<PAGE>
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 March 31, 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 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 Class A, $.25 Par
Common Stock Class B, $.25 Par
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained herein, and
will not be contained, to best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to the Form 10-K. X
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 X No
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 June 1, 1996 was approximately $98,704,000.
Common shares outstanding as of June 1, 1996 were Class A: 3,143,125,
Class B: 2,796,555.
Documents Incorporated by Reference:
(1) Proxy Statement to be issued prior to June 30, 1996 in connection with the
registrant's annual meeting of stockholders (the "Proxy Statement")
applicable to Part III, Items 10-13 of Form 10-K.
(2) Portions of the Annual Report to shareholders for fiscal year-ended
March 31, 1996 (the "Annual Report") applicable to
Part II, Items 5-8 and Part IV, Item 14 of Form 10-K.
<PAGE>
<TABLE>
TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT - FISCAL 1996
SENECA FOODS CORPORATION
<CAPTION>
Pages
<S> <C> <C> <C>
PART I.
Item 1. Business 1-3
Item 2. Properties 3
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Equity Security Holders 4
PART II.
Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters 4
Item 6. Selected Financial Data 4
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations 4
Item 8. Financial Statements and Supplementary Data 4
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure 4
PART III.
Item 10. Directors and Executive Officers of the Registrant 6
Item 11. Executive Compensation 6
Item 12. Security Ownership of Certain Beneficial Owners and Management 6
Item 13. Certain Relationships and Related Transactions 6
PART IV.
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K 6-10
SIGNATURES 11-12
</TABLE>
<PAGE>
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. Seneca Foods
Corporation purchased six Green Giant(R) vegetable plants from The Pillsbury
Company effective February 1, 1995, resulting in vegetable products becoming
nearly 80% of Seneca's overall business. Consequently, Seneca has changed its
fiscal year-end from July 31 to March 31 to avoid overlapping pack seasons
between fiscal years. Therefore, Fiscal 1995 was an eight-month transition
period.
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. The air charter service represents 1% of the Company's business and
therefore the financial information related to segments is not material.
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, Michigan, 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. Vegetable operations are primarily supported by plant locations in New
York, Wisconsin, Washington, Idaho, and Minnesota. In addition, the Company
operates a mushroom canning facility in Pennsylvania.
The following summarizes net sales by major category for the four years ended
March 31, 1996 and 1995 and July 31, 1994 and 1993:
<TABLE>
<CAPTION>
(Eight Months)
1996 1995 1994 1993
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Vegetable $ 330,654 $117,504 $145,010 $132,459
Apple 87,585 62,688 78,453 71,748
Grape 19,159 10,325 17,457 19,058
Other 66,453 40,809 45,334 30,205
------- ------- ------- -------
Total $503,851 $231,326 $286,254 $253,470
======= ======= ======= =======
</TABLE>
Other
Seneca Flight Operations provides air charter service primarily to industries in
upstate New York.
<PAGE>
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 26% of the Company's
processed foods were packed for retail customers under the Company branded
labels of Libby's(R), Nature's Favorite(R), TreeSweet(R), and Seneca(R). About
10% of the processed foods were packed for institutional food distributors and
31% of processed foods were retail packed under the private label of customers.
The remaining 33% is sold to Pillsbury under the Alliance Agreement (see Note 12
of Item 8, Financial Statements and Supplementary Data). 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. In 1996 and in the future, The Pillsbury Company represents our largest
customer as a result of the 20-year Alliance Agreement entered into during 1995.
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. The information under the heading Liquidity and
Capital Resources in Management's Discussion and Analysis of Financial Condition
and Results of Operations in the 1996 Annual Report is incorporated by
reference.
<PAGE>
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. The Company is a potentially responsible party with respect to two
sites but the Company does not believe the aggregate liability is material.
Employment
Food processing - Full time 2,049
- Seasonal 534
-----
2,583
Other 125
-----
2,708
Foreign Operations
Export sales for the Company are a relatively small portion (about 5%) of the
food processing sales, excluding the Pillsbury Alliance sales. Approximately 20%
of the Pillsbury Alliance sales are for eventual export.
Item 2
Properties
The Company has nine food processing, packaging, and warehousing facilities
located in New York State that provide approximately 1,819,000 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 (223,000 square feet), Pennsylvania (39,000 square
feet), and in Washington (three locations totaling 292,000 square feet).
Processing operations in North Carolina are primarily devoted to apple juice
products; in Washington, grape juice, apple juice, apple chips, and sauce; and
in Pennsylvania, mushroom canning and warehousing.
Four facilities in Minnesota, one facility in Michigan, one facility in
Washington, one facility in Idaho, and seven facilities in Wisconsin provide
approximately 4,456,000 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 two food distribution facilities in Massachusetts and New York
totaling approximately 206,000 square feet which are leased out to other
companies through 1996 and 2004. The Company has entered into an agreement to
sell the New York property in August 1996. Sublease income of $1,849,000 was
received on these facilities during the period. In addition the air charter
division has a 14,000 square foot facility.
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.
Certain of the Company's facilities are mortgaged to financial institutions to
secure long-term debt and capital lease obligations. See Notes 4 and 5 of Item
8, Financial Statements and Supplementary Data, for additional information about
the Company's lease commitments.
<PAGE>
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
No matters were submitted to vote of shareholders during the last quarter of the
fiscal period covered by this report.
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 information in the
1996 Annual Report, "Shareholder Information", which is incorporated by
reference.
Item 6
Selected Financial Data
Refer to the information in the 1996 Annual Report, "Five Year Selected
Financial Data", which is incorporated by reference.
Item 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Refer to the information in the 1996 Annual Report, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", which is
incorporated by reference.
Item 8
Financial Statements and Supplementary Data
Refer to the information in the 1996 Annual Report, "Consolidated Financial
Statements and Notes thereto including Independent Auditors' Report", which is
incorporated by reference.
Item 9
Changes in and Disagreements on Accounting and Financial Disclosure
None.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Seneca Foods Corporation
Pittsford, New York
We have audited the consolidated financial statements of Seneca Foods
Corporation and subsidiaries as of March 31, 1996, March 31, 1995 and July 31,
1994, and for the year ended March 31, 1996, the eight months ended March 31,
1995 and for each of the two years in the period ended July 31, 1994, and have
issued our report thereon dated May 31, 1996, which report includes an
explanatory paragraph as to changes in accounting for inventories in 1996 and
income taxes in 1994; such consolidated financial statements and report are
included in your 1996 Annual Report to Stockholders and are incorporated herein
by reference. Our audits also included the consolidated financial statement
schedule of Seneca Foods Corporation, listed in Item 14 (A)(2). This
consolidated financial statement schedule is 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 schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/Deloitte & Touche LLP
Rochester, New York
May 31, 1996
<PAGE>
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 which is incorporated herein by reference.
PART IV
Item 14
Exhibits, Financial Statement Schedules, and Reports on Form 8-K
A. Exhibits and Financial Statement Schedules
1. (i) Financial Statement Schedules - the following consolidated financial
statements of the Registrant, included in the Annual Report for the year
ended March 31, 1996, are incorporated by reference in Item 8:
Consolidated Statements of Net Earnings - March 31, 1996 and 1995 and
July 31, 1994 and 1993
Consolidated Balance Sheets - March 31, 1996 and 1995 and July 31, 1994
Consolidated Statements of Cash Flows - March 31, 1996 and 1995 and
July 31, 1994 and 1993
Consolidated Statements of Stockholders' Equity - March 31, 1996 and
1995 and July 31, 1994 and 1993
Notes to Consolidated Financial Statements - March 31, 1996 and 1995
and July 31, 1994 and 1993
Independent Auditors' Report
<PAGE>
(ii) As a result of the Company's change in 1995 in the fiscal year-end date
from July 31 to March 31 (see Note 1 of Item 8, Financial Statements and
Supplementary Data), the following is an unaudited comparison of eight
months ended March 31, 1995 and March 26, 1994:
<TABLE>
<CAPTION>
March 31 March 26
Eight Months Ended (1994 Unaudited) 1995 1994
(In thousands, except share amounts)
<S> <C> <C> <C>
Net sales $234,073 $195,048
------- -------
Costs and expenses:
Cost of product sold 202,068 162,356
Selling, general, and administrative expense 23,620 20,231
Interest expense, net of interest income 6,296 4,178
------- -------
231,984 186,765
Earnings from continuing operations before income
taxes, extraordinary item and cumulative effect of
accounting change 2,089 8,283
Income taxes 768 3,231
----- -----
Earnings from continuing operations $ 1,321 $ 5,052
===== =====
Earnings from continuing operations per share $ .23 $ 1.71
===== =====
Weighted average shares outstanding 5,593,110 5,899,284
========= =========
</TABLE>
Pages
2. Supplemental Schedule:
Schedule II -- Valuation and Qualifying Accounts 8
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/A filed August, 1995 as amended by Exhibit
No. 3 filed herewith.
No. 4 - Articles defining the rights of security holders - Incorporated by
reference to the Company's 10-Q/A filed August, 1995 as amended by Exhibit
No. 3 filed herewith. Instrument defining the rights of any holder of
Long-Term Debt - Incorporated by reference to Exhibit 99 to the Company's
10-Q filed January 1995 as amended by Exhibit No. 4 filed herewith. 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. 10 - Material Contracts - Incorporated by reference to the Company's 8-K
dated February 24, 1995 for the First Amended and Restated Alliance
Agreement and the First Amended and Restated Asset Purchase
Agreement both with The Pillsbury Company.
No. 11 - Computation of Earnings per Share 9
No. 13 - The material contained in the 1996 Annual Report to Shareholders under
the following headings: "Five Year Selected Financial Data", "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
"Consolidated Financial Statements and Notes thereto including Independent
Auditors' Report", and "Shareholder Information".
No. 18 - Preferability Letter 10
No. 21 - List of Subsidiaries 10
No. 27 - Financial Data Schedules
B. Reports on Form 8-K
None.
<TABLE>
Schedule II
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 March 31, 1996:
Allowance for doubtful accounts $ 227 $ 52 $ -- $ 114 (a) $ 165
====== ======= ===== ===== =======
Year-ended March 31, 1995:
Allowance for doubtful accounts $ 183 $ 166 $ -- $ 122 (a) $ 227
====== ======= ===== ===== ======
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
====== ======= ===== ===== =======
<FN>
(a) Accounts written off, net of recoveries.
</FN>
</TABLE>
<PAGE>
<TABLE>
Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<CAPTION>
(Eight Months)
Years ended March 31 and July 31, 1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary
Net earnings applicable to common stock:
Net earnings $ (10,147) $ 1,321 $ 9,037 $ 2,258
Deduct preferred stock dividends paid 12 12 23 23
------- ----- ----- ------
Net earnings applicable to common stock $ (10,159) $ 1,309 $ 9,014 $ 2,235
======= ===== ===== ======
Weighted average number of common shares and
common equivalents outstanding 5,622 5,593 5,798 6,171
======= ===== ===== ======
Primary earnings per share $ (1.81) $ .23 $ 1.55 $ .36
======= ===== ===== ======
Fully Diluted
Net earnings applicable to common stock per above $ (10,159) $ 1,309 $ 9,014 $ 2,235
Add dividends on convertible preferred stock 10 10 20 20
------- ----- ----- ------
Net earnings applicable to common stock on a fully
diluted basis $ (10,149) $ 1,319 $ 9,034 $ 2,255
======= ===== ===== ======
Shares used in calculating primary earnings per
share above 5,622 5,593 5,798 6,171
Additional shares to be issued under full
conversion of preferred stock 68 68 68 68
------ ------ ------ ------
Total shares for fully diluted 5,690 5,661 5,866 6,239
====== ====== ====== ======
Fully diluted earnings per share $ (1.78) $ .23 $ 1.54 $ .36
====== ====== ====== ======
<FN>
1995-1993 has been restated to reflect the Company's change from the LIFO
inventory valution method to the FIFO inventory valuation method and to reflect
the stock split in the form of a dividend.
</FN>
</TABLE>
<PAGE>
Exhibit 18
Seneca Foods Corporation
Pittsford, New York 14534
Dear Sirs/ Madames:
We have audited the consolidated financial statements of Seneca Foods
Corporation and subsidiaries as of March 31, 1996, March 31, 1995 and July 31,
1994, and for the year ended March 31, 1996, the eight months ended March 31,
1995 and for each of the two years in the period ended July 31, 1994, included
in your Annual Report on Form 10-K to the Securities and Exchange Commission and
have issued our report thereon dated May 31, 1996. Note 1 to such consolidated
financial statements contains a description of your adoption during the year
ended March 31, 1996 of the first-in, first-out (FIFO) method of accounting for
inventories, whereas you previously used the last-in, first-out (LIFO) method.
In our judgment, such change is to an alternative accounting principle that is
preferable under the circumstances.
