer) November 27, 1996
/s/ W. Thomas Jagodinski
- ---------------------- Vice President-Finance and
W. Thomas Jagodinski Treasurer (Principal Financial
and Accounting Officer) November 27, 1996
/s/ Nam-Hai Chua Director November 27, 1996
- ----------------------
Nam-Hai Chua
/s/ Jon E.M. Jacoby Director November 27, 1996
- -----------------------
Jon E.M. Jacoby
/s/ Joseph M. Murphy Director November 27, 1996
- -----------------------
Joseph M. Murphy
/s/ Stanley P. Roth Director November 27, 1996
- -----------------------
Stanley P. Roth
/s/ Rudi E. Scheidt Director November 27, 1996
- -----------------------
Rudi E. Scheidt
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO DELTA AND PINE LAND COMPANY:
We have audited in accordance with generally accepted auditing standards, the
financial statements of Delta and Pine Land Company included in this Form 10-K.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the Index of Part
IV, Item 14(a)2, are the responsibility of the Company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. The
schedule has been subjected to the auditing procedures applied in the audit of
the basic 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 financial statements taken as a whole.
Arthur Andersen LLP
Memphis, Tennessee,
October 11, 1996
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
DELTA AND PINE LAND COMPANY AND SUBSIDIARIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Column A Column B Column C Column D Column E
ADDITIONS
Balance at Charged to Charged Balance
Beginning of Costs and to Other at end of
Description Period Expenses Accounts Deductions Period
<S> <C> <C> <C> <C> <C>
Fiscal year ended August 31, 1994
Allowance for doubtful accounts $ 108 $ 25 $ - $ 20(a) $ 153
Inventory valuation reserve $ 241 $ 47 $ - $ - (b) $ 288
Fiscal year ended August 31, 1995
Allowance for doubtful accounts $ 153 $ 66 $ - $ - (a) $ 219
Inventory valuation reserve $ 288 $ 2,643(c) $ - $ (109)(b) $ 2,822
Fiscal year ended August 31, 1996
Allowance for doubtful accounts $ 219 $ 200 $ - $ (40)(a) $ 379
Inventory valuation reserve $2,822 $ 850 $ - $ (1,738)(b) $ 1,934
(a) Write off of uncollectible accounts, net of recoveries
(b) Disposal of excess/obsolete inventory, net of scrap sales
(c) Additional reserve the result of the Company's sale
of its corn and sorghum operations
</TABLE>
<PAGE>
INDEX
EXHIBITS TO ANNUAL REPORT ON FORM 10-K
YEAR ENDED AUGUST 31, 1996
DELTA AND PINE LAND COMPANY
Exhibits1 Description
3.01 Certificate of Incorporation of the Registrant dated September 20, 1978, as
amended by Certificate of Amendment dated October 23, 1978, Certificate of
Ownership dated June 19, 1985, Certificate of Amendment dated June 18, 1986,
Certificate of Change of Address of Registered Agent dated February 14, 1986 and
Certificate of Change of Address of Registered Agent dated October 27, 1989.
3.02 Restated Certificate of Incorporation of the Registrant dated June 11, 1993
3.03 Amended and Restated By-Laws of the Registrant dated April 26, 1993.
3.04 Certificate of Designation, Convertible Preferred Stock of Delta and Pine
Land Company.3
4.01 Specimen Certificate representing the Common Stock, par value $.10 per
share.
4.02 Letter from Registrant to John Hancock Mutual Life Insurance Company
regarding certain registration rights dated June 28, 1993.
4.03 Rights Agreement, dated as of August 13, 1996, between Delta and Pine Land
Company and Harris Trust and Savings Bank, including the form of Right
Certificate and related form of Election to Purchase as Exhibit A and the
Summary of Rights to Purchase Preferred Shares as Exhibit B.4
4.04 Certificate of Designations of the rights and privileges of the shares of
junior participating preferred stock created on August 13, 1996, to be filed
pursuant to Section 151 of the Delaware General Corporation Law.4
10.01 Lease dated March 25, 1995, between Registrant, as Lessee, and The
Prudential Insurance Company of America ("Prudential"), as Lessor regarding
approximately 2,500-acre farm, certain grain bins, and a certain research
facility in Scott, Mississippi.2
10.02 License Agreement dated February 1, 1990, between Registrant, as Licensor,
and Semillas Deltacol, Ltd., as Licensee, regarding operations in Columbia.
10.03 License Agreement dated March 5, 1990, between Registrant, as Licensor and
Helena Chemical Company d/b/a HyPerformer Seed Company, as Licensee.
10.04 License Agreement dated March 16, 1992, between Registrant and Monsanto
Company, as amended by the Agreement on Modified Terms for License Agreement
Dated October 11, 1993 (confidential treatment has been requested for portions
of this exhibit pursuant to Rule 24b-2 under the Securities and Exchange Act of
1934). 1,7
10.05 Incentive Bonus Program.1,5
10.06 Retirement Plan of the Company, dated January 2, 1992, Amendment No. 1 to
the Plan dated April 30, 1992, Amendment No. 2 to the Plan dated December 20,
1992, and Amendment No. 3 to the Plan dated October 6, 1994.1,2
10.07 Agreement between Educo, Inc. and Southwide dated June 1, 1975, relating
to employer-sponsored college scholarships and medical expense plan for children
of certain employees of Registrant.
10.08 Supplemental Executive Retirement plan dated May 22, 1992, and effective
January 1, 1992.1,5
10.09 Tax Sharing Agreement dated May 24, 1993, between Southwide and
Registrant.
