-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NRFdFIXITkB18UtFWyT0N//wtuvMNeyOl4CnMePdZ9b0pWUorGon3ylwM87ibh0Z FNMXfNsfHyA/p8wsCxIQ7A== 0000088948-03-000036.txt : 20031112 0000088948-03-000036.hdr.sgml : 20031111 20031112151121 ACCESSION NUMBER: 0000088948-03-000036 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20030927 FILED AS OF DATE: 20031112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SENECA FOODS CORP /NY/ CENTRAL INDEX KEY: 0000088948 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FRUITS, VEG & PRESERVES, JAMS & JELLIES [2033] IRS NUMBER: 160733425 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01989 FILM NUMBER: 03993346 BUSINESS ADDRESS: STREET 1: 3736 SOUTH MAIN STREET CITY: MARION STATE: NY ZIP: 14534 BUSINESS PHONE: 315 926 8100 MAIL ADDRESS: STREET 1: 3736 SOUTH MAIN STREET CITY: MARION STATE: NY ZIP: 14505 FORMER COMPANY: FORMER CONFORMED NAME: PIERCE S S COMPANY INC DATE OF NAME CHANGE: 19861210 FORMER COMPANY: FORMER CONFORMED NAME: SENECA FOODS CORP DATE OF NAME CHANGE: 19780425 FORMER COMPANY: FORMER CONFORMED NAME: SENECA GRAPE JUICE CORP DATE OF NAME CHANGE: 19710419 10-Q 1 a10q0903.txt 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 September 27, 2003 Commission File Number 0-1989 ------------------ ------ Seneca Foods Corporation ------------------------ (Exact name of Company as specified in its charter) New York 16-0733425 -------- ---------- (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 3736 South Main Street, Marion, New York 14505 ---------------------------------------- ----- (Address of principal executive offices) (Zip Code) Company's telephone number, including area code 315/926-8100 ------------ Not Applicable -------------- Former name, former address and former fiscal year, if changed since last report Check mark indicates whether Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange 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 ------ ------- Indicate by check mark whether the Company is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 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, 2003 ----- -------------------------------------- Common Stock Class A, $.25 Par 3,918,880 Common Stock Class B, $.25 Par 2,764,005 PART I ITEM 1 FINANCIAL INFORMATION SENECA FOODS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands of Dollars)
9/27/03 3/31/03 ------- ------- ASSETS Current Assets: Cash and Cash Equivalents $ 4,697 $ 64,984 Accounts Receivable, Net 70,906 31,799 Inventories: Finished Goods 396,495 88,769 Work in Process 45,845 13,911 Raw Materials 30,968 38,969 ------- ------- 473,308 141,649 Off-Season Reserve (Note 2) (61,784) - Deferred Income Tax Asset, Net 3,300 3,300 Assets Held For Sale 3,578 - Refundable Income Taxes 1,225 715 Other Current Assets 2,975 1,254 -------------- --------------- Total Current Assets 498,205 243,701 Property, Plant and Equipment, Net 188,727 132,969 Other Assets 6,531 2,870 -------------- --------------- Total Assets $693,463 $379,540 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes Payable $ 26,674 $ - Accounts Payable 204,198 22,730 Accrued Expenses 54,999 25,602 Current Portion of Long-Term Debt and Capital Lease Obligations 21,021 22,987 --------------- --------------- Total Current Liabilities 306,892 71,319 Long-Term Debt 173,162 127,107 Capital Lease Obligations 7,140 6,230 Deferred Income Tax Liability 10,883 9,023 Other Long-Term Liabilities 11,990 6,497 Commitments - - 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, $12.00 Stated Value 41,462 41,586 Convertible, Participating Preferred Stock, $15.50 Stated Value 15,000 - Common Stock 2,852 2,849 Paid in Capital 15,803 14,616 Accumulated Other Comprehensive Income 818 422 Retained Earnings 107,391 99,821 --------------- --------------- Stockholders' Equity 183,396 159,364 --------------- --------------- Total Liabilities and Stockholders' Equity $693,463 $379,540 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS (Unaudited) (In Thousands, except Share Data)
Three Months Ended ------------------ 9/27/03 9/28/02 ------- ------- Net Sales $ 248,194 $ 183,806 Costs and Expenses: Cost of Product Sold 228,207 171,632 Selling, General, and Administrative 9,491 4,657 Other Expense - 620 Interest Expense 4,087 3,578 ------------------ ----------------- Total Costs and Expenses 241,785 180,487 ------------------ ----------------- Earnings Before Income Taxes 6,409 3,319 Income Taxes 2,499 1,229 ------------------ ----------------- Net Earnings $ 3,910 $ 2,090 ================= ================ Basic: Earnings Per Common Share (2002 restated - Note 6) $ .35 $ .21 ================= ================ Diluted: Earnings Per Common Share $ .35 $ .20 ================= =============== The accompanying notes are an integral part of these condensed consolidated financial statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS (Unaudited) (In Thousands, except Share Data)