/s/Deloitte & Touche LLP
Rochester, New York
May 31, 1996
Exhibit 21
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
<PAGE>
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 June 21, 1996
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:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Arthur S. Wolcott Chairman and Director June 21, 1996
Arthur S. Wolcott
/s/Kraig H. Kayser President, Chief Executive Officer, June 21, 1996
Kraig H. Kayser and Director
/s/Philip G. Paras Vice President, Finance June 21, 1996
Philip G. Paras
/s/Devra A. Bevona Treasurer June 21, 1996
Devra A. Bevona
/s/Jeffrey L. Van Riper Controller and Secretary June 21, 1996
Jeffrey L. Van Riper (Principal Accounting Officer)
/s/Robert T. Brady Director June 21, 1996
Robert T. Brady
/s/David L. Call Director June 21, 1996
David L. Call
/s/Edward O. Gaylord Director June 21, 1996
Edward O. Gaylord
/s/G. Brymer Humphreys Director June 21, 1996
G. Brymer Humphreys
/s/Susan W. Stuart Director June 21, 1996
Susan W. Stuart
</TABLE>
<PAGE>
Exhibit No. 3
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
SENECA FOODS CORPORATION
======================================================
Under Section 805 of the Business Corporation Law
======================================================
<PAGE>
================================================================================
3
================================================================================
We, the undersigned, being the President and Secretary of SENECA FOODS
CORPORATION, do hereby certify as follows:
FIRST: The name of the Corporation is SENECA FOODS CORPORATION. The name under
which the Corporation was formed is SENECA GRAPE JUICE CORPORATION.
SECOND: The certificate of incorporation of the Corporation was filed by the
Department of State on August 17, 1949.
THIRD: The certificate of incorporation of the Corporation is hereby amended to:
(a) Authorize a new class of ten million (10,000,000) shares of Common Stock of
the par value of $0.25 to be designated Class A Common Stock;
(b) Reclassify the existing class of Common Stock as Class B Common Stock;
(c) Establish the express terms of the Class A Common Stock and the Class B
Common Stock.
To accomplish this, Articles 3 and 4 of the Certificate of
Incorporation, are hereby amended to read in their entirety as follows:
3. The Capital Stock of the Corporation shall consist of ten
million (10,000,000) shares of Class A Common Stock of the par value of
$0.25 each; ten million (10,000,000) shares of Class B Common Stock of
the par value of $0.25 each; two hundred thousand (200,000) shares of
Six Percent (6%) Voting Cumulative Preferred Stock of the par value of
$0.25 each; thirty thousand (30,000) shares of Preferred Stock Without
Par Value, to be issued in series by the Board of Directors, pursuant
to the provisions of Article 4, Section (c) hereof, subject to the
limitations prescribed by law; and four million (4,000,000) shares of
Preferred Stock with $.025 par value, Class A, to be issued by the
Board of Directors pursuant to the provisions of Article 4, Section (d)
hereof, subject to the limitations prescribed by law. The stated
capital of the Corporation as determined pursuant to Section 506 of the
Business Corporation Law shall be increased by six hundred ninety nine
thousand one hundred thirty nine dollars ($699,139) and such increase
shall be allocated equally to the stated capital in respect of the
Corporation's $0.25 par value Class A Common Stock and Class B Common
Stock.
4. The designations, preferences, privileges and voting powers
of the shares of each class of stock which the Corporation is
authorized to issue, and the restrictions or qualifications thereof,
shall be as follows:
(a) Class A Common Stock and Class B Common Stock.
(A) Provisions Applicable to Class A Common Stock and Class B Common Stock.
(i) The holders of record of Class A Common Stock and
the holders of record of Class B Common Stock shall have equal rights
and rank per share with respect to any and all dividends and
distributions declared on the common stock of the Corporation, and no
dividend or distribution shall be declared or made with respect to
either Class A Common Stock or Class B Common Stock unless that
dividend or distribution is declared and made with respect to both such
classes; except that (subject to conversion rights of any preferred
stocks) a dividend or distribution upon Class A Common Stock which will
be paid in shares of common stock of the Corporation shall be declared
and made only in shares of Class A Common Stock and a dividend or
distribution upon Class B Common Stock which will be paid in shares of
common stock of the Corporation shall be declared and made only in
shares of Class B Common Stock, and if a dividend or distribution is so
declared and paid in shares of one class of common stock to the holder
of each share of that class, a per-share dividend or distribution in an
equal number of shares of the other class of common stock shall be
concurrently declared and paid to the holder of each share of such
other class, so that the number of shares of Class A Common Stock paid
as a dividend or distribution on a share of Class A Common Stock shall
be equal to the number of shares of Class B Common Stock paid as a
dividend or distribution on a share of Class B Common Stock.
(ii) In the event of any voluntary or involuntary
liquidation, dissolution or any winding up of the Corporation, each
share of Class A Common Stock and Class B Common Stock shall rank
equally with respect to any distribution to be received by holders of
common stock upon or with respect to liquidation, dissolution or
winding up.
(B) Provisions Applicable to Class A Common Stock.
(i) The holders of Class A Common Stock are entitled
to one-twentieth (1/20th) of one vote per share on all questions
presented to the stockholders. In all elections of directors of the
Corporation, each holder of Class A Common Stock shall have the right
to vote in person or by proxy one-twentieth (1/20th) of one vote for
each share of Class A Common Stock held by such holder for as many
Persons as there are directors to be elected. No cumulative voting for
directors shall be permitted.
Any provision of the Certificate of Incorporation or By-laws
of the Corporation requiring the affirmative vote of a specified
percentage of shares of the Corporation shall be read to give effect to
the lesser voting rights of the holders of Class A Common Stock as
described above; specifically, a provision that the affirmative vote of
a specified percentage of the shares of the Corporation is required
shall require the affirmative vote of the holders of that percentage of
the aggregate voting power of the Corporation.
The holders of Class A Common Stock are entitled to
vote as a separate class (i) on any proposal to amend the Corporation's
Certificate of Incorporation to increase the authorized number of
shares of Class B Common Stock, unless the increased authorization does
not exceed the number of shares of Class B Common Stock which must be
issued in a proposed stock dividend with respect to shares of Class B
Common Stock and which conforms to the requirements set forth in this
Article with respect to payment of dividends in stock of this
Corporation upon shares of Class B Common Stock and Class A Common
Stock and (ii) as required by applicable law.
(ii) The Class A Common Stock is not convertible into
shares of Class B Common Stock, unless the number of outstanding shares
of Class B Common Stock falls below 5% of the aggregate number of
outstanding shares of Class B Common Stock and Class A Common Stock. At
such time, all of the outstanding Class A Common Stock will be
converted automatically into shares of Class B Common Stock on a
share-for-share basis. For purposes of this Article 4(a)(B)(ii),
"outstanding" shares of Common Stock would not include shares of Class
B Common Stock or shares of Class A Common Stock repurchased by the
Corporation and not reissued.
(C) Provisions Applicable to Class B Common Stock.
(i) Except as provided in paragraph (C)(ii) of this
Article 4(a), the holders of Class B Common Stock are entitled to one
vote per share on all questions presented to the stockholders. In all
elections of directors of the Corporation, each holder of Class B
Common Stock shall have the right to vote in person or by proxy the
number of shares of Class B Common Stock held by such holder for as
many Persons as there are directors to be elected. No cumulative voting
for directors shall be permitted. The holders of Class B Common Stock
are entitled to vote as a separate class where required by applicable
law. If any share of Class B Common Stock is ineligible to vote by
reason of the limitations contained in paragraph (c)(ii) of this
Article 4(a), that share will be excluded from the determination of the
total shares eligible to vote for any purpose for which a vote of
shareholders is taken.
(ii) The voting rights of holders of shares of Class
B Common Stock are subject to the following restrictions: If a Person
acquires more than 15% (the "15% Threshold Amount") of the outstanding
Class B Common Stock after August 5, 1995 (the "Threshold Date") and
does not acquire after the Threshold Date a percentage of the Class A
Common Stock outstanding at least equal to the percentage of Class B
Common Stock acquired by that Person after the Threshold Date in excess
of the 15% Threshold Amount, such Person will not be allowed to vote
shares of Class B Common Stock acquired after the Threshold Date in
excess of the 15% Threshold Amount. The inability of the Person to vote
the shares of Class B Common Stock in excess of the 15% Threshold
Amount will continue until such time as a sufficient number of shares
of Class A Common Stock have been acquired by the Person.
For purposes of calculating the 15% Threshold
Amount, the following acquisitions and increases shall be excluded: (i)
shares of Class B Common Stock held by any Person on the Threshold
Date, (ii) an increase in a holder's percentage ownership of Class B
Common Stock resulting solely from a change in the total number of
shares of Class B Common Stock outstanding as a result of a repurchase
of Class B Common Stock by the Corporation since the last date on which
that holder acquired Class B Common Stock, (iii) acquisitions of Class
B Common Stock (1) made pursuant to contracts existing prior to the
Threshold Date, including the acquisition of Class B Common Stock
pursuant to the conversion provisions of Class A Preferred Stock
outstanding prior to the Threshold Date, (2) by bequest or inheritance,
or by operation of law upon the death or incompetency of any individual
and (3) by any other transfer made without valuable consideration, in
good faith and not for the purpose of circumventing the restrictions
imposed by the 15% Threshold Amount. A gift made to any Person who is
related to the donor by blood or marriage, a gift made to a charitable
organization qualified under Section 501(c)(3) of the Internal Revenue
Code of 1986 or a successor provision and a gift to a Person who is a
fiduciary solely for the benefit of, or which is owned entirely by, one
or more of the following persons or entities:
(1) a person who is related to the donor by blood or marriage, or
(2) a charitable organization which is qualified under Section
501(c)(3) as described above
shall be presumed to be made in good faith and not for purposes of
circumventing the restrictions imposed by the 15% Threshold Amount.
Acquisitions of Class A Common Stock so as to
preclude the effect of the voting restrictions contained in the
preceding paragraph must be made for an "equitable price." For purposes
of this paragraph an "equitable price" is deemed to have been paid only
when the shares of Class A Common Stock have been acquired at a price
at least equal to the greater of (i) the highest per share price paid
by the acquiring Person, in cash or non-cash consideration, for any
Class B Common Stock acquired within the 60-day periods preceding and
following the acquisition of the Class A Common Stock or (ii) the
highest closing market sale price of Class B Common Stock during the
30-day periods preceding and following the acquisition of the Class A
Common Stock. The value of any non-cash consideration will be
determined by the Board of Directors acting in good faith. The highest
closing market sale price of a share of Class B Common Stock will be
the highest closing sale price reported by the principal trading market
for either class of Common Stock.
As used in this Article 4(a)(C)(ii):
"Person" shall include one or more
persons and entities who act or agree to act in concert with
respect to the acquisition or disposition of Class B Common
Stock or with respect to proposing or effecting a plan or
proposal to (a) a merger, reorganization or liquidation of the
Corporation or a sale of a material amount of its assets, (b)
a change in the Corporation's Board of Directors or
management, including any plans or proposal to fill vacancies
on the Board of Directors or change the number or term of
Directors, (c) a material change in the business or corporate
structure of the Corporation, or (d) any material change in
the capitalization or dividend policy of the Corporation. As
used in the preceding sentence, "act or agree to act in
concert" shall not include acts or agreements to act by
persons pursuant to their official capacities as Directors or
officers of the Corporation or because they are related by
blood or marriage.
Each reference to acquiring or
acquisition of Class B Common Stock and Class A Common Stock
shall include direct and indirect acquisitions of such stock.
(iii) The holders of Class B Common Stock shall have
the right, at their option, to convert such shares into shares of Class
A Common Stock at any time after the issuance thereof, on a
share-per-share basis. The conversion rights in the preceding sentence
shall expire upon the occurrence of the automatic conversion of all
outstanding shares of Class A Common Stock into Class B Common Stock
pursuant to the provisions of paragraph (B)(ii) of this Article 4(a).
In order to convert shares of Class B Common Stock into shares of Class
A Common Stock, the holder thereof shall surrender at the office of the
Corporation the certificate or certificates therefor, duly endorsed to
the Corporation or in blank, and give written notice at such office
that he elects to convert such shares of Class B Common Stock which
shall be deemed to have been converted as of the date (hereinafter
called the "Class A Conversion Date") of the surrender of such shares
for conversion as provided above, and the person or persons entitled to
receive the shares of Class A Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or
holders of such Class A Common Stock on such date. As soon as
practicable on or after the Class A Conversion Date, the Corporation
will deliver at such office a certificate or certificates for the
number of shares of Class A Common Stock issuable on such conversion.
(b) Six Percent (6%) Voting Cumulative Preferred Stock.
(A) The holders of record of Six Percent (6%) Voting
Cumulative Preferred Stock shall be entitled to cash dividends when and
as declared by the Board of Directors at the rate of six percent (6%)
of the par value per share per annum and no more, payable on the first
days of January and July in each year in preference to and in priority
over dividends upon the common stock and all other shares junior to the
Six Percent (6%) Voting Cumulative Preferred Stock. Such cash dividends
on the Six Percent (6%) Voting Cumulative Preferred Stock are to be
cumulative so that, if for any year or years cash dividends at the rate
of six percent (6%) per share per annum are not declared and paid or
set apart for payment on such Six Percent (6%) Voting Cumulative
Preferred Stock outstanding, the deficiency shall be declared and paid
or set apart for payment prior to the making of any dividend or other
distribution on the common stock, such cash dividends on the Six
Percent (6%) Voting Cumulative Preferred Stock to accrue from the date
of issue if that be a dividend date, otherwise from the dividend date
next preceding the date of issue of such Six Percent (6%) Voting
Cumulative Preferred Stock. Upon the payment or setting apart for
payment of all dividends current and accumulated at the rate of six
percent (6%) per annum upon the Six Percent (6%) Voting Cumulative
Preferred Stock, the directors may declare and pay dividends in order
of priority upon shares junior to the said Six Percent (6%) Voting
Cumulative Preferred Stock.
