-----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, N1/r9/uKGPEVYwrm3kojUPsNZe1AMeJo8F20eBcJAMJP5m7BeLstNn7hR8QtuYE7 /+/6QyYAEyl+9kZX+STrzQ== 0000088948-99-000019.txt : 19990819 0000088948-99-000019.hdr.sgml : 19990819 ACCESSION NUMBER: 0000088948-99-000019 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990818 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/A SEC ACT: SEC FILE NUMBER: 000-01989 FILM NUMBER: 99695501 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/A 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, 1999 Commission File Number 0-1989 SENECA FOODS CORPORATION (Exact name of registrant as specified in its charter) New York 16-0733425 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1162 Pittsford-Victor Road, Pittsford, New York 14534 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (716) 385-9500 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, to the best of 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 Indicate by check mark whether the 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 the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes X No ----- ----- The aggregate market value of the Registrant's common equity securities held by non-affiliates based on the closing sales price per market reports by the National Market System on June 1, 1999 was approximately $89,007,000. Common shares outstanding as of June 1, 1999 were Class A: 3,598,767, Class B: 2,791,017. Documents Incorporated by Reference: (1) Proxy Statement to be issued prior to June 30, 1999 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, 1999 (the "1999 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 1999 SENECA FOODS CORPORATION
PART I. Pages Item 1. Business 1-3 Item 2. Properties 4 Item 3. Legal Proceedings 5 Item 4. Submission of Matters to a Vote of Equity Security Holders 5 PART II. Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters 5 Item 6. Selected Financial Data 5 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 5 Item 8. Financial Statements and Supplementary Data 6 Item 9. Changes in and Disagreements on Accounting and Financial Disclosure 6 PART III. Item 10. Directors and Executive Officers of the Registrant 8 Item 11. Executive Compensation 8 Item 12. Security Ownership of Certain Beneficial Owners and Management 8 Item 13. Certain Relationships and Related Transactions 8 PART IV. Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K 8-11 SIGNATURES 12-13
PART I Item 1 Business General Development of Business SENECA FOODS CORPORATION (the "Company") was organized in 1949 and incorporated under the laws of the State of New York. In the spring of 1995, the Company began operations under its Alliance Agreement with The Pillsbury Company, which created the Company's most significant business relationship. Under the Alliance Agreement, the Company has packed canned and frozen vegetables carrying Pillsbury's Green Giant brand name. These Green Giant vegetables have been produced in vegetable plants which the Company acquired from Pillsbury and, to a lesser extent, in the Company's other vegetable plants, which also produce vegetables under the Libby's brand name, which is licensed to the Company, and other brand names owned by the Company or its customers. Since the onset of the Alliance Agreement, vegetable production has been the Company's dominant line of business. In the most recent fiscal year, the Company successively sold its fruit juice business and its applesauce and industrial flavors business. As a result of these fiscal 1999 divestitures, the Company's only non-vegetable food products are specialty cherry products and a line of fruit chips. Financial Information about Industry Segments The Company's business activities are conducted in food and non-food segments. Giving effect to the 1999 divestitures, the food segment constitutes 99% of total sales, of which approximately 96% is vegetable processing and 3% is fruit processing. The non-food segment is an air charter service, which represents 1% of the Company's business. Consequently, 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 canned vegetable, frozen vegetable and fruit products. The products are sold to retail and institutional markets. The Company has divided the United States into four major marketing sections: Eastern, Southern, Northwestern, and Southwestern. Vegetable operations are primarily supported by plant locations in New York, Wisconsin, Washington, Idaho, and Minnesota. Plant locations in Kentucky, Michigan and Washington provide ready access to the domestic sources of fruit necessary to support marketing efforts in their respective sections of the country. The following table summarizes net sales by major product category for the years ended March 31, 1999, 1998, and 1997, after eliminating in each year sales attributable to the product lines which were sold in the 1999 divestitures:
Classes of similar products/services: 1999 1998 1997 - ------------------------------------------------------------------------------------------------------- (In thousands) Green Giant vegetables $ 289,946 $ 277,080 $ 391,724 Canned vegetables 242,702 243,003 146,338 Frozen vegetables 20,446 19,283 20,094 Fruit products 13,825 14,558 5,550 Flight operations 4,225 2,894 2,624 Other 5,049 3,708 4,686 - ------------------------------------------------------------------------------------------------------- $ 576,193 $ 560,526 $ 571,016 =======================================================================================================
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 producing states. Fruits and vegetables are primarily obtained through contracts with growers. 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. Off Season Allowance 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 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. All of the Company's products compete with those of other national, major, and smaller regional food processing companies under highly competitive conditions. The Company's major competitors in the vegetable business have substantially greater sales and assets than the Company. The Company also sells vegetable products which compete with Pillsbury products manufactured by the Company under the Alliance Agreement. The vegetable business in the last three years has undergone consolidation as a result of adverse market conditions, and many smaller vegetable processors have been acquired by the Company and its major competitors. Future acquisitions may increase the market strength of the Company's larger competitors providing them with even greater resources for obtaining desirable shelf space and promotional programs with major retail food stores. However, the major segment of the Company's business is producing vegetables for sale by others - such as Green Giant vegetables for Pillsbury and vegetables carrying the brand names of the Company's grocery chain customers. In that segment of the business, the marketing programs are determined by the Company's customers. In recent years, many major retail food stores have been increasing their promotions and offerings of their own brand name vegetables, to the detriment of vegetable brands owned by the producers, including the Company's own brands. During the past year approximately 9% of the Company's processed foods were packed for retail customers under the Company branded labels of Libby's(R), Blue Boy(R), Aunt Nellie's Farm Kitchen(R), and Seneca(R). About 12% of the processed foods were packed for institutional food distributors and 28% of processed foods were retail packed under the private label of customers. The remaining 51% is sold under the Alliance Agreement with Pillsbury (see note 13 of Item 8, Financial Statements and Supplementary Data). Termination of the Alliance Agreement would have a material adverse effect on the Company taken as a whole. 