Company Quick10K Filing
Seneca Foods
Price31.28 EPS1
Shares9 P/E27
MCap295 P/FCF3
Net Debt226 EBIT17
TEV522 TEV/EBIT31
TTM 2019-09-28, in MM, except price, ratios
10-Q 2020-06-27 Filed 2020-08-05
10-K 2020-03-31 Filed 2020-07-02
10-Q 2019-12-28 Filed 2020-02-05
10-Q 2019-09-28 Filed 2019-11-06
10-Q 2019-06-29 Filed 2019-08-07
10-K 2019-03-31 Filed 2019-06-13
10-Q 2018-12-29 Filed 2019-02-01
10-Q 2018-09-29 Filed 2018-11-09
10-Q 2018-06-30 Filed 2018-07-31
10-K 2018-03-31 Filed 2018-06-29
10-Q 2017-12-30 Filed 2018-01-25
10-Q 2017-09-30 Filed 2017-10-26
10-Q 2017-07-01 Filed 2017-07-31
10-K 2017-03-31 Filed 2017-05-25
10-Q 2016-12-31 Filed 2017-01-25
10-Q 2016-10-01 Filed 2016-11-07
10-Q 2016-07-02 Filed 2016-07-29
10-K 2016-03-31 Filed 2016-06-08
10-Q 2015-12-26 Filed 2016-02-02
10-Q 2015-09-26 Filed 2015-11-02
10-Q 2015-06-27 Filed 2015-07-31
10-K 2015-03-31 Filed 2015-06-09
10-Q 2014-12-27 Filed 2015-02-02
10-Q 2014-09-27 Filed 2014-10-23
10-Q 2014-06-28 Filed 2014-08-06
10-K 2014-03-31 Filed 2014-05-22
10-Q 2013-12-28 Filed 2014-01-29
10-Q 2013-09-28 Filed 2013-10-23
10-Q 2013-06-29 Filed 2013-08-01
10-K 2013-03-31 Filed 2013-05-23
10-Q 2012-12-29 Filed 2013-01-31
10-Q 2012-09-29 Filed 2012-10-25
10-Q 2012-06-30 Filed 2012-08-03
10-K 2012-03-31 Filed 2012-06-08
10-Q 2011-12-31 Filed 2012-01-27
10-Q 2011-10-01 Filed 2011-10-27
10-Q 2011-07-02 Filed 2011-08-03
10-K 2011-03-31 Filed 2011-05-26
10-Q 2011-01-01 Filed 2011-01-27
10-Q 2010-10-02 Filed 2010-10-28
10-Q 2010-07-03 Filed 2010-08-04
10-K 2010-03-31 Filed 2010-05-26
10-Q 2009-12-26 Filed 2010-02-02
8-K 2020-08-31 Exhibits
8-K 2020-08-18
8-K 2020-08-05 Earnings, Exhibits
8-K 2020-06-12
8-K 2020-05-28
8-K 2020-03-31 Earnings, Exhibits
8-K 2020-02-05
8-K 2019-11-06
8-K 2019-08-22
8-K 2019-08-07
8-K 2019-08-07
8-K 2019-06-13
8-K 2019-05-09
8-K 2018-12-29
8-K 2018-12-07
8-K 2018-11-09
8-K 2018-08-10
8-K 2018-07-31
8-K 2018-07-27
8-K 2018-06-29
8-K 2018-06-28
8-K 2018-02-16
8-K 2018-01-25

SENEA 10Q Quarterly Report

Item 2 Managements Discussion and Analysis
EX-31.1 ex_195393.htm
EX-31.2 ex_195394.htm
EX-32 ex_195395.htm

Seneca Foods Earnings 2020-06-27

Balance SheetIncome StatementCash Flow
1.31.00.80.50.30.02012201420172020
Assets, Equity
0.50.40.30.10.0-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin

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Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D. C. 20549

 

Form 10-Q

 

   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarter Ended June 27, 2020

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) 

OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 0-01989

 

 

Seneca Foods Corporation

(Exact name of Company as specified in its charter)

New York

16-0733425

(State or other jurisdiction of

(I. R. S. Employer

incorporation or organization)

Identification No.)

 

3736 South Main Street, Marion, New York

14505 

(Address of principal executive offices)

(Zip Code)

 

Company's telephone number, including area code 315/926-8100

 

Not Applicable

Former name, former address and former fiscal year,

if changed since last report

 

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.

Yes ☑ No ☐

 

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).

