UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year-ended March 31, 2005 Commission File Number 0-01989
SENECA FOODS CORPORATION
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(Exact name of registrant as specified in its charter)
New York 16-0733425
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3736 South Main Street, Marion, New York 14505
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (315) 926-8100
Securities registered pursuant to Section 12(b) of the Act:
Name of
Each Exchange on
Title of Each Class Which Registered
- ------------------- ----------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock Class A, $.25 Par
Common Stock Class B, $.25 Par
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained herein, and
will not be contained, to best of the Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to the Form 10-K. X
Check mark indicates whether Registrant (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 registrant was required to
file such reports), and (2) has been subject to the filing requirements for at
least the past 90 days.
Yes X No
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Check mark indicates whether the Company is an accelerated filer (as defined in
Exchange Act Rule 12b-2).
Yes X No
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The aggregate market value of the Registrant's voting and non-voting common
equity held by non-affiliates based on the closing sales price per market
reports by the National Market System on September 25, 2004 was approximately
$103,123,000.
Common shares outstanding as of May 30, 2005 were Class A: 3,951,717, Class B:
2,762,905.
Documents Incorporated by Reference:
(1) Proxy Statement to be issued in connection with the Registrant's annual
meeting of stockholders (the "Proxy Statement") applicable to Part III,
Items 10-14 of Form 10-K.
(2) Portions of the Annual Report to shareholders for fiscal year ended March
31, 2005 (the "2005 Annual Report") applicable to Part I, Part II, Items
5-8 and Part IV, Item 15 of Form 10-K.
TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT - FISCAL 2005
SENECA FOODS CORPORATION
PART I. Pages
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Item 1. Business 1-3
Item 2. Properties 3
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security Holders 4
PART II.
Item 5. Market for Registrant's Common Stock and Related Security Holder Matters
and Issuer Purchases of
Equity Securities 4
Item 6. Selected Financial Data 5-6
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations 5
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 5
Item 8. Financial Statements and Supplementary Data 5
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 5
Item 9A. Controls and Procedures 6-7
Item 9B. Other Information 7
PART III.
Item 10. Directors and Executive Officers of the Registrant 8
Item 11. Executive Compensation 8
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Security Holder Matters 8
Item 13. Certain Relationships and Related Transactions 8
Item 14. Principal Accountant Fees and Services 8
PART IV.
Item 15. Exhibits and Financial Statements Schedules 10-11
SIGNATURES 12
2
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.
PART I
Item 1
Business
General Development of Business
SENECA FOODS CORPORATION (the "Company") was organized in 1949 and incorporated
under the laws of the State of New York. In the spring of 1995, the Company
initiated a 20-year Alliance Agreement with the Pillsbury Company, which was
acquired by General Mills Operations, Inc. ("GMOI"), that created the Company's
most significant business relationship. Under the Alliance Agreement, the
Company has packed canned and frozen vegetables carrying GMOI's Green Giant
brand name.
Since the onset of the Alliance Agreement, vegetable production has been the
Company's dominant line of business. In fiscal 1999, the Company sold its fruit
juice business and its applesauce and industrial flavors business. As a result
of these fiscal 1999 divestitures, the Company's only non-vegetable food
products are a line of fruit products.
On May 27, 2003, the Company completed the acquisition of the sole membership
interest in Chiquita Processed Foods, L.L.C. from Chiquita Brands International,
Inc.
Available Information
The Company's Internet address is www.senecafoods.com. The Company's annual
report on Form 10-K, the Company's quarterly reports on Form 10-Q, current
reports on Form 8-K and any amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are
available on the Company's web site, as soon as reasonably practicable after
they are electronically filed with or furnished to the SEC. All such filings on
the Company's web site are available free of charge.
In addition, the Company's website includes items related to corporate
governance matters, including charters of various committees of the Board of
Directors and the Company's Code of Business Conduct and Ethics. The Company
intends to disclose on its website any amendment to or waiver of any provision
of the Code of Business Conduct and Ethics that would otherwise be required to
be disclosed under the rules of the SEC and NASDAQ.
Financial Information about Industry Segments
The Company's business activities are conducted in food and non-food operations.
The food operation constitutes 99% of total sales, of which approximately 99% is
vegetable processing and 1% is fruit processing. The non-food operation is
mostly trade sales of cans and ends, which represents 1% of the Company's total
sales.