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 other than sales attributable to the Alliance Agreement. The Company's principal branded products are Libby's canned vegetables, which rank among the top five national brands in sales volume. The information under the heading Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations in the 1999 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 three waste disposal sites, owned and operated by others. The Company believes that any reasonably anticipated liabilities related to those sites will not exceed $260,000 in the aggregate. Employment Food processing - Full time 1,967 - Seasonal 496 --------- 2,463 Other 103 --------- 2,566 The Company has six collective bargaining agreements with six union locals covering approximately 536 of its full time employees. The terms of these agreements result in wages and benefits, which are substantially the same for comparable positions for the Company's non-union employees. Two collective bargaining agreements expire in calendar 1999. The remaining agreements expire in calendar 2000, 2001, and 2002. Foreign Operations Export sales for the Company are a relatively small portion (about 2%) of the food processing sales. Item 2 Properties The Company owns seven food processing, packaging, and warehousing facilities located in New York State that provide approximately 1,867,000 square feet of food packaging, freezing and freezer storage, and warehouse storage space. These facilities process and package 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 facilities in Minnesota, one facility in Michigan, three facilities in Washington, one facility in Idaho, one facility in Kentucky, and six facilities in Wisconsin provide approximately 5,294,000 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 $271,000 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 the production facilities are 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 In the ordinary course of its business, the Company is made a party to certain legal proceedings seeking monetary damages. The Company does not believe that an adverse decision in any of these proceedings would have a material adverse impact on its financial position, results of operations or cash flows. 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 1999 Annual Report, "Shareholder Information and Quarterly Results", which is incorporated by reference. Item 6 Selected Financial Data Refer to the information in the 1999 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 1999 Annual Report, "Management's Discussion and Analysis of Financial Condition and Results of Operations", which is incorporated by reference. Item 7A Quantitative and Qualitative Disclosures about Market Risk Refer to the information in the 1999 Annual Report, "Quantitative and Qualitative Disclosures about Market Risk", which is incorporated by reference. Item 8 Financial Statements and Supplementary Data Refer to the information in the 1999 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, 1999 and 1998, and for each of the three years in the period ended March 31, 1999, and have issued our report thereon dated May 21, 1999; such consolidated financial statements and report are included in your 1999 Annual Report to Shareholders 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 21, 1999 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. Financial Statement Schedules - the following consolidated financial statements of the Registrant, included in the Annual Report for the year ended March 31, 1999, are incorporated by reference in Item 8: Consolidated Statements of Net Earnings - March 31, 1999, 1998 and 1997 Consolidated Balance Sheets - March 31, 1999 and 1998 Consolidated Statements of Cash Flows - March 31, 1999, 1998 and 1997 Consolidated Statements of Stockholders' Equity - March 31, 1999, 1998 and 1997 Notes to Consolidated Financial Statements - March 31, 1999, 1998 and 1997 Independent Auditors' Report 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, as amended by the Company's definitive proxy filed July, 1998. 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 of the Company's 10-K filed June, 1997, amended by Exhibit 4 of the Company's 10-Q and 10-Q/A filed November, 1997, as amended by the Company's definitive proxy filed July, 1998. 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. 13 - The material contained in the 1999 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", "Quantitative and Qualitative Disclosures about Market Risk", and "Shareholder Information and Quarterly Results". No. 21 - List of Subsidiaries 10 No. 23 - Consents of Experts and Counsel 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, 1999: Allowance for doubtful accounts $ 207 $ 425 $ -- $ 145 (a) $ 487 =================================================================== Year-ended March 31, 1998: Allowance for doubtful accounts $ 200 $ 140 $ -- $ 133 (a) $ 207 =================================================================== Year-ended March 31, 1997: Allowance for doubtful accounts $ 165 $ 72 $ -- $ 37 (a) $ 200 ===================================================================
(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 18, 1999 -------------------- 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 18, 1999 - ----------------------- Arthur S. Wolcott /s/Kraig H. Kayser President, Chief Executive Officer, June 18, 1999 - ----------------------- Kraig H. Kayser and Director /s/Philip G. Paras Vice President, Finance June 18, 1999 - ----------------------- Philip G. Paras /s/Jeffrey L. Van Riper Controller and Secretary June 18, 1999 - ----------------------- Jeffrey L. Van Riper (Principal Accounting Officer) /s/Arthur H. Baer Director June 18, 1999 - ----------------------- Arthur Baer /s/Andrew M. Boas Director June 18, 1999 - ----------------------- Andrew Boas Director June 18, 1999 - ----------------------- Robert T. Brady Director June 18, 1999 - ----------------------- David L. Call /s/Edward O. Gaylord Director June 18, 1999 - ----------------------- Edward O. Gaylord /s/G. Brymer Humphreys Director June 18, 1999 - ----------------------- G. Brymer Humphreys /s/Susan W. Stuart Director June 18, 1999 - ----------------------- Susan W. Stuart
EX-13 2 1999 ANNUAL REPORT TO SHAREHOLDERS Exhibit 13 Five Year Selected Financial Data Summary of Operations and Financial Condition (In thousands of dollars, except per share data)
(Eight Months) Years ended March 31, and July 31, 1999 1998 1997 1996 1995 1994 --------------------------------------------------------------------------------------------------------------------------------- Net sales $ 576,193 $ 560,526 $ 571,016 $ 354,286 $ 128,744 $ 154,726 --------------------------------------------------------------------------------------------------------------------------------- Operating earnings (before Corporate interest and administrative expense) $ 27,138 $ 22,732 $ 43,536 $ 18,613 $ 4,840 $ 11,242 Earnings (loss) from continuing operations before extraordinary item and cumulative effect of accounting change 1,420 (3,181) 8,966 (6,618) (1,941) 2,039 Earnings (loss) from discontinued operations (6,791) (1,963) (1,435) (3,529) 3,262 3,325 Gain on sale of discontinued operations 11,756 -- -- -- -- 2,273 Earnings (loss) before extraordinary item and cumulative effect of accounting change 6,385 (5,144) 7,531 (10,147) 1,321 7,637 Extraordinary loss (1,222) -- -- -- -- (606) Cumulative effect of accounting change -- -- -- -- -- 2,006 Net earnings (loss) 5,163 (5,144) 7,531 (10,147) 1,321 9,037 --------------------------------------------------------------------------------------------------------------------------------- Basic earnings (loss) from continuing operations per common share $ .23 $ (.54) $ 1.51 $ (1.18) $ (.34) $ .35 Basic earnings (loss) per common share before extraordinary item and cumulative effect of accounting change 1.05 (.87) 1.27 (1.81) .23 1.31 Basic earnings (loss) per common share .85 (.87) 1.27 (1.81) .23 1.55 --------------------------------------------------------------------------------------------------------------------------------- Working capital $ 167,435 $ 112,299 $ 132,351 $ 111,301 $ 138,030 $ 67,591 Inventories 152,634 194,044 158,197 229,759 138,113 98,202 Net property, plant, and equipment 178,658 218,408 207,439 222,720 179,718 78,216 Total assets 404,870 474,926 416,023 523,859 385,502 204,899 Long-term debt and capital lease obligations 187,904 227,858 224,128 226,574 221,480 51,476 Stockholders' equity 144,588 89,125 93,736 90,939 90,821 88,620 --------------------------------------------------------------------------------------------------------------------------------- Additions to property, plant, and equipment $ 9,494 $ 15,693 $ 11,650 $ 67,897 $ 26,966 $ 9,384 Interest expense, net 21,594 23,913 25,960 25,069 4,916 3,976 --------------------------------------------------------------------------------------------------------------------------------- Net earnings/average equity 4.4% (5.6)% 8.2% (11.2)% 1.5% 10.4% Continuing earnings before taxes/sales 0.3% (0.9)% 2.4% (1.9)% (1.5)% 1.3% Net earnings/sales 0.9% (0.9)% 1.3% (2.9)% 1.0% 5.8% Long-term debt/equity 130% 256 % 239% 249% 244% 58% Current ratio 4.0:1 1.8:1 2.8:1 1.6:1 3.3:1 2.3:1 --------------------------------------------------------------------------------------------------------------------------------- Stockholders' equity per share $ 16.40 $ 14.99 $ 15.77 $ 15.30 $ 16.23 $ 15.83 Class A National Market System closing price range 17 1/8-10 3/8 18 3/4-15 3/4 18 3/4-14 3/4 20-15 -- -- Class B National Market System closing price range 16 3/4-10 3/8 18 1/2-15 1/2 19-14 1/2 22-16 17 3/4-10 1/2 11 3/8-7 3/4 Common cash dividends declared per share -- -- -- -- -- -- Price earnings ratio 13.1 NM 13.7x NM 74.5x 6.9x --------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------- 1995 represents eight months ended March 31 due to a change in the Company's fiscal year end. 1994 ended July 31. NM - not meaningful.
Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Because the Company is primarily engaged in vegetable processing, the Company's yearly business cycle shows large inventory growth during the summer and fall harvest period. The inventory peaks in the early fall and drops to its minimum level immediately prior to the next pack season (pack refers to canning and freezing of vegetables and certain fruits with each commodity at a certain time during the year, which can vary based on weather conditions among other factors). These peaks are financed through seasonal borrowings whose high and low points essentially correspond with the changes in inventory, or by a reduction in short-term investments. Accordingly, inventory management is key to liquidity. During September 1998, the Company completed an equity sale, which raised $50 million. The equity sale consisted of a Rights Offering to the Company's common shareholders and a Stock Purchase Agreement with certain investors. In December 1998, the Company sold a significant portion of its Juice Division to Northland Cranberries, Inc., together with an exclusive license to market and sell Seneca juice products, for $28.2 million in cash plus the assumption of certain liabilities. This sale included plants in Dundee, New York; Mountain Home, North Carolina; Jackson, Wisconsin; a warehouse in Eau Claire, Michigan; and a receiving station in Portland, New York. In January 1999, the Company sold to Tree Top, Inc. its processing facility in Prosser, Washington together with its non-branded specialty fruit concentrate business and an exclusive license to market and sell Seneca applesauce. Tree Top paid approximately $29.0 million in cash. As a result of the fiscal 1999 divestitures and equity sale, the Company anticipates that its requirements for working capital financing will be substantially reduced in the fiscal year ending March 31, 2000 as compared to the prior fiscal year. Accordingly, the total financing commitment of the Company's line of credit banks was reduced in a series of steps from $130 million to $75 million. On January 29, 1999, the Company elected to terminate its Amended and Restated Credit Agreement with those banks. As of March 31, 1999, the Company has obtained a line of credit commitment of $20 million from one of its former lending banks and $30 million of uncommitted line of credit financing from two other banks, which were also in the former lending group. The new credit arrangements with the three banks do not require the Company to pay any commitment fees, whereas the Company paid fees for the unused portion of the bank commitments under the Amended and Restated Credit Agreement, which it terminated in January 1999. The Company has three major long-term debt instruments: 1) A $44,700,000 note payable to The Prudential Insurance Company of America, with an interest rate of 10.78%, which is due through 2005, 2) A $68,083,000 secured nonrecourse note payable to The Pillsbury Company, with an interest rate of 8%, which is due through 2009, and 3) A $50,000,000 note payable to John Hancock Mutual Life Insurance Company, with an interest rate of 10.81%, which is due beginning March 2001 and a final maturity of January 2009. The Company believes that the credit facilities described above will be sufficient, with its other resources, for its anticipated working capital requirements in 2000. In the final quarter of 1999, the Company made the following prepayments on long-term debt (plus prepayment penalty payments to the lenders in accordance with the terms of the indebtedness): (1) With respect to its outstanding 10.78% Series A Note due February 23, 2005, in addition to the scheduled payment of a principal installment of $7,500,000 due February 23, 1999, the Company prepaid two annual principal installments of $8,400,000 each due February 23 in 2000 and 2001; and (2) With respect to its outstanding 9.17% Senior Notes due 2004, the Company prepaid $15,000,000, the entire outstanding principal amount of these Notes. During May 1996, the Company sold its investment in Moog Inc. Class A Common Stock back 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 net 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. During 1995, the Company acquired certain assets of the Green Giant Division of The Pillsbury Company. Under an Alliance Agreement concurrently executed in 1995 by the Company, Pillsbury and Grand Metropolitan Incorporated, Pillsbury continues to be responsible for all of the sales, marketing and customer service functions for the Green Giant brand, while the Company will handle vegetable processing and canning operations. Pillsbury continues to own all the trademark rights to the Green Giant brand and its proprietary seed varieties. The assets acquired included certain raw material and supplies inventory and six manufacturing facilities located in the Midwestern and Northwestern United States. The 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. The increase in cash and short-term investments of $25.6 million over the three year period ended in 1999 was primarily due to: the inventory reduction of $71.7 million; the proceeds of the sale of assets (primarily the Juice sale) totaling $69.9 million; proceeds from the new equity issue from the Stock Purchase Agreement and Rights Offering totaling $49.7 million; proceeds of the new long-term debt issues totaling $16.4 million; proceeds from the sale of Moog Inc. stock of $12.9 million; and net earnings (before depreciation effect, which is non-cash). This was partially offset by: repayments of notes payable totaling $113.0 million; long-term debt repayments totaling $55.2 million; Aunt Nellie's Farm Kitchens and Curtice Burns acquisitions of $53.7 million; capital additions of $9.4 million, $15.7 million, and $11.7 million, in 1999, 1998, and 1997, respectively. In 1999, accounts receivable decreased by $12.9 million mainly due to the Juice divestitures. In 1998, accounts receivable increased by $12.2 million to $48.6 million. This was due in part to Non-Alliance sales being $87.7 million higher reflecting the two acquisitions described below. In 1999, inventories decreased by $41.4 million mainly due to the Juice divestitures. In 1998, inventories increased $35.8 million over 1997. This was largely due to the acquisitions made during the year (see below). In 1997, inventories declined by $71.6 million due to the sales increase on Alliance sales. In 1999, capital expenditures were $9.4 million as compared to $15.7 million in 1998. In 1998, capital expenditures were $15.7 million as compared to $11.7 million in 1997. No major capital expenditures occurred in 1999. In 1998, certain juice production lines were converted to PET (plastic bottles) totaling $3.2 million at plants in the South and Midwest. The 1997 capital expenditures were down substantially from 1996. The largest project was the Alliance related green bean plant expansion in Cumberland costing $4.4 million in 1997. In 1998, the Company completed two acquisitions. The first acquisition was Aunt Nellie's Farm Kitchens, which produces, markets, and sells fruit and vegetable products from their plants in the Midwest, costing approximately $24.3 million. The second acquisition was the Curtice Burns canned branded and private label vegetable business costing approximately $29.4 million (see Acquisitions, note 10). Results of Operations Net sales from continuing operations for 1999 were $576.2 million, which includes $289.9 million sold under the Alliance with Pillsbury. Net sales for 1998 were $560.5 million, which includes $277.1 million sold under the Alliance with Pillsbury. Net sales for 1997 were $571.0 million, which includes $391.7 million sold under the Alliance with Pillsbury. In 1999, Non-Alliance sales increased by $2.7 million. In 1999, vegetable unit non-branded sales increased over 1998 due to increased distribution on the west coast and another large pack. In 1998, vegetable unit sales increased due to the two acquisitions and the high pack levels of the last two years. In 1997, vegetable unit sales increased due to getting higher 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. The sale of the Juice business to Northland Cranberries, Inc. resulted in a pre-tax gain on the disposal of $6,760,000, which was recognized during the Company's fourth quarter ended March 31, 1999. The sale of the Company's processing facility in Prosser, Washington together with its non-branded specialty fruit concentrate business to Tree Top, Inc. resulted in a pre-tax gain on the disposal of $10,427,000, which was also recognized in the Company's fourth quarter. As a result of these sales, the Juice Business has been accounted for as discontinued operations in prior periods in the Consolidated Statements of Net Earnings. Net sales for these businesses were $121,290,000 in 1999 and $142,694,000 in 1998. In March 1999, the Company sold a parcel of land in Rochester, Minnesota, which resulted in a gain of $6.2 million before income taxes. The 1997 results include a $7.5 million gain on the sale of Moog Inc. Class A Common Stock back to Moog and a gain on the sale of a Clifton Park, New York warehouse of $1.6 million. In 1999, earnings increased due to the following reasons: 1) the gain on the sale of land in Rochester, Minnesota of $6.2 million, 2) somewhat better selling prices on vegetables after low prices the previous year, and 3) a gain on the sale of an aircraft of $.7 million. These gains were partially offset by an impairment provision on real estate and equipment of $2.0 million, which was established in 1999. 1998 earnings decreased mainly due to lower selling prices on vegetables due to an ongoing industry oversupply due in part to the second consecutive above budget pack. 