Exhibit 13

 

 

Five Year Selected Financial Data

 

Summary of Operations and Financial Condition

(In thousands of dollars, except per share data and ratios)

 

Years ended March 31,		2018				2017				2016 (a)				2015				2014
							(Restated)(e)				(Restated)(e)				(Restated)(e)				(Restated)(e)
Net sales		$	1,314,765			$	1,262,198			$	1,279,567			$	1,283,426			$	1,340,001
Operating (loss) income before interest (b)		$	(5,267	)		$	34,742			$	91,731			$	27,819			$	20,288
Interest expense, net			15,037				9,672				8,044				6,862				7,564
Net (loss) earnings (b)			(13,811	)			15,895				56,399				14,453				10,962
Basic (loss) earnings per common share (b)		$	(1.41	)		$	1.61			$	5.65			$	1.34			$	0.98
Diluted (loss) earnings per common share (b)			(1.41	)			1.60				5.61				1.32				0.97
Working capital		$	583,658			$	541,385			$	254,200			$	449,265			$	433,937
Inventories			680,828				628,935				609,481				512,844				496,250
Net property, plant, and equipment			277,025				237,476				188,837				185,557				183,917
Total assets			1,070,431				978,268				944,991				855,257				825,895
Long-term debt less current portion			414,132				329,138				35,967				271,634				216,239
Stockholders’ equity			396,930				425,204				392,835				337,450				374,798
Additions to property, plant, and equipment		$	32,789			$	32,512			$	9,966			$	23,734			$	19,448
Net (loss) earnings/average equity			(3.4	)%			3.9	%			15.4	%			4.1	%			3.0	%
(Loss) earnings before taxes/sales			(1.5	)%			2.0	%			6.5	%			1.7	%			0.9	%
Net (loss) earnings/sales			(1.1	)%			1.3	%			4.4	%			1.1	%			0.8	%
Long-term debt/equity (c)			113.4	%			85.4	%			10.4	%			80.5	%			57.7	%
Total debt/equity ratio		1.7:1				1.3:1				1.4:1				1.5:1				1.2:1
Current ratio		4.0:1				4.1:1				1.6:1				3.4:1				3.0:1
Total stockholders’ equity per equivalent common share (d)		$	40.30			$	42.72			$	39.40			$	33.40			$	33.57
Stockholders’ equity per common share			40.66				43.27				39.90				33.89				34.37
Class A Global Market System closing price range			38.15-27.60				42.65-27.03				35.78-25.85				32.65-25.06				36.07-27.80
Class B Global Market System closing price range			39.00-29.30				46.00-32.89				44.88-32.00				41.00-27.91				36.29-27.42
Common cash dividends declared per share			-				-				-				-				-
Price earnings ratio			-				22.9				6.5				23.2				32.1

 

(a)	The fiscal 2016 financial results include five months and one month of operating activity related to the Gray and Diana acquisitions, respectively.

(b)

The effect of using the LIFO inventory valuation method in Fiscal 2018 was to reduce operating earnings by $15.0 million and net earnings by $11.2 million or $1.15 per share ($1.15 diluted). The effect of using the LIFO inventory valuation method in fiscal 2017 was to increase operating earnings by $10.0 million and net earnings by $6.6 million or $0.67 per share ($0.67 diluted). The effect of using the LIFO inventory valuation method in fiscal 2016 was to increase operating earnings by $27.7 million and net earnings by $18.0 million or $1.81 per share ($1.79 diluted). The effect of using the LIFO inventory valuation method in fiscal 2015 was to reduce operating earnings by $4.2 million and net earnings by $2.7 million or $0.25 per share ($0.25 diluted). The effect of using the LIFO inventory valuation method in fiscal 2014 was to reduce operating earnings by $25.1 million and net earnings by $16.3 million or $1.47 per share ($1.46 diluted).

(c)

The long-term debt to equity percentage for fiscal 2018, 2017, 2015 and 2014 include the Revolving Credit Facility as discussed in Note 5, Long-Term Debt. During fiscal 2016, the Revolving Credit Facility was included in current liabilities. If calculated on a comparable basis to other fiscal years, the fiscal 2016 percentage would be 77.2%.

(d)	Equivalent common shares are either common shares or, for convertible preferred shares, the number of common shares that the preferred shares are convertible into. See Note 8 of the Notes to Consolidated Financial Statements for conversion details.
(e)	For information regarding the background of the restatement see Note 2 of the accompanying  Financial Statements.

 

 

Management’s Discussion and Analysis of

 

Financial Condition and Results of Operations

 

 

 

OVERVIEW 

 

Our Business 

 

Seneca Foods is one of North America’s leading providers of packaged fruits and vegetables, with facilities located throughout the United States. Its high quality products are primarily sourced from over 2,000 American farms.

 

Seneca holds a large share of the retail private label, food service, and export canned vegetable markets, distributing to over 90 countries.   Products are also sold under the highly regarded brands of Libby’s®, Aunt Nellie’s®, Green Valley®, READ®, Cherryman® and Seneca labels, including Seneca snack chips.  In addition, Seneca provides vegetable products under a contract packing agreement with B&G Foods North America, under the Green Giant label.

 

During 2014, the Company acquired a 50% equity interest in Truitt Bros., Inc. (“Truitt”) which was accounted for as an equity interest. During 2018, the Company purchased the remaining 50% equity interest in Truitt. Truitt is known for its industry innovation related to packing shelf stable foods in trays, pouches and bowls. The business, based in Salem, Oregon, has two state-of-the-art plants located in Oregon and Kentucky.

