-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, njF9ltvWlA0RN154GfL/4boaXBrfXQ+MnTZjvJRZvcvaJTrp/4KdY/Pka66VnEyx 6mTZ4DwumpmWgOxUP5LsgQ== 0000078716-94-000001.txt : 19940114 0000078716-94-000001.hdr.sgml : 19940114 ACCESSION NUMBER: 0000078716-94-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931130 FILED AS OF DATE: 19940113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER HI BRED INTERNATIONAL INC CENTRAL INDEX KEY: 0000078716 STANDARD INDUSTRIAL CLASSIFICATION: 0100 IRS NUMBER: 420470520 STATE OF INCORPORATION: IA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 000-07908 FILM NUMBER: 94501326 BUSINESS ADDRESS: STREET 1: 700 CAPITAL SQ STREET 2: 400 LOCUST ST CITY: DES MOINES STATE: IA ZIP: 50309 BUSINESS PHONE: 5152453500 10-Q 1 LIVE 10-Q FILING 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 quarterly period ended November 30, 1993 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 : 0-7908 PIONEER HI-BRED INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Iowa 42-0470520 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 700 Capital Square, 400 Locust, Des Moines, Iowa 50309 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (515) 245-3500 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at December 27, 1993 Common Stock ($1.00 par value) 89,348,605 -1- PIONEER HI-BRED INTERNATIONAL, INC. INDEX PART I. FINANCIAL INFORMATION PAGE NO. ITEM 1 FINANCIAL STATEMENTS CONSOLIDATED CONDENSED BALANCE SHEETS- NOVEMBER 30, 1993, AUGUST 31, 1993, AND NOVEMBER 30, 1992 3-4 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS- 5 THREE MONTHS ENDED NOVEMBER 30, 1993 AND 1992 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS- 6 THREE MONTHS ENDED NOVEMBER 30, 1993 AND 1992 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 7-8 ITEM 2 MANAGEMENT'S DISCUSSION AND 9-13 ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PART II. OTHER INFORMATION ITEM 6(a) EXHIBITS 14 ITEM 6(b) REPORTS ON FORM 8-k 15 -2- PIONEER HI-BRED INTERNATIONAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited, in thousands) November 30, August 31, November 30, ASSETS 1993 1993 1992 CURRENT ASSETS Cash and cash equivalents $ 64,369 $ 91,976 $ 59,259 Accounts and notes receivable, net 111,410 196,063 145,783 Inventories: Finished seed 338,555 229,550 328,922 Unfinished seed 253,909 149,299 336,697 Other 6,691 3,935 3,226 Prepaid expenses 6,867 3,979 9,437 Income taxes 3,738 - - 4,172 Deferred income taxes 54,362 42,180 49,356 Total current assets $ 839,901 $ 716,982 $ 936,852 LONG-TERM ASSETS 40,110 39,195 44,253 PROPERTY AND EQUIPMENT, net of accumulated depreciation and allowances November 30, 1993 $365,596 August 31, 1993 $356,479 November 30, 1992 $342,426 443,688 437,660 458,851 INTANGIBLES 25,807 27,527 26,642 $1,349,506 $1,221,364 $1,466,598 See Notes to Consolidated Condensed Financial Statements.
-3- PIONEER HI-BRED INTERNATIONAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited, in thousands) November 30, August 31, November 30, 1993 1993 1992 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings $ 160,118 $ 64,029 $ 225,397 Current maturities of long-term debt 1,521 2,250 3,167 Accounts payable, trade 219,197 79,386 305,243 Accrued compensation 26,511 42,080 22,825 Income taxes payable - - 17,522 - - Other accruals 47,054 55,846 29,849 Total current liabilities $ 454,401 $ 261,113 $ 586,481 LONG-TERM DEBT $ 65,730 $ 68,127 $ 78,057 DEFERRED ITEMS, primarily income taxes and retirement benefits $ 59,438 $ 60,587 $ 60,756 MINORITY INTEREST IN SUBSIDIARIES $ 5,486 $ 6,098 $ 10,908 SHAREHOLDERS' EQUITY Preferred stock, no par value $ - - $ - - $ - - Common stock, $1 par value 92,694 92,694 92,694 Additional paid-in capital 12,962 12,962 14,249 Retained earnings 778,363 835,466 694,359 Cumulative translation adjustment (11,151) (6,982) 16,039 $ 872,868 $ 934,140 $ 817,341 Less: Cost of common shares acquired for the treasury (98,534) (97,078) (78,991) Unearned compensation (9,883) (11,623) (7,954) $ 764,451 $ 825,439 $ 730,396 $1,349,506 $1,221,364 $1,466,598 See Notes to Consolidated Condensed Financial Statements.
