SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
June 30, 1997 (April 18, 1997)
Seneca Foods Corporation
(Exact name of registrant as specified in its charter)
New York 0-1989 16-0733425
(State or other jurisdiction of (Commission (I. R. S. Employer
incorporation or organization) File Number) Identification No.)
1162 Pittsford-Victor Road, Pittsford, New York 14534
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 716/385-9500
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Form 8-K
Seneca Foods Corporation
Item 2. Acquisition or Disposition of Assets
On April 18, 1997 Seneca Foods Corporation ("Registrant") acquired certain
assets of the Aunt Nellie's Farm Kitchens from the Pillsbury Company, an
indirect subsidiary of Grand Metropolitan plc, for approximately $24 million
(referred to as "Aunt Nellie's"). Aunt Nellie's produces, markets, and sells
fruit and vegetable products from plants in the Midwest. Its 1996 sales were
approximately $59 million. The Registrant purchased the plants, inventories,
accounts receivable, and trademarks of the business. Aunt Nellie's includes
facilities located in Clyman, Wisconsin; Covington, Kentucky; and Buckley,
Michigan.
This acquisition was funded primarily out of working capital. A proposed $15
million debt issue of the Registrant to fund the long-term assets of this
acquisition and another acquisition recently completed is being negotiated. The
Registrant expects to consummate the financing and issue the note sometime in
July 1997.
Item 7. Financial Statements and Exhibits
Financial Statements
The Registrant had concluded that the assets purchased did not constitute a
significant subsidiary within the language and intent of Regulation S-X. On June
9, 1997 the Commission advised that it did not agree with the Registrant's
position. The Commission staff further advised that it would accept audited
statements for the most recent fiscal year in satisfaction of the requirements
of Rule 3-05 of Regulation S-X. The audited financial statement information
required by Article 11 of Regulation S-X follows:
AUNT NELLIE'S FARM KITCHENS
(A Division of The Pillsbury Company)
Statements of Net Assets to be Acquired as of March 29, 1997 and September 28,
1996 and Statements of Revenue and Direct Operating Expenses for the Six Months
Ended March 29, 1997 and for the Year Ended September 28, 1996 and Independent
Auditors' Report
AUNT NELLIE'S FARM KITCHENS
(A Division of The Pillsbury Company)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets to be Acquired 2
Statements of Revenue and Direct Operating Expenses 3
Notes to Financial Statements 4
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Pillsbury Company
We have audited the accompanying statement of net assets to be acquired of Aunt
Nellie's Farm Kitchens ("the Company"), a division of The Pillsbury Company
("Pillsbury"), a wholly owned subsidiary of Grand Metropolitan PLC., as of
September 28, 1996 and the related statement of revenue and direct operating
expenses for the year ended September 28, 1996. These financial statements are
the responsibility of the management of the Company and Pillsbury. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets to be acquired of Aunt Nellie's Farm Kitchens as of
September 28, 1996 and the results of its revenue and direct operating expenses
for the year ended September 28, 1996 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the financial statements, the Company is a division of
The Pillsbury Company, a wholly owned subsidiary of Grand Metropolitan PLC.
Portions of certain expenses represent allocations made from Pillsbury of
certain items applicable to Pillsbury as a whole. As a result, the accompanying
financial statements may not necessarily be indicative of the conditions that
would have existed or the results of operations that would have occurred had the
Company been operated as an unaffiliated entity.
