Seneca Foods Reports Sales and Earnings for the Quarter and Six Months Ended September 29, 2018
November 09 2018 - 4:15PM
Seneca Foods Corporation (NASDAQ: SENEA, SENEB) today announced
financial results for the second quarter and six months ended
September 29, 2018.
Highlights (vs. year-ago, second quarter
results)
- The Company has applied discontinued operations treatment as
related to its Modesto operations during the second quarter of
fiscal 2019.
- Included in the second fiscal year 2019 quarter net earnings
from discontinued operations is a $24.2 million non-cash gain as a
result of the Modesto LIFO layer liquidation.
- Net continuing sales decreased $7.0 million or 2.1% as compared
to the prior year quarter. A decrease in sales volume of
$10.0 million was partially offset by higher selling prices/mix of
$3.0 million. The sales volume decrease is primarily from a
reduction in B&G Foods Inc. sales and is partially offset by an
increase in other canned vegetable sales.
- Gross margin percentage from continuing operations income
decreased from 6.6% to 3.4% as compared to the prior year
quarter. Lower sales volume, cost increases, and an increase
in the LIFO charge all contributed to the lower gross margin
percentage.
- During the second quarter of fiscal 2019 the Company has met
the criteria to classify certain operating units as assets held for
sale.
“As we anticipated, we have sold the Modesto facility subsequent
to the quarter end and are in the process of completing the orderly
liquidation of the Modesto operations. We are expecting a
third quarter pre-tax gain on the sale of the Modesto facility of
approximately $53.9 million.
Continuing operations results are lagging behind the prior year
primarily due to higher steel and transportation costs,” stated
Kraig Kayser, President and Chief Executive Officer.
Highlights (vs. year-ago, year-to-date
results)
- Net continuing sales decreased $4.1 million or 0.7% during the
first six months of fiscal 2019. A decrease in sales volume
of $18.8 million was partially offset by higher selling prices/mix
of $14.7 million. The sales volume decrease is
primarily from a reduction in B&G Foods Inc. sales and is
partially offset by an increase in other canned vegetable
sales.
- Gross margin percentage from continuing operations income
decreased from 6.2% to 4.9% as compared to the prior year first six
months. Lower sales volume and cost increases contributed to
the lower gross margin percentage.
About Seneca Foods
CorporationSeneca Foods is North America’s leading
provider of packaged fruits and vegetables, with facilities located
throughout the United States. Its high quality products are
primarily sourced from over 2,000 American farms. Seneca
holds the largest share of the retail private label, food service,
and export canned vegetable markets, distributing to over 90
countries. Products are also sold under the highly
regarded brands of Libby’s®, Aunt Nellie’s®, Green Valley®,
CherryMan®, READ®, Seneca Farms® and Seneca labels, including
Seneca snack chips. In addition, Seneca provides vegetable
products under a contract packing agreement with B&G Foods
North America, under the Green Giant label. Seneca’s
common stock is traded on the Nasdaq Global Stock Market under the
symbols “SENEA” and “SENEB”. SENEA is included in the S&P
SmallCap 600, Russell 2000 and Russell 3000 indices.
Non-GAAP Financial Measures—Operating
Earnings Excluding LIFO and Plant Restructuring Impact, EBITDA and
FIFO EBITDA
Operating earnings excluding LIFO and plant restructuring,
EBITDA and FIFO EBITDA are non-GAAP financial measures. The Company
believes these non-GAAP financial measures provide a basis for
comparison to companies that do not use LIFO or have plant
restructuring and enhance the understanding of the Company’s
historical operating performance. The Company does not intend
for this information to be considered in isolation or as a
substitute for other measures prepared in accordance with GAAP.
