-----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, SkowjttKH+RXHtH/pkEBVO9fRTkGTIoByOAA1dFrbkIoOEUgDo0MG5qljbQkqe18 ZTec376px3Mq2MCl3YJjHw== 0000088948-97-000004.txt : 19970630 0000088948-97-000004.hdr.sgml : 19970630 ACCESSION NUMBER: 0000088948-97-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970627 SROS: NASD 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-01989 FILM NUMBER: 97631975 BUSINESS ADDRESS: STREET 1: 1162 PITTSFORD VICTOR RD CITY: PITTSFORD STATE: NY ZIP: 14534 BUSINESS PHONE: 7163859500 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-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the fiscal year-ended March 31, 1997 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 Identification No.) incorporation or organization) 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 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered None None Securities registered pursuant to Section 12(g) of the Act: Common Stock Class A, $.25 Par Common Stock Class B, $.25 Par (Title of Class) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained herein, and will not be contained, to best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. X ----- Check mark indicates whether registrant has (1) 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 registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes No X ----- ----- The aggregate market value of the Registrant's voting securities held by non-affiliates based on the closing sales price per market reports by the National Market System on June 1, 1997 was approximately $100,582,000. Common shares outstanding as of June 1, 1997 were Class A: 3,143,125, Class B: 2,796,555. Documents Incorporated by Reference: (1) Proxy Statement to be issued prior to June 30, 1997 in connection with the registrant's annual meeting of stockholders (the "Proxy Statement") applicable to Part III, Items 10-13 of Form 10-K. (2) Portions of the Annual Report to shareholders for fiscal year ended March 31, 1997 (the "1997 Annual Report") applicable to Part II, Items 5-8 and Part IV, Item 14 of Form 10-K. TABLE OF CONTENTS FORM 10-K ANNUAL REPORT - FISCAL 1997 SENECA FOODS CORPORATION
PART I. Pages Item 1. Business 1-3 Item 2. Properties 3 Item 3. Legal Proceedings 4 Item 4. Submission of Matters to a Vote of Equity Security Holders 4 PART II. Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters 4 Item 6. Selected Financial Data 4 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 4 Item 8. Financial Statements and Supplementary Data 4 Item 9. Changes in and Disagreements on Accounting and Financial Disclosure 4 PART III. Item 10. Directors and Executive Officers of the Registrant 6 Item 11. Executive Compensation 6 Item 12. Security Ownership of Certain Beneficial Owners and Management 6 Item 13. Certain Relationships and Related Transactions 6 PART IV. Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K 6-11 SIGNATURES 12-13
PART I Item 1 Business General Development of Business SENECA FOODS CORPORATION (herein referred to as the "Company") was organized in 1949 and incorporated under the laws of the State of New York. Seneca Foods Corporation purchased six Green Giant(R) vegetable plants from The Pillsbury Company effective February 1, 1995, resulting in vegetable products becoming nearly 80% of Seneca's overall business. Consequently during 1995, Seneca changed its fiscal year-end from July 31 to March 31 to avoid overlapping pack seasons between fiscal years. Therefore, Fiscal 1995 was an eight-month transition period. Financial Information About Industry Segments The Company's business activities are conducted in food and non-food segments. The food segment is food processing. The non-food segment is an air charter service. The air charter service represents 1% of the Company's business and therefore the financial information related to segments is not material. Narrative Description of Business Principal Products and Markets Food Processing The principal products of this segment include grape products, apple products, and vegetables. The products are canned, bottled, and frozen and are sold to retail and institutional markets. The Company has divided the United States into four major marketing sections: Eastern, Southern, Northwestern, and Southwestern. Plant locations in New York, Michigan, North Carolina, and Washington provide ready access to the domestic sources of grapes and apples necessary to support marketing efforts in their respective sections of the country. Vegetable operations are primarily supported by plant locations in New York, Wisconsin, Washington, Idaho, and Minnesota. In addition, the Company operates a mushroom canning facility in Pennsylvania. The following summarizes net sales by major category for the four years ended March 31, 1997, 1996 and 1995 and July 31, 1994:
(Eight Months) 1997 1996 1995 1994 -------------------------------------------------------------- (In thousands) Vegetable $562,265 $330,654 $117,504 $145,010 Apple 93,047 87,585 62,688 78,453 Grape 19,605 19,159 10,325 17,457 Other 52,017 66,453 40,809 45,334 ------------------------------------------------------------------ Total $726,934 $503,851 $231,326 $286,254 ==================================================================
Other Seneca Flight Operations provides air charter service primarily to industries in upstate New York. Source and Availability of Raw Material Food Processing The Company's food processing plants are located in major vegetable, grape, and apple producing states. Fruits and vegetables are primarily obtained through contracts with growers. Apple concentrate is purchased domestically and abroad to supplement raw fruit purchased under contract. The Company's sources of supply are considered equal or superior to its competition for all of its food products. Seasonal Business Food Processing While individual fruits and vegetables have seasonal cycles of peak production and sales, the different cycles are usually offsetting to some extent. The supply of commodities, current pricing, and expected new crop quantity and quality affect the timing of the Company's sales and earnings. An Off Season Allowance is established during the year to minimize the effect of seasonal production on earnings. This is zero at fiscal year-end. Backlog Food Processing In the food processing business the end of year sales order backlog is not considered meaningful. Traditionally, larger customers provide tentative bookings for their expected purchases for the upcoming season. These bookings are further developed as data on the expected size of the related national harvests becomes available. In general these bookings serve as a yardstick, rather than as a firm commitment, since actual harvest results can vary notably from early estimates. In actual practice, the Company has substantially all of its expected seasonal production identified to potential sales outlets before the seasonal production is completed. Competition and Customers Food Processing Competition in the food business is substantial with imaginative brand registration, quality service, and pricing being the major determinants in the Company's relative market position. Except for the Seneca apple and grape products and Libby's vegetable products data mentioned below, no reliable statistics are available to establish the exact market position of the Company's own food products. During the past year approximately 20% of the Company's processed foods were packed for retail customers under the Company branded labels of Libby's(R), TreeSweet(R), and Seneca(R). About 7% of the processed foods were packed for institutional food distributors and 19% of processed foods were retail packed under the private label of customers. The remaining 54% is sold under the Alliance Agreement (see Note 12 of Item 8, Financial Statements and Supplementary Data). The customers represent a full cross section of the retail, institutional, distributor, and industrial markets and the Company does not consider itself dependent on any single sales source (see Note 1 of Item 8, Financial Statements and Supplementary Data). In 1996 and 1997, The Pillsbury Company represented our largest customer as a result of the 20-year Alliance Agreement entered into during 1995. The principal branded products are Seneca Frozen Apple Juice Concentrate, rated the number one seller nationally, Seneca Frozen Natural Grape Juice Concentrate, Seneca applesauce, and Libby's canned vegetable products which rate among the top five national brands. The information under the heading Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations in the 1997 Annual Report is incorporated by reference. Environmental Protection Environmental protection is an area that has been worked on most diligently at each food processing facility. In all locations the Company has cooperated with federal, state, and local environmental protection authorities in developing and maintaining suitable antipollution facilities. In general, pollution control facilities are equal to or somewhat superior to those of our competitors and are within environmental protection standards. The Company does not expect any material capital expenditures to comply with environmental regulations in the near future. The Company is a potentially responsible party with respect to two sites but the Company does not believe the aggregate liability is material. Employment Food processing - Full time 2,047 - Seasonal 438 --------- 2,485 Other 87 --------- 2,572 ========= Foreign Operations Export sales for the Company are a relatively small portion (about 