 

The Company’s business strategies are designed to grow the Company’s market share and enhance the Company’s sales and margins and include: 1) expanding the Company’s leadership in the packaged fruit and vegetable industry; 2) providing low cost, high quality fruit and vegetable products to consumers through the elimination of costs from the Company’s supply chain and investment in state-of-the-art production and logistical technology; 3) focusing on growth opportunities to capitalize on higher expected returns; and 4) pursuing strategic acquisitions that leverage the Company’s core competencies.

 

All references to years are fiscal years ended March 31 unless otherwise indicated.

 

Restatement of Previously Issued Financial Statements

 

On June 28, 2018, the Company concluded that it did not meet all of the criteria for bill and hold treatment under Staff Accounting Bulletin Topic 13 for the Green Giant contract. In particular, the Company determined that performance obligations were not complete at the time title transferred to the customer as the unlabeled products under this contract were not ready for shipment. The Company has determined that the audited consolidated financial statements as of and for the years ended March 31, 2016 and 2017 and the unaudited condensed consolidated financial statements as of and for each of the interim periods within the years ended March 31, 2017 and 2018 should be restated to correct these inadvertent errors in the application of generally accepted accounting principles dealing with complex and technical accounting issues relating to “bill and hold” revenue recognition. 

 

See Note 2 of the Notes to Consolidated Financial Statements for a summary of the effects of the restatement on the Company’s Consolidated Statement of Net Earnings (Loss), Consolidated Balance Sheets, Consolidated Statement of Stockholder’s Equity and Consolidated Statement of Cash Flows.

 

Restructuring 

 

During 2018, the Company recorded restructuring charges of $10.0 million mostly related to the closing of the Modesto plant in the West ($5.4 million related to operating lease termination costs and $4.1 million related to a pension termination cost), of which $0.7 million was related to severance cost ($0.6 million related to Modesto) and the balance for a plant in the Midwest and Northwest. In addition, there was a true-up credit mostly related to long-lived asset charges (fixed asset impairment) of a credit of $0.4 million and other costs for various equipment transfers of a charge of $0.1 million.

 

During 2017, the Company increased the costs related to the closing of the plant in the Northwest, started in 2016, by $0.5 million, mostly related to operating equipment move costs partially offset by an adjustment to a lease liability. In addition, in 2017 the Company incurred $1.3 million related to severance costs for a plant in the West.

 

During 2016, the Company recorded a restructuring charge of $10.4 million related to the closing of a plant in the Northwest of which $0.2 million was related to severance cost, $5.1 million was related to asset impairments (contra fixed assets), and $5.1 million was related to other costs ($3.6 related to operating lease costs). During 2016, the Company reduced the costs of a plant closing in the Midwest, started in 2015, by $0.1 million, mostly related to severance costs.

 

These charges are included under Plant Restructuring in the Consolidated Statements of Net Earnings (Loss).

 

 

Management’s Discussion and Analysis of

 

Financial Condition and Results of Operations

 

 

 

Divestitures, Other Charges and Credits 

 

Other operating income in 2018 includes an acquisition bargain purchase gain of $1.8 million, a gain on the sale of a plant of $1.1 million and a gain on the partial sale of a plant of $0.4 million. The Company also recorded a gain of $0.4 million on the sale of fixed assets.

 

Other operating expense in 2017 includes a charge for $1.2 million related to costs incurred due to some roof collapses at a Northwest plant as a result of heavy snowfall. In addition, there was a charge for an impairment of a long-term asset of $1.1 million. The Company also recorded a loss of $0.2 million on the sale of fixed assets.

 

Other operating income in 2016 included a gain of $24.3 million related to a contractual payment received in conjunction with a relationship transfer agreement with General Mills. The Company reversed a provision for the Prop 65 litigation of $0.2 million and reduced an environmental accrual by $0.1 million. The Company also recorded a gain of $0.4 million from the sale of other fixed assets.

 

Liquidity and Capital Resources 

 

The Company’s primary cash requirements are to make payments on the Company’s debt, finance seasonal working capital needs and to make capital expenditures. Internally generated funds and amounts available under the revolving credit facility are the Company’s primary sources of liquidity, although the Company believes it has the ability to raise additional capital by issuing additional stock, if it desires.

 

Revolving Credit Facility 

 

The Company completed the closing of a five-year revolving credit facility (“Revolver”) on July 5, 2016. Maximum borrowings under the Revolver total $400.0 million from April through July and $500.0 million from August through March.  The Revolver balance as of March 31, 2018 was $293.5 million and is included in Long-Term Debt in the accompanying Consolidated Balance Sheet due to the Revolver’s July 5, 2021 maturity. In order to maintain availability of funds under the facility, the Company pays a commitment fee on the unused portion of the Revolver. The Revolver is secured by the Company’s accounts receivable and inventories and contains a financial covenant and borrowing base requirements. The Company utilizes its Revolver for general corporate purposes, including seasonal working capital needs, to pay debt principal and interest obligations, and to fund capital expenditures and acquisitions. Seasonal working capital needs are affected by the growing cycles of the vegetables and fruits the Company packages. The majority of vegetable and fruit inventories are produced during the months of June through November and are then sold over the following year. Payment terms for vegetable and fruit produce are generally three months but can vary from a few days to seven months. Accordingly, the Company’s need to draw on the Revolver may fluctuate significantly throughout the year.

 

The Company believes that cash flows from operations and availability under its new Revolver will provide adequate funds for the Company’s working capital needs, planned capital expenditures and debt service obligations for at least the next 12 months.

 

Seasonality 

 

The Company’s revenues typically are higher in the second and third fiscal quarter due to increased retail sales during the holiday season.

