UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1995 Commission File No.:0-11854
BIOTECHNICA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2344703
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4001 WAR MEMORIAL DRIVE
PEORIA, ILLINOIS 61614
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (309) 681-0300
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.01 par value
NASDAQ Stock Market
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,
and (2) has been subject to such filing requirements for the past 90 days:
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
At August 31, 1995, the Company had 115,379,628 shares (not
including 39,160 treasury shares) of its Common Stock, $.01 par
value, issued and outstanding. At August 31, 1995, the
aggregate market value of the voting stock held by non-affiliates
of the registrant was $15,476,095.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement with respect
to its 1995 Annual Meeting of Shareholders to be held on November
14, 1995 is incorporated herein by reference to Part III of this
report.
PART I
ITEM 1. BUSINESS
THE LIMAGRAIN TRANSACTION
On October 26, 1993, BioTechnica International, Inc. (the
"Registrant", which together with its subsidiaries is referred to
herein as "BioTechnica" or the "Company") entered into the Credit
Enhancement and Reorganization Agreement (the "Limagrain
Agreement") with Groupe Limagrain Holding S.A. ("Limagrain") and
Limagrain Genetics Corp. ("LG Corp."), a majority-owned
subsidiary of Limagrain, which was amended on December 10, 1993.
As a result of this agreement, on March 7, 1994, following the
Company's Annual Meeting of Shareholders (the "1993 Annual
Meeting"), Limagrain, through LG Corp., obtained voting control
of the Company (the "Limagrain Transaction").
In the first phase of the transaction, which was consummated on
October 27, 1993 (the "First Closing"), the Company issued
500,000 shares of its common stock, par value $.01 per share (the
"common stock") to LG Corp. in consideration of $5,000 and the
guarantee of Limagrain and LG Corp. of a $15 million line of
credit arrangement (the "Line of Credit") with Harris Trust &
Savings Bank ("Harris Bank").
In the second phase of the transaction, which was completed
following the 1993 Annual Meeting (the "Second Closing"), the
Company issued an additional 97,777,178 shares of common stock to
LG Corp. in exchange for the transfer to the Company by LG Corp.
of all the issued and outstanding shares of capital stock of
Shissler Seed Company, Inc. ("Shissler"), which held the
pre-existing United States seed corn production and sales
operations of Limagrain. Upon completion of the second phase,
Limagrain, through LG Corp., obtained approximately 80% of the
outstanding capital stock (voting and non-voting) and
approximately 93% of the outstanding voting common stock of
BioTechnica.
The exchange of shares described above has been accounted for as
a purchase of the Company by Shissler (a "reverse acquisition")
because Shissler's parent, LG Corp., owned 80% of the combined
entity after the exchange. See "BASIS OF PRESENTATION" below.
After the reverse acquisition, the Company adopted a June 30
fiscal year to conform to LG Corp.'s and Shissler's fiscal year.
BASIS OF PRESENTATION
The consolidated financial statements presented herein reflect
the results of the reverse acquisition as described above.
For the year ended June 30, 1995 ("Fiscal 1995"), the financial
statements contained herein present twelve months of operations
of the Company. Results for the Scott Seed Division of the
Company and other properties sold during Fiscal 1995 are included
up to the date of their respective disposals.
For the year ended June 30, 1994 ("Fiscal 1994"), the financial
statements contained herein present twelve months of operations
of Shissler, plus operations of the Company (as it was
constituted prior to the Limagrain Transaction) from February 1,
1994 (the effective date of the Limagrain Transaction) through
June 30, 1994.
For the year ended June 30, 1993 ("Fiscal 1993"), the attached
financial statements present twelve months of operations of
Shissler only.
Proforma statements have been prepared and are included in the
Management Discussion and Analysis section that compare full
twelve-month operating cycles for the Company as it exists today.
The results of the Scott Seed Division and other sold properties
have been eliminated and costs specifically identified with the
Limagrain Transaction are not included.
CAPITAL AND FINANCING ACTIVITY
On June 29, 1994, BioTechnica, Limagrain, LG Corp. and Shissler
entered into a Debt Restructuring Agreement (the "Debt
Restructuring Agreement") whereby (i) certain advances to the
Company and Shissler by LG Corp. and Limagrain of $8,260,000 in
the aggregate were consolidated, (ii) indebtedness in the
principal amount of $5,000,000 was contributed to the Company as
consideration for the issuance to LG Corp. of 500,000 shares of a
then-newly-created Class A Preferred Stock, par value $.01 per
share, and (iii) a new promissory note was issued to LG Corp. in
the principal amount of $3,260,000. Pursuant to the Certificate
of Designations filed with the Secretary of State of Delaware on
June 29, 1994, the Class A Preferred Stock issued to LG Corp. (i)
has no voting rights, (ii) is non-convertible, (iii) is
redeemable solely at the option of the Company, and (iv) has the
right to a cumulative dividend at the rate of $0.75 per share per
year.
In August 1994, LG Corp. advanced $4,000,000 to the Company as a
short-term loan to enable the Company to reduce the amounts
borrowed under the Harris Bank Line of Credit so as to bring the
Company within the borrowing base limits of the Line of Credit.
On November 30, 1994, LG Corp. converted the $4,000,000 advanced
to the Company into (i) a long-term note for $2,000,000 bearing
interest at the London Inter-Bank Offered Rate ("LIBOR") plus
1.15%, and (ii) 200,000 shares of Class A Preferred Stock of the
Company, as described above.
On November 30, 1994, State Farm Automobile Insurance Company
("State Farm") converted 4,698,336 shares of Class A common stock
and 4,807,533 shares of Class B common Stock of the Company into
9,505,869 shares of common stock of the Company. This conversion
was available to State Farm at their option under the terms and
conditions of the Class A and Class B common stock. This
transaction had no effect on the net outstanding, fully diluted
shares of the Company, or on the relative equity of any
shareholder.
On June 26, 1995, State Farm sold 6,054,751 shares of Class A
common stock back to the Company at par value (i.e., $0.01 per
share). This transaction represented approximately 5% of the
outstanding shares of the Company. The price of $0.01 is
substantially below the current market price and the net book
value per share. The result of this transaction was to increase
the equity position of all remaining shareholders by
approximately 5%.
After these transactions, there are only two classes of capital
stock issued and outstanding as of June 30, 1995: common stock
and Class A Preferred Stock.
BUSINESS RESTRUCTURING AND REDIRECTION
During Fiscal 1994, the Company began an in-depth restructuring
of its seed operations to focus the Company on higher margin
products, to gain production efficiencies and to reduce costs.
As of June 30, 1995, this restructuring was essentially
completed. Under the new structure, the Company will conduct its
operations through its operating subsidiary, LG Seeds, Inc.
Certain functions have been consolidated by combining management
and operations into three main departments: (i) administration
and finance; (ii) production and logistics; and (iii) sales and
marketing. The goal of this restructuring has been to streamline
operations, eliminate duplicated efforts, improve information
flow, and increase efficiency to improve the profitability of
the Company. Under the new structure, the Company will operate
from a corporate headquarters office in Peoria, Illinois, produce
seed at four locations, and service its customers from seven
regional service centers.
During Fiscal 1994, as part of this restructuring, the Company
sold certain of the assets of Donley Seed Company ("Donley"), a
forage mix and bird feed company. The operations of Donley did
not contribute to the refocused corporate strategy of marketing
corn and soybean seeds through a dealer network located in the
Corn Belt Region of the United States.
During Fiscal 1994, the Company changed the name of its largest
operating division from BioTechnica Agriculture, Inc. to LG
Seeds, Inc. The LG brand name will be prominent in the
introduction of new products throughout the Company.
During Fiscal 1995, the Company sold certain unused and unneeded
facilities. These assets were classified as "Assets Held for
Sale" as of June 30, 1994. The assets sold included:
1. the unused conditioning plant/warehouse located in Hereford, Texas;
2. the unused conditioning plant/warehouse located in Manilla, Iowa; and
3. the unused conditioning plant/warehouse located in Dieterich, Illinois.
Pursuant to an Asset Purchase Agreement dated April 19, 1995,
effective as of February 28, 1995, the Company sold its Scott
Seed Division of New Albany, Indiana ("Scott Seed") to
AgriBioTech, Inc. ("ABT") for an aggregate net purchase price of
approximately $1,950,000. This amount consisted of cash, 158,000
common shares of ABT common stock with a guaranteed value of
$3.00 per share, and assumption of the accounts payable of Scott
Seed. Scott Seed markets alfalfa, clover, pasture mixes, and
grasses throughout Kentucky and Southern Indiana in a wholesale
environment. The operations of Scott Seed did not contribute to
the refocused corporate strategy of marketing corn and soybean
seeds through a dealer network located in the Corn Belt Region of
the United States. ABT is traded on the NASDAQ Small-Cap Market
and is trading in excess of $3.00 per share as of August 31,
1995. To the extent that the 158,000 shares of common stock of
ABT are sold, in the aggregate, in excess of $3 per share, net of
brokerage commissions, the Company will recognize a gain on such
sales. As of June 30, 1995, none of the ABT shares had been
sold. As of August 31, 1995, 45,500 ABT shares have been sold
for an aggregate amount of $220,067. Management of the Company
intends to liquidate the ABT shares as expeditiously as possible,
in accordance with the terms of its agreement with ABT.
CONTINUING BUSINESS
The primary business of the Company, a Delaware corporation
formed in 1981, is the production, processing and sale of
agricultural seeds. Corn, soybeans and alfalfa comprise the
Company's major product lines. During Fiscal 1995, sales of
corn, soybeans, and alfalfa products represented 52%, 26%, and 6%
of net sales, respectively. This compares to 52%, 27% and 7% of
the Company's net sales during Fiscal 1994, and 78%, 18% and 1% of
the (Shissler only) net sales for corn, soybeans and alfalfa in Fiscal 1993.
The Company contracts with independent farmer-growers for the
production of corn, soybeans, and wheat to be grown under Company
supervision to meet specific quality and marketability
specifications. The Company then processes and treats the
delivered seed with appropriate fungicides and insecticides and
bags the products for sale. Because weather conditions can cause
material fluctuations in yields and seed quality, the Company's
cost of goods sold is highly dependent upon weather conditions in
its growing areas. The Company buys alfalfa and other seed
products as finished goods from seed producers based upon
annually negotiated terms which fluctuate with growing conditions
and supply levels.
The Company sells its products throughout the midwestern United
States mainly to farmer-dealers who in turn market the seed to
farmers. The Company also sells its products to affiliates of
Limagrain (see "Export Sales"). Because of the seasonal nature
of the agricultural seed business, the Company's sales are highly
concentrated during the period beginning in December and running
through the spring planting season of each year. This heavy
sales season is followed by a period during which the dealers are
generally allowed to return unplanted seed to the Company.
