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 December 27, 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 January 31, 1998
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>
12/27/97 3/31/97
-------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Short-term Investments $ 4,034 $ 1,584
Accounts Receivable, Net 51,518 36,477
Inventories:
Finished Goods 163,594 75,898
Work in Process 32,311 35,373
Raw Materials 38,178 46,926
------- -------
234,083 158,197
Off-Season Reserve (Note 3) (35,689) -
Deferred Tax Asset (Net) 6,156 6,156
Refundable Income Taxes 2,279 -
Other Current Assets 424 4,432
-------------- ---------------
Total Current Assets 262,805 206,846
Property, Plant and Equipment, Net 224,282 207,439
Other Assets 2,239 1,738
-------------- ---------------
$489,326 $416,023
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 30,740 $ 18,000
Accounts Payable 78,017 24,435
Accrued Expenses 19,608 25,615
Income Taxes - 599
Current Portion of Long-Term Debt and Capital
Lease Obligations 10,051 9,465
--------------- ---------------
Total Current Liabilities 138,416 78,114
Long-Term Debt 226,362 214,848
Capital Lease Obligations 8,857 9,280
Deferred Income Taxes 13,785 15,797
Other Long-Term Liabilities 8,770 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 754 435
Retained Earnings 83,733 84,652
--------------- ---------------
Stockholders' Equity 93,136 93,736
--------------- ---------------
$489,326 $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
12/27/97 12/28/96
-------- --------
<S> <C> <C>
Net Sales $ 275,863 $ 291,188
Other Income (See Notes) - -
------------------ -----------------
275,863 291,188
Costs and Expenses:
Cost of Product Sold 261,643 275,837
Selling, General, and Administrative 9,406 7,025
Interest Expense 6,752 7,496
------------------ -----------------
Total Costs and Expenses 277,801 290,358
------------------ -----------------
Earnings (Loss) Before Income Taxes (1,938) 830
Income Taxes (698) 471
------------------ -----------------
Net Earnings (Loss) $ (1,240) $ 359
================== =================
Net Earnings (Loss) Applicable to
Common Stock (1,246) 359
Weighted Average Common
Shares Outstanding 5,939,680 5,939,680
Basic and Diluted Earnings (Loss)
Per Share of Common Stock (Exhibit II):
Basic Net Earnings (Loss) $ (0.21) $ 0.06
================= =================
Diluted Net Earnings (Loss) $ (0.21) $ 0.06
================= =================
<FN>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, except Share Data)
<CAPTION>
Nine Months Ended
12/27/97 12/28/96
-------- --------
<S> <C> <C>
Net Sales $ 589,931 $ 574,403
Other Income (See Notes) - 9,141
------------------ -----------------
589,931 583,544
Costs and Expenses:
Cost of Product Sold 545,895 528,437
Selling, General, and Administrative 25,271 20,278
Interest Expense 20,111 22,223
------------------ -----------------
Total Costs and Expenses 591,277 570,938
------------------ -----------------
Earnings (Loss) Before Income Taxes (1,346) 12,606
Income Taxes (485) 4,710
------------------ -----------------
Net Earnings (Loss) $ (861) $ 7,896
================== =================
Net Earnings (Loss) Applicable to
Common Stock (878) 7,879
Weighted Average Common
Shares Outstanding 5,939,680 5,939,680
Basic and Diluted Earnings (Loss)
Per Share of Common Stock (Exhibit II):
Basic Net Earnings (Loss) $ (0.15) $ 1.33
================= =================
Diluted Net Earnings (Loss) $ (0.14) $ 1.31
================= =================
<FN>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<CAPTION>
Nine Months Ended
12/27/97 12/28/96
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Earnings $ (861) $ 7,896
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 21,561 19,796
Deferred Income Taxes (2,176) 1,963
Gain on the Sale of Assets - (9,141)
Changes in Working Capital:
Accounts Receivable (10,954) 21,146
Inventories (47,193) (8,369)
Off-Season Reserve 35,689 39,146
Other Current Assets 4,163 (472)
Income Taxes (2,878) 3,183
Accounts Payable, Accrued
Expenses and Other Liabilities 48,574 10,796
------------------ -----------------
Net Cash Provided
by Operations 45,925 85,944
------------------ -----------------
Cash Flows From Investing Activities:
Acquisitions (53,672) -
Proceeds from the Sale of Assets - 15,511
Additions to Property, Plant,
and Equipment (14,160) (7,041)
Disposals of Property, Plant,
and Equipment 16 6
------------------ -----------------
Net Cash Provided in (Used by) Investing
Activities (67,816) 8,476
------------------ -----------------
Cash Flows From Financing Activities:
Notes Payable 12,740 (87,000)
Long-Term Borrowing 15,106 1,343
Payments and Current Portion of Long-Term
Debt and Capital Lease Obligations (3,429) (477)
Other (18) 73
Dividends (58) -
------------------ -----------------
Net Cash Provided in (Used by)
Financing Activities 24,341 (86,061)
------------------ -----------------
Net Increase in Cash and Short-
Term Investments 2,450 8,359
Cash and Short-Term Investments,
Beginning of Period 1,584 1,297
------------------ -----------------
Cash and Short-Term Investments,
End of Period $ 4,034 $ 9,656
================== ==================
<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
December 27, 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 December 27, 1997 and March 31, 1997
and results of operations for the three and nine month periods ended
December 27, 1997 and December 28, 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 and nine month periods ended
December 27, 1997 and December 28, 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 the
Notes 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. Basic earnings per share are based on the weighted average number of
common shares outstanding. Diluted earnings per share assumes full
conversion of common stock equivalents.
