UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10‑Q10
-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended | Commission File Number 0-01989 |
Seneca Foods Corporation
(Exact name of Company as specified in its charter)
New York | 16-0733425 |
(State or other jurisdiction of | (I. R. S. Employer |
incorporation or organization) | Identification No.) |
3736 South Main Street, Marion, New York | 14505 |
(Address of principal executive offices) | (Zip Code) |
Company's telephone number, including area code | 315/926-8100 |
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☑ No ☐
Indicate by check mark whether the Company is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer" andfiler," "smaller reporting company" and an emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐ Accelerated filer þ ☑ Non-accelerated filer ¨ ☐ Smaller reporting company ☐
Emerging growth company ☐
Indicate by check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
If an emerging growth company, indicate by checkmark if the Company has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act ☐
The number of shares outstanding of each of the issuer's classes of common stock at the latest practical date are:
Class | Shares Outstanding at October |
Common Stock Class A, $.25 Par | 7,875,188 |
Common Stock Class B, $.25 Par | 1,884,439 |
Seneca Foods Corporation |
Quarterly Report on Form 10-Q |
Page | ||
PART 1 | FINANCIAL INFORMATION | |
Item 1 | Financial Statements: | |
Condensed Consolidated Balance Sheets-September 30, 2017, October 1, 2016 and March 31, 2017 | ||
1 | ||
September 30, 2017 and October 1, 2016 | 2 | |
September 30, 2017 and October 1, 2016 | 2 | |
September 30, 2017 and October 1, 2016 | 3 | |
4 | ||
5 | ||
Item 2 | ||
and Results of Operations | 12 | |
Item 3 | 18 | |
Item 4 | 19 | |
PART II | OTHER INFORMATION | |
Item 1 | 20 | |
Item 1A | 20 | |
Item 2 | 20 | |
Item 3 | 20 | |
Item 4 | 20 | |
Item 5 | 21 | |
Item 6 | 22 | |
23 |
SENECA FOODS CORPORATION AND SUBSIDIARIES | |||
(In Thousands, Except Per Share Data) |
Unaudited | Unaudited | |||||||||||
September 30, 2017 | October 1, 2016 | March 31, 2017 | ||||||||||
ASSETS | ||||||||||||
Current Assets: | ||||||||||||
Cash and Cash Equivalents | $ | 14,940 | $ | 10,124 | $ | 11,992 | ||||||
Accounts Receivable, Net | 112,297 | 102,727 | 72,080 | |||||||||
Assets Held For Sale | - | 5,025 | - | |||||||||
Inventories: | ||||||||||||
Finished Goods | 664,816 | 639,603 | 435,247 | |||||||||
Work in Process | 32,287 | 18,098 | 32,528 | |||||||||
Raw Materials and Supplies | 105,284 | 114,295 | 130,281 | |||||||||
Total Inventories | 802,387 | 771,996 | 598,056 | |||||||||
Refundable Income Taxes | 336 | - | 2,471 | |||||||||
Other Current Assets | 2,649 | 15,157 | 3,671 | |||||||||
Total Current Assets | 932,609 | 905,029 | 688,270 | |||||||||
Property, Plant and Equipment, Net | 272,176 | 207,474 | 237,476 | |||||||||
Deferred Income Taxes, Net | - | 15,364 | - | |||||||||
Other Assets | 5,183 | 20,847 | 20,273 | |||||||||
Total Assets | $ | 1,209,968 | $ | 1,148,714 | $ | 946,019 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
Current Liabilities: | ||||||||||||
Notes Payable | $ | - | $ | - | $ | 166 | ||||||
Accounts Payable | 249,803 | 237,008 | 72,824 | |||||||||
Accrued Vacation | 12,656 | 11,936 | 11,867 | |||||||||
Accrued Payroll | 12,178 | 10,120 | 6,593 | |||||||||
Other Accrued Expenses | 38,905 | 39,243 | 32,493 | |||||||||
Income Taxes Payable | - | 4,172 | - | |||||||||
Current Portion of Long-Term Debt and Capital Lease Obligations | 9,440 | 9,987 | 8,334 | |||||||||
Total Current Liabilities | 322,982 | 312,466 | 132,277 | |||||||||
Long-Term Debt, Less Current Portion | 395,128 | 354,905 | 329,138 | |||||||||
Capital Lease Obligations, Less Current Portion | 37,879 | 18,425 | 34,194 | |||||||||
Pension Liabilities | 9,220 | 41,119 | 8,193 | |||||||||
Deferred Income Taxes, Net | 1,565 | - | 4,181 | |||||||||
Other Long-Term Liabilities | 13,440 | 11,559 | 3,775 | |||||||||
Total Liabilities | 780,214 | 738,474 | 511,758 | |||||||||
Commitments and Contingencies | ||||||||||||
Stockholders' Equity: | ||||||||||||
Preferred Stock | 719 | 1,338 | 1,324 | |||||||||
Common Stock, $.25 Par Value Per Share | 3,038 | 3,024 | 3,024 | |||||||||
Additional Paid-in Capital | 98,099 | 97,395 | 97,458 | |||||||||
Treasury Stock, at Cost | (69,195 | ) | (66,730 | ) | (66,499 | ) | ||||||
Accumulated Other Comprehensive Loss | (11,073 | ) | (28,396 | ) | (11,175 | ) | ||||||
Retained Earnings | 408,166 | 403,609 | 410,129 | |||||||||
Total Stockholders' Equity | 429,754 | 410,240 | 434,261 | |||||||||
Total Liabilities and Stockholders’ Equity | $ | 1,209,968 | $ | 1,148,714 | $ | 946,019 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
SENECA FOODS CORPORATION AND SUBSIDIARIES | ||||
(Unaudited) | ||||
(In Thousands, Except Per Share Data) |
Three Months Ended | Six Months Ended | |||||||||||||||
September 30, 2017 | October 1, 2016 | September 30, 2017 | October 1, 2016 | |||||||||||||
Net Sales | $ | 376,308 | $ | 357,247 | $ | 656,495 | $ | 609,861 | ||||||||
Costs and Expenses: | ||||||||||||||||
Cost of Product Sold | 355,904 | 327,035 | 620,331 | 559,674 | ||||||||||||
Selling, General and Administrative | 18,865 | 18,702 | 36,318 | 35,907 | ||||||||||||
Plant Restructuring (Credit) Charge | (25 | ) | 277 | 56 | 1,462 | |||||||||||
Other Operating (Income) Loss | (20 | ) | 31 | (2,632 | ) | 19 | ||||||||||
Total Costs and Expenses | 374,724 | 346,045 | 654,073 | 597,062 | ||||||||||||
Operating Income | 1,584 | 11,202 | 2,422 | 12,799 | ||||||||||||
Loss (Earnings) From Equity Investment | - | 270 | (21 | ) | (167 | ) | ||||||||||
Interest Expense, Net | 3,433 | 2,151 | 6,650 | 4,295 | ||||||||||||
(Loss) Earnings Before Income Taxes | (1,849 | ) | 8,781 | (4,207 | ) | 8,671 | ||||||||||
Income Taxes (Benefit) Expense | (737 | ) | 2,637 | (2,256 | ) | 2,589 | ||||||||||
Net (Loss) Earnings | $ | (1,112 | ) | $ | 6,144 | $ | (1,951 | ) | $ | 6,082 | ||||||
(Loss) Earnings Applicable to Common Stock | $ | (1,114 | ) | $ | 6,082 | $ | (1,952 | ) | $ | 6,014 | ||||||
Basic (Loss) Earnings per Common Share | $ | (0.11 | ) | $ | 0.62 | $ | (0.20 | ) | $ | 0.61 | ||||||
Diluted (Loss) Earnings per Common Share | $ | (0.11 | ) | $ | 0.62 | $ | (0.20 | ) | $ | 0.61 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
SENECA FOODS CORPORATION AND SUBSIDIARIES | |||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME | |||||
(Unaudited) | |||||
(In Thousands) |
Three Months Ended | Six Months Ended | |||||||||||||||
September 30, 2017 | October 1, 2016 | September 30, 2017 | October 1, 2016 | |||||||||||||
Comprehensive (loss) income: | ||||||||||||||||
Net (loss) earnings | $ | (1,112 | ) | $ | 6,144 | $ | (1,951 | ) | $ | 6,082 | ||||||
Change in pension, post retirement benefits and other (net of tax of $26 and $63) | 43 | - | 102 | - | ||||||||||||
