Exhibit 13
<TABLE>
Five Year Selected Financial Data
Summary of Operations and Financial Condition
(In thousands of dollars, except per share data)
<CAPTION>
(Eight Months)
Years ended March 31, 2000 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 604,956 $ 576,193 $ 560,526 $ 571,016 $ 354,286 $ 128,744
--------------------------------------------------------------------------------------------------------------------------------
Operating earnings (before Corporate
interest and administrative expense) $ 27,335 $ 27,138 $ 22,732 $ 43,536 $ 18,613 $ 4,840
Earnings (loss) from continuing
operations before extraordinary item and
cumulative effect of accounting change 4,320 1,420 (3,181) 8,966 (6,618) (1,941)
Earnings (loss) from discontinued operations -- (6,791) (1,963) (1,435) (3,529) 3,262
Gain on sale of discontinued operations -- 11,756 -- -- -- --
Earnings (loss) before extraordinary item and
cumulative effect of accounting change 4,320 6,385 (5,144) 7,531 (10,147) 1,321
Extraordinary loss -- (1,222) -- -- -- --
Net earnings (loss) 4,320 5,163 (5,144) 7,531 (10,147) 1,321
--------------------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) from continuing
operations per common share $ .66 $ .23 $ (.54) $ 1.51 $ (1.18) $ (.34)
Basic earnings (loss) per common share before
extraordinary item and cumulative
effect of accounting change .66 1.05 (.87) 1.27 (1.81) .23
Basic earnings (loss) per common share .66 .85 (.87) 1.27 (1.81) .23
---------------------------------------------------------------------------------------------------------------------------------
Working capital $ 168,972 $ 167,435 $ 112,299 $ 132,351 $ 111,301 $ 138,030
Inventories 203,173 152,634 194,044 158,197 229,759 138,113
Net property, plant, and equipment 179,146 178,658 218,408 207,439 222,720 179,718
Total assets 438,540 404,870 474,926 416,023 523,859 385,502
Long-term debt and capital lease
obligations 189,968 187,904 227,858 224,128 226,574 221,480
Stockholders' equity 148,999 144,588 89,125 93,736 90,939 90,821
---------------------------------------------------------------------------------------------------------------------------------
Additions to property, plant, and equipment $ 19,875 $ 9,494 $ 15,693 $ 11,650 $ 67,897 $ 26,966
Interest expense, net 16,147 21,594 23,913 25,960 25,069 4,916
---------------------------------------------------------------------------------------------------------------------------------
Net earnings/average equity 3.6% 4.4% (5.6)% 8.2% (11.2)% 1.5 %
Continuing earnings before taxes/sales 1.1% 0.3% (0.9)% 2.4% (1.9)% (1.5)%
Net earnings/sales 0.7% 0.9% (0.9)% 1.3% (2.9)% 1.0 %
Long-term debt/equity 127% 130% 256 % 239% 249% 244 %
Current ratio 3.1:1 4.0:1 1.8:1 2.8:1 1.6:1 3.3:1
---------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity per common share $ 16.16 $ 15.65 $ 14.99 $ 15.77 $ 15.30 $ 16.23
Class A National Market System
closing price range 15 1/2-10 1/4 17 1/8-10 3/8 18 3/4-15 3/4 18 3/4-14 3/4 20-15 --
Class B National Market System
closing price range 14 3/4-10 16 3/4-10 3/8 18 1/2-15 1/2 19-14 1/2 22-16 17 3/4-10 1/2
Common cash dividends declared per share -- -- -- -- -- --
Price earnings ratio 17.1 13.1 NM 13.7x NM 74.5x
---------------------------------------------------------------------------------------------------------------------------------
<FN>
1995 represents eight months ended March 31 due to a change in the Company's
fiscal year end.
NM - not meaningful.
</FN>
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Because the Company is primarily engaged in vegetable processing, the Company's
yearly business cycle shows large inventory growth during the summer and fall
harvest period. The inventory peaks in the early fall and drops to its minimum
level immediately prior to the next pack season (pack refers to canning and
freezing of vegetables and certain fruits with each commodity at a certain time
during the year which can vary based on weather conditions among other factors).
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 September 1998, the Company completed an equity sale, which raised $49.7
million. The equity sale consisted of a Rights Offering to the Company's common
shareholders and a Stock Purchase Agreement with certain investors.
In December 1998, the Company sold a significant portion of its Juice Division
to Northland Cranberries, Inc. together with an exclusive license to market and
sell Seneca juice products, for $28.2 million in cash plus the assumption of
certain liabilities. This sale included plants in Dundee, New York; Mountain
Home, North Carolina; Jackson, Wisconsin; and a warehouse in Eau Claire,
Michigan.
In January 1999, the Company sold to Tree Top, Inc. its processing facility in
Prosser, Washington together with its non-branded specialty fruit concentrate
business and an exclusive license to market and sell Seneca applesauce. Tree Top
paid approximately $29.0 million in cash.
During November 1999, the Company acquired certain assets of the Midwest private
label canned vegetable business from Agrilink Foods, Inc., for approximately
$48.0 million. The Company purchased one plant and inventories of the business.
The annual sales of this business are approximately $73.0 million. The purchase
price was partially funded by a subordinated note for $5.0 million while the
balance was paid in cash (see Acquisitions, note 10).
As a result of the fiscal 1999 divestitures and equity sale, the Company's
requirements for working capital financing were substantially reduced during the
fiscal years ended 2000 and 1999 as compared to 1998 and prior years.
Accordingly, the total financing commitment of the Company's line of credit
banks was reduced in a series of steps from $130 million to $75 million on
January 29, 1999, at which date the Company elected to terminate its Amended and
Restated Credit Agreement with those banks. As of March 31, 2000, the Company
maintained a committed revolving line of credit of $20 million and uncommitted
lines of credit totaling $45 million. Subsequent to March 31, 2000, the Company
increased its uncommitted lines of credit to $80 million. These credit
arrangements do not require the Company to pay any commitment fees, whereas the
Company paid fees for the unused portion of the bank commitments under the
Amended and Restated Credit Agreement which it terminated in January 1999. The
Company had no short-term bank borrowings throughout fiscal 2000. The Company
believes that the credit facilities will be sufficient, with its other
resources, for its anticipated working capital requirements in 2001.
