Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended January 1, 2000 Commission File Number 0-1989 Seneca Foods Corporation (Exact name of Company as specified in its charter) New York 16-0733425 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 1162 Pittsford-Victor Road, Pittsford, New York 14534 (Address of principal executive offices) (Zip Code) Company's telephone number, including area code 716/385-9500 Not Applicable Former name, former address and former fiscal year, if changed since last report Check mark indicates whether Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- The number of shares outstanding of each of the issuer's classes of common stock at the latest practical date are: Class Shares Outstanding at January 31, 2000 ------------ ------------------------------- Common Stock Class A, $.25 Par 3,776,858 Common Stock Class B, $.25 Par 2,767,357
<TABLE> PART I FINANCIAL INFORMATION SENECA FOODS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In Thousands of Dollars) <CAPTION> 1/1/00 3/31/99 ------ ------- <S> <C> <C> ASSETS Current Assets: Cash and Short-term Investments $ 24,582 $ 31,003 Accounts Receivable, Net 36,547 35,717 Inventories: Finished Goods 185,850 107,127 Work in Process 6,775 11,143 Raw Materials 36,678 34,364 ------- ------- 229,303 152,634 Off-Season Reserve (Note 3) (35,711) - Deferred Tax Asset, Net 3,276 3,276 Refundable Income Taxes 181 - Other Current Assets 1,052 911 -------------- --------------- Total Current Assets 259,230 223,541 Property, Plant and Equipment, Net 176,691 178,658 Escrow Fund 5,207 - Other Assets 2,833 2,671 -------------- --------------- $ 443,961 $ 404,870 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 57,000 $ 27,034 Accrued Expenses 18,984 20,952 Income Taxes - 309 Current Portion of Long-Term Debt and Capital Lease Obligations 8,204 7,811 --------------- --------------- Total Current Liabilities 84,188 56,106 Long-Term Debt 186,407 179,533 Capital Lease Obligations 7,500 8,371 Deferred Income Taxes 8,381 6,870 Other Long-Term Liabilities 10,236 9,402 10% Preferred Stock, Series A, Voting, Cumulative, Convertible, $.025 Par Value Per Share 10 10 10% Preferred Stock, Series B, Voting, Cumulative, Convertible, $.025 Par Value Per Share 10 10 6% Preferred Stock, Voting, Cumulative, $.25 Par Value 50 50 Convertible, Participating Preferred Stock, $12 Stated Value 43,115 46,363 Common Stock 2,816 2,748 Paid in Capital 13,120 9,940 Accumulated Other Comprehensive Income 991 877 Retained Earnings 87,137 84,590 --------------- --------------- Stockholders' Equity 147,249 144,588 --------------- --------------- $ 443,961 $ 404,870 =============== =============== <FN> The accompanying notes are an integral part of these financial statements. </FN> </TABLE>
<TABLE> SENECA FOODS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) (In Thousands, except Share Data) <CAPTION> Three Months Ended ------------------- 1/1/00 12/26/98 ------ -------- <S> <C> <C> Net Sales $ 241,731 $ 246,624 Other Income - 650 ------------------ ----------------- 241,731 247,274 Costs and Expenses: Cost of Product Sold 228,086 237,126 Selling, General, and Administrative 6,272 5,961 Interest Expense 3,917 5,089 ------------------ ----------------- Total Costs and Expenses 238,275 248,176 ------------------ ----------------- Earnings (Loss) From Continuing Operations Before Income Taxes 3,456 (902) Income Taxes 1,244 (288) ------------------ ------------------ Earnings (Loss) from Continuing Operations 2,212 (614) Earnings from Discontinued Operations Net of Income Taxes - 1,072 ------------------ ----------------- Net Earnings $ 2,212 $ 458 ================= ================ Basic: Earnings (Loss) From Continuing Operations Per Common Share $ .34 $ (.10) ================= ================ Earnings From Discontinued Operations Per Common Share $ .00 $ .17 ================= ================ Earnings Per Common Share $ .34 $ .07 ================= ================ Diluted: Earnings (Loss) From Continuing Operations Per Common Share $ .22 $ (.10) ================= ================ Earnings From Discontinued Operations Per Common Share $ .00 $ .17 ================= ================ Earnings Per Common Share $ .22 $ .07 ================= ================ <FN> The accompanying notes are an integral part of these condensed financial statements. </FN> </TABLE>
<TABLE> SENECA FOODS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) (In Thousands, except Share Data) <CAPTION> Nine Months Ended ----------------- 1/1/00 12/26/98 ------ -------- <S> <C> <C> Net Sales $ 510,917 $ 490,882 Other Income 965 650 ------------------ ----------------- 511,882 491,532 Costs and Expenses: Cost of Product Sold 478,798 462,634 Selling, General, and Administrative 17,041 13,318 Interest Expense 12,025 17,400 ------------------ ----------------- Total Costs and Expenses 507,864 493,352 ------------------ ----------------- Earnings (Loss) From Continuing Operations Before Income Taxes 4,018 (1,820) Income Taxes 1,446 (582) ------------------ ------------------ Earnings (Loss) from Continuing Operations 2,572 (1,238) Loss from Discontinued Operations Net of Income Taxes - (703) ------------------ ----------------- Net Earnings (Loss) $ 2,572 $ (1,941) ================= ================ Basic: Earnings (Loss) from Continuing Operations Per Common Share $ .39 $ (.21) ================= ================ Earnings (Loss) from Discontinued Operations Per Common Share $ .00 $ (.12) ================= ================ Earnings (Loss) Per Common Share $ .39 $ (.33) ================= ================ Diluted: Earnings (Loss) From Continuing Operations Per Common Share $ .25 $ (.21) ================= ================ Earnings (Loss) From Discontinued Operations Per Common Share $ .00 $ (.12) ================= ================ Earnings (Loss) Per Common Share $ .25 $ (.33) ================= ================ <FN> The accompanying notes are an integral part of these condensed financial statements. </FN> </TABLE>
