UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended February 28, 1998 or
-----------------
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
------------------------
Commission File Number: 000-21788
Exact name of registrant as specified in its
charter:
DELTA AND PINE LAND COMPANY
State of Incorporation: Delaware
I.R.S. Employer Identification Number: 62-1040440
Address of Principal Executive Offices (including zip code)
One Cotton Row, Scott, Mississippi 38772
Registrant's telephone number, including area code:
(601) 742-4000
Indicate by check mark whether 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 ( )
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $0.10 Par Value--38,044,792 shares outstanding as of March 31,1998
<PAGE>
DELTA AND PINE LAND COMPANY AND SUBSIDIARIES
INDEX
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Page No.
PART I. FINANCIAL INFORMATION
Item 1................................................................................Consolidated Financial Statements
Consolidated Balance Sheets - February 28, 1997,
August 31, 1997, and February 28, 1998 1
Consolidated Statements of Income - Three Months
Ended February 28, 1997 and February 28, 1998 2
Consolidated Statements of Income - Six Months
Ended February 28, 1997 and February 28, 1998 3
Consolidated Statements of Cash Flows - Six Months
Ended February 28, 1997 and February 28, 1998 4
Notes to Consolidated Financial Statements 5
Item 2....Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. ....Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
DELTA AND PINE LAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
(Unaudited)
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February 28, August 31, February 28,
1997 1997 1998
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 598 $ 1,890 $ 1,343
Receivables, net 72,984 95,437 82,761
Inventories 65,845 42,886 76,621
Prepaid expenses 1,221 2,167 1,467
Deferred income taxes 1,907 3,069 3,069
------------------- ------------------ -------------------
Total current assets 142,555 145,449 165,261
------------------- ------------------ -------------------
PROPERTY, PLANT and EQUIPMENT, net 60,240 63,022 66,131
EXCESS OF COST OVER NET ASSETS OF
BUSINESS ACQUIRED, net 4,737 4,689 4,650
INTANGIBLES, net 3,142 3,674 3,536
OTHER ASSETS 4,130 3,822 2,159
------------------- ------------------ -------------------
$ 214,804 $ 220,656 $ 241,737
=================== ================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 39,482 $ 259 $ 39,355
Accounts payable 17,285 19,113 20,110
Accrued expenses 38,435 91,196 58,903
Income taxes payable 7,149 1,956 3,097
------------------- ------------------ -------------------
Total current liabilities 102,351 112,524 121,465
------------------- ------------------ -------------------
LONG-TERM DEBT, less current maturities 36,486 30,572 36,114
DEFERRED INCOME TAXES 2,888 4,038 4,038
MINORITY INTEREST IN SUBSIDIARIES - 991 1,719
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;
429,319 shares authorized; no shares issued or outstanding
Series M Convertible Non-Voting Preferred, par value $0.10 per share;
1,066,666 shares authorized; 800,000 shares issued and outstanding 80 80 80
Common stock, par value $0.10 per share;
100,000,000 shares authorized; 37,592,764; 37,724,116
and 38,005,050 shares issued; 37,592,764; 37,609,849
and 37,890,784 shares outstanding 3,760 3,772 3,800
Capital in excess of par value 21,124 22,865 26,634
Retained earnings 48,653 48,894 51,715
Cumulative foreign currency translation adjustments (538) (907) (1,655)
Treasury stock at cost, 0; 114,266 and 114,266 shares - (2,173) (2,173)
------------------- ------------------ -------------------
Total stockholders' equity 73,079 72,531 78,401
-
------------------- ------------------ -------------------
$ 214,804 $ 220,656 $ 241,737
=================== ================== ===================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
DELTA AND PINE LAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
(in thousands, except per share amounts)
(Unaudited)
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February 28, February 28,
1997 1998
NET SALES AND LICENSING FEES $ 66,425 $ 77,245
COST OF SALES 41,100 50,098
-------------- ---------------
GROSS PROFIT 25,325 27,147
-------------- ---------------
OPERATING EXPENSES:
Research and development 3,445 3,964
Selling 3,548 4,649
General and administrative 2,847 2,214
Unusual charges related to acquisitions 111 -
---------------- ------------------
9,951 10,827
--------------- -----------------
OPERATING INCOME 15,374 16,320
INTEREST EXPENSE, net of capitalized interest of $156 and $42 (953) (895)
OTHER 129 100
---------------- -------------------
INCOME BEFORE INCOME TAXES 14,550 15,525
PROVISION FOR INCOME TAXES (5,237) (5,744)
--------------- -------------------
NET INCOME 9,313 9,781
DIVIDENDS ON PREFERRED STOCK (14) (24)
----------------- --------------------
NET INCOME APPLICABLE TO COMMON SHARES $ 9,299 $ 9,757
=============== =================
BASIC EARNINGS PER SHARE:
NET INCOME PER SHARE $ 0.25 $ 0.26
================ ================
NUMBER OF SHARES USED IN BASIC EARNINGS
PER SHARE CALCULATION 37,578 37,858
=============== ==============
DILUTED EARNINGS PER SHARE:
NET INCOME PER SHARE $ 0.23 $ 0.24
================ ================
NUMBER OF SHARES USED IN DILUTED EARNINGS
PER SHARE CALCULATION 39,861 40,397
=============== ===============
DIVIDENDS PER SHARE $ 0.0169 $ 0.03
============== ================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
DELTA AND PINE LAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED
(in thousands, except per share amounts)
(Unaudited)
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February 28, February 28,
