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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended
OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number
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Seneca Foods Corporation
(Exact name of Company as specified in its charter)
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| (State or other jurisdiction of | (I. R. S. Employer | |||
| incorporation or organization) | Identification No.) | |||
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| (Address of principal executive offices) | (Zip Code) | |||
| Company's telephone number, including area code |
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Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Securities registered pursuant to Section 12(b) of the Act:
| Name of Exchange on | |||||
| Title of Each Class | Trading Symbol | Which Registered | |||
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Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the Company is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐
Emerging growth company
If an emerging growth company, indicate by checkmark if the Company has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
The number of shares outstanding of each of the issuer's classes of common stock at the latest practical date are:
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Class |
Shares Outstanding at January 22 , 20 21 |
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Common Stock Class A, $.25 Par |
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Common Stock Class B, $.25 Par |
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Quarterly Report on Form 10-Q |
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Table of Contents |
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Page |
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PART 1 |
FINANCIAL INFORMATION |
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Item 1 |
Financial Statements: |
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Condensed Consolidated Balance Sheets-December 26, 2020, December 28, 2019 and March 31, 2020 |
1 | |
| Item 2 |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3 |
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Item 4 |
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PART II |
OTHER INFORMATION |
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Item 1 |
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Item 1A |
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Item 2 |
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Item 3 |
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Item 4 |
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Item 5 |
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Item 6 |
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SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Data)
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Unaudited |
Unaudited |
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December 26, 2020 |
December 28, 2019 |
March 31, 2020 |
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ASSETS |
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Current Assets: |
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Cash and Cash Equivalents |
$ |
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$ |
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$ |
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Accounts Receivable, Net |
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Contracts Receivable |
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Current Assets Held For Sale |
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Current Assets Held For Sale-Discontinued Operations |
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Inventories |
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Refundable Income Taxes |
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Other Current Assets |
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Total Current Assets |
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Property, Plant and Equipment, Net |
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Right-of-Use Assets Operating, Net |
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Right-of-Use Assets Financing, Net |
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Deferred Income Taxes, Net |
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Noncurrent Assets Held For Sale-Discontinued Operations |
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Other Assets |
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Total Assets |
$ |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current Liabilities: |
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Accounts Payable |
$ |
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$ |
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$ |
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Deferred Revenue |
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Accrued Vacation |
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Accrued Payroll |
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Other Accrued Expenses |
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Income Taxes Payable |
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Current Liabilities Held For Sale-Discontinued Operations |
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Current Portion of Operating Lease Obligations |
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Current Portion of Financing Lease Obligations |
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Current Portion of Long-Term Debt |
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Total Current Liabilities |
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Long-Term Debt, Less Current Portion |
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Operating Lease Obligations, Less Current Portion |
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Financing Lease Obligations, Less Current Portion |
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Pension Liabilities |
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Deferred Income Taxes, Net |
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Other Long-Term Liabilities |
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Total Liabilities |
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Commitments and Contingencies |
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Stockholders' Equity: |
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Preferred Stock |
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Common Stock, $.25 Par Value Per Share |
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Additional Paid-in Capital |
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Treasury Stock, at Cost |
(
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(
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(
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Accumulated Other Comprehensive Loss |
(
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(
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(
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Retained Earnings |
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Total Stockholders' Equity |
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Total Liabilities and Stockholders’ Equity |
$ |
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$ |
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$ |
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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 |
Nine Months Ended |
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December 26, 2020 |
December 28, 2019 |
December 26, 2020 |
December 28, 2019 |
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Net Sales |
$ |
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$ |
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$ |
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$ |
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Costs and Expenses: |
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Cost of Product Sold |
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Selling, General and Administrative |
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Plant Restructuring (Credit)/Charge |
(
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Other Operating Income |
(
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(
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(
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(
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Total Costs and Expenses |
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Operating Income |
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(Income)/Loss From Equity Investment |
(
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Other (Income)/Loss |
(
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(
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(
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Interest Expense, Net |
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Earnings From Continuing Operations Before Income Taxes |
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Income Taxes From Continuing Operations |
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Earnings From Continuing Operations |
$ |
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$ |
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$ |
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$ |
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Earnings From Discontinued Operations (net of income taxes) |
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Net Earnings |
$ |
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$ |
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$ |
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$ |
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Basic Earnings per Common Share |
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Continuing Operations |
$ |
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$ |
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$ |
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$ |
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Discontinued Operations |
$ |
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$ |
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$ |
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$ |
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Net Basic Earnings per Common Share |
$ |
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$ |
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$ |
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$ |
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Diluted Earnings per Common Share: |
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Continuing Operations |
$ |
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$ |
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$ |
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$ |
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Discontinued Operations |
$ |
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$ |
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$ |
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$ |
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Net Diluted Earnings per Common Share |
$ |
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$ |
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$ |
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$ |
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SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In Thousands)
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
December 26, 2020 |
December 28, 2019 |
December 26, 2020 |
December 28, 2019 |
|||||||||||||
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Comprehensive income: |
||||||||||||||||
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Net earnings |
$ |
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$ |
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$ |
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$ |
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||||||||
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Total |
$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
|
Nine Months Ended |
||||||||
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December 26, 2020 |
December 28, 2019 |
|||||||
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Cash Flows from Operating Activities: |
||||||||
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Net Earnings From Continuing Operations |
$ |
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$ |
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Net Earnings From Discontinued Operations (Net of Tax) |
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Adjustments to Reconcile Net Earnings to Net Cash Provided by Operations: |
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Depreciation & Amortization |
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Gain on the Sale of Assets |
(