Yes ☑ No ☐

 

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 an "emerging growth company" in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer ☐ Accelerated filer ☑ Non-accelerated filer ☐ Smaller reporting company

Emerging growth company

 

Indicate by check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No  ☑

 

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 ☐

 

Title of Each ClassTrading Symbol

Name of Exchange on

Which Registered

Common Stock Class A, $.25 ParSENEANASDAQ Global Market
Common Stock Class B, $.25 Par SENEBNASDAQ Global Market

 

The number of shares outstanding of each of the issuer's classes of common stock at the latest practical date are:

 

Class

Shares Outstanding at July 31, 2020

Common Stock Class A, $.25 Par

7,368,593

Common Stock Class B, $.25 Par

1,733,902

 

 

 

Seneca Foods Corporation

Quarterly Report on Form 10-Q

Table of Contents

 

   

Page

     

PART 1

FINANCIAL INFORMATION

 
     

 Item 1

Financial Statements:

 
     
 

Condensed Consolidated Balance Sheets-June 27, 2020, June 29, 2019 and March 31, 2020

   1

     
 

Condensed Consolidated Statements of Net Earnings-Three Months Ended June 27, 2020 and June 29, 2019

   2

     
 

Condensed Consolidated Statements of Comprehensive Income-Three Months Ended June 27, 2020 and June 29, 2019

   2

     
 

Condensed Consolidated Statements of Cash Flows-Three Months Ended June 27, 2020 and June 29, 2019

   3

     
 

Condensed Consolidated Statements of Stockholders' Equity-Three Months Ended June 27, 2020 and June 29, 2019

   4

     
 

Notes to Condensed Consolidated Financial Statements

   5

     
 Item 2 

Management's Discussion and Analysis of Financial Condition and Results of Operations

   14

     

 Item 3 

Quantitative and Qualitative Disclosures about Market Risk

   20

     

 Item 4 

Controls and Procedures

   21

     

PART II

OTHER INFORMATION

 
     

 Item 1

Legal Proceedings

   22

     

 Item 1A

Risk Factors

   22

     

 Item 2 

Unregistered Sales of Equity Securities and Use of Proceeds

   22

     

 Item 3

Defaults Upon Senior Securities

   22

     

 Item 4

Mine Safety Disclosures

   22

     

 Item 5

Other Information

   22

     

 Item 6 

Exhibits

   22

     

SIGNATURES

 

   23

 

 

 

 

SENECA FOODS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Per Share Data)

 

  

Unaudited

  

Unaudited

     
  

June 27,

2020

  

June 29,

2019

  

March 31,

2020

 

ASSETS

            
             

Current Assets:

            

Cash and Cash Equivalents

 $11,607  $16,901  $10,702 

Accounts Receivable, Net

  62,860   74,000   109,802 

Contracts Receivable

  6,059   5,157   7,610 

Current Assets Held For Sale

  11,989   -   - 

Current Assets Held For Sale-Discontinued Operations

  182   98   182 

Inventories

  423,844   493,498   411,631 

Refundable Income Taxes

  -   441   4,350 

Other Current Assets

  7,363   3,577   7,323 

Total Current Assets

  523,904   593,672   551,600 

Property, Plant and Equipment, Net

  239,524   206,188   228,489 

Right-of-Use Assets Operating, Net

  57,349   83,742   60,663 

Right-of-Use Assets Financing, Net

  32,222   34,294   33,617 

Deferred Income Taxes, Net

  9,185   3,722   7,872 

Noncurrent Assets Held For Sale-Discontinued Operations

  1,026   1,143   1,026 

Other Assets

  19,751   2,547   26,042 

Total Assets

 $882,961  $925,308  $909,309 
             

LIABILITIES AND STOCKHOLDERS' EQUITY

            
             

Current Liabilities:

            

Accounts Payable

 $99,615  $77,571  $71,194 

Deferred Revenue

  3,594   1,936   7,758 

Accrued Vacation

  12,147   11,843   11,876 

Accrued Payroll

  8,796   6,002   11,864 

Other Accrued Expenses

  17,182   17,550   17,808 

Income Taxes Payable

  8,463   -   - 

Current Liabilities Held For Sale-Discontinued Operations

  -   3,653   880 

Current Portion of Operating Lease Obligations

  21,311   26,641   21,550 

Current Portion of Financing Lease Obligations

  6,232   6,573   6,224 

Current Portion of Long-Term Debt

  500   88   500 

Total Current Liabilities

  177,840   151,857   149,654 

Long-Term Debt, Less Current Portion

  144,467   246,645   217,081 

Operating Lease Obligations, Less Current Portion

  38,634   60,979   42,760 

Financing Lease Obligations, Less Current Portion

  22,613   29,907   24,366 

Pension Liabilities

  79,321   18,005   75,742 

Other Long-Term Liabilities

  5,000   4,077   5,342 

Total Liabilities

  467,875   511,470   514,945 

Commitments and Contingencies

               