Total | $ | (1,069 | ) | $ | 6,144 | $ | (1,849 | ) | $ | 6,082 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
SENECA FOODS CORPORATION AND SUBSIDIARIES | ||
(Unaudited) | ||
(In Thousands) |
Six Months Ended | ||||||||
September 30, 2017 | October 1, 2016 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net (Loss) Earnings | $ | (1,951 | ) | $ | 6,082 | |||
Adjustments to Reconcile Net (Loss) Earnings to | ||||||||
Net Cash Used in Operations (Net of Acquisition): | ||||||||
Depreciation & Amortization | 15,349 | 12,018 | ||||||
(Gain) Loss on the Sale of Assets | (1,591 | ) | 48 | |||||
Bargain Purchase Gain | (1,096 | ) | - | |||||
Provision for Restructuring and Impairment | 56 | 1,462 | ||||||
Earnings From Equity Investment | (21 | ) | (167 | ) | ||||
Deferred Income Tax Benefit | (2,272 | ) | (2,467 | ) | ||||
Changes in Operating Assets and Liabilities: | ||||||||
Accounts Receivable | (34,173 | ) | (25,939 | ) | ||||
Inventories | (188,255 | ) | (204,289 | ) | ||||
Other Current Assets | 1,106 | 608 | ||||||
Income Taxes | 2,126 | 1,198 | ||||||
Accounts Payable, Accrued Expenses and Other Liabilities | 192,932 | 183,025 | ||||||
Net Cash Used in Operations | (17,790 | ) | (28,421 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Additions to Property, Plant and Equipment | (13,743 | ) | (14,518 | ) | ||||
Cash Paid for Acquisition (Net of Cash Acquired) | (14,420 | ) | - | |||||
Proceeds from the Sale of Assets | 1,790 | 13 | ||||||
Net Cash Used in Investing Activities | (26,373 | ) | (14,505 | ) | ||||
Cash Flow from Financing Activities: | ||||||||
Long-Term Borrowing | 282,862 | 183,744 | ||||||
Payments on Long-Term Debt and Capital Lease Obligations | (232,706 | ) | (136,613 | ) | ||||
Payments on Notes Payable | (166 | ) | (402 | ) | ||||
Other Assets | (171 | ) | (1,248 | ) | ||||
Purchase of Treasury Stock | (2,696 | ) | (1,021 | ) | ||||
Dividends | (12 | ) | (12 | ) | ||||
Net Cash Provided by Financing Activities | 47,111 | 44,448 | ||||||
Net Increase in Cash and Cash Equivalents | 2,948 | 1,522 | ||||||
Cash and Cash Equivalents, Beginning of the Period | 11,992 | 8,602 | ||||||
Cash and Cash Equivalents, End of the Period | $ | 14,940 | $ | 10,124 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Noncash Transactions: | ||||||||
Property, Plant and Equipment Purchased Under Capital Lease Obligations | $ | 7,155 | $ | 15,416 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
SENECA FOODS CORPORATION AND SUBSIDIARIES | ||||||||||||
(In Thousands, Except Per Share Data) | ||||||||||||
Unaudited | Unaudited | |||||||||||
October 1, | September 26, | March 31, | ||||||||||
2016 | 2015 | 2016 | ||||||||||
ASSETS | ||||||||||||
Current Assets: | ||||||||||||
Cash and Cash Equivalents | $ | 10,124 | $ | 9,397 | $ | 8,602 | ||||||
Accounts Receivable, Net | 102,727 | 83,296 | 76,788 | |||||||||
Assets Held For Sale | 5,025 | - | 5,025 | |||||||||
Inventories: | ||||||||||||
Finished Goods | 639,603 | 631,467 | 366,911 | |||||||||
Work in Process | 18,098 | 7,107 | 17,122 | |||||||||
Raw Materials and Supplies | 114,295 | 123,129 | 183,674 | |||||||||
Total Inventories | 771,996 | 761,703 | 567,707 | |||||||||
Deferred Income Taxes, Net | - | 6,674 | - | |||||||||
Other Current Assets | 15,157 | 13,251 | 15,765 | |||||||||
Total Current Assets | 905,029 | 874,321 | 673,887 | |||||||||
Property, Plant and Equipment, Net | 207,474 | 178,370 | 188,837 | |||||||||
Deferred Income Tax Asset, Net | 15,364 | 17,335 | 12,897 | |||||||||
Other Assets | 20,847 | 17,583 | 19,706 | |||||||||
Total Assets | $ | 1,148,714 | $ | 1,087,609 | $ | 895,327 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
�� | ||||||||||||
Current Liabilities: | ||||||||||||
Notes Payable | $ | - | $ | - | $ | 402 | ||||||
Accounts Payable | 237,008 | 265,578 | 67,410 | |||||||||
Accrued Vacation | 11,936 | 11,499 | 11,792 | |||||||||
Accrued Payroll | 10,120 | 13,440 | 9,438 | |||||||||
Other Accrued Expenses | 39,243 | 25,732 | 27,627 | |||||||||
Income Taxes Payable | 4,172 | 3,886 | 2,974 | |||||||||
Current Portion of Long-Term Debt and Capital Lease Obligations | 9,987 | 307,080 | 279,815 | |||||||||
Total Current Liabilities | 312,466 | 627,215 | 399,458 | |||||||||
Long-Term Debt, Less Current Portion | 354,905 | 37,322 | 35,967 | |||||||||
Capital Lease Obligations, Less Current Portion | 18,425 | - | 4,988 | |||||||||
Pension Liabilities | 41,119 | 60,245 | 37,798 | |||||||||
Other Long-Term Liabilities | 11,559 | 3,222 | 11,942 | |||||||||
Total Liabilities | 738,474 | 728,004 | 490,153 | |||||||||
Commitments and Contingencies | ||||||||||||
Stockholders' Equity: | ||||||||||||
Preferred Stock | 1,338 | 1,344 | 1,344 | |||||||||
Common Stock, $.25 Par Value Per Share | 3,024 | 3,023 | 3,023 | |||||||||
Additional Paid-in Capital | 97,395 | 97,373 | 97,373 | |||||||||
Treasury Stock, at Cost | (66,730 | ) | (62,913 | ) | (65,709 | ) | ||||||
Accumulated Other Comprehensive Loss | (28,396 | ) | (31,804 | ) | (28,396 | ) | ||||||
Retained Earnings | 403,609 | 352,582 | 397,539 | |||||||||
Total Stockholders' Equity | 410,240 | 359,605 | 405,174 | |||||||||
Total Liabilities and Stockholders' Equity | $ | 1,148,714 | $ | 1,087,609 | $ | 895,327 | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
SENECA FOODS CORPORATION AND SUBSIDIARIES | ||||||
(Unaudited) | ||||||
(In Thousands) |
Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Preferred | Common | Paid-In | Treasury | Comprehensive | Retained | |||||||||||||||||||
Stock | Stock | Capital | Stock | Loss | Earnings | |||||||||||||||||||
Balance March 31, 2017 | $ | 1,324 | $ | 3,024 | $ | 97,458 | $ | (66,499 | ) | $ | (11,175 | ) | $ | 410,129 | ||||||||||
Net loss | - | - | - | - | - | (1,951 | ) | |||||||||||||||||
Cash dividends paid on preferred stock | - | - | - | - | - | (12 | ) | |||||||||||||||||
Equity incentive program | - | - | 50 | - | - | - | ||||||||||||||||||
Preferred stock conversion | (605 | ) | 14 | 591 | - | - | - | |||||||||||||||||
Purchase treasury stock | - | - | - | (2,696 | ) | - | - | |||||||||||||||||
Change in pension, post retirement benefits, other adjustment (net of tax of $63) | - | - | - | - | 102 | - | ||||||||||||||||||
Balance September 30, 2017 | $ | 719 | $ | 3,038 | $ | 98,099 | $ | (69,195 | ) | $ | (11,073 | ) | $ | 408,166 |
Preferred Stock | Common Stock | |||||||||||||||||||||||
6% | 10% | |||||||||||||||||||||||
Cumulative Par | Cumulative Par | 2003 Series | ||||||||||||||||||||||
Value $.25 | Value $.025 | Participating | Participating | Class A | Class B | |||||||||||||||||||
Callable at Par | Convertible | Convertible Par | Convertible Par | Common Stock | Common Stock | |||||||||||||||||||
Voting | Voting | Value $.025 | Value $.025 | Par Value $.25 | Par Value $.25 | |||||||||||||||||||
Shares authorized and designated: | ||||||||||||||||||||||||