10.10 1993 Stock Option Plan of Registrant, as adopted on June 11, 1993.1,5
10.11 Asset Purchase agreement between Delta and Pine Land Company and Cargill,
Inc.6
10.12 Herbicide-Tolerant Cotton License Agreement dated August 22, 1994, between
the Company and E.I. Dupont De Nemours and Company (confidential treatment has
been requested for portions of this exhibit pursuant to the Rule 24b-2
under the Securities and Exchange Act of 1934).7
10.13 1994 Saving Plan of Registrant, as adopted on April 1, 1994, Amendment No.
1 dated May 1, 1994.2,5
10.14 $50,000,000 Revolving Credit Agreement between Registrant and NationsBank
dated November 15, 1995.2
10.15 Hartz Cotton Acquisition Agreement dated February 2, 1996 among Monsanto
Company ("Monsanto"), Hartz Cotton, Inc. ("Hartz Cotton"), Delta and Pine Land
Company (the "Company") and Paymaster Technology Corp. ("PTC").3
10.16 Trademark License Agreement dated February 2, 1996 between Monsanto and
the Company.3
10.17 Registration Rights Agreement between the Company and Monsanto dated
February 2, 1996.3
10.18 Temporary Services Agreement dated February 2, 1996 between Monsanto, the
Company, and PTC. 3
10.19 Research Facility Lease with Option to Purchase dated February 2, 1996
between Monsanto and PTC.3
10.20 Greenhouse Lease dated February 2, 1996 between Monsanto and PTC. 3
10.21 Research Agreement dated February 2, 1996 between Monsanto and PTC.3
10.22 Partnership Agreement dated February 2, 1996 between the Company and
Monsanto.3
10.23 Marketing Services Agreement dated February 2, 1996 between the Company,
Monsanto and D&M Partners.3
10.24 Bollgard(TM) Gene License and Seed Services Agreement dated February 2,
1996 between Monsanto, D&M Partners, and the Company.3
10.25 Roundup Ready(R) Gene License and Seed Services Agreement dated February
2, 1996 between Monsanto, D&M Partners and the Company.3
10.26 Option Agreement dated February 2, 1996 between Monsanto and the
Company.3,5
10.27 Agreement between the D&PL Companies and The Sure Grow Companies, Sure
Grow Shareholders and Sure Grow Principals dated May 20, 1996.8
10.28 Delta and Pine Land Company 1995 Long-Term Incentive Plan, as adopted on
February 6, 1996.5,9
11.01 Statement Re: Computation of Earnings per Share.9
21.01 Subsidiaries of the Registrant. 9
27.01 Financial Data Schedule. 9
- --------------------
1 All incorporated by reference from Registration Statement on Form S-1, File
No. 33-61568. filed June 29, 1993,except as otherwise noted herein.
2 Incorporated by reference from Form 10-K filed November 22, 1995.
3 Incorporated by reference from Form 8-K filed February 19, 1996.
4 Incorporated by reference from Form 8-A filed September 3, 1996.
5 Represents management contract or compensatory plan.
6 Incorporated by reference from Form 8-K filed May 16, 1994.
7 Incorporated by reference from Form 10-Q filed July 14, 1995.
8 Incorporated by reference from Form 8-K filed June 4, 1996
9 Filed herewith.
EXHIBIT 10.28
DELTA AND PINE LAND COMPANY
1995 LONG-TERM INCENTIVE PLAN
1. Purpose.
The purpose of the DELTA AND PINE LAND COMPANY 1995 LONG-TERM INCENTIVE
PLAN (the "Plan") is to further the earnings of DELTA AND PINE LAND COMPANY, a
Delaware corporation, and its subsidiaries (collectively, the "Company") by
assisting the Company in attracting, retaining and motivating management
employees and directors of high caliber and potential. The Plan provides for the
award of long-term incentives to those officers, other key employees and
directors who make substantial contributions to the Company by their loyalty,
industry and invention.
2. Administration.
The Plan shall be administered by a committee (the "Committee")
selected by the Board of Directors of the Company (the "Board of Directors")
consisting solely of two or more members who are "outside directors" as
described in Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). Except to the extent permitted under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "1934 Act") (or any successor
rule of similar import), each Committee member shall be ineligible to receive,
and shall not have been, during the one-year period prior to appointment
thereto, granted or awarded stock options, stock appreciation rights,
performance units, or restricted stock pursuant to this Plan or any other
similar plan of the Company or any affiliate of the Company. Without limiting
the foregoing, the Committee shall have full and final authority in its
discretion to interpret the provisions of the Plan and to decide all questions
of fact arising in its application. Subject to the provisions hereof, the
Committee shall have full and final authority in its discretion to determine the
employees and directors to whom awards shall be made under the Plan; to
determine the type of awards to be made and the amount, size and terms and
conditions of each such award; to determine the time when awards shall be
granted; to determine the provisions of each agreement evidencing an award; and
to make all other determinations necessary or advisable for the administration
of the Plan.
3. Stock Subject to the Plan.
The Company may grant awards under the Plan with respect to not more than a
total of 960,000 shares of $.10 par value common stock of the Company (the
"Shares") (subject, however, to adjustment as provided in paragraph 20, below).
Such Shares may be authorized and unissued Shares or treasury Shares. Except as
otherwise provided herein, any Shares subject to an option or right which for
any reason is surrendered before exercise or expires or is terminated
unexercised as to such Shares shall again be available for the granting of
awards under the Plan. Similarly, if any Shares granted pursuant to restricted
stock awards are forfeited, such forfeited Shares shall again be available for
the granting of awards under the Plan.