Six Months Ended ---------------- 9/27/03 9/28/02 ------- ------- (Continued) Net Sales $ 399,490 $ 307,061 Costs and Expenses: Cost of Product Sold 363,942 283,121 Selling, General, and Administrative 15,621 9,487 Other Expense - 620 Interest Expense 7,498 7,240 ------------------ ----------------- Total Costs and Expenses 387,061 300,468 ------------------ ----------------- Earnings Before Income Taxes 12,429 6,593 Income Taxes 4,847 2,571 ------------------ ----------------- Net Earnings $ 7,582 $ 4,022 ================= ================ Basic: Earnings Per Common Share (2002 restated - Note 6) $ .70 $ .39 ================= ================ Diluted: Earnings Per Common Share $ .70 $ .39 ================= ================ The accompanying notes are an integral part of these condensed consolidated financial statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands)
Six Months Ended ----------------- 9/27/03 9/28/02 ------- ------- Cash Flows From Operating Activities: Net Earnings $ 7,582 $ 4,022 Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: Depreciation and Amortization 14,022 11,489 Deferred Income Taxes 1,649 1,851 Impairment Provision - 620 Changes in Working Capital: Accounts Receivable (15,030) (4,582) Inventories (244,009) (131,038) Off-Season Reserve 61,784 46,046 Other Current Assets (1,659) (71) Refundable Income Taxes (510) 582 Accounts Payable, Accrued Expenses, and Other Liabilities 178,632 109,190 ------------------ ----------------- Net Cash Provided by Operating Activities 2,461 38,109 ------------------ ----------------- Cash Flows From Investing Activities: Acquisition (113,691) - Proceeds from the Sale of Assets 46,077 - Cash Received with Acquisition 2,560 - Additions to Property, Plant, and Equipment (8,685) (1,499) ------------------ ----------------- Net Cash Used in Investing Activities (73,739) (1,499) ------------------ ----------------- Cash Flows From Financing Activities: Proceeds from Issuance of Long-Term Debt 42,500 - Net Borrowings on Notes Payable 1,299 - Payments of Long-Term Debt and Capital Lease Obligations (32,976) (842) Other 180 9 Dividends (12) (12) ------------------ ----------------- Net Cash Provided by (Used in) Financing Activities 10,991 (845) ------------------ ----------------- Net (Decrease) Increase in Cash and Cash Equivalents (60,287) 35,765 Cash and Cash Equivalents, Beginning of Period 64,984 24,973 ------------------------------------------ Cash and Cash Equivalents, End of Period $ 4,697 $ 60,738 ================== ================== Supplemental information on non-cash investing and financing activities: $16.1 million of Preferred Stock was issued in partial consideration for the CPF acquisition. The Company assumed $9.1 million of long-term debt related to the CPF acquisition (see Note 5). The accompanying notes are an integral part of these condensed consolidated financial statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In Thousands) September 27, 2003 1. Condensed Consolidated Financial Statements In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which are normal and recurring in nature, necessary to present fairly the financial position of the Company as of September 27, 2003 and results of its operations and its cash flows for the interim periods presented. All significant intercompany transactions and accounts have been eliminated in consolidation. The March 31, 2003 balance sheet was derived from audited financial statements. The results of operations for the three and six month periods ended September 27, 2003 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 Consolidated financial statements in the 2003 Seneca Foods Corporation Annual Report and Form 10-K/A. Other footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company's 2003 Annual Report and Form 10-K/A. 2. 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, which essentially represent a contra-inventory account, are zero at fiscal year end. Depending on the time of year, Off-Season Reserve is either the excess of absorbed expenses over incurred expenses to date or the excess of incurred expenses over absorbed expenses to date. Other than the first quarter of each year, absorbed expenses exceed incurred expenses due to timing of production. 3. Comprehensive income consisted solely of Net Earnings, and net unrealized gains on securities classified as available-for-sale. The following table provides the results for the periods presented: Six Months Ended ---------------- 9/27/03 9/28/02 ------- ------- Net Earnings $7,582 $4,022 Other Comprehensive Earnings, Net of Tax: Net Unrealized Gains on Investment 396 (94) ------------------- Comprehensive Earnings $7,978 $3,928 =================== 4. Recently issued accounting standards have been considered by the Company and are not expected to have a material effect on the Company's financial position or results of operations. 