Reserves are made throughout the selling season in anticipation
of these returns. The Company issues settlement statements to
its dealers following the return period each year and generally
collects payments on annual sales during the summer, although
some payments are received at various times throughout the year
as induced by early payment discounts.
Seed product revenues were $23.9 million for Fiscal 1995,
including $3.1 million in sales to affiliated companies,
primarily in Europe. These sales to affiliated companies are the
result of yearly production contracts for specific corn varieties
and are negotiated at arm's length prior to planting season each
year. Export sales represent approximately 15% of revenues for
Fiscal 1995 and 6% of revenues for Fiscal 1994. As a percentage
of (Shissler only) revenues for Fiscal 1993, export sales
accounted for 42% of revenues, most of which were sales made to
affiliate companies. Sales to affiliated companies are based
solely on their respective needs. There is no assurance that
these levels of sales will be maintained in the future.
GOVERNMENT REGULATION
The Company's business is subject to federal, state and local regulations.
The Company is not aware of any material administrative, regulatory or
judicial actions, suits, demand letters, liens, notices of non-compliance or
violations, investigations or proceedings associated which will materially
impact the Company.
COMPETITION
The Company markets its products primarily in the Corn Belt
Region of the United States, comprised of approximately 12
midwestern states from Colorado to Ohio, and from Kentucky to the
Canadian border. The competitors of the Company in these markets
differentiate their products primarily based on price and yield
and other agronomic characteristics, as well as on seed quality,
brand name recognition, and customer service. The Company
believes that its products are competitively priced and offer
similar agronomic characteristics, yield performance, seed
quality, and customer service as the products of its major
competitors in these areas. The brand names under which the
Company's products are marketed tend to be regional in focus.
However, following the above-described business restructuring and
redirection, the Company is introducing the "LG" Brand to become
a nationally recognized brand.
The alliance with Limagrain allows the Company to position itself
to compete with other large seed companies on a more effective
basis. Limagrain, together with its affiliates ("the Limagrain
Group"), being the third largest seed company in the world, has
extensive research capabilities and expertise in the seed
industry in which the Company now shares. In particular, the
germplasm resources of the Limagrain Group are available to the
Company.
The benefits of association with the Limagrain Group extend not
only to the technical side of the business, but also to the
extensive management, marketing, financial, and personnel
resources of the Limagrain Group throughout the world.
CUSTOMERS
No single domestic customer represents more than 10% of the total
revenues of the Company for Fiscal 1995, 1994, or 1993.
Export sales to foreign affiliates do represent a significant
portion of the total net sales of the Company. Sales to these
affiliates consist of 13% of net sales for Fiscal 1995, 6% of net
sales for Fiscal 1994, and 39% of (Shissler only) net sales for
Fiscal 1993.
EMPLOYEES
The Company employed 121 people as of August 31, 1995, including
17 part-time employees.
ITEM 2. PROPERTIES
The following table identifies the properties owned or leased by
the Company and its subsidiaries as of June 30, 1995:
Approximate
Acreage Square Footage
Owned Owned Leased
Peoria, IL Corporate Headquarters 6,000
Overland Park, KS* Office 3,303
Prescott, WI Office/Warehouse 1,200
Mt. Pleasant, IA Office/Plant/Warehouse 20.0 64,000
Tekamah, NE Office/Plant/Warehouse 17.7 74,620
Ashland, OH* Office/Plant/Warehouse 26,000
Decatur, IL Office/Plant/Warehouse 8.3 59,000
Windfall, IN Office/Plant/Warehouse 9.9 49,300
Elmwood, IL** Office/Plant/Warehouse 40.5 121,647
Sunfield, MI Office/Warehouse 19,000
*Both leases expire during the 1996 fiscal year. These
facilities have been sublet to non-related parties.
**On August 11, 1995, fire destroyed a building at the Elmwood,
Illinois Service Center. See "SUBSEQUENT EVENTS."
Conditioning facilities have peak usage only a few months of the
year during the fall harvest season of September and October.
Weather conditions at harvest time can shorten the time available
for harvest, requiring more capacity at these locations. During
the fall harvest season, the Company's production facilities run
at full capacity. The Company believes it has adequate
conditioning/warehouse capacity for the effective operation of its business.
ITEM 3. LEGAL PROCEEDINGS
As of August 31, 1995, there are no material pending legal proceedings to
which the Company or any of its subsidiaries is a party or of which any of
its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the
fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The common stock of the Company is traded on the NASDAQ Stock
Market under the symbol BIOT.
No dividends on common equity have been paid since the Company's
inception and the Company anticipates that for the foreseeable
future any earnings that would otherwise be available for the
payment of dividends to the holders of common stock will be
retained partially to fund the Company's cash requirements.
The Class A Preferred Stock of the Company (all of which is owned
by LG Corp.) pays a cumulative dividend of $.75 per share per
year when declared by the Board of Directors. No such dividend
has been declared by the Board of Directors. Pursuant to the
terms and conditions of the Company's Class A Preferred Stock,
should any dividend be declared or paid on the common stock of
the Company, the holders of Class A Preferred Stock would be
entitled to receive dividends at a rate per share equal to that
of the common stock.
Pursuant to the Credit Agreement with Harris Bank, the Company
has agreed that the payment of dividends in any fiscal year, if
any, will not exceed the Company's net income determined on a
consolidated basis. If the Company is in default on any of the
terms of the Credit Agreement, then the Company may not pay or
declare any dividends, other than dividends payable in stock of
the Company.
As of August 31, 1995, there were approximately 611 shareholders
of record of the Company's common stock, representing
approximately 2,165 beneficial owners. As of August 31, 1995,
the price per share of common stock was $0.9062.
Price range of common stock:
High Last Sale Low Last Sale
Quarter Ended
June 30, 1995 $ 11/32 $ 3/16
March 31, 1995 5/16 3/16
December 31, 1994 13/32 3/16
September 30, 1994 21/32 5/16
Quarter Ended
June 30, 1994 27/32 15/32
Two Months Ended
March 31, 1994 1 9/32 5/8
Quarter Ended
January 31, 1994 1 7/8 7/8
October 31, 1993 2 1 1/4
July 31, 1993 2 3/4 1 5/8
ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth selected consolidated financial
and operating data for the Company and its predecessors for the
periods and at the dates indicated. The selected consolidated
operating and financial data presented below was derived from the
Consolidated Financial Statements of the Company, which were
audited by KPMG Peat Marwick LLP, independent auditors. The
table should be read in conjunction with the Consolidated
Financial Statements, related notes, and other financial
information.
Fiscal 1994 and 1995 reflect the reverse acquisition accounting
of the Limagrain Transaction and are not comparable with years
prior to 1994 that represent Shissler only. As discussed in
"ITEM 1. BASIS of PRESENTATION," Fiscal 1994 contains twelve
months of Shissler standing alone plus five months of the Company
(as it was constituted prior to the Limagrain Transaction). See
Notes 1 and 2 of the "NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS."
($000's, except per share data)
For Years Ended June 30,
1995* 1994* 1993** 1992** 1991**
Operations:
Net Sales
Domestic $ 20,434 $ 23,005 $ 4,768 $4,985 $ 4,563
Export
-Affiliate 3,089 1,582 3,187 2,193 979
-Other 438 -- 284 -- 20
Operating income
(loss) (1,395) (426) 411 232 191
Net interest expense (1,068) (405) (55) (96) (63)
Other income (expense) 97 (1) 10 45 33
Income taxes 28 -- 148 76 47
Net income (loss)
before extraordinary
item (2,394) (832) 218 105 114
Extraordinary item-
utilization of NOL -- -- 84 76 47
Net income (loss) $ (2,394) $ (832) $ 302 $ 181 $ 161
Net income (loss)
per share:
Before extraordinary
item $ (0.02) $ (0.01) $ 0.00 $ 0.00 $ 0.00
Extraordinary item 0.00 0.00 0.00 0.00 0.00
Net income (loss)
per share $ (0.02) $ (0.01) $ 0.00 $ 0.00 $ 0.00
Cash Dividends Declared
per common share $ -- $ -- $ -- $ -- $ --
Balance Sheet:
Cash and cash
equivalents $ 399 $ 1,141 $ 418 $ 185 $ 532
Property, plant and
equipment, net 9,771 10,950 5,723 5,908 6,112
Total assets 34,502 39,320 9,925 10,000 9,883
Notes payable and
long-term debt 285 513 -- 20 28
Due to affiliate,
long-term 5,326 3,260 2,261 2,261 2,281
Shareholders' equity $ 16,790 $ 17,245 $ 6,657 $ 6,355 $ 5,774
*Post-acquisition
**Pre-acquisition
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIMAGRAIN TRANSACTION
On October 26, 1993, the Company entered into the Limagrain
Agreement, a two-phase transaction completed on March 7, 1994.
See "ITEM 1. BUSINESS-- LIMAGRAIN TRANSACTION."
The Limagrain Transaction is recorded on the books of the Company
as of February 1, 1994, the effective date of the transaction.
As of February 1, 1994, the assets and liabilities of Shissler,
which was a wholly-owned subsidiary of LG Corp. prior to February
1, 1994, which after the Second Closing became a wholly-owned
subsidiary of the Company, were recorded at their historical book
values and combined with the revalued assets and equity of the
Company. The shares of common stock issued by the Company to LG
Corp. were recorded based upon the value assigned to the
consideration received. The pro rata portion of the net assets
of the Company acquired by LG Corp. were adjusted to their
estimated fair market value as of February 1, 1994. The
difference resulting from these two amounts, totaling $9,091,000,
was recorded as goodwill to be amortized over twenty years.
CHANGE IN FISCAL YEAR
During Fiscal 1994, the Company changed its fiscal year end from
July 31 to June 30 to conform with Shissler's and LG Corp.'s fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
On October 26, 1993, the Company entered into a one year
revolving credit arrangement, the Line of Credit with Harris
Bank, whereby the Company may borrow up to $15,000,000 subject to
the limitations of a borrowing base formula and other limitations
contained in the Limagrain Agreement. Borrowings under the Line
of Credit are secured by the inventory and accounts receivable of
the Company and its subsidiaries, and by the guarantees of
Limagrain, LG Corp. and LG Seeds, Inc.
