Seneca Foods Corp - Annual Report: 2007 (Form 10-K)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
Annual
Report Pursuant to Section 13 or 15(d) of
The
Securities Exchange Act of 1934
|
For
the fiscal year ended March 31, 2007
|
Commission
File Number 0-01989
|
SENECA
FOODS CORPORATION
(Exact
name of registrant as specified in its charter)
|
New
York
(State
or other jurisdiction of
incorporation
or organization)
3736
South Main Street, Marion, New York
(Address
of principal executive offices)
Registrant’s
telephone number, including area code
|
16-0733425
(I.R.S.
Employer Identification No.)
14505
(Zip
Code)
(315)
926-8100
|
Securities
registered pursuant to Section 12(b) of the Exchange Act:
|
Title
of Each Class
|
Name
of Each Exchange on
Which
Registered
|
|
Common
Stock Class A, $.25 Par
|
NASDAQ
Global Market
|
|
Common
Stock Class B, $.25 Par
|
NASDAQ
Global Market
|
Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act.
Yes
No
X
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Yes
No
X
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to best
of
the registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this
Form 10-K. X
Indicate
by check mark whether the registrant (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 registrant was required
to file such reports), and (2) has been subject to the filing requirements
for
at least the past 90 days.
Yes
X
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (as defined in Rule 12(b-2) of
the
Exchange Act).
Large
accelerated filer
Accelerated filer
X
Non-accelerated filer
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)
Yes
No
X
The
aggregate market value of the Registrant’s voting and non-voting common equity
held by non-affiliates based on the closing sales price per market reports
by
the NASDAQ Global Market System on September 30, 2006 was approximately
$166,711,000.
Common
shares outstanding as of May 30, 2007 were Class A: 4,814,284, Class B:
2,760,905.
Documents
Incorporated by Reference:
|
(1)
|
Proxy
Statement to be issued in connection with the Registrant’s annual meeting
of stockholders (the “Proxy Statement”) applicable to Part III, Items
10-14 of Form 10-K.
|
|
(2)
|
Portions
of the Annual Report to shareholders for fiscal year ended March
31, 2007
(the “2007 Annual Report”) applicable to Part I, Part II, Items 5-8 and
Part IV, Item 15 of Form 10-K.
|
TABLE
OF
CONTENTS
FORM
10-K
ANNUAL REPORT - FISCAL 2007
SENECA
FOODS CORPORATION
|
PART
I.
|
Pages
|
|
|
Item
1.
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1-4
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Item
1A.
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4-6
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Item
1B.
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6
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Item
2.
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7
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Item
3.
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8
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Item
4.
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8
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PART
II.
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Item
5.
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9-10
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Item
6.
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10
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Item
7.
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10
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Item
7A.
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10
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Item
8.
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10
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Item
9.
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10
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Item
9A.
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11-12
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Item
9B.
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13
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PART
III.
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Item
10.
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14
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Item
11.
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14
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Item
12.
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14
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Item
13.
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14
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Item
14.
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14
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PART
IV.
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||
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Item
15.
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15-16
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17
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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.
PART
I
Business
General
Development of Business
SENECA
FOODS CORPORATION (the “Company”) was organized in 1949 and incorporated under
the laws of the State of New York. In the spring of 1995, the Company initiated
a 20-year Alliance Agreement with the Pillsbury Company, which was acquired
by
General Mills Operations, Inc. (“GMOI”) that created the Company’s most
significant business relationship. Under the Alliance Agreement, the Company
packs canned and frozen vegetables carrying GMOI’s Green Giant brand name.
Since
the
onset of the Alliance Agreement, vegetable production has been the Company’s
dominant line of business. In fiscal 1999, the Company sold its fruit juice
business and its applesauce and industrial flavors business. As a result of
these divestitures, the Company’s only non-vegetable food products are a line of
fruit and chip products.
On
August
18, 2006, the Company completed the acquisition of the sole membership interest
in Signature Fruit Company L.L.C., a large producer of fruit products, from
John
Hancock Life Insurance Company and John Hancock Variable Life Insurance Company.
As a result of this acquisition, the Company expanded its line of fruit
products.
Available
Information
The
Company’s Internet address is www.senecafoods.com.
The
Company’s annual report on Form 10-K, the Company’s quarterly reports on Form
10-Q, current reports on Form 8-K and any amendments to those reports filed
or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of
1934 are available on the Company’s web site, as soon as reasonably practicable
after they are electronically filed with or furnished to the SEC. All such
filings on the Company’s web site are available free of charge.
In
addition, the Company's website includes items related to corporate governance
matters, including charters of various committees of the Board of Directors
and
the Company's Code of Business Conduct and Ethics. The Company intends to
disclose on its website any amendment to or waiver of any provision of the
Code
of Business Conduct and Ethics that would otherwise be required to be disclosed
under the rules of the SEC and NASDAQ.
Financial
Information about Industry Segments
The
Company’s business activities are principally conducted in food processing
operations. The food operation constitutes 99% of total sales, of which
approximately 82% is vegetable processing and 18% is fruit processing. The
fruit
processing percentage represents eight months of sales of the acquired Signature
Fruit Company, L.L.C. The non-food operation is mostly trade sales of cans
and
ends, which represents 1% of the Company’s total sales.
Narrative
Description of Business
Principal
Products and Markets
Food
Processing
The
principal products include canned fruits and vegetables, frozen vegetables
and
other food products. The products are sold to retail and institutional markets.
The Company has divided the United States into four major marketing sections:
Eastern, Southern, Northwestern, and Southwestern. Food processing operations
are primarily supported by plant locations in New York, California, Wisconsin,
Washington, Idaho, Illinois, and Minnesota.
