-----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, OR7joVj/b9IelcxQR7X7FZd9+TTNGxibve3EPz8gJ1ARUC05Jd8xOQ50wiwxIpDL +D89DqKMowUeolCxN5ZyLg== 0000078716-95-000005.txt : 19950415 0000078716-95-000005.hdr.sgml : 19950414 ACCESSION NUMBER: 0000078716-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950228 FILED AS OF DATE: 19950413 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER HI BRED INTERNATIONAL INC CENTRAL INDEX KEY: 0000078716 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 420470520 STATE OF INCORPORATION: IA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07908 FILM NUMBER: 95528701 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 February 28, 1995 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) 248-4800 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 March 27, 1995 Common Stock ($1.00 par value) 84,622,951 1 PIONEER HI-BRED INTERNATIONAL, INC. INDEX PART I. FINANCIAL INFORMATION PAGE NO. ITEM 1 FINANCIAL STATEMENTS CONSOLIDATED CONDENSED BALANCE SHEETS- FEBRUARY 28, 1995, AUGUST 31, 1994, AND FEBRUARY 28, 1994 3-4 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS- 5 THREE MONTHS AND SIX MONTHS ENDED FEBRUARY 28, 1995 AND FEBRUARY 28, 1994 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS- 6 SIX MONTHS ENDED FEBRUARY 28, 1995 AND FEBRUARY 28, 1994 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 7 ITEM 2 MANAGEMENT'S DISCUSSION AND 8-12 ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PART II. OTHER INFORMATION ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 13 2 PIONEER HI-BRED INTERNATIONAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited, in millions) February 28, August 31, February 28, ASSETS 1995 1994 1994 CURRENT ASSETS Cash and cash equivalents $ 361 $ 135 $ 377 Accounts and notes receivable, net 201 193 188 Inventories: Finished seed 489 164 500 Unfinished seed 189 190 62 Other 7 5 5 Prepaid expenses and other current assets 55 3 39 Deferred income taxes 76 52 77 Total current assets $1,378 $ 742 $1,248 LONG-TERM ASSETS 37 38 38 PROPERTY AND EQUIPMENT, net of accumulated depreciation and allowances February 28, 1995 $410 August 31, 1994 $397 February 28, 1994 $370 450 450 444 INTANGIBLES 19 23 24 $1,884 $1,253 $1,754
See Notes to Consolidated Condensed Financial Statements. 3 PIONEER HI-BRED INTERNATIONAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited, in millions) February 28, August 31, February 28, 1995 1994 1994 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings $ 34 $ 14 $ 48 Current maturities of long-term debt 52 1 1 Accounts payable, trade 261 80 121 Customer deposits 599 - 587 Accrued compensation 32 54 30 Income taxes payable - 31 19 Other 39 52 52 Total current liabilities $1,017 $ 232 $ 858 LONG-TERM DEBT $ 14 $ 66 $ 66 DEFERRED ITEMS, primarily income taxes and retirement benefits $ 81 $ 67 $ 60 MINORITY INTEREST IN SUBSIDIARIES $ 8 $ 7 $ 6 SHAREHOLDERS' EQUITY Preferred stock, no par value $ - $ - $ - Common stock, $1 par value 93 93 93 Additional paid-in capital 16 15 14 Retained earnings 927 995 782 Cumulative translation adjustment (1) (3) (11) $1,035 $1,100 $ 878 Less: Cost of common shares acquired for the treasury (254) (207) (99) Unearned compensation (17) (12) (15) $ 764 $ 881 $ 764 $1,884 $1,253 $1,754
See Notes to Consolidated Condensed Financial Statements. 4 PIONEER HI-BRED INTERNATIONAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited, in millions) Three Months Ended Six Months Ended February 28, February 28, 1995 1994 1995 1994 Net sales $ 277 $ 250 $ 346 $ 317 Operating costs and expenses: Cost of goods sold $ 142 $ 110 $ 182 $ 149 Research and development 31 27 58 51 Selling 60 55 110 99 General and administrative 33 29 62 54 Restructuring and settlements - (1) - 4 $ 266 $ 220 $ 412 $ 357 Operating income (loss) $ 11 30 $ (66) $ (40) Investment income 5 4 9 7 Interest expense (4) (6) (7) (9) Net exchange gain (loss) 6 - 4 (2) Income (loss) before items below $ 18 $ 28 $ (60) $ (44) Provision for income taxes (7) (11) 23 17 Minority interest and other (2) - (2) - Net income (loss) $ 9 $ 17 $ (39) $ (27) Income (loss) per common share* $ .11 $ .19 $(.46) $(.30) Dividends per common share* $ .17 $ .14 $ .34 .28 Weighted average number of common shares outstanding 85 89 85 89