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, and 3) greater sales under the Alliance Agreement produced additional earnings. A deferred tax valuation allowance as of March 31, 1999, was not deemed necessary due to the fact that there was positive evidence that outweighed the negative evidence that it was more likely than not that these tax assets will be realized. While the Company has suffered losses in two of the last three fiscal years, the fiscal 1996 loss was due, in part, to an unusual charge of $15.1 million. The Company does not believe that the recent losses should be considered a trend, and that other evidence, including the fact that the Company has never had a net operating loss expire, should be considered in evaluating whether a valuation allowance is necessary. In general, inflation played a relatively small role in the operating results and cash flows of 1999, 1998, and 1997 since the Company depreciates its fixed assets under accelerated depreciation methods for tax purposes. New Accounting Pronouncements In June 1998, the Financial Accounting Standards board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Company does not use derivative instruments nor does it engage in hedging activities. Therefore, this standard is not expected to have an impact on the Company's reported financial position, results of operations or cash flows. Year 2000 The Company recognizes the need to ensure its operations will not be adversely impacted by Year 2000 software failures. Software failures due to processing errors potentially arising from calculations using the Year 2000 date are a known risk. The Company is in the process of replacing some systems, which are known not to be Year 2000 compliant, and updating others to be Year 2000 compliant. The Company is addressing the computing environment along with any other systems in the operating facilities, which may also not be Year 2000 compliant. The Company is using internal resources to make systems Year 2000 compliant as much as possible only using external resources for specialized equipment, which is mostly at our plants. The total cost of compliance, above and beyond normal software upgrades, is not expected to exceed $750,000, of which approximately $400,000 has been incurred to date. The Project includes the following phases: assessment of the problem, correction/replacement of systems, testing, vendor assessment and development of a contingency plan. The identification of all equipment with date sensitive operating controls (including embedded systems) has been completed. An inventory of our systems assets has also been completed. All critical systems will have been replaced or modified to be compliant by June 30, 1999, with testing complete by September 30, 1999. The Company has begun evaluating the potential impact of Year 2000 problems in the event that our external vendors are not adequately prepared. If necessary, the Company will secure an alternate supply for the required products and/or services. The Company has not yet developed a contingency plan but anticipates completion of this phase by July 31, 1999. The Company's reasonable worst case scenario might involve not being able to buy cans from our normal suppliers. Some of the Company's can requirements are produced within the Company and the balance are purchased from two major suppliers. If a computer or embedded processor failure at one of these suppliers caused them not to be able produce cans, the Company would need to find alternate sources of supply. In addition, all of our plants are in the northern part of the United States and some of the Company's warehouses are only heated by natural gas. Therefore, when the Year 2000 issues first materialize in January, if there is an issue with the supply of natural gas, the Company could incur losses of canned vegetables due to freezing, unless the Company can find alternative sources of heat or other storage space with heat. Many of our plants have boilers that can use different fuels, so this is less of an issue. The Company does not believe the purchase of fresh vegetables for canning and freezing is a major risk since much of the equipment used in this process does not have Year 2000 issues. The Company believes the most reasonably likely worst case scenario is there could be some localized, temporary disruptions to portions of business activities such as shipping, information systems, warehousing, and agricultural production rather than systemic or long-term problems affecting its business operations as a whole. Consolidated Statements of Net Earnings Seneca Foods Corporation and Subsidiaries (In thousands of dollars, except share amounts)
Years ended March 31, 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------- Revenue: Net sales $ 576,193 $ 560,526 $ 571,016 Other income 4,834 -- 9,141 ------------------------------------------------- 581,027 560,526 580,157 - ------------------------------------------------------------------------------------------------------------------------- Costs and expenses: Cost of product sold 538,678 521,432 526,335 Selling, general, and administrative expense 18,778 20,124 13,878 Interest expense, net of interest income of $648, $109, and $185 respectively 21,594 24,200 25,960 ------------------------------------------------- 579,050 565,756 566,173 - ------------------------------------------------------------------------------------------------------------------------- Earnings (loss) from continuing operations before income taxes and extraordinary item 1,977 (5,230) 13,984 Income taxes 557 (2,049) 5,018 ------------------------------------------------- Earnings (loss) from continuing operations before extraordinary item 1,420 (3,181) 8,966 Loss from discontinued operations, less applicable income tax benefit of $3,138, $1,265 and $803 (6,791) (1,963) (1,435) Gain on the sale of discontinued operations, less applicable income taxes of $5,431 11,756 -- -- Extraordinary loss on early extinguishment of debt, less applicable income tax benefit of $564 (1,222) -- -- ------------------------------------------------- Net earnings (loss) $ 5,163 $ (5,144) $ 7,531 ========================================================================================================================= Earnings (loss) from continuing operations per common share $ .23 $ (.54) $ 1.51 Loss from discontinued operations per common share (1.11) (.33) (.24) Gain on the sale of discontinued operations per common share 1.93 -- -- Extraordinary loss on early extinguishment of debt per common share (.20) -- -- ------------------------------------------------- Basic net earnings (loss) per common share $ .85 $ (.87) $ 1.27 ========================================================================================================================= Earnings (loss) from continuing operations per common share $ .17 $ (.54) $ 1.49 Loss from discontinued operations per common share (.80) (.33) (.24) Gain on the sale of discontinued operations per common share 1.39 -- -- Extraordinary loss on early extinguishment of debt per common share (.15) -- -- ------------------------------------------------- Diluted earnings (loss) per common share $ .61 $ (.87) $ 1.25 ========================================================================================================================= See notes to consolidated financial statements.
Consolidated Balance Sheets Seneca Foods Corporation and Subsidiaries (In thousands)
March 31, 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Assets: Current Assets: Cash and short-term investments $ 31,003 $ 4,077 Accounts receivable, less allowance for doubtful accounts of $487 and $207, respectively 35,717 48,647 Inventories: Finished products 107,127 118,067 In process 11,143 25,440 Raw materials and supplies 34,364 50,537 Refundable income taxes -- 1,576 Deferred tax asset 3,276 3,870 Prepaid expenses 911 1,680 ------------------------------------- Total Current Assets 223,541 253,894 - ------------------------------------------------------------------------------------------------------------------------------------ Other Assets 2,671 2,624 - ------------------------------------------------------------------------------------------------------------------------------------ Property, Plant, and Equipment: Land 5,205 6,117 Building 89,651 99,708 Equipment 247,360 287,899 ------------------------------------- 342,216 393,724 Less accumulated depreciation and amortization 163,558 175,316 ------------------------------------- Net Property, Plant, and Equipment 178,658 218,408 ==================================================================================================================================== Total Assets $ 404,870 $ 474,926 ==================================================================================================================================== Liabilities and Stockholders' Equity Current Liabilities: Notes payable $ -- $ 62,270 Accounts payable 27,034 46,540 Accrued expenses 20,952 21,210 Current portion of long-term debt and capital lease obligations 7,811 11,575 Income taxes 309 -- --------------------------------------- Total Current Liabilities 56,106 141,595 Long-Term Debt 179,533 219,023 Capital Lease Obligations 8,371 8,835 Deferred Gain and Other Liabilities 9,402 8,750 Deferred Income Taxes 6,870 7,598 Commitments (Note 5) -- -- ------------------------------------- Total Liabilities 260,282 385,801 - ------------------------------------------------------------------------------------------------------------------------------------ Stockholders' Equity: Preferred stock 46,433 70 Common stock 2,748 2,666 ------------------------------------- Total Capital Stock 49,181 2,736 Additional paid-in capital 9,940 5,913 Accumulated other comprehensive income 877 1,026 Retained earnings 84,590 79,450 ------------------------------------- Total Stockholders' Equity 144,588 89,125 ==================================================================================================================================== Total Liabilities and Stockholders' Equity $ 404,870 $ 474,926 ==================================================================================================================================== See notes to consolidated financial statements.
Consolidated Statements of Cash Flows Seneca Foods Corporation and Subsidiaries (In thousands)
Years ended March 31, 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net earnings (loss) $ 5,163 $ (5,144) $ 7,531 Adjustments to reconcile net earnings (loss) to net cash provided by operations: Depreciation and amortization 27,641 28,849 26,338 Deferred income taxes (49) (6,231) (1,868) Gain on the sale of assets (24,057) -- (8,308) Impairment provision 3,354 -- -- Changes in operating assets and liabilities: Accounts receivable 12,930 (8,083) 14,641 Inventories 7,243 (7,154) 71,562 Prepaid expenses 720 2,907 (3,391) Accounts payable, accrued expenses, and other liabilities (7,817) 18,679 (23,327) Income taxes 1,885 (2,175) 6,653 ------------------------------------------------- Net cash provided by operations 27,013 21,648 89,831 - -------------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Proceeds from the sale of assets 65,270 -- 4,643 Additions to property, plant, and equipment (9,494) (15,693) (11,650) Disposals of property, plant, and equipment 400 135 699 Acquisitions -- (53,672) -- Proceeds from sale of common stock of Moog Inc. -- -- 12,863 ------------------------------------------------- Net cash provided by (used in) investing activities 56,176 (69,230) 6,555 - -------------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net (payments) borrowings on notes payable (62,270) 44,270 (95,000) Equity issue 49,712 -- -- Payments of long-term debt and capital lease obligations (43,401) (9,266) (2,572) Dividends paid (23) (58) -- Other assets (281) 23 130 Proceeds from issuance of long-term debt -- 15,106 1,343 ------------------------------------------------- Net cash provided by (used in) financing activities (56,263) 50,075 (96,099) - -------------------------------------------------------------------------------------------------------------------------------- Net increase in cash and short-term investments 26,926 2,493 287 Cash and short-term investments, beginning of year 4,077 1,584 1,297 ------------------------------------------------- Cash and short-term investments, end of year $ 31,003 $ 4,077 $ 1,584 ================================================================================================================================ Supplemental disclosures of cash flow information: Cash paid (received) during the year for: Interest $ 24,259 $ 28,042 $ 28,751 Income taxes 451 5,092 (570) Supplemental information of 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. =============================================================================================================================== See notes to consolidated financial statements.