5. On May 27, 2003, the Company completed its acquisition of 100% of the membership interest in Chiquita Processed Foods, L.L.C. ("CPF") from Chiquita Brands International, Inc. The primary reason for the acquisition was to acquire additional production capacity in the Canned Vegetable business. The purchase price totaled $126.1 million plus the assumption of certain liabilities. This acquisition was financed with cash, proceeds from a new $200 million revolving credit facility, and $16.1 million of the Company's Participating Convertible Preferred Stock. The Preferred Stock was valued at $16.60 per share based on the market value of the Class A Common Stock around the time the acquisition was announced. The new $200 million revolving credit facility has a five-year term. The Preferred Stock is convertible into the Company's Class A Common Stock on a one-for-one basis. In the second quarter of 2004, the Company refinanced $42.5 million of outstanding debt under the revolving credit facility with new term debt from an insurance company. The new term debt from the insurance company of $42.5 million, when combined with the refinancing of existing insurance company debt of $32.5 million, has an interest rate of 8.03%, a fifteen year amortization and a ten year term. As part of this acquisition, the Company assumed seasonal notes payable from the CPF revolving credit facility of $25.4 million which was paid off at the time of acquisition with proceeds from the new $200 million revolving credit facility. The Company also assumed $35.9 million of CPF long-term debt and capital lease obligations, of which $26.8 million was paid off at the time of acquisition with proceeds from the new $200 million revolving credit facility. The remaining long-term debt principally involves two Industrial Revenue Development Bonds totaling $5.5 million and consisting of a $3 million Pickett, Wisconsin issue due on June 1, 2005 with an interest rate of 7.75% and a $2.5 million Walla Walla, Washington issue due on September 1, 2005 with an interest rate of 7.75%. The balance of the debt acquired, totaling $3.6 million, has interest rates ranging from 1.9% to 9% and is due through 2011. The Company's statement of net earnings for the six months ended September 27, 2003 includes four months of the CPF acquired operations. A pro forma income statement as if the operations were acquired at the beginning of the periods presented follows: Three Months Ended ------------------ 9/27/03 9/28/02 ------- ------- Net Sales $248,194 $278,934 Cost of Product Sold 228,207 258,613 Selling, General, and Administrative 9,491 11,376 Interest Expense 4,087 4,603 Other Expense (Income) - 623 ---------------------- Total Costs and Expenses 241,785 275,215 Earnings From Continuing Operations Before Income Taxes 6,409 3,719 Income Taxes 2,499 1,385 ---------------------- Net Earnings From Continuing Operations 3,910 2,334 ====================== Basic Earnings Per Share From Continuing Operations $ 0.35 $ 0.23 ====================== Diluted Earnings Per Share From Continuing Operations $ 0.35 $ 0.23 ====================== Six Months Ended ---------------- 9/27/03 9/28/02 ------- ------- Net Sales $453,972 $489,475 Cost of Product Sold 414,872 451,863 Selling, General, and Administrative 19,926 24,524 Interest Expense 8,348 9,463 Other Expense (Income) 1,882 (332) ---------------------- Total Costs and Expenses 445,028 485,518 Earnings From Continuing Operations Before Income Taxes 8,944 3,957 Income Taxes 3,488 1,543 ---------------------- Net Earnings From Continuing Operations 5,456 2,414 ====================== Basic Earnings Per Share From Continuing Operations $ 0.50 $ 0.24 ====================== Diluted Earnings Per Share From Continuing Operations $ 0.50 $ 0.24 ====================== The Company sold three former Chiquita Processed Foods plants and related assets to Lakeside Foods, Inc. on June 17, 2003. The Company sold one additional plant of Chiquita Processed Foods and related assets to Lakeside Foods, Inc. on August 6, 2003. The aforementioned sales to Lakeside Foods generated $47 million in cash proceeds, which was used to pay down debt. The allocation of purchase price is preliminary and is subject to change as additional information regarding the fair value of assets acquired and liabilities assumed is obtained. 6. Earnings per Share-Subsequent to the issuance of its condensed consolidated financial statements for the three and six month periods ended September 28, 2002, the Company determined that it should have included convertible participating preferred stock in its calculation of basic earnings per common share under the if-converted method. As a result, the accompanying condensed consolidated financial statements for the three and six months ended September 28, 2002 have been restated from the amounts previously reported to reduce basic earnings per common share for the three and six month periods ended September 28, 2002 from $.32 to $.21 and $.61 to $.39, respectively.