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
December 27, 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 purchase price was approximately $29 million. 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 $15
million long-term debt financing to fund the long-term assets of this
acquisition and the Aunt Nellie's acquisition described above was
completed in September 1997. The debt requires principal payments of $3
million beginning September 2000 and carries an interest rate of 9.17%.
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:
Nine months
9/27/97
Net Sales $596,848
Net Earnings (Loss) (869)
Net Earnings (Loss) per Share (.15)
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.
8. The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards (SFAS) No. 130 on "Reporting Comprehensive
Income and SFAS No. 131 on "Disclosures about Segments of Enterprise and
Related Information." SFAS No. 130 changes the reporting of certain items
currently reported in the common stock equity section of the balance
sheet and is not expected to have a material effect on the Registrant's
financial statements. This standard is effective for fiscal years
beginning after December 15, 1997.
SFAS No. 131 requires that public companies report certain information
about operating segments in their interim financial statements. It also
establishes related disclosures about products and services, geographic
areas, and major customers. The Registrant is currently evaluating what
impact this standard will have on its disclosures. This standard is
effective for fiscal years beginning after December 15, 1997.
<PAGE>
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
December 27, 1997
9. During the second quarter, the Registrant completed a modification to its
Revolving Credit Facility. Under this agreement, which has been extended
to June 30, 1999, there is a new cleandown provision where the Registrant
must reduce its Notes Payable to below $30 million for a 30-day period
during each year. In addition, the total available credit was reduced
from $150 million to $130 million on December 1, 1997. The Registrant has
already complied with the cleandown provision of the Revolving Credit
Facility in the current fiscal year.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION RESULTS OF OPERATIONS
December 27, 1997
Results of Operations:
Sales:
Sales reflect an increase of 2.7% for the first nine months versus 1996. The
sales were higher in spite of lower canned vegetables quantities sold under the
Alliance with Pillsbury. Under this Green Giant Net Sales were $280,301,000 for
nine months ended December 1997 versus $333,341,000 for the comparable period in
the previous year. Non-Green Giant vegetable sales quantities were up 86.6%
while juice and fruit sales quantities were up 6.3%. 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 Nine months Ended
12/27/97 12/28/96 12/27/97 12/28/96
-------- -------- -------- --------
Cost of Product Sold 94.9% 94.7% 92.5% 92.0%
Selling 2.9 1.9 3.5 2.7
Administrative 0.5 0.5 0.8 0.8
Interest Expense 2.4 2.6 3.4 3.9
---------------------------------------------------------
100.7% 99.7% 100.2% 99.4%
=========================================================
Higher Cost of Product Sold percentages (i.e. lower Gross Margins) reflect, in
part, lower selling prices in the canned vegetable business than the prior year.
This was partially offset by better margins in the juice and fruit business
during the same period.