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(
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) | ||||
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Provision for Restructuring and Impairment |
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Loss From Equity Investment |
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Deferred Income Tax Benefit |
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Changes in Operating Assets and Liabilities: |
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Accounts Receivable |
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(
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) | |||||
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Inventories |
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Other Current Assets |
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(
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) | |||||
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Income Taxes |
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Accounts Payable, Accrued Expenses and Other |
(
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) |
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Net Cash Provided by Operations |
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Cash Flows from Investing Activities: |
||||||||
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Additions to Property, Plant and Equipment |
(
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) |
(
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) | ||||
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Proceeds from the Sale of Assets |
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Net Cash Provided By/(Used In) Investing Activities |
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(
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) | |||||
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Cash Flows from Financing Activities: |
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Long-Term Borrowing |
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||||||
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Payments on Long-Term Debt |
(
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) |
(
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) | ||||
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Other Assets |
(
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) |
(
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) | ||||
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Payments on Financing Leases |
(
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) |
(
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) | ||||
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Purchase of Treasury Stock |
(
|
) |
(
|
) | ||||
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Dividends |
(
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) |
(
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) | ||||
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Net Cash Used In Financing Activities |
(
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) |
(
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) | ||||
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Net Increase in Cash and Cash Equivalents |
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||||||
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Cash and Cash Equivalents, Beginning of the Period |
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||||||
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Cash and Cash Equivalents, End of the Period |
$ |
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$ |
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Supplemental Disclosures of Cash Flow Information: |
||||||||
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Noncash Transactions: |
||||||||
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Property, Plant and Equipment Purchased Under Lease Obligations |
$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
||||||||
SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
(In Thousands)
|
Accumulated |
||||||||||||||||||||||||
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Additional |
Other |
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Preferred |
Common |
Paid-In |
Treasury |
Comprehensive |
Retained |
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Stock |
Stock |
Capital |
Stock |
Loss |
Earnings |
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First Quarter FY 2021: |
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Balance March 31, 2020 |
$ |
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$ |
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$ |
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$ |
(
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) | $ |
(
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) | $ |
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Net earnings |
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Cash dividends declared on preferred stock |
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(
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Equity incentive program |
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Balance June 27, 2020 |
$ |
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$ |
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$ |
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$ |
(
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) | $ |
(
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) | $ |
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Second Quarter FY 2021: |
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Net earnings |
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Equity incentive program |
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Purchase treasury stock |
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(
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) |
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Balance September 26, 2020 |
$ |
|
$ |
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$ |
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$ |
(
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) | $ |
(
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) | $ |
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Third Quarter FY 2021: |
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Net earnings |
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Cash dividends declared on preferred stock |
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(
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) | |||||||||||||||||
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Equity incentive program |
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Preferred stock conversion |
(
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) |
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Purchase treasury stock |
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(
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) |
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Balance December 26, 2020 |
$ |
|
$ |
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$ |
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$ |
(
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) | $ |
(
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) | $ |
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First Quarter FY 2020: |
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Balance March 31, 2019 |
$ |
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$ |
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$ |
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$ |
(
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) | $ |
(
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) | $ |
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||||||||||
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Net earnings |
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Cash dividends declared on preferred stock |
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(
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) | |||||||||||||||||
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Equity incentive program |
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||||||||||||||||||
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Purchase treasury stock |
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(
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) |
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Operating lease impairment adjustment upon the adoption of ASU 2016-02 "Leases" (net of tax) |
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(
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) | |||||||||||||||||
|
Balance June 29, 2019 |
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
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|
Second Quarter FY 2020: |
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Net earnings |
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||||||||||||||||||
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Equity incentive program |
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||||||||||||||||||
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Preferred stock conversion |
(
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) |
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|||||||||||||||||
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Purchase treasury stock |
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|
|
(
|
) |
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|
|||||||||||||||||
|
Balance September 28, 2019 |
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
||||||||||
|
Third Quarter FY 2020: |
||||||||||||||||||||||||
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Net earnings |
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Cash dividends declared on preferred stock |
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(
|
) | |||||||||||||||||
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Equity incentive program |
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||||||||||||||||||
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Purchase treasury stock |
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|
|
(
|
) |
|
|
|||||||||||||||||
|
Balance December 28, 2019 |
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
||||||||||
|
Preferred Stock |
Common Stock |
|||||||||||||||||||||||
| 6% | 10% | |||||||||||||||||||||||
|
Cumulative Par |
Cumulative Par |
2003 Series |
||||||||||||||||||||||
|
Value $.25 |
Value $.025 |
Participating |
Participating |
Class A |
Class B |
|||||||||||||||||||
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Callable at Par |
Convertible |
Convertible Par |
Convertible Par |
Common Stock |
Common Stock |
|||||||||||||||||||
|
Voting |
Voting |
Value $.025 |
Value $.025 |
Par Value $.25 |
Par Value $.25 |
|||||||||||||||||||
|
Shares authorized and designated: |
||||||||||||||||||||||||
|
December 26, 2020 |
|
|
|
|
|
|
||||||||||||||||||
|
Shares outstanding: |
||||||||||||||||||||||||
|
December 26, 2020 |
200,000 | 807,240 |
|
|
|
|
||||||||||||||||||
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 26, 2020
1. Unaudited Condensed Consolidated Financial Statements
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which are normal and recurring in nature, necessary to present fairly the financial position of Seneca Foods Corporation (the “Company”) as of December 26, 2020 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, 2020 balance sheet was derived from the audited consolidated financial statements.
The results of operations for the three and nine month periods ended December 26, 2020 are not necessarily indicative of the results to be expected for the full year.
For the
nine
months ended
December 26, 2020
and
December 28, 2019
the Company sold certain finished goods inventory for cash on a bill and hold basis. The terms of the bill and hold agreement(s) provide that title to the specified inventory is transferred to the customer(s) prior to shipment and the Company has the right to payment (prior to physical delivery) which results in recorded revenue as determined under the revenue recognition standard.
The accounting policies followed by the Company are set forth in Note 1 to the Company's Consolidated Financial Statements in the Company’s 2020 Annual Report on Form 10 -K.
Other footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company's 2020 Annual Report on Form 10 -K.
All references to years are fiscal years ended or ending March 31 unless otherwise indicated. Certain percentage tables may not foot due to rounding.
Reclassifications—Certain previously reported amounts have been reclassified to conform to the current period classification. In addition, the Company has adjusted its prior quarter cash flow statement to properly reflect lease payments made on operating leases under Accounting Standards Codification (“ASC”) 842 - Leases. This adjustment reduced net cash provided by operations and reduced net cash used in financing activities.