5%) of the food processing sales, excluding the Pillsbury Alliance sales. Approximately 20% of the Pillsbury Alliance sales are for eventual export. Item 2 Properties The Company has nine food processing, packaging, and warehousing facilities located in New York State that provide approximately 2,365,000 square feet of food packaging, freezing and freezer storage, and warehouse storage space. These facilities process and package fruit and vegetable products. The Company is a lessee under a number of operating and capital leases for equipment and real property used for processing and warehousing. Five other processing, packaging, and warehousing facilities are located in the states of North Carolina (223,000 square feet), Pennsylvania (39,000 square feet), and in Washington (three locations totaling 292,000 square feet). Processing operations in North Carolina are primarily devoted to apple juice products; in Washington, grape juice, apple juice, apple chips, and sauce; and in Pennsylvania, mushroom canning and warehousing. Four facilities in Minnesota, two facilities in Michigan, one facility in Washington, one facility in Idaho, one facility in Kentucky, and seven facilities in Wisconsin provide approximately 5,765,000 square feet of food packaging, freezing and freezer storage, and warehouse storage space. These facilities process and package various vegetable and fruit products. The facilities are owned by the Company. The Company owns one food distribution facility in Massachusetts totaling approximately 59,000 square feet which is leased out to another company through 2004. Sublease income of $577,000 was received on this facility during the period. In addition the air charter division has a 14,000 square foot facility. All of the properties are well maintained and equipped with modern machinery. All locations, although highly utilized, have the ability to expand as sales requirements justify. Because of the seasonal production cycles the exact extent of utilization is difficult to measure. In certain circumstances the theoretical full efficiency levels are being reached; however, expansion of the number of production days or hours could increase the output by up to 20% for a season. Certain of the Company's facilities are mortgaged to financial institutions to secure long-term debt and capital lease obligations. See Notes 4 and 5 of Item 8, Financial Statements and Supplementary Data, for additional information about the Company's long-term debt and lease commitments. Item 3 Legal Proceedings The Company is not involved in any material legal proceedings. Item 4 Submission of Matters to a Vote of Equity Security Holders No matters were submitted to vote of shareholders during the last quarter of the fiscal period covered by this report. PART II Item 5 Market for the Registrant's Common Stock and Related Security Holder Matters Each class of preferred stock receives preference as to dividend payment and declaration over any common stock. In addition, refer to the information in the 1997 Annual Report, "Shareholder Information", which is incorporated by reference. Item 6 Selected Financial Data Refer to the information in the 1997 Annual Report, "Five Year Selected Financial Data", which is incorporated by reference. Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations Refer to the information in the 1997 Annual Report, "Management's Discussion and Analysis of Financial Condition and Results of Operations", which is incorporated by reference. Item 8 Financial Statements and Supplementary Data Refer to the information in the 1997 Annual Report, "Consolidated Financial Statements and Notes thereto including Independent Auditors' Report", which is incorporated by reference. Item 9 Changes in and Disagreements on Accounting and Financial Disclosure None. INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Seneca Foods Corporation Pittsford, New York We have audited the consolidated financial statements of Seneca Foods Corporation and subsidiaries as of March 31, 1997 and 1996, and for the years ended March 31, 1997 and 1996, for the eight months ended March 31, 1995 and for the year ended July 31, 1994, and have issued our report thereon dated May 23, 1997, which report includes an explanatory paragraph as to a change in accounting for income taxes in 1994; such consolidated financial statements and report are included in your 1997 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedule of Seneca Foods Corporation, listed in Item 14 (A)(2). This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/Deloitte & Touche LLP Rochester, New York May 23, 1997 PART III Item 10 Directors and Executive Officers of the Registrant Item 11 Executive Compensation Item 12 Security Ownership of Certain Beneficial Owners and Management Item 13 Certain Relationships and Related Transactions Information required by Items 10 through 13 will be filed separately with the Commission, pursuant to Regulation 14A, in a definitive proxy statement involving the election of directors which is incorporated herein by reference. PART IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K A. Exhibits and Financial Statement Schedules 1. (i) Financial Statement Schedules - the following consolidated financial statements of the Registrant, included in the Annual Report for the year ended March 31, 1997, are incorporated by reference in Item 8: Consolidated Statements of Net Earnings - March 31, 1997, 1996 and 1995 and July 31, 1994 Consolidated Balance Sheets - March 31, 1997 and 1996 Consolidated Statements of Cash Flows - March 31, 1997, 1996 and 1995 and July 31, 1994 Consolidated Statements of Stockholders' Equity - March 31, 1997, 1996 and 1995 and July 31, 1994 Notes to Consolidated Financial Statements - March 31, 1997, 1996 and 1995 and July 31, 1994 Independent Auditors' Report (ii) As a result of the Company's change in 1995 in the fiscal year-end date from July 31 to March 31 (see Note 1 of Item 8, Financial Statements and Supplementary Data), the following is an unaudited comparison of eight months ended March 31, 1995 and March 26, 1994:
March 31 March 26 Eight Months Ended (1994 Unaudited) 1995 1994 ------------------------------------------------------------------------------------------------------- (In thousands, except share amounts) Net sales $234,073 $195,048 ----------------------- Costs and expenses: Cost of product sold 202,068 162,356 Selling, general, and administrative expense 23,620 20,231 Interest expense, net of interest income 6,296 4,178 ------------------------ 231,984 186,765 Earnings from continuing operations before income taxes, extraordinary item and cumulative effect of accounting change 2,089 8,283 Income taxes 768 3,231 ------------------------ Earnings from continuing operations $ 1,321 $ 5,052 ======================== Earnings from continuing operations per share $ .23 $ 1.71 ======================== Weighted average shares outstanding 5,593,110 5,899,284 ========================
Pages 2. Supplemental Schedule: Schedule II -- Valuation and Qualifying Accounts 9 Other schedules have not been filed because the conditions requiring the filing do not exist or the required information is included in the consolidated financial statements, including the notes thereto. 3. Exhibits: No. 3 - Articles of Incorporation and By-Laws - Incorporated by reference to the Company's 10-Q/A filed August, 1995 as amended by the Company's 10-K filed June 1996. No. 4 - Articles defining the rights of security holders - Incorporated by reference to the Company's 10-Q/A filed August, 1995 as amended by the Company's 10-K filed June 1996. Instrument defining the rights of any holder of Long-Term Debt - Incorporated by reference to Exhibit 99 to the Company's 10-Q filed January 1995 as amended by Exhibit No. 4 filed herewith. The Company will furnish, upon request to the SEC, a copy of any instrument defining the rights of any holder of Long-Term Debt. No. 10 - Material Contracts - Incorporated by reference to the Company's 8-K dated February 24, 1995 for the First Amended and Restated Alliance Agreement and the First Amended and Restated Asset Purchase Agreement both with The Pillsbury Company. No. 11 - Computation of Earnings per Share 9 No. 13 - The material contained in the 1997 Annual Report to Shareholders under the following headings: "Five Year Selected Financial Data", "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Consolidated Financial Statements and Notes thereto including Independent Auditors' Report", and "Shareholder Information". No. 21 - List of Subsidiaries 10 No. 27 - Financial Data Schedules B. Reports on Form 8-K None. Schedule II VALUATION AND QUALIFYING ACCOUNTS (In thousands)
Balance at Charged to Deductions Balance beginning Charged to other from at end of period income accounts reserve of period ---------- ---------- ---------- ---------- --------- Year-ended March 31, 1997: Allowance for doubtful accounts $ 165 $ 72 $ -- $ 37 (a) $ 200 ============================================================================== Year-ended March 31, 1996: Allowance for doubtful accounts $ 227 $ 52 $ -- $ 114 (a) $ 165 ============================================================================== Year-ended March 31, 1995: Allowance for doubtful accounts $ 183 $ 166 $ -- $ 122 (a) $ 227 ============================================================================== Year-ended July 31, 1994: Allowance for doubtful accounts $ 435 $ (213) $ -- $ 39 (a) $ 183 ============================================================================== (a) Accounts written off, net of recoveries.
SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) 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 By/s/ Jeffrey L. Van Riper June 20, 1997 -------------------- Jeffrey L. Van Riper Controller and Secretary (Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/Arthur S. Wolcott Chairman and Director June 20, 1997 - -------------------- Arthur S. Wolcott /s/Kraig H. Kayser President, Chief Executive Officer, June 20, 1997 - ------------------ Kraig H. Kayser and Director /s/Philip G. Paras Vice President, Finance June 20, 1997 - ------------------ Philip G. Paras /s/Jeffrey L. Van Riper Controller and Secretary June 20, 1997 - ----------------------- Jeffrey L. Van Riper (Principal Accounting Officer) Director June 20, 1997 - ------------------ Robert T. Brady /s/David L. Call Director June 20, 1997 - ---------------- David L. Call /s/Edward O. Gaylord Director June 20, 1997 - -------------------- Edward O. Gaylord /s/G. Brymer Humphreys Director June 20, 1997 - ---------------------- G. Brymer Humphreys /s/Susan W. Stuart Director June 20, 1997 - ------------------ Susan W. Stuart
EX-11 2 Exhibit 11 COMPUTATION OF EARNINGS PER SHARE (In thousands, except per share amounts)
(Eight Months) Years ended March 31 and July 31, 1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------------- Primary Net earnings applicable to common stock: Net earnings $ 7,531 $ (10,147) $ 1,321 $ 9,037 Deduct preferred stock dividends paid -- 12 12 23 -------------------------------------------------------------- Net earnings applicable to common stock $ 7,531 $ (10,159) $ 1,309 $ 9,014 ============================================================== Weighted average number of common shares and common equivalents outstanding 5,940 5,622 5,593 5,798 ============================================================== Primary earnings per share $ 1.27 $ (1.81) $ .23 $ 1.55 ============================================================== Fully Diluted Net earnings applicable to common stock per above $ 7,531 $ (10,159) $ 1,309 $ 9,014 Add dividends on convertible preferred stock -- 10 10 20 -------------------------------------------------------------- Net earnings applicable to common stock on a fully diluted basis $ 7,531 $ (10,149) $ 1,319 $ 9,034 ============================================================== Shares used in calculating primary earnings per share above 5,940 5,622 5,593 5,798 Additional shares to be issued under full conversion of preferred stock 68 68 68 68 -------------------------------------------------------------- Total shares for fully diluted 6,008 5,690 5,661 5,866 ============================================================== Fully diluted earnings per share $ 1.25 $ (1.78) $ .23 $ 1.54 ==============================================================
EX-13 3 1997 ANNUAL REPORT TO SHAREHOLDERS Exhibit 13 Five Year Selected Financial Data Summary of Operations and Financial Condition
(Eight Months) Years ended March 31 and July 31, 1997 1996 1995 1994 1993 1992 - --------------------------------------------------------------------------------------------------------------------------------- (In thousands of dollars, except per share data) Net sales $730,135 $507,988 $234,073 $290,185 $257,402 $279,708 - --------------------------------------------------------------------------------------------------------------------------------- Operating earnings (before Corporate interest and administrative expense) $ 44,165 $ 16,418 $ 11,380 $ 18,251 $ 10,029 $ 13,122 Earnings (loss) from continuing operations before extraordinary item and cumulative effect of accounting change 7,531 (10,147) 1,321 5,274 1,293 (157) Earnings from discontinued operations -- -- -- 90 965 1,663 Gain on the sale of discontinued operations -- -- -- 2,273 -- -- Earnings (loss) before extraordinary item and cumulative effect of accounting change 7,531 (10,147) 1,321 7,637 2,258 1,506 Extraordinary loss -- -- -- (606) -- (467) Cumulative effect of accounting change -- -- -- 2,006 -- -- Net earnings (loss) 7,531 (10,147) 1,321 9,037 2,258 1,039 - --------------------------------------------------------------------------------------------------------------------------------- Earnings (loss) from continuing operations per common share $ 1.27 $ (1.81) $ .23 $ .91 $ .21 $ (.03) Earnings (loss) per common share before extraordinary item and cumulative effect of accounting change 1.27 (1.81) .23 1.31 .36 .24 Net earnings (loss) per common share 1.27 (1.81) .23 1.55 .36 .16 - --------------------------------------------------------------------------------------------------------------------------------- Working capital $128,732 $108,761 $136,342 $ 66,129 $ 90,005 $ 85,059 Inventories 158,197 229,759 138,113 98,202 88,181 94,718 Net property, plant, and equipment 207,439 222,720 179,718 78,216 74,089 81,718 Total assets 416,023 523,859 385,502 204,899 208,733 214,223 Long-term debt and capital lease obligations 224,128 226,574 221,480 51,476 72,556 77,614 Stockholders' equity 93,736 90,939 90,821 88,620 84,698 81,090 - --------------------------------------------------------------------------------------------------------------------------------- Additions to property, plant, and equipment $ 11,650 $ 67,897 $ 26,966 $ 9,384 $ 1,723 $ 8,702 Interest expense, net 28,827 28,157 6,296 6,046 5,834 10,186 - --------------------------------------------------------------------------------------------------------------------------------- Net earnings/average equity 8.2% (11.2)% 1.5% 10.4% 2.7% 1.3 % Continuing earnings before taxes/sales 1.6% (3.0)% 0.9% 2.8% 0.2% (0.1)% Net earnings/sales 1.0% (2.0)% 0.6% 3.1% 0.9% 0.4 % Long-term debt/equity 239% 249 % 244% 58% 86% 96 % Current ratio 2.7:1 1.6:1 3.2:1 2.2:1 3.4:1 3.0:1 - --------------------------------------------------------------------------------------------------------------------------------- Common stockholder's equity per share $ 15.77 $ 15.30 $ 16.23 $ 15.83 $ 13.79 $ 13.09 Class A National Market System closing price range 18 3/4-14 3/4 20-15 -- -- -- -- Class B National Market System closing price range 19-14 1/2 22-16 17 3/4-10 1/2 11 3/8-7 3/4 8 3/16-7 3/8 10 5/8-7 5/8 Common cash dividends declared per share -- -- -- -- -- -- Price earnings ratio 13.7x NM 74.5x 6.9x 21.5x 48.4x - --------------------------------------------------------------------------------------------------------------------------------- 1995 represents eight months ended March 31 due to a change in the Company's fiscal year end. 1994-1992 ended July 31. NM - not meaningful.
Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Because of the food processing segment, the Company's yearly business cycle shows large inventory growth during the summer and fall harvest period. The inventory peaks in the early winter and drops to its minimum level immediately prior to the next pack season. 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 May 1996 the Company sold its investment in Moog Inc. Class A Common Stock to Moog. This sale generated cash proceeds of $12.9 million and a pre-tax gain of $7.5 million. During August 1996 the Company sold its Clifton Park, New York facility for cash resulting in cash proceeds of $4.6 million and a gain of $1.6 million before income tax expense. The Company had leased this facility to a third party. The sales increase discussed below reduced the Company's inventory by $71.6 million as of the 1997 year-end. During December 1995 the Company sold its Peabody, Massachusetts facility for cash resulting in net cash proceeds of $6.3 million and a gain of $4.3 million before income tax expense. The Company had leased this facility to a third party. In addition, during September 1995 the Company entered into a sale and leaseback transaction whereby three of its wastewater facilities in New York State were sold to the Wayne County Water and Sewer Authority for net proceeds of $9.3 million. During February 1995 the Company acquired certain assets (see Acquisitions, note 12) of the Green Giant Division of The Pillsbury Company (referred to as "Pillsbury"), a subsidiary of Grand Metropolitan Incorporated. Under an Alliance Agreement concurrently executed 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 purchase price of $86.1 million was funded by a subordinated note issued by the Company for $73.0 million and the balance was funded out of working capital. This subordinated note decreased $6.0 million in 1996 as a result of an agreement reached with Pillsbury to convert that amount to the Company's Class A Common Stock. Such conversion was completed in March 1996. The subordinated note increased by $7.6 million in 1997 due to the addition of capital projects that Pillsbury has completed and green bean processing equipment acquired from Pillsbury, which was transferred to the Company. In conjunction with this acquisition, the Company entered into a revolving credit facility for up to $150.0 million from a syndicate of eleven banks. In addition, the Company issued two new senior debt notes. The first was a $75.0 million unsecured note issued to The Prudential Insurance Company of America, with repayment due beginning in March 1998, a final maturity date of February 2005, and an interest rate of 10.78% (see Long-Term Debt, note 4). The second was a $50.0 million unsecured note issued to John Hancock Mutual Life Insurance Company, with repayment due beginning in March 2001, a final maturity of January 2009, and an interest rate of 10.81%. The proceeds of these two notes were used to finance or replenish working capital for the following: 1) capital expenditures of $50.0 million related to the Alliance Agreement with Pillsbury; 2) repayment of two notes due an insurance company, one repaid in July 1994 for $13.8 million, the other repaid when the new debt was issued for $26.6 million; 3) three small acquisitions made over the previous fifteen months totaling $15.6 million; and 4) the balance, $19.0 million, for capital expenditures made over the previous three years. During 1994 the Company prepaid an issue of high interest long-term debt totaling $13.8 million. This resulted in an extraordinary loss of $0.6 million after taxes. Also during 1994 the Company made two small acquisitions totaling $11.7 million. The debt prepayment and acquisitions were funded from working capital (see below) and current operations. During 1994 the Company had no new long-term financing. As mentioned above, during 1995 the Company entered into an unsecured revolving credit agreement for up to $150.0 million. Previously, the Company maintained uncommitted lines of credit. Credit lines provide for interest rate options based on Prime, Eurodollar, or Money Market. There were $18.0 million of borrowings outstanding under these lines at the end of 1997 and $113.0 million at the end of 1996. The decrease in cash and short-term investments of $13.9 million over the three and two-thirds year period ended in 1997 was primarily due to Green Giant acquisition of $86.1 million, the debt prepayments totaling $40.4 million; three small acquisitions totaling $15.6 million; the common stock retirement of $5.1 million; capital additions of $11.7 million, $67.9 million, $27.0 million, and $9.4 million, in 1997, 1996, 1995, and 1994, respectively; and smaller items not identified. This was partially offset by the proceeds of the four new long-term debt issues totaling $207.3 million; proceeds from the sale of Moog Inc. stock of $12.9 million, proceeds from the disposal of two warehouses totaling $13.5 million; proceeds from the disposal of the textile segment of $8.4 million; and net earnings. The 1997 capital expenditures are down substantially from 1996. The largest project was the green bean expansion in Cumberland, Wisconsin related to the Alliance where $4.4 million was spent in 1997. The 1996 capital expenditures of $67.9 million are substantially due to a major capital expansion, which began in 1995, integrating six of Pillsbury's Green Giant vegetable processing plants and significantly increasing the Company's own production capabilities to accommodate the production of four Pillsbury plants that were concurrently closed. This capital expansion was originally expected to be $50.0 million, but to meet the Company's ambitious goals, an additional $25.0 million was spent on this project, primarily in the New York State operations in order to meet operational needs of the Alliance. The 1995 capital expenditures of $27.0 million largely reflect spending related to the Alliance with Pillsbury as mentioned above. During 1995 the Company began installation of a green bean processing line in the Eastern Division, cold storage facilities in the Central Division in the Midwest and Northwest, and a frozen vegetable processing expansion in the Central Division. During 1994 the Company upgraded its vegetable processing and juice bottling equipment in the Eastern Division. During August 1993 the Company sold its textile division for approximately $8.4 million. It represented about 6% of the Company's assets and 13% of the Company's sales in 1993. Subsequent to the 1997 year-end, the Company completed two acquisitions. The first acquisition was Aunt Nellie's Farm Kitchen, which produces, markets, and sells fruit and vegetable products from plants in the Midwest, for approximately $24.4 million. The fruit product part of the business is in the process of being sold by the Company. The second acquisition was the Curtice Burns canned branded and private label vegetable business for approximately $30.9 million (see Acquisitions, note 12). Results of Operations During 1995, the Company changed its fiscal year-end to March 31 from July 31. With the acquisition of the Green Giant plants, vegetables now represent a substantial portion of the Company's business. The July year-end fell in the middle of the pack season for certain vegetable commodities while March 31 is before the pack season begins. Net sales for 1997 were $730.1 million, which includes $391.7 million sold of Green Giant vegetables. During 1997 the Company sold for cash, at the request of an independent third party, on a bill and hold basis, all the remaining Green Giant vegetables (see Summary of Significant Accounting Policies, note 1). Net sales for 1996 were $508.0 million, which includes $168.0 million of sales to Pillsbury under the Alliance. In 1997 non-Alliance sales decreased by $1.6 million. If 1996 net sales are compared with the last full year sales (1994), the increase for the two year period is 22.7% excluding the effect of the Alliance. The Company's sales were $234.1 million in the eight month transition period ended 1995. It is not appropriate to annualize this amount since vegetables tend to be sold on a more seasonal basis. A full year's sales in 1995 would have shown an increase over 1994. Sales increased by 12.7% in 1994. In 1997 vegetable unit sales increased due to larger packs than the prior year. In 1997 vegetable unit prices increased for part of the year but declined later in the year due to excess inventories. In 1996 vegetable unit sales were lower due to a less than budget pack. Unit vegetable selling prices dropped in 1996, while apple pricing rose due to the worldwide shortage of processing apples. In 1995 vegetable unit sales were sharply higher due to the industry-wide large packs. Unit selling prices were down which partially offset the vegetable dollar sales increases due to volume. The three small acquisitions (one in 1995 and two in 1994) also contributed to the increase (see Acquisitions, note 12). In 1994 vegetable sales increased 9.5% due to sharply higher unit selling prices that resulted from 1993's flooding in the Midwest. In 1994 fruit and juice sales were up 16.7% led by apple juice which was up 9.3%. The two small acquisitions also contributed to the increase (see Acquisitions, note 12). The 1997 results include a $7.5 million pre-tax gain on the sale of Moog Inc. Class A Common Stock back to Moog and a pre-tax gain on the sale of a Clifton Park, New York warehouse of $1.6 million. The 1996 results include a non-recurring charge of $15.1 million, before income tax benefit, due to a combination of start-up costs related to the Pillsbury Alliance and severe drought conditions in New York State throughout the entire summer. The Company undertook an ambitious capital expenditure program related to the Pillsbury Alliance. In the relatively short time between the February 1995 closing of the Pillsbury Alliance and the beginning of the 1995 vegetable pack, 37 separate major capital projects needed to be completed. There were some unforeseen problems related to a few of these projects, mostly in the New York plants. Some of the used equipment transferred from the closed plants had operating difficulties and were not always easily repaired, thus causing downtime. Therefore, plant throughput and yields were poor at some plants resulting in unfavorable manufacturing variances. The problems were magnified when the drought and the hot weather conditions forced the uneven timing of maturities of vegetables. In 1997 earnings increased for the following reasons: 1) the Moog gain of $7.5 million detailed above, 2) higher vegetable selling prices for part of the year, 3) the gain on the sale of the New York warehouse of $1.6 million detailed above, and 4) greater sales under the Alliance agreement produced additional earnings. In 1996 earnings decreased for the following reasons: 1) the $15.1 million non-recurring charge detailed above, 2) higher apple cost of product sold due to a world-wide shortage of processing apples, and 3) lower selling prices on vegetables due to an ongoing industry oversupply. In 1995 earnings decreased due, in part, to lower selling prices caused by an industry-wide oversupply of processed vegetables. In 1994 earnings increased for the following reasons: 1) lower apple