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 September 30, 1997
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 October 31, 1997, the Registrant had 104,055,577 (104,094,737 total
shares, less 39,160 treasury shares) shares of Common Stock outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BIOTECHNICA INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of dollars)
September 30, June 30,
1997 1997
Assets
Current assets:
Cash & cash equivalents $ -- $ 207
Accounts receivable 2,299 7,068
Inventories 11,327 8,330
Prepaid expenses & other assets 167 130
Total Current Assets 13,793 15,735
Property, plant & equipment 14,400 14,317
Less accumulated depreciation (5,247) (5,001)
Net property, plant & equipment 9,153 9,316
Goodwill and other assets 8,249 8,385
Total Assets $ 31,195 $ 33,436
Liabilities and Shareholders' Equity
Current liabilities:
Cash Overdraw $ 175 $ --
Borrowings under line of credit 4,800 10,900
Borrowings from affiliates 4,200 --
Current portion of long-term debt -- 31
Accounts payable 1,683 690
Accrued liabilities 687 1,669
Due to affiliates 312 115
Total current liabilities 11,857 13,405
Long-term debt:
Due to affiliates 6,761 5,261
Other noncurrent liabilities 295 295
Total Liabilities $ 18,913 $ 18,961
Shareholders' Equity
Preferred Stock, Class A, 900,000
shares outstanding 9 9
Common Stock, 150,000,000
shares authorized; 104,055,577
shares outstanding, net of $95,000
for treasury shares 946 946
Additional paid-in capital 20,823 20,823
Accumulated deficit (9,496) (7,303)
Total Equity $ 12,282 $ 14,475
Total Liabilities
and Shareholders' Equity $ 31,195 $ 33,436
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
September 30,
1997 1996
Net Sales:
Domestic $ 418 $ 755
Export 0 0
Total 418 755
Cost of Goods Sold:
Cost of Goods Sold 364 619
Gross Margin 54 136
Operating expenses:
Sales & Marketing 1,084 939
Warehouse & Distribution 225 263
Administration 673 725
Amortization of goodwill 126 126
2,108 2,053
Operating income(loss) (2,054) (1,917)
Other income (expense):
Interest expense (241) (222)
Other 102 109
Net income before taxes (2,193) (2,030)
Income Taxes -- --
Net income(loss) $ (2,193) $ (2,030)
Net income per share $ (0.02) $ (0.02)
Weighted average
shares oustanding 104,055,577 115,379,628
See notes to Condensed Consolidated Financial Statements
BIOTECHNICA INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of dollars)
Three Months Ended
September 30,
1997 1996
Cash flow from operating activities:
Net income (loss) $ (2,193) $ (2,030)
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 371 306
Changes in assets and liabilities
Accounts receivable 4,769 5,634
Inventories (2,997) (3,176)
Other current assets (26) (13)
Accounts payable & accrued liabilities 11 (135)
Net cash provided by (used for)
operating activities (65) 586
Cash flow from investing activities:
Acquisition of property,
plant & equipment (83) (505)
Net cash provided by (used for)
investing activities (83) (505)
Cash flow from financing activities:
Net repayment under line of credit (6,100) (1,500)
Increase in borrowings from affiliates 4,200 --
Increase in long-term debt to affiliates 1,500 --
Increase in debt to affiliates 197 1,155
Decrease in long-term debt (31) (28)
Net cash provided by (used for)
financing activities (234) (373)
Net increase (decrease) in cash
and cash equivalents (382) (292)
Cash and cash equivalents at the
beginning of period 207 194
Cash and cash equivalents at the
end of period $ (175) $ (98)
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 Additional Retained Total
Stock Class A Paid In Earnings Treasury Shareholder
Non-Voting Common Stock Capital (Deficit) Stock Equity
<CAPTION)
Shares Shares Shares
Balance
June 30, 1997 900,000 104,094,737 (39,160)
Net loss 0 0 0
Balance
September 30,
1997 900,000 104,094,737 (39,160)
Par Value Par Value Value Value Cost Total
Balance
June 30, 1997 $9 $1,041 $20,823 ($7,303) ($95) $14,475
Net loss 0 0 0 (2,193) 0 (2,193)
Balance
September 30,
1997 $9 $1,041 $20,823 ($9,496) ($95) $12,282
See notes to Condensed Consolidated Financial Statements
BIOTECHNICA INTERNATIONAL, INC.
