UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1998
Commission File Number 0-11854
BIOTECHNICA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2344703
(State of incorporation) (I.R.S. Employer
Identification No.)
4001 North War Memorial Drive, Peoria, Il 61614
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 309/681-0300
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No _______
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
On April 30, 1998, the Registrant had 103,055,577 shares of common stock
outstanding (103,094,577 shares less 39,160 treasury shares).
PART I - FINANCIAL INFORMATION
Certain statements incorporated by reference or made in this Report,
including those under the caption "Management's Discussion and Analysis"
and elsewhere are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, and are subject to the
safe harbor created by the Act. Such forward-looking statements include,
without limitation, the future availability and prices of raw materials,
the availability of capital on acceptable terms, the competitiveness of
the agricultural seed industry, the future availability and pricing of
export sale arrangements and other statements contained herein that are
not historical facts. Because such forward-looking statements involve
risks and uncertainties, there are important factors that could cause
actual results to differ materially from those expressed or implied by
such forward-looking statements. Factors that could cause actual results
to differ materially include, but are not limited to, changes in general
economic and business conditions (including in the agricultural seed
industry), the Company's ability to recover its costs of goods sold in
the pricing of its products, the availability of capital on acceptable
terms, the availability of raw materials, actions of competitors and
governmental entities, adverse weather conditions, the future
availability of export sale arrangements, the support of the Company's
parent and affiliates, changes in the Company's business strategies and
other factors.
Item 1. Financial Statements
BIOTECHNICA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of dollars)
March 31, June 30,
Assets 1998 1997
Current assets:
Cash & cash equivalents $ -- $ 207
Accounts receivable 8,778 7,068
Inventories 8,378 8,330
Prepaid expenses & other assets 335 130
Total Current Assets 17,491 15,735
Property, plant & equipment 13,846 14,317
Less: accumulated depreciation (5,592) (5,001)
Net property, plant & equipment 8,254 9,316
Goodwill and other assets 7,967 8,385
Total Assets $33,712 $33,436
Liabilities and Shareholders' Equity
Current liabilities:
Cash overdraw $ 631 $ --
Borrowings under line of credit 5,200 10,900
Borrowings from affiliates 3,202 --
Current portion of debt -- 31
Accounts payable 621 690
Accrued liabilities 3,739 1,669
Due to affiliates 571 115
Total current liabilities 13,964 13,405
Long-term debt:
Due to affiliates 6,761 5,261
Other noncurrent liabilities 363 295
Total Liabilities $21,088 $18,961
Shareholders' Equity
Preferred stock, Class A, 900,000
outstanding 9 9
Common stock, 150,000,000 shares
authorized; 103,055,577 shares
outstanding, net of $95,000
for treasury shares 936 946
Additional paid-in capital 20,823 20,823
Accumulated deficit (9,144) (7,303)
Total equity $12,624 $14,475
Total Liabilities and
Shareholders' Equity $33,712 $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 Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
Net Sales:
Domestic $12,554 $11,902 $13,141 $13,199
Export-Affiliates 423 1,232 2,690 2,520
Export-Other -- 93 172 93
12,977 13,227 16,003 15,812
Cost of Goods Sold:
Cost of goods sold 7,830 7,850 10,353 9,928
Gross Margin 5,147 5,377 5,650 5,884
Operating expenses:
Sales and marketing 1,352 1,299 3,366 3,102
Warehouse and distribution 455 445 884 915
Administration 762 693 2,150 2,073
Amortization of goodwill 126 124 378 376
2,695 2,561 6,778 6,466
Operating income (loss) 2,452 2,816 (1,128) (582)
Other income (expense):
Interest (213) (229) (696) (683)
Other 14 22 (17) 186
Net income before taxes 2,253 2,609 (1,841) (1,079)
Income taxes -- -- -- --
Net income (loss) $ 2,253 $ 2,609 $(1,841) $(1,079)
Current undeclared
preferred stock
dividend 169 169 506 506
Net income available to
common shareholders net of
undeclared preferred
dividends 2,084 2,440 (2,347) (1,585)