<PAGE>
4. Eligibility to Receive Awards.
Persons eligible to receive awards under the Plan shall be limited to
those officers, other key employees and directors of the Company who are in
positions in which their decisions, actions and counsel have a significant
impact upon the profitability and success of the Company (but excluding members
of the Committee, except as provided in paragraph 6(h)).
5. Form of Awards.
Awards may be made from time to time by the Committee in the form of
stock options to purchase Shares, stock appreciation rights, performance units,
restricted stock, or any combination of the above. Stock options may be options
which are intended to qualify as incentive stock options ("Incentive Stock
Options") within the meaning of Section 422(b) of the Code, or options which are
not intended to so qualify ("Nonqualified Stock Options").
6. Stock Options.
Stock options for the purchase of Shares shall be evidenced by written
agreements in such form not inconsistent with the Plan as the Committee
shall approve from time to time; provided that the maximum number of
options which may be granted to any one grantee during any twelve-month
period is 75,000 (as adjusted pursuant to paragraph 20, below). Such
agreement shall contain the terms and conditions applicable to the options,
including in substance the following terms and conditions:
(a) Type of Option. Each option agreement shall identify the options
represented thereby as Incentive Stock Options or Nonqualified Stock
Options, as the case may be, and shall set forth the number of Shares
subject to the options.
(b) Option Price. The option exercise price to be paid by the optionee to the
Company for each Share purchased upon the exercise of an option shall be
determined by the Committee, but shall in no event be less than the par
value of a Share.
(c) Exercise Term. Each option agreement shall state the period or periods of
time within which the option may be exercised, in whole or in part, as
determined by the Committee and subject to such terms and conditions as are
prescribed for such purpose by the Committee, provided that no option shall
be exercisable after ten years from the date of grant thereof. The
Committee, in its discretion, may provide in the option agreement
circumstances under which the option shall become immediately exercisable,
in whole or in part, and, notwithstanding the foregoing, may accelerate the
exercisability of any option, in whole or in part, at any time.
(d) Payment for Shares. The purchase price of the Shares with respect to which
an option is exercised shall be payable in full at the time of exercise in
cash, Shares at fair market value, or a combination thereof, as the
Committee may determine and subject to such terms and conditions as may be
prescribed by the Committee for such purpose. Payment may also be made, in
the discretion of the Committee, by delivery (including by facsimile
transmission) to the Company or its designated agent of an executed
irrevocable option exercise form, together with irrevocable instructions to
a broker-dealer to sell (or margin) a sufficient portion of the Shares, and
deliver the sale (or margin loan) proceeds directly to the Company to pay
for the purchase price. If the purchase price is paid by tendering Shares,
the Committee in its discretion may grant the optionee a new stock option
for the number of Shares used to pay the purchase price.
(e) Rights Upon Termination. In the event of Termination (as defined below) of
an optionee's status as an employee or director of the Company for any
cause other than Retirement (as defined below), death or Disability (as
defined below), the optionee shall have the right to exercise the option
during its term within a period of three months after such Termination to
the extent that the option was exercisable at the time of Termination, or
within such other period, and subject to such terms and conditions, as may
be specified by the Committee. (As used herein, "Termination" means, (i) in
the case of an employee, the cessation of the grantee's employment by the
Company for any reason, and (ii) in the case of a director, the cessation
of the grantee's service as a director of the Company; and "Terminates" has
the corresponding meaning. As used herein, "Retirement" means retirement
from active employment (in the case of an employee), or active service (in
the case of a director), with the Company on or after age 65, or such
earlier age with the express written consent for purposes of the Plan of
the Company at or before the time of such retirement, and "Retires" has the
corresponding meaning. As used herein, "Disability" means a condition that,
in the judgment of the Committee, has rendered a grantee completely and
presumably permanently unable to perform any and every duty of his regular
occupation, and "Disabled" has the corresponding meaning). In the event
that an optionee Retires, dies or becomes Disabled prior to the expiration
of his option and without having fully exercised his option, the optionee
or his Beneficiary (as defined below) shall have the right to exercise the
option during its term within a period of (i) one year after Termination
due to Retirement, death or Disability, or (ii) one year after death if
death occurs either within one year after Termination due to Retirement or
Disability or within three months after Termination for other reasons, to
the extent that the option was exercisable at the time of death or
Termination, or within such other period, and subject to such terms and
conditions, as may be specified by the Committee. (As used herein,
"Beneficiary" means the person or persons designated in writing by the
grantee as his Beneficiary with respect to an award under the Plan; or, in
the absence of an effective designation or if the designated person or
persons predecease the grantee, the grantee's Beneficiary shall be the
person or persons who acquire by bequest or inheritance the grantee's
rights in respect of an award). In order to be effective, a grantee's
designation of a Beneficiary must be on file with the Committee before the
grantee's death, but any such designation may be revoked and a new
designation substituted therefor at any time before the grantee's death.
(f) Nontransferability. Options granted under the Plan shall not be sold,
assigned, transferred, exchanged, pledged, hypothecated, or otherwise
encumbered, other than by will or by the laws of descent and distribution.
During the lifetime of the optionee the option is exercisable only by the
optionee.
(g) Incentive Stock Options. In the case of an Incentive Stock Option, each
option shall be subject to such other terms conditions and provisions as
the Committee determines necessary or desirable in order to qualify such
option as an incentive stock option within the meaning of Section 422(b) of
the Code (or any amendment or substitute or successor thereto or regulation
thereunder), including in substance, without limitation, the following:
(i) The purchase price of stock subject to an Incentive Stock Option shall
not be less than 100 percent of the fair market value of such stock on the
date the option is granted, as determined by the Committee.