The Company has three major long-term debt instruments: 1) A $44.7 million note
payable to The Prudential Insurance Company of America, with an interest rate of
10.78%, which is due through 2005, 2) A $64.6 million secured nonrecourse note
payable to The Pillsbury Company, with an interest rate of 8%, which is due
through 2009, and 3) A $46.3 million note payable to John Hancock Mutual Life
Insurance Company, with an interest rate of 10.81%, which is due through 2009.
In the third quarter of 2000, the Company issued an Industrial Revenue
Development Bond for $6.0 million to finance production equipment in the
Midwest. The Other Assets category includes $5.3 million of yet unspent proceeds
of this debt issue.
In the final quarter of 1999, the Company made the following prepayments on
long-term debt (plus yield-maintenance payments to the lenders in accordance
with the terms of the indebtedness):
(1) With respect to its outstanding 10.78% Series A Note due
February 23, 2005, and in addition to the scheduled payment of
a principal installment of $7.5 million due February 23, 1999,
the Company prepaid two annual principal installments of $8.4
million each due February 23 in 2000 and 2001; and
(2) With respect to its outstanding 9.17% Senior Notes due 2004,
the Company prepaid $15.0 million, the entire outstanding
principal amount of these Notes.
During 1995, the Company acquired certain assets of the Green Giant Division of
The Pillsbury Company. Under an Alliance Agreement concurrently executed in 1995
by the Company, Pillsbury and Grand Metropolitan Incorporated, Pillsbury
continues 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 increase in cash and short-term investments of $9.8 million over the three
year period ended in 2000 was primarily due to the proceeds of the sale of
assets (primarily the Juice sale) totaling $67.1 million; proceeds from the new
equity issue from the Stock Purchase Agreement and Rights Offering totaling
$49.7 million; proceeds of the new long-term debt issues totaling $22.4 million;
and net earnings (before depreciation effect, which is non-cash). This was
partially offset by: Agrilink, Aunt Nellie's Farm Kitchens and Curtice Burns
acquisitions of $97.2 million; long-term debt repayments totaling $61.2 million;
repayments of notes payable totaling $18.0 million; and capital additions of
$19.9 million, $9.5 million, and $15.7 million, in 2000, 1999, and 1998,
respectively
In 2000, accounts receivable decreased by $4.0 million to $31.7 million. In
1999, accounts receivable decreased by $12.9 million mainly due to the Juice
divestitures. In 1998, accounts receivable increased by $12.2 million to $48.6
million. This was due in part to Non-Alliance sales being $87.7 million higher
fueled by the two acquisitions (see below).
In 2000, inventories increased by $50.5 million mainly due to the acquisition of
the Midwest private label canned vegetable business described above. In 1999,
inventories decreased by $41.4 million mainly due to the Juice divestitures. In
1998, inventories increased $35.8 million over 1997. This was largely due to the
acquisitions made during the year (see below).
In 2000, capital expenditures were $19.9 million as compared to $9.5 million in
1999 and $15.7 million in 1998. In 2000, certain expenditures of approximately
$5.0 million were made to accommodate the additional volume acquired from
Agrilink (since only one of three plants was purchased). Another major capital
initiative in 2000 involved increasing production capacity in the Northwest. No
major capital expenditures occurred in 1999. In 1998, certain juice production
lines were converted to PET (plastic bottles) totaling $3.2 million at plants in
the south and midwest.
In 1998, the Company completed two acquisitions. The first acquisition was Aunt
Nellie's Farm Kitchens, which produces, markets, and sells fruit and vegetable
products from their plants in the midwest, for approximately $24.3 million. The
second acquisition was the Curtice Burns canned branded and private label
vegetable business for approximately $29.4 million (see Acquisitions, note 10).
<PAGE>
Results of Operations
Net sales for 2000 were $605.0 million, which includes $263.3 million sold under
the Alliance with Pillsbury. Net sales for 1999 were $576.2 million, which
includes $289.9 million sold under the Alliance with Pillsbury. Net sales for
1998 were $560.5 million, which includes $277.1 million sold under the Alliance
with Pillsbury. In 2000, Non-Alliance sales increased from $286.3 million to
$341.7 million reflecting the Agrilink acquisition, distribution gains in the
vegetable non-branded area, and higher selling prices. This increase was
partially offset by a reduction in Alliance sales reflecting a planned smaller
pack than the previous year. In 1999, vegetable unit non-branded sales increased
over 1998 due to increased distribution on the west coast and another large
pack. In 1998, vegetable unit sales increased due to the two acquisitions and
the high pack levels of the last two years.
The sale of the Juice business to Northland Cranberries, Inc. resulted in a
pre-tax gain on the disposal of $6.8 million which was recognized during the
Company's fourth quarter ended March 31, 1999. The sale of the Company's
processing facility in Prosser, Washington together with its non-branded
specialty fruit concentrate business to Tree Top, Inc. resulted in a pre-tax
gain on the disposal of $10.4 million which was also recognized in the Company's
fourth quarter ended March 31, 1999. As a result of these sales, the Juice
Business has been accounted for as discontinued operations. Net sales for these
businesses were $121.3 million in 1999 and $142.7 million in 1998.
In 2000, the Company sold a distribution facility in Chicopee, Massachusetts,
which resulted in a gain of $1.0 million before income taxes. In 1999, the
Company sold a parcel of land in Rochester, Minnesota, which resulted in a gain
of $6.2 million before income taxes.
In 2000, earnings increased due to the following reasons: 1) a $5.4 million
reduction in interest expense as a result of the $49.7 million equity offering
and juice and applesauce divestitures completed in fiscal 1999, 2) better
selling prices on vegetables, especially on private label canned retail and food
service vegetables than the previous year, 3) additional sales due to the
acquired business described above, and 4) a gain on the sale of a warehouse of
$1.0 million. These gains were partially offset by a provision principally to
reflect the expected liquidation costs of our maraschino cherry business,
including a plant closure, of $2.0 million, established in 2000. In 1999,
earnings increased due to the following reasons: 1) the gain on the sale of land
in Rochester, Minnesota of $6.2 million, 2) somewhat better selling prices on
vegetables after low prices the previous year, and 3) a gain on the sale of an
aircraft of $.7 million. These gains were partially offset by an impairment
provision of $2.0 million. In 1998, earnings decreased mainly due to lower
selling prices on vegetables due to an ongoing industry oversupply due in part
to the second consecutive above budget pack.