(B) In the event of any voluntary or involuntary
liquidation, dissolution or any winding up of the Corporation, the
holders of record of the Six Percent (6%) Voting Cumulative Preferred
Stock shall be entitled to be paid the full par value of such issue of
Preferred Stock plus accumulated dividends thereon to the date of such
liquidation, dissolution or winding up of the Corporation, whether or
not the Corporation shall have a surplus or earnings available for
dividends, and no more before any distribution of any assets shall be
made to the holders of any class of common stock or other shares junior
to the Six Percent (6%) Voting Cumulative Preferred Stock.
(C) The Corporation at its option may redeem the
whole or any part, pro rata or by lot, of the Six Percent (6%) Voting
Cumulative Preferred Stock outstanding at any time by paying therefor
in cash one hundred percent (100%) of the par value thereof plus
accumulated dividends thereon to the date fixed for such redemption by
mailing notice of such redemption to the holders of such Six Percent
(6%) Voting Cumulative Preferred Stock to be redeemed at their
respective addresses as such addresses may appear on the stock books of
the Corporation, specifying the time and place of redemption at the
office of the Corporation, such notice to be mailed at least thirty
(30) days and not more than sixty (60) days prior to the date specified
therein for redemption.
(D) In all elections of directors of the Corporation,
each holder of Six Percent (6%) Voting Cumulative Preferred Stock shall
have the right to vote in person or by proxy the number of shares of
Six Percent (6%) Voting Cumulative Preferred Stock held by him for as
many Persons as there are directors to be elected. No cumulative voting
for directors shall be permitted.
(E) A class of stock shall be deemed to be "junior to
the Six Percent (6%) Voting Cumulative Preferred Stock" if the Six
Percent (6%) Voting Cumulative Preferred Stock has priority over such
class with
respect to dividend rights or liquidation rights.
(c) Preferred Stock Without Par Value.
(A) The Board of Directors is authorized, subject to
limitations prescribed by law and the provisions of this paragraph, to
provide for the issuance in series of the shares of Preferred Stock
Without Par Value, and by filing a certificate pursuant to the Business
Corporation Law, to establish the number of shares to be included in
each such series, and to fix the designation, relative rights,
preferences and limitations of the shares of each such series whether
or not such relative rights, preferences and limitations of such series
shall be fixed as senior to, junior to, or on a parity with the
relative rights, preferences and limitations of any other class of
stock or series thereof, and to reclassify or alter the designation,
relative rights, preferences and limitations of any authorized and
unissued Preferred Stock Without Par Value whether or not such shares
shall have been designated as shares of any particular series and
whether or not such relative rights, preferences and limitations of
such series shall be fixed as senior to, junior to, or on a parity with
the relative rights, preferences and limitations of any other class of
stock or series thereof. The authority of the Board with respect to
each series shall include, but not be limited to, determination of the
following:
(i) The number of shares constituting that series
and the distinctive designation of that series;
(ii) The rate and times at which, and the terms
and conditions on which, dividends, if any, on shares of such series
shall be paid, the extent of the preference or relation, if any, of
such dividends to the dividends payable on any other class or classes
or series of the same or other classes of stock and whether such
dividends shall be cumulative or non-cumulative;
(iii) Whether that series shall have voting
rights, in addition to any voting rights provided by law, and, if
so, the terms of such voting rights;
(iv) Whether that series shall have conversion
privileges, and, if so, the terms and conditions of such conversion,
including provision for adjustment of the conversion rate in such
events as the Board of Directors shall determine;
(v) Whether or not the shares of that series shall
be redeemable, and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
(vi) The rights of the shares of that series in the
event of voluntary or involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding up of the
Corporation; and
(vii) Any other relative rights, preferences and
limitations of that series.
The authority of the Board of Directors with respect
to each such series shall be limited by the condition that no series of
the shares of any series so authorized by the Board of Directors to be
issued shall rank as to the payment of dividends or rights on
liquidation, dissolution or winding up of the Corporation senior to the
shares of any previously authorized series or of any other class of
Preferred Stock without an affirmative vote of a majority of the
holders of each such series or class of stock.
(B) Dividends on outstanding shares of Preferred
Stock Without Par Value shall be declared and paid, or set apart for
payment, before any dividends shall be declared and paid, or set apart
for payment, on any class of common stock with respect to the same
dividend period. If the stated dividends on the shares of all series of
Preferred Stock Without Par Value are not paid in full, the shares of
all series of such class shall share ratably in the payment of
dividends including accumulation, if any, in accordance with the sums
which would be payable on such shares if all dividends were declared
and paid in full.
(C) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders
of shares of each series of Preferred Stock Without Par Value then
outstanding shall be entitled to receive out of the assets of the
Corporation, before any distribution or payment shall be made to the
holders of any class of common stock, an amount equal to the stated
value of the stock plus, in respect of each share with respect to which
dividends are cumulative, a sum computed at the dividend rate provided
for in the Certificate of Incorporation from and after the date on
which dividends on such shares became cumulative to and including the
date fixed for such payment, less the aggregate of the dividends
theretofore paid thereon, but computed without interest. If the amounts
payable on liquidation in respect to the shares of all series of
Preferred Stock Without Par Value are not paid in full, the shares of
all series of such class shall share ratably in any distribution of
assets other than by way of dividends in accordance with the sums which
would be payable in such distribution if all sums payable were
discharged in full. If such payment shall have been made in full to the
holders of all shares of Preferred Stock Without Par Value on voluntary
or involuntary liquidation, dissolution or winding up, the remaining
assets of the Corporation shall be distributed in accordance with
Section (d)(C) of this Article 4. For the purpose of this paragraph, a
consolidation or merger of the Corporation with one or more other
corporations shall not be deemed to be a liquidation or winding up of
the Corporation.
(d) Preferred Stock With $.025 Par Value, Class A.
(A) The Board of Directors is authorized, subject to
the limitations prescribed by law and the provisions of this paragraph,
to provide for the issuance in series of the shares of Preferred Stock
With $.025 Par Value, Class A (hereinafter called "Class A Preferred
Stock"), and by filing a certificate pursuant to the Business
Corporation Law, to establish the number of shares to be included in
each such series, and to fix the designation, relative rights,
preferences and limitations of the shares of each such series. The
authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
(i) The number of shares constituting that series
and the distinctive designation of that series;
(ii) The rate and times at which, and the terms
and conditions on which, dividends, if any, on shares of such series
shall be paid, the extent of the preference or relation, if any, of
such dividends to the dividends payable on any other class or classes
or series of the same or other classes of stock and whether such
dividends shall be cumulative or non-cumulative;
(iii) Whether that series shall have voting
rights, in addition to any voting rights provided by law, and, if so,
the terms of such voting rights;
(iv) Whether that series shall have conversion
privileges, and, it so, the terms and conditions of such conversion,
including provision for adjustment of the conversion rate in such
events as the Board of Directors shall determine;
(v) Whether or not the shares of that series shall
be redeemable, and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
(vi) The rights of the shares of that series in
the event of voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding
up of the Corporation; and
(vii) Any other relative rights, preferences and
limitations of that series.
The authority of the Board of Directors shall be limited by
the condition that the shares of each series of Class A Preferred Stock
authorized by the Board of Directors to be issued shall rank, as to the
payment of dividends or rights on liquidation, dissolution or winding
up of the Corporation, junior to the shares of any authorized class of
Preferred Stock.
(B) Dividends on outstanding shares of Class A
Preferred Stock shall be declared and paid, or set apart for payment,
before any dividends shall be declared and paid, or set apart for
payment, on any class of common stock with respect to the same dividend
period. It the stated dividends on the shares of all series of Class A
Preferred Stock are not paid in full, the shares of all series of such
class shall share ratably in the payment of dividends including
accumulation, if any, in accordance with the sums which would be
payable on such shares if all dividends were declared and paid in full.
(C) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders
of shares of each series of Class A Preferred Stock then outstanding
shall be entitled to receive out of the assets of the Corporation,
before any distribution or payment shall be made to the holders of any
class of common stock, an amount equal to the stated value of the stock
plus, in respect of each share with respect to which dividends are
cumulative, a sum computed at the dividend rate provided for in the
Certificate of Incorporation from and after the date on which dividends
on such shares became cumulative to and including the date fixed for
such payment, less the aggregate of the dividends theretofore paid
thereon, but computed without interest. If the amounts payable on
liquidation in respect to the shares of all series of Class A Preferred
Stock are not paid in full, the shares of all series of such class
shall share ratably in any distribution of assets other than by way of
dividends in accordance with the sums which would be payable in such
distribution if all sums payable were discharged in full. If such
payment shall have been made in full to the holders of all shares of
Class A Preferred Stock on voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the remaining assets of
the Corporation shall be distributed among the holders of each class of
common stock pro rata in accordance with their respective holdings. For
the purpose of this paragraph, a consolidation or merger of the
Corporation with one or more other corporations shall not be deemed to
be a liquidation or winding up of the Corporation.
(D) First Series of Class A Preferred Stock. The
first series of 1,000,000 shares of Class A Preferred Stock shall be
designated Ten Percent (10%) Cumulative Convertible Voting Preferred
Stock--Series A, $0.25 stated value (hereinafter called "10% Voting
Preferred Stock"), and shall have the following rights, preferences and
limitations:
(i) Dividends. The holders of the 10% Voting
Preferred Stock shall be entitled to receive, when and as declared by
the Board of Directors, but only out of surplus legally available for
the payment of dividends, cumulative cash dividends at the rate of
$.025 per share per annum, and no more, payable on the first days of
January and July, commencing January l, 1984. Such dividends shall be
payable after all past and current dividends on the Six Percent (6%)
Voting Cumulative Preferred Stock and the Preferred Stock Without Par
Value have been declared and paid, or a sum sufficient therefor has
been set aside for that purpose, and before any dividends (other than a
stock dividend in shares of the same class of stock) on any class of
common stock shall be paid or set apart for payment or any shares of
such stock shall be acquired for consideration. Dividends shall be
cumulative from and after the date of issue of such shares, but any
arrearages in payment shall not bear interest.
(ii) Redemption. Provided that dividends on the
Six Percent (6%) Voting Cumulative Preferred Stock and the Preferred
Stock Without Par Value have been paid or a sum set aside for payment,
the Corporation, at the option of the Board of Directors, may redeem
all or any part of the 10% Voting Preferred Stock at any time
outstanding, at any time or from time to time, upon notice duly given
as hereinafter provided for an amount in respect of each share to be
redeemed equal to the sum of $0.25 and an amount computed at the annual
rate of $.025 per annum per share from and after the date on which
dividends on such share became cumulative to and including the date
fixed for such redemption, less the aggregate of the dividends
theretofore and on such redemption date paid, but computed without
interest.
Notice of every such redemption of 10% Voting Preferred Stock
shall be mailed at least thirty (30) days prior to the date fixed for
such redemption to the holders of record of shares so to be redeemed at
their respective addresses as the same shall appear on the books of the
Corporation. In case of redemption of a part only of the 10% Voting
Preferred Stock at the time outstanding, the shares to be redeemed
shall be selected in such manner as the Board of Directors may
determine, whether by lot or by pro rata redemption or by selection of
particular shares, and the proceedings and actions of the Board of
Directors in this connection shall not be subject to attack except for
fraud.
(iii) Voting. The holders of 10% Voting Preferred
Stock shall be entitled to one vote for each share of such stock on all
questions presented to the stockholders of the Corporation.
(iv) Conversion. The holders of 10% Voting
Preferred Stock shall have the right, at their option, to convert such
shares into shares of common stock, $0.25 par value, at any time after
the issuance thereof, on and subject to the following terms and
conditions:
(a) The 10% Voting Preferred Stock shall be
convertible, at the office of the Corporation or at such other
office or offices, if any, as the Board of Directors may
designate, into fully paid and non-assessable shares of Class
A Common Stock and Class B Common Stock (calculated as to each
conversion to the nearest 1/10 of a share) at the conversion
rate, determined as hereinafter provided, in effect at the
time of conversion. The conversion rate shall be one (l) share
of Class A Common Stock and one (1) share of Class B Common
Stock for every twenty (20) shares of 10% Voting Preferred
Stock. In case the Corporation shall at any time subdivide its
outstanding shares of common stock into a greater number of
shares or shall pay in shares of common stock a dividend on
then outstanding shares of common stock, the number of shares
of common stock into which the 10% Voting Preferred Stock is
convertible shall be proportionately increased and,
conversely, in case the Corporation shall at any time combine
its outstanding shares of common stock into a smaller number
of shares, the number of shares of common stock into which the
10% Voting Preferred Stock is convertible shall be
proportionately reduced. If any capital reorganization or
reclassification of the capital stock of the Corporation, or
any consolidation or merger of the Corporation with another
corporation, shall be effected, the holder of 10% Voting
Preferred Stock shall thereafter be entitled upon the exercise
of conversion rights to receive the number and kind of shares
of stock, securities or assets which the holder would have
been entitled to receive in connection with such
reorganization, recapitalization, merger or consolidation if
he had been a holder of the number of shares of common stock
of the Corporation issuable upon the conversion of his 10%
Voting Preferred Stock immediately prior to the time such
reorganization, recapitalization, merger, or consolidation
became effective. No adjustment shall be made upon any
conversion on account of any dividends accrued on the shares
of 10% Voting Preferred Stock surrendered for conversion or on
account of any dividend on the shares of common stock issued
on such conversion.