(ii) The aggregate fair market value (determined as of the time the option
is granted) of the stock with respect to which incentive stock options are
exercisable for the first time by an optionee in any calendar year (under
all plans of the Company and its subsidiary corporations (which term, as
used hereinafter, shall have the meaning ascribed thereto in Section 424(f)
of the Code (or successor provision of similar import))) shall not exceed
$100,000.
(iii) No Incentive Stock Option shall be granted to any employee if at the
time the option is granted the individual owns stock possessing more than
10 percent of the total combined voting power of all classes of stock of
the Company or of a subsidiary corporation of the Company, unless at the
time such option is granted the option price is at least 110 percent of the
fair market value (as determined by the Committee) of the stock subject to
the option and such option by its terms is not exercisable after the
expiration of five years from the date of grant.
(iv) Directors who are not employees of the Company shall not be eligible
to receive Incentive Stock Options.
(v) In the event of Termination of employment by reason of Retirement, if
an Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, the option will
thereafter be treated as a Nonqualified Stock Option.
(h) Automatic Grant of Options to Nonemployee Directors. Notwithstanding
any other provision of the Plan, the grant of options hereunder to
directors who are not also employees of the Company ("Nonemployee
Directors") shall be subject to the following terms and conditions:
(i) If, during the period beginning on December 1, 1995 and ending with the
2005 annual meeting of the stockholders of the Company ("Annual Meeting"),
a person is first elected or appointed as a Nonemployee Director of the
Company, such person shall thereupon be granted a Nonqualified Stock Option
to purchase 20,000 Shares (as adjusted pursuant to paragraph 20, below).
(ii) The purchase price of stock subject to an option granted to
Nonemployee Directors under this paragraph 6(h) shall be equal to 100
percent of the fair market value of such stock on the date the option is
granted.
(iii) Except as provided in paragraph 18, each option
granted to Nonemployee Directors under this paragraph
6(h) shall become exercisable in installments as
follows: to the extent of 20 percent of the number of
Shares originally covered by the option, at any time
after the commencement of the second year of the term
of the option, and to the extent of an additional 20
percent of such number of Shares, at any time after
the commencement of each of the third, fourth, fifth
and sixth years of the term of the option; provided,
however, that the stock option agreements for options
granted under this Section 6(h) shall provide that if
the tenure of such Nonemployee Director shall
terminate by reason of Retirement at or after age 65,
such options shall be fully exercisable with respect
to all Shares not previously purchased, commencing on
the date of retirement of such Director and
continuing for a period of three months.
(iv) Unless otherwise provided in the Plan, all provisions
with respect to the terms of Nonqualified Stock
Options hereunder shall be applicable to options
granted to Nonemployee Directors under this paragraph
6(h).
(v) The automatic grants described in this paragraph 6(h)
shall constitute the only awards under the Plan
permitted to be made to Nonemployee Directors of the
Company.
7. Stock Appreciation Rights.
Stock appreciation rights (SARs) shall be evidenced by written SAR
agreements in such form not inconsistent with the Plan as the Committee shall
approve from time to time; provided that the maximum number of SARs which may be
granted to any one grantee during any twelve-month period is 75,000 (as adjusted
pursuant to paragraph 20, below). Such SAR agreements shall contain the terms
and conditions applicable to the SARs, including in substance the following
terms and conditions:
(a) Award. SARs may be granted in connection with a previously or
contemporaneously granted stock option, or independently of a stock option.
SARs shall entitle the grantee, subject to such terms and conditions as may
be determined by the Committee, to receive upon exercise thereof all or a
portion of the excess of (i) the fair market value at the time of exercise,
as determined by the Committee, of a specified number of Shares with
respect to which the SAR is exercised, over (ii) a specified price which
shall not be less than 100 percent of the fair market value of the Shares
at the time the SAR is granted, or, if the SAR is granted in connection
with a previously issued stock option, not less than 100 percent of the
fair market value of the Shares at the time such option was granted. Upon
exercise of a SAR, the number of Shares reserved for issuance hereunder
shall be reduced by the number of Shares covered by the SAR. Shares covered
by a SAR shall not be used more than once to calculate the amount to be
received pursuant to the exercise of the SAR.
(b) SARs Related to Stock Options. If a SAR is granted in relation to a stock
option, (i) the SAR shall be exercisable only at such times, and by such
persons, as the related option is exercisable; (ii) the grantee's right to
exercise the related option shall be canceled if and to the extent that the
Shares subject to the option are used to calculate the amount to be
received upon the exercise of the related SAR; (iii) the grantee's right to
exercise the related SAR shall be canceled if and to the extent that the
Shares subject to the SAR are purchased upon the exercise of the related
option; and (iv) the SAR shall not be transferable other than by will or by
the laws of descent and distribution, and shall be exercisable during the
lifetime of the grantee only by him.
(c) Term. Each SAR agreement shall state the period or periods of time within
which the SAR may be exercised, in whole or in part, as determined by
the Committee and subject to such terms and conditions as are prescribed
for such purpose by the Committee, provided that no SAR shall be
exercisable earlier than six months after the date of grant or later than
ten years after the date of grant. The Committee may, in its discretion,
provide in the SAR agreement circumstances under which the SARs shall
become immediately exercisable, in whole or in part, and may,
notwithstanding the foregoing, accelerate the exercisability of any SAR, in
whole or in part, at any time.
