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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, 1999 Commission File Number 0-1989
SENECA FOODS CORPORATION
(Exact name of registrant as specified in its charter)
New York 16-0733425
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1162 Pittsford-Victor Road, Pittsford, New York 14534
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 385-9500
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, to the
best of 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
Indicate by check mark whether the registrant has (1) 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 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
----- -----
The aggregate market value of the Registrant's common equity securities held by
non-affiliates based on the closing sales price per market reports by the
National Market System on June 1, 1999 was approximately $89,007,000.
Common shares outstanding as of June 1, 1999 were Class A: 3,598,767, Class B:
2,791,017.
Documents Incorporated by Reference:
(1) Proxy Statement to be issued prior to June 30, 1999 in connection with the
registrant's annual meeting of stockholders (the "Proxy Statement")
applicable to Part III, Items 10-13 of Form 10-K.
(2) Portions of the Annual Report to shareholders for fiscal year ended
March 31, 1999 (the "1999 Annual Report") applicable to Part II, Items 5-8
and Part IV, Item 14 of Form 10-K.
TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT - FISCAL 1999
SENECA FOODS CORPORATION
PART I. Pages
Item 1. Business 1-3
Item 2. Properties 4
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Equity Security Holders 5
PART II.
Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters 5
Item 6. Selected Financial Data 5
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 6
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure 6
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 8
Item 13. Certain Relationships and Related Transactions 8
PART IV.
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K 8-11
SIGNATURES 12-13
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
began operations under its Alliance Agreement with The Pillsbury Company, which
created the Company's most significant business relationship. Under the Alliance
Agreement, the Company has packed canned and frozen vegetables carrying
Pillsbury's Green Giant brand name. These Green Giant vegetables have been
produced in vegetable plants which the Company acquired from Pillsbury and, to a
lesser extent, in the Company's other vegetable plants, which also produce
vegetables under the Libby's brand name, which is licensed to the Company, and
other brand names owned by the Company or its customers.
Since the onset of the Alliance Agreement, vegetable production has been the
Company's dominant line of business. In the most recent fiscal year, the Company
successively 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 specialty cherry products and a line of
fruit chips.
Financial Information about Industry Segments
The Company's business activities are conducted in food and non-food segments.
Giving effect to the 1999 divestitures, the food segment constitutes 99% of
total sales, of which approximately 96% is vegetable processing and 3% is fruit
processing. The non-food segment is an air charter service, which represents 1%
of the Company's business. Consequently, the financial information related to
segments is not material.
Narrative Description of Business
Principal Products and Markets
Food Processing
The principal products of this segment include canned vegetable, frozen
vegetable 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. Vegetable
operations are primarily supported by plant locations in New York, Wisconsin,
Washington, Idaho, and Minnesota. Plant locations in Kentucky, Michigan and
Washington provide ready access to the domestic sources of fruit necessary to
support marketing efforts in their respective sections of the country.
The following table summarizes net sales by major product category for the years
ended March 31, 1999, 1998, and 1997, after eliminating in each year sales
attributable to the product lines which were sold in the 1999 divestitures:
Classes of similar products/services: 1999 1998 1997
- -------------------------------------------------------------------------------------------------------
(In thousands)
Green Giant vegetables $ 289,946 $ 277,080 $ 391,724
Canned vegetables 242,702 243,003 146,338
Frozen vegetables 20,446 19,283 20,094
Fruit products 13,825 14,558 5,550
Flight operations 4,225 2,894 2,624
Other 5,049 3,708 4,686
- -------------------------------------------------------------------------------------------------------
$ 576,193 $ 560,526 $ 571,016
=======================================================================================================
Other
Seneca Flight Operations provides air charter service primarily to industries in
upstate New York.
Source and Availability of Raw Material
Food Processing
The Company's food processing plants are located in major vegetable producing
states. 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.
Seasonal Business
Food Processing
While individual fruits and vegetables have seasonal cycles of peak production
and sales, the different cycles are usually offsetting to some extent. The
supply of commodities, current pricing, and expected new crop quantity and
quality affect the timing of the Company's sales and earnings. An Off Season
Allowance is established during the year to minimize the effect of seasonal
production on earnings. Off Season Allowance is zero at fiscal year-end.
