<PAGE>
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OF 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 28, 1996 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
incorporation or organization) Identification No.)
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
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Check mark indicates whether registrant (1) has filed all reports required to be
filed by Section 13 of 15(d) of the Securities 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
The number of shares outstanding of each of the issuer's classes of common stock
at the latest practical date are:
Class Shares Outstanding at October 31, 1996
Common Stock Class A, $.25 Par 3,143,125
Common Stock Class B, $.25 Par 2,796,555
<PAGE>
<TABLE>
PART I FINANCIAL INFORMATION
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands of Dollars)
<CAPTION>
9/28/96 3/31/96
------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Short-term Investments $ 1,029 $ 1,297
Common Stock of Moog Inc. - 12,863
Accounts Receivable, Net 55,382 51,118
Inventories:
Finished Goods 369,155 138,953
Work in Process 14,719 63,730
Raw Materials 31,013 27,076
------- -------
414,887 229,759
Off-Season Reserve (Note 3) (54,189) -
Deferred Tax (Net) 53 53
Refundable Income Taxes 1,901 3,503
Other Current Assets 565 1,041
-------------- ---------------
Total Current Assets 419,628 299,634
Property, Plant and Equipment, Net 223,819 222,720
Common Stock of Moog Inc. 1,261 1,048
Other Assets 401 457
-------------- ---------------
$645,109 $523,859
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 121,780 $ 113,000
Accounts Payable 144,196 48,930
Accrued Expenses 35,440 28,253
Current Portion of Long-Term Debt and Capital
Lease Obligations 177 690
--------------- ---------------
Total Current Liabilities 301,593 190,873
Long-Term Debt 223,733 216,928
Capital Lease Obligations 9,826 9,646
Deferred Income Taxes 11,930 11,414
Deferred Gain 4,380 4,059
10% Preferred Stock, Series A, Voting, Cumulative,
Convertible, $.025 Par Value Per Share 10 10
10% Preferred Stock, Series B, Voting, Cumulative,
Convertible, $.025 Par Value Per Share 10 10
6% Preferred Stock, Voting, Cumulative, $.25 Par Value 50 50
Common Stock 2,666 2,666
Paid in Capital 5,913 5,913
Net Unrealized Gain on Available-For-Sale Securities 340 5,169
Retained Earnings 84,658 77,121
--------------- ---------------
Stockholders' Equity 93,647 90,939
--------------- ---------------
$645,109 $ 523,859
======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, except Share Data)
<CAPTION>
Three Months Ended
9/28/96 9/30/95
------- -------
<S> <C> <C>
Net Sales $ 159,521 $ 131,979
Other Income (See Notes) 1,640 -
------------------ -----------------
161,161 131,979
Costs and Expenses:
Cost of Product Sold 143,194 118,324
Selling, General, and Administrative 6,669 8,185
Interest Expense 7,246 6,820
Nonrecurring Charge (See Notes) - 15,078
------------------ -----------------
Total Costs and Expenses 157,109 148,407
------------------ -----------------
Earnings (Loss) Before Income Taxes 4,052 (16,428)
Income Taxes 1,342 (6,079)
------------------ -----------------
Net Earnings (Loss) $ 2,710 $ (10,349)
================== =================
Net Earnings Applicable to
Common Stock 2,704 (10,355)
Weighted Average Common
Shares Outstanding 5,939,680 5,593,110
Primary and Fully Diluted Earnings Per
Share of Common Stock (Exhibit II):
Net Earnings(Loss) $ .46 $ (1.85)
================== ===============
<FN>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, except Share Data)
<CAPTION>
Six Months Ended
9/28/96 9/30/95
------- -------
<S> <C> <C>
Net Sales $ 283,215 $ 213,924
Other Income (See Notes) 9,141 -
------------------ -----------------
292,356 213,924
Costs and Expenses:
Cost of Product Sold 252,600 186,853
Selling, General, and Administrative 13,253 15,968
Interest Expense 14,727 12,365
Nonrecurring Charge (See Notes) - 15,078
------------------ -----------------
Total Costs and Expenses 280,580 230,264
------------------ -----------------
Earnings (Loss) Before Income Taxes 11,776 (16,340)
Income Taxes 4,239 (6,046)