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
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 consis- tent
with the audited consolidated financial statements incorporated in the
Company's Form 10-K for the year ended June 30, 1997,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 refected herein.
2) Inventories (in thousand of dollars)
September 30, June 30,
1997 1997
Finished seed $ 5,810 $ 4,666
Unfinished seed 4,766 2,955
Supplies and other 751 709
-------- --------
Total Inventory $ 11,327 $ 8,330
"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 1997,
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.
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
product 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
Since October 1993, the Company has had a revolving credit arrangement with
its principal bank, 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. Borrowings under the Line of Credit are secured by
the inventory and accounts receivable of the Company and its subsidiary, and
by the guarantees of Limagrain, LG Corp. and the Company's subsidiary.
Borrowings under the Line of Credit at June 30, 1997 and September 30, 1997
totaled $10,900,000 and $4,800,000, respectively. The maximum amounts
available under the Line of Credit pursuant to the borrowing base formula,
absent waivers, at June 30, 1997 and September 30, 1997 were $9,804,000 and
$7,820,000, respectively. In addition to the Line of Credit, the Company
also borrows funds from affiliates of Limagrain from time to time in order
to fund the interim working capital needs of the Company, including the
reduction of the Line of Credit.
Cash and cash equivalents decreased $382,000 during the first three months
of Fiscal 1998 from $207,000 at June 30, 1997 to a negative $175,000 at
September 30, 1997. This negative cash balance represented checks written
by the Company at the end of September, but which had not been covered
through borrowings on the Line of Credit. Cash flow from operations
consumed $65,000. Major items impacting cash flow from operations for the
three months ended September 30, 1997 were: (i) net loss for the period of
$2,193,000, offset by depreciation and amortization of $371,000; (ii) a
decrease in accounts receivable of $4,769,000 as a result of collection on
prior year sales; (iii) an increase in inventory of $2,997,000 resulting
from inventory produced this year; (iv) a decrease in accrued liabilities
and payables of $11,000; and (v) $26,000 consumed by other changes in working
capital.
Cash flow from investing activities consumed $83,000, related to new capital
expenditures.
Cash flow from financing activities consumed $234,000. The Company borrowed
a total of $5,700,000 from affiliates ($4,200,000 short-term and $1,500,000
long-term) and used the proceeds to reduce its borrowings under its bank Line
of Credit and to finance operations during the quarter. Of these affiliate
borrowing amounts, $700,000 is due upon demand and bears interest at prime;
$500,000 is due on demand and bears interest at Canadian prime plus 0.18%;
$3,500,000 is due December 10, 1997 and bears interest at Canadian prime plus
0.18%; and $1,500,000 is due July 1, 1999 and bears interest at Canadian
prime plus 0.18%. The $1,500,000 due July 1, 1999 is subordinated to the
Line of Credit. Management believes that upon the maturities of these notes,
either (i) the notes will be extended, (ii) amounts due will be refinanced by
affilaites, or (iii) borrowings can be made under the Line of Credit to offset
any needed repayments to affiliates.
Effective December 1, 1996, the Line of Credit was extended until December
31, 1997 under substantially the same conditions. Management expects that
the Company will have access to sufficient cash resources to meet the
reasonably foreseeable obligations of its continuing business operaitons.
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 obligation to continue since November 1994), its past
contributions of $9,000,000 for Preferred Stock and its past advances of
$6,761,000 in long-term borrowings. Limagrain has no legal obligation to
provide additional funding for the Company.
