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, 1996 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 30, 1996, 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 30, 1996, the aggregate market value of the voting stock held
by non-affiliates of the registrant was $7,473,537.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement with respect to its
1996 Annual Meeting of Shareholders to be held on November 12, 1996: Part
III.
PART I
ITEM 1. BUSINESS
The Limagrain Transaction
On October 26, 1993, BioTechnica International, Inc. (the "Registrant",
which together with its subsidiary 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 "Voting 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 its principal
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 Voting 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, 1996 ("Fiscal 1996"), the financial statements
contained herein present twelve months of operations of the Company.
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.
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. In the Proforma Statement, 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 BioTechnica 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
$3,261,000. 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 its bank
line of credit (the "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 was 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%.
On November 30, 1995, the Company converted the $2,000,000 long-term note
owed to LG Corp. into an additional 200,000 shares of Class A Preferred
Stock.
Business Restructuring And Redirection
The Company conducts its operations through its operating subsidiary, LG
Seeds, Inc. Since the date of the Limagrain Transaction, 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, all with the ultimate goal of
improving the profitability of the Company. Under the new structure, the
Company operates from a corporate headquarters office in Peoria, Illinois,
produces seed at four locations, and services 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 is prominent in the introduction of new products throughout the
Company.
During Fiscal 1995, the Company sold certain unused and unneeded facilities.
These assets 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.
Also during Fiscal 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 shares of ABT common stock with a guaranteed value of
$3.00 per share, and assumption of the accounts payable of Scott Seed by
ABT. 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. The ABT stock , which
is traded on the NASDAQ Small-Cap Market was sold during Fiscal 1996 for a
gain of approximately $94,000, relative to the guaranteed amount, and is
included as other income (expense).
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 1996, sales of corn, soybeans, and alfalfa products represented 60%,
31%, and 4% of net sales, respectively. This compares to 52%, 26% and 6% of
the Company's net sales during Fiscal 1995, and 52%, 27% and 7% of the net
sales for corn, soybeans and alfalfa in Fiscal 1994. Total net sales for
Fiscal 1995 and Fiscal 1994 included Scott Seed sales of 14% and 11%,
respectively, which were primarily grass and other seeds.
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. 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 or at
harvest time in the fall, although some payments are received at various
times throughout the year as induced by early payment discounts. Management
believes these practices and policies are typical of those of competitors in
the seed industry.
Seed product revenues were $18,767,000 for Fiscal 1996, including $1,489,000
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. Total Export sales represent approximately 9% of revenues
for Fiscal 1996 and 15% of revenues for Fiscal 1995. As a percentage of
revenues for Fiscal 1994, export sales accounted for 6% 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 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. Competitors of the
Company consist of several very large seed companies and numerous smaller
operations throughout the Midwestern United States. 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. In the past, the brand
names under which the Company's products were marketed tended to be regional
in focus. However, following the above-described business restructuring and
redirection, the Company has introduced the "LG" Brand with the intention of
it becoming 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 and expertise 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 1996, 1995, or 1994.
Export sales to foreign affiliates do represent a significant portion of the
total net sales of the Company. Sales to these affiliates consist of 8% of
net sales for Fiscal 1996, 13% of net sales for Fiscal 1995, and 6% of net
sales for Fiscal 1994.
Employees
The Company employed 111 people as of August 30, 1996, including 11 part-
time employees.
ITEM 2. PROPERTIES
The following table identifies the properties owned or leased by the Company
and its subsidiary as of June 30, 1996:
Approximate
Acreage Square Footage
Owned Owned Leased
Peoria, IL Corporate Headquarters 6,000
Prescott, WI Office/Warehouse 16,056
Mt. Pleasant, IA Office/Plant/Warehouse 20.0 64,000
Tekamah, NE Office/Plant/Warehouse 17.7 74,620
Decatur, IL Office/Plant/Warehouse 8.3 59,000
Windfall, IN Office/Plant/Warehouse 9.9 49,300
Elmwood, IL Office/Plant/Warehouse 40.5 122,577
Sunfield, MI Office/Warehouse 19,000
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.
There is an outstanding mortgage on the Tekamah, Nebraska facility in the
amount of $138,000.
ITEM 3. LEGAL PROCEEDINGS
As of August 30, 1996, there are no material pending legal proceedings to
which the Company or its subsidiary 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 to partially 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 line of credit arrangement with its 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 30, 1996 there were approximately 597 shareholders of record of
the Company's common stock, representing approximately 1,964 beneficial
owners. As of August 30, 1996, the closing price per share of common stock
was $0.4375.
Price range of common stock:
High Last Sale Low Last Sale
Quarter Ended
June 30, 1996 $ 7/8 $ 1/2
March 31, 1996 1 1/8 3/8
December 31, 1995 15/16 5/16
September 30, 1995 1 7/8 9/32
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
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.
The fiscal years ended June 30, 1994 through 1996 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.
