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 June 29, 2002 Commission File Number 0-1989
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Seneca Foods Corporation
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(Exact name of Company as specified in its charter)
New York 16-0733425
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(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
3736 South Main Street, Marion, New York 14505
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(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code 315/926-8100
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Not Applicable
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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
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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, 2002
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Common Stock Class A, $.25 Par 3,826,513
Common Stock Class B, $.25 Par 2,764,053
PART I FINANCIAL INFORMATION
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands of Dollars)
6/29/02 3/31/02
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ASSETS
Current Assets:
Cash and Cash Equivalents $ 31,029 $ 24,973
Accounts Receivable, Net 28,885 32,035
Inventories:
Finished Goods 109,740 135,727
Work in Process 9,657 8,526
Raw Materials 46,500 37,582
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165,897 181,835
Off-Season Reserve (Note 2) 26,857 -
Deferred Income Tax Asset, Net 4,623 4,624
Refundable Income Taxes 723 1,657
Other Current Assets 754 362
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Total Current Assets 258,768 245,486
Property, Plant and Equipment, Net 150,019 155,189
Other Assets 3,555 2,901
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$412,342 $403,576
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 40,097 $ 33,979
Accrued Expenses 24,863 25,078
Current Portion of Long-Term Debt and Capital
Lease Obligations 22,847 22,823
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Total Current Liabilities 87,807 81,880
Long-Term Debt 148,989 149,430
Capital Lease Obligations 6,670 6,670
Deferred Income Taxes 8,020 7,308
Other Long-Term Liabilities 7,462 7,165
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 42,565 42,605
Common Stock 2,829 2,827
Paid in Capital 13,659 13,619
Accumulated Other Comprehensive Income 1,557 1,208
Retained Earnings 92,714 90,794
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Stockholders' Equity 153,394 151,123
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$412,342 $403,576
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The accompanying notes are an integral part of these financial statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, except Share Data)
Three Months Ended
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6/29/02 6/30/01
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Net Sales $ 123,255 $ 132,693
Costs and Expenses:
Cost of Product Sold 111,489 124,720
Selling, General, and Administrative 4,830 5,067
Interest Expense 3,662 4,915
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Total Costs and Expenses 119,981 134,702
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Earnings (Loss) Before Income Taxes 3,274 (2,009)
Income Taxes 1,342 (723)
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Net Earnings (Loss) $ 1,932 $ (1,286)
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Basic:
Earnings(Loss) Per Common Share .29 (.20)
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Diluted:
Earnings (Loss) Per Common Share .19 (.20)
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The accompanying notes are an integral part of these condensed financial
statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Three Months Ended
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6/29/02 6/30/01
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Cash Flows From Operating Activities:
Net Earnings (Loss) $ 1,932 $ (1,286)
Adjustments to Reconcile Net Earnings (Loss)
to Net Cash Provided by (Used in)
Operating Activities:
Depreciation and Amortization 5,885 6,108
Deferred Income Taxes 405 (725)
Changes in Working Capital:
Accounts Receivable 3,150 2,339
Inventories 15,938 18,714
Off-Season Reserve (26,857) (35,865)
Other Current Assets (392) (136)
Income Taxes 934 (601)
Accounts Payable, Accrued
Expenses, and Other Liabilities 6,200 (3,355)
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Net Cash Provided by (Used
in) Operations 7,195 (14,807)
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Cash Flows From Investing Activities:
Additions to Property, Plant,
and Equipment (715) (4,314)
Escrow Funds - (1,525)
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Net Cash Used in Investing
Activities (715) (5,839)
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Cash Flows From Financing Activities:
Payments and Current Portion of Long-Term
Debt and Capital Lease Obligations (417) (170)
Other 5 5
Net Borrowings on Notes Payable - 13,545
Proceeds from the Issuance of Long-Term
Debt - 3,950
Dividends (12) (12)
Net Cash (Used in) Provided by
Financing Activities (424) 17,318
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Net Increase (Decrease) in Cash and Short-
Term Investments 6,056 (3,328)
Cash and Short-Term Investments,
Beginning of Period 24,973 5,391
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Cash and Short-Term Investments,
End of Period $ 31,029 $ 2,063
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The accompanying notes are an integral part of these condensed financial
statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 29, 2002
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 June 29, 2002 and results of its operations and its
cash flows for the three month periods ended June 29, 2002 and June 30,
2001. All significant intercompany transactions and accounts have been
eliminated in consolidation. The March 31, 2002 balance sheet was derived
from audited financial statements.
The results of operations for the three month periods ended June 29, 2002
and June 30, 2001 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 2002 Seneca Foods Corporation
Annual Report and 10-K.
