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 July 31, 1994 Commission File Number 0-1989
SENECA FOODS CORPORATION
(Exact name of registrant as specified in its charter)
New York 16-0733425
(State or other jurisdiction of (I.R.S. Employer Identification
No.)
incorporation or organization)
1162 Pittsford-Victor Road, Pittsford, New York 14534
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716)385-9500
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.25 Par
(Title of Class)
Check mark indicates whether registrant has (1) 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 registrant was required to
file such reports), and (2) has been subject to the filing requirements for at
least the past 90 days.
Yes No X
The aggregate market value of the Registrant's voting securities held by
non-affiliates based on the closing sales price per market reports by the
National Market System on September 30, 1994 was approximately $65,719,000.
Common shares outstanding as of September 30, 1994 were 2,796,555.
Documents Incorporated by Reference:
(1) Proxy Statement to be issued prior to October 31, 1994, in connection with
the registrant's annual meeting of stockholders applicable to Part I, Item
4 and Part III, Items 10-13 of Form 10-K.
(2) Portions of the Annual Report to shareholders for fiscal year ended July
31, 1994 applicable to Part II, Items 5-8 and Part IV, Item 14 of Form
10-K.
TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT - FISCAL 1994
SENECA FOODS CORPORATION
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Equity Security Holders
PART II.
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements on Accounting and Financial
Disclosure
PART III.
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
SIGNATURES
PART I
Item 1
Business
General Development of Business
SENECA FOODS CORPORATION (herein referred to as the "Company") was
organized in 1949 and incorporated under the laws of the State of New York.
On December 20, 1993 the Company acquired certain assets of ERLY Juice,
Inc. and WorldMark, Inc. This included manufacturing facilities located in
Eau Claire, Michigan. Most of the products are sold under the TreeSweet(r)
brand. In an unrelated transaction Seneca acquired the Wapato, Washington
juice ingredients business of Sanofi Bio-Industries, Inc. on November 30,
1993. The Company's textile division was sold during August 1993.
Financial Information About Industry Segments
The Company's business activities are conducted in food and non-food
segments. The food segment is food processing. The non-food segment is an
air charter service.
Narrative Description of Business
Principal Products and Markets
Food Processing
The principal products of this segment include grape products, apple
products, and vegetables. The products are canned, bottled, and frozen and
are sold to retail and institutional markets. The Company has divided the
United States into four major marketing sections: Eastern, Southern,
Northwestern, and Southwestern. Plant locations in New York, North
Carolina, and Washington provide ready access to the domestic sources of
grapes and apples necessary to support marketing efforts in their
respective sections of the country. There is also a newly acquired
bottling plant in Michigan. Vegetable operations are primarily supported
by plant locations in New York, Wisconsin, and Minnesota. In addition, the
Company operates a mushroom canning facility in Pennsylvania.
The following summarizes net sales by major category for the three years
ended July 31, 1994, 1993, and 1992.
<TABLE>
<CAPTION>
1994 1993 1992
(In thousands)
<S> <C> <C> <C> <C>
Vegetable $ 145,010 $ 132,459 $ 151,169
Apple 78,453 71,748 78,361
Grape 17,457 19,058 19,457
Other 45,334 30,205 26,844
__________ _________ __________
Total $ 286,254 $ 253,470 $ 275,831
</TABLE>
Other
Seneca Flight Operations provides air charter service primarily to
industries in upstate New York.
Source and Availability of Raw Material
Food Processing
The Company's food processing plants are located in major vegetable, grape,
and apple producing states. Fruits and vegetables are primarily obtained
through contracts with growers. Apple concentrate is purchased
domestically and abroad to supplement raw fruit purchased under contract.
The Company's sources of supply are considered equal or superior to its
competition for all of its food products.
Seasonal Business
Food Processing
While individual fruits and vegetables have seasonal cycles of peak
production and sales, the different cycles are usually offsetting to some
extent. The supply of commodities, current pricing, and expected new crop
quantity and quality affect the timing of the Company's sales and earnings.
An Off Season Allowance is established during the year to minimize the
effect of seasonal production on earnings. This is zero at fiscal year
end.
Backlog
Food Processing
In the food processing business the end of year sales order backlog is not
considered meaningful. Traditionally, larger customers provide tentative
bookings for their expected purchases for the upcoming season. These
bookings are further developed as data on the expected size of the related
national harvests becomes available. In general these bookings serve as a
yardstick, rather than as a firm commitment, since actual harvest results
can vary notably from early estimates. In actual practice, the Company has
substantially all of its expected seasonal production identified to
potential sales outlets before the seasonal production is completed.
Competition and Customers
Food Processing
Competition in the food business is substantial with imaginative brand
registration, quality service, and pricing being the major determinants in
the Company's relative market position. Except for the Seneca apple and
grape products and Libby's vegetable products data mentioned below, no
reliable statistics are available to establish the exact market position of
the Company's own food products. During the past year approximately 43% of
the Company's processed foods were packed for retail customers under the
Company branded labels of Libby's(r), TreeSweet(r), and Seneca(r). About 18% of
the processed foods were packed for institutional food distributors and the
remaining 39% of processed foods were retail packed under the private label
of customers. The customers represent a full cross section of the retail,
institutional, distributor, and industrial markets and the Company does not
consider itself dependent on any single sales source. The principal
branded products are Seneca Frozen Apple Juice Concentrate, rated the
number one seller nationally, Seneca Frozen Natural Grape Juice
Concentrate, Seneca applesauce, and Libby's canned vegetable products which
rate among the top five national brands.
Environmental Protection
Environmental protection is an area that has been worked on most diligently
at each food processing facility. In all locations the Company has
cooperated with federal, state, and local environmental protection
authorities in developing and maintaining suitable antipollution
facilities. In general, pollution control facilities are equal to or
somewhat superior to those of our competitors and are within environmental
protection standards. The Company does not expect any material capital
expenditures to comply with environmental regulations in the near future.
Employment
Food processing - Full time 1,409
- Seasonal 1,567
2,976
- Other 115
_____
3,091
Foreign Operations
Export sales for the Company are a relatively small portion (less than 3%)
of the food processing sales.
Item 2
Properties
The Company has ten food processing, packaging, and warehousing facilities
located in New York State that provide approximately 1,067,000 square feet
of food packaging, freezing and freezer storage, and warehouse storage
space. These facilities process and package fruit and vegetable products.
The Company is a lessee under a number of operating and capital leases for
equipment and real property used for processing and warehousing.
Five other processing, packaging, and warehousing facilities are located in
the states of North Carolina (208,000 square feet), Pennsylvania (39,000
square feet) and in Washington (263,000 square feet). Processing
operations in North Carolina are primarily devoted to apple juice products;
in Washington, grape juice, apple juice and sauce; and in Pennsylvania,
mushroom canning and warehousing.
One facility in Minnesota, one facility in Michigan, and four facilities in
Wisconsin provide approximately 1,795,000 square feet of food packaging,
freezing and freezer storage, and warehouse storage space. These
facilities process and package various vegetable and fruit products. The
facilities are owned by the Company.
The Company owns three food distribution facilities in Massachusetts and
New York totaling approximately 400,000 square feet which are leased out to
another company through 1995-97.
Substantially all of the properties are well maintained and equipped with
modern machinery. All locations, although highly utilized, have the
ability to expand as sales requirements justify. Because of the seasonal
production cycles the exact extent of utilization is difficult to measure.
In certain circumstances the theoretical full efficiency levels are being
reached; however, expansion of the number of production days or hours could
increase the output by up to 20% for a season.
See Note 6 of Item 8, Financial Statements and Supplementary Data, for
additional information about the Company's lease commitments.