(d) Termination. SARs shall be exercisable only during the grantee's tenure as
an employee or director of the Company, except that, in the discretion of
the Committee, a SAR may be made exercisable for up to three months after
the grantee is Terminated for any reason other than Retirement, death or
Disability, and for up to one year after the grantee is Terminated because
of Retirement, death or Disability.
(e) Payment. Upon exercise of a SAR, payment shall be made in cash, in Shares
at fair market value on the date of exercise, or in a combination thereof,
as the Committee may determine at the time of exercise.
(f) Other Terms. SARs shall be granted in such manner and such form, and
subject to such additional terms and conditions, as the Committee in its
sole discretion deems necessary or desirable, including without limitation:
(i) if granted in connection with an Incentive Stock Option, in order to
satisfy any requirements set forth under Section 422 of the Code; or, (ii)
in order to avoid any insider-trading liability in connection with a SAR
under Section 16(b) of the 1934 Act.
8. Restricted Stock Awards.
Restricted stock awards under the Plan shall consist of Shares free of
any purchase price or for such purchase price as may be established by the
Committee restricted against transfer, subject to forfeiture, and subject to
such other terms and conditions (including attainment of performance objectives)
as may be determined by the Committee; provided that the maximum number of
Shares of restricted stock which may be awarded to any one grantee during any
twelve-month period is 75,000 (as adjusted pursuant to paragraph 20, below).
Restricted stock shall be evidenced by written restricted stock agreements in
such form not inconsistent with the Plan as the Committee shall approve from
time to time, which agreement shall contain the terms and conditions applicable
to such awards, including in substance the following terms and conditions:
(a) Restriction Period. Restrictions shall be imposed for such period or
periods as may be determined by the Committee. The Committee, in its
discretion, may provide in the agreement circumstances under which the
restricted stock shall become immediately transferable and nonforfeitable,
or under which the restricted stock shall be forfeited, and,
notwithstanding the foregoing, may accelerate the expiration of the
restriction period imposed on any Shares at any time.
(b) Restrictions Upon Transfer. Restricted stock and the right to vote such
Shares and to receive dividends thereon, may not be sold, assigned,
transferred, exchanged, pledged, hypothecated, or otherwise encumbered,
except as herein provided, during the restriction period applicable to such
Shares. Notwithstanding the foregoing, and except as otherwise provided in
the Plan, the grantee shall have all of the other rights of a stockholder,
including, but not limited to, the right to receive dividends and the right
to vote such Shares.
(c) Certificates. A certificate or certificates representing the number of
restricted Shares granted shall be registered in the name of the grantee.
The Committee, in its sole discretion, shall determine when the certificate
or certificates shall be delivered to the grantee (or, in the event of the
grantee's death, to his Beneficiary), may provide for the holding of such
certificate or certificates in escrow or in custody by the Company or its
designee pending their delivery to the grantee or Beneficiary, and may
provide for any appropriate legend to be borne by the certificate or
certificates.
(d) Lapse of Restrictions. The restricted stock agreement shall specify the
terms and conditions upon which any restriction upon restricted stock
awarded under the Plan shall expire, lapse, or be removed, as determined by
the Committee. Upon the expiration, lapse, or removal of such restrictions,
Shares free of the restrictive legend shall be issued to the grantee of his
legal representative. 9. Performance Units.
Performance unit awards under the Plan shall entitle grantees to future
payments based upon the achievements of pre-established long-term performance
objectives and shall be evidenced by written performance unit agreements in such
form not inconsistent with this Plan as the Committee shall approve from time to
time. Such agreements shall contain the terms and conditions applicable to the
performance unit awards, including in substance the following terms and
conditions:
(a) Performance Period. The Committee shall establish with respect to each unit
award a performance period of not fewer than two years.
(b) Unit Value. The Committee shall establish with respect to each unit award
value for each unit which shall not thereafter change, or which may vary
thereafter pursuant to criteria specified by the Committee.
(c) Performance Targets. The Committee shall establish with respect to each
unit award maximum and minimum performance targets to be achieved during
the applicable performance period. Achievement of maximum targets shall
entitle grantees to payment with respect to the full value of a unit award.
Grantees shall be entitled to payment with respect to a portion of a unit
award according to the level of achievement of targets as specified by the
Committee for performance which achieves or exceeds the minimum target but
fails to achieve the maximum target.
(e) Adjustments. At any time prior to the payment of a unit award, the
Committee may adjust previously established performance targets or other
terms and conditions, including the Company's or other corporations'
financial performance for Plan purposes, to reflect major unforeseen events
such as changes in laws, regulations or accounting practices, mergers,
acquisitions or divestitures or other extraordinary unusual or
non-recurring items or events.
(f) Payment of Unit Awards. Following the conclusion of each performance
period, the Committee shall determine the extent to
which performance targets have been attained and any other terms and
conditions satisfied for such period. The Committee shall determine what,
if any, payment is due on the unit award and whether such payment shall be
made in cash, Shares, or a combination thereof. Payment shall be made in a
lump sum or installments, as determined by the Committee, commencing as
promptly as practicable following the end of the performance period unless
deferred subject to such terms and conditions and in such form as may be
prescribed by the Committee.
(g) Termination. In the event that a grantee is Terminated as an employee or
director by the Company prior to the end of the performance period by
reason of death, Disability, or Retirement with the consent of the Company,
any unit award, to the extent earned under the applicable performance
targets, shall be payable at the end of the performance period according to
the portion of the performance period during which the grantee was employed
by or served as a director of the Company, provided that the Committee
shall have the power to provide for an appropriate settlement of a unit
award before the end of the performance period. Upon any other Termination,
participation shall terminate forthwith and all outstanding unit awards
shall be canceled.