cost of product sold due to a greater availability of apples, 2) higher selling prices on vegetables which more than offset higher cost of product sold, 3) the sale of the textile segment, and 4) the $2.0 million gain due to implementing Statement of Financial Accounting Standards (SFAS) 109, "Accounting for Income Taxes" (see Income Taxes, note 6). In 1996, the Company changed its inventory valuation method from the lower of cost; last-in, first-out; or market to the lower of cost; first-in, first-out; or market. The major reason for the change is the Alliance inventories are on the first-in, first-out method which represent the majority of the Company's inventory dollars. The change had been applied retroactively in 1996 by restating the financial statements of prior years. In general, inflation played a relatively small role in the operating results and cash flows of 1997, 1996, 1995 and 1994. Earnings Per Share - SFAS No. 128 The Company must adopt Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," in 1998. Early adoption of the Statement is not permitted. The new standard requires dual presentation of basic and diluted earnings per share (EPS) on the face of the Consolidated Statements of Net Earnings and requires a reconciliation of the numerators and denominators of basic and diluted EPS calculations. The Company's current EPS calculation conforms to basic EPS as defined in the new Statement. Diluted EPS will not be materially different from basic EPS since potential common shares in the form of convertible preferred shares are not materially dilutive (see Summary of Significant Accounting Policies, note 1). Consolidated Statements of Net Earnings Seneca Foods Corporation and Subsidiaries
(Eight Months) Years ended March 31 and July 31, 1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------------------- (In thousands of dollars, except share amounts) Revenue: Net sales $730,135 $507,988 $234,073 $290,185 Other income (Note 13) 8,308 4,271 -- -- - --------------------------------------------------------------------------------------------------------------------------------- 738,443 512,259 234,073 290,185 - --------------------------------------------------------------------------------------------------------------------------------- Costs and expenses: Cost of product sold 669,261 452,584 202,068 247,261 Selling, general, and administrative expense 28,609 31,640 23,620 28,824 Interest expense, net of interest income of $185, $180, $116, and $528, respectively 28,827 28,157 6,296 6,046 Non-recurring charge (Note 14) -- 15,078 -- -- - --------------------------------------------------------------------------------------------------------------------------------- 726,697 527,459 231,984 282,131 - --------------------------------------------------------------------------------------------------------------------------------- Earnings (loss) from continuing operations before income taxes, extraordinary item and cumulative effect of accounting change 11,746 (15,200) 2,089 8,054 Income taxes (Note 6) 4,215 (5,053) 768 2,780 - --------------------------------------------------------------------------------------------------------------------------------- Earnings (loss) from continuing operations before extraordinary item and cumulative effect of accounting change 7,531 (10,147) 1,321 5,274 Earnings from discontinued operations, less applicable income taxes of $46 (Note 10) -- -- -- 90 Gain on the sale of discontinued operations, less applicable income taxes of $1,171 (Note 10) -- -- -- 2,273 Extraordinary loss on early extinguishment of debt, less applicable income tax benefit of $312 -- -- -- (606) Cumulative effect of accounting change (Note 6) -- -- -- 2,006 -------------------------------------------------------------------- Net earnings (loss) $ 7,531 $ (10,147) $ 1,321 $ 9,037 ================================================================================================================================= Earnings (loss) from continuing operations per common share $ 1.27 $ (1.81) $ .23 $ .91 Earnings from discontinued operations per common share -- -- -- .01 Gain on the sale of discontinued operations per common share -- -- -- .39 Extraordinary loss on early extinguishment of debt per common share -- -- -- (.11) Cumulative effect of accounting change per common share -- -- -- .35 -------------------------------------------------------------------- Net earnings (loss) per common share $ 1.27 $ (1.81) $ .23 $ 1.55 =========================================================================================== ===================================== Weighted average shares outstanding 5,939,680 5,621,991 5,593,110 5,797,726 ======================================================================================================================= See notes to consolidated financial statements.
Consolidated Balance Sheets Seneca Foods Corporation and Subsidiaries
March 31, 1997 1996 - ---------------------------------------------------------------------------------------------------------------------------------- (In thousands) Assets Current Assets: Cash and short-term investments $ 1,584 $ 1,297 Common stock of Moog Inc. (Notes 2 and 13) -- 12,863 Accounts receivable, less allowance for doubtful accounts of $200 and $165, respectively 36,477 51,118 Inventories: Finished products 75,898 138,953 In process 35,373 63,730 Raw materials and supplies 46,926 27,076 Refundable income taxes (Note 6) -- 3,503 Deferred tax asset (Note 6) 6,156 53 Prepaid expenses 4,432 1,041 ------------------------------ Total Current Assets 206,846 299,634 - ---------------------------------------------------------------------------------------------------------------------------------- Other Assets (Note 2) 1,738 1,505 - ---------------------------------------------------------------------------------------------------------------------------------- Property, Plant, and Equipment (Note 5): Land 5,449 4,832 Buildings 88,959 92,283 Equipment 261,444 251,859 ------------------------------ 355,852 348,974 Less accumulated depreciation and amortization 148,413 126,254 ------------------------------ Net Property, Plant, and Equipment 207,439 222,720 - ---------------------------------------------------------------------------------------------------------------------------------- Total Assets $416,023 $523,859 ================================================================================================================================== Liabilities and Stockholders' Equity Current Liabilities: Notes payable (Note 3) $ 18,000 $113,000 Accounts payable 24,435 48,930 Accrued expenses 25,615 28,253 Current portion of long-term debt and capital lease obligations 9,465 690 Income taxes (Note 6) 599 -- ------------------------------ Total Current Liabilities 78,114 190,873 Long-Term Debt (Note 4) 214,848 216,928 Capital Lease Obligations (Note 5) 9,280 9,646 Deferred Gain and Other Liabilities (Note 5) 4,248 4,059 Deferred Income Taxes (Note 6) 15,797 11,414 Commitments (Note 5) -- -- ------------------------------ Total Liabilities 322,287 432,920 - ---------------------------------------------------------------------------------------------------------------------------------- Stockholders' Equity (Notes 4 and 7): Preferred stock 70 70 Common stock 2,666 2,666 ------------------------------ Total Capital Stock 2,736 2,736 Additional paid-in capital 5,913 5,913 Net unrealized gain on available-for-sale securities (Note 2) 435 5,169 Retained earnings 84,652 77,121 ------------------------------ Total Stockholders' Equity 93,736 90,939 - ---------------------------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $416,023 $523,859 ================================================================================================================================== See notes to consolidated financial statements.
Consolidated Statements of Cash Flows Seneca Foods Corporation and Subsidiaries
(Eight Months) Years ended March 31 and July 31, 1997 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------------------------- (In thousands) Cash flows from operating activities: Net earnings (loss) $ 7,531 $ (10,147) $ 1,321 $ 9,037 Adjustments to reconcile net earnings (loss) to net cash provided (used) by operations: Depreciation and amortization 26,338 23,563 6,773 9,253 Deferred income taxes (1,868) (2,215) 446 (606) Gain on the sale of assets (8,308) (4,271) -- (3,444) Cumulative effect of accounting change -- -- -- (2,006) Extraordinary losses on early extinguishment of debt -- -- -- 606 Changes in operating assets and liabilities: Accounts receivable 14,641 (18,517) (13,536) 4,142 Inventories 71,562 (91,646) (25,256) (9,935) Prepaid expenses (3,391) (240) (458) (147) Accounts payable, accrued expenses, and other liabilities (23,327) 21,376 3,275 16,117 Income taxes 6,653 (3,985) 356 (494) ------------------------------------------------------------- Net cash provided by (used in) operations 89,831 (86,082) (27,079) 22,523 - ---------------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Proceeds from sale of common stock of Moog Inc. 12,863 -- -- -- Additions to property, plant, and equipment (11,650) (67,897) (26,966) (9,384) Proceeds from the sale of assets 4,643 8,904 -- 8,356 Disposals of property, plant, and equipment 699 876 527 866 Acquisitions -- -- (16,837) (11,670) ------------------------------------------------------------- Net cash provided by (used in) investing activities 6,555 (58,117) (43,276) (11,832) - ----------------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net (payments) borrowings on notes payable (95,000) 113,000 (1,600) 1,600 Proceeds from issuance of long-term debt and sale and leaseback 1,343 9,258 125,000 -- Payments of long-term debt and capital lease obligations (2,572) (3,068) (28,776) (19,788) Other assets 130 (220) (44) 21 Dividends paid -- (12) (12) (23) Common stock retirements -- -- -- (5,092) Extraordinary loss on early extinguishment of debt -- -- -- (606) ------------------------------------------------------------- Net cash provided by (used in) financing activities (96,099) 118,958 94,568 (23,888) - ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and short-term investments 287 (25,241) 24,213 (13,197) Cash and short-term investments, beginning of year 1,297 26,538 2,325 15,522 ------------------------------------------------------------ Cash and short-term investments, end of year $ 1,584 $ 1,297 $ 26,538 $ 2,325 ================================================================================================================================== Supplemental disclosures of cash flow information: Cash paid (received) during the year for: Interest $ 28,751 $ 26,480 $ 5,543 $ 7,170 Income taxes (570) 1,147 (33) 4,785 Supplemental information on noncash investing and financing activities: In 1997 an additional $7,558 was added to the secured nonrecourse subordinated note in conjunction with the acquisition of additional assets. The Company reached an agreement with Pillsbury to convert $6,000 of its subordinated note into the Company's Class A Common Stock in 1996. The Company issued a secured nonrecourse subordinated promissory note for $73,025 in 1995 in conjunction with the acquisition of certain Green Giant assets. See notes to consolidated financial statements.