On June 29, 1994, the Company executed a Debt Restructuring
Agreement by and among the Company, Shissler, LG Corp. and
Limagrain. This Debt Restructuring Agreement converted all of
the outstanding cash advances and promissory notes due to
Limagrain and LG Corp. by the Company and Shissler to long-term
debt and equity in the Company. The total amount of outstanding
debt to affiliates on that date, $8,260,000, was converted to (i)
a two-year unsecured promissory note in the amount of $3,260,000
and (ii) 500,000 shares of the Company's Class A Preferred Stock,
in exchange for the remaining $5,000,000 of outstanding
indebtedness. The two-year promissory note is subordinate to the
Harris Bank Line of Credit and bears interest at 0.4375% above
the one-year LIBOR rate as of July 1 for the following twelve
month period, payable annually. (See Notes 7 and 8 of the "NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.")
As of June 30, 1995, the promissory note in the amount of
$3,260,000 was extended until July 1, 1997. All other terms and
conditions remain the same.
Borrowings outstanding under the Line of Credit at June 30, 1995
and 1994 totaled $9,200,000 and $13,800,000, respectively. As of
June 30, 1994, the Company was not in compliance with its
borrowing base loan covenant. In August 1994, the Company
received $4,000,000 as a short-term cash advance from LG Corp.
(the "$4,000,000 Cash Advance"), which remedied its borrowing
base shortfall.
On November 30, 1994, LG Corp. converted the $4,000,000 Cash
Advance into (i) a two-year, long-term note for $2,000,000
bearing interest at LIBOR plus 1.15%, and (ii) 200,000 shares of
Class A Preferred Stock of the Company. (See Notes 7 and 8 of
the "NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.")
Management believes that the two-year $2,000,000 note will be
converted into 200,000 shares of Class A Preferred Stock of the
Company prior to its due date of November 30, 1996.
Effective June 29, 1995, the Harris Bank Line of Credit was
extended until November 30, 1995. Management expects that this
Line of Credit will be renewed under substantially the same
conditions for one year at that time and that the Company will
have access to sufficient cash resources to meet the reasonably
foreseeable obligations of its continuing business operations.
Management believes there is a strong commitment by Limagrain
to enable the Company to obtain sufficient working capital to
support the business. Management's belief that Limagrain's
support will continue is based on Limagrain's commitment under
the Line of Credit guarantee, the additional contribution of
$7,000,000 for Preferred Stock, and the advance of $5,260,000 in
long-term borrowing. Limagrain has no legal obligation to
provide additional funding for the Company.
Due to seasonal fluctuations, the Company from time to time
borrows money from Limagrain affiliates. There is no assurance
that LG Corp., or any other affiliate of Limagrain, will continue
to (i) loan funds to the Company, or (ii) convert such loans to
preferred stock. In addition, there is no assurance that,
without such loans and conversions, the Company would not be out
of compliance with (a) the Harris Bank Line of Credit, or (b) the
NASDAQ Stock Market quantitative maintenance criteria, during
seasonal fluctuations in the Company's borrowing base and net
tangible assets, respectively.
On August 11, 1995, fire destroyed a building at the Elmwood,
Illinois Service Center. See "SUBSEQUENT EVENTS." For
accounting purposes, the difference between the insurance
proceeds received for the destroyed building and the basis in
such building will be treated as a gain or loss on the Fiscal
1996 financial statements. The cost of replacing the building
will be a capital expenditure at the time the building is
replaced. The Company has not decided whether to incur capital
expenditures in excess of insurance proceeds for the replacement
of this building.
Fiscal 1995
During Fiscal 1995, Cash and Cash equivalents decreased by
$742,000. The Company has a policy of using excess cash
available to reduce the principal amount outstanding under its
Line of Credit with Harris Bank. As of June 30, 1995, the
Company had a cash balance of $399,000.
Cash flow used in operations totaled $176,000 in Fiscal 1995.
This amount consisted of net loss of $2,394,000 and a decrease in
accounts payable and accrued liabilities of $1,299,000 which were
partially offset by $1,553,000 in depreciation and amortization,
a $852,000 decrease in receivables, a $415,000 decrease in
inventory and a $697,000 decrease in other current assets.
Cash flow from investing activities provided the Company with
$559,000 in cash. Capital expenditures used $237,000 in cash but
were offset by $647,000 in cash received from the sale of
non-operating assets. A reduction in long-term assets provided
$149,000 in cash.
Cash flow used for financing activities amounted to $1,125,000.
Borrowings under the Harris Line of Credit were decreased
$4,600,000, long-term debt and notes payable were reduced
$377,000, and Class A common stock declined $61,000 from the
repurchase of 6,054,751 shares from State Farm. These reductions
in debt and equity were partially funded by a $2,000,000 increase
in equity from the issuance of Preferred Stock to LG Corp. and a
net $1,913,000 increase in debt with LG Corp.
Fiscal 1994 (See "ITEM 1. BUSINESS -- BASIS OF PRESENTATION")
During Fiscal 1994, Cash and Cash Equivalents increased by
$723,000. As of June 30, 1994, the Company had a cash balance of $1,141,000.
Net cash used in operations totaled $4,665,000 during Fiscal
1994. This amount consisted of net loss of $832,000, offset by
depreciation and amortization of $1,140,000 and a decrease in
inventories of $7,477,000. Additional items that consumed cash
were an increase in accounts receivable of $4,566,000, a decrease
in accounts payable and accrued liabilities of $7,642,000, and an
increase in other current assets of $242,000.
Cash flow used in investing activities was $445,000. This
consisted of $62,000 in capital expenditures offset by $352,000
in cash acquired as a result of the reverse acquisition
accounting treatment of the Limagrain Transaction and the
collection of long-term, non-trade receivables totaling $155,000.
Cash was generated by financing activities in the amount of
$4,943,000. The principal amount outstanding under the Line of
Credit with Harris Bank was reduced by $900,000; however, debts
to affiliates increased by $947,000. The majority of the cash
generated from financing activities came from the $5,000,000 in
Class A Preferred Stock issued to LG Corp.
Fiscal 1993 (See "ITEM 1. BUSINESS--BASIS OF PRESENTATION")
During Fiscal 1993, cash and cash equivalents increased by
$233,000. As of June 30, 1993, the Company had a cash balance of $418,000.
Cash flow from operations generated $1,053,000. This consisted
of net income of $302,000, depreciation and amortization of
$610,000, and other decreases in current assets of $141,000.
Cash flow from investing activities consisted of $413,000 in
capital expenditures, primarily at the Company's Elmwood, Illinois
production facility.
Financing activities consumed $407,000 in cash. Cash in the
amount of $500,000 was used to reduce the principal amount
outstanding under lines of credit. Cash in the amount of $93,000
was generated from increases in long-term debt.
RESULTS OF OPERATIONS
As discussed in "ITEM 1. BUSINESS -- BASIS OF PRESENTATION," the
actual audited financial statements for Fiscal 1995, 1994, and
1993 do not lend themselves to meaningful comparisons as the
relevant entity for each period is significantly different.
Consequently, management has prepared the following unaudited
proforma financial statements in an attempt to depict more
accurately changes in the operations of the combined entity as it
exists today.
The following is a discussion of significant trends represented
in these proforma financial statements.
Proforma Financial Statements
The following proforma consolidated statements of operations for
the years ended June 30, 1995, 1994, and 1993 reflect the
combined results of the Company and Shissler as if the Limagrain
Transaction had been consummated at the beginning of the years
presented, and as if Scott Seed and Donley had been sold at the
beginning of the years presented. These statements present the
comparative operations of the Company as it existed on June 30,
1995.
Adjustments are included to record depreciation and amortization
of the Company's assets based upon the purchase accounting as
described in "ITEM 1. BUSINESS--THE LIMAGRAIN TRANSACTION."
Pursuant to a Termination of Employment Agreement between the
Company and the former President and Chief Executive Officer of
the Company, effective as of the Second Closing, the Company paid
to the former officer a one-time gross lump-sum severance payment
of $200,000. This severance payment has been eliminated from the
accompanying proforma statements.
RESULTS OF OPERATIONS (PRO FORMA)
BIOTECHNICA INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - Excludes Donley and Scott Seed)
(in thousands of dollars)
12 months Ended June 30,
1995 1994 1993
NET SALES:
Domestic $ 16,988 $ 20,284 $21,494
Export 3,527 1,582 3,471
20,515 21,866 24,965
COST AND OPERATING EXPENSES:
Cost of goods sold 12,628 16,901 18,537
Sales and marketing 4,122 5,429 5,938
General, administrative
and other 5,059 6,037 4,758
21,809 28,367 29,233
Operating Loss (1,294) (6,501) (4,268)
OTHER INCOME (EXPENSE):
Interest expense (1,065) (915) (1,252)
Other 100 12 (53)
Net loss before taxes $(2,259) $(7,404) $(5,573)
PROFORMA FISCAL 1995 COMPARED TO PROFORMA FISCAL 1994
The above proforma statements were prepared based on the results
of the Company as it exists today, without Scott Seed and Donley.
As discussed earlier, the Company now conducts business from
seven service centers strategically located throughout the corn
growing area of the Midwest. The Company produces and processes
corn, soybean and wheat seeds at only four locations (that are
also service centers) in order to improve product quality and
increase efficiency. Quality testing is done at the Company's
Elmwood, Illinois facility in order to assure uniform quality of
products.
Domestic Sales
The Company had domestic seed sales in Fiscal 1995 of
$16,988,000, compared to $20,284,000 in Fiscal 1994. Corn acres
decreased by 11% this year due to (i) an increase in government
set aside programs; and (ii) an unusually wet spring throughout
much of the Company's marketing area. This wet spring resulted
in some farmers switching from corn to soybean planting or
letting fields go unplanted. Sales volume was also affected by a
more selective approach of not selling to farmer-customers who
had a history of poor payment practices. There also has been
some loss of business resulting from the major reorganization of
the Company and the major realignment of the sales force.
Management anticipates taking steps in Fiscal 1996 to recover
certain portions of the lost sales volume.
Export Sales
Export sales for Fiscal 1995 show a significant increase over
Fiscal 1994. Fiscal 1995 sales were $3,527,000, compared to
Fiscal 1994 sales of $1,582,000. Of these amounts, sales to
affiliates amounted to $3,089,000 and $1,582,000, respectively.
Since most export sales are based on annually negotiated
production contracts - negotiated at arms-length by management of
the Company and a representative of the respective affiliate -
the increase in sales was the result of very good production
yields during the Fall of 1994 and high demand by affiliated
companies in Europe. Typically, high export sales to Europe in
one year translate into lower sales in the following year, as the
affiliates have a larger carryover inventory to sell. (See "ITEM
1. BUSINESS--CONTINUING BUSINESS.") There is no assurance that
the Company and the Limagrain affiliates will continue to reach
agreement on such export sales arrangements in the future and, in
such event, there will be a negative impact upon the Company's
sales and profit margins.
