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 September 27, 2003 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 Exchange 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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Indicate by check mark whether the Company is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act).
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 October 31, 2003
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Common Stock Class A, $.25 Par 3,918,880
Common Stock Class B, $.25 Par 2,764,005
PART I ITEM 1 FINANCIAL INFORMATION
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
9/27/03 3/31/03
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ASSETS
Current Assets:
Cash and Cash Equivalents $ 4,697 $ 64,984
Accounts Receivable, Net 70,906 31,799
Inventories:
Finished Goods 396,495 88,769
Work in Process 45,845 13,911
Raw Materials 30,968 38,969
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473,308 141,649
Off-Season Reserve (Note 2) (61,784) -
Deferred Income Tax Asset, Net 3,300 3,300
Assets Held For Sale 3,578 -
Refundable Income Taxes 1,225 715
Other Current Assets 2,975 1,254
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Total Current Assets 498,205 243,701
Property, Plant and Equipment, Net 188,727 132,969
Other Assets 6,531 2,870
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Total Assets $693,463 $379,540
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 26,674 $ -
Accounts Payable 204,198 22,730
Accrued Expenses 54,999 25,602
Current Portion of Long-Term Debt and Capital
Lease Obligations 21,021 22,987
--------------- ---------------
Total Current Liabilities 306,892 71,319
Long-Term Debt 173,162 127,107
Capital Lease Obligations 7,140 6,230
Deferred Income Tax Liability 10,883 9,023
Other Long-Term Liabilities 11,990 6,497
Commitments - -
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, $12.00
Stated Value 41,462 41,586
Convertible, Participating Preferred Stock, $15.50
Stated Value 15,000 -
Common Stock 2,852 2,849
Paid in Capital 15,803 14,616
Accumulated Other Comprehensive Income 818 422
Retained Earnings 107,391 99,821
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Stockholders' Equity 183,396 159,364
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Total Liabilities and Stockholders' Equity $693,463 $379,540
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS
(Unaudited)
(In Thousands, except Share Data)
Three Months Ended
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9/27/03 9/28/02
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Net Sales $ 248,194 $ 183,806
Costs and Expenses:
Cost of Product Sold 228,207 171,632
Selling, General, and Administrative 9,491 4,657
Other Expense - 620
Interest Expense 4,087 3,578
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Total Costs and Expenses 241,785 180,487
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Earnings Before Income Taxes 6,409 3,319
Income Taxes 2,499 1,229
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Net Earnings $ 3,910 $ 2,090
================= ================
Basic:
Earnings Per Common Share (2002
restated - Note 6) $ .35 $ .21
================= ================
Diluted:
Earnings Per Common Share $ .35 $ .20
================= ===============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS
(Unaudited)
(In Thousands, except Share Data)
Six Months Ended
----------------
9/27/03 9/28/02
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(Continued)
Net Sales $ 399,490 $ 307,061
Costs and Expenses:
Cost of Product Sold 363,942 283,121
Selling, General, and Administrative 15,621 9,487
Other Expense - 620
Interest Expense 7,498 7,240
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Total Costs and Expenses 387,061 300,468
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Earnings Before Income Taxes 12,429 6,593
Income Taxes 4,847 2,571
------------------ -----------------
Net Earnings $ 7,582 $ 4,022
================= ================
Basic:
Earnings Per Common Share (2002
restated - Note 6) $ .70 $ .39
================= ================
Diluted:
Earnings Per Common Share $ .70 $ .39
================= ================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Six Months Ended
-----------------
9/27/03 9/28/02
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Cash Flows From Operating Activities:
Net Earnings $ 7,582 $ 4,022
Adjustments to Reconcile Net Earnings
to Net Cash Provided by
Operating Activities:
Depreciation and Amortization 14,022 11,489
Deferred Income Taxes 1,649 1,851
Impairment Provision - 620
Changes in Working Capital:
Accounts Receivable (15,030) (4,582)
Inventories (244,009) (131,038)
Off-Season Reserve 61,784 46,046
Other Current Assets (1,659) (71)
Refundable Income Taxes (510) 582
Accounts Payable, Accrued
Expenses, and Other Liabilities 178,632 109,190
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Net Cash Provided by Operating