(b) In order to convert shares of 10% Voting
Preferred Stock into shares of common stock, the holder
thereof shall surrender at the office of the Corporation the
certificate or certificates therefor, duly endorsed to the
Corporation or in blank, and give written notice at such
office that he elects to convert such shares of 10% Voting
Preferred Stock which shall be deemed to have been converted
as of the date (hereinafter called the "Conversion Date") of
the surrender of such shares for conversion as provided above,
and the person or persons entitled to receive the shares of
common stock issuable upon such conversion shall be treated
for all purposes as the record holder or holders of such
common stock on such date. As soon as practicable on or after
the Conversion Date, the Corporation will deliver at such
office a certificate or certificates for the number of full
shares of common stock issuable on such conversion, together
with cash in lieu of any fraction of a share, as hereinafter
provided, to the persons entitled to receive the same. In case
shares of 10% Voting Preferred Stock are called for
redemption, the right to convert such shares shall cease and
terminate at the close of business on the date fixed for
redemption, unless default shall have been made in the payment
of the redemption price.
(c) No fractional shares of common stock shall be
issued upon conversion, but the Corporation shall pay a cash
adjustment in respect of any fraction of a share which would
otherwise be issuable, in an amount equal to the same fraction
of the market price per share of common stock at the close of
business on the Conversion Date. The market price per share
shall be, (i) if traded on the over-the-counter market, the
mean between the closing bid and asked quotations, or (ii) if
traded on a national securities exchange, the closing sale
price, or (iii) if traded on both the over-the-counter market
and an exchange, the mean between the prices determined in
accordance with clauses (i) and (ii) of this sentence.
(E) Second Series of Class A Preferred Stock. The
second series of 400,000 shares of Class A Preferred Stock shall be
designated Ten Percent (10%) Cumulative Convertible Voting Preferred
Stock--Series B, $0.25 stated value (hereinafter called "Series B
Preferred Stock"), and shall have the following rights, preferences and
limitations:
(i) Dividends. The holders of the Series B
Preferred Stock shall be entitled to receive, when and as declared by
the Board of Directors, but only out of surplus legally available for
the payment of dividends, cumulative cash dividends at the rate of
$.025 per share per annum, and no more, payable on the first days of
January and July, commencing July 1, 1985. Such dividends shall be
payable after all past and current dividends on the Six Percent (6%)
Voting Cumulative Preferred Stock and the Preferred Stock Without Par
Value have been declared and paid, or a sum sufficient therefor has
been set aside for that purpose, and before any dividends (other than a
stock dividend in shares of the same class of stock) on any class of
common stock shall be paid or set apart for payment or any shares of
such stock shall be acquired for consideration. Dividends shall be
cumulative from and after the date of issue of such shares, but any
arrearages in payment shall not bear interest.
(ii) Redemption. Provided that dividends on the
Six Percent (6%) Voting Cumulative Preferred Stock and the Preferred
Stock without Par Value have been paid or a sum set aside for payment,
the Corporation, at the option of the Board of Directors, may redeem
all or any part of the Series B Preferred Stock at any time
outstanding, at any time or from time to time, upon notice duly given
as hereinafter provided for an amount in respect of each share to be
redeemed equal to the sum of $0.25; and an amount computed at the
annual rate of $.025 per annum per share from and after the date on
which dividends on such share became cumulative to and including the
date fixed for such redemption, less the aggregate of the dividends
theretofore and on such redemption date paid, but computed without
interest.
Notice of every such redemption of Series
B Preferred Stock shall be mailed at least thirty (30) days prior to
the date fixed for such redemption to the holders of record of shares
so to be redeemed at their respective addresses as the same shall
appear on the books of the Corporation. In case of redemption of a part
only of the Series B Preferred Stock at the time outstanding, the
shares to be redeemed shall be selected in such manner as the Board of
Directors may determine, whether by lot or by pro rata redemption or by
selection of particular shares, and the proceedings and actions of the
Board of Directors in this connection shall not be subject to attack
except for fraud.
(iii) Voting. The holders of Series B Preferred
Stock shall be entitled to one vote for each share of such stock in all
questions presented to the stockholders of the Corporation.
(iv) Conversion. The holders of Series B
Preferred Stock shall have the right, at their option, to convert such
shares into shares of common stock, $0.25 par value, at any time after
the issuance thereof, on and subject to the following terms and
conditions:
(a) The Series B Preferred Stock shall be
convertible, at the office of the Corporation or at such other
office or offices, if any, as the Board of Directors may
designate, into fully paid and non-assessable shares of Class
A Common Stock and Class B Common Stock (calculated as to each
conversion to the nearest 1/10 of a share) at the conversion
rate, determined as hereinafter provided, in effect at the
time of conversion. The conversion rate shall be one (1) share
of Class A Common Stock and one (1) share of Class B Common
Stock for every thirty (30) shares of Series B Preferred
Stock. In case the Corporation shall at any time subdivide its
outstanding shares of common stock into a greater number of
shares or shall pay in shares of common stock a dividend on
then outstanding shares of common stock, the number of shares
of common stock into which the Series B Preferred Stock is
convertible shall be proportionately increased and,
conversely, in case the Corporation shall at any time combine
its outstanding shares of common stock into a smaller number
of shares, the number of shares of common stock into which the
Series B Preferred Stock is convertible shall be
proportionately reduced. If any capital reorganization or
reclassification of the capital stock of the Corporation, or
any consolidation or merger of the Corporation with another
corporation, shall be effected, the holder of Series B
Preferred Stock shall thereafter be entitled upon the exercise
of conversion rights to receive the number and kind of shares
of stock, securities or assets which the holder would have
been entitled to receive in connection with such
reorganization, recapitalization, merger or consolidation if
he had been a holder of the number of shares of common stock
of the Corporation issuable upon the conversion of his Series
B Preferred Stock immediately prior to the time such
reorganization, recapitalization, merger, or consolidation
became effective. No adjustment shall be made upon any
conversion on account of any dividends accrued on the shares
of Series B Preferred Stock surrendered for conversion or on
account of any dividend on the shares of common stock issued
on such conversion.
(b) In order to convert shares of Series B Preferred
Stock into shares of common stock, the holder thereof shall
surrender at the office of the Corporation the certificate or
certificates therefor, duly endorsed to the Corporation or in
blank, and give written notice at such office that he elects
to convert such shares of Series B Preferred Stock which shall
be deemed to have been converted as of the date (hereinafter
called the "Conversion Date") of the surrender of such shares
for conversion as provided above, and the person or persons
entitled to receive the shares of common stock issuable upon
such conversion shall be treated for all purposes as the
record holder or holders of such common stock on such date. As
soon as practicable on or after the Conversion Date, the
Corporation will deliver at such office a certificate or
certificates for the number of full shares of common stock
issuable on such conversion, together with cash in lieu of any
fraction of a share, as hereinafter provided, to the persons
entitled to receive the same. In case shares of Series B
Preferred Stock are called for redemption, the right to
convert such shares shall cease and terminate at the close of
business on the date fixed for redemption, unless default
shall have been made in the payment of the redemption price.
(c) No fractional shares of common stock shall be
issued upon conversion, but the Corporation shall pay a cash
adjustment in respect of any fraction of a share which would
otherwise be issuable, in an amount equal to the same fraction
of the market price per share of common stock at the close of
business on the Conversion Date. The market price per share
shall be, (i) if traded on the over-the-counter market, the
mean between the closing bid and asked quotations, or (ii) if
traded on a national securities exchange, the closing sale
price, or (iii) if traded on both the over-the-counter market
and an exchange, the mean between the prices determined in
accordance with clauses (i) and (ii) of this sentence.
(e) Provisions Generally Applicable to Capital Stock.
(A) No holder of shares of the Capital Stock of any
class of the Corporation shall have any preemptive or preferential
right of subscription to any shares of any class of stock of the
Corporation, whether now or hereafter authorized, or to any obligations
convertible into stock of the Corporation, issued or sold, nor any
right of subscription to any thereof other than such, if any, as the
Board of Directors, in its discretion, may from time to time determine
and at such price as the Board of Directors may, from time to time,
fix; and any shares of stock or convertible obligations which the
Corporation may determine to offer for subscription to the holders of
stock may, as the Board of Directors shall determine, be offered to
holders of any class or classes of stock exclusively or to holders of
all classes of stock, and if offered to more than one class of stock,
in such proportions as between the said classes of stock as the Board
of Directors in its discretion may determine.
As used in this Section (e) the expression
"convertible obligations" shall include any notes, bonds or other
evidences of indebtedness to which are attached or with which are
issued warrants or other rights to purchase stock of the Corporation of
any class or classes; and the Board of Directors is hereby expressly
authorized, in its discretion, in connection with the issue of any
obligations or stock of the Corporation (but without intending hereby
to limit its general power as to do in any other cases) to grant rights
or options to purchase stock of the Corporation of any class upon such
terms and during such periods as the Board of Directors shall
determine, and to cause such rights or options to be evidenced by such
warrants or other instruments as it may deem advisable.
(B) The Board of Directors may authorize the purchase of
shares of Class A Common Stock or Class B Common Stock or any other
class of stock or any combination of classes without regard to
differences among the classes in price or other terms upon which such
shares may be purchased.
FOURTH: Upon the filing of this certificate by the Department of State,
the 2,796,555 issued shares and the 7,203,445 unissued shares of the Corporation
shall be changed into (1) 2,796,555 issued shares and 7,203,445 unissued shares
of Class A Common Stock and (2) 2,796,555 issued shares and 7,203,445 unissued
shares of Class B Common Stock at the rate of one share of Class A Common Stock
and one share of Class B Common Stock for each current outstanding share of
Common Stock.
FIFTH: Article 7 of the certificate of incorporation of the Corporation
is amended to change the office of the Corporation. To accomplish this, Article
7 of the certificate of incorporation is hereby amended to read in its entirety
as follows:
7. The office of the Corporation shall be located in
the Village of Pittsford, County of Monroe, New York, and the address
to which the Secretary of State shall mail a copy of process in any
action or proceeding against the Corporation that may be served upon
the Secretary of State is 1162 Pittsford-Victor Road, Pittsford, New
York 14534.
<PAGE>
SIXTH: The foregoing amendments of the certificate of incorporation
were authorized at a meeting of the Board of Directors, followed by the votes
cast in person or by proxy of the holders of record of a majority of the
outstanding shares entitled to vote at the annual shareholders meeting of the
Corporation, except that the amendment contained in Article FIFTH hereof was not
voted upon by shareholders.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment this 5th day of August 1995 and affirm that the statements made herein
are true under penalty of perjury.
/s/ Kraig H. Kayser
---------------------
Kraig H. Kayser, President
/s/ Jeffrey L. Van Riper
-------------------------
Jeffrey L. Van Riper, Secretary
165714
<PAGE>
Exhibit No. 4
EXECUTION COUNTERPART
AMENDMENT NO. 1 TO NOTE AGREEMENT
This Amendment, entered into as of February 29, 1996, by and among
SENECA FOODS CORPORATION (the "Company"), THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA ("Prudential") and JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
("Hancock").
WHEREAS, the parties hereto have executed and delivered that certain
Note Agreement dated as of February 23, 1995 (the "Note Agreement");
WHEREAS, Prudential and Hancock are the holders of 100% of the Notes
issued under the Note Agreement; and
WHEREAS, the parties hereto wish to amend certain terms of 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:
Amendments.
Amendments of Paragraph 5 of the Note Agreement. Paragraph
5A(1) shall be amended by deleting the "and" at the end of clause (viii), adding
a new clause (ix) as follows and renumbering clause (ix) as clause (x):
"(ix) Within 10 days after the date as of which financial
information is required to be delivered pursuant to clause (i) of this paragraph
5A(1), a report as of the end of the Fiscal Quarter covered by such financial
information setting forth the Company's sales, for such Fiscal Quarter and for
the current year to date, and inventory, as of the end of such Fiscal Quarter,
separately for all of its Green Giant brand products and for all other products;
and"
Amendment of Paragraph 6A of the Note Agreement. Clauses (i),
(ii) and (iii) of paragraph 6A of the Note Agreement are amended in their
entirety to read as follows:
6A. Current Ratio and Interest Coverage. The Company
covenants that it will not permit at any time:
(i) the ratio of Current Assets to Current
Liabilities to be less than 1.25 to 1.0 for each Fiscal Quarter ending
September and December and 1.50 to 1.0 for all other Fiscal Quarters;
(ii) the Interest Coverage Ratio for its four
consecutive Fiscal Quarters most recently ended during any period specified
below to be less than the ratio set forth opposite such period:
December 31, 1995 though March 31, 1996 1.50 to 1
April 1, 1996 through June 29, 1996 1.60 to 1
June 30, 1996 through September 28, 1996 1.75 to 1
September 29, 1996 through December 28, 1996 1.85 to 1
December 29, 1996 through March 31, 1999 2.00 to 1
April 1, 1999 through March 31, 2001 2.20 to 1
April 1, 2001 and thereafter 2.40 to 1
(iii) at any time, the excess of Current Assets over Current
Liabilities during any period specified below to be less than the amount set
forth opposite such period:
December 31, 1995 through March 30, 1997 $80,000,000
March 31, 1997 through March 31, 1998 $90,000,000
April 1, 1998 through March 31, 1999 $100,000,000
April 1, 1999 and thereafter $110,000,000
Amendment of Paragraph 6C(2) of the Note Agreement. Clauses
(i) and (ii) of paragraph 6C(2) of the Note Agreement are amended in their
entirety to read as follows:
during any period specified below, the aggregate outstanding amount
of Consolidated Senior Funded Debt, whether Secured or Unsecured, exceeds an
aggregate amount equal to the applicable percentage of Consolidated Tangible
Gross Worth set forth below for any date of determination during such period:
December 31, 1995 though June 29, 1996 65%
June 30, 1996 through September 28, 1996 67%
September 29, 1996 through March 31, 1997 65%
April 1, 1997 through March 31, 1998 62%
April 1, 1998 through March 31, 1999 60%
April 1, 1999 through March 31, 2000 55%
April 1, 2000 and thereafter 50%
the aggregate outstanding amount of Consolidated Total Funded Debt
exceeds an aggregate amount equal to the applicable percentage of Consolidated
Tangible Gross Worth set forth below for any date of determination during such
period:
December 31, 1995 through March 31, 1996 80%
April 1, 1996 through September 30, 1996 82%
October 1, 1996 through March 31, 1997 80%
April 1, 1997 through March 31, 1998 78%
April 1, 1998 through March 31, 1999 76%
April 1, 1999 through March 31, 2000 73%
April 1, 2000 through March 31, 2001 70%
April 1, 2001 and thereafter 65%
; provided, however, that if after the date hereof the Company shall
reduce (by conversion to equity, optional prepayment or otherwise) its
Subordinated Debt by an aggregate amount equal to $20,000,000 or more (the "Sub
Debt Reduction"), the Company agrees to adjust the foregoing ratios to take into
account the Sub Debt Reduction to levels acceptable to the Required Holders,
such adjustment to occur as soon as possible and in no event later than 60 days
after the Sub Debt Reduction.