------------------ -----------------
Net Earnings (Loss) $ 7,537 $ (10,294)
================== =================
Net Earnings Applicable to
Common Stock 7,525 (10,306)
Weighted Average Common
Shares Outstanding 5,939,680 5,593,110
Primary and Fully Diluted Earnings Per
Share of Common Stock (Exhibit II):
Net Earnings (Loss) $ 1.27 $ (1.84)
================== ===============
<FN>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<CAPTION>
Six Months Ended
9/28/96 9/30/95
------- -------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Earnings (Loss) $ 7,537 $ (10,294)
Adjustments to Reconcile Net Earnings
(Loss) to Net Cash Used by
Operating Activities:
Depreciation and Amortization 12,701 10,358
Deferred Income Taxes 523 (35)
Gain on the Sale of Assets (9,141) -
Changes in Working Capital:
Accounts Receivable (4,264) (8,464)
Inventories (185,128) (130,993)
Off-Season Reserve 54,189 (36,631)
Other Current Assets 476 43
Income Taxes 4,054 (6,864)
Accounts Payable and
Accrued Expenses 102,774 108,549
------------------ -----------------
Net Cash Used by Operations (16,279) (74,331)
------------------ -----------------
Cash Flows From Investing Activities:
Additions to Property, Plant,
and Equipment (9,275) (59,409)
Proceed from the Sale of Assets 15,511 -
Disposals of Property, Plant,
and Equipment 30 33
------------------ -----------------
Net Cash Provided (Used) by Investing
Activities 6,266 (59,376)
------------------ -----------------
Cash Flows From Financing Activities:
Long-Term Borrowing 1,745 9,258
Notes Payable 8,780 109,100
Payments and Current Portion of Long-Term
Debt and Capital Lease Obligations (836) (326)
Other 56 (111)
Dividends - (12)
------------------ -----------------
Net Cash Provided by
Financing Activities 9,745 117,909
------------------ -----------------
Net Decrease in Cash and Short-
Term Investments (268) (15,798)
Cash and Short-Term Investments,
Beginning of Period 1,297 26,538
------------------ -----------------
Cash and Short-Term Investments,
End of Period $ 1,029 10,740
================== =================
<FN>
An addition to the secured nonrecourse subordinated promissory note of
$7,558,000 occurred in the second quarter of 1997 in conjunction with the
acquisition of additional Green Giant assets. The accompanying notes are an
integral part of these consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 28, 1996
1. Consolidated Condensed Financial Statements
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, which are normal
and recurring in nature, necessary to present fairly the financial
position of the Registrant as of September 28, 1996 and March 31, 1996
and results of operations for the three and six month periods ended
September 28, 1996 and September 30, 1995 and Cash Flows for the six
month periods ended September 28, 1996 and September 30, 1995. All
significant intercompany transactions and accounts have been eliminated
in consolidation. The March 31, 1996 balance sheet was derived from
audited financial statements.
The results of operations for the three and six month periods ended
September 28, 1996 and September 30, 1995 are not necessarily indicative
of the results to be expected for the full year.
The accounting policies followed by the Registrant are set forth in Note
1 to the Registrant's financial statements in the 1996 Seneca Foods
Corporation Annual Report and 10-K.
Other footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
condensed financial statements be read in conjunction with the financial
statements and notes included in the Registrant's March 31, 1996
financial report.
2. Primary earnings per share are based on the weighted average number of
common shares outstanding, as the effect of common stock equivalents is
immaterial. The difference between primary and fully diluted earnings
per share is immaterial.
3. Off-Season Reserve is the excess of absorbed expenses over incurred
expenses to date. The seasonal nature of the Registrant's Food
Processing business results in a timing difference between expenses
(primarily overhead expenses) incurred and absorbed into product cost.
