Seneca Foods Corp - Quarter Report: 2009 June (Form 10-Q)

For the Quarter Ended June 27, 2009

Commission File Number  0-01989

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)

 

Class	Shares Outstanding at July 31, 2009
Common Stock Class A, $.25 Par	8,442,266
Common Stock Class B, $.25 Par	2,195,515

PART I FINANCIAL INFORMATION, ITEM 1 FINANCIAL STATEMENTS
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Data)
		Actual				Actual
		June 27, 2009				June 28, 2008				March 31, 2009
ASSETS
Current Assets:
Cash and Cash Equivalents		$	8,575			$	7,830			$	5,849
Accounts Receivable, Net			59,864				49,535				76,713
Inventories (Note 2):
Finished Goods			167,413				155,025				270,481
Work in Process			26,101				14,210				24,280
Raw Materials and Supplies			155,396				134,445				98,194
Off-Season Reserve (Note 3)			66,845				69,977
Total Inventories			415,755				373,657				392,955
Deferred Income Tax Asset, Net			6,438				6,507				6,449
Refundable Income Taxes			-				10,427				-
Other Current Assets			8,749				7,131				5,966
Total Current Assets			499,381				455,087				487,932
Property, Plant and Equipment, Net			180,687				179,518				179,245
Deferred Income Tax Asset, Net			3,957				721				6,692
Other Assets			1,581				2,193				1,736
Total Assets		$	685,606			$	637,519			$	675,605
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable		$	93,264			$	76,105			$	60,019
Other Accrued Expenses			30,206				28,868				35,689
Accrued Vacation			9,768				9,656				9,843
Accrued Payroll			6,523				3,681				9,771
Income Taxes Payable			5,659				-				1,579
Current Portion of Long-Term Debt			38,377				10,213				38,949
Total Current Liabilities			183,797				128,523				155,850
Long-Term Debt, Less Current Portion			170,309				203,843				191,853
Other Long-Term Liabilities			32,377				27,791				45,477
Total Liabilities			386,483				360,157				393,180
Commitments
10% Preferred Stock, Series A, Voting, Cumulative,
Convertible, $.025 Par Value Per Share			102				102				102
10% Preferred Stock, Series B, Voting, Cumulative,
Convertible, $.025 Par Value Per Share			100				100				100
6% Preferred Stock, Voting, Cumulative, $.25 Par Value			50				50				50
Convertible, Participating Preferred Stock, $12.00
Stated Value Per Share			35,564				35,600				35,580
Convertible, Participating Preferred Stock, $15.50
Stated Value Per Share			8,535				8,596				8,571
Convertible, Participating Preferred Stock, $24.39
Stated Value Per Share			25,000				25,000				25,000
Common Stock $.25 Par Value Per Share			3,082				3,079				3,080
Additional Paid-in Capital			28,609				28,466				28,546
Treasury Stock, at cost			(257	)			-				(257	)
Accumulated Other Comprehensive Loss			(13,561	)			(3,613	)			(19,160	)
Retained Earnings			211,899				179,982				200,813
Stockholders' Equity			299,123				277,362				282,425
Total Liabilities and Stockholders’ Equity		$	685,606			$	637,519			$	675,605
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS
(Unaudited)
(In Thousands, Except Per Share Data)
		Three Months Ended
		June 27, 2009				June 28, 2008
Net Sales		$	230,528			$	216,713
Costs and Expenses:
Cost of Product Sold			194,591				200,851
Selling and Administrative			16,780				15,864
Other Operating Income			-				(271	)
Total Costs and Expenses			211,371				216,444
Operating Income			19,157				269
Interest Expense			2,637				3,752
Earnings (Loss) Before Income Taxes			16,520				(3,483	)
Income Taxes			5,434				(1,406	)
Net  Earnings (Loss)		$	11,086			$	(2,077	)
Earnings (Loss) Applicable to Common Stock		$	6,920			$	(1,300	)
Basic Earnings (Loss) per Common Share		$	0.91			$	(0.17	)
Diluted Earnings (Loss) per Common Share		$	0.91			$	(0.17	)

SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
		Three Months Ended
		June 27, 2009				June 28, 2008
Cash Flows from Operating Activities:
Net Earnings (Loss)		$	11,086			$	(2,077	)
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operations:
Depreciation & Amortization			5,401				5,503
Gain on the Sale of Assets			-				(271	)
Deferred Tax (Benefit) Expense			(755	)			653
Changes in operating assets and liabilities:
Accounts Receivable			16,849				12,477
Inventories			44,045				92,044
Off-Season Reserve			(66,845	)			(69,977	)
Other Current Assets			(2,783	)			(2,405	)
Income Taxes			4,002				9
Accounts Payable, Accrued Expenses
and Other Liabilities			20,375				13,524
Net Cash Provided by Operations			31,375				49,480
Cash Flows from Investing Activities:
Additions to Property, Plant and Equipment			(6,661	)			(6,304	)
Proceeds from the Sale of Assets			-				358
Net Cash Used in Investing Activities			(6,661	)			(5,946	)
Cash Flow from Financing Activities:
Long-Term Borrowing			48,255				24,661
Payments on Long-Term Debt and Capital Lease Obligations			(70,371	)			(70,804	)
Other			128				129
Dividends			-				(12	)
Net Cash Used in Financing Activities			(21,988	)			(46,026	)
Net Increase (Decrease) in Cash and Cash Equivalents			2,726				(2,492	)
Cash and Cash Equivalents, Beginning of the Period			5,849				10,322
Cash and Cash Equivalents, End of the Period		$	8,575			$	7,830

 

 

 

2.