For Years Ended June 30,
1996* 1995* 1994* 1993** 1992**
($000's, except per share data)
Operations:
Net Sales
Domestic $17,151 $ 20,434 $ 23,005 $ 4,768 $ 4,985
Export-Affiliate 1,489 3,089 1,582 3,187 2,193
-Export-Other 127 438 -- 284 --
Operating income (2,594) (1,531) (477) 411 232
Net interest expense (832) (1,068) (405) (55) (96)
Other income (expense) 726 272 50 10 45
Income taxes (15) 67 -- 148 76
Net income (loss)
before extraordinary
item $(2,685) $(2,394) $ (832) $ 218 $ 105
Extraordinary item-
utilization of NOL -- -- -- 84 76
Net income (loss) $(2,685) $(2,394) $ (832) $ 302 $ 181
Net income (loss)
per common share: $ (0.03) $ (0.02) $ (0.01) $ 0.00 $ 0.00
Cash Dividends Declared
per common share $ -- $ -- $ -- $ -- $ --
Balance Sheet:
Cash and cash
equivalents $ 194 $ 399 $ 1,141 $ 418 $ 185
Property, plant and
equipment, net 9,722 9,771 10,950 5,723 5,908
Total assets 32,957 34,502 39,320 9,925 10,000
Notes payable and
long-term debt 201 285 513 -- 20
Due to affiliate
long-term 3,261 5,326 3,260 2,261 2,261
Shareholder equity $16,105 $16,790 $17,245 $ 6,657 $ 6,355
*Post-acquisition
**Pre-acquisition
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Since October 1993, the Company has had a revolving credit arrangement,
renewable annually, (the "Line of Credit"), whereby the Company may borrow
up to $12,000,000 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. Borrowings outstanding under the Line of Credit at
June 30, 1996 and 1995 totaled $8,500,000 and $9,200,000, respectively. The
Company has been in compliance with all loan covenants since August 1994.
Effective November 30, 1995, the Line of Credit was extended until December
1, 1996. 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 (which it has not had the
legal obligation to continue since November 1994), the additional
contribution of $9,000,000 for Preferred Stock, and the advance of
$3,261,000 in long-term borrowing. Limagrain has no legal obligation to
provide additional funding for the Company.
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, $8,261,000, was converted to
(i) a two-year unsecured promissory note in the amount of $3,261,000 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 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, 1996, the promissory note in the amount of $3,261,000 was
extended until July 1, 1998. All other terms and conditions remain the same
as the prior note.
On November 30, 1994, LG Corp. converted a $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.")
On November 30, 1995, the Company converted the $2,000,000 long-term note
owed to LG Corp. into an additional 200,000 shares of Class A Preferred
Stock.
On July 31, 1996, the Company received a long-term cash advance from an
affiliate in order to help fund operations of the Company. On August 30,
1996, this long-term cash advance was re-negotiated and increased to a
$2,000,000 note with LG Corp. bearing interest at 7% and due July 1, 1998.
There is no assurance that LG Corp., or any other affiliate of Limagrain,
will continue to (i) guarantee the Line of Credit, (ii) loan funds to the
Company, or (iii) convert such loans to preferred stock. In addition, there
is no assurance that, without such guarantees, loans, and/or conversions,
the Company would not be out of compliance with (a) the 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.
Fiscal 1996
During Fiscal 1996, Cash and cash equivalents decreased by $205,000. The
Company has a policy of using excess cash to reduce the principal amount
outstanding under its Line of Credit. As of June 30, 1996, the Company had
a cash balance of $194,000.
Cash flow used in operations totaled $1,074,000 in Fiscal 1996. This
consisted of a net loss of $2,685,000, a non-operating gain on disposal of
assets of $405,000, an increase in receivables of $186,000 and a decrease in
accounts payable and accrued liabilities of $178,000 which were partially
offset by $1,402,000 in depreciation and amortization, a $951,000 decrease
in inventory and a $27,000 reduction in other current assets.
Cash flow from investing activities used $449,000 of the Company's cash.
Capital expenditures totaled $1,527,000 with $1,383,000 of that amount
relating to the replacement of the Elmwood building destroyed by fire in
August of 1995. These expenditures were partially funded by $1,078,000 in
proceeds from asset sales of which $1,029,000 is insurance proceeds from the
replacement cost insurance policy covering the building destroyed by fire.
The net book value of this building was $646,000. The resulting gain of
$383,000 is classified as part of gain on disposition of fixed assets. The
Company has entered into a contract to replace this destroyed building with
a new, modern grading and treating building with a total projected cost of
$1,881,000. As of June 30, 1996, $1,383,000 had been spent and is included
in the construction in progress account.
Cash flow provided by financing activities totaled $1,318,000. The issuance
of $2,000,000 in Class A Preferred Stock to LG Corp. and $2,175,000 increase
in short term debt to affiliates more than offset the $2,000,000 decrease in
long-term debt to LG Corp. (which resulted from the issuance of the Class A
Preferred Stock), the $700,000 decrease in the line of credit and the
$92,000 decrease in long-term debt and notes payable.
Fiscal 1995
During Fiscal 1995, Cash and Cash equivalents decreased by $742,000. 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 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 provided by 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 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.
RESULTS OF OPERATIONS
As discussed in "ITEM 1. BUSINESS -- BASIS OF PRESENTATION," the actual
audited financial statements for Fiscal 1996, 1995, and 1994 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, 1996, 1995, and 1994 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, 1996.
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 is not reflected in the
accompanying proforma statements.
These 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
(which 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.
Results of Operations (Proforma)
BIOTECHNICA INTERNATIONAL, INC.