1
The
following table summarizes net sales by major product category for the years
ended March 31, 2007, 2006, and 2005:
|
Classes
of similar products/services:
|
2007
|
2006
|
2005
|
|||||||
|
(In
thousands)
|
||||||||||
|
Net
Sales:
|
||||||||||
|
GMOI
|
$
|
210,313
|
$
|
240,490
|
$
|
225,527
|
||||
|
Canned
vegetables
|
579,731
|
573,779
|
574,802
|
|||||||
|
Frozen
vegetables
|
35,696
|
29,464
|
28,304
|
|||||||
|
Fruit
and chip products
|
183,338
|
26,640
|
23,358
|
|||||||
|
Other
|
15,775
|
13,450
|
12,283
|
|||||||
|
$
|
1,024,853
|
$
|
883,823
|
$
|
864,274
|
|||||
Source
and Availability of Raw Materials
The
Company’s food processing plants are located in major vegetable producing states
and in two fruit producing states. Fruits and vegetables are primarily obtained
through contracts with growers. The Company’s sources of supply are considered
equal or superior to its competition for all of its food products.
Intellectual
Property
The
Company's most significant brand name, Libby's, is held pursuant to a trademark
license granted to the Company in March 1982 and renewable by the Company every
10 years for an aggregate period expiring in March 2081. The original licensor
was Libby, McNeill & Libby, Inc., then an indirect subsidiary of Nestlé, S.
A. ("Nestlé") and the license was granted in connection with the Company's
purchase of certain of the licensor's canned vegetable operations in the United
States. Corlib Brands Management, LTD, acquired the license from Nestlé during
2006. The license is limited to vegetables which are shelf-stable and thermally
processed, and includes the Company's major vegetable varieties - corn, peas
and
green beans - as well as certain other thermally processed vegetable varieties
and sauerkraut.
The
Company is required to pay an annual royalty, initially set at $25,000, and
adjustable up or down in subsequent years based upon changes in the "Employment
Cost Index-Private Non-farm Workers" published by the U. S. Bureau of Labor
Statistics or an appropriate successor index as defined in the license
agreement. Corlib Brands may terminate the license for non-payment of royalty,
use of the trademark in sales outside the licensed territory, failure to achieve
a minimum level of sales under the licensed trademark during any calendar year
or a material breach or default by the Company under the agreement (which is
not
cured within the specified cure period). With the purchase of Signature, which
also uses the Libby’s brand name, the Company re-negotiated the license
agreement and created a new, combined agreement based on Libby’s revenue dollars
for fruits, vegetables, and dry beans. A total of $116,000 was paid as a royalty
fee for the quarter ended March of 2007.
Seasonal
Business
While
individual fruits and vegetables have seasonal cycles of peak production and
sales, the different cycles are usually offsetting to some extent. Minimal
food
processing occurs in the Company's last fiscal quarter ending March 31, which
is
the optimal time for maintenance, repairs and equipment changes in its
processing plants. The supply of commodities, current pricing, and expected
new
crop quantity and quality affect the timing of the Company’s sales and earnings.
When the seasonal harvesting periods of the Company's major vegetables are
newly
completed, inventories for these processed vegetables are at their highest
levels. For peas, the peak inventory time is mid-summer and for corn, the
Company's highest volume vegetable, the peak inventory is in mid-autumn. An
Off
Season Allowance is established during the year to minimize the effect of
seasonal production on earnings. The Off Season Allowance is zero at each fiscal
year-end.
Backlog
In
the
food processing business, the end of year sales order backlog is not considered
meaningful. Traditionally, larger customers provide tentative bookings for
their
expected purchases for the upcoming season. These bookings are further developed
as data on the expected size of the related national harvests becomes available.
In general, these bookings serve as a yardstick rather than as a firm
commitment, since actual harvest results can vary notably from early estimates.
In actual practice, the Company has substantially all of its expected seasonal
production identified to potential sales outlets before the seasonal production
is completed.
2
Competition
and Customers
Competition
in the food business is substantial with imaginative brand registration and
promotion, quality, service, and pricing being the major determinants in the
Company’s relative market position. The Company is aware of approximately 18
competitors in the U.S. processed vegetable industry, many of which are
privately held companies. The Company believes that it is a major producer
of
canned vegetables, but some producers of canned, frozen and other modes of
vegetable products have sales which exceed the Company's sales. The Company
is
aware of approximately eight competitors in the U.S. processed fruit industry.
In addition, there are significant quantities of fruit that are imported from
Europe, Asia and South America.
During
the past year, approximately 10% of the Company’s processed foods sales were
packed for retail customers under the Company’s branded labels of
Libby’s®,
Blue
Boy®,
Aunt
Nellie’s Farm Kitchen®,
Stokely®,
Read®,
Festal®,
Diamond
A®,
and
Seneca®.
About
24% of processed foods sales were packed for institutional food distributors
and
45% were retail packed under the private label of customers. The remaining
21%
was sold under the Alliance Agreement with GMOI (see note 12 of Item 8,
Financial Statements and Supplementary Data). Termination of the Alliance
Agreement would substantially reduce the Company’s sales and profitability
unless the Company was to enter into a new substantial supply relationship
with
GMOI or another major vegetable marketer. The non-Alliance customers represent
a
full cross section of the retail, institutional, distributor, and industrial
markets; and the Company does not consider itself dependent on any single sales
source other than sales attributable to the Alliance Agreement.
The
Company's principal branded products are its Libby’s canned fruit and vegetable
products, which rate among the top five national brands.
The
information under the heading Results of Operations in Management’s Discussion
and Analysis of Financial Condition and Results of Operations in the 2007 Annual
Report is incorporated by reference.
