Seneca Foods Corporation (NASDAQ:SENEA) (NASDAQ:SENEB) today
announced financial results for the fourth quarter and year ended
March 31, 2018.
Highlights (vs. year-ago, year-to-date
results):
- Net sales increased 4.2% to $1,314.8 million.
- The increase in sales attributed to favorable sales mix and
higher selling price variance of $50.5 million and favorable sales
volume variance of $2.1 million.
- The favorable sales volume variance was primarily due to the
Truitt acquisition in the first quarter of 2018.
- Net earnings decreased to a loss of $(13.8) million or $(1.41)
per diluted share.
- A significant portion of the net earnings comparative decline
was attributable to a non-recurring plant restructuring charge of
$10.0 million in the current year.
- The previously reported financial statements have been restated
to reflect the change in when revenue is recognized under the Green
Giant contract.
“Fiscal Year 2018 was a challenging year for
us. The canned fruit business in particular continued to
struggle. As a result, we announced the closing of our
Modesto, California facility during the year. This decision
had a direct impact on our fiscal year earnings as we incurred
approximately $10.0 million of plant restructuring charges.
In addition, the Company determined that it needed to restate prior
year financial statements regarding the bill and hold treatment for
the Green Giant contract. The restatement relates to the
timing of when revenue is recognized for this contract,” stated
Kraig Kayser, President and Chief Executive Officer.
Financial Results for the Fiscal 2018 Year
Seneca Foods Corporation reported a net loss for
the fiscal year ended March 31, 2018 of $(13.8) million, or $(1.41)
per diluted share, compared to net earnings of $15.9 million, or
$1.60 per diluted share, in the fiscal year ended March 31,
2017. A significant portion of the net earnings decrease was
attributable to non-recurring restructuring charges related to the
Modesto plant closing of $10.0 million which occurred in the
current year.
Net sales for the fiscal year ended March 31,
2018 increased from the fiscal year ended March 31, 2017 by 4.2%,
to $1,314.8 million. The increase in net sales is
attributable to higher selling prices/more favorable sales mix of
$50.5 million and increased sales volume of $2.1 million, which is
primarily due to the Truitt acquisition in the first quarter of
2018.
Operating (loss) income was $(5.3) million and
$34.7 million for the year ended March 31, 2018 and 2017,
respectively. Operating income, excluding the LIFO charge/credit
and the restructuring charges, for the twelve months ended March
31, 2018 and the twelve months ended March 31, 2017, was $19.7
million and $26.4 million, respectively. A reconciliation of
reported operating income to operating income excluding LIFO and
plant restructuring charges is provided below.
Other operating income in 2018 includes a
bargain purchase gain of $1.8 million due to the Truitt
acquisition, a gain on the sale of a plant of $1.1 million and a
gain on the partial sale of a plant of $0.4 million.
Other operating expense in 2017 was $2.4 million and mostly
included a charge of $1.2 million related to costs incurred due to
some roof collapses at a Northwest plant and a charge for an
impairment of a long-term asset of $1.1 million. The Company
corrected some inadvertent errors in connection with the
application of its revenue recognition policy with respect to bill
and hold transactions in fiscal 2018 and also restated its prior
financial statements consistent with such policy. As a
result, for those periods the Company recognized revenue under the
Green Giant contract when the product was physically delivered
rather than at the time title transferred under the former bill and
hold treatment. Effective April 1, 2018, the Company anticipates
that under new revenue recognition standards issued by the
Financial Accounting Standards Board, bill and hold treatment will
once again be appropriate for a majority of the Company's Green
Giant contract. The Company will have some small changes with its
revenue recognition relating to labeling and warehousing services
which will be recognized into revenue as those services are
performed. Otherwise the packaging of canned and frozen vegetables
under the Green Giant contract will qualify for bill and hold
treatment beginning with the first interim period for the fiscal
year ending March 31, 2019. The Company will apply the full
retrospective method of adoption of this new accounting standard
meaning that information in the Company's financial statements for
prior periods will be reclassified to conform to the current period
classification. The Company anticipates that the
retrospective reclassification of revenue under the new accounting
standard will result in the timing of the recognition of revenue in
connection with the Green Giant contract to be substantively
similar to the Company's bill and hold policy prior to the
restatement.
Highlights (vs. year-ago, fourth quarter
results):
- Net sales increased $19.0 million, or 6.8% to $299.7 million.
- Net earnings decreased to a loss of $(14.3) million or $(1.46)
per diluted share.
