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Previous: CSX TRANSPORTATION INC, 10-Q, 1999-11-15 |
Next: CONSOLIDATED TECHNOLOGY GROUP LTD, 10-Q, 1999-11-15 |
<PAGE>
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended October 2, 1999 Commission File Number 0-1989
Seneca Foods Corporation
(Exact name of Company 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)
Company'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 Company (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding
12 months (or for such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
----- -----
The number of shares outstanding of each of the issuer's classes of common stock
at the latest practical date are:
Class Shares Outstanding at October 31, 1999
Common Stock Class A, $.25 Par 3,756,208
Common Stock Class B, $.25 Par 2,767,357
<PAGE>
<TABLE>
PART I FINANCIAL INFORMATION
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands of Dollars)
<CAPTION>
10/2/99 3/31/99
------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Short-term Investments $ 11,501 $ 31,003
Accounts Receivable, Net 40,123 35,717
Inventories:
Finished Goods 311,910 107,127
Work in Process 7,825 11,143
Raw Materials 22,755 34,364
------- -------
342,490 152,634
Off-Season Reserve (Note 3) (60,436) -
Deferred Tax Asset, Net 3,276 3,276
Refundable Income Taxes 105 -
Other Current Assets 891 911
-------------- ---------------
Total Current Assets 337,950 223,541
Property, Plant and Equipment, Net 173,806 178,658
Other Assets 2,840 2,671
-------------- ---------------
$514,596 $404,870
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 133,538 $ 27,034
Accrued Expenses 23,820 20,952
Income Taxes - 309
Current Portion of Long-Term Debt and Capital
Lease Obligations 7,725 7,811
--------------- ---------------
Total Current Liabilities 165,083 56,106
Long-Term Debt 179,479 179,533
Capital Lease Obligations 7,890 8,371
Deferred Income Taxes 7,137 6,870
Other Long-Term Liabilities 9,958 9,402
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
Convertible, Participating Preferred Stock, $12
Stated Value 43,370 46,363
Common Stock 2,811 2,748
Paid in Capital 12,870 9,940
Accumulated Other Comprehensive Income 991 877
Retained Earnings 84,937 84,590
--------------- ---------------
Stockholders' Equity 145,049 144,588
--------------- ---------------
$514,596 $404,870
======== ========
<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
------------------
10/2/99 9/26/98
------- -------
<S> <C> <C>
Net Sales $ 181,451 $ 176,792
Costs and Expenses:
Cost of Product Sold 171,508 165,616
Selling, General, and Administrative 5,429 3,342
Interest Expense 4,006 6,590
------------------ -----------------
Total Costs and Expenses 180,943 175,548
------------------ -----------------
Earnings From Continuing Operations
Before Income Taxes 508 1,244
Income Taxes 183 448
------------------ -----------------
Earnings from Continuing Operations 325 796
Loss from Discontinued
Operations Net of Income Taxes - (513)
------------------ ------------------
Net Earnings $ 325 $ 283
================= ================
Basic:
Earnings From Continuing Operations
Per Common Share $ .05 $ .13
================= ================
Loss From Discontinued Operations
Per Common Share $ .00 $ (.09)
================= ================
Earnings Per Common Share $ .05 $ .05
================= ================
Diluted:
Earnings From Continuing Operations
Per Common Share $ .03 $ .11
================= ================
Loss From Discontinued Operations
Per Common Share $ .00 $ (.07)
================= ================
Earnings Per Common Share $ .03 $ .04
================= ================
<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 INCOME
(Unaudited)
(In Thousands, except Share Data)
<CAPTION>
Six Months Ended
----------------
10/2/99 9/26/98
------- -------
<S> <C> <C>
Net Sales $ 269,186 $ 244,258
Other Income 965 -
------------------ -----------------
270,151 244,258
Costs and Expenses:
Cost of Product Sold 250,712 225,508
Selling, General, and Administrative 10,769 7,357
Interest Expense 8,108 12,311
------------------ -----------------
Total Costs and Expenses 269,589 245,176
------------------ -----------------
Earnings (Loss) From Continuing Operations
Before Income Taxes 562 (918)
Income Taxes 202 (294)
------------------ -----------------
Earnings (Loss) from Continuing Operations 360 (624)
Loss from Discontinued
Operations Net of Income Taxes - (1,776)
------------------ -----------------
Net Earnings (Loss) $ 360 $ (2,400)
================= ================
Basic:
Earnings (Loss) From Continuing Operations
Per Common Share $ .05 $ (.11)
================= ================
Loss From Discontinued Operations
Per Common Share $ .00 $ (.30)
