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 December 29, 2001 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, 2002 Common Stock Class A, $.25 Par 3,820,467 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, Except Share Data) <CAPTION> 12/29/01 3/31/01 -------- ------- <S> <C> <C> ASSETS Current Assets: Cash and Short-term Investments $ 12,281 $ 5,391 Accounts Receivable, Net 35,383 31,510 Inventories: Finished Goods 196,967 178,415 Work in Process 15,563 13,297 Raw Materials 25,342 37,458 ------- ------- 237,872 229,170 Off-Season Reserve (Note 2) (45,576) - Deferred Tax Asset 5,656 5,602 Refundable Income Taxes 189 - Other Current Assets 1,267 1,308 -------------- --------------- Total Current Assets 247,072 272,981 Property, Plant and Equipment, Net 160,623 167,450 Other Assets 2,452 3,802 -------------- --------------- $410,147 $444,233 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes Payable $ - $ 24,500 Accounts Payable 26,706 39,726 Accrued Expenses 26,962 26,423 Income Taxes Payable - 343 Current Portion of Long-Term Debt and Capital Lease Obligations 19,441 18,622 --------------- --------------- Total Current Liabilities 73,109 109,614 Long-Term Debt 167,122 164,251 Capital Lease Obligations 6,670 7,095 Deferred Income Taxes 7,041 7,132 Other Long-Term Liabilities 5,865 6,382 Stockholders' Equity: 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 42,624 42,671 Common Stock 2,827 2,825 Paid in Capital 13,601 13,555 Accumulated Other Comprehensive Income 977 961 Retained Earnings 90,241 89,677 --------------- --------------- Stockholders' Equity 150,340 149,759 --------------- --------------- $410,147 $444,233 ======== ======== <FN> The accompanying notes are an integral part of these financial statements. </FN> </TABLE>
<TABLE> SENECA FOODS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (In Thousands, except Share Data) <CAPTION> Three Months Ended ------------------ 12/29/01 12/30/00 -------- -------- <S> <C> <C> Net Sales $ 236,932 $ 248,109 Costs and Expenses: Cost of Product Sold 223,964 238,525 Selling, General, and Administrative 5,325 6,498 Interest Expense 4,018 4,667 ------------------ ----------------- Total Costs and Expenses 233,307 249,690 ------------------ ----------------- Earnings (Loss) Before Income Taxes 3,625 (1,581) Income Taxes 1,335 (465) ------------------ ----------------- Net Earnings (Loss) 2,290 (1,116) ================== ================= Basic Earnings (Loss) Per Common Share $ .35 $ (.17) ================= ================ Diluted Earnings (Loss) Per Common Share $ .22 $ (.17) ================= ================ <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 OPERATIONS (Unaudited) (In Thousands, except Share Data) <CAPTION> Nine Months Ended ----------------- 12/29/01 12/30/00 -------- -------- <S> <C> <C> Net Sales $ 546,425 $ 567,042 Costs and Expenses: Cost of Product Sold 516,112 532,362 Selling, General, and Administrative 15,483 18,445 Other Expense (Income) 321 (1,151) Interest Expense 13,543 13,744 ------------------ ----------------- Total Costs and Expenses 545,459 563,400 ------------------ ----------------- Earnings Before Income Taxes 966 3,642 Income Taxes 378 1,415 ------------------ ----------------- Net Earnings $ 588 $ 2,227 ================= ================ Basic Earnings Per Common Share $ .09 $ .34 ================= ================ Diluted Earnings Per Common Share $ .06 $ .22 ================= ================ <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 ----------------- 12/29/01 12/30/00 -------- -------- <S> <C> <C> Cash Flows from Operating Activities: Net Earnings $ 588 $ 2,227 Adjustments to Reconcile Net Earnings to Net Cash Provided by (Used in) Operating Activities: Depreciation and Amortization 18,287 17,827 Deferred Income Taxes (108) (2,021) Gain on the Sale of Assets - (1,151) Other Expense 321 - Changes in Operating Assets and Liabilities: Accounts Receivable (3,873) 966 Inventories (8,702) (81,072) Off-Season Reserve 45,576 43,036 Other Current Assets 41 (266) Income Taxes (532) 749 Accounts Payable, Accrued Expenses and Other (13,319) (19,981) ------------------ ----------------- Net Cash Provided by (Used in) Operations 38,279 (39,686) ------------------ ----------------- Cash Flows From Investing Activities: Additions to Property, Plant, and Equipment (11,555) (11,448) Capital Escrows 1,316 3,548 