Item 3
Legal Proceedings
The Company is not involved in any material legal proceedings.
Item 4
Submission of Matters to a Vote of Equity Security Holders
Additional information will be filed separately with the Commission,
pursuant to Regulation 14A, in the Proxy Statement.
PART II
Item 5
Market for the Registrant's Common Stock and Related Security Holder
Matters
Each class of preferred stock receives preference as to dividend payment
and declaration over any common stock.
In addition, refer to the 1994 Annual Report, page 16, "Shareholder
Information".
Item 6
Selected Financial Data
Refer to the 1994 Annual Report page 3, "Five Year Selected Financial
Data".
Item 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Refer to the 1994 Annual Report page 4, "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
Item 8
Financial Statements and Supplementary Data
Refer to the 1994 Annual Report pages 5 through 14, "Consolidated Financial
Statements and Notes thereto including Independent Auditors' Report".
Item 9
Changes in and Disagreements on Accounting and Financial Disclosure
None.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Seneca Foods Corporation
Rochester, New York
We have audited the consolidated financial statements of Seneca Foods
Corporation and subsidiaries as of July 31, 1994 and 1993, and for each of
the three years in the period ended July 31, 1994, and have issued our
report thereon dated September 24, 1994; which report includes an
explanatory paragraph as to a change in accounting for income taxes; such
consolidated financial statements and report are included in your 1994
Annual Report to Stockholders and are incorporated herein by reference.
Our audits also included the consolidated financial statement schedules of
Seneca Foods Corporation and subsidiaries, listed in Item 14(A)(2). These
consolidated financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such consolidated financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
/S/Deloitte & Touche LLP
Rochester, New York
September 24, 1994
PART III
Item 10
Directors and Executive Officers of the Registrant
Item 11
Executive Compensation
Item 12
Security Ownership of Certain Beneficial Owners and Management
Item 13
Certain Relationships and Related Transactions
Information required by Items 10 through 13 will be filed separately with
the Commission, pursuant to Regulation 14A, in a definitive proxy statement
involving the election of directors.
PART IV
Item 14
Exhibits, Financial Statement Schedules, and Reports on Form 8-K
A. Exhibits and Financial Statement Schedules
1. Financial Statement Schedules - the following consolidated financial
statements of the Registrant, included in the Annual Report for the year
ended July 31, 1994, are incorporated by reference in Item 8:
Consolidated Statements of Net Earnings - July 31, 1994, 1993,
and 1992
Consolidated Balance Sheets - July 31, 1994 and 1993
Consolidated Statements of Cash Flows - July 31, 1994, 1993, and
1992
Consolidated Statements of Stockholders' Equity - July 31, 1994,
1993, and 1992
Notes to Consolidated Financial Statements - July 31, 1994, 1993,
and 1992
Independent Auditors' Report
2. Supplemental Schedules:
Schedule I - Marketable Securities - Other Investments
Schedule V - Property, Plant, and Equipment
Schedule VI - Accumulated Depreciation and Amortization
of Property, Plant, and Equipment
Schedule VIII - Valuation and Qualifying Accounts
Schedule X - Supplementary Income Statement Information
Other schedules have not been filed because the conditions requiring the
filing do not exist or the required information is included in the
consolidated financial statements, including the notes thereto.
3. Exhibits:
No. 3 -Articles of Incorporation and By-Laws - Incorporated by
reference to the Company's 10-Q filed October, 1992.
No. 4 -Articles defining the rights of security holders -
Incorporated by reference to the Company's 10-Q filed
October, 1992. The Company will furnish, upon request to the
SEC, a copy of any instrument defining the rights of any
holder of Long-Term Debt.
No. 11 -Computation of Earnings per Share
No. 13 -1994 Annual Report to Shareholders, incorporated by
reference and filed herewith.
No. 22 -List of Subsidiaries
B. Reports on Form 8-K
None filed during this period.
<TABLE>
Schedule I
MARKETABLE SECURITIES - OTHER INVESTMENTS
(In thousands, except shares)
<CAPTION>
Amount at which
Market value portfolio of equity
Name of issuer of each issue security issues is
and title of at balance carried in the
each issue Number of shares Cost sheet date balance sheet
<S> <C> <C> <C> <C>
MARKETABLE SECURITIES
None
OTHER INVESTMENTS
Common Stocks:
Moog Inc. Class A 714,600 $ 5,363 $ 6,074 $5,363
Moog Inc. Class B 55,900 716 713 716
$ 6,079 $ 6,787 $6,079
</TABLE>
<TABLE>
Schedule V
PROPERTY, PLANT, AND EQUIPMENT
(In thousands)
<CAPTION>
Balance at Balance
beginning Additions at end
of period at cost Retirements Other of period
<S> <C> <C> <C> <C> <C>
Year ended July 31, 1994:
Land $ 4,526 $ 93 $ - $ 95(b) $ 4,714
Buildings 50,582 246 844 1,478(b) 51,462
Machinery and equipment 112,628 9,045 2,097 3,289(b) 122,865
_________ ________ _______ ______
$ 167,736 $ 9,384 $ 2,941 $4,862 $ 179,041
Year ended July 31, 1993:
Land $ 4,426 $ 100 $ - $ - $ 4,526
Buildings 50,427 48 22 129(a) 50,582
Machinery and equipment 112,031 1,575 849 (129)(a) 112,628
_________ ________ _______ ______ _________
$ 166,884 $ 1,723 $ 871 $ - $ 167,736
Year ended July 31, 1992:
Land $ 4,426 $ - $ - $ - $ 4,426
Buildings 50,146 115 - 166(a) 50,427
Machinery and equipment 104,516 8,587 906 (166)(a) 112,031
_________ ________ _______ _______ _________
$ 159,088 $ 8,702 $ 906 $ - $ 166,884
</TABLE>
(a) reclassifications
(b) acquisitions
<TABLE>
Schedule VI
ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, PLANT, AND EQUIPMENT
(In thousands)
<CAPTION>
Balance at Balance
beginning Charged to at end
of period expense Retirements Other of period
<S> <C> <C> <C> <C> <C>
Year ended July 31, 1994:
Buildings $ 19,183 $ 1,727 $ 825 $ (5) $ 20,080
Machinery and equipment 74,464 7,526 1,250 5 80,745
________ ________ _______ _____ _________
$ 93,647 $ 9,253 $ 2,075 $ - $ 100,825
Year ended July 31, 1993:
Buildings $ 17,471 $ 1,718 $ 6 $ - $ 19,183
Machinery and equipment 67,695 7,552 783 - 74,464
________ ________ _______ _____ _________
$ 85,166 $ 9,270 $ 789 $ - $ 93,647
Year ended July 31, 1992:
Buildings $ 15,607 $ 1,864 $ - $ - $ 17,471
Machinery and equipment 60,727 7,778 810 - 67,695
________ ________ _______ ______ _________
$ 76,334 $ 9,642 $ 810 $ - $ 85,166
</TABLE>
<TABLE>
Schedule VIII
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<CAPTION>
Balance at Charged to Deductions Balance
beginning Charged to other from at end
of period income accounts reserve of period
<S> <C> <C> <C> <C> <C>
Year ended July 31, 1994:
Allowance for doubtful accounts $ 435 $ (213) $ - $ 39(a) $ 183
Year ended July 31, 1993:
Allowance for doubtful accounts $ 281 $ 182 $ - $ 28(a) $ 435
Year ended July 31, 1992:
Allowance for doubtful accounts $ 285 $ 448 $ - $ 452(a) $ 281
</TABLE>
(a)Accounts written off, net of recoveries.