- A significant portion of the net earnings comparative decline
was attributable to a non-recurring plant restructuring charge of
$9.9 million in fourth quarter of the current year.
Financial Results for the Fourth Quarter
of 2018
The Company reported a net loss for the fiscal
fourth quarter of 2018 of $(14.3) million, or $(1.46) per diluted
share, compared to net earnings of $0.3 million, or $0.03 per
diluted share, in the fiscal fourth quarter of 2017. Net
sales for the fourth quarter ended March 31, 2018, increased from
the fourth quarter ended March 31, 2017, by 6.8%, to $299.7
million.
Operating (loss) income was $(14.7) million and
$4.8 million for the quarter ended March 31, 2018 and 2017,
respectively. Operating (loss) income, excluding the LIFO
credit/charge and the restructuring charge/credit, was $1.5 million
for the quarter ended March 31, 2018 and $(3.5) million for the
quarter ended March 31, 2017. A reconciliation of reported
operating income to operating income excluding LIFO and plant
restructuring charges is provided below.
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®, CherryMan®, Green Valley®, Aunt
Nellie’s®, READ®, Seneca Farms® and Seneca labels, including Seneca
snack chips. Seneca’s common stock is traded on the Nasdaq
Global Stock Market under the symbols “SENEA” and “SENEB”. SENEA is
included the S&P SmallCap 600, Russell 2000 and Russell 3000
indices.
Non-GAAP Financial Measures—Operating
Income Excluding LIFO and Plant Restructuring Impact, EBITDA and
FIFO EBITDA
Operating income 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.
The Company’s financial covenants under its various credit
facilities are calculated on a FIFO basis.
Set forth below is a reconciliation of reported
Operating Income excluding LIFO and plant restructuring:
|
|
|
|
|
|
|
Quarter Ended |
|
Twelve Months Ended |
|
|
In millions |
|
In millions |
|
|
3/31/2018 |
|
3/31/2017 |
|
3/31/2018 |
|
3/31/2017 |
|
|
FY 2018 |
|
FY 2017 |
|
FY 2018 |
|
FY 2017 |
|
|
|
|
(Restated |
) |
|
|
|
(Restated |
) |
|
|
|
|
|
|
|
|
|
Operating income, as
reported: |
$ |
(14.7 |
) |
$ |
4.8 |
|
$ |
(5.3 |
) |
$ |
34.7 |
|
|
|
|
|
|
|
|
|
|
LIFO charge
(credit) |
|
6.3 |
|
|
(7.4 |
) |
|
15.0 |
|
|
(10.1 |
) |
|
|
|
|
|
|
|
|
|
Plant restructuring
charge (credit) |
|
9.9 |
|
|
(0.9 |
) |
|
10.0 |
|
|
1.8 |
|
|
|
|
|
|
|
|
|
|
Operating (loss)
income, excluding LIFO and plant restructuring impact |
$ |
1.5 |
|
$ |
(3.5 |
) |
$ |
19.7 |
|
$ |
26.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Set forth below is a reconciliation of reported
net earnings to EBITDA and FIFO EBITDA (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.
|
|
|
Year Ended |
EBITDA and FIFO
EBITDA: |
March 31, 2018 |
|
March 31, 2017 |
|
(In thousands) |
|
|
|
(Restated |
) |
|
|
|
|
Net (loss)
earnings |
$ |
(13,811 |
) |
|
$ |
15,895 |
|
Income tax (benefit)
expense |
|
(6,472 |
) |
|
|
9,753 |
|
Interest expense, net
of interest income |
|
15,037 |
|
|
|
9,672 |
|
Depreciation and
amortization |
|
31,547 |
|
|
|
24,824 |
|
Interest
amortization |
|
(284 |
) |
|
|
(340 |
) |
EBITDA |
|
26,017 |
|
|
|
59,804 |
|
LIFO charge
(credit) |
|
14,968 |
|
|
|
(10,099 |
) |
FIFO EBITDA |
$ |
40,985 |
|
|
$ |
49,705 |
|
|
|
|
|
|
|
|
|
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;
- changes in accounting principles or the application of such
principle to the Company; 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. Benjamin315-926-8100
|
Seneca Foods Corporation |
Unaudited Selected Financial Data |