Amendments to Paragraph 10B of the Note Agreement. The
following definitions set forth in Paragraph 10B shall be amended in their
entirety to read as follows:
"`Change of Control Event' shall mean (i) the beneficial
ownership or acquisition by any Person or group of affiliated Persons (other
than directly or indirectly through the Wolcott or Kayser families) in any
transaction or series of related transactions of shares of the Company
representing more than 50% of the total number of votes which the Company's
shareholders (assuming full participation of all of the shareholders) shall be
entitled to cast in the election of the Board of Directors of the Company; and
(ii) the Wolcott and Kayser families shall cease to own shares, directly or
indirectly, or have the power to vote shares held by trusts of which all of the
trustees of such trusts are family members and such trustees have independent
discretion regarding the exercise of the associated voting rights, having in the
aggregate at least 25% of the total number of votes which the Company's
shareholders (assuming full participation of all of the shareholders) shall be
entitled to cast in the election of the Board of Directors of the Company.
`Consolidated EBITDA' shall mean, for any fiscal period of the
Company, an amount equal to (A) the sum for such fiscal period of Consolidated
Net Income (Loss) and, to the extent subtracted in determining such Consolidated
Net Income (Loss), provisions for (i) taxes based on income, (ii) Consolidated
Interest Expense, and (iii) depreciation and amortization expense minus (B) any
items of gain (or plus any items of loss) which were included in determining
such Consolidated Net Income (Loss) and were (x) not realized in the ordinary
course of business (whether or not classified as "ordinary" by generally
accepted accounting principles), or (y) the result of any sale of assets, or (z)
resulting from minority investments plus (C) $15,078,000 for the non-recurring
write-off that occurred in the second Fiscal Quarter of 1996 plus (D) $4,279,000
capital gain on the sale of the Peabody property located in Peabody,
Massachusetts that occurred in second fiscal quarter of 1996.
"Fiscal Quarter" shall mean the approximately 13-week period
ending on a Saturday near the close of each calendar quarter of each year as
established on an annual basis by the Company.
Conditions of Effectiveness. This Amendment shall become
effective when, and only when, Prudential and Hancock shall have received
counterparts of this Amendment 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
Amendment and the matters contemplated hereby and thereby, and (B) all documents
evidencing all governmental approvals, if any, with respect to this Amendment
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 Amendment on behalf of the Company and any other documents to be
delivered by the Company hereunder.
Payment in full of the modification fee of _ of 1% of the outstanding
principal amount of the Notes owed to Prudential and Hancock.
Such other documents, instruments, approvals or opinions as
Prudential or Hancock may reasonably request; and
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, 1995 other than as reported by the Company in its
quarterly reports on Form 10-Q filed with the Securities and Exchange Commission
for quarterly periods subsequent to March 31, 1995; 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
Amendment is within its corporate powers, have been duly authorized by all
necessary corporate action and do not contravene (A) its charter or by-laws, (B)
law or (C) 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 Amendment, 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 Amendment 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 as amended by this Amendment.
Miscellaneous.
Reference to and Effect on the Note Agreement. Upon the
effectiveness of this Amendment, on and after the date hereof each reference in
the Note Agreement to "this Agreement", "hereunder", "hereof" or words of like
import referring to the Note Agreement, and each reference in any other document
to "the Note Agreement", "thereunder", "thereof" or words of like import
referring to the Note Agreement, shall mean and be a reference to the Note
Agreement, as amended hereby.
Except as specifically amended 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.
The execution, delivery and effectiveness of this Amendment
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 Amendment, 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
Amendment, including, without limitation, counsel fees and expenses in
connection with the enforcement of rights under this paragraph 4B.
Execution in Counterparts. This Amendment 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 Amendment 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 Amendment 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 and 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>
<TABLE>
Exhibit 13
Five Year Selected Financial Data
Summary of Operations and Financial Condition
<CAPTION>
(Eight Months)
Years ended March 31 and July 31, 1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
(In thousands of dollars, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 507,988 $ 234,073 $ 290,185 $ 257,402 $ 279,708 $279,973
Operating earnings (before Corporate
interest and administrative expense) $ 16,418 $ 11,380 $ 18,251 $ 10,029 $ 13,122 $ 24,126
Earnings (loss) from continuing
operations before extraordinary item and
cumulative effect of accounting change (10,147) 1,321 5,274 1,293 (157) 6,854
Earnings from discontinued operations -- -- 90 965 1,663 651
Gain on the sale of discontinued operations -- -- 2,273 -- -- --
Earnings (loss) before extraordinary item and
cumulative effect of accounting change (10,147) 1,321 7,637 2,258 1,506 7,505
Extraordinary loss -- -- (606) -- (467) --
Cumulative effect of accounting change -- -- 2,006 -- -- --
Net earnings (loss) (10,147) 1,321 9,037 2,258 1,039 7,505
Earnings (loss) from continuing
operations per common share $ (1.81) $ .23 $ .91 $ .21 $ (.03) $ 1.10
Earnings (loss) per common share before
extraordinary item and cumulative
effect of accounting change (1.81) .23 1.31 .36 .24 1.21
Net earnings (loss) per common share (1.81) .23 1.55 .36 .16 1.21
Working capital $ 108,761 $ 136,342 $ 66,129 $ 90,005 $ 85,059 $ 85,860
Inventories 229,759 138,113 98,202 88,181 94,718 100,405
Net property, plant, and equipment 222,720 179,718 78,216 74,089 81,718 82,754
Total assets 523,859 385,502 204,899 208,733 214,223 219,227
Long-term debt and capital lease
obligations 226,574 221,480 51,476 72,556 77,614 79,938
Stockholders' equity 90,939 90,821 88,620 84,698 81,090 81,912
Additions to property, plant, and equipment $ 67,897 $ 26,966 $ 9,384 $ 1,723 $ 8,702 $ 17,167
Interest expense, net 28,157 6,296 6,046 5,834 10,186 9,289
Net earnings/average equity (11.2) % 1.5% 10.4 % 2.7% 1.3 % 9.6%
Continuing earnings before taxes/sales (3.0) % 0.9% 2.8 % 0.2% (0.1)% 4.0%
Net earnings/sales (2.0) % 0.6% 3.1 % 0.9% 0.4 % 2.7%
Long-term debt/equity 249 % 244% 58 % 86% 96 % 98%
Current ratio 1.6:1 3.2:1 2.2:1 3.4:1 3.0:1 3.0:1
Common stockholder's equity per share $ 15.30 $ 16.23 $ 15.83 $ 13.79 $ 13.09 $ 13.21
Class A National Market System
closing price range 20-15 -- -- -- -- --
Class B National Market System
closing price range 22-16 17 3/4-10 1/2 11 3/8-7 3/4 8 3/16-7 3/8 10 5/8-7 5/8 12 5/8-10
Common cash dividends declared per share -- -- -- -- -- --
Price earnings ratio NM 74.5x 6.9x 21.5x 48.4x 8.3x
<FN>
1995 represents eight months ended March 31.
1995-1991 have been restated to reflect the Company's change from the LIFO
inventory valuation method to the FIFO inventory valuation method and to reflect
the stock spilt in the form of a dividend.
NM - not meaningful.
</FN>
</TABLE>
<PAGE>
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 immediately
prior to the next pack season. 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 December 1995 the Company sold its Peabody, Massachusetts facility for
cash resulting in net cash proceeds of $6.3 million and a gain of $4.3 million
before income tax expense. The Company had leased this facility to a third
party. In addition, during September 1995 the Company entered into a sale and
leaseback transaction whereby three of its wastewater facilities in New York
State were sold to the Wayne County Water and Sewer Authority for net proceeds
of $9.3 million.
During February 1995 the Company acquired certain assets (see Acquisitions, note
12) of the Green Giant Division of The Pillsbury Company (referred to as
"Pillsbury"), a subsidiary of Grand Metropolitan Incorporated. Under an Alliance
Agreement concurrently executed by the Company, Pillsbury and Grand Metropolitan
Incorporated, Pillsbury will continue to be responsible for all of the sales,
marketing and customer service functions for the Green Giant brand, while the
Company will handle vegetable processing and canning operations. Pillsbury
continues to own all the trademark rights to the Green Giant brand and its
proprietary seed varieties. The assets acquired included certain raw material
and supplies inventory and six manufacturing facilities located in the
Midwestern and Northwestern United States. The purchase price of $86.1 million
was funded by a subordinated note issued by the Company for $73.0 million and
the balance was funded out of working capital. This subordinated note decreased
$6.0 million in 1996 as a result of an agreement reached with Pillsbury to
convert that amount to the Company's Class A Common Stock. Such conversion was
completed in March 1996. The subordinated note is expected to increase
approximately $8.0 million in 1997 due to the addition of capital projects that
Pillsbury has completed and green bean processing equipment acquired from
Pillsbury which is being transferred to the Company.
In conjunction with this acquisition, the Company entered into a revolving
credit facility for up to $150.0 million from a syndicate of eleven banks. In
addition, the Company issued two new senior debt notes. The first was a $75.0
million unsecured note issued to The Prudential Insurance Company of America,
with repayment due beginning in March 1998, a final maturity date of February
2005, and an interest rate of 10.78% (see Long-Term Debt, note 4). The second
was a $50.0 million unsecured note issued to John Hancock Mutual Life Insurance
Company, with repayment due beginning in March 2001, a final maturity of January
2009, and an interest rate of 10.81%. The proceeds of these two notes were used
to finance or replenish working capital for the following: 1) capital
expenditures of $50.0 million related to the Alliance Agreement with Pillsbury;
2) repayment of two notes due an insurance company, one repaid in July 1994 for
$13.8 million, the other repaid when the new debt was issued for $26.6 million;
3) three small acquisitions made over the previous fifteen months totaling $15.6
million; and 4) the balance, $19.0 million, for capital expenditures made over
the previous three years.
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 from working
capital (see below) and current operations. During 1994 and 1993 the Company had
no new long-term financing.
As mentioned above, during 1995 the Company entered into an unsecured revolving
credit agreement for up to $150.0 million. Previously, the Company maintained
uncommitted lines of credit. The peak borrowings reached $144.2 million during
1996. Credit lines provide for interest rate options based on Prime, Eurodollar,
or Money Market. There were $113.0 million of borrowings outstanding under these
lines at the end of 1996, $1.6 million at the end of 1994, and none at the end
of 1995 and 1993.
The decrease in cash and short-term investments of $6.6 million over the three
and two-thirds year period ended in 1996 was primarily due to Green Giant
acquisition of $86.1 million, the debt prepayments totaling $40.4 million; three
small acquisitions totaling $15.6 million; the common stock retirement of $5.1
million; capital additions of $67.9 million, $27.0 million, $9.4 million, and
$1.7 million, in 1996, 1995, 1994, and 1993, respectively; and smaller items not
identified. This was partially offset by the proceeds of the four new long-term
debt issues totaling $207.3 million; 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.
<PAGE>
The 1996 capital expenditures of $67.9 million are substantially due to a major
capital expansion, which began in 1995, integrated six of Pillsbury's Green
Giant vegetable processing plants and significantly increased the Company's own
production capabilities to accommodate the production of four Pillsbury plants
that were concurrently closed. This capital expansion was originally expected to
be $50.0 million, but to meet our ambitious goals, an additional $25.0 million
was spent on this project, primarily in our New York State operations in order
to meet operational needs of the Alliance. The 1995 capital expenditures of
$27.0 million largely reflect spending related to the Alliance with Pillsbury as
mentioned above. During 1994 capital expenditures were higher than both 1993 and
1992. During 1995 the Company began installation of a green bean processing line
in the Eastern Division, cold storage facilities in the Central Division in the
midwest and northwest, and a frozen vegetable processing expansion in the
Central Division. During 1994 the Company upgraded its vegetable processing and
juice bottling equipment in the Eastern Division.