Schedule X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In thousands)
Charged to costs and expenses
Years ended July 31, 1994 1993 1992
Maintenance and repairs $ 17,172 $ 10,791 $ 11,349
The amounts for taxes, other than payroll and income taxes, and advertising are
omitted because they are less than 1% of Net Sales.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
SENECA FOODS CORPORATION
By/s/ Jeffrey L. Van Riper
October 21, 1994
Jeffrey L. Van Riper
Controller and Secretary
(Principal Accounting
Officer)
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 registrant and in
the capacities and on the dates indicated:
Signature Title Date
/s/Arthur S. Wolcott Chairman and Director October 21, 1994
Arthur S. Wolcott
/s/Kraig H. Kayser President, Chief Executive October 21, 1994
Kraig H. Kayser Officer, and Director
/s/Devra A. Bevona Treasurer October 21, 1994
Devra A. Bevona
/s/Jeffrey L. Van Riper Controller and Secretary October 21, 1994
Jeffrey L. Van Riper (Principal Accounting
Officer)
Continued
/s/Robert T. Brady Director October 21, 1994
Robert T. Brady
/s/David L. Call Director October 21, 1994
David L. Call
/s/Edward O. Gaylord Director October 21, 1994
Edward O. Gaylord
/s/G. Brymer Humphreys Director October 21, 1994
G. Brymer Humphreys
/s/Susan W. Stuart Director October 21, 1994
Susan W. Stuart
<TABLE>
Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<CAPTION>
Years ended July 31, 1994 1993 1992
<S> <C> <C> <C>
Primary
Net earnings applicable to common stock:
Net earnings $ 9,104 $ 4,118 $ 891
Deduct preferred stock dividends paid 23 23 23
_________ _________ _________
Net earnings applicable to common stock $ 9,081 $ 4,095 $ 868
Weighted average number of common shares and
common equivalents outstanding 2,899 3,085 3,096
Primary earnings per share $ 3.13 $ 1.33 $ .28
Fully Diluted
Net earnings applicable to common stock per above $ 9,081 $ 4,095 $ 868
Add dividends on convertible preferred stock 20 20 20
Net earnings applicable to common stock on a fully
__________ _________ _________
diluted basis $ 9,101 $ 4,115 $ 888
Shares used in calculating primary earnings per
share above 2,899 3,085 3,096
Additional shares to be issued under full
conversion of preferred stock 34 34 34
__________ _________ ________
Total shares for fully diluted 2,933 3,119 3,130
Fully diluted earnings per share $ 3.10 $ 1.32 $ .28
</TABLE>
Description of Business
Seneca Foods Corporation conducts its business almost entirely in food
processing which currently contributes about 99% of the Company's sales. Canned
and frozen vegetables represent 51% of the food processing volume. Within the
apple products category, which contributed 27% of all processed food sales, the
Company's Seneca(r) brand frozen apple concentrate continues its position as the
nation's number one seller. Of the remaining food processing sales, grape
products account for 6%, and bottled, canned, and frozen fruit juice drinks
account for the remaining 16%.
Approximately 43% of the Company's food products are packed under its own brands
including Seneca(r), Libby's(r) and TreeSweet(r). About 39% of the processed
foods are packed under private labels with the remaining 18% sold to
institutional food distributors.
The Company also operates a non-food division which contributes about 1% to the
Company's sales. Seneca Flight Operations provides air charter service
primarily to industries located in upstate New York.
Pittsford, New York
October 14, 1994
<TABLE>
Financial Highlights
________________________________________________________________________
<CAPTION>
Increase(Decrease)
Years ended July 31, 1994 1993 1992 1994-93 1993-92
<S> <C> <C> <C> <C> <C>
Net sales $290,185,000 $ 257,402,000 $ 279,708,000 12.7% (8.0)%
Earnings (loss) from continuing operations 5,341,000 3,153,000 (305,000) 69.4 1,133.8
Earnings before extraordinary item and cumulative
effect of accounting change 7,704,000 4,118,000 1,358,000 87.1 203.2
Cumulative effect of accounting change 2,006,000 - - - -
Net earnings 9,104,000 4,118,000 891,000 121.1 362.2
Earnings (loss) from continuing
operations per share $ 1.84 $ 1.02 $ (.11 ) 80.4% 1,027.3%
Earnings before extraordinary item and cumulative
effect of accounting change per share 2.65 1.33 .43 99.2 209.3
Cumulative effect of accounting
change per share .69 - - - -
Net earnings per share 3.13 1.33 .28 135.3 375.0
Stockholders' equity 85,285,000 81,296,000 75,828,000 4.9 7.2
Common stockholders' equity per share 30.47 26.47 24.49 15.1 8.1
</TABLE>
Note -- The Company's textile division was sold during August, 1993.
To Our Fellow Shareholders:
Fiscal 1994 was a busy and successful year for Seneca
Foods. The Company was able to post a healthy profit
and grew both case and dollar sales. This was due
primarily to the sharply higher vegetable selling
prices, the reasonably normal fruit crop conditions and
the addition of two small acquisitions. Earnings from
continuing operations were $5,341,000, up 69.4% over
1993. In addition, we had several non-recurring items
which affected 1994 earnings. The sale of the
Company's textile subsidiary resulted in an after-tax
gain of $2,273,000. Also, a required accounting change
for recognizing deferred taxes was implemented which
resulted in a $2,006,000 gain. Lastly, the Company
paid an early payment penalty on a large piece of high
interest, long-term debt which was repaid in 1994,
resulting in an after-tax extraordinary loss of
$606,000. The net result of all of these items was net
earnings of $9,104,000 or $3.13 per share versus
$4,118,000 or $1.33 per share in 1993. Net sales were
up 12.7% in 1994 to $290,185,000 versus 1993's sales of
$257,402,000.
As we mentioned before, selling prices in vegetables
were sharply higher due to 1993's summer flooding in
the midwest. This flooding caused an industrywide
shortage of virtually all types of canned and frozen
vegetables. While our costs were higher as a result,
this increase was more than offset by the higher
selling prices. In addition, nearly one-third of
Seneca's vegetable pack is produced in New York State,
which had almost ideal growing conditions last summer.
Consequently, our above budget packs in New York
contributed handsomely to our bottom line.
Our juice business also grew in terms of sales and
profits, helped by lower raw material costs. During
the past several years, increasing apple and grape
juice prices had led to the introduction of a variety
of less expensive non-100% juice alternatives, such as
fruit-flavored drinks, to meet the needs of price-
conscious consumers. Today, our products are once
again very price competitive versus these non-100%
juice alternatives.
In addition, we made two strategic acquisitions in our
juice business. In November, we purchased a small,
profitable, juice ingredients business in Washington
State that was folded into our Western Division. One
month later, we purchased the citrus juice business of
ERLY Industries which included a bottling plant in
Michigan and distribution of canned, frozen and bottled
orange and grapefruit juices under the TreeSweet Brand
name. This acquisition permits Seneca to offer its
customers citrus juice products in addition to our
traditional apple, grape and cranberry juice products.
Most of this production was moved efficiently into our
five bottling facilities around the country.
After the close of the year, we purchased the Nature's
Favorite Apple Chip business from Mitsubishi Foods,
Inc. This is a niche snack food business with a state-
of-the-art manufacturing facility in Yakima,
Washington. We expect this business to contribute
modestly to our bottom line in 1995, and hope to
leverage our sales and marketing expertise to build
sales over time.
A major accomplishment in 1994 was the successful
implementation of the Nutritional Labeling and
Education Act that required that we put nutritional
statements on all of our food products. While we
welcome the law, which will highlight to the consumer
the positive nutritional value of Seneca's products,
the logistics of compliance was a costly and time
consuming project for Seneca and the entire industry.