Other footnote disclosures normally included in annual 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 2002 Annual Report and 10-K.
2. Off-Season Reserve is the excess of absorbed expenses over incurred
expenses to date. During the first quarter of each year, incurred expenses
exceed absorbed expenses due to timing of production. 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:
Three Months Ended
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6/29/02 6/30/01
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Net Earnings (Loss) $1,932 $(1,286)
Other Comprehensive Earnings, Net of Tax:
Net Unrealized Gain Change on
Moog, Inc. Stock 349 30
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Comprehensive Earnings (Loss) $2,281 $(1,256)
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION RESULTS OF OPERATIONS
June 29, 2002
Results of Operations:
Sales: Total Sales reflect a decrease of 7.1% for the first three months versus
2001. The Company's Alliance business sales dollars decreased by 19.1%. This
decrease was primarily a result of planned reduction in asparagus volume.
Non-Alliance sales dollars decreased by 1.3%.
Costs and Expenses:
The following table shows costs and expenses as a percentage of sales:
Three Months Ended
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6/29/02 6/30/01
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Cost of Product Sold 90.4% 94.0%
Selling 3.2 3.1
Administrative 0.7 0.7
Interest Expense 3.0 3.7
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97.3% 101.5%
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Higher selling prices as compared to the prior year, especially in the Private
Label Retail Canned, Frozen and Branded businesses, were a major contributing
factor in improved operating results. In addition, interest expense decreased
$1,253,000 as a result of lower interest rates and lower average debt balances.
Income Taxes:
The effective tax rate was 41% in 2002 and 36% in 2001.
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 June Ended March
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2002 2001 2002 2001
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Working Capital Balance $170,961 $164,944 $163,606 $163,367
Quarter Change 7,355 1,577 - -
Notes Payable - 38,045 - 24,500
Long-Term Debt 155,659 174,495 156,100 171,346
Current Ratio 2.95:1 2.38:1 3.00:1 2.49:1
The change in the Working Capital for the June 2002 quarter from the June 2001
quarter is largely due to higher earnings in the current year quarter than the
prior year quarter ($1,932,000 earnings as compared to $1,286,000 loss last
year) and lower capital expenditures, which were $0.7 million in 2002 as
compared to $4.3 million in 2001. This was partially offset by new debt issued
in 2001 of $4.0 million primarily to fund an expansion in Yakima, Washington.
See Consolidated Condensed Statements of Cash Flows for further details.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 29, 2002
Quantitative and Qualitative Disclosures about Market Risk:
The Company has not experienced any material changes in Market Risk since our
March 31, 2002 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.
Critical Accounting Policies
In the first quarter ended June 29, 2002, the Company sold for cash, on a bill
and hold basis, $23,377,000 of Green Giant finished goods inventory to General
Mills Operations, Inc. ("GMOI"). At the time of the sale of the Green Giant
vegetables to the GMOI, 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.
Off-Season Reserve is the excess of absorbed expenses over incurred expenses to
date. During the first quarter of each year, incurred expenses exceed absorbed
expenses due to timing of production. 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.
Alliance Agreement Amendment
On May 23, 2002, the Company, The Pillsbury Company, General Mills Operations,
Inc. and General Mills, Inc. entered into an amendment to the Alliance Agreement
pursuant to which certain provisions were modified to (i) assign Pillsbury's
rights and obligations under the Alliance Agreement to General Mills Operations,
Inc. ("GMOI"), which is an indirect, wholly-owned subsidiary of General Mills,
Inc.; (ii) accelerate the timing of the obligation of GMOI to purchase Green
Giant inventory from the Company by requiring that such inventory be purchased
at the end of each commodity production cycle (e.g. corn, peas, green beans, and
asparagus); and (iii) substitute General Mills, Inc. for Diageo PLC as the
guarantor of GMOI's obligations under the Alliance Agreement.
Recently Issued Accounting Standard
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 rescinds several statements, including SFAS No. 4, "Reporting Gains
and Losses from Extinguishment of Debt." The statement also makes several
technical corrections to other existing authoritative pronouncements. SFAS No.
145 is effective in May 2002, except for the rescission of SFAS No. 4, which is
effective in April 2003. The Company does not expect the adoption of SFAS No.
145 to have a significant impact on its consolidated financial statements.
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 - a report was filed in June 2002 related to an Amended
Alliance Agreement.
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
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(Company)
/s/Kraig H. Kayser
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August 12, 2002 Kraig H. Kayser
President and
Chief Executive Officer
/s/Jeffrey L. Van Riper
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August 12, 2002 Jeffrey L. Van Riper
Controller and
Chief Accounting Officer