Stockholders' Equity:

            

Preferred Stock

  681   707   681 

Common Stock, $.25 Par Value Per Share

  3,041   3,039   3,041 

Additional Paid-in Capital

  98,412   98,285   98,384 

Treasury Stock, at Cost

  (88,319)  (78,484)  (88,319)

Accumulated Other Comprehensive Loss

  (79,220)  (18,285)  (79,220)

Retained Earnings

  480,491   408,576   459,797 

Total Stockholders' Equity

  415,086   413,838   394,364 

Total Liabilities and Stockholders’ Equity

 $882,961  $925,308  $909,309 

 

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,

2020

  

June 29,

2019

 
         

Net Sales

 $288,165  $264,925 
         

Costs and Expenses:

        

Cost of Product Sold

  239,603   245,751 

Selling, General and Administrative

  18,145   16,258 

Plant Restructuring Charge

  263   4,806 

Other Operating Income

  (145)  (4,827)

Total Costs and Expenses

  257,866   261,988 

Operating Income

  30,299   2,937 

Loss From Equity Investment

  676   - 

Other Loss (Income)

  931   (1,803)

Interest Expense, Net

  1,651   3,352 

Earnings Before Income Taxes

  27,041   1,388 

Income Taxes

  6,335   285 

Net Earnings

 $20,706  $1,103 
         
         

Basic Earnings per Common Share

 $2.26  $0.12 

Diluted Earnings per Common Share:

 $2.24  $0.12 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

SENECA FOODS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In Thousands)

 

   

Three Months Ended

 
   

June 27, 2020

   

June 29, 2019

 
                 

Comprehensive income:

               

Net earnings

  $ 20,706     $ 1,103  

Total

  $ 20,706     $ 1,103  

 

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)

 

  

Three Months Ended

 
  

June 27, 2020

  

June 29, 2019

 

Cash Flows from Operating Activities:

        

Net Earnings From Operations

 $20,706  $1,103 
         

Adjustments to Reconcile Net Earnings to Net Cash Used In Operations:

        

Depreciation & Amortization

  7,881   7,382 

Gain on the Sale of Assets

  (315)  (4,663)

Provision for Restructuring and Impairment

  263   4,806 

Loss From Equity Investment

  676   - 

Deferred Income Tax Benefit

  (1,313)  (1,305)

Changes in Operating Assets and Liabilities:

        

Accounts Receivable

  48,493   4,965 

Inventories

  (12,213)  8,186 

Other Current Assets

  (94)  (502)

Income Taxes

  12,813   1,453 

Accounts Payable, Accrued Expenses and Other

  23,424   7,382 

Net Cash Provided By Operations

  100,321   28,807 

Cash Flows from Investing Activities:

        

Additions to Property, Plant and Equipment

  (19,230)  (9,776)

Proceeds from the Sale of Assets

  914   6,398 

Net Cash Used In Investing Activities

  (18,316)  (3,378)

Cash Flows from Financing Activities:

        

Long-Term Borrowing

  91,896   93,600 

Payments on Long-Term Debt

  (164,510)  (109,236)

Other Assets

  (6,950)  - 

Payments on Financing Leases

  (1,536)  (1,616)

Purchase of Treasury Stock

  -   (2,744)

Dividends

  -   (12)

Net Cash Used In Financing Activities

  (81,100)  (20,008)

Net Increase in Cash and Cash Equivalents

  905   5,421 

Cash and Cash Equivalents, Beginning of the Period

  10,702   11,480 

Cash and Cash Equivalents, End of the Period

 $11,607  $16,901 
         

Supplemental Disclosures of Cash Flow Information:

        

Noncash Transactions:

        

Property, Plant and Equipment Purchased Under Lease Obligations

 $2,375  $4,775 

 

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

         
                   

Additional

           

Other

         
   

Preferred

   

Common

   

Paid-In

   

Treasury

   

Comprehensive

   

Retained

 
   

Stock

   

Stock

   

Capital

   

Stock

   

Loss

   

Earnings

 

First Quarter FY 2021:

                                               