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - Excludes Donley and Scott Seed)
(in thousands of dollars)
12 months Ended June 30,
1996 1995 1994
NET SALES:
Domestic $ 17,151 $ 16,988 $20,284
Export 1,616 3,527 1,582
------ ------- -------
18,767 20,515 21,866
COST AND OPERATING EXPENSES:
Cost of goods sold 12,990 12,628 16,901
Sales and marketing 4,203 4,122 5,429
Warehouse and distribution 1,196 1,630 1,397
General and administrative 2,473 3,061 4,392
Amortization of goodwill 499 479 282
------ ------ ------
21,361 21,920 28,401
Operating Loss (2,594) (1,405) (6,535)
OTHER INCOME (EXPENSE):
Interest expense (832) (1,065) (915)
Gain on disposal-fixed assets 405 0 0
Other 321 211 46
------- ------- -------
Net loss before taxes $(2,700) $(2,259) $(7,404)
======= ======= =======
FISCAL 1996 COMPARED TO PROFORMA FISCAL 1995
Domestic Sales
The Company had domestic seed sales in Fiscal 1996 of $17,151,000, compared
to $16,988,000 in Fiscal 1995. Due primarily to the changes in the Federal
government's farm programs, acreage devoted to corn and soybeans increased
by approximately 8% in the Company's marketing area. Corn sales increased
by almost that rate, indicating that the Company was able to maintain its
market share in spite of major availability problems for many of its
premier, newly-introduced hybrids. This increase was offset by a decrease
in alfalfa sales. Late snow cover across the Dairy Belt region of
Minnesota, Wisconsin, and Michigan, where the Company sells most of its
alfalfa, resulted in low planting of spring alfalfa. In addition, the
growing conditions during the summer of 1995 resulted in smaller soybean
seeds being produced. Since soybean seeds are sold in 50 pound bags, there
were more seeds per bag. This resulted in fewer bags required to plant the
same number of acres compared to the prior year. Domestic net sales changes
were:
Proforma Fiscal 1995 $16,988
Increase in Domestic Corn 939
Decrease in Alfalfa (380)
Decrease in Soybeans (440)
Other 44
-------
Proforma Fiscal 1996 $17,151
=======
Export Sales
Export sales for Fiscal 1996 showed a decrease compared to Fiscal 1995.
Fiscal 1996 sales were $1,616,000, compared to Fiscal 1995 sales of
$3,527,000. Of these amounts, sales to affiliates amounted to $1,489,000
and $3,089,000, 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 decrease
in sales was the result of disappointing production yields during the Fall
of 1994 and lower 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 would
be a negative impact upon the Company's sales and profit margins.
Cost of Goods Sold
Cost of goods sold was significantly higher in Fiscal 1996 than in Fiscal
1995. This resulted primarily from high production costs caused by the poor
growing conditions during the Summer of 1995. This resulted in lower yields
and higher costs per unit. These higher costs per unit accounted for
approximately $1,200,000 in higher costs.
Warehouse and Distribution
Warehouse and distribution costs were $1,196,000 in Fiscal 1996, compared to
$1,630,000 in Fiscal 1995. This reduction resulted from organizational
efficiencies at the Company's warehouses and improved management of freight
and other distribution costs.
Sales and Marketing
Sales and marketing costs were $4,203,000 in Fiscal 1996, compared to
$4,122,000 in Fiscal 1995. Sales and marketing costs were relatively stable
due to a relatively constant sales volume.
General and Administrative
A significant goal of the Company for Fiscal 1996 was the reduction of
general and administrative expenses. These costs were reduced by $588,000.
Included in that amount was a reduction of general and administrative costs
of $150,000 resulting from the expiration or repurchase of incentive stock
options. Additionally, Fiscal 1995 costs included administrative costs
associated with the reorganization, redirection, and divestment efforts of
the Company.
Interest Expense
Interest expense was lower in Fiscal 1996 than in Fiscal 1995 by $233,000.
This was generated primarily by reduced interest rates and lower borrowings
from affiliates subsequent to the conversion of $2,000,000 in long-term debt
into Preferred Stock as described above.
Gain on Disposition of Fixed Assets
The increase in gain on disposition of fixed assets resulted primarily from
the recognition of the $383,000 gain on the involuntary conversion of the
Grading Building at Elmwood due to fire in August, 1995.
Net Loss Before Taxes
Proforma net loss before taxes shows a deterioration for Fiscal 1996
compared to Fiscal 1995 of $441,000.
PROFORMA FISCAL 1995 COMPARED TO PROFORMA FISCAL 1994
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 11% due to (i) an
increase in government set aside programs and (ii) an unusually wet spring
throughout much of the Company's marketing area. The 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 was also some loss of business resulting from the major reorganization
of the Company and the major realignment of the sales force.
Export Sales
Export sales for Fiscal 1995 showed 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. Export sales tend to fluctuate from year to year
as discussed above. 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 would 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
$1,331,000. 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.
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
efficiencies (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).