================= ================
Earnings (Loss) Per Common Share $ .05 $ (.40)
================= ================
Diluted:
Earnings (Loss) From Continuing Operations
Per Common Share $ .04 $ (.11)
================ ================
Loss From Discontinued Operations
Per Common Share $ .00 $ (.30)
================ ================
Earnings (Loss) Per Common Share $ .04 $ (.40)
================ ================
<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>
Six Months Ended
----------------
10/2/99 9/26/98
------- -------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Earnings (Loss) $ 360 $ (2,400)
Adjustments to Reconcile Net Earnings (Loss)
to Net Cash Used by Operating Activities:
Depreciation and Amortization 11,501 14,301
Contribution of Stock to Benefit Plan - 683
Deferred Income Taxes 203 (1,303)
Gain on Sale of Assets (965) -
Changes in Working Capital:
Accounts Receivable (4,406) (3,985)
Inventories (189,856) (213,469)
Off-Season Reserve 60,436 54,719
Other Current Assets 20 955
Income Taxes (414) 836
Accounts Payable and
Accrued Expenses 109,928 148,028
------------------ -----------------
Net Cash Used
in Operations (13,193) (1,635)
------------------ -----------------
Cash Flows From Investing Activities:
Additions to Property, Plant,
and Equipment (7,638) (4,104)
Disposals 167 342
Proceed from the Sale of Assets 1,800 -
------------------ -----------------
Net Cash Used in Investing
Activities (5,671) (3,762)
------------------ -----------------
Cash Flows From Financing Activities:
Payments and Current Portion of Long-Term
Debt and Capital Lease Obligations (621) (152)
Dividends (12) (12)
Other (5) 28
Rights Offering - 49,715
Notes Payable - (39,270)
------------------ -----------------
Net Cash (Used in) Provided by
Financing Activities (638) 10,309
------------------ -----------------
Net (Decrease) Increase in Cash and Short-
Term Investments (19,502) 4,912
Cash and Short-Term Investments,
Beginning of Period 31,003 4,077
------------------ -----------------
Cash and Short-Term Investments,
End of Period $ 11,501 $ 8,989
================== ==================
<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
October 2, 1999
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 Company as of October 2, 1999 and results of operations
for the three and six month periods ended October 2, 1999 and September
26, 1998. All significant intercompany transactions and accounts have
been eliminated in consolidation. The March 31, 1999 balance sheet was
derived from audited financial statements.
The results of operations for the three month periods ended October 2,
1999 and September 26, 1998 are not necessarily indicative of the
results to be expected for the full year.
The accounting policies followed by the Company are set forth in Note 1
to the Company's financial statements in the 1999 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 Company's 1999 Annual Report and
10-K.
2. Off-Season Reserve is the excess of absorbed expenses over incurred
expenses to date. The seasonal nature of the Company'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.
3. Comprehensive income consisted solely of Net Earnings and Net Unrealized
Gain Change on Moog, Inc. Stock. The following table provides the results
for the periods presented:
Six Months Ended
September
1999 1998
---- ----
Net Earnings (Loss) $360 $(2,400)
Other Comprehensive Earnings, Net of Tax:
Net Unrealized Gain (Loss) Change on
Moog, Inc. Stock 114 (259)
--------------------------
Comprehensive Earnings (Loss) $474 $(2,659)
===========================
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION RESULTS OF OPERATIONS
October 2, 1999
Results of Operations:
Sales:
Sales reflect an increase of 10.2% for the six months versus 1998. The higher
sales, in large part, are due to higher canned vegetables quantities sold under
the Company's Non-Alliance business. Non-Alliance vegetable sales quantities
were up 15.6%.
Costs and Expenses:
The following table shows costs and expenses as a percentage of sales:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
10/2/99 9/26/98 10/2/99 9/26/98
------- ------- ------- -------
<S> <C> <C> <C> <C>
Cost of Product Sold 94.6% 93.7% 93.1% 92.3%
Selling 2.2 1.4 3.0 2.3
Administrative 0.7 0.5 1.0 0.8
Interest Expense 2.2 3.7 3.0 5.0
---------------------------------------------------------
99.7% 99.3% 100.1% 100.4%
=========================================================
</TABLE>
Lower interest expense percentage in 1999 is as a result of the $50 million
equity sale last year and the divestiture of the juice and sauce businesses also
during last year.
Income Taxes:
The effective tax rate used in fiscal 1999 is 36% and 1998 is 32%.