-4- PIONEER HI-BRED INTERNATIONAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited, in thousands) Three Months Ended November 30, 1993 1992 Net sales $ 66,668 $ 68,357 Operating costs and expenses: Cost of goods sold $ 38,734 $ 35,431 Research and development 24,635 22,644 Selling 43,661 42,873 General and administrative 29,814 25,233 $136,844 $126,181 Operating (loss) $(70,176) $(57,824) Investment income 3,579 3,475 Interest expense (3,216) (4,186) Net exchange (loss) (2,340) (4,236) (Loss) before items shown below $(72,153) $(62,771) Provision for income taxes 28,162 23,497 Minority interest and other 141 467 (Loss) before cumulative effect of accounting chnage $(43,850) $(38,807) Cumulative effect of accounting change, net of income taxes of $10,849 - - (16,969) Net (loss) $(43,850) $(55,776) (Loss) per common share:* (Loss) before cumulative effect of accounting change $ (.49) $ (.43) Cumulative effect of accounting change - - (.19) Net (loss) $ (.49) $ (.62) Weighted average number of common shares outstanding 89,402 90,274 * Not in thousands See Notes to Consolidated Condensed Financial Statements.
-5- PIONEER HI-BRED INTERNATIONAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Three Months Ended November 30, 1993 1992 CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) $ (43,850) $ (55,776) Noncash items included in net loss: Depreciation and amortization 16,442 14,054 Cumulative effect of accounting change - - 16,969 Other (108) (11,279) Net change in assets and liabilities (72,179) (104,593) Net cash used in operating activities $ (99,695) $(140,625) CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures $ (21,124) $ (30,068) Other 2,889 4,847 Net cash used in investing activities $ (18,235) $ (25,221) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds on short-term borrowings $ 100,595 $ 135,412 Dividends paid (12,517) (10,833) Other (1,325) 4,295 Net cash provided by financing activities $ 86,753 $ 128,874 Effect of foreign currency exchange rate changes on cash and cash equivalents $ (868) $ (1,360) Effect of change in year-end of the Company's international subsidiaries on cash and cash equivalents $ 4,438 $ - - Net decrease in cash and cash equivalents $ (27,607) $ (38,332) Cash and cash equivalents, beginning 91,976 97,591 CASH AND CASH EQUIVALENTS, ENDING $ 64,369 $ 59,259 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest $ 5,759 $ 7,699 Income taxes $ 8,549 $ 18,592 See Notes to Consolidated Condensed Financial Statements.
-6- PIONEER HI-BRED INTERNATIONAL, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to fairly present the financial position as of November 30, 1993 and 1992, and the results of operations and cash flows for the three months ended November 30, 1993 and 1992. Because of the seasonal nature of the Company's business, the results of operations for the three months ended November 30, 1993, are not indicative of the results to be expected for the full year. 2. The Company is involved in litigation and disputes which are normal to its business, including litigation related to the operations and sale of its former subsidiary, Norand Corporation. In February 1992, the Company filed suit against Bob Groulx, a dealer in field seeds in the vicinity of Munger, Michigan, alleging that Mr. Groulx has engaged in (1) tortious interference with the Company's business relationships with its sales representatives, (2) trademark infringement, (3) federal statutory unfair competition, and (4) common law unfair competition. In March, 1992, Mr. Groulx filed an answer and countercomplaint which asserted that Pioneer had violated federal and Michigan antitrust statutes and committed various commercial torts. A related case alleging violation of federal and Michigan antitrust statutes, interference with contractual relations and wrongful discharge has been filed by a former Pioneer sales representative. The Company has moved for summary judgment in the Groulx case and has been granted a motion to dismiss the antitrust claims in the related case. The Company believes these claims are without merit. -7- Although the outcome of the above matters cannot be predicted with certainty, trial counsel for the Company and management do not believe that their disposition will have a materially adverse effect on the consolidated financial position and results of operations of the Company. The Company has guaranteed the repayment of principal and interest on certain obligations of Village Court Associates, an affiliated real estate venture. At November 30, 1993, such guarantees totaled approximately $23 million. On February 5, 1981, the Company initiated litigation in the Federal District Court for the Southern District of Iowa against Holden Foundation Seeds, Inc. alleging that the named defendants had improperly obtained and used one of the Company's proprietary lines of corn breeding material. On October 30, 1987, a judgment was entered against Holden Foundation Seeds, Inc. on the issue of liability. On December 30, 1991, the court entered a judgment against Holden in the sum of $46.7 million plus interest from December 30, 1991. On September 23, 1992, the court issued its final order in the case. Both parties have appealed. The Company has not recognized any benefit in the financial statements related to this judgment. 