As we look to 1995, the vegetable pack has been
excellent thus far and we are rapidly filling the
depleted pipeline of inventories into the grocery
stores. Our expectations are for continuing growth in
sales which will include the full year impact of the
acquisitions, as well as the more modest growth of our
core business. It is, however, still too early to say
just how our bottom line will be affected by this
year's crops.
Finally, let us thank Seneca's employees who put in
many long hours this year managing the expansion of our
business. Our strategy of having modern plants and
dedicated employees has served the Company well for
over forty-five years. Consequently, we believe we are
well positioned to take advantage of further growth
opportunities and handle the commodity cycles in our
business.
/s/Arthur S. Wolcott
/s/Kraig H. Kayser
Chairman
President and Chief
Executive Officer
<TABLE>
Five Year Selected Financial Data
________________________________________________________________________________
Summary of Operations and Financial Condition
<CAPTION>
Years ended July 31, 1994 1993 1992 1991 1990
(In thousands of dollars, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $ 290,185 $ 257,402 $ 279,708 $ 279,973 $ 295,120
Operating earnings (before Corporate interest
and administrative) $ 18,354 $ 12,843$ 12,870 $ 21,544 $ 20,206
Earnings (loss) from continuing operations
before extraordinary item and cumulative
effect of accounting change 5,341 3,153 (305) 5,252 4,028
Earnings from discontinued operations 90 965 1,663 651 1,778
Gain on the sale of discontinued operations 2,273 - - - -
Earnings before extraordinary item and
cumulative effect of accounting change 7,704 4,118 1,358 5,903 5,806
Extraordinary loss (606) - (467) - -
Cumulative effect of accounting change 2,006 - - - -
Net earnings 9,104 4,118 891 5,903 5,806
Earnings (loss) from continuing
operations per common share $ 1.84 $ 1.02 $ (.11) $ 1.69 $ 1.25
Earnings per common share before
extraordinary item and cumulative
effect of accounting change 2.65 1.33 .43 1.90 1.80
Net earnings per common share 3.13 1.33 .28 1.90 1.80
Working capital $ 62,794 $ 84,410 $ 76,650 $ 77,703 $ 61,590
Inventories 92,710 82,586 86,309 92,248 84,927
Net property, plant, and equipment 78,216 74,089 81,718 82,754 73,951
Total assets 200,601 203,138 205,814 211,070 194,036
Long-term debt and capital lease obligations 51,476 72,556 77,614 79,938 57,885
Stockholders' equity 85,285 81,296 75,828 76,798 70,918
Additions to property, plant, and equipment $ 9,384 $ 1,723$ 8,702 $ 17,167 $ 11,981
Interest expense, net 6,046 5,834 10,186 9,289 10,106
Net earnings/average equity 10.9 % 5.2% 1.2% 8.0% 8.2%
Continuing earnings before taxes/sales 2.8 % 1.3% (0.2)% 3.0% 2.2%
Net earnings/sales 3.1 % 1.6% 0.3% 2.1% 2.0%
Long-term debt/equity 60 % 89% 102% 104% 82%
Current ratio 2.2:1 3.2:1 2.8:1 2.8:1 2.2:1
Common stockholders' equity per share $ 30.47 $ 26.47 $ 24.49 $ 24.77 $ 22.87
National Market System closing price range 22 3/4-15 1/2 16 3/8-14 3/4 21 1/4-15 1/4 25 1/4-20 25 1/4-18
Common cash dividends declared per share - - - - -
Price earnings ratio 6.8 x 11.7x 55.4x 10.5x 13.6x
</TABLE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
Because of the food processing segment, the Company's
yearly business cycle shows large inventory growth
during the summer and fall harvest period. The
inventory peaks in the early winter and drops to its
minimum level about the fiscal year end. These peaks
are financed through seasonal borrowings whose high and
low points essentially correspond with the changes in
inventory, or by a reduction in short-term investments.
Accordingly, inventory management is key to liquidity.
During 1994 the Company prepaid an issue of high
interest long-term debt totaling $13.8 million. This
resulted in an extraordinary loss of $0.6 million after
taxes. Also during 1994 the Company made two small
acquisitions totaling $11.7 million. The debt
prepayment and acquisitions were funded by the proceeds
from the sale of the textile division (see below) and
current operations. During 1994 and 1993 the Company
had no new long-term financing. During 1992 the
Company began refunding $22.6 million of tax exempt
industrial revenue bonds that was completed in 1993
(see Long-Term Debt, note 5). The Company maintained
unsecured lines of credit totaling $90.0 million, with
peak borrowings reaching $7.0 million during 1994. All
credit lines provide for interest below prime rates.
There were $1.6 million of borrowings outstanding
under these lines at the end of 1994 and none for years
1993 and 1992.
The increase in cash and short-term investments of $0.5
million over the three year period ended in 1994 was
primarily due to proceeds from the disposal of the
textile segment of $8.4 million; an income tax refund
in 1993 of $4.2 million; and net earnings. This was
offset by the debt prepayment of $13.8 million; two
small acquisitions totaling $11.7 million; the common
stock retirement of $5.1 million; capital additions of
$9.4 million, $1.7 million, and $8.7 million in 1994,
1993, and 1992, respectively; and smaller items not
identified.
During 1994 capital expenditures were higher than both
1993 and 1992. During 1994 the Company upgraded its
vegetable processing and juice bottling equipment in
the Eastern Division. During 1992 the Company upgraded
a portion of its can manufacturing equipment in the
midwest.
During August 1993 the Company sold its textile
division for approximately $8.4 million. It
represented about 6% of the Company's assets and 13% of
the Company's sales in 1993.
Results of Operations
The Company's sales from continuing operations of
$290.2 million in 1994 represent an increase of 12.7%
over last year's results. Sales decreased 8.0% in 1993
and decreased 0.1% in 1992.
In 1994 vegetable sales increased 9.5% due to sharply
higher unit selling prices that resulted from 1993's
flooding in the midwest. In 1994 fruit and juice sales
were up 16.7% led by apple juice which was up 9.3%.
The two small acquisitions also contributed to the
increase (see Acquisitions, note 13). In 1993
vegetable sales declined 12.4% due to lower unit sales
and selling prices while apple and grape sales declined
by 8.4% and 2.1%, respectively. This was partially
offset by an increase in co-pack sales. Vegetable
sales decreased due, in part, to a continued oversupply
of processed vegetables in the industry. In 1992
vegetable sales increased due to greater unit sales
while apple and grape sales declined. Apple sales in
1992 declined due to the second consecutive year of the
worldwide apple shortage.
In 1994 earnings increased for the following reasons:
1) lower apple cost of product sold due to a greater
availability of apples, 2) higher selling prices on
vegetables which more than offset higher cost of goods
sold, 3) the sale of the textile segment and, 4) the
$2.0 million gain due to implementing Statement of
Financial Accounting Standards (SFAS) 109, Accounting
for Income Taxes (see Income Taxes, note 7). In 1993
earnings increased for the following reasons: 1) lower
apple cost of product sold due to a greater
availability of apples, 2) lower interest cost since
there were lower short-term rates, 3) the refinancing
mentioned below and, 4) the $1.7 million of interest
income from the Internal Revenue Service (see Income
Taxes, note 7). In 1992 earnings decreased due, in
part, to lower selling prices caused by an industrywide
oversupply of processed vegetables. In addition a
major shortage of processing apples in Europe and the
U. S. caused unprecedented increases in the cost of
goods sold which resulted in lower earnings. The 1992
earnings included an extraordinary loss of $0.5 million
(after tax benefit) related to a prepayment penalty
paid for early extinguishment of Industrial Revenue
Bonds and accelerated amortization of their deferred
financing costs. Interest savings in the first year
more than offset the costs of refinancing (see
Long-Term Debt, note 5).
