UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
Commission File Number 0-11854
BIOTECHNICA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2344703
(State of incorporation) (I.R.S. Employer
Identification No.)
4001 North War Memorial Drive, Peoria, IL 61614
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 309/681-0300
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No _______
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
On April 19, 1996, the Registrant had 115,379,628 (115,418,788 shares
less, 39,160 treasury shares) shares of Common Stock outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BIOTECHNICA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of dollars)
March 31, June 30,
Assets 1996 1995
Current assets:
Cash & cash equivalents $ 235 $ 399
Accounts receivable 7,679 7,778
Inventories 6,802 6,927
Prepaid expenses & other assets 438 105
------ ------
Total current assets 15,154 15,209
Property, plant & equipment
At cost 13,470 13,281
Less accumulated depreciation 3,915 3,510
------ ------
Net property, plant & equipment 9,555 9,771
Goodwill and other assets 9,096 9,522
Total assets $ 33,805 $ 34,502
====== ======
Liabilities and Shareholders' Equity
Current liabilities:
Borrowings under line of credit $ 7,400 $ 9,200
Current portion of long-term debt 115 115
Accounts payable 1,807 735
Customer advances 789 0
Accrued liabilities 2,009 2,051
Due to affiliates 720 0
------ ------
Total current liabilities 12,840 12,101
Long-term debt 40 129
Due to affiliates 3,261 5,326
Other noncurrent liabilities 191 156
------ ------
Total liabilities 16,332 17,712
Shareholders' equity:
Preferred stock, Class A, 2,000,000
shares authorized; 900,000 and 700,000
shares outstanding, respectively 9 7
Common stock, 150,000,000 shares
authorized; 115,418,788 shares
outstanding 1,154 1,154
Additional paid-in capital 20,891 18,893
Accumulated deficit (4,486) (3,169)
Treasury stock (95) (95)
------ ------
Total shareholders' equity 17,473 16,790
Total liabilities and
shareholders' equity $ 33,805 $ 34,502
====== ======
See notes to Condensed Consolidated Financial Statements
BIOTECHNICA INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands of dollars except per share amounts)
Three Months Ended Nine Months Ended
March 31, March 31,
1996 1995 1996 1995
Net Sales:
Domestic $ 12,687 $ 12,898 $ 13,557 $ 15,804
Export-Affiliates 288 1,152 1,506 3,131
Export-Other (73) 438 88 438
------ ------ ------ ------
12,902 14,488 15,151 19,373
Cost of Goods Sold:
Cost of goods sold 8,108 8,491 10,049 12,976
------ ------ ------ ------
Gross Margin 4,794 5,997 5,102 6,397
Operating expenses:
Sales and marketing 1,421 1,335 3,266 3,420
Warehouse and distribution 500 675 880 1,543
General and administrative 747 917 2,035 2,652
------ ------ ------ ------
2,668 2,927 6,181 7,615
Operating income 2,126 3,070 (1,079) (1,218)
Other income (expense):
Interest expense (166) (180) (621) (807)
Amortization of goodwill (124) (121) (374) (359)
Gain on sale of fixed assets (3) 0 403 21
Other 20 27 354 90
------ ------ ------ ------
Net income before taxes 1,853 2,796 (1,317) (2,273)
Income taxes 0 0 0 0
Net income (loss) $ 1,853 $ 2,796 $ (1,317) $ (2,273)
====== ====== ====== ======
Net income (loss) per share 0.02 0.02 (0.01) (0.02)
Weighted average
shares outstanding
(in thousands) 115,419 121,434 115,419 121,434
See notes to Condensed Consolidated Financial Statements
BIOTECHNICA INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of dollars)
Nine Months Ended
March 31,
1996 1995
Cash flow from operating activities:
Net income (loss) $ (1,317) $ (2,273)
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,062 1,141
Changes in assets and liabilities
Accounts receivable 99 (290)
Inventories 125 (436)
Other current assets (282) 1,872
Customer advances 789 1,095
Accounts payable and accrued liabilities 1,030 1,139
------ ------
Net cash provided by (used in)
operating activities 1,506 2,248
Cash flow from investing activities:
Acquisition of property, plant & equipment (1,120) (151)
Other 649 0
------ ------
Net cash provided by (used in)
investing activities (471) (151)
Cash flow from financing activities:
Increase (decrease)in line of credit (1,800) (6,800)
Increase (decrease)in debt to affiliates (1,345) 2,181
(Decrease) in long-term debt and notes payable (54) (351)
Increase in equity 2,000 2,000
------ ------
Net cash provided by (used in)
financing activities (1,199) (2,970)
Net increase (decrease) in cash $ (164) $ (873)
Cash and cash equivalents at beginning of period $ 399 $ 1,141
Cash and cash equivalents at end of period $ 235 $ 268
See notes to Condensed Consolidated Financial Statements