 

 

Management’s Discussion and Analysis of

 

Financial Condition and Results of Operations

 

 

 

The seasonality of the Company’s business is illustrated by the following table:

 

		First Quarter				Second Quarter				Third Quarter				Fourth Quarter
		(In thousands)
Year ended March 31, 2018:			(Restated)				(Restated)				(Restated)
Net sales		$	288,927			$	338,470			$	387,689			$	299,679
Gross margin			15,535				17,411				30,501			$	11,140
Net (loss) earnings			(980	)			(2,958	)			4,377				(14,250	)
Inventories (at quarter end)			655,419				859,146				770,702				680,828
Revolver outstanding (at quarter end)			226,010				272,609				290,196				293,459
Year ended March 31, 2017:			(Restated)				(Restated)				(Restated)				(Restated)
Net sales		$	272,135			$	352,606			$	356,767			$	280,690
Gross margin			21,955				31,025				37,926			$	21,098
Net (loss) earnings			965				6,821				7,789				320
Inventories (at quarter end)			611,063				801,684				699,445				628,935
Revolver outstanding (at quarter end)			264,000				342,935				232,586				214,781

 

 

Management’s Discussion and Analysis of

 

Financial Condition and Results of Operations

 

 

 

Short-Term Borrowings

 

During 2017, the Company entered into some interim lease notes which financed down payments for various equipment orders at market rates. As of March 31, 2017, these interim notes had not been converted into operating leases since the equipment was not yet delivered. These notes, which total $0.2 million as of March 31, 2017, are included in notes payable in the accompanying Consolidated Balance Sheets. As of March 31, 2018 the notes were converted into operating leases.

 

The maximum level of short-term borrowings during 2018 was affected by the acquisition of Truitt using $14.4 million in cash and the higher inventory due to the large pack totaling $25.8 million. The maximum level of short-term borrowings during 2017 was affected by the new $100.0 million unsecured term loan partially offset by higher inventory due to the large pack totaling $30.3 million. Details of the acquisition is outlined in Note 3 of the Notes to Consolidated Financial Statements.

 

General terms of the Revolver include payment of interest at LIBOR plus an agreed upon spread.

 

The following table documents the quantitative data for Short-Term Borrowings during 2018 and 2017:

 

		Fourth Quarter								Year Ended
		2018				2017				2018				2017
		(In Thousands)
Reported end of period:
Revolver outstanding		$	293,459			$	214,781			$	293,459			$	214,781
Weighted average interest rate			3.35	%			2.22	%			3.35	%			2.22	%
Reported during period:
Maximum Revolver		$	312,917			$	245,857			$	312,917			$	361,800
Average Revolver outstanding		$	300,075			$	231,946			$	259,792			$	275,647
Weighted average interest rate			3.16	%			2.12	%			2.76	%			1.93	%

 

Long-Term Debt 

 

At March 31, 2018, the Company has two mortgages outstanding for $9.5 million. On December 9, 2016, the Company entered into a $100.0 million unsecured term loan with a maturity date of December 9, 2021. As discussed in Note 4 of the Notes to Consolidated Financial Statements, the Company classified its Revolver balance as long-term debt at March 31, 2018 and 2017. On August 16, 2016, the Company paid off four industrial revenue bonds ("IRBs"), totaling $22.6 million. The Company assumed a tax-exempt bond with the Truitt acquisition on April 1, 2018 for $10.0 million with a maturity date of October 1, 2032. The Company did not issue any significant long-term debt in 2016, other than the Revolver.

 

 

Management’s Discussion and Analysis of

 

Financial Condition and Results of Operations

 

 

 

Restrictive Covenants 

 

The Company’s debt agreements, including the Revolver and term loan, contain covenants that restrict the Company’s ability to incur additional indebtedness, pay dividends on the Company’s capital stock, make other restricted payments, including investments, sell the Company’s assets, incur liens, transfer all or substantially all of the Company’s assets and enter into consolidations or mergers. The Company’s debt agreements also require the Company to meet certain financial covenants, including a minimum fixed charge coverage ratio, a minimum interest coverage ratio and minimum tangible net worth. The Revolver also contains borrowing base requirements related to accounts receivable and inventories. These financial requirements and ratios generally become more restrictive over time and are subject to allowances for seasonal fluctuations. The most restrictive financial covenant in the debt agreements is the interest coverage ratio within the Farm Credit term loan which for 2018 was defined as greater than 4 to 1. However, this covenant was updated in connection with an amendment on June 18, 2018.  The interest coverage ratio will be 1.1 to 1.0 through December 31, 2018,  2.0 to 1.0 from March 31, 2019, through September 30, 2019 and 4.0 to 1.0, thereafter. The Company computes its financial covenants as if the Company were on the FIFO method of inventory accounting. The Company has met or has received a waiver/amendment for all such financial covenants as of March 31, 2018.

 

Capital Expenditures 

 

Capital expenditures in 2018 totaled $32.7 million and there were two major projects in 2018 as follows: 1) $2.8 million for the expansion of a production line in Princeville, Illinois, and 2) $3.4 million for a warehouse in Payette, Idaho. In addition, there were lease buyouts, equipment replacements and other improvements in 2018. Capital expenditures in 2017 totaled $32.1 million and there were two major projects in 2017 as follows: 1) $2.0 million to purchase land in Princeville, Illinois, and 2) $4.8 million to buy fixed assets of a seed processing facility in Nampa, Idaho. Capital expenditures in 2016 totaled $9.9 million and were equipment replacements and other improvements, and cost saving projects but no major projects in 2016.

 

Accounts Receivable 

 

In 2018, accounts receivable increased by $6.7 million or 9.3% versus 2017, due to higher sales volume in the fourth quarter of 2018 compared to 2017 and the Truitt business we acquired in April 2017. In 2017, accounts receivable decreased by $4.7 million or 6.1% versus 2016, due to the impact of decreased sales volume in the fourth quarter of 2017 compared to 2016.

