Financial Highlights
2021
Years ended March 31,
Net sales
Earnings from continuing operations (see note 1)
Net earnings
Stockholders' equity
Total debt/equity ratio
Current ratio
Diluted continuing earnings per share (see note 1)
Diluted earnings per share (see note 1)
Total stockholders' equity per equivalent common share (see note 2)
2020
$ 1,467,644,000 $ 1,335,769,000
51,188,000
52,335,000
394,364,000
1.3:1
3.7:1
5.46
5.58
42.77
126,100,000
126,100,000
577,815,000
0.6:1
3.3:1
13.72 $
13.72
63.05
$
Increase
9.9 %
146.3 %
140.9 %
46.5 %
151.3 %
145.9 %
47.4 %
Note 1: During 2008, the Company changed its inventory valuation method from FIFO (first-in, first out) to LIFO (last-in,
first out) which increased earnings from continuing operations by $11.7 million ($1.28 per diluted share) and $12.8
million ($1.37 per diluted share) in 2021 and 2020, respectively.
Note 2: Equivalent common shares are either common shares or, for convertible preferred shares, the number of common
shares that the preferred shares are convertible into.
Description of Business
Seneca Foods Corporation (“Seneca” or the “Company”) conducts its business almost entirely in food packaging, which
contributed about 98% of the Company's fiscal year 2021 net sales. Canned vegetables represented 81%, fruit products
represented 6%, frozen fruit and vegetables represented 7%, prepared foods represented 5% and chip products represented
1% of the total food packaging net sales. Non-food packaging sales, which primarily related to the sale of cans and ends, and
outside revenue from the Company's trucking and aircraft operations, represented 2% of the Company's fiscal year 2021 net
sales.
Approximately 10% of the Company’s packaged foods, excluding cherry products, were sold under its own brands, or
licensed trademarks, including Seneca®, Libby's®, Aunt Nellie's®, Green Valley® and READ®. The remaining 90% of
packaged foods were sold under private labels, food service, international, contracting packaging, industrial, prepared foods,
chips, and cherry products (including the CherryMan® brand) segments.
Marion, New York
July 12, 2021
1
To Our Shareholders,
The Company recorded net earnings for fiscal 2021 of $126.1 million or $13.72 per diluted share on sales of $1,467.6 million
versus net earnings of $52.3 million or $5.58 per diluted share on sales of $1,335.8 million in fiscal 2020. As outlined in more
detail below, financially, fiscal 2021 was an impressive year.
However, fiscal 2021 began with perhaps the most significant challenge of our lifetime in the form of the COVID-19
pandemic. It is hard to overstate the stress on our organization in dealing with significantly increased demand leading to out
of stock situations while at the same time operating in an environment of fear and uncertainty related to protecting our
employees, families and communities as guidance from CDC and other government institutions evolved. Add to that the
enormous undertaking that comes with the hiring of 5,000 seasonal employees to work with our 3,500 full time employees
to process hundreds of thousands of tons of raw product into the billions of cans of nutritious fruits and vegetables that we
provide. It was truly an effort like never before and more than ever our people came through and made the difference.
As is always the case in our agriculturally based company, our expectations hinge on the uncertainty of the growing season
and what Mother Nature delivers. The crop actually started out better than it had in the past several years but it still fell
somewhat short of meeting our needs as a result of weather stress reducing yields in some cases, as well as the inability to
process available tonnage in other cases, driven by reduced production capacity a result of labor shortages with COVID
infections and quarantine. The timing of the unexpected sales lift from the pandemic did not allow adjustments to the 2020
planting and production leading to the shortages.
The Company’s canned vegetable business showed improved margins as a result of increased sales volume, mostly from the
pandemic, and higher selling prices. The increased selling prices have been implemented across our businesses as inflationary
costs driven by steel and raw product affected costs. Digging down into our vegetable business, it can be stated that while
overall our retail channels are very strong and sales have returned to pre-pandemic levels, foodservice and chain accounts
remained challenged through fiscal 2021. Our frozen business has performed well and has stabilized with a core group of
customers that we serve. Our Seneca Snack business was impacted significantly when a large customer was closed for a
period of time, but that business has largely rebounded to pre-pandemic levels and the Snack business was profitable. Our
candied fruit business continues to work through integration of our Paradise asset acquisition with production now fully
transitioned. We have moved through high cost inventory as a result of the acquisition and integration at the plant is largely
complete. Sales overall were also heavily impacted by the foodservice down turn, also a result of the pandemic. We are
pleased where we are with this business and look forward to a more consistent performance as we emerge from pandemic
related impacts.
Our Truitt business had been performing well and the team there had developed a strong core base of customers with a
pipeline of opportunities making the decision to divest a difficult one. However, in the end, the nature of the business was
not core to our primary business and we were able to get a value that made sense, allowing us to remain focused on investment
in our core fruit and vegetable business. Included in the fiscal 2021 figures is a pre-tax gain of $34.8 million from the sale of
the Truitt business which was reported as “Other Operating Income” within our income statement.
The Company also incurred a pre-tax impairment charge of $9.7 million related to its CraftAg investment, reported in the
“Loss from Equity Investment” line within the income statement. The Company’s 2021 net earnings would be $106.3 million
or $11.56 per diluted share without the one-time items, Truitt gain and the CraftAg impairment.
With the fall of the equity markets associated with the pandemic last March, as well as very low interest rates, the funding
status of our pension plan was impacted negatively. The decision was made that we would use cash generated from earnings
and the Truitt deal to make a $73.0 million pension contribution. This contribution plus a gain on plan assets of $103.2 million
brought our pension to a 122.2% funding status at year end. We believe that we have taken significant steps over the past
year to stabilize our pension plan despite volatile times.
