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 December 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 January 31, 1997 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> 12/28/96 3/31/96 -------- ------- <S> <C> <C> ASSETS Current Assets: Cash and Short-term Investments $ 9,656 $ 1,297 Common Stock of Moog Inc. - 12,863 Accounts Receivable, Net 29,972 51,118 Inventories: Finished Goods 186,070 138,953 Work in Process 19,799 63,730 Raw Materials and Supplies 32,259 27,076 ------- ------- 238,128 229,759 Off-Season Reserve (Note 3) (39,146) - Deferred Tax (Net) 2,553 53 Refundable Income Taxes 320 3,503 Other Current Assets 1,513 1,041 -------------- --------------- Total Current Assets 242,996 299,634 Property, Plant and Equipment, Net 214,525 222,720 Common Stock of Moog Inc. 1,397 1,048 Other Assets 384 457 -------------- --------------- $459,302 $523,859 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes Payable $ 26,000 $ 113,000 Accounts Payable 31,738 48,930 Accrued Expenses 20,461 28,253 Customer Advance 35,500 - Current Portion of Long-Term Debt and Leases 3,464 690 --------------- --------------- Total Current Liabilities 117,163 190,873 Long-Term Debt 220,724 216,928 Capital Lease Obligations 9,515 9,646 Deferred Income Taxes 13,459 11,414 Deferred Gain 4,339 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 436 5,169 Retained Earnings 85,017 77,121 --------------- --------------- Stockholders' Equity 94,102 90,939 --------------- --------------- $459,302 $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 ------------------ 12/28/96 12/30/95 -------- -------- <S> <C> <C> Net Sales $ 291,188 $ 201,032 Other Income (See Notes) - 4,279 ------------------ ----------------- 291,188 205,311 Costs and Expenses: Cost of Product Sold 275,837 188,779 Selling, General, and Administrative 7,025 7,790 Interest Expense 7,496 7,669 ------------------ ----------------- Total Costs and Expenses 290,358 204,238 ------------------ ----------------- Earnings Before Income Taxes 830 1,073 Income Taxes 471 855 ------------------ ----------------- Net Earnings $ 359 $ 218 ================== ================= Net Earnings Applicable to Common Stock 353 212 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 Per Share $ .06 $ .04 ================== =============== <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> Nine Months Ended ----------------- 12/28/96 12/30/95 -------- -------- <S> <C> <C> Net Sales $ 574,403 $ 414,956 Other Income (See Notes) 9,141 4,279 ------------------ ----------------- 583,544 419,235 Costs and Expenses: Cost of Product Sold 528,437 375,632 Selling, General, and Administrative 20,278 23,758 Interest Expense 22,223 20,034 Nonrecurring Charge (See Notes) - 15,078 ------------------ ----------------- Total Costs and Expenses 570,938 434,502 ------------------ ----------------- Earnings (Loss) Before Income Taxes 12,606 (15,267) Income Taxes 4,710 (5,191) ------------------ ----------------- Net Earnings (Loss) $ 7,896 $ (10,076) ================== ================= Net Earnings Applicable to Common Stock 7,879 (10,093) 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) Per Share $ 1.33 $ (1.80) ================== ============ <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> Nine Months Ended ----------------- 12/28/96 12/30/95 -------- -------- <S> <C> <C> Cash Flows From Operating Activities: Net Earnings (Loss) $ 7,896 $ (10,076) Adjustments to Reconcile Net Earnings (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation and Amortization 19,796 16,689 Deferred Income Taxes 1,963 (2,385) Gain on the Sale of Assets (9,141) (4,279) Changes in Working Capital: Accounts Receivable 21,146 977 Inventories (8,369) (126,369) Off-Season Reserve 39,146 38,982 Other Current Assets (472) 124 Income Taxes 3,183 (3,949) Accounts Payable and Accrued Expenses 10,796 (6,686) ------------------ ----------------- Net Cash Used by Operations 85,944 (96,972) ------------------ ----------------- Cash Flows From Investing Activities: Additions to Property, Plant, and Equipment (7,041) (62,794) Proceed from the Sale of Assets 15,511 8,904 Disposals of Property, Plant, and Equipment 6 39 ------------------ ----------------- Net Cash Provided (Used) by Investing Activities 8,476 (53,851) ------------------ ----------------- Cash Flows From Financing Activities: Long-term Borrowing 1,343 9,258 Notes Payable (87,000) 120,950 Payments of Long-term Debt and Capital Lease Obligations (477) (3,095) Other 73 (275) Dividends - (24) ------------------ ----------------- Net Cash (Used) Provided by Financing Activities (86,061) 126,814 ------------------- ----------------- Net Increase (Decrease) in Cash and Short- term Investments 8,359 (24,009) Cash and Short-term Investments, Beginning of Period 1,297 26,538 ------------------ ----------------- Cash and Short-term Investments, End of Period $ 9,656 2,529 ================== ================= <FN> An addition of $7,558,000 to the secured nonrecourse subordinated promissory note 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 December 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 December 28, 1996 and March 31, 1996 and results of operations for the three and nine month periods ended December 28, 1996 and December 30, 1995 and Cash Flows for the nine month periods ended December 28, 1996 and December 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 nine month periods ended December 28, 1996 and December 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) December 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. 