2. Discontinued Operations
On
July 13, 2018,
the Company executed a nonbinding letter of intent with a perspective buyer of the Modesto facility. On
October 9, 2018,
the Company closed on the sale of the facility to this outside buyer with net proceeds of $
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 26, 2020
The following table presents information related to the major classes of assets and liabilities of Modesto that are classified as Held For Sale-Discontinued Operations in the Company's Consolidated Balance Sheets (in thousands):
|
December 26, |
December 28, |
March 31, |
||||||||||
|
2020 |
2019 |
2020 |
||||||||||
|
Other Current Assets |
|
|
|
|||||||||
|
Current Assets Held For Sale-Discontinued Operations |
$ |
|
$ |
|
$ |
|
||||||
|
Other Assets |
|
|
|
|||||||||
|
Noncurrent Assets Held For Sale-Discontinued Operations |
$ |
|
$ |
|
$ |
|
||||||
|
Accounts Payable and Accrued Expenses |
$ |
|
$ |
|
$ |
|
||||||
|
Current Liabilities Held For Sale-Discontinued Operations |
$ |
|
$ |
|
$ |
|
||||||
The operating results of the discontinued operations that are reflected in the Unaudited Condensed Consolidated Statements of Net Earnings from discontinued operations are as follows (in thousands):
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
December 26, |
December 28 |
December 26, |
December 28 |
|||||||||||||
|
2020 |
2019 |
2020 |
2019 |
|||||||||||||
|
Net Sales |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Cost of Product Sold |
|
|
|
|
||||||||||||
|
Plant Restructuring Credit (a) |
|
(
|
) |
|
(
|
) | ||||||||||
|
Earnings From Discontinuned Operations Before Income Taxes |
|
(
|
) |
|
(
|
) | ||||||||||
|
Gain on the Sale of Assets Before Income Taxes |
|
(
|
) |
|
(
|
) | ||||||||||
|
Income Tax Expense |
|
|
|
|
||||||||||||
|
Net Earnings From Discontinued Operations, Net of Tax |
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | ||||||
|
(a) Includes $
|
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 26, 2020
3. Assets Held For Sale
As of December 26, 2020, the Company has certain non-operating units in the Midwest that met the criteria to be classified as held for sale, which requires the Company to present the related assets and liabilities as separate line items in our Condensed Consolidated Balance Sheet. The Company is required to record the assets held for sale at the lower of carrying value or fair value less costs to sell. The following table presents information related to the major classes of assets and liabilities that were held for sale in our Condensed Consolidated Balance sheets (in thousands):
|
December 26, |
||||
|
2020 |
||||
|
Property, Plant and Equipment (net) |
$ |
|
||
|
Current Assets Held For Sale |
$ |
|
||
4. Revenue Recognition
In the following table, revenue is disaggregated by product category groups (in millions):
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
December 26, 2020 |
December 28, 2019 |
December 26, 2020 |
December 28, 2019 |
|||||||||||||
|
Canned Vegetables |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Frozen |
|
|
|
|
||||||||||||
|
Fruit Products |
|
|
|
|
||||||||||||
|
Chip Products |
|
|
|
|
||||||||||||
|
Prepared Foods |
|
|
|
|
||||||||||||
|
Other |
|
|
|
|
||||||||||||
| $ |
|
$ |
|
$ |
|
$ |
|
|||||||||
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 26, 2020
|
5. |
Inventories
|
The change in the LIFO Reserve for the
nine
months ended
December 26, 2020
was a decrease of $
|
December 26, 2020 |
December 28, 2019 |
March 31, 2020 |
||||||||||
|
Finished products |
$ |
|
$ |
|
|
|||||||
|
In process |
|
|
|
|||||||||
|
Raw materials and supplies |
|
|
|
|||||||||
|
|
|
|
||||||||||
|
Less excess of FIFO cost over LIFO cost |
|
|
|
|||||||||
|
Total inventories |
$ |
|
$ |
|
$ |
|
||||||
|
6. |
Leases |
The Company determines if an arrangement is a lease at inception of the agreement. Operating leases are included in right-of-use operating assets, and current and noncurrent operating lease obligations in the Company’s Condensed Consolidated Balance Sheets. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. If the lease does not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The right-of-use operating lease assets also include in its calculation any prepaid lease payments made and excludes any lease incentives received from the arrangement. The Company’s lease terms may include options to extend or terminate the lease, and the impact of these options are included in the lease liability and lease asset calculations when the exercise of the option is at the Company’s sole discretion and it is reasonably certain that the Company will exercise that option. The Company will not separate lease and nonlease components for its leases when it is impractical to separate the two, such as leases with variable payment arrangements. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 26, 2020
The Company has operating leases for land, machinery and equipment. The Company also has finance leases for machinery and equipment. The commencement date used for the calculation of the lease obligation is the latter of the commencement date of the new standard ( April 1, 2019) or the lease start date. Certain of the leases have options to extend the life of the lease, which are included in the liability calculation when the option is at the sole discretion of the Company and it is reasonably certain that the Company will exercise the option. In addition, the Company has certain leases that have variable payments based solely on output or usage of the leased asset. These variable operating lease assets are excluded from the Company’s balance sheet presentation and expensed as incurred. Leases with an initial term of 12 months or less are not material.
Upon adoption of Accounting Standards Update (“ASU”)
No.
2016
-
02,
the Company determined its right-of-use assets related to the operating leases for its plant equipment in Sunnyside, Washington were partially impaired and therefore were reduced with a corresponding charge to retained earnings of $
Lease expense for lease payments is recognized on a straight-line basis over the lease term. The components of lease expense were as follows (in thousands):
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
December 26, 2020 |
December 28, 2019 |
December 26, 2020 |
December 28, 2019 |
|||||||||||||
|
Lease cost: |
||||||||||||||||
|
Amortization of right of use asset |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Interest on lease liabilities |
|
|
|
|
||||||||||||
|
Finance lease cost |
|
|
|
|
||||||||||||
|
Operating lease cost |
|
|
|
|
||||||||||||
|
Total lease cost |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Cash paid for amounts included in the measurement of lease liabilities |
||||||||||||||||
|
Operating cash flows from finance leases |
$ |
|
$ |
|
||||||||||||
|
Operating cash flows from operating leases |
|
|
||||||||||||||
|
Financing cash flows from finance leases |
|
|
||||||||||||||
| $ |
|
$ |
|
|||||||||||||
|
Right-of-use assets obtained in exchange for new finance lease liabilities |
$ |
|
$ |
|
||||||||||||
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
$ |
|
$ |
|
||||||||||||
|
Weighted-average lease term (years): |
||||||||||||||||
|
Financing leases |
|
|
||||||||||||||
|
Operating leases |
|
|
||||||||||||||
|
Weighted-average discount rate (percentage): |
||||||||||||||||
|
Financing leases |
|
|
||||||||||||||
|
Operating leases |
|
|
||||||||||||||
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 26, 2020
Undiscounted future lease payments under non-cancelable operating leases and financial leases, along with a reconciliation of undiscounted cash flows to operating and financing lease liabilities, respectively, as of December 26, 2020 were as follows (in thousands):
|
Years ending March 31: |
Operating |
Financing |
|||||||
|
Balance of 2021 |
$ |
|
$ |
|
|||||
|
2022 |
|
|
|||||||
|
2023 |
|
|
|||||||
|
2024 |
|
|
|||||||
|
2025 |
|
|
|||||||
| 2026-2032 |
|
|
|||||||
|
Total minimum payment required |
$ |
|
$ |
|
|||||
|
Less interest |
|
|
|||||||
|
Present value of minimum lease payments |
|
|
|||||||
|
Amount due within one year |
|
|
|||||||
|
Long-term lease obligations |
$ |
|
$ |
|
|||||
| 7. | Revolving Credit Facility |
The Company entered into a
five
-year revolving credit facility (“Revolver”) on
July 5, 2016.