Activities 2,461 38,109
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Cash Flows From Investing Activities:
Acquisition (113,691) -
Proceeds from the Sale of Assets 46,077 -
Cash Received with Acquisition 2,560 -
Additions to Property, Plant,
and Equipment (8,685) (1,499)
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Net Cash Used in Investing
Activities (73,739) (1,499)
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Cash Flows From Financing Activities:
Proceeds from Issuance of Long-Term Debt 42,500 -
Net Borrowings on Notes Payable 1,299 -
Payments of Long-Term Debt and Capital
Lease Obligations (32,976) (842)
Other 180 9
Dividends (12) (12)
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Net Cash Provided by (Used in)
Financing Activities 10,991 (845)
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Net (Decrease) Increase in Cash and Cash
Equivalents (60,287) 35,765
Cash and Cash Equivalents,
Beginning of Period 64,984 24,973
------------------------------------------
Cash and Cash Equivalents,
End of Period $ 4,697 $ 60,738
================== ==================
Supplemental information on non-cash investing and financing activities:
$16.1 million of Preferred Stock was issued in partial consideration for the CPF
acquisition. The Company assumed $9.1 million of long-term debt related to the
CPF acquisition (see Note 5).
The accompanying notes are an integral part of these condensed consolidated
financial statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In Thousands)
September 27, 2003
1. Condensed Consolidated Financial Statements
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, which are
normal and recurring in nature, necessary to present fairly the
financial position of the Company as of September 27, 2003 and results
of its operations and its cash flows for the interim periods presented.
All significant intercompany transactions and accounts have been
eliminated in consolidation. The March 31, 2003 balance sheet was
derived from audited financial statements.
The results of operations for the three and six month periods ended
September 27, 2003 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 Consolidated financial statements in the 2003 Seneca
Foods Corporation Annual Report and Form 10-K/A.
Other footnote disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted. These
condensed consolidated financial statements should be read in
conjunction with the financial statements and notes included in the
Company's 2003 Annual Report and Form 10-K/A.
2. 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,
which essentially represent a contra-inventory account, are zero at
fiscal year end. Depending on the time of year, Off-Season Reserve is
either the excess of absorbed expenses over incurred expenses to date or
the excess of incurred expenses over absorbed expenses to date. Other
than the first quarter of each year, absorbed expenses exceed incurred
expenses due to timing of production.
3. Comprehensive income consisted solely of Net Earnings, and net unrealized
gains on securities classified as available-for-sale. The following table
provides the results for the periods presented:
Six Months Ended
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9/27/03 9/28/02
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Net Earnings $7,582 $4,022
Other Comprehensive Earnings, Net of Tax:
Net Unrealized Gains on
Investment 396 (94)
-------------------
Comprehensive Earnings $7,978 $3,928
===================
4. Recently issued accounting standards have been considered by the Company
and are not expected to have a material effect on the Company's financial
position or results of operations.
5. On May 27, 2003, the Company completed its acquisition of 100% of the
membership interest in Chiquita Processed Foods, L.L.C. ("CPF") from
Chiquita Brands International, Inc. The primary reason for the
acquisition was to acquire additional production capacity in the Canned
Vegetable business. The purchase price totaled $126.1 million plus the
assumption of certain liabilities. This acquisition was financed with
cash, proceeds from a new $200 million revolving credit facility, and
$16.1 million of the Company's Participating Convertible Preferred Stock.
The Preferred Stock was valued at $16.60 per share based on the market
value of the Class A Common Stock around the time the acquisition was
announced.
The new $200 million revolving credit facility has a five-year term. The
Preferred Stock is convertible into the Company's Class A Common Stock on
a one-for-one basis. In the second quarter of 2004, the Company
refinanced $42.5 million of outstanding debt under the revolving credit
facility with new term debt from an insurance company. The new term debt
from the insurance company of $42.5 million, when combined with the
refinancing of existing insurance company debt of $32.5 million, has an
interest rate of 8.03%, a fifteen year amortization and a ten year term.