 

Inventories 

 

In 2018, inventories increased by $51.9 million primarily reflecting the effect of higher finished goods quantities (including Truitt inventories) and higher work in process quantities partially offset by the $15.0 million LIFO reserve increase. The LIFO reserve balance was $158.8 million at March 31, 2018 versus $143.8 million at the prior year end. The LIFO reserve increased as a result of higher input costs in 2018.

 

In 2017, inventories increased by $19.4 million primarily reflecting the effect of higher finished goods quantities and higher work in process quantities. The LIFO reserve balance was $143.8 million at March 31, 2017 versus $153.9 million at the prior year end.

 

The Company believes that the use of the LIFO method better matches current costs with current revenues.

 

 

Management’s Discussion and Analysis of

 

Financial Condition and Results of Operations

 

 

 

Critical Accounting Policies 

 

The Company recognizes revenue when it’s realized or realizable and has been earned.  Revenue is recognized when there is persuasive evidence of an arrangement, the sales price is determinable, collectability is reasonable assured, and shipment or delivery has occurred or services have been rendered

 

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, which are recorded as a reduction of net sales, include amounts paid to encourage retailers to offer temporary price reductions for the sale of the Company’s products to consumers, amounts paid to obtain favorable display positions in retail 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. 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 the Company. 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 extended periods of time.

 

The Company assesses its long-lived assets for impairment whenever there is an indicator of impairment. Property, plant, and equipment are depreciated over their assigned lives. The assigned lives and the projected cash flows used to test impairment are subjective. If actual lives are shorter than anticipated or if future cash flows are less than anticipated, a future impairment charge or a loss on disposal of the assets could be incurred. Impairment losses are evaluated if the estimated undiscounted value of the cash flows is less than the carrying value. If such is the case, a loss is recognized when the carrying value of an asset exceeds its fair value.

 

Obligations and Commitments 

 

As of March 31, 2018, the Company was obligated to make cash payments in connection with its debt, operating and capital leases, and purchase commitments. The effect of these obligations and commitments on the Company’s liquidity and cash flows in future periods are listed below. All of these arrangements require cash payments over varying periods of time. Certain of these arrangements are cancelable on short notice and others require additional payments as part of any early termination. The interest rate used for variable rate debt is the current year average.

 

		Contractual Obligations
		March 31, 2018
														2024
		2019					2020-21				2022-23			and beyond				Total
		(In thousands)
Long-term debt (largely variable rate)		$	3,702			$	8,735			$	395,197			$	10,200			$	417,834
Interest			13,589				25,813				7,275				3,154				49,831
Operating lease obligations			36,459				56,728				26,098				4,369				123,654
Purchase commitments			114,296				—				—				—				114,296
Capital lease obligations			7,679				15,357				15,356				9,744				48,136
Total		$	175,725			$	106,633			$	443,926			$	27,467			$	753,751

 

In addition, the Company’s defined benefit plan has an unfunded pension liability of $23.3 million which is subject to certain actuarial assumptions. The unfunded status increased by $15.1 million during 2018 reflecting the actual fair value of plan assets and the projected benefit obligation as of March 31, 2018. This unfunded status increase was recognized via the actual gain on plan assets and the increase in accumulated other comprehensive loss of $11.7 million after the income tax expense of $3.9 million. The increase in projected benefit obligation was a function of using the full yield curve approach, a decrease in the discount rate from 4.35% to 4.14% and the change to using an updated mortality table. During 2018, the Company converted to the 2006 base rates from the RP-2016 mortality study with the Blue Collar adjustment, with a generational projection of future mortality improvements from 2006 using Scale MP-2017 for calculating the pension obligation in 2018 and the related pension expense in 2019. Effective March 31, 2016, the Company elected to change the approach used to calculate the service and interest cost components of the net periodic benefit cost for its pension and postretirement benefit plans to provide a more precise measurement of service and interest costs. Historically the Company calculated the service and interest cost components utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. Now the new estimate utilizes a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve used in determination of the benefit obligation to their underlying projected cash flows. The change does not affect the measurement of pension and postretirement obligations and is accounted for as a change in accounting estimate, which is applied prospectively.

 

 

Management’s Discussion and Analysis of

 

Financial Condition and Results of Operations

 

 

 

Plan assets increased from $207.8 million as of March 31, 2017 to $212.8 million as of March 31, 2018 due to a gain on plan assets of $7.0 million from a continued recovery in market conditions and the $2.7 million contribution by the Company. The increase was also attributable to the merger of the Gray Plan of $3.3 million.  These increases were partially offset by $8.0 million in benefit payments.  The Company made this contribution to maintain its funding status at an acceptable level.

 

During 2018, the Company entered into new capital and operating leases of approximately $11.8 million, based on the if-purchased value, which was primarily for agricultural and packaging equipment.

 

Purchase commitments represent estimated payments to growers for crops that will be grown during the calendar 2018 season.

 

Due to uncertainties related to uncertain tax positions, the Company is not able to reasonably estimate the cash settlements required in future periods.

 

The Company has no off-balance sheet debt or other unrecorded obligations other than operating lease obligations and purchase commitments noted above.

 

Standby Letters of Credit 

 

The Company has standby letters of credit for certain insurance-related requirements. The majority of the Company’s standby letters of credit are automatically renewed annually, unless the issuer gives cancellation notice in advance. On March 31, 2018, the Company had $10.4 million in outstanding standby letters of credit. These standby letters of credit are supported by the Company’s Revolver and reduce borrowings available under the Revolver.