Three Months Ended Six Months Ended ------------------ ---------------- 9/27/03 9/28/02 9/27/03 9/28/02 ------- ------- ------- ------- Basic Net Earnings Applicable to Common Stock (In thousands except per share data): Net Earnings $ 3,910 $ 2,090 $ 7,582 $ 4,022 Deduct Preferred Cash Dividends 6 6 12 12 -------------------------------------------------------------------- Net Earnings Applicable to Common Stock $ 3,904 $ 2,084 $ 7,570 $ 4,010 ==================================================================== Weighted Average Common Shares Outstanding 6,683 6,591 6,679 6,589 Weighted Average Participating Preferred Shares 4,443 3,567 4,124 3,569 -------------------------------------------------------------------- Weighted Average Shares Outstanding for Basic Earnings per Common Share 11,126 10,158 10,803 10,158 ==================================================================== Basic Earnings Per Common Share $ .35 $ .21 $ .70 $ .39 ==================================================================== Diluted Net Earnings Applicable to Common Stock (In thousands except per share data): Net Earnings Applicable to Common Stock $ 3,904 $ 2,084 $ 7,570 $ 4,010 Add Back Preferred Cash Dividends 5 5 10 10 -------------------------------------------------------------------- Net Earnings Applicable to Common Stock-Diluted $ 3,909 $ 2,089 $ 7,580 $ 4,020 ==================================================================== Weighted Average Shares Outstanding for Basic Earnings per Common Share 11,126 10,158 10,803 10,158 Effect of Convertible Preferred Stock 67 67 67 67 Weighted Average Shares Outstanding for Diluted Earnings per Common Share 11,193 10,225 10,870 10,225 ==================================================================== Diluted Earnings Per Common Share $ .35 $ .20 $ .70 $ .39 ====================================================================
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION RESULTS AND OF OPERATIONS September 27, 2003 Results of Operations: Sales: Total sales reflect an increase of 35.0% for the second quarter versus 2002. The sales increase primarily reflects three months of operating activity related to Chiquita Processed Foods, L.L.C. acquired May 27, 2003. Costs and Expenses: The following table shows costs and expenses as a percentage of sales:
Three Months Ended Six Months Ended ------------------ ---------------- 9/27/03 9/28/02 9/27/03 9/28/02 ------- ------- ------- ------- Cost of Product Sold 92.0% 93.4% 91.1 92.2 Selling 3.4 2.1 3.3 2.5 Administrative 0.4 0.5 0.6 0.6 Other Expense - 0.3 - 0.2 Interest Expense 1.6 1.9 1.9 2.4 ---------------------------------------------------- 97.4% 98.2% 96.9% 97.9% ====================================================
Favorable cost of manufacturing variances were a major contributing factor in improved operating results. Income Taxes: The effective tax rate was 39% for the six month periods ended September 27, 2003 and September 28, 2002. Financial Condition: The financial condition of the Company is summarized in the following table and explanatory review (In Thousands):
For the Quarter For the Year Ended September Ended March --------------- ----------- 2003 2002 2003 2002 ---- ---- ---- ---- Working Capital Balance $191,313 $179,171 $172,382 $163,606 Quarter Change 64,238 8,210 - - Notes Payable 26,674 - - - Long-Term Debt 180,302 155,208 133,337 156,100 Current Ratio 1.62:1 1.94:1 3.42:1 3.00:1
The change in Working Capital for the September 2003 quarter from the September 2002 quarter is largely due to the proceeds from the issuance of new term debt from an insurance company of $42.5 million. The proceeds were used to pay down current borrowings. See Condensed Consolidated Statements of Cash Flows for further details. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS September 27, 2003 Inventory increased $160.4 million from the same period last year primarily reflecting an increase of $82.8 million representing the net effect of the CPF acquisition less the inventory sold to Lakeside Foods, Inc., as discussed in the Notes to the Condensed Consolidated Financial Statements. The $82.8 million increase was partially offset by the Company's continued emphasis on inventory management and reduced production from last year. Cash and short term investments decreased $56.0 million again due to the acquisition. On May 27, 2003, the Company completed its acquisition of 100% of the membership interest in Chiquita Processed Foods, L.L.C. ("CPF") from Chiquita Brands International, Inc. The primary reason for the acquisition was to acquire additional production capacity in the Canned Vegetable business. The purchase price totaled $126.1 million plus the assumption of certain liabilities. This acquisition was financed with cash, proceeds