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, 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 October 31, 1998, the Registrant had 103,055,577 (103,094,737 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,
Assets 1998 1998
Current assets:
Cash & cash equivalents $ 101 $ 353
Accounts receivable 3,089 9,458
Inventories 10,977 7,761
Prepaid expenses & other assets 118 139
Total Current Assets 14,285 17,711
Property, plant & equipment 13,957 13,858
Less accumulated depreciation (6,029) (5,818)
Net property, plant & equipment 7,928 8,040
Goodwill and other assets 7,749 7,879
Total Assets $ 29,962 $ 33,630
Liabilities and Shareholders' Equity
Current liabilities:
Borrowings under line of credit $ 4,600 $ 7,700
Borrowings from affiliates 5,800 3,600
Accounts payable 1,712 489
Accrued liabilities 1,000 2,936
Due to affiliates 415 244
Total current liabilities 13,527 14,969
Long-term debt:
Due to affiliates 6,761 6,761
Other noncurrent liabilities 424 431
Total Liabilities $ 20,712 $ 22,161
Shareholders' Equity
Preferred Stock, Class A, 900,000
shares outstanding (Liquidation
value of $9 million) 9 9
Common Stock, 150,000,000
shares authorized; 103,055,577
shares outstanding, net of $95,000
for treasury shares 936 936
Additional paid-in capital 20,823 20,823
Accumulated deficit (12,518) (10,299)
Total Equity $ 9,250 $ 11,469
Total Liabilities
and Shareholders' Equity $ 29,962 $ 33,630
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,
1998 1997
Net Sales:
Domestic $ 316 $ 418
Export -- --
316 418
Cost of Goods Sold:
Cost of Goods Sold 305 364
Gross Margin 11 54
Operating expenses:
Sales & Marketing 1,039 1,084
Warehouse & Distribution 176 225
Administration 723 673
Amortization of goodwill 125 126
2,063 2,108
Operating income(loss) (2,052) (2,054)
Other income (expense):
Interest expense (257) (241)
Other 90 102
Net income before taxes (2,219) (2,193)
Income Taxes -- --
Net income(loss) $ (2,219) $ (2,193)
Net income (loss) per share $ (0.02) $ (0.02)
Weighted average
shares outstanding 103,055,577 104,055,577
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,
1998 1997
Cash flow from operating activities:
Net income (loss) $ (2,219) $ (2,193)
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 345 371
Changes in assets and liabilities
Accounts receivable 6,369 4,769
Inventories (3,216) (2,997)
Other current assets 18 (26)
Accounts payable & accrued liabilities (542) 208
Net cash provided by (used for)
operating activities 755 132
Cash flow from investing activities:
Acquisition of property,
plant & equipment (100) (83)
Net cash provided by (used for)
investing activities (100) (83)
Cash flow from financing activities:
Net repayment under line of credit (3,100) (6,100)
Increase in borrowings from affiliates 2,200 4,200
Increase in long-term debt to affiliates -- 1,500
Decrease in other long-term debts (7) (31)
Net cash provided by (used for)
financing activities (907) (431)
Net increase (decrease) in cash
and cash equivalents (252) (382)
Cash and cash equivalents at the
beginning of period 353 207
Cash and cash equivalents at the
end of period $ 101 $ (175)
See notes to Condensed Consolidated Financial Statement
BIOTECHNICA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(in thousands of dollars, except share data)
Preferred Stock Additional
Class A Non-Voting Common Stock Paid-In
Shares Par Value Shares Par Value Capital
Balance
June 30, 1998 900,000 $9 103,094,737 $1,031 $20,823
Net loss 0 0 0 0 0
Balance
September 30,
1998 900,000 $9 103,094,737 $1,031 $20,823
Retained Total
Earnings Treasury Stock Shareholders'
(Deficit) Shares Par Value Equity
Balance
June 30, 1998 ($10,299) (39,160) ($95) $11,469
Net loss (2,219) 0 0 (2,219)
Balance
September 30, 1998 ($12,518) (39,160) ($95) $ 9,250
See notes to Condensed Consolidated Financial Statement
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 consistent with the
audited consolidated financial statements incorporated in the Company's Form
10-K for the year ended June 30, 1998,such information and footnotes have not
been duplicated herein. In the opinion of management, all adjustments,
consisting of normal recurring accruals, considered necessary for a fair
presentation of financial statements have been reflected herein.
2) Inventories (in thousand of dollars)
September 30, June 30,
1998 1998
Finished seed $ 4,492 $ 4,473
Unfinished seed 5,808 2,594
Supplies and other 677 694
Total Inventory $ 10,977 $ 7,761
"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 1998,
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, 1998 and September 30, 1998
totaled $7,700,000 and $4,600,000, respectively. The maximum amounts
available under the Line of Credit pursuant to the borrowing base formula,
absent waivers, at June 30, 1998 and September 30, 1998 were $10,422,000 and
$5,951,000, 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 $252,000 during the first three months of
Fiscal 1999 from $353,000 at June 30, 1998 to $101,000 at September 30, 1998.
