Form 10-Q/A
Amendment No. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 28, 2003 Commission File Number 0-1989
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
Check mark indicates whether 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 X No _____
-----
Indicate by check mark whether the Company is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act).
Yes X No _____
-----
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 July 31, 2003
Common Stock Class A, $.25 Par 3,911,480
Common Stock Class B, $.25 Par 2,764,005
Explanatory Note on Amendment
The Company has filed this amendment (i) to reflect changes made under Item 1 to
its Condensed Consolidated Statement of Cash Flows for the quarter ended June
28, 2003 and (ii) to restate its basic earnings per common share in order to
include the Company's participating convertible preferred stock in the
calculation of weighted average number of shares outstanding for basic earnings
per share purposes, which reduces previously reported basic earnings per share.
Previously reported diluted earnings per share are not affected and remain
unchanged. These changes do not impact the Condensed Consolidated Balance Sheets
or Condensed Consolidated Statements of Net Earnings except for basic earnings
per share. In addition, this amendment includes certain other corrections and
clarifications under Items 1 and 2 that were identified in the course of the
Company's review of the amended report.
The Company filed its Form 10-Q for the three month period ended June 28, 2003,
before the Company's independent acccountants had completed their review of such
Form 10-Q.
For convenience, the Company is restating its Form 10-Q for the quarterly period
ended June 28, 2003 in its entirety.
PART I ITEM 1 FINANCIAL INFORMATION
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
6/28/03 3/31/03
------- -------
ASSETS
Current Assets:
Cash and Cash Equivalents $ 2,576 $ 64,984
Accounts Receivable, Net 49,079 31,799
Inventories:
Finished Goods 134,072 88,769
Work in Process 8,514 13,911
Raw Materials 68,525 38,969
-------- --------
211,111 141,649
Off-Season Reserve (Note 2) 39,225 -
Deferred Income Tax Asset, Net 3,300 3,300
Assets Held For Sale 9,169 -
Refundable Income Taxes - 715
Other Current Assets 2,373 1,254
-------- --------
Total Current Assets 316,833 243,701
Property, Plant and Equipment, Net 202,856 132,969
Other Assets 5,885 2,870
-------- --------
Total Assets $525,574 $379,540
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 60,386 $ -
Accounts Payable 60,884 22,730
Accrued Expenses 43,985 25,602
Income Taxes Payable 695 -
Current Portion of Long-Term Debt and Capital
Lease Obligations 23,807 22,987
-------- --------
Total Current Liabilities 189,757 71,319
Long-Term Debt 128,588 127,107
Capital Lease Obligations 7,178 6,230
Deferred Income Tax Liability 9,891 9,023
Other Long-Term Liabilities 10,905 6,497
Commitments - -
10% Preferred Stock, Series A, Voting, Cumulative,
Convertible, $.025 Par Value Per Share 10 10
10% Preferred Stock, Series B, Voting, Cumulative,
Convertible, $.025 Par Value Per Share 10 10
6% Preferred Stock, Voting, Cumulative, $.25 Par Value 50 50
Convertible, Participating Preferred Stock, $12
Stated Value 41,551 41,586
Convertible, Participating Preferred Stock, $15.50
Stated Value 15,000 -
Common Stock 2,850 2,849
Paid in Capital 15,716 14,616
Accumulated Other Comprehensive Income 587 422
Retained Earnings 103,481 99,821
-------- --------
Stockholders' Equity 179,255 159,364
-------- --------
Total Liabilities and Stockholders' Equity $525,574 $379,540
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS
(Unaudited)
(In Thousands, except Share Data)
Three Months Ended
------------------
6/28/03 6/29/02
------- -------
Net Sales $ 151,296 $ 123,255
Costs and Expenses:
Cost of Product Sold 135,735 111,489
Selling, General, and Administrative 6,130 4,830
Interest Expense 3,411 3,662
----------------- --------------
Total Costs and Expenses 145,276 119,981
Earnings Before Income Taxes 6,020 3,274
Income Taxes 2,348 1,342
----------------- --------------
Net Earnings $ 3,672 $ 1,932
================= ==============
Basic:
Earnings Per Common Share (as restated, see Note 7) $ .35 $ .19
================= ==============
Diluted:
Earnings Per Common Share $ .35 $ .19
================= ==============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Three Months Ended
------------------
6/28/03 6/29/02
------- -------
Cash Flows From Operating Activities:
Net Earnings $ 3,672 $ 1,932
Adjustments to Reconcile Net Earnings
to Net Cash Provided by
Operating Activities:
Depreciation and Amortization 6,399 5,885
Deferred Income Taxes 798 405
Changes in Working Capital:
Accounts Receivable 6,603 3,150
Inventories 6,059 15,938
