Seneca Foods Reports Sales and Earnings for the Quarter and Nine Months Ended December 29, 2018
February 01 2019 - 3:15PM
Seneca Foods Corporation (NASDAQ: SENEA, SENEB) today announced
financial results for the third quarter and nine months ended
December 29, 2018.
Highlights (vs. year-ago, year-to-date
results):
- Net sales increased 1.4% to $937.0 million.
- Gross margin percentage from continuing operations income
decreased from 6.9% to 2.8% as compared to the prior year nine
months. Cost increases and a $39.9 million LIFO charge all
contributed to the lower gross margin percentage.
- The Company has applied discontinued operations treatment as
related to its Modesto operations.
- Net earnings from discontinued operations increased by $46.1
million as compared to the prior nine months. Included in the nine
months ended December 29, 2018 discontinued operations was a $24.2
million pre-tax non-cash gain as result of the Modesto LIFO layer
liquation and a pre-tax cash gain of $51.5 million on the sale of
the Modesto plant and equipment.
“The first nine months of Fiscal Year 2019 was a challenge for
us. Our business faced meaningful costs increases due to higher
steel and transportation costs. When coupled with poor growing
conditions during the 2018 growing season, the Company ended up
with a year to date non-cash LIFO charge of almost $40 million
related to its continuing operations as inventory costs for the
fiscal year rose significantly. When combined with fixed annual
pricing commitments to much of our customer base, this has resulted
in a significant squeeze on earnings. The Modesto peach plant
liquidation activities are coming to an end. The sale of the
facility in the third quarter has enabled the Company to pay down a
significant amount of debt and generate sizable one-time gains,”
stated Kraig Kayser, President and Chief Executive Officer.
Highlights (vs. year-ago, third quarter
results):
- Net sales increased 4.9% to $372.2 million.
- Gross margin percentage from continuing operations decreased
from 8.1% to (0.4) % as compared to the prior third quarter. Cost
increases and a $25.8 million LIFO charge all contributed to the
lower gross margin percentage.
- Net earnings from discontinued operation increased by $35.2
million as compared to the prior third quarter. Included in the
third quarter ended December 29, 2018 for discontinued operations
is a pre-tax cash gain of $50.4 million on the sale of the Modesto
plant and equipment.
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 From Continuing Operations 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 to 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 |
|
Nine Months Ended |
|
|
In millions |
|
In millions |
|
|
12/29/2018 |
|
12/30/2017 |
|
12/29/2018 |
|
12/30/2017 |
|
|
FY 2019 |
|
FY 2018 |
|
FY 2019 |
|
FY 2018 |
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
from Continuing Operations, as reported: |
$ |
(23.7 |
) |
$ |
9.5 |
|
$ |
(28.5 |
) |
$ |
12.4 |
|
|
|
|
|
|
|
|
|
|
|
|
LIFO charge |
|
25.8 |
|
|
1.3 |
|
|
39.9 |
|
|
19.8 |
|
|
|
|
|
|
|
|
|
|
|
|
Plant restructuring
charge |
|
1.4 |
|
|
0.1 |
|
|
2.3 |
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating income,
excluding LIFO and plant restructuring impact |
$ |
3.5 |
|
$ |
10.9 |
|
$ |
13.7 |
|
$ |
32.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
Nine Months Ended |
EBITDA and FIFO
EBITDA: |
|
December 29, 2018 |
|
December 30, 2017 |
|
|
(In thousands) |
|
|
|
|
|
Net (loss) earnings
from continuing operations |
$ |
(27,834 |
) |
$ |
9,696 |
|
Income tax expense |
|
(9,617 |
) |
|
(1,710 |
) |
Interest expense, net
of interest income |
|
11,587 |
|
|
9,053 |
|
Depreciation and
amortization |
|
22,248 |
|
|
21,529 |
|
Interest
amortization |
|
(213 |
) |
|
(214 |
) |
EBITDA |
|
(3,829 |
) |
|
38,354 |
|
LIFO (credit)
charge |
|
39,933 |
|
|
19,763 |
|