Maximum borrowings under the Revolver total $
The decrease in average amount of Revolver borrowings during the first nine months of fiscal 2021 compared to the first nine months of fiscal 2020 was attributable to strong earnings during the first nine months of fiscal 2021.
General terms of the Revolver include payment of interest at LIBOR plus a defined spread.
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 26, 2020
The following table documents the quantitative data for Revolver borrowings during the third quarter and year-to-date for fiscal 2021 and fiscal 2020 (in thousands):
|
Third Quarter |
Year-to-Date |
|||||||||||||||
|
2021 |
2020 |
2021 |
2020 |
|||||||||||||
|
Reported end of period: |
||||||||||||||||
|
Outstanding borrowings |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Weighted average interest rate |
|
% |
|
% |
|
% |
|
% |
||||||||
|
Reported during the period: |
||||||||||||||||
|
Maximum amount of borrowings |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Average outstanding borrowings |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Weighted average interest rate |
|
% |
|
% |
|
% |
|
% |
||||||||
|
8. |
Stockholders’ Equity |
During the
nine
-month period ended
December 26, 2020,
the Company repurchased $
|
9. |
Retirement Plans |
The net periodic benefit cost for the Company’s pension plan consisted of (dollar amounts in thousands):
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
December 26, 2020 |
December 28, 2019 |
December 26, 2020 |
December 28, 2019 |
|||||||||||||
|
Service Cost Including Administration |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Interest Cost |
|
|
|
|
||||||||||||
|
Expected Return on Plan Assets |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
|
Amortization of Prior Service Cost |
|
|
|
|
||||||||||||
|
Amortization of Net Loss |
|
|
|
|
||||||||||||
|
Net Periodic Benefit Cost |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
On
December 14, 2020,
the Company made a pension contribution of $
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 26, 2020
|
10. |
Plant Restructuring |
The following table summarizes the rollforward of restructuring charges and related asset impairment charges recorded and the accruals established (In thousands):
|
Restructuring Payable |
||||||||||||
|
Severance |
Other Costs |
Total |
||||||||||
|
Balance March 31, 2020 |
$ |
|
$ |
|
$ |
|
||||||
|
First quarter charge |
|
|
|
|||||||||
|
Second quarter charge |
|
|
|
|||||||||
| Third quarter credit |
|
(
|
(
|
|||||||||
|
Cash payments/write offs |
(
|
) |
|
(
|
) | |||||||
|
Balance December 26, 2020 |
$ |
|
$ |
|
$ |
|
||||||
|
Severance |
Other Costs |
Total |
||||||||||
|
Balance March 31, 2019 |
$ |
|
$ |
|
$ |
|
||||||
|
First quarter charge |
|
|
|
|||||||||
|
Second quarter charge |
|
|
|
|||||||||
| Third quarter charge |
|
|
|
|||||||||
|
Cash payments/write offs |
(
|
) |
(
|
) |
(
|
) | ||||||
|
Balance December 28, 2019 |
$ |
|
$ |
|
$ |
|
||||||
During the
nine
months ended
December 26, 2020,
the Company recorded a restructuring charge of $
During the
nine
months ended
December 28, 2019,
the Company recorded a restructuring charge of $
|
11. |
Other Operating Income and Expense |
On
December 18, 2020,
the Company completed the sale of its prepared foods business to an unaffiliated buyer who was
not
a previous customer. The Company recorded a gain on the sale of the prepared food business of $
These items are included in Other Operating Income in the Unaudited Condensed Consolidated Statements of Net Earnings.
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 26, 2020
|
12. |
Recently Issued Accounting Standards |
In August 2018, the FASB issued ASU No. 2018 - 14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715 - 20 ): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans , which modifies the disclosure requirements for defined benefit pension plans and other postretirement plans. ASU 2018 - 14 is effective for annual periods beginning after December 15, 2020, with early adoption permitted. The amendments in this ASU should be applied on a retrospective basis to all periods presented. We are currently evaluating the effect that ASU 2018 - 14 will have on our condensed consolidated financial statements and related disclosures.
In December 2019, the FASB issued ASU No. 2019 - 12 to simplify the accounting for income taxes by removing certain exceptions to the general principles and simplify areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enacted tax laws or rate changes. The new standard will be effective for the Company in the first quarter of fiscal year 2022. We are currently evaluating the effect that the new standard will have on the Company’s financial position, results of operations and related disclosures.
In June 2016, the FASB issued ASU No. 2016 - 13, "Financial Instruments - Credit Losses (Topic 326 ): Measurement of Credit Losses on Financial Instruments," which was subsequently amended in November 2018 through ASU No. 2018 - 19, "Codification Improvements to Topic 326, Financial Instruments – Credit Losses." ASU No. 2016 - 13 will require entities to estimate lifetime expected credit losses for trade and other receivables along with other financial instruments which will result in earlier recognition of credit losses. Further, the new credit loss model will affect how entities in all industries estimate their allowance for losses for receivables that are current with respect to their payment terms. In November 2019, the FASB issued ASU No. 2019 - 10, which, among other things, deferred the application of the new guidance on credit losses for smaller reporting companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This guidance will be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., a modified-retrospective approach). Under the above-mentioned deferral, the Company expects to adopt ASU No. 2016 - 03, and the related ASU No. 2018 - 19 amendments, beginning as of April 1, 2023 and is in the process of assessing the impact, if any, that this new guidance is expected to have on the Company’s results of operations, financial condition and/or financial statement disclosures.
In May 2020, the SEC issued a final rule that amends the financial statement requirements for acquisitions and dispositions of businesses. The amendments primarily relate to disclosures required by Rule 3 - 05 and Article 11 of Regulation S- X. Among other things, the final rule modifies the tests provided in Rule 1 - 02 (w) of Regulation S- X used to determine whether a subsidiary or an acquired or disposed business is significant. The amendments take effect January 1, 2021. The Company has elected not to early adopt the provisions of the final rule, and therefore the final rule becomes effective January 1, 2021 and will not impact the Company’s financial statement disclosures unless we acquire or dispose of a business subsequent to the effective date.
There were no other recently issued accounting pronouncements that impacted the Company’s condensed consolidated financial statements. In addition, the Company did not adopt any other new accounting pronouncements during the quarter ended December 26, 2020.
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 26, 2020
13.