Off-Season Reserve (39,225) (26,857)
Other Current Assets (1,057) (392)
Refundable Income Taxes 1,410 934
Accounts Payable, Accrued
Expenses, and Other Liabilities 23,693 6,200
---------------- ---------------
Net Cash Provided by Operations 8,352 7,195
Cash Flows From Investing Activities:
Acquisition (110,449) -
Proceeds from the Sale of Assets 39,585 -
Cash Received with Acquisition 2,560 -
Additions to Property, Plant,
and Equipment (2,913) (715)
---------------- ---------------
Net Cash Used in Investing
Activities (71,217) (715)
Cash Flows From Financing Activities:
Net Borrowings on Notes Payable 35,011 -
Payments of Long-Term Debt and Capital
Lease Obligations (32,200) (417)
Other (2,342) 5
Dividends (12) (12)
----------------- ---------------
Net Cash Provided by (Used in)
Financing Activities 457 (424)
Net (Decrease) Increase in Cash and Cash
Equivalents (62,408) 6,056
Cash and Cash Equivalents,
Beginning of Period 64,984 24,973
----------------- -----------------
Cash and Cash Equivalents,
End of Period $ 2,576 $ 31,029
================ ================
Supplemental information on non-cash investing and financing activities:
$16.1 million of Preferred Stock was issued in partial consideration for the CPF
acquisition. The Company assumed $9.1 million of long-term debt related to the
CPF acquisition. (see Note 5).
The accompanying notes are an integral part of these condensed consolidated
financial statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 28, 2003
1. 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 the Company as of June 28, 2003 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, 2003 balance sheet was derived from
audited financial statements.
The results of operations for the three month period ended June 28, 2003
are not necessarily indicative of the results to be expected for the
full year.
The accounting policies followed by the Company are set forth in Note 1
to the Company's Consolidated financial statements in the 2003 Seneca
Foods Corporation Annual Report and Form 10-K.
Other footnote disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted.
It is suggested that these condensed consolidated financial statements
be read in conjunction with the financial statements and notes included
in the Company's 2003 Annual Report and Form 10-K.
2. The seasonal nature of the Company's Food Processing business results in a
timing difference between expenses (primarily overhead expenses) incurred
and absorbed into product cost. All Off-Season Reserve balances are zero at
fiscal year end. Depending on the time of year, Off-Season Reserve is
either the excess of absorbed expenses over incurred expenses to date or
the excess of incurred expenses over absorbed expenses to date. During the
first quarter of each year, incurred expenses exceed absorbed expenses due
to timing of production.
3. Comprehensive income consisted solely of Net Earnings, and net unrealized
gains on securities classified as available-for-sale. The following table
provides the results for the periods presented:
Three Months Ended
------------------
6/28/03 6/29/02
------- -------
Net Earnings $3,672 $1,932
Other Comprehensive Earnings, Net of Tax:
Net Unrealized Gains on
Investment 165 349
--------------------
Comprehensive Earnings $3,837 $2,281
====================
4. Recently issued, but not yet effective, accounting standards have been
considered by the Company and are not expected to have a material effect on
the Company's financial position or results of operations.
5. On May 27, 2003, the Company completed its acquisition of 100% of the
membership interest in Chiquita Processed Foods, L.L.C. ("CPF") from
Chiquita Brands International, Inc. The primary reason for the acquisition
was to acquire additional production capacity in the Canned Vegetable
business. The purchase price totaled $126.1 million plus the assumption of
certain liabilities. This acquisition was financed with cash, proceeds from
a new $200 million revolving credit facility, and $16.1 million of the
Company's Participating Convertible Preferred Stock. The Preferred Stock
was valued at $16.60 per share based on the market value of the Class A
Common Stock at the time the acquisition was announced.
The new $200 million revolving credit facility has a five-year term. The
Preferred Stock is convertible into the Company's Class A Common Stock on a
one-for-one basis. On June 30, 2003 (second quarter), the Company
refinanced $20.0 million of outstanding debt under the revolving credit
facility with new term debt from an insurance company. The new term debt
from the insurance company of $20 million, when combined with the
refinancing of existing insurance company debt of $32.5 million, has an
interest rate of 8.37%, a fifteen year amortization and a ten year term.