 

Cash Flows 

 

In 2018, the Company’s cash and cash equivalents increased by $3.1 million, which is due to the net impact of $13.2 million used in operating activities, $45.0 million used in investing activities, and $61.3 million provided by financing activities.  This is compared to cash and cash equivalents increased by $3.4 million in 2017, which is due to the net impact of $24.3 million provided by operating activities, $31.7 million used in investing activities, and $10.8 million provided by financing activities.

 

Operating Activities 

 

Cash used in operating activities was $13.2 million in 2018 compared to $24.3 million of cash provided by operating activities in 2017. The increase is primarily attributable to a net loss in 2018 versus a profit in 2017 which was a $29.7 million swing, a decrease in deferred income tax of $13.8 million, and a decrease in accounts payable and accrued expense of $21.5 million, partially offset by a decrease in inventories in 2018 versus 2017. The 2018 earnings reflect a LIFO charge of $15.0 million resulting in an increase in the tax payment deferral of $3.8 million. During 2018, the Company made a $2.7 million contribution to its pension plan compared to an $8.2 million contribution in the previous year.

 

Cash provided by operating activities decreased to $24.3 million in 2017 from $39.2 million in 2016. The decrease is primarily attributable to a significant decrease in net earnings and an increase in inventories in 2017 versus 2016. The 2017 LIFO credit of $10.1 million resulted in a decrease in the tax payment deferral of $3.5 million. During 2017, the Company made an $8.2 million contribution to its pension plan compared to a $23.1 million contribution in the previous year. The 2016 net earnings reflect the effect of a one-time $24.3 million payment received from General Mills related to a relationship transfer agreement.

 

The cash requirements of the business fluctuate significantly throughout the year to coincide with the seasonal growing cycles of vegetables and fruits. The majority of the inventories are produced during the packing months, from June through November, and are then sold over the following year. Cash flow from operating activities is one of the Company’s main sources of liquidity.

 

 

Management’s Discussion and Analysis of

 

Financial Condition and Results of Operations

 

 

 

Investing Activities 

 

Cash used in investing activities was $45.0 million for 2018, principally reflecting capital expenditures and an acquisition for $14.4 million. Capital expenditures aggregated $32.7 million in 2018 versus $32.1 million in 2017. There were two major projects in 2018 as follows: 1) $2.8 million for the expansion of a production line in Princeville, Illinois, and 2) $3.4 million for a warehouse in Payette, Idaho.

 

Cash used in investing activities was $31.7 million for 2017, principally reflecting capital expenditures. Capital expenditures aggregated $32.1 million in 2017 versus $9.9 million in 2016. The increase was primarily attributable to more large projects in 2017 along with lease buyouts, equipment replacements and other improvements. There were two major projects in 2017 as follows: 1) $2.0 million to purchase land in Princeville, Illinois, and 2) $4.8 million to buy fixed assets of a seed processing facility in Nampa, Idaho.

 

Financing Activities 

 

Cash provided by financing activities was $61.3 million in 2018 representing a net increase in long-term debt (primarily the Revolver) of $66.3 million (net of acquisition debt) partially offset by the purchase of $4.6 million of treasury stock during 2018 versus $2.8 million purchased in 2017.

Cash provided by financing activities was $10.8 million in 2017 representing the new Farm Credit note for $100.0 million and a net decrease in the Revolver of $56.8 million and the payoff of $22.6 million industrial revenue bonds, partially offset by a partial payoff of interim funding of $0.2 million and the purchase of $2.8 million of treasury stock during 2017 versus $6.3 million purchased in 2016.

 

RESULTS OF OPERATIONS 

 

Classes of similar products/services:		2018				2017					2016
							(Restated)				(Restated)
		(In thousands)
Net Sales:
Green Giant *		$	111,014			$	136,329				$	148,517
Canned vegetables			721,121				705,297					746,501
Frozen			105,857				98,597					94,710
Fruit			256,687				286,464					253,658
Prepared foods			92,826				-					-
Snack			10,110				12,430					12,336
Other			17,150				23,081					23,845
Total		$	1,314,765			$	1,262,198				$	1,279,567

 

* Green Giant includes canned and frozen vegetables packaged exclusively for B&G Foods.

 

 

Fiscal 2018 versus Fiscal 2017 

 

Net sales for 2018 increased $52.6 million, from $1,262.2 million to $1,314.8 million. The increase primarily reflects a $92.8 million increase in prepared food sales due to the April 2017 Truitt acquisition, a $25.3 million decrease in Green Giant sales, a $29.8 million decrease in Fruit sales, a $15.8 million increase in canned vegetables sales, a $7.3 million increase in frozen, a $2.3 million decrease in Snack sales, and a $5.9 million decrease in other sales. The increase in sales is attributable to higher selling prices/more favorable sales mix of $50.5 million and increased sales volume of $2.1 million. The increased selling prices/more favorable sales mix is primarily due to canned vegetables.

 

 

Management’s Discussion and Analysis of

 

Financial Condition and Results of Operations

 

 

 

Cost of product sold as a percentage of sales increased from 91.1% in 2017 to 94.3% in 2018 primarily as a result of a $25.1 million LIFO charge increase in 2018, due to higher commodity and steel costs, and lower selling prices (primarily the fruit) in 2018 versus 2017.

 

Selling, general and administrative expense was 5.6% of sales in 2018 and 5.8% of sales in 2017. This decrease is due in part to lower employment costs in 2018 than 2017.

 

Other operating income in 2018 includes a bargain purchase acquisition gain of $1.8 million related to Truitt, a gain on the sale of a plant of $1.1 million and a gain on the partial sale of a plant of $0.4 million. The Company also recorded a gain of $0.4 million on the sale of fixed assets.