10. Loans and Supplemental Cash.
The Committee, in its sole discretion to further the purpose of the
Plan, may provide for supplemental cash payments or loans to individuals in
connection with all or any part of an award under the Plan. Supplemental cash
payments shall be subject to such terms and conditions as shall be prescribed by
the Committee at the time of grant, provided that in no event shall the amount
of payment exceed:
(a) In the case of an option, the excess fair market value of a
Share on the date of exercise over the option price multiplied
by the number of Shares for which such option is exercised, or
(b) In the case of a SAR, performance unit, or restricted stock
award, the value of the Shares and other consideration issued
in payment of such award.
Any loan shall be evidenced by a written loan agreement or other instrument in
such form and containing such terms and conditions (including, without
limitation, provisions for interest, payment schedules, collateral, forgiveness
or acceleration) as the Committee may prescribe from time to time.
11. General Restrictions.
Each award under the Plan shall be subject to the requirement that if
at any time the Company shall determine that (i) the listing, registration or
qualification of the Shares subject or related thereto upon any securities
exchange or under any state or federal law, or (ii) the consent or approval of
any regulatory body, or (iii) an agreement by the recipient of an award with
respect to the disposition of Shares, or (iv) the satisfaction of withholding
tax or other withholding liabilities is necessary or desirable as a condition of
or in connection with the granting of such award or the issuance or purchase of
Shares thereunder, such award shall not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval, agreement,
or withholding shall have been effected or obtained free of any conditions not
acceptable to the Company. Any such restriction affecting an award shall not
extend the time within which the award may be exercised; and neither the Company
nor its directors or officers nor the Committee shall have any obligation or
liability to the grantee or to a Beneficiary with respect to any Shares with
respect to which an award shall lapse or with respect to which the grant,
issuance or purchase of Shares shall not be effected, because of any such
restriction.
12. Single or Multiple Agreements.
Multiple awards, multiple forms of awards, or combinations thereof may
be evidenced by a single agreement or multiple agreements, as determined by the
Committee.
13. Rights of the Shareholder.
The recipient of any award under the Plan, shall have no rights as a
shareholder with respect thereto unless and until certificates for Shares are
issued to him, and the issuance of Shares shall confer no retroactive right to
dividends.
14. Rights to Terminate.
Nothing in the Plan or in any agreement entered into pursuant to the
Plan shall confer upon any person the right to continue in the employment of the
Company or to serve as a director, or affect any right which the Company may
have to terminate the employment or directorship of such person.
15. Withholding.
(a) Prior to the issuance or transfer of Shares under the Plan, the recipient
shall remit to the Company an amount sufficient to satisfy any federal,
state or local withholding tax requirements. The recipient may satisfy the
withholding requirement in whole or in part by electing to have the Company
withhold Shares having a value equal to the amount required to be withheld.
The value of the Shares to be withheld shall be the fair market value, as
determined by the Committee, of the stock on the date that the amount of
tax to be withheld is determined (the "Tax Date"). Such election must be
made prior to the Tax Date, must comply with all applicable securities law
and other legal requirements, as interpreted by the Committee, and may not
be made unless approved by the Committee, in its discretion.
(b) Whenever payments to a grantee in respect of an award under the Plan to be
made in cash, such payments shall be net of the amount necessary to satisfy
any federal, state or local withholding tax requirements.
16. Non-Assignability.
No award under the Plan shall be sold, assigned, transferred,
exchanged, pledged, hypothecated, or otherwise encumbered, other than by will or
by the laws of descent and distribution, or by such other means as the Committee
may approve. Except as otherwise provided herein, during the life of the
recipient, such award shall be exercisable only by such person or by such
person's guardian or legal representative.
17. Non-Uniform Determinations.
The Committee's determinations under the Plan (including without
limitation determinations of the persons to receive awards, the form, amount and
timing of such awards, the terms and provisions of such awards and the
agreements evidencing same, and the establishment of values and performance
targets) need not be uniform and may be made selectively among persons who
receive, or are eligible to receive, awards under the Plan, whether or not such
persons are similarly situated.
18. Change In Control Provisions.
(a) In the event of (1) a Change in Control (as defined) or (2) a
Potential Change in Control (as defined), but only if and to the extent so
determined by the Board of Directors at or after grant (subject to any right of
approval expressly reserved by the Board of Directors at the time of such
determination), the following acceleration and valuation provisions shall apply:
(i) Any SARs outstanding for at least six months and any stock
options awarded under the Plan not previously exercisable and
vested shall become fully exercisable and vested.
(ii) Any restrictions and deferral limitations applicable to any
restricted stock, performance units or other Stock-based
awards, in each case to the extent not already vested under
the Plan, shall lapse and such shares, performance units or
other stock-based awards shall be deemed fully vested.
(iii) The value of all outstanding stock options, SARs, restricted
stock, performance units and other stock-based awards, in each
case to the extent vested, shall, unless otherwise determined
by the Committee in its sole discretion at or after grant but
prior to any Change in Control, be cashed out on the basis of
the Change in Control Price (as defined) as of the date such
Change in Control or such Potential Change in Control is
determined to have occurred or such other date as the
Committee may determine prior to the Change in Control.