Balance March 31, 2020

  $ 681     $ 3,041     $ 98,384     $ (88,319 )   $ (79,220 )   $ 459,797  

Net earnings

    -       -       -       -       -       20,706  

Cash dividends declared on preferred stock

    -       -       -       -       -       (12 )

Equity incentive program

    -       -       28       -       -       -  

Balance June 27, 2020

  $ 681     $ 3,041     $ 98,412     $ (88,319 )   $ (79,220 )   $ 480,491  
                                                 

First Quarter FY 2020:

                                               

Balance March 31, 2019

  $ 707     $ 3,039     $ 98,260     $ (75,740 )   $ (18,285 )   $ 409,504  

Net earnings

    -       -       -       -       -       1,103  

Cash dividends declared on preferred stock

    -       -       -       -       -       (12 )

Equity incentive program

    -       -       25       -       -       -  

Purchase treasury stock

    -       -       -       (2,744 )     -       -  

Operating lease impairment adjustment upon the adoption of ASU 2016-02 "Leases" (net of tax)

    -       -       -       -       -       (2,019 )

Balance June 29, 2019

  $ 707     $ 3,039     $ 98,285     $ (78,484 )   $ (18,285 )   $ 408,576  

 

  

Preferred Stock

  

Common Stock

 
  6%  10%                 
  

Cumulative Par

  

Cumulative Par

      

2003 Series

         
  

Value $.25

  

Value $.025

  

Participating

  

Participating

  

Class A

  

Class B

 
  

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:

                        

June 27, 2020

  200,000   1,400,000   35,355   500   20,000,000   10,000,000 

Shares outstanding:

                        

June 27, 2020

  200,000   807,240   35,355   500   7,383,993   1,733,902 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 27, 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 June 27, 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 month period ended June 27, 2020 are not necessarily indicative of the results to be expected for the full year.


For the three months ended June 27, 2020 and June 29, 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 ASC 842.  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 $63,326,000. During the second quarter of fiscal 2019, the Company ceased use of the Modesto facility. Based on its magnitude of revenue to the Company (approximately 15%) and because the Company was exiting the production of peaches, this sale represented a significant strategic shift that has a material effect on the Company’s operations and financial results. Accordingly, the Company has applied discontinued operations treatment for this sale as required by Accounting Standards Codification 210-05—Discontinued Operations. The business we exited is part of the Fruit and Vegetable segment.

 

5

 

SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 27, 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):

 

  

June 27

  

June 29

March 31 
  

2020

  

2019

2020 

Other Current Assets

  182   98182 
          

Current Assets Held For Sale-Discontinued Operations

 $182  $98182 
          

Other Assets

 $1,026  $1,1431,026 

Noncurrent Assets Held For Sale-Discontinued Operations

 $1,026  $1,1431,026 
          

Accounts Payable and Accrued Expenses

 $-  $3,653880 

Current Liabilities Held For Sale-Discontinued Operations

 $-  $3,653880 

 

 

3.

Assets Held For Sale

 

As of June 27, 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):

 

Property, Plant and Equipment (net)

  $ 11,989  

Current Assets Held For Sale

  $ 11,989  

 

 

4.

Revenue Recognition

 

In the following table, revenue is disaggregated by product category groups (in millions):

 

  

Three Months Ended

 
  

June 27,

2020

  

June 29,

2019

 

Canned Vegetables

 $221.0  $187.2 

Frozen

  17.9   18.2 

Fruit Products

  18.8   22.7 

Chip Products

  2.4   2.9 

Prepared Foods

  24.2   29.8 

Other

  3.9   4.1 
  $288.2  $264.9 

 

6

 

SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 27, 2020

 

 

5.

Inventories

 

First-In, First-Out (“FIFO”) based inventory costs exceeded LIFO based inventory costs by $142,126,000 as of the end of the first quarter of fiscal 2021 as compared to $164,517,000 as of the end of the first quarter of fiscal 2020. The change in the LIFO Reserve for the three months ended June 27, 2020 was a decrease of $2,141,000 as compared to an increase of $3,176,000 for the three months ended June 29, 2019. This reflects the projected impact of an overall cost decrease expected in fiscal 2021 versus fiscal 2020. The following table shows inventory by category and the related LIFO balance (in thousands):

 

  

June 27, 2020

  

June 29, 2019

  March 31, 2020 
             

Finished products

 $330,071  $405,372  $351,251 

In process

  29,875   33,568   31,173 

Raw materials and supplies

  206,024   219,075   173,474 
   565,970   658,015   555,898 

Less excess of FIFO cost over LIFO cost

  142,126   164,517   144,267 

Total inventories

 $423,844  $493,498  $411,631 

 

 

 

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.