Consolidated Statements of Stockholders' Equity Seneca Foods Corporation and Subsidiaries
Preferred Stock --------------- 6% Class A 10% Cumulative Par Cumulative Par Net Unrealized Value $.25 Value $.025 Class A Class B Additional Gain (Loss) on Callable at Par Convertible Common Stock Common Stock Paid-In Available-For- Retained Voting Voting Par Value $.25 Par Value $.25 Capital Sale Securities Earnings - ---------------------------------------------------------------------------------------------------------------------------------- (In thousands, except share amounts) Shares authorized 200,000 1,400,000 10,000,000 10,000,000 ====================================================================================== Shares issued and outstanding: July 31, 1994 200,000 807,240 -- 5,593,110 ====================================================================================== March 31, 1995 200,000 807,240 -- 5,593,110 ====================================================================================== March 31, 1996 200,000 807,240 3,143,125 2,796,555 ====================================================================================== March 31, 1997 200,000 807,240 3,143,125 2,796,555 ====================================================================================== Balance July 31, 1993 $50 $20 $ -- $1,948 $ 3,157 $ -- $ 79,523 Net earnings -- -- -- -- -- -- 9,037 Cash dividends paid on preferred stock -- -- -- -- -- -- (23) Retirement of common stock -- -- -- (68) (3,157) -- (1,867) - ---------------------------------------------------------------------------------------------------------------------------------- Balance July 31, 1994 50 20 -- 1,880 -- -- 86,670 Net earnings -- -- -- -- -- -- 1,321 Cash dividends paid on preferred stock -- -- -- -- -- -- (12) Net unrealized gain change -- -- -- -- -- 892 -- - ---------------------------------------------------------------------------------------------------------------------------------- Balance March 31, 1995 50 20 -- 1,880 -- 892 87,979 Net loss -- -- -- -- -- -- (10,147) Cash dividends paid on preferred stock -- -- -- -- -- -- (12) Debt to equity conversion -- -- 87 -- 5,913 -- -- Stock split in the form of a dividend -- -- 699 -- -- -- (699) Net unrealized gain change -- -- -- -- -- 4,277 -- - ---------------------------------------------------------------------------------------------------------------------------------- Balance March 31, 1996 50 20 786 1,880 5,913 5,169 77,121 Net earnings -- -- -- -- -- -- 7,531 Net unrealized gain change -- -- -- -- -- (4,734) -- - ---------------------------------------------------------------------------------------------------------------------------------- Balance March 31, 1997 $50 $20 $786 $1,880 $ 5,913 $ 435 $ 84,652 ================================================================================================================================== See notes to consolidated financial statements.
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 32 plants and warehouses in nine states. The Company markets branded and private label processed foods to retail customers and institutional food distributors. Accounting Period - In 1995, the Company changed its fiscal year-end to March 31. Fiscal 1995 is an eight-month transition period ended March 31, 1995. 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. During 1997 and 1996, the Company sold $205,633,000 and $167,994,000, respectively, of canned and frozen vegetables to Pillsbury under its Alliance Agreement (see Acquisitions, note 12), which represented 28% and 33%, respectively, of net sales. During 1997, the Company sold for cash, at the request of an independent third party, on a bill and hold basis, all of the remaining Green Giant vegetables. At the time of the sales, the aforementioned finished goods inventory was complete, ready for shipment and segregated from the Company's other finished goods inventory. The Company had performed all of its obligations with respect to the specified finished goods inventory sold. Sales under these agreements were $186,091,000, or 26% of net sales. Total net sales in 1997 of Green Giant vegetables were $391,724,000 or 54% of net sales. Concentration of Credit Risk - Financial instruments that potentially subject the Company to credit risk consist of trade receivables and interest-bearing investments. With the exception of the aforementioned relationship with Pillsbury, 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 - 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. 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. During 1997, the Company adopted SFAS No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". This Statement requires that impairment losses be recognized when the carrying value of an asset exceeds its fair value. The Company regularly assesses all of its long-lived assets for impairment and determined that no impairment loss need be recognized for applicable assets of continuing operations. Earnings per Common Share - Primary earnings per share are calculated on the basis of weighted average common shares outstanding since the effect of common stock equivalents is immaterial. The difference between primary and fully diluted earnings per share is also immaterial. In March 1997 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," which will be in effect for the Company's fourth quarter ended March 31, 1998. Early adoption of the Statement is not permitted. The Company's current earnings per share calculation conforms to basic earnings per share as defined in the new Statement. Had SFAS No. 128 been effective for the years 1997, 1996, 1995, and 1994, reported net earnings per share, on an unaudited, proforma basis, would have been as follows:
(Eight Months) Years ended March 31 and July 31, 1997 1996 1995 1994 -------------------------------------------------------------------------------------------------- Basic $1.27 $(1.81) $.23 $1.55 Diluted 1.25 (1.81) .23 1.55
Notes to Consolidated Financial Statements (continued) 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. Notes to Consolidated Financial Statements (continued) 2. Common Stock of Moog Inc. The Company's investment in the common stock of Moog Inc. is carried at fair value in 1997 and 1996 in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities". There was a realized gain of $7,501,000 before income taxes in 1997. There were no realized gains or losses in 1996, 1995, or 1994 and gross unrealized holding gains of $695,000 and $7,832,000, at March 31, 1997 and 1996, respectively. Notes to Consolidated Financial Statements (continued) 3. Lines of Credit The Company obtains required short-term funds through bank borrowings. During 1995 the Company entered into an unsecured revolving credit agreement with various banks. At March 31, 1997, the Company had $7,119,000 outstanding for letters of credit and an unsecured revolving line of credit totaling $150,000,000. The line is renewable in 1998 and provides for loans of varying maturities at rate options based on Prime, Eurodollar, or Money Market. This unsecured revolving line of credit provides for various financial covenants. All provisions have been meet at March 31, 1997. As of March 31, 1997 and 1996, the amounts borrowed under the revolving line of credit were $18,000,000 and $113,000,000, respectively. The weighted average interest rate on the amounts borrowed during these periods were 7.94% and 7.66%, respectively. Notes to Consolidated Financial Statements (continued) 4. Long-Term Debt
1997 1996 - -------------------------------------------------------------------------------------------------------------------------------- (In thousands) Note payable to insurance company, 10.78%, due through 2005 $ 75,000 $ 75,000 Secured nonrecourse subordinated promissory note, 8.00%, due through 2009 74,583 67,025 Note payable to insurance company, 10.81%, due through 2009 50,000 50,000 Industrial Revenue Development Bonds, variable rate, due through 2028 22,630 24,625 Other 1,738 547 ------------------------------- 223,951 217,197 Less current portion 9,103 269 ------------------------------- $214,848 $216,928 ===============================