Cost of Goods Sold
Cost of goods sold was significantly lower in Fiscal 1995 than in
Fiscal 1994. This resulted primarily from two factors.
First, during Fiscal 1994, cost of goods sold had been increased
due to the write-off of $3,297,000 in obsolete inventory. During
Fiscal 1995, the Company wrote off an additional $568,000 in
obsolete inventory. The high write-offs in Fiscal 1994, and the
still higher than normal write-offs in Fiscal 1995, resulted from
careful review of the product line of the Company and a stringent
approach to product quality. As of June 30, 1995, the Company
consolidated the product lines of the various service centers.
Management's goal is to evaluate genetics available from many
sources (including Limagrain) and to market what is considered to
be the best varieties available in the different geographic
regions of the marketing area.
Second, the Company benefited from reduced costs as a result of
the very good growing conditions and yields during the Fall of
1994. These conditions allowed the Company to spread fixed costs
over a higher number of units. In addition, the Company
initiated a program of cost control in all areas and gained
efficiencies from closing two production locations and
consolidating production.
Sales and Marketing
Sales and marketing costs were $4,122,000 in Fiscal 1995,
compared to $5,429,000 in Fiscal 1994. Although a portion of
this reduction resulted from lower sales volume, most of the
savings resulted from a major realignment of our sales and
marketing effort. In the past, each of the different BioTechnica
"companies" operated independently. As such, the Company may
have had two district sales managers representing two different
companies covering the same territory, often calling on the same
prospects. After the realignment, each marketing area (normally
a state or states) is serviced by one service center. The Company
now has a group of sales managers assigned a particular service
center, each of whom are assigned a group of counties in a
particular state (district or area). The Company has assigned all
former dealers of any previous BioTechnica "company" within that
district to that sales manager. The dealers continue to receive
the same brands of product as before, but they are serviced by
only one sales manager, they place orders at a local service
center, and product is shipped from that service center. Because
of this realignment, the Company has eliminated approximately
twenty-five district sales manager positions while maintaining
the same dealer force. Management believes this realignment will
enhance the relationship between the Company, its dealers, and
its customers.
General, Administrative, and Other
A significant goal of the Company for Fiscal 1995 was the
reduction of general and administrative expenses. These costs
were reduced by $978,000. As part of the overall reorganization of the
Company, much effort has been put into reorganizing and centralizing the
administrative functions of the Company. Whereas all of the
former "companies" had full, in-house administrative and
accounting staffs, including a controller, now each service
center has an office manager and one or two sales/administrative
assistants who handle the clerical functions required to service
our customers. Most accounting and other administrative tasks
are performed at the corporate office in Peoria, Illinois.
Interest Expense
Interest expense was higher in Fiscal 1995 than in Fiscal 1994 by
$150,000. The addition of $5,000,000 in equity by LG Corp. as of
June 30, 1994 and $2,000,000 in equity by LG Corp. as of November
30, 1994 reduced the need to borrow and pay interest. The
resulting reduction was offset by higher market interest rates in
Fiscal 1995.
Other Income (Expense)
This category consists primarily of amortization of goodwill from
the Limagrain Transaction, offset by finance charges on dealer
accounts and other miscellaneous income. For Fiscal 1995,
amortization expense was $479,000.
Net Loss Before Taxes
Proforma net loss before taxes shows an improvement for Fiscal
1995 compared to Fiscal 1994 of $5,145,000. This improvement is
the direct consequence of the in-depth restructuring initiated at
the end of Fiscal 1994 allowing the Company to (i) reduce costs
very significantly; and (ii) improve production efficiences (see
"ITEM 1. BUSINESS--BUSINESS RESTRUCTURING AND REDIRECTION").
However, the lower sales volume and the costs associated with the
final phase of the restructuring process partially offset the
favorable factors discussed above (see "Sales and Marketing"
above).
PROFORMA FISCAL 1994 COMPARED TO PROFORMA FISCAL 1993
Domestic Sales
The Company had domestic seed sales in Fiscal 1994 of
$20,284,000, compared to $21,494,000 in Fiscal 1993. This
decrease of $1,210,000 occurred despite the addition in Fiscal
1994 of a newly acquired business which added $1,100,000 in
additional sales. During Fiscal 1994, the Company experienced
various production and logistical problems that resulted in part
from cash shortages in the former BioTechnica organization prior
to the Limagrain Transaction.
Export Sales
Export sales were $1,582,000 in Fiscal 1994, compared to
$3,471,000 in Fiscal 1993. Most of these sales were to
affiliated companies in Europe. This decrease was the result of
lower requirements in Fiscal 1994 by affiliated companies. This
is typical of the trend discussed in the analysis of "PROFORMA
FISCAL 1995 COMPARED TO PROFORMA FISCAL 1994." Export sales are
based on production contracts which are negotiated annually at
arms-length by management of the Company and a representative of
the respective affiliate.
Cost of Goods Sold
Cost of goods sold for Fiscal 1994 was $16,901,000. This
compared to Fiscal 1993 cost of goods sold of $18,537,000.
During Fiscal 1994, the Company wrote off $3,297,000 in low
quality and obsolete inventory. During Fiscal 1993, the Company
wrote off $1,260,000 in low quality and obsolete inventory. Poor
production yields and spring flooding during Fiscal 1993 caused
costs in that year to be higher than in Fiscal 1994.
Sales and Marketing
Sales and marketing costs were $5,429,000 in Fiscal 1994,
compared to $5,938,000 in Fiscal 1993. This decrease is
consistent with the decrease in domestic sales volume.
General, Administrative, and Other
General, administrative, and other costs were $6,037,000 in
Fiscal 1994, compared to $4,758,000 in Fiscal 1993. This
increase resulted in part due to higher administrative, legal,
and accounting activity during Fiscal 1994 associated with the
Limagrain Transaction. In addition, there were higher than
normal costs during the restructuring and relocation process.
Interest Expense
Interest expense decreased by $337,000. The expense was $915,000
in Fiscal 1994, compared to $1,252,000 in Fiscal 1993. This
reduction is a direct result of lower borrowing requirements
after the infusion of capital from LG Corp. and Shissler. In
addition, the Company was able to borrow at significantly lower
interest rates after the Limagrain loan guarantee was in place.
Other Income (Expense)
Other income (expense) improved from expense of $53,000 in Fiscal
1993 to income of $12,000 in Fiscal 1994.
Net Loss Before Taxes
Net loss before taxes showed a deterioration of $1,831,000, from
a loss of $5,573,000 in Fiscal 1993 to a loss of $7,404,000 in
Fiscal 1994. The increase in the net loss before taxes for
Fiscal 1994 resulted primarily from higher inventory write offs
and lower sales volumes as discussed above.
ACCOUNTING STANDARDS
Statement of Financial Accounting Standard No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" was issued in March 1995 and is effective for
fiscal years beginning after December 15, 1995. Management is
currently assessing the effects of the provisions of the
Statement on the financial condition and results of operations of
the Company.
SUBSEQUENT EVENTS
On August 11, 1995, fire destroyed a building used for the
treating of corn and the bagging of soybeans at the Elmwood,
Illinois service center. The Company maintains replacement cost
property insurance on its three corn production facilities.
Cleanup expenses and costs incurred to process seed while the
building is being replaced are expected to be substantially
offset by the Company's property and business interruption
insurance coverage. The Company has not decided whether to incur
capital expenditures in excess of insurance proceeds for the
replacement of this building.
At this time, (i) the Company intends to shift some seed
processing to other Company locations or to have it processed by
third parties on a contract basis, and (ii) management believes
there will not be an interruption in the ability of the Company
to supply seed to its customers.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Consolidated Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets at June 30, 1995 and 1994
Consolidated Statements of Operations for the years ended
June 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended
June 30, 1995, 1994 and 1993
Consolidated Statements of Changes in Shareholders' Equity
for the years ended June 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Consolidated Financial Statement Schedule:
Valuation and Qualifying Accounts - Schedule II
All other schedules have been omitted because the required
information is not applicable or not present in amounts
sufficient to require submission of the schedule, or because the
information required is included in the consolidated financial
statements or the notes thereto.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
BioTechnica International, Inc.:
We have audited the consolidated financial statements of
BioTechnica International, Inc. and subsidiaries as listed in the
accompanying index. In connection with our audits of the
consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index.