Consolidated Statements of Stockholders' Equity Seneca Foods Corporation and Subsidiaries (In thousands, except share amounts)
Preferred Stock ------------------------------------------------- 6% Class A 10% Participating Cumulative Par Cumulative Par Convertible Par Accumulated Value $.25 Value $.025 Value $.025 Class A Class B Additional Other Compre- Callable at Par Convertible Stated Value Common Stock Common Stock Paid-In Comprehensive Retained hensive Voting Voting $11.93 Par Value $.25 Par Value $.25 Capital Income Earnings Income(Loss) - ------------------------------------------------------------------------------------------------------------------------------------ Shares authorized 200,000 1,400,000 4,166,667 20,000,000 10,000,000 - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- Shares issued and outstanding: March 31, 1997 200,000 807,240 -- 3,143,125 2,796,555 ====================================================================================== March 31, 1998 200,000 807,240 -- 3,143,125 2,796,555 ====================================================================================== March 31, 1999 200,000 807,240 3,885,869 3,480,719 2,791,017 ====================================================================================== Balance March 31, 1996 $50 $ 20 $ -- $786 $1,880 $ 5,913 $ 5,169 $77,121 Net earnings -- -- -- -- -- -- -- 7,531 $ 7,531 Net unrealized loss on investments -- -- -- -- -- -- (4,734) -- (4,734) - ----------------------------------------------------------------------------------------------------------------------------------- Balance March 31, 1997 50 20 -- 786 1,880 5,913 435 84,652 $ 2,797 ======= Net loss -- -- -- -- -- -- -- (5,144) $ (5,144) Cash dividends paid on preferred stock -- -- -- -- -- -- -- (58) -- Net unrealized gain on investments -- -- -- -- -- -- 591 -- 591 - ----------------------------------------------------------------------------------------------------------------------------------- Balance March 31, 1998 50 20 -- 786 1,880 5,913 1,026 79,450 $ (4,553) ======== Net earnings -- -- -- -- -- -- -- 5,163 $ 5,163 Cash dividends paid on preferred stock -- -- -- -- -- -- -- (23) -- Equity issue -- -- 49,712 -- -- -- -- -- -- Preferred stock conversion -- -- (3,349) 71 -- 3,278 -- -- -- Common stock conversion -- -- -- -- (2) 2 -- -- -- Stock issuance -- -- -- 13 -- 747 -- -- -- Net unrealized loss on investments -- -- -- -- -- -- (149) -- (149) - ----------------------------------------------------------------------------------------------------------------------------------- Balance March 31, 1999 $50 $20 $ 46,363 $870 $ 1,878 $9,940 $ 877 $84,590 $ 5,014 =================================================================================================================================== 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 24 plants and warehouses in seven states. The Company markets branded and private label processed foods to retail customers and institutional food distributors. Principles of Consolidation - The consolidated financial statements include the accounts for the parent Company and all of its wholly-owned subsidiaries after elimination of intercompany transactions, profits, and balances. Revenue Recognition - Sales and related cost of product sold are recognized primarily upon shipment of products. When customers, under the terms of specific orders, request that the Company invoice goods and hold the goods for future shipment, the Company recognizes revenue when legal title to the finished goods inventory passes to the purchaser. Generally the Company receives cash from the purchaser when legal title passes. Concentration of Credit Risk - Financial instruments that potentially subject the Company to credit risk consist of trade receivables and interest-bearing investments. With the exception of the 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 in certain accounts exceed the federal insured limit, however, the Company has not experienced any losses in such accounts. Cash and Short-Term Investments - The Company considers all highly liquid instruments purchased with a maturity of three months or less as short-term investments. Inventories - Inventories are stated at lower of cost; first-in, first-out (FIFO); or market. Income Taxes - The provision for income taxes includes federal, foreign, and state income taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities. Notes to Consolidated Financial Statements (continued) Earnings per Common Share A reconciliation of basic earnings per share from continuing operations with diluted earnings per share from continuing operations follows:
Years ended March 31, 1999 1998 1997 - ---------------------------------------------------------------------------------------------- (In thousands, except per share amounts) Basic Earnings from continuing operations $ 1,420 $ (3,181) $ 8,966 Deduct preferred stock dividends paid 23 58 -- ---------------------------------------- Basic earnings (loss) $ 1,397 $ (3,239) $ 8,966 ============================================================================================== Weighted average common shares outstanding 6,082 5,940 5,940 ============================================================================================== Basic earnings (loss) per share $ .23 $ (.54) $ 1.51 ============================================================================================== Diluted Basic earnings (loss) $ 1,397 $ (3,239) $ 8,966 Add dividends on convertible preferred stock 20 -- -- ---------------------------------------- Earnings applicable to common stock on a diluted basis $ 1,417 $ (3,239) $ 8,966 ============================================================================================== Shares used in calculating earnings per share above 6,082 5,940 5,940 Additional shares to be issued under full conversion of preferred stock 2,396 -- 68 ---------------------------------------- Total shares for diluted 8,478 5,940 6,008 ============================================================================================== Diluted earnings (loss) per share $ .17 $ (.54) $ 1.49 ==============================================================================================
The additional shares and dividends were not considered in the 1998 diluted calculation since diluting a loss is not allowed. Depreciation - Property, plant, and equipment is stated at cost or, in the case of capital leases, the present value of future lease payments. For financial reporting, the Company provides for depreciation and capital lease amortization on the straight-line method at rates based upon the estimated useful lives of the various assets. Impairment losses are recognized when the carrying value of an asset exceeds its fair value. The Company regularly assesses all of its long-lived assets for impairment and an impairment loss of approximately $3,354,000 was recognized in 1999 of which $2,036,000 is included in Other Income (see Other Income, note 11) and $1,318,000 is included in discontinued operations. There was no impairment loss recognized in 1998 or 1997. Use of Estimates in the Preparation of Financial Statements - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the related revenues and expenses during the reporting period. Actual amounts could differ from those estimated. New Accounting Pronouncements: During fiscal 1999, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income", SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" and SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits". SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components. The Company's comprehensive income includes net earnings (loss) and the unrealized gain (loss) on investments. SFAS No. 131 establishes standards for reporting information about operating segments and related disclosures about products and services, geographic areas and major customers. SFAS No. 132 revises current disclosure requirements for employers' pensions and other retiree benefits. These standards expanded or modified current disclosures and, accordingly, had no impact on the Company's reported financial position, results of operations and cash flows. Reclassifications - Certain previously reported amounts have been reclassified to conform to the current period classification. Notes to Consolidated Financial Statements (continued) 2. Common Stock of Moog Inc. Other assets include the Company's investment in the Class B Common Stock of Moog Inc., which is classified as an available-for-sale security and is carried at fair value. There was a realized gain on the sale of Class A Common Stocks of Moog Inc. of $7,501,000 before income taxes in 1997. There were no realized gains or losses in 1999 and 1998, and gross unrealized holding gains were $1,379,000, $1,604,000, and $695,000, at March 31, 1999, 1998, and 1997, respectively. Notes to Consolidated Financial Statements (continued) 3. Lines of Credit The Company obtains required short-term funds through bank borrowings. At March 31, 1999, the Company had $2,874,000 outstanding for letters of credit, a committed revolving line of credit totaling $20,000,000, and uncommitted lines of credit totaling $30,000,000. The lines are renewable annually at various dates and provide for loans of varying maturities. There are no formal compensating balance arrangements with any of the banks. As of March 31, 1999 and 1998, the amounts borrowed under the lines of credit were none and $62,270,000, respectively. The weighted average interest rate on the amounts borrowed during 1999 and 1998 was 8.01% and 7.88%, respectively. Notes to Consolidated Financial Statements (continued) 4. Long-Term Debt