Per share of common stock 0.02 0.02 (0.02) (0.01)
Weighted average
shares 103,055,577 115,418,788 103,055,577 115,418,788
See notes to Condensed Consolidated Financial Statements
BIOTECHNICA INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of dollars)
Nine Months Ended
March 31,
1998 1997
Cash flow from operating activities:
Net income (loss) $(1,841) $(1,079)
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 714 665
Amortization 374 374
Loss on disposition of fixed assets 225 --
Changes in assets and liabilities:
Accounts receivable (1,710) (17)
Inventories (48) (2,649)
Accounts payable and accrued liabilities 2,069 1,320
Other (161) (244)
Net cash provided by (used in)
operating activities (378) (1,630)
Cash flow from investing activities:
Acquisition of property, plant & equipment (117) (433)
Proceeds from sale of fixed assets 240 --
Net cash provided by (used in)
investing activities 123 (433)
Cash flow from financing activities:
Net borrowing (repayment) under
line of credit (5,700) 1,300
Increase (decrease)in debt to affiliates 5,158 192
Increase (decrease) in long-term debt (31) (87)
Repurchase of common stock (10) --
Net cash provided by (used in)
financing activities (583) 1,405
Net increase (decrease) in cash
and cash equivalents (838) (658)
Cash and cash equivalents at beginning
of period 207 194
Cash and cash equivalents at end of
Period $ (631) $ (464)
See notes to Condensed Consolidated Financial Statements
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENT IN SHAREHOLDERS' EQUITY
(Unaudited)
(in thousands of dollars, except share data)
Preferred
Stock Additional Retained Total
(Class A) Common Paid-In Earnings Treasury Shareholders'
Non-Voting Stock Capital (Deficit) Stock Equity
PAR VALUE
Balance 6/30/97
$9 $1,041 $20,823 $( 7,303) $(95) $14,475
Net loss -- -- -- ( 2,193) -- (2,193)
Balance 9/30/97
9 1,041 20,823 ( 9,496) (95) 12,282
Net loss -- -- -- ( 1,901) -- (1,901)
Balance 12/31/97
9 1,041 20,823 (11,397) (95) 10,381
Net income -- -- -- 2,253 -- 2,253
Repurchase of Common stock
-- (10) -- __ (10)
Balance 3/31/98
$9 $1,031 $20,823 (9,144) $(95) $12,624
SHARES
Balance 6/30/97
900,000 104,094,737 (39,160)
Net loss -- -- --
Balance 9/30/97
900,000 104,094,737 (39,160)
Net loss -- -- --
Balance 12/31/97
900,000 104,094,737 (39,160)
Net income -- -- --
Repurchase of Common stock
-- (1,000,000) --
Balance 3/31/98
900,000 103,094,737 (39,160)
See notes to Condensed Consolidated Financial Statements
BIOTECHNICA INTERNATIONAL, INC.
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1) Financial Statements
The accompanying condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q. To the extent
that information and footnotes required by generally accepted accounting
principles for complete financial statements are contained in or consis-
tent with the audited consolidated financial statements incorporated in
the Company's Form 10-K for the year ended June 30, 1997, such informa-
tion and footnotes have not been duplicated herein. In the opinion of
management, all adjustments, consisting of normal recurring accruals,
considered necessary for a fair presentation of financial statements have
been reflected herein.
2) Inventories
(in thousand of dollars)
March 31, June 30,
1998 1997
Finished seed $ 6,573 $ 4,666
Unfinished seed 1,119 2,955
Supplies and other 686 709
Total Inventory $ 8,378 $ 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 the year, 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. The Company
includes in its production cost of seed (i) amounts paid to farmer
growers, (ii) the direct costs of producing the seed, and (iii) an
allocation of indirect plant operating costs. These costs are spread
over good units produced to arrive at a cost per unit.
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. Corn, soybeans, and alfalfa comprise the
Company's major product lines.
The Company contracts with independent farmer-growers for the production
of seed to be grown under Company supervision to meet specific quality
and marketability specifications. The Company then processes and treats
the delivered seed with appropriate fungicides and insecticides and bags
the products for sale. Because weather conditions can cause material
fluctuations in yields and seed quality, the Company's cost of goods sold
is highly dependent upon weather conditions in its growing areas.