BIOTECHNICA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(in thousands of dollars, except share data)
Preferred Stock Common Stock
Class A Non-Voting
Shares Par Value Shares Par Value
June 30, 1995 700,000 $7 115,418,788 $1,154
Net loss First Quarter 0 $0 0 $0
September 30, 1995 700,000 $7 115,418,788 $1,154
Issuance of Preferred Stock 200,000 $2 0 $0
Net loss Second Quarter 0 $0 0 $0
December 31, 1995 900,000 $9 115,418,788 $1,154
Net profit Third Quarter 0 $0 0 $0
March 31, 1996 900,000 $9 115,418,788 $1,154
BIOTECHNICA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(in thousands of dollars, except share data)
Additional Retained Treasury Stock Total
Paid-In Earnings Shareholders
Capital (Deficit) Shares Par Value Equity
June 30, 1995 $18,893 ($3,169) (39,160) ($95) $16,790
Net loss First Quarter $0 ($1,824) 0 $0 ($1,824)
September 30, 1995 $18,893 ($4,993) (39,160) ($95) $14,966
Issuance of
Preferred Stock $1,998 $0 0 $0 $2,000
Net loss Second Quarter $0 ($1,346) 0 $0 ($1,346)
December 31, 1995 $20,891 ($6,339) (39,160) ($95) $15,620
Net profit Third Quarter $0 $1,853 0 $0 $1,853
March 31, 1996 $20,891 ($4,486) (39,160) ($95) $17,473
See notes to Condensed Consolidated Financial Statements
BIOTECHNICA INTERNATIONAL, INC.
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1) Financial Statements
The accompanying condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q. To the extent
that information and footnotes required by generally accepted accounting
principles for complete financial statements are contained in or
consistent with the audited consolidated financial statements
incorporated in the Company's Form 10-K for the year ended June 30, 1995,
such information and footnotes have not been duplicated herein. In the
opinion of management, all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation of financial
statements have been reflected herein.
2) Inventories
(in thousand of dollars)
March 31, June 30,
1996 1995
Finished seed $ 5,295 $ 4,243
Unfinished seed 618 2,123
Supplies and other 889 561
-------- --------
Total Inventory $ 6,802 $ 6,927
"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 costs 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. 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.
3) Financing Agreement
On November 15, 1995, the Company renewed its line of credit with its
principal bank, extending the terms of the agreement until December 1,
1996. The Company may borrow up to $12,000,000, based upon a borrowing
base formula, subject to certain limitations and availability. Borrowings
under the line of credit are secured by receivables and inventory and by
the guarantee of the majority shareholder, Limagrain Genetics Corp., and
its parent, Groupe Limagrain Holding S.A. Borrowings against the line of
credit at March 31, 1996, totaled $7,400,000.
4) Changes in Equity
On November 30, 1995, the Company retired $2,000,000 of long-term debt
with its majority shareholder in exchange for 200,000 shares of the
Company's Class A Preferred Stock. The additional 200,000 shares brought
the total Class A Preferred Stock ownership of the majority shareholder
to 900,000 shares, representing a contribution of $9,000,000 in equity to
the Company during the past two years.
Item 2. Management's Discussion and Analysis
Business
The primary business of the Company is the production, processing and
sale of agricultural seeds to a network of farmer-dealers throughout the
midwestern United States. Hybrid corn seed, varietal soybean seed, and
alfalfa seed comprise the Company's major product lines.
The Company contracts with independent farmer-growers for the production
of seed 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.
Liquidity and Capital Resources
Cash and cash equivalents declined $164,000 during the first nine months
of Fiscal 1996 from $399,000 at June 30, 1995, to $235,000 at March 31,
1996. Cash flow from operations totaled $1,506,000 with $1,062,000 in
Depreciation and amortization, $789,000 in Customer prepayments and a
$1,030,000 increase in accounts payable and accrued expenses offsetting
the $1,317,000 net loss for the nine months ended March 31, 1996.
The on-going construction of the new grading and bagging building in
Elmwood (see below), other production projects and information system
improvements used $1,120,000 in cash during the nine month period but
this was partially offset by the $649,000 reduction in net fixed assets
for the nine month period. This reduction is due to the involuntary
disposal and resulting gain on fixed assets mentioned in the last
paragraph of this section.