1999 1998 - ---------------------------------------------------------------------------------------------------------------------------------- (In thousands) Note payable to insurance company, 10.78%, due through 2005 $ 44,700 $ 69,000 Secured nonrecourse subordinated promissory note, 8.00%, due through 2009 68,083 71,583 Note payable to insurance company, 10.81%, due through 2009 50,000 50,000 Note payable to insurance company, 9.17%, originally due through 2004 -- 10,000 Note payable to bank, 9.17%, originally due through 2004 -- 5,000 Industrial Revenue Development Bonds, 5.62% and 5.60%, due through 2028 22,630 22,630 Other 1,467 1,944 -------------------------- 186,880 230,157 Less current portion 7,347 11,134 -------------------------- $ 179,533 $ 219,023 ==========================
Long-term debt agreements contain various restrictive financial covenants, the most restrictive of which requires the Company to maintain specific quarterly levels of interest coverage. In addition, these agreements include a provision that the Company may pay dividends on any class of stock only from consolidated net earnings available for distribution. There were no earnings available for distribution as of March 31, 1999. The Company has four Industrial Revenue Bonds ("IRB's") totaling $22,630,000, which are backed by direct pay letters of credit and unrelated to the industrial development agency financing instruments discussed in Leases, note 5. The interest rates in the table above reflect the direct pay letters of credit costs and amortization of other related costs for those IRB's. Debt repayment requirements for the next five fiscal years are: (In thousands) 2000 $ 7,347 2001 7,352 2002 17,718 2003 20,712 2004 20,716 During 1999 the Company paid off $15,000,000 of its outstanding 9.17% notes payable due 2004 and prepaid two annual principal installments of $8,400,000, each due February 23 in 2000 and 2001, of its outstanding 10.78% note payable due 2005. The prepayment penalty paid for the early extinguishment of the debt totaled $1,786,000, before the applicable income tax benefit of $564,000, which has been accounted for as a net extraordinary loss of $1,222,000. 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 2014. Leased assets under capital leases consist of the following:
1999 1998 ------------------------------------------------------------------------------ (In thousands) Land $ 160 $ 160 Buildings 1,792 1,792 Equipment 10,359 10,359 ------------------------------- 12,311 12,311 Less accumulated amortization 5,447 4,483 ------------------------------- $ 6,864 $ 7,828 ==============================================================================
The following is a schedule by year of minimum payments due under leases as of March 31, 1999:
Operating Capital ---------------------------------------------------------------------------- (In thousands) Years ending March 31: 2000 $ 5,290 $ 843 2001 4,618 843 2002 3,513 842 2003 2,876 845 2004 2,392 842 2005-2014 8,546 7,959 ----------------------------- Total minimum payment required $27,234 $ 12,174 ============================================================= Less interest 3,339 -------------- Present value of minimum lease payments 8,835 Amount due within one year 464 -------------- Long-term capital lease obligations $ 8,371 ============================================================================
Aggregate continuing rental expense in 1999, 1998, and 1997 was $9,228,000, $9,616,000, and $7,299,000, respectively. Notes to Consolidated Financial Statements (continued) 6. Income Taxes The Company files a consolidated income tax return. The provision for income taxes for continuing operations is as follows: 1999 1998 1997 ---------------------------------------- (In thousands) Current: Federal $405 $ (300) $ 4,093 State 100 105 138 ---------------------------------------- 505 (195) 4,231 ---------------------------------------- Deferred: Federal 69 (1,551) 554 State (17) (303) 233 --------------------------------------- 52 (1,854) 787 --------------------------------------- Total income taxes $ 557 $(2,049) $ 5,018 ================================================================== At March 31, 1999, the Company has Alternative Minimum Tax Credits in the amount of $6,724,000 to offset future years' regular tax expense, and Research and Development Credits carryforwards in the amount of $299,000, expiring through 2007 - 2013. State net operating loss carryforwards of approximately $16,000,000, expiring March 31, 2001, through March 31, 2118, are available to offset future state tax expense. A reconciliation of the expected U.S. statutory rate to the effective rate for continuing operations follows: 1999 1998 1997 - ----------------------------------------------------------------------------- Computed (expected tax rate) 34.0% (34.0)% 34.0% Tax-exempt income (11.3) -- -- State income taxes (net of federal tax benefit) 8.5 (5.0) 1.5 Other (3.0) (0.2) 0.4 -------------------------------------------- Effective tax rate 28.2% (39.2)% 35.9% ============================================================================= 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, 1999 and 1998: 1999 1998 - ----------------------------------------------------------------------------- (In thousands) Deferred tax liabilities: Basis and depreciation difference $ 18,386 $ 20,035 Inventory valuation 1,448 2,172 Moog investment 502 577 --------------------------------- 20,336 22,784 --------------------------------- Deferred tax assets: Inventory valuation 1,508 2,818 Future tax credits 7,102 6,035 Net operating loss carryforwards 1,301 3,711 Employee benefits 1,526 1,775 Pension 2,147 1,805 Insurance 1,496 1,370 Deferred gain on sale/leaseback 1,300 1,382 Other 362 160 --------------------------------- 16,742 19,056 ----------------------------------- Net deferred tax liability $ 3,594 $ 3,728 ============================================================================= Net current deferred tax assets of $3,276,000 as of March 31, 1999, and $3,870,000 as of March 31, 1998, are recognized in the Consolidated Balance Sheets. Also recognized are net non-current deferred tax liabilities of $6,870,000 and $7,598,000 at March 31, 1999 and 1998, respectively. Notes to Consolidated Financial Statements (continued) 7. Stockholders' Equity Preferred Stock - During September 1998, the Company completed an equity sale that raised $49,998,000 before issuance costs of $286,000. This equity sale consisted of a Rights Offering to the Company's common shareholders and a Stock Purchase Agreement with certain investors. A new class of preferred stock ("New Preferred Stock") was issued, which is convertible, participating, and has a $12 stated value, which is now $11.93 due to issue costs. The Rights Offering consisted of a distribution payable to holders of the Company's Class A Common Stock at a rate of 1/2 right for each share held to purchase the New Preferred Stock at $12 per share. The shares of New Preferred Stock are convertible immediately on a share-for-share basis into shares of Class A Common Stock. Holders of the Company's common stock acquired 1,146,639 shares of new preferred stock for a total investment of $13,759,000. Certain investors acquired a total of 3,019,895 shares of New Preferred Stock for a total investment of $36,239,000 under the Stock Purchase Agreement. There were no dividends on this New Preferred Stock. The outstanding 10% cumulative, convertible, voting preferred stock consists of 407,240 Series A shares, convertible at the rate of one common share of Class A and Class B for every twenty preferred shares, and 400,000 Series B shares, which carry a one for thirty conversion rate. The Series A and B shares have a $.025 stated value and a $.025 par value. There are 2,633,333 shares authorized of Class A $.025 par value stock, which are unissued and undesignated. In addition there are 30,000 shares of no par stock, which are also unissued and undesignated. Common Stock - In September 1998, an amendment to the Company's Certificate of Incorporation, which created the new class of preferred stock described above, increased the number of authorized shares of Class A Common Stock from 10,000,000 to 20,000,000 shares. The Class A Common Stock and the Class B Common Stock have substantially identical rights with respect to any dividends or distributions of cash or property declared on shares of common stock and rank equally as to the right to receive proceeds on liquidation or dissolution of the Company after payment of the Company's indebtedness and liquidation right to the holders of preferred shares. However, holders of Class B Common Stock retain a full vote per share whereas the holders of Class A Common Stock have voting rights of 1/20th of one vote per share on all matters as to which shareholders of the Company are entitled to vote. Unissued shares of common stock reserved for conversion privileges were 33,695 of Class A and Class B at March 31, 1999 and 1998. Additionally, there were 3,885,869 shares of Class A reserved for conversion of the New Preferred Stock. Notes to Consolidated Financial Statements (continued) 8. 