These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of BioTechnica International, Inc. and subsidiaries as
of June 30, 1995 and 1994, and the results of their operations
and their cash flows for each of the years in the three-year
period ended June 30, 1995, in conformity with generally accepted
accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set
forth therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois
July 28, 1995
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
June 30, June 30,
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $ 399 $1,141
Accounts receivable, less allowance
for doubtful accounts of $123
in 1995 and $371 in 1994 7,778 8,114
Inventories 6,927 7,342
Prepaid expenses and other current assets 105 802
Net assets held for sale -- 1,335
Total current assets 15,209 18,734
Net property, plant and equipment 9,771 10,950
Goodwill and other assets 9,522 9,636
Total assets $34,502 $39,320
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit $ 9,200 $ 13,800
Notes payable -- 100
Current portion of long-term debt 115 164
Accounts payable 735 1,238
Accrued liabilities 2,051 2,847
Due to affiliates -- 153
Total current liabilities 12,101 18,302
Long-term debt 129 311
Due to affiliates 5,326 3,260
Other noncurrent liabilities 156 202
Total liabilities $17,712 $22,075
Shareholders' equity
Preferred stock, Class A, 700,000 and
500,000 shares outstanding at June 30,
1995 and 1994, respectively $ 7 $ 5
Common stock, 115,418,788 and 105,912,919
shares outstanding at June 30, 1995
and 1994, respectively 1,154 1,059
Common stock, Class A, 10,753,087
shares outstanding at June 30, 1994 -- 108
Common stock, Class B, 4,807,533
shares outstanding at June 30, 1994 -- 48
Additional paid-in capital 18,893 16,895
Accumulated deficit (3,169) (775)
Treasury stock (95) (95)
Total shareholders' equity $16,790 $17,245
Commitments (note 12)
Total liabilities and shareholders'
equity $34,502 $39,320
See accompanying notes to consolidated financial statements
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of dollars, except per share amounts)
Years Ended June 30,
1995 1994 1993
(Post- (Post (Pre-
Acquisition) Acquisition) Acquisition)
Net Sales:
Domestic $ 20,434 $ 23,005 $ 4,768
Export-Affiliates 3,089 1,582 3,187
Export-Other 438 -- 284
23,961 24,587 8,239
Costs and Operating Expenses:
Cost of goods sold 15,432 17,831 5,589
Sales and marketing 4,293 4,673 1,462
General and administrative 5,631 2,509 777
Operating income (loss) (1,395) (426) 411
Other income (expense):
Interest expense (1,068) (405) (55)
Other 97 (1) 10
Net earnings (loss) before income
taxes and extraordinary item (2,366) (832) 366
Income taxes 28 -- 148
Net earnings (loss) before
extraordinary item (2,394) (832) 218
Extraordinary item-utilization of
net operating loss -- -- 84
Net Earnings (loss) $(2,394) $ (832) $ 302
Net Earnings (loss) Per Share before Extraordinary Item:
Post-acquisition $ (0.02) $(0.01) Not applicable
Pre-acquisition Not applicable Not applicable $43.60
Extraordinary Item Per Share:
Post-acquisition $ -- $ -- Not applicable
Pre-acquisition Not applicable Not applicable $16.80
Net Earnings (loss) Per Share after Extraordinary Item:
Post-acquisition $ (0.02) $(0.01) Not applicable
Pre-acquisition Not applicable Not applicable $60.40
Weighted Average Shares Outstanding:
Post-acquisition 121,385,000 107,435,000 Not applicable
Pre-acquisition Not applicable Not applicable 5,000
See accompanying notes to consolidated financial statements
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
Years Ended June 30,
1995 1994 1993
(Post- (Post- (Pre-
Acquisition) Acquisition) Acquisition)
Cash Flow from Operating Activities:
Net income $ (2,394) $ (832) $ 302
Adjustments to reconcile net earnings
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,553 1,140 610
Changes in assets and liabilities
Accounts receivable 852 (4,566) 296
Inventories 415 7,477 (300)
Other current assets 697 (242) 107
Accounts payable and accrued
liabilities (1,299) (7,642) 38
Net cash provided by (used
in) operating activities (176) (4,665) 1,053
Cash Flow from Investing Activities:
Acquisition of property, plant,
and equipment (237) (62) (413)
Proceeds from asset sales 647 -- --
Cash of business acquired -- 352 --
Other 149 155 --
Net cash provided by (used in)
investing activities 559 445 (413)
Cash Flow from Financing Activities:
Net repayment under line of credit (4,600) (900) (500)
Increase in long-term debt
to affiliates 2,066 1,000 --
Increase (Decrease) in short-term debt
to affiliates (153) (53) 101
(Decrease) in long-term debt and
notes payable (377) (104) (8)
Repurchase of Class A common stock (61) -- --
Issuance of Class A Preferred Stock 2,000 5,000 --
Net cash provided by (used for)
financing activities (1,125) 4,943 (407)
Net increase (decrease) in
cash and cash equivalents (742) 723 233
Cash and cash equivalents at beginning
of period 1,141 418 185
Cash and cash equivalents at end of
period $ 399 $ 1,141 $ 418
See accompanying notes to consolidated financial statements
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands of dollars, except share data)
Preferred Stock Common Stock
Class A Non-Voting Common Stock Class A Non-Voting
Shares Par Value Shares Par Value Shares Par Value
Balance June 30, 1992
(pre-acquisition) -- $ -- 5,000 $ 5 -- $ --
Net income for
Fiscal 1993 -- -- -- -- -- --
Balance June 30, 1993
(pre-acquisition) -- $ -- 5,000 $ 5 -- $ --
Limagrain Transaction
Acquisition of existing
common stock -- -- 8,135,741 81 10,753,087 108
Issuance of common
stock -- -- 97,777,178 978 -- --
Receipt of Shissler
common stock -- -- (5,000) (5) -- --
Issuance of Preferred
Stock 500,000 5 -- -- -- --
Net loss for
Fiscal 1994 -- -- -- -- -- --
Balance June 30, 1994
(post-acquisition) 500,000 $ 5 105,912,919 $1,059 10,753,087 $108
Issuance of Preferred
Stock 200,000 2 -- -- -- --
Conversion of Class A
& B Shares -- -- 9,505,869 95 (4,698,336) (47)
Repurchase of Class A
Shares -- -- -- -- (6,054,751) (61)
Net loss for
Fiscal 1995 -- -- -- -- -- --
Balance June 30,
1995 700,000 $ 7 115,418,788 $1,154 -- $ --
(Continued)
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands of dollars, except share data)
Common Stock
Class B Non-Voting Additional Retained Earnings
Shares Par Value Paid-In Capital (Accumulated Deficit)
Balance June 30, 1992
(pre-acquisition) -- $ -- $ 6,595 $(245)
Net income for
Fiscal 1993 -- -- -- 302
Balance June 30, 1993
(pre-acquisition) -- $ -- $ 6,595 $ 57
Limagrain Transaction
Acquisition of existing
common stock 4,807,533 48 5,305 --
Issuance of common
stock -- -- -- --
Receipt of Shissler
common stock -- -- -- --
Issuance of Preferred
Stock -- -- 4,995 --
Net loss for
Fiscal 1994 -- -- -- (832)
Balance June 30, 1994
(post-acquisition) 4,807,533 $48 $16,895 $(775)
Issuance of Preferred
Stock -- -- 1,998 --
Conversion of Class A
& B Shares (4,807,533) (48) -- --
Repurchase of Class A
Shares -- -- -- --
Net loss for
Fiscal 1995 -- -- -- (2,394)
Balance June 30,
1995 -- $ -- $18,893 $(3,169)
(Continued)
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands of dollars, except share data)
Total
Treasury Stock Shareholders'
Shares Par Value Equity
Balance June 30, 1992
(pre-acquisition) -- $ -- $ 6,355
Net income for
Fiscal 1993 -- -- 302
Balance June 30, 1993
(pre-acquisition) -- $ -- $ 6,657
Limagrain Transaction
Acquisition of existing
common stock (39,160) (95) 5,447
Issuance of common
stock -- -- 978
Receipt of Shissler
common stock -- -- (5)
Issuance of Preferred
Stock -- -- 5,000
Net loss for
Fiscal 1994 -- -- (832)
Balance June 30, 1994
(post-acquisition) (39,160) $(95) $17,245
Issuance of Preferred
Stock -- -- 2,000
Conversion of Class A
& B Shares -- -- --
Repurchase of Class A
Shares -- -- (61)
Net loss for
Fiscal 1995 -- -- (2,394)
Balance June 30,
1995 (39,160) $(95) $ 16,790
See accompanying notes to consolidated financial statements
BIOTECHNICA INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BUSINESS
BioTechnica International, Inc. (the "Company") sells corn,
soybean, alfalfa and other seed to dealers, distributors, and
farmers through its seed operations. The Company operates in a
twelve-state region centered in the Midwestern United States.
Sales are generally made on open account to customers. Because
of the geographic concentration of the Company's customers in the
Midwest, it is significantly dependent upon the weather and
market conditions in its market areas. In addition, industry
sales levels are dependent upon factors resulting from
governmental agriculture policies and farm programs.
As a result of a series of transactions culminating on March 7,
1994 (the "Limagrain Transaction"), at the 1993 Annual Meeting of
Shareholders of the Company, voting and management control of the
Company was obtained by Limagrain Genetics Corporation ("LG
Corp."). LG Corp. is a subsidiary of Groupe Limagrain Holding
("Limagrain") of Chappes, France (see "NOTE 2--LIMAGRAIN
TRANSACTION"). As part of the Limagrain Transaction, Shissler
Seed Company, Inc. ("Shissler"), a subsidiary of LG Corp., became
a subsidiary of the Company.
B. BASIS OF PRESENTATION
The consolidated balance sheets as of June 30, 1995 and 1994
(post-acquisition") includes the Company and its wholly owned
subsidiaries. All significant intercompany transactions have
been eliminated in consolidation.
For the year ended June 30, 1995 ("Fiscal 1995"), the financial
statements contained herein present twelve months of operations
of the Company. Results for the Scott Seed Division of the
Company and other properties sold during Fiscal 1995 are included
up to the date of their respective disposals.
For the year ended June 30, 1994 ("Fiscal 1994"), the financial
statements contained herein present twelve months of operations
of Shissler, plus operations of the Company (as it was
constituted prior to the Limagrain Transaction) from February 1,
1994 (the effective date of the Limagrain Transaction) through
June 30, 1994.
For the year ended June 30, 1993 ("Fiscal 1993"), the
accompanying financial statements present twelve months of
operations of Shissler only.
C. REVENUE RECOGNITION
Sales of seed products are recorded upon shipment, reduced by a
reserve for estimated returns and discounts.
D. RESEARCH AND DEVELOPMENT COSTS
Although the Company has no significant internal research and
development effort, it has access to research conducted by LG
Corp. The cost of this expertise is paid to Limagrain Genetics
in the form of royalties on products sold.
E. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash in banks and short-term
investments with original maturities of three months or less.
F. INVENTORIES
Inventories consist primarily of seed products and supplies.
Seed product inventory is valued at the lower of average cost by
crop year or market. Supply inventory is valued at the lower of
cost using the first-in, first-out method or market.
G. NET ASSETS HELD FOR SALE
Net assets held for sale consist of fixed assets which were not,
at June 30, 1994, being used in operations, but were being held
in anticipation of sale to third parties. These assets were all
sold during Fiscal 1995.
H. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and are
depreciated using the straight-line method over the estimated
useful lives of the assets ranging from 3 to 40 years.
I. GOODWILL AND OTHER ASSETS
Goodwill arising from the 1994 reverse acquisition is being
amortized using the straight-line method over a period of 20
years. Adjustments were made to goodwill during Fiscal 1995
resulting from refinements to the actual value of certain assets
sold. The Company evaluates the existence of goodwill impairment
on the basis of whether the goodwill is fully recoverable from
projected, undiscounted net cash flows.
J. INCOME TAXES
The Company adopted Statement of Financial Accounting Standard
No. 109, "Accounting for Income Taxes" ("Statement 109") on July
1, 1993. Statement 109 requires the asset and liability method
of accounting for income taxes. Under the asset and liability
method of Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
Prior to July 1, 1993, in accordance with Accounting Principles
Board Opinion No. 11 ("APB 11"), income taxes were computed using
the deferred method, in which amounts provided for income tax
expense were based on income reported for financial statement
purposes rather than amounts currently payable under tax laws.
Deferred taxes, which arose from timing differences between the
period in which they affected taxable income, were included in
the amounts provided for income taxes. Under the deferred
method, deferred taxes are not adjusted for subsequent changes in
tax rates.
The Company files a Federal consolidated tax return with other
corporations controlled by LG Corp. A tax sharing agreement has
been signed whereby consolidated Federal income tax is allocated
among profitable companies. Companies with operating losses
receive benefits in the future by effectively offsetting taxable
income against prior operating losses.