Also in an effort to leverage our cash position, and to maximize shareholder value, we undertook a formal Tender Offer in
an effort to repurchase a significant number of our outstanding shares. Our view was that given the value that our stock was
trading, the best use of capital was to repurchase shares. Despite our Tender Price being a 10.8% premium to the closing price
of the previous full trading day prior to the Tender Offer and a 14.3% premium to the trailing 50 day trading price, we were
not able to repurchase significant shares. It seemed clear that investors agreed that our stock was undervalued and decided to
hold rather than Tender their shares.
2
We continue, in support of our longstanding philosophy, to upgrade our facilities to improve our operations and during the
last year invested 220.6% of depreciation in capital expenditures in addition to 5.2% financed through capital leases. In
March, we completed the acquisition of a processing facility in central Wisconsin. This acquisition not only expands our
freezing capability, but gets us into the frozen celery business. It also adds migrant worker housing assets which have been
another source of investment over the past couple of years and are fundamental to the success of our seasonal operations.
It is also important to note that a portion of the current year earnings were due to a non-cash credit to earnings from our
inventory accounting methodology. Our Last In, First Out (LIFO) inventory accounting methodology added another $15.6
million to pre-tax profits as strong sales coming on the heels of a smaller than anticipated pack resulted in lower overall
inventory levels.
As mentioned previously, the planting and growing season was improved over the past several years but still had its challenges
with record breaking frost early in the season, excessive heat later in the summer and several severe storms throughout the
season. The net effect was that our company was only able to can and freeze about 92% of the crops we had originally
planned.
This outcome came on the heels of reduced packs the last couple of years, and with the impact of the pandemic, further
challenged inventory levels to accomplish our goal of being the 52 week supplier that our customers expect.
This past year we renewed our efforts to expand the co-packing segment of our business. We entered into a couple of
agreements during the year in which we process canned vegetables on a contractual basis. We are pleased with how things
went with these new agreements and will continue to work closely with counterparties to meet their needs. We also continue
to work closely with our preexisting co-pack partners under our agreement to produce products for them and completed the
year packing those products for them and predecessor companies. These are important relationships that remain a focus for
us.
A fundamental objective of the Company is to continue to strengthen our balance sheet. In that regard, during fiscal year
2021 we have paid down $192.2 million of debt, net of cash, and lease obligations. In addition, we just refinanced our $400
million revolver for a new 5 year term. We believe Seneca has a strong balance sheet that provides us the opportunity to
continue to grow in the future.
While last year’s results were encouraging, we are in a business that has its up and downs. As mentioned above, we believe
a key is that the Company has a strong balance sheet and the financial wherewithal to ride out whatever challenges lie ahead
but it is our people who will make the difference. We are fortunate to have a team whose experience, strength and capabilities
have been clearly demonstrated in the months since the pandemic started. As shareholders, we should all be proud of their
efforts in the face of what is an unprecedented period in our 73 year history.
Keeping our employees safe and our plants operating is a major endeavor which has been, and will continue to be, consuming
most of our time and effort over the coming months.
In closing, we would like to recognize the immeasurable contributions of Kraig Kayser who retired from the Company after
35 years of combined service on the Board of Directors and as an employee, including 27 years as President and CEO. His
calm and steady leadership was a model for those of us who worked closely with him and has left the company in a very
strong position.
Sincerely,
Chairman
President & Chief Executive Officer
3
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
OVERVIEW
Our Business
Seneca is a leading provider of packaged fruits and vegetables, with facilities located throughout the United States. Its high
quality products are primarily sourced from over 1,600 American farms. 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.
All references to years are fiscal years ended March 31 unless otherwise indicated.
During March 2021, the Company completed the acquisition of a processing facility in central Wisconsin for $7.1 million.
This acquisition will aid the Company’s frozen business by expanding freezing capability and adding frozen celery production
to the core fruit and vegetable business.
In December 2020, the Company completed the sale of its prepared foods business to an unaffiliated buyer who was not a
previous customer, resulting in a gain of $34.8 million. The nature of the prepared foods business was not central to Seneca’s
primary business and the sale allowed for the continued focus and investment in the Company’s core fruit and vegetable
business.
In November 2019, the Company executed an agreement with Del Monte Foods to purchase a plant in Wisconsin, and as part
of that agreed to process certain quantities of canned vegetables for them on a contractual basis. At the same time, Seneca
acquired equipment from two already closed facilities, which was relocated and utilized by existing Seneca facilities in order
to improve efficiencies or expand production capacities. Any equipment that was unable to be utilized was disposed of in
fiscal 2021. The idle facilities were acquired in fiscal 2021 with no plans of operation and are currently classified as assets
held for sale on the consolidated balance sheet as of March 31, 2021.
In October 2019, the Company ceased production at its fruit processing plant in Sunnyside, Washington but continued to
store, case and label products at this facility until late in fiscal 2020. In February 2020, the Company invested approximately
$10 million and contributed the Sunnyside facility to acquire a 49% stake in CraftAg, LLC, a newly formed company which
processes hemp.
The Company’s business strategies are designed to grow the Company’s market share and enhance the Company’s sales and
margins and include: 1) expand the Company’s leadership in the packaged fruit and vegetable industry; 2) provide low cost,
high quality vegetable products to consumers through the elimination of costs from the Company’s supply chain and
investment in state-of-the-art production and logistical technology; 3) focus on growth opportunities to capitalize on higher
expected returns; and 4) pursue strategic acquisitions that leverage the Company’s core competencies.
Impact of the COVID-19 Pandemic:
The effect of COVID-19 felt throughout the United States and the international community has had, and will continue to
have, an impact on financial markets, economic conditions, and portions of our business and industry.
Business Impact – We have implemented a wide range of precautionary measures at our manufacturing facilities and other
work locations in response to COVID-19. We have also been working closely with our supply chain partners to ensure that
we can continue to provide uninterrupted service. To date, there has been minimal disruption in our supply chain network,
including the supply of fruits and vegetables, packaging or other sourced materials. We also continue to work closely with
our customers and have implemented measures to allocate order volumes to ensure a consistent supply across our retail
partners during this period of high demand.