Backlog
Food Processing
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 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
Food Processing
Competition in the food business is substantial with imaginative brand
registration, quality service, and pricing being the major determinants in the
Company's relative market position.
All of the Company's products compete with those of other national, major, and
smaller regional food processing companies under highly competitive conditions.
The Company's major competitors in the vegetable business have substantially
greater sales and assets than the Company. The Company also sells vegetable
products which compete with Pillsbury products manufactured by the Company under
the Alliance Agreement.
The vegetable business in the last three years has undergone consolidation as a
result of adverse market conditions, and many smaller vegetable processors have
been acquired by the Company and its major competitors. Future acquisitions may
increase the market strength of the Company's larger competitors providing them
with even greater resources for obtaining desirable shelf space and promotional
programs with major retail food stores. However, the major segment of the
Company's business is producing vegetables for sale by others - such as Green
Giant vegetables for Pillsbury and vegetables carrying the brand names of the
Company's grocery chain customers. In that segment of the business, the
marketing programs are determined by the Company's customers. In recent years,
many major retail food stores have been increasing their promotions and
offerings of their own brand name vegetables, to the detriment of vegetable
brands owned by the producers, including the Company's own brands.
During the past year approximately 9% of the Company's processed foods were
packed for retail customers under the Company branded labels of Libby's(R), Blue
Boy(R), Aunt Nellie's Farm Kitchen(R), and Seneca(R). About 12% of the processed
foods were packed for institutional food distributors and 28% of processed foods
were retail packed under the private label of customers. The remaining 51% is
sold under the Alliance Agreement with Pillsbury (see note 13 of Item 8,
Financial Statements and Supplementary Data). Termination of the Alliance
Agreement would have a material adverse effect on the Company taken as a whole.
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 Libby's canned vegetables, which
rank among the top five national brands in sales volume. The information under
the heading Liquidity and Capital Resources in Management's Discussion and
Analysis of Financial Condition and Results of Operations in the 1999 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
three waste disposal sites, owned and operated by others, but the Company does
not believe the aggregate liability is material.
Employment
Food processing - Full time 1,967
- Seasonal 496
---------
2,463
Other 103
---------
2,566
The Company has six collective bargaining agreements with six union locals
covering approximately 536 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. Two collective
bargaining agreements expire in calendar 1999. The remaining agreements expire
in calendar 2000, 2001, and 2002.
Foreign Operations
Export sales for the Company are a relatively small portion (about 2%) of the
food processing sales.
Item 2
Properties
The Company owns seven food processing, packaging, and warehousing facilities
located in New York State that provide approximately 1,867,000 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.
Five facilities in Minnesota, one facility in Michigan, three facilities in
Washington, one facility in Idaho, one facility in Kentucky, and six facilities
in Wisconsin provide approximately 5,294,000 square feet of food packaging,
freezing and freezer storage, and warehouse storage space. These facilities
process and package various vegetable and fruit products. The facilities are
owned by the Company.
The Company owns one food distribution facility in Massachusetts totaling
approximately 59,000 square feet which is leased out to another company through
2004. Sublease income of $271,000 was received on this facility during the
period. In addition the air charter division has a 14,000 square foot facility.
All of the properties are well maintained and the production facilities are
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
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.
Item 4
Submission of Matters to a Vote of Equity Security Holders
No matters were submitted to vote of shareholders during the last quarter of the
fiscal period covered by this report.
PART II
Item 5
Market for the Registrant's Common Stock and Related Security Holder Matters
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
1999 Annual Report, "Shareholder Information and Quarterly Results", which is
incorporated by reference.
Item 6
Selected Financial Data
Refer to the information in the 1999 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 1999 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 1999 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 1999 Annual Report, "Consolidated Financial
Statements and Notes thereto including Independent Auditors' Report", which is
incorporated by reference.