K. LOSS PER SHARE
Loss per common share is computed based on the weighted average
of all classes of common shares outstanding during the period.
The effect of outstanding stock options is antidilutive and
therefore has not been recognized in the computation of loss per
share.
The weighted average number of shares outstanding for the year
ended June 30, 1995 was 121,385,000. The weighted average number
of shares outstanding for the year ended June 30, 1994, reflects
seven months of historical Shissler shares (5,000 shares
converted to 97,777,178 shares computed by applying the exchange
ratio of 19,555.44 shares of Company stock to each share of
Shissler stock) and five months of shares since the exchange
(121,000,000).
L. FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts of cash, accounts receivable, accounts payable,
and accrued liabilities approximate fair value because of the
short maturity of these financial instruments. The Harris Bank
Credit Agreement is at variable interest rates tied to market
rates and, accordingly, the Company considers the fair value to
be the same as its carrying value.
2. LIMAGRAIN TRANSACTION
On October 26, 1993, the Company entered into the Credit
Enhancement and Reorganization Agreement (The "Limagrain
Agreement") by and among the Company, Limagrain, and LG Corp. As
a result of this agreement, upon completion of the Second Closing
(herein defined) following the Company's Annual Meeting of
Shareholders on March 7, 1994, Limagrain, through LG Corp.,
obtained voting control of the Company.
In the first phase of the transaction, which was consummated on
October 27, 1993 (the "First Closing"), the Company issued
500,000 shares of Voting Common Stock to LG Corp. in
consideration of $5,000 and the guaranty of Limagrain and LG
Corp. delivered to Harris Trust & Savings Bank ("Harris Bank") of
a new $15,000,000 line of credit for the Company.
In the second phase of the transaction, which was completed
following the Annual Meeting of Shareholders on March 7, 1994
(the "Second Closing"), the Company issued 97,777,178 shares of
Voting Common Stock to LG Corp. in consideration of the transfer
by LG Corp. to the Company of all the issued and outstanding
shares of capital stock of Shissler Seed Company ("Shissler").
When added to the 500,000 shares of Voting Common Stock acquired
at the First Closing, this transaction resulted in LG Corp.
holding 98,277,178 shares of the Voting Common Stock of the
Company, representing approximately 80% of the Capital Stock and
approximately 93% of the Voting Common Stock of the Company at
that time.
The exchange of shares related to the Second Closing was
accounted for as a purchase of the Company by Shissler (a
"reverse acquisition") because, after the exchange, LG Corp.,
Shissler's parent, owned 80% of the combined entity. The shares
of Voting Common Stock issued by the Company have been recorded
based upon the value assigned to the consideration received. The
pro rata portion of the net assets of the Company acquired by LG
Corp. have been adjusted to their estimated fair market value and
the difference between these two values has been recorded as
goodwill. The assets and liabilities of Shissler, which after
the Second Closing became a wholly-owned subsidiary of the
Company, have been recorded in the consolidated financial
statements at their historical book values. The transaction was
recorded on the books of the Company as of February 1, 1994, the
effective date of the transaction.
3. INVENTORIES
Inventories at June 30, 1995 and 1994 are as follows:
(in thousands of dollars)
1995 1994
Finished seed $ 4,243 $ 4,886
Unfinished seed 2,123 1,835
Supplies and other 561 621
Total inventories $ 6,927 $ 7,342
"Finished seed" consists of bagged product, ready for sale, net
of reserves for obsolescence. "Unfinished seed" consists of bulk
product not yet bagged and the cost associated with the seed crop
planted in the spring of 1995, net of reserves for obsolescence.
"Supplies and other" consists of foundation seed, unused bags,
pallets, and other supply items.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment with an estimated market value of
$1,335,000, which were being held in anticipation of their sale,
were reclassified to current assets as of June 30, 1994. All of
these assets were sold during the year ended June 30, 1995.
Property, plant and equipment used in the normal on-going
operations of the Company at June 30, 1995 and 1994 are as
follows:
(in thousands of dollars)
1995 1994
Land and improvements $ 793 $ 875
Buildings and improvements 8,109 8,235
Machinery and equipment 4,379 4,488
$ 13,281 $13,598
Less accumulated depreciation (3,510) (2,648)
Net property, plant and
equipment $ 9,771 $10,950
5. GOODWILL AND OTHER ASSETS
Goodwill and other assets (at cost, less accumulated amortization
of $676,000 and $247,000 at June 30, 1995 and 1994, respectively)
are set forth in the following table. Goodwill arose primarily
from the Limagrain Transaction.
(in thousands of dollars)
1995 1994
Goodwill (net of amortization) $ 9,290 $ 9,358
Deposits and other 232 278
$ 9,522 $ 9,636
Adjustments were made to goodwill during the year ended June 30,
1995 as a result of refinements to the carrying value of various
assets to more accurately reflect their value as of the date of
the Limagrain Transaction.
These adjustments, principally as a result of asset sales, are as
follows:
(in thousands of dollars)
Hereford, Texas Plant $ 79
Manilla, Iowa Plant 285
Scott Seed Division (141)
Investment in Biotal 176
Other Asset Sales 12
Net increase to Goodwill $411
6. LINE OF CREDIT AND NOTES PAYABLE
The Company has a revolving credit arrangement with Harris Bank
through November 30, 1995, whereby the Company could borrow up to
$15,000,000 based on a borrowing base formula and subject to
certain limitations in availability contained in the Limagrain
Agreement. This line of credit bears interest rates based on (at
the Company's option) either (i) the Bank Prime Loan rate, or
(ii) the London Interbank Offered Rate ("LIBOR") index.
Borrowings under this Line of Credit are secured by the inventory
and accounts receivable of the Company and its subsidiaries and
by the guarantees of Limagrain and LG Corp. The maximum and
average amounts outstanding under this line of credit during the
year ended June 30, 1995 were $13,800,000 and $8,862,000,
respectively. The weighted average interest rate during Fiscal
1995 was 7.28%.
As of June 30, 1995, the Company's outstanding borrowing against
the line of credit totaled $9,200,000. Effective June 29, 1995,
the line of credit was extended until November 30, 1995.
Other notes payable and outstanding at June 30, 1995 aggregate
approximately $244,000. These notes bear interest at an annual
rate of 9% and are payable in various amounts through September
1997.
The annual maturities of other notes payable are as follows:
(in thousands of dollars)
Year Amount
1996 $ 115
1997 108
1998 21
$ 244
7. DUE TO AFFILIATES
Amounts due to affiliates at June 30, 1995 and 1994 were
comprised as follows:
(in thousands of dollars)
1995 1994
Promissory note dated June 30, 1995 $ 3,260 $ --
Promissory note dated June 29, 1994 -- 3,260
Promissory note dated December 1, 1994 2,000 --
Other long-term payable 66 --
Current amounts due to affiliates -- 153
$ 5,326 $ 3,413
On June 30, 1995, the Company executed a promissory note in the
amount of $3,260,000 to LG Corp. This note is subordinate to the
Harris Bank Credit Agreement and is for a term of two years.
Interest is due annually and is set each period (July 1 through
June 30 of the following year) based on the one-year LIBOR rate
on July 1 plus .4375%.
On December 1, 1994, the Company executed a promissory note in
the amount of $2,000,000 to LG Corp. The term of this note is
two years. Interest is due semiannually and is based on the
one-year LIBOR rate plus 1.15%. Other current amounts due to
affiliates result from amounts due for services rendered under
various contracts.
8. CAPITAL STOCK
The number of authorized shares of common stock of the Company
was increased from 48,000,000 to 150,000,000 at the Annual
Meeting of Shareholders on March 7, 1994 by adoption of the
Amended and Restated Certificate of Incorporation of the Company.
Additional authorized shares of stock include: 11,100,000
shares of Class A common; 11,100,000 shares of Class B common;
and 2,000,000 shares of Class A Preferred.
On June 29, 1994, the Company, Limagrain, LG Corp. and Shissler
entered into a Debt Restructuring Agreement (the "Debt
Restructuring Agreement") whereby (i) certain advances to the
Company and Shissler by LG Corp. and Limagrain of $8,260,000 in
the aggregate were consolidated, (ii) indebtedness in the
principal amount of $5,000,000 was contributed to the Company as
consideration for the issuance to LG Corp. of 500,000 shares of a
newly-created Class A Preferred Stock, par value $.01 per share,
and (iii) a new promissory note was issued to LG Corp. in the
principal amount of $3,260,000. Pursuant to the Certificate of
Designations filed with the Secretary of State of Delaware on
June 29, 1994, the Class A Preferred Stock issues to LG Corp. (i)
has no voting rights, (ii) is non-convertible, (iii) is
redeemable solely at the option of the Company, and (iv) has the
right to a cumulative dividend at the rate of $0.75 per share per
year.
As of June 30, 1994, there were 105,912,919 shares of the
Company's common stock issued and outstanding, with a par value
of $0.01 per share. There was also 10,753,087 shares of Class A
common stock, 4,807,533 shares of Class B common stock, and
500,000 shares of Class A Preferred Stock issued and outstanding.
In August 1994, LG Corp. advanced $4,000,000 to the Company as a
short-term loan to enable the Company to reduce the amounts
borrowed under the Harris Bank Line of Credit so as to bring the
Company within the borrowing base limits of the line of credit.
On November 30, 1994, LG Corp. converted the $4,000,000 advanced
to the Company into (i) a long-term note for $2,000,000 bearing
interest at LIBOR plus 1.15%, and (ii) $2,000,000 in Class A
Preferred Stock of the Company, as described above.
On November 30, 1994, State Farm Automobile Insurance Company
("State Farm") converted 4,698,336 shares of Class A common stock
and 4,807,533 shares of Class B common stock of the Company into
9,505,869 shares of common stock. This conversion was available
to State Farm at their option under the conditions of the Class A
and Class B common stock. This transaction had no effect on the
net outstanding, fully diluted shares of the Company, or on the
relative equity of any shareholder.
On June 26, 1995, State Farm sold 6,054,751 shares of Class A
common stock back to the Company at par value (i.e., $0.01 per
share). This represented approximately 5% of the outstanding
shares of the Company. The price of $0.01 is substantially below
the current market price and the net book value per share. The
result of this transaction was to increase the equity position of
all remaining shareholders by approximately 5%.
As of June 30, 1995, there are only two classes of stock issued
and outstanding: common stock and Class A Preferred Stock.