Earnings per Common
Share
From Continuing Operations
Earnings per share for the quarters and year-to-date periods ended
December 26, 2020
and
December 28, 2019
are as follows:
|
Q U A R T E R |
Y E A R T O D A T E |
|||||||||||||||
|
(Thousands, except per share amounts) |
Fiscal 2021 |
Fiscal 2020 |
Fiscal 2021 |
Fiscal 2020 |
||||||||||||
|
Basic |
||||||||||||||||
|
Earnings from continuing operations |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Deduct preferred stock dividends paid |
|
|
|
|
||||||||||||
|
Undistributed earnings from continuing operations |
|
|
|
|
||||||||||||
|
Earnings from continuing operations attributable to participating preferred |
|
|
|
|
||||||||||||
|
Earnings from continuing operations attributable to common shareholders |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Weighted average common shares outstanding |
|
|
|
|
||||||||||||
|
Basic earnings per common share from continuing operations |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Diluted |
||||||||||||||||
|
Earnings from continuing operations attributable to common shareholders |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Add dividends on convertible preferred stock |
|
|
|
|
||||||||||||
|
Earnings from continuing operations attributable to common stock on a diluted basis |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Weighted average common shares outstanding-basic |
|
|
|
|
||||||||||||
|
Additional shares issued related to the equity compensation plan |
|
|
|
|
||||||||||||
|
Additional shares to be issued under full conversion of preferred stock |
|
|
|
|
||||||||||||
|
Total shares for diluted |
|
|
|
|
||||||||||||
|
Diluted earnings per common share from continuing operations |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 26, 2020
|
Earnings per Common Share From Discontinued Operations |
|
(Thousands, except per share amounts) |
Fiscal 2021 |
Fiscal 2020 |
Fiscal 2021 |
Fiscal 2020 |
||||||||||||
|
Discontinued Operations |
||||||||||||||||
|
Basic |
||||||||||||||||
|
Earnings from discontinued operations |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Deduct preferred stock dividends paid |
|
|
|
|
||||||||||||
|
Undistributed earnings from discontinued operations |
|
|
|
|
||||||||||||
|
Earnings from discontinued operations attributable to participating preferred |
|
|
|
|
||||||||||||
|
Earnings from discontinued operations attributable to common shareholders |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Weighted average common shares outstanding |
- |
|
- |
|
||||||||||||
|
Basic earnings per common share from discontinued operations |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Diluted |
||||||||||||||||
|
Earnings from discontinued operations attributable to common shareholders |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Add dividends on convertible preferred stock |
|
|
|
|
||||||||||||
|
Earnings from discontinued operations attributable to common stock on a diluted basis |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Weighted average common shares outstanding-basic |
|
|
||||||||||||||
|
Additional shares issued related to the equity compensation plan |
|
|
||||||||||||||
|
Additional shares to be issued under full conversion of preferred stock |
|
|
||||||||||||||
|
Total shares for diluted |
|
|
|
|
||||||||||||
|
Diluted earnings per common share from discontinued operations |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
14.
Fair Value of Financial Instruments
As required by ASC
825
- Financial Instruments, the Company estimates the fair values of financial instruments on a quarterly basis. The estimated fair value for long-term debt (classified as Level
2
in the fair value hierarchy) is determined by the quoted market prices for similar debt (comparable to the Company’s financial strength) or current rates offered to the Company for debt with the same maturities. Long-term debt, including current portion had a carrying amount of $
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 26, 2020
|
15. |
Income Taxes |
The effective tax rate for continuing operations was
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OPERATIONS
December 26, 2020
|
|
Seneca Foods Corporation (the “Company”) is a leading provider of packaged fruits and vegetables, with facilities located throughout the United States. The Company’s product offerings include canned, frozen and bottled produce and snack chips. Its products are sold under private label as well as national and regional brands that the Company owns or licenses, including Seneca®, Libby’s®, Aunt Nellie’s®, Cherryman®, Green Valley® and READ®. The Company’s canned fruits and vegetables are sold nationwide by major grocery outlets, including supermarkets, mass merchandisers, limited assortment stores, club stores and dollar stores. The Company also sells its products to foodservice distributors, industrial markets, other food processors, export customers in over 90 countries and federal, state and local governments for school and other food programs. The Company packs canned vegetables as well as frozen vegetables under contract packing agreements. |
The Company’s raw product is harvested mainly between June through November.
Impact of the COVID-19 Pandemic:
The continued spread of COVID-19 throughout the United States and the international community has had, and will continue to have, an impact on financial markets, economic conditions, and portions of our business and industry.
Business Impact – We have implemented a wide range of precautionary measures at our manufacturing facilities and other work locations in response to COVID-19. We have also been working closely with our supply chain partners to ensure that we can continue to provide uninterrupted service. To date, there has been minimal disruption in our supply chain network, including the supply of fruits and vegetables, packaging or other sourced materials. We also continue to work closely with our customers and have implemented measures to allocate order volumes to ensure a consistent supply across our retail partners during this period of high demand.
We continue to monitor the latest guidance from the CDC, FDA and other federal, state and local authorities regarding COVID-19 to ensure our safety protocols remain current to protect our employees, customers, suppliers and other business partners.
Financial Impac t to Date – We began to see a significant increase in net sales in the second half of March 2020 as the COVID-19 pandemic reached the United States and consumers began pantry loading and increasing their at-home consumption as a result of increased social distancing and stay-at-home mandates. The overall increase in net sales has continued for the first three quarters of 2021. Growth in the retail channel has remained strong and exceeded declines in the foodservice and chain channels experienced due to the pandemic.
We have incurred incremental costs to take the precautionary health and safety measures described above, which partially offsets the net sales favorability in our operating results, however gross margin has increased through nine months of 2021 as compared to the same time period of 2020. Most of the incremental costs impact our costs of goods sold and the remaining portion impacts our selling, general and administrative expenses.
As reflected above, the pandemic has to date overall had a positive impact on our operating results and our net cash provided by operating activities. As a result, during the third quarter of 2020 we repaid all outstanding borrowings under our revolving credit facility.
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OPERATIONS
December 26, 2020
Expectations and Risk Factors in Light of the COVID-19 Pandemic - As discussed above, increased customer and consumer demand resulting from the COVID-19 pandemic, social distancing and stay-at-home mandates has had a material positive impact on our company’s net sales, net cash provided by operating activities and net leverage in the first three quarters of 2021. However, the ultimate impact of the COVID-19 pandemic on our business will depend on many factors, including, among others, the duration of social distancing and stay-at-home mandates and whether an additional wave of COVID-19 will affect the United States and the rest of North America, our company’s ability to continue to operate our manufacturing facilities, retain a sufficient seasonal workforce, fill open full time positions, maintain our supply chain without material disruption, and procure ingredients, packaging and other raw materials when needed despite unprecedented demand in the food industry, and the extent to which macroeconomic conditions resulting from the pandemic and the pace of the subsequent recovery may impact consumer eating habits.
Internal controls over financial reporting have not been impacted by COVID-19. Management is continuously monitoring to ensure controls are effective and properly maintained.