Narrative Description of Business
Principal Products and Markets
Food Processing
The principal products of this segment include canned vegetables, frozen
vegetables and fruit products. The products are sold to retail and institutional
markets. The Company has divided the United States into four major marketing
sections: Eastern, Southern, Northwestern, and Southwestern. Food processing
operations are primarily supported by plant locations in New York, Wisconsin,
Washington, Idaho, Illinois, and Minnesota.
The following table summarizes net sales by major product category for the years
ended March 31, 2005, 2004, and 2003:
Classes of similar products/services:
2005 2004 2003
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(In thousands)
Net Sales:
GMOI $ 225,527 $ 247,992 $ 252,059
Canned vegetables 581,486 586,594 328,907
Frozen vegetables 28,304 29,410 30,422
Fruit and chip products 16,674 15,347 20,784
Other 12,283 11,507 12,207
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$ 864,274 $ 890,850 $ 644,379
=====================================================================================================
Source and Availability of Raw Materials
The Company's food processing plants are located in major vegetable producing
states and in one fruit producing state. Fruits and vegetables are primarily
obtained through contracts with growers. The Company's sources of supply are
considered equal or superior to its competition for all of its food products.
Intellectual Property
The Company's most significant brand name, Libby's, is held pursuant to a
trademark license granted to the Company in March 1982 and renewable by the
Company every 10 years for an aggregate period expiring in March 2081. The
original licensor was Libby, McNeill & Libby, Inc., then an indirect subsidiary
of Nestle, S. A. ("Nestle") and the license was granted in connection with the
Company's purchase of certain of the licensor's canned vegetable operations in
the United States. Nestle, one of the world's major food companies, is
successor-licensor. The license is limited to vegetables which are shelf-stable
and thermally processed, and includes the Company's major vegetable varieties -
corn, peas and green beans - as well as certain other thermally processed
vegetable varieties plus sauerkraut.
The Company is required to pay an annual royalty, initially set at $25,000, and
adjustable up or down in subsequent years based upon changes in the "Employment
Cost Index-Private Nonfarm Workers" published by the U. S. Bureau of Labor
Statistics or an appropriate successor index as defined in the license
agreement. For the year which began in March 2005, the royalty was $56,823.
Nestle may terminate the license for non-payment of royalty, use of the
trademark in sales outside the licensed territory, failure to achieve a minimum
level of sales under the licensed trademark during any calendar year or a
material breach or default by the Company under the agreement (which is not
cured within the specified cure period).
Seasonal Business
While individual fruits and vegetables have seasonal cycles of peak production
and sales, the different cycles are usually offsetting to some extent. Minimal
food processing occurs in the Company's last fiscal quarter ending March 31,
which is the optimal time for maintenance, repairs and equipment changes in its
processing plants. The supply of commodities, current pricing, and expected new
crop quantity and quality affect the timing of the Company's sales and earnings.
When the seasonal harvesting periods of the Company's major vegetables are newly
completed, inventories for these processed vegetables are at their highest
levels. For peas, the peak inventory time is mid-summer and for corn, the
Company's highest volume vegetable, the peak inventory is in mid-autumn. An Off
Season Allowance is established during the year to minimize the effect of
seasonal production on earnings. The Off Season Allowance is zero at fiscal
year-end.
Backlog
In the food processing business, the end of year sales order backlog is not
considered meaningful. Traditionally, larger customers provide tentative
bookings for their expected purchases for the upcoming season. These bookings
are further developed as data on the expected size of the related national
harvests becomes available. In general, these bookings serve as a yardstick
rather than as a firm commitment, since actual harvest results can vary notably
from early estimates. In actual practice, the Company has substantially all of
its expected seasonal production identified to potential sales outlets before
the seasonal production is completed.
Competition and Customers
Competition in the food business is substantial with imaginative brand
registration and promotion, quality, service, and pricing being the major
determinants in the Company's relative market position. The Company is aware of
approximately 18 competitors in the U.S. processed vegetable industry, many of
which are privately held companies. The Company believes that it is a major
producer of canned vegetables, but some producers of canned, frozen and other
modes of vegetable products have sales which exceed the Company's sales.