A deferred tax valuation allowance as of March 31, 2000, was not deemed
necessary due to the fact that there was positive evidence that outweighed the
negative evidence that it was more likely than not that these tax assets will be
realized. While the Company has suffered losses in two of the last five fiscal
years, the Company does not believe that such losses should be considered a
trend, and that other evidence, including the fact that the Company has never
had a net operating loss expire, should be considered in evaluating whether a
valuation allowance is necessary.
In general, inflation played a relatively small role in the operating results
and cash flows of 2000, 1999, and 1998 since the Company depreciates its fixed
assets under accelerated depreciation methods for tax purposes.
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". The Company does not use derivative instruments nor
does it engage in hedging activities. Therefore, this standard will have no
impact on the Company's reported financial position, results of operations and
cash flows.
<PAGE>
Year 2000
The Company's Year 2000 project was designed to reduce the risk that the Year
2000 issue would cause significant interruptions to the Company's operations. As
a result of the Project, the Company experienced no significant problems
affecting its business operations related to the Year 2000 issue. The Company
does not expect any future problems arising from Year 2000 issues that would
have a material impact on the Company's financial statements. The total cost of
the project was less than $.8 million.
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
and has not utilized financial instruments for trading or other speculative
purposes.
Interest Rate Risk
As a result of its regular borrowing activities, 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 March 31, 2000, it uses bank lines of credit with variable
interest rates to finance seasonal working capital requirements. The Company
maintains investments in cash equivalents ($6.3 million as of March 31, 2000)
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 March 31, 2000:
<TABLE>
Interest Rate Sensitivity of Long-Term Debt and Short-Term Investments
March 31, 2000
(In Thousands)
<CAPTION>
EXPECTED MATURITY DATE
Total /
Weighted
2001 2002 2003 2004 2005 Thereafter Average
---- ---- ---- ---- ---- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed-rate debt:
Principal cash flows $8,214 $18,622 $21,665 $21,716 $21,773 $83,562 $ 175,552
Average interest rate 9.17% 9.15% 9.06% 8.92% 8.71% 8.45% 8.86%
Variable-rate debt:
Principal cash flows $ -- $ -- $ -- $ -- $ -- $22,630 $ 22,630
Average interest rate 5.78% 5.78% 5.78% 5.78% 5.78% 5.78% 5.78%
Short-term investments:
Balance $ 6,323
Average interest rate 5.96%
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Net Earnings
Seneca Foods Corporation and Subsidiaries
(In thousands of dollars, except share amounts)
<CAPTION>
Years ended March 31, 2000 1999 1998
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 604,956 $ 576,193 $ 560,526
-------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of product sold 557,848 538,678 521,432
Selling, general, and administrative expense 22,819 18,778 20,124
Other expense (income) 1,254 (4,834) --
Interest expense, net of interest income of $1,672, $648, and
$109, respectively 16,147 21,594 24,200
-------------------------------------------------
598,068 574,216 565,756
-------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations before income taxes
and extraordinary item 6,888 1,977 (5,230)
Income taxes 2,568 557 (2,049)
-------------------------------------------------
Earnings (loss) from continuing operations before
extraordinary item 4,320 1,420 (3,181)
Loss from discontinued operations, less applicable
income tax benefit of $3,138 and $1,265 -- (6,791) (1,963)
Gain on the sale of discontinued operations, less applicable
income taxes of $5,431 -- 11,756 --
Extraordinary loss on early extinguishment of debt,
less applicable income tax benefit of $564 -- (1,222) --
-------------------------------------------------
Net earnings (loss) $ 4,320 $ 5,163 $ (5,144)
==========================================================================================================================
Earnings (loss) from continuing operations per common share $ .66 $ .23 $ (.54)
Loss from discontinued operations per common share -- (1.11) (.33)
Gain on the sale of discontinued operations per common share -- 1.93 --
Extraordinary loss on early extinguishment of debt per common share -- (.20) --
-------------------------------------------------
Basic net earnings (loss) per common share $ .66 $ .85 $ (.87)
==========================================================================================================================
Earnings (loss) from continuing operations per common share $ .42 $ .17 $ (.54)
Loss from discontinued operations per common share -- (.80) (.33)
Gain on the sale of discontinued operations per common share -- 1.39 --
Extraordinary loss on early extinguishment of debt per common share -- (.15) --
-------------------------------------------------
Diluted earnings (loss) per common share $ .42 $ .61 $ (.87)
==========================================================================================================================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets
Seneca Foods Corporation and Subsidiaries
(In thousands)
<CAPTION>
March 31, 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Current Assets:
Cash and short-term investments $ 11,348 $ 31,003
Accounts receivable, less allowance for doubtful accounts
of $469 and $487, respectively 31,702 35,717
Inventories:
Finished products 156,349 107,127
In process 4,610 11,143
Raw materials and supplies 42,214 34,364
Deferred tax asset 4,812 3,276
Prepaid expenses 528 911
-------------------------------------
Total Current Assets 251,563 223,541
------------------------------------------------------------------------------------------------------------------------------------
Other Assets 7,831 2,671
------------------------------------------------------------------------------------------------------------------------------------
Property, Plant, and Equipment:
Land 5,700 5,205
Building 94,525 89,651
Equipment 264,454 247,360
-------------------------------------
364,679 342,216
Less accumulated depreciation and amortization 185,533 163,558
-------------------------------------
Net Property, Plant, and Equipment 179,146 178,658
------------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 438,540 $404,870
====================================================================================================================================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 48,699 $ 27,034
Accrued expenses 25,033 20,952
Current portion of long-term debt and capital lease obligations 8,214 7,811
Income taxes 645 309
------------------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 82,591 56,106
Long-Term Debt 182,468 179,533
Capital Lease Obligations 7,500 8,371
Deferred Gain and Other Liabilities 8,599 9,402
Deferred Income Taxes 8,383 6,870
Commitments (Note 5) -- --