Year 2000:
The Registrant has initiated a Year 2000 Compliance Project to ensure that
business processes, equipment and systems will operate up to, over and following
the change of the century. Software failures due to processing errors
potentially arising from calculations using the Year 2000 are a known risk. The
total cost of the Project, above and beyond normal software upgrades, is not
expected to exceed $750,000, of which approximately $600,000 has been incurred
to date.
The Project includes the following phases: assessment of the problem,
correction/replacement of systems, testing, vendor assessment and development of
a contingency plan. The identification of all equipment with date sensitive
operating controls (including embedded systems) has been completed. An inventory
of our systems assets has also been completed. As expected, all critical systems
were replaced or modified to be compliant by June 30, 1999, and testing was
completed by September 30, 1999. The Registrant has begun evaluating the
potential impact of Year 2000 problems in the event that our external vendors
are not adequately prepared. If necessary, the Registrant will secure an
alternate supply for the required products and/or services. The Registrant has
developed a contingency plan for Year 2000 issues.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
October 2, 1999
The Company's reasonable worst case scenario might involve not being able to buy
cans from our normal suppliers. Some of the Company's can requirements are
produced within the Company and the balance are purchased from two major
suppliers. If a computer or embedded processor failure at one of these suppliers
caused them not to be able produce cans, the Company would need to find
alternate sources of supply. In addition, all of our plants are in the northern
part of the United States and some of the Company's warehouses are only heated
by natural gas. Therefore, when the Year 2000 issues first materialize in
January, if there is an issue with the supply of natural gas, the Company could
incur losses of canned vegetables due to freezing, unless the Company can find
alternative sources of heat or other storage space with heat. Many of our plants
have boilers that can use different fuels, so this is less of an issue. The
Company does not believe the purchase of fresh vegetables for canning and
freezing is a major risk since much of the equipment used in this process does
not have Year 2000 issues. The Company believes the most reasonably likely worst
case scenario is there could be some localized, temporary disruptions to
portions of business activities such as shipping, information systems,
warehousing, and agricultural production rather than systemic or long-term
problems affecting its business operations as a whole.
Financial Condition:
The financial condition of the Company is summarized in the following table and
explanatory review (In Thousands):
<TABLE>
<CAPTION>
For the Quarter For the Year
Ended September Ended March
--------------- ------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Working Capital Balance $172,867 $169,871 $167,435 $112,299
Quarter Change 3,029 56,612 - -
Notes Payable - 23,000 - 62,270
Long-Term Debt 187,369 227,713 187,904 227,858
Current Ratio 2.05:1 1.68:1 3.98:1 1.79:1
</TABLE>
The change in the Working Capital for the September 1999 quarter from the
September 1998 quarter is largely due to the equity sale last year of $50
million. This equity sale and the divestiture of the Juice and Applesauce
businesses for $57 million, both completed last year, dramatically reduced our
short-term borrowing needs.
See Consolidated Condensed Statements of Cash Flows for further details.
Letter of Intent:
During September 1999, the Registrant signed a letter of intent to acquire
Agrilink Foods, Inc. Midwest private label canned vegetable business. Agrilink
Foods, Inc. is a wholly-owned subsidiary of Pro-Fac Cooperative. The Registrant
is expected to purchase a plant in Arlington, Minnesota and related inventories.
The closing is expected to be during November, 1999. The Registrant also has a
commitment to purchase Agrilink Food's Cambria, Wisconsin plant under certain
circumstances.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
October 2, 1999
Quantitative and Qualitative Disclosures about Market Risk:
As a result of its operating and financing activities, the Company is exposed to
certain market risks including changes in commodity pricing and fluctuations in
interest rates. Commodity pricing exposure includes weather phenomena and their
effect on industry volumes, prices, product quality, and costs. The Company
manages its exposure to commodity price risk primarily through its regular
operating activities. The Company has not used derivative financial instruments.
The Company has not utilized financial instruments for trading or other
speculative purposes.
Interest Rate Risk:
As a result of its regular financing requirements, the Company's operating
results are exposed to fluctuations in interest rates, which it manages
primarily through its regular financing activities. Although the Company does
not have any short-term debt as of October 2, 1999, it uses bank lines of credit
with variable interest rates to finance seasonal working capital requirements.
The Company maintains investments in cash equivalents ($9.6 million as of
October 2, 1999) and does have investments in a modest amount of marketable
securities. Long-term debt represents secured and unsecured notes and debentures
and certain notes payable to insurance companies used to finance long-term
investments such as business acquisitions. Long-term debt bears interest at
fixed and variable rates. The following table provides information about the
Company's financial instruments that are sensitive to changes in interest rates.