Environmental
Protection
Environmental
protection is an area that has been worked on most diligently at each food
processing facility. In all locations, the Company has cooperated with federal,
state, and local environmental protection authorities in developing and
maintaining suitable antipollution facilities. In general, pollution control
facilities are equal to or somewhat superior to those of our competitors and
are
within environmental protection standards. The Company does not expect any
material capital expenditures to comply with environmental regulations in the
near future. The Company is a potentially responsible party with respect to
a
waste disposal site owned and operated by a third party. The Company believes
that any reasonably anticipated liabilities will not exceed $300,000 for the
waste disposal site.
Environmental
Litigation and Contingencies
The
Company is one of a number of business and local government entities which
contributed waste materials to a landfill in Yates County in upstate New York,
which was operated by a party unrelated to the Company primarily in the 1970’s
through the early 1980’s. The Company’s wastes were primarily food and juice
products. The landfill contained some hazardous materials and was remediated
by
the State of New York. The New York Attorney General has advised the Company
and
other known non-governmental waste contributors that New York has sustained
a
total remediation cost of $4.9 million and seeks recovery of half that cost
from
the non-governmental waste contributors. The Company is one of four identified
contributors (Group) who cooperatively are investigating the history of the
landfill so as to identify and seek out other potentially responsible parties
who are not defunct and are financially able to contribute to the
non-governmental parties’ reimbursement liability. The Group has offered a
settlement but has not received a response from the State. The Company does
not
believe that any ultimate settlement in excess of the amount accrued will have
a
material impact on its financial position or results of operations.
In
early
1999, the Company sold to Tree Top, Inc. its applesauce business, including
a
plant in Prosser, Benton County, Washington. In the sale agreement governing
the
transaction, the Company represented to Tree Top that it was in compliance
with
all environmental laws. In 2003, the Benton County Clean Air Authority (“BCAA”)
brought an enforcement action against Tree Top under Title V of the Clean Air
Act and related State of Washington statutes, alleging that Tree Top was
violating the Clean Air Act by failing to register the facility with BCAA
pursuant to Title V. The BCAA also alleged that the facility failed to provide
BCAA with a required notice of construction when it replaced a fourth boiler
in
the Prosser plant in 1988 when the Company was the sole owner. Tree Top has
reached a settlement with the BCAA which, according to Tree Top, requires Tree
Top to pay penalties and make modifications to equipment at a total cost of
approximately $493,000. Tree Top had made a formal demand on the Company for
reimbursement of the entire amount. On May 1, 2007, the Company made a payment
in full settlement of this claim in an amount less than the original amount
demanded. This amount did not have a material impact on its financial position
or results of operations.
Employment
The
Company has 3,358 employees of which 2,738 full time and 520 seasonal employees
work in food processing and 73 full time employees work in other
activities.
3
The
Company has seven collective bargaining agreements with three unions covering
approximately 900 of its full-time employees. The terms of these agreements
result in wages and benefits, which are substantially the same for comparable
positions for the Company’s non-union employees. Four collective bargaining
agreements expire in calendar 2008, two agreements expire in calendar 2009,
and
one agreement expires in calendar 2010.
Export
Sales
|
The
following table sets forth domestic and export sales:
|
||||||||||
|
Fiscal
Year
|
||||||||||
|
2007
|
2006
|
2005
|
||||||||
|
(In
thousands, except percentages)
|
||||||||||
|
Net
Sales:
|
||||||||||
|
United
States
|
$
|
935,948
|
$
|
804,236
|
$
|
782,282
|
||||
|
Export
|
88,905
|
79,587
|
81,992
|
|||||||
|
Total
Net Sales
|
$
|
1,024,853
|
$
|
883,823
|
$
|
864,274
|
||||
|
As
a Percentage of Net Sales:
|
||||||||||
|
United
States
|
91.3
|
%
|
91.0
|
%
|
90.5
|
%
|
||||
|
Export
|
8.7
|
%
|
9.0
|
%
|
9.5
|
%
|
||||
|
Total
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||
Risk
Factors
The
risks
and uncertainties described below are not the only ones we face. Additional
risks and uncertainties not presently known to us, may also impair our business
operations. If any of the following risks actually occurs, our business,
financial condition or results of operations could be materially and adversely
affected. The Company refers to itself as “we”, “our” or “us” in this
section.
Excess
capacity in the fruit and vegetable industry has a downward impact on selling
price.
Our
financial performance and growth are related to conditions in the United States
fruit and vegetable processing industry which is a mature industry with a modest
growth rate in the last 10 years. Our net sales are a function of product
availability and market pricing. In the fruit and vegetable processing industry,
product availability and market prices tend to have an inverse relationship:
market prices tend to decrease as more product is available and to increase
if
less product is available. Product availability is a direct result of plantings,
growing conditions, crop yields and inventory levels, all of which vary from
year to year. In addition, market prices can be affected by the planting and
inventory levels and individual pricing decisions of the three or four largest
processors in the industry. Generally, market prices in the fruit and vegetable
processing industry adjust more quickly to variations in product availability
than an individual processor can adjust its cost structure; thus, in an
oversupply situation, a processor’s margins likely will weaken. We typically
have experienced lower margins during times of industry oversupply.
In
the
past, the fruit and vegetable processing industry has been characterized by
excess capacity, with resulting pressure on our prices and profit margins.
Both
the Company and our competitors have closed processing plants in response to
the
downward pressure on prices. There can be no assurance that our margins will
improve in response to favorable market conditions or that we will be able
to
operate profitably during depressed market conditions. Moreover, fruit and
vegetable production outside the United States, particularly in Europe, Asia
and
South America, is increasing and, in the future, may have a significant effect
on competition and create downward pressure on prices.
Growing
cycles and adverse weather conditions may decrease our results from
operations.