 

Plant restructuring costs, which are described in detail in the Restructuring section of Management’s Discussion and Analysis of Financial Condition and Results of Operations, increased from $1.8 million in 2017 to $10.0 million in 2018. The $10.0 million was mostly due to the closing of a plant in Modesto, California.  No new production will be coming from this facility for the 2018 pack.  The facility will continue to be a warehouse in the near term.

 

Interest expense, net, increased from $9.7 million in 2017 to $15.0 million in 2018 due in part to the higher average Revolver borrowings in 2018 versus 2017, due to the Truitt acquisition in 2018 and the higher inventories in 2018 than 2017. Approximately $3.1 million of this interest expense increase was as a result of rising interest rates.

 

As a result of the aforementioned factors, pre-tax earnings decreased from $25.6 million in 2017 to pre-tax loss of $20.3 million in 2018. The effective tax rate was 31.9% in 2018 and 38.0% in 2017.  Of the 6.1 percentage point decrease in the effective tax rate for the year, there are three major contributors. The change in valuation allowance related to state credits accounts for a 9.9% decrease. There are certain California state income tax credit carryovers that will likely not be realized given the closure of the Modesto plant. The change in income tax rate resulting from the Tax Cuts and Jobs Act accounts for 4.9% of this decrease. These two items were partially offset by the change in federal and state credits and incentives which accounts for an 8.8% increase. The dollar amount of these credits and incentives did not change significantly from 2017 to 2018.  However, because income was reported in 2017 and a loss was reported in 2018, the credits and incentives have an inverse impact on the tax rate in 2018 compared to 2017. 

 

Fiscal 2017 versus Fiscal 2016 

 

Net sales for 2017 decreased $17.4 million, from $1,279.6 million to $1,262.2 million. The decrease primarily reflects a $12.2 million decrease in Green Giant sales, a $32.8 million increase in fruit sales, a $3.9 million increase in frozen sales, a $41.2 million decrease in canned vegetables sales and a $0.7 million decrease in other sales. The decrease in sales is attributable to lower selling prices/less favorable sales mix of $91.8 million partially offset by increased sales volume of $74.5 million. The decreased selling prices/less favorable sales mix is primarily due to canned fruit and vegetables. Canned fruit sales include a $48.4 million increase from Gray and Diana sales which was acquired during the third and fourth quarters of 2016.

 

Cost of product sold as a percentage of sales increased from 88.2% in 2016 to 91.1% in 2017 primarily as a result of lower selling prices and a $17.6 million LIFO credit decrease in 2017 versus 2016.

 

Selling, general and administrative expense was unchanged at 5.7% of sales in 2017 from 2016.

 

Other operating expense in 2017 includes a charge for $1.2 million related to costs incurred due to some roof collapses at a Northwest plant as a result of heavy snowfall. In addition, there was a charge for an impairment of a long-term asset of $1.1 million. The Company also recorded a loss of $0.2 million on the sale of fixed assets.

 

Plant restructuring costs, which are described in detail in the Restructuring section of Management’s Discussion and Analysis of Financial Condition and Results of Operations, decreased from $10.3 million in 2016 to $2.4 million in 2017. About $1.8 million of this charge was due to the closing of a plant in the West during the year.

 

Interest expense, net, increased from $8.0 million in 2016 to $9.7 million in 2017 due to higher overall average borrowing rates in 2017 versus 2016.

 

As a result of the aforementioned factors, pre-tax earnings decreased from $83.6 million in 2016 to $25.6 million in 2017. The effective tax rate was 38.0% in 2017 and 32.6% in 2016. Of the 5.4 percentage point increase in the effective tax rate for the year, the major contributor to this increase is the permanent differences not deductible which account for 2.0% of this increase. The other significant change is in the manufacturer’s deduction, which is based on taxable income. As a result of significant bonus depreciation in the fourth quarter of 2017, the percentage of the deduction in relationship to book income is lower than last year by 2.4%.

 

 

Management’s Discussion and Analysis of

 

Financial Condition and Results of Operations

 

 

 

Recently Issued Accounting Standards 

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to be collected and to which the entity expects to be entitled in exchange for the transfer of goods or services. In August 2015, the FASB deferred the effective date by one year while providing the option to early adopt the standard on the original effective date. The new standard was effective for the Company on April 1, 2018. We analyzed the expected impact that the new guidance will have on our policies, processes, controls, and disclosures. This assessment required, among other things, a review of the contracts we have with our customers. The majority of our revenue is earned pursuant to agreements under which we have performance obligations, which are satisfied at a point-in-time, and the timing of revenue recognition will be similar under the new standard as control of the goods transfers to our customers at the same point-in-time that the risks and rewards of ownership transferred historically.   However, based on our analysis, we do expect that this ASU will have a material effect on our historically reported Consolidated Financial Statements as well as our existing processes to recognize revenue, primarily as a result of the Company’s Green Giant contract. As discussed in Note 2 to the Consolidated Financial Statements, this contract did not meet all the requirements for bill and hold revenue recognition treatment under Staff Accounting Bulletin Topic 13.  However, under the new revenue recognition standard, this contract will quality for bill and hold accounting treatment as the Company has concluded that control of the unlabeled products transfers to the customer at the time title transfers and the customer has the right to payment (prior to physical delivery), which will result in earlier revenue recognition.  Additionally, labeling and storage services that are provided after control of the goods has transferred to the customer will be accounted for as separate performance obligations for which revenue will be deferred until the services are performed.  For the fiscal year ended in 2018, as a result of the adoption of the new standard, revenue would have increased by approximately $14.0 million, net loss would have decreased by approximately $5.3 million, and stockholders’ equity as of March 31, 2018 would have increased by $14.4 million. Beginning in fiscal 2019, our disclosures will change as appropriate to comply with the new guidance. The guidance allows for both retrospective and modified retrospective methods of adoption. We will apply the full retrospective method of adoption.

