Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OF 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 28, 1996 Commission File Number 0-1989
Seneca Foods Corporation
(Exact name of registrant as specified in its charter)
New York 16-0733425
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
1162 Pittsford-Victor Road, Pittsford, New York 14534
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 716/385-9500
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Check mark indicates whether registrant (1) has filed all reports required to be
filed by Section 13 of 15(d) of the Securities Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
The number of shares outstanding of each of the issuer's classes of common stock
at the latest practical date are:
Class Shares Outstanding at October 31, 1996
Common Stock Class A, $.25 Par 3,143,125
Common Stock Class B, $.25 Par 2,796,555
PART I FINANCIAL INFORMATION
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands of Dollars)
9/28/96 3/31/96
------- -------
ASSETS
Current Assets:
Cash and Short-term Investments $ 1,029 $ 1,297
Common Stock of Moog Inc. - 12,863
Accounts Receivable, Net 55,382 51,118
Inventories:
Finished Goods 369,155 138,953
Work in Process 14,719 63,730
Raw Materials 31,013 27,076
------- -------
414,887 229,759
Off-Season Reserve (Note 3) (54,189) -
Deferred Tax (Net) 53 53
Refundable Income Taxes 1,901 3,503
Other Current Assets 565 1,041
-------------- ---------------
Total Current Assets 419,628 299,634
Property, Plant and Equipment, Net 223,819 222,720
Common Stock of Moog Inc. 1,261 1,048
Other Assets 401 457
-------------- ---------------
$645,109 $523,859
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 121,780 $ 113,000
Accounts Payable 144,196 48,930
Accrued Expenses 35,440 28,253
Current Portion of Long-Term Debt and Capital
Lease Obligations 177 690
--------------- ---------------
Total Current Liabilities 301,593 190,873
Long-Term Debt 223,733 216,928
Capital Lease Obligations 9,826 9,646
Deferred Income Taxes 11,930 11,414
Deferred Gain 4,380 4,059
10% Preferred Stock, Series A, Voting, Cumulative,
Convertible, $.025 Par Value Per Share 10 10
10% Preferred Stock, Series B, Voting, Cumulative,
Convertible, $.025 Par Value Per Share 10 10
6% Preferred Stock, Voting, Cumulative, $.25 Par Value 50 50
Common Stock 2,666 2,666
Paid in Capital 5,913 5,913
Net Unrealized Gain on Available-For-Sale Securities 340 5,169
Retained Earnings 84,658 77,121
--------------- ---------------
Stockholders' Equity 93,647 90,939
--------------- ---------------
$645,109 $ 523,859
======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, except Share Data)
Three Months Ended
9/28/96 9/30/95
------- -------
Net Sales $ 159,521 $ 131,979
Other Income (See Notes) 1,640 -
------------------ -----------------
161,161 131,979
Costs and Expenses:
Cost of Product Sold 143,194 118,324
Selling, General, and Administrative 6,669 8,185
Interest Expense 7,246 6,820
Nonrecurring Charge (See Notes) - 15,078
------------------ -----------------
Total Costs and Expenses 157,109 148,407
------------------ -----------------
Earnings (Loss) Before Income Taxes 4,052 (16,428)
Income Taxes 1,342 (6,079)
------------------ -----------------
Net Earnings (Loss) $ 2,710 $ (10,349)
================== =================
Net Earnings Applicable to
Common Stock 2,704 (10,355)
Weighted Average Common
Shares Outstanding 5,939,680 5,593,110
Primary and Fully Diluted Earnings Per
Share of Common Stock (Exhibit II):
Net Earnings(Loss) $ .46 $ (1.85)
================== ===============
<FN>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
</FN>
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, except Share Data)
Six Months Ended
9/28/96 9/30/95
------- -------
Net Sales $ 283,215 $ 213,924
Other Income (See Notes) 9,141 -
------------------ -----------------
292,356 213,924
Costs and Expenses:
Cost of Product Sold 252,600 186,853
Selling, General, and Administrative 13,253 15,968
Interest Expense 14,727 12,365
Nonrecurring Charge (See Notes) - 15,078
------------------ -----------------
Total Costs and Expenses 280,580 230,264
------------------ -----------------
Earnings (Loss) Before Income Taxes 11,776 (16,340)
Income Taxes 4,239 (6,046)
------------------ -----------------
Net Earnings (Loss) $ 7,537 $ (10,294)
================== =================
Net Earnings Applicable to
Common Stock 7,525 (10,306)
Weighted Average Common
Shares Outstanding 5,939,680 5,593,110
Primary and Fully Diluted Earnings Per