Cash flow from operations generated $755,000. Major items impacting cash flow
from operations for the three months ended September 30, 1998 were: (i) net
loss for the period of $2,219,000, offset by depreciation and amortization of
$345,000; (ii) a decrease in accounts receivable of $6,369,000 as a result of
collection on prior year sales; (iii) an increase in inventory of $3,216,000
resulting from inventory produced this year; (iv) a decrease in accrued
liabilities and payables of $542,000 primarily from the payment of accrued
technology fees to technology suppliers; and (v) $18,000 generated by other
changes in working capital.
Cash flow from investing activities consumed $100,000, related to new capital
expenditures.
Cash flow from financing activities consumed $907,000. The Company repaid
$3,100,000 in borrowings under its Line of Credit. The Company borrowed a
total of $2,200,000 from affiliates on demand notes at 5% interest.
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.
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 September 30, 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 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 1999 decreased $112,000 compared to
Fiscal 1998, decreasing from $418,000 in Fiscal 1998 to $316,000 for Fiscal
1999. This decrease was primarily related to lower wheat sales in Fiscal
1999. This trend continues the decrease in wheat sales relative to Fiscal
1997, when sales were $755,000. The low commodity price of wheat, lower
wheat plantings in the Company's marketing area, and competition from
farmer-use of saved seeds have contributed to the declining sales volumes.
Additionally, in Fiscal 1999, the Company has attempted to minimize its
wheat inventory levels. This has hurt overall margins as wholesale sales
have been at margins lower than normal retail margins. Cost of goods
decreased $59,000 due primarily to volume compared to last year, decreasing
from $364,000 in Fiscal 1998 to $305,000 in Fiscal 1999.
Sales and marketing expenses have decreased $45,000 from $1,084,000 in the
first quarter of Fiscal 1998 to $1,039,000 for the first quarter of Fiscal
1999. Most of the decrease relates to timing of expenses from one year to
the next. Warehouse and distribution costs were lower by $49,000, decreasing
from $225,000 in the first quarter of Fiscal 1998 to $176,000 in the first
quarter of Fiscal 1999. Most of this decrease is attributed to the lower
wheat sales volume as discussed above.
General and administrative costs increased $50,000 from $673,000 for the first
quarter of Fiscal 1998 to $723,000 for the first quarter of Fiscal 1999.
Most of the decrease related to differences in when expenses were incurred
from year-to-year.
Interest costs increased $16,000 from $241,000 in the first quarter of Fiscal
1998 to $257,000 in the first quarter of Fiscal 1999, due primarily to higher
borrowing levels resulting from the Fiscal 1998 loss , partially offset by
lower interest rates.
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.
On September 21, 1998, the Company received a letter from LG Corp. notifying
the Company of LG Corp.'s intention to cash out the minority stockholders of
the Company via a short form merger effected pursuant to Section 253 of the
General Corporation Law of the State of Delaware (the "DGCL"). The
consideration to be paid to the minority stockholders of the Company in such
merger is $0.05 per share.
Under the DGCL, because LG Corp. owns more than 90% of the Company, no action
will be required of the board of directors of the Company or the stockholders
of the Company (other than LG Corp. acting through its board of directors),
for the merger to become effective. Also, as a "short form" merger, the
board of directors of the Company had no right to a role, nor did they have
a role, in negotiating the cash-out price, and the Company's directors have
made no determination, nor are they required to make a determination, with
respect to the fairness of the cash-out price.
The merger is expected to be consummated prior to December 31, 1998, or as
soon as practicable thereafter. Under the DGCL, minority stockholders of
the Company who do not wish to accept the consideration of $0.05 per share
and who follow the procedures set forth in Section 262 of the DGCL will be
entitled to have their shares of common stock appraised by the Delaware Court
of Chancery and to receive payment in cash of the "fair value" of such shares.
Prior to the consummation of the merger, LG Corp. reserves the right to
cancel the merger for any reason, including without limitation if (i) any
stockholder of the Company seeks to enjoin the merger or (ii) in LG Corp.'s
judgment, the anticipated cost of the merger would be materially increased by
the number of stockholders of the Company seeking their appraisal remedy.
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 21, 1998,
announcing the intention of Limagrain Genetics Corp. to cash out the
minority stockholders of BioTechnica International, Inc. via a short form
merger.
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, 1998 /s/ Bruno Carette
Bruno Carette, President and
Chief Executive Officer
Date: November 13, 1998 /s/ Edward Germain
Edward Germain
Chief Financial Officer