Liquidity and Capital Resources
Groupe Limagrain Holding ("Limagrain") is a large European seed company,
headquartered in Chappes, France. Limagrain is the parent of Limagrain
Genetics Corp., a Delaware corporation, ("LG Corp.") that owns
Limagrain's United States-based field seed business. LG Corp. owns
approximately 95% of the common stock and 100% of the preferred stock of
the Company.
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 March 31, 1998 totaled $10,900,000 and $5,200,000,
respectively. The maximum amounts available under the line of Credit
pursuant to the borrowing base formula, absent waivers, at June 30, 1997
and March 31, 1998 were $9,804,000 and $11,410,871, respectively. The
Company received waivers from its principal bank to allow it to borrow up
to $1,500,000 in excess of its Borrowing Base during the periods June 15,
1997 to July 31, 1997 and from August 27, 1997 to September 30, 1997.
The Company was not out of compliance with the Line of Credit at any
other times during the relevant periods. 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 and long-term working capital
needs of the Company, including the reduction of the Line of Credit.
Cash and cash equivalents decreased $838,000 during the first nine months
of Fiscal 1998 from $207,000 at June 30, 1997 to negative $631,000 at
March 31, 1998. (The negative cash balance of March 31, 1998 resulted
from checks written in March which had not cleared the bank as of March
31, 1998.) The Company will borrow under its Line of Credit to cover
these checks as they clear the bank. Cash flow from operations consumed
$378,000 for the nine months ended March 31, 1998. Major items impacting
cash flow from operations for the nine months ended March 31, 1998 were:
(i) net loss for the period of $1,841,000, offset by depreciation and
amortization of $1,088,000; (ii) an increase in accounts receivable of
$1,710,000 as a result of sales during the current quarter; (iii) an
increase in inventory of $48,000; (iv) a decrease in accrued liabilities
and payables of $2,069,000, resulting primarily from prepayments on seed
to be delivered to customers and reserves for returns; (v) $225,000 in
losses on disposal of fixed assets included in net income; and (vi)
$161,000 consumed by other charges.
Cash flow from investing activities generated $123,000. Of this amount,
$117,000 was consumed by new capital expenditures, but $240,000 was
generated by the proceeds from disposals of fixed assets.
Cash flow from financing activities consumed $583,000. The Company
borrowed a net total of $5,158,000 from affiliates ($3,000,000 in short-
term borrowings, $1,500,000 in long-term borrowings, and $658,000 in
other amounts due, primarily accrued interest) and used the proceeds to
reduce its borrowings under the Line of Credit and to finance operations
during the period. Net borrowings under the Line of Credit decreased by
$5,700,000. This was possible primarily as a result of the affiliate
borrowings discussed above.
Of the affiliate borrowing amounts, $3,000,000 is due on demand and bears
interest at Canadian prime plus 0.18% or 6.5%, whichever is less; and
$1,500,000 is due July 1, 1999 and bears interest at Canadian prime plus
0.18% or 6.5%, whichever is less. 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 affiliates, or (iii) borrowings can be
made under the Line of Credit to offset any needed repayments to
affiliates.
Effective December 31, 1997, the Line of Credit was extended until
December 31, 1998 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
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 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 assets, respectively, or otherwise.
Results of Operations - Quarter Ended March 31, 1998
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 the 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 began in the third fiscal quarter.
Net sales for the third quarter of Fiscal 1998 decreased $250,000
compared to Fiscal 1997, decreasing from $13,227,000 in Fiscal 1997 to
$12,977,000 for Fiscal 1998. This decrease was primarily related to
lower export sales to affiliates, offset by higher domestic seed sales.
The lower export sales level resulted because most of the export seed was
shipped in the second fiscal quarter. Higher domestic sales resulted
from timing on shipping schedules. Cost of goods decreased $20,000
compared to last year, decreasing from $7,850,000 in Fiscal 1997 to
$7,830,000 in Fiscal 1998. This was due to lower volume offset by higher
production costs in this year resulting from lower production yields due
primarily to weather factors. Gross margin is lower by $230,000 compared
to the third quarter of last year. This change resulted primarily from
changes in sales volumes and costs as discussed above.
Sales and marketing expenses have increased $53,000 from $1,299,000 in
the third quarter of Fiscal 1997 to $1,352,000 for the third quarter of
Fiscal 1998. Most of the increase relates to costs incurred in launching
the new year marketing campaign, increased advertising programs to
promote brand and product awareness and differences in when expenses were
incurred from year-to-year.