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 continues to assess the effects of the
provisions of the Statement on the financial condition and results of
operations of the Company, and has determined that no adjustment to asset
carrying values is required at this time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Page
Consolidated Financial Statements: Number
Independent Auditors' Report 14
Consolidated Balance Sheets at June 30, 1996 and 1995 15
Consolidated Statements of Operations for the years 16
ended June 30, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years 17
ended June 30, 1996, 1995 and 1994
Consolidated Statements of Changes in Shareholders' 18-20
Equity for the years ended June 30, 1996, 1995
and 1994
Notes to Consolidated Financial Statements 21-27
Consolidated Financial Statement Schedule:
Valuation and Qualifying Accounts - Schedule II 28
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 Shareholders
BioTechnica International, Inc.:
We have audited the consolidated financial statements of BioTechnica
International, Inc. and subsidiary (the Company) 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 subsidiary as of June 30, 1996 and 1995,
and the results of their operations and their cash flows for each of the
years in the three-year period ended June 30, 1996, 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 25, 199
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
June 30, June 30,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 194 $ 399
Accounts receivable, less allowance for doubtful
accounts of $90 in 1996 and $123 in 1995 7,964 7,778
Inventories 5,976 6,927
Prepaid expenses and other current assets 153 105
------ ------
Total current assets 14,287 15,209
Net property, plant and equipment 9,722 9,771
Goodwill and other assets, net 8,948 9,522
------- -------
Total assets $32,957 $34,502
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit $ 8,500 $ 9,200
Current portion of long-term debt 107 115
Accounts payable 1,013 735
Accrued liabilities 1,595 2,051
Due to affiliates 2,175 --
------ ------
Total current liabilities 13,390 12,101
Long-term debt 31 129
Due to affiliates 3,261 5,326
Other noncurrent liabilities 170 156
------- -------
Total liabilities $16,852 $17,712
Shareholder equity:
Preferred stock, Class A, 900,000 and 700,000
shares outstanding at June 30, 1996 and 1995,
respectively $ 9 $ 7
Common stock, 115,418,788 shares outstanding
at June 30, 1996 and 1995 1,154 1,154
Additional paid-in capital 20,891 18,893
Accumulated deficit (5,854) (3,169)
Treasury stock (95) (95)
------ ------
Total shareholders' equity $16,105 $16,790
Commitments (note 12)
Total liabilities and shareholder equity $32,957 $34,502
======= =======
See accompanying notes to consolidated financial statement
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of dollars, except per share amounts)
Years Ended June 30,
1996 1995 1994
Net Sales:
Domestic $ 17,151 $ 20,434 $ 23,005
Export-Affiliates 1,489 3,089 1,582
Export-Other 127 438 --
------ ------ ------
18,767 23,961 24,587
Costs and Operating Expenses:
Cost of goods sold 12,990 15,432 17,831
Sales and marketing 4,203 4,293 3,418
Warehouse and distribution 1,196 2,043 1,255
General and administrative 2,473 3,245 2,371
Amortization of goodwill 499 479 189
------ ------ ------
Operating loss (2,594) (1,531) (477)
Other income (expense):
Interest expense (832) (1,068) (405)
Gain on disposal-fixed assets 405 0 --
Other 321 272 50
------ ------ ------
Net loss before income taxes (2,700) (2,327) (832)
Income tax expense (benefit) (15) 67 --
------- ------- -------
Net Loss $(2,685) $(2,394) $ (832)
======= ======= =======
Net Loss per common share $ (0.03) $ (0.02) $ (0.01)
======= ======= =======
Weighted Average
Shares Outstanding 115,419,000 121,385,000 107,435,000
=========== =========== ===========
See accompanying notes to consolidated financial statement
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
Years Ended June 30,
1996 1995 1994
Cash Flow from Operating Activities:
Net loss $ (2,685) $ (2,394) $ (832)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation 903 1,074 951
Amortization 499 479 189
Gain on disposal-fixed assets (405) -- --
Changes in assets and liabilities:
Accounts receivable (186) 852 (4,566)
Inventories 951 415 7,477
Other assets 27 697 (242)
Accounts payable and accrued
liabilities (178) (1,299) (7,642)
------- ------- -------
Net cash used in operating activities (1,074) (176) (4,665)
------- ------- -------
Cash Flow from Investing Activities:
Acquisition of property, plant
and equipment (1,527) (237) (62)
Proceeds from asset sales 1,078 647 --
Cash of business acquired -- -- 352
Other -- 149 155
------- ------- -------
Net cash provided by (used in)
investing activities (449) 559 445
------- ------- -------
Cash Flow from Financing Activities:
Net repayment under line of credit (700) (4,600) (900)
Increase (Decrease)in long-term debt
to affiliates (2,065) 2,066 1,000
Increase (Decrease) in short-term debt
to affiliates 2,175 (153) (53)
Decrease in long-term debt and
notes payable (92) (377) (104)
Repurchase of Class A common stock -- (61) --
Issuance of Class A Preferred Stock 2,000 2,000 5,000
------- ------- -------
Net cash provided by (used in)
financing activities 1,318 (1,125) 4,943
------- ------- -------
Net increase (decrease) in
cash and cash equivalents (205) (742) 723
------- ------- -------
Cash and cash equivalents at
beginning of year $ 399 $ 1,141 $ 418
------- -------- --------
Cash and cash equivalents at
end of year $ 194 $ 399 $ 1,141
======= ======== ========
See accompanying notes to consolidated financial statement
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, 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
(post-acquisition) 700,000 $ 7 115,418,788 $1,154 -- $ --
Issuance of Preferred
Stock 200,000 2 -- -- -- --
Net loss for
Fiscal 1996 -- -- -- -- -- --
------- --- ----------- ------ ---------- ----
Balance June 30, 1996
(post-acquisition) 900,000 $ 9 115,418,788 $1,154 -- $ --
======= === =========== ====== ========= ====
(Continued)
See accompanying notes to consolidated financial statement
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, 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
(post-acquisition) -- $ -- $18,893 $(3,169)
Issuance of Preferred
Stock -- -- 1,998 --
Net loss for
Fiscal 1996 -- -- -- (2,685)
--------- ----- ------- --------
Balance June 30, 1996
(post-acquisition) -- $ -- $20,891 $(5,854)
========= ===== ======= ========
(Continued)
See accompanying notes to consolidated financial statement
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, 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
(post-acquisition) (39,160) $(95) $ 16,790
Issuance of Preferred
Stock -- -- 2,000
Net loss for
Fiscal 1996 -- -- (2,685)
-------- ----- ---------
Balance June 30, 1996
(post-acquisition) (39,160) $(95) $ 16,105
======== ===== =========
See accompanying notes to consolidated financial statements
BIOTECHNICA INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Business
BioTechnica International, Inc. and its subsidiary, LG Seeds, 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. 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, 1996 and 1995 include the
Company and its wholly owned subsidiary, LG Seeds, Inc. All significant
intercompany transactions have been eliminated in consolidation.
For the year ended June 30, 1996 ("Fiscal 1996"), the financial statements
contained herein present twelve months of operations of the Company.
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.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
related disclosures at the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
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. and other Limagrain
affiliates. The cost of this expertise is paid to LG Corp. 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. Gains or losses on commodity hedging transactions are
included as a component of inventory.