As part of this acquisition, the Company assumed seasonal notes payable
from the CPF revolving credit facility of $25.4 million which was paid
off at the time of acquisition with proceeds from the new $200 million
revolving credit facility. The Company also assumed $35.9 million of CPF
long-term debt and capital lease obligations, of which $26.8 million was
paid off at the time of acquisition with proceeds from the new $200
million revolving credit facility. The remaining long-term debt
principally involves two Industrial Revenue Development Bonds totaling
$5.5 million and consisting of a $3 million Pickett, Wisconsin issue due
on June 1, 2005 with an interest rate of 7.75% and a $2.5 million Walla
Walla, Washington issue due on September 1, 2005 with an interest rate of
7.75%. The balance of the debt acquired, totaling $3.6 million, has
interest rates ranging from 1.9% to 9% and is due through 2011.
The Company's statement of net earnings for the six months ended
September 27, 2003 includes four months of the CPF acquired operations. A
pro forma income statement as if the operations were acquired at the
beginning of the periods presented follows:
Three Months Ended
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9/27/03 9/28/02
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Net Sales $248,194 $278,934
Cost of Product Sold 228,207 258,613
Selling, General, and
Administrative 9,491 11,376
Interest Expense 4,087 4,603
Other Expense (Income) - 623
----------------------
Total Costs and Expenses 241,785 275,215
Earnings From Continuing Operations
Before Income Taxes 6,409 3,719
Income Taxes 2,499 1,385
----------------------
Net Earnings From Continuing Operations 3,910 2,334
======================
Basic Earnings Per Share From
Continuing Operations $ 0.35 $ 0.23
======================
Diluted Earnings Per Share From
Continuing Operations $ 0.35 $ 0.23
======================
Six Months Ended
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9/27/03 9/28/02
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Net Sales $453,972 $489,475
Cost of Product Sold 414,872 451,863
Selling, General, and
Administrative 19,926 24,524
Interest Expense 8,348 9,463
Other Expense (Income) 1,882 (332)
----------------------
Total Costs and Expenses 445,028 485,518
Earnings From Continuing Operations
Before Income Taxes 8,944 3,957
Income Taxes 3,488 1,543
----------------------
Net Earnings From Continuing Operations 5,456 2,414
======================
Basic Earnings Per Share From
Continuing Operations $ 0.50 $ 0.24
======================
Diluted Earnings Per Share From
Continuing Operations $ 0.50 $ 0.24
======================
The Company sold three former Chiquita Processed Foods plants and related
assets to Lakeside Foods, Inc. on June 17, 2003. The Company sold one
additional plant of Chiquita Processed Foods and related assets to
Lakeside Foods, Inc. on August 6, 2003. The aforementioned sales to
Lakeside Foods generated $47 million in cash proceeds, which was used to
pay down debt.
The allocation of purchase price is preliminary and is subject to change
as additional information regarding the fair value of assets acquired and
liabilities assumed is obtained.
6. Earnings per Share-Subsequent to the issuance of its condensed
consolidated financial statements for the three and six month periods
ended September 28, 2002, the Company determined that it should have
included convertible participating preferred stock in its calculation
of basic earnings per common share under the if-converted method.
As a result, the accompanying condensed consolidated financial
statements for the three and six months ended September 28, 2002 have
been restated from the amounts previously reported to reduce basic
earnings per common share for the three and six month periods ended
September 28, 2002 from $.32 to $.21 and $.61 to $.39, respectively.