<TABLE> SENECA FOODS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands) <CAPTION> Nine Months Ended ----------------- 1/01/00 12/26/98 ------- -------- <S> <C> <C> Cash Flows from Operating Activities: Net Earnings (Loss) $ 2,572 $ (1,941) Adjustments to Reconcile Net Earnings (Loss) to Net Cash Provided by Operating Activities: Depreciation and Amortization 17,406 21,348 Deferred Income Taxes 1,446 (1,178) Gain on the Sale of Assets (965) (650) Contribution of Stock to Benefit Plan - 761 Changes in Operating Assets and Liabilities: Accounts Receivable (830) 6,418 Inventories (33,186) (43,314) Off-Season Reserve 35,711 42,549 Other Current Assets (141) (20) Income Taxes (490) 1,343 Accounts Payable and Accrued Expenses 28,659 9,488 ------------------ ----------------- Net Cash Provided by Operations 50,182 34,804 ------------------ ----------------- Cash Flows From Investing Activities: Acquisition (48,459) - Additions to Property, Plant, and Equipment (11,304) (4,774) Glencoe Escrow (5,207) - Proceeds from the Sale of Assets 1,800 843 Disposals 179 377 ------------------ ----------------- Net Cash Used in Investing Activities (62,991) (3,554) ------------------ ----------------- Cash Flows From Financing Activities: Long-Term Borrowing 10,978 - Payments and Current Portion of Long-Term Debt and Capital Lease Obligations (4,582) (4,047) Other 16 33 Notes Payable - (62,270) Rights Offering - 49,712 Dividends (24) (24) ------------------ ----------------- Net Cash Provided by (Used in) Financing Activities 6,388 (16,596) ------------------ ----------------- Net (Decrease) Increase in Cash and Short- Term Investments (6,421) 14,654 Cash and Short-Term Investments, Beginning of Period 31,003 4,077 ------------------ ----------------- Cash and Short-Term Investments, End of Period $ 24,582 $ 18,731 ================== ================== <FN> The accompanying notes are an integral part of these condensed financial statements. </FN> </TABLE>
SENECA FOODS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS January 1, 2000 1. Consolidated Condensed Financial Statements In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments, which are normal and recurring in nature, necessary to present fairly the financial position of the Company as of January 1, 2000 and results of operations for the three and nine month periods ended January 1, 2000 and December 26, 1998. All significant intercompany transactions and accounts have been eliminated in consolidation. The March 31, 1999 balance sheet was derived from audited financial statements. The results of operations for the nine month periods ended January 1, 2000 and December 26, 1998 are not necessarily indicative of the results to be expected for the full year. The accounting policies followed by the Company are set forth in Note 1 to the Company's financial statements in the 1999 Seneca Foods Corporation Annual Report and 10-K. Other footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated condensed financial statements be read in conjunction with the financial statements and notes included in the Company's 1999 Annual Report and 10-K. 2. Off-Season Reserve is the excess of absorbed expenses over incurred expenses to date. The seasonal nature of the Company's Food Processing business results in a timing difference between expenses (primarily overhead expenses) incurred and absorbed into product cost. All Off-Season Reserve balances are zero at fiscal year end. 3. Comprehensive income consisted solely of Net Earnings and Net Unrealized Gain Change on Moog, Inc. Stock. The following table provides the results for the periods presented: Nine Months December 1999 1998 ---- ---- Net Earnings (Loss) $2,572 $(1,941) Other Comprehensive Earnings, Net of Tax: Net Unrealized Gain Change on Moog, Inc. Stock 114 211 ------------------ Comprehensive Earnings (Loss) $2,686 $(1,730) =====================
