Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OF 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 28, 1997 Commission File Number 0-1989
Seneca Foods Corporation
(Exact name of registrant as specified in its charter)
New York 16-0733425
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
1162 Pittsford-Victor Road, Pittsford, New York 14534
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 716/385-9500
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Check mark indicates whether registrant (1) has filed all reports required to be
filed by Section 13 of 15(d) of the Securities Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
The number of shares outstanding of each of the issuer's classes of common stock
at the latest practical date are:
Class Shares Outstanding at July 31, 1997
Common Stock Class A, $.25 Par 3,143,125
Common Stock Class B, $.25 Par 2,796,555
<PAGE>
<TABLE>
PART I FINANCIAL INFORMATION
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands of Dollars)
<CAPTION>
6/28/97 3/31/97
------- -------
ASSETS
<S> <C> <C>
Current Assets:
Cash and Short-term Investments $ 1,152 $ 1,584
Accounts Receivable, Net 41,628 36,477
Inventories:
Finished Goods 135,147 75,898
Work in Process 26,246 35,373
Raw Materials 59,149 46,926
------- -------
220,542 158,197
Off-Season Reserve (Note 3) 33,660 -
Deferred Tax Asset (Net) 6,156 6,156
Refundable Income Taxes 683 -
Other Current Assets 5,347 4,432
-------------- ---------------
Total Current Assets 309,168 206,846
Property, Plant and Equipment, Net 231,119 207,439
Other Assets 2,064 1,738
-------------- ---------------
$542,351 $416,023
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 87,490 $ 18,000
Accounts Payable 67,857 24,435
Accrued Expenses 39,111 25,615
Income Taxes - 599
Current Portion of Long-Term Debt and Capital
Lease Obligations 9,469 9,465
--------------- ---------------
Total Current Liabilities 203,927 78,114
Long-Term Debt 214,911 214,848
Capital Lease Obligations 9,258 9,280
Deferred Income Taxes 15,911 15,797
Deferred Gain 4,187 4,248
10% Preferred Stock, Series A, Voting, Cumulative,
Convertible, $.025 Par Value Per Share 10 10
10% Preferred Stock, Series B, Voting, Cumulative,
Convertible, $.025 Par Value Per Share 10 10
6% Preferred Stock, Voting, Cumulative, $.25 Par Value 50 50
Common Stock 2,666 2,666
Paid in Capital 5,913 5,913
Net Unrealized Gain on Available-For-Sale Securities 664 435
Retained Earnings 84,844 84,652
--------------- ---------------
Stockholders' Equity 94,157 93,736
--------------- ---------------
$542,351 $416,023
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, except Share Data)
<CAPTION>
Three Months Ended
------------------
6/28/97 6/29/96
------- -------
<S> <C> <C>
Net Sales $ 105,078 $ 123,694
Other Income (See Notes) - 7,501
------------------ -----------------
105,078 131,195
Costs and Expenses:
Cost of Product Sold 90,381 109,406
Selling, General, and Administrative 7,929 6,584
Interest Expense 6,469 7,481
------------------ -----------------
Total Costs and Expenses 104,779 123,471
------------------ -----------------
Earnings Before Income Taxes 299 7,724
Income Taxes 107 2,897
------------------ -----------------
Net Earnings $ 192 $ 4,827
================== =================
Net Earnings Applicable to
Common Stock 192 4,827
Weighted Average Common
Shares Outstanding 5,939,680 5,939,680
Primary and Fully Diluted Earnings Per
Share of Common Stock (Exhibit II):
Net Earnings $ .03 $ .81
================== =================
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<CAPTION>
Three Months Ended
------------------
6/28/97 6/29/96
------- -------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Earnings $ 192 $ 4,827
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 6,785 6,374
Deferred Income Taxes - 697
Gain on the Sale - (7,501)
Changes in Working Capital:
Accounts Receivable (1,064) 14,878
Inventories (33,652) 17,157
Off-Season Reserve (33,660) (28,271)
Other Current Assets (760) 360
Income Taxes (1,282) 2,380
Accounts Payable and
Accrued Expenses 53,334 2,957
------------------ -----------------
Net Cash Provided (Used)
by Operations (10,107) 13,858
------------------ -----------------
Cash Flows From Investing Activities:
Acquisitions (53,672) -
Proceeds from the Sale of Moog Stock - 12,863
Additions to Property, Plant,
and Equipment (6,205) (6,195)
------------------ -----------------
Net Cash Provided (Used) in Investing
Activities (59,877) 6,668
------------------ -----------------
Cash Flows From Financing Activities:
Notes Payable 69,490 (15,000)
Long-Term Borrowing 106 230
Payments and Current Portion of Long-Term
Debt and Capital Lease Obligations (61) (85)
Other 17 40
Dividends - -
------------------ -----------------
Net Cash Provided (Used) in
Financing Activities 69,552 (14,815)
------------------ -----------------
Net Increase (Decrease) in Cash and Short-
Term Investments (432) 5,711
Cash and Short-Term Investments,
Beginning of Period 1,584 1,297
------------------ -----------------
Cash and Short-Term Investments,
End of Period $ 1,152 $ 7,008
================== ==================
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</FN>
</TABLE>
<PAGE>
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 28, 1997
1. Consolidated Condensed Financial Statements
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, which are normal
and recurring in nature, necessary to present fairly the financial
position of the Registrant as of June 28, 1997 and March 31, 1997 and
results of operations for the three month periods ended June 28, 1997
and June 29, 1996. All significant intercompany transactions and
accounts have been eliminated in consolidation. The March 31, 1997
balance sheet was derived from audited financial statements.