/s/Deloitte & Touche LLP
Rochester, New York
June 20, 1997
AUNT NELLIE'S FARM KITCHENS
(A Division of The Pillsbury Company)
STATEMENTS OF NET ASSETS TO BE ACQUIRED
MARCH 29, 1997 AND SEPTEMBER 28, 1996 (In Thousands)
March 29,
1997 September 28,
(Unaudited) 1996
----------- -------------
ASSETS
CURRENT ASSETS:
Accounts receivable $ 4,448 $ 5,577
Inventories:
Finished products 14,016 20,293
In process 1,320 1,723
Raw materials and supplies 2,562 3,402
------ ------
17,898 25,418
Prepaid expenses 2,395 851
------ ------
Total current assets 24,741 31,846
PROPERTY, PLANT AND EQUIPMENT:
Land 460 439
Buildings 12,960 12,986
Equipment 21,044 20,516
------ ------
34,464 33,941
Less accumulated depreciation and amortization 18,643 17,702
------ ------
Net property, plant, and equipment 15,821 16,239
------ ------
Total assets $ 40,562 $ 48,085
====== ======
LIABILITIES
CURRENT LIABILITIES:
Accounts payable 1,783 5,068
Accrued expenses 624 713
Current portion of capital lease obligation 37 37
------ ------
Total current liabilities 2,444 5,818
LONG TERM CAPITAL LEASE OBLIGATION 1,097 1,187
------ ------
Total liabilities 3,541 7,005
NET ASSETS TO BE ACQUIRED $37,021 $41,080
======= =======
<FN>
See notes to financial statements.
</FN>
AUNT NELLIE'S FARM KITCHENS
(A Division of The Pillsbury Company)
STATEMENTS OF REVENUE AND DIRECT OPERATING EXPENSES
SIX MONTHS ENDED MARCH 29, 1997 AND YEAR ENDED SEPTEMBER 28, 1996
(In Thousands)
Six Months
Ended Year Ended
March 29, September 28,
1997 1996
(Unaudited)
----------- -------------
REVENUE $ 28,792 $58,986
DIRECT OPERATING EXPENSES:
Cost of product sold 26,122 51,849
Inventory write down adjustment - 1,670
Selling, general and administrative expense 3,680 7,647
------- --------
29,802 61,166
-------- --------
REVENUE UNDER DIRECT OPERATING EXPENSES $ (1,010) $ (2,180)
======== ========
<FN>
See notes to financial statements.
</FN>
AUNT NELLIE'S FARM KITCHENS
(A Division of The Pillsbury Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 29, 1997 AND YEAR ENDED SEPTEMBER 28, 1996
- --------------------------------------------------------------------------------
(Amounts in Thousands)
- --------------------------------------------------------------------------------
1. ORGANIZATION, OPERATIONS AND BASIS OF PRESENTATION
Aunt Nellie's Farm Kitchens ("the Company"), a division of The Pillsbury
Company ("Pillsbury"), a wholly owned subsidiary of Grand Metropolitan,
PLC., produces fruit and vegetable products from three manufacturing
facilities located in Clyman, Wisconsin, Covington, Kentucky and Buckley,
Michigan. In addition to its branded products, the Company has a private
label and foodservice business.
The Company does not maintain stand-alone corporate treasury, legal, tax
and other similar corporate support functions. In addition, Pillsbury's
systems and procedures do not provide sufficient information to develop a
reasonable cost allocation for corporate general and administrative
expense, income taxes, corporate debt and interest expense. Accordingly,
distinct and separate accounts necessary to present the Company's
individual balance sheet and income statement as of and for the year ended
September 28, 1996 have not been maintained.
With respect to cash flows, purchases of inventory, payroll, capital and
other expenditures are funded through the Company's intercompany account
with Pillsbury. Remittances from sales to customers are collected by the
Company and are accounted for through the intercompany account.
Accordingly, the Company has no cash flows on a stand alone basis.
Financial Statement Presentation - Based upon the above information, the
following financial information is presented:
Statements of Net Assets to be Acquired. This statement includes
only the net assets of the Company being purchased by
Seneca Foods Corporation. (See Note 6.)
Statements of Revenue and Direct Operating Expenses of the Company
to be acquired by Seneca Foods Corporation.
Statements of Cash Flows are not presented because as explained above the
Company has essentially no cash flows.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information - In the opinion of management, the
unaudited information presented as of and for the six months ended March
29, 1997 reflects all adjustments which consist of normal recurring
adjustments necessary for a fair presentation of the interim period.
Operating results for the interim period is not necessarily indicative of
the results that may be expected for a full year.
Fiscal year - The Company's fiscal year ends on the last Saturday in
September.