As part of this acquisition, the Company assumed seasonal notes payable
from the CPF revolving credit facility of $25.4 million which was paid off
at the time of acquisition with proceeds from the new $200 million
revolving credit facility. The Company also assumed $35.9 million of CPF
long-term debt and capital lease obligations, of which $26.8 million was
paid off at the time of acquisition with proceeds from the new $200
million revolving credit facility. The remaining long-term debt
principally involves two Industrial Revenue Development Bonds totaling
$5.5 million and consisting of a $3 million Pickett, Wisconsin issue
due on June 1, 2005 with an interest rate of 7.75% and a $2.5 million
Walla Walla, Washington issue due on September 1, 2005 with an interest
rate of 7.75%. The balance of the debt acquired, totaling $3.6 million,
has interest rates ranging from 1.9% to 9% and is due through 2011.
The Company's statement of net earnings for the quarter ended June 28,
2003 includes one month of the CPF acquired operations. A pro forma
income statement as if the operations were acquired at the beginning
of the periods presented follows:
Three Months Ended
------------------
6/28/03 6/29/02
------- -------
Net Sales $205,778 $210,195
Cost of Product Sold 186,665 192,063
Selling, General, and
Administrative 10,435 12,390
Interest Expense 4,261 4,860
Other Expense (Income) 1,882 (23)
----------------------
Total Costs and Expenses 203,243 209,290
Earnings From Continuing Operations
Before Income Taxes 2,535 905
Income Taxes 989 371
----------------------
Net Earnings From Continuing Operations 1,546 534
======================
Basic Net Earnings Per Share From
Continuing Operations $ 0.15 $ 0.05
======================
Diluted Net Earnings Per Share From
Continuing Operations $ 0.15 $ 0.05
======================
The Company sold three former Chiquita Processed Foods plants and
related assets to Lakeside Foods, Inc. on June 17, 2003. The
Company sold one additional plant of Chiquita Processed Foods and
related assets to Lakeside Foods, Inc. on August 6, 2003. The
aforementioned sales to Lakeside Foods generated $47 million in
cash proceeds, which was used to pay down debt.
The Company expects to refinance up to an additional $22.5 million of
outstanding debt under the revolving credit facility with new
term debt from an insurance company in late August 2003. The
refinancing of the additional outstanding debt is subject to the
negotiation of definitive documentation. Therefore, there can be
no assurance that this transaction will be completed.
The allocation of purchase price is preliminary and is subject to
change as additional information regarding the fair value of
assets and liabilities acquired is obtained.
6. Earnings per Share:
Three Months Ended
6/28/03 6/29/02
Basic Net Earnings Applicable to Common
Stock (In thousands except per share data):
Net Earnings $ 3,672 $ 1,932
Deduct Preferred Cash Dividends 6 6
------------------------------
Net Earnings Applicable to
Common Stock $ 3,666 $ 1,926
==============================
Weighted Average Common Shares
Outstanding 6,999 6,589
Weighted Average Participating
Preferred Shares 3,482 3,569
------------------------------
Weighted Average Shares
Outstanding for Basic Earnings
per Share 10,481 10,158
=============================
Basic Earnings Per Share $ .35 $ .19
=============================
Diluted Net Earnings Applicable to Common
Stock (In thousands except per share data):
Net Earnings Applicable to
Common Stock $ 3,666 $ 1,926
Add Back Preferred Cash Dividends 5 5
-----------------------------
Net Earnings Applicable to
Common Stock $ 3,671 $ 1,931
=============================
Weighted Average
Shares Outstanding 10,481 10,158
Effect of Convertible Preferred Stock 67 67
-----------------------------
Weighted Average Shares
Outstanding for Diluted Earnings
per Share 10,548 10,225
=============================
Diluted Earnings Per Share $ .35 $ .19
=============================
7. Subsequent to the issuance of its condensed consolidated financial
statements for the quarter ended June 28, 2003, the Company determined that
it should have included convertible participating preferred stock in its
calculation of basic earnings per share under the if-converted method. The
Company also determined that it had not provided appropriate information
with respect to the calculation of earnings per share in the notes to
condensed consolidated financial statements and identified errors in its
statement of cash flows for the three months ended June 28, 2003 with
respect to amounts reported for assets held for sale.
