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 June 28, 1997 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 July 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> 6/28/97 3/31/97 ------- ------- ASSETS <S> <C> <C> Current Assets: Cash and Short-term Investments $ 1,152 $ 1,584 Accounts Receivable, Net 41,628 36,477 Inventories: Finished Goods 135,147 75,898 Work in Process 26,246 35,373 Raw Materials 59,149 46,926 ------- ------- 220,542 158,197 Off-Season Reserve (Note 3) 33,660 - Deferred Tax Asset (Net) 6,156 6,156 Refundable Income Taxes 683 - Other Current Assets 5,347 4,432 -------------- --------------- Total Current Assets 309,168 206,846 Property, Plant and Equipment, Net 231,119 207,439 Other Assets 2,064 1,738 -------------- --------------- $542,351 $416,023 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes Payable $ 87,490 $ 18,000 Accounts Payable 67,857 24,435 Accrued Expenses 39,111 25,615 Income Taxes - 599 Current Portion of Long-Term Debt and Capital Lease Obligations 9,469 9,465 --------------- --------------- Total Current Liabilities 203,927 78,114 Long-Term Debt 214,911 214,848 Capital Lease Obligations 9,258 9,280 Deferred Income Taxes 15,911 15,797 Deferred Gain 4,187 4,248 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 664 435 Retained Earnings 84,844 84,652 --------------- --------------- Stockholders' Equity 94,157 93,736 --------------- --------------- $542,351 $416,023 ======== ======== <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 ------------------ 6/28/97 6/29/96 ------- ------- <S> <C> <C> Net Sales $ 105,078 $ 123,694 Other Income (See Notes) - 7,501 ------------------ ----------------- 105,078 131,195 Costs and Expenses: Cost of Product Sold 90,381 109,406 Selling, General, and Administrative 7,929 6,584 Interest Expense 6,469 7,481 ------------------ ----------------- Total Costs and Expenses 104,779 123,471 ------------------ ----------------- Earnings Before Income Taxes 299 7,724 Income Taxes 107 2,897 ------------------ ----------------- Net Earnings $ 192 $ 4,827 ================== ================= Net Earnings Applicable to Common Stock 192 4,827 Weighted Average Common Shares Outstanding 5,939,680 5,939,680 Primary and Fully Diluted Earnings Per Share of Common Stock (Exhibit II): Net Earnings $ .03 $ .81 ================== ================= <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> Three Months Ended ------------------ 6/28/97 6/29/96 ------- ------- <S> <C> <C> Cash Flows From Operating Activities: Net Earnings $ 192 $ 4,827 Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: Depreciation and Amortization 6,785 6,374 Deferred Income Taxes - 697 Gain on the Sale - (7,501) Changes in Working Capital: Accounts Receivable (1,064) 14,878 Inventories (33,652) 17,157 Off-Season Reserve (33,660) (28,271) Other Current Assets (760) 360 Income Taxes (1,282) 2,380 Accounts Payable and Accrued Expenses 53,334 2,957 ------------------ ----------------- Net Cash Provided (Used) by Operations (10,107) 13,858 ------------------ ----------------- Cash Flows From Investing Activities: Acquisitions (53,672) - Proceeds from the Sale of Moog Stock - 12,863 Additions to Property, Plant, and Equipment (6,205) (6,195) ------------------ ----------------- Net Cash Provided (Used) in Investing Activities (59,877) 6,668 ------------------ ----------------- Cash Flows From Financing Activities: Notes Payable 69,490 (15,000) Long-Term Borrowing 106 230 Payments and Current Portion of Long-Term Debt and Capital Lease Obligations (61) (85) Other 17 40 Dividends - - ------------------ ----------------- Net Cash Provided (Used) in Financing Activities 69,552 (14,815) ------------------ ----------------- Net Increase (Decrease) in Cash and Short- Term Investments (432) 5,711 Cash and Short-Term Investments, Beginning of Period 1,584 1,297 ------------------ ----------------- Cash and Short-Term Investments, End of Period $ 1,152 $ 7,008 ================== ================== <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 June 28, 1997 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 June 28, 1997 and March 31, 1997 and results of operations for the three month periods ended June 28, 1997 and June 29, 1996. All significant intercompany transactions and accounts have been eliminated in consolidation. The March 31, 1997 balance sheet was derived from audited financial statements. The results of operations for the three month periods ended June 28, 1997 and June 29, 1996 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 to the Registrant's financial statements in the 1997 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, 1997 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. On April 18, 1997 the Registrant acquired certain assets of the Aunt Nellie's Farm Kitchens from the Pillsbury Company, an indirect subsidiary of Grand Metropolitan plc, for approximately $24 million (referred to as "Aunt Nellie's"). Aunt Nellie's produces, markets, and sells fruit and vegetable products from plants in the Midwest. Its 1996 sales were approximately $59 million. The Registrant purchased the plants, inventories, accounts receivable, and trademarks of the business. Aunt Nellie's includes facilities located in Clyman, Wisconsin; Covington, Kentucky; and Buckley, Michigan. This acquisition was funded primarily out of working capital.