During the past year, approximately 10% of the Company's processed foods sales
were packed for retail customers under the Company's branded labels of
Libby's(R), Blue Boy(R), Aunt Nellie's Farm Kitchen(R), Stokely(R), Read(R),
Festal(R), Diamond A(R), and Seneca(R). About 18% of processed foods sales were
packed for institutional food distributors and 46% were retail packed under the
private label of customers. The remaining 26% is sold under the Alliance
Agreement with GMOI (see note 13 of Item 8, Financial Statements and
Supplementary Data). Termination of the Alliance Agreement would substantially
reduce the Company's sales and profitability unless the Company were to enter
into a new substantial supply relationship with GMOI or another major vegetable
marketer. The customers represent a full cross section of the retail,
institutional, distributor, and industrial markets; and the Company does not
consider itself dependent on any single sales source other than sales
attributable to the Alliance Agreement.
The Company's principal branded products are its Libby's canned vegetable
products, which rate among the top five national brands. The information under
the heading Results of Operations in Management's Discussion and Analysis of
Financial Condition and Results of Operations in the 2005 Annual Report is
incorporated by reference.
Environmental Protection
Environmental protection is an area that has been worked on most diligently at
each food processing facility. In all locations, the Company has cooperated with
federal, state, and local environmental protection authorities in developing and
maintaining suitable antipollution facilities. In general, pollution control
facilities are equal to or somewhat superior to those of our competitors and are
within environmental protection standards. The Company does not expect any
material capital expenditures to comply with environmental regulations in the
near future. The Company is a potentially responsible party with respect to two
waste disposal sites owned and operated by others. The Company believes that any
reasonably anticipated liabilities will not exceed $437,000 in the aggregate.
Environmental Litigation
The Company is one of a number of business and local government entities which
contributed waste materials to a landfill in Yates County in upstate New York,
which was operated by a party unrelated to the Company primarily in the 1970's
through the early 1980's. The Company's wastes were primarily food and juice
products. The landfill contained some hazardous materials and was remediated by
the State of New York. The New York Attorney General has advised the Company and
other known non-governmental waste contributors that New York has sustained a
total remediation cost of $4.9 million and seeks recovery of half that cost from
the non-governmental waste contributors. The Company is one of four identified
contributors who cooperatively are investigating the history of the landfill so
as to identify and seek out other potentially responsible parties who are not
defunct and are financially able to contribute to the non-governmental parties'
reimbursement liability. Until that search is completed, the Company's liability
cannot be definitively estimated. The Company does not believe that any ultimate
settlement in excess of the amount accrued will have a material impact on its
financial position or results of operations.
Employment
The Company has 3,183 employees of which 2,588 full time and 508 seasonal
employees work in food processing and 87 full time employees work in other
activities.
The Company has six collective bargaining agreements with three union locals
covering approximately 825 of its full time employees. The terms of these
agreements result in wages and benefits which are substantially the same for
comparable positions for the Company's non-union employees. Four collective
bargaining agreements expire in calendar 2008. Two agreements expire in calendar
2006.
Foreign Operations
Export sales for the Company are a relatively small portion (about 8%) of the
food processing sales.
Item 2
Properties
The Company has five food processing, packaging, and warehousing facilities
located in New York State that provide approximately 1,608,000 square feet of
food packaging, freezing and freezer storage, and warehouse storage space. These
facilities process and package vegetable products. The Company is a lessee under
a number of operating and capital leases for equipment and real property used
for processing and warehousing.
Seven facilities in Minnesota, three facilities in Washington, three facilities
in Idaho, two facilities in Oregon, one facility in Illinois, and ten facilities
in Wisconsin provide approximately 8,539,000 square feet of food packaging,
freezing and freezer storage, and warehouse storage space. These facilities
process and package various vegetable and fruit products. Most of the facilities
are owned by the Company.
All of the properties are well maintained and equipped with modern machinery.
All locations, although highly utilized, have the ability to expand as sales
requirements justify. Because of the seasonal production cycles the exact extent
of utilization is difficult to measure. In certain circumstances, the
theoretical full efficiency levels are being reached; however, expansion of the
number of production days or hours could increase the output by up to 20% for a
season.