* Not in millions See Notes to Consolidated Condensed Financial Statements. 5 PIONEER HI-BRED INTERNATIONAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited, in millions) Six Months Ended February 28, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) $(39) $(27) Noncash items included in net (loss): Depreciation and amortization 34 33 Other (11) (38) Net change in assets and liabilities 334 383 Net cash provided by operating activities $318 $351 CASH FLOWS FROM INVESTING ACTIVITIES: Payments received on notes receivable $ 4 $ 7 Disbursements for notes receivable (2) (3) Capital expenditures (31) (33) Other (3) (1) Net cash used in investing activities $(32) $(30) CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds (payments) on short-term borrowings $ 21 $ (8) Purchase of treasury stock (52) (5) Dividends paid (29) (25) Other (1) (1) Net cash used in financing activities $(61) $(39) Effect of foreign currency exchange rate changes on cash and cash equivalents $ 1 $ (1) Effect of change in year-end of the Company's international subsidiaries on cash and cash equivalents $ - $ 4 Net increase in cash and cash equivalents $226 $285 Cash and cash equivalents, beginning 135 92 CASH AND CASH EQUIVALENTS, ENDING $361 $377 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest $ 9 $ 11 Income taxes $ 24 $ 21
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 February 28, 1995 and 1994, and the results of operations and cash flows for the six months ended February 28, 1995 and 1994. Because of the seasonal nature of the Company's business, the results of operations for the six months ended February 28, 1995, are not indicative of the results to be expected for the full year. 2. The Company has guaranteed the repayment of principal and interest on certain obligations of Village Court Associates, an affiliated real estate venture. At February 28, 1995, such guarantees totaled approximately $23 million. 3. Certain individual financial statement categories were reclassified for the six months ended February 28, 1994 to conform with the presentation adopted for the six months ended February 28, 1995. 7 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, 1994. 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. Short-term debt at February 28, 1995, consisted of $34 million in direct short-term borrowings from foreign banks. During fiscal 1995, the Company has available the following domestic lines of credit: (in millions) Revolving Seasonal Total First quarter $100 $ 74 $174 Second quarter $100 $118 $218 Third quarter $ 50 none $ 50 Fourth quarter $ 50 none $ 50
The Company also has a $100 million private medium-term note program of which $50 million was outstanding as of February 28, 1995. The medium-term note matures in February, 1996. February 28, 1995, seed inventories and accounts payable are higher than the previous year due to the above-average yields harvested in the fall of 1994 compared to the fall of 1993. Higher advance commissions through February 28, 1995, account for the increase in prepaid expenses and other current assets over the prior year. The Company repurchased $52 million of its stock during the six months ended February 28, 1995. At February 28, 1995, authorized shares remaining to be repurchased totaled 1.8 million. 8 MATERIAL CHANGES IN RESULTS OF OPERATIONS: Net loss for the six months ended February 28, 1995, was $39 million, or $.46 per share, compared to a net loss of $27 million, or $.30 per share, for the same period a year ago. Due to the seasonality of the seed business, single quarter 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. Net Sales and Operating Profit (Loss) (Unaudited, in millions) Quarter Ended Six Months Ended February 28, Increase/ February 28, Increase/ 1995 1994 (Decrease) 1995 1994 (Decrease) Net sales: Corn $236 $210 $ 26 $267 $236 $ 31 Other 41 40 1 79 81 (2) Total net sales $277 $250 $ 27 $346 $317 $ 29 Operating profit (loss): Corn $ 42 $ 59 $(17) $ (8) $ 15 $(23) Other (12) (15) 3 (23) (22) (1) Restructuring and settlements - 1 (1) - (4) 4 Product line operating profit (loss) $ 30 $ 45 $(15) $(31) $(11) $(20) Indirect general and administrative expenses (19) (15) (4) (35) (29) (6) Operating income (loss) $ 11 $ 30 $(19) $(66) $(40) $(26) Units delivered, North America: Corn 1.407 1.567 (.160) 1.418 1.585 (.167)
Operating results for the second quarter and first six months of fiscal 1995 decreased from the same period a year ago principally due to lower seed corn units delivered and increased research and development costs. Unit sales decreased in North America primarily as a result of reduced corn acreage. Several European countries also experienced lower seed corn sales primarily the result of the timing of seed deliveries. Lower unit sales in Mexico through second quarter are due to reduced corn acreage. Research and development costs increased due to planned expansion in laboratory research. 