 

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. 

 

7

 

SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 27, 2020

 

Upon adoption of ASU 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 $2,019,000 (which is net of tax). The estimated lives of these assets were shortened due to the planned closure of the facility after the year’s pack.

 

Lease expense for lease payments is recognized on a straight-line basis over the lease term. The components of lease expense were as follows:

 

  

Three Months Ended

 
  

June 27, 2020

  

June 29, 2019

 
  

(In thousands)

  

(In thousands)

 

Lease cost:

        
         

Amortization of right of use asset

 $1,186  $1,067 

Interest on lease liabilities

  294   368 

Finance lease cost

  1,480   1,435 

Operating lease cost

  6,407   7,900 

Total lease cost

 $7,887  $9,335 
         

Cash paid for amounts included in the measurement of lease liabilities

        

Operating cash flows from finance leases

 $294  $368 

Operating cash flows from operating leases

  7,278   8,961 

Financing cash flows from finance leases

  1,536   1,616 
  $9,108  $10,945 
         

Right-of-use assets obtained in exchange for new finance lease liabilities

 $35  $237 

Right-of-use assets obtained in exchange for new operating lease liabilities

 $2,340  $4,538 

Weighted-average lease term (years):

        

Financing leases

  5.1   5.7 

Operating leases

  3.7   4.1 

Weighted-average discount rate (percentage):

        

Financing leases

  4.1   4.2 

Operating leases

  4.4   4.6 

 

8

 

SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 27, 2020

 

Estimated 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 June 27, 2020 (in thousands) were as follows:

 

Years ending March 31:

  

Operating

  

Financing

 

Balance of 2021

  $17,076  $5,442 

2022

   19,469   7,255 

2023

   13,675   7,255 

2024

   6,819   5,728 

2025

   3,262   2,374 
2026-2032   4,598   4,005 

Total minimum payment required

  $64,899  $32,059 

Less interest

   4,954   3,214 

Present value of minimum lease payments

   59,945   28,845 

Amount due within one year

   21,311   6,232 

Long-term lease obligations

  $38,634  $22,613 

 

 

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 $300,000,000 from April through July and $400,000,000 from August through March.   The Revolver balance as of June 27, 2020 was $34,406,000 and is included in Long-Term Debt in the accompanying Condensed Consolidated Balance Sheets since the Revolver matures on July 5, 2021. The Company utilizes its Revolver for general corporate purposes, including seasonal working capital needs, to pay debt principal and interest obligations, and to fund capital expenditures and acquisitions. Seasonal working capital needs are affected by the growing cycles of the vegetables and fruits the Company processes. The majority of vegetable and fruit inventories are produced during the months of June through November and are then sold over the following year. Payment terms for vegetable and fruit produce are generally three months but can vary from a few days to seven months. Accordingly, the Company’s need to draw on the Revolver may fluctuate significantly throughout the year.

 

The decrease in average amount of Revolver borrowings during the first three months of fiscal 2021 compared to the first three months of fiscal 2020 was attributable to the high sales in March through June 2020 due to pantry loading as a result of COVID-19.

 

General terms of the Revolver include payment of interest at LIBOR plus a defined spread.

 

9

 

SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 27, 2020

 

The following table documents the quantitative data for Revolver borrowings during the first quarter of fiscal 2021 and fiscal 2020:

 

  

First Quarter

 
  

2021

  

2020

 
  

(In thousands)

 

Reported end of period:

        

Outstanding borrowings

 $34,406  $136,014 

Weighted average interest rate

  1.75

%

  4.00

%

Reported during the period:

        

Maximum amount of borrowings

 $107,967  $151,107 

Average outstanding borrowings

 $57,281  $134,135 

Weighted average interest rate

  2.03

%

  3.96

%

 

 

8.

Stockholders’ Equity

 

There were no repurchases of stock during the three-month period ended June 27, 2020. As of June 27, 2020, there are 3,042,092 shares or $88,319,000 of repurchased stock. These shares are not considered outstanding.

 

 

9.

Retirement Plans

 

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

 

  

Three Months Ended

 
  

June 27, 2020

  

June 29, 2019

 
         

Service Cost Including Administration

 $2,574  $2,288 

Interest Cost

  2,251   2,296 

Expected Return on Plan Assets

  (3,567)  (3,958)

Amortization of Prior Service Cost

  23   30 

Amortization of Net Loss

  2,224   - 

Net Periodic Benefit Cost

 $3,505  $656 

 

There was no contribution to the pension plan in the three month periods ended June 27, 2020 or June 29, 2019.

