Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended September 28, 1996 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 Not Applicable Former name, former address and former fiscal year, if changed since last report Check mark indicates whether registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities 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 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 October 31, 1996 Common Stock Class A, $.25 Par 3,143,125 Common Stock Class B, $.25 Par 2,796,555
<TABLE> PART I FINANCIAL INFORMATION SENECA FOODS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In Thousands of Dollars) <CAPTION> 9/28/96 3/31/96 ------- ------- <S> <C> <C> ASSETS Current Assets: Cash and Short-term Investments $ 1,029 $ 1,297 Common Stock of Moog Inc. - 12,863 Accounts Receivable, Net 55,382 51,118 Inventories: Finished Goods 369,155 138,953 Work in Process 14,719 63,730 Raw Materials 31,013 27,076 ------- ------- 414,887 229,759 Off-Season Reserve (Note 3) (54,189) - Deferred Tax (Net) 53 53 Refundable Income Taxes 1,901 3,503 Other Current Assets 565 1,041 -------------- --------------- Total Current Assets 419,628 299,634 Property, Plant and Equipment, Net 223,819 222,720 Common Stock of Moog Inc. 1,261 1,048 Other Assets 401 457 -------------- --------------- $645,109 $523,859 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes Payable $ 121,780 $ 113,000 Accounts Payable 144,196 48,930 Accrued Expenses 35,440 28,253 Current Portion of Long-Term Debt and Capital Lease Obligations 177 690 --------------- --------------- Total Current Liabilities 301,593 190,873 Long-Term Debt 223,733 216,928 Capital Lease Obligations 9,826 9,646 Deferred Income Taxes 11,930 11,414 Deferred Gain 4,380 4,059 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 Common Stock 2,666 2,666 Paid in Capital 5,913 5,913 Net Unrealized Gain on Available-For-Sale Securities 340 5,169 Retained Earnings 84,658 77,121 --------------- --------------- Stockholders' Equity 93,647 90,939 --------------- --------------- $645,109 $ 523,859 ======= ======= <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 9/28/96 9/30/95 ------- ------- <S> <C> <C> Net Sales $ 159,521 $ 131,979 Other Income (See Notes) 1,640 - ------------------ ----------------- 161,161 131,979 Costs and Expenses: Cost of Product Sold 143,194 118,324 Selling, General, and Administrative 6,669 8,185 Interest Expense 7,246 6,820 Nonrecurring Charge (See Notes) - 15,078 ------------------ ----------------- Total Costs and Expenses 157,109 148,407 ------------------ ----------------- Earnings (Loss) Before Income Taxes 4,052 (16,428) Income Taxes 1,342 (6,079) ------------------ ----------------- Net Earnings (Loss) $ 2,710 $ (10,349) ================== ================= Net Earnings Applicable to Common Stock 2,704 (10,355) Weighted Average Common Shares Outstanding 5,939,680 5,593,110 Primary and Fully Diluted Earnings Per Share of Common Stock (Exhibit II): Net Earnings(Loss) $ .46 $ (1.85) ================== =============== <FN> The accompanying notes are an integral part of these consolidated condensed financial statements. </FN> </TABLE>
<TABLE> SENECA FOODS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) (In Thousands, except Share Data) <CAPTION> Six Months Ended 9/28/96 9/30/95 ------- ------- <S> <C> <C> Net Sales $ 283,215 $ 213,924 Other Income (See Notes) 9,141 - ------------------ ----------------- 292,356 213,924 Costs and Expenses: Cost of Product Sold 252,600 186,853 Selling, General, and Administrative 13,253 15,968 Interest Expense 14,727 12,365 Nonrecurring Charge (See Notes) - 15,078 ------------------ ----------------- Total Costs and Expenses 280,580 230,264 ------------------ ----------------- Earnings (Loss) Before Income Taxes 11,776 (16,340) Income Taxes 4,239 (6,046) ------------------ ----------------- Net Earnings (Loss) $ 7,537 $ (10,294) ================== ================= Net Earnings Applicable to Common Stock 7,525 (10,306) Weighted Average Common Shares Outstanding 5,939,680 5,593,110 Primary and Fully Diluted Earnings Per Share of Common Stock (Exhibit II): Net Earnings (Loss) $ 1.27 $ (1.84) ================== =============== <FN> The accompanying notes are an integral part of these consolidated condensed financial statements. </FN> </TABLE>