4
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
We continue to monitor the latest guidance from the CDC, FDA and other federal, state and local authorities regarding
COVID-19 to ensure our safety protocols remain current to protect our employees, customers, suppliers and other business
partners.
Financial Impact to Date – We began to see a significant increase in net sales in the second half of March 2020 as the COVID-
19 pandemic reached the United States and consumers began pantry loading and increasing their at-home consumption as a
result of increased social distancing and stay-at-home mandates. The overall increase in net sales continued throughout 2021.
Growth in the retail channel remained strong and exceeded declines in the foodservice and chain channels experienced due
to the pandemic.
We have incurred incremental costs to take the precautionary health and safety measures described above, which partially
offsets the net sales favorability in our operating results, however gross margin has increased in 2021 as compared to 2020.
Most of the incremental costs impact our costs of goods sold and the remaining portion impacts our selling, general and
administrative expenses.
As reflected above, the pandemic has overall to date had a positive impact on our operating results and our net cash provided
by operating activities. As a result, during the third quarter of fiscal 2021 we repaid all outstanding borrowings under our
revolving credit facility.
Expectations and Risk Factors in Light of the COVID-19 Pandemic - As discussed above, increased customer and consumer
demand resulting from the COVID-19 pandemic, social distancing and stay-at-home mandates has had a material positive
impact on our company’s net sales, net cash provided by operating activities and net leverage in 2021. However, the ultimate
impact of the COVID-19 pandemic on our business will depend on many factors, including, among others, the duration of
social distancing and stay-at-home mandates and whether an additional wave of COVID-19 will affect the United States and
the rest of North America, our company’s ability to continue to operate our manufacturing facilities, retain a sufficient
seasonal workforce, fill open full time positions, maintain our supply chain without material disruption, and procure
ingredients, packaging and other raw materials when needed despite unprecedented demand in the food industry, and the
extent to which macroeconomic conditions resulting from the pandemic and the pace of the subsequent recovery may impact
consumer eating habits.
Internal controls over financial reporting have not been impacted by COVID-19. Management is continuously monitoring to
ensure controls are effective and properly maintained.
Restructuring
During 2021, the Company recorded a restructuring charge of $0.2 million related to closed plants mostly for severance.
During 2020, the Company recorded a restructuring charge of $7.0 million related to the closing of plants in the Midwest and
Northwest of which $5.3 million was for accelerated amortization of right-of-use operating lease assets, $2.4 million was
mostly related to equipment moves and $1.2 million was related to severance. The Company also recorded a credit of $1.9
million for the reduced lease liability of previously impaired leases.
These charges are included under Plant Restructuring Charge in the Consolidated Statements of Net Earnings.
Divestitures, Other Charges and Credits
Other operating income in 2021 includes a gain on the sale of the prepared food business of $34.8 million. Additionally the
Company recorded a loss of $0.8 million on the disposal of equipment from a sold Northwest plant, a loss on the sale of
unused fixed assets of $0.4 million, a loss of $3.2 million on the disposition of equipment that was previously held for sale,
and a charge of $0.2 for severance. The company also recorded a charge of $1.2 million for a supplemental early retirement
plan.
Other operating income in 2020 includes a gain on the partial sale of a plant in the Midwest of $3.3 million and a gain on the
sale of a plant in the Northwest of $8.2 million. The Company also recorded a gain on the sale of unused fixed assets of $1.2
million.
5
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
During 2021, the Company recorded an other-than-temporary impairment charge of $9.7 million to its equity method
investment representing the difference between the carrying value of the Company’s investment and its proportionate share
of the investment’s fair value. This charge was included in “Loss from equity investment” in the Company’s Consolidated
Statements of Net Earnings.
Liquidity and Capital Resources
The Company’s primary cash requirements are to make payments on the Company’s debt, finance seasonal working capital
needs and to make capital expenditures. Internally generated funds and amounts available under the revolving credit facility
are the Company’s primary sources of liquidity, although the Company believes it has the ability to raise additional capital
by issuing additional stock, if it desires.
Revolving Credit Facility
On March 24, 2021, the Company entered into a Fourth Amended and Restated Loan and Security Agreement with the lenders
party thereto, Bank of America, N.A. as agent, issuing bank, and syndication agent, and BofA Securities, Inc. as lead arranger,
that provides for a senior revolving credit facility of up to $400 million that is seasonally adjusted (the “Revolver”). Maximum
borrowings under the Revolver total $300.0 million from April through July and $400.0 million from August through March.
The Revolver balance as of March 31, 2021 was $1.0 million and is included in Long-Term Debt in the accompanying
Consolidated Balance Sheet due to the Revolver’s March 24, 2026 maturity. In order to maintain availability of funds under
the facility, the Company pays a commitment fee on the unused portion of the Revolver. The Revolver is secured by
substantially all of the Company’s accounts receivable and inventories and contains borrowing base requirements as well as
a financial covenant, if certain circumstances apply. 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 the Company packages.
The majority of vegetable inventories are produced during the months of June through November and are then sold over the
following year. Payment terms for vegetable 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 Company believes that cash flows from operations and availability under its Revolver will provide adequate funds for
the Company’s working capital needs, planned capital expenditures and debt service obligations for at least the next
12 months.
Seasonality
The Company’s revenues typically are highest in the second and third fiscal quarters. This is due, in part, because the
Company sells canned and frozen vegetables to a co-pack customer on a bill and hold basis at the end of each pack cycle,
which typically occurs during these quarters. In addition, the Company’s other fruit and vegetable sales exhibit seasonal
increases in the third fiscal quarter due to increased retail demand during the holiday season.