Three Months Ended Six Months Ended
------------------ ----------------
9/27/03 9/28/02 9/27/03 9/28/02
------- ------- ------- -------
Basic Net Earnings Applicable to Common Stock (In thousands except per share
data):
Net Earnings $ 3,910 $ 2,090 $ 7,582 $ 4,022
Deduct Preferred Cash Dividends 6 6 12 12
--------------------------------------------------------------------
Net Earnings Applicable to
Common Stock $ 3,904 $ 2,084 $ 7,570 $ 4,010
====================================================================
Weighted Average Common Shares
Outstanding 6,683 6,591 6,679 6,589
Weighted Average Participating
Preferred Shares 4,443 3,567 4,124 3,569
--------------------------------------------------------------------
Weighted Average Shares
Outstanding for Basic Earnings
per Common Share 11,126 10,158 10,803 10,158
====================================================================
Basic Earnings Per Common Share $ .35 $ .21 $ .70 $ .39
====================================================================
Diluted Net Earnings Applicable to Common Stock (In thousands except per share
data):
Net Earnings Applicable to
Common Stock $ 3,904 $ 2,084 $ 7,570 $ 4,010
Add Back Preferred Cash Dividends 5 5 10 10
--------------------------------------------------------------------
Net Earnings Applicable to
Common Stock-Diluted $ 3,909 $ 2,089 $ 7,580 $ 4,020
====================================================================
Weighted Average
Shares Outstanding for Basic
Earnings per Common Share 11,126 10,158 10,803 10,158
Effect of Convertible Preferred Stock 67 67 67 67
Weighted Average Shares
Outstanding for Diluted Earnings
per Common Share 11,193 10,225 10,870 10,225
====================================================================
Diluted Earnings Per Common Share $ .35 $ .20 $ .70 $ .39
====================================================================
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION RESULTS AND OF OPERATIONS
September 27, 2003
Results of Operations:
Sales:
Total sales reflect an increase of 35.0% for the second quarter versus 2002. The
sales increase primarily reflects three months of operating activity related to
Chiquita Processed Foods, L.L.C. acquired May 27, 2003.
Costs and Expenses:
The following table shows costs and expenses as a percentage of sales:
Three Months Ended Six Months Ended
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9/27/03 9/28/02 9/27/03 9/28/02
------- ------- ------- -------
Cost of Product Sold 92.0% 93.4% 91.1 92.2
Selling 3.4 2.1 3.3 2.5
Administrative 0.4 0.5 0.6 0.6
Other Expense - 0.3 - 0.2
Interest Expense 1.6 1.9 1.9 2.4
----------------------------------------------------
97.4% 98.2% 96.9% 97.9%
====================================================
Favorable cost of manufacturing variances were a major contributing factor in
improved operating results.
Income Taxes:
The effective tax rate was 39% for the six month periods ended September 27,
2003 and September 28, 2002.
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 September Ended March
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2003 2002 2003 2002
---- ---- ---- ----
Working Capital Balance $191,313 $179,171 $172,382 $163,606
Quarter Change 64,238 8,210 - -
Notes Payable 26,674 - - -
Long-Term Debt 180,302 155,208 133,337 156,100
Current Ratio 1.62:1 1.94:1 3.42:1 3.00:1
The change in Working Capital for the September 2003 quarter from the September
2002 quarter is largely due to the proceeds from the issuance of new term debt
from an insurance company of $42.5 million. The proceeds were used to pay down
current borrowings.
See Condensed Consolidated Statements of Cash Flows for further details.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 27, 2003
Inventory increased $160.4 million from the same period last year primarily
reflecting an increase of $82.8 million representing the net effect of the CPF
acquisition less the inventory sold to Lakeside Foods, Inc., as discussed in the
Notes to the Condensed Consolidated Financial Statements. The $82.8 million
increase was partially offset by the Company's continued emphasis on inventory
management and reduced production from last year. Cash and short term
investments decreased $56.0 million again due to the acquisition.
On May 27, 2003, the Company completed its acquisition of 100% of the membership
interest in Chiquita Processed Foods, L.L.C. ("CPF") from Chiquita Brands
International, Inc. The primary reason for the acquisition was to acquire
additional production capacity in the Canned Vegetable business. The purchase
price totaled $126.1 million plus the assumption of certain liabilities. This
acquisition was financed with cash, proceeds from a new $200 million revolving
credit facility, and $16.1 million of the Company's Participating Convertible
Preferred Stock. The Preferred Stock was valued at $16.60 per share based on the
market value of the Class A Common Stock around the time the acquisition was
announced.
The new $200 million revolving credit facility has a five-year term. The
Preferred Stock is convertible into the Company's Class A Common Stock on a
one-for-one basis. In the second quarter, the Company refinanced $42.5 million
of outstanding debt under the revolving credit facility with new term debt from
an insurance company. The new term debt from the insurance company of $42.5
million, when combined with the refinancing of existing insurance company debt
of $32.5 million, has an interest rate of 8.03%, a fifteen year amortization and
a ten year term.