September 30, 2017 | 200,000 | 1,400,000 | 38,542 | 500 | 20,000,000 | 10,000,000 | ||||||||||||||||||
Shares outstanding: | ||||||||||||||||||||||||
September 30, 2017 | 200,000 | 807,240 | 38,542 | 500 | 7,875,188 | 1,884,439 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
SENECA FOODS CORPORATION AND SUBSIDIARIES | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(In Thousands, Except Per Share Data) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
October 1, | September 26, | October 1, | September 26, | |||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net Sales | $ | 357,247 | $ | 313,202 | $ | 609,861 | $ | 539,460 | ||||||||
Costs and Expenses: | ||||||||||||||||
Cost of Product Sold | 327,035 | 284,129 | 559,674 | 489,488 | ||||||||||||
Selling, General and Administrative | 18,702 | 17,394 | 35,907 | 32,450 | ||||||||||||
Plant Restructuring Charge (Credit) | 277 | 15 | 1,462 | (66 | ) | |||||||||||
Other Operating Expense (Income) | 31 | (67 | ) | 19 | (403 | ) | ||||||||||
Total Costs and Expenses | 346,045 | 301,471 | 597,062 | 521,469 | ||||||||||||
Operating Income | 11,202 | 11,731 | 12,799 | 17,991 | ||||||||||||
Loss (Earnings) From Equity Investment | 270 | 86 | (167 | ) | 86 | |||||||||||
Interest Expense, Net | 2,151 | 1,889 | 4,295 | 3,581 | ||||||||||||
Earnings Before Income Taxes | 8,781 | 9,756 | 8,671 | 14,324 | ||||||||||||
Income Taxes Expense | 2,637 | 3,234 | 2,589 | 4,834 | ||||||||||||
Net Earnings | $ | 6,144 | $ | 6,522 | $ | 6,082 | $ | 9,490 | ||||||||
Earnings Applicable to Common Stock | $ | 6,082 | $ | 6,456 | $ | 6,014 | $ | 9,376 | ||||||||
Basic Earnings per Common Share | $ | 0.62 | $ | 0.65 | $ | 0.61 | $ | 0.95 | ||||||||
Diluted Earnings per Common Share | $ | 0.62 | $ | 0.65 | $ | 0.61 | $ | 0.94 | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
SENECA FOODS CORPORATION AND SUBSIDIARIES | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(In Thousands) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
October 1, | September 26, | October 1, | September 26, | |||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Comprehensive income: | ||||||||||||||||
Net earnings | $ | 6,144 | $ | 6,522 | $ | 6,082 | $ | 9,490 | ||||||||
Change in pension and post retirement benefits (net of tax) | - | - | - | - | ||||||||||||
Total | $ | 6,144 | $ | 6,522 | $ | 6,082 | $ | 9,490 | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
SENECA FOODS CORPORATION AND SUBSIDIARIES | ||||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
Six Months Ended | ||||||||
October 1, 2016 | September 26, 2015 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net Earnings | $ | 6,082 | $ | 9,490 | ||||
Adjustments to Reconcile Net Earnings to | ||||||||
Net Cash Used in Operations: | ||||||||
Depreciation & Amortization | 12,018 | 10,487 | ||||||
Loss (Gain) on the Sale of Assets | 48 | (143 | ) | |||||
Impairment Provision (Benefit) | 1,462 | (66 | ) | |||||
(Earnings) Loss From Equity Investment | (167 | ) | 86 | |||||
Deferred Income Tax Benefit | (2,467 | ) | (2,183 | ) | ||||
Changes in Operating Assets and Liabilities: | ||||||||
Accounts Receivable | (25,939 | ) | (13,459 | ) | ||||
Inventories | (204,289 | ) | (289,291 | ) | ||||
Other Current Assets | 608 | 14,448 | ||||||
Income Taxes | 1,198 | 2,099 | ||||||
Accounts Payable, Accrued Expenses | ||||||||
and Other Liabilities | 183,025 | 211,664 | ||||||
Net Cash Used in Operations | (28,421 | ) | (56,868 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Additions to Property, Plant and Equipment | (14,518 | ) | (3,111 | ) | ||||
Proceeds from the Sale of Assets | 13 | 155 | ||||||
Net Cash Used in Investing Activities | (14,505 | ) | (2,956 | ) | ||||
Cash Flow from Financing Activities: | ||||||||
Long-Term Borrowing | 183,744 | 154,763 | ||||||
Payments on Long-Term Debt | (136,613 | ) | (84,525 | ) | ||||
Payment on Notes Payable | (402 | ) | (9,903 | ) | ||||
Other Assets | (1,248 | ) | (74 | ) | ||||
Purchase of Treasury Stock | (1,021 | ) | (1,636 | ) | ||||
Dividends | (12 | ) | (12 | ) | ||||
Net Cash Provided by Financing Activities | 44,448 | 58,613 | ||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 1,522 | (1,211 | ) | |||||
Cash and Cash Equivalents, Beginning of the Period | 8,602 | 10,608 | ||||||
Cash and Cash Equivalents, End of the Period | $ | 10,124 | $ | 9,397 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Noncash Transactions: | ||||||||
Property, Plant and Equipment Purchased Under Capital Lease Obligations | $ | 15,416 | $ | - | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
SENECA FOODS CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Additional | Accumulated Other | |||||||||||||||||||||||
Preferred | Common | Paid-In | Treasury | Comprehensive | Retained | |||||||||||||||||||
Stock | Stock | Capital | Stock | Loss | Earnings | |||||||||||||||||||
Balance March 31, 2016 | $ | 1,344 | $ | 3,023 | $ | 97,373 | $ | (65,709 | ) | $ | (28,396 | ) | $ | 397,539 | ||||||||||
Net earnings | - | - | - | - | - | 6,082 | ||||||||||||||||||
Cash dividends paid | ||||||||||||||||||||||||
on preferred stock | - | - | - | - | - | (12 | ) | |||||||||||||||||
Equity incentive program | - | - | 17 | - | - | - | ||||||||||||||||||
Preferred stock conversion | (6 | ) | 1 | 5 | - | - | - | |||||||||||||||||
Purchase treasury stock | - | - | - | (1,021 | ) | - | - | |||||||||||||||||
Balance October 1, 2016 | $ | 1,338 | $ | 3,024 | $ | 97,395 | $ | (66,730 | ) | $ | (28,396 | ) | $ | 403,609 | ||||||||||
Preferred Stock | Common Stock | ||||||||
6 | % | 10 | % | ||||||
Cumulative Par | Cumulative Par | 2003 Series | |||||||
Value $.25 | Value $.025 | Participating | Participating | Class A | Class B | ||||
Callable at Par | Convertible | Convertible Par | Convertible Par | Common Stock | Common Stock | ||||
Voting | Voting | Value $.025 | Value $.025 | Par Value $.25 | Par Value $.25 | ||||
Shares authorized and designated: | |||||||||
October 1, 2016 | 200,000 | 1,400,000 | 90,351 | 500 | 20,000,000 | 10,000,000 | |||
Shares outstanding: | |||||||||
October 1, 2016 | 200,000 | 807,240 | 90,351 | 500 | 7,885,485 | 1,894,321 | |||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
SENECA FOODS CORPORATION AND SUBSIDIARIES
(Unaudited)
September 30, 2017
1. | Unaudited Condensed Consolidated Financial Statements |
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which are normal and recurring in nature, necessary to present fairly the financial position of Seneca Foods Corporation (the "Company"“Company”) as of October 1, 2016September 30, 2017 and results of its operations and its cash flows for the interim periods presented. All significant intercompany transactions and accounts have been eliminated in consolidation. The March 31, 20162017 balance sheet was derived from the audited consolidated financial statements.