G. Derivatives
The Company has contractual commitments with seed growers for payments based
on the local commodity prices for soybeans and wheat. To mitigate the
impact of fluctuations in commodity prices on inventory costs, the Company
attempts from time to time to hedge these commitments by using Chicago Board
of Trade futures contracts for the respective crops. The Company matches
these futures contracts to its purchases of inventory, closing out the
futures contracts as payments are made to the seed growers. Unrealized gains
and losses on the futures contracts are included in the inventoried seed
cost of soybeans and wheat. At June 30, 1996, the Company had futures
contracts for 80,000 bushels of December wheat at prices ranging from $5.75
to $5.80 per bushel which resulted in a $69,000 unrealized loss included in
inventory. There were no open futures contracts at June 30, 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.
Depreciable lives for asset classes are:
Land improvements 15 years
Buildings and improvements 15 to 32 years
Machinery and equipment 7 to 20 years
Office equipment and computers 3 to 5 years
I. Goodwill
Goodwill arose primarily from the 1994 Limagrain Transaction and is being
amortized using the straight-line method over a period of 20 years. 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 utilizes the asset and liability method of accounting for income
taxes whereby 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.
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.
The Company files a Federal consolidated tax return with other corporations
controlled by LG Corp. The related tax sharing agreement provides that
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 Common Share
Loss per common share is computed based on the weighted average of all
classes of common shares outstanding during the period after taking into
account the amount of cumulative Preferred Stock dividends, whether or not
declared.
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 Company's borrowings under its Line of Credit
are at variable interest rates tied to market rates and, accordingly, the
Company considers the fair value to be the same as the carrying value.
M. Reclassification of Financial Statements
Certain amounts in the Fiscal 1995 and Fiscal 1994 financial statements have
been reclassified to conform with the current year presentation.
Specifically, Warehouse and distribution expenses were reclassified from
sales and marketing expense. Gain on disposition of fixed assets,
miscellaneous taxes, and finance charge income have been moved from general
and administrative expense to the other income (expense) section of the
Statements of Operations.
N. Advertising
The Company expenses all advertising in the period incurred.
2. INVENTORIES
Inventories at June 30, 1996 and 1995 are as follows:
(in thousands of dollars)
1996 1995
Finished seed $ 3,599 $ 4,243
Unfinished seed 1,630 2,123
Supplies and other 747 561
------- -------
Total inventories $ 5,976 $ 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 cost associated with the seed crop planted in the spring of the
applicable fiscal year. "Supplies and other" consists of foundation seed,
unused bags, pallets and other supply items.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30, 1996 and 1995 are as follows:
(in thousands of dollars)
1996 1995
Land and improvements $ 793 $ 793
Buildings and improvements 7,395 8,109
Machinery and equipment 4,186 4,274
Construction in progress 1,437 105
------- -------
$13,811 $13,281
Less accumulated depreciation (4,089) (3,510)
------- -------
Net property, plant and equipment $ 9,722 $ 9,771
======== =======
4. FIRE AT ELMWOOD, ILLINOIS PRODUCTION FACILITY
During Fiscal 1996, fire destroyed the building used for the treating and
grading of corn and soybeans at the Company's Elmwood, Illinois facility.
The Company received $1,029,000 in insurance proceeds as a result of this
fire. The net book value of this building was $646,000. The resulting gain
of $383,000 is classified as part of gain on disposition of fixed assets.
The Company has entered into a contract to replace this destroyed building
with a new, modern grading and treating building with a total projected cost
of $1,881,000. As of June 30, 1996, $1,383,000 had been spent and is
included in the construction in progress account.
5. GOODWILL AND OTHER ASSETS
Goodwill and other assets (at cost, less accumulated amortization of
$1,175,000 and $676,000 at June 30, 1996 and 1995, respectively) are set
forth in the following table. Goodwill arose primarily from the Limagrain
Transaction.
(in thousands of dollars)
1996 1995
Goodwill (net of amortization) $ 8,791 $ 9,290
Deposits and other 157 232
-------- -------
$ 8,948 $ 9,522
======== =======
6. LINE OF CREDIT AND NOTE PAYABLE
The Company has a revolving credit arrangement with its principal bank
whereby the Company can borrow up to $12,000,000 based on a borrowing base
formula and subject to certain limitations in availability contained in the
Limagrain Agreement. This line of credit, which expires December 1, 1996,
bears interest (at the Company's option) based on either (i) the Bank Prime
Loan rate, (ii) the London Interbank Offered Rate ("LIBOR") index or (iii) the
Bank Offered Rate. Borrowings under this line of credit are secured by the
inventory and accounts receivable of the Company and its subsidiary 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, 1996
were $9,600,000 and $6,762,000, respectively. The weighted average interest
rate during Fiscal 1996 was 6.81%.
The Company also has a note payable to non-affiliates of $138,000 at June
30, 1996. This note bears interest at an annual rate of 9% and is payable
through September 1997.
The annual maturities of the other note payable are as follows:
(in thousands of dollars)
Year Amount
1997 $ 107
1998 31
------
$ 138
======
7. DUE TO AFFILIATES
Amounts due to affiliates at June 30, 1996 and 1995 were comprised as
follows:
(in thousands of dollars)
1996 1995
Promissory note dated June 30, 1995 $ -- $ 3,261
Promissory note dated June 30, 1996 3,261 --
Promissory note dated December 1, 1994 -- 2,000
Other long-term payable -- 65
Promissory note dated June 27, 1996 2,000 --
Current amounts due to affiliates 175 --
------- -------
$ 5,436 $ 5,326
======= =======
On June 30, 1995, the Company executed a promissory note in the amount of
$3,261,000 payable to LG Corp. This note is subordinate to the Company's
line of credit and had an initial 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 on July 1 plus .4375%. During Fiscal
1996, the maturity of this note was extended to July 1, 1998.