Share of Common Stock (Exhibit II):
Net Earnings (Loss) $ 1.27 $ (1.84)
================== ===============
<FN>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
</FN>
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Six Months Ended
9/28/96 9/30/95
------- -------
Cash Flows From Operating Activities:
Net Earnings (Loss) $ 7,537 $ (10,294)
Adjustments to Reconcile Net Earnings
(Loss) to Net Cash Used by
Operating Activities:
Depreciation and Amortization 12,701 10,358
Deferred Income Taxes 523 (35)
Gain on the Sale of Assets (9,141) -
Changes in Working Capital:
Accounts Receivable (4,264) (8,464)
Inventories (185,128) (130,993)
Off-Season Reserve 54,189 (36,631)
Other Current Assets 476 43
Income Taxes 4,054 (6,864)
Accounts Payable and
Accrued Expenses 102,774 108,549
------------------ -----------------
Net Cash Used by Operations (16,279) (74,331)
------------------ -----------------
Cash Flows From Investing Activities:
Additions to Property, Plant,
and Equipment (9,275) (59,409)
Proceed from the Sale of Assets 15,511 -
Disposals of Property, Plant,
and Equipment 30 33
------------------ -----------------
Net Cash Provided (Used) by Investing
Activities 6,266 (59,376)
------------------ -----------------
Cash Flows From Financing Activities:
Long-Term Borrowing 1,745 9,258
Notes Payable 8,780 109,100
Payments and Current Portion of Long-Term
Debt and Capital Lease Obligations (836) (326)
Other 56 (111)
Dividends - (12)
------------------ -----------------
Net Cash Provided by
Financing Activities 9,745 117,909
------------------ -----------------
Net Decrease in Cash and Short-
Term Investments (268) (15,798)
Cash and Short-Term Investments,
Beginning of Period 1,297 26,538
------------------ -----------------
Cash and Short-Term Investments,
End of Period $ 1,029 10,740
================== =================
<FN>
An addition to the secured nonrecourse subordinated promissory note of
$7,558,000 occurred in the second quarter of 1997 in conjunction with the
acquisition of additional Green Giant assets. The accompanying notes are an
integral part of these consolidated condensed financial statements.
</FN>
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 28, 1996
1. Consolidated Condensed Financial Statements
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, which are normal
and recurring in nature, necessary to present fairly the financial
position of the Registrant as of September 28, 1996 and March 31, 1996
and results of operations for the three and six month periods ended
September 28, 1996 and September 30, 1995 and Cash Flows for the six
month periods ended September 28, 1996 and September 30, 1995. All
significant intercompany transactions and accounts have been eliminated
in consolidation. The March 31, 1996 balance sheet was derived from
audited financial statements.
The results of operations for the three and six month periods ended
September 28, 1996 and September 30, 1995 are not necessarily indicative
of the results to be expected for the full year.
The accounting policies followed by the Registrant are set forth in Note
1 to the Registrant's financial statements in the 1996 Seneca Foods
Corporation Annual Report and 10-K.
Other footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
condensed financial statements be read in conjunction with the financial
statements and notes included in the Registrant's March 31, 1996
financial report.
2. Primary earnings per share are based on the weighted average number of
common shares outstanding, as the effect of common stock equivalents is
immaterial. The difference between primary and fully diluted earnings
per share is immaterial.
3. Off-Season Reserve is the excess of absorbed expenses over incurred
expenses to date. The seasonal nature of the Registrant's Food
Processing business results in a timing difference between expenses
(primarily overhead expenses) incurred and absorbed into product cost.
All Off-Season Reserve balances are zero at fiscal year end.
4. The Registrant issued a stock split in the form of a dividend during
1996. This has been reflected in the prior year of these financial
statements as if it had occurred at the beginning of the year.
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
September 28, 1996
5. The prior year second quarter results include a nonrecurring charge of
$15,078,000, before income tax benefit, due to a combination of start-up
costs related to the Pillsbury Alliance and severe drought conditions
that New York State suffered during the entire summer.