The results of operations for the threeand six month periods ended October 1, 2016September 30, 2017 are not necessarily indicative of the results to be expected for the full year.
During the six months ended October 1, 2016,September 30, 2017, the Company sold $54,146,000$73,096,000 of Green Giant finished goods inventory to B&G Foods, Inc. for cash, on a bill and hold basis, as compared to $32,765,000$54,416,000 for the six months ended September 26, 2015.October 1, 2016. Under the terms of the bill and hold agreement, title to the specified inventory transferred to B&G. The Company believes it has met the criteria required for bill and hold treatment.
The accounting policies followed by the Company are set forth in Note 1 to the Company's Consolidated Financial Statements in the Company's 2016Company’s 2017 Annual Report on Form 10-K.
Other footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notesnotes included in the Company's 20162017 Annual Report on Form 10-K.
All references to years are fiscal years ended or ending March 31 unless otherwise indicated. Certain percentage tables may not foot due to rounding.
Reclassifications—Certain previously reported amounts have been reclassified to conform to the current period classification.
2. |
|
Purchase Price (net of cash received) | $ | 31,842 | ||
Approximate fair values of assets acquired and liabilities assumed: | ||||
Current assets | $ | 22,823 | ||
Other long-term assets | 1,744 | |||
Property, plant and equipment | 28,696 | |||
Current liabilities | (5,068 | ) | ||
Deferred taxes | 407 | |||
Other long-term liabilities | (15,664 | ) | ||
Bargain purchase gain | (1,096 | ) | ||
Total | $ | 31,842 |
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Purchase Price (net of cash received) | $ | 23,784 | ||
Allocated as follows: | ||||
Current assets | $ | 36,647 | ||
Other long-term assets | 1,395 | |||
Property, plant and equipment | 13,654 | |||
Deferred taxes | (7,710 | ) | ||
Other long-term liabilities | (4,120 | ) | ||
Current liabilities | (16,082 | ) | ||
Total | $ | 23,784 |
September 30, 2017
The Company is continuing to evaluate the Company completed the acquisitionpurchase price allocation and these preliminary estimates could change. Proforma results of 100% of the stock of Diana Fruit Co., Inc. The business, based in Santa Clara, California, is a processor of maraschino cherries and cherries for fruit cocktail. The purchase price was approximately $15,011,000 (net of cash acquired) plus the assumption of certain liabilities. In conjunction with the closing, the Company paid off $1,441,000 of liabilities acquired. The rationaleoperations for the Truitt acquisition wasare not presented because the business is a complementary fit witheffects are not material to the recent acquisition of Gray & Company. This acquisition was financed with proceeds from the Company's revolving credit facility. The purchase price to acquire Diana was allocated based on the internally developed fair value of the assets acquired and liabilities assumed and the independent valuation of inventory, intangibles, and property, plant, and equipment. The purchase price of $15,011,000 has been allocated as follows (in thousands):
Purchase Price (net of cash received) | $ | 15,011 | ||
Allocated as follows: | ||||
Current assets | $ | 16,834 | ||
Other long-term assets | 509 | |||
Property, plant and equipment | 872 | |||
Deferred taxes | 428 | |||
Current liabilities | (3,632 | ) | ||
Total | $ | 15,011 |
3. | Inventories |
4. | Revolving Credit Facility |
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2017
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.
General terms of the Revolver include payment of interest at LIBOR plus a defined spread.
The following table documents the quantitative data for Revolver borrowings during the second quarter and year-to-date periods of fiscal 20172018 and fiscal 2016:
Second Quarter | Year-to-Date | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Reported end of period: | ||||||||||||||||
Outstanding borrowings | $ | 342,935 | $ | 304,468 | $ | 342,935 | $ | 304,468 | ||||||||
Weighted average interest rate | 1.88 | % | 1.99 | % | 1.88 | % | 1.99 | % | ||||||||
Reported during the period: | ||||||||||||||||
Maximum amount of borrowings | $ | 361,800 | $ | 304,468 | $ | 361,800 | $ | 304,468 | ||||||||
Average outstanding borrowings | $ | 314,102 | $ | 242,255 | $ | 284,287 | $ | 225,112 | ||||||||
Weighted average interest rate | 1.78 | % | 1.96 | % | 1.93 | % | 1.95 | % | ||||||||
Second Quarter | Year-to-Date | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Reported end of period: | ||||||||||||||||
Outstanding borrowings | $ | 272,609 | $ | 342,935 | $ | 272,609 | $ | 342,935 | ||||||||
Weighted average interest rate | 2.75 | % | 1.88 | % | 2.75 | % | 1.88 | % | ||||||||
Reported during the period: | ||||||||||||||||
Maximum amount of borrowings | $ | 274,117 | $ | 361,800 | $ | 274,117 | $ | 361,800 | ||||||||
Average outstanding borrowings | $ | 244,160 | $ | 314,102 | $ | 229,235 | $ | 284,287 | ||||||||
Weighted average interest rate | 2.58 | % | 1.78 | % | 2.45 | % | 1.93 | % |
5. |
|
6. | Retirement Plans |
Three Months Ended | Six Months Ended | |||||||||||||||
October 1, | September 26, | October 1, | September 26, | |||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(In thousands) | ||||||||||||||||
Service Cost | $ | 2,164 | $ | 2,519 | $ | 4,328 | $ | 5,039 | ||||||||
Interest Cost | 1,919 | 2,177 | 3,838 | 4,355 | ||||||||||||
Expected Return on Plan Assets | (2,978 | ) | (2,625 | ) | (5,958 | ) | (5,252 | ) | ||||||||
Amortization of Actuarial Loss | 679 | 844 | 1,358 | 1,687 | ||||||||||||
Amortization of Transition Asset | 27 | 27 | 55 | 55 | ||||||||||||
Net Periodic Benefit Cost | $ | 1,811 | $ | 2,942 | $ | 3,621 | $ | 5,884 |
Three Months Ended | Six Months Ended | |||||||||||||||
September 30, 2017 | October 1, 2016 | September 30, 2017 | October 1, 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Service Cost | $ | 1,981 | $ | 2,164 | $ | 3,963 | $ | 4,328 | ||||||||
Interest Cost | 1,985 | 1,919 | 3,971 | 3,838 | ||||||||||||
Expected Return on Plan Assets | (3,482 | ) | (2,978 | ) | (6,967 | ) | (5,957 | ) | ||||||||
Amortization of Actuarial Loss | - | 679 | - | 1,358 | ||||||||||||
Amortization of Transition Asset | 30 | 27 | 60 | 55 | ||||||||||||
Net Periodic Benefit Cost | $ | 514 | $ | 1,811 | $ | 1,027 | $ | 3,622 |
There was ano contribution of $300,000 to the pension plan in the six month period ended October 1, 2016.September 30, 2017. There was a contribution of $600,000$300,000 made in the six month period ended October 1, 2016.
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 26, 2015.