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(In thousands)
Year ended March 31, 2021:
Net sales
Gross margin
Net earnings
Revolver outstanding (at quarter end) 34,406 62,611
$ 288,165 $ 390,294 $ 484,392 $ 304,793
48,562 48,943 77,704 56,976
20,706 18,105 72,460 14,829
1,000
-
Year ended March 31, 2020:
$ 264,925 $ 370,002 $ 392,971 $ 307,871
Net sales
Gross margin
19,174 24,055 52,277 46,382
Net earnings
4,635 24,428 21,022
Revolver outstanding (at quarter end) 136,014 133,338 114,689 106,924
1,103
6
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Short-Term Borrowings
The maximum level of short-term borrowings outstanding during 2021 was lower as compared 2020 driven in part by
increased sales resulting from the COVID-19 pandemic. The favorable impact that increased sales had on the Company’s
short-term borrowings during 2021 was partially offset by increased expenditures due to implementing a wide range of
precautionary measures at our manufacturing facilities and other work locations in response to COVID-19. The maximum
level of short-term borrowings during 2020 was affected by lower inventory due to a smaller seasonal pack partially offset
by the purchase of assets from Del Monte Foods and the investment in CraftAg.
The following table documents the quantitative data for Short-Term Borrowings during 2021 and 2020:
Fourth Quarter
2021
2020
Year Ended
2021
2020
(In Thousands)
$ 1,000 $ 106,924 $
1.38%
2.59%
1,000 $106,924
2.59%
1.38%
$ 1,000 $ 118,790 $107,967 $151,477
$ 572 $ 109,031 $ 33,453 $122,443
3.61%
3.22%
1.95%
1.69%
Reported end of period:
Revolver outstanding
Weighted average interest rate
Reported during period:
Maximum Revolver
Average Revolver outstanding
Weighted average interest rate
Long-Term Debt
On May 28, 2020 the Company entered into an Amended and Restated Loan and Guaranty Agreement with Farm Credit East,
ACA that provides for a $100.0 million unsecured term loan. The amended and restated agreement with Farm Credit East
has a maturity date of June 1, 2025 and converted the term loan to a fixed interest rate rather than a variable interest rate in
addition to requiring quarterly principal payments of $1.0 million, which commenced during fiscal 2021. The Company
incurred financing costs totaling $0.2 million which have been classified as a discount to the debt. This agreement contains
certain covenants, including maintaining a minimum EBITDA and minimum tangible net worth.
As of March 31, 2021, scheduled maturities of long-term debt in each of the five succeeding fiscal years and thereafter are
presented below. The March 31, 2021 Revolver balance of $1.0 million is presented as being due in fiscal 2026, based upon
the Revolver’s March 24, 2026 maturity date (in thousands):
2022
2023
2024
2025
2026
Thereafter
Total
$ 4,500
4,000
4,000
4,000
81,869
216
$ 98,585
7
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Restrictive Covenants
The Company’s debt agreements, including the Revolver and term loan, contain customary affirmative and negative
covenants that restrict, with specified exceptions, the Company’s ability to incur additional indebtedness, incur liens, pay
dividends on the Company’s capital stock, make other restricted payments, including investments, transfer all or substantially
all of the Company’s assets, enter into consolidations or mergers, and enter into transactions with affiliates. The Company’s
debt agreements also require the Company to meet certain financial covenants including a minimum EBITDA and minimum
tangible net worth. The Revolver contains borrowing base requirements related to accounts receivable and inventories and
also requires the Company to meet a financial covenant related to a minimum fixed charge coverage ratio if (a) an event of
default has occurred or (b) availability on the Revolver is less than the greater of (i) 10% of the commitments then in effect
and (ii) $25,000,000. The most restrictive financial covenant in the debt agreements is the minimum EBITDA within the
Farm Credit term loan which for fiscal year end 2021 was greater than $50 million. The Company computes its financial
covenants as if the Company were on the FIFO method of inventory accounting. The Company has met all such financial
covenants as of March 31, 2021.
The Company's debt agreements limit the payment of dividends and other distributions. There is an annual total distribution
limitation of $50,000, less aggregate annual dividend payments totaling $23,000 that the Company presently pays on two
outstanding classes of preferred stock.
Capital Expenditures
Capital expenditures in 2021 totaled $71.5 million and there were 4 major projects in 2021 as follows; 1) $7.1 million for a
facility in Berlin, Wisconsin, 2) $5.0 million for a facility and equipment in Albany, Oregon, 3) $4.4 million for a production
line in Janesville, Wisconsin, 4) $2.5 million for a spray field in Cambia, Wisconsin. Capital expenditures in 2020 totaled
$66.4 million and there were four major projects in 2020 as follows: 1) $10.0 million to buy the plant in Cambria, Wisconsin
from Del Monte, 2) $9.6 million for equipment purchases from Del Monte, 3) $4.7 million for the Glencoe Freezer project
and 4) $2.6 million for the completion of a warehouse in Hart, Michigan started in 2019. In addition, there were lease buyouts,
equipment replacements and other improvements in 2021 and 2020.
Accounts Receivable
In 2021, accounts receivable decreased by $17.6 million or 16.0% versus 2020, due partially to lower sales volume in March
2021 compared to March 2020 and also the sale of our prepared foods business. In 2020, accounts receivable increased by
$25.7 million or 30.6% versus 2019 due to higher sales volume in the fourth quarter of 2020 compared to 2019.
Inventories
In 2021, inventories decreased by $68.5 million or 16.6% primarily reflecting the effect of lower finished goods quantities
due to increased sales demand outpacing the 2020 seasonal pack yields. The LIFO reserve balance was $128.7 million at
March 31, 2021 versus $144.3 million at the prior year end.
The Company believes that the use of the LIFO method better matches current costs with current revenues.
8
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Critical Accounting Policies
During the years ended March 31, 2021 and 2020, 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 the Company’s products to consumers, amounts paid
to obtain favorable display positions in retail 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 the Company. 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 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.