(b) As used herein, the term "Change in Control" means the happening of any
of the following:
(i) Any person or entity, including a "group" as defined in Section 13(d)(3) of
the 1934 Act, other than the Company, a subsidiary of the Company, or any
employee benefit plan of the Company or its subsidiaries, becomes the
beneficial owner of the Company's securities having 20 percent or more of
the combined voting power of the then outstanding securities of the Company
that may be cast for the election for directors of the Company (other than
as a result of an issuance of securities initiated by the Company in the
ordinary course of business), or
(ii) As the result of, or in connection with, any cash tender or exchange offer,
merger or other business combination, sale of assets or contested election,
or any combination of the foregoing transactions, less than a majority of
the combined voting power of the then outstanding securities of the Company
or any successor corporation or entity entitled to vote generally in the
election of directors of the Company or such other corporation or entity
after such transaction, are held in the aggregate by holders of the
Company's securities entitled to vote generally in the election of
directors of the Company immediately prior to such transactions; or
(iii)During any period of two consecutive years, individuals who at the
beginning of any such period constitute the Board of Directors cease for
any reason to constitute at least a majority thereof, unless the election,
or the nomination for election by the Company's stockholders, of each
director of the Company first elected during such period was approved by a
vote of at least two-thirds of the directors of the Company then still in
office who were directors of the Company at the beginning of any such
period.
(c) As used herein, the term "Potential Change in Control" means the
happening of any of the following:
(i) The approval by stockholders of an agreement by the Company, the
consummation of which would result in a Change in Control of the Company;
or
(ii) The acquisition of beneficial ownership, directly or indirectly, by any
entity, person or group (other than the Company, a wholly-owned subsidiary
thereof or any employee benefit plan of the Company or its subsidiaries
(including any trustee of such plan acting as such trustee)) of securities
of the Company representing 5 percent or more of the combined voting power
of the Company's outstanding securities and the adoption by the Board of
Directors of a resolution to the effect that a Potential Change in Control
of the Company has occurred for purposes of this Plan.
(d) As used herein, the term "Change in Control Price" means the highest price
per share paid in any transaction reported on the National Association of
Securities Dealers Automated Quotation System (or the New York Stock
Exchange or other national securities exchange, as the case may be), or
paid or offered in any bonafide transaction related to a Potential or
actual Change in Control of the Company at any time during the 60 day
period immediately preceding the occurrence of the Change in Control (or,
where applicable, the occurrence of the Potential Change in Control event),
in each case determined by the Committee except that, in the case of
Incentive Stock Options and SARs relating to Incentive Stock Options, such
price shall be based only on transactions reported for the date on which
the optionee exercises such SARs or, where applicable, the date on which a
cash out occurs under Section 18(a)(iii).
19. Non-Competition Provision.
Unless the award agreement relating to a stock option, SAR, restricted
stock or performance unit specifies otherwise, a grantee shall forfeit all
unexercised, unearned and/or unpaid awards, including, but not by way of
limitation, awards earned but not yet paid, all unpaid dividends and dividend
equivalents, and all interest, if any, accrued on the foregoing if, (i) in the
opinion of the Committee, the grantee without the written consent of the
Company, engages directly or indirectly in any manner or capacity as principal,
agent, partner, officer, director, employee or otherwise, in any business or
activity competitive with the business conducted by the Company or any of its
subsidiaries; or (ii) the grantee performs any act or engages in any activity
which in the opinion of the Chief Executive Officer of the Company is inimical
to the best interests of the Company.
20. Adjustments.
In the event of any change in the outstanding common stock of the
Company, by reason of a stock dividend or distribution, recapitalization,
merger, consolidation, reorganization, split-up, combination, exchange or Shares
or the like, the Board of Directors, in its discretion, may adjust
proportionately the number of Shares which may be issued under the Plan, the
number of Shares subject to outstanding awards, and the option exercise price of
each outstanding option, and may make such other changes in outstanding options,
SARs, performance units and restricted stock awards, as it deems equitable in
its absolute discretion to prevent dilution or enlargement of the rights of
grantees, provided that any fractional Shares resulting from such adjustments
shall be eliminated.
21. Amendment.
The Board of Directors may terminate, amend, modify or suspend the Plan
at any time, except that the Board shall not, without the authorization of the
holders of a majority of Company's voting securities, increase the maximum
number of Shares which may be issued under the Plan (other than increases
pursuant to paragraph 20 hereof), extend the last date on which awards may be
granted under the Plan, extend the date on which the Plan expires, change the
class of persons eligible to receive awards, or change the minimum option price.
In no event, however, shall the provisions of paragraph 6(h) be amended more
often than once every six months, other than to comport with changes in the
Code, the Employment Retirement Income Security Act of 1974, as amended, or the
rules thereunder. No termination, modification, amendment or suspension of the
Plan shall adversely affect the rights of any grantee or Beneficiary under an
award previously granted, unless the grantee or Beneficiary shall consent; but
it shall be conclusively presumed that any adjustment pursuant to paragraph 20
hereof does not adversely affect any such right.
22. Effect on Other Plans.
Participation in this Plan shall not affect a grantee's eligibility to
participate in any other benefit or incentive plan of the Company. Any awards
made pursuant to this Plan shall not be used in determining the benefits
provided under any other plan of the Company unless specifically provided
therein.
23. Effective Date and Duration of the Plan.
The Plan shall become effective when adopted by the Board of Directors,
provided that the Plan is approved by the holders of a majority of the Company's
voting securities on the date of its adoption by the Board or before the first
anniversary of that date. Unless it is sooner terminated in accordance with
paragraph 21 hereof, the Plan shall remain in effect until all awards under the
Plan have been satisfied by the issuance of Shares or payment of cash or have
expired or otherwise terminated, but no award shall be granted more than ten
years after the earlier of the date the Plan is adopted by the Board of
Directors or is approved by the holders of the Company's voting securities.