7. | Plant Restructuring |
Long-Lived | ||||||||||||||||
Severance | Asset Charges | Other Costs | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Balance March 31, 2016 | $ | - | $ | 4,975 | $ | 3,897 | $ | 8,872 | ||||||||
First quarter charge (credit) | 127 | (6 | ) | 1,064 | 1,185 | |||||||||||
Second quarter charge (credit) | 112 | (286 | ) | 451 | 277 | |||||||||||
Cash payments/write offs | (123 | ) | 240 | (3,242 | ) | (3,125 | ) | |||||||||
Balance October 1, 2016 | $ | 116 | $ | 4,923 | $ | 2,170 | $ | 7,209 | ||||||||
Balance March 31, 2015 | $ | 715 | $ | 264 | $ | 270 | $ | 1,249 | ||||||||
First quarter credit | (81 | ) | - | - | (81 | ) | ||||||||||
Second quarter charge | 15 | - | - | 15 | ||||||||||||
Cash payments/write offs | (649 | ) | - | (240 | ) | (889 | ) | |||||||||
Balance September 26, 2015 | $ | - | $ | 264 | $ | 30 | $ | 294 |
Long-Lived | ||||||||||||||||
Severance | Asset Charges | Other Costs | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Balance March 31, 2017 | $ | 37 | $ | 4,773 | $ | 305 | $ | 5,115 | ||||||||
First quarter charge | 36 | 9 | 36 | 81 | ||||||||||||
Second quarter charge (credit) | - | 8 | (33 | ) | (25 | ) | ||||||||||
Cash payments/write offs | (73 | ) | (3,888 | ) | (308 | ) | (4,269 | ) | ||||||||
Balance September 30, 2017 | $ | - | $ | 902 | $ | - | $ | 902 | ||||||||
Balance March 31, 2016 | $ | - | $ | 4,975 | $ | 3,897 | $ | 8,872 | ||||||||
First quarter charge (credit) | 127 | (6 | ) | 1,064 | 1,185 | |||||||||||
Second quarter charge (credit) | 112 | (286 | ) | 451 | 277 | |||||||||||
Cash payments/write offs | (123 | ) | 240 | (3,242 | ) | (3,125 | ) | |||||||||
Balance October 1, 2016 | $ | 116 | $ | 4,923 | $ | 2,170 | $ | 7,209 |
During fiscal 2016, the Company recorded a restructuring charge of $10,302,000 related to the closing of a plant in the Northwest of which $162,000 was related to severance cost, $5,065,000 was related to asset impairments (contra fixed assets), and $5,075,000 was related to other costs (mostly operating lease costs).
During the quartersix months ended October 1, 2016,September 30, 2017, the Company recorded an additional restructuring charge of $277,000$57,000 related to the previous closing of a plant in thethis Northwest plant.
8. | Other Operating Income and Expense |
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 26, 2015. During the quarter ended June 27, 2015, the Company reversed a provision for the Prop 65 litigation of $200,000 and reduced an environmental accrual by $60,000. These items are included in other operating income in the Unaudited Condensed Consolidated Statements of Net Earnings.
9. | Recently Issued Accounting Standards |
In February 2016, the FASB issued ASUAccounting Standards Update No. 2016-02, LeasesLeases.. The new standard establishes a right-of-use ("ROU"(“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)2020 for the Company), 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"), which clarifies 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.
There were no other recently issued accounting pronouncements that impacted the Company'sCompany’s condensed consolidated financial statements. In addition, the Company did not adopt any new accounting pronouncements during the quarter ended October 1, 2016.September 30, 2017.
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2017
10. | (Loss) Earnings per Common Share |
Q U A R T E R | YEAR TO DATE | |||||||||||||||
Fiscal | Fiscal | Fiscal | Fiscal | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||
Basic | ||||||||||||||||
Net earnings | $ | 6,144 | $ | 6,522 | $ | 6,082 | $ | 9,490 | ||||||||
Deduct preferred stock dividends paid | 6 | 6 | 12 | 12 | ||||||||||||
Undistributed earnings | 6,138 | 6,516 | 6,070 | 9,478 | ||||||||||||
Earnings attributable to participating preferred | 56 | 60 | 56 | 102 | ||||||||||||
Earnings attributable to common shareholders | $ | 6,082 | $ | 6,456 | $ | 6,014 | $ | 9,376 | ||||||||
Weighted average common shares outstanding | 9,792 | 9,901 | 9,800 | 9,895 | ||||||||||||
Basic earnings per common share | $ | 0.62 | $ | 0.65 | $ | 0.61 | $ | 0.95 | ||||||||
Diluted | ||||||||||||||||
Earnings attributable to common shareholders | $ | 6,082 | $ | 6,456 | $ | 6,014 | $ | 9,376 | ||||||||
Add dividends on convertible preferred stock | 5 | 5 | 10 | 10 | ||||||||||||
Earnings attributable to common stock on a diluted basis | $ | 6,087 | $ | 6,461 | $ | 6,024 | $ | 9,386 | ||||||||
Weighted average common shares outstanding-basic | 9,792 | 9,901 | 9,800 | 9,895 | ||||||||||||
Additional shares issuable related to the | ||||||||||||||||
equity compensation plan | 3 | 2 | 3 | 2 | ||||||||||||
Additional shares to be issued under full | ||||||||||||||||
conversion of preferred stock | 67 | 67 | 67 | 67 | ||||||||||||
Total shares for diluted | 9,862 | 9,970 | 9,870 | 9,964 | ||||||||||||
Diluted earnings per common share | $ | 0.62 | $ | 0.65 | $ | 0.61 | $ | 0.94 |
Q U A R T E R | Y E A R T O D A T E | |||||||||||||||
(Thousands, except share amounts) | Fiscal 2018 | Fiscal 2017 | Fiscal 2018 | Fiscal 2017 | ||||||||||||
Basic | ||||||||||||||||
Net (loss) earnings | $ | (1,112 | ) | $ | 6,144 | $ | (1,951 | ) | $ | 6,082 | ||||||
Deduct preferred stock dividends paid | 6 | 6 | 12 | 12 | ||||||||||||
Undistributed (loss) earnings | (1,118 | ) | 6,138 | (1,963 | ) | 6,070 | ||||||||||
(Loss) earnings attributable to participating preferred | (4 | ) | 56 | (11 | ) | 56 | ||||||||||
(Loss) earnings attributable to common shareholders | $ | (1,114 | ) | $ | 6,082 | $ | (1,952 | ) | $ | 6,014 | ||||||
Weighted average common shares outstanding | 9,792 | 9,792 | 9,803 | 9,800 | ||||||||||||
Basic (loss) earnings per common share | $ | (0.11 | ) | $ | 0.62 | $ | (0.20 | ) | $ | 0.61 | ||||||
Diluted | ||||||||||||||||
(Loss) earnings attributable to common shareholders | $ | (1,114 | ) | $ | 6,082 | $ | (1,952 | ) | $ | 6,014 | ||||||
Add dividends on convertible preferred stock | 5 | 5 | 10 | 10 | ||||||||||||
(Loss) earnings attributable to common stock on a diluted basis | $ | (1,109 | ) | $ | 6,087 | $ | (1,942 | ) | $ | 6,024 | ||||||
Weighted average common shares outstanding-basic | 9,792 | 9,792 | 9,803 | 9,800 | ||||||||||||
Additional shares issued related to the equity compensation plan | - | 3 | - | 3 | ||||||||||||
Additional shares to be issued under full conversion of preferred stock | - | 67 | - | 67 | ||||||||||||
Total shares for diluted | 9,792 | 9,862 | 9,803 | 9,870 | ||||||||||||
Diluted (loss) earnings per common share | $ | (0.11 | ) | $ | 0.62 | $ | (0.20 | ) | $ | 0.61 |
Note: For fiscal 2018, add backs for equity compenstion and additional shares that were anti-dilutive were excluded. |
11. | Fair Value of Financial Instruments |
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 26, 2015, respectively. The 3.8 percentage point decrease in the effective tax rate represents a decrease in tax expense as a percentage of book income when compared to the same period last year. The major contributor to this decrease is with the federal credits for R & D, WOTC and fuel plus state credits. These credits are largely fixed and with the relatively low pre-tax earnings for the six months ended October 1, 2016, these credits add to the credit provision and are a larger percentage of pre-tax earnings in comparison to the six months ended September 26, 2015. This accounts for 2.9 percent of the decrease.
12. |
|
September 30, 2017
Seneca Foods Corporation (the "Company"“Company”) is a leading provider of packaged fruits and vegetables, with facilities located throughout the United States. The Company'sCompany’s product offerings include canned, frozen and bottled produce and snack chips. Its products are sold under private label as well as national and regional brands that the Company owns or licenses, including Seneca®, Libby's®Libby’s®, Aunt Nellie's®Nellie’s®, Cherryman®, Green Valley®, READ® and Seneca Farms®. The Company'sCompany’s canned fruits and vegetables are sold nationwide by major grocery outlets, including supermarkets, mass merchandisers, limited assortment stores, club stores and dollar stores. The Company also sells its products to foodservice distributors, industrial markets, other food processors, export customers in over 90 countries and federal, state and local governments for school and other food programs. In addition, the Company packs Green Giant®, Le Sueur® and other brands of canned vegetables as well as select Green Giant® frozen vegetables for B&G Foods North America ("(“B&G"&G”) under a contract packing agreement.