-------------------------------------
Total Liabilities 289,541 260,282
------------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock 42,940 46,433
Common stock 2,822 2,748
-------------------------------------
Total Capital Stock 45,762 49,181
Additional paid-in capital 13,359 9,940
Accumulated other comprehensive income 991 877
Retained earnings 88,887 84,590
-------------------------------------
Total Stockholders' Equity 148,999 144,588
------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 438,540 $404,870
====================================================================================================================================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
Seneca Foods Corporation and Subsidiaries
(In thousands)
<CAPTION>
Years ended March 31, 2000 1999 1998
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 4,320 $ 5,163 $ (5,144)
Adjustments to reconcile net earnings (loss) to
net cash provided by operations:
Depreciation and amortization 23,554 27,641 28,849
Deferred income taxes (87) (49) (6,231)
Gain on the sale of assets (965) (24,057) --
Impairment provision and other expenses 2,219 3,354 --
Changes in operating assets and liabilities:
Accounts receivable 4,015 12,930 (8,083)
Inventories (6,961) 7,243 (7,154)
Prepaid expenses 383 720 2,907
Accounts payable, accrued expenses, and other liabilities 22,770 (7,817) 18,679
Income taxes 336 1,885 (2,175)
-------------------------------------------------
Net cash provided by operations 49,584 27,013 21,648
--------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisitions (43,481) -- (53,672)
Additions to property, plant, and equipment (19,875) (9,494) (15,693)
Escrow fund (5,326) -- --
Proceeds from the sale of assets 1,790 65,270 --
Disposals of property, plant, and equipment 159 400 135
-------------------------------------------------
Net cash provided by (used in) investing activities (66,733) 56,176 (69,230)
--------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments of long-term debt and capital lease obligations (8,511) (43,401) (9,266)
Proceeds from issuance of long-term debt 6,000 -- 15,106
Other assets 28 (281) 23
Dividends paid (23) (23) (58)
Net (payments) borrowings on notes payable -- (62,270) 44,270
Equity issue -- 49,712 --
-------------------------------------------------
Net cash provided by (used in) financing activities (2,506) (56,263) 50,075
--------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and short-term investments (19,655) 26,926 2,493
Cash and short-term investments, beginning of year 31,003 4,077 1,584
-------------------------------------------------
Cash and short-term investments, end of year $ 11,348 $ 31,003 $ 4,077
================================================================================================================================
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest $ 16,264 $ 24,259 $ 28,042
Income taxes 2,171 451 5,092
Supplemental information of noncash investing and financing activities:
In 2000, a $4,978 unsecured subordinated note was issued in conjunction with the
acquisition of assets.
================================================================================================================================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
Seneca Foods Corporation and Subsidiaries
(In thousands, except share amounts)
<CAPTION>
Preferred Stock
-------------------------------------------------
6% Class A 10% Participating
Cumulative Par Cumulative Par Convertible Par Accumulated
Value $.25 Value $.025 Value $.025 Class A Class B Additional Other Compre-
Callable at Par Convertible Stated Value Common Stock Common Stock Paid-In Comprehensive Retained hensive
Voting Voting $11.93 Par Value $.25 Par Value $.25 Capital Income Earnings Income(Loss)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares authorized 200,000 1,400,000 4,166,667 20,000,000 10,000,000
====================================================================================
Shares issued and outstanding:
March 31, 1998 200,000 807,240 -- 3,143,125 2,796,555
====================================================================================
March 31, 1999 200,000 807,240 3,885,869 3,480,719 2,791,017
====================================================================================
March 31, 2000 200,000 807,240 3,593,140 3,797,388 2,767,357
====================================================================================
----------------------------------------------------------------------------------------------------------------------------------
Balance March 31, 1997 $50 $ 20 $-- $786 $1,880 $5,913 $ 435 $84,652
Net loss -- -- -- -- -- -- -- (5,144) $ (5,144)
Cash dividends paid
on preferred stock -- -- -- -- -- -- -- (58) --
Net unrealized gain on
investments -- -- -- -- -- -- 591 -- 591
----------------------------------------------------------------------------------------------------------------------------------
Balance March 31, 1998 50 20 -- 786 1,880 5,913 1,026 79,450 $ (4,553)
========
Net earnings -- -- -- -- -- -- -- 5,163 $ 5,163
Cash dividends paid
on preferred stock -- -- -- -- -- -- -- (23) --
Equity issue -- -- 49,712 -- -- -- -- -- --
Preferred stock
conversion -- -- (3,349) 71 -- 3,278 -- -- --
Common stock
conversion -- -- -- -- (2) 2 -- -- --
Stock issuance -- -- -- 13 -- 747 -- -- --
Net unrealized loss on
investments -- -- -- -- -- -- (149) -- (149)
-----------------------------------------------------------------------------------------------------------------------------------
Balance March 31, 1999 50 20 46,363 870 1,878 9,940 877 84,590 $ 5,014
=======
Net earnings -- -- -- -- -- -- -- 4,320 $ 4,320
Cash dividends paid
on preferred stock -- -- -- -- -- -- -- (23) --
Preferred Stock
Conversion -- -- (3,493) 80 -- 3,413 -- -- --
Common Stock
Conversion -- -- -- -- (6) 6 -- -- --
Net unrealized gain
on investments -- -- -- -- -- -- 114 -- 114
----------------------------------------------------------------------------------------------------------------------------------
Balance March 31, 2000 $50 $20 $ 42,870 $950 $ 1,872 $13,359 $ 991 $ 88,887 $ 4,434
==================================================================================================================================
<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 25 plants and warehouses in seven states. The Company
markets branded and private label processed foods to retail customers and
institutional food distributors.
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. When customers, under the terms of specific
orders, request that the Company invoice goods and hold the goods for future
shipment, the Company recognizes revenue when legal title to the finished goods
inventory passes to the purchaser. Generally, the Company receives cash from the
purchaser when legal title passes.
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. The Company places
substantially all its interest-bearing investments with financial institutions
and monitors credit exposure. Cash and short-term investments in certain
accounts exceed the federal insured limit, however, the Company has not
experienced any losses in such accounts.