Set forth below is a reconciliation of reported
Operating Earnings excluding LIFO and plant restructuring.
|
|
Quarter Ended |
|
Six Months Ended |
|
|
In millions |
|
In millions |
|
|
9/29/2018 |
|
9/30/2017 |
|
9/29/2018 |
|
9/30/2017 |
|
|
FY 2019 |
|
FY 2018 |
|
FY 2019 |
|
FY 2018 |
|
|
|
|
|
|
|
|
|
Operating (loss) income
from Continuing Operations, as reported: |
$ |
(4.8 |
) |
$ |
3.7 |
$ |
(4.9 |
) |
$ |
3.0 |
|
|
|
|
|
|
|
|
|
LIFO (credit)
charge |
|
14.7 |
|
|
10.8 |
|
14.2 |
|
|
18.5 |
|
|
|
|
|
|
|
|
|
Plant restructuring
charge |
|
0.8 |
|
|
- |
|
0.9 |
|
|
0.1 |
|
|
|
|
|
|
|
|
|
Operating income,
excluding LIFO and plant restructuring impact |
$ |
10.7 |
|
$ |
14.5 |
$ |
10.2 |
|
$ |
21.6 |
|
|
|
|
|
|
|
|
|
Set forth below is a reconciliation of reported net (loss)
earnings to EBITDA and FIFO EBITDA ((loss) earnings before
interest, income taxes, depreciation, amortization, non-cash
charges and credits related to the LIFO inventory valuation
method). The Company does not intend for this information to be
considered in isolation or as a substitute for other measures
prepared in accordance with GAAP.
|
|
Six Months Ended |
EBITDA and FIFO
EBITDA: |
|
September 29, 2018 |
|
September 30, 2017 |
|
|
(In thousands) |
|
|
|
|
|
Net (loss) earnings
from continuing operations |
$ |
(7,794 |
) |
$ |
810 |
|
Income tax (benefit)
expense |
|
(2,743 |
) |
|
(465 |
) |
Interest expense, net
of interest income |
|
7,723 |
|
|
5,578 |
|
Depreciation and
amortization |
|
14,791 |
|
|
14,257 |
|
Interest
amortization |
|
(142 |
) |
|
(143 |
) |
EBITDA |
|
11,835 |
|
|
20,037 |
|
LIFO (credit)
charge |
|
14,157 |
|
|
18,495 |
|
FIFO EBITDA |
$ |
25,992 |
|
$ |
38,532 |
|
|
|
|
|
|
Forward-Looking Information
The information contained in this release
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
release 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.
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 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;
- availability of financing;
- leverage and the Company’s ability to service and reduce its
debt;
- foreign currency exchange and interest rate fluctuations;
- effectiveness of the Company’s marketing and trade promotion
programs;
- changing consumer preferences;
- competition;
- product liability claims;
- the loss of significant customers or a substantial reduction in
orders from these customers;
- changes in, or the failure or inability to comply with, United
States, 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.
Contact: Timothy J. Benjamin, Chief Financial
Officer315-926-8100
Seneca Foods Corporation |
Unaudited Selected Financial Data |
|
|
|
|
|
|
|
|
For the Periods Ended September 29, 2018 and September
30, 2017 |
(In thousands of dollars, except share data) |
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Year-to-Date |
|
Fiscal 2019 |
|
Fiscal 2018 |
|
Fiscal 2019 |
|
Fiscal 2018 |
|
|
|
|
|
|
|
|
Net sales |
$ |
320,660 |
|
|
$ |
327,664 |
|
|
$ |
564,753 |
|
|
$ |
568,839 |
|
|
|
|
|
|
|
|
|
Plant restructuring
expense (income) (note 2) |
$ |
845 |
|
|
$ |
(25 |
) |
|
$ |
883 |
|
|
$ |
56 |
|
|
|
|
|
|
|
|
|
Other operating income,
net (note 3) |
$ |
3,359 |
|
|
$ |
20 |
|
|
$ |
4,274 |
|
|
$ |
2,632 |
|
|
|
|
|
|
|
|
|
Operating (loss) income
(note 1) |
$ |
(4,833 |