1997 1998
NET SALES AND LICENSING FEES $ 72,742 $ 82,585
COST OF SALES 46,229 53,371
-------------- ---------------
GROSS PROFIT 26,513 29,214
-------------- ---------------
OPERATING EXPENSES:
Research and development 6,035 7,596
Selling 5,969 7,525
General and administrative 5,441 4,816
Unusual charges related to acquisitions 507 47
---------------- --------------------
17,952 19,984
-------------- -----------------
OPERATING INCOME 8,561 9,230
INTEREST EXPENSE, net of capitalized interest of $288 and $99 (1,222) (1,238)
OTHER 386 166
---------------- -------------------
INCOME BEFORE INCOME TAXES 7,725 8,158
PROVISION FOR INCOME TAXES (2,780) (3,018)
---------------- -------------------
NET INCOME 4,945 5,140
DIVIDENDS ON PREFERRED STOCK (27) (48)
----------------- ---------------------
NET INCOME APPLICABLE TO COMMON SHARES $ 4,918 $ 5,092
=============== =================
BASIC EARNINGS PER SHARE:
NET INCOME PER SHARE $ 0.13 $ 0.13
================ ================
NUMBER OF SHARES USED IN BASIC EARNINGS
PER SHARE CALCULATION 37,578 37,786
=============== =================
DILUTED EARNINGS PER SHARE:
NET INCOME PER SHARE $ 0.12 $ 0.13
================= ================
NUMBER OF SHARES USED IN DILUTED EARNINGS
PER SHARE CALCULATION 39,692 40,259
=============== ================
DIVIDENDS PER SHARE $ 0.0338 $ 0.06
============== =================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
DELTA AND PINE LAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
(in thousands)
(Unaudited)
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February 28, February 28,
1997 1998
---------------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,945 $ 5,140
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 2,470 3,427
Minority interest in subsidiaries - 728
Effects of foreign currency translation losses (293) (748)
Changes in current assets and liabilities:
Receivables (6,334) 12,676
Inventories (24,492) (33,735)
Prepaid expenses 142 700
Accounts payable 2,331 997
Accrued expenses (16,644) (32,293)
Income taxes payable 3,811 1,141
Decrease in intangible and other assets 653 290
------------------- --------------------
Net cash used in operating activities (33,411) (41,677)
------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (7,545) (6,336)
Proceeds from sale of investment - 1,350
------------------- --------------------
Net cash used in investing activities (7,545) (4,986)
------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of short-term debt (56) (3,861)
Payments of long-term debt - (35,092)
Dividends paid (1,296) (2,319)
Proceeds from long-term debt 5,021 40,634
Proceeds from short-term debt 36,943 42,957
Proceeds from exercise of stock options and tax benefit
of stock option exercises 382 3,797
------------------- --------------------
Net cash provided by financing activities 40,994 46,116
------------------- --------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 38 (547)
CASH AND CASH EQUIVALENTS, as of August 31 560 1,890
------------------- --------------------
CASH AND CASH EQUIVALENTS, as of February 28 $ 598 $ 1,343
=================== ====================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the six months for:
Interest paid, net of capitalized interest $ 1,200 $ 725
Income taxes $ - $ -
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
DELTA AND PINE LAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except percentages and share amounts)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the generally accepted accounting principles for interim
financial information and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for the fair presentation of the consolidated financial statements
have been included. Due to the seasonal nature of Delta and Pine Land Company
and subsidiaries' (the "Company") business, the results of operations for the
three and six month periods ended February 28, 1997 and February 28, 1998, are
not necessarily indicative of the results to be expected for the full year. For
further information reference should be made to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report to
Stockholders on Form 10-K for the fiscal year ended August 31, 1997.
In October 1997, the Board of Directors authorized a 4 for 3 stock split for all
common and preferred shares outstanding effected in the form of a dividend, with
no change in par value, distributed on November 20, 1997 to stockholders of
record on November 10, 1997. This stock split has been reflected in the
accompanying financial statements.
Certain prior year balances have been reclassified to conform to the current
year presentation. Shares outstanding and per share amounts have been restated
to reflect the adoption of Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings per Share". This statement requires, among other things, the
presentation of basic earnings per share and diluted earnings per share. Basic
earnings per share excludes dilution and is computed by dividing net income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity.
2. RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 130, "Reporting Comprehensive Income", establishes new standards for
reporting comprehensive income and its components (revenues, expenses, gains and
losses) in financial statements. This statement is effective for fiscal years
beginning after December 15, 1997. The Company does not expect the adoption of
SFAS No. 130 to have a material effect on its financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. This statement is
effective for financial statements for periods beginning after December 15,
1997. The Company will not be affected by this statement, because it is in only
one line of business.