<TABLE> SENECA FOODS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands) <CAPTION> Six Months Ended 9/28/96 9/30/95 ------- ------- <S> <C> <C> Cash Flows From Operating Activities: Net Earnings (Loss) $ 7,537 $ (10,294) Adjustments to Reconcile Net Earnings (Loss) to Net Cash Used by Operating Activities: Depreciation and Amortization 12,701 10,358 Deferred Income Taxes 523 (35) Gain on the Sale of Assets (9,141) - Changes in Working Capital: Accounts Receivable (4,264) (8,464) Inventories (185,128) (130,993) Off-Season Reserve 54,189 (36,631) Other Current Assets 476 43 Income Taxes 4,054 (6,864) Accounts Payable and Accrued Expenses 102,774 108,549 ------------------ ----------------- Net Cash Used by Operations (16,279) (74,331) ------------------ ----------------- Cash Flows From Investing Activities: Additions to Property, Plant, and Equipment (9,275) (59,409) Proceed from the Sale of Assets 15,511 - Disposals of Property, Plant, and Equipment 30 33 ------------------ ----------------- Net Cash Provided (Used) by Investing Activities 6,266 (59,376) ------------------ ----------------- Cash Flows From Financing Activities: Long-Term Borrowing 1,745 9,258 Notes Payable 8,780 109,100 Payments and Current Portion of Long-Term Debt and Capital Lease Obligations (836) (326) Other 56 (111) Dividends - (12) ------------------ ----------------- Net Cash Provided by Financing Activities 9,745 117,909 ------------------ ----------------- Net Decrease in Cash and Short- Term Investments (268) (15,798) Cash and Short-Term Investments, Beginning of Period 1,297 26,538 ------------------ ----------------- Cash and Short-Term Investments, End of Period $ 1,029 10,740 ================== ================= <FN> An addition to the secured nonrecourse subordinated promissory note of $7,558,000 occurred in the second quarter of 1997 in conjunction with the acquisition of additional Green Giant assets. The accompanying notes are an integral part of these consolidated condensed financial statements. </FN> </TABLE>
SENECA FOODS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS September 28, 1996 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 Registrant as of September 28, 1996 and March 31, 1996 and results of operations for the three and six month periods ended September 28, 1996 and September 30, 1995 and Cash Flows for the six month periods ended September 28, 1996 and September 30, 1995. All significant intercompany transactions and accounts have been eliminated in consolidation. The March 31, 1996 balance sheet was derived from audited financial statements. The results of operations for the three and six month periods ended September 28, 1996 and September 30, 1995 are not necessarily indicative of the results to be expected for the full year. The accounting policies followed by the Registrant are set forth in Note 1 to the Registrant's financial statements in the 1996 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 Registrant's March 31, 1996 financial report. 2. Primary earnings per share are based on the weighted average number of common shares outstanding, as the effect of common stock equivalents is immaterial. The difference between primary and fully diluted earnings per share is immaterial. 3. Off-Season Reserve is the excess of absorbed expenses over incurred expenses to date. The seasonal nature of the Registrant'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. 4. The Registrant issued a stock split in the form of a dividend during 1996. This has been reflected in the prior year of these financial statements as if it had occurred at the beginning of the year.