Obligations and Commitments
As of March 31, 2021, the Company was obligated to make cash payments in connection with its debt, operating and finance
leases, and purchase commitments. The effect of these obligations and commitments on the Company’s liquidity and cash
flows in future periods are listed below. All of these arrangements require cash payments over varying periods of time. Certain
of these arrangements are cancelable on short notice and others require additional payments as part of any early termination.
In addition, the Company has a defined benefit plan which is subject to certain actuarial assumptions. The funded status
increased by $138.3 million during 2021 reflecting the actual fair value of plan assets and the projected benefit obligation as
of March 31, 2021. During fiscal years 2021 and 2020, the actuarial loss in the pension plan’s projected benefit obligation
was primarily driven by data revisions resulting in demographic losses as well as a decline in discount rates. Additionally,
the Society of Actuaries released an updated mortality table for fiscal year 2020 and an updated mortality projection scale for
both fiscal years 2020 and 2021 which partially offset the actuarial loss. Plan assets increased from $202.5 million as of
March 31, 2020 to $348.9 million as of March 31, 2021 due primarily to a gain on plan assets of $103.2 million and a $73.0
million contribution by the Company.
The Plan was amended to freeze accruals to new hires and rehires effective January 1, 2020. This amendment triggered a
curtailment event under ASC 715. The curtailment accelerated statement of earnings recognition of the unrecognized prior
service cost resulting in $0.1 million curtailment charge in 2020.
During 2021, the Company entered into new finance and operating leases of approximately $3.7 million, based on the if-
purchased value, which was primarily for agricultural and packaging equipment.
Purchase commitments represent estimated payments to growers for crops that will be grown during the calendar 2021 season.
Due to uncertainties related to uncertain tax positions, the Company is not able to reasonably estimate the cash settlements
required in future periods.
The Company has no off-balance sheet debt or other unrecorded obligations other than operating lease obligations and
purchase commitments noted above.
9
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Standby Letters of Credit
The Company has standby letters of credit for certain insurance-related requirements. The majority of the Company’s standby
letters of credit are automatically renewed annually, unless the issuer gives cancellation notice in advance. On March 31,
2021, the Company had $10.1 million in outstanding standby letters of credit. These standby letters of credit are supported
by the Company’s Revolver and reduce borrowings available under the Revolver.
Cash Flows
In 2021, the Company’s cash and cash equivalents increased by $49.1 million, which is due to the net impact of $183.2 million
provided by operating activities, $2.3 million provided by investing activities, and $136.3 million used in financing activities.
Operating Activities
Cash provided by operating activities totaled $183.2 million in 2021 as compared to $127.3 million of cash provided by
operating activities in 2020, an increase of $55.9 million. The increase was largely due to higher net income, primarily
attributable to the positive impact of increased base business unit volume on our net sales as a result of the COVID-19
pandemic. The 2021 earnings reflect a LIFO credit of $15.6 million that resulted in an increase in the tax payment deferral
of $3.9 million. The increase in net cash provided by operating activities also reflected favorable working capital comparisons
in fiscal 2021 compared to the fiscal 2020 comparisons, primarily comprised of accounts receivable, $57.6 million, and other
current assets, $8.4 million. The increases were partially offset by an unfavorable working capital comparison for inventories
of $21.6 million and a pension contribution made by the Company of $73.0 million in fiscal 2021 compared to a $26.0 million
contribution in the previous year.
The cash requirements of the business fluctuate significantly throughout the year to coincide with the seasonal growing cycles
of vegetables. The majority of the inventories are produced during the packing months, from June through November, and
are then sold over the following year. Cash flow from operating activities is one of the Company’s main sources of liquidity.
Investing Activities
Cash provided by investing activities was $2.3 million for 2021, principally reflecting proceeds from the sales of assets of
$73.7 million largely offset by $71.4 million of capital expenditures. Cash used by investing activities was $43.2 million for
2020, principally reflecting proceeds from the sale of assets of $22.5 million offset by $65.7 million of capital expenditures.
Financing Activities
Cash used in financing activities was $136.3 million in 2021 compared to $84.9 million in 2020, an increase of $51.4 million.
The cash used in financing during 2021 is primarily comprised of a net decrease in the debt (primarily the Revolver) of $119.0
million compared to $48.7 million in the prior year. In addition, the Company purchased $4.4 million of treasury stock in
2021 compared to $12.7 million in 2020. Lastly, the Company made a $10.0 million investment in CraftAg during 2020.
Results of Operations - Fiscal 2021 versus Fiscal 2020
Net Sales:
The following table presents net sales by product category:
Canned vegetables
Frozen
Fruit Products
Prepared foods
Chip Products
Other
Total
2020
2021
(In thousands)
$ 1,172,635 $ 986,080
119,044
102,339
97,393
88,289
105,044
71,866
11,475
10,999
16,733
21,516
$ 1,467,644 $ 1,335,769
10
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Net sales for 2021 totaled $1,467.6 million compared to $1,335.8 million for the prior year, an increase of $131.8 million.
The overall increase was driven by a $186.6 million increase in canned vegetables sales along with a $4.7 million increase in
other sales that was partially offset by declines in frozen sales of $16.7 million, fruit product sales of $9.1 million, and chip
product sales of $0.4 million. Additionally, prepared foods sales decreased by $33.2 million in 2021 compared to 2020 due
to the sale of the business in December 2020. The overall increase in sales is attributable to increased sales volume of
$74.2 million and higher selling prices/ favorable sales mix of $57.6 million, both predominantly due to canned vegetables.