In general, inflation played a relatively small role in
the operating results and cash flows of 1994, 1993, and
1992 since the Company values its inventories on a
last-in, first-out (LIFO) basis and depreciates its
fixed assets under accelerated depreciation methods for
tax purposes.
Accounting for Equity Securities - SFAS 115
The Financial Accounting Standards Board recently
issued SFAS 115, Accounting for Certain Investments in
Debt and Equity Securities. The Company will adopt
this statement, as required, in the first quarter of
1995. Based on the current situation with the Common
Stock of Moog Inc., under this statement the Company's
investment would be classified as available-for-sale
securities and thus reported at fair value, with the
unrealized gain reported as a separate component of
equity.
<TABLE>
Consolidated Statements of Net Earnings
________________________________________________________________________________________________________
Seneca Foods Corporation and Subsidiaries
<CAPTION>
Years ended July 31, 1994 1993 1992
(In thousands of dollars, except share amounts)
<S> <C> <C> <C>
Net sales $ 290,185 $ 257,402 $ 279,708
Costs and expenses:
Cost of product sold 247,158 222,143 241,361
Selling, general, and administrative expense 28,824 26,166 28,681
Interest expense, net of interest income
of $528, $1,865, and $196, respectively (Note 7) 6,046 5,834 10,186
_________ __________ _________
282,028 254,143 280,228
Earnings (loss) from continuing operations before income
taxes, extraordinary item and cumulative effect of
accounting change 8,157 3,259 (520)
Income taxes (Note 7) 2,816 106 (215)
________ __________ _________
Earnings (loss) from continuing operations before
extraordinary item and cumulative effect of accounting change 5,341 3,153 (305)
Earnings from discontinued operations, less applicable
income taxes of $46, $591, and $939, respectively (Note 11) 90 965 1,663
Gain on the sale of discontinued operations, less applicable
income taxes of $1,171 (Note 11) 2,273 - -
Extraordinary losses on early extinguishment of debt,
less applicable income tax benefit of $312 and $303 (Note 5) (606) - (467)
Cumulative effect of accounting change (Note 7) 2,006 - -
_________ _____________ __________
Net earnings $ 9,104 $ 4,118 $ 891
Earnings (loss) from continuing operations per common share $ 1.84 $ 1.02 $ (.11)
Earnings from discontinued operations per common share .03 .31 .54
Gain on the sale of discontinued operations per common share .78 - -
Extraordinary losses on early extinguishment of debt
per common share (.21) - (.15)
Cumulative effect of accounting change per common share .69 - -
_________ _____________ __________
Net earnings per common share $ 3.13 $ 1.33 $ .28
Weighted average shares outstanding 2,898,863 3,085,333 3,095,887
See notes to consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Balance Sheets
_______________________________________________________________________________
Seneca Foods Corporation and Subsidiaries
<CAPTION>
July 31, 1994 1993
(In thousands)
Assets
Current Assets:
<S> <C> <C>
Cash and short-term investments $ 2,325 $ 15,522
Accounts receivable, less allowance for doubtful accounts
of $183 and $435, respectively 18,651 24,398
Inventories (Note 2):
Finished products 46,530 38,350
In process 17,980 16,366
Raw materials and supplies 28,200 27,870
Refundable income taxes (Note 7) 890 -
Deferred tax asset (Note 7) 1,194 -
Prepaid expenses 343 250
_________ _________
Total Current Assets 116,113 122,756
Common Stock of Moog Inc. (Note 3) 6,079 6,079
Other Assets 193 214
Property, Plant, and Equipment (Note 6):
Land 4,714 4,526
Buildings 51,462 50,582
Equipment 122,865 112,628
179,041 167,736
Less accumulated depreciation and amortization 100,825 93,647
Net Property, Plant, and Equipment 78,216 74,089
__________ __________
Total Assets $ 200,601 $ 203,138
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable (Note 4) $ 1,600 $ -
Accounts payable 31,829 19,742
Accrued expenses 13,541 12,980
Current portion of long-term debt and capital lease obligations 6,349 5,057
Income taxes (Note 7) - 567
__________ __________
Total Current Liabilities 53,319 38,346
Long-Term Debt (Note 5) 50,619 71,534
Capital Lease Obligations (Note 6) 857 1,022
Deferred Income Taxes (Note 7) 10,521 10,940
Commitments (Note 6) - -
Total Liabilities 115,316 121,842
Stockholders' Equity (Notes 5 and 8):
Preferred stock 70 70
Common stock 1,880 1,948
Total Capital Stock 1,950 2,018
Additional paid-in capital - 3,157
Retained earnings 83,335 76,121
__________ __________
Total Stockholders' Equity 85,285 81,296
__________ __________
Total Liabilities and Stockholders' Equity $ 200,601 $ 203,138
See notes to consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Cash Flows
________________________________________________________________________________
Seneca Foods Corporation and Subsidiaries
<CAPTION>
Years ended July 31, 1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 9,104 $ 4,118 $ 891
Adjustments to reconcile net earnings to
net cash provided (used) by operations:
Depreciation and amortization 9,253 9,270 9,642
Deferred income taxes (419) 1,615 (904)
Gain on the sale of discontinued operations (3,444) - -
Changes in working capital:
Accounts receivable 4,142 822 2,006
Inventories (10,038) 3,723 5,939
Prepaid expenses (147) 22 (31)
Accounts payable and accrued expenses 16,117 (7,981) 5,044
Income taxes (2,651) 573 303
_________ __________ _________
Net cash provided by operations 21,917 12,162 22,890
Cash flows from investing activities:
Acquisitions (11,670) - -
Additions to property, plant, and equipment (9,384) (1,723) (8,702)
Proceeds from the disposal of a segment 8,356 - -
Disposals of property, plant, and equipment 866 82 96
_________ __________ _________
Net cash used in investing activities (11,832) (1,641) (8,606)
Cash flows from financing activities:
Payments of long-term debt and capital lease obligations (19,788) (2,345) (31,056)
Common stock retirements (5,092) (384) (81)
Notes payable 1,600 - -
Proceeds from issuance of long-term debt - - 22,630
Other assets 21 (137) 352
Dividends paid (23) (23) (23)
_________ __________ _________
Net cash used in financing activities (23,282) (2,889) (8,178)
Net increase (decrease) in cash and short-term investments (13,197) 7,632 6,106
Cash and short-term investments, beginning of year 15,522 7,890 1,784
__________ __________ _________
Cash and short-term investments, end of year $ 2,325 $ 15,522 $ 7,890
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 7,170 $ 9,400 $ 10,853
Income taxes 4,785 1,076 1,022
Supplemental schedule of noncash investing and
financing activities:
None during the periods presented
See notes to consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Stockholders' Equity
________________________________________________________________________________
Seneca Foods Corporation and Subsidiaries
<CAPTION>
Preferred Stock
Class A
6% Cumulative 10% Cumulative Net Unrealized
Par Value $.25 Par Value $.025 Additional Loss on
Callable at Par Convertible Common Stock Paid-In Noncurrent Retained
Voting Voting Par Value $.25 Capital Securities Earnings
(In thousands, except share
amounts)
<S> <C> <C> <C> <C> <C> <C>
Shares authorized 200,000 1,400,000 10,000,000
Shares issued and outstanding:
July 31, 1992 200,000 807,240 3,093,666
July 31, 1993 200,000 807,240 3,068,666
July 31, 1994 200,000 807,240 2,796,555
Balance July 31, 1991 $50 $20 $1,955 $ 3,615 $ - $ 71,158
Net earnings - - - - - 891
Cash dividends paid
on preferred stock - - - - - (23)
Retirement of
common stock - - (1) (80) - -
Net unrealized loss on
noncurrent securities - - - - (1,757) -
______ _______ ______ _______ _______ ________
Balance July 31, 1992 50 20 1,954 3,535 (1,757) 72,026
Net earnings - - - - - 4,118
Cash dividends paid
on preferred stock - - - - - (23)
Retirement of
common stock - - (6) (378) - -
Net unrealized gain on
noncurrent securities - - - - 1,757 -
______ _______ ______ _______ _______ ________
Balance July 31, 1993 $50 $20 1,948 3,157 - 76,121
Net earnings - - - - - 9,104
Cash dividends paid
on preferred stock - - - - - (23)
Retirement of
common stock - - (68) (3,157) - (1,867)
______ _______ ______ _______ _______ ________
Balance July 31, 1994 $50 $20 $1,880 $ - $ - $ 83,335
See notes to consolidated financial statements.