9. STOCK OPTION PLAN
The Company has reserved 1,500,000 shares of common stock for
issuance under an incentive stock option plan (the "1992 Plan")
which was adopted by the shareholders at the Annual Meeting of
Shareholders on May 7, 1992. Incentive stock options granted
under the 1992 Plan are exercisable in installments following a
minimum period of employment but expire within ten years from the
date of grant. Additionally, the 1992 Plan permits the Company
to issue nonqualified stock options. As of June 30, 1995 and
1994, the Company had 1,140,000 shares available under the 1992
Plan for the grant of options to eligible employees. Subsequent
to the Limagrain Transaction there have been no additional grants
under the 1992 Plan.
The 1992 Plan also permits the Company to issue tandem stock
appreciation rights that permit the recipient to exchange an
option for an amount of stock and/or cash equal to the increase
in the value of the common stock from the date of the grant to
the date of its exercise. No such awards have been granted.
The Company previously granted stock options pursuant to a stock
option plan (the "1982 Plan") which expired on April 17, 1992.
Incentive stock options and nonqualified stock options granted
under the 1982 Plan are exercisable in installments following a
minimum period of employment, but expire within ten years from
the date of grant. Certain of such options were granted at
exercise prices which were lower than the prevailing market price
of the stock at the date of grant. The Company recorded
compensation expense equal to the difference between the market
prices and exercise prices of such options. The remaining
balance of such liability, included in other noncurrent
liabilities in the accompanying June 30, 1995 and 1994
consolidated balance sheets is approximately $156,000 and
$202,000, respectively.
The following table summarizes options granted, exercised and
outstanding for the two years ended June 30, 1995:
Outstanding Exercisable Price
Range
Assumed with Limagrain
Transaction, February 1, 1994 1,104,239 $1.31-$5.50
Granted --
Canceled (718,000) $1.75-$5.50
Exercised --
Options as of June 30, 1994 386,239 317,239 $1.31-$5.50
Granted -- --
Canceled (145,614) (85,614) $1.75-$5.33
Exercised -- --
Vested -- 3,000 $1.75
Options as of June 30, 1995 240,625 234,625 $1.31-$5.50
10. PENSION PLAN
Substantially all full-time employees of the former Shissler
subsidiary are covered under a defined benefit pension plan (the
"Plan") sponsored by an affiliate. The Plan provides benefits
based on years of service and the employee's' compensation during
the last five years of employment. Plan assets are primarily
invested in pooled equity and fixed income funds and are managed
by a life insurance company. The Company's funding policy is to
contribute annually an amount that is not less than the ERISA
minimum funding requirement and not in excess of the amount that
can be deducted for federal income tax purposes. The following
table sets forth the Company's portion of the Plan's funded
status and amounts recognized in the Company's balance sheets at
June 30, 1995 and 1994:
(in thousands of dollars)
1995 1994
Actuarial present value of benefit obligations:
Vested benefit obligation $116 $ 119
Accumulated benefit obligation 134 137
Projected benefit obligation for service
rendered to date 264 256
Plan assets at fair value 225 234
Projected benefit obligation in excess of
Plan assets 39 22
Unrecognized net gain (39) (21)
Prior service cost not yet recognized in
net periodic pension costs -- (2)
Unrecognized net assets -- 1
Prepaid pension cost $ -- $ --
Net pension cost for 1995, 1994 and 1993 included the following
components:
(in thousands of dollars)
1995 1994 1993
Service cost of benefits earned
during the period $ 24 $ 27 $ 32
Interest cost on projected benefit
obligation 43 45 56
Actual return on plan assets (42) (42) (53)
Net amortization and deferral -- 1 1
Net pension cost $ 25 $ 31 $ 36
Assumptions used in accounting for the Plan as of June 30, 1995
and 1994 were:
1995 1994
Discount rate 7.75% 7.75%
Rate of increase in compensation levels 6.00% 6.00%
Expected long-term rate of return on assets 8.00% 8.00%
11. INCOME TAXES
The Company adopted Statement 109 as of July 1, 1993. Under the
asset and liability method of Statement 109, deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. On June 30, 1995, the Company had net
operating loss carryforwards of approximately $96,000,000 which
expire at various dates from 1996 through 2008. As a result of
certain transactions that have occurred including the Limagrain
Transaction, utilization of these net operating carryforwards is
significantly limited.
The provision for income tax expense for 1993 of $148,000 related
to Shissler only. The actual provision for income tax expense
differed from the expected provision for income tax expense
(computed by applying the applicable U.S. Federal corporate
income tax rate of 34% to earnings before income taxes) as
follows:
(thousands of dollars)
1995 1994 1993
Computed "expected" tax (benefit)
expense $(814) $(322) $124
State income taxes, net of
federal benefit -- -- 18
Alternative Minimum Tax 28 -- --
Other -- -- 6
Net operating loss carryforward 814 322 --
Total $ 28 $ -- $148
The components of income tax expense are as follows:
1995 1994 1993
Federal $ 28 $ -- $121
State -- -- 27
Total $ 28 $ -- $148
Deferred tax assets and liabilities at June 30, 1995 consist
primarily of net operating loss carryforwards and various
reserves not yet deductible for tax purposes, and differences
between book and tax depreciation. At June 30, 1995 and 1994,
the valuation allowance is sufficient to reduce the net deferred
tax asset, net of deferred tax liabilities, to zero.
LG Corp. historically has filed its tax return on a November 30
fiscal year. Effective June 30, 1995, LG Corp. elected to file
its tax returns on a fiscal year ending June 30 to coincide with
the fiscal period used by the Company for financial reporting
purposes.
12. COMMITMENTS
The Company leases office space and certain equipment under
non-cancelable operating leases which expire through 1998.
Rental expenses charged to operations were $476,000, $349,000 and
- -$0- for the years ended June 30, 1995, 1994 and 1993,
respectively. Future annual minimum rentals are $185,000,
$157,000, $83,000, $59,000, and -$0- for Fiscal 1996 through
2000, respectively.
13. RELATED PARTIES
The Company has no significant internal research and development
effort. The Company, however, has access to the research
conducted by Limagrain Genetics (an affiliated company in the
Limagrain Group). The cost of this expertise is paid to
Limagrain Genetics as royalties on products sold. Costs incurred
were approximately $81,000, $78,000 and $80,000 for 1995, 1994
and 1993, respectively. In addition, the Company paid $35,000 to
Callahan (a division of LG Corp.) for royalties on soybean
genetics for Fiscal 1995.
The Company has agreements with affiliated companies that provide
for certain administrative and management services. Combined
costs incurred under these agreements were approximately
$320,000, $305,000 and $321,000 for 1995, 1994 and 1993,
respectively. Fees for these arrangements are negotiated
annually by management and approved by the Board of Directors.
The Company sells seed to various affiliated companies in Europe
primarily under production contracts. These contracts are
negotiated annually and are based on arms-length negotiated
pricing and in quantities determined by the affiliates reflecting
their requirements. Export sales to affiliates amounted to
$3,089,000 for Fiscal 1995, $1,582,000 for Fiscal 1994, and
$3,187,000 for Fiscal 1993.
14. SUBSEQUENT EVENTS
On August 11, 1995, fire destroyed a building used for the
treating of corn and the bagging of soybeans at the Elmwood,
Illinois service center. The Company maintains replacement cost
insurance on its three corn production facilities. Consequently,
there will be no material cost to the Company with respect to
property loss as a result of the fire. Cleanup expenses and costs
incurred to process seed while the building is being replaced are
expected to be substantially offset by the Company's property and
business interruption insurance coverage.
At this time, (i) the Company intends to shift some seed
processing to other Company locations or to have it processed by
third parties on a contract basis, and (ii) management believes
there will not be an interruption in the ability of the Company
to supply seed to its customers.
15. SUPPLEMENTAL CASH FLOW INFORMATION
(in thousands of dollars)
June 30 June 30 June 30
1995 1994 1993
Cash paid for interest $687 $493 $ 86
Supplemental schedule of
noncash investing activities:
In connection with the sale of various assets during Fiscal 1995,
the Company received cash of $647,000 and non-operating receivables
of $722,000. The net book value of assets sold was $1,780,000.
BIOTECHNICA INTERNATIONAL, INC.
VALUATION AND QUALIFICATION ACCOUNTS
Years ended June 30, 1995, 1994 and 1993
Schedule II
(in thousands of dollars)
Balance Charged to Balance
at July 1, Costs and at June 30,
1992 Expenses Other Deductions 1993
Allowance for doubtful
accounts $ 21 $ 34 $ -- $ (36)** $ 19
Accumulated amortization:
Goodwill 4 2 -- -- 6
Non-compete agreement 37 10 -- -- 47
$ 41 $ 12 $ -- $ -- $ 53
Balance Charged to Balance
at July 1, Costs and at June 30,
1993 Expenses Other Deductions 1994
Allowance for doubtful
accounts $ 19 $ 80 $338* $ (66)** $371
Accumulated amortization:
Goodwill 6 191 -- -- 197
Non-compete agreement 47 3 -- -- 50
$ 53 $ 194 $-- $ -- $247
Balance Charged to Balance
at July 1, Costs and at June 30,
1994 Expenses Other Deductions 1995
Allowance for doubtful
accounts $ 371 $ 173 $-- $(421)** $123
Accumulated amortization:
Goodwill 197 479 -- -- 676
Non-compete agreement 50 -- -- (50) --
$ 247 $ 479 $-- $ (50) $676
*Balance received as part of the reverse acquisition accounting
for Limagrain Transaction
**Write-off of uncollectible accounts receivable
See accompanying independent auditors' report
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "EXECUTIVE
COMPENSATION," "INFORMATION ABOUT EXECUTIVE OFFICERS" and
"PROPOSAL 1: ELECTION OF DIRECTORS" in the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on
November 14, 1995 (the "1995 Proxy Statement") is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "EXECUTIVE
COMPENSATION" in the Company's 1995 Proxy Statement is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information set forth under the captions "SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS" and "SECURITY OWNERSHIP OF
MANAGEMENT" in the Company's 1995 Proxy Statement is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "CERTAIN
RELATIONSHIPS AND OTHER RELATED TRANSACTIONS" in the Company's
1995 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON
FORM 8-K
(a) Financial Statements, Financial Statement Schedule and
Exhibits
1. Financial Statements. See Item 8 for the financial
statements of
the Company filed as part hereof.
2. Financial Statement Schedule. See Item 8 for the
financial
statement schedule of the Company filed as part hereof.
3. Exhibits. The exhibits listed in the following index
are
incorporated herein by reference.
Exhibit No. Description of Exhibit
2.1 Credit Enhancement and Reorganization Agreement among the
Company, Groupe Limagrain Holding S.A., and Limagrain
Genetics Corp. dated as of October 26, 1993 (incorporated
by reference to Exhibit 2.1 to Form 8-K filed with the
Commission November 10, 1993, File No. 0-11854).