Repayment of both short and long term debt used $1,854,000 of the
Company's cash flow, while the conversion of $2,000,000 in affiliate debt
into Preferred Stock mentioned in Note 4 of the Notes to the Quarterly
Consolidated Financial Statements resulted in the $2,000,000 increase to
equity and corresponding decline in debt to affiliates.
On November 15, 1995, the Company renewed its line of credit with its
principal bank, extending the terms of the agreement until December 1,
1996. The Company may borrow up to $12,000,000, based upon a borrowing
base formula, subject to certain limitations and availability. Borrowings
under the line of credit are secured by receivables and inventory and by
the guarantee of the majority shareholder and its parent. Borrowings at
March 31, 1996, totaled $7,400,000 compared to an availability under the
borrowing base of $9,965,000. Management believes that the Company has access
to sufficient cash to fund the Company's operational needs for Fiscal 1996.
In October the Company and its insurance carrier reached a settlement in
determining the replacement cost of a production building destroyed by
fire on August 11, 1995. The insurance carrier has paid the Company
$1,029,000 for the replacement of the building which results in a gain on
involuntary disposal of fixed assets of approximately $383,000 which is
included in the nine month period ending March 31, 1996. Management has
decided to replace the destroyed building with a more efficient and
higher capacity facility, resulting in a capital improvement project for
Fiscal 1996 and Fiscal 1997 totaling $1,900,000. This project will
improve the processing capability at the Elmwood facility and integrate
it into the $3,500,000 plant built in Elmwood in 1990.
Results of Operations
Due to the seasonal nature of the seed business, 80-90% of the Company's
revenues normally occur during the third and fourth fiscal quarters of
each year. During the first six months of the year, the Company's
production facilities are harvesting, conditioning and bagging their seed
products and substantial marketing efforts are underway in preparation
for the next planting season which begins in the spring. Consequently,
companies in this industry typically have losses during the July through
December period and, as a result, the first and second quarters of the
year are not indicative of the results to be expected for the full year.
The Condensed Consolidated Statements of Operations for the three and
nine months ended March 31, 1995, include the operations of Scott Seed
and severance costs for a number of former Company employees. For a more
meaningful comparison of the operating results of the respective three
and nine month periods ending March 31, of Fiscal 1996 versus Fiscal
1995, the severance costs and the operations of Scott Seed have been
excluded in the proforma statement of operations shown below. Management
believes this proforma allows the reader to make a better comparison of
the three and nine month periods ending March 31, of Fiscal 1995 to
Fiscal 1996 as the Company exists today and shows the Company's
continuing efforts to reduce expenses and improve profitability. The
following discussion is in reference to these proforma statements.
BIOTECHNICA INTERNATIONAL INC.
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands of dollars except per share amounts)
Three Months Ended Nine Months Ended
March 31, March 31,
1996 1995 1996 1995
Net Sales:
Domestic $ 12,687 $ 11,675 $ 13,557 $ 12,357
Export-Affiliates 288 1,152 1,506 3,131
Export-Other (73) 438 88 438
------ ------ ------ ------
12,902 13,265 15,151 15,926
Cost of Goods Sold:
Cost of goods sold 8,108 7,569 10,049 10,233
------ ------ ------ ------
Gross Margin 4,794 5,696 5,102 5,693
Operating expenses:
Sales and marketing 1,421 1,279 3,266 3,247
Warehouse and distribution 500 567 880 1,132
General and administrative 747 926 2,035 2,542
------ ------ ------ ------
2,668 2,772 6,181 6,921
Operating income 2,126 2,924 (1,079) (1,228)
Other income (expense):
Interest expense (166) (179) (621) (804)
Amortization of goodwill (124) (121) (374) (359)
Gain on sale of fixed assets (3) 0 403 21
Other 20 28 354 137
------ ------ ------ ------
Net income before taxes 1,853 2,652 (1,317) (2,233)
Income taxes 0 0 0 0
Net income (loss) $ 1,853 $ 2,652 $ (1,317) $ (2,233)
====== ====== ====== ======
Net income (loss) per share 0.02 0.02 (0.01) (0.02)
Weighted average
shares outstanding 115,419 121,434 115,419 121,434
(in thousands)
See notes to Condensed Consolidated Financial Statements
Net sales on a proforma basis are $363,000 lower in the third quarter of
Fiscal 1996, declining from $13,265,000 in Fiscal 1995 to $12,902,000
in Fiscal 1996. Domestic sales improved over last year increasing
$1,012,000 from $11,675,000 in the third quarter of Fiscal 1995 to
$12,687,000 in the third quarter of Fiscal 1996, however export sales are
$1,375,000 lower declining from $1,590,000 in Fiscal 1995 to $215,000 in
Fiscal 1996. Affiliate corn sales contracts for Fiscal 1996 are roughly
half of Fiscal 1995 totals. Additionally, due to the poor production year
experienced by the entire industry, the Company was unable to produce
enough of the proprietary corn genetics to fill all of the Export orders.