The Company implemented the Last-In, First-Out (“LIFO”) inventory valuation method during 2008.  First-In, First-Out (“FIFO”) based inventory costs exceeded LIFO based inventory costs by $91,199,000 as of June 27, 2009.  The increase in the LIFO Reserve for the first three months of fiscal 2010 ended June 27, 2009 was $4,701,000 as compared to $10,276,000 for the first three months ended June 28, 2008 and reflects the projected impact of reduced inflationary cost increases expected in fiscal 2010 versus fiscal 2009.

3.

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.  These “off-season” variances are reserved for in a contra-inventory account and are included in the Inventory section of the Condensed Consolidated Balance Sheets. Depending on the time of year, the Off-Season Reserve is either the excess of absorbed expenses over incurred expenses to date resulting in a credit reserve balance, or the excess of incurred expenses over absorbed expenses to date resulting in a debit reserve balance.  Other than at the end of the first and fourth fiscal quarters of each year, absorbed expenses exceed incurred expenses due to timing of production.  All Off-Season Reserve balances are zero at fiscal year end.

4.	During the three-month period ended June 27, 2009, there were 3,700 shares, or $52,000, of Convertible Participating Preferred Stock converted to Class A Common Stock.

As previously disclosed, on July 21, 2009 certain shareholders of the Company closed on the sale of 3,756,332 shares of Class A common stock (including the shares sold pursuant to the underwriters' over allotment option) pursuant to an Underwriting Agreement among the Company, the selling shareholders and Merrill Lynch Pierce Fenner & Smith Inc. and Piper Jaffray & Co.  The Company received none of the proceeds of the offering.  Subsequent to June 27, 2009, 2,607,156 shares, or $31,104,000, of Convertible Preferred Stock and 556,088 shares, or $139,000, of Class B Common Stock (at par), were converted to Class A Common Stock in connection with this secondary stock offering.

5.	The following schedule presents Comprehensive Income (Loss) for the three months ended June 27, 2009 and June 28, 2008:

	Three Months Ended
	June 27, 2009		June 28, 2008
	(in thousands)
Comprehensive Income (Loss):
Net Earnings (Loss)	11,086		(2,077)
Change in 401(k) stock adjustment (net of tax)	123		15
Change in pension and post retirement benefits                adjustment (net of tax)	5,476		-
Total	16,685		(2,062)

6.

The changes in the Stockholders’ Equity accounts for the three months period ended June 27, 2009, consist of an increase of $11,086,000 for Net Earnings, an increase of $5,476,000 related to the change in pension and post retirement benefits adjustment, an increase of $123,000 for a mark-to-market adjustment of 401(k) plan stock, and an increase of $13,000 for the restricted stock issued pursuant to the Company’s equity compensation plan.

7.	The net periodic benefit cost for the Company’s pension plan consisted of:

		Three Months Ended
		June 27, 2009				June 28, 2008
		(in thousands)
Service  Cost		$	408			$	756
Interest Cost			1,545				1,435
Expected Return on Plan Assets			(997	)			(1,474	)
Amortization of Transition Asset			(69	)			(69	)
Net Periodic Benefit Cost		$	887			$	648

8.	The following table summarizes the restructuring and related asset impairment charges recorded and the accruals established:

				Long-Lived
		Severance		Asset Charges		Other Costs		Total
		(in thousands)
Total expected
Restructuring charge		$2,152		$5,749		$3,909		$11,810
Balance March 31, 2009		$       -		$250		$1,035		$1,285
Cash payments/write offs				-		(65)		(65)
Balance June 27, 2009		$       -		$250		$970		$1,220
Total costs incurred
to date		$2,152		$5,499		$2,939		$10,590

9.

During the three months ended June 28, 2008, the Company sold some unused fixed assets which resulted in a gain of $271,000.  This gain is included in Other Operating Income in the Unaudited Condensed Consolidated Statements of Net Earnings.  No similar gains were incurred during the three months ended June 27, 2009.

10.

In September 2006, the Financial Accounting Standards Board (“FASB”)   issued SFAS No. 157, “Fair Value Measurements” ("SFAS 157").  This statement clarifies the definition of fair value, establishes a framework for measuring fair value and expands the disclosures on fair value measurements.  SFAS 157 was initially effective for the Company beginning April 1, 2008.  In February 2008, the FASB approved the issuance of FASB Staff Position (“FSP”) FAS 157-2.  FSP FAS 157-2 allowed the Company to electively defer the effective date of SFAS No. 157 until April 1, 2009 for nonfinancial assets and nonfinancial liabilities except those items recognized or disclosed at fair value on an annual or more frequently recurring basis. Through June 27, 2009, SFAS 157 had no effect on the Company’s consolidated results of operations or financial position with respect to its financial assets and liabilities.  Effective April 1, 2009, the Company applied the fair value measurement and disclosure provisions of SFAS 157 to its nonfinancial assets and liabilities measured on a nonrecurring basis.  Such also had no effect on its consolidated results of operations or financial position through June 27, 2009 and is also expected to have no material impact on the Company’s future consolidated results of operations or financial position.