Cash and Short-Term Investments - The Company considers all highly liquid
instruments purchased with 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.
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.
<PAGE>
Notes to Consolidated Financial Statements (continued)
Earnings per Common Share
A reconciliation of basic earnings per share from continuing operations with
diluted earnings per share from continuing operations follows:
Years ended March 31, 2000 1999 1998
-------------------------------------------------------------------------------
(In thousands, except per share amounts)
Basic
Earnings (loss) from continuing operations $ 4,320 $ 1,420 $ (3,181)
Deduct preferred stock dividends paid 23 23 58
------------------------------------
Basic earnings (loss) $ 4,297 $ 1,397 $ (3,239)
===============================================================================
Weighted average common shares outstanding 6,498 6,082 5,940
===============================================================================
Basic earnings (loss) per share $ .66 $ .23 $ (.54)
===============================================================================
Diluted
Basic earnings (loss) $ 4,297 $ 1,397 $ (3,239)
Add dividends on convertible
preferred stock 20 20 --
---------------------------------------
Earnings applicable to common stock on a
diluted basis $ 4,317 $ 1,417 $ (3,239)
===============================================================================
Shares used in calculating earnings per
share above 6,498 6,082 5,940
Additional shares to be issued under full
conversion of preferred stock 3,727 2,396 --
---------------------------------------
Total shares for diluted 10,225 8,478 5,940
===============================================================================
Diluted earnings (loss) per share $ .42 $ .17 $ (.54)
===============================================================================
The additional shares and dividends were not considered in the 1998 diluted
calculation since diluting a loss is not allowed.
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. Impairment losses are recognized when the carrying value of
an asset exceeds its fair value. The Company regularly assesses all of its
long-lived assets for impairment. An impairment loss of $518,000 was recognized
in 2000 and was included in Other Income and Expenses (see Other Income and
Expenses, note 11). An impairment loss of approximately $3,354,000 was
recognized in 1999 of which $2,036,000 is included in Other Income and Expenses
(see Other Income and Expenses, note 11) and $1,318,000 is included in
discontinued operations. There was no impairment loss recognized in 1998.
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.
New Accounting Pronouncement - In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities". The Company does not use
derivative instruments nor does it engage in hedging activities. Therefore, this
standard will have no impact on the Company's reported financial position,
results of operations and cash flows.
Reclassifications - Certain previously reported amounts have been reclassified
to conform to the current period classification.
<PAGE>
Notes to Consolidated Financial Statements (continued)
2. Common Stock of Moog Inc.
Other assets include the Company's investment in the Class B Common Stock of
Moog Inc. totaling $2,264,000 and $2,086,000 at March 31, 2000 and 1999,
respectively, which is classified as an available-for-sale security and is
carried at fair value. There were no realized gains or losses in 2000, 1999 and
1998, and gross unrealized holding gains were $1,548,000, $1,379,000, and
$1,604,000, at March 31, 2000, 1999, and 1998, respectively.
<PAGE>
Notes to Consolidated Financial Statements (continued)
3. Lines of Credit
The Company obtains required short-term funds through bank borrowings. At March
31, 2000, the Company had $2,798,000 outstanding for letters of credit, a
committed revolving line of credit totaling $20,000,000, and uncommitted lines
of credit totaling $45,000,000. Subsequent to March 31, 2000, the Company
increased its uncommitted lines of credit to $80,000,000. The lines are
renewable annually at various dates and provide for loans of varying maturities.
There are no formal compensating balance arrangements with any of the banks.
As of March 31, 2000 and 1999, there were no amounts borrowed under lines of
credit. The Company had no short-term bank borrowings throughout fiscal 2000.
The weighted average interest rate on amounts borrowed during fiscal 1999 and
1998 was 8.01% and 7.88%, respectively.
<PAGE>
Notes to Consolidated Financial Statements (continued)
4. Long-Term Debt
<TABLE>
<CAPTION>
2000 1999
----------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Note payable to insurance company, 10.78%, due through 2005 $ 44,700 $ 44,700
Secured nonrecourse subordinated promissory note, 8.00%, due through 2009 64,583 68,083
Unsecured subordinated promissory note, 8.00%, due through 2009 4,978 --
Note payable to insurance company, 10.81%, due through 2009 46,250 50,000
Industrial Revenue Development Bonds, 5.62% and 5.60%, due through 2028 22,630 22,630
Industrial Revenue Development Bond, 5.69%, due through 2009 5,812 --
Other 1,339 1,467
--------------------------
190,292 186,880
Less current portion 7,824 7,347
--------------------------
$ 182,468 $ 179,533
==========================
</TABLE>
Long-term debt agreements contain various restrictive financial covenants, the
most restrictive of which requires the Company to maintain specific quarterly
levels of interest coverage. In addition, these agreements include a provision
that the Company may pay dividends on any class of stock only from consolidated
net earnings available for distribution. There were no earnings available for
distribution as of March 31, 2000.
The Company has four Industrial Revenue Bonds ("IRB's") totaling $22,630,000,
which are backed by direct pay letters of credit and unrelated to the industrial
development agency financing instruments discussed in Leases, note 5. The
interest rates in the table above reflect the direct pay letters of credit costs
and amortization of other related costs for those IRB's.
Debt repayment requirements for the next five fiscal years are:
(In thousands)
2001 $ 7,824
2002 18,217
2003 21,240
2004 21,276
2005 21,313
During 1999, the Company paid off $15,000,000 of its outstanding 9.17% notes
payable due 2004 and prepaid two annual principal installments of $8,400,000,
each due February 23 in 2000 and 2001, of its outstanding 10.78% note payable
due 2005. The prepayment penalty paid for the early extinguishment of the debt
totaled $1,786,000, before the applicable income tax benefit of $564,000, which
has been accounted for as a net extraordinary loss of $1,222,000.
<PAGE>
Notes to Consolidated Financial Statements (continued)
5. Leases
The Company leases a portion of its equipment and buildings. Capitalized leases
consist primarily of limited obligation special revenue bonds, which bear
interest rates from 3.55% to 4.75%. Other leases include non-cancelable
operating leases expiring at various dates through 2013.