6. During the first quarter, the Registrant sold its investment in Moog,
Inc. Class A Common Stock back to Moog. This resulted in
a Pre-Tax gain of $7,501,000.
7. During the second quarter, the Registrant sold its Clifton Park, New
York facility for cash resulting in a gain of $1,640,000 before income
tax expense. The Registrant had leased this facility to a third party.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION RESULTS OF OPERATIONS
September 28, 1996
Results of Operations:
Sales:
Sales reflect an increase of 20.9% for the second quarter and 32.4% for the
comparable six month period, versus 1995. The higher sales, in large part, are
due to higher canned vegetables quantities sold than the previous period.
Costs and Expenses:
The following table shows cost and expenses as a percentage of sales:
Three Months Ended Six Months Ended
9/28/96 9/30/95 9/28/96 9/30/95
------- ------- ------- -------
Cost of Product Sold 89.8% 89.6% 89.2% 87.3%
Selling 3.2 4.5 3.6 5.5
Administrative 1.0 1.7 1.1 2.0
Interest Expense 4.5 5.2 5.2 5.8
Nonrecurring Charge - 11.4 - 7.0
---------------------------------------------------
98.5% 112.4% 99.1% 107.6%
====================================================
Higher Cost of Product Sold percentages (i.e. lower Gross Margins) and lower
Selling percentages reflect, in part, higher proportion of vegetable sales under
the Pillsbury Alliance. Refer to the footnotes for the discussion of the
Nonrecurring Charge.
Income Taxes:
The effective tax rate used in fiscal 1997 is 36% and in fiscal 1996 it is 37%.
Financial Condition:
The financial condition of the Registrant is summarized in the following table
and explanatory review (In Thousands):
For the Quarter For the Year
Ended September Ended March
1996 1995 1996 1995
---- ---- ---- ----
Working Capital Balance $118,035 $86,621 $108,761 $136,342
Quarter Change 10,116 (13,662) - -
Inventory 414,887 336,659 229,759 138,113
Notes Payable 121,780 109,100 - -
Long-Term Debt 233,559 234,701 226,574 221,480
Current Ratio 1.39:1 1.32:1 1.57:1 3.21:1
Inventory (Average) Turnover 1.2 1.6 2.0 2.2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION RESULTS OF OPERATIONS
September 28, 1996
The change in the Working Capital for the quarter from the prior year is largely
due to acquisition of Green Giant assets in the prior year and the capital
expenditure program needed for the Registrant's plants to take on some of the
canned vegetable volume added by the acquisition.
Inventory is $78 million greater than the same month in the prior year largely
due to the larger vegetable pack than the prior year. The increase was expected
as the Registrant is now producing Pillsbury's green bean requirements. In
addition, unlike the prior year, the pack budgets were met this year.
As part of the Alliance with Pillsbury (see 1996 Annual Report for details),
Pillsbury takes Green Giant inventory as it needs it or at least by the
take-or-pay date (varies by commodity).
The Registrant was in compliance with its debt covenants related to Short-Term
and Long-Term Debt.
See Consolidated Condensed Statements of Cash Flows for further details.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults on Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 4 - (4a) Instrument defining the rights of
any holder of Long-Term Debt related to the Note
Agreement by and among SENECA FOODS CORPORATION,
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA and
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY as
amended by Consent under Note Agreement as Exhibit
4a filed hereto.
(b) Exhibit 4 - (4b) Instrument defining the rights of
any holder of any holder of Long-Term Debt:
Supplementary Agreement dated October 2, 1996 made by
Seneca Foods Corporation, The Pillsbury Company and
Grand Metropolitan Incorporated related to a First
Restated and Amended Alliance Agreement as amended by
Exhibit 4b filed hereto.
(c) Exhibit 11 - (11) Computation of earnings per share
(d) Exhibit 27 - (27) Financial Data Schedules
(e) Reports on Form 8-K - None during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Seneca Foods Corporation
(Registrant)
/s/Kraig H. Kayser
-----------------------
November 13, 1996 Kraig H. Kayser
President and
Chief Executive Officer
/s/Jeffrey L. Van Riper
------------------------
November 13, 1996 Jeffrey L. Van Riper
Controller and
Chief Accounting Officer