<PAGE>
3. INVENTORIES
Inventories consisted of the following (in thousands):
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February 28, August 31, February 28,
1997 1997 1998
---------------- --------------- ----------
Finished goods $ 36,392 $ 28,114 $ 50,019
Raw materials 29,090 16,121 25,744
Growing crops 687 300 766
Supplies and other 1,765 876 2,782
---------------- ------------- ---------------
67,934 45,411 79,311
Less reserves (2,089) (2,525) (2,690)
--------------- -------------- ---------------
$ 65,845 $ 42,886 $ 76,621
============= ============ =============
</TABLE>
Substantially all finished goods and raw material inventory is valued at the
lower of average cost or market. Growing crops are recorded at cost.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
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February 28, August 31, February 28,
1997 1997 1998
Land and improvements $ 4,157 $ 4,360 $ 4,415
Buildings and improvements 27,320 32,425 32,196
Machinery and equipment 35,570 29,658 36,618
Germplasm 7,500 7,500 7,500
Breeder and foundation seed 2,000 2,000 2,000
Construction in progress 6,535 8,276 7,612
------------------------------ ---------------
83,082 84,219 90,341
Less accumulated depreciation (22,842) (21,197) (24,210)
--------------- -------------- ---------------
$ 60,240 $ 63,022 $ 66,131
============== ============= ==============
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5. CONTINGENCIES
Between August 1997 and February 1998, numerous farmers filed arbitration claims
against the Company and Monsanto
Company ("Monsanto") with state agencies, primarily Mississippi. The
complainants allege that Roundup Ready(R) seed marketed by the Company failed to
perform as anticipated resulting in deformed or missing bolls and some further
assert substantial yield losses in their 1997 crops. The Company and Monsanto
are presently investigating these claims to determine the cause or causes of the
problems alleged. Pursuant to the terms of the Roundup Ready Gene License and
Seed Services Agreement (the "Roundup Agreement") between D&PL and Monsanto,
Monsanto has assumed responsibility for the defense of these claims.
Additionally, under the Roundup Agreement, Monsanto is contractually obligated
to defend and indemnify the Company against all claims arising out of failure of
the Roundup Ready glyphosate tolerance gene. D&PL will not have a right to
indemnification from Monsanto, however, for any claims involving defective
varietal characteristics separate from or in addition to failure of the
herbicide-tolerance gene. D&PL believes that these claims will be resolved
without any material impact on the Company's financial statements.
<PAGE>
The Company, Monsanto and other third parties were named as defendants in a
lawsuit filed in the District Court of Falls County, Texas, in August 1996.
Another lawsuit was filed in October 1996, in the District Court for
Natchitoches Parish, Louisiana. A second Texas lawsuit brought in 1996 was
settled in 1997 with no material impact on the Company or its financial
statements. In the two remaining cases, the plaintiffs allege, among other
things, that D&PL's NuCOTN varieties, which contain Monsanto's Bollgard(TM)
gene, did not perform as these farmers had anticipated and, in particular, did
not fully protect their cotton crops from certain lepidopteran insects. Pursuant
to the terms of the Bollgard Gene License and Seed Services Agreement (the
"Bollgard Agreement") between D&PL and Monsanto, Monsanto has assumed
responsibility for the defense of these claims. Some of these claims for failure
of the Bollgard gene are subject to a duty of defense by Monsanto and prorata
indemnification under the Bollgard Agreement. Under the applicable indemnity
provisions of the Bollgard Agreement, defense costs and liability to the
plaintiffs on any failure of the technology would be apportioned 71% to Monsanto
and 29% to D&PL. Some of the claims in this litigation concern failure of
Monsanto's express warranties relating to insect resistance and those claims may
not be within the scope of D&PL's indemnity obligation to Monsanto. On the other
hand, some of the claims made in the litigation concern the quality of seed and
seed coat treatments, or other varietal aspects of NuCOTN, not involving failure
of performance of the Bollgard gene or express representations with respect
thereto and, therefore, may not be within the scope of Monsanto's indemnity
obligation to D&PL. D&PL intends to cooperate with Monsanto in its anticipated
vigorous defense of these suits. D&PL believes that these suits will be resolved
without any material impact on the Company's financial statements.
In October 1996, Mycogen Plant Science, Inc. ("Mycogen") and Agrigenetics, Inc.
filed a lawsuit in U.S. District Court in Delaware naming D&PL, Monsanto and
DeKalb Genetics ("DeKalb") as defendants alleging that two of Mycogen's recently
issued patents have been infringed by the defendants by making, selling, and
licensing seed that contains the Bollgard gene. The suit seeks injunctions
against alleged infringement, compensatory damages, treble damages and
attorney's fees and court costs. Pursuant to the terms of the Bollgard
Agreement, Monsanto is required to defend D&PL against patent infringement
claims and indemnify D&PL against damages from any patent infringement claims
and certain other losses and costs. Due to Monsanto's obligation to indemnify
D&PL, the Company believes that the resolution of this matter will not have a
material impact on the Company or its financial statements. In February 1998,
the Court returned a verdict in favor of D&PL, Monsanto and DeKalb on all counts
finding Mycogen's patents invalid.
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 $850,000 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 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. (which own the outstanding common stock of
Sure Grow Seed, Inc). The CID states that the USDOJ is investigating whether
these transactions may have violated the provisions of Section 7 of the Clayton
Act, 15 USC ss. 18. D&PL has responded to the CID, employees have been examined
by the USDOJ, and D&PL is committed to full cooperation with the USDOJ. At the
present time, the ultimate outcome of the investigation cannot be predicted.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Delta and Pine Land Company and subsidiaries ("D&PL" or the "Company"), a
Delaware corporation, 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, conditions 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 sold D&PL's remaining corn and sorghum
varieties through 1997. D&PL will exchange a sorghum processing plant located in
Plainview, Texas for a cotton seed delinting facility in Lubbock, Texas owned by
Mycogen by December 31, 1998.