The results of operations for the three month periods ended June 28,
1997 and June 29, 1996 are not necessarily indicative of the results to
be expected for the full year.
The accounting policies followed by the Registrant are set forth in Note
to the Registrant's financial statements in the 1997 Seneca Foods
Corporation Annual Report and 10-K.
Other footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
condensed financial statements be read in conjunction with the financial
statements and notes included in the Registrant's March 31, 1997
financial report.
2. Primary earnings per share are based on the weighted average number of
common shares outstanding, as the effect of common stock equivalents is
immaterial. The difference between primary and fully diluted earnings
per share is immaterial.
3. Off-Season Reserve is the excess of absorbed expenses over incurred
expenses to date. The seasonal nature of the Registrant's Food Processing
business results in a timing difference between expenses (primarily
overhead expenses) incurred and absorbed into product cost. All
Off-Season Reserve balances are zero at fiscal year end.
4. On April 18, 1997 the Registrant acquired certain assets of the Aunt
Nellie's Farm Kitchens from the Pillsbury Company, an indirect subsidiary
of Grand Metropolitan plc, for approximately $24 million (referred to as
"Aunt Nellie's"). Aunt Nellie's produces, markets, and sells fruit and
vegetable products from plants in the Midwest. Its 1996 sales were
approximately $59 million. The Registrant purchased the plants,
inventories, accounts receivable, and trademarks of the business. Aunt
Nellie's includes facilities located in Clyman, Wisconsin; Covington,
Kentucky; and Buckley, Michigan. This acquisition was funded primarily
out of working capital.
<PAGE>
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 28, 1997
5. On May 5, 1997 the Registrant acquired certain assets of the Curtice
Burns Foods, Inc. ("Curtice Burns"), a wholly owned subsidiary of
Pro-Fac Cooperative, Inc., used in the canned vegetable business of
Curtice Burns. The 1996 sales of the acquired assets were approximately
$37 million. The Registrant purchased two plants, inventories, and
trademarks of the business. Assets purchased include a warehouse located
in LeRoy, New York and a processing plant located in Leicester, New
York.
In conjunction with the acquisition, the Registrant and Curtice Burns
entered into a long-term strategic alliance, combining their New York
agricultural departments into one organization, now managed by Curtice
Burns.
This acquisition was funded primarily out of working capital. A proposed
$15 million long-term debt financing to fund the long-term assets of
this acquisition and the Aunt Nellie's acquisition described above is
being negotiated by the Registrant.
The Registrant expects to consummate the financing sometime in August
1997.
6. The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if Aunt Nellie's and Curtice Burns
were acquired at the beginning of the periods presented:
Three Months Three Months
6/28/97 6/29/96
------------ ------------
Net Sales $111,995 $147,627
Net Earnings 184 3,872
Net Earnings per Share .03 .65
7. During the first quarter of the prior year, the Registrant sold its
investment in Moog, Inc. Class A Common Stock back to Moog. This
resulted in a Pre-Tax gain of $7,501,000.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION RESULTS OF OPERATIONS
June 28, 1997
Results of Operations:
Sales:
Sales reflect a decrease of 15.1% for the first three months versus 1996. The
lower sales, in large part, are due to lower canned vegetables quantities sold
under the Alliance with Pillsbury. Under this Alliance Net Sales were $6,918,000
for three months ended June 1997 versus $55,161,000 for the comparable period in
the previous year. Non-Alliance vegetable sales quantities were up 73.2% while
juice and fruit sales quantities were up 2.3%. The vegetable sales increase was
largely due to the acquisition of the Curtice Burns and Aunt Nellie's canned
vegetable businesses described above.
Costs and Expenses:
The following table shows cost and expenses as a percentage of sales:
Three Months Ended
------------------
6/28/97 6/29/96
------- -------
Cost of Product Sold 86.0% 88.5%
Selling 6.1 4.0
Administrative 1.4 1.3
Interest Expense 6.2 6.0
-----------------------
99.7% 99.8%
=======================
Lower Cost of Product Sold percentages (i.e. higher Gross Margins) and higher
Selling reflect, in part, substantially lower sales under the Pillsbury
Alliance, which are at low Gross Margins and have no Selling costs.