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.
Subsequent to the 1996 year-end, the Company sold its investment in Moog Inc.
Class A Common Stock back to Moog which generated $12.9 million in net cash
proceeds. In addition, besides the proceeds from the sale of the Peabody,
Massachusetts facility in 1996 mentioned above for $6.3 million, the Company has
entered into an agreement to sell its Clifton Park, New York warehouse later in
1997, which will generate an additional $2.5 million in net cash proceeds.
Results of Operations
During 1995, the Company changed its fiscal year-end to March 31 from July 31.
With the acquisition of the Green Giant plants, vegetables now represent a
substantial portion of the Company's business. The July year-end fell in the
middle of the pack season for certain vegetable commodities while March 31 is
before the pack season begins.
Net sales for 1996 were $508.0 million which includes $152.0 million of sales to
Pillsbury under the Alliance. If 1996 net sales are compared with the last full
year sales (1994), the increase for the two year period is 22.7% excluding the
effect of the Alliance. The Company's sales were $234.1 million in the eight
month transition period ended 1995. It is not appropriate to annualize this
amount since vegetables tend to be sold on a more seasonal basis. A full year's
sales in 1995 would have shown an increase over 1994. Sales increased by 12.7%
in 1994 and decreased 8.0% in 1993.
In 1996 vegetable unit sales were lower due to a less than budget pack. Unit
vegetable selling prices dropped in 1996, while apple pricing rose due to the
world-wide shortage of processing apples. In 1995 vegetable unit sales were
sharply higher due to the industry-wide large packs. Unit selling prices were
down which partially offset the vegetable dollar sales increases due to volume.
The three small acquisitions (one in 1995 and two in 1994) also contributed to
the increase (see Acquisitions, note 12). 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 12). 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.
The 1996 results include a non-recurring charge of $15.1 million, before income
tax benefit, due to a combination of start-up costs related to the Pillsbury
Alliance and severe drought conditions in New York State throughout the entire
summer. The Company undertook an ambitious capital expenditure program related
to the Pillsbury Alliance. In the relatively short time between the February
1995 closing of the Pillsbury Alliance and the beginning of the 1995 vegetable
pack, 37 separate major capital projects needed to be completed. There were some
unforeseen problems related to a few of these projects, mostly in the New York
plants. Some of the used equipment transferred from the closed plants had
operating difficulties and were not always easily repaired, thus causing
downtime. Therefore, plant throughput and yields were poor at some plants
resulting in unfavorable manufacturing variances. The problems were magnified
when the drought and the hot weather conditions forced the uneven timing of
maturities of vegetables.
In 1996 earnings decreased for the following reasons: 1) the $15.1 million
non-recurring charge detailed above, 2) higher apple cost of product sold due to
a world-wide shortage of processing apples, and 3) lower selling prices on
vegetables due to an ongoing industry oversupply. In 1995 earnings decreased
due, in part, to lower selling prices caused by an industry-wide oversupply of
processed vegetables. 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
product 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 6). 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 of some Industrial Revenue Bonds and, 4)
the $1.7 million of interest income from the Internal Revenue Service (see
Income Taxes, note 6).
<PAGE>
In 1996, the Company changed its inventory valuation method from the lower of
cost; last-in, first-out; or market to the lower of cost; first-in, first-out;
or market. The major reason for changing to the FIFO method is because, the
majority of the Company's production and inventories are designated for sale to
Pillsbury (under the Alliance Agreement) at prices based upon FIFO cost of
production by pack year. In addition, the increase in the Company's production
volume resulting from the Alliance Agreement, and other factors, has caused a
reduction in the overhead cost per unit of the Company's other production, thus
changing the basic cost structure of the Company's non-Pillsbury production. The
change has been applied retroactively by restating the financial statements of
prior years (see Summary of Significant Accounting Policies, note 1).
In general, inflation played a relatively small role in the operating results
and cash flows of 1996, 1995, 1994 and 1993 since the Company depreciates its
fixed assets under accelerated depreciation methods for tax purposes.
Accounting for Impairment of Long-Lived Assets - SFAS 121
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
must be adopted by the Company in 1997. The standard requires that impairment
losses be recognized when the carrying value of an asset exceeds its fair value.
The Company regularly assesses all of its long-lived assets for impairment and,
therefore, does not believe the adoption of the standard will have a material
effect on its financial position or results of operations.
<PAGE>
<TABLE>
Consolidated Statements of Net Earnings
- --------------------------------------------------------------------------------------------------------
Seneca Foods Corporation and Subsidiaries
<CAPTION>
(Eight Months)
Years ended March 31 and July 31, 1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
(In thousands of dollars, except share amounts)
Revenue:
Net sales $ 507,988 $ 234,073 $ 290,185 $ 257,402
Other income (Note 13) 4,271 -- -- --
------- ------- ------- -------
512,259 234,073 290,185 257,402
Costs and expenses:
Cost of product sold 452,584 202,068 247,261 224,957
Selling, general, and administrative expense 31,640 23,620 28,824 26,166
Interest expense, net of interest income of $180,
$116, $528, and $1,865, respectively (Note 6) 28,157 6,296 6,046 5,834
Non-recurring charge (Note 14) 15,078 -- -- --
------- ------- ------- -------
527,459 231,984 282,131 256,957
Earnings (loss) from continuing operations before
income taxes, extraordinary item and cumulative
effect of accounting change (15,200) 2,089 8,054 445
Income taxes (Note 6) (5,053) 768 2,780 (848)
------- ----- ----- -----
Earnings (loss) from continuing operations before
extraordinary item and cumulative effect of
accounting change (10,147) 1,321 5,274 1,293
Earnings from discontinued operations, less
applicable income taxes of $46 and $591
(Note 10) -- -- 90 965
Gain on the sale of discontinued operations, less
applicable income taxes of $1,171 (Note 10) -- -- 2,273 --
Extraordinary loss on early extinguishment of debt,
less applicable income tax benefit of $312 -- -- (606) --
Cumulative effect of accounting change (Note 6) -- -- 2,006 --
------- ------ ------ -----
Net earnings (loss) $ (10,147) $ 1,321 $ 9,037 $ 2,258
======= ====== ====== =====
Earnings (loss) from continuing operations
per common share $ (1.81) $ .23 $ .91
$ .21
Earnings from discontinued operations per
common share -- -- .01 .15
Gain on the sale of discontinued operations
per common share -- -- .39 --
Extraordinary loss on early extinguishment
of debt per common share -- -- (.11) --
Cumulative effect of accounting change per
common share -- -- .35 --
----- ------ ----- ----
Net earnings (loss) per common share $ (1.81) $ .23 $ 1.55 $ .36
======== ======= ======== =======
Weighted average shares outstanding 5,621,991 5,593,110 5,797,726 6,170,666
========= ========= ========= =========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets
Seneca Foods Corporation and Subsidiaries
<CAPTION>
March 31 and July 31, 1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Assets
Current Assets:
Cash and short-term investments $ 1,297 $ 26,538 $ 2,325
Common Stock of Moog Inc. (Note 2) 12,863 -- --
Accounts receivable, less allowance for doubtful accounts
of $165, $227, and $183, respectively 51,118 32,601 18,651
Inventories:
Finished products 138,953 70,322 52,022
In process 63,730 19,531 17,980
Raw materials and supplies 27,076 48,260 28,200
Refundable income taxes (Note 6) 3,503 -- 890
Deferred tax asset (Note 6) 53 -- --
Prepaid expenses 1,041 801 343
------- ------- -------
Total Current Assets 299,634 198,053 120,411
Common Stock of Moog Inc. (Note 2) 1,048 7,494 6,079
Other Assets 457 237 193
Property, Plant, and Equipment (Note 5):
Land 4,832 7,810 4,714
Buildings 92,283 89,298 51,462
Equipment 251,859 189,545 122,865
------- ------- -------
348,974 286,653 179,041
Less accumulated depreciation and amortization 126,254 106,935 100,825
------- ------- -------
Net Property, Plant, and Equipment 222,720 179,718 78,216
------- ------- -------
Total Assets $ 523,859 $ 385,502 $ 204,899
======= ======= =======
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable (Note 3) $ 113,000 $ -- $ 1,600
Accounts payable 48,930 36,089 31,829
Accrued expenses 28,253 19,599 13,541
Current portion of long-term debt and capital lease obligations 690 5,594 6,349
Deferred tax liability (Note 6) -- 304 963
Income taxes (Note 6) -- 125 --
------- ------- -------
Total Current Liabilities 190,873 61,711 54,282
Long-Term Debt (Note 4) 216,928 220,677 50,619
Capital Lease Obligations (Note 5) 9,646 803 857
Deferred Gain (Note 5) 4,059 -- --
Deferred Income Taxes (Note 6) 11,414 11,490 10,521
Commitments (Note 5) -- -- --
------- ------- -------
Total Liabilities 432,920 294,681 116,279
Stockholders' Equity (Notes 4 and 7):
Preferred stock 70 70 70
Common stock 2,666 1,880 1,880
Total Capital Stock 2,736 1,950 1,950
Additional paid-in capital 5,913 -- --
Net unrealized gain on available-for-sale
securities (Note 2) 5,169 892 --
Retained earnings 77,121 87,979 86,670
------- ------- -------
Total Stockholders' Equity 90,939 90,821 88,620
------- ------- -------
Total Liabilities and Stockholders' Equity $ 523,859 $ 385,502 $ 204,899
======= ======= =======
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
- ---------------------------------------------------------------------------------------------------------
Seneca Foods Corporation and Subsidiaries
<CAPTION>
(Eight Months)
Years ended March 31 and July 31, 1996 1995 1994 1993
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (10,147) $ 1,321 $ 9,037 $ 2,258
Adjustments to reconcile net earnings (loss) to net cash provided (used) by
operations:
Depreciation and amortization 23,563 6,773 9,253 9,270
Deferred income taxes (2,215) 446 (606) 661
Gain on the sale of assets (4,271) -- (3,444) --
Cumulative effect of accounting change -- -- (2,006) --
Extraordinary losses on early extinguishment of debt -- -- 606 --
Changes in operating assets and liabilities:
Accounts receivable (18,517) (13,536) 4,142 822
Inventories (91,646) (25,256) (9,935) 6,537
Prepaid expenses (240) (458) (147) 22
Accounts payable, accrued expenses,
and other liabilities 21,376 3,275 16,117 (7,981)
Income taxes (3,985) 356 (494) 573
------- ------- ------- -------
Net cash provided (used) by operations (86,082) (27,079) 22,523 12,162
Cash flows from investing activities:
Additions to property, plant, and equipment (67,897) (26,966) (9,384) (1,723)
Proceeds from the sale of assets 8,904 -- 8,356 --
Disposals of property, plant, and equipment 876 527 866 82
Acquisitions -- (16,837) (11,670) --
------- ------- ------- ------
Net cash used in investing activities (58,117) (43,276) (11,832) (1,641)
Cash flows from financing activities:
Notes payable 113,000 (1,600) 1,600 --
Proceeds from issuance of long-term debt and
sale and leaseback 9,258 125,000 -- --
Payments of long-term debt and capital lease obligations (3,068) (28,776) (19,788) (2,345)
Other assets (220) (44) 21 (137)
Dividends paid (12) (12) (23) (23)
Common stock retirements -- -- (5,092) (384)
Extraordinary losses on early extinguishment of debt -- -- (606) --
------- ------- ------- -------
Net cash provided (used) in financing activities 118,958 94,568 (23,888) (2,889)
Net increase (decrease) in cash and short-term investments (25,241) 24,213 (13,197) 7,632
Cash and short-term investments, beginning of year 26,538 2,325 15,522 7,890
------- ------- ------- ------
Cash and short-term investments, end of year $ 1,297 $ 26,538 $ 2,325 $ 15,522
======= ====== ======= ======
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest $ 26,480 $ 5,543 $ 7,170 $ 9,400
Income taxes 1,147 (33) 4,785 1,076
Supplemental information on noncash investing and
financing activities:
The Company reached an agreement with Pillsbury to convert $6,000,000 of
its subordinated note into the Company's Class A Common Stock in 1996.
The Company issued a secured nonrecourse subordinated promissory note for
$73,025,000 in 1995 in conjunction with the acquisition of certain Green
Giant assets.