) |
|
$ |
3,699 |
|
|
$ |
(4,856 |
) |
|
$ |
2,966 |
|
Earnings from equity
investment |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(21 |
) |
Other income |
|
(1,022 |
) |
|
|
(1,469 |
) |
|
|
(2,042 |
) |
|
|
(2,936 |
) |
Interest expense,
net |
|
3,898 |
|
|
|
2,900 |
|
|
|
7,723 |
|
|
|
5,578 |
|
(Loss) earnings from
continuing operations before income taxes |
$ |
(7,709 |
) |
|
$ |
2,268 |
|
|
$ |
(10,537 |
) |
|
$ |
345 |
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense |
|
(2,075 |
) |
|
|
825 |
|
|
|
(2,743 |
) |
|
|
(465 |
) |
|
|
|
|
|
|
|
|
(Loss) earnings from
continuting operations |
|
(5,634 |
) |
|
|
1,443 |
|
|
|
(7,794 |
) |
|
|
810 |
|
Earnings (loss) from
discontinued operations (net of tax) |
|
14,750 |
|
|
|
(2,543 |
) |
|
|
8,155 |
|
|
|
(2,752 |
) |
Net earnings
(loss) |
$ |
9,116 |
|
|
$ |
(1,100 |
) |
|
$ |
361 |
|
|
$ |
(1,942 |
) |
|
|
|
|
|
|
|
|
Basic (loss)
earnings per share: |
|
|
|
|
|
|
|
Continuing operations |
$ |
(0.58 |
) |
|
$ |
0.15 |
|
|
$ |
(0.80 |
) |
|
$ |
0.08 |
|
Discontinued operations |
|
1.51 |
|
|
|
(0.26 |
) |
|
|
0.83 |
|
|
|
(0.28 |
) |
Net basic earnings
(loss) per common share |
$ |
0.93 |
|
|
$ |
(0.11 |
) |
|
$ |
0.03 |
|
|
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
Diluted (loss)
earnings per share: |
|
|
|
|
|
|
|
Continuing operations |
$ |
(0.58 |
) |
|
$ |
0.15 |
|
|
$ |
(0.80 |
) |
|
$ |
0.08 |
|
Discontinued operations |
|
1.50 |
|
|
|
(0.26 |
) |
|
|
0.83 |
|
|
|
(0.28 |
) |
Net diluted earnings
(loss) per common share |
$ |
0.92 |
|
|
$ |
(0.11 |
) |
|
$ |
0.03 |
|
|
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
Note 1:
The effect of the LIFO inventory valuation method on second quarter
pre-tax results decreased continuing operating earnings by |
$14,661,000 for the three month period ended September 29, 2018 and
decreased operating earnings by $10,759,000 for the three |
month period
ended September 30, 2017. |
|
|
|
|
|
|
|
The
effect of the LIFO inventory valuation method on six months
pre-tax results decreased continuing operating earnings by |
$14,157,000 for the six month period ended September 29, 2018 and
decreased operating earnings by $18,495,000 for the six |
month period
ended September 30, 2017. |
|
|
|
|
|
|
|
Note 2:
The six month period ended September 29, 2018 included a
restructuring charge primarily for severance of $883,000
related |
to
plants in the East and Northwest. The six month period ended
September 30, 2017 included a restructuring charge primarily
for |
severance and
moving costs of $56,000. |
|
|
|
|
|
|
|
Note 3:
Other operating income for the six months ended September 29, 2018
of $4,274,000 includes a gain on the sale of unused
fixed |
assets of $4,060,000. Other operating income for the for the
period ended September 30, 2017 of $2,632,000 includes the
bargain |
purchase gain on the Truitt acquisition of $1,096,000, a gain on
the sale of a Midwest plant of $1,081,000 and net gain on the |
sale of other
unused fixed assets of $455,000. |
|
|
|
|
|
|
|
Note 4:
The Company uses the "two-class" method for basic earnings (loss)
per share by dividing the earnings (loss) attributable
to |
common shareholders by the weighted average of common shares
outstanding during the period. |
|
|
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