All Off-Season Reserve balances are zero at fiscal year end.
4. The Registrant issued a stock split in the form of a dividend during
1996. This has been reflected in the prior year of these financial
statements as if it had occurred at the beginning of the year.
<PAGE>
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
September 28, 1996
5. The prior year second quarter results include a nonrecurring charge of
$15,078,000, before income tax benefit, due to a combination of start-up
costs related to the Pillsbury Alliance and severe drought conditions
that New York State suffered during the entire summer.
6. During the first quarter, the Registrant sold its investment in Moog,
Inc. Class A Common Stock back to Moog. This resulted in
a Pre-Tax gain of $7,501,000.
7. During the second quarter, the Registrant sold its Clifton Park, New
York facility for cash resulting in a gain of $1,640,000 before income
tax expense. The Registrant had leased this facility to a third party.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION RESULTS OF OPERATIONS
September 28, 1996
Results of Operations:
Sales:
Sales reflect an increase of 20.9% for the second quarter and 32.4% for the
comparable six month period, versus 1995. The higher sales, in large part, are
due to higher canned vegetables quantities sold than the previous period.
Costs and Expenses:
The following table shows cost and expenses as a percentage of sales:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
9/28/96 9/30/95 9/28/96 9/30/95
------- ------- ------- -------
<S> <C> <C> <C> <C>
Cost of Product Sold 89.8% 89.6% 89.2% 87.3%
Selling 3.2 4.5 3.6 5.5
Administrative 1.0 1.7 1.1 2.0
Interest Expense 4.5 5.2 5.2 5.8
Nonrecurring Charge - 11.4 - 7.0
---------------------------------------------------
98.5% 112.4% 99.1% 107.6%
====================================================
</TABLE>
Higher Cost of Product Sold percentages (i.e. lower Gross Margins) and lower
Selling percentages reflect, in part, higher proportion of vegetable sales under
the Pillsbury Alliance. Refer to the footnotes for the discussion of the
Nonrecurring Charge.
Income Taxes:
The effective tax rate used in fiscal 1997 is 36% and in fiscal 1996 it is 37%.
Financial Condition:
The financial condition of the Registrant is summarized in the following table
and explanatory review (In Thousands):
<TABLE>
<CAPTION>
For the Quarter For the Year
Ended September Ended March
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Working Capital Balance $118,035 $86,621 $108,761 $136,342
Quarter Change 10,116 (13,662) - -
Inventory 414,887 336,659 229,759 138,113
Notes Payable 121,780 109,100 - -
Long-Term Debt 233,559 234,701 226,574 221,480
Current Ratio 1.39:1 1.32:1 1.57:1 3.21:1
Inventory (Average) Turnover 1.2 1.6 2.0 2.2
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION RESULTS OF OPERATIONS
September 28, 1996
The change in the Working Capital for the quarter from the prior year is largely
due to acquisition of Green Giant assets in the prior year and the capital
expenditure program needed for the Registrant's plants to take on some of the
canned vegetable volume added by the acquisition.
Inventory is $78 million greater than the same month in the prior year largely
due to the larger vegetable pack than the prior year. The increase was expected
as the Registrant is now producing Pillsbury's green bean requirements. In
addition, unlike the prior year, the pack budgets were met this year.
As part of the Alliance with Pillsbury (see 1996 Annual Report for details),
Pillsbury takes Green Giant inventory as it needs it or at least by the
take-or-pay date (varies by commodity).
The Registrant was in compliance with its debt covenants related to Short-Term
and Long-Term Debt.
See Consolidated Condensed Statements of Cash Flows for further details.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults on Senior Securities
None.
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) Exhibit 4 - (4a) Instrument defining the rights of
any holder of Long-Term Debt related to the Note
Agreement by and among SENECA FOODS CORPORATION,
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA and
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY as
amended by Consent under Note Agreement as Exhibit
4a filed hereto.