Our
operations are affected by the growing cycles of the fruits and vegetables
we
process. When the fruits and vegetables are ready to be picked, we must harvest
and process them or forego the opportunity to process fresh picked fruits and
vegetables for an entire year. Most of our fruits and vegetables are grown
by
farmers under contract with us. Consequently, we must pay the contract grower
for the fruits and vegetables even if we cannot or do not harvest or process
them. Most of our production occurs during the second quarter (July through
September) of our fiscal year, which corresponds with the fact that the growing
season ends for most of the produce processed by us. In that quarter, the
growing season ends for most of the vegetables processed by us in the northern
United States. A majority of our sales occur during the third and fourth quarter
of each fiscal year due to seasonal consumption patterns for our products.
Accordingly, inventory levels are highest during the second and third quarters,
and accounts receivable levels are highest during the third and fourth quarters.
Net sales generated during our third and fourth fiscal quarters have a
significant impact on our results of operations. Because of these seasonal
fluctuations, the results of any particular quarter, particularly in the first
half of our fiscal year, will not necessarily be indicative of results for
the
full year or for future years.
4
Because
weather conditions during the course of each fruit and vegetable crop’s growing
season will affect the volume and growing time of that crop, we must set
planting schedules without knowing the effect of the weather on the crops or
on
the entire industry’s production. As most fruits and vegetables are produced in
more than one part of the U.S., we may somewhat reduce our risk that our entire
crop will be subject to disastrous weather. The upper Midwest is the primary
growing region for the principal vegetables which we pack, namely peas, green
beans and corn, and it is also a substantial source of our competitors’
vegetable production. California is the primary growing region for the fruits
we
pack, namely peaches, pears, apricots and grapes. The adverse effects of
weather-related reduced production may be partially mitigated by higher selling
prices for the fruits and vegetables which are produced.
The
commodity materials that we process or otherwise require are subject to price
increases that could adversely affect our profitability.
The
materials that we use, such as fruits and vegetables, steel (used to make cans)
and packaging materials are commodities that may experience price volatility
caused by external factors including market fluctuations, availability, currency
fluctuations and changes in governmental regulations and agricultural programs.
These events can result in reduced supplies of these materials, higher supply
costs or interruptions in our production schedules. If prices of these raw
materials increase, but we are not able to effectively pass such price increases
along to our customers, our operating income will decrease.
Increased
focus on ethanol will impact the Company’s cost of produce that could adversely
affect our profitability.
As
part
of the U.S. Government’s efforts to promote alternative fuel sources via
subsidies and tax credits, there is an increased interest in the production
of
corn-based ethanol fuel, which is diverting acreage previously used for the
production of food for human consumption. Further restricting available acreage
are Farm Bill provisions prohibiting planting fruits and vegetables on “base”
acres used for soybeans and field corn. If prices of raw produce increase,
but
we are not able to effectively pass such price increases along to our customers,
our operating income will decrease.
We
face risks generally associated with our debt.
As
of
March 31, 2007, we had a total of approximately $220 million of indebtedness.
Our indebtedness could have important consequences, such as limiting our
operational flexibility due to the covenants contained in our debt agreements;
limiting our ability to invest in our business due to debt service requirements;
limiting our ability to compete with companies that are not as highly leveraged;
and increasing our vulnerability to economic downturns and changing market
conditions.
Our
ability to meet our debt service obligations will depend on our future
performance, which will be affected by financial, business, economic,
governmental and other factors, including potential changes in consumer
preferences and pressure from competitors. If we do not have enough money to
pay
our debt service obligations, we may be required to refinance all or part of
our
existing debt, sell assets, borrow more money or raise equity. There is a risk
that we may not be able to refinance existing debt or that the terms of any
refinancing will not be as favorable as the terms of the existing
debt.
Our
dependence on the Alliance Agreement could negatively affect
sales.
We
have
an Alliance Agreement with GMOI, whereby we process canned and frozen vegetables
for GMOI under the Green Giant brand name. GMOI continues to be responsible
for
all of the sales, marketing and customer service functions for the Green Giant
products. The Alliance Agreement has a remaining term of eight years. Green
Giant products packed by us in fiscal 2007 and 2006 constituted approximately
21% and 27%, respectively, of our total sales. General Mills, Inc. guarantees
GMOI’s obligations under the Alliance Agreement.
The
Alliance Agreement has an initial term ending December 31, 2014, and will be
extended automatically for additional five year terms unless terminated in
accordance with the provisions of the Alliance Agreement. Upon virtually all
of
the causes of termination enumerated in the Alliance Agreement, GMOI will
acquire legal title to three production plants and certain of the other assets
which we acquired under the Alliance Agreement, and various financial
adjustments between the parties will occur. If GMOI terminates the Alliance
Agreement without cause, it must pay us a substantial termination payment.
Our
sales
and financial performance under the Alliance Agreement and our sales of Green
Giant products depend to a significant extent on our success in producing
quality Green Giant vegetables at competitive costs and GMOI’s success in
marketing the products produced by us. The ability of GMOI to successfully
market these products will depend upon GMOI’s sales efforts, as well as the
factors described above under “—Excess capacity in the vegetable industry has a
downward effect on price.” We cannot give assurance as to the volume of GMOI’s
sales and cannot control many of the key factors affecting that volume. The
Alliance Agreement contains extensive covenants by us with respect to quality
and delivery of products, maintenance of the Alliance Plants and other standards
of our performance. If we were to fail in our performance of these covenants,
GMOI would be entitled to terminate the Alliance Agreement.
Termination
of the Alliance Agreement will, in most cases, entitle our principal lenders,
including our long-term lenders, to declare a default under our loan agreements
with them. The principal lenders have a security interest in certain payments
that we will receive from GMOI on termination of the Alliance Agreement. Unless
we were to enter into a new substantial supply relationship with GMOI or another
major vegetable marketer and acquire substantial production capacity to replace
the GMOI production plants, any such termination would substantially reduce
our
sales.