As part of this acquisition, the Company assumed seasonal notes payable from the
CPF revolving credit facility of $25.4 million which was paid off at the time of
acquisition with proceeds from the new $200 million revolving credit facility.
The Company also assumed $35.9 million of CPF long-term debt and capital lease
obligations, of which $26.8 million was paid off at the time of acquisition with
proceeds from the new $200 million revolving credit facility. The remaining
long-term debt principally involves two Industrial Revenue Development Bonds
totaling $5.5 million and consisting of a $3 million Pickett, Wisconsin issue
due on June 1, 2005 with an interest rate of 7.75% and a $2.5 million Walla
Walla, Washington issue due on September 1, 2005 with an interest rate of 7.75%.
The balance of the debt acquired, totaling $3.6 million, has interest rates
ranging from 1.9% to 9% and is due through 2011.
The Company's statement of net earnings for the six months ended September 27,
2003 includes four months of the CPF acquired operations. A pro forma income
statement as if the operations were acquired at the beginning of the periods
presented follows:
Three Months Ended
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9/27/03 9/28/02
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Net Sales $248,194 $278,934
Cost of Product Sold 228,207 258,613
Selling, General, and
Administrative 9,491 11,376
Interest Expense 4,087 4,603
Other Expense (Income) - 623
----------------------
Total Costs and Expenses 241,785 275,215
Earnings From Continuing Operations
Before Income Taxes 6,409 3,719
Income Taxes 2,499 1,385
----------------------
Net Earnings From Continuing Operations 3,910 2,334
======================
Basic Earnings Per Share From
Continuing Operations $ 0.35 $ 0.23
======================
Diluted Earnings Per Share From
Continuing Operations $ 0.35 $ 0.23
======================
Six Months Ended
------------------
9/27/03 9/28/02
------- -------
Net Sales $453,972 $489,475
Cost of Product Sold 414,872 451,863
Selling, General, and
Administrative 19,926 24,524
Interest Expense 8,348 9,463
Other Expense (Income) 1,882 (332)
----------------------
Total Costs and Expenses 445,028 485,518
Earnings From Continuing Operations
Before Income Taxes 8,944 3,957
Income Taxes 3,488 1,543
----------------------
Net Earnings From Continuing Operations 5,456 2,414
======================
Basic Earnings Per Share From
Continuing Operations $ 0.50 $ 0.24
======================
Diluted Earnings Per Share From
Continuing Operations $ 0.50 $ 0.24
======================
The Company sold three former Chiquita Processed Foods plants and related assets
to Lakeside Foods, Inc. on June 17, 2003. The Company sold one additional plant
of Chiquita Processed Foods and related assets to Lakeside Foods, Inc. on August
6, 2003. The aforementioned sales to Lakeside Foods generated $47 million in
cash proceeds, which was used to pay down debt.
The allocation of purchase price is preliminary and is subject to change as
additional information regarding the fair value of assets acquired and
liabilities assumed is obtained.
Seasonality
The Company's revenues typically have been higher in the second and third
quarters, primarily because the Company sells, on a bill and hold basis, Green
Giant canned and frozen vegetables to General Mills Operations, Inc. at the end
of each pack cycle. The two largest commodities are peas and corn, which are
sold in the second and third quarters, respectively. See the Critical Accounting
Policies section below for further details. In addition, our non Green Giant
sales have exhibited seasonality with the third quarter generating the highest
sales. This quarter reflects increased sales of the Company's products during
the holiday period.
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 six months ended September 27, 2003, the Company sold for cash, on a bill
and hold basis, $78,644,000 of Green Giant finished goods inventory to General
Mills Operations, Inc. ("GMOI"). At the time of the sale of the Green Giant
vegetables to GMOI, title of the specified inventory transferred to GMOI. In
addition, 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 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, which essentially
represent a contra-inventory account, are zero at fiscal year end. Depending on
the time of year, Off-Season Reserve is either the excess of absorbed expenses
over incurred expenses to date or the excess of incurred expenses over absorbed
expenses to date. Other than the first quarter of each year, absorbed expenses
exceed incurred expenses due to timing of production.