Certain of the Company's facilities are mortgaged to financial institutions to
secure long-term debt and capital lease obligations. See Notes 4 and 5 of Item
8, Financial Statements and Supplementary Data, for additional information about
the Company's long-term debt and lease commitments.
Item 3
Legal Proceedings
During 2004, various claims totaling approximately $3,211,000 were asserted by
the Fleming Companies against the Company and a subsidiary acquired in 2003 in
the Bankruptcy proceedings in the U. S. Bankruptcy Court for the District of
Delaware for (i)receipt of allegedly preferential payments under the U. S.
Bankruptcy Code ($1,292,000), (ii) receipt of alleged overpayments ($1,139,000)
and (iii) amounts allegedly owing under various vendor promotional programs
($780,000). During 2005, the Company settled these claims for $399,000.
On June 15, 2004, an accident occurred at the Company's aircraft hangar located
at the Yates County Airport in Penn Yan, New York. A collision occurred between
an automobile owned by an employee of an aircraft service company doing contract
work at the Company's hangar and two jet aircraft standing in the hangar. The
incident caused minor damage to the hangar and one of the airplanes and
substantial damage to the wing of the second airplane. A corporate customer of
the Company's Flight Division shares ownership with the Company of the
less-damaged aircraft and has sole ownership of the more-damaged aircraft. The
Company does not believe that any ultimate settlement will have a material
impact on its financial position or results of operations.
In the ordinary course of its business, the Company is made a party to certain
legal proceedings seeking monetary damages. The Company does not believe that an
adverse decision in any of these proceedings would have a material adverse
impact on its financial position, results of operations or cash flows. See
Environmental Litigation in Item 1 for further legal discussion.
Item 4
Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of shareholders during the last quarter of
the fiscal period covered by this report.
PART II
Item 5
Market for Registrant's Common Stock and Related Security Holder Matters and
Issuer Purchases of Equity Securities
Each class of preferred stock receives preference as to dividend payment and
declaration over any common stock. In addition, refer to the information in the
2005 Annual Report, "Shareholder Information and Quarterly Results", which is
incorporated by reference.
Issuer Purchases of Equity Securities
- ------------------- ------------------------ ----------------------- ---------------------- ----------------------
Maximum Number (or
Total Number of Approximate Dollar
Shares Purchased as Value) or Shares
Part of Publicly that May Yet Be
Total Number of Shares Average Price Paid Announced Plans or Purchased Under the
Period Purchased (1) per Share Programs Plans or Programs
- ------------------- ------------------------ ----------------------- ---------------------- ----------------------
Class A Class B Class A Class B
Common Common Common Common
- ------------------- ------------ ----------- ----------- ----------- ---------------------- ----------------------
1/01/05 - 1/31/05 12,000 3,500 $19.06 $15.79 N/A N/A
- ------------------- ------------ ----------- ----------- ----------- ---------------------- ----------------------
2/01/05 - 2/29/05 - - - - N/A N/A
- ------------------- ------------ ----------- ----------- ----------- ---------------------- ----------------------
3/01/05 - 3/31/05 34,603 - $17.25 - N/A N/A
- ------------------- ------------ ----------- ----------- ----------- ---------------------- ----------------------
Total 46,603 3,500 $17.72 $15.79 N/A N/A
- ------------------- ------------ ----------- ----------- ----------- ---------------------- ----------------------
(1) These purchases were made in open market transactions by the trustees under
the Seneca Foods Corporation Employees' Savings Plan and the Seneca Foods,
L.L.C. 401(k) Retirement Savings Plan to provide employee matching contributions
under the plans.
Item 6
Selected Financial Data
Refer to the information in the 2005 Annual Report, "Five Year Selected
Financial Data", which is incorporated by reference.
Item 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Refer to the information in the 2005 Annual Report, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", which is
incorporated by reference.
Item 7A
Quantitative and Qualitative Disclosures about Market Risk
Refer to the information in the 2005 Annual Report, "Quantitative and
Qualitative Disclosures about Market Risk", which is incorporated by reference.
Item 8
Financial Statements and Supplementary Data
Refer to the information in the 2005 Annual Report, "Consolidated Financial
Statements and Notes thereto including Report of Independent Registered Public
Accounting Firms", which is incorporated by reference.