Debt agreements provide various financial covenants including 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, 1997. All provisions have been met at March 31, 1997. During 1997, the Company increased the amount owed on its secured nonrecourse subordinated promissory note to The Pillsbury Company by $7,558,000 due to the acquisition of additional assets. The Company has four Industrial Revenue Bonds ("IRB's") totaling $22,630,000 which are backed by direct pay letters of credit. Debt repayment requirements for the next five fiscal years are: (In thousands) 1998 $ 9,103 1999 11,082 2000 15,724 2001 15,728 2002 17,797 Notes to Consolidated Financial Statements (continued) 5. Leases The Company leases a portion of its equipment and buildings. Capitalized leases consist primarily of industrial development agency financing instruments and limited obligation special revenue bonds which bear interest rates from 3.55% to 6.75%. Other leases include non-cancelable operating leases expiring at various dates through 2007. During 1996, the Company entered into a sale and leaseback transaction whereby three of its wastewater facilities in New York State were sold for $9,258,000 and leased back under a 20-year lease agreement. This transaction produced a gain of $4,178,000 which was deferred and is being amortized over the 20-year lease period. Leased assets under capital leases consist of the following:
1997 1996 ------------------------------------------------------------------------------- (In thousands) Land $ 160 $ 160 Buildings 1,792 1,792 Equipment 10,385 10,385 ----------------------------------- 12,337 12,337 Less accumulated amortization 3,519 2,555 ----------------------------------- $ 8,818 $ 9,782 ===============================================================================
The following is a schedule by year of minimum payments due under leases as of March 31, 1997: Operating Capital --------- ------- (In thousands) Year ending March 31: 1998 $ 3,962 $ 842 1999 3,591 843 2000 3,156 843 2001 2,861 843 2002 1,659 842 2003-2014 6,205 9,647 -------------------------- Total minimum payment required $21,434 13,860 ========================================================= Less interest 4,218 ------------- Present value of minimum lease payments 9,642 Amount due within one year 362 ------------- Long-term capital lease obligations $ 9,280 ===========================================================================
Aggregate rental expense in 1997, 1996, 1995, and 1994 was $7,881,000, $7,076,000, $2,031,000, and $2,190,000, respectively. Notes to Consolidated Financial Statements (continued) 6. Income Taxes The Company files a consolidated income tax return. The provision for income taxes includes the effect of continuing and discontinued operations and the extraordinary items as follows:
(Eight Months) 1997 1996 1995 1994 --------------------------------------------------------------------------------- (In thousands) Current: Federal $3,438 $(3,282) $ 716 $ 2,970 State 116 762 107 430 ------------------------------------------------------ 3,554 (2,520) 823 3,400 ------------------------------------------------------ Deferred: Federal 465 (1,961) (123) 239 State 196 (572) 68 46 ------------------------------------------------------ 661 (2,533) (55) 285 ------------------------------------------------------ Total income taxes $4,215 $(5,053) $ 768 $ 3,685 =================================================================================
At March 31, 1997, the Company has Research and Development Credits to carry-over in the amount of $91,000 of which $31,000 will expire in the year 2010 and $52,000 will expire in 2011, and $8,000 will expire in 2012, and Alternative Minimum Tax Credits in the amount of $2,267,000 to offset future years regular tax expense. State Net Operating Loss carry-over of approximately $4,000,000 are available to offset future state tax expense, approximately one-half will expire in 2001 and the balance will expire in 2012. During calendar year 1996, the Internal Revenue Service began an audit of fiscal years 1994, 1995, and 1996. Currently, no adjustments have been received by the Company. In the opinion of management any additional tax liability will not have a material effect on the financial position or results of operations of the Company. The cumulative effect of the adoption of SFAS No. 109 on August 1, 1993 was $2,006,000. This change is reported in the 1994 Consolidated Statement of Net Earnings. A reconciliation of the expected U.S. statutory rate to the effective rate follows:
1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------ Computed (expected tax rate) 34.0% (34.0)% 34.0% 34.0% State income taxes (net of federal tax benefit) 1.5 0.8 6.2 2.4 Other .4 -- (3.5) (1.9) ------------------------------------------------------------- Effective tax rate 35.9% (33.2)% 36.7% 34.5% ==============================================================================================================
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, 1997 and 1996:
1997 1996 ------------------------------------------------------------------------------- (In thousands) Deferred tax liabilities: Basis and depreciation difference $14,479 $10,728 LIFO 2,590 3,237 Moog investment 260 2,663 State taxes 1,059 618 ----------------------------------- 18,388 17,246 ----------------------------------- Deferred tax assets: Inventory valuation 2,974 2,046 Future tax credits 2,357 1,254 Employee benefits 1,229 1,149 Pension 1,231 863 Insurance 703 395 Other 253 178 ----------------------------------- 8,747 5,885 ----------------------------------- Net deferred tax liability $ 9,641 $11,361 ===============================================================================
Net current deferred tax assets of $6,156,000 as of March 31, 1997 and $53,000 as of March 31, 1996 are recognized in the Consolidated Balance Sheets. Also recognized are net non-current deferred tax liabilities of $15,797,000 and $11,414,000 at March 31, 1997 and 1996, respectively. Notes to Consolidated Financial Statements (continued) 7. Stockholders' Equity 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 $.25 stated value and a $.025 par value. There are 2,600,000 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 - During 1996 an amendment to the Company's Certificate of Incorporation, which effected a recapitalization of the Company by creating a second class of common stock (which was distributed to all common shareholders as a stock split in the form of a dividend), was adopted at the Annual Meeting held on August 5, 1995. This recapitalization amendment (i) reclassified the existing Common Stock as Class B Common Stock, (ii) authorized a new class of 10,000,000 shares designated as Class A Common Stock and (iii) established the express terms of the Class A Common Stock and the Class B Common Stock. 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. In 1996, the Company reached an agreement with Pillsbury to convert $6,000,000 of its subordinated note into 346,570 shares of the Company's Class A Common Stock. Unissued shares of common stock reserved for conversion privileges were 33,695 of Class A and Class B at March 31, 1997 and 1996. Notes to Consolidated Financial Statements (continued) 8. Quarterly Results (Unaudited) The following is a summary of the unaudited interim results of operations by quarter:
First Second Third Fourth ----- ------ ----- ------ (In thousands, except per share data) Year ended March 31, 1997: Net sales $123,694 $159,521 $291,188 $155,732 Gross margin 14,288 16,327 15,351 14,908 Net earnings (loss) 4,827 2,710 359 (365) Net earnings (loss) per common share .81 .46 .06 (.06) Year ended March 31, 1996: Net sales $ 81,945 $131,979 $201,032 $ 93,032 Gross margin 13,416 13,655 12,253 16,080 Net earnings (loss) 55 (10,349) 218 (71) Net earnings (loss) per common share .01 (1.85) .04 (.01)
The second quarter of 1996 results include a non-recurring charge of $15,078,000 before income tax benefit, due to start-up costs related to the Pillsbury Alliance (see Acquisitions, note 12 and Non-Recurring Charge, note 14). 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. Notes to Consolidated Financial Statements (continued) 9. Retirement Plan 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. Pension expense includes the following:
(Eight Months) 1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------------- (In thousands) Service cost for benefits earned during the period $ 1,565 $ 1,336 $ 484 $ 818 Interest cost on projected benefit obligation 1,329 1,210 745 998 Actual return on plan assets (2,660) (2,372) (2,474) (1,691) Net deferral of actuarial gains 1,027 860 1,593 673 Amortization of net unrecognized gain at August 1, 1987 (276) (276) (184) (276) Amortization of losses -- -- -- 144 Amortization of prior service cost 94 94 62 94 -------------------------------------------------------------------- Pension expense $ 1,079 $ 852 $ 226 $ 760 ===========================================================================================================================
The following table summarizes the funded status and related amounts that are recognized in the consolidated balance sheets:
1997 1996 - ----------------------------------------------------------------------------------- (In thousands) Actuarial present value of accumulated benefit obligation: Vested $ 13,524 $ 12,227 Nonvested 823 683 --------------------------- Total $ 14,347 $ 12,910 =================================================================================== Plan assets at fair market value, primarily listed stocks and fixed income securities $ 21,545 $ 19,718 Projected benefit obligation 19,004 17,242 --------------------------- Plan assets in excess of projected benefit obligation 2,541 2,476 Unrecognized gain at transition (4,095) (4,371) Unrecognized prior service cost 500 594 Unrecognized net gain (2,565) (1,239) ---------------------------- Accrued pension liability $ (3,619) $ (2,540) ====================================================================================
The projected benefit obligation was determined using an assumed discount rate of 8% and an assumed long-term salary increase rate of 5%. The assumed long-term rate of return on plan assets was 8.5%. The Plan holds the Company's common stock with a fair market value of $2,717,000. 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 during 1997 amounted to $211,000 which represents four months of the year. Notes to Consolidated Financial Statements (continued) 10. Discontinued Operations In August 1993 the Company completed its sale of the textile division for $8,400,000 in cash and reported a net gain of $2,273,000 in the first quarter of 1994. As a result of the sale, textile operations have been accounted for as a discontinued operation in the 1994 Consolidated Statement of Net Earnings. Net sales for the textile division were $2,246,000 in 1994. Total assets were $8,400,000 and total liabilities were $3,500,000 resulting in $4,900,000 of net assets as of the August 1993 closing. Notes to Consolidated Financial Statements (continued) 11. Fair Value of Financial Instruments The carrying amounts and the estimated fair values of the Company's financial instruments, as determined under SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," are summarized as follows:
1997 1996 ----------------------------------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value -------- ---------- -------- ---------- (In thousands) Long-term debt, including current portion $223,951 $225,112 $217,197 $226,015 Notes payable 18,000 18,000 113,000 113,000 Common stock of Moog Inc. 1,411 1,411 13,911 13,911
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. Notes payable - The carrying amount approximates fair value due to the short-term maturity of these instruments. Common stock of Moog Inc. - Based on quoted market prices. Notes to Consolidated Financial Statements (continued) 12. Acquisitions On February 10, 1995 the Company acquired certain assets of the Green Giant Division of The Pillsbury Company (referred to as "Pillsbury"), a subsidiary of Grand Metropolitan Incorporated. Under an Alliance Agreement concurrently executed 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 purchase price was based on the book value of the assets acquired. The purchase price of $86,093,000 was funded by a secured nonrecourse subordinated promissory note issued by the Company for $73,025,000 and the balance was funded out of working capital. On August 17, 1994 the Company acquired the assets of M.C. Snack, Inc. of Yakima, Washington, a snack food maker of apple chips. The purchase price was $3,769,000 which was funded out of working capital. On December 20, 1993 the Company acquired certain assets of ERLY Juice, Inc. and WorldMark, Inc. The assets acquired include certain trademarks, inventory, accounts receivable, and manufacturing facilities located in Eau Claire, Michigan. Most of the products are sold under the TreeSweet brand. The purchase price was $8,372,000 which was funded out of working capital. The Company acquired the Wapato, Washington juice processing business of Sanofi Bio-Industries, Inc. on November 30, 1993. The purchase price was $3,298,000 which was funded out of working capital. All acquisitions were accounted for under the purchase method and, accordingly, the operating results of the acquired have been included in the consolidated operating results since the dates of acquisition. Subsequent to March 31, 1997 the Company completed two acquisitions. The first was the acquisition of Aunt Nellie's Farm Kitchen from The Pillsbury Company, a subsidiary of Grand Metropolitan Incorporated, for approximately $25 million. Aunt Nellie's Farm Kitchen produces, markets, and sells fruit and vegetable products from plants in the Midwest and its sales were approximately $50 million for 1996. The Company purchased the plants, inventories, accounts receivable, and trademarks of the business. This acquisition was funded primarily out of working capital and will be accounted for under the purchase method. 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 in 1996. The purchase price was approximately $31 million which was funded primarily out of working capital and will be accounted for under the purchase method. Notes to Consolidated Financial Statements (continued) 13. Other Income Other income in 1997 consisted of the following: 1) a gain on the sale of the Moog, Inc. common stock of $7,501,000, 2) a gain on the sale of the Clifton Park, New York warehouse of $1,640,000, and 3) a loss on the sale of Eau Claire, Michigan plant of $833,000. Other income in 1996 consisted of the gain on the sale of the Peabody, Massachusetts warehouse totaling $4,271,000. 14. Non-Recurring Charge The 1996 operating results include a non-recurring 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 in New York State throughout the entire summer. The Company undertook an ambitious capital expenditure program related to the Pillsbury Alliance. In the relatively short time between the February 1995 closing of the Pillsbury Alliance and the beginning of the 1995 vegetable pack, 37 separate major capital projects needed to be completed. There were some unforeseen problems related to a few of these projects, mostly in the New York plants. Some of the used equipment transferred from the closed plants had operating difficulties and were not always easily repaired, thus causing downtime. Throughput and yields were poor at some plants resulting in unfavorable manufacturing variances. The problems were magnified when the drought and the hot weather conditions forced the uneven timing of maturities of vegetables. 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, 1997 and 1996, and the related consolidated statements of net earnings, stockholders' equity, and cash flows for the years ended March 31, 1997 and 1996, for the eight months ended March 31, 1995 and for the year ended July 31, 1994. 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 generally accepted auditing standards. 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, 1997 and 1996, and the results of their operations and their cash flows for the years ended March 31, 1997 and 1996, for the eight months ended March 31, 1995 and for the year ended July 31, 1994 in conformity with generally accepted accounting principles. As discussed in note 6 the consolidated financial statements, in fiscal 1994 the Company changed its method of accounting for income taxes to conform with Statement of Financial Accounting Standards No. 109. Deloitte & Touche LLP Rochester, New York May 23, 1997 Shareholder Information The Company's common stock is traded on NASDAQ National Market System. The 3.1 million of Class A outstanding shares and 2.8 million Class B outstanding shares are owned by 454 and 451 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: 1997 1996 ------------------------------------------ Quarter High Low High Low ------- ---- --- ---- --- First $18.00 $14.75 $ -- $ -- Second 17.75 15.75 20.00 19.50 Third 17.00 15.00 19.75 15.00 Fourth 18.75 15.00 19.00 15.25 Class B: 1997 1996 ------------------------------------ Quarter High Low High Low First $18.00 $14.50 $17.88 $16.75 Second 17.75 16.00 22.00 17.25 Third 17.50 15.25 21.25 16.50 Fourth 19.00 15.25 20.00 16.00
The Company may pay dividends on any class of stock only from consolidated net earnings available for distribution, which were none as of March 31, 1997. 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. EX-21 4 Exhibit 21 LIST OF SUBSIDIARIES The following is a listing of subsidiaries 100% owned by Seneca Foods Corporation, directly or indirectly: Name State ---- ----- Marion Foods, Inc. New York Seneca Foods International, Ltd. New York SSP Company, Inc. Massachusetts EX-27 5
5 Commercial and Industrial Companies Article 5 of Regulation S-X 1000 12-MOS MAR-31-1997 MAR-31-1997 1584 0 36677 200 158197 206846 355852 148413 416023 78114 224128 0 70 2666 91000 416023 730135 738443 669261 669261 28609 0 28827 11746 4215 7531 0 0 0 7531 1.27 1.25
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