 

10

 

SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 27, 2020

 

 

10.

Plant Restructuring

 

The following table summarizes the rollforward of restructuring charges and related asset impairment charges recorded and the accruals established:

 

   

Restructuring Payable

 
   

Severance

   

Other Costs

   

Total

 
   

(In thousands)

 
                         

Balance March 31, 2020

  $ 202     $ -     $ 202  

First quarter charge

    219       44       263  

Cash payments/write offs

    (203 )     (44 )     (247 )

Balance June 27, 2020

  $ 218     $ -     $ 218  

 

   

Severance

   

Other Costs

   

Total

 
   

(In thousands)

 
                         

Balance March 31, 2019

  $ 225     $ 1     $ 226  

First quarter charge

    586       4,220       4,806  

Cash payments/write offs

    (170 )     (4,220 )     (4,390 )

Balance June 29, 2019

  $ 641     $ 1     $ 642  

 

During the quarter ended June 27, 2020, the Company recorded a restructuring charge of $263,000 related to the closing of plants in the Northwest, of which $219,000 was related to severance and $44,000 was for lease impairments.

 

During the quarter ended June 29, 2019, the Company recorded a restructuring charge of $4,806,000 related to the closing of plants in the Midwest and Northwest of which $2,245,000 was for accelerated amortization of right of use operating lease assets, $1,975,000 was mostly related to equipment moves and $586,000 was related to severance.

 

 

11.

Other Operating Income and Expense

 

During the three months ended June 27, 2020 the Company recorded a gain on the sale of unused fixed assets of $534,000. The Company also recorded a loss of $389,000 on the disposal of equipment from a sold Northwest plant. During the three months ended June 29, 2019 the Company recorded a gain on the partial sale of a plant in the Midwest of $4,075,000. The Company also recorded a gain of on the sale of unused fixed assets of $752,000. These items are included in other operating income in the Unaudited Condensed Consolidated Statements of Net Earnings.

 

 

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.

 

11

 

SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 27, 2020

 

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 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.

 

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 June 27, 2020.

 

12

 

SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 27, 2020

 

 

13.

Earnings per Common Share

 

Earnings per share for the quarters ended June 27, 2020 and June 29, 2019 are as follows: 

 

   

Q U A R T E R

 

(Thousands, except per share amounts)

 

Fiscal 2021

   

Fiscal 2020

 
                 

Basic

               
                 

Net Earnings

  $ 20,706     $ 1,103  

Deduct preferred stock dividends paid

    6       6  
                 

Undistributed earnings

    20,700       1,097  

Earnings attributable to participating preferred

    81       4  
                 

Earnings attributable to common shareholders

  $ 20,619     $ 1,093  
                 

Weighted average common shares outstanding

    9,118       9,477  
                 

Basic earnings per common share

  $ 2.26     $ 0.12  
                 

Diluted

               
                 

Earnings from attributable to common shareholders

  $ 20,619     $ 1,093  

Add dividends on convertible preferred stock

    5       5  
                 

Earnings attributable to common stock on a diluted basis

  $ 20,624     $ 1,098  
                 

Weighted average common shares outstanding-basic

    9,118       9,477  

Additional shares issued related to the equity compensation plan

    3       2  

Additional shares to be issued under full conversion of preferred stock

    67       67  
                 

Total shares for diluted

    9,188       9,546  
                 

Diluted earnings per common share

  $ 2.24     $ 0.12  

 

 

14.

Fair Value of Financial Instruments

 

As required by Accounting Standards Codification ("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 $144,967,000 and an estimated fair value of $145,261,000 as of June 27, 2020. As of March 31, 2020, the carrying amount was $217,581,000 and the estimated fair value was $217,559,000. The fair values of all the other financial instruments approximate their carrying value due to their short-term nature.

 

 

15.

Income Taxes

 

The effective tax rate for continuing operations was 23.4% and 20.5% for the three month periods ended June 27, 2020 and June 29, 2019, respectively. The change in tax rate resulting from federal credits and incentives is a 4.8 percentage point increase.  This change is the majority of the 2.9 percentage point increase in the effective tax rate.  The dollar amount of these credits and incentives did not change significantly from 2020 to 2021.  The projected pre-tax income increased significantly from 2020 to 2021 which resulted in the federal credits and incentives having a smaller impact on the tax rate in 2021.  This increase was partially offset by a 1.3 percentage point decrease resulting from interest received from the federal refund for the NOL carryback claim filed as a result of the CARES Act.