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
Item 9A
Controls and Procedures
An evaluation was performed under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation, as of March 31, 2005,
of our disclosure controls and procedures, as that term is defined in Rule
13a-15(e) under the Securities and Exchange Act of 1934, as amended (the
Exchange Act). Our disclosure controls and procedures have been designed to
ensure that information we are required to disclose in our reports that we file
with the SEC under the Exchange Act is recorded, processed and reported on a
timely basis. Based upon this evaluation, our chief executive officer and our
chief financial officer concluded that, because of the material weaknesses
described below under "Management's Report on Internal Control Over Financial
Reporting," our disclosure controls and procedures were not effective as of
March 31, 2005.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as that term is defined in Rule 13a-15(f)
under the Exchange Act. Our internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of our company's financial statements
for external reporting purposes in accordance with U.S. generally accepted
accounting principles. Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
we conducted a review, evaluation and assessment of the effectiveness of our
internal control over financial reporting as of March 31, 2005, based upon the
criteria set forth in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
A material weakness is a significant deficiency (as defined in the Public
Company Accounting Oversight Board's Auditing Standard No. 2), or combination of
significant deficiencies, that results in there being more than a remote
likelihood that a material misstatement in the annual or interim financial
statements will not be prevented or detected on a timely basis by employees in
the normal course of their work. Management's assessment identified the
following three material weaknesses as of March 31, 2005 related to the
financial statement close process:
o Insufficient controls to review the application of accounting principles
over the determination and calculation of asset impairments in accordance
with FAS 144.
o Insufficient controls over the calculation and review of accrued promotion
expense.
o Insufficient controls over the selection and monitoring of key assumptions
supporting accounting estimates.
These material weaknesses related to the financial statement close process
affect the following significant accounts: property, plant and equipment,
accrued expense, allowance for doubtful accounts, inventory, and the related
income statement accounts, and could result in a material misstatement to our
annual or interim consolidated financial statements that would not be prevented
or detected.
As a result of these material weaknesses, management recorded adjustments in the
fourth quarter of fiscal 2005 to the following accounts: property, plant and
equipment, allowance for doubtful accounts, accrued promotion expense, accrued
payroll taxes, accrued unemployment expenses, and the related income statement
accounts.
Because of the material weaknesses described above, our management concluded
that our internal control over financial reporting was not effective as of March
31, 2005. Management's assessment of the effectiveness of internal control over
financial reporting as of March 31, 2005, has been audited by Ernst & Young LLP,
the Company's independent registered public accounting firm. Their report
appears below.
Plan to Remediate Material Weaknesses
The Company has dedicated substantial resources to the review of its internal
control processes and procedures. As a result of that review, the Company plans
to take the following steps toward remediation of the material weaknesses
identified as of March 31, 2005 by: (i) developing an internal audit process in
the quarter ending July 2, 2005, which will include using a third party public
accounting firm; (ii) establishing a control whereby a detailed analysis, in
accordance with the provisions of FAS 144, will be prepared and reviewed when
management identifies an indicator of impairment; (iii) creating a control
procedure whereby management will be required to provide detailed support for
each promotion accrual on a quarterly basis and corporate accounting personnel
will be actively involved in reviewing the documentation for compliance with
GAAP; (iv) implementing control procedures for the monitoring of key
assumptions, on a quarterly basis, to ensure that they are appropriate.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company's internal control over financial
reporting during the fourth quarter that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
Report of Independent Registered Public Accounting Firm on Internal Control over
Financial Reporting
The Board of Directors and Stockholders of Seneca Foods Corporation
We have audited management's assessment, included in "Management's Report on
Internal Control over Financial Reporting," that Seneca Foods Corporation did
not maintain effective internal control over financial reporting as of March 31,
2005, because of the effect of the material weaknesses identified in
management's assessment and described below, based on criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Seneca Foods
Corporation's management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an
opinion on management's assessment and an opinion on the effectiveness of the
Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
A material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected.
As of March 31, 2005, three material weaknesses existed related to the financial
statement close process:
o Insufficient controls to review the application of accounting principles
over the determination and calculation of asset impairments in accordance
with FAS 144.
o Insufficient controls over the calculation and review of accrued promotion
expense.
o Insufficient controls over the selection and monitoring of key assumptions
supporting accounting estimates.