Leased assets under capital leases consist of the following:
2000 1999
--------------------------------------------------------------------
(In thousands)
Land $ 67 $ 160
Buildings 1,033 1,792
Equipment 9,711 10,359
-------------------------
10,811 12,311
Less accumulated amortization 5,381 5,447
-------------------------
$ 5,430 $ 6,864
====================================================================
The following is a schedule by year of minimum payments due under leases as of
March 31, 2000:
Operating Capital
--------------------------------------------------------------------
(In thousands)
Years ending March 31:
2001 $ 4,912 $ 718
2002 4,403 717
2003 3,638 721
2004 3,240 718
2005 2,752 720
2006-2015 8,743 7,176
-----------------------
Total minimum payment required $27,688 $ 10,770
================================================
Less interest 2,880
---------
Present value of minimum lease payments 7,890
Amount due within one year 390
---------
Long-term capital lease obligations $ 7,500
================================================================
Aggregate continuing rental expense in 2000, 1999, and 1998 was $10,612,000,
$9,863,000, and $9,735,000, respectively.
<PAGE>
Notes to Consolidated Financial Statements (continued)
6. Income Taxes
The Company files a consolidated income tax return. The provision for income
taxes for continuing operations is as follows:
2000 1999 1998
----------------------------------------
(In thousands)
Current:
Federal $ 2,233 $405 $ (300)
State 413 100 105
--------------------------------------
2,646 505 (195)
--------------------------------------
Deferred:
Federal (59) 69 (1,551)
State (19) (17) (303)
--------------------------------------
(78) 52 (1,854)
--------------------------------------
Total income taxes $ 2,568 $ 557 $(2,049)
=====================================
At March 31, 2000, the Company has Alternative Minimum Tax Credits in the amount
of $5,290,000 to offset future years' regular tax expense, and Research and
Development Credits carryforwards in the amount of $301,000, expiring 2007 to
2014.
State net operating loss carryforwards of approximately $14,000,000, expiring
March 31, 2001 through March 31, 2118, are available to offset future state tax
expense.
A reconciliation of the expected U.S. statutory rate to the effective rate for
continuing operations follows:
2000 1999 1998
--------------------------------------------------------------------------
Computed (expected tax rate) 34.0% 34.0% (34.0)
Tax-exempt income (0.9) (11.3) --
State income taxes (net of
federal tax benefit) 3.7 8.5 (5.0)
Other 0.5 (3.0) (0.2)
-------------------------------------
Effective tax rate 37.3% 28.2% (39.2)%
==========================================================================
<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, 2000 and 1999:
2000 1999
---------------------------------------------------------------------
(In thousands)
Deferred tax liabilities:
Basis and depreciation difference $ 18,455 $ 19,160
Inventory valuation 724 1,448
Moog investment 557 502
----------------------------
19,736 21,110
----------------------------
Deferred tax assets:
Inventory valuation 948 1,508
Future tax credits 5,671 7,102
Net operating loss carryforwards 1,033 1,301
Employee benefits 1,827 1,526
Pension 1,934 2,147
Insurance 1,818 1,496
Deferred gain on sale/leaseback 1,218 1,300
Impairment 1,534 774
Other 182 362
----------------------------
16,165 17,516
----------------------------
Net deferred tax liability $ 3,571 $ 3,594
=====================================================================
Net current deferred tax assets of $4,812,000 as of March 31, 2000, and
$3,276,000 as of March 31, 1999, are recognized in the Consolidated Balance
Sheets. Also recognized are net non-current deferred tax liabilities of
$8,383,000 and $6,870,000 at March 31, 2000 and 1999, respectively.
<PAGE>
Notes to Consolidated Financial Statements (continued)
7. Stockholders' Equity
Preferred Stock - During September 1998, the Company completed an equity sale
that raised $49,998,000 before issuance costs of $286,000. This equity sale
consisted of a Rights Offering to the Company's common shareholders and a Stock
Purchase Agreement with certain investors. A new class of preferred stock ("New
Preferred Stock") was issued, which is convertible, participating, and has a $12
stated value, which is now $11.93 due to issue costs. The Rights Offering
consisted of a distribution payable to holders of the Company's Class A Common
Stock at a rate of 1/2 right for each share held to purchase the New Preferred
Stock at $12 per share. The shares of New Preferred Stock are convertible
immediately on a share-for-share basis into shares of Class A Common Stock.
Holders of the Company's common stock acquired 1,146,639 shares of new preferred
stock for a total investment of $13,759,000. Certain investors acquired a total
of 3,019,895 shares of New Preferred Stock for a total investment of $36,239,000
under the Stock Purchase Agreement. There were no dividends on this New
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 of Class A
and Class B 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
$.025 stated value and a $.025 par value. There are 2,633,333 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 - In September 1998, an amendment to the Company's Certificate of
Incorporation, which created the new class of preferred stock described above,
increased the number of authorized shares of Class A Common Stock from
10,000,000 to 20,000,000 shares. 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.
Unissued shares of common stock reserved for conversion privileges were 33,695
of Class A and Class B at March 31, 2000 and 1999. Additionally, there were
3,593,140 and 3,885,869 shares of Class A reserved for conversion of the New
Preferred Stock at March 31, 2000 and 1999, respectively.
<PAGE>
Notes to Consolidated Financial Statements (continued)
8. Retirement Plans
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.
The following tables provide a reconciliation of the changes in the plan's
benefit obligation and fair value of assets over the two-year period ended March
31, 2000, and a statement of the funded status as of March 31 of both years:
2000 1999
---------------------------------
Change in Benefit Obligation (In thousands)
Benefit obligation at beginning of year $ 26,787 $ 24,031
Service cost 1,781 2,030
Interest cost 1,843 1,701
Actuarial loss (2,631) 152
Benefit payments and expenses (1,125) (1,127)
----------------------------------------------------------------------------
Benefit obligation at end of year $ 26,655 $ 26,787
============================================================================
Change in Plan Assets
Fair value of plan assets at beginning of year $ 21,800 $ 26,881
Actual return (loss) on plan assets 2,698 (3,954)
Benefit payments and expenses (1,125) (1,127)
----------------------------------------------------------------------------
Fair value of plan assets at end of year $ 23,373 $ 21,800
============================================================================
Funded Status
Funded status at end of year $ (3,281) $ (4,987)
Unrecognized transition asset (3,266) (3,542)
Unrecognized prior service cost 219 313
Unrecognized (gain) loss (757) 2,560
----------------------------------------------------------------------------
Accrued benefit cost $ (7,085) $ (5,656)
============================================================================
The Plan holds the Company's common stock with a fair market value of
$1,759,000.