Income Taxes:
The effective tax rate used in 1998 is 36% and 1997 is 37.4%.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION RESULTS OF OPERATIONS
December 27, 1997
Financial Condition:
The financial condition of the Registrant is summarized in the following table
and explanatory review (In Thousands):
For the Quarter For the Year
Ended December Ended March
1997 1996 1997 1996
---- ---- ---- ----
Working Capital Balance $124,389 $125,833 $128,732 $108,761
Quarter Change 148 7,798 - -
Notes Payable 30,740 26,000 18,000 113,000
Long-Term Debt 235,219 230,239 224,128 226,574
Current Ratio 1.90:1 2.07:1 2.65:1 1.57:1
Inventory (Average) Turnover 3.8 3.0 3.5 2.5
The change in the working capital for the quarter from the prior year is due in
part to lower net earnings of $1.6 million, settlement payment of an IRS audit
of $2.1 million, and higher capital expenditures in current year than the prior
year.
The Registrant was in compliance with its debt covenants related to short-term
and long-term Debt. However, the Registrant believes that it may not meet
certain debt covenants as of the end of the 1998 fiscal year to the extent that
weak selling price conditions persist in the canned vegetable business.
See Consolidated Statements of Cash Flows for further details.
Forward-Looking Statements
When used in this discussion, the words, "believes", "anticipates", "expects",
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected, including among other
things decreases in the prices of packaged food products or increases in the
cost of the Registrant's raw materials (particularly fruit and vegetable
produce) resulting from oversupply or undersupply, respectively, reflecting
growing conditions in the U.S. and overseas regions from which the Registrant
obtains its produce and from other factors affecting food costs and production.
These risks insofar as they have affected results of operations in the past
three years are discussed under "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" in Exhibit No. 13 of the
Registrant's Annual Report on Form 10-K for its Fiscal Year Ended March 31,
1997, as filed with the Securities and Exchange Commission. Results of
operations in any past period should not be considered indicative of the results
to be expected for future periods.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults on Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 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
February 10, 1998 Kraig H. Kayser
President and
Chief Executive Officer
/s/Jeffrey L. Van Riper
February 10, 1998 Jeffrey L. Van Riper
Controller and
Chief Accounting Officer
<PAGE>
<TABLE>
EXHIBIT 11
SENECA FOODS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In thousands except share data)
<CAPTION>
Three Months Ended Nine months Ended
12/27/97 12/28/96 12/27/97 12/28/96
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Earnings (Loss) Applicable to Common Stock:
Net Earnings (Loss) $ (1,240) $ 359 $ (861) $ 7,896
Deduct Preferred Cash Dividends 6 6 17 17
------------------------------------------------------------------
Net Earnings (Loss) Applicable to
Common Stock Basic $ (1,246) $ 353 $ (878) $ 7,879
===================================================================
Net Earnings (Loss) Applicable to
Common Stock Basic $ (1,246) $ 353 $ (878) $ 7,879
Add Preferred Cash Dividends
on Convertible Preferred 5 5 15 15
------------------------------------------------------------------
Net Earnings (Loss) Applicable to
Common Stock Diluted $ (1,241) $ 358 $ (863) $ 7,864
===================================================================
Weighted Average Common
Shares Outstanding Basic 5,939,680 5,939,680 5,939,680 5,939,680
Effect of Common Stock Equivalents 67,390 67,390 67,390 67,390
-------------------------------------------------------------------
Weighted Average Common Shares Out-
standing for Diluted 6,007,070 6,007,070 6,007,070 6,007,070
==================================================================
Basic (Loss) Earnings Per Share $ (.21) $ .06 $ (.15) $ 1.33
=================================================================
Diluted (Loss) Earnings Per Share $ (.21) $ .06 $ (.14) $ 1.31
=================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Commercial and Industrial Companies
Article 5 of Regulation S-X
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-27-1997
<CASH> 4034
<SECURITIES> 0
<RECEIVABLES> 51696
<ALLOWANCES> 178
<INVENTORY> 234083
<CURRENT-ASSETS> 262805
<PP&E> 393000
<DEPRECIATION> 168718
<TOTAL-ASSETS> 489326
<CURRENT-LIABILITIES> 138416
<BONDS> 235219
0
70
<COMMON> 2666
<OTHER-SE> 90400
<TOTAL-LIABILITY-AND-EQUITY> 489326
<SALES> 589931
<TOTAL-REVENUES> 589931
<CGS> 545895
<TOTAL-COSTS> 545895
<OTHER-EXPENSES> 25271
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20111
<INCOME-PRETAX> (1346)
<INCOME-TAX> (485)
<INCOME-CONTINUING> (861)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (861)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.14)
<FN>
Other Expenses is Selling, General and Administrative Expenses
</FN>
</TABLE>