2.2 Amendment to Credit Enhancement and Reorganization
Agreement dated December 10, 1993, among the Company,
Groupe Limagrain Holding S.A., and Limagrain Genetics
Corp. (incorporated by reference to Exhibit 1 to Form 8-K
filed with the Commission December 16, 1993, File No. 0-11854).
3.1 Amended and Restated Certificate of Incorporation dated
March 7, 1994, of the Company, as amended on June 28,
1994.
3.2 By-laws of the Company, as amended on October 29, 1983,
May 7, 1987 and May 18, 1994.
4.1 Specimen Certificate of Common Stock of the Company
(incorporated by reference to Exhibit 4(A) to the
Company's Annual Report on Form 10-K filed with the
Commission on March 31,1986, File No. 0-11854).
4.2 Note Purchase Agreement dated as of December 31, 1987,
between BioTechnica International, Inc. and State Farm
Mutual Automobile Insurance Company as amended
(incorporated by reference to Exhibit 4.1 to Form 8-K
filed with the Commission on February 16, 1988,
File No. 0-11854).
4.3 Common Stock Purchase Agreement dated as of December 31,
1987, between BioTechnica International, Inc. and State
Farm Mutual Automobile Insurance Company as amended
(incorporated by reference to Exhibit 4.2 to Form 8-K
filed with the Commission on February 16, 1988,
File No. 0-11854).
4.4 Class A Common Stock Purchase Agreement dated as of March
31, 1988, between BioTechnica International, Inc. and
State Farm Mutual Automobile Insurance Company as amended
(incorporated by reference to Exhibit 4.3 to Form 10-Q
filed with the Commission on August 12, 1988,
File No. 0-11854).
4.5 Class A Common Stock Purchase Agreement dated as of August
31, 1989, between BioTechnica International, Inc. and
State Farm Mutual Automobile Insurance Company, as amended
(incorporated by reference to Exhibit 4.6 to Form 10-K
filed with the Commission on March 29, 1990,
File No. 0-11854).
4.6 Amendment No. 1 to the Common Stock Purchase Agreement,
Note Agreement and Class A Common Stock Purchase Agreement
between BioTechnica International, Inc. and State Farm
Mutual Automobile Insurance Company (incorporated by
reference to Exhibit 4.7 to Form 10-K filed with the
Commission on March 29,1990, File No. 0-11854).
4.8 Specimen Certificate of Class A Preferred Stock of the
Company.
4.9 Certificate of Designations.
10.1 The Company's 1982 Incentive Stock Option Plan adopted on
July 30, 1982, as amended on January 31, 1987, on May 7, 1987,
and on May 11, 1989 (incorporated by reference to Exhibit
10.1 to Form 10-K filed with the Commission on March 29, 1990,
File No. 0-11854).
10.2 The Company's 1992 Stock Incentive Plan adopted on May 7,
1992, as amended on May 18, 1994.
10.3 Secured Revolving Credit Agreement dated October 26, 1993,
between Harris Trust and Savings Bank and the Company
(incorporated by reference to Exhibit 10.31 to Form 10-K
filed with the Commission on November 15, 1993,
File No. 0-11854).
10.4 Letter Agreement dated October 18, 1993, between State Farm
Mutual Automobile Insurance Company and the Company
(incorporated by reference to Exhibit 10.32 to Form 10-K filed
with the Commission on November 15, 1993, File No. 0-11854).
10.5 Letter Agreement dated October 25, 1993, between The Seagram
Company, Ltd. and the Company (incorporated by reference to
Exhibit 10.33 to Form 10-K filed with the Commission on
November 15, 1993, File No. 0-11854).
10.6 Letter Agreement dated October 18, 1993, between John A.
Masters and the Company (incorporated by reference to Exhibit
10.34 to Form 10-K filed with the Commission on November 15,
1993, File No. 0-11854).
10.7 Termination of Employment Agreement dated December 10, 1993,
between the Company and Charles H. Baker (incorporated by
reference to Exhibit 2 to Form 8-K filed with the Commission
on December 16, 1993, File No. 0-11854).
10.8 Amended Letter Agreement dated December 8, 1993, between State
Farm Mutual Automobile Insurance Company and the Company
(incorporated by reference to Exhibit 10.36 to Amendment No. 2
on Form 10-K/A filed with the Commission on January 26, 1994,
File No. 0-11854).
10.9 Amended Letter Agreement dated December 8, 1993, between The
Seagram Company, Ltd. and the Company (incorporated by
reference to Exhibit 10.37 to Amendment No. 2 on Form 10-K/A
filed with the Commission on January 26, 1994,
File No. 0-11854).
10.10 Amended Letter Agreement dated December 8, 1993, between John
A. Masters and the Company (incorporated by reference to
Exhibit 10.38 to Amendment No. 2 on Form 10-K/A filed with the
Commission on January 26, 1994, File No.0-11854).
10.11 First Amendment to Secured Revolving Credit Agreement between
Harris Trust and Savings Bank and BioTechnica International,
Inc. dated as of February 15, 1994.
10.12 Second Amendment to Secured Revolving Credit Agreement between
Harris Trust and Savings Bank and BioTechnica International,
Inc. dated March 7, 1994.
10.13 Debt Subordination Agreement between Harris Trust and Savings
Bank and BioTechnica International, Inc. dated June 29, 1994.
10.14 Debt Restructuring Agreement by and among Limagrain Genetics
Corp., Shissler Seed Co., Inc., Limagrain Holding S.A. and
BioTechnica International, Inc. dated June 29, 1994.
10.15 Promissory Note issued to Limagrain Genetics, Corporation by
BioTechnica International, Inc. on June 29, 1994.
10.16 Subscription by Limagrain Genetics Corporation of 500,000
shares of Class A Preferred Stock of BioTechnica International,
Inc. dated June 20, 1994.
10.17 Executive Compensation Agreement 1994/95 for J.C. Gouache
dated October 21, 1994.*/**
10.18 Consulting Agreement between the Company and William C.
Hittinger dated January 1, 1995.*
10.19 Consulting Agreement between the Company and Ralph W.F. Hardy
dated January 1, 1995.*
10.20 Agreement between the Company and George R. Allbritten dated
January 4, 1995.
10.21 Agreement for Administrative and Support Services by and
between Shissler Seed Company, Inc. and Limagrain dated
June 29, 1990.
10.22 Promissory note issued to LG Corp. by Shissler dated July 1,
1994.
10.23 Promissory note issued to LG Corp. by the Company dated
March 10, 1994.
10.24 Promissory note issued to LG Corp. by the Company dated
April 14, 1994.
10.25 Promissory note issued to LG Corp. by the Company dated
April 19, 1994.
10.26 Promissory note issued to LG Corp. by the Company dated
June 29, 1994.
10.27 Promissory note issued to LG Corp. by the Company dated
June 29, 1995.*
10.28 Promissory note issued to LG Corp. by the Company dated
December 1, 1994.
10.29 Service Agreement between LG Seeds, Inc. and Limagrain
Innovations dated July 1, 1994.*
10.30 Biotechnology Service Agreement between LG Seeds, Inc.
and BIOCEM S.A dated July 1, 1994.*
10.31 Service Agreement between LG Seeds, Inc. and Limagrain
Genetics International S.A. dated July 1, 1994.*
10.32 Tax Allocation Agreement among the Limagrain Affiliated
U.S. corporations filing a consolidated tax return with
Limagrain Genetics Corporation.*
21.00 Subsidiaries of the Company.*
27.00 Financial Data Schedule.*
(b) Reports on Form 8-K.
Current report on Form 8-K dated April 28, 1995, File Number
0-11854, was filed in connection with the sale by the Company of
the assets of its Scott Seed to AgriBioTech.
Current report on Form 8-K dated June 29, 1995, File Number
0-11854, was filed in connection with an agreement between the
Company and State Farm Automobile Insurance Company to repurchase
100% of the Company's remaining Class A Common shares
outstanding.
(*)Filed herewith.
(**)Management contract filed pursuant to Item 14(c) of Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
BIOTECHNICA INTERNATIONAL, INC.
By: /s/ Jean Ferrand
Jean Ferrand
Chairman, Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Company and in the capacities and on the dates
indicated.
Signature Title
Date
/s/ Jean Ferrand Chairman, Director
Jean Ferrand
/s/ Emmanuel Rougier Chief Executive Officer,
Emmanuel Rougier Director
/s/ Jean Christophe Gouache President and
Jean Christophe Gouache Chief Operating Officer
/s/ Edward M. Germain Chief Financial Officer
Edward M. Germain
/s/ Philip M. Nordeen Chief Accounting Officer
Philip M. Nordeen
/s/ Claude Agier Director
Claude Agier
/s/ George R. Allbritten Director
George R. Allbritten
/s/ Ralph W.F. Hardy Director
Ralph W.F. Hardy
/s/ William C. Hittinger Director
William C. Hittinger
/s/ Laurent Petoton Director
Laurent Petoton
CORPORATE INFORMATION
SHAREHOLDER REFERENCE EXECUTIVE OFFICERS
CORPORATE HEADQUARTERS Jean Christophe (J.C.) Gouache
BioTechnica International, Inc. President and Chief
Operating Officer
4001 War Memorial Drive
Peoria, IL 61614 Edward M. Germain
(309) 681-0300 Secretary and
Chief Financial Officer
OPERATING SUBSIDIARY
LG Seeds, Inc. Philip M. Nordeen
4001 War Memorial Drive Treasurer and
Peoria, IL 61614 Chief Accounting Officer
TRANSFER AGENTS Bruno Carette
American Stock Transfer & Vice President, Sales and Marketing
Trust Company
40 Wall Street
New York, NY 10005
(212) 936-5100 BOARD OF DIRECTORS
Jean Ferrand
AUDITORS Chairman of the Board
KPMG Peat Marwick LLP
Chicago, IL 60601 Emmanuel Rougier
Chief Executive Officer
COUNSEL
Shook, Hardy & Bacon P.C. George R. Allbritten
Kansas City, MO 64106
Claude Agier
SEC FORM 10-K
A copy of the Company's annual Ralph W.F. Hardy
report to the Securities and
Exchange Commission on Form 10-K William C. Hittinger
Commission on Form 10-K is
available without charge upon Laurent Petoton
written request to:
Shareholder Relations
BioTechnica International, Inc.
4001 War Memorial Drive
Peoria, IL 61614
ANNUAL MEETING
The annual meeting of shareholders will
be held at 10:00 A.M. on Tuesday,
November 14, 1995 at The Signature Inn,
4112 North Brandywine, Peoria, IL.