As a result of these material weaknesses, management recorded adjustments in the
fourth quarter of fiscal 2005 to the following accounts: property, plant and
equipment, allowance for doubtful accounts, accrued promotion expense, accrued
payroll taxes, accrued unemployment expenses, and the related income statement
accounts. These material weaknesses were considered in determining the nature,
timing, and extent of audit tests applied in our audit of the 2005 financial
statements, and this report does not affect our report dated June 10, 2005 on
those financial statements.
In our opinion, management's assessment that Seneca Foods Corporation did not
maintain effective internal control over financial reporting as of March 31,
2005, is fairly stated, in all material respects, based on the COSO control
criteria. Also, in our opinion, because of the effect of the material weaknesses
described above on the achievement of the objectives of the control criteria,
Seneca Foods Corporation has not maintained effective internal control over
financial reporting as of March 31, 2005 based on the COSO control criteria.
/s/ Ernst & Young LLP
Buffalo, New York
June 10, 2005
Item 9B
Other Information
None.
PART III
Item 10
Directors and Executive Officers of the Registrant
The Company has adopted a Code of Ethics that applies to the Chief Executive
Officer, Chief Financial Officer and Controller. The Code of Ethics is available
on our web site www.senecafoods.com (free of charge).
Additional information required by Item 10 will be filed separately with the
Commission, pursuant to Regulation 14A, in a definitive proxy statement
involving the election of directors, which is incorporated herein by reference.
Item 11
Executive Compensation
Information required by Item 11 will be filed separately with the Commission,
pursuant to Regulation 14A, in a definitive proxy statement involving the
election of directors, which is incorporated herein by reference.
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Information required by Item 12 will be filed separately with the Commission,
pursuant to Regulation 14A, in a definitive proxy statement involving the
election of directors, which is incorporated herein by reference.
Item 13
Certain Relationships and Related Transactions
Information required by Item 13 will be filed separately with the Commission,
pursuant to Regulation 14A, in a definitive proxy statement involving the
election of directors, which is incorporated herein by reference.
Item 14
Principal Accountant Fees and Services
Information required by Item 14 will be filed separately with the Commission,
pursuant to Regulation 14A, in a definitive proxy statement involving the
election of directors, which is incorporated herein by reference.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Seneca Foods Corporation
Marion, New York
We have audited the consolidated statements of net earnings, stockholders'
equity, and of cash flows of Seneca Foods Corporation and subsidiaries (the
"Company") for the year ended March 31, 2003, and have issued our report thereon
dated May 21, 2003; such consolidated financial statements and report is
included in your 2005 Annual Report to Shareholders and is incorporated herein
by reference. Our audit also included the consolidated financial statement
schedule of the Company listed in Item 15 (A)(2). This consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audit. In our opinion, such
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
/s/Deloitte & Touche LLP
Rochester, New York
May 21, 2003
PART IV
Item 15
Exhibits and Financial Statement Schedules
A. Exhibits, Financial Statements, and Supplemental Schedules
1. Financial Statements - the following consolidated financial statements
of the Registrant, included in the Annual Report for the year ended
March 31, 2005, are incorporated by reference in Item 8:
Consolidated Statements of Net Earnings - Years ended March 31,
2005, 2004 and 2003
Consolidated Balance Sheets - March 31, 2005 and 2004
Consolidated Statements of Cash Flows - Years ended March 31, 2005,
2004 and 2003
Consolidated Statements of Stockholders' Equity - Years ended March 31,
2005, 2004 and 2003
Notes to Consolidated Financial Statements - Years ended March 31,
2005, 2004 and 2003
Reports of Independent Registered Public Accounting Firms
Pages
2. Supplemental Schedule:
Schedule II -- Valuation and Qualifying Accounts 11
Other schedules have not been filed because the conditions requiring the filing
do not exist or the required information is included in the consolidated
financial statements, including the notes thereto.
3. Exhibits:
No. 3 - Articles of Incorporation and By-Laws - Incorporated by
reference to exhibits 3.1, 3.2 and 3.3 the Company's Form
10-Q/A filed August, 1995; as amended by exhibit 3 filed
with the Company's Form 10-K filed June 1996 as amended by
exhibit 3(i) to the Company's Form 8-K dated September 17,
1998; as amended by exhibit 3.3 to the Company's form 8-K
dated June 10, 2003.