(b) Exhibit 4 - (4b) Instrument defining the rights of
any holder of any holder of Long-Term Debt:
Supplementary Agreement dated October 2, 1996 made by
Seneca Foods Corporation, The Pillsbury Company and
Grand Metropolitan Incorporated related to a First
Restated and Amended Alliance Agreement as amended by
Exhibit 4b filed hereto.
(c) Exhibit 11 - (11) Computation of earnings per share
(d) Exhibit 27 - (27) Financial Data Schedules
(e) Reports on Form 8-K - None during the quarter.
<PAGE>
SIGNATURES
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.
Seneca Foods Corporation
(Registrant)
/s/Kraig H. Kayser
-----------------------
November 13, 1996 Kraig H. Kayser
President and
Chief Executive Officer
/s/Jeffrey L. Van Riper
------------------------
November 13, 1996 Jeffrey L. Van Riper
Controller and
Chief Accounting Officer
<PAGE>
Exhibit 4a
EXECUTION COUNTERPART
CONSENT UNDER NOTE AGREEMENT
This Consent, entered into as of October 2, 1996, by and among SENECA
FOODS CORPORATION (the "Company"), THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
("Prudential") and JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY ("Hancock";
Prudential and Hancock, collectively , the "Purchasers").
PRELIMINARY STATEMENTS
The parties hereto have executed and delivered that certain
Note Agreement dated as of February 23, 1995 (the "Note Agreement");
Prudential and Hancock are the holders of 100% of the Notes
issued under the Note Agreement;
As described in the Company's memorandum, dated August 6,
1996, a copy of which is attached hereto (the "Inventory Sale Proposal"), the
Company wishes to enter into a purchase and sale transaction (the "Transaction")
with Al Rajhi Banking & Investment Corp. (the "Investor"), whereby the Investor
will purchase the Company's 1996 asparagus pack inventory (the "Inventory") with
an estimated value of not more than $23,000,000 as of such date.
As a part of the Transaction, the Company will act as the
agent for the Investor, such that the Company will, on behalf of and as agent
for the Investor, warehouse the purchased inventory and distribute it to and
invoice Pillsbury for the Inventory, as agreed between Pillsbury and the
Investor. The Investor will assume all risks and rewards of ownership of the
Inventory and will assume and fully insure against all risk of loss with respect
to all Inventory purchased. The Company will not be required to repurchase any
of the Inventory, guaranty sales prices or provide price supports for the
Inventory or agree to cover any revenue shortfalls of the Investor.
The Company believes that entering into the Transaction will
improve its cash flow and strengthen its balance sheet by reducing its
short-term debt.
The Company plans to convey five acres of land (with a fair
market value of $15,000) (the "Land") to the City of Montgomery, Minnesota (the
"City"). The City will construct a 228,000 square foot warehouse adjacent to the
Company's Montgomery, Minnesota processing plant (collectively with the Land,
the "Project"). The Project will be financed through the City's IDA bonds in an
amount not to exceed $7,200,000, with the City being the sole obligor on the
bonds.
The Company and the City will enter into an operating lease
agreement with a 10 year term for the use of the Project by the Company. The
Company will have a buyout option at the end of such 10 year term for a purchase
price equal to the Project's fair market value at such time.
Pillsbury will provide the Company with a mortgage release
relating to the Land. The Project will represent a sale/leaseback of the Land
and require a modification to the mortgage on the Montgomery property to
Pillsbury.
To effect the Transaction, the Company must obtain a release
from certain restrictions with respect to the Inventory contained in the
Alliance Agreement as well as the consent of the Purchasers under the terms of
the Note Agreement.
In connection with the Project, the Company requests a
one-time waiver of paragraphs 6C(6) and 6E of the Note Agreement.
Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Note Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
Consents. Provided that the conditions set forth in
Section 2 below are met no later than October 2, 1996, each Purchaser hereby
consents to:
the Transaction and agrees to (i) the sale of the Inventory
for purposes of paragraph 6C(5) of the Note Agreement; and (ii) Pillsbury's
waiver of the terms of the Alliance Agreement to the extent necessary to permit
the sale of the Inventory substantially in accordance with the terms outlined in
the Inventory Sale Proposal for purposes of paragraph 6E(ii)(C); and
the Project, as outlined above, to extent of the
sale-leaseback for purposes of paragraph 6(C)6 and to the modification of the
Pillsbury Security Documents with respect to the property located in Montgomery,
Minnesota for purposes of paragraph 6E(ii)(A).
Conditions of Effectiveness. This Consent shall become
effective when, and only when, Prudential and Hancock shall have received
counterparts of this Consent executed by each of the parties hereto and all of
the following documents, each (unless otherwise indicated) being dated the date
hereof, in form and substance satisfactory to Prudential and Hancock:
Copies of (A) all documents evidencing all requisite
corporate action of the Company (including any and all resolutions of the
Board of Directors of the Company) authorizing the execution, delivery and
performance of this Consent and the matters contemplated hereby and
thereby, and (B) all documents evidencing all governmental approvals,
if any, with respect to this Consent and the matters contemplated hereby and
thereby.
A certificate of the Secretary or an Assistant
Secretary of the Company certifying the names and true signatures of the
officers authorized to sign this Consent on behalf of the Company and any other
documents to be delivered by the Company hereunder.
All consents or waivers that are required, under the
Pillsbury Agreements, the Bank Facility and any other agreement to which the
Company is a party, in order to permit the Transaction, shall have been
obtained.
Each of the Purchasers shall have received, in
each case immediately upon their becoming
effective, a copy of the definitive documents (A) between and among the other
parties involved in the Transaction, including but not limited to: (x) all
agreements between or among the Company and/or Pillsbury and/or the Investor;
and (y) any amendments to or consents required under the Pillsbury Agreements,
the Bank Facility and any other agreement under which consent is required for
the Transaction and (B) with respect to the Project, including the modifications
to the Pillsbury Security Documents.
Such other documents, instruments, approvals or
opinions as Prudential or Hancock may reasonably request.
The representations and warranties contained herein shall be
true on and as of the date hereof, there shall exist on the date hereof, no
Event of Default or Default; there shall exist no material adverse change in the
financial condition, business operation or prospects of the Company or its
Subsidiaries since March 31, 1996; and the Company shall have delivered to
Prudential and Hancock an Officer's Certificate to such effect.
Representations and Warranties.
The Company hereby repeats and confirms each of the
representations and warranties made by it in the Note Agreement, as amended
hereby, as though made on and as of the date hereof, with each reference therein
to "this Agreement", "hereof", "hereunder", "thereof", "thereunder" and words of
like import being deemed to be a reference to the Note Agreement as amended
hereby.
The Company further represents and warrants as follows:
The execution, delivery and performance by the
Company of this Consent is within its corporate
powers, have been duly authorized by all necessary corporate action and do not
contravene (C) its charter or by-laws, (D) law or (E) any legal or contractual
restriction binding on or affecting the Company; and such execution, delivery
and performance do not or will not result in or require the creation of any Lien
upon or with respect to any of its properties.
No governmental approval is required for the due
execution, delivery and performance by the
Company of this Consent, except for such governmental approvals as have been
duly obtained or made and which are in full force and effect on the date hereof
and not subject to appeal.
This Consent constitutes the legal, valid and
binding obligations of the Company enforceable against the Company in
accordance with its terms.
There are no pending or threatened actions, suits or
proceedings affecting the Company or any of
its Subsidiaries or the properties of the Company or any of its Subsidiaries
before any court, governmental agency or arbitrator, that may, if adversely
determined, materially adversely affect the financial condition, properties,
business, operations or prospects of the Company and it Subsidiaries, considered
as a whole, or affect the legality, validity or enforceability of the Note
Agreement.
The Inventory Sale Proposal does not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading.
The Transaction will not result in the creation of
either Debt or any contingent liability of the Company, or a Lien against the
Company or any of the Company's assets.
