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 December 29, 2001 Commission File Number 0-1989
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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.)
3736 South Main Street, Marion, New York 14505
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code 716/385-9500
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1162 Pittsford-Victor Road, Pittsford, NY 14534
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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
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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, 2002
Common Stock Class A, $.25 Par 3,820,467
Common Stock Class B, $.25 Par 2,767,357
PART I FINANCIAL INFORMATION
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands of Dollars, Except Share Data)
12/29/01 3/31/01
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ASSETS
Current Assets:
Cash and Short-term Investments $ 12,281 $ 5,391
Accounts Receivable, Net 35,383 31,510
Inventories:
Finished Goods 196,967 178,415
Work in Process 15,563 13,297
Raw Materials 25,342 37,458
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237,872 229,170
Off-Season Reserve (Note 2) (45,576) -
Deferred Tax Asset 5,656 5,602
Refundable Income Taxes 189 -
Other Current Assets 1,267 1,308
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Total Current Assets 247,072 272,981
Property, Plant and Equipment, Net 160,623 167,450
Other Assets 2,452 3,802
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$410,147 $444,233
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ - $ 24,500
Accounts Payable 26,706 39,726
Accrued Expenses 26,962 26,423
Income Taxes Payable - 343
Current Portion of Long-Term Debt and Capital
Lease Obligations 19,441 18,622
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Total Current Liabilities 73,109 109,614
Long-Term Debt 167,122 164,251
Capital Lease Obligations 6,670 7,095
Deferred Income Taxes 7,041 7,132
Other Long-Term Liabilities 5,865 6,382
Stockholders' Equity:
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 42,624 42,671
Common Stock 2,827 2,825
Paid in Capital 13,601 13,555
Accumulated Other Comprehensive Income 977 961
Retained Earnings 90,241 89,677
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Stockholders' Equity 150,340 149,759
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$410,147 $444,233
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<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, except Share Data)
Three Months Ended
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12/29/01 12/30/00
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Net Sales $ 236,932 $ 248,109
Costs and Expenses:
Cost of Product Sold 223,964 238,525
Selling, General, and Administrative 5,325 6,498
Interest Expense 4,018 4,667
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Total Costs and Expenses 233,307 249,690
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Earnings (Loss) Before Income Taxes 3,625 (1,581)
Income Taxes 1,335 (465)
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Net Earnings (Loss) 2,290 (1,116)
================== =================
Basic Earnings (Loss) Per Common Share $ .35 $ (.17)
================= ================
Diluted Earnings (Loss) Per Common Share $ .22 $ (.17)
================= ================
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</FN>
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, except Share Data)
Nine Months Ended
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12/29/01 12/30/00
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Net Sales $ 546,425 $ 567,042
Costs and Expenses:
Cost of Product Sold 516,112 532,362
Selling, General, and Administrative 15,483 18,445
Other Expense (Income) 321 (1,151)
Interest Expense 13,543 13,744
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Total Costs and Expenses 545,459 563,400
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Earnings Before Income Taxes 966 3,642
Income Taxes 378 1,415
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Net Earnings $ 588 $ 2,227
================= ================
Basic Earnings Per Common Share $ .09 $ .34
================= ================
Diluted Earnings Per Common Share $ .06 $ .22
================= ================
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</FN>
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Nine Months Ended
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12/29/01 12/30/00
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Cash Flows from Operating Activities:
Net Earnings $ 588 $ 2,227
Adjustments to Reconcile Net Earnings
to Net Cash Provided by (Used in)
Operating Activities:
Depreciation and Amortization 18,287 17,827
Deferred Income Taxes (108) (2,021)
Gain on the Sale of Assets - (1,151)
Other Expense 321 -
Changes in Operating Assets
and Liabilities:
Accounts Receivable (3,873) 966
Inventories (8,702) (81,072)
Off-Season Reserve 45,576 43,036
Other Current Assets 41 (266)
Income Taxes (532) 749
Accounts Payable,
Accrued Expenses and Other (13,319) (19,981)
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Net Cash Provided by
(Used in) Operations 38,279 (39,686)
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Cash Flows From Investing Activities:
Additions to Property, Plant,
and Equipment (11,555) (11,448)
Capital Escrows 1,316 3,548
Proceeds from the Sale of Assets - 2,514
Disposals 95 166
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Net Cash Used in Investing
Activities (10,144) (5,220)
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Cash Flows From Financing Activities:
Notes Payable (24,500) 40,593
Long-Term Borrowing 8,079 -
Payments and Current Portion of Long-Term
Debt and Capital Lease Obligations (4,814) (4,275)
Other 14 14
Dividends (24) (24)
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Net Cash (Used in) Provided by
Financing Activities (21,245) 36,308
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Net Increase (Decrease) in Cash and
Short-Term Investments 6,890 (8,598)
Cash and Short-Term Investments,
Beginning of Period 5,391 11,348
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Cash and Short-Term Investments,
End of Period $ 12,281 $ 2,750
================== ==================
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</FN>
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
December 29, 2001
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 December 29, 2001 and results of
operations for the three and nine month periods ended, December 29, 2001
and December 30, 2000. All significant intercompany transactions and
accounts have been eliminated in consolidation. The March 31, 2001
balance sheet was derived from audited financial statements.