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
Seneca Foods Corporation and Subsidiaries
<CAPTION>
Preferred Stock
---------------
6% Class A 10%
Cumulative Par Cumulative Par Net Unrealized
Value $.25 Value $.025 Class A Class B Additional Gain (Loss) on
Callable at Par Convertible Common Stock Common Stock Paid-In Available-For- Retained
Voting Voting Par Value $.25 Par Value $.25 Capital Sale Securities Earnings
--------------- -------------- -------------- -------------- ---------- --------------- --------
(In thousands, except share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Shares authorized 200,000 1,400,000 10,000,000 10,000,000
======= ========= ========== ==========
Shares issued and
outstanding:
July 31, 1993 200,000 807,240 -- 6,137,332
======= ======= ========= =========
July 31, 1994 200,000 807,240 -- 5,593,110
======= ======= ========= =========
March 31, 1995 200,000 807,240 -- 5,593,110
======= ======= ========= =========
March 31, 1996 200,000 807,240 3,143,125 2,796,555
======= ======= ========= =========
Balance July 31, 1992 $50 $20 $-- $1,954 $3,535 $ (1,757) $ 77,288
Net earnings -- -- -- -- -- -- 2,258
Cash dividends paid
on preferred stock -- -- -- -- -- -- (23)
Retirement of
common stock -- -- -- (6) (378) -- --
Net unrealized gain -- -- -- -- -- 1,757 --
--- --- --- ------ ------ -------- -------
Balance July 31, 1993 50 20 -- 1,948 3,157 -- 79,523
Net earnings -- -- -- -- -- -- 9,037
Cash dividends paid
on preferred stock -- -- -- -- -- -- (23)
Retirement of
common stock -- -- -- (68) (3,157) -- (1,867)
--- --- --- ------ ------ -------- -------
Balance July 31, 1994 50 20 -- 1,880 -- -- 86,670
Net earnings -- -- -- -- -- -- 1,321
Cash dividends paid
on preferred stock -- -- -- -- -- -- (12)
Net unrealized gain -- -- -- -- -- 892 --
--- --- --- ------ ------ -------- -------
Balance March 31, 1995 50 20 -- 1,880 -- 892 87,979
Net loss -- -- -- -- -- -- (10,147)
Cash dividends paid
on preferred stock -- -- -- -- -- -- (12)
Debt to equity conversion -- -- 87 -- 5,913 -- --
Stock split in the form of
a dividend -- -- 699 -- -- -- (699)
Net unrealized gain -- -- -- -- -- 4,277 --
--- --- --- ------ ------ -------- -------
Balance March 31, 1996 $50 $20 $786 $1,880 $5,913 $ 5,169 $ 77,121
=== === ==== ====== ====== ======== =======
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
- --------------------------------------------------
Seneca Foods Corporation and Subsidiaries
1. Summary of Significant Accounting Policies
Nature of Operations - The Company conducts its business almost entirely in food
processing operating 28 plants and warehouses in nine states. The Company
markets branded and private label processed foods to retail customers and
institutional food distributors.
Accounting Period - In 1995, the Company changed its fiscal year-end to March
31. Fiscal 1995 is an eight-month transition period ended March 31, 1995.
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. During 1996, the
Company sold to Pillsbury $152,013,000 of canned and frozen vegetables under its
Alliance Agreement (see Acquisitions, note 12), which represented 30% of net
sales.
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; first-in, first-out
(FIFO); or market. During 1996, the Company changed its inventory valuation
method from the lower of cost last-in, first-out (LIFO); or market, to the lower
of cost; FIFO; or market. The change has been applied retroactively by restating
the financial statements for prior years. The major reason for changing to the
FIFO method is because, the majority of the Company's production and inventories
are designated for sale to Pillsbury (under the Alliance Agreement) at prices
based upon FIFO cost of production by pack year. In addition, the increase in
the Company's production volume resulting from the Alliance Agreement, and other
factors, has caused a reduction in the overhead cost per unit of the Company's
other production, thus changing the basic cost structure of the Company's
non-Pillsbury production. The cumulative effect of the change (reported as an
increase in retained earnings as of July 31, 1992) of $5,262,000 represents the
effect on net earnings of the reversal of the LIFO reserve at that date. The
effect of this accounting change on net earnings as previously reported follows:
<TABLE>
<CAPTION>
(Eight Months)
1995 1994 1993
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Earnings from continuing operations before
extraordinary item and cumulative effect
of accounting change as previously reported $1,184 $ 5,341 $ 3,153
Effect of accounting change, net of income taxes 137 (67) (1,860)
------ ------- --------
As restated $1,321 $ 5,274 $ 1,293
====== ======= ========
Per share amounts as previously reported $ .21 $ .92 $ .51
Effect of accounting change, net of income taxes .02 (.01) (.30)
------ ------- --------
As restated $ .23 $ .91 .21
====== ======= ========
Net earnings as previously reported $1,184 $ 9,104 $ 4,118
Effect of accounting change, net of income taxes 137 (67) (1,860)
------ ------- --------
As restated $1,321 $ 9,037 $ 2,258
====== ======= ========
Per share amounts as previously reported $ .21 $ 1.56 $ .66
Effect of accounting change, net of income taxes .02 (.01) (.30)
------ ------- --------
As restated $ .23 $ 1.55 $ .36
====== ======= ========
</TABLE>
<PAGE>
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. Prior year earnings per share
have been restated to reflect the stock split in the form of a dividend.
Use of Estimates in the Preparation of Financial Statements - The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, as well as the related
revenues and expenses during the reporting period. Actual amounts could differ
from those estimated. The consolidated financial statements include the
Company's estimate of its liability to Pillsbury under the Alliance Agreement
for inventory costing adjustments.
<PAGE>
Notes to Consolidated Financial Statements (continued)
2. Common Stock of Moog Inc.
The Company's investment in the common stock of Moog Inc. is carried at fair
value in 1996 and 1995 in accordance with Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". There were no realized gains or losses in 1996, 1995, 1994, or
1993, and gross unrealized holding gains of $7,832,000 at March 31, 1996,
$1,416,000 at March 31, 1995, and $708,000 at July 31, 1994. The Company owns
about 7% of the voting stock of Moog Inc. as of March 31, 1996. Subsequent to
March 31, 1996, the Company sold its class A common stock back to Moog which
resulted in a realized gain of $7,503,000, before income taxes, which will be
recognized as income in the first quarter of 1997. Accordingly, this portion of
the Company's investment has been classified as a current asset as of March 31,
1996.
<PAGE>
Notes to Consolidated Financial Statements (continued)
3. Lines of Credit
The Company obtains required short-term funds through bank borrowings. During
1995 the Company entered into an unsecured revolving credit agreement with
various banks. At March 31, 1996, the Company had $4,195,000 outstanding for
letters of credit and an unsecured revolving line of credit totaling
$150,000,000. The line is renewable in 1998 and provides for loans of varying
maturities at rate options based on Prime, Eurodollar, or Money Market.
Selected details are as follows:
<TABLE>
<CAPTION>
1996 1995 1994 1993
---- ---- ---- ----
(In thousands of dollars)
<S> <C> <C> <C>
Borrowings at year end:
Amount $113,000 $ -- $1,600 $--
Interest rate 7.69% -- 5.34% --
Maximum borrowings during the year $144,161 $54,140 $7,000 $38,300
Average borrowings during the year:
Amount $ 83,498 $20,467 $ 158 $14,703
Interest rate 7.66% 6.06% 4.53% 4.17%
</TABLE>
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.
<PAGE>
Notes to Consolidated Financial Statements (continued)
4. Long-Term Debt
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Note payable to insurance company, 10.78%, due through 2005 $ 75,000 $ 75,000 $ --
Secured nonrecourse subordinated promissory note, 8.00%, due through 2009 67,025 73,025 --
Note payable to insurance company, 10.81%, due through 2009 50,000 50,000 --
Note payable to insurance company, 9.78%, paid in full in 1995 -- -- 28,300
Industrial Revenue Development Bonds, variable rate or 8.21%, due through 2028 24,625 26,480 26,780
Other 547 1,657 1,723
------- ------- ------
217,197 226,162 56,803
Less current portion 269 5,485 6,184
------- ------- ------
$216,928 $220,677 $50,619
======= ======= ======
</TABLE>
Debt agreements provide various financial covenants including a provision that
the Company may pay dividends on stock only from consolidated net earnings
available for distribution. There were no earnings available for distribution as
of March 31, 1996. All provisions have been met at March 31, 1996.
During 1996, the Company reduced the amount owed on its secured nonrecourse
subordinated promissory note to The Pillsbury Company by converting the first
two payments totaling $6,000,000 into shares of Class A Common Stock.
The Company has four Industrial Revenue Bonds ("IRB's") totaling $22,630,000
which are backed by direct pay letters of credit.
Debt repayment requirements for the next five fiscal years are:
(In thousands)
1997 $ 269
1998 9,246
1999 11,221
2000 15,860
2001 15,860
<PAGE>
Notes to Consolidated Financial Statements (continued)
5. Leases
The Company leases a portion of its equipment and buildings. Capitalized leases
consist primarily of industrial development agency financing instruments and
limited obligation special revenue bonds which bear interest rates from 3.55% to
6.75%. Other leases include non-cancelable operating leases expiring at various
dates through 2016.
During 1996, the Company entered into a sale and leaseback transaction whereby
three of its wastewater facilities in New York State were sold for $9,258,000
and leased back under a 20-year lease agreement. This transaction produced a
gain of $4,178,000 which was deferred and is being amortized over the 20-year
lease period.
Leased assets under capital leases consist of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Land $ 160 $ 93 $ 93
Buildings 1,792 1,792 1,792
Equipment 10,385 1,194 1,167
------ ----- -----
12,337 3,079 3,052
Less accumulated amortization 2,555 1,821 1,791
------ ----- -----
$ 9,782 $1,258 $1,261
====== ===== =====
</TABLE>
The following is a schedule by year of minimum payments due under leases as of
March 31, 1996:
<TABLE>
<CAPTION>
Operating Capital
--------- -------
(In thousands)
<S> <C> <C>
Year ending March 31:
1997 $ 3,624 $ 849
1998 2,730 842
1999 2,133 843
2000 1,654 843
2001 1,297 843
2002-2016 2,237 10,487
------- ------
Total minimum payments required $13,675 14,707
=======
Less interest 4,640
------
Present value of minimum lease payments 10,067
Amount due within one year 421
------
Long-term capital lease obligations $ 9,646
======
</TABLE>
Aggregate rental expense in 1996, 1995, 1994, and 1993 was $7,043,000,
$2,031,000, $2,190,000, and $2,266,000, respectively.
<PAGE>
Notes to Consolidated Financial Statements (continued)
6. 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:
<TABLE>
<CAPTION>
(Eight Months)
1996 1995 1994 1993
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Current:
Federal $(3,282) $ 716 $2,970 $ 1,365
State 762 107 430 178
----- --- ----- -----
(2,520) 823 3,400 1,543
Deferred:
Federal (1,961) (123) 239 (1,752)
State (572) 68 46 (48)
----- --- ----- -----
(2,533) (55) 285 (1,800)
----- --- ----- -----
Total income taxes $(5,053) $ 768 $3,685 $ (257)
===== === ===== =====
</TABLE>
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.
At March 31, 1996, the Company has Research and Development Credits to
carryforward in the amount of $83,000 of which $31,000 will expire in the year
2010 and $52,000 will expire in 2011, and Alternative Minimum Tax Credits in the
amount of $1,176,000 to offset future years regular tax expense. State Net
Operating Loss carryforwards of approximately $4,661,000 are available to offset
future state tax expense, approximately one-half will expire in 2001 and the
balance will expire in 2012.
The cumulative effect of the adoption of SFAS No. 109 on August 1, 1993 was
$2,006,000. This change is reported in the 1994 Consolidated Statements of Net
Earnings. As permitted under this rule, prior years financial statements have
not been restated to apply the provisions of SFAS No. 109.
A reconciliation of the expected U.S. statutory rate to the effective rate
follows:
<TABLE>
<CAPTION>
1996 1995 1994 1993
---- ---- ----
<S> <C> <C> <C> <C>
Computed (expected tax rate) (34.0)% 34.0 % 34.0 % 34.0 %
State income taxes (net of
federal tax benefit) 0.8 6.2 2.4 4.3
Depreciation adjustment -- -- -- 0.2
IRS settlement -- -- -- (50.0)
Other -- (3.5) (1.9) (1.3)
---- ---- ---- ----
Effective tax rate (33.2)% 36.7 % 34.5 % (12.8)%
==== ==== ==== ====
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements (continued)
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities as of March 31, 1996, March 31, 1995 and
July 31, 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Deferred tax liabilities:
Basis and depreciation difference $10,728 $10,208 $ 9,946
LIFO 3,237 3,298 2,779
Moog investment 2,663 524 --
State taxes 618 758 789
Other -- -- 538
------ ------ ------
17,246 14,788 14,052
Deferred tax assets:
Inventory valuation 2,046 27 584
Future tax credits 1,254 720 --
Employee benefits 1,149 756 586
Pension 863 574 497
Insurance 395 381 466
Other 178 424 321
Sales tax -- 112 114
------ ------ -------
5,885 2,994 2,568
------ ------ ------
Deferred tax liability $11,361 $11,794 $11,484
====== ====== ======
</TABLE>
Net current deferred tax assets of $53,000 as of March 31, 1996 and net current
deferred tax liabilities of $304,000 and $963,000 as of March 31, 1995 and July
31, 1994, respectively, are recognized in the Consolidated Balance Sheets. Also
recognized is net non-current deferred tax liabilities of $11,414,000,
$11,490,000 and $10,521,000 for the respective years as of March 31, 1996, March
31, 1995 and July 31, 1994. Certain items in the prior year have been
reclassified to conform to current year classifications.