As a result, the accompanying condensed consolidated financial statements
for the three months ended June 28, 2003 have been restated from the
amounts previously reported to include appropriate disclosure of the
calculations of earnings per share (see note 6); to reduce basic earnings
per share for the three months ended June 28, 2003 and June 29,
2002; and to appropriately classify certain cash flows for the three
months ended June 28, 2003.
The following summarizes these restatements (In Thousands except earnings
per share data):
June 28, 2003 June 29, 2002
------------- -------------
As Previously As As Previously As
Reported Restated Reported Restated
-------- -------- -------- --------
Basic earnings per share $.55 $.35 $.29 $.19
June 28, 2003
-------------
As Previously
Reported As Restated
-------- -----------
Net Cash Provided by Operating
Activities $ 15,300 $8,352
Net Cash Used in Investing
Activities (80,383) (71,217)
Net Cash Provided by
Financing Activities 2,675 457
------------------------
Net Decrease in Cash and Cash
Equivalents $(62,408) $(62,408)
========================
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION RESULTS AND OF OPERATIONS
June 28, 2003
Results of Operations:
Sales:
Total sales reflect an increase of 22.8% for the first quarter versus 2002. The
sales increase, primarily reflects one month of operating activity related to
the Chiquita Processed Foods, L.L.C. acquired May 27, 2003.
Costs and Expenses:
The following table shows costs and expenses as a percentage of sales:
Three Months Ended
------------------
6/28/03 6/29/02
------- -------
Cost of Product Sold 89.6% 90.4%
Selling 3.2 3.2
Administrative 0.9 0.7
Interest Expense 2.3 3.0
------- ------
96.0% 97.3%
====== ======
Favorable cost of manufacturing variances were a major contributing factor in
improved operating results.
Income Taxes:
The effective tax rate was 39% in 2003 and 41% in 2002.
Financial Condition:
The financial condition of the Company is summarized in the following table and
explanatory review (In Thousands):
For the Quarter For the Year
Ended June Ended March
--------------- ------------
2003 2002 2003 2002
---- ---- ---- ----
Working Capital Balance $127,076 $173,963 $172,382 $163,606
Quarter Change (45,306) 4,500 - -
Notes Payable 60,386 - - -
Long-Term Debt 135,766 173,792 133,337 156,100
Current Ratio 1.65:1 3.38:1 3.42:1 3.00:1
The change in Working Capital for the June 2003 quarter from the June 2002
quarter is largely due to the acquisition of the membership interest in Chiquita
Processed Foods, L.L.C. for $110 million in cash and $16.1 million in preferred
stock. This was partially offset by higher earnings in the current year quarter
than the prior year quarter ($3,672,000 earnings as compared to $1,932,000
earnings last year).
See Condensed Consolidated Statements of Cash Flows for further details.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 28, 2003
Inventory increased $45.2 million from the same period last year primarily
reflecting an increase of $82.8 million representing the net effect of the CPF
acquisition less the inventory sold to Lakeside Foods, Inc., as discussed in the
Notes to the Condensed Consolidated Financial Statements. The $82.8 million
increase was partially offset by the Company's continued emphasis on inventory
management and reduced production from last year. Cash and short term
investments decreased $28.5 million again due to the acquisition.
On May 27, 2003, the Company completed its acquisition of 100% of the membership
interest in Chiquita Processed Foods, L.L.C. ("CPF") from Chiquita Brands
International, Inc. The primary reason for the acquisition was to acquire
additional production capacity in the Canned Vegetable business. The purchase
price totaled $126.1 million plus the assumption of certain liabilities. This
acquisition was financed with cash, proceeds from a new $200 million revolving
credit facility, and $16.1 million of the Company's Participating Convertible
Preferred Stock. The Preferred Stock was valued at $16.60 per share based on the
market value of the Class A Common Stock at the time the acquisition was
announced.
The new $200 million revolving credit facility has a five-year term. The
Preferred Stock is convertible into the Company's Class A Common Stock on a
one-for-one basis. On June 30, 2003 (second quarter), the Company refinanced
$20.0 million of outstanding debt under the revolving credit facility with new
term debt from an insurance company. The new term debt from the insurance
company of $20 million, when combined with the refinancing of existing insurance
company debt of $32.5 million, has an interest rate of 8.37%, a fifteen year
amortization and a ten year term.
As part of this acquisition, the Company assumed seasonal notes payable from the
CPF revolving credit facility of $25.4 million which was paid off at the time of
acquisition with proceeds from the new $200 million revolving credit facility.