Item 9
Changes in and Disagreements on Accounting and Financial Disclosure
None.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Seneca Foods Corporation
Pittsford, New York
We have audited the consolidated financial statements of Seneca Foods
Corporation and subsidiaries as of March 31, 1999 and 1998, and for each of the
three years in the period ended March 31, 1999, and have issued our report
thereon dated May 21, 1999; such consolidated financial statements and report
are included in your 1999 Annual Report to Shareholders and are incorporated
herein by reference. Our audits also included the consolidated financial
statement schedule of Seneca Foods Corporation, listed in Item 14 (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 audits. 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, 1999
PART III
Item 10
Directors and Executive Officers of the Registrant
Item 11
Executive Compensation
Item 12
Security Ownership of Certain Beneficial Owners and Management
Item 13
Certain Relationships and Related Transactions
Information required by Items 10 through 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.
PART IV
Item 14
Exhibits, Financial Statement Schedules, and Reports on Form 8-K
A. Exhibits and Financial Statement Schedules
1. Financial Statement Schedules - the following consolidated financial
statements of the Registrant, included in the Annual Report for the
year ended March 31, 1999, are incorporated by reference in Item 8:
Consolidated Statements of Net Earnings - March 31, 1999, 1998 and
1997
Consolidated Balance Sheets - March 31, 1999 and 1998
Consolidated Statements of Cash Flows - March 31, 1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity - March 31, 1999,
1998 and 1997
Notes to Consolidated Financial Statements - March 31, 1999, 1998 and
1997
Independent Auditors' Report
Pages
2. Supplemental Schedule:
Schedule II -- Valuation and Qualifying Accounts 9
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 the Company's 10-Q/A filed August, 1995 as amended by the
Company's 10-K filed June 1996, as amended by the Company's
definitive proxy filed July, 1998.
No. 4 - Articles defining the rights of security holders - Incorporated by
reference to the Company's 10-Q/A filed August, 1995 as amended by
the Company's 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 10-Q filed January 1995 as amended by
Exhibit No. 4 of the Company's 10-K filed June, 1997, amended by
Exhibit 4 of the Company's 10-Q and 10-Q/A filed November, 1997,
as amended by the Company's definitive proxy filed July, 1998.
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
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.
No. 13 - The material contained in the 1999 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 10
No. 23 - Consents of Experts and Counsel 10
No. 27 - Financial Data Schedules
B. Reports on Form 8-K
None.
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance at Charged to Deductions Balance
Beginning Charged to other from at end
of period income accounts reserve of period
-------------------------------------------------------------------
Year-ended March 31, 1999:
Allowance for doubtful accounts $ 207 $ 425 $ -- $ 145 (a) $ 487
===================================================================
Year-ended March 31, 1998:
Allowance for doubtful accounts $ 200 $ 140 $ -- $ 133 (a) $ 207
===================================================================
Year-ended March 31, 1997:
Allowance for doubtful accounts $ 165 $ 72 $ -- $ 37 (a) $ 200
===================================================================
(a) Accounts written off, net of recoveries.
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 18, 1999
--------------------
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 18, 1999
- -----------------------
Arthur S. Wolcott
/s/Kraig H. Kayser President, Chief Executive Officer, June 18, 1999
- -----------------------
Kraig H. Kayser and Director
/s/Philip G. Paras Vice President, Finance June 18, 1999
- -----------------------
Philip G. Paras
/s/Jeffrey L. Van Riper Controller and Secretary June 18, 1999
- -----------------------
Jeffrey L. Van Riper (Principal Accounting Officer)
/s/Arthur H. Baer Director June 18, 1999
- -----------------------
Arthur Baer
/s/Andrew M. Boas Director June 18, 1999
- -----------------------
Andrew Boas
Director June 18, 1999
- -----------------------
Robert T. Brady
Director June 18, 1999
- -----------------------
David L. Call
/s/Edward O. Gaylord Director June 18, 1999
- -----------------------
Edward O. Gaylord
/s/G. Brymer Humphreys Director June 18, 1999
- -----------------------
G. Brymer Humphreys
/s/Susan W. Stuart Director June 18, 1999
- -----------------------
Susan W. Stuart