3. During the first quarter of fiscal 1994, the Company changed the reporting year-end of its international subsidiaries from June to August to have the subsidiaries' accounting period match the Company's. The effect of this change, a net loss of $.7 million, was recorded as a reduction in retained earnings. -8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes, and with the Company's audited financial statements and notes for the fiscal year ended August 31, 1993. MATERIAL CHANGES IN FINANCIAL CONDITION: Due to the seasonal nature of the agricultural seed business, the Company generates most of its cash from operations during the second and third quarters of the fiscal year. Cash generated during this time is used to meet the cash needs of the period and to pay the commercial paper and accounts payable which are the Company's primary sources of financing during the first and fourth quarters of the fiscal year. Any excess funds are invested, primarily in short-term commercial paper. Most of the Company's financing is done through the issuance of commercial paper in the U.S., backed by revolving and seasonal lines of credit. In addition, foreign lines of credit and direct borrowing agreements are relied upon to support overseas financing needs. The Company also has a $100 million private medium-term note program of which $50 million is available as of November 30, 1993. Short-term debt at November 30, 1993, consisted of $123 million in domestic commercial paper and $37.1 million in direct short-term borrowings from foreign banks. As of November 30, 1993, the Company had available domestic lines of credit totaling $175 million consisting of a $100 million revolving line of credit and $75 million in seasonal lines of credit. The maximum available during the year is $199 million in the second quarter consisting of $100 million revolving lines and $99 million seasonal. The minimum available is a $50 million revolving line of credit during the fourth quarter. Long-term debt at November 30, 1993, consisted principally of $50 million in medium-term notes maturing in February, 1996. -9- At November 30, 1993, accounts and notes receivable decreased from a year earlier due to a change in year-end of the Company's international subsidiaries. Seed inventories are lower at November 30, 1993, compared to November 30, 1992, due to fewer acres planted and lower yields. Prior year inventories were higher resulting from a record number of seed corn acres planted during 1992 in North America which produced yields 145 percent higher than the 1993 crop. Short-term borrowings and accounts payable at November 30, 1993, are lower than the same point in time a year ago primarily due to lower production costs associated with the smaller production crop harvested in the fall of 1993 compared to the fall of 1992. Other accruals increased from November 30, 1992, levels due to accruals associated with the restructuring of operations in Africa and the Middle East. Additional purchases of the Company's stock represent the increase in treasury stock at November 30, 1993, from a year earlier. To date, of the 5.3 million shares authorized for purchase by the Board of Directors, 3.5 million have been repurchased. MATERIAL CHANGES IN RESULTS OF OPERATIONS: Net loss for the three months ended November 30, 1993, was $43.9 million, down from the net loss of $55.8 million reported for the first quarter of fiscal 1993. On a per-share basis, net loss for the period ended November 30, 1993, was $.49 compared to a per-share net loss of $.62 for the same period a year earlier. Net loss for the first three months of fiscal 1993 includes the cumulative effect of adopting Financial Accounting Standard 106 -10- (FAS106) which had the effect of reducing fiscal 1993 results $.19 per share. Excluding the effect of this accounting change, per-share net loss for the first three months of fiscal 1993 was $.43 per-share compared to a net loss of $.49 per-share for the current period. The main factors responsible for the larger current period loss were increased fixed costs and additional costs related to the restructuring of operations in Africa and the Middle East. These increases were partially offset by lower net financial expense. Net sales through first quarter of fiscal 1994 reached $66.7 million, a decrease from net sales of $68.4 million for the same period a year ago. First quarter seed corn sales are almost entirely generated in regions outside North America and Europe and totaled $26.1 million, a $5.6 million decrease from a year earlier. Seed corn sales in South Africa increased $2.1 as a result of unit sales increases due to initial sales from a new subsidiary. However, reported sales decreased in total due to the change in fiscal year-end for the Company's international subsidiaries from June 30 to August 31. Certain operations in the Southern Hemisphere record a large portion of their sales in July and August. Fiscal 1993's first quarter included July and August for our