</TABLE>
Notes to Consolidated Financial Statements
Seneca Foods Corporation and Subsidiaries
1. Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements include
the accounts for the parent Company and all of its wholly-owned subsidiaries
after elimination of intercompany transactions, profits, and balances.
Revenue Recognition - Sales and related cost of product sold are recognized
primarily upon shipment of products.
Concentration of Credit Risk - Financial instruments that potentially subject
the Company to credit risk consist of trade receivables and interest-bearing
investments. Wholesale and retail food distributors comprise a significant
portion of the trade receivables; collateral is not required. The risk
associated with the concentration is limited due to the large number of
wholesalers and retailers and their geographic dispersion.
The Company places substantially all its interest-bearing investments with
financial institutions and monitors credit exposure.
Cash and Short-Term Investments - For purposes of the statement of cash
flows, the Company considers all highly liquid instruments purchased for a
maturity of three months or less as short-term investments.
Inventories - Inventories are stated at lower of cost; last-in, first-out
(LIFO); or market.
Income Taxes - Effective August 1, 1993, the Company adopted SFAS 109,
Accounting for Income Taxes which requires the use of the liability method
of accounting for deferred income taxes. The provision for income taxes
includes federal, foreign, and state income taxes currently payable and those
deferred because of temporary differences between the financial statement and
tax bases of assets and liabilities.
Depreciation - Property, plant, and equipment is stated at cost or, in the
case of capital leases, the present value of future lease payments. For
financial reporting, the Company provides for depreciation and capital lease
amortization on the straight-line method at rates based upon the estimated
useful lives of the various assets.
Earnings per Common Share - Primary earnings per share are calculated on the
basis of weighted average common shares outstanding since the effect of
common stock equivalents is immaterial. The difference between primary and
fully diluted earnings per share is also immaterial.
2. Inventories
The replacement value of the LIFO based inventory was $99,647,000 at July 31,
1994, and $88,864,000 at July 31, 1993.
3. Common Stock of Moog Inc.
The Company's investment in the common stock of Moog Inc. is carried at the
lower of aggregate cost or market. The market value of these securities was
$6,787,000 as of July 31, 1994 and $6,179,000 as of July 31, 1993. There
were no realized gains or losses in 1994, 1993, or 1992, and unrealized gains
of $708,000 at July 31, 1994 and $100,000 at July 31, 1993. The Company owns
about 7% of the voting stock of Moog Inc. as of July 31, 1994. The Company
has the ability and intent to hold these securities for the foreseeable
future.
The Financial Accounting Standards Board recently issued SFAS 115,
Accounting for Certain Investments in Debt and Equity Securities. The
Company will adopt this statement, as required, in the first quarter of 1995.
Based on the current situation with the Common Stock of Moog Inc., under this
statement the Company's investment would be classified as available-for-sale
securities and thus reported at fair value, with the unrealized gain reported
as a separate component of equity.
4. Lines of Credit
The Company obtains required short-term funds through bank borrowings. At
July 31, 1994, the Company had $4,660,000 outstanding for letters of credit
and lines of credit totaling $90,000,000.
The lines are renewable annually at various dates and provide for loans of
varying maturities at rates below prime. There are no formal compensating
balance arrangements with any of the banks.
Selected details are as follows:
1994 1993 1992
(In thousands of dollars)
Borrowings at year end:
Amount $1,600 - -
Interest rate 5.34 % - -
Maximum borrowings
during the year $7,000 $38,300 $40,500
Average borrowings
during the year:
Amount $ 158 $14,703 $22,563
Interest rate 4.53 % 4.17 % 5.44 %
The average borrowings were computed by dividing the total daily outstanding
balances by 365 days. The average interest rate was computed by dividing the
actual interest expense by the average borrowings.
5. Long-Term Debt
1994 1993
(In thousands)
Note payable to insurance company,
9.78%, due through 2001 $28,300 $ 30,000
Note payable to insurance company,
13.25%, due through 2001 - 16,800
Industrial Revenue Development
Bonds, variable rate, 12.76%, or
varies with prime, due through 2028 26,780 27,430
Subordinated debentures, 12% or
varies with prime, due through 1996 471 471
Notes payable to others, 3% to 8.55%,
due through 2012 1,252 1,263
_______ ________
56,803 75,964
Less current portion 6,184 4,430
_______ ________
$50,619 $ 71,534
The Company has four Industrial Revenue Bonds ("IRB's") totalling $22,630,000
which are secured by direct pay letters of credit.
Debt agreements provide, among other things, that the Company may pay
dividends on common stock only from consolidated net earnings available for
distribution. There was $4,748,000 of earnings available for distribution as
of July 31, 1994. The debt agreements also require the maintenance of
$51,000,000 in working capital and limit outstanding short-term borrowings to
$50,000,000 at any one time. All provisions have been met at July 31, 1994.
Debt repayment requirements for the next five fiscal years are:
(In thousands)
1995 $ 6,184
1996 3,756
1997 4,149
1998 3,734
1999 3,701
During 1994 the Company paid off its 13.25% note payable to the insurance
company. The prepayment penalty paid for the early extinguishment of the
debt totaled $918,000, before the applicable income tax benefit of $312,000
which has been accounted for as a net extraordinary loss of $606,000.
6. Leases
The Company leases a portion of its equipment and buildings. Capitalized
leases consist primarily of industrial development agency financing
instruments which bear interest rates ranging from 4.71% to 6.75%. Other
leases include non-cancelable operating leases expiring at various dates
through 2005.
Leased assets under capital leases consist of the following:
1994 1993
(In thousands)
Land $ 93 $ 156
Buildings 1,792 5,892
Equipment 1,167 4,004
_______ _______
3,052 10,052
Less accumulated amortization 1,791 6,070
_______ _______
$ 1,261 $ 3,982
The following is a schedule by year of minimum payments due under leases as
of July 31, 1994:
Operating Capital
(In thousands)
Year ending July 31:
1995 $ 1,048 $ 229
1996 692 133
1997 276 124
1998 5 124
1999 4 124
2000-2004 15 622
2005-2009 2 21
________ ______
Total minimum payment required $ 2,042 1,377
Less interest 355
______
Present value of minimum lease payments 1,022
Amount due within one year 165
______
Long-term capital lease obligations $ 857
Aggregate rental expense in 1994, 1993, and 1992 was $2,190,000, $2,266,000,
and $2,684,000, respectively.