 

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018 (beginning fiscal 2020), including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. While we are still evaluating the impact of our pending adoption of the new standard on our consolidated financial statements, we expect that upon adoption we will recognize ROU assets and lease liabilities and that the amounts could be material.

In January 2017, the FASB issued Accounting Standards Update No. 2017-01 ("ASU 2017-01"), Business Combinations (Topic 805): Clarifying the Definition of a Business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and early adoption is permitted for transactions which occur before the issuance or effective date of the amendments, only when the transaction has not been reported in the financial statements that have been issued or made available for issuance. ASU 2017-01 is to be applied on a prospective basis. The Company does not expect the adoption of ASU 2017-01 to have a material impact on its consolidated financial statements.

In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This amendment is intended to allow a reclassification from accumulated other comprehensive loss to retained earnings for stranded tax effects resulting only from the December 2017 enacted United States Tax Cuts and Jobs Act (TCJA) and is not intended to impact underlying accounting guidance that requires that the effect of a change in tax laws or tax rates be included in income from operations. This update is effective for fiscal years beginning after December 31, 2018 with earlier adoption permitted. The Company has early adopted this update in its fourth quarter ended March 31, 2018 resulting in a $2.4 million reclassification from accumulated other comprehensive loss and a corresponding $2.4 million increase to retained earnings. This reclassification from accumulated other comprehensive loss relates to the deferred income tax stranded tax effects resulting from the change in the U.S. federal corporate income tax rate under the TCJA.  The pension and post-retirement benefits adjustment is the Company’s only component of accumulated other comprehensive loss.

In March 2017, the FASB issued Accounting Standards Update2017-07, Compensation – Retirement Benefits (Topic 715) Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires the service cost component of the net periodic pension cost to be presented separately from the other components of the net periodic pension cost in the income statement. Additionally, only the service cost component of the net periodic pension cost will be eligible for capitalization. ASU 2017-07 will be effective for the Company on April 1, 2018. The change in presentation of service cost must be applied retrospectively, while the capitalization of service cost must be applied on a prospective basis. We do not anticipate that the adoption of this ASU will have a material impact on our financial statements and disclosures.

 

Management’s Discussion and Analysis of

 

Financial Condition and Results of Operations

 

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Interest Rate Risk 

 

The Company maintained $15.1 million in cash equivalents as of March 31, 2018. 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. The Company uses a revolving credit facility with variable interest rates and a $100.0 million term loan to finance capital expenditures, acquisitions, seasonal working capital requirements and to pay debt principal and interest obligations. In addition, long-term debt includes secured notes payable and an industrial bond. Long-term debt bears interest at fixed and variable rates. With $359.7 million in average variable-rate debt during fiscal 2018, a 1% change in interest rates would have had a $3.6 million effect on interest expense. The following table provides information about the Company’s financial instruments that are sensitive to changes in interest rates. The table presents principal cash flows and related weighted average interest rates by expected maturity date. Weighted average interest rates on long-term variable-rate debt are based on rates as of March 31, 2018.

 

Interest Rate Sensitivity of Long-Term Debt and Short-Term Investments
March 31, 2018
(In thousands)
		P A Y M E N T S  B Y  Y E A R
																										Total/				Estimated
																										Weighted				Fair
		2019				2020				2021				2022				2023				Thereafter				Average				Value
Fixed-rate L/T debt:
Principal cash flows		$	3,702			$	3,217			$	5,518			$	1,868			$	-			$	216			$	14,521			$	14,309
Average interest rate			5.38	%			5.21	%			5.45	%			6.98	%			-	%			12.00	%			5.76	%
Variable-rate L/T debt:
Principal cash flows		$	-			$	-			$	-			$	393,329			$	-			$	9,984			$	403,313			$	403,176
Average interest rate			-	%			-	%			-	%			3.07	%			-	%			2.44	%			3.06	%
Average Revolver debt:
Principal cash flows																										$	259,669			$	259,669
Average interest rate																											2.80	%

 

Commodity Risk 

 

The materials that the Company uses, such as vegetables, fruits, steel, ingredients, and packaging materials, as well as the electricity and natural gas used in the Company’s business are commodities that may experience price volatility caused by external factors including market fluctuations, availability, weather, currency fluctuations, and changes in governmental regulations and agricultural programs. These events may result in reduced supplies of these materials, higher supply costs, or interruptions in the Company’s production schedules. If prices of these raw materials increase and the Company is not able to effectively pass such price increases along to its customers, operating income will decrease. With $114.3 million in produce costs expected during 2019, a 1% change would have a $1.1 million effect on inventory costs. A 1% change in steel unit costs would equate to a $1.1 million cost impact.

 

The Company does not currently hedge or otherwise use derivative instruments to manage interest rate or commodity risks.

 

 

Consolidated Statements of Net (Loss) Earnings

 

 

 

Seneca Foods Corporation and Subsidiaries

(In thousands of dollars, except per share amounts)

 

 

See notes to consolidated financial statements.

 

 

Consolidated Statements of Comprehensive (Loss) Income

Seneca Foods Corporation and Subsidiaries

(In thousands of dollars)

 

 

See notes to consolidated financial statements.

 

 

Consolidated Balance Sheets

 

 

See notes to consolidated financial statements.

 

 

Consolidated Statement of Cash Flows

 

 

See notes to consolidated financial statements.

 

 

Consolidated Statements of Stockholders' Equity

 

 

Seneca Foods Corporation and Subsidiaries

(In thousands, except share amounts)

 

 

 

See notes to consolidated financial statements.