Income Taxes:
The effective tax rate used in fiscal 1997 is 36% and 1996 is 38%.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION RESULTS OF OPERATIONS
June 28, 1997
Financial Condition:
The financial condition of the Registrant is summarized in the following table
and explanatory review (In Thousands):
<TABLE>
<CAPTION>
For the Quarter For the Year
Ended June Ended March
---------- -----------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Working Capital Balance $105,241 $107,919 $128,732 $108,761
Quarter Change (23,491) (842) - -
Notes Payable 87,490 98,000 18,000 113,000
Long-Term Debt 224,169 224,973 224,128 226,574
Current Ratio 1.52:1 1.60:1 2.65:1 1.57:1
Inventory (Average) Turnover 1.9 2.1 3.5 2.0
</TABLE>
The change in the Working Capital for the quarter from the prior year is largely
due to the two acquisitions in the current year (see footnotes for details) and
proceeds from the sale of the Moog stock in the prior year quarter.
As part of the Alliance with Pillsbury (see 1997 Annual Report for details),
Pillsbury takes Green Giant inventory as it needs it or at least by the
take-or-pay date (varies by commodity).
At June 28, 1997, due to two acquisitions, the Registrant was not in
compliance with certain debt covenants related to its Revolving Credit Facility
and on a portion of its Long-Term Debt. The Registrant has received waivers for
the covenant violations. The Registrant has received a commitment letter to
amend certain debt covenants and extend the maturity of the Revolving Credit
Facility through June 30, 1999. If the new Revolving Credit Facility had been in
effect at June 28, the Registrant would have been in compliance with all its
provisions. The closing of the Revolving Credit Facility is not expected to
occur on approximately August 29, 1997.
See Consolidated Statements of Cash Flows for further details.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults on Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Registrant was
held on August 8, 1997 and the following were the voting
results: (1) Management's nominees for Director positions
were elected, and (2) a management proposal to ratify the
appointment of Deloitte & Touche L.L.P. as independent
auditors was adopted. A summary of the voting results
follows (In thousands):
<TABLE>
<CAPTION>
Proposal For Withheld Against Abstain Broker Non-Votes
-------- --- -------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Directors:
E. O. Gaylord 3,660 14
G. B. Humphreys 3,661 13
K. H. Kayser 3,661 13
Appointment of Auditors 3,663 7 4
Such other business 3,674
</TABLE>
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 - (11) Computation of earnings per share
(b) Exhibit 27 - (27) Financial Data Schedules
(c) Reports on Form 8-K - none during the quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Seneca Foods Corporation
(Registrant)
/s/Kraig H. Kayser
August 11, 1997 Kraig H. Kayser
President and
Chief Executive Officer
/s/Jeffrey L. Van Riper
August 11, 1997 Jeffrey L. Van Riper
Controller and
Chief Accounting Officer
<PAGE>
EXHIBIT 11
SENECA FOODS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In thousands except share data)
Three Months Ended
------------------
6/28/97 6/29/96
------- -------
Net Earnings Applicable to Common Stock:
Net Earnings $ 192 $ 4,827
Deduct Preferred Cash Dividends - -
----------------------------------
Net Earnings Applicable to
Common Stock $ 192 $ 4,827
==================================
Weighted Average Common
Shares Outstanding 5,939,680 5,939,680
Effect of Common Stock Equivalent - -
----------------------------------
Weighted Average Common Shares Outstanding
for Primary Earnings per Share 5,939,680 5,939,680
==================================
Primary and Fully Diluted
Earnings Per Share $ .03 $ .81
==================================
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Commercial and Industrial Companies
Article 5 of Regulation S-X
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-28-1997
<CASH> 1152
<SECURITIES> 0
<RECEIVABLES> 41835
<ALLOWANCES> 207
<INVENTORY> 220542
<CURRENT-ASSETS> 309168
<PP&E> 385822
<DEPRECIATION> 154703
<TOTAL-ASSETS> 542351
<CURRENT-LIABILITIES> 203927
<BONDS> 224169
0
70
<COMMON> 2666
<OTHER-SE> 91421
<TOTAL-LIABILITY-AND-EQUITY> 542351
<SALES> 105078
<TOTAL-REVENUES> 105078
<CGS> 90381
<TOTAL-COSTS> 90381
<OTHER-EXPENSES> 7929
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6469
<INCOME-PRETAX> 299
<INCOME-TAX> 192
<INCOME-CONTINUING> 192
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 192
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
<FN>
Other Expenses is Selling, General and Administrative Expenses
</FN>
</TABLE>