FIFO EBITDA |
$ |
36,104 |
|
$ |
58,117 |
|
|
|
|
|
|
CHECK |
|
36,526 |
|
|
58,117 |
|
|
|
|
|
|
|
|
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 December 29, 2018 and December
30, 2017 |
(In thousands of dollars, except share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Year-to-Date |
|
Fiscal 2019 |
|
Fiscal 2018 |
|
Fiscal 2019 |
|
Fiscal 2018 |
|
|
|
|
|
|
|
|
Net sales |
$ |
372,238 |
|
|
$ |
354,894 |
|
|
$ |
936,991 |
|
|
$ |
923,733 |
|
|
|
|
|
|
|
|
|
Plant restructuring
expense (note 2) |
$ |
1,396 |
|
|
$ |
101 |
|
|
$ |
2,279 |
|
|
$ |
157 |
|
|
|
|
|
|
|
|
|
Other operating (loss)
income, net (note 3) |
$ |
(776 |
) |
|
$ |
(17 |
) |
|
$ |
3,498 |
|
|
$ |
2,615 |
|
|
|
|
|
|
|
|
|
Operating (loss) income
(note 1) |
$ |
(23,657 |
) |
|
$ |
9,458 |
|
|
$ |
(28,513 |
) |
|
$ |
12,424 |
|
Earnings from equity
investment |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(21 |
) |
Other income |
|
(607 |
) |
|
|
(1,658 |
) |
|
|
(2,649 |
) |
|
|
(4,594 |
) |
Interest expense,
net |
|
3,864 |
|
|
|
3,475 |
|
|
|
11,587 |
|
|
|
9,053 |
|
(Loss) earnings from
continuing operations before income taxes |
$ |
(26,914 |
) |
|
$ |
7,641 |
|
|
$ |
(37,451 |
) |
|
$ |
7,986 |
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense |
|
(6,874 |
) |
|
|
(1,245 |
) |
|
|
(9,617 |
) |
|
|
(1,710 |
) |
|
|
|
|
|
|
|
|
(Loss) earnings from
continuting operations |
|
(20,040 |
) |
|
|
8,886 |
|
|
|
(27,834 |
) |
|
|
9,696 |
|
Earnings (loss) from
discontinued operations (net of tax) |
|
34,056 |
|
|
|
(1,157 |
) |
|
|
42,211 |
|
|
|
(3,909 |
) |
Net earnings
(loss) |
$ |
14,016 |
|
|
$ |
7,729 |
|
|
$ |
14,377 |
|
|
$ |
5,787 |
|
|
|
|
|
|
|
|
|
Basic (loss) earnings
per share: |
|
|
|
|
|
|
|
Continuing operations |
$ |
(2.07 |
) |
|
$ |
0.91 |
|
|
$ |
(2.86 |
) |
|
$ |
0.98 |
|
Discontinued operations |
|
3.52 |
|
|
|
(0.12 |
) |
|
|
4.34 |
|
|
|
(0.40 |
) |
Net basic earnings
(loss) per common share |
$ |
1.45 |
|
|
$ |
0.79 |
|
|
$ |
1.48 |
|
|
$ |
0.58 |
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings
per share: |
|
|
|
|
|
|
|
Continuing operations |
$ |
(2.07 |
) |
|
$ |
0.90 |
|
|
$ |
(2.86 |
) |
|
$ |
0.98 |
|
Discontinued operations |
|
3.50 |
|
|
|
(0.12 |
) |
|
|
4.31 |
|
|
|
(0.40 |
) |
Net diluted earnings
(loss) per common share |
$ |
1.43 |
|
|
$ |
0.78 |
|
|
$ |
1.45 |
|
|
$ |
0.58 |
|
|
|
|
|
|
|
|
|
Note 1:
The effect of the LIFO inventory valuation method on third quarter
pre-tax results decreased continuing operating earnings by
$25,776,000 for the three month period ended December 29, 2018 and
decreased operating earnings by $1,268,000 for the three month
period ended December 30, 2017. The effect of the LIFO inventory
valuation method on nine months pre-tax results decreased
continuing operating earnings by $39,933,000 for the nine month
period ended December 29, 2018 and decreased operating earnings by
$19,763,000 for the nine month period ended September 30,
2017. |
Note 2:
The nine month period ended December 29, 2018 included a
restructuring charge primarily for severance of $2,279,000 related
to plants in the East and Northwest. The nine month period ended
December 30, 2017 included a restructuring charge primarily for
severance and moving costs of $157,000. |
Note 3:
During the nine months ended December 29, 2018, the Company sold
unused fixed assets which resulted in a gain of $3,920,000 as
compared to a gain of $1,590,000 during the nine months ended
December 30, 2017. The current year gain was mostly related
to the sale of a closed plant in the Midwest. $1,081,000 of
the prior year gain was related to the sale of a closed plant
in the Midwest. In addition, the Company recorded a bargain
purchase gain of $1,078,000 during the nine months ended December
30, 2017. |
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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