international subsidiaries, while in fiscal 1994 this period will fall in the fourth quarter. Although net sales for the current period are below fiscal 1993 levels for the first quarter, annual seed corn revenues are expected to grow in almost all regions. The likelihood of more normal weather in the central United States together with the announced change in the U.S. farm program set-aside from 10 percent to zero is expected to result in more North American corn acres planted in fiscal 1994. In Europe, 1994 acreage is expected to stabilize following implementation of the Common Agricultural Policy (CAP) while continued sales growth in 1994 is expected in Mexico. Results from Central and South America and Asia are expected to show modest growth in 1994. -11- Other Products Net Sales (In thousands) Three Months Ended November 30, 1993 1992 Wheat $ 16,462 $ 15,384 Microbial products 8,331 8,289 Other 15,806 13,001 $ 40,599 $ 36,674
In total, other products sales improved $3.9 million for the period ended November 30, 1993, compared to the same period a year ago. Modest improvement in wheat and specialty plant product sales represent the bulk of the increase in other product sales. Additional wheat sales in Europe and Africa and the Middle East represent the majority of the total wheat sales increase as a result of the change in year-end for the Company's international subsidiaries. A $2.8 million increase in specialty plant product sales accounts for the remaining increase in other products revenue. Research expenses increased $2.0 million, or 9 percent, over last year's first quarter. Increased compensation costs due to additional personnel and additional amortization related to technology acquisitions were the main components of the increase. Research expenses are expected to increase approximately 9 percent on an annual basis. Selling and general and administrative expenses for the first three months of fiscal 1994, excluding variable costs, increased $7.5 million over the same period a year earlier. Increased compensation costs due to normal merit increases and additional personnel and an additional $4.7 million charge related to restructuring the Company's operations in Africa and the Middle East represent the majority of the increase. Variable costs (commission and shipping costs) as a percentage of sales were comparable between periods. -12- Net interest expense for the quarter ended November 30, 1993, decreased $1.1 million from the same period a year ago. Lower average borrowings is the primary factor behind this decrease. Net exchange loss decreased $1.9 million through first quarter of fiscal 1993 compared to the same period a year earlier principally due to lower exchange losses in Europe. The estimated fiscal 1994 world-wide effective tax rate reflected in the first quarter is 39.1 percent. The actual world-wide effective tax rate for fiscal 1993 was also 39.1 percent. Due to the seasonality of the seed business, single quarter results are seldom indicative of year-end results and quarter-to- quarter comparisons are not always meaningful. Accordingly, such comparisons are not emphasized. Typically, most of the Company's revenue and operating profit is generated in the third quarter. -13-
5 1,000 EXHIBIT 27 FINANCIAL DATA SCHEDULE REGULATION STATEMENT CAPTION QTR - 1 QTR - 1 3 - MOS 3 - MOS 1994 1993 1994 1993 5-02(1) Cash and cash equivalents 64369 59259 5-02(3)(a)(1) Accounts and notes receivable, net 111410 145783 5-02(6) Inventory 599155 668845 5-02(9) Total current assets 839901 936852 5-02(13) Property, plant, and equipment 809284 801277 5-02(14) Accumulated depreciation 365596 342426 5-02(18) Total assets 1349506 1466598 5-02(21) Total current liabilities 454401 586481 5-02(22) Long-term debt 65730 78057 5-02(30) Common stock 92694 92694 5-02(31) Other shareholder's equity 671757 637702 5-02(32) Total liabilities and shareholder's equity 1349506 1466598 5-03(b)(1)(a) Net sales 66668 68357 66668 68357 5-03(b)(2)(a) Cost of goods sold and research 63369 58075 63369 58075 5-03(b)(3) Selling and general and administrative 73475 68106 73475 68106 5-03(b)(3) Restructuring of operations - - - - - - - - 5-03(b)(8) Financial income (expense), net (1977) (4947) (1977) (4947) 5-03(b)(10) Income/(loss) before taxes and other items (72153) (62771) (72153) (62771) 5-03(b)(11) Income tax (expense) benefit 28162 23497 28162 23497 5-03(b)(14) Income/(loss) continuing operations (43850) (38807) (43850) (38807) 5-03(b)(18) Cumulative effect of accounting change - - (16969) - - (16969) 5-03(b)(19) Net income/(loss) (43850) (55776) (43850) (55776) 5-03(b)(20) Earnings (loss) per share (.49) (.62) (.49) (.62)
-14- PIONEER HI-BRED INTERNATIONAL, INC. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (b) Reports on Form 8-K. No reports on Form 8-K were filed with the Commission during the three months ended November 30, 1993. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PIONEER HI-BRED INTERNATIONAL, INC. (Registrant) Date THOMAS N. URBAN, CHAIRMAN OF THE BOARD AND PRESIDENT Date JERRY L. CHICOINE, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER -15- -----END PRIVACY-ENHANCED MESSAGE-----