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. The following tables provide a reconciliation of the changes in the plan's benefit obligation and fair value of assets over the 2-year period ended March 31, 1999, and a statement of the funded status as of March 31 of both years: 1999 1998 --------------------------------- Change in Benefit Obligation (In thousands) Benefit obligation at beginning of year $ 24,031 $ 19,003 Service cost 2,030 1,741 Interest cost 1,701 1,573 Actuarial loss 152 2,646 Benefit payments and expenses (1,127) (932) - ------------------------------------------------------------------------------- Benefit obligation at end of year $ 26,787 $ 24,031 =============================================================================== Change in Plan Assets Fair value of plan assets at beginning of year $ 26,881 $ 21,545 Actual return (loss) on plan assets (3,954) 6,268 Benefit payments and expenses (1,127) (932) - ------------------------------------------------------------------------------- Fair value of plan assets at end of year $ 21,800 $ 26,881 =============================================================================== Funded Status Funded status at end of year $ (4,987) $ 2,850 Unrecognized transition asset (3,542) (3,819) Unrecognized prior service cost 313 406 Unrecognized (gain) loss 2,560 (4,192) - ------------------------------------------------------------------------------- Accrued benefit cost $ (5,656) $ (4,755) =============================================================================== The Plan holds the Company's common stock with a fair market value of $1,484,000. Notes to Consolidated Financial Statements (continued) 8. Retirement Plan (continued) The following table provides the components of net periodic benefit cost for the plans for fiscal years 1999, 1998, and 1997: 1999 1998 1997 - ------------------------------------------------------------------------------------------------------- (In thousands) Service cost $ 2,030 $ 1,741 $ 1,565 Interest cost 1,701 1,572 1,329 Expected return on plan assets (2,499) (1,996) (1,633) Amortization of transition (assets) obligation (276) (276) (276) Amortization of prior service cost 94 94 94 Amortization of net (gain) loss (149) 1 -- - ------------------------------------------------------------------------------------------------------- Net periodic benefit cost $ 901 $ 1,136 $ 1,079 =======================================================================================================
The prior service costs are amortized on a straight-line basis over the average remaining service period of active participants. Gains and losses in excess of 10% of the greater of the benefit obligation and the market-related value of assets are amortized over the average remaining service period of active participants. The assumptions used in the measurement of the Company's benefit obligation are shown in the following table: 1999 1998 - ------------------------------------------------------------------------------- Weighted-average assumptions as of March 31 Discount rate 7.20% 7.40% Expected return on plan assets 9.50% 9.50% Rate of compensation increase 4.50% 5.00% The Company has an Employees' Savings Plan (401(k)) covering all employees who meet certain age entry requirements and work a stated minimum number of hours per year. Participants may make contributions up to the legal limit. The Company's matching contributions are discretionary. Costs charged to operations for the Company's matching contributions amounted to $808,000, $811,000, and $211,000 in 1999, 1998, and 1997, respectively. 9. 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:
1999 1998 ----------------------------------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value - ------------------------------------------------------------------------------------------------------------------------------------ (In thousands) Long-term debt, including current portion $ 186,880 $ 191,363 $230,157 $241,405 Notes payable -- -- 62,270 62,270 Class B Common Stock of Moog Inc. 2,086 2,086 2,320 2,320
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. Class B Common Stock of Moog Inc. - Based on quoted market prices. Notes to Consolidated Financial Statements (continued) 10. Acquisitions In 1998, the Company completed two acquisitions. The first was the acquisition of Aunt Nellie's Farm Kitchens from The Pillsbury Company, a subsidiary of Diageo plc, for approximately $24 million. Aunt Nellie's Farm Kitchens produces, markets, and sells fruit and vegetable products from plants in the Midwest and its sales were approximately $50 million. The Company purchased the plants, inventories, accounts receivable, and trademarks of the business. This acquisition included $16 million of inventory and $8 million of property, plant, and equipment, and was funded primarily out of working capital. The second acquisition was the Comstock canned private label vegetable business from Curtice Burns Foods, a wholly-owned subsidiary of Pro-Fac Cooperative, along with the Blue Boy branded canned vegetable business. The Company purchased two New York plants, related inventories, and certain trademarks. The companies also formed a long-term strategic alliance, combining their New York agricultural departments into one organization. The sales were approximately $40 million. The purchase price was approximately $29 million, which included $13 million of inventory and $16 million of property, plant, and equipment, and was funded primarily out of working capital. Both acquisitions were accounted for under the purchase method and, accordingly, the operating results of the acquired businesses have been included in the consolidated operating results since the dates of acquisition. The fiscal 1998 results of operations on a proforma basis, assuming the acquisitions occurred at the beginning of fiscal 1998, do not differ materially from the actual results of operations. Notes to Consolidated Financial Statements (continued) 11. Other Income Other income in 1999 consisted of the following: 1) a gain on the sale of land in Rochester, Minnesota of $6,220,000; 2) a gain on the sale of an aircraft of $650,000; and 3) an impairment loss of $2,036,000. Other income in 1997 consisted of the following: 1) a gain on the sale of the Moog Inc. Class A Common Stock of $7,501,000; and 2) a gain on the sale of the Clifton Park, New York warehouse of $1,640,000. 12. Sales Information During 1997, the Company sold $205,633,000 to one customer, which represented 36% of net sales. The Company sold $78,461,000 and $186,091,000 to one customer, representing 14% and 33% of net sales, in 1998 and 1997, respectively. Also, the Company sold $246,760,000 and $149,747,000, representing 43% and 27% of net sales, to one customer in 1999 and 1998, respectively. 13. Segment Information The Company manages its business on the basis of one reportable segment - the processing and sale of vegetables. The Company markets its product almost entirely in the United States. The Company has an Alliance Agreement with Pillsbury whereby the Company processes canned and frozen vegetables for Pillsbury under the Green Giant brand name. Pillsbury continues to be responsible for all of the sales, marketing, and customer service functions for the Green Giant products. In 1999, 1998, and 1997 the sale of Green Giant vegetables account for 50%, 49%, and 69% of net sales (see Sales Information, note 12). The following information is presented in accordance with SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," which the Company has adopted in the current year:
Classes of similar products/services: 1999 1998 1997 - ------------------------------------------------------------------------------------------------------- (In thousands) Net Sales: Green Giant vegetables $ 289,946 $ 277,080 $ 391,724 Canned vegetables 242,702 243,003 146,338 Frozen vegetables 20,446 19,283 20,094 Fruit products 13,825 14,558 5,550 Flight operations 4,225 2,894 2,624 Other 5,049 3,708 4,686 - ------------------------------------------------------------------------------------------------------- $ 576,193 $ 560,526 $ 571,016 =======================================================================================================