On December 1, 1994, the Company executed a promissory note in the amount of
$2,000,000 payable to LG Corp. On November 30, 1995, the note was retired in
exchange for 200,000 shares of the Company's Class A Preferred Stock.
On June 27, 1996, the Company executed a promissory note in the amount of
$2,000,000 payable to an affiliated company. The term of the note is 68 days
with interest to be paid at maturity based on LIBOR plus .50%.
Other current amounts due to affiliates result from amounts due for services
rendered under various contracts.
8. CAPITAL STOCK
Authorized shares of stock include: 150,000,000 shares of common stock;
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 December 1, 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.
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%.
On November 30, 1995, the Company retired the long-term note of $2,000,000
described above in exchange for $2,000,000 of the Company's Class A
Preferred Stock.
As of June 30, 1996, there are only two classes of stock issued and
outstanding: common stock and Class A Preferred Stock.
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.
As of June 30, 1996 and 1995, the cumulative amount of undeclared dividends
on the Class A Preferred Stock was $1,075,000 and $462,500, respectively.
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"). 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, 1996 and 1995, 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.
During Fiscal 1996, all outstanding options were either (i) repurchased by
the Company or (ii) determined to have expired. See RELATED PARTY
TRANSACTIONS. The repurchase on expiration of these options resulted in a
reduction of administrative expense of $150,000 during Fiscal 1996.
The following table summarizes options granted, exercised and outstanding
for the two years ended June 30, 1996:
Price
Outstanding Exercisable Range
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
Canceled (240,625) (234,625) $1.31-$5.50
---------- ---------
Options as of June 30, 1996 -- -- --
========== =========
10. PENSION PLAN
Substantially all full-time employees of the former Shissler subsidiary were
covered under a defined benefit pension plan (the "Plan") sponsored by an
affiliate. The Plan provided benefits based on years of service and the
employee's compensation during the last five years of employment. Plan
assets were primarily invested in pooled equity and fixed income funds and
managed by a life insurance company. The Company's funding policy was to
contribute annually an amount that is not less than the Employee Retirement
Income Security Act of 1974 minimum funding requirement and not in excess of
the amount that could be deducted for Federal income tax purposes.
Effective December 31, 1995, the Company elected to cease participation in
the Plan. At that time (i) all covered employees became fully vested, (ii)
the Company entered into an agreement with the sponsoring affiliate whereby
the Company ceases to be a participating employer in the Plan and (iii) the
Company established a defined contribution plan covering all regular full
time employees. The Company has no obligation for future benefits under the
Plan. The following table sets forth the Company's portion of the Plan's
funded status and amounts recognized in the Company's balance sheet at June
30, 1995:
(in thousands of dollars)
Actuarial present value of benefit obligations:
Vested benefit obligation $116
Accumulated benefit obligation 134
Projected benefit obligation for service
rendered to date 264
Plan assets at fair value 225
-----
Projected benefit obligation in excess of
Plan assets 39
Unrecognized net gain (39)
-----
Prepaid pension cost $ --
=====
Net pension cost for Fiscal 1996, 1995 and 1994 included the following
components:
(in thousands of dollars)
1996 1995 1994
Service cost of benefits earned
during the period $ 32 $ 24 $ 27
Interest cost on projected benefit
obligation -- 43 45
Actual return on plan assets -- (42) (42)
Net amortization and deferral -- -- 1
----- ----- -----
Net pension cost $ 32 $ 25 $ 31
===== ===== =====
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
Prior to June 30, 1995 LG Corp. had 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.
On June 30, 1996 and 1995, the Company had pre-acquisition net operating
loss carryforwards of approximately $1,632,000 and $1,768,000, respectively,
which expire at a rate of $136,000 per year through 2008. The Company had
post-acquisition net operating loss carryforwards of approximately
$12,593,000 and $9,832,000 on June 30, 1996 and 1995, respectively, which
expire through 2011. (Refer to footnote 1.J--SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES--INCOME TAXES)
The components of income tax expense are as follows:
(thousands of dollars)
1996 1995 1994
Federal $(28) $ 28 $ --
State 13 39 --
----- ---- ----
Total $(15) $ 67 $ --
===== ==== ====
The actual income tax benefit differed from the expected income tax benefit
(computed by applying the applicable U.S. Federal corporate income tax rate
of 34% to loss before income taxes) as follows:
(thousands of dollars)
1996 1995 1994
Computed "expected" tax benefit $(933) $(814) $(322)
State income taxes, net of
Federal benefit 9 25 --
Alternative minimum tax (28) 28 --
Other -- -- --
Net operating loss carryforward 937 828 322
------ ----- -----
Total $ (15) $ 67 $ --
====== ===== =====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at June 30, 1996 and
1995 are presented below.
(in thousands of dollars)
1996 1995
Deferred tax assets:
Net operating loss carryforward
(Pre-acquisition) $ 636 $ 689
Net operating loss carryforward
(Post-acquisition) 4,911 3,834
Allowance for bad debts 35 48
Allowance inventory valuation 74 270
Accrued compensation, sales allowances
and other expenses 336 202
------- -------
Total gross deferred tax assets $5,992 $5,043
Less: valuation allowance (5,324) (4,307)
------- -------
Total deferred tax assets $ 668 $ 736
Deferred tax liability:
Difference between net value of fixed
assets for book and tax purposes (668) (736)
------- -------
Net deferred tax assets $ -- $ --
======= =======
The change in the deferred tax valuation allowance was an increase of
$1,017,000 in Fiscal 1996 compared to an increase of $3,172,000 in Fiscal
1995, and an increase of $394,000 in Fiscal 1994.