The Transaction will be structured and consummated
substantially as outlined in the Inventory Sale Proposal; it will constitute a
true sale of the Inventory to the Investor; all risk of loss will pass to the
Investor upon the closing of the Transaction; and the Investor will have
adequately insured against any risk of loss with respect to the Inventory.
Further, the Transaction will not require of the Company any greater
warranty obligations with respect to the Inventory than those contained in
the Alliance Agreement, nor will it create or provide for any rights or recourse
against the Company if Pillsbury or another buyer does not take or pay for the
Inventory from the Investor except for Pillsbury's rejection of product
because of failure to comply with quality requirements or
specifications under the Alliance Agreement.
Miscellaneous.
Reference to and Effect on the Note Agreement. Except as
specifically consented to above, the Note Agreement and the Notes, and all other
related documents, are and shall continue to be in full force and effect and are
hereby in all respects ratified and confirmed by the Company.
The execution, delivery and effectiveness of this Consent
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of any holder of a Note under the Note Agreement or the
Notes, nor constitute a waiver of any provision of any of the foregoing.
Costs and Expenses. The Company agrees to pay on demand all
costs and expenses incurred by any holder of a Note in connection with the
preparation, execution and delivery of this Consent, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel. The
Company further agrees to pay on demand all costs and expenses, if any
(including, without limitation, reasonable counsel fees and expenses of
counsel), incurred by any holder of a Note in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this Consent,
including, without limitation, counsel fees and expenses in connection with the
enforcement of rights under this paragraph 4B.
Execution in Counterparts. This Consent may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.
Governing Law. This Consent shall be governed by, and
construed in accordance with, the laws of the State of New York.
[Signatures on Next Page.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Consent to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SENECA FOODS CORPORATION
By__/s/Kraig H. Kayser___________
Title: President & Chief Executive Officer
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By_/s/Kevin J. Kraska______________
Title: Vice President
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By_/s/Scott O. McFetridge__________
Title: Investment Officer
<PAGE>
Exhibit 4b
SUPPLEMENTARY AGREEMENT
<PAGE>
5
<PAGE>
This Supplementary Agreement dated October 2, 1996 ("Supplementary
Agreement") is made by Seneca Foods Corporation ("Seneca"), The Pillsbury
Company ("Pillsbury") and Grand Metropolitan Incorporated ("GMI").
RECITALS
This Supplementary Agreement relates to the First Amended and
Restated Alliance Agreement, dated December 8, 1994, as amended February 10,
1995, by and among the parties hereto (the "Alliance Agreement"). Unless
otherwise indicated, each term or phrase in this Supplementary Agreement
designated by initial capital letters has the same meaning as in the Alliance
Agreement.
The parties desire to set forth in this Supplementary
Agreement their intentions with respect to a proposal by Seneca to sell its 1996
asparagus pack which constitutes Acceptable Cases of Asparagus Product under the
Alliance Agreement and which is described by each Product classification set
forth in Exhibit A attached hereto and made a part hereof (collectively, the
"Asparagus"). Al Rajhi Banking & Investment Corp. (the "Bank") will purchase all
of the Asparagus pursuant to the terms of a Purchase and Sale and Warehousing
Agreement, dated the date hereof (the "Bank Purchase Agreement").
After the sale of the Asparagus to the Bank, the Bank will
have title and all risk of loss, with respect to the Asparagus, and the
Asparagus will be stored at Bank's request where it is now located at Seneca's
warehouse facilities in Dayton, Washington, Buhl, Idaho, and Geneva, New York
and Pillsbury's Clearfield, Utah warehouse, at a cost to be paid by the Bank.
Pillsbury will thereafter purchase all of the Asparagus from the Bank pursuant
to the terms of a purchase and sale agreement, dated the date hereof, between
Pillsbury, GMI and the Bank (the "Pillsbury Purchase Agreement").