9 Year-to-year comparisons of sales and expenses were also impacted by a change in the structure of the Company's operations in France. During the fourth quarter of fiscal 1994, the Company purchased 65 percent of the entity which handles the distribution and marketing of Pioneer(R) brand products in France. This purchase brought the Company's ownership of this entity to 100 percent. Beginning in fiscal 1995 the revenues and expenses of this distribution entity are fully consolidated in the Company's financial statements. As a result, year- to-date sales increased $48 million and expenses increased $46 million compared to the same period last year. SEED CORN North America Operations within North America account for approximately $14 million of the year-to-date seed corn operating profit decrease. Lower seed corn deliveries compared to the prior year was the primary driver affecting North American operations. Through second quarter, deliveries are running 10.5 percent behind 1994, primarily due to reduced corn acreage. As a result, sales are $11 million lower than a year ago and operating results are approximately $6 million lower. For the six months ended February 28, 1995, seed corn units invoiced, including those not yet delivered, have decreased to 10.3 million units, or 4 percent, from the same period last year. Cash collected for the same period has increased $10 million to $745 million, in part due to an increase in the average selling price of Pioneer(R) brand hybrids of approximately 4 percent in 1995. On an annual basis, corn unit sales could be 3 percent to 4 percent below 1994 levels. A change in the U.S. farm program requires farmers participating in the 1995 feed grain program to keep their corn acres at 92.5 percent or less of their historical corn acreage base, down from 100 percent in 1994. As a result, it is estimated that total 1995 seed corn acreage will decrease approximately 5 percent from 1994. In addition to this, some farmers in the South are switching acreage to cotton as a result of higher prices which will have an impact on seed corn unit sales volume. Through the first six months of 1995, sales to customers in the South account for approximately 50 percent of total units delivered. On an annual basis, they typically will contribute less than 10 percent of total unit sales. Finally, aggressive sales programs and discounting by competitors aimed at reducing their high inventory levels is also putting pressure on unit sales. Our exceptional sales and marketing force is continuing to provide information to customers on the value of purchasing Pioneer(R) brand seed. As a result, management expects to hold or have a modest gain in market share. Research expenses for corn increased $5 million, or 20 percent, from year-to-date levels a year ago. Planned growth in winter nursery costs and expansion of laboratory research and development projects account for most of the increase. On an annual basis, research costs are expected to increase 12 percent. 10 The Company's commitment to research continues to provide customers with value-added products. For 1995, 17 new seed corn hybrids were released. These new releases add to the Company's ability to provide products which deliver higher and more consistent profits to our customers. Fixed selling and general and administrative expenses for seed corn in North America increased $3 million, or 8 percent, from 1994 year-to- date levels. The major components of this increase were planned increases in advertising expenses and personnel costs and earlier timing of certain expenses. Management believes the Company is on track to post another outstanding year. In North America, Pioneer(R) brand hybrids once again performed very well compared to the competition. On-farm yield comparisons in the fall of 1994 showed that Pioneer hybrids continued to out-yield the average competitor, even under conditions that were favorable across much of the corn belt. Higher yields from the 1994 crop and excellent winter production activities in Argentina and Chile will improve the variable cost per unit. In conjunction with a higher per unit sales price, these factors will positively impact current year results. Other Regions Operating results outside North America decreased approximately $9 million. European operations account for $5 million of the total decrease. On a constant dollar basis, European operating profits decreased $10 million compared to 1994, mostly due to fewer unit sales. Italy's operating profit decreased $5 million primarily due to the timing of current year seed corn deliveries compared to 1994. Operating results in France decreased $2 million due to fewer unit sales. In Germany, the timing of deliveries reduced operating profit $2 million. The effect of the U.S. dollar weakening against European currencies positively impacted current year operating profit $5 million. Mexico's