The results of operations for the nine month periods ended December 29,
2001 and December 30, 2000 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 2001 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 2001 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 on Moog, Inc. Stock. The following table provides the results for
the periods presented:
Nine Months Ended December
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2001 2000
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Net Earnings $588 $2,227
Other Comprehensive Earnings, Net of Tax:
Net Unrealized Gain (Loss) Change on
Moog, Inc. Stock 16 (32)
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Comprehensive Earnings $604 $2,195
======================
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
December 29, 2001
Results of Operations:
Sales:
Total Sales reflect a decrease of 4.5% for the third quarter versus 2000. The
Company's Alliance business sales dollars decreased by 10.6%. Non-Alliance
vegetable sales dollars increased by 3.3% and sales quantities decreased 1.8%.
Costs and Expenses:
The following table shows costs and expenses as a percentage of sales:
Three Months Ended Nine Months Ended
12/29/01 12/30/00 12/29/01 12/30/00
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Cost of Product Sold 94.5% 96.1% 94.4% 94.0%
Selling 1.9 2.1 2.3 2.6
Administrative 0.4 0.5 0.5 0.6
Other Expense (Income) 0.0 0.0 0.1 (0.2)
Interest Expense 1.7 1.9 2.5 2.4
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98.5% 100.6% 99.8% 99.4%
====================================================
Higher selling prices as compared to the prior year quarter, especially in the
Branded and Private Label Retail businesses, were a major contributing factor in
higher profitability in the current year quarter.
Income Taxes:
The effective tax rate used in 2002 and 2001 is 39%.
Financial Condition:
The financial condition of the Company is summarized in the following table and
explanatory review (In Thousands):
As of and As of and
For the Quarter For the Year
Ended December Ended March
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2001 2000 2001 2000
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Working Capital Balance $173,963 $173,715 $163,367 $168,972
Quarter Change 4,500 (4,917) - -
Notes Payable - 40,593 24,500 -
Long-Term Debt 173,792 185,238 171,346 189,968
Current Ratio 3.38:1 2.63:1 2.49:1 3.05:1
The change in the Working Capital for the December 2001 quarter from the
December 2000 quarter is largely due to higher earnings in the current year
quarter than the prior year quarter ($2,290,000 earnings as compared to
$1,116,000 loss last year) and the reduction of deferred taxes last year due to
a payment of $2,000,000 to the Internal Revenue Service for an examination
adjustments related to timing issues.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
December 29, 2001
During the second quarter of the current year, a $1,500,000 mortgage was issued
to finance the purchase of a warehouse in Mayville, Wisconsin.
The following addresses the recently issued SEC disclosure guidelines entitled,
"Commission Statement about Management's Disclosure and Analysis of Financial
Condition and Results of Operations." The Company has an Alliance Agreement with
Pillsbury (a subsidiary of General Mills, Inc.), 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. For the nine months
ended December 29, 2001, the Company sold $21 million of canned and frozen
vegetables to Pillsbury, which compares to $40 million sold to Pillsbury for the
nine months ended December 30, 2000. In addition, for the nine months ended
December 29, 2001, the Company sold for cash, $229 million of Green Giant
vegetables to a special purpose entity (SPE), versus $241 million sold to the
SPE for the nine months ended December 30, 2000. At the time of the sale of the
Green Giant vegetables to the SPE, the aforementioned finished goods inventory
was complete, ready for shipment and segregated from the Company's other
finished goods inventory. Further, the Company had performed all of its
obligations with respect to the sale of the specified Green Giant finished goods
inventory.
The SPE is not required to be consolidated with the Company's financial
statements due, in part, to several reasons:
- - The majority owner of the SPE has control of the SPE and is an independent
third party who has made a substantial capital contribution in the SPE. In
addition, the equity capital of the SPE is always in excess of the minimum
guidelines for such an entity.
- - The majority owner of the SPE has substantial risks and rewards of
ownership of the assets of the SPE. The equity investment of the majority
owner is subordinate to any debt holders.
- - The SPE activities are not on the exclusive behalf of the Company.
The Company expects to continue selling product to the SPE through, at least,
December 2002. Cash generated from these sales together with its available
credit resources, will be sufficient for its anticipated working capital
requirements through fiscal 2003.
See Consolidated Condensed Statements of Cash Flows for further details.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
December 29, 2001
Quantitative and Qualitative Disclosures about Market Risk:
The Company has not experienced any material changes in Market Risk since our
March 31, 2001 report.
Forward-Looking Statements
Except for the historical information contained herein, the matters discussed in
this 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.
Recently Issued Accounting Standards
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
142, Goodwill and Other Intangible Assets. Since the Company does not have
goodwill or other intangible assets on its balance sheet, this Statement is not
expected to have a material impact on its consolidated financial statements.
In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 is effective for
years beginning after June 15, 2002. The Company is in the process of evaluating
the impact of implementing SFAS No. 143.
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment of Long-Lived Assets, which supersedes SFAS No. 121, Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, and
the accounting provisions of APB No. 30, Reporting the Results of
Operations-Reporting and Effects of the Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for
the disposal of a segment of a business. SFAS No. 144 is effective for years
beginning after December 15, 2001. SFAS No. 144 retains many of the provisions
of SFAS No. 121, but addresses certain implementation issues associated with the
Statement. The Company is currently evaluating the impact of this Statement.
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
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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)
Reports on Form 8-K - None during the quarter.
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
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(Company)
/s/Kraig H. Kayser
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February 12, 2002 Kraig H. Kayser
President and
Chief Executive Officer
/s/Jeffrey L. Van Riper
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February 12, 2002 Jeffrey L. Van Riper
Controller and
Chief Accounting Officer