Quarterly Report for the quarter ended November
30, 1996
January 9, 1997
To Our Shareowners:
The impressive debut of Mycogen's NatureGard™
corn plants with genetically engineered pest-resistance and the
strides we've made in building a global platform to commercialize
these and other new products have set the stage for dramatic progress
in fiscal 1997. In reviewing the financial results reported below,
please bear in mind that our businesses are highly seasonal. North
American seed sales are concentrated in the second and third fiscal
quarters; crop protection revenues fall mainly in the third and
fourth quarters. The sharp increase in seed revenues over the
same period a year ago reflects partial year revenues of our newly
acquired Morgan Seeds unit in South America, where the planting
season is the reverse of that in the Northern Hemisphere. Other
notable developments include:
Strategic Alliances - In
December, DowElanco purchased one million shares of common stock
from Pioneer Hi-Bred, increasing its ownership stake to 52 percent
and reaffirming our shared goal of building Mycogen into a major
agricultural biotechnology company. Majority ownership carries
the right to a fifth seat on our board of directors, and DowElanco
nominated Louis W. Pribila, its vice president, secretary and
general counsel, who was elected at the annual meeting. Pioneer
remains our second largest shareowner, and the Pioneer-Mycogen
collaboration to develop technology for pest-resistant varieties
of six major crops continues in high gear. Our acquisition of
an 18.75 percent equity stake and an option to purchase another
16.25 percent of Verneuil Holding, a major European seed company,
greatly strengthens our foothold in the world's second largest
agricultural market. With pest-resistant seed corn now approved
for commercial sale in Europe, we could introduce insect-resistant
hybrids there by 1998 through a Mycogen-Verneuil joint venture.
Mycogen Seeds - The
consolidation of the United AgriSeeds organization and brands
into Mycogen Seeds has gone smoothly, and early season order activity
supports our prediction that, contrary to the experience of previous
seed company mergers, we will be able to hold unit sales volumes.
Despite difficult growing conditions, seed production went well
and availability is good in virtually all of our NatureGard, Totally
Managed Feedstuffs™ and other elite corn hybrids. Last year's
addition of large, efficient, former UAS conditioning plants in
Iowa and Minnesota, and the expansion and modernization of two
existing plants enabled us to achieve significant product quality
and cost of goods improvements for 1997.
Patents & Litigation - The
wheels of justice are turning slowly as Mycogen and various competitors
have turned to the courts to resolve disputes over ownership of
the extremely valuable technology that is being used to develop
genetically enhanced seed products. We believe that the two U.S.
patents Mycogen received in October, along with patents in Europe
and elsewhere, give us a dominant position in the use of Bacillus
thuringiensis (Bt) genes to make plants pest-resistant,
and we will continue to employ whatever means are necessary to
ensure that Mycogen and its shareowners receive the full value
of those rights.
Outlook - With
the vast promise of agricultural biotechnology becoming commercial
reality, we see tremendous opportunities to continue building
the business and increasing shareowner value in the months and
years ahead. Please recognize that our forward-looking statements
are based on projections and estimates relating to the economy
and the seed and crop protection industries. Various factors may
cause actual results to vary significantly from our expectations.
These include the impact of weather on production and sales, competitive
and regulatory actions, intellectual property positions and fluctuations
in crop acreage and commodity prices. We appreciate your support.
| Jerry Caulder | Carl Eibl |
| Chairman & Chief Executive Officer | President & Chief Operating Officer |
| 1996 | 1995 | ||||
| (Unaudited) | |||||
| Revenues: | |||||
| Net operating revenues: | |||||
| Seed segment | $ 6,902 | $ 1,126 | |||
| Crop protection segment | 9,388 | 10,923 | |||
| 16,290 | 12,049 | ||||
| Contract and other revenues | 2,410 | 1,571 | |||
| Total revenues | 18,700 | 13,620 | |||
| Costs and expenses: | |||||
| Cost of operating revenues | 10,148 | 7,823 | |||
| Operating Expenses | 18,919 | 13,364 | |||
| Total costs and expenses | 29,067 | 21,187 | |||
| Operating Loss: | (10,367) | (7,567) | |||
| Interest and other, net | 139 | 155 | |||
| Net Loss: | (10,228) | (7,412) | |||
| Dividends on preferred stock | - | (384) | |||
| Net loss applicable to common shares | $ (10,228) | $ (7,796) | |||
| Net loss per common share | $ (.33) | $ (.40) | |||
| Weighted average number of shares | 30,709 | 19,447 | |||