SENECA FOODS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS June 28, 1997 5. On May 5, 1997 the Registrant acquired certain assets of the Curtice Burns Foods, Inc. ("Curtice Burns"), a wholly owned subsidiary of Pro-Fac Cooperative, Inc., used in the canned vegetable business of Curtice Burns. The 1996 sales of the acquired assets were approximately $37 million. The Registrant purchased two plants, inventories, and trademarks of the business. Assets purchased include a warehouse located in LeRoy, New York and a processing plant located in Leicester, New York. In conjunction with the acquisition, the Registrant and Curtice Burns entered into a long-term strategic alliance, combining their New York agricultural departments into one organization, now managed by Curtice Burns. This acquisition was funded primarily out of working capital. A proposed $15 million long-term debt financing to fund the long-term assets of this acquisition and the Aunt Nellie's acquisition described above is being negotiated by the Registrant. The Registrant expects to consummate the financing sometime in August 1997. 6. The following summary, prepared on a pro forma basis, combines the consolidated results of operations as if Aunt Nellie's and Curtice Burns were acquired at the beginning of the periods presented: Three Months Three Months 6/28/97 6/29/96 ------------ ------------ Net Sales $111,995 $147,627 Net Earnings 184 3,872 Net Earnings per Share .03 .65 7. During the first quarter of the prior year, 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION RESULTS OF OPERATIONS June 28, 1997 Results of Operations: Sales: Sales reflect a decrease of 15.1% for the first three months versus 1996. The lower sales, in large part, are due to lower canned vegetables quantities sold under the Alliance with Pillsbury. Under this Alliance Net Sales were $6,918,000 for three months ended June 1997 versus $55,161,000 for the comparable period in the previous year. Non-Alliance vegetable sales quantities were up 73.2% while juice and fruit sales quantities were up 2.3%. The vegetable sales increase was largely due to the acquisition of the Curtice Burns and Aunt Nellie's canned vegetable businesses described above. Costs and Expenses: The following table shows cost and expenses as a percentage of sales: Three Months Ended ------------------ 6/28/97 6/29/96 ------- ------- Cost of Product Sold 86.0% 88.5% Selling 6.1 4.0 Administrative 1.4 1.3 Interest Expense 6.2 6.0 ----------------------- 99.7% 99.8% ======================= Lower Cost of Product Sold percentages (i.e. higher Gross Margins) and higher Selling reflect, in part, substantially lower sales under the Pillsbury Alliance, which are at low Gross Margins and have no Selling costs. Income Taxes: The effective tax rate used in fiscal 1997 is 36% and 1996 is 38%.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION RESULTS OF OPERATIONS June 28, 1997 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 June Ended March ---------- ----------- 1997 1996 1997 1996 ---- ---- ---- ---- <S> <C> <C> <C> <C> Working Capital Balance $105,241 $107,919 $128,732 $108,761 Quarter Change (23,491) (842) - - Notes Payable 87,490 98,000 18,000 113,000 Long-Term Debt 224,169 224,973 224,128 226,574 Current Ratio 1.52:1 1.60:1 2.65:1 1.57:1 Inventory (Average) Turnover 1.9 2.1 3.5 2.0 </TABLE> The change in the Working Capital for the quarter from the prior year is largely due to the two acquisitions in the current year (see footnotes for details) and proceeds from the sale of the Moog stock in the prior year quarter. As part of the Alliance with Pillsbury (see 1997 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). At June 28, 1997, due to two acquisitions, the Registrant was not in compliance with certain debt covenants related to its Revolving Credit Facility and on a portion of its Long-Term Debt. The Registrant has received waivers for the covenant violations. The Registrant has received a commitment letter to amend certain debt covenants and extend the maturity of the Revolving Credit Facility through June 30, 1999. If the new Revolving Credit Facility had been in effect at June 28, the Registrant would have been in compliance with all its provisions. The closing of the Revolving Credit Facility is not expected to occur on approximately August 29, 1997. See Consolidated 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 The annual meeting of shareholders of the Registrant was held on August 8, 1997 and the following were the voting results: (1) Management's nominees for Director positions were elected, and (2) a management proposal to ratify the appointment of Deloitte & Touche L.L.P. as independent auditors was adopted. A summary of the voting results follows (In thousands): <TABLE> <CAPTION> Proposal For Withheld Against Abstain Broker Non-Votes -------- --- -------- ------- ------- ---------------- <S> <C> <C> <C> <C> <C> Directors: E. O. Gaylord 3,660 14 G. B. Humphreys 3,661 13 K. H. Kayser 3,661 13 Appointment of Auditors 3,663 7 4 Such other business 3,674 </TABLE> Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 11 - (11) Computation of earnings per share (b) Exhibit 27 - (27) Financial Data Schedules (c) 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 August 11, 1997 Kraig H. Kayser President and Chief Executive Officer /s/Jeffrey L. Van Riper August 11, 1997 Jeffrey L. Van Riper Controller and Chief Accounting Officer