In the 1980's, as a component of its long-term growth strategy, the Company
began to market its products, primarily cotton seed, internationally. The
Company has strengthened and expanded its international staff in order to
support its expanding joint venture activities. 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) gene technology licensed from Monsanto Company
("Monsanto") would be effective and help farmers in those countries to control
certain lepidopteran cotton pests.
D&PL sells its products in foreign countries through (i) export sales from the
U.S., (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 from the U.S. of the
Company's products rather than direct in-country operations.
D&M International, LLC, is a venture formed in 1995 through which D&PL (the
managing member) and Monsanto plan to introduce in combination D&PL's acid
delinting technology and Monsanto's Bollgard gene technology. In November 1995,
D&M International, LLC formed a subsidiary, D&PL China Pte Ltd. ("D&PL China").
In November 1996, D&PL China concluded negotiations with parties in Hebei
Province, one of the major cotton producing regions in the People's Republic of
China, to form Hebei Ji Dai Cotton Seed Technology Company Ltd. ("Ji Dai"), a
joint venture controlled by D&PL China. In June 1997, Ji Dai commenced
construction of a new cotton seed conditioning and storage facility in Hebei,
China, under terms of the joint venture agreement. The new facility was
completed in November 1997. During the 1997 growing season, the joint venture
harvested sufficient seed (assuming normal production runs) to produce seed
sufficient to plant up to 500,000 acres of Bollgard cotton in Hebei in 1998.
In December 1997, D&M International, LLC announced a joint venture with Centro
Integral Agropecuario ("CIAGRO"), a distributor of agricultural inputs in the
Argentine cotton region, for the production and sale of genetically improved
cotton seed. The new joint venture will be called CDM Mandiyu and will be owned
60% by D&M International, LLC and 40% by
<PAGE>
CIAGRO. The cotton region, comprised of the Provinces of Chaco, Santiago del
Estero, Catamarca and Jujuy, presently has 2.5 million acres of cotton requiring
21,000 tons of cotton planting seed per year. The new venture, CDM Mandiyu, will
produce high quality cotton seed, integrating CIAGRO's local market and
distribution knowledge and D&PL's cotton breeding and production capabilities
with Monsanto's biotechnology expertise.
CDM Mandiyu will be licensed to sell D&PL cotton varieties containing Monsanto's
Bollgard gene technology. Commercialization is planned for calendar 1998, after
final approval from certain Argentine governmental agencies. Future plans
include the production and sale of Roundup Ready(R) cotton, which is estimated
to take place in fiscal 1999.
The Company reached an agreement with parties in Zimbabwe to form a joint
venture that will provide high quality acid delinted seed to farmers in Zimbabwe
and is awaiting final approval from the Zimbabwean government. Initially, the
seed processing facility will process and sell locally developed and owned
varieties which will be genetically transformed so they contain the Bollgard
gene technology and potentially other technologies developed in the future. The
introduction of these technologies into locally developed germplasm is expected
to provide both large commercial growers as well as the small communal growers a
significant economic advantage over those who don't use these technologies. The
Zimbabwean government has proposed certain changes to the agreement which are
unacceptable to D&PL. The Company believes it is unlikely that the agreement
will be approved in its present form.
The Company and parties in Latin America are negotiating to form joint ventures
that will process locally, and/or form distributorships that will import, acid
delinted cotton seed for sale in certain Latin America countries. Initial plans
call for the introduction of D&PL transgenic varieties which have already
performed well in these countries as well as the transformation of locally
developed germplasm into varieties that contain the Bollgard gene technology and
potentially other new technologies. The ventures will also evaluate for
suitability D&PL germplasm developed in the Southern Hemisphere and elsewhere.
Monsanto's Bollgard gene is currently sold in cotton seed varieties owned by
D&PL in the United States, Mexico and Australia
The Company's recently completed delinting plants in South Africa and Argentina
process foundation seed grown in these countries. Such seed was exported to the
U.S. for sale in the Spring of 1997. The use of Southern Hemisphere winter
nurseries and seed production programs such as these can dramatically accelerate
the introduction of new varieties because D&PL can raise at least two crops per
year by taking advantage of the Southern Hemisphere growing season. Through
these locations, the Company is also evaluating local market opportunities for
the Company's cotton and, where feasible, soybean seed varieties.
The Company's 1997 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,
has been in effect for over one year now. This new structure has created healthy
competition among the brands, particularly in the sales and research and
development areas.
In 1997, D&PL announced a production and cost optimization program aimed to
improve operating efficiencies. The Company expects this program will reduce its
unit cost of production and reduce the operating expense growth rate in future
years. As part of this program, the Company idled three of its higher cost
delinting facilities and reduced its work force at these facilities. The Company
also reduced its work force further with a voluntary early retirement plan. D&PL
believes its reconfigured production capabilities will allow it to continue to
meet the accelerating demand for its insect resistant and herbicide tolerant
transgenic products on a cost efficient basis to the farmer.
The Company is currently addressing its "Year 2000" computer software issues and
has formulated a plan to resolve these matters. Management believes the
Company's applications on operating systems software will be Year 2000 compliant
before 2000. The Company expects no material costs or interruptions to its
operations because a significant portion of the Company's software was replaced
by the purchase of computer software that is already Year 2000 compliant.