5
Sales
to
GMOI have declined $42 million, from $252 million to $210 million, between
fiscal year 2003 and fiscal year 2007.
If
we do not maintain the market shares of our products, our business and revenues
may be adversely affected.
All
of
our products compete with those of other national and regional food processing
companies under highly competitive conditions. The vegetable products which
we
sell under our own brand names not only compete with vegetable products produced
by vegetable processing competitors, but also compete with products we produce
and sell to other companies who market those products under their own brand
names, such as the Green Giant vegetables we sell to GMOI under the Alliance
Agreement and the vegetables we sell to various retail grocery chains which
carry our buyers’ own brand names.
The
customers who buy our products to sell under their own brand names control
the
marketing programs for those products. In recent years, many major retail food
chains have been increasing their promotions, offerings and shelf space
allocations for their own fruit and vegetable brands, to the detriment of fruit
and vegetable brands owned by the processors, including our own brands. We
cannot predict the pricing or promotional activities of our competitors or
whether they will have a negative effect on us. There are competitive pressures
and other factors, which could cause our products to lose market share or result
in significant price erosion that could have a material adverse effect on our
business, financial condition and results of operations.
Increases
in logistics and other transportation-related costs could materially adversely
impact our results of operations. Our ability to competitively serve our
customers depends on the availability of reliable and low-cost
transportation.
Logistics
and other transportation-related costs have a significant impact on our earnings
and results of operations. We use multiple forms of transportation to bring
our
products to market. They include trucks, intermodals, rail cars, and ships.
Disruption to the timely supply of these services or increases in the cost
of
these services for any reason, including availability or cost of fuel,
regulations affecting the industry, or labor shortages in the transportation
industry, could have an adverse effect on our ability to serve our customers,
and could have a material adverse effect on our financial
performance.
If
we are subject to product liability claims, we may incur significant and
unexpected costs and our business reputation could be adversely affected.
Food
processors are subject to significant liability should the consumption of their
products cause injury or illness. A product liability judgment against us could
also result in substantial and unexpected expenditures, affect consumer
confidence in our products, and divert management’s attention from other
responsibilities. Although we maintain product liability insurance coverage
in
amounts customary within the industry, there can be no assurance that this
level
of coverage is adequate or that we will be able to continue to maintain our
existing insurance or obtain comparable insurance at a reasonable cost, if
at
all. A product recall or a partially or completely uninsured judgment against
us
could have a material adverse effect on results of operations and financial
condition. During the second quarter of our fiscal year 2005, the Company
recalled certain products and recognized a charge of $1,280,000 as previously
reported.
We
generate agricultural food processing wastes and are subject to substantial
environmental regulation.
As
a food
processor, we regularly dispose of produce wastes (silage) and processing water,
as well as materials used in plant operation and maintenance, and our plant
boilers, which generate heat used in processing, produce generally small
emissions into the air. These activities and operations are regulated by federal
and state laws and the respective federal and state environmental agencies.
Occasionally, we may be required to remediate conditions found by the regulators
to be in violation of environmental law or to contribute to the cost of
remediating waste disposal sites, which we neither owned nor operated, but
in
which, we and other companies deposited waste materials, usually through
independent waste disposal companies. The costs of this remediation and
contributions (including occasional fines) have not been significant. As a
major
food producer, we run the risk of occasional future costs and inadvertent
violations, even though we maintain an environmental department to assist us
in
environmental compliance.
Unresolved
Staff Comments
The
Company does not have any unresolved comments from the SEC staff regarding
its
periodic or current reports under the Securities Exchange Act of 1934, as
amended.
6
Properties
The
following table details the Company’s manufacturing plants and
warehouses:
|
Square
Footage
(000)
|
Acres
|
||||||
|
Food
Group
|
|||||||
|
Modesto,
California
|
1,970
|
120
|
|||||
|
Buhl,
Idaho
|
489
|
102
|
|||||
|
Payette,
Idaho
|
387
|
43
|
|||||
|
Princeville,
Illinois
|
205
|
222
|
|||||
|
Arlington,
Minnesota
|
264
|
541
|
|||||
|
Blue
Earth, Minnesota
|
286
|
352
|
|||||
|
Bricelyn,
Minnesota
|
58
|
6
|
|||||
|
Glencoe,
Minnesota
|
630
|
785
|
|||||
|
LeSueur,
Minnesota
|
181
|
71
|
|||||
|
Montgomery,
Minnesota
|
549
|
1,021
|
|||||
|
Rochester,
Minnesota
|
1,031
|
854
|
|||||
|
Geneva,
New York
|
754
|
601
|
|||||
|
Leicester,
New York
|
216
|
91
|
|||||
|
Marion,
New York
|
368
|
187
|
|||||
|
Dayton,
Washington
|
257
|
52
|
|||||
|
Yakima,
Washington
|
119
|
8
|
|||||
|
Baraboo,
Wisconsin
|
254
|
8
|
|||||
|
Cambria,
Wisconsin
|
411
|
329
|
|||||
|
Clyman,
Wisconsin
|
406
|
416
|
|||||
|
Cumberland,
Wisconsin
|
228
|
287
|
|||||
|
Gillett,
Wisconsin
|
157
|
105
|
|||||
|
Janesville,
Wisconsin
|
1,094
|
271
|
|||||
|
Mayville,
Wisconsin
|
282
|
367
|
|||||
|
Oakfield,
Wisconsin
|
220
|
421
|
|||||
|
Ripon,
Wisconsin
|
348
|
75
|
|||||
|
Non-Food
Group
|
|||||||
|
Penn
Yan, New York
|
27
|
4
|
|||||
|
Total
|
11,191
|
7,339
|
|||||
These
facilities primarily process and package various vegetable and fruit products.