The Company also assumed $35.9 million of CPF long-term debt and capital lease
obligations, of which $26.8 million was paid off at the time of acquisition with
proceeds from the new $200 million revolving credit facility. The remaining
long-term debt principally involves two Industrial Revenue Development Bonds
totaling $5.5 million and consisting of a $3 million Pickett, Wisconsin issue
due on June 1, 2005 with an interest rate of 7.75% and a $2.5 million Walla
Walla, Washington issue due on September 1, 2005 with an interest rate of 7.75%.
The balance of the debt acquired, totaling $3.6 million, has interest rates
ranging from 1.9% to 9% and is due through 2011.
The Company's statement of net earnings for the quarter ended June 28, 2003
includes one month of the CPF acquired operations. A pro forma income statement
as if the operations were acquired at the beginning of the periods presented
follows:
Three Months Ended June
-----------------------
6/28/03 6/29/02
------- -------
Net Sales $205,778 $210,195
Cost of Product Sold 186,665 192,063
Selling, General, and
Administrative 10,435 12,390
Interest Expense 4,261 4,860
Other Expense (Income) 1,882 (23)
----------------------
Total Costs and Expenses 203,243 209,290
Earnings From Continuing Operations
Before Income Taxes 2,535 905
Income Taxes 989 371
----------------------
Net Earnings From Continuing Operations 1,546 534
======================
Basic Net Earnings Per Share From
Continuing Operations $ 0.15 $ 0.05
======================
Diluted Net Earnings Per Share From
Continuing Operations $ 0.15 $ 0.05
======================
The Company sold three former Chiquita Processed Foods plants and related assets
to Lakeside Foods, Inc. on June 17, 2003. The Company sold one additional plant
of Chiquita Processed Foods and related assets to Lakeside Foods, Inc. on August
6, 2003. The aforementioned sales to Lakeside Foods generated $47 million in
cash proceeds, which was used to pay down debt.
The Company expects to refinance up to an additional $22.5 million of
outstanding debt under the revolving credit facility with new term debt from an
insurance company in late August 2003. The refinancing of the additional
outstanding debt is subject to the negotiation of definitive documentation.
Therefore, there can be no assurance that this transaction will be completed.
The allocation of purchase price is preliminary and is subject to change as
additional information regarding the fair value of assets and liabilities
acquired is obtained.
Subsequent to the issuance of its condensed consolidated financial statements
for the quarter ended June 28, 2003, the Company determined that it should have
included convertible participating preferred stock in its calculation of basic
earnings per share under the if-converted method. The Company also determined
that it had not provided appropriate information with respect to the calculation
of earnings per share in the notes to condensed consolidated financial
statements and identified errors in its statement of cash flows for the three
months ended June 28, 2003 with respect to amounts reported for assets held for
sale.
As a result, the accompanying condensed consolidated financial statements for
the three months ended June 28, 2003 have been restated from the amounts
previously reported to include appropriate disclosure of the calculations of
earnings per share (see note 6); to reduce basic earnings per share for the
three months ended June 28, 2003 and June 29, 2002; and to appropriately
classify certain cash flows for the three months ended June 28, 2003.
The following summarizes these restatements (In Thousands except earnings
per share data):
June 28, 2003 June 29, 2002
------------- -------------
As Previously As As Previously As
Reported Restated Reported Restated
-------- -------- -------- --------
Basic earnings per share $.55 $.35 $.29 $.19
June 28, 2003
-------------
As Previously
Reported As Restated
-------- -----------
Net Cash Provided by Operating
Activities $ 15,300 $8,352
Net Cash Used in Investing
Activities (80,383) (71,217)
Net Cash Provided by
Financing Activities 2,675 457
------------------------
Net Decrease in Cash and Cash
Equivalents $(62,408) $(62,408)
========================
Forward-Looking Statements
Except for the historical information contained herein, the matters discussed in
this report are forward-looking statements as defined in the Private Securities
Litigation Reform Act (PSLRA) of 1995. The Company wishes to take advantage of
the "safe harbor" provisions of the PSLRA by cautioning that numerous important
factors which involve risks and uncertainties, including but not limited to
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products, services and prices, and other factors
discussed in the Company's filings with the Securities and Exchange Commission,
in the future, could affect the Company's actual results and could cause its
actual consolidated results to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the Company.