There is no assurance that Limagrain, LG Corp., or any other affiliate of
the Company 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
conversions, the Company would not be out of compliance with the Line of
Credit during seasonal fluctuations in the Company's borrowing base and net
tangible assetes, respectively, or otherwise.
Results of Operations - Quarter Ended September 30, 1997
Due to the seasonal nature of the seed business, 70-80% of the Company's
revenues normally occur during the third and fourth fiscal quarters of each
year. During the first six months of each fiscal year, the Company's
production facilities are harvesting, conditioning and bagging seed
products, and substantial marketing efforts are underway in preparation for
the next sales season which begins in the third fiscal quarter.
Net sales for the first quarter of Fiscal 1998 decreased $337,000 compared
to Fiscal 1997, decreasing from $755,000 in Fiscal 1997 to $418,000 for
Fiscal 1998. This decrease was primarily related to lower wheat sales in
Fiscal 1998. Cost of goods decreased $255,000 compared to last year,
decreasing from $619,000 in Fiscal 1997 to $364,000 in Fiscal 1998. This
also was primarily a result of lower wheat sales volume. Gross margin is lower
by $82,000 compared to the first quarter of last year. This decrease resulted
primarily from lower wheat sales volumes.
Sales and marketing expenses have increased $145,000 from $939,000 in the
first quarter of Fiscal 1998 to $1,084,000 for the first quarter of Fiscal
1998. Most of the increase relates to costs incurred in launching the new
year marketing campaign, increased advertising programs and differences in
when expenses were incurred from year-to-year.
Warehouse and distribution costs were lower by $38,000, decreasing from
$263,000 in the first quarter of Fiscal 1997 to $225,000 in the first
quarter of Fiscal 1998. Most of this decrease is attributed to the lower
wheat sales volume.
General and administrative costs decreased $52,000 from $725,000 for the
first quarter of Fiscal 1998 to $673,000 for the first quarter of Fiscal
1998. Most of the decrease related to differences in when expenses were
incurred from year-to-year.
Interest costs increased $19,000 from $222,000 in the first quarter of
Fiscal 1998 to $241,000 in the first quarter of Fiscal 1998, due primarily
to higher borrowing levels.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Not applicable.
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.
(a) The Company has entered into an agreement to sell a portion of its
facility located in Mt. Pleasant, IA to an unrelated party for the
sum of $250,000, with the transaction scheduled to be closed in
early November, 1997. The book value of these assets was deter-
mined to be approximately $467,000. The sale of these assets will
have no impact on the operations of the Mt. Pleasant Service Cen-
ter. This action was taken after a reevaluation of Company assets
that could be turned into cash without adversely impacting
operations.
(b) On November 12, 1997, the Company issued a press release, among
other things, reiterating its prior statements that, from time to
time, the Company's 94% parent, Limagrain Genetics Corp. ("LG
Corp. ("LG Corp."), evaluates its strategic alternatives with
respect to its investment in the Company. Such alternatives in-
clude, among other things, a possible cash-out merger of the
minority shareholders of the Company. Although the Company and
LG Corp. have had no substantive discussions regarding such a
merger, LG Corp. has informed the Company that it has begun pre-
liminary internal discussions regarding the possibility of such a
merger and that it may consider such a merger in the future. The
Company and its Board of Directors have discussed the possible
legal structure of such a transaction among themselves and with
representatives of LG Corp. As a part of these discussions, the
Company's Board was informed that such a merger could be effected
by LG Corp. without any action or approval by the Company's Board
of Directors or its stockholders. Because there can be no assur-
ance whether or not LG Corp. will effect such a merger in the
future, the Company will not make any additional comments regarding
the possibility of such a merger unless such a merger is approved
by the Board of Directors of LG Corp. or other events occur that
make an announcement appropriate.
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 September
24, 1997, announcing the Company's Fiscal 1997 year-end results.
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: November 13, 1997 /s/ Bruno Carette
Bruno Carette, President and
Chief Executive Officer
Date: November 13, 1997 /s/ Edward Germain
Edward M.Germain
Chief Financial Officer
(principal financial officer)