SENECA FOODS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS January 1, 2000 4. In November 1999, the Company acquired certain assets of the Midwest private label canned vegetable business, of Agrilink Foods, Inc., a wholly owned subsidiary of Pro-Fac Cooperative. The Company purchased a plant and equipment in Arlington, Minnesota and inventories of the acquired business. The annual sales of this business are approximately $73 million. The purchase price was approximately $48 million, partially funded by a subordinated note for $5 million and the balance paid in cash. The Company also had a commitment to purchase Agrilink Food's Cambria, Wisconsin plant, but this plant was purchased by another Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION RESULTS OF OPERATIONS January 1, 2000 Results of Operations: Sales: Sales reflect an increase of 4.1% for the nine months versus 1998. The higher sales, in large part, are due to higher canned vegetables quantities sold under the Company's Non-Alliance business. Non-Alliance vegetable sales quantities were up 13.5% including sales from the Midwest private label canned vegetable business acquired from Agrilink Foods, Inc. (see acquisition discussion in footnotes). Costs and Expenses: The following table shows costs and expenses as a percentage of sales: Three Months Ended Nine Months Ended ------------------ ------------------ 1/1/00 12/26/98 1/1/00 12/26/98 ------ -------- ------ -------- Cost of Product Sold 94.4% 96.0% 93.7% 94.2% Selling 2.1 2.1 2.6 2.2 Administrative 0.5 0.4 0.7 0.6 Interest Expense 1.6 2.1 2.4 3.5 --------------------------------------------------------- 98.6% 100.6% 99.4% 100.5% ========================================================= Lower interest expense percentage in 1999 is as a result of the $50 million equity sale last year and the divestiture of the juice and sauce businesses also during last year. Income Taxes: The effective tax rate used in fiscal 1999 is 36% and 1998 is 32%.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS January 1, 2000 Financial Condition: The financial condition of the Company is summarized in the following table and explanatory review (In Thousands): For the Quarter For the Year Ended December Ended March 1999 1998 1999 1998 ---- ---- ---- ---- Working Capital Balance $175,042 $173,475 $167,435 $112,299 Quarter Change 2,175 3,604 - - Notes Payable - - - 62,270 Long-Term Debt 193,907 223,805 187,904 227,858 Current Ratio 3.08:1 2.97:1 3.98:1 1.79:1 The change in the Working Capital for the December 1999 quarter from the December 1998 quarter is largely due to greater capital additions in the current year than the prior year($3.7 million current and $700 thousand prior). The equity sale of $50 million and the divestiture of the Juice and Applesauce businesses for $57 million, both completed last year, dramatically reduced our short-term borrowing needs. New Long-Term Debt: During the Third Quarter of this year, the Company issued an Industrial Revenue Development Bond for $6 million where proceeds are being used to finance production equipment in the Midwest. The Escrow Fund of $5.2 million on the Balance Sheet as a long-term asset is the yet upspent proceeds of this debt issue. See Consolidated Condensed Statements of Cash Flows for further details. Acquistion: In November 1999, the Company acquired certain assets of the Midwest private label canned vegetable business, of Agrilink Foods, Inc., a wholly owned subsidiary of Pro-Fac Cooperative. The Company purchased a plant and equipment in Arlington, Minnesota and inventories of the acquired business. The annual sales of this business are approximately $73 million. The purchase price was approximately $48 million, partially funded by a subordinated note for $5 million and the balance paid in cash. The Company also had a commitment to purchase Agrilink Food's Cambria, Wisconsin plant, but this plant was purchased by another Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS January 1, 2000 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 financing requirements, 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 January 1, 2000, it uses bank lines of credit with variable interest rates to finance seasonal working capital requirements. The Company maintains investments in cash equivalents ($22.2 million as of January 1, 2000) 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 January 1, 2000:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS January 1, 2000 <TABLE> Interest Rate Sensitivity of Long-Term Debt and Short-Term Investments January 1, 2000 (In Thousands) <CAPTION> EXPECTED MATURITY DATE Total / Weighted 2000 2001 2002 2003 2004 There-after Average --------- --------- --------- --------- --------- ------------ -------- Fixed-rate debt: <S> <C> <C> <C> <C> <C> <C> <C> Principal cash flows $8,480 $8,213 $18,620 $21,663 $21,713 $100,792 $ 179,481 Average interest rate 9.34% 9.32% 9.28% 9.16% 8.97% 8.21% 8.89% Variable-rate debt: Principal cash flows $ -- $ -- $ -- $ -- $ -- $ 22,630 $ 22,630 Average interest rate 5.81% 5.81% 5.81% 5.81% 5.81% 5.81% 5.81% Short-term investments: Balance $ 22,237 Average interest rate 5.82% </TABLE>
PART II - OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults on Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K A. Exhibits 11 (11) Computation of earnings per share (filed herewith) 27 (27) Financial Data Schedules (filed herewith) Reports on Form 8-K - A November 1999 8-K was filed.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Seneca Foods Corporation (Company) /s/Kraig H. Kayser ------------------------ February 14, 2000 Kraig H. Kayser President and Chief Executive Officer /s/Jeffrey L. Van Riper ------------------------ February 14, 2000 Jeffrey L. Van Riper Controller and Chief Accounting Officer