As a result, these sales are significantly lower than Fiscal 1995. Cost
of goods sold is $539,000 higher than Fiscal 1995, despite the lower
export volume, due to the poor production year. The cost of the
current years corn crop for both domestic and export markets will be
significantly higher than the prior production year. Sales and marketing
costs are $142,000 higher in the second quarter of Fiscal 1996 increasing
from $1,279,000 in Fiscal 1995 to $1,421,000 in Fiscal 1996, as the
Company seeks to expand its domestic corn sales. Warehouse and
distribution costs are $67,000 lower, declining from $567,000 in Fiscal
1995 to $500,000 in Fiscal 1996. Administrative costs are $179,000 lower
in the third quarter of Fiscal 1996 declining from $926,000 in Fiscal
1995 to $747,000 in Fiscal 1996. As a result, the Company's net profit for the
third quarter was reduced by $799,000 from a profit of $2,652,000 in
Fiscal 1995 to a profit of $1,853,000 for the third quarter of Fiscal
1996.
On a year to date proforma basis, net sales for the first nine months of
the year are $775,000 lower than Fiscal 1995, declining from $15,926,000
to $15,151,000. Domestic sales have increased $1,200,000 over the nine
month period ended March 31 from $12,357,000 in 1995 to $13,557,000 in
1996, however Export sales are $1,975,000 lower due to the reduced Affiliate
sales contracts and the poor production year mentioned in the preceding
paragraph. The main objective of the restructuring of the Company over the past
two years has been to increase the Domestic sales of corn and soybeans, the
Company's primary market. Management believes that the actual year-to-date
sales increase over last year is due in part to the effect of restructuring
the Company described above. In addition, intended planting acres for corn and
soybeans in the spring of Fiscal 1996 are higher than those planted in Fiscal
1995. Cost of goods is $184,000 lower in Fiscal 1996 with the reduced export
volume, declining from $10,233,000 in Fiscal 1995 to $10,049,000 in Fiscal
1996. Sales and marketing costs are $19,000 higher in the nine months ended
March 31, 1996, increasing from $3,247,000 in Fiscal 1995 to $3,266,000
in Fiscal 1996. Warehouse and distribution costs are $252,000 lower
declining from $1,132,000 in Fiscal 1995 to $880,000 in Fiscal 1996 as
the Company tries to improve its product management. Administrative costs
declined $507,000 in the nine months ending March 31, 1996, decreasing
from $2,542,000 in Fiscal 1995 to $2,035,000 in Fiscal 1996. Interest
expense declined $183,000 decreasing from $804,000 in Fiscal 1995 to
$621,000 in Fiscal 1996. The decline in interest expense is due to the
conversion of $2,000,000 in debt into Preferred Stock by the majority
shareholder. With the $383,000 gain from the Elmwood fire, gain on the sale
of fixed assets rose from $21,000 in Fiscal 1995 to $403,000 in Fiscal
1996. Other income rose $217,000 during the first nine months ending
March 31, 1996, increasing from $137,000 in Fiscal 1995 to $354,000 in
Fiscal 1996. As a result of these factors the Company reduced its net
loss for the first nine months ending March 31, 1996, from $2,233,000 in
Fiscal 1995 to $1,317,000 in Fiscal 1996, a reduction of $916,000.
The Company's Results of Operations contain forward-looking estimates and
accruals for a number of key expenses such as returns, commissions and
discounts. Should these key items differ from the Company's best
estimates at this time, the net loss for the nine months year to date
could be substancially higher or lower than currently reported.
PART II
Item 1. Legal Proceedings.
Not Applicable.
Item 2. Changes in Securities.
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information.
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K:
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K:
Current Report on Form 8-K filed with the Commission on April 1,
1996, File No. 0-11854, announcing the selection of Bruno Carette as
President and Chief Operating Officer effective July 1, 1996.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BIOTECHNICA INTERNATIONAL, INC.
Date: April 22, 1996 J. C. Gouache_______________
J. C. Gouache, President and
Chief Operating Officer
Date: April 22, 1996 Edward M. Germain___________
Edward Germain
Chief Financial Officer