Operating Income:
The following table presents components of operating income as a percentage of net sales:
Gross Margin
2020
2021
(In thousands)
15.8 %
10.6 %
Selling, General, and Administrative expense
Plant Restructuring
Other Operating Income
5.4 %
0.0 %
-2.0 %
5.8 %
0.5 %
-0.9 %
Operating Income
12.3 %
5.3 %
Interest Expense, net
0.4 %
0.9 %
Gross margin as a percentage of net sales increased from 10.6% in 2020 to 15.8% in 2021 due to the favorable impact of
higher selling prices and an improved selling mix outweighing the negative impact of a smaller than planned pack and
incremental expenditures incurred for precautionary and safety measures taken for COVID-19.
Selling, general and administrative expense was at 5.4% of sales in 2021 and 5.8% of sales in 2020. The decrease as a
percentage of net sales is primarily due to higher sales and the fixed nature of certain expenses.
Other operating income in 2021 includes a gain on the sale of the prepared food business of $34.8 million. Additionally the
Company recorded a loss of $0.8 million on the disposal of equipment from a sold Northwest plant, a loss on the sale of
unused fixed assets of $0.4 million, a loss of $3.2 million on the disposition of equipment that was previously held for sale,
and a charge of $0.2 for severance. The Company also recorded a charge of $1.2 million for a supplemental early retirement
plan. Other operating income in 2020 includes a gain on the partial sale of a plant in the Midwest of $3.3 million and a gain
on the sale of a plant in the Northwest of $8.2 million. The Company also recorded a gain on the sale of unused fixed assets
of $1.2 million.
Non-Operating Income:
The Company’s loss from equity investment was $11.5 million and $0.1 million for 2021 and 2020, respectively. During
2021, the Company recorded an other-than-temporary impairment charge of $9.7 million to its equity method investment
representing the difference between the carrying value of the Company’s investment and its proportionate share of the
investment’s fair value. This charge was included in “Loss from equity investment” in the Company’s Consolidated
Statements of Net Earnings.
Interest expense, net, decreased from $11.8 million in 2020 to $6.1 million in 2021 due mostly to lower average Revolver
borrowings during the year in 2021 versus 2020.
As a result of the aforementioned factors, continuing pre-tax earnings increased from $65.6 million in 2020 to pre-tax earnings
of $160.0 million in 2021. The effective tax rate was 21.2% in 2021 and 22.0% in 2020. The decrease of 0.8 percentage points
in the effective tax rate for the year is primarily the result of two items. The Coronavirus Aid, Relief, and Economic Security
Act (CARES Act), among other things, allows NOLs incurred in taxable years beginning after December 31, 2017 and before
January 01, 2021 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income
11
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
taxes. Seneca was able to carryback the NOL generated in the 2019 tax year at a 21% corporate tax rate to the 2015 tax year
at a 35% corporate tax rate. The tax rate difference realized for the NOL carryback decreased the Company’s effective tax
rate by 2.8%. See Footnote 8 for the full tax rate reconciliation.
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 became effective
for annual periods ending after December 15, 2020. The Company adopted the standard for its fiscal year ended March 31,
2021 and the adoption of ASU 2018-14 did not have an impact on the consolidated financial statements as this ASU only
modified disclosure requirements. See Note 10 “Retirement Plants” and related disclosures.
In May 2020, the SEC issued a final rule that amends the financial statement requirements for acquisitions and dispositions
of businesses. The amendments primarily relate to disclosures required by Rule 3-05 and Article 11 of Regulation S-X.
Among other things, the final rule modifies the tests provided in Rule 1-02(w) of Regulation S-X used to determine whether
a subsidiary or an acquired or disposed business is significant. The amendments took effect January 1, 2021 and the Company
did not elect to early adopt the provisions of the final rule prior to that date. This rule, as amended, did not impact the
Company’s financial statement disclosures in fiscal 2021.
In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform: Facilitation of
the Effects of Reference Rate Reform on Financial Reporting which provides optional guidance for a limited time to ease the
potential accounting burden associated with the expected market transition away from the London Interbank Offered Rate
(LIBOR) and other interbank offered rates to alternative reference rates. LIBOR is used to determine interest expense related
to the Company’s Revolver, which matures in 2026. This update was effective starting March 12, 2020 and the Company
may elect to apply the amendments prospectively through December 31, 2022. We are currently evaluating the effect that
ASU 2020-04 will have on our consolidated financial statements and related disclosures.
In December 2019, the FASB issued ASU No. 2019-12 to simplify the accounting for income taxes by removing certain
exceptions to the general principles and simplify areas such as franchise taxes, step-up in tax basis goodwill, separate entity
financial statements and interim recognition of enacted tax laws or rate changes. The new standard will be effective for the
Company in the first quarter 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.
12
Consolidated Statements of Net Earnings
Seneca Foods Corporation and Subsidiaries
(In thousands of dollars, except per share amounts)
Years ended March 31,
2021
2020
Net sales
Costs and expenses:
Cost of products sold
Selling, general, and administrative expense
Other operating income, net
Plant restructuring charge
Total costs and expenses
Operating income
Loss from equity investment
Other loss (income)
Interest expense, net of interest income of $42 and $25, respectively
Earnings From Continuing Operations Before Income Taxes
Income Taxes From Continuing Operations
Earnings From Continuing Operations
Earnings From Discontinued Operations (net of income taxes)
Net Earnings
Basic Earnings per Common Share:
Continuing Operations
Discontinued Operations
Net Basic Earnings per Common Share
Diluted Earnings per Common Share:
Continuing Operations
Discontinued Operations
Net Diluted Earnings per Common Share
See notes to consolidated financial statements.
$ 1,467,644 $ 1,335,769
1,235,459 1,193,881
76,971
(12,653 )
7,046
1,286,577 1,265,245
79,950
(29,014 )
182
181,067
11,453
3,473
6,125
160,016
33,916
126,100
-
$ 126,100 $
$
$
$
$
$
$
13.82 $
- $
13.82 $
13.72 $
- $
13.72 $
70,524
93
(7,018 )
11,834
65,615
14,427
51,188
1,147
52,335
5.50
0.12
5.62
5.46
0.12
5.58
13
Consolidated Statements of Comprehensive Income (Loss)
Seneca Foods Corporation and Subsidiaries
(In thousands of dollars)
Years ended March 31,
Comprehensive income (loss):
Net earnings
Change in pension and postretirement benefits (net of income tax of ($19,528) and $20,312,
respectively)
Total
See notes to consolidated financial statements.