In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations," ("SFAS 141(R)") to further enhance the accounting and financial reporting related to business combinations. SFAS 141(R) establishes principles and requirements for how the acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Therefore, the effects of the Company's adoption of SFAS 141(R) will depend upon the extent and magnitude of acquisitions after March 2009.

FSP Financial Accounting Statement (“FAS”) 132(R)-1, issued on December 30, 2008, amends FAS 132(R), "Employers' Disclosures about Pensions and Other Postretirement Benefits", to expand disclosures in an employer's financial statements about plan assets.  Among other things, the FSP requires employers to disclose information regarding the fair value measurements of plan assets that are similar to the disclosures required by FAS 157 (e.g., information regarding the fair value disclosure hierarchy and rollforward of assets measured using Level 3 inputs).  The disclosures about plan assets required by the FSP are required for fiscal years ending on or after December 15, 2009.

In June 2008, the FASB issued Emerging Issues Task Force (“EITF”) 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock”. EITF 07-5 provides guidance in assessing whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock for purposes of determining whether the appropriate accounting treatment falls under the scope of SFAS 133, “Accounting For Derivative Instruments and Hedging Activities,” and/or EITF 00-19, “Accounting For Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock.” EITF 07-05 is effective as of the beginning of our 2010 fiscal year. This EITF did not have a impact on the Company’s consolidated financial statements.

 

 

 

 

 

 

 

 

11.	Earnings per share for the Quarters Ended June 27, 2009 and June 28, 2008 are as follows:

		Q U A R T E R
		2009			2008
		(In thousands, except per share amounts)
Basic
Net earnings (loss)		$	11,086			$	(2,077	)
Deduct preferred stock dividends paid			6				6
Undistributed earnings			11,080				(2,083	)
Deduct earnings allocated to participating preferred			4,160				(783	)
Earnings allocated to common shareholders		$	6,920			$	(1,300	)
Weighted average common shares outstanding			7,584				7,591
Basic earnings per common share		$	0.91			$	(0.17	)
Diluted
Earnings allocated to common shareholders		$	6,920			$	(1,300	)
Add dividends on convertible preferred stock			5				5
Earnings applicable to common stock on a diluted basis		$	6,925			$	(1,295	)
Weighted average common shares outstanding-basic			7,584				7,591
Additional shares to be issued under full conversion of preferred stock			67				67
Total shares for diluted			7,651				7,658
Diluted earnings per common share		$	0.91			$	(0.17	)

 

 

 

 

		Three Months Ended
		June 27, 2009				June 28, 2008
Canned Vegetables		$	161.3			$	150.5
Green Giant Alliance			1.8				3.0
Frozen Vegetables			9.8				10.2
Fruit Products			47.1				45.9
Snack			7.4				3.7
Other			3.1				3.4
		$	230.5			$	216.7

		Three Months Ended
		June 27, 2009				June 28, 2008
Gross Margin			15.6	%			7.3	%
Selling			3.8	%			4.3	%
Administrative			3.5	%			3.0	%
Other Operating Income			0.0	%			-0.1	%
Operating Income			8.3	%			0.1	%
Interest Expense			1.1	%			1.7	%

 

		June								March
		2009				2008				2009				2008
Working Capital:
Balance		$	315,584			$	326,564			$	332,082			$	370,102
Change in Quarter			(16,498	)			(7,891	)			-				-
Long-Term Debt, Less Current Portion			170,309				203,843				191,853				250,039
Total Stockholders' Equity Per Equivalent
Common Share (see Note)			24.49				22.69				23.13				22.86
Stockholders' Equity Per Common Share			30.27				27.39				28.10				27.66
Current Ratio			2.71				3.54				3.13				4.21

·	general economic and business conditions;

·	cost and availability of commodities and other raw materials such as vegetables, steel and packaging materials;

·	transportation costs;

·	climate and weather affecting growing conditions and crop yields;

·	leverage and the Company’s ability to service and reduce its debt;

·	foreign currency exchange and interest rate fluctuations;

·	effectiveness of the Company’s marketing and trade promotion programs;

·	changing consumer preferences;

·	competition;

·	product liability claims;

·	the loss of significant customers or a substantial reduction in orders from these customers;

·	changes in, or the failure or inability to comply with, U.S., foreign and local governmental regulations, including environmental and health and safety regulations; and

·	other risks detailed from time to time in the reports filed by the Company with the SEC.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

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
4/01/09 – 4/30/09	6,000	-	$21.23	-	N/A	N/A
5/01/09 – 5/31/09		-	-	-	N/A	N/A
6/01/09 – 6/30/09	7,600	-	$24.63	-	N/A	N/A
Total	14,200	-	$23.05	-	N/A	N/A