from a new $200 million revolving credit facility, and $16.1 million of the Company's Participating Convertible Preferred Stock. The Preferred Stock was valued at $16.60 per share based on the market value of the Class A Common Stock around the time the acquisition was announced. The new $200 million revolving credit facility has a five-year term. The Preferred Stock is convertible into the Company's Class A Common Stock on a one-for-one basis. In the second quarter, the Company refinanced $42.5 million of outstanding debt under the revolving credit facility with new term debt from an insurance company. The new term debt from the insurance company of $42.5 million, when combined with the refinancing of existing insurance company debt of $32.5 million, has an interest rate of 8.03%, a fifteen year amortization and a ten year term. As part of this acquisition, the Company assumed seasonal notes payable from the CPF revolving credit facility of $25.4 million which was paid off at the time of acquisition with proceeds from the new $200 million revolving credit facility. The Company also assumed $35.9 million of CPF long-term debt and capital lease obligations, of which $26.8 million was paid off at the time of acquisition with proceeds from the new $200 million revolving credit facility. The remaining long-term debt principally involves two Industrial Revenue Development Bonds totaling $5.5 million and consisting of a $3 million Pickett, Wisconsin issue due on June 1, 2005 with an interest rate of 7.75% and a $2.5 million Walla Walla, Washington issue due on September 1, 2005 with an interest rate of 7.75%. The balance of the debt acquired, totaling $3.6 million, has interest rates ranging from 1.9% to 9% and is due through 2011. The Company's statement of net earnings for the six months ended September 27, 2003 includes four months of the CPF acquired operations. A pro forma income statement as if the operations were acquired at the beginning of the periods presented follows: Three Months Ended ------------------ 9/27/03 9/28/02 ------- ------- Net Sales $248,194 $278,934 Cost of Product Sold 228,207 258,613 Selling, General, and Administrative 9,491 11,376 Interest Expense 4,087 4,603 Other Expense (Income) - 623 ---------------------- Total Costs and Expenses 241,785 275,215 Earnings From Continuing Operations Before Income Taxes 6,409 3,719 Income Taxes 2,499 1,385 ---------------------- Net Earnings From Continuing Operations 3,910 2,334 ====================== Basic Earnings Per Share From Continuing Operations $ 0.35 $ 0.23 ====================== Diluted Earnings Per Share From Continuing Operations $ 0.35 $ 0.23 ====================== Six Months Ended ------------------ 9/27/03 9/28/02 ------- ------- Net Sales $453,972 $489,475 Cost of Product Sold 414,872 451,863 Selling, General, and Administrative 19,926 24,524 Interest Expense 8,348 9,463 Other Expense (Income) 1,882 (332) ---------------------- Total Costs and Expenses 445,028 485,518 Earnings From Continuing Operations Before Income Taxes 8,944 3,957 Income Taxes 3,488 1,543 ---------------------- Net Earnings From Continuing Operations 5,456 2,414 ====================== Basic Earnings Per Share From Continuing Operations $ 0.50 $ 0.24 ====================== Diluted Earnings Per Share From Continuing Operations $ 0.50 $ 0.24 ====================== The Company sold three former Chiquita Processed Foods plants and related assets to Lakeside Foods, Inc. on June 17, 2003. The Company sold one additional plant of Chiquita Processed Foods and related assets to Lakeside Foods, Inc. on August 6, 2003. The aforementioned sales to Lakeside Foods generated $47 million in cash proceeds, which was used to pay down debt. The allocation of purchase price is preliminary and is subject to change as additional information regarding the fair value of assets acquired and liabilities assumed is obtained. Seasonality The Company's revenues typically have been higher in the second and third quarters, primarily because the Company sells, on a bill and hold basis, Green Giant canned and frozen vegetables to General Mills Operations, Inc. at the end of each pack cycle. The two largest commodities are peas and corn, which are sold in the second and third quarters, respectively. See the Critical Accounting Policies section below for further details. In addition, our non Green Giant sales have exhibited seasonality with the third quarter generating the highest sales. This quarter reflects increased sales of the Company's products during the holiday period. 