SENECA FOODS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) September 28, 1996 5. The prior year second quarter results include a nonrecurring charge of $15,078,000, before income tax benefit, due to a combination of start-up costs related to the Pillsbury Alliance and severe drought conditions that New York State suffered during the entire summer. 6. During the first quarter, the Registrant sold its investment in Moog, Inc. Class A Common Stock back to Moog. This resulted in a Pre-Tax gain of $7,501,000. 7. During the second quarter, the Registrant sold its Clifton Park, New York facility for cash resulting in a gain of $1,640,000 before income tax expense. The Registrant had leased this facility to a third party.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION RESULTS OF OPERATIONS September 28, 1996 Results of Operations: Sales: Sales reflect an increase of 20.9% for the second quarter and 32.4% for the comparable six month period, versus 1995. The higher sales, in large part, are due to higher canned vegetables quantities sold than the previous period. Costs and Expenses: The following table shows cost and expenses as a percentage of sales: <TABLE> <CAPTION> Three Months Ended Six Months Ended 9/28/96 9/30/95 9/28/96 9/30/95 ------- ------- ------- ------- <S> <C> <C> <C> <C> Cost of Product Sold 89.8% 89.6% 89.2% 87.3% Selling 3.2 4.5 3.6 5.5 Administrative 1.0 1.7 1.1 2.0 Interest Expense 4.5 5.2 5.2 5.8 Nonrecurring Charge - 11.4 - 7.0 --------------------------------------------------- 98.5% 112.4% 99.1% 107.6% ==================================================== </TABLE> Higher Cost of Product Sold percentages (i.e. lower Gross Margins) and lower Selling percentages reflect, in part, higher proportion of vegetable sales under the Pillsbury Alliance. Refer to the footnotes for the discussion of the Nonrecurring Charge. Income Taxes: The effective tax rate used in fiscal 1997 is 36% and in fiscal 1996 it is 37%. Financial Condition: The financial condition of the Registrant is summarized in the following table and explanatory review (In Thousands): <TABLE> <CAPTION> For the Quarter For the Year Ended September Ended March 1996 1995 1996 1995 ---- ---- ---- ---- <S> <C> <C> <C> <C> Working Capital Balance $118,035 $86,621 $108,761 $136,342 Quarter Change 10,116 (13,662) - - Inventory 414,887 336,659 229,759 138,113 Notes Payable 121,780 109,100 - - Long-Term Debt 233,559 234,701 226,574 221,480 Current Ratio 1.39:1 1.32:1 1.57:1 3.21:1 Inventory (Average) Turnover 1.2 1.6 2.0 2.2 </TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION RESULTS OF OPERATIONS September 28, 1996 The change in the Working Capital for the quarter from the prior year is largely due to acquisition of Green Giant assets in the prior year and the capital expenditure program needed for the Registrant's plants to take on some of the canned vegetable volume added by the acquisition. Inventory is $78 million greater than the same month in the prior year largely due to the larger vegetable pack than the prior year. The increase was expected as the Registrant is now producing Pillsbury's green bean requirements. In addition, unlike the prior year, the pack budgets were met this year. As part of the Alliance with Pillsbury (see 1996 Annual Report for details), Pillsbury takes Green Giant inventory as it needs it or at least by the take-or-pay date (varies by commodity). The Registrant was in compliance with its debt covenants related to Short-Term and Long-Term Debt. See Consolidated Condensed Statements of Cash Flows for further details.
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) Exhibit 4 - (4a) Instrument defining the rights of any holder of Long-Term Debt related to the Note Agreement by and among SENECA FOODS CORPORATION, THE PRUDENTIAL INSURANCE COMPANY OF AMERICA and JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY as amended by Consent under Note Agreement as Exhibit 4a filed hereto. (b) Exhibit 4 - (4b) Instrument defining the rights of any holder of any holder of Long-Term Debt: Supplementary Agreement dated October 2, 1996 made by Seneca Foods Corporation, The Pillsbury Company and Grand Metropolitan Incorporated related to a First Restated and Amended Alliance Agreement as amended by Exhibit 4b filed hereto. (c) Exhibit 11 - (11) Computation of earnings per share (d) Exhibit 27 - (27) Financial Data Schedules (e) Reports on Form 8-K - None during the quarter.
SIGNATURES Pursuant to the requirements 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 (Registrant) /s/Kraig H. Kayser ----------------------- November 13, 1996 Kraig H. Kayser President and Chief Executive Officer /s/Jeffrey L. Van Riper ------------------------ November 13, 1996 Jeffrey L. Van Riper Controller and Chief Accounting Officer