Most of the facilities are owned by the Company. The Company is a lessee under
a
number of operating and capital leases for equipment and real property used
for
processing and warehousing.
All
of
the properties are well maintained and equipped with modern machinery. All
locations, although highly utilized, have the ability to expand as sales
requirements justify. Because of the seasonal production cycles, the exact
extent of utilization is difficult to measure. In certain circumstances, the
theoretical full efficiency levels are being reached; however, expansion of
the
number of production days or hours could increase the output by up to 20% for
a
season.
Certain
of the Company’s facilities are mortgaged to financial institutions to secure
long-term debt and capital lease obligations. See Notes 4 and 5 of Item 8,
Financial Statements and Supplementary Data, for additional information about
the Company’s long-term debt and lease commitments.
7
Legal
Proceedings
In
the
ordinary course of its business, the Company is made a party to certain legal
proceedings seeking monetary damages, including proceedings involving product
liability claims, worker’s compensation and other employee claims, tort and
other general liability claims, for which it carries insurance, as well as
patent infringement and related litigation. While it is not feasible to predict
or determine the ultimate outcome of these matters, the Company does not believe
that an adverse decision in any of these legal proceedings would have a material
adverse impact on its financial position, results of operations, or cash
flows.
Refer
to
Item 1, Business
--
Environmental
Protection,
for
information regarding environmental legal proceedings.
Submission
of Matters to a Vote of Security Holders
No
matters were submitted to a vote of shareholders during the last quarter of
the
fiscal period covered by this report.
8
PART
II
Market
for Registrant’s Common Stock, Related Security Holder Matters and Issuer
Purchases of Equity Securities
Each
class of preferred stock receives preference as to dividend payment and
declaration over any common stock. In addition, refer to the information in
the
2007 Annual Report, “Shareholder Information and Quarterly Results”, which is
incorporated by reference.
Securities
Authorized for Issuance Under Equity Compensation
Plans
The
Company currently has no equity compensation plans or individual compensation
arrangements under which equity securities of the Company are authorized for
issuance to employees or directors, therefore, no table is necessary as
described in Item 201(d) of Regulation S-K.
Common
Stock Performance Graph
Refer
to
the information in the 2007 Annual Report, “Shareholder Information and
Quarterly Results”, which is incorporated by reference.
9
Issuer
Purchases of Equity Securities
|
Period
|
Total
Number of Shares Purchased (1)
|
Average
Price Paid per Share
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans or
Programs
|
Maximum
Number (or Approximate Dollar Value) or Shares that May Yet Be Purchased
Under the Plans or Programs
|
||
|
Class
A Common
|
Class
B Common
|
Class
A Common
|
Class
B Common
|
|||
|
1/01/07
- 1/31/07
|
-
|
-
|
$
-
|
$ -
|
N/A
|
N/A
|
|
2/01/07
- 2/29/07
|
-
|
-
|
-
|
-
|
N/A
|
N/A
|
|
3/01/07
- 3/31/07
|
9,000
|
-
|
26.38
|
-
|
N/A
|
N/A
|
|
Total
|
9,000
|
-
|
$26.38
|
$ -
|
N/A
|
N/A
|
(1)
These
purchases were made in open market transactions by the Trustees of the Seneca
Foods Corporation Employees' Savings Plan and the Seneca Foods, L.L.C. 401(k)
Retirement Savings Plan to provide employee matching contributions under the
Plans.
Selected
Financial Data
Refer
to
the information in the 2007 Annual Report, “Five Year Selected Financial Data”,
which is incorporated by reference.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
Refer
to
the information in the 2007 Annual Report, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations”, which is incorporated by
reference.
Quantitative
and Qualitative Disclosures about Market Risk
Refer
to
the information in the 2007 Annual Report, “Quantitative and Qualitative
Disclosures about Market Risk”, which is incorporated by reference.
Financial
Statements and Supplementary Data
Refer
to
the information in the 2007 Annual Report, “Consolidated Financial Statements
and Notes thereto including Report of Independent Registered Public Accounting
Firms”, which is incorporated by reference.
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
10
Controls
and Procedures
Evaluation
of Disclosure Controls and Procedures
Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934), as of March 31, 2007. Based upon this evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that, as of March
31, 2007, the Company’s disclosure controls and procedures: (1) were designed to
ensure that material information relating to the Company is made known to our
Chief Executive Officer and Chief Financial Officer by others within those
entities, particularly during the period in which this report was being
prepared, so as to allow timely decisions regarding required disclosure and
(2)
were effective, in that they provide reasonable assurance that information
required to be disclosed by the Company in the reports we file or submit under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms.
Management’s
Annual Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over the Company’s financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act). Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
Our
management assessed the effectiveness of the Company’s internal control over
financial reporting as of March 31, 2007. In making this assessment, our
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework. Based on our assessment, management believes that, as of March 31,
2007, our internal control over financial reporting is effective based on those
criteria.
In
conducting the Company’s evaluation of the effectiveness of its internal control
over financial reporting, the Company has excluded the acquisition of Signature
Fruit Company, LLC (Signature), which was completed on August 18, 2006. The
contribution from the Signature acquisition represents approximately 16% of
consolidated revenue for the year ended March 31, 2007 and approximately 14%
of
consolidated assets as of March 31, 2007. Refer to Note 2, Acquisition to the
consolidated financial statements for further discussion of the Signature
acquisition and their impact on the Company’s consolidated financial
statements.
The
independent registered public accounting firm BDO Seidman, LLP, which audited
the Company’s 2007 financial statements incorporated into this Form 10-K, has
issued an opinion on management’s assessment, as of March 31, 2007, of the
Company’s internal control over financial reporting. Their opinion appears on
page 12.