14. Discontinued Operations In December 1998, the Company sold a significant portion of its Juice Division to Northland Cranberries, Inc., together with an exclusive license to market and sell Seneca juice products, for $28,200,000 in cash plus the assumption of certain liabilities. This transaction resulted in a pre-tax gain on the disposal of $6,760,000, which was recognized during the Company's fourth quarter ended March 31, 1999. This sale included plants in Dundee, New York; Mountain Home, North Carolina; Jackson, Wisconsin; a warehouse in Eau Claire, Michigan; and a receiving station in Portland, New York. In January 1999, the Company completed the sale to Tree Top, Inc. of its processing facility in Prosser, Washington together with its non-branded specialty fruit concentrate business and an exclusive license to market and sell the Company's branded applesauce. Tree Top paid approximately $29,000,000 in cash. This transaction resulted in a pre-tax gain on the disposal of $10,427,000, which was also recognized in the Company's fourth quarter. As a result of these sales, the disposition of the Juice Business has been accounted for as a discontinued operation. The consolidated financial statements of prior years have been restated to separately report discontinued operating results. Net sales for the Juice Business were $121,290,000 in 1999, $142,694,000 in 1998, and $159,119,000 in 1997. Interest expense allocated to discontinued operations includes an allocation of corporate interest expense and amounts directly related to the discontinued business. The allocation of corporate interest expense was based, in part, on a ratio of the net assets of the discontinued operations to the sum of consolidated net assets and consolidated debt. The amounts allocated in 1999, 1998, and 1997 totaled $1,567,000, $2,580,000, and $2,867,000, respectively. 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, 1999 and 1998, and the related consolidated statements of net earnings, stockholders' equity, and cash flows for each of the three years in the period ended March 31, 1999. 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, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1999 in conformity with generally accepted accounting principles. Deloitte & Touche LLP Rochester, New York May 21, 1999 Additional Information A copy of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999, as filed with the Securities and Exchange Commission, will be provided by the Company to any shareholder who so requests in writing. Requests should be sent to Philip G. Paras, Seneca Foods Corporation, 1162 Pittsford-Victor Road, Pittsford, New York 14534, or contact us via our web site at http://www.senecafoods.com, or e-mail us at senecafoods@senecafoods.com. Forward-Looking Statements Except for the historical information contained herein, the matters discussed in this annual report are forward-looking statements as defined in the Private Securities Litigation Reform Act (PSLRA) of 1995. The Company wishes to take advantage of the "safe harbor" provisions of the PSLRA by cautioning that numerous important factors which involve risks and uncertainties, including but not limited to economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services and prices, and other factors discussed in the Company's filings with the Securities and Exchange Commission, in the future, could affect the Company's actual results and could cause its actual consolidated results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company. Shareholder Information and Quarterly Results The Company's common stock is traded on The NASDAQ National Stock Market. The 3.4 million of Class A outstanding shares and 2.8 million Class B outstanding shares are owned by 414 and 374 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: 1999 1998 ------------------------------------------------ Quarter High Low High Low --------------------------------------------------------------- First $17.13 $13.50 $18.75 $16.75 Second 14.50 12.00 18.50 16.75 Third 13.25 11.00 18.25 16.50 Fourth 15.25 10.00 17.62 15.75 Class B: 1999 1998 ------------------------------------------------ Quarter High Low High Low --------------------------------------------------------------- First $16.75 $14.75 $18.50 $16.75 Second 14.75 12.00 18.50 16.75 Third 15.00 11.25 18.25 16.50 Fourth 14.00 10.38 17.25 15.50 The Company may pay dividends on common stock only from consolidated net earnings available for distribution, which were none as of March 31, 1999. Payment of dividends to common stockholders is made at the discretion of the Company's Board of Directors and depends, among other factors, on earnings, capital requirements, operating and financial condition of the Company. The Company has not declared or paid a common dividend in many years. The following is a summary of the unaudited interim results of operations by quarter:
First Second Third Fourth - ------------------------------------------------------------------------------------------------------------------------------- (In thousands, except per share data) Year ended March 31, 1999: Net sales $ 67,466 $ 176,792 $ 246,624 $ 85,311 Gross margin 7,574 10,596 9,491 9,854 Earnings (loss) from continuing operations before extraordinary (1,420) 796 (613) 2.657 item Basic earnings (loss) from continuing operations before extraordinary item per common share (.24) .13 (.10) .43 Diluted earnings (loss) from continuing operations before extraordinary item per common share (.24) .11 (.10) .26 Net earnings (loss) (2,683) 283 459 7,104 Basic earnings (loss) per common share (.45) .05 .07 1.16 Diluted earnings (loss) per common share (.45) .04 .07 .69 Year ended March 31, 1998: Net sales $ 70,496 $ 178,528 $ 238,333 $ 73,169 Gross margin 6,776 13,633 10,601 7,797 Earnings (loss) from continued operations (537) 991 138 (3,773) Basic earnings (loss) from continued operations per common share (.09) .17 .02 (.64) Diluted earnings (loss) from continuing operations per common (.09) .16 .02 (.64) share Net earnings (loss) 192 187 (1,240) (4,283) Basic earnings (loss) per common share .03 .03 (.21) (.72) Diluted earnings (loss) per common share .03 .03 (.21) (.72)
Earnings for the fourth quarter have historically reflected adjustments of previously estimated raw material costs and production levels. Due to the dependence on fruit and vegetable yields of the Company's food processing segment, interim costing must be estimated. The first and second quarters of 1999 and all of 1998 have been restated to reflect the sale of the Juice segment in the third and fourth quarters of 1999. The fourth quarter includes an extraordinary loss from debt extinguishment $1,222,000 after tax benefit. Quantitative and Qualitative Disclosures about Market Risk As a result of its operating and financing activities, the Company is exposed to certain market risks including changes in commodity pricing and fluctuations in interest rates. Commodity pricing exposure includes weather phenomena and their effect on industry volumes, prices, product quality, and costs. The Company manages its exposure to commodity price risk primarily through its regular operating activities. The Company has not used derivative financial instruments. The Company has not utilized financial instruments for trading or other speculative purposes. Interest Rate Risk As a result of its regular borrowing activities, the Company's operating results are exposed to fluctuations in interest rates, which it manages primarily through its regular financing activities. Although the Company does not have any short-term debt as of March 31, 1999, it uses bank lines of credit with variable interest rates to finance seasonal working capital requirements. The Company maintains investments in cash equivalents ($26.9 million as of March 31, 1999) and does have investments in a modest amount of marketable securities. Long-term debt represents secured and unsecured notes and debentures and certain notes payable to insurance companies used to finance long-term investments such as business acquisitions. Long-term debt bears interest at fixed and variable rates. The following table provides information about the Company's financial instruments that are sensitive to changes in interest rates. The table presents principal cash flows and sinking fund requirements and related weighted-average interest rates by expected maturity date. Weighted-average interest rates on variable-rate debt are based on current rates as of March 31, 1999: Interest Rate Sensitivity of Long-Term Debt and Short-Term Investments March 31, 1999 (In Thousands) EXPECTED MATURITY DATE ------------------------------------------------------------------------------------------------ Total / Weighted 2000 2001 2002 2003 2004 Thereafter Average ---- ---- ---- ---- ---- ---------- -------- Fixed-rate debt: Principal cash flows $8,292 $7,743 $18,123 $21,137 $21,156 $96,634 $ 173,085 Average interest rate 9.35% 9.36% 9.32% 9.20% 9.01% 8.23% 8.93% Variable-rate debt: Principal cash flows $ -- $ -- $ -- $ -- $ -- $22,630 $ 22,630 Average interest rate 5.62% 5.62% 5.62% 5.62% 5.62% 5.62% 5.62% Short-term investments: Balance $ 26,931 Average interest rate 4.84%
EX-21 3 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. Barbados SSP Company, Inc. Massachusetts EX-23 4 Exhibit 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Post-Effective Amendment No. 1 of Registration Statement No. 333-12365 of Seneca Foods Corporation on Form S-8 of our report dated May 21,1999, appearing in this Annual Report on Form 10-K of Seneca Foods Corporation for the year ended March 31, 1999. /s/Deloitte & Touche LLP Rochester, New York June 23, 1999 EX-27 5
5 Commercial and Industrial Companies Article 5 of Regulation S-X 1000 12-MOS MAR-31-1999 MAR-31-1999 31003 0 36204 487 152634 223541 342216 163558 404870 56106 187904 0 46433 2748 95407 404870 576193 581027 538678 538678 18778 0 21594 1977 557 1420 4965 (1222) 0 5163 .85 .85
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