Results of Operations:
Sales:
Net sales were $484,392,000 for the three months ended December 26, 2020 as compared with $392,971,000 for the three months ended December 28, 2019. The net sales increase of $91,421,000, or 23.3%, was due to a sales volume increase of $71,265,000 and by higher selling prices/sales mix of $20,156,000. The increase in sales is primarily from a $97,198,000 increase in Canned Vegetable sales and a $1,114,000 increase in Other sales partially offset by a $3,298,000 decrease in Frozen sales, a $1,515,000 decrease in Fruit Product sales, a $1,964,000 decrease in Prepared Food sales, and a $114,000 decrease in Chip Product sales.
Net sales were $1,162,851,000 for the nine months ended December 26, 2020 as compared with $1,027,898,000 for the nine months ended December 28, 2019. The net sales increase of $134,953,000, or 13.1%, was due to a sales volume increase of $76,735,000 and by higher selling prices/sales mix of $58,218,000. The increase in sales is primarily from a $160,381,000 increase in Canned Vegetable sales and a $4,097,000 increase in Other sales, partially offset by a $13,443,000 decrease in Frozen sales, a $8,344,000 decrease in Fruit Product sales, a $7,045,000 decrease in Prepared Food sales, and a $693,000 decrease in Chip Product sales.
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OPERATIONS
December 26, 2020
The following table presents net sales by product category (in millions):
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Three Months Ended |
Nine Months Ended |
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December 26, 2020 |
December 28, 2019 |
December 26, 2020 |
December 28, 2019 |
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Canned Vegetables |
$ | 394.5 | $ | 297.3 | $ | 917.8 | $ | 757.4 | ||||||||
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Frozen |
27.3 | 30.6 | 76.3 | 89.7 | ||||||||||||
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Fruit Products |
30.7 | 32.2 | 73.4 | 81.8 | ||||||||||||
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Chip Products |
2.8 | 2.9 | 8.2 | 8.9 | ||||||||||||
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Prepared Foods |
23.5 | 25.5 | 71.9 | 78.9 | ||||||||||||
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Other |
5.6 | 4.5 | 15.3 | 11.2 | ||||||||||||
| $ | 484.4 | $ | 393.0 | $ | 1,162.9 | $ | 1,027.9 | |||||||||
Operating Income:
The following table presents components of operating income as a percentage of net sales:
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Three Months Ended |
Nine Months Ended |
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December 26, 2020 |
December 28, 2019 |
December 26, 2020 |
December 28, 2019 |
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Gross Margin |
16.0 | % | 13.3 | % | 15.1 | % | 9.3 | % | ||||||||
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Selling |
2.2 | % | 2.4 | % | 2.2 | % | 2.5 | % | ||||||||
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Administrative |
2.5 | % | 2.7 | % | 3.0 | % | 2.8 | % | ||||||||
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Plant Restructuring |
0.0 | % | 0.2 | % | 0.0 | % | 0.7 | % | ||||||||
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Other Operating Loss/(Income) |
-7.3 | % | -0.4 | % | -2.9 | % | -0.8 | % | ||||||||
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Operating Income |
18.7 | % | 8.4 | % | 12.8 | % | 4.2 | % | ||||||||
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Interest Expense, Net |
0.3 | % | 0.7 | % | 0.4 | % | 0.9 | % | ||||||||
Gross margin for the three months ended December 26, 2020 was 16.0% as compared with 13.3% for the three months ended December 28, 2019. The increase in gross margin for the three months ended December 26, 2020 was due primarily to higher selling prices/mix partially offset by a less favorable LIFO adjustment. The Company’s LIFO credit for the three months ended December 26, 2020 was $4,656,000 or as compared to a credit of $11,337,000 for the three months ended December 28, 2019. This reflects the impact of lower inventory levels as a result of the increased sales volumes and lower than planned pack quantities for certain commodities. On an after-tax basis, LIFO increased net earnings by $3,492,000 for the three months ended December 26, 2020 and increased net earnings by $8,503,000 for the three months ended December 28, 2019, based on the historical statutory federal income tax rate.
Gross margin for the nine months ended December 26, 2020 was 15.1% as compared with 9.3% for the nine months ended December 28, 2019. The increase in gross margin for the nine months ended December 26, 2020 was due primarily to higher selling prices/mix partially offset by a less favorable LIFO adjustment. The Company’s LIFO credit for the nine months ended December 26, 2020 was $4,268,000 as compared to a credit of $7,457,000 for the nine months ended December 28, 2019, reflecting the impact of lower inventory levels as a result of the increased sales volumes and lower than planned pack quantities for certain commodities. On an after-tax basis, LIFO increased net earnings by $3,201,000 for the nine months ended December 26, 2020 and increased net earnings by $5,593,000 for the nine months ended December 28, 2019, based on the historical statutory federal income tax rate.
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OPERATIONS
December 26, 2020
Selling costs as a percentage of net sales for the three months ended December 26, 2020 were 2.2% as compared with 2.4% for the prior year quarter. For the nine months ended December 26, 2020, selling costs as a percentage of net sales were 2.2% as compared with 2.5% for the same period of the prior year. The decreases in selling costs as a percentage of net sales for the three and nine months ended December 26, 2020 are primarily due to higher sales and the fixed nature of certain expenses.
Administrative costs as a percentage of net sales for the three months ended December 26, 2020 were 2.5% as compared with 2.7% for the prior year quarter, which was driven by higher sales in the quarter. For the nine month period ended December 26, 2020, administrative costs as a percentage of net sales were 3.0% as compared with 2.8% for the same period of the prior year. The increase in administrative costs as a percentage of net sales for the nine months ended December 26, 2020 is primarily due to higher employment costs.
On December 18, 2020, the Company completed the sale of its prepared foods business to an unaffiliated buyer who was not a previous customer. The Company recorded a gain on the sale of the prepared food business of $35,660,000. Additionally during the nine months ended December 26, 2020, the Company recorded a loss of $405,000 on the disposal of equipment from a sold Northwest plant and a loss on the sale of unused fixed assets of $365,000. The Company also recorded a charge of $1,174,000 for a supplemental early retirement plan. During the nine months ended December 28, 2019 the Company recorded a gain on the partial sale of a plant in the Midwest of $3,742,000 and a gain on the partial sale of a plant in the Northwest of $1,737,000. The Company also recorded a gain of on the sale of unused fixed assets of $3,139,000. These items are included in Other Operating Income in the Unaudited Condensed Consolidated Statements of Net Earnings.
Interest expense as a percentage of net sales for the three months ended December 26, 2020 was 0.3% as compared with 0.7% for the prior year quarter. For the nine months ended December 26, 2020, interest expense as a percentage of net sales was 0.4% as compared with 0.9% for the same period of the prior year. During fiscal 2021, overall borrowings and interest rates were lower than the previous year resulting in lower interest expense for the three and nine months ended December 26, 2020.