11
Internal
Control over Financial Reporting
Board
of
Directors and Stockholders
Seneca
Foods Corporation
Marion,
New York
We
have
audited management’s assessment, included in the accompanying Management’s
Annual Report on Internal Control Over Financial Reporting that Seneca Foods
Corporation maintained effective internal control over financial reporting
as of
March 31, 2007, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). The Company’s management is responsible for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting.
Our responsibility is to express an opinion on management’s assessment and an
opinion on the effectiveness of the Company’s internal control over financial
reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control
over
financial reporting, evaluating management’s assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing
such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain
to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors
of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
As
indicated in the accompanying Managements’ Annual Report on Internal Control
Over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal
control over financial reporting did not include the internal controls of
Signature Fruit Company LLC, which was acquired on August 18, 2006, and which
is
included in the 2007 consolidated financial statements of Seneca Foods
Corporation and constituted 14% of consolidated assets as of March 31, 2007
and
16% of consolidated revenues for the year then ended. Management did not assess
the effectiveness of internal control over financial reporting of Signature
Fruit Company LLC because of the timing of the acquisition which was completed
on August 18, 2006. Our audit of internal control over financial reporting
of
Seneca Foods Corporation also did not include an evaluation of the internal
control over financial reporting of Signature Fruit Company LLC.
In
our
opinion, management’s assessment that the Company maintained effective internal
control over financial reporting as of March 31, 2007, is fairly stated, in
all
material respects, based on the criteria established in Internal Control-
Integrated Framework issued by COSO. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of March 31, 2007, based on the criteria established in Internal
Control - Integrated Framework issued by COSO.
We
have
also audited, in accordance with the standards of the Public Company Accounting
Standards Board (United States), the consolidated balance sheets of Seneca
Foods
Corporation as of March 31, 2007 and 2006, and the related consolidated
statements of net earnings, stockholders’ equity and cash flows for the years
then ended and our report dated June 8, 2007 expressed an unqualified opinion
on
those consolidated financial statements.
/s/BDO
Seidman, LLP
Milwaukee,
Wisconsin
June
8,
2007
Changes
in Internal Control over Financial Reporting
No
change
in our internal control over financial reporting (as defined in rules 13a-15(f)
and 15d-15(f) under the Exchange Act) occurred during the quarter ended March
31, 2007 that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.
12
Other
Information
None.
13
PART
III
Directors,
Executive Officers and Corporate Governance
The
Company has adopted a Code of Ethics that applies to the Chief Executive
Officer, Chief Financial Officer and Controller. The Code of Ethics is available
on our web site www.senecafoods.com (free of charge).
Additional
information required by Item 10 will be filed separately with the Commission,
pursuant to Regulation 14A, in a definitive proxy statement involving the
election of directors, which is incorporated herein by reference.
Executive
Compensation
Information
required by Item 11 will be filed separately with the Commission, pursuant
to
Regulation 14A, in a definitive proxy statement involving the election of
directors, which is incorporated herein by reference.
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Information
required by Item 12 will be filed separately with the Commission, pursuant
to
Regulation 14A, in a definitive proxy statement involving the election of
directors, which is incorporated herein by reference.
Certain
Relationships and Related Transactions, and Director
Independence
Information
required by Item 13 will be filed separately with the Commission, pursuant
to
Regulation 14A, in a definitive proxy statement involving the election of
directors, which is incorporated herein by reference.
Principal
Accountant Fees and Services
Information
required by Item 14 will be filed separately with the Commission, pursuant
to
Regulation 14A, in a definitive proxy statement involving the election of
directors, which is incorporated herein by reference.
14
PART
IV
Exhibits
and Financial Statement Schedules
A. Exhibits,
Financial Statements, and Supplemental Schedules
1. Financial
Statements
- the
following consolidated financial statements of the Registrant, included in
the
Annual Report for the year ended March 31, 2007, are incorporated by reference
in Item 8:
|
Consolidated
Statements of Net Earnings - Years ended March 31, 2007, 2006 and
2005
|
|
Consolidated
Balance Sheets - March 31, 2007 and
2006
|
|
Consolidated
Statements of Cash Flows - Years ended March 31, 2007, 2006 and
2005
|
|
Consolidated
Statements of Stockholders’ Equity - Years ended March 31, 2007, 2006 and
2005
|
|
Notes
to Consolidated Financial Statements - Years ended March 31, 2007,
2006
and 2005
|
|
Reports
of Independent Registered Public Accounting
Firms
|
Pages
2. Supplemental
Schedule:
Other
schedules have not been filed because the conditions requiring the filing do
not
exist or the required
information
is included in the consolidated financial statements, including the notes
thereto.
|
3.
|
Exhibits:
|
|
No
3
|
-
|
Articles
of Incorporation and By-Laws - Incorporated by reference to exhibits
3.1,
3.2 and 3.3 the Company’s Form 10-Q/A filed August, 1995; as amended by
exhibit 3 filed with the Company’s Form 10-K filed June 1996 as amended by
exhibit 3(i) to the Company’s Form 8-K dated September 17, 1998; as
amended by exhibit 3.3 to the Company’s form 8-K dated June 10, 2003,
amended by Exhibit 3 of the Company’s Form 8-K dated August 23,
2006.
|
||
|
No.