Critical Accounting Policies
In the three months ended June 28, 2003, the Company sold for cash, on a bill
and hold basis, $23,706,000 of Green Giant finished goods inventory to General
Mills Operations, Inc. ("GMOI"). At the time of the sale of the Green Giant
vegetables to GMOI, title of the specified inventory transferred to GMOI. In
addition, the aforementioned finished goods inventory was complete, ready for
shipment and segregated from the Company's other finished goods inventory.
Further, the Company had performed all of its obligations with respect to the
sale of the specified Green Giant finished goods inventory.
The seasonal nature of the Company's Food Processing business results in a
timing difference between expenses (primarily overhead expenses) incurred and
absorbed into product cost. All Off-Season Reserve balances are zero at fiscal
year end. Depending on the time of year, Off-Season Reserve is either the excess
of absorbed expenses over incurred expenses to date or the excess of incurred
expenses over absorbed expenses to date. During the first quarter of each year,
incurred expenses exceed absorbed expenses due to timing of production.
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 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' 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 and are recorded as a reduction of
revenue. 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.
Recently issued, but not yet effective, accounting standards have been
considered by the Company and are not expected to have a material effect on the
Company's financial position or results of operations.
ITEM 3 Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
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. In connection with the acquisition of
CPF, the Company entered into a new $200 million revolving credit facility with
a five-year term to finance its seasonal working capital requirements. Interest
is based on LIBOR plus a spread. Repayment is required at the expiration date of
the facility which is May 27, 2008. The Company had $60.4 million outstanding
under this facility as of June 28, 2003. The Company maintains investments in
cash equivalents (none at June 28, 2003 and $60.9 million as of March 31, 2003)
and has investments in a modest amount of marketable securities. Long-term debt
represents secured and unsecured debentures, certain notes payable to insurance
companies used to finance long-term investments such as business acquisitions,
and capital lease obligations. Long-term debt bears interest at fixed and
variable rates. Refer to the March 31, 2003 report for the table of Interest
Rate Sensitivity of Long-Term Debt, Short Term Debt and Short Term Investments.
ITEM 4 Controls and Procedures
(a) Disclosure controls and procedures. We evaluated the effectiveness of the
design and operation of our disclosure controls and procedures. Our disclosure
controls and procedures are the controls and other procedures that we designed
to ensure that we record, process, summarize and report in a timely manner the
information we must disclose in reports that we file with or submit to the SEC.
Kraig H. Kayser, our President and Chief Executive Officer, and Philip G. Paras,
our Chief Financial Officer, reviewed and participated in this evaluation. Based
on this evaluation, Messrs. Kayser and Paras concluded that as of the end of our
most recent fiscal quarter, our disclosure controls were effective.
(b) Internal controls. During the period covered by this report, there have not
been any significant changes in our internal controls over financial reporting
that has materially affected, or is reasonable likely to materially affect, the
Company's internal controls over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
On May 27, 2003, the Company issued 967,742 shares of
Convertible Participating Preferred Stock, May 2003
Series, to Friday Holdings L.L.C. as partial consideration
for the acquisition of the membership interest in Chiquita
Processed Foods, L.L.C. These shares are exempt from
registration pursuant to Section 4(2) of the Securities
Act of 1933. Upon issuance, these preferred shares were
initially convertible into Seneca Foods Class A Common
Stock on a one-for-one basis. Additional conversion
provisions, including among other things, adjustments to
the one-for-one conversion ratio resulting from stock
splits, stock dividends, reorganizations and sales by the
Company of Class A Common Stock (or securities convertible
into that stock) at a price below current market price of
Class A Common Stock are set forth in the Amendment to the
Company's Articles of Incorporation filed as an exhibit to
the Company's Form 8-K filed on June 10, 2003. The
proceeds were valued at $16.60 per share based on the
market value of the Class A Common Stock at the time the
acquisition was announced.
Item 3. Defaults on Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Computation of earnings per share (filed herewith)
31.1 Certification of Kraig H. Kayser pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith)
31.2 Certification of Philip G. Paras pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith)
32 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(filed herewith)
(b) Reports on Form 8-K
(1) Form 8-K Filed June 10, 2003
A Current Report on Form 8-K was filed related to the acquisition of
Chiquita Processed Foods, L.L.C.
SIGNATURES
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
------------------------
September 5, 2003 Kraig H. Kayser
President and
Chief Executive Officer
/s/Jeffrey L. Van Riper
-------------------------
September 5, 2003 Jeffrey L. Van Riper
Controller and
Chief Accounting Officer