24. Unfunded Plan.
The Plan shall be unfunded, except to the extent otherwise provided in
accordance with Section 8 hereof. Neither the Company nor any affiliate shall be
required to segregate any assets that may be represented by stock options, SARs,
or performance units, and neither the Company nor any affiliate shall be deemed
to be a trustee of any amounts to be paid under any stock option, SAR or
performance unit. Any liability of the Company or any affiliate to pay any
grantee or Beneficiary with respect to an option, SAR or performance unit shall
be based solely upon any contractual obligations created pursuant to the
provisions of the Plan; no such obligations will be deemed to be secured by a
pledge or encumbrance on any property of the Company or an affiliate.
<PAGE>
25. Governing Law.
The Plan shall be construed and its provisions enforced and
administered in accordance with the laws of the State of Mississippi except to
the extent that such laws may be superseded by any federal law.
ADOPTED BY THE BOARD OF DIRECTORS OF DELTA AND PINE LAND COMPANY ON THE 17TH DAY
OF OCTOBER, 1995 TO BE EFFECTIVE ON DECEMBER 1, 1995 (AFTER THE STOCK SPLIT
EFFECTIVE FOR SHAREHOLDERS OF RECORD ON DECEMBER 1, 1995).
By:
Roger D. Malkin, Chief Executive Officer
<TABLE>
<CAPTION>
EXHIBIT 11.01
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(AS RESTATED)
-------------------------------------------
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING AT THE BEGINNING OF
PERIOD 19,149 19,149 20,849 20,849 20,856
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK ISSUED DURING THE
PERIOD - 256 - 2 120
WEIGHTED AVERAGE NUMBER OF SHARES
ATTRIBUTED TO OPTIONS - - - 265 732
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING
DURING THE PERIOD FOR COMPUTATION
OF PRIMARY EARNINGS PER SHARE 19,149 19,405 20,849 21,116 21,708
====== ====== ====== ====== ======
FULLY DILUTED EARNINGS PER SHARE:
NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING AT THE BEGINNING OF
PERIOD 19,149 19,149 20,849 20,849 20,856
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK ISSUED DURING THE
PERIOD - 256 - 2 120
WEIGHTED AVERAGE NUMBER OF CONVERTIBLE
PREFERRED STOCK ISSUED DURING THE
PERIOD - - - - 264
WEIGHTED AVERAGE NUMBER OF SHARES
ATTRIBUTED TO OPTIONS - - - 293 846
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING
DURING THE PERIOD FOR COMPUTATION
OF FULLY DILUTED EARNINGS PER SHARE 19,149 19,405 20,849 21,144 22,086
========== ========== =========== =========== =========
NET INCOME APPLICABLE TO
COMMON SHARES $7,850 $8,618 $7,827 $10,935 $15,237
========= ========= ========== =========== =========
NET INCOME PER COMMON SHARE:
PRIMARY $ 0.41 $ 0.44 $ 0.38 $ 0.52 $ 0.70
========= ========== ========= =========== ==========
FULLY DILUTED $ 0.41 $ 0.44 $ 0.38 $ 0.52 $ 0.69
========= ========== ========= =========== ==========
At August 31, 1994, Options for 1,155,000 shares (after effect of stock splits)
of D&PL Common Stock were granted at exercise prices of 8 5/16 and 8 13/16.
These options are exercisable over five years commencing in March 1995. They are
not included in the calculations above until 1995 because the deemed exercise of
these options would be antidilutive and/or the impact was less than 3%.
</TABLE>
- --------------------------------------------------------------------------------
EXHIBIT 21.01
SUBSIDIARIES OF REGISTRANT
- --------------------------------------------------------------------------------
PLACE OF
SUBSIDIARY INCORPORATION
GREENFIELD SEED COMPANY USA
D&PL INVESTING CORP. USA
TURK DELTAPINE, INC. USA
DELTA AND PINE LAND INTERNATIONAL, LTD VIRGIN ISLANDS
DELTAPINE AUSTRALIA, PTY., LTD. AUSTRALIA
DELTA PINE DE MEXICO, S.A. DE C.V. MEXICO
ATLED CORPORATION USA
D&PL CHINA, INC. USA
DELTAPINE PARAGUAY, INC. USA
D&PL TECHNOLOGY CORP. USA
D&PL INVESTMENTS, INC. USA
D&PL SOUTH AFRICA, INC. USA
D&M INTERNATIONAL LLC USA
D&M PARTNERS USA
D&PL ARGENTINA, INC. USA
D&PL CHINA PTE, LTD. SINGAPORE
D&PL MEXICO, INC. USA
PAYMASTER TECHNOLOGY CORP. USA
SURE GROW SEED, INC. USA
ELLIS BROTHERS SEED, INC. USA
ARIZONA PROCESSING, INC. USA
MISSISSIPPI SEED, INC. USA
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-K 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-31-1996
<PERIOD-END> AUG-31-1996
<CASH> 560
<SECURITIES> 0
<RECEIVABLES> 67029
<ALLOWANCES> 379
<INVENTORY> 41460
<CURRENT-ASSETS> 111940
<PP&E> 75507
<DEPRECIATION> 20449
<TOTAL-ASSETS> 179660
<CURRENT-LIABILITIES> 75966
<BONDS> 34060
0
45
<COMMON> 2113
<OTHER-SE> 67183
<TOTAL-LIABILITY-AND-EQUITY> 179660
<SALES> 153271
<TOTAL-REVENUES> 153271
<CGS> 97477
<TOTAL-COSTS> 97477
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2418
<INCOME-PRETAX> 23729
<INCOME-TAX> 8453
<INCOME-CONTINUING> 15276
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15237
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.69
</TABLE>