Proceeds from the Sale of Assets - 2,514 Disposals 95 166 ------------------ ----------------- Net Cash Used in Investing Activities (10,144) (5,220) ------------------ ----------------- Cash Flows From Financing Activities: Notes Payable (24,500) 40,593 Long-Term Borrowing 8,079 - Payments and Current Portion of Long-Term Debt and Capital Lease Obligations (4,814) (4,275) Other 14 14 Dividends (24) (24) ------------------ ----------------- Net Cash (Used in) Provided by Financing Activities (21,245) 36,308 ------------------ ----------------- Net Increase (Decrease) in Cash and Short-Term Investments 6,890 (8,598) Cash and Short-Term Investments, Beginning of Period 5,391 11,348 ------------------ ----------------- Cash and Short-Term Investments, End of Period $ 12,281 $ 2,750 ================== ================== <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 December 29, 2001 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 December 29, 2001 and results of operations for the three and nine month periods ended, December 29, 2001 and December 30, 2000. All significant intercompany transactions and accounts have been eliminated in consolidation. The March 31, 2001 balance sheet was derived from audited financial statements. The results of operations for the nine month periods ended December 29, 2001 and December 30, 2000 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 2001 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 2001 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 on Moog, Inc. Stock. The following table provides the results for the periods presented: Nine Months Ended December -------------------------- 2001 2000 ---- ---- Net Earnings $588 $2,227 Other Comprehensive Earnings, Net of Tax: Net Unrealized Gain (Loss) Change on Moog, Inc. Stock 16 (32) ---------------------- Comprehensive Earnings $604 $2,195 ====================== MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS December 29, 2001 Results of Operations: Sales: Total Sales reflect a decrease of 4.5% for the third quarter versus 2000. The Company's Alliance business sales dollars decreased by 10.6%. Non-Alliance vegetable sales dollars increased by 3.3% and sales quantities decreased 1.8%. Costs and Expenses: The following table shows costs and expenses as a percentage of sales: <TABLE> <CAPTION> Three Months Ended Nine Months Ended 12/29/01 12/30/00 12/29/01 12/30/00 -------- -------- -------- -------- <S> <C> <C> <C> <C> Cost of Product Sold 94.5% 96.1% 94.4% 94.0% Selling 1.9 2.1 2.3 2.6 Administrative 0.4 0.5 0.5 0.6 Other Expense (Income) 0.0 0.0 0.1 (0.2) Interest Expense 1.7 1.9 2.5 2.4 --------------------------------------------------- 98.5% 100.6% 99.8% 99.4% ==================================================== </TABLE> Higher selling prices as compared to the prior year quarter, especially in the Branded and Private Label Retail businesses, were a major contributing factor in higher profitability in the current year quarter. Income Taxes: The effective tax rate used in 2002 and 2001 is 39%. Financial Condition: The financial condition of the Company is summarized in the following table and explanatory review (In Thousands): <TABLE> <CAPTION> As of and As of and For the Quarter For the Year Ended December Ended March -------------- ----------- 2001 2000 2001 2000 ---- ---- ---- ---- <S> <C> <C> <C> <C> Working Capital Balance $173,963 $173,715 $163,367 $168,972 Quarter Change 4,500 (4,917) - - Notes Payable - 40,593 24,500 - Long-Term Debt 173,792 185,238 171,346 189,968 Current Ratio 3.38:1 2.63:1 2.49:1 3.05:1 </TABLE> The change in the Working Capital for the December 2001 quarter from the December 2000 quarter is largely due to higher earnings in the current year quarter than the prior year quarter ($2,290,000 earnings as compared to $1,116,000 loss last year) and the reduction of deferred taxes last year due to a payment of $2,000,000 to the Internal Revenue Service for an examination adjustments related to timing issues. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS December 29, 2001 During the second quarter of the current year, a $1,500,000 mortgage was issued to finance the purchase of a warehouse in Mayville, Wisconsin. The following addresses the recently issued SEC disclosure guidelines entitled, "Commission Statement about Management's Disclosure and Analysis of Financial Condition and Results of Operations." The Company has an Alliance Agreement with Pillsbury (a subsidiary of General Mills, Inc.), 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. For the nine months ended December 29, 2001, the Company sold $21 million of canned and frozen vegetables to Pillsbury, which compares to $40 million sold to Pillsbury for the nine months ended December 30, 2000. In addition, for the nine months ended December 29, 2001, the Company sold for cash, $229 million of Green Giant vegetables to a special purpose entity (SPE), versus $241 million sold to the SPE for the nine months ended December 30, 2000. At the time of the sale of the Green Giant vegetables to the SPE, the aforementioned finished goods inventory was complete, ready for shipment and segregated from the Company's other finished goods inventory. Further, the Company had performed all of its obligations with respect to the sale of the specified Green Giant finished goods inventory. The SPE is not required to be consolidated with the Company's financial statements due, in part, to several reasons: - - The majority owner of the SPE has control of the SPE and is an independent third party who has made a substantial capital contribution in the SPE. In addition, the equity capital of the SPE is always in excess of the minimum guidelines for such an entity. - - The majority owner of the SPE has substantial risks and rewards of ownership of the assets of the SPE. The equity investment of the majority owner is subordinate to any debt holders. - - The SPE activities are not on the exclusive behalf of the Company. The Company expects to continue selling product to the SPE through, at least, December 2002. Cash generated from these sales together with its available credit resources, will be sufficient for its anticipated working capital requirements through fiscal 2003. See Consolidated Condensed Statements of Cash Flows for further details.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS December 29, 2001 Quantitative and Qualitative Disclosures about Market Risk: The Company has not experienced any material changes in Market Risk since our March 31, 2001 report. Forward-Looking Statements Except for the historical information contained herein, the matters discussed in this report are forward-looking statements as defined in the Private Securities Litigation Reform Act (PSLRA) of 1995. The Company wishes to take advantage of the "safe harbor" provisions of the PSLRA by cautioning that numerous important factors which involve risks and uncertainties, including but not limited to economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services and prices, and other factors discussed in the Company's filings with the Securities and Exchange Commission, in the future, could affect the Company's actual results and could cause its actual consolidated results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company. Recently Issued Accounting Standards In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142, Goodwill and Other Intangible Assets. Since the Company does not have goodwill or other intangible assets on its balance sheet, this Statement is not expected to have a material impact on its consolidated financial statements. In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 is effective for years beginning after June 15, 2002. The Company is in the process of evaluating the impact of implementing SFAS No. 143. In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment of Long-Lived Assets, which supersedes SFAS No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, and the accounting provisions of APB No. 30, Reporting the Results of Operations-Reporting and Effects of the Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business. SFAS No. 144 is effective for years beginning after December 15, 2001. SFAS No. 144 retains many of the provisions of SFAS No. 121, but addresses certain implementation issues associated with the Statement. The Company is currently evaluating the impact of this Statement.
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) Reports on Form 8-K - None during the quarter.
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 12, 2002 Kraig H. Kayser President and Chief Executive Officer /s/Jeffrey L. Van Riper ------------------------ February 12, 2002 Jeffrey L. Van Riper Controller and Chief Accounting Officer