2021
2020
$ 126,100 $ 52,335
60,153 (60,935 )
$ 186,253 $
(8,600 )
14
Consolidated Balance Sheets
Seneca Foods Corporation and Subsidiaries
(In thousands)
March 31,
Assets
Current Assets:
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of $339 and $1,598, respectively
Contracts receivable
Assets held for sale-discontinued operations
Inventories
Assets held for sale
Refundable income taxes
Other current assets
Total Current Assets
Deferred income tax asset, net
Noncurrent assets held for sale-discontinued operations
Other assets
Pension assets
Right-of-use assets operating, net
Right-of-use assets financing, net
Property, plant, and equipment:
Land
Buildings and improvements
Equipment
Total
Less accumulated depreciation and amortization
Net property, plant, and equipment
Total Assets
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable
Deferred revenue
Accrued vacation
Accrued payroll
Other accrued expenses
Current liabilities held for sale-discontinued operations
Current portion of long-term debt and lease obligations
Total Current Liabilities
Long-term debt, less current portion
Operating lease obligations, less current portion
Financing lease obligations, less current portion
Pension liabilities
Other liabilities
Deferred income tax liability, net
Total Liabilities
Commitments and contingencies
Stockholders’ Equity:
Preferred stock
Common stock
Additional paid-in capital
Treasury stock, at cost
Accumulated other comprehensive loss
Retained earnings
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
See notes to consolidated financial statements.
15
2021
2020
8,656
8,385
2,807
$ 59,837 $ 10,702
92,221 109,802
7,610
911
338
182
343,144 411,631
-
4,350
7,323
516,299 551,600
7,872
-
1,026
778
8,033 26,042
62,851
-
42,193 60,663
30,611 33,617
26,031 24,955
188,332 184,945
430,526 408,385
644,889 618,285
396,306 389,796
248,583 228,489
$ 909,348 $ 909,309
4,287
$ 74,089 $ 71,194
7,758
11,660 11,876
15,366 11,864
24,403 17,808
-
880
28,325 28,274
158,130 149,654
94,085 217,081
27,769 42,760
19,232 24,366
- 75,742
5,342
4,011
28,306
-
331,533 514,945
663
3,041
681
3,041
98,502 98,384
(91,198) (88,319)
(19,067) (79,220)
585,874 459,797
577,815 394,364
$ 909,348 $ 909,309
Consolidated Statements of Cash Flows
Seneca Foods Corporation and Subsidiaries
(In thousands)
Years ended March 31,
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation and amortization
Deferred income tax expense
Gain on the sale of assets
Restructuring provision
Loss from equity investment
401(k) match stock contribution
Changes in operating assets and liabilities (net of acquisitions):
Accounts and contracts receivable
Inventories
Other current assets
Accounts payable, accrued expenses, and other liabilities
Income taxes
Net cash provided by operating activities
Cash flows from investing activities:
Additions to property, plant, and equipment
Proceeds from the sale of assets
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from issuance of long-term debt
Payments of long-term debt
Payments on financing leases
Change in other assets
Purchase of treasury stock
Preferred stock dividends paid
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest
Income taxes paid
Noncash transactions:
2021
2020
$ 126,100 $ 52,335
32,375 30,933
16,650 15,529
(31,938) (13,086)
5,626
93
94
182
11,453
1,479
4,083
24,280 (33,290)
68,487 90,053
(4,332)
(65,936) (13,509)
(3,129)
183,180 127,317
(4,035)
(71,431) (65,686)
73,688 22,529
2,257 (43,157)
478,059 494,098
(597,055) (542,778)
(6,437)
(6,321)
(6,604) (17,125)
(4,358) (12,673)
(23)
(23)
(136,302) (84,938)
49,135
(778)
10,702 11,480
$ 59,837 $ 10,702
$
22,692
5,094 $ 10,836
573
Investment in CraftAg. LLC via contribution of plant
Property, plant and equipment issued under finance and operating leases
Property, plant and equipment purchased on account
$
See notes to consolidated financial statements.
16
- $
7,975
3,749 10,843
754
19
Consolidated Statements of Stockholders' Equity
Seneca Foods Corporation and Subsidiaries
(In thousands, except share amounts)
Additional
Accumulated
Other
Preferred Common
Stock
Stock
Paid-In Treasury Comprehensive Retained
Loss Earnings
Capital
Stock
Balance March 31, 2019
Net earnings
Cash dividends paid on preferred stock
Equity incentive program
Contribution of 401(k) match
Purchase of treasury stock
Preferred stock conversion
Operating lease impairment adjustment
upon the adoption of ASU 2016-02
"Leases" (net of tax $673)
Change in pension and postretirement
benefits adjustment (net of tax $20,312)
Balance March 31, 2020
Net earnings
Cash dividends paid on preferred stock
Equity incentive program
Contribution of 401(k) match
Purchase of treasury stock
Preferred stock conversion
Change in pension and postretirement
$707
-
-
-
-
-
(26)
$ 3,039
-
-
-
-
-
2
$ 98,260 $
-
-
100
-
-
24
(75,740)
-
-
-
94
(12,673)
-
$ (18,285 ) $ 409,504
- 52,335
(23)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,019)
-
681
-
-
-
-
-
(18)
-
3,041
-
-
-
-
-
-
-
98,384
-
-
100
-
-
18
-
(88,319)
-
-
-
1,479
(4,358)
-
(60,935 )
-
(79,220 ) 459,797
- 126,100
(23)
-
-
-
-
-
-
-
-
-
benefits adjustment (net of tax $19,528)
Balance March 31, 2021
-
$663
-
$ 3,041
-
$ 98,502 $
-
(91,198)
60,153
-
$ (19,067 ) $ 585,874
Preferred Stock
Common Stock
6%
10%
Cumulative Cumulative
Par Value
$.25
Callable at
Par Voting
Par Value
$.025
Convertible
Participating
Convertible
Par Value
Voting
$.025
2003 Series
Participating
Convertible
Par Value
$.025
Class A
Common
Stock
Par Value
$.25
Class B
Common
Stock
Par Value
$.25
Shares authorized and designated:
March 31, 2021
Shares outstanding:
March 31, 2020
March 31, 2021
Stock amount
200,000 1,400,000
33,855
500 20,000,000 10,000,000
200,000
200,000
$50
807,240
807,240
$202
35,355
33,855
$403
500 7,383,993 1,733,902
500 7,353,545 1,709,638
$496
$2,545
$8
See notes to consolidated financial statements.