Prior to the change in accounting methods, the source of deferred tax items and
the corresponding tax effects during 1993 was as follows:
<TABLE>
<CAPTION>
1993
----
(In thousands)
<S> <C>
Accelerated depreciation:
Federal $ 275
State 19
Vacation accrual 5
Bad debts (92)
Inventory valuation (1,045)
Involuntary conversion (30)
Insurance accrual (157)
Promotion accrual 6
Prepayments:
Debt extinguishment 262
Lease 48
IRS settlement (1,000)
Other (91)
-----
Total deferred taxes $ (1,800)
=====
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements (continued)
7. 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 - A proposed amendment to the Company's Certificate of
Incorporation which effected a recapitalization of the Company by creating a
second class of common stock (which was distributed to all common shareholders
as a stock split in the form of a dividend) was adopted at the Annual Meeting
held on August 5, 1995. This recapitalization amendment (i) reclassified the
existing Common Stock as Class B Common Stock, (ii) authorized a new class of
10,000,000 shares designated as Class A Common Stock and (iii) established the
express terms of the Class A Common Stock and the Class B Common Stock. The
Class A Common Stock and the Class B Common Stock have substantially identical
rights with respect to any dividends or distributions of cash or property
declared on shares of common stock and rank equally as to the right to receive
proceeds on liquidation or dissolution of the Company after payment of the
Company's indebtedness and liquidation right to the holders of preferred shares.
However, holders of Class B Common Stock retain a full vote per share whereas
the holders of Class A Common Stock have voting rights of 1/20th of one vote per
share on all matters as to which shareholders of the Company are entitled to
vote.
In 1996, the Company reached an agreement with Pillsbury to convert $6,000,000
of its subordinated note into 346,570 shares of the Company's Class A Common
Stock.
Unissued shares of common stock reserved for conversion privileges were 33,695
at March 31, 1996 and 1995 and July 31, 1994 and 1993.
<PAGE>
Notes to Consolidated Financial Statements (continued)
8. Quarterly Results (Unaudited)
The following is a summary of the unaudited interim results of operations by
quarter:
<TABLE>
<CAPTION>
First Second Third Fourth
----- ------ ----- ------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Year ended March 31, 1996:
Net sales $81,945 $131,979 $201,032 $ 93,032
Gross margin 13,416 13,655 12,253 16,080
Net earnings (loss) 55 (10,349) 218 (71)
Net earnings (loss) per common share .01 (1.85) .04 (.01)
Year ended March 31, 1995:
Net sales $88,827 $ 87,935 $ 57,311 *$ NA
Gross margin 10,845 10,353 10,807* NA
Net earnings 733 159 429* NA
Net earnings per common share .13 .02 .08* NA
Year ended July 31, 1994:
Net sales $62,003 $ 83,780 $ 82,586 $61,816
Gross margin 8,618 12,426 11,893 9,987
Earnings from continuing operations 259 1,203 1,784 2,028
Earnings from continuing operations per share .04 .21 .31 .35
Earnings before extraordinary item and
accounting change 2,406 1,203 1,857 2,171
Earnings before extraordinary item and
accounting change per share .40 .21 .33 .37
Net earnings 4,412 1,203 1,857 1,565
Net earnings per common share .73 .21 .33 .28
<FN>
*Represents two months of activity.
</FN>
</TABLE>
The second quarter of 1996 results include a nonrecurring charge of $15,078,000
before income tax benefit, due to start-up costs related to the Pillsbury
Alliance (see Acquisitions, Note 12).
The 1995 and 1994 results have been restated to reflect the change in 1996 from
the LIFO inventory valuation method to the FIFO inventory valuation method and
to reflect the stock split in the form of a dividend.
Earnings for the fourth quarter (third quarter in 1995) 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.
<PAGE>
Notes to Consolidated Financial Statements (continued)
9. 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:
<TABLE>
<CAPTION>
(Eight Months)
1996 1995 1994 1993
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Service cost for benefits earned during the period $ 1,336 $ 484 $ 818 $ 838
Interest cost on projected benefit obligation 1,210 745 998 983
Actual return on plan assets (2,372) (2,474) (1,691) (655)
Net deferral of actuarial gains (losses) 860 1,593 673 (568)
Amortization of net unrecognized gain at
August 1, 1987 (276) (184) (276) (276)
Amortization of losses -- -- 144 --
Amortization of prior service cost 94 62 94 94
----- ----- ----- -----
Pension expense $ 852 $ 226 $ 760 $ 416
===== ===== ===== =====
</TABLE>
The following table summarizes the funded status and related amounts that are
recognized in the consolidated balance sheets:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested $ 12,227 $ 10,717 $ 11,214
Nonvested 683 562 689
------ ------ ------
Total $ 12,910 $ 11,279 $ 11,903
====== ====== ======
Plan assets at fair market value, primarily listed
stocks and fixed income securities $ 19,718 $ 18,165 $ 16,009
Projected benefit obligation 17,242 15,113 15,684
------ ------ ------
Plan assets in excess of projected
benefit obligation 2,476 3,052 325
Unrecognized gain at transition (4,371) (4,647) (4,832)
Unrecognized prior service cost 594 688 750
Unrecognized net (gain) loss (1,239) (781) 2,295
----- ----- -----
Accrued pension liability $ (2,540) $ (1,688) $ (1,462)
===== ===== =====
</TABLE>
The projected benefit obligation was determined using an assumed discount rate
of 8% and an assumed long-term salary increase rate of 5%. The assumed long-term
rate of return on plan assets was 8.5%. The Plan holds the Company's stock with
a fair market value of $2,463,000.
<PAGE>
Notes to Consolidated Financial Statements (continued)
10. 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 prior periods in the Consolidated Statements of Net
Earnings.
Net sales for the textile division were $2,246,000 in 1994 and $43,087,000 in
1993. 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.
<PAGE>
Notes to Consolidated Financial Statements (continued)
11. Fair Value of Financial Instruments
The carrying amounts and the estimated fair values of the Company's financial
instruments, as determined under SFAS No. 107, "Disclosures about Fair Value of
Financial Instruments," are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Carrying Estimated Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Amount Fair Value
-------- ---------- -------- ---------- -------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Long-term debt, including current portion $217,197 $226,015 $226,162 $226,371 $56,803 $60,074
Notes payable 113,000 113,000 - - 1,600 1,600
Common stock of Moog Inc. 13,911 13,911 7,494 7,494 6,079 6,787
</TABLE>
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.
Notes payable - The carrying amount approximates fair value due to the
short-term maturity of these instruments.
Common stock of Moog Inc. - Based on quoted market prices.
<PAGE>
Notes to Consolidated Financial Statements (continued)
12. Acquisitions
On February 10, 1995 the Company acquired certain assets of the Green Giant
Division of The Pillsbury Company (referred to as "Pillsbury"), a subsidiary of
Grand Metropolitan Incorporated. Under an Alliance Agreement concurrently
executed by the Company, Pillsbury and Grand Metropolitan Incorporated,
Pillsbury will continue to be responsible for all of the sales, marketing and
customer service functions for the Green Giant brand, while the Company will
handle vegetable processing and canning operations. Pillsbury continues to own
all the trademark rights to the Green Giant brand and its proprietary seed
varieties. The assets acquired include certain raw material and supplies
inventory and six manufacturing facilities located in the Midwestern and
Northwestern United States. The purchase price was based on the book value of
the assets acquired. The purchase price of $86,093,000 was funded by a secured
nonrecourse subordinated promissory note issued by the Company for $73,025,000
and the balance was funded out of working capital.
On August 17, 1994 the Company acquired the assets of M.C. Snack, Inc. of
Yakima, Washington, a snack food maker of apple chips. The purchase price was
$3,769,000 which was funded out of working capital.
On December 20, 1993 the Company acquired certain assets of ERLY Juice, Inc. and
WorldMark, Inc. The assets acquired include certain trademarks, inventory,
accounts receivable, and manufacturing facilities located in Eau Claire,
Michigan. Most of the products are sold under the TreeSweet brand. The purchase
price was $8,372,000 which was funded out of working capital.
The Company acquired the Wapato, Washington juice processing business of Sanofi
Bio-Industries, Inc. on November 30, 1993. The purchase price was $3,298,000
which was funded out of working capital.
All acquisitions 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.
<PAGE>
Notes to Consolidated Financial Statements (continued)
13. Other Income.
Other income in 1996 consisted of the gain on the sale of the Peabody,
Massachusetts warehouse totaling $4,271,000 before income taxes.
14. Non-Recurring Charge.
The 1996 operating results include a non-recurring 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 in New York State throughout
the entire summer. The Company undertook an ambitious capital expenditure
program related to the Pillsbury Alliance. In the relatively short time between
the February 1995 closing of the Pillsbury Alliance and the beginning of the
1995 vegetable pack, 37 separate major capital projects needed to be completed.
There were some unforeseen problems related to a few of these projects, mostly
in the New York plants. Some of the used equipment transferred from the closed
plants had operating difficulties and were not always easily repaired, thus
causing downtime. Throughput and yields were poor at some plants resulting in
unfavorable manufacturing variances. The problems were magnified when the
drought and the hot weather conditions forced the uneven timing of maturities of
vegetables.
<PAGE>
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 March 31, 1996, March 31, 1995 and July 31,
1994, and the related consolidated statements of net earnings, stockholders'
equity, and cash flows for the year ended March 31, 1996, the eight months ended
March 31, 1995 and for each of the two 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 March 31, 1996, March 31, 1995 and July 31, 1994, and the
results of their operations and their cash flows for the year ended March 31,
1996, the eight months ended March 31, 1995 and for each of the two years in the
period ended July 31, 1994 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, in fiscal 1996
the Company changed its method of accounting for inventories and, retroactively,
restated the 1995, 1994, and 1993 consolidated financial statements for the
change. Further, as discussed in Note 6 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.
DELOITTE & TOUCHE LLP
/s/Deloitte & Touche LLP
Rochester, New York
May 31, 1996
<PAGE>
===============================================================================
<PAGE>
===============================================================================
Shareholder Information
The Company's common stock is traded on NASDAQ National Market System. The 3.1
million of Class A outstanding shares and 2.8 million Class B outstanding shares
are owned by 475 and 470 shareholders of record, respectively. The high and low
prices of the Company's common stock during each quarter of the past three years
are shown below.
<TABLE>
<CAPTION>
Class A: 1996 1995 1994
---- ---- ----
Quarter High Low High Low High Low
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First $ -- $ -- $ -- $ -- $ -- $ --
Second 20.00 19.50 -- -- -- --
Third 19.75 15.00 -- -- -- --
Fourth 19.00 15.25 -- -- -- --
Class B: 1996 1995 1994
---- ---- ----
Quarter High Low High Low High Low
---- --- ---- --- ---- ---
First $ 17.88 $ 16.75 $ 12.25 $ 10.50 $ 9.75 $ 7.75
Second 22.00 17.25 17.50 11.75 10.00 9.25
Third 21.25 16.50 17.75 16.25 10.50 9.50
Fourth 20.00 16.00 NA NA 11.38 9.75
</TABLE>
The Company may pay dividends on stock only from consolidated net earnings
available for distribution which were none as of March 31, 1996. 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.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Commercial and Industrial Companies
Article 5 of Regulation S-X
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1297
<SECURITIES> 12863
<RECEIVABLES> 51283
<ALLOWANCES> 165
<INVENTORY> 229759
<CURRENT-ASSETS> 299634
<PP&E> 348974
<DEPRECIATION> 126254
<TOTAL-ASSETS> 523859
<CURRENT-LIABILITIES> 190873
<BONDS> 226574
0
70
<COMMON> 2666
<OTHER-SE> 88203
<TOTAL-LIABILITY-AND-EQUITY> 523859
<SALES> 507988
<TOTAL-REVENUES> 512259
<CGS> 452584
<TOTAL-COSTS> 452584
<OTHER-EXPENSES> 46718
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28157
<INCOME-PRETAX> (15200)
<INCOME-TAX> (5053)
<INCOME-CONTINUING> (10147)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10147)
<EPS-PRIMARY> (1.81)
<EPS-DILUTED> (1.78)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Commercial and Industrial Companies
Article 5 of Regulation S-X
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 26538
<SECURITIES> 0
<RECEIVABLES> 32828
<ALLOWANCES> 227
<INVENTORY> 138113
<CURRENT-ASSETS> 198053
<PP&E> 286653
<DEPRECIATION> 106935
<TOTAL-ASSETS> 385502
<CURRENT-LIABILITIES> 61711
<BONDS> 221480
0
70
<COMMON> 1950
<OTHER-SE> 88871
<TOTAL-LIABILITY-AND-EQUITY> 385502
<SALES> 234073
<TOTAL-REVENUES> 230073
<CGS> 202068
<TOTAL-COSTS> 202068
<OTHER-EXPENSES> 23620
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6296
<INCOME-PRETAX> 2089
<INCOME-TAX> 768
<INCOME-CONTINUING> 1321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1321
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Commercial and Industrial Companies
Article 5 of Regulation S-X
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-END> JUL-31-1994
<CASH> 2325
<SECURITIES> 0
<RECEIVABLES> 18834
<ALLOWANCES> 183
<INVENTORY> 98202
<CURRENT-ASSETS> 120411
<PP&E> 179041
<DEPRECIATION> 100825
<TOTAL-ASSETS> 204899
<CURRENT-LIABILITIES> 54282
<BONDS> 51476
0
70
<COMMON> 1950
<OTHER-SE> 86670
<TOTAL-LIABILITY-AND-EQUITY> 204899
<SALES> 290185
<TOTAL-REVENUES> 290185
<CGS> 247261
<TOTAL-COSTS> 247261
<OTHER-EXPENSES> 28824
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6046
<INCOME-PRETAX> 8054
<INCOME-TAX> 2780
<INCOME-CONTINUING> 5274
<DISCONTINUED> 2363
<EXTRAORDINARY> (606)
<CHANGES> 2006
<NET-INCOME> 9037
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 1.54
</TABLE>