8. During the third quarter of 1997 the Registrant executed a Supplementary Agreement to its Alliance Agreement with Pillsbury which, among other things, allowed the Company to execute two Purchase and Sale and Warehousing Agreements ("the Sale Agreements") for the sale of specified finished goods inventory to an independent, third party. Based on the Sale Agreements, and at the request of the independent third party, the Registrant sold for cash on a bill and hold basis all of the Green Giant brand canned corn, canned green beans, and frozen cut corn from the 1996 pack season, and the majority of the Green Giant brand canned asparagus from the 1996 pack season. At the time of sale the aforementioned finished goods inventory was complete, ready for shipment and segregated from the Registrant's other finished goods inventory, and the Registrant had performed all of its obligations with respect to the specified finished goods inventory sold. Sales of the Green Giant brand vegetables totaled $223,452,000 in the third quarter of 1997, of which $143,044,000 were sold pursuant to the Sale Agreements. In the same quarter for the prior year, Green Giant brand vegetable sales totaled $107,756,000. 9. During the third quarter of 1997, the Registrant announced its intention to acquire the private label canned vegetable business of Curtice Burns Foods, a wholly-owned subsidiary of Pro-Fac Cooperative.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION RESULTS OF OPERATIONS December 28, 1996 Results of Operations: Sales: Sales reflect an increase of 44.8% for the third quarter and 38.4% for the comparable nine month period, versus 1995. The higher sales, in large part, are due to higher canned vegetables quantities sold than the previous period due to the Sale Agreements (see footnote 8 for details). Costs and Expenses: The following table shows cost and expenses as a percentage of sales: Three Months Ended Nine Months Ended ------------------ ----------------- 12/28/96 12/30/95 12/28/96 12/30/95 -------- -------- -------- -------- Cost of Product Sold 94.7% 93.9% 92.0% 90.6% Selling 1.9 3.0 2.7 4.3 Administrative 0.5 0.9 0.8 1.4 Interest Expense 2.6 3.8 3.9 4.8 Nonrecurring Charge - - - 3.6 ------------------------------------------------- 99.7% 101.6% 99.4% 104.7% ================================================== 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 37.4% and in fiscal 1996 it is 34.0%. Financial Condition: The financial condition of the Registrant is summarized in the following table and explanatory review (In Thousands): For the Quarter For the Year Ended December Ended March -------------- ----------- 1996 1995 1996 1995 ---- ---- ---- ---- Working Capital Balance $125,833 $89,808 $108,761 $136,342 Quarter Change 3,881 6,008 - - Inventory 238,128 258,773 229,759 138,113 Notes Payable 26,000 120,950 113,000 - Long-Term Debt 230,239 232,619 226,574 221,480 Current Ratio 2.07:1 1.53:1 1.57:1 3.21:1 Inventory (Average) Turnover 3.0 2.6 2.0 2.2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION RESULTS OF OPERATIONS December 28, 1996 Notes payable is $94 million less than last year largely due to the Sale Agreements (see footnote 8 for details) partially offset by a larger pack in the current year than the prior year. Inventory is $21 million less than the same month in the prior year largely due to the Sale Agreements (see footnote 8 for details) partially offset by a larger pack in the current year than the prior year. The Registrant was in compliance with its financial covenants related to its Short-term and Long-term Debt as of December 28, 1996. 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 Credit Agreement by and among SENECA FOODS CORPORATION, THE BANKS SIGNATORY THERETO AND THE CHASE MANHATTAN BANK AS AGENT as amended by Amendment Nos. 1 to 6 and filed herewith. (b) Exhibit 11 - (11) Computation of earnings per share (c) Exhibit 27 - (27) Financial Data Schedules (d) 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 February 10, 1997 Kraig H. Kayser President and Chief Executive Officer /s/Jeffrey L. Van Riper February 10, 1997 Jeffrey L. Van Riper Controller and Chief Accounting Officer