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. Critical Accounting Policies In the six months ended September 27, 2003, the Company sold for cash, on a bill and hold basis, $78,644,000 of Green Giant finished goods inventory to General Mills Operations, Inc. ("GMOI"). At the time of the sale of the Green Giant vegetables to GMOI, title of the specified inventory transferred to GMOI. In addition, 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 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, which essentially represent a contra-inventory account, are zero at fiscal year end. Depending on the time of year, Off-Season Reserve is either the excess of absorbed expenses over incurred expenses to date or the excess of incurred expenses over absorbed expenses to date. Other than the first quarter of each year, absorbed expenses exceed incurred expenses due to timing of production. Trade promotions are an important component of the sales and marketing of the Company's branded products, and are critical to the support of the business. Trade promotion costs include amounts paid to encourage retailers to offer temporary price reductions for the sale of our products to consumers, amounts paid to obtain favorable display positions in retailers' stores, and amounts paid to retailers for shelf space in retail stores. Accruals for trade promotions are recorded primarily at the time of sale of product to the retailer based on expected levels of performance and are recorded as a reduction of revenue. Settlement of these liabilities typically occurs in subsequent periods primarily through an authorized process for deductions taken by a retailer from amounts otherwise due to us. As a result, the ultimate cost of a trade promotion program is dependent on the relative success of the events and the actions and level of deductions taken by retailers for amounts they consider due to them. Final determination of the permissible deductions may take years. Recently issued accounting standards have been considered by the Company and are not expected to have a material effect on the Company's financial position or results of operations. ITEM 3 Quantitative and Qualitative Disclosures about Market Risk 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. In connection with the acquisition of CPF, the Company entered into a new $200 million revolving credit facility with a five-year term to finance its seasonal working capital requirements. Interest is based on LIBOR plus a spread. Repayment is required at the expiration date of the facility, which is May 27, 2008. The Company had $26.7 million outstanding under this facility as of September 27, 2003. The Company maintains investments in cash equivalents (none at September 27, 2003 and $60.9 million as of March 31, 2003) and has investments in $3.2 million of marketable securities at September 27, 2003. Long-term debt represents secured and unsecured debentures, certain notes payable to insurance companies used to finance long-term investments such as business acquisitions, and capital lease obligations. Long-term debt bears interest at fixed and variable rates. Refer to the March 31, 2003 report for the table of Interest Rate Sensitivity of Long-Term Debt, Short Term Debt and Short Term Investments. ITEM 4 Controls and Procedures (a) Disclosure controls and procedures. We evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Our disclosure controls and procedures are the controls and other procedures that we designed to ensure that we record, process, summarize and report in a timely manner the information we must disclose in reports that we file with or submit to the SEC. Kraig H. Kayser, our President and Chief Executive Officer, and Philip G. Paras, our Chief Financial Officer, reviewed and participated in this evaluation. We adopted several improvements to increase the effectiveness of our disclosure controls and procedures during the most recent fiscal quarter. Based on this evaluation, Messrs. Kayser and Paras have concluded that as of the end of our most recent fiscal quarter, our disclosure controls were effective. (b) Internal controls. During the period covered by this report, there have not been any significant changes in our internal controls over financial reporting that has materially affected, or is reasonable likely to materially affect, the Company's internal controls over financial reporting. PART II - OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults on Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11 Computation of earnings per share (filed herewith) 31.1 Certification of Kraig H. Kayser pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 31.2 Certification of Philip G. Paras pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 32 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) (b) Reports on Form 8-K (1) Form 8-K/A Filed August 11, 2003 A Current Report on Form 8-K/A was filed related to the acquisition of Chiquita Processed Foods, L.L.C. (2) Form 8-K Filed August 13, 2003 A Current Report on Form 8-K was filed with the Company's earnings press release. (3) Form 8-K Filed August 19, 2003 A Current Report on Form 8-K was filed with the Company's earnings press release. (4) Form 8-K Filed August 22, 2003 A Current Report on Form 8-K was filed with the Company's change in its basic earnings per share and cash flows from operations press release. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Seneca Foods Corporation (Company) /s/Kraig H. Kayser ----------------------- November 12, 2003 Kraig H. Kayser President and Chief Executive Officer /s/Jeffrey L. Van Riper ----------------------- November 12, 2003 Jeffrey L. Van Riper Controller and Chief Accounting Officer EX-11 3 ex1110q0903.txt EXHIBIT 11 SENECA FOODS CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (In thousands except per share data)
Three Months Ended Six Months Ended ------------------ ---------------- 9/27/03 9/28/02 9/27/03 9/28/02 ------- ------- ------- ------- Basic Net Earnings Applicable to Common Stock (In thousands except per share data): Net Earnings $ 3,910 $ 2,090 $ 7,582 $ 4,022 Deduct Preferred Cash Dividends 6 6 12 12 ------------------------------------------------------------------- Net Earnings Applicable to Common Stock $ 3,904 $ 2,084 $ 7,570 $ 4,010 =================================================================== Weighted Average Common Shares Outstanding 6,683 6,591 6,679 6,589 Weighted Average Participating Preferred Shares 4,443 3,567 4,124 3,569 ------------------------------------------------------------------- Weighted Average Shares Outstanding for Basic Earnings per Common Share 11,126 10,158 10,803 10,158 =================================================================== Basic Earnings Per Common Share $ .35 $ .21 $ .70 $ .39 =================================================================== Diluted Net Earnings Applicable to Common Stock (In thousands except per share data): Net Earnings Applicable to Common Stock $ 3,904 $ 2,084 $ 7,570 $ 4,010 Add Back Preferred Cash Dividends 5 5 10 10 ------------------------------------------------------------------- Net Earnings Applicable to Common Stock-Diluted $ 3,909 $ 2,089 $ 7,580 $ 4,020 =================================================================== Weighted Average Shares Outstanding for Basic Earnings per Common Share 11,126 10,158 10,803 10,158 Effect of Convertible Preferred Stock 67 67 67 67 ---------------------------------------------------------------------------------------------- Weighted Average Shares Outstanding for Diluted Earnings per Common Share 11,193 10,225 10,870 10,225 =================================================================== Diluted Earnings Per Common Share $ .35 $ .20 $ .70 $ .39 ===================================================================
Subsequent to the issuance of its condensed consolidated financial statements for the three and six month periods ended September 28, 2002, the Company determined that it should have included convertible participating preferred stock in its calculation of basic earnings per common share under the if-converted method. As a result, the accompanying condensed consolidated financial statements for the three and six months ended September 28, 2002 have been restated from the amounts previously reported to reduce basic earnings per common share for the three and six month periods ended September 28, 2002 from $.32 to $.21 and $.61 to $.39, respectively. EX-31 4 ex31110q0903.txt EXHIBIT 31.1 CERTIFICATION I, Kraig H. Kayser, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Seneca Foods Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Dated: November 12, 2003 By: /s/Kraig H. Kayser --------------------------------- Kraig H. Kayser President and Chief Executive Officer EX-31 5 ex31210q0903.txt EXHIBIT 31.2 CERTIFICATION I, Philip G. Paras, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Seneca Foods Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Dated: November 12, 2003 By: /s/Philip G. Paras -------------------------------- Philip G. Paras Chief Financial Officer EX-32 6 ex3210q0903.txt EXHIBIT 32 CERTIFICATION PURSUANT TO 18. U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Seneca Foods Corporation (the"Registrant") on Form 10-Q for the period ended September 27, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Kraig H. Kayser, Chief Executive Officer and Philip G. Paras, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that, to our knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. /s/Kraig H. Kayser ------------------- Kraig H. Kayser Chief Executive Officer November 12, 2003 /s/ Philip G. Paras --------------------- Philip G. Paras Chief Financial Officer November 12, 2003 -----END PRIVACY-ENHANCED MESSAGE-----