Inventories - Inventories are stated at the lower of cost (first-in,
first-out) or market.
Property, plant and equipment is recorded at cost. Depreciation is
provided using a straight line method over the estimated useful lives of
the assets. The carrying amount of long-lived assets is evaluated annually
to determine if adjustment to the deprecation period or to the unamortized
balance is warranted. Ranges of estimated useful lives for computing
depreciation are as follows:
Buildings 5-40 years
Machinery and equipment 5-15 years
Purchases of property, plant and equipment and depreciation expense
for the year ended September 28, 1996 totaled $578 and $1,891,
respectively.
Revenue Recognition - Sales are recorded at the date of shipment.
Fair Value of Financial Instruments - The carrying value of cash, accounts
receivable, accounts payable and accrued expenses approximate fair value
because of the short maturity of these items. The fair value of the
Company's capital lease obligation approximates its carrying value.
Concentration of Credit Risk - Financial instruments that potentially
subject the Company to credit risk consist of trade receivables for which
collateral is not required. This risk associated with this concentration
is limited due to the large number of customers and their geographic
dispersion.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities and
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. LEASE COMMITMENTS
The Company has long-term noncancelable leases for the use of certain
equipment and land. The leases are for varying periods and the rental
expense under such agreements totaled approximately $800,000 for the year
ended September 28, 1996.
As of September 28, 1996, the aggregate minimum future rental commitments
under such noncancelable leases with terms in excess of one year are as
follows:
Operating Capital
--------- -------
Fiscal year ending September:
1997 $ 832 $ 297
1998 527 297
1999 240 297
2000 152 297
2001 112 297
Thereafter 53 124
------- ------
$ 1,916 1,609
Less interest 385
-----
Present value of minimum lease payments 1,224
Amount due within one year 37
-----
Long-term capital lease obligation $ 1,187
=====
The cost and related accumulated depreciation for equipment under
capital leases totaled $3,438 and $791, respectively, as of
September 28, 1996.
4. EMPLOYEE BENEFIT PLANS
The Company's employees participate in Pillsbury benefit plans which
primarily include defined benefit pension plans, a defined contribution
plan and various health and medical plans. Expenses for the various
benefit plans have been allocated to the Company by Pillsbury, as
disclosed in Note 5.
Upon the sale of the Company to Seneca Foods Corporation in April 1997
(see Note 6), the Company's employees were terminated from the various
benefit plans with the exception of those Company employees who
participate in certain union plans. Additionally, employees of the Company
became eligible to participate in the Seneca Foods Corporation benefit
plans.
5. CORPORATE ALLOCATIONS AND RELATED PARTY TRANSACTIONS
The Company does not maintain stand-alone corporate treasury, legal, tax
and other similar corporate support functions. The Company does record
certain expenses allocated from Pillsbury related primarily to employee
benefits and property insurance. For purposes of preparing the financial
information for the Company, these expenses were allocated based upon a
variety of factors which include the number of employees of the Company
and the identification of costs specifically attributable to the Company.
Management believes that these allocations are based on assumptions that
are reasonable under the circumstances; however, the Company's statements
of net assets to be acquired and revenue and direct operating expenses may
not be indicative of the conditions that would have existed or results of
operations that would have occurred had the Company been operated as an
unaffiliated entity.
The following represents a summary of the costs allocated to the Company
by Pillsbury which were included in the statement of revenue and direct
operating expenses:
Year Ended
September 28,
1996
Employee benefits $ 3,414
Property insurance 127
The Company's revenue and related cost of product sold to Pillsbury for
the year ended September 28, 1996 totaled $5,990 and $5,482,
respectively.
6. SALE OF AUNT NELLIE'S FARM KITCHENS
On April 18, 1997, Seneca Foods Corporation acquired the Company from
Pillsbury, for a purchase price totaling a $23,687. The purchase included
manufacturing facilities, machinery and equipment, inventories, accounts
receivable, prepaid expenses and the assumption of operating liabilities
and agreements in effect related to the acquired assets, such as leases,
supply agreements and labor agreements.