operating profit decreased $11 million. Decreased seed corn acreage in Northern Mexico resulting from NAFTA, drought, and subsidy reductions reduced unit sales. Also contributing to the decrease was the effect of the devaluation of the Mexican peso. Operations in Asia and Central and South America provided positive results to operating profit over 1994 levels. For the current year, Asia's operating profit improved $5 million. Higher selling prices in the Philippines accounted for $1 million of the increase, while lower seed writedowns in the region and reduced regional administrative costs account for most of the remaining improvement. Central and South American operating profit improved $2 million, almost entirely due to operations in Argentina. This improvement is the result of increased unit sales and higher selling price along with lower per unit costs. 11 For the year, management expects operating profit from regions outside North America to be comparable to 1994. A reduction in corn subsidies and water restrictions are expected to reduce corn acreage in Mexico with a corresponding reduction in unit sales of approximately 30 percent. This, in conjunction with the devaluation of the Mexican peso, is expected to reduce operating results for Mexico to about half of that in 1994. This could be offset by operations in the remaining regions outside North America. With the U.S. dollar weaker compared to European currencies, operating profit in Europe should improve over prior year levels. Operating profit in Central and South America and Asia is expected to improve over 1994 results due to increased unit sales. OTHER PRODUCTS Other products' 1995 year-to-date operating results were comparable to the prior year. Other products include soybean, alfalfa, sorghum, wheat, sunflower, microbial products, and developing products - all of which reflected minimal change from 1994 year-to-date results. RESTRUCTURING AND SETTLEMENTS Year-to-date 1994 included a $4 million charge related to restructuring the Company's operations in Africa and the Middle East. Management does not expect to incur any additional restructuring charges for this region in 1995. INDIRECT GENERAL AND ADMINISTRATIVE EXPENSES Current year indirect general and administrative expenses increased $6 million, or 20 percent, over 1994 levels. Normal merit and personnel cost increases and increased charitable contributions account for approximately $3 million of the increase. The remainder is attributable to the increased emphasis on worldwide process and product management activities. NET FINANCIAL AND TAXES Net interest income for the first six months of fiscal 1995 increased $4 million compared to the same period a year ago resulting from a $2 million increase in investment income and a $2 million decrease in interest expense. Investment income improved principally due to higher interest rates earned on investments. Interest expense decreased due to lower levels of external borrowings by international subsidiaries. Net exchange gain increased $6 million through the second quarter of fiscal 1995 compared to the same period a year earlier principally due to translation gains resulting from devaluation of the Mexican peso and net gains on hedging intercompany transactions with Mexico. The estimated fiscal 1995 world-wide effective tax rate reflected in the second quarter is 38 percent. The actual world-wide effective tax rate for fiscal 1994 was 38.5 percent. 12 PIONEER HI-BRED INTERNATIONAL, INC. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K No reports on Form 8-K were filed with the Commission during the three months ended February 28, 1995. The Exhibits filed as part of this report are listed below. Exhibit 4 - Instruments defining the rights of security holders, including indentures. On March 14, 1995 a Form 8-A was filed with the Commission amending the Company's Shareholder Rights Plan and is incorported herein by reference Exhibit 27 - Financial data schedule 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 April 13, 1995 ____________________________________ THOMAS N. URBAN, CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER Date April 13, 1995 ______________________________________ JERRY L. CHICOINE, SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND CORPORATE SECRETARY 13 12 EX-27 2
5 1,000,000 6-MOS 6-MOS AUG-31-1995 AUG-31-1994 FEB-28-1995 FEB-28-1994 14 28 347 349 221 198 20 10 685 567 1,378 1,248 860 814 410 370 1,884 1,754 1,017 858 0 0 93 93 0 0 0 0 671 671 1,884 1,754 346 317 346 317 240 200 240 200 172 157 0 0 7 9 (62) (44) 23 17 (39) (27) 0 0 0 0 0 0 (39) (27) (.46) (.30) (.46) (.30)
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