Subsequently recognized tax benefits relating to the valuation allowance at
the date of the Limagrain Transaction (see Note 1.A--BUSINESS) will be
allocated to goodwill. At June 30, 1996, the amount of valuation allowance
potentially applicable to goodwill aggregated $636,000.
12. COMMITMENTS
The Company leases office space and certain equipment under non-cancelable
operating leases which expire through 2000. Rental expenses charged to
operations were $465,000, $476,000 and $349,000 for the years ended June 30,
1996, 1995 and 1994, respectively. Future annual minimum rentals are
$183,000, $113,000, $82,000, $19,000 and $0, for Fiscal 1997 through 2001,
respectively.
13. RELATED PARTIES
The Company has access to the research conducted by LG Corp. The cost of
this expertise is paid to LG Corp. as royalties on corn units sold. Costs
incurred were approximately $94,000, $81,000 and $78,000 for Fiscal 1996,
1995 and 1994, respectively. In addition, the Company paid $50,000, $35,000
and $0 to Callahan (a division of LG Corp.) for royalties on soybean
genetics for Fiscal 1996, 1995 and 1994, respectively.
The Company has agreements with affiliated companies that provide for
certain administrative and management services. Combined costs incurred
under these agreements were $320,000, $320,000 and $305,000 for Fiscal 1996,
1995 and 1994, 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' requirements. Export sales to affiliates amounted to $1,489,000
for Fiscal 1996, $3,089,000 for Fiscal 1995 and $1,582,000 for Fiscal 1994.
During Fiscal 1996 the Company repurchased 70,000 stock options from
officers and directors for $3,400. The repurchase of the options, with
exercise prices between $1.31 and $3.50 per share, resulted in a reduction
of approximately $66,000 in long-term liabilities. The net result was a
reduction of general and administrative expenses of $62,000.
14. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest aggregated approximately $728,000, $687,000, and
$493,000 for Fiscal 1996, 1995, and 1994, respectively.
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.
15. LIQUIDITY
The Company has incurred net operating losses and negative cash flow from
operations for Fiscal 1996, 1995, and 1994. The Company's current line of
credit expires on December 1, 1996, at which time management expects to
renew this credit facility.
Management believes that the Company's operations will begin to generate
positive cash flows as a result of the restructuring and redirection of its
marketing, production, and administrative functions. In the event that
additional financial support is required, 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 $9,000,000 for
Preferred Stock, and the advance of $3,261,000 in long-term borrowing.
16. OTHER INCOME AND EXPENSE
Included in other income and expense for Fiscal 1996 is $94,000 of gain on
the disposal of AgriBioTech, Inc. common stock received during Fiscal 1995
by the Company as part of the proceeds from the disposal of its Scott Seed
Company operations. Also included here are $68,000, $133,000, and $51,000
in finance charge income on customer accounts for Fiscal 1996, 1995, and
1994, respectively.
BIOTECHNICA INTERNATIONAL, INC.
VALUATION AND QUALIFICATION ACCOUNTS
Years ended June 30, 1996, 1995 and 1994
Schedule II
(in thousands of dollars)
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 Charged to Balance
at July 1, Costs and at June 30,
1995 Expenses Other Deductions 1996
Allowance for doubtful
accounts $ 123 $ -- $ -- $ (33)** $ 90
Accumulated amortization:
Goodwill $ 676 $ 499 $ -- $ -- $1,175
*Balance received as part of the reverse acquisition accounting for
Limagrain Transaction
**Write-off of uncollectible accounts receivable
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 "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 12,
1996 (the "1996 Proxy Statement") is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the captions "EXECUTIVE COMPENSATION,"
"PROPOSAL 1: ELECTION OF DIRECTORS," "REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION," and "STOCK PERFORMANCE
GRAPH" in the Company's 1996 Proxy Statement are 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
1996 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 1996 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 (incorporated by reference
to Exhibit 3.1 to Form 10-K filed with the Commission on October 13, 1994,
File No. 0-11854).
3.2 By-laws of the Company, as amended on October 29, 1983, May 7, 1987
and May 18, 1994 (incorporated by reference to Exhibit 3.2 to Form 10-K
filed with the Commission on October 13, 1994, File No. 0-11854).
Exhibit No. Description of Exhibit
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).
4.8 Specimen Certificate of Class A Preferred Stock of the Company
(incorporated by reference to Exhibit 4.8 to Form 10-K filed with the
Commission on October 13, 1994, File No. 0-11854).
4.9 Certificate of Designations (incorporated by reference to Exhibit 4.9
to Form 10-K filed with the Commission on October 13, 1994, File No. 0-11854).
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 (incorporated by reference to Exhibit 10.2 to Form
10-K filed with the Commission on October 13, 1994, File No. 0-11854).
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).
10.11 First Amendment to Secured Revolving Credit Agreement between Harris
Trust and Savings Bank and the Company dated as of February 15, 1994
(incorporated by reference to Exhibit 10.39 to Form 10-K filed with the
Commission on October 13, 1994, File No. 0-11854).
10.12 Second Amendment to Secured Revolving Credit Agreement between Harris
Trust and Savings Bank and the Company dated March 7, 1994 (incorporated by
reference to Exhibit 10.40 to Form 10-K filed with the Commission on October
13, 1994, File No. 0-11854).
10.13 Debt Subordination Agreement between Harris Trust and Savings Bank
and the Company dated June 29, 1994 (incorporated by reference to Exhibit
10.42 to Form 10-K filed with the Commission on October 13, 1994, File No.
0-11854).