<PAGE>
Acquisitions
In 1996, D&PL acquired Ellis Brothers Seed, Inc., Arizona Processing, Inc. and
Mississippi Seed, Inc., which own the outstanding common stock of Sure Grow
Seed, Inc., (the "Sure Grow Companies") in exchange for stock valued at
approximately $70 million on the day of closing. D&PL exchanged 2.8 million
shares of its common stock (after adjustment for all stock splits effected
through November 1997) for all outstanding shares of the three companies. The
merger was accounted for as a pooling-of-interests. The acquired companies have
continued to market upland picker cotton seed varieties under their existing
brand, Sure Grow. Additionally, through the Company, the Sure Grow breeding
program now has access to Monsanto's Bollgard and Roundup Ready gene
technologies.
In 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 800,000 shares (after
adjustment for all stock splits effected through November 1997) of the Company's
Series M Convertible Non-Voting Preferred Stock. Additional shares may be issued
to Monsanto depending on the sales and profitability levels achieved by the
product line acquired.
Since the 1940's, the Paymaster(R) and Lankart(R) upland stripper cotton seed
varieties have been developed for and marketed primarily in the High Plains of
Texas and Oklahoma ("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 were planted on approximately 80% of
the estimated 4.0 to 5.0 million cotton acres in the High Plains through 1997,
only a small portion of that seed was actually sold by Paymaster. Farmer-saved
seed accounted for up to 85% of the seed needed to plant the acreage in this
market area. Through 1997 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, D&PL's, operations
department, in addition to producing parent seed, commenced delinting,
conditioning and bagging seed. Unconditioned ("fuzzy") seed is also supplied by
D&PL to a limited number of contract processors who delint, condition and bag
seed for a fee. This finished seed is then sold by Paymaster as registered seed
to 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(R) trade name and
trademark and the right to distribute Pima extra-long staple (fiber-length)
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 is
produced, conditioned and sold by D&PL to distributors and dealers.
Biotechnology
Collaborative biotechnology licensing agreements which were executed with
Monsanto in 1992 and subsequently revised in 1993 and 1997, provide for the
commercialization of Monsanto's Bollgard ("Bacillus thuringiensis" or "Bt") gene
technology in D&PL's varieties. The selected Bt is a bacterium found naturally
in soil and 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. In October 1995, Monsanto was
notified that the United States Environmental Protection Agency ("EPA") had
completed its initial registration of the Bollgard gene technology, thus
clearing the way for commercial sales of seed containing the Bollgard gene. In
1996, D&PL sold commercially for the first time two NuCOTN varieties, which
contained the Bollgard gene, in accordance with the terms of the Bollgard Gene
License and Seed Services Agreement (the "Bollgard
<PAGE>
Agreement") between the Company and Monsanto. This initial EPA registration
expires on January 1, 2001, at which time the EPA will, among other things,
reevaluate the effectiveness of the insect resistance management plan and decide
whether to convert the registration to a non-expiring (and/or unconditional)
registration.
The Bollgard Agreement between D&PL and certain of its affiliates and Monsanto
provides for D&PL to commercialize D&PL cotton varieties that contain Monsanto's
Bt gene technology. The gene and the related technology were patented or
licensed from others by Monsanto and were licensed to D&PL for use under the
trade name, Bollgard. Pursuant to the terms of the Bollgard Agreement, farmers
must buy a limited use sub-license for the technology in order to purchase seed
containing the Bt gene technology. The distributor/dealers who coordinate the
farmer licensing process receive a service payment of up to 20% of the
technology sub-licensing fee. After the dealers and distributors are
compensated, D&PL pays Monsanto a royalty equal to 71% of the net sub-license
fee (technology sub-licensing fees less distributor/dealer payments) and D&PL
retains 29%. The license agreement continues until the later of the expiration
of all patent rights or October 2008.
Pursuant to the Bollgard Agreement, Monsanto must defend and indemnify D&PL
against claims of patent infringement, including all damages awarded or amounts
paid in settlements. Monsanto will also indemnify D&PL against a) costs of
inventory and b) lost profits on inventory which becomes unsaleable because of
patent infringement claims. Monsanto must defend any claims of failure of
performance of a Bollgard gene. Monsanto and D&PL will share the cost of any
product performance claims in proportion to each party's share of the royalty.
Indemnity from Monsanto only covers performance claims involving failure of
insect resistance, and not claims alleging poor seed quality, vigor, or
agronomic characteristics.
D&PL has also developed transgenic cotton and transgenic soybean varieties that
are tolerant to Roundup(R) , 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 (the "Roundup Ready Agreement") which
provides for the commercialization of Roundup Ready cotton seed. The Roundup
Ready Agreement grants a license to D&PL and certain of its affiliates the right
in the United States to sell cotton seed of D&PL's varieties that contain
Monsanto's Roundup Ready gene. The Roundup Ready gene makes cotton plants
tolerant to contact with Roundup (glyphosate) herbicide. Similar to the Bollgard
Agreement, farmers must execute limited use sub-licenses for the technology in
order to purchase seed containing the Roundup Ready Gene. Monsanto must defend
and indemnify D&PL against claims of patent infringement, including all damages
awarded or amounts paid in settlements. Monsanto will also indemnify D&PL
against the cost of inventory that becomes unsaleable because of patent
infringement claims, but Monsanto is not required to indemnify D&PL against lost
profits on such unsaleable seed. In contrast with the Bollgard Gene License
where the costs of gene performance claims will be shared in proportion to the
division of sub-license revenue, Monsanto must defend and must bear the full
cost of any claims of failure of performance of the Roundup Ready Gene. In both
agreements, generally, D&PL is responsible for varietal/seed performance issues
and Monsanto is responsible for failure of the genes. In February 1997, the
Company and Monsanto executed the Roundup Ready Soybean License Agreement (the
"Roundup Ready Soybean Agreement") which provides for the commercialization of
Roundup Ready soybean seed.