The Company'sCompany’s raw product is harvested mainly between June through November.
Results of Operations:
Sales:
Second fiscal quarter 20172018 results include net sales of $357,246,000,$376,308,000, which represents a 14.1%5.3% increase, or $44,045,000,$19,061,000, from the second quarter of fiscal 2016.2017. The net increase in sales is attributable to a sales volume increase of $87,022,000 partially offset by lower$15,866,000 and higher selling prices/sales mix of $42,977,000.$3,195,000. The increase in sales is primarily from the acquisition of Truitt during the current year with sales of $19,466,000, a $34,417,000 increase in Canned Fruit sales ($20,960,000 from the acquisitions of Gray and Diana), a $14,441,000$13,609,000 increase in B&G Foods, Inc. sales, and a $218,000$2,141,000 increase in SnackFrozen sales, a $797,000 increase in Canned Vegetable sales, partially offset by a $4,639,000$13,527,000 decrease in Canned VegetableFruit sales and a $793,000$461,000 decrease in FrozenSnack sales.
Six months ended October 1, 2016September 30, 2017 include net sales of $609,861,000,$656,495,000, which represents a 13.1%7.6% increase, or $70,401,000,$46,634,000, from the first six months of fiscal 2016.2017. The net increase in sales is attributable to a sales volume increase of $116,908,000, partially offset by lower$44,448,000, and higher selling prices/sales mix of $46,507,000.$2,186,000. The increase in sales is primarily from the acquisition of Truitt during the current year with sales of $41,138,000, a $19,832,000$14,073,000 increase in B&G Foods, Inc. sales, a $58,844,000$13,286,000 increase in Canned FruitVegetable sales, ($41,076,000 from the acquisitions of Gray and Diana), a $1,112,000$5,927,000 increase in Frozen sales, and a $1,009,000 increase in Snack sales, partially offset by a $9,790,000$22,794,000 decrease in Canned VegetableFruit sales of and a $2,150,000 decrease in Snack sales.
The following table presents sales by product category (in millions):
Three Months Ended | Six Months Ended | |||||||||||||||
September 30, 2017 | October 1, 2016 | September 30, 2017 | October 1, 2016 | |||||||||||||
Canned Vegetables | $ | 184.9 | $ | 184.1 | $ | 338.7 | $ | 325.4 | ||||||||
B&G* | 70.8 | 57.2 | 81.4 | 67.4 | ||||||||||||
Frozen | 24.2 | 22.0 | 51.2 | 45.2 | ||||||||||||
Fruit Products | 70.7 | 84.3 | 130.7 | 153.5 | ||||||||||||
Chip Products | 3.3 | 3.7 | 5.5 | 7.7 | ||||||||||||
Truitt | 19.4 | 0.0 | 41.1 | 0.0 | ||||||||||||
Other | 3.0 | 5.9 | 7.9 | 10.7 | ||||||||||||
$ | 376.3 | $ | 357.2 | $ | 656.5 | $ | 609.9 |
*B&G includes frozen vegetable sales exclusively for B&G. |
Three Months Ended | Six Months Ended | |||||||||||||||||
October 1, | September 26, | October 1, | September 26, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Canned Vegetables | $ | 184.1 | $ | 188.7 | $ | 325.4 | $ | 335.2 | ||||||||||
B&G | * | 57.2 | 42.8 | 67.4 | 47.6 | |||||||||||||
Frozen | 22.0 | 22.8 | 45.2 | 44.1 | ||||||||||||||
Fruit Products | 84.3 | 49.9 | 153.5 | 94.6 | ||||||||||||||
Snack | 3.7 | 3.5 | 7.7 | 6.7 | ||||||||||||||
Other | 5.9 | 5.5 | 10.7 | 11.3 | ||||||||||||||
$ | 357.2 | $ | 313.2 | $ | 609.9 | $ | 539.5 | |||||||||||
*B&G includes frozen vegetable sales exclusively for B&G. |
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 201
7
Operating Income:
Three Months Ended | Six Months Ended | |||||||
October 1, | September 26, | October 1, | September 26, | |||||
2016 | 2015 | 2016 | 2015 | |||||
Gross Margin | 8.5 | % | 9.3 | % | 8.2 | % | 9.3 | % |
Selling | 2.6 | % | 2.9 | % | 2.9 | % | 3.1 | % |
Administrative | 2.6 | % | 2.7 | % | 3.0 | % | 2.9 | % |
Plant Restructuring | 0.1 | % | - | % | 0.2 | % | - | % |
Other Operating Income | - | % | - | % | - | % | (0.1) | % |
Operating Income | 3.2 | % | 3.7 | % | 2.1 | % | 3.4 | % |
Interest Expense, Net | 0.6 | % | 0.6 | % | 0.7 | % | 0.7 | % |
Three Months Ended | Six Months Ended | |||||||||||||||
September 30, 2017 | October 1, 2016 | September 30, 2017 | October 1, 2016 | |||||||||||||
Gross Margin | 5.4 | % | 8.5 | % | 5.5 | % | 8.2 | % | ||||||||
Selling | 2.5 | % | 2.6 | % | 2.7 | % | 2.9 | % | ||||||||
Administrative | 2.6 | % | 2.6 | % | 2.8 | % | 3.0 | % | ||||||||
Plant Restructuring | 0.0 | % | 0.1 | % | 0.0 | % | 0.2 | % | ||||||||
Other Operating Income | 0.0 | % | 0.0 | % | -0.4 | % | 0.0 | % | ||||||||
Operating Income | 0.4 | % | 3.1 | % | 0.4 | % | 2.1 | % | ||||||||
Interest Expense, Net | 0.9 | % | 0.6 | % | 1.0 | % | 0.7 | % |
For the threethree month period ended October 1, 2016,September 30, 2017, the gross margin decreased from the prior year quarter from 9.3%8.5% to 8.5%5.4% due primarily to lower net selling prices (after considering promotions) compared to prior year. Thethe LIFO charge for the second quarter ended October 1, 2016September 30, 2017 which was $2,476,000$10,398,000 as compared to a charge of $50,000$2,476,000 for the second quarter ended September 26, 2015October 1, 2016 and reflects the impact on the quarter of higher cost increases expected in fiscal 2017,2018, compared with smaller cost increases to fiscal 2016.2017. On an after-tax basis, LIFO net earnings decreased by $6,759,000 for the quarter ended September 30, 2017 and decreased LIFO net earnings by $1,609,000 for the quarter ended October 1, 2016, and decreased LIFO net earnings by $33,000 for the quarter ended September 26, 2015, based on the statutory federal income tax rate.
For the six month period ended October 1, 2016,September 30, 2017, the gross margin decreased from the prior year period from 9.3%8.2% to 8.2%5.5% due primarily to lower net selling prices (after considering promotions) compared to the prior year and a higher LIFO charge in the current year as compared to a credit the prior year. The LIFO charge for the six months ended October 1, 2016September 30, 2017 was $4,375,000$17,841,000 as compared to a creditcharge of $1,587,000$4,375,000 for the six months ended September 26, 2015October 1, 2016 and reflects the impact on the six months of cost increases expected in fiscal 2017,2018, compared to cost decreases in fiscal 2016.2017. On an after-tax basis, LIFO decreased net earnings by $11,597,000 for the six months ended September 30, 2017 and decreased net earnings by $2,844,000 for the six months ended October 1, 2016, and increased net earnings by $1,032,000 for the six months ended September 26, 2015, based on the statutory federal income tax rate.
For the threethree month period ended October 1, 2016,September 30, 2017, selling costs as a percentage of sales decreased from 2.9%2.6% to 2.6%2.5% for the same period in the prior year. For the six month period ended October 1, 2016,September 30, 2017, selling costs as a percentage of sales decreased from 3.1%2.9% to 2.9%2.7% for the same period in the prior year. The three and six month decreases are primarily as a result of the Green Giant Alliance sales increase, which don't incur selling costs.