<PAGE>
Notes to Consolidated Financial Statements (continued)
8. Retirement Plan (continued)
The following table provides the components of net periodic benefit cost for the
plan for fiscal years 2000, 1999, and 1998:
2000 1999 1998
----------------------------------------------------------------------------
(In thousands)
Service cost $ 1,781 $ 2,030 $ 1,741
Interest cost 1,843 1,701 1,572
Expected return on plan assets (2,013) (2,499) (1,996)
Amortization of transition
(assets) obligation (276) (276) (276)
Amortization of prior
service cost 94 94 94
Amortization of net
(gain) loss - (149) 1
-----------------------------------------------------------------------------
Net periodic benefit cost $ 1,429 $ 901 $ 1,136
=============================================================================
The prior service costs are amortized on a straight-line basis over the average
remaining service period of active participants. Gains and losses in excess of
10% of the greater of the benefit obligation and the market-related value of
assets are amortized over the average remaining service period of active
participants.
The assumptions used in the measurement of the Company's benefit obligation are
shown in the following table:
2000 1999
---------------------------------------------------------------------------
Discount rate 7.80% 7.20%
Expected return on plan assets 9.50% 9.50%
Rate of compensation increase 5.00% 4.50%
The Company has an Employees' Savings Plan (401(k)) covering all employees who
meet certain age entry requirements and work a stated minimum number of hours
per year. Participants may make contributions up to the legal limit. The
Company's matching contributions are discretionary. Costs charged to operations
for the Company's matching contributions amounted to $761,000, $808,000, and
$811,000 in 2000, 1999, and 1998, respectively.
9. Fair Value of Financial Instruments
The carrying amounts and the estimated fair values of the Company's financial
instruments are summarized as follows:
2000 1999
------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------------------------------------------------------------------------
(In thousands)
Long-term debt, including
current portion $190,292 $187,140 $186,880 $ 191,363
Class B Common Stock
of Moog Inc. 2,264 2,264 2,086 2,086
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.
Class B Common Stock of Moog Inc. - Based on quoted market prices.
<PAGE>
Notes to Consolidated Financial Statements (continued)
10. Acquisitions
In 2000, the Company acquired certain assets of the Midwest private label canned
vegetable business from Agrilink Foods, Inc., a wholly-owned subsidiary of
Pro-Fac Cooperative, for approximately $48 million. The Company purchased a
plant and related equipment for $5 million in Arlington, Minnesota and
inventories of the acquired business for $43 million. The annual sales of this
business are approximately $73 million. The purchase price was partially funded
by a subordinated note for $5 million while the balance was paid in cash.
The fiscal 2000 and 1999 results of operations on a proforma basis, assuming the
Agrilink acquisition occurred at the beginning of the periods, are as follows:
2000 1999
-----------------------------------------------------------------------
(Unaudited)
(In thousands, except per share amounts)
Net sales $ 647,309 $ 649,225
=======================================================================
Net earnings from continuing operations
before extraordinary item $ 4,118 $ 1,107
=======================================================================
Basic net earnings from continuing
operations before extraordinary
item per share $ .63 $ .18
=======================================================================
In 1998, the Company completed two acquisitions. The first was the acquisition
of Aunt Nellie's Farm Kitchens from The Pillsbury Company, a subsidiary of
Diageo plc, for approximately $24 million. Aunt Nellie's Farm Kitchens produces,
markets, and sells fruit and vegetable products from plants in the Midwest and
its sales were approximately $50 million. The Company purchased the plants,
inventories, accounts receivable, and trademarks of the business. This
acquisition included $16 million of inventory and $8 million of property, plant,
and equipment, and was funded primarily out of working capital.
The second acquisition was the Comstock canned private label vegetable business
from Curtice Burns Foods, a wholly-owned subsidiary of Pro-Fac Cooperative,
along with the Blue Boy branded canned vegetable business. The Company purchased
two New York plants, related inventories, and certain trademarks. The companies
also formed a long-term strategic alliance, combining their New York
agricultural departments into one organization. The sales were approximately $40
million. The purchase price was approximately $29 million, which included $13
million of inventory and $16 million of property, plant, and equipment, and was
funded primarily out of working capital.
Each acquisition was accounted for under the purchase method and, accordingly,
the operating results of the acquired businesses have been included in the
consolidated operating results since the dates of acquisition.
<PAGE>
Notes to Consolidated Financial Statements (continued)
11. Other Income and Expenses
Other expense in 2000 consisted of the following: 1) a loss of $2,219,000 which
is related primarily to exiting a line of business; and 2) a gain on the sale of
the Chicopee, Massachusetts warehouse of $965,000.
Other income in 1999 consisted of the following: 1) a gain on the sale of land
in Rochester, Minnesota of $6,220,000; 2) a gain on the sale of an aircraft of
$650,000; and 3) an impairment loss of $2,036,000.
12. Sales Information
The Company sold $78,461,000 to one customer, representing 14% of net sales, in
1998. Also, the Company sold $209,872,000, $246,760,000 and $149,747,000,
representing 35%, 43% and 27% of net sales, to one customer in 2000, 1999 and
1998, respectively.