7. Income Taxes
The Company files a consolidated income tax return. The provision for
income taxes includes the effect of continuing and discontinued operations
and the extraordinary items as follows:
1994 1993 1992
(In thousands)
Current:
Federal $ 2,970 $ 1,175 $ 1,276
State 430 363 200
_________ ________ ________
3,400 1,538 1,476
Deferred:
Federal 275 (784) (897)
State 46 (57) (158)
_________ ________ ________
321 (841) (1,055)
_________ ________ ________
Total income taxes $ 3,721 $ 697 $ 421
In August 1992 the Internal Revenue Service completed its audit of fiscal
years 1983 and 1984. This conclusion allowed the Company to file a refund
claim for the years 1985 and 1986. This refund was received during the
1993 fiscal year resulting in a $1,000,000 reduction in the provision for
income taxes. Also in 1993, interest income of $1,680,000 has been netted
against the interest expense category in the Consolidated Statements of Net
Earnings.
The cumulative effect of the adoption of SFAS 109 on August 1, 1993 was
$2,006,000. This change is reported in the current Consolidated Statements
of Net Earnings. As permitted under this rule, prior years financial
statements have not been restated to apply the provisions of SFAS 109.
SFAS 109 is an asset and liability approach to deferred income taxes. It
requires the recognition of deferred income taxes reflecting the net tax
effect of temporary differences between the carrying amount of assets and
liabilities for financial purposes and income tax purposes.
A reconciliation of the expected U.S. statutory rate to the effective rate
follows:
1994 1993 1992
Computed (expected tax rate) 34.0 % 34.0 % 34.0 %
State income taxes (net of
federal tax benefit) 2.4 4.2 2.1
Depreciation adjustment - 0.1 0.6
IRS settlement - (20.8) -
Other (1.9) (3.0) (4.6)
____ _____ ____
Effective tax rate 34.5 % 14.5 % 32.1 %
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities as of July 31, 1994:
Deferred tax liabilities: (In thousands)
Basis and depreciation difference $ 9,946
State taxes 789
Other 538
________
11,273
Deferred tax assets:
Employee benefits 586
Pension 497
Insurance 466
Sales tax 114
Other 283
________
1,946
________
Deferred tax liability $ 9,327
Net current assets of $1,194,000 and net non-current liabilities of
$10,521,000 are recognized in the balance sheet for the current year. As
required by SFAS 109, the deferred tax asset was recorded on the balance
sheet as a current asset. Prior to SFAS 109, it was netted against the
long-term deferred income tax liability.
Prior to the change in accounting methods, the sources of deferred tax
items and the corresponding tax effects during 1993 and 1992 were as
follows:
1993 1992
(In thousands)
Accelerated depreciation:
Federal $ 275 $ (94)
State 19 (20)
Vacation accrual 5 (4)
Bad debts (92) 1
Inventory valuation (91) (586)
Involuntary conversion (30) (30)
Insurance accrual (157) 321
Promotion accrual 6 49
Prepayments:
Debt extinguishment 262 (262)
Lease 48 (103)
IRS settlement (1,000) -
Other (86) (327)
_____ _______
Total deferred taxes $(841) $(1,055)
8. Stockholders' Equity
Preferred Stock - The outstanding 10% cumulative, convertible, voting
preferred stock consists of 407,240 series A shares, convertible at the
rate of one common share for every twenty preferred shares, and 400,000
series B shares, which carry a one for thirty conversion rate. The series
A and B shares have a $.25 stated value and a $.025 par value. There are
2,600,000 shares authorized of Class A $.025 par value stock which are
unissued and undesignated. In addition there are 30,000 shares of no par
stock which are also unissued and undesignated.
Common Stock - Unissued shares of common stock reserved for conversion
privileges were 33,695 at July 31, 1994, 1993, and 1992.
9. Quarterly Results (Unaudited)
The following is a summary of the unaudited interim results of operations by
quarter:
First Second Third Fourth
(In thousands, except per share data)
Year ended July 31, 1994:
Net sales $62,003 $83,780 $82,586 $61,816
Gross margin 8,618 12,426 11,893 10,090
Earnings from
continuing operations 259 1,203 1,784 2,095
Earnings from continuing
operations per share .07 .41 .62 .74
Earnings before extraordinary
item and accounting
change 2,406 1,203 1,857 2,238
Earnings before extraordinary
item and accounting
change per share .80 .41 .64 .80
Net earnings 4,412 1,203 1,857 1,632
Net earnings per
common share 1.47 .42 .66 .58
Year ended July 31, 1993:
Net sales $58,451 $71,510 $67,635 $59,806
Gross margin 8,751 8,993 6,355 11,160
Earnings (loss) from
continuing operations 129 (206) (153) 3,383
Earnings (loss) from
continuing operations
per share .04 (.07) (.05) 1.10
Net earnings 303 4 252 3,559
Net earnings per
common share .10 .00 .08 1.15
Earnings for the fourth quarter have historically reflected adjustments of
previously estimated raw material costs and production levels. Due to the
dependence on fruit and vegetable yields of the Company's food processing
segment, interim costing must be estimated. The volatile nature of inventory
quantities and costs within the food processing segment also necessitates
estimates of interim changes to the Company's LIFO reserve.
10. Retirement Plan
The Company has a noncontributory defined benefit pension plan covering all
employees who meet certain age entry requirements and work a stated minimum
number of hours per year. Annual contributions are made to the Plan
sufficient to satisfy legal funding requirements.
Pension expense includes the following:
1994 1993 1992
(In thousands)
Service cost for benefits
earned during the period $ 818 $ 838 $ 701
Interest cost on projected
benefit obligation 998 983 905
Actual (return) loss on
plan assets (1,691) (655) 337
Net deferral of actuarial
gains (losses) 673 (568) (1,659)
Amortization of net
unrecognized gain at
August 1, 1987 (276) (276) (276)
Amortization of losses 144 - -
Amortization of prior
service cost 94 94 94
_______ _____ _______
Pension expense $ 760 $ 416 $ 102
The following table summarizes the funded status and related amounts that are
recognized in the consolidated balance sheets:
1994 1993 1992
(In thousands)
Actuarial present value of
accumulated benefit obligation:
Vested $ 11,214 $8,478 $ 7,896
Nonvested 689 507 262
________ ______ _______
Total $ 11,903 $8,985 $ 8,158
Plan assets at fair market
value, primarily listed stocks
and fixed income securities $ 16,009 $14,867 $14,739
Projected benefit obligation 15,684 12,920 11,877
________ ______ _______
Plan assets in excess of
projected benefit obligation 325 1,947 2,862
Unrecognized gain at transition (4,832) (5,108) (5,384)
Unrecognized prior service cost 750 844 938
Unrecognized net loss 2,295 1,616 1,299
________ ______ _______
Accrued pension liability $ (1,462) $(701) $ (285)
The projected benefit obligation was determined using an assumed discount
rate of 7% and an assumed long-term salary increase rate of 4%. The assumed
long-term rate of return on plan assets was 7%. The Plan holds the Company's
stock with a fair market value of $1,661,000.
11. Discontinued Operations
In August 1993 the Company completed its sale of the textile division for
$8,400,000 in cash and reported a net gain of $2,273,000 in the first quarter
of 1994. As a result of the sale, textile operations have been accounted for
as discontinued operations in current and prior periods in the Consolidated
Statements of Net Earnings.
Net sales for the textile division were $2,246,000 in 1994, $43,087,000 in
1993, and $49,265,000 in 1992. Total assets were $8,400,000 and total
liabilities were $3,500,000 resulting in $4,900,000 of net assets as of the
August 1993 closing.
12. Fair Value of Financial Instruments
As of July 31, 1994, the carrying amount and the fair value of the Company's
financial instruments, as determined under SFAS 107, "Disclosures about Fair
Value of Financial Instruments", were as follows:
Carrying Estimated
Amount Fair Value
(In thousands)
Long-term debt, including
current portion $ 56,803 $ 60,074
Common stock of Moog Inc. 6,079 6,787
Notes payable 1,600 1,600
The estimated fair values were determined as follows:
Long-term debt - The quoted market prices for similar debt or current rates
offered to the Company for debt with the same maturities.