The table presents principal cash flows and sinking fund requirements and
related weighted-average interest rates by expected maturity date.
Weighted-average interest rates on variable-rate debt are based on current rates
as of October 2, 1999:
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
October 2, 1999
<TABLE>
Interest Rate Sensitivity of Long-Term Debt and Short-Term Investments
October 2, 1999
(In Thousands)
<CAPTION>
EXPECTED MATURITY DATE
---------------------------------------------------------------------------------------
Total /
Weighted
2000 2001 2002 2003 2004 There-after Average
--------- --------- --------- --------- --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed-rate debt:
Principal cash flows
$7,670 $7,743 $18,123 $21,137 $21,156 $96,634 $ 172,463
Average interest rate
9.35% 9.36% 9.32% 9.20% 9.01% 8.23% 8.93%
Variable-rate debt:
Principal cash flows
$ -- $ -- $ -- $ -- $ -- $22,630 $ 22,630
Average interest rate 5.71% 5.71% 5.71% 5.71% 5.71% 5.71% 5.71%
Short-term investments:
Balance $ 9,648
Average interest rate
5.27%
</TABLE>
<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. Exhibits
11 (11) Computation of earnings per share (filed herewith)
27 (27) Financial Data Schedules (filed herewith)
Reports on Form 8-K - None during the quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Seneca Foods Corporation
(Company)
/s/Kraig H. Kayser
---------------------------
November 12, 1999 Kraig H. Kayser
President and
Chief Executive Officer
/s/Jeffrey L. Van Riper
---------------------------
November 12, 1999 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 Six Months Ended
------------------ ----------------
10/2/99 9/26/99 10/2/99 9/26/98
------- ------- ------- -------
<S> <C> <C> <C> <C>
Basic Net Earnings Applicable to Common Stock:
Net Earnings (Loss) $ 325 $ 283 $ 360 $ (2,400)
Deduct Preferred Cash Dividends 6 6 6 -
-----------------------------------------------------------------------
Net Earnings (Loss) Applicable to
Common Stock $ 319 $ 277 $ 354 $ (2,400)
=======================================================================
Weighted Average Common
Shares Outstanding 6,513,859 5,969,469 6,451,017 5,981,881
Effect of Common Stock Equivalent - - - -
----------------------------------------------------------------------
Weighted Average Common Shares Outstanding
for Primary Earnings per Share 6,513,859 5,969,469 6,451,017 5,981,881
======================================================================
Basic Earnings (Loss) Per Share $ .05 $ .05 $ .05 $ (.40)
======================================================================
Diluted Net Earnings Applicable to Common Stock:
Net Earnings (Loss) Applicable to
Common Stock $ 319 $ 277 $ 354 $ (2,400)
Add Back Preferred Cash Dividends 5 5 10 -
---------------------------------------------------------------------
Net Earnings (Loss) Applicable to
Common Stock $ 324 282 $ 364 $ (2,400)
=====================================================================
Weighted Average Common
Shares Outstanding 6,513,859 5,969,469 6,451,017 5,981,881
Effect of Common Stock Equivalent 3,711,136 1,471,227 3,773,978 749,449
--------------------------------------------------------------------
Weighted Average Common Shares
Outstanding for Diluted Earnings
per Share 10,224,995 7,440,696 10,224,995 6,731,330
====================================================================
Diluted Earnings (Loss) Per Share $ .03 $ .04 $ .04 $ (.40)
====================================================================
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Commercial and Industrial Companies
Article 5 of Regulation S-X
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> OCT-2-1999
<CASH> 11501
<SECURITIES> 0
<RECEIVABLES> 40672
<ALLOWANCES> 549
<INVENTORY> 342490
<CURRENT-ASSETS> 337950
<PP&E> 347491
<DEPRECIATION> 173685
<TOTAL-ASSETS> 514596
<CURRENT-LIABILITIES> 165083
<BONDS> 187369
0
43440
<COMMON> 2811
<OTHER-SE> 98798
<TOTAL-LIABILITY-AND-EQUITY> 514596
<SALES> 269186
<TOTAL-REVENUES> 270151
<CGS> 250712
<TOTAL-COSTS> 250712
<OTHER-EXPENSES> 10769
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8108
<INCOME-PRETAX> 562
<INCOME-TAX> 202
<INCOME-CONTINUING> 360
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 360
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.04
<FN>
Other Expenses is Selling, General and Administrative Expenses
</FN>
</TABLE>
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