|
|
|
|
|
|
|
|
For the Periods Ended March 31, 2018 and 2017 |
(In thousands of dollars, except share data) |
|
|
|
|
|
|
|
|
|
Fourth Quarter |
|
Year-to-Date |
|
Fiscal 2018 |
|
Fiscal 2017 |
|
Fiscal 2018 |
|
Fiscal 2017 |
|
|
|
(Restated |
) |
|
|
|
(Restated |
) |
|
|
|
|
|
|
|
|
Net sales |
$ |
299,679 |
|
|
$ |
280,690 |
|
|
$ |
1,314,765 |
|
|
$ |
1,262,198 |
|
|
|
|
|
|
|
|
|
Plant restructuring
expense (credit) (note 2) |
$ |
9,854 |
|
|
$ |
(949 |
) |
|
$ |
10,011 |
|
|
$ |
1,829 |
|
|
|
|
|
|
|
|
|
Other operating income
(expense) net (note 3) |
$ |
1,056 |
|
|
$ |
(1,265 |
) |
|
$ |
3,671 |
|
|
$ |
(2,437 |
) |
|
|
|
|
|
|
|
|
Operating (loss) income
(note 1) |
$ |
(14,742 |
) |
|
$ |
4,809 |
|
|
$ |
(5,267 |
) |
|
$ |
34,742 |
|
Earnings from equity
investment |
|
- |
|
|
|
(78 |
) |
|
|
(21 |
) |
|
|
(578 |
) |
Interest expense,
net |
|
4,375 |
|
|
|
2,963 |
|
|
|
15,037 |
|
|
|
9,672 |
|
(Loss)
earnings before income taxes |
$ |
(19,117 |
) |
|
$ |
1,924 |
|
|
$ |
(20,283 |
) |
|
$ |
25,648 |
|
|
|
|
|
|
|
|
|
Income taxes (benefit)
expense |
|
(4,867 |
) |
|
|
1,604 |
|
|
|
(6,472 |
) |
|
|
9,753 |
|
|
|
|
|
|
|
|
|
Net
(loss) earnings |
$ |
(14,250 |
) |
|
$ |
320 |
|
|
$ |
(13,811 |
) |
|
$ |
15,895 |
|
|
|
|
|
|
|
|
|
(Loss)
earnings attributable to common stock |
$ |
(14,201 |
) |
|
$ |
311 |
|
|
$ |
(13,768 |
) |
|
$ |
15,726 |
|
|
|
|
|
|
|
|
|
Basic (loss) earnings
per share |
$ |
(1.46 |
) |
|
$ |
0.03 |
|
|
$ |
(1.41 |
) |
|
$ |
1.61 |
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings
per share |
$ |
(1.46 |
) |
|
$ |
0.03 |
|
|
$ |
(1.41 |
) |
|
$ |
1.60 |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding basic |
|
9,731,723 |
|
|
|
9,771,116 |
|
|
|
9,769,300 |
|
|
|
9,785,455 |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding diluted |
|
9,801,660 |
|
|
|
9,840,945 |
|
|
|
9,839,237 |
|
|
|
9,855,284 |
|
Note 1: |
|
The effect
of the LIFO inventory valuation method on fourth quarter
pre-tax results increased operating earnings by $6,306,000
for the three month period ended March 31, 2018 and increased
operating earnings by $7,430,000 for the three month period ended
March 31, 2017. The effect of the LIFO inventory
valuation method on year-to-date pre-tax results decreased
operating earnings by $14,968,000 for the twelve month period
ended March 31, 2018 and increased operating earnings by
$10,099,000 for the twelve month period ended March 31,
2017. |
Note 2: |
|
The twelve
month period ended March 31, 2018 included a restructuring charge
primarily for operating lease costs of $5,393,000 and
pension costs of $4,168,000. |
|
|
The twelve
month period ended March 31, 2017 included a restructuring charge
primarily for severance and moving costs of $1,829,000. |
Note 3: |
|
Other
income for the twelve month period ended March 31, 2018 of
$3,671,000 represents a credit for $1,786,000 related to a
bargain purchase gain due to the Truitt acquisition, a gain on
the sale of a plant for $1,089,000, a partial sale of a plant of
$443,000 and a net gain on the sale of unused fixed assets of
$353,000 and other minor items. |
|
|
Other loss
for the twelve month period ended March 31, 2017 of $2,437,000
represents a charge for $1,160,000 related to some
costs incurred due to some roof collapses as a result of heavy
snowfall at at Northwest plant, a charge for impairment of a
long-term asset of $1,052,000, a net loss on the sale of
unused fixed assets of $177,000 and other minor items. |
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