Common stock of Moog Inc. - Based on quoted market prices.
Notes payable - The carrying amount approximates fair value.
13. Acquisitions
On December 20, 1993 the Company acquired certain assets of ERLY Juice, Inc.
and WorldMark, Inc. This included manufacturing facilities located in Eau
Claire, Michigan. Most of the products are sold under the TreeSweet brand.
In an unrelated transaction Seneca acquired the Wapato, Washington juice
ingredients business of Sanofi Bio-Industries, Inc. on November 30, 1993.
The combined purchase price of these acquisitions was $11,670,000 which was
funded out of working capital.
Both were accounted for under the purchase method and, accordingly, the
operating results of the acquired have been included in the consolidated
operating results since the dates of acquisition.
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if ERLY and Sanofi were acquired at the
beginning of the periods presented:
1994 1993
(Unaudited)
(In thousands, except per share amounts)
Net sales $301,121 $318,302
Net earnings from
continuing operations$ 5,602 $ 3,036
Net earnings from
continuing operations
per share $ 1.92 $ .98
The 1993 pro forma amounts are based on the prior owners actual sales. The
1994 pro forma amounts are based on the Company's partial year sales
annualized.
The explanation for the difference is the Company's strategic focus on the
most profitable areas of the acquired businesses.
Subsequent to 1994 year end the Company acquired the assets of M.C. Snack,
Inc. of Yakima, Washington, a snack food maker of apple chips under the
Nature's Favorite Brand. Results of this acquisition, on a pro forma basis,
would not be materially different from the results reported.
Independent Auditors' Report
To the Board of Directors
and Stockholders of
Seneca Foods Corporation
Pittsford, New York
We have audited the accompanying consolidated balance sheets of Seneca Foods
Corporation and subsidiaries as of July 31, 1994 and 1993, and the related
consolidated statements of net earnings, stockholders' equity, and cash flows
for each of the three years in the period ended July 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Seneca Foods Corporation and
subsidiaries as of July 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended July 31, 1994 in conformity with generally accepted accounting
principles.
As discussed in Note 7 to the consolidated financial statements, in fiscal
1994 the Company changed its method of accounting for income taxes to conform
with Statement of Financial Accounting Standards No. 109.
/s/Deloitte & Touche LLP
Rochester, New York
September 23, 1994
Directors
Robert T. Brady
President and Chief Executive Officer
Moog Inc.
David L. Call
Dean, College of Agriculture
and Life Sciences
Cornell University
Edward O. Gaylord
President
Gaylord & Company
G. Brymer Humphreys
President
Humphreys Farm Inc.
Kraig H. Kayser
President and Chief Executive Officer
Susan W. Stuart
Marketing Consultant
Arthur S. Wolcott
Chairman
Officers
Corporate
Arthur S. Wolcott
Chairman
Kraig H. Kayser
President and Chief Executive Officer
Alvin L. Gauvin
Senior Vice President, Sales and Marketing
Ricke A. Kress
Senior Vice President, Operations
Devra A. Bevona
Treasurer
Jeffrey L. Van Riper
Controller and Secretary
Processed Food Group
Seneca Foods -
Central
Michael H. Haney
President
Eastern
Steven E. Klus
President
Western
Edward J. Johnson
President
Kennett
Richard O. Mayo
President
Sales and Marketing Groups -
Branded Sales
Michael B. Malone
Vice President
Food Service and
Private Label Sales
R. Russell Curtis
Vice President
Technical Services Group -
Vincent J. Lammers
Vice President
Non-Food Group
Seneca Flight Operations
Paul E. Middlebrook
President
Corporate Offices
1162 Pittsford-Victor Road
Pittsford, New York 14534
Telephone (716) 385-9500
Independent Auditors
Deloitte & Touche LLP
Rochester, New York
General Counsel
Jaeckle, Fleischmann & Mugel
Buffalo, New York
Transfer Agent and Registrar
Seneca Foods Corporation
Suite 1010, 1605 Main Street
Sarasota, Florida 34236
Manufacturing Plants
and Warehouses
Food Group
Eau Claire, Michigan
Rochester, Minnesota
Dundee, New York
East Williamson, New York
Geneva, New York
Marion, New York
Newark, New York
Oaks Corners, New York
Portland, New York
Seneca Castle, New York
Mountain Home, North Carolina
Kennett Square, Pennsylvania
Othello, Washington
Prosser, Washington
Wapato, Washington
Yakima, Washington
Baraboo, Wisconsin
Cumberland, Wisconsin
Jackson, Wisconsin
Janesville, Wisconsin
Non-Food Group
Chicopee, Massachusetts
Peabody, Massachusetts
Clifton Park, New York
Penn Yan, New York
Notice of Annual Meeting
The 1994 Annual Meeting of Shareholders will be held on Saturday, December 3,
1994, beginning at 9:00 A.M. at the Company's facilities at 74 Seneca Street,
Dundee, New York. A formal notice of the meeting together with a proxy
statement and proxy form will be mailed to shareholders of record as of
October 14, 1994.
Additional Information
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
July 31, 1994, as filed with the Securities and Exchange Commission, will be
provided by the Company to any shareholder who so requests in writing.
Requests should be sent to Devra A. Bevona, Seneca Foods Corporation, 1162
Pittsford-Victor Road, Pittsford, New York 14534.
Shareholder Information
The Company's common stock is traded on NASDAQ National Market System. The
2.8 million outstanding shares are owned by 654 shareholders of record. The
high and low prices of the Company's common stock during each calendar
quarter of the past two years are shown below.
1994 1993
Quarter High Low High Low
First $19.50 $15.50 $16.00 $15.25
Second 20.00 18.50 16.25 15.25
Third 21.00 19.00 16.25 15.25
Fourth 22.75 19.50 16.38 14.75
The Company may pay dividends on common stock only from consolidated net
earnings available for distribution which were $4,748,000 as of July 31,
1994. Payment of dividends to common stockholders is made at the discretion
of the Company's Board of Directors and depends, among other factors, on
earnings, capital requirements, operating and financial condition of the
Company. The Company has not declared or paid a common dividend in many
years.
Exhibit 22
LIST OF SUBSIDIARIES
The following is a listing of subsidiaries 100% owned by Seneca Foods
Corporation, directly or indirectly:
Name State
Marion Foods, Inc. New York
Seneca Foods International, Ltd. New York
SSP Company, Inc. Massachusetts
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Commercial and Industrial Companies
Article 5 of Regulation S-X
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-END> JUL-31-1994
<CASH> 2325
<SECURITIES> 0
<RECEIVABLES> 18834
<ALLOWANCES> 183
<INVENTORY> 92710
<CURRENT-ASSETS> 116113
<PP&E> 179041
<DEPRECIATION> 100825
<TOTAL-ASSETS> 200601
<CURRENT-LIABILITIES> 53319
<BONDS> 51476
<COMMON> 1880
0
70
<OTHER-SE> 83335
<TOTAL-LIABILITY-AND-EQUITY> 200601
<SALES> 290185
<TOTAL-REVENUES> 290185
<CGS> 247158
<TOTAL-COSTS> 247158
<OTHER-EXPENSES> 28824
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6046
<INCOME-PRETAX> 8157
<INCOME-TAX> 2816
<INCOME-CONTINUING> 5341
<DISCONTINUED> 2363
<EXTRAORDINARY> (606)
<CHANGES> 2006
<NET-INCOME> 9104
<EPS-PRIMARY> 3.13
<EPS-DILUTED> 3.10
</TABLE>