Income Taxes:
The effective tax rate for continuing operations was 20.9% and 23.7% for the nine month periods ended December 26, 2020 and December 28, 2019, respectively. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), among other things, allows NOLs incurred in taxable years beginning after December 31, 2017 and before January 01, 2021 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company was able to carryback the NOL generated in the 2019 tax year at a 21% corporate tax rate to the 2015 tax year at a 35% corporate tax rate. The tax rate difference realized for the NOL carryback decreased the Company’s effective tax rate by 3.2%. The effective tax rate was also decreased 0.5% by the receipt of interest from the previously filed federal NOL carryback and the reversal of interest and penalties from the removal of the uncertain tax benefits for 163(j) interest limitations due to changes in regulations. The overall effective tax rate decrease was offset primarily by a 0.7% increase in the tax rate resulting from federal credits and incentives and a 0.5% increase from state credits and incentives. The dollar amount of the credits and incentives did not change significantly. Projected pre-tax income increased from 2020 to 2021, resulting in the credits and incentives having a smaller impact on the tax rate in 2021.
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OPERATIONS
December 26, 2020
Earnings per Share :
Continuing basic earnings per share were $7.96 and $2.65 for the three months ended December 26, 2020 and December 28, 2019, respectively. Continuing diluted earnings per share were $7.90 and $2.63 for the three months ended December 26, 2020 and December 28, 2019, respectively. Continuing basic earnings per share were $12.18 and $3.23 for the nine months ended December 26, 2020 and December 28, 2019, respectively. Continuing diluted earnings per share were $12.09 and $3.20 for the nine months ended December 26, 2020 and December 28, 2019, respectively. For details of the calculation of these amounts, refer to footnote 13 of the Notes to Condensed Consolidated Financial Statements.
Liquidity and Capital Resources:
The financial condition of the Company is summarized in the following table and explanatory review (dollar amounts in thousands, except per share data):
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December 26, |
December 28, |
March 31, |
March 31, |
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2020 |
2019 |
2020 |
2019 |
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Working Capital: |
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Balance |
$ | 347,709 | $ | 426,968 | $ | 401,946 | $ | 490,871 | ||||||||
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Change in Quarter |
13,791 | (10,305 | ) | |||||||||||||
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Current Portion of Long-Term Debt |
4,500 | - | 500 | 345 | ||||||||||||
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Long-Term Debt, Less Current Portion |
94,077 | 225,337 | 217,081 | 265,900 | ||||||||||||
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Operating Lease Obligations, Less Current Portion |
30,436 | 47,965 | 42,760 | - | ||||||||||||
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Financing Lease Obligations, Less Current Portion |
20,546 | 27,007 | 24,366 | - | ||||||||||||
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Capital Lease Obligations, Less Current Portion |
- | - | - | 31,286 | ||||||||||||
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Total Stockholders' Equity Per Equivalent |
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Common Share (see Note below) |
54.90 | 47.01 | 42.77 | 43.27 | ||||||||||||
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Stockholders' Equity Per Common Share |
55.45 | 47.47 | 43.18 | 43.67 | ||||||||||||
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Current Ratio |
2.85 | 3.47 | 3.69 | 5.37 | ||||||||||||
Note: Equivalent common shares are either common shares or, for convertible preferred shares, the number of common shares that the preferred shares are convertible into. See Note 9 of the Notes to Consolidated Financial Statements of the Company’s 2020 Annual Report on Form 10-K for conversion details.
As shown in the Condensed Consolidated Statements of Cash Flows, net cash provided by operating activities was $103,090,000 for the nine months ended December 26, 2020, compared to $90,024,000 for the same period of the prior year. The increase in cash provided by operating activities is primarily comprised of increases in cash provided by net earnings, $81,105,000, accounts receivable, $23,304,000, other current assets $7,855,000 and income taxes, $1,861,000 partially offset by cash used for accounts payable, accrued expenses and other, $71,856,000 and inventory, $7,915,000.
As compared to December 28, 2019, inventory decreased $82,138,000 to $410,927,000 at December 26, 2020. The components of the inventory decrease (excluding LIFO) reflect a $43,319,000 decrease in finished goods, and a $56,571,000 decrease in raw materials and supplies partially offset by a $3,867,000 increase in work in process. The finished goods decrease primarily reflects increased sales partially offset by higher pack inventory quantities attributable to the larger calendar year 2020 pack versus the calendar year 2019 pack. The raw materials and supplies decrease is primarily due to a decrease in cans and raw steel quantities compared to the prior year. FIFO based inventory costs exceeded LIFO based inventory costs by $139,999,000 as of the end of the third quarter of 2020 as compared to $153,884,000 as of the end of the third quarter of 2019.
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OPERATIONS
December 26, 2020
Cash provided by investing activities was $32,615,000 in the first nine months of fiscal 2021 compared to cash used in investing activities of $25,506,000 in the first nine months of fiscal 2020. Additions to property, plant and equipment were $40,167,000 in the first nine months of fiscal 2021 as compared to $47,681,000 in first nine months of fiscal 2020. Proceeds from the sale of assets were $72,782,000 for the first nine months of fiscal 2021 as compared to $22,175,000 in first nine months of fiscal 2020.
Cash used in financing activities was $132,258,000 in the first nine months of fiscal 2021, which included borrowings of $468,181,000 and the repayment of $587,185,000 of long-term debt, principally consisting of borrowings and repayments on the revolving credit facility (“Revolver”). Other than borrowings under the Revolver, there was no new long-term debt during the first nine months of fiscal 2021. The Company repurchased treasury stock of $2,154,000 in the first nine months of fiscal 2021 and repurchased $11,454,000 of its stock during the first nine months of fiscal year 2020.
The Company entered into a five-year revolving credit facility on July 5, 2016. Available borrowings on the Revolver total $300,000,000 from April through July and $400,000,000 from August through March with a maturity date of July 5, 2021. The interest rate on the Revolver is based on LIBOR plus an applicable margin based on excess availability and the Company's fixed charge coverage ratio. As of December 26, 2020, there were no outstanding borrowings on the Revolver. We believe that cash flows from operations, availability under our Revolver and other financing sources will provide adequate funds for our working capital needs, planned capital expenditures, and debt obligations for at least the next 12 months.
The Company’s credit facilities contain standard representations and warranties, events of default, and certain affirmative and negative covenants, including various financial covenants. At December 26, 2020, the Company was in compliance with all such financial covenants.
New Accounting Standards
Refer to footnote 12 of the Notes to Condensed Consolidated Financial Statements.