17
Notes to Consolidated Financial Statements
Seneca Foods Corporation and Subsidiaries
1. Summary of Significant Accounting Policies
Nature of Operations — Seneca Foods Corporation (the “Parent Company”) and subsidiaries (the “Company”) currently
has 26 plants and 25 warehouses in eight states in support of its operations. The Company markets private label and branded
packaged foods to retailers and institutional food distributors.
Principles of Consolidation — The consolidated financial statements include the accounts for the Parent Company and all
of its wholly-owned subsidiaries after elimination of intercompany transactions, profits, and balances.
Revenue Recognition — Revenue recognition is completed primarily at a point in time basis when product control is
transferred to the customer. In general, control transfers to the customer when the product is shipped or delivered to the
customer based upon applicable shipping terms, as the customer can direct the use and obtain substantially all of the remaining
benefits from the asset at this point in time. See Note 4, Revenue Recognition, for further discussion of the policy.
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 sales, include amounts paid to
retailers for shelf space, to obtain favorable display positions and to offer temporary price reductions for the sale of our
products to consumers. Accruals for trade promotions are recorded primarily at the time of sale 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 the Company. 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. Final determination of the permissible deductions may take extended periods of time.
Concentration of Credit Risk — Financial instruments that potentially subject the Company to credit risk consist of trade
receivables and interest-bearing investments. Wholesale and retail food distributors comprise a significant portion of the trade
receivables; collateral is generally not required. A relatively limited number of customers account for a large percentage of
the Company’s total net sales. The top ten customers represented approximately 50%, and 49% of net sales for 2021 and
2020, respectively. The Company closely monitors the credit risk associated with its customers. The Company places
substantially all of its interest-bearing investments with financial institutions and monitors credit exposure. Cash and short-
term investments in certain accounts exceed the federal insured limit; however, the Company has not experienced any losses
in such accounts.
Cash Equivalents — The Company considers all highly liquid instruments purchased with an original maturity of three
months or less as cash equivalents. As of March 31, 2021, the Company had $47.4 million of cash and cash equivalents
invested in a money market fund that invests in high-quality, short-term obligations that present minimal credit risk including
U.S. government securities, demand notes of U.S. and foreign corporations, certificates of deposit and time deposits, and
asset backed securities. There were no such investments as of March 31, 2020.
Fair Value of Financial Instruments — The carrying values of cash and cash equivalents (Level 1), accounts receivable,
short-term debt (Level 2) and accounts payable approximate fair value because of the immediate or short-term maturity of
these financial instruments. See Note 11, Fair Value of Financial Instruments, for a discussion of the fair value of long-term
debt.
The three-tier value hierarchy is utilized to prioritize the inputs used in measuring fair value. The hierarchy gives the highest
priority to quoted prices in active markets (Level 1) and the lowest priority to unobserved inputs (Level 3). The three levels
are defined as follows:
● Level 1- Quoted prices for identical instruments in active markets.
● Level 2- Quoted prices for similar instruments; quoted prices for identical or similar instruments in markets that
are not active; and model-derived valuations in which all significant inputs or significant value-drivers are
observable.
● Level 3- Model-derived valuations in which one or more inputs or value-drivers are both significant to the fair
value measurement and unobservable.
18
Notes to Consolidated Financial Statements
Cash and cash equivalents as of March 31, 2021 include an investment in a money market fund, which is classified within
Level 1 of the fair value hierarchy because it has readily-available market prices in active markets that are publicly accessible
at the measurement date.
Deferred Financing Costs — Deferred financing costs incurred in obtaining debt are amortized on a straight-line basis over
the term of the debt, which is not materially different than using the effective interest rate method. As of March 31, 2021
there were $0.9 million of unamortized financing cost included in other current assets and $0.1 million of unamortized
financing costs included as a contra to long-term debt and current portion of long-term debt on the Consolidated Balance
Sheets.
Inventories — Substantially all inventories are stated at the lower of cost; determined under the last-in, first-out (“LIFO”)
method; or market.
Income Taxes — The provision for income taxes includes federal and state income taxes currently payable and those deferred
because of temporary differences between the financial statement and tax basis of assets and liabilities and tax credit
carryforwards. The Company uses the flow-through method to account for its investment tax credits.
The Company evaluates the likelihood of realization of its net deferred income tax assets by assessing its valuation allowance
and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization are the
Company’s forecast of future taxable income, the projected reversal of temporary differences and available tax planning
strategies that could be implemented to realize the net deferred income tax assets.
Current rules on the accounting for uncertainty on income taxes prescribe a minimum recognition threshold for a tax position
taken or expected to be taken in a tax return that is required to be met before being recognized in the financial statements.
Those rules also provide guidance on derecognition, measurement, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The Company recognizes interest and penalties accrued on unrecognized tax benefits as
well as interest received from favorable settlements within income tax expense.
Assets Held for Sale—The Company classifies