Trade promotions are an important component of the sales and marketing of the
Company's branded products, and are critical to the support of the business.
Trade promotion costs include amounts paid to encourage retailers to offer
temporary price reductions for the sale of our products to consumers, amounts
paid to obtain favorable display positions in retailers' stores, and amounts
paid to retailers for shelf space in retail stores. Accruals for trade
promotions are recorded primarily at the time of sale of product to the retailer
based on expected levels of performance and are recorded as a reduction of
revenue. Settlement of these liabilities typically occurs in subsequent periods
primarily through an authorized process for deductions taken by a retailer from
amounts otherwise due to us. As a result, the ultimate cost of a trade promotion
program is dependent on the relative success of the events and the actions and
level of deductions taken by retailers for amounts they consider due to them.
Final determination of the permissible deductions may take years.
Recently issued accounting standards have been considered by the Company and are
not expected to have a material effect on the Company's financial position or
results of operations.
ITEM 3 Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
As a result of its regular borrowing activities, the Company's operating results
are exposed to fluctuations in interest rates, which it manages primarily
through its regular financing activities. In connection with the acquisition of
CPF, the Company entered into a new $200 million revolving credit facility with
a five-year term to finance its seasonal working capital requirements. Interest
is based on LIBOR plus a spread. Repayment is required at the expiration date of
the facility, which is May 27, 2008. The Company had $26.7 million outstanding
under this facility as of September 27, 2003. The Company maintains investments
in cash equivalents (none at September 27, 2003 and $60.9 million as of March
31, 2003) and has investments in $3.2 million of marketable securities at
September 27, 2003. Long-term debt represents secured and unsecured debentures,
certain notes payable to insurance companies used to finance long-term
investments such as business acquisitions, and capital lease obligations.
Long-term debt bears interest at fixed and variable rates. Refer to the March
31, 2003 report for the table of Interest Rate Sensitivity of Long-Term Debt,
Short Term Debt and Short Term Investments.
ITEM 4 Controls and Procedures
(a) Disclosure controls and procedures. We evaluated the effectiveness of the
design and operation of our disclosure controls and procedures. Our disclosure
controls and procedures are the controls and other procedures that we designed
to ensure that we record, process, summarize and report in a timely manner the
information we must disclose in reports that we file with or submit to the SEC.
Kraig H. Kayser, our President and Chief Executive Officer, and Philip G. Paras,
our Chief Financial Officer, reviewed and participated in this evaluation. We
adopted several improvements to increase the effectiveness of our disclosure
controls and procedures during the most recent fiscal quarter. Based on this
evaluation, Messrs. Kayser and Paras have concluded that as of the end of our
most recent fiscal quarter, our disclosure controls were effective.
(b) Internal controls. During the period covered by this report, there have not
been any significant changes in our internal controls over financial reporting
that has materially affected, or is reasonable likely to materially affect, the
Company's internal controls over financial reporting.
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 Computation of earnings per share (filed herewith)
31.1 Certification of Kraig H. Kayser pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith) 31.2 Certification of Philip G.
Paras pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(filed herewith)
(b) Reports on Form 8-K
(1) Form 8-K/A Filed August 11, 2003
A Current Report on Form 8-K/A was filed related to the acquisition of
Chiquita Processed Foods, L.L.C.
(2) Form 8-K Filed August 13, 2003
A Current Report on Form 8-K was filed with the Company's earnings
press release.
(3) Form 8-K Filed August 19, 2003
A Current Report on Form 8-K was filed with the Company's earnings
press release.
(4) Form 8-K Filed August 22, 2003
A Current Report on Form 8-K was filed with the Company's change in its
basic earnings per share and cash flows from operations press release.
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
-----------------------
November 12, 2003 Kraig H. Kayser
President and
Chief Executive Officer
/s/Jeffrey L. Van Riper
-----------------------
November 12, 2003 Jeffrey L. Van Riper
Controller and
Chief Accounting Officer