Seasonality
The Company's revenues are typically higher in the second and third fiscal quarters. The Company’s sales also exhibit seasonality with the third fiscal quarter generating the highest retail sales due to holidays that occur during that quarter. See the Critical Accounting Policies section below for further details.
Forward-Looking Information
The information contained in this report contains, or may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this report and include statements regarding the intent, belief or current expectations of the Company or its officers (including statements preceded by, followed by or that include the words “believes,” “expects,” “anticipates” or similar expressions) with respect to various matters, including (i) the Company’s anticipated needs for, and the availability of, cash, (ii) the Company’s liquidity and financing plans, (iii) the Company’s ability to successfully integrate acquisitions into its operations, (iv) trends affecting the Company’s financial condition or results of operations, including anticipated sales price levels and anticipated expense levels, in particular higher production, fuel and transportation costs, (v) the Company’s plans for expansion of its business (including through acquisitions) and cost savings, and (vi) the impact of competition.
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OPERATIONS
December 26, 2020
Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Investors are cautioned not to place undue reliance on such statements, which speak only to events as of the date the statements were made. Among the factors that could cause actual results to differ materially are:
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general economic and business conditions; |
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cost and availability of commodities and other raw materials such as vegetables, steel and packaging materials; |
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transportation costs; |
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climate and weather affecting growing conditions and crop yields; |
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the availability of financing; |
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leverage and the Company’s ability to service and reduce its debt; |
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Potential impact of COVID-19 related issues at our facilities; |
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foreign currency exchange and interest rate fluctuations; |
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effectiveness of the Company’s marketing and trade promotion programs; |
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changing consumer preferences; |
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competition; |
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product liability claims; |
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the loss of significant customers or a substantial reduction in orders from these customers; |
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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 |
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other risks detailed from time to time in the reports filed by the Company with the SEC. |
Except for ongoing obligations to disclose material information as required by the federal securities laws, the Company does not undertake any obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of the filing of this report or to reflect the occurrence of unanticipated events.
Critical Accounting Policies
For the nine months ended December 26, 2020 and December 28, 2019 the Company sold certain finished goods inventory for cash on a bill and hold basis. The terms of the bill and hold agreement(s) provide that title to the specified inventory is transferred to the customer(s) prior to shipment and the Company has the right to payment (prior to physical delivery) which results in recorded revenue as determined under the revenue recognition standard.
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, which are recorded as a reduction of net sales, include amounts paid to encourage retailers to offer temporary price reductions for the sale of our products to consumers, amounts paid to obtain favorable display positions in retailers’ stores, and amounts paid to retailers for shelf space in retail stores. Accruals for trade promotions are recorded primarily at the time of sale of product to the retailer based on expected levels of performance. Settlement of these liabilities typically occurs in subsequent periods primarily through an authorized process for deductions taken by a retailer from amounts otherwise due to us. As a result, the ultimate cost of a trade promotion program is dependent on the relative success of the events and the actions and level of deductions taken by retailers for amounts they consider due to them. Final determination of the permissible deductions may take extended periods of time.
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OPERATIONS
December 26, 2020
The Company uses the lower of cost, determined under the LIFO (last-in, first out) method, or market, to value substantially all of its inventories. In a high inflation environment that the Company is experiencing, the Company believes that the LIFO method was preferable over the FIFO method because it better compares the cost of current production to current revenue.
The Company assesses its long-lived assets for impairment whenever there is an indicator of impairment. Property, plant, and equipment are depreciated over their assigned lives. The assigned lives and the projected cash flows used to test impairment are subjective. If actual lives are shorter than anticipated or if future cash flows are less than anticipated, a future impairment charge or a loss on disposal of the assets could be incurred. Impairment losses are evaluated if the estimated undiscounted value of the cash flows is less than the carrying value. If such is the case, a loss is recognized when the carrying value of an asset exceeds its fair value.
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk
In the ordinary course of business, the Company is exposed to various market risk factors, including changes in general economic conditions, competition and raw material pricing and availability. In addition, the Company is exposed to fluctuations in interest rates, primarily related to its revolving credit facility. To manage interest rate risk, the Company uses both fixed and variable interest rate debt plus fixed interest rate lease obligations. There have been no material changes to the Company’s exposure to market risk since March 31, 2020.
ITEM 4 Controls and Procedures
The Company maintains a system of internal and disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported on a timely basis. The Company’s Board of
Directors, operating through its Audit Committee, which is composed entirely of independent outside directors, provides oversight to the financial reporting process.
An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of December 26, 2020, our disclosure controls and procedures were effective. The Company continues to examine, refine and formalize its disclosure controls and procedures and to monitor ongoing developments in this area.
There have been no changes during the period covered by this report to the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1.
Legal Proceedings
Refer to footnote 15 to the Consolidated Financial Statements included in Part II Item 8 of the Annual Report on Form 10-K.
There have been no material changes to the risk factors disclosed in the Company’s Form 10-K for the period ended March 31, 2020 except to the extent factual information disclosed elsewhere in this Form 10-Q relates to such risk factors.
Item 2. Unregistered Sales of Equity Securities and Use of Procee ds
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Total Number of |
Average Price Paid |
Total Number |
Maximum Number |
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Shares Purchased |
per Share |
of Shares |
(or Approximate |
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Purchased as |
Dollar Value) of |
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Part of Publicly |
Shares that May |
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Announced |
Yet Be Purchased |
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Class A |
Class B |
Class A |
Class B |
Plans or |
Under the Plans or |
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Period |
Common |
Common |
Common |
Common |
Programs |
Programs |
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10/01/2020 – 10/31/2020 |
12,800 | - | $ | 36.17 | $ | - | - | |||||
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11/01/2020 – 11/30/2020 |
13,800 | - | $ | 38.29 | $ | - | - | |||||
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12/01/2020 – 12/31/2020 |
- | - | $ | - | $ | - | - | |||||
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Total |
26,600 | - | $ | 37.23 | $ | - | - | 516,287 | ||||
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Note 1: 13,800 of these shares were purchased in open market transactions by the trustees under the Seneca Foods Corporation Employees' Savings Plan 401(k) Retirement Savings Plan to provide employee matching contributions under the plan. |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
None.
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31.1 |
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31.2 |
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Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) |
101.INS Inline XBRL Instance Document (filed herewith).
101.1.SCH Inline XBRL Taxonomy Extension Calculation Schema Document (filed herewith).
101.2.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
101.3.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).
101.4.LAB Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith).
101.5.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).
104 Cover page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)
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)
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/s/ Paul L. Palmby |
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February 3, 2021 |
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Paul L. Palmby |
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/s/ Timothy J. Benjamin |
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February 3, 2021 |
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Timothy J. Benjamin |
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| Chief Financial Officer | |||
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
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No information found
No Customers Found
No Suppliers Found
Price
Yield
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