Warehouse and distribution costs were higher by $10,000, increasing from
$445,000 in the third quarter of Fiscal 1997 to $455,000 in the third
quarter of Fiscal 1998. Most of this increase resulted from higher
domestic sales volume.
General and administrative costs increased by $69,000 from $693,000 for
the third quarter of Fiscal 1997 to $762,000 for the third quarter of
Fiscal 1998. Most of the increase related to differences in when expenses
were incurred from year-to-year.
Interest costs decreased $16,000 from $229,000 in the third quarter of
Fiscal 1997 to $213,000 in the third quarter of Fiscal 1998, due
primarily to lower interest rates.
The Company purchases soybeans and wheat futures to hedge its cost of
those commodities. During the third quarter of Fiscal 1998 and 1997, the
Company had losses of $38,000 and gained $218,000, respectively, on
futures. These amounts have been included in inventory valuation. These
losses related only to soybean and wheat hedging. The impact of these
losses on the income statement is unfavorable $25,000 and favorable
$150,000 for Fiscal 1998 and 1997 respectively.
Other incomes and expenses decreased by $8,000, deteriorating from
$22,000 in the third quarter of Fiscal 1997 to $14,000 in the third
quarter of Fiscal 1998.
Results of Operations - Nine Months Ended March 31, 1998
Net sales for the first nine months of Fiscal 1998 increased $191,000
over Fiscal 1997, increasing from $15,812,000 in Fiscal 1997 to
$16,003,000 for Fiscal 1998. This improvement is a result of slightly
increased export sales, offset by lower domestic fall seed sales,
compared to the first nine months of Fiscal 1997. Cost of goods
increased $425,000 compared to last year, increasing from $9,928,000 in
Fiscal 1997 to $10,353,000 in Fiscal 1998 due to volume and to higher
production costs in this year resulting from lower production yields due
primarily to weather fluctuations. Gross margin is lower by $234,000
compared to the first nine months of last year. This deterioration
related to higher production cost of seed.
Sales and marketing expenses have increased $264,000 from $3,102,000 in
Fiscal 1997 to $3,366,000 for the first nine months of Fiscal 1998. Most
of this increase relates to the higher cost of launching the new year
marketing campaign, increased advertising programs to promote product and
brand awareness, and timing differences account for most of the lower
costs.
Warehouse and distribution costs were lower by $31,000, decreasing from
$915,000 in Fiscal 1997 to $884,000 in Fiscal 1998. Most of this
decrease resulted because of timing in when expenses are incurred.
General and administrative costs increased $77,000 from $2,073,000 for
the first nine months of Fiscal 1997 to $2,150,000 for the first nine
months of Fiscal 1998. Most of these increases were in payroll costs.
Interest costs increased $13,000 compared to the first nine months of
Fiscal 1997, increasing from $683,000 to $696,000 in Fiscal 1998. This
was due to higher borrowing levels.
Other income and expense deteriorated by $203,000 over the first nine
months of last year from $186,000 to negative $17,000. Most of this
change related to the loss on the sale of an unused portion of the
Company's facility in Mt. Pleasant, IA. This loss amounted to $215,000.
The Company purchases soybeans and wheat futures to hedge its cost of
those commodities. During the first nine months of Fiscal 1998 and 1997,
the Company had losses of $186,512 and $168,000, respectively, on
futures. These amounts have been included in inventory valuation. These
losses related only to soybean and wheat hedging. The impact of these
losses on the income statement is unfavorable $130,000 and $164,000 for
Fiscal 1998 and 1997 respectively.
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
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K:
Exhibit 11 Statement Regarding Computation of Per
Share Earnings
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
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: May 12, 1998 /s/ Bruno Carette
Bruno Carette, President and
Chief Executive Officer
Date: May 12, 1998 /s/ Edward M. Germain
Chief Financial Officer
(Principal Accounting Officer)
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: May 12, 1998 ________________________________
Bruno Carette, President and
Chief Executive Officer
Date: May 12, 1998 ________________________________
Edward M./ Germain
Chief Financial Officer
(Principal Accounting Officer)