For the three month period ended October 1, 2016,September 30, 2017, administrative expense as a percentage of sales was unchanged at 2.6%. For the six month period ended September 30, 2017, administrative expense as a percentage of sales decreased from 2.7%3.0% to 2.6%2.8% due primarily to lower employment costs in the current year than the prior year. For
During the six month periodmonths ended October 1, 2016, administrative expenseSeptember 30, 2017, the Company sold some unused fixed assets which resulted in a gain of $1,591,000. $1,081,000 of the current year gain was related to the sale of a closed plant in the Midwest. In addition, the Company recorded a bargain purchase gain of $1,096,000 as a percentage of sales increased from 2.9%discussed in the Acquisition footnote to 3.0%.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 2017
Interest expense for thethe second quarter ended September 30, 2017, as a percentage of sales, increased from 0.6% to 0.9% in second quarter ended October 1, 2016, as a percentage of sales, remained the same at 0.6% compared to second quarter ended September 26, 2015.2016. For the six month period ended October 1, 2016,September 30, 2017, interest expense as a percentage of sales remained the same atincreased from 0.7% to 1.0% compared to six months ended September 26, 2015.
Income Taxes:
The effective tax rate was 29.9%53.6% and 33.7%29.9% for the three six month periods ended September 30, 2017 and October 1, 2016, and September 26, 2015, respectively. The 3.823.7 percentage point decreaseincrease in the effective tax rate represents a decreasean increase in tax expensebenefit as a percentage of book incomeloss when compared to the same period last year. The major contributorcontributors to this decreaseincrease are a result of the Truitt acquisition. The bargain purchase gain is withnon-taxable and the federal creditsdeferred tax liability related to the outside basis difference in the Truitt investment was written off because the investment can now be recovered in a tax-free manner.
Earnings per Share:
Basic (loss) earnings per share were $(0.11) and $0.62 for R & D, WOTCthe three months ended September 30, 2017 and fuel; plus state credits. These credits are largely fixedOctober 1, 2016, respectively. Diluted (loss) earnings per share were $(0.11) and with$0.62 for the relatively low pre-taxthree months ended September 30, 2017 and October 1, 2016, respectively. Basic (loss) earnings per share were $(0.20) and $0.61 for the six months ended September 30, 2017 and October 1, 2016, these credits add to the credit provision and are a larger percentage of pre-tax earnings in comparison to the six months ended September 26, 2015. This accounts for 2.9 percent of the decrease.
Liquidity and Capital Resources:
The financial condition of the Company is summarized in the following table and explanatory review:
October 1, | September 26, | March 31, | March 31, | |||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Working capital: | ||||||||||||||||
Balance | $ | 592,563 | $ | 247,106 | $ | 274,429 | $ | 463,545 | ||||||||
Change during quarter | 78,493 | (187,993 | ) | |||||||||||||
Long-term debt, less current portion | 354,905 | 37,322 | 35,967 | 271,634 | ||||||||||||
Total stockholders' equity per equivalent | ||||||||||||||||
common share (see Note) | 41.28 | 35.79 | 40.63 | 34.81 | ||||||||||||
Stockholders' equity per common share | 41.81 | 36.22 | 41.15 | 35.33 | ||||||||||||
Current ratio | 2.90 | 1.39 | 1.69 | 4.72 |
September 30, | October 1, | March 31, | March 31, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Working Capital: | ||||||||||||||||
Balance | $ | 609,627 | $ | 592,563 | $ | 555,993 | $ | 274,429 | ||||||||
Change in Quarter | 41,970 | 78,493 | ||||||||||||||
Long-Term Debt, Less Current Portion | 395,128 | 354,905 | 329,138 | 35,967 | ||||||||||||
Capital Lease Obligations, Less Current Portion | 37,879 | 18,425 | 34,194 | 4,988 | ||||||||||||
Total Stockholders' Equity Per Equivalent | ||||||||||||||||
Common Share (see Note below) | 43.56 | 41.28 | 43.63 | 40.63 | ||||||||||||
Stockholders' Equity Per Common Share | 43.96 | 41.81 | 44.20 | 41.15 | ||||||||||||
Current Ratio | 2.89 | 2.90 | 5.20 | 1.69 |
Note: Equivalent common shares are either common shares or, for convertible preferred shares, the number of common shares that the preferred shares areare convertible into. See Note 7 of the Notes to Consolidated Financial Statements of the Company's 2016Company’s 2017 Annual Report on Form 10-K for conversion details.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 2017
As shown in the Condensed Consolidated Statements of Cash Flows, net cash used in operating activities was $17,790,000 in the first six months of fiscal 2018, compared to $28,421,000 in the first six months of fiscal 2017, compared to $56,868,000 in the first six months of fiscal 2016.2017. The $28,447,000$10,631,000 decrease in cash used is primarily attributable to a $28,639,000 decrease in cash provided by accounts payable, accrued expenses and other liabilities and decreased net earnings of $3,408,000 as previously discussed, a $13,840,000 decrease in cash provided by other current assets, a $901,000 decrease in cash provided by income taxes, and an $12,480,000$188,255,000 increase in cash used by accounts receivable partially offset by ainventory in the first six months of fiscal 2018 as compared to $204,289,000 increase in inventory in the first six months of fiscal 2017, as compared to $289,291,000a $9,907,000 increase in inventorycash provided by accounts payable, accrued expenses and other liabilities, a $928,000 increase in the first six monthscash provided by income taxes partially offset by decreased net earnings of fiscal 2016.
As compared to September 26, 2015,October 1, 2016, inventory increased $10,293,000$30,391,000 to $771,996,000$802,387,000 at October 1, 2016.September 30, 2017 (including $16,076,000 increase from the Truitt Bros. Inc. acquisition). The components of the inventory increase reflect an $8,136,000a $25,213,000 increase in finished goods, a $10,991,000$14,189,000 increase in work in process and an $8,834,000a $9,011,000 decrease in raw materials and supplies. The finished goods increaseis primarily due to the Truitt acquisition and reflects higher inventory quantities due to the magnitude and timing of the fiscal year 20172018 pack versus fiscal year 20162017 pack partially offset by increased sales volume as compared to the prior year. The raw materials and supplies decrease is primarily due to a decrease in cans and raw steel quantities compared to the prior year. FIFO based inventory costs exceeded LIFO based inventory costs by $151,096,000 as of the end of the second quarter of 2018 as compared to $143,650,000 as of the end of the second quarter of 2017 as2017.
Cash used in investing activities was $26,373,000 in the first six months of fiscal 2018 compared to $162,480,000 as of the end of the second quarter of 2016.
Cash provided by financing activities was $47,111,000 in the first six months of fiscal 2018, which included borrowings of $282,862,000 and the repayment of $232,706,000 of long-term debt, principally consisting of borrowing and repayment on the revolving credit facility (“Revolver”). Cash provided by financing activities was $44,448,000 in the first six months of fiscal 2017, which included borrowings of $183,744,000 and the repayment of $136,613,000 of long-term debt, principally consisting of borrowing and repayment on the revolving credit facility ("Revolver").Revolver. Other than borrowings under the Revolver, there was no new long-term debt during the first six months of fiscal 2016.2018. During the six months ended October 1, 2016, the Company paid off $22,596,000 of Industrial Revenue Bonds. During the six months ended October 1, 2016,September 30, 2017, the Company repurchased $1,021,000$2,696,000 of its Class A and Class B Common Stock as treasury stock compared to $1,636,000$1,021,000 in the prior period. In addition, the Company paid down Notes Payable of $402,000 during the six month period ended October 1, 2016 related to some interim notes which became operating leases and was $9,903,000 in the six month period ended September 26, 2015.
During the six months ended October 1, 2016,September 30, 2017, the Company entered into $15,416,000$7,155,000 of equipment capital leases.
The Company completed the closing of a new five-year revolving credit facility on July 5, 2016. Available borrowings on the Revolver total $400,000,000 from April through July and $500,000,000 from August through March with a maturity date of July 5, 2021. The interest rate on the Revolver is based on LIBOR plus an applicable margin based on excess availability and the Company's fixed charge coverage ratio. As of October 1, 2016,September 30, 2017, the interest rate was approximately 1.88%2.75% on a balance of $342,935,000.$272,609,000. We believe that cash flows from operations, availability under our Revolver and other financing sources will provide adequate funds for our working capital needs, planned capital expenditures, and debt obligations for at least the next 12 months.