10.14 Debt Restructuring Agreement by and among Limagrain Genetics Corp.,
Shissler Seed Co., Inc., Limagrain Holding S.A. and the Company dated June
29, 1994 (incorporated by reference to Exhibit 10.43 to Form 10-K filed with
the Commission October 13, 1994, File No. 0-11854).
10.16 Remuneration Individuelle Sur Objectifs Cadres Associes (Individual
Compensation and Performance Objectives for Associate Level Employees) for
J.C. Gouache dated October 4, 1995, amended February 9, 1996.*/**
10.17 Remuneration Individuelle Sur Objectifs Cadres Associes (Individual
Compensation and Performance Objectives for Associate Level Employees) for
Bruno Carette dated October 4, 1995, amended February 9, 1996.*/**
10.18 Letter Amendment to Consulting Agreement between the Company and
William C. Hittinger dated December 8, 1995.*
10.19 Letter Amendment to Consulting Agreement between the Company and
Ralph W.F. Hardy dated January 8, 1996.*
10.26 Promissory note issued to LG Corp. by the Company dated June 29, 1995
(incorporated by reference to Exhibit 10.27 to Form 10-K filed with the
Commission on September 22, 1995, File No. 0-11854).
10.27 Promissory note issued to LG Corp. by the Company dated June 30,
1996.*
10.29 Service Agreement between LG Seeds, Inc. and Limagrain Innovations
dated July 1, 1994 (incorporated by reference to Exhibit 10.29 to Form 10-K
filed with the Commission September 22, 1995, File No. 0-11854).
10.30 Amendment 2 to Exhibit A, dated July 1, 1996, to Service Agreement
between LG Seeds, Inc. and Limagrain Innovations dated July 1, 1994.*
10.31 Biotechnology Service Agreement between LG Seeds, Inc. and BIOCEM
S.A. dated July 1, 1994 (incorporated by reference to Exhibit 10.30 to Form
10-K filed with the Commission on September 22, 1995, File No. 0-11854).
10.32 Amendment 2 to Exhibit A dated July 1, 1996 to Biotechnology Service
Agreement between LG Seeds, Inc. and BIOCEM S.A. dated July 1, 1994.*
10.33 Service Agreement between LG Seeds, Inc. and Limagrain Genetics
International S.A. dated July 1, 1994 (incorporated by reference to Exhibit
10.31 to Form 10-K filed with the Commission on September 22, 1995, File No.
0-11854).
10.34 Amendment 2 to Exhibit A dated July 1, 1996 to Service Agreement
between LG Seeds, Inc. and Limagrain Genetics International S.A. dated July
1, 1994.*
10.35 Tax Allocation Agreement among the Limagrain Affiliated U.S.
corporations filing a consolidated tax return with Limagrain Genetics
Corporation (incorporated by reference to Exhibit 10.32 to Form 10-K filed
with the Commission September 22, 1995, File No. 0-11854).
10.36 Option Buyout Agreement between Ralph W.F. Hardy and the Company
dated June 10, 1996.*
10.37 Option Buyout Agreement between William C. Hittinger and the Company
dated May 8, 1996.*
10.38 Option Buyout Agreement between Larry D. Rieffel and the Company
dated May 6, 1996.*
21.00 Subsidiaries of the Company.*
27.00 Financial Data Schedule.*
(b) Reports on Form 8-K.
Current report on Form 8-K dated March 29, 1996, Filed Number 0-11854,
was filed in connection with a change in officers of the Corporation.
(*)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 September 4, 1996
Jean Ferrand
/s/ Emmanuel Rougier Chief Executive Officer,
Emmanuel Rougier Director September 4, 1996
/s/ Bruno Carette President and
Bruno Carette Chief Operating Officer September 4, 1996
/s/ Edward M. Germain Chief Financial Officer September 4, 1996
Edward M. Germain
/s/ Philip M. Nordeen Chief Accounting Officer September 4, 1996
Philip M. Nordeen
/s/ Claude Agier Director September 4, 1996
Claude Agier
/s/ George R. Allbritten Director September 4, 1996
George R. Allbritten
/s/ Ralph W.F. Hardy Director September 4, 1996
Ralph W.F. Hardy
/s/ William C. Hittinger Director September 4, 1996
William C. Hittinger
/s/ Laurent Petoton Director September 4, 1996
Laurent Petoton
CORPORATE INFORMATION
SHAREHOLDER REFERENCE EXECUTIVE OFFICERS
CORPORATE HEADQUARTERS Bruno Carette
BioTechnica International, Inc. President and Chief
Operating Officer
4001 War Memorial Drive
Peoria, IL 61614 Edward M. Germain
(309) 681-0300 Vice President, Secretary
and Chief Financial Officer
OPERATING SUBSIDIARY
LG Seeds, Inc. Larry D. Rieffel
4001 War Memorial Drive Vice President, Production
Peoria, IL 61614 and Logistics
Philip M. Nordeen
Chief Accounting Officer
and Treasurer
TRANSFER AGENTS
American Stock Transfer & BOARD OF DIRECTORS
Trust Company
40 Wall Street Jean Ferrand
New York, NY 10005 Chairman of the Board
(212) 936-5100
Emmanuel Rougier
AUDITORS Chief Executive Officer
KPMG Peat Marwick L.L.P.
Chicago, IL 60601 George R. Allbritten
COUNSEL Claude Agier
Shook, Hardy & Bacon L.L.P.
Kansas City, MO 64106 Ralph W. F. Hardy
SEC FORM 10-K William C. Hittinger
A copy of the Company's annual report
to the Securities and Exchange Laurent Petoton
Commission on Form 10-K is available
without charge upon 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 12, 1996 at The Signature Inn,
4112 North Brandywine, Peoria, IL.