AGREEMENT
The parties agree that the transaction will be conducted as follows:
On approximately October 4, 1996, Seneca will sell to
Bank all of the Asparagus pursuant to the terms of the Bank Purchase Agreement
for an aggregate amount equal to $20,871,088.
The parties hereto recognize that, upon the sale of
the Asparagus from Seneca to the Bank pursuant to the terms of the Bank
Purchase Agreement, title to the Asparagus shall be held by the Bank,
and title shall remain with the Bank until the Asparagus is sold to
Pillsbury pursuant to the terms of the Pillsbury Purchase Agreement.
Pillsbury will thereafter purchase the Asparagus from
the Bank, at such times, and in accordance with the other terms, as are set
forth in the Pillsbury Purchase Agreement. With respect to each purchase of
Asparagus from the Bank made by Pillsbury pursuant
to the Pillsbury Purchase Agreement, Seneca, as agent for the Bank, will ship
the purchased Asparagus to Pillsbury in the same manner and on the same terms
(other than price, which is covered under the terms of the Pillsbury Purchase
Agreement) as would be applicable to a direct sale by Seneca to Pillsbury under
the terms of the Alliance Agreement. On behalf of the Bank, and with the Bank's
consent, Seneca will invoice Pillsbury monthly for Pillsbury's purchases of
Asparagus under the Pillsbury Purchase Agreement and Pillsbury will pay each
invoice to an account for the benefit of the Bank in accordance with the terms
set forth on Exhibit A to the Pillsbury Purchase Agreement.
The parties hereto recognize that Sections 3.6(b) and
(c) of the Alliance Agreement provide for
fees and other payments between Pillsbury and Seneca, including an annual
reconciliation procedure which is not necessarily Product specific but which
carries out the general purposes of the Alliance Agreement. The parties will use
this procedure as contemplated therein. The Transfer Price and warehousing and
handling fees and costs to be paid by Bank to Seneca with respect to the
Asparagus, are set forth in Exhibit B hereto.
Except as specifically modified by the procedures
specified in this Supplementary Agreement for
the intervening sale of the Asparagus to Bank and the subsequent sale of the
Asparagus to Pillsbury, the provisions of the Alliance Agreement shall govern
the respective obligations of the parties to the Alliance Agreement. Without
limiting the general effect of the first sentence of this paragraph 5, at all
times while the Asparagus is in Seneca's possession, whether as owner or as
warehousing agent for Bank, Seneca shall comply, as instructed by the Bank,with
the provisions of the Alliance Agreement as to handling, storing, labelling and
other matters relating to Products prior to shipment to Pillsbury; and Seneca
will remain subject to the Quality Documents and have the obligations and
liabilities described in Articles X and XII of the Alliance Agreement with
respect to the Asparagus, including without limitation the warranties and
indemnities given by Seneca in Article XII. The intervening sale to the Bank
contemplated by the Bank Purchase Agreement will not expand or reduce the
obligations and liabilities of Seneca to Pillsbury with respect to Product
quality and Product warranties regarding the Asparagus. Pillsbury hereby
consents to the location of a portion of the Asparagus at its Clearfield, Utah
plant.
Pillsbury waives the provisions of Section 6.5 of the
Alliance Agreement insofar as those
provisions would prevent Seneca from selling and transferring title to the
Asparagus to the Bank or entering into the Bank Purchase Agreement. The parties
agree that the Transactions with the Bank contemplated by this Supplementary
Agreement do not constitute an assignment by either Seneca or Pillsbury which
would be prohibited by Section 22.1 of the Alliance Agreement; and,
additionally, the parties waive any prohibition contained in the Alliance
Agreement which would bar the Transactions contemplated by this Supplementary
Agreement. Pursuant to the terms of the Pillsbury Purchase Agreement, Pillsbury
has furnished to the Bank a written commitment, in form and substance reasonably
satisfactory to Bank, that Pillsbury will purchase the Asparagus in accordance
with the terms of the Alliance Agreement as modified by this Supplementary
Agreement, and Bank has furnished to Pillsbury the Bank's written commitment
that it will not sell the Asparagus to any person or entity other than Pillsbury
and will not grant, permit or suffer any person or entity other than Pillsbury
to acquire a lien or other interest in the Asparagus adverse to Pillsbury.