The Company'sCompany’s credit facilities contain standard representations and warranties, events of default, and certain affirmative and negative covenants, including various financial covenants. At October 1, 2016,September 30, 2017, the Company was in compliance with all such financial covenants.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30, 2017
New Accounting Standards
Refer to footnote 9 of the Notes to Condensed Consolidated Financial Statements.
Seasonality
The Company's revenues are typically higher in the second and third fiscal quarters. This is due in part because the Company sells, on a bill and hold basis, Green Giant canned and frozen vegetables to B&G either weekly during production for specialty items, or at the end of each pack cycle, which typically occurs during these quarters. B&G buys the product from the Company at cost plus a specified fee for each equivalent case. See the Critical Accounting Policies section below for further details. The Company'sCompany’s non-Green Giant sales also exhibit seasonality with the third fiscal quarter generating the highest retail sales due to holidays that occur during that quarter.
Forward-Looking Information
The information contained in this report contains, or may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this report and include statements regarding the intent, belief or current expectations of the Company or its officers (including statements preceded by, followed by or that include the words "believes," "expects," "anticipates"“believes,” “expects,” “anticipates” or similar expressions) with respect to various matters, including (i) the Company'sCompany’s anticipated needs for, and the availability of, cash, (ii) the Company'sCompany’s liquidity and financing plans, (iii) the Company'sCompany’s ability to successfully integrate acquisitions into its operations, (iv) trends affecting the Company'sCompany’s financial condition or results of operations, including anticipated sales price levels and anticipated expense levels, in particular higher production, fuel and transportation costs, (v) the Company'sCompany’s plans for expansion of its business (including through acquisitions) and cost savings, and (vi) the impact of competition.
Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Investors are cautioned not to place undue reliance on such statements, which speak only to events as of the date the statements were made. Among the factors that could cause actual results to differ materially are:
● | general economic and business conditions; |
● | cost and availability of commodities and other raw materials such as vegetables, steel and packaging materials; |
● | transportation costs; |
● | climate and weather affecting growing conditions and crop yields; |
● | the availability of financing; |
● | leverage and the |
● | foreign currency exchange and interest rate fluctuations; |
● | effectiveness of the |
● | changing consumer preferences; |
● | competition; |
● | product liability claims; |
● | the loss of significant customers or a substantial reduction in orders from these customers; |
● | changes in, or the failure or inability to comply with, U.S., foreign and local governmental regulations, including environmental and health and safety regulations; and |
● | other risks detailed from time to time in the reports filed by the Company with the SEC. |
Except for ongoing obligations to disclose material information as required by the federal securities laws, the Company does not undertake any obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of the filing of this report or to reflect the occurrence of unanticipated events.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30, 2017
Critical Accounting Policies
During the six months ended October 1, 2016,September 30, 2017, the Company sold $54,146,000$73,096,000 of Green Giant finished goods inventory to B&G Foods North America ("(“B&G"&G”) for cash, on a bill and hold basis, as compared to $32,765,000$54,416,000 for the six months ended September 26, 2015.October 1, 2016. Under the terms of the bill and hold agreement, title to the specified inventory transferred to B&G. The Company believes it has met the criteria required for bill and hold treatment.
Trade promotions are an important component of the sales and marketing of the Company'sCompany’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 our products to consumers, amounts paid to obtain favorable display positions in retailers'retailers’ stores, and amounts paid to retailers for shelf space in retail stores. Accruals for trade promotions are recorded primarily at the time of sale of product to the retailer based on expected levels of performance. Settlement of these liabilities typically occurs in subsequent periods primarily through an authorized process for deductions taken by a retailer from amounts otherwise due to us. As a result, the ultimate cost of a trade promotion program is dependent on the relative success of the events and the actions and level of deductions taken by retailers for amounts they consider due to them. Final determination of the permissible deductions may take extended periods of time.
The Company uses the lower of cost, determined under the LIFO (last-in, first out) method, or market, to value substantially all of its inventories. In a high inflation environment that the Company was experiencing, the Company believes that the LIFO method was preferable over the FIFO method because it better compares the cost of current production to current revenue.
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.
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk
In the ordinary course of business, the Company is exposed to various market risk factors, including changes in general economic conditions, competition and raw material pricing and availability. In addition, the Company is exposed to fluctuations in interest rates, primarily related to its revolving credit facility.facility and the $100,000,000 term loan. To manage interest rate risk, the Company uses both fixed and variable interest rate debt.debt plus fixed interest rate capital lease obligations. There have been no material changes to the Company'sCompany’s exposure to market risk since March 31, 2016.
The Company maintains a system of internal and disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported on a timely basis. The Company'sCompany’s Board of Directors, operating through its Audit Committee, which is composed entirely of independent outside directors, provides oversight to the financial reporting process.
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 of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of October 1, 2016,September 30, 2017, our disclosure controls and procedures were effective. The Company continues to examine, refine and formalize its disclosure controls and procedures and to monitor ongoing developments in this area.
There have been no changes during the period covered by this report to the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company'sCompany’s internal control over financial reporting.
PART II - OTHER INFORMATION
Total Number of | Average Price Paid | Total Number | Maximum Number | |||||||||||||||||||||
Shares Purchased | per Share | of Shares | (or Approximate | |||||||||||||||||||||
Purchased as | Dollar Value) or | |||||||||||||||||||||||
Part of Publicly | Shares that May | |||||||||||||||||||||||
Announced | Yet Be Purchased | |||||||||||||||||||||||
Class A | Class B | Class A | Class B | Plans or | Under the Plans or | |||||||||||||||||||
Period | Common | Common | Common | Common | Programs | Programs | ||||||||||||||||||
7/01/2017 – | ||||||||||||||||||||||||
7/31/2017 | - | - | $ | - | $ | - | - | |||||||||||||||||
8/01/2017 – | ||||||||||||||||||||||||
8/31/2017 | 89,532 | 200 | $ | 29.02 | $ | 32.53 | 89,732 | |||||||||||||||||
9/01/2017 – | ||||||||||||||||||||||||
9/30/2017 | 3,050 | - | $ | 29.92 | $ | - | 3,050 | |||||||||||||||||
Total | 92,582 | 200 | $ | 29.06 | $ | 32.53 | 92,782 | 1,088,579 |
Item 3. | |
None. | |
Item 4. | Mine Safety Disclosures |
None. | |
Item 5. | Other Information |
None
Total Number of | Average Price Paid | Total Number | Maximum Number | ||||||||||||||||||
Shares Purchased | per Share | of Shares | (or Approximate | ||||||||||||||||||
Purchased as | Dollar Value) or | ||||||||||||||||||||
Part of Publicly | Shares that May | ||||||||||||||||||||
Announced | Yet Be Purchased | ||||||||||||||||||||
Class A | Class B | Class A | Class B | Plans or | Under the Plans or | ||||||||||||||||
Period | Common | Common | Common | Common | Programs | Programs | |||||||||||||||
7/01/2016 – | |||||||||||||||||||||
7/31/2016 | - | - | $ | - | $ | - | |||||||||||||||
8/01/2016 – | |||||||||||||||||||||
8/31/2016 | - | 1,737 | $ | - | $ | 36.04 | 1,737 | ||||||||||||||
9/01/2016 – | |||||||||||||||||||||
9/30/2016 | 17,100 | (1) | 100 | $ | 29.03 | $ | 36.09 | ||||||||||||||
Total | 17,100 | 1,837 | $ | 29.03 | $ | 36.04 | 1,737 | 1,192,366 |
PART II - OTHER INFORMATION
31.1 |
101 | The following materials from Seneca Foods |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Seneca Foods Corporation (Company) | |
/s/Kraig H. Kayser | |
October 26, 2017 | |
Kraig H. Kayser | |
President and Chief Executive Officer | |
/s/ Timothy J. Benjamin | |
October 26, 2017 | |
Timothy J. Benjamin | |
Chief Financial Officer |
22