Since 1987, D&PL has conducted research using genes provided by DuPont to
develop soybean plants that are tolerant to certain DuPont ALS(R) herbicides.
Such plants enable farmers to apply these herbicides for weed control without
significantly affecting the agronomics of the 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.
D&PL announced in March 1998 that it has been granted United States Patent No.
5,723,765, entitled CONTROL OF PLANT GENE EXPRESSION. This patent is owned
jointly by D&PL and the United States of America, as represented by the
Secretary of Agriculture. The patent broadly covers plants and seed, both
transgenic and conventional, of all species for a system designed to allow
control of progeny seed viability without harming the crop. The principal
application of the technology will be to control unauthorized planting of seed
of proprietary varieties (sometimes called "brown bagging") by making such
practice non-economic since unauthorized saved seed will not germinate, and
would be useless for planting. The patent has the prospect of opening
significant worldwide seed markets to the sale of transgenic technology in
varietal crops in which crop seed currently is saved and used in subsequent
seasons as planting seed. D&PL intends that licensing of this technology will be
made widely available to other seed companies.
<PAGE>
The patent was developed from a research program conducted pursuant to a
Cooperative Research and Development Agreement between D&PL and the U.S.
Department of Agriculture's Agricultural Research Service in Lubbock, Texas. The
technology resulted from basic research and will require further development,
which is already underway, in order to be used in commercial seed.
The Company has agreements with other providers of technology that the Company
is evaluating for potential commercial applications and/or introduction. The
Company also contracts with third parties to perform research on the Company's
behalf for germplasm protection techniques and enabling technologies that the
Company believes have potential commercial applications in varietal crops around
the world.
Commercial Seed
Seed of all commercial plant species is either varietal or hybrid. D&PL's cotton
and soybean seed are varietals. 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 of 1970, as amended in 1994, in
essence prohibits, with limited exceptions, purchasers of varieties protected
under the amended Act from selling seed harvested from these varieties without
permission of the plant variety protection owner. Some foreign countries provide
similar protection.
Although cotton is 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 cotton seed 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
2,600 acres in the U.S., 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 parent 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 may be 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 from early in the second fiscal
quarter through the beginning of the fourth fiscal quarter. Varying climatic
conditions can change the quarter in which seed is delivered, thereby shifting
sales and the Company's earnings 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 and Roundup Ready licensing fees are recognized based on
the number of acres to be planted with such seed when the seed is shipped. Prior
to 1998, licensing fees were based on the estimated number of acres that farmers
were expected to plant with the seed purchased. In 1998 the licensing fees
charged to farmers is based on seed drop rates established for seven geographic
regions. Revenue is recognized based on established technology fee per unit
shipped in each geographic region. Domestically, the Company promotes its cotton
and soybean seed directly to farmers and sells its seed through distributors and
dealers. All of the Company's domestic seed products (including Bollgard and
Roundup Ready technologies) 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 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 export seed revenues are
recognized upon the date seed is shipped or the date letters of credit are
cleared, whichever is later. Generally, international export sales are not
subject to return.
<PAGE>
Outlook
From time to time, the Company may make forward-looking statements relating to
such matters as anticipated financial performance, existing 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 those noted elsewhere in this Item and the following:
Demand for D&PL's seed will 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.
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.
The production, distribution or sale of crop seed in or to foreign markets
may be subject to special risks, including fluctuations in foreign
currency, exchange rate controls, expropriation, nationalization and other
agricultural, economic, tax and regulatory policies of foreign
governments. Particular policies which may affect the international
operations of D&PL include the testing and quarantine and other
restrictions relating to the import and export of plants and seed products
and the availability of proprietary protection for plant products. In
addition, United States government policies, particularly those affecting
foreign trade and investment, may impact the Company's international
operations.
Overall profitability will depend on weather conditions, government
policies in all countries where the Company sells products, worldwide
commodity prices, the Company's ability to successfully open new
international markets, the Company's ability to successfully continue the
development of the High Plains market, the technology partners' ability to
obtain timely government approval (and maintain such approval) for
existing and 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 successfully complete 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.