If any issues arise with respect to the subject
matter of this Supplementary Agreement which are
not specifically covered by its provisions, the parties will endeavor in good
faith to resolve the issues consistent with the purposes of this Supplementary
Agreement and the Alliance Agreement, and, to the extent not otherwise resolved,
in accordance with the provisions of Article XVIII of the Alliance Agreement.
IN WITNESS WHEREOF, the parties have caused this Supplementary
Agreement to be executed by their duly authorized officers or representatives.
THE PILLSBURY COMPANY SENECA FOODS CORPORATION
By: /s/Tom Paulson By: /s/Kraig H. Kayser
-------------- ------------------
GRAND METROPOLITAN INCORPORATED
By: /s/David Laurey
---------------
<PAGE>
230073
<PAGE>
EXHIBIT B
(Paragraph 4 of Supplementary Agreement)
Transfer Price and Warehousing and Handling Costs and Fees with respect to
Asparagus to be paid by Bank to Seneca:
<TABLE>
<CAPTION>
Costs:
<S> <C>
Actual goods - specific $12.4500
Estimated post production
(Insurance, storage and handling) .94
Pre-tolling fee fixed unit cost $13.3900
Tolling Fee (categorized as follows)
4a. Relating to Production Costs .08
4b. Relating to Warehousing Functions .02
Post-tolling fee fixed unit cost &
warehousing fee $13.4900
Additional warehousing fee computed as follows:
6a. Capstone Arrangement Fee .0675
6b. Surety Bond .0049
Warehousing Fee (items 2, 4b, 6a, and 6b) (1.0324)
------------
Unit Price 12.53
Number of Units 1,538,893
Unit Price x Number of Units $19,282,329
Warehousing Fee to be earned over term $ 1,588,759
-----------
Total of above costs $20,871,088
</TABLE>
<PAGE>
<TABLE>
<PAGE>
EXHIBIT 11
SENECA FOODS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In thousands except share data)
<CAPTION>
Three Months Ended Six Months Ended
9/28/96 9/30/95 9/28/96 9/30/95
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Earnings Applicable to Common Stock:
Net Earnings $ 2,710 $ (10,349) $ 7,537 $ (10,294)
Deduct Preferred Cash Dividends 6 6 12 12
------------------------------------------------------------------
Net Earnings Applicable to
Common Stock $ 2,704 $ (10,355) $ 7,525 $ (10,306)
===================================================================
Weighted Average Common
Shares Outstanding 5,939,680 5,593,110 5,939,680 5,593,110
Effect of Common Stock Equivalents - - - -
-------------------------------------------------------------------
Weighted Average Common Shares Out-
standing for Primary 5,939,680 5,593,110 5,939,680 5,593,110
==================================================================
Primary and Fully Diluted
Earnings Per Share $ .46 $ (1.85) $ 1.27 $ (1.84)
=================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Commercial and Industrial Companies
Article 5 of Regulation S-X
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-28-1996
<CASH> 1029
<SECURITIES> 0
<RECEIVABLES> 55563
<ALLOWANCES> 181
<INVENTORY> 414887
<CURRENT-ASSETS> 419628
<PP&E> 360364
<DEPRECIATION> 136545
<TOTAL-ASSETS> 645109
<CURRENT-LIABILITIES> 301593
<BONDS> 233559
0
70
<COMMON> 2666
<OTHER-SE> 81922
<TOTAL-LIABILITY-AND-EQUITY> 645109
<SALES> 283215
<TOTAL-REVENUES> 292356
<CGS> 252600
<TOTAL-COSTS> 252600
<OTHER-EXPENSES> 13253
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14727
<INCOME-PRETAX> 11776
<INCOME-TAX> 4239
<INCOME-CONTINUING> 7537
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7537
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.27
</TABLE>