Pro Forma Financial Information
The pro forma financial information required by Article 11 of Regulation S-X
follows:
SENECA FOODS CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1997
(Unaudited)
(In Thousands of Dollars)
Consolidated Pro Forma Pro Forma
Historical Adjustments Balance
------------ ----------- ----------
ASSETS
Current Assets:
Cash and Short Term Invest. $1,584 $2 (a) $1,586
Accounts Receivable, Net 36,477 4,087 (a) 40,564
Inventories 158,197 15,910 (a) 174,107
Deferred Tax Asset , Net 6,156 6,156
Other Current Assets 4,432 4,432
-------------------------------------------------------------------------
Total Current Assets 206,846 19,999 226,845
Prop., Plant and Eq., Net 207,439 7,679 (a) 215,118
Other Assets 1,738 1,738
-------------------------------------------------------------------------
$416,023 $27,678 $443,701
=========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $18,000 $15,348 (c) $33,348
Accounts Payable 24,435 1,681 (a) 26,116
Accrued Expenses 25,615 1,708 (a) 27,323
Income Taxes 599 599
Current Portion of Long-Term Debt
and Capital Lease Obligations 9,465 9,465
------------------------------------------------------------------------
Total Current Liabilities 78,114 18,737 96,851
Long-Term Debt 214,848 7,679 (c) 222,527
Capital Lease Obligations 9,280 9,280
Deferred Gain and Other Liabilities 4,248 4,248
Deferred Income Taxes 15,797 390 (b) 16,187
Stockholders' Equity:
Preferred Stock 70 70
Common Stock 2,666 2,666
Additional Paid-in Capital 5,913 5,913
Net Unrealized Gain on Available-
For-Sale Securities 435 435
Retained Earnings 84,652 872 (a) 85,524
------------------------------------------------------------------------
Stockholders' Equity 93,736 872 94,608
------------------------------------------------------------------------
$416,023 $27,678 $443,701
========================================================================
<FN>
The accompanying notes are an integral part of these unaudited Pro Forma
Condensed Financial Statements.
</FN>
SENECA FOODS CORPORATION, AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF INCOME
TWELVE MONTHS ENDED MARCH 31, 1997
(Unaudited)
(In thousands, except share data)
Consolidated Pro Forma Pro Forma
Historical Adjustments Balance
------------ ----------- ---------
Revenue $738,443 $36,147 (a) $774,590
Costs and Expenses:
Cost of Product Sold 669,261 30,235 (a) 699,496
Selling and Administrative 28,609 2,475 (a) 31,084
Interest Expense 28,827 2,077 (a) 30,904
----------------------------------------------------------------------
Total Costs and Expenses 726,697 34,787 761,484
Income Before Income Taxes 11,746 1,360 (a) 13,106
Income Taxes 4,215 488 (a) 4,703
----------------------------------------------------------------------
Net Earnings $7,531 $872 $8,403
======================================================================
Net Earnings- Common Stock $7,531 $872 $8,403
Earnings Per Share $1.27 $0.15 $1.42
======================================================================
Weighted Average Common Shares O/S 5,939,680 5,939,680 5,939,680
======================================================================
<FN>
The accompanying notes are an integral part of these unaudited Pro Forma
Condensed Financial Statements.
</FN>
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997 Statements (Last previous fiscal year):
(a) The Pro Forma adjustments referenced as (a) reflect the addition of the
assets and liabilities and related income and expense accounts of Aunt
Nellie's Farm Kitchens a division of The Pillsbury Company which was
purchased April 18, 1997 as described in Item 2 of this Form 8-K.
(b) The Pro Forma adjustments referenced as (b) reflect the the estimated
federal and state income tax effect of the Aforementioned purchase.
(c) The Pro Forma adjustments referenced as (c) reflect the source of the funds
used for the aforementioned purchase.
Exhibits
The Asset Purchase Agreement related to the transaction with Pillsbury is
attached hereto as Exhibits 2(A).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Seneca Foods Corporation
(Registrant)
/s/Kraig H. Kayser
------------------
June 30, 1997 Kraig H. Kayser
President and
Chief Executive Officer