<PAGE>
RESULTS OF OPERATIONS
The following sets forth selected operating data of the Company (in thousands):
<TABLE>
<S> <C> <C>
For the Three Months Ended For the Six Months Ended
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
February 28, February 28, February 28, February 28,
1997 1998 1997 1998
---------------- --------------- --------------- ----------
Operating results -
Net sales and licensing fees $ 66,425 $ 77,245 $ 72,742 $ 82,585
Gross profit 25,325 27,147 26,513 29,214
Operating expenses:
Research and development 3,445 3,964 6,035 7,596
Selling 3,548 4,649 5,969 7,525
General and administrative 2,847 2,214 5,441 4,816
Unusual charges related to acquisitions 111 - 507 47
Operating income 15,374 16,320 8,561 9,230
Interest expense, net (953) (895) (1,222) (1,238)
Income before income taxes 14,550 15,525 7,725 8,158
Net income applicable to common shares 9,299 9,757 4,918 5,092
</TABLE>
The following sets forth selected balance sheet data of the Company as of the
following periods (in thousands):
<TABLE>
<S> <C> <C> <C> <C>
February 28, August 31, February 28,
1997 1997 1998
----------------------- ----------------------- ------------------------
Balance sheet summary-
Current assets $ 142,555 $ 145,449 $ 165,261
Current liabilities 102,351 112,524 121,465
Working capital 40,204 32,925 43,796
Property, plant and equipment, net 60,240 63,022 66,131
Total assets 214,804 220,656 241,737
Outstanding borrowings 75,968 30,831 75,469
Stockholders' equity 73,079 72,531 78,401
</TABLE>
Three months ended February 28, 1998, compared to three months ended February
28, 1997:
Net sales and licensing fees increased approximately $10.8 million to $77.2
million from $66.4 million. The increase in net sales and licensing fees is the
result of increased sales of Roundup Ready stripper cotton seed and first year
sales by the China joint venture, partially offset by lower sales of upland
picker cotton seed.
Operating expenses increased from $9.9 million in the second fiscal quarter of
1997 to $10.8 million in fiscal 1998. This increase is attributable to
additional product development, research and promotional costs, the effects of
which were partially offset by lower costs of professional and legal fees.
Interest expense decreased by 6% to $0.89 million from $0.95 million primarily
due to lower outstanding borrowings, partially offset by lower capitalized
interest.
Six months ended February 28, 1998, compared to six months ended February 28,
1997:
Net sales and licensing fees increased approximately $9.8 million to $82.5
million from $72.7 million. The increase in net sales and licensing fees is the
result of increased sales of Roundup Ready stripper cotton seed and first year
sales by the China joint venture, partially offset by lower sales of upland
picker cotton seed and lower sales in Australia.
<PAGE>
Operating expenses increased from $17.9 million in 1997 to $19.9 million in
1998. This expected increase is primarily due to additional domestic product
development costs, research and promotional costs and the establishment of
international research operations in Greece, Spain and China, offset by lower
professional and legal fees.
Interest expense was consistent between 1997 and 1998, although capitalized
interest decreased between years.
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 16 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 by the first fiscal quarter of the following
year. D&PL also offers distributors, dealers and farmers financial incentives to
make early payments. To the extent D&PL attracts early payments from customers,
bank borrowings under the credit facility are reduced.
The Company records receivables for technology fees on Bollgard and Roundup
Ready seed sales as the seed is shipped, usually in the Company's second and
third quarters. The Company has contracted the billing and collection activities
for Bollgard and Roundup Ready seed technology fees to Monsanto. In September,
the technology fees are due at which time D&PL receives payment from Monsanto.
D&PL then pays Monsanto its royalty for the Bollgard and Roundup Ready
technology fees.
The Company borrows funds from a financial institution to meet its working
capital needs. The current agreement provides a core commitment of $50 million
and a seasonal commitment of $25 million, plus additional availability of $10
million at the Company's discretion. The core commitment is a long-term loan
that may be borrowed upon at any time and is due January 1, 2000. The seasonal
commitment is a working capital loan that may be drawn upon from September 1
through June 30 of each fiscal year and expires January 1, 2000. Each commitment
offers variable and fixed interest rate options and requires the Company to pay
facility or commitment fees and to comply with certain financial covenants.
The Company is currently negotiating a $110 million Senior Credit Facility with
its existing lender and two participating institutions and anticipates executing
this agreement in April 1998. The planned facility will include a $55 million
core facility due in 2001 and a $55 million seasonal facility available
September 1 through June 30 each year, also due in 2001. The new agreement will
have covenants and pricing structures similar to the existing agreements.
Capital expenditures for the second fiscal quarter of 1998 were $1.9 million.
Domestic projects for fiscal 1998 include additional bagged seed storage to
centralize warehousing of bagged seed and minimize storage and handling costs
and an upgrade of computer hardware. The primary international project for
fiscal 1998 to date is the completion of a new cotton seed conditioning and
storage facility in Hebei, China. Management believes that domestic and
international capital expenditures will approximate $7.5 million and $8.0
million, respectively, in fiscal 1998. These capital projects will be funded by
cash from operations, borrowings or investments from joint venture partners, as
necessary.
In October 1997, the Board of Directors authorized a 4 for 3 stock split for all
common and preferred shares outstanding effected in the form of a dividend, with
no change in par value, distributed on November 20, 1997 to stockholders of
record on November 10, 1997. This stock split has been reflected in the
accompanying financial statements. A quarterly dividend rate of $0.03 per share
was maintained after the split, which represents a 25% increase in the dividend
rate.
<PAGE>
In the second quarter of fiscal 1998, the Board of Directors authorized a
quarterly dividend of $0.03 per share, paid March 16, 1998 to the stockholders
of record on March 1, 1998. It is anticipated that quarterly dividends of $0.03
per share will continue to paid in the future, although the Board of Directors
reviews this policy quarterly.