13. Segment Information
The Company manages its business on the basis of one reportable segment - the
processing and sale of vegetables. The Company markets its product almost
entirely in the United States. The Company has an Alliance Agreement with
Pillsbury whereby the Company processes canned and frozen vegetables for
Pillsbury under the Green Giant brand name. Pillsbury continues to be
responsible for all of the sales, marketing, and customer service functions for
the Green Giant products. In 2000, 1999, and 1998, the sale of Green Giant
vegetables account for 44%, 50%, and 49% of net sales. The following information
is presented in accordance with SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information,":
<TABLE>
<CAPTION>
Classes of similar products/services: 2000 1999 1998
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(In thousands)
Net Sales:
Green Giant vegetables $ 263,279 $ 289,946 $ 277,080
Canned vegetables 279,774 239,338 241,166
Frozen vegetables 27,156 20,446 19,283
Fruit and chip products 20,083 17,189 16,395
Flight operations 5,105 4,225 2,894
Other 9,559 5,049 3,708
-------------------------------------------------------------------------------------------------------
$ 604,956 $ 576,193 $ 560,526
=======================================================================================================
</TABLE>
14. Discontinued Operations
In December 1998, the Company sold a significant portion of its Juice Division
to Northland Cranberries, Inc., together with an exclusive license to market and
sell Seneca juice products, for $28,200,000 in cash plus the assumption of
certain liabilities. This transaction resulted in a pre-tax gain on the disposal
of $6,760,000, which was recognized during the Company's fourth quarter ended
March 31, 1999. This sale included plants in Dundee, New York; Mountain Home,
North Carolina; Jackson, Wisconsin; a warehouse in Eau Claire, Michigan; and a
receiving station in Portland, New York.
In January 1999, the Company completed the sale to Tree Top, Inc. of its
processing facility in Prosser, Washington together with its non-branded
specialty fruit concentrate business and an exclusive license to market and sell
the Company's branded applesauce. Tree Top paid approximately $29,000,000 in
cash. This transaction resulted in a pre-tax gain on the disposal of
$10,427,000, which was also recognized in the Company's fourth quarter ended
March 31, 1999.
As a result of these sales, the disposition of the Juice Business has been
accounted for as a discontinued operation. The consolidated financial statements
for 1998 have been restated to separately report discontinued operating results.
Net sales for the Juice Business were $121,290,000 in 1999 and $142,694,000 in
1998. Interest expense allocated to discontinued operations includes an
allocation of corporate interest expense and amounts directly related to the
discontinued business. The allocation of corporate interest expense was based,
in part, on a ratio of the net assets of the discontinued operations to the sum
of consolidated net assets and consolidated debt. The amounts allocated in 1999
and 1998 totaled $1,567,000 and $2,580,000 respectively.
<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, 2000 and 1999, and the related
consolidated statements of net earnings, stockholders' equity, and cash flows
for each of the three years in the period ended March 31, 2000. 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 auditing standards generally accepted
in the United States of America. 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, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
2000 in conformity with accounting principles generally accepted in the United
States of America.
DELOITTE & TOUCHE LLP
Rochester, New York
May 26, 2000
Notice of Annual Meeting
The 2000 Annual Meeting of Shareholders will be held on Friday, August 4, 2000,
beginning at 1:00 P.M. at the Company's facilities at 3736 South Main Street,
Marion, New York. A formal notice of the meeting together with a proxy statement
and proxy form will be mailed to shareholders of record as of June 16, 2000.
Additional Information
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 2000, as filed with the Securities and Exchange Commission, will be
provided by the Company to any shareholder who so requests in writing. Requests
should be sent to Philip G. Paras, Seneca Foods Corporation, 1162
Pittsford-Victor Road, Pittsford, New York 14534, or contact us via our web site
at http://www.senecafoods.com, or e-mail us at [email protected].
Forward-Looking Statements
Except for the historical information contained herein, the matters discussed in
this annual report are forward-looking statements as defined in the Private
Securities Litigation Reform Act (PSLRA) of 1995. The Company wishes to take
advantage of the "safe harbor" provisions of the PSLRA by cautioning that
numerous important factors which involve risks and uncertainties, including but
not limited to economic, competitive, governmental and technological factors
affecting the Company's operations, markets, products, services and prices, and
other factors discussed in the Company's filings with the Securities and
Exchange Commission, in the future, could affect the Company's actual results
and could cause its actual consolidated results to differ materially from those
expressed in any forward-looking statement made by, or on behalf of, the
Company.
<PAGE>
Shareholder Information and Quarterly Results
The Company's common stock is traded on The NASDAQ National Stock Market. The
3.8 million of Class A outstanding shares and 2.8 million Class B outstanding
shares are owned by 366 and 361 shareholders of record, respectively. The high
and low prices of the Company's common stock during each quarter of the past two
years are shown below.
Class A: 2000 1999
--------------------------------------------------------------
Quarter High Low High Low
--------------------------------------------------------------
First $15.50 $10.25 $17.13 $13.50
Second 13.75 12.50 14.50 12.00
Third 12.75 11.50 13.25 11.00
Fourth 11.94 10.69 15.25 10.00
Class B: 2000 1999
--------------------------------------------------------------
Quarter High Low High Low
--------------------------------------------------------------
First $14.75 $10.00 $16.75 $14.75
Second 13.88 10.50 14.75 12.00
Third 12.38 11.25 15.00 11.25
Fourth 11.94 10.75 14.00 10.38
The Company may pay dividends on common stock only from consolidated net
earnings available for distribution, which were none as of March 31, 2000.
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.
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, 2000:
Net sales $ 87,735 $ 181,451 $ 241,731 $ 94,039
Gross margin 9,496 9,943 13,645 14,024
Net earnings 35 325 2,212 1,748
Basic earnings per common share .00 .05 .34 .27
Diluted earnings per common share .00 .03 .22 .17
Year ended March 31, 1999:
Net sales $ 67,466 $ 176,792 $ 246,624 $ 85,311
Gross margin 7,574 10,596 9,491 9,854
Earnings (loss) from continuing operations before extraordinary (1,420) 796 (613) 2,657
item
Basic earnings (loss) from continuing operations before
extraordinary item per common share (.24) .13 (.10) .43
Diluted earnings (loss) from continuing operations before
extraordinary item per common share (.24) .11 (.10) .26
Net earnings (loss) (2,683) 283 459 7,104
Basic earnings (loss) per common share (.45) .05 .07 1.16
Diluted earnings (loss) per common share (.45) .04 .07 .69
</TABLE>
Earnings for the fourth quarter 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. The fourth quarter of 1999 includes
an extraordinary loss from debt extinguishment of $1,222,000 after income tax
benefit.
<PAGE>