4
|
-
|
Articles
defining the rights of security holders - Incorporated by reference
to the
Company’s Form 10-Q/A filed August, 1995 as amended by amendments filed
with the Company’s Form 10-K filed June 1996. Instrument defining the
rights of any holder of Long-Term Debt - Incorporated by reference
to
Exhibit 99 to the Company’s Form 10-Q filed January 1995 as amended by
Exhibit No. 4 of the Company’s Form 10-K filed June, 1997, amended by
Exhibit 4 of the Company’s Form 10-Q and Form 10-Q/A filed November, 1997,
as amended by amendments filed with the Company’s definitive proxy
statement filed July, 1998 as amended by the Company’s 8-K dated June 10,
2003, amended by Exhibit 10.2 of the Company’s Form 8-K dated August 23,
2006. The Company will furnish, upon request to the SEC, a copy of
any
instrument defining the rights of any holder of Long-Term
Debt.
|
||
15
|
|
||||
|
No.
10
|
-
|
Material
Contracts - Incorporated by reference to the Company’s Form 8-K dated
February 24, 1995 for the First Amended and Restated Alliance Agreement
and the First Amended and Restated Asset Purchase Agreement both
with The
Pillsbury Company amended by the Company’s Form 8-K dated June 11, 2002.
Incorporated by reference to exhibit 10 to the Company's Form 10-K
filed
June 25, 2002 for a form of Indemnification Agreement dated January
31, 2002. Incorporated by reference to the Company’s 8-K dated June 10,
2003 for the Purchase Agreement by and among Seneca Foods Corporation,
Chiquita Brands International, Inc. and Friday Holdings, L.C.C. dated
as
of March 6, 2003. Incorporated by reference to the Company’s Form 8-K
dated August 23, 2006 for the Purchase Agreement by and among Seneca
Foods
Corporation, John Hancock Life Insurance Company and John Hancock
Variable
Life Insurance Company dated as of August 18, 2006, the Company's
Amended
and Restated Revolving Credit Agreement and Registration Rights Agreement
between the Company and John Hancock Life Insurance Company. Seneca Foods Corporation Management
Profit
Sharing Bonus Plan (filed herewith).
|
||
|
No.
13
|
-
|
The
material contained in the 2007 Annual Report
to Shareholders under the following headings: “Five Year Selected
Financial Data”, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations”, “Consolidated Financial Statements
and Notes thereto including Independent Auditors’ Report”, “Quantitative
and Qualitative Disclosures about Market Risk”, and “Shareholder
Information and Quarterly Results” (filed herewith).
|
||
|
No.
21
|
-
|
List
of Subsidiaries (filed herewith)
|
||
|
No.
23.1
|
-
|
Consent
of BDO Seidman, LLP (filed
herewith)
|
||
|
No.
23.2
|
-
|
Consent
of Ernst & Young LLP (filed
herewith)
|
||
|
No.
24
|
Powers
of Attorney (filed
herewith)
|
|||
|
No.
31.1
|
-
|
|||
|
No.
31.2
|
-
|
|||
|
No.
32
|
-
|
Schedule
II
(In
thousands)
|
Balance
at
Beginning
of
period
|
Charged/
(Credited)
to
income
|
Charged
to
other
accounts
|
Deductions
from
reserve
|
Balance
at
end
of
period
|
||||||||||||
|
Year-ended
March 31, 2007:
Allowance
for doubtful accounts
|
$
|
445
|
$
|
(149
|
)
|
$
|
89
(b
|
)
|
$
|
(119)
(c
|
)
|
$
|
504
|
|||
|
Income
tax valuation allowance
|
$
|
¾
|
$
|
3,538
|
$
|
¾
|
$
|
¾
|
$
|
3,538
|
||||||
|
Year-ended
March 31, 2006:
Allowance
for doubtful accounts
|
$
|
625
|
$
|
(568
|
)
|
$
|
¾
|
$
|
(388)
(c
|
)
|
$
|
445
|
||||
|
Year-ended
March 31, 2005:
Allowance
for doubtful accounts
|
$
|
945
|
$
|
913
|
$
|
¾
|
$
|
1,233
(a
|
)
|
$
|
625
|
|||||
(a)
Accounts written off, net of recoveries.
(b)
Acquired via the Signature acquisition.
(c)
Recoveries, net of accounts written off.
16
Pursuant
to the requirements of Section 13 or 15 (d) of the Securities Exchange Act
of
1934, the registrant has duly caused this report to be signed on its behalf
by
the undersigned, thereunto duly authorized.
|
SENECA
FOODS CORPORATION
By
/s/Jeffrey L. Van Riper
Jeffrey
L. Van Riper
Controller
and Secretary
(Principal
Accounting Officer)
|
June
13, 2007
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
|
Signature
|
Title
|
Date
|
||
|
*
|
Chairman
and Director
|
June
13, 2007
|
||
|
Arthur
S. Wolcott
|
||||
|
*
Kraig
H. Kayser
|
President,
Chief Executive Officer, and Director
|
June
13, 2007
|
||
|
/s/Roland
E. Breunig
Roland
E. Breunig
|
Chief
Financial Officer and Treasurer
|
June
13, 2007
|
||
|
/s/Jeffrey
L. Van Riper
Jeffrey
L. Van Riper
|
Controller
and Secretary (Principal Accounting Officer)
|
June
13, 2007
|
||
|
*
|
Director
|
June
13, 2007
|
||
|
Arthur
H. Baer
|
||||
|
*
|
Director
|
June
13, 2007
|
||
|
Andrew
M. Boas
|
||||
|
*
|
Director
|
June
13, 2007
|
||
|
Robert
T. Brady
|
||||
|
*
|
Director
|
June
13, 2007
|
||
|
Douglas
F. Brush
|
||||
|
*
|
Director
|
June
13, 2007
|
||
|
G.
Brymer Humphreys
|
||||
|
*
|
Director
|
June
13, 2007
|
||
|
Thomas
Paulson
|
||||
|
*
|
Director
|
June
13, 2007
|
||
|
Susan
W. Stuart
|
||||
|
/s/Roland
E. Breunig
*By
Roland E. Breunig,
Attorney-in-fact
|
17