Cash provided from operations, early payments from customers and borrowings
under the loan agreement should be sufficient to meet the Company's 1998 working
capital needs.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the stockholders of Delta and Pine Land Company was held
on Thursday, February 27, 1998, for the following purposes:
1. to elect two Class II members to the Board of Directors, each to serve until
the 2001 Annual Meeting of Stockholders. 2. to increase the number of shares of
Common Stock authorized from 50,000,000 to 100,000,000; 3. to ratify the
appointment of Arthur Andersen LLP as the independent public accountants for the
fiscal year ending
August 31, 1998;
The results from the stockholders' meeting is as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Item Number For Against Withheld/Abstained
1.(a) Joseph M Murphy 27,133,048 - 23,439
(b) Rudi E. Scheidt 27,132,764 - 23,723
2. 26,652,961 486,396 17,128
3. 27,118,872 24,941 12,672
</TABLE>
Other directors whose term of office continued after the meeting are
Roger D. Malkin, Jon E.M. Jacoby, Stanley P. Roth and
Nam-Hai Chua.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
11.01 Computation of Earnings Per Share
27.01 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended February 28,
1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DELTA AND PINE LAND COMPANY
<TABLE>
<S> <C> <C>
Date: April 14, 1998 /s/ Roger D. Malkin
-------------------
Roger D. Malkin, Chairman and
Chief Executive Officer
Date: April 14, 1998 /s/ W. Thomas Jagodinski
------------------------
W. Thomas Jagodinski,
Vice President - Finance and Treasurer
</TABLE>
<PAGE>
EXHIBIT 11.01
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS ENDED
<TABLE>
<S> <C> <C> <C>
February 28, February 28,
1997 1998
--------------------- ---------------------
BASIC EARNINGS PER SHARE:
NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING AT THE BEGINNING OF
PERIOD 37,572 37,840
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK ISSUED DURING THE
PERIOD 6 18
--------------------- ---------------------
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING
DURING THE PERIOD FOR COMPUTATION
OF BASIC EARNINGS PER SHARE 37,578 37,858
===================== =====================
DILUTED EARNINGS PER SHARE:
NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING AT THE BEGINNING OF 37,572 37,840
PERIOD
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK ISSUED DURING THE
PERIOD 6 18
WEIGHTED AVERAGE NUMBER OF SHARES
ATTRIBUTED TO CONVERTIBLE PREFERRED 800 800
STOCK
NUMBER OF SHARES ATTRIBUTED TO
STOCK OPTIONS 1,483 1,739
--------------------- ---------------------
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING
DURING THE PERIOD FOR COMPUTATION
OF DILUTED EARNINGS PER SHARE 39,861 40,397
===================== =====================
NET INCOME APPLICABLE TO COMMON SHARES $ 9,299 $ 9,757
===================== =====================
NET INCOME PER COMMON SHARE:
BASIC $ 0.25 $ 0.26
===================== =====================
DILUTED $ 0.23 $ 0.24
===================== =====================
</TABLE>
<PAGE>
EXHIBIT 11.01
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE SIX MONTHS ENDED
<TABLE>
<S> <C> <C> <C>
February 28, February 28,
1997 1998
--------------------- ---------------------
BASIC EARNINGS PER SHARE:
NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING AT THE BEGINNING OF
PERIOD 37,564 37,610
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK ISSUED DURING THE
PERIOD 14 176
--------------------- ---------------------
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING
DURING THE PERIOD FOR COMPUTATION
OF BASIC EARNINGS PER SHARE 37,578 37,786
===================== =====================
DILUTED EARNINGS PER SHARE:
NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING AT THE BEGINNING OF 37,564 37,610
PERIOD
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK ISSUED DURING THE
PERIOD 14 176
WEIGHTED AVERAGE NUMBER OF SHARES
ATTRIBUTED TO CONVERTIBLE PREFERRED 800 800
STOCK
NUMBER OF SHARES ATTRIBUTED TO
STOCK OPTIONS 1,314 1,673
--------------------- ---------------------
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING
DURING THE PERIOD FOR COMPUTATION
OF DILUTED EARNINGS PER SHARE 39,692 40,259
===================== =====================
NET INCOME APPLICABLE TO COMMON SHARES $ 4,918 $ 5,092
===================== =====================
NET INCOME PER COMMON SHARE:
BASIC $ 0.13 $ 0.13
===================== =====================
DILUTED $ 0.12 $ 0.13
===================== =====================
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> FEB-28-1998
<CASH> 1,343
<SECURITIES> 0
<RECEIVABLES> 82,761
<ALLOWANCES> 0
<INVENTORY> 76,621
<CURRENT-ASSETS> 165,261
<PP&E> 90,341
<DEPRECIATION> 24,210
<TOTAL-ASSETS> 241,737
<CURRENT-LIABILITIES> 121,465
<BONDS> 36,114
0
80
<COMMON> 3,800
<OTHER-SE> 74,521
<TOTAL-LIABILITY-AND-EQUITY> 241,737
<SALES> 77,245
<TOTAL-REVENUES> 77,245
<CGS> 50,098
<TOTAL-COSTS> 50,098
<OTHER-EXPENSES> 10,827
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 895
<INCOME-PRETAX> 15,525
<INCOME-TAX> 5,744
<INCOME-CONTINUING> 9,757
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,757
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.24
</TABLE>