No. 4 - Articles defining the rights of security holders -
Incorporated by reference to the Company's Form 10-Q/A
filed August, 1995 as amended by amendments filed with the
Company's Form 10-K filed June 1996. Instrument defining
the rights of any holder of Long-Term Debt - Incorporated
by reference to Exhibit 99 to the Company's Form 10-Q
filed January 1995 as amended by Exhibit No. 4 of the
Company's Form 10-K filed June, 1997, amended by Exhibit 4
of the Company's Form 10-Q and Form 10-Q/A filed November,
1997, as amended by amendments filed with the Company's
definitive proxy statement filed July, 1998 as amended by
the Company's 8-K dated June 10, 2003. The Company will
furnish, upon request to the SEC, a copy of any instrument
defining the rights of any holder of Long-Term Debt.
No. 10 - Material Contracts - Incorporated by reference to the
Company's Form 8-K dated February 24, 1995 for the First
Amended and Restated Alliance Agreement and the First
Amended and Restated Asset Purchase Agreement both with
The Pillsbury Company amended by the Company's Form 8-K
dated June 11, 2002. Incorporated by reference to exhibit
10 to the Company's Form 10-K filed June 25, 2002 for an
Indemnification Agreement dated January 31, 2002.
Incorporated by reference to the Company's 8-K dated June
10, 2003 for the Purchase Agreement by and among Seneca
Foods Corporation, Chiquita Brands International, Inc. and
Friday Holdings, L.C.C. dated as of March 6, 2003.
No. 13 - The material contained in the 2005 Annual Report to
Shareholders under the following headings: "Five Year
Selected Financial Data", "Management's Discussion and
Analysis of Financial Condition and Results of
Operations", "Consolidated Financial Statements and Notes
thereto including Independent Auditors' Report",
"Quantitative and Qualitative Disclosures about Market
Risk", and "Shareholder Information and Quarterly Results".
No. 21 - List of Subsidiaries (filed herewith)
No. 23.1 - Consent of Ernst & Young LLP (filed herewith)
No. 23.2 - Consent of Deloitte & Touche LLP (filed herewith)
No. 31.1 - Certification of Kraig H. Kayser pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 (filed herewith)
No. 31.2 - Certification of Philip G. Paras pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 (filed herewith)
No. 32 - Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed herewith)
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance at Charged/ Charged to Deductions Balance
Beginning (Credited) other from at end
of period to income accounts reserve of period
-------------------------------------------------------------
Year-ended March 31, 2005:
Allowance for doubtful accounts $ 945 $ 913 $ -- $ 1,233(a) $ 625
============================================================
Year-ended March 31, 2004:
Allowance for doubtful accounts $ 761 $ 694 $ 355 (b) $ 155(a) $ 945
============================================================
Year-ended March 31, 2003:
Allowance for doubtful accounts $ 605 $ 390 $ -- $ 234 (a) $ 761
============================================================
(a) Accounts written off, net of recoveries.
(b) Reclassified to accrued expense related to a liability for Chapter
11 preference payments received from a customer.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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
By /s/Jeffrey L. Van Riper June 14, 2005
-------------------------- -------------
Jeffrey L. Van Riper
Controller and Secretary
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/Arthur S. Wolcott Chairman and Director June 14, 2005
- --------------------
Arthur S. Wolcott
/s/Kraig H. Kayser President, Chief Executive Officer, June 14, 2005
- ------------------ and Director
Kraig H. Kayser
/s/Philip G. Paras Chief Financial Officer June 14, 2005
- ------------------
Philip G. Paras
/s/Jeffrey L. Van Riper Controller and Secretary June 14, 2005
- ----------------------- (Principal Accounting Officer)
Jeffrey L. Van Riper
/s/Arthur H. Baer Director June 14, 2005
- -----------------
Arthur H. Baer
/s/Andrew M. Boas Director June 14, 2005
- -----------------
Andrew M. Boas
/s/Robert T. Brady Director June 14, 2005
- ------------------
Robert T. Brady
/s/Douglas F. Brush Director June 14, 2005
- -------------------
Douglas F. Brush
/s/G. Brymer Humphreys Director June 14, 2005
______________________
G. Brymer Humphreys
/s/Susan W. Stuart Director June 14, 2005
- ------------------
Susan W. Stuart