 

 

Notes to Consolidated Financial Statements

 

Seneca Foods Corporation and Subsidiaries 

 

 

Report of Independent Registered Public Accounting Firm

 

Shareholders and Board of Directors

Seneca Foods Corporation

Marion, New York

 

Opinion on the Consolidated Financial Statements

 

We have audited the accompanying consolidated balance sheets of Seneca Foods Corporation (the “Company”) as of March 31, 2018 and 2017, the related consolidated statements of net (loss) earnings and comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended March 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at March 31, 2018 and 2017, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of March 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated June 29, 2018 expressed an adverse opinion thereon.

 

As discussed in Note 2 to the consolidated financial statements, the 2017 and 2016 financial statements have been restated to correct a misstatement.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

 

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

/s/ BDO USA, LLP

 

 

We have served as the Company's auditor since 2006.

 

Milwaukee, Wisconsin

June 29, 2018

 

Report of Independent Registered Public Accounting Firm

 

Shareholders and Board of Directors

Seneca Foods Corporation

Marion, New York

 

Opinion on Internal Control over Financial Reporting

 

We have audited Seneca Foods Corporation’s (the “Company’s”) internal control over financial reporting as of March 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of March 31, 2018, based on the COSO criteria.

 

We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company and subsidiaries as of March 31, 2018 and 2017, the related consolidated statements of net (loss) earnings, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended March 31, 2018, and the related notes (collectively referred to as “the financial statements”) and our report dated June 29, 2018, expressed an unqualified opinion thereon.

 

Basis for Opinion

 

The Company’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, included in the accompanying Item 9A, Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. 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, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness regarding management’s failure to design and maintain controls over bill and hold revenue recognition has been identified and described in management’s assessment. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2018 financial statements, and this report does not affect our report dated June 29, 2018 on those financial statements.

 

Definition and Limitations of Internal Control over Financial Reporting

 

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.

 

 

 

/s/ BDO USA, LLP

 

Milwaukee, Wisconsin

 

June 29, 2018

 

 

Shareholder Information and Quarterly Results

 

 

The Company’s common stock is traded on The NASDAQ Global Stock Market. The 7.9 million Class A outstanding shares and 1.9 million Class B outstanding shares are owned by 164 and 172 shareholders of record, respectively. The high and low closing prices of the Company’s common stock during each quarter of the past two years are shown below:

 

Class A:		2018								2017
Quarter		High				Low				High				Low
First		$	38.15			$	30.00			$	36.50			$	29.32
Second			34.55				27.75				40.88				27.03
Third			36.60				28.60				42.65				27.90
Fourth			35.00				27.60				41.52				34.30

 

 

Class B:		2018								2017
Quarter		High				Low				High				Low
First		$	39.00			$	34.80			$	38.50			$	32.89
Second			36.25				29.30				46.00				36.00
Third			35.95				32.00				44.70				33.00
Fourth			34.30				31.00				44.00				38.20

 

 

Common Stock Performance Graph 

 

The graph below shows the cumulative, five year total return for the Company’s Common Stock compared with the NASDAQ Market Total U.S. Return Index (which includes the Company) and a peer group of companies (described below).

 

Performance data assumes that $100.00 was invested on March 31, 2013, in the Company’s Class A Common Stock, the NASDAQ Market, and the peer group. The data assumes the reinvestment of all cash dividends and the cash value of other distributions. Stock price performance shown in the graph is not necessarily indicative of future stock price performance. The companies in the peer group are B&G Foods Inc., Fresh Del Monte, Hanover Foods Corporation, John B. Sanfilippo & Son Inc., Treehouse Foods, Inc. and Hain Celestial Group Inc. The peer group members are in related food businesses, but not necessarily direct competitors in canning.

 

 

Shareholder Information and Quarterly Results

 

 

Shareholder Information and Quarterly Results

 

 

As of March 31, 2018, the most restrictive credit agreement limitation on the Company’s payment of dividends, to holders of Class A or Class B Common Stock is an annual total limitation of $50,000, reduced by aggregate annual dividend payments totaling $23,000 that the Company presently pays on two outstanding classes of preferred stock. Payment of dividends to common stockholders is made at the discretion of the Company’s Board of Directors and depends, among other factors, on earnings; capital requirements; and the operating and financial condition of the Company. The Company has not declared or paid a common dividend in many years.

 

Quarterly Results

 

The following is a summary of the unaudited interim results of operations by quarter:

 

		First				Second				Third				Fourth
		(In thousands, except per share data)
Year ended March 31, 2018:			(Restated)				(Restated)				(Restated)
Net sales		$	288,927			$	338,470			$	387,689			$	299,679
Gross margin			15,535				17,411				30,501				11,140
Net (loss) earnings			(980	)			(2,958	)			4,377				(14,250	)
Basic (loss) earnings per common share			(0.10	)			(0.30	)			0.45				(1.46	)
Diluted (loss) earnings per common share			(0.10	)			(0.30	)			0.44				(1.46	)
Year ended March 31, 2017:			(Restated)				(Restated)				(Restated)				(Restated)
Net sales		$	272,135			$	352,606			$	356,767			$	280,690
Gross margin			21,955				31,025				37,926				21,098
Net earnings			965				6,821				7,789				320
Basic earnings per common share			0.09				0.69				0.78				0.03
Diluted earnings per common share			0.09				0.69				0.77				0.03

 

 

Earnings for the fourth quarter have historically reflected adjustments of previously estimated raw material cost and production levels. Due to the dependence on the fruit and vegetable yields of the Company's food packaging, interim costing must be estimated. During the fourth quarter of 2018, the Company incurred $9.9 million of restructuring charges. See Note 15, Plant Restructuring, for details.

 

 

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