 

 

 

 

 

ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OPERATIONS

June 27, 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. In addition, Seneca provides contract packing services mostly through its wholly owned subsidiary Truitt Bros., Inc.

 

The Company’s raw product is harvested mainly between June through November.

 

Results of Operations:

 

Sales:

 

The first fiscal quarter 2021 results include net sales of $288,165,000, which represents an 8.8% increase, or $23,240,000, from the first quarter of fiscal 2020.  The net increase in sales is due to higher selling prices/sales mix of $25,446,000 partially offset by volume decreases of $2,206,000. The increase in sales is primarily from a $33,785,000 increase in Canned Vegetable sales, partially offset by a $5,590,000 decrease in Prepared Food sales, a $3,906,000 decrease in other Canned Fruit sales, a $544,000 decrease in Snack sales, a $240,000 decrease in Frozen sales, and a $265,000 decrease in Other sales.

 

The following table presents sales by product category (in millions):

 

   

Three Months Ended

 
   

June 27, 2020

   

June 29, 2019

 

Canned Vegetables

  $ 221.0     $ 187.2  

Frozen

    17.9       18.2  

Fruit Products

    18.8       22.7  

Chip Products

    2.4       2.9  

Prepared Foods

    24.2       29.8  

Other

    3.9       4.1  
    $ 288.2     $ 264.9  

 

 

ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OPERATIONS

June 27, 2020

 

Operating Income:

The following table presents components of operating income as a percentage of net sales:

 

   

Three Months Ended

 
   

June 27, 2020

   

June 29, 2019

 

Gross Margin

    16.9 %     7.2 %
                 

Selling

    2.8 %     2.8 %

Administrative

    3.5 %     3.3 %

Plant Restructuring

    0.1 %     1.8 %

Other Operating Income

    -0.1 %     -1.8 %
                 

Operating Income

    10.5 %     1.1 %
                 

Interest Expense, Net

    0.6 %     1.3 %

 

For the three month period ended June 27, 2020, the gross margin increased from the prior year quarter from 7.2% to 16.9% due primarily to higher prices in the first quarter of 2021. The Company’s LIFO credit for the first quarter ended June 27, 2020 was $2,141,000 as compared to a charge of $3,176,000 for the first quarter ended June 29, 2019. This reflects the impact on the quarter of lower cost increases expected to be incurred in fiscal 2021, compared with to fiscal 2020. On an after-tax basis, LIFO increased net earnings by $1,606,000 for the quarter ended June 27, 2020 and LIFO decreased net earnings by $2,382,000 for the quarter ended June 29, 2019, based on the historical statutory federal income tax rates.

 

For the three month period ended June 27, 2020, selling costs as a percentage of sales remained the same at 2.8% compared to the same period in the prior year.

 

For the three month period ended June 27, 2020, administrative expense as a percentage of sales increased from 3.3% to 3.5% primarily due to higher employment costs.

 

During the three months ended June 27, 2020 the Company recorded a gain on the sale of unused fixed assets of $534,000. The Company also recorded a loss of $389,000 on the disposal of equipment from a sold Northwest plant. During the three months ended June 29, 2019 the Company recorded a gain on the partial sale of a plant in the Midwest of $4,075,000. The Company also recorded a gain of on the sale of unused fixed assets of $752,000. These items are included in other operating income in the Unaudited Condensed Consolidated Statements of Net Earnings.

 

Interest expense for the first quarter ended June 27, 2020, as a percentage of sales, decreased to 0.6% from 1.3% in first quarter ended June 29, 2019. During fiscal 2021, overall borrowings were lower than the previous year along with higher sales for the current period.

 

Income Taxes:

 

The effective tax rate for continuing operations was 23.4% and 20.5% for the three month periods ended June 27, 2020 and June 29, 2019, respectively. The change in tax rate resulting from federal credits and incentives is a 4.8 percentage point increase.  This change is the majority of the 2.9 percentage point increase in the effective tax rate.  The dollar amount of these credits and incentives did not change significantly from 2020 to 2021.  The projected pre-tax income increased significantly from 2020 to 2021 which resulted in the federal credits and incentives having a smaller impact on the tax rate in 2021.  This increase was partially offset by a 1.3 percentage point decrease resulting from interest received from the federal refund for the NOL carryback claim filed as a result of the CARES Act.

 

 

ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OPERATIONS

June 27, 2020

 

Earnings per Share:

 

Basic earnings per share were $2.26 and $0.12 for the three months ended June 27, 2020 and June 29, 2019, respectively. Diluted earnings per share were $2.24 and $0.12 for the three months ended June 27, 2020 and June 29, 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:

 

   

June 27,

   

June 29,

   

March 31,

   

March 31,

 
   

2020

   

2019

   

2020

   

2019

 

Working Capital:

                               

Balance

  $ 346,064     $ 441,815     $ 401,946     $ 490,871  

Change in Quarter

    (55,882 )     (49,056 )                

Current Portion of Long-Term Debt

    500       88       6,763       7,468  

Long-Term Debt, Less Current Portion

    144,467       246,645       217,081       265,900  

Operating Lease Obligations, Less Current Portion

    38,634       60,979       42,760       -  

Financing Lease Obligations, Less Current Portion

    22,613       29,907       24,366       -  

Capital Lease Obligations, Less Current Portion

    -       -       -       31,286  

Total Stockholders' Equity Per Equivalent Common Share (see Note below)

    45.01       43.39       42.77       43.27  

Stockholders' Equity Per Common Share

    45.45       43.80       43.17       43.67  

Current Ratio

    2.95       3.91       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 $100,321,000 in the first three months of fiscal 2021, compared to $28,807,000 in the first three months of fiscal 2020. The $71,514,000 increase in cash provided is a $43,528,000 increase in cash provided for in accounts receivable in the first three months of fiscal 2021 as compared to the first three months of fiscal 2020, a $19,603,000 increase in cash provided by net earnings, a $11,360,000 increase in cash provided by income taxes, a $17,394,000 increase in cash provided by accounts payable, accrued expenses and other liabilities and a $408,000 increase in cash provided by other current assets, partially offset by a $20,399,000 decrease in inventories.

 

As compared to June 29, 2019, inventory decreased $69,654,000 to $423,844,000 at June 27, 2020. The components of the inventory decrease (excluding LIFO) reflect a $75,301,000 decrease in finished goods, a $3,693,000 decrease in work in process and a $13,051,000 decrease in raw materials and supplies. The finished goods decrease primarily reflects higher sales due to COVID-19 pantry loading and lower inventory quantities attributable to the lower calendar year 2019 pack versus the calendar year 2018 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 $142,126,000 as of the end of the first quarter of 2021 as compared to $164,517,000 as of the end of the first quarter of 2020.

 

Cash used in investing activities was $18,316,000 in the first three months of fiscal 2021 compared to cash used in investing activities of $3,378,000 in the first three months of fiscal 2020. Additions to property, plant and equipment were $19,230,000 in the first three months of fiscal 2021 as compared to $9,776,000 in first three months of fiscal 2011. Proceeds from the sale of assets were $914,000 for the first three months of fiscal 2021 as compared to $6,398,000 in first three months of fiscal 2020.

 

 

ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OPERATIONS

June 27, 2020

 

Cash used in financing activities was $81,100,000 in the first three months of fiscal 2021, which included borrowings of $91,896,000 and the repayment of $164,510,000 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 three months of fiscal 2020. The Company did not repurchase treasury stock in the first three months of fiscal 2021 but repurchased $2,744,000 of treasury stock during the first quarter 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 June 27, 2020, the interest rate was approximately 1.75% on a balance of $34,406,000. 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 June 27, 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 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

June 27, 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:

 

 

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;

 

the availability of financing;

 

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

 

potential impact of COVID-19 related issues at our facilities;

 

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.

 

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.

 

 

ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OPERATIONS

June 27, 2020

 

Critical Accounting Policies

 

For the three months ended June 27, 2020 and June 29, 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.

 

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 June 27, 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.

 

Item 1A.

Risk Factors

 

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 Proceeds

 

   

Total Number of

   

Average Price Paid

   

Total Number

   

Maximum Number

 
   

Shares Purchased

   

per Share

   

of Shares

   

(or Approximate

 
                                   

Purchased as

   

Dollar Value) of

 
                                   

Part of Publicly

   

Shares that May

 
                                   

Announced

   

Yet Be Purchased

 
   

Class A

   

Class B

   

Class A

   

Class B

   

Plans or

   

Under the Plans or

 

Period

 

Common

   

Common

   

Common

   

Common

   

Programs

   

Programs

 

4/01/2020 –

                                               

4/30/2020

    -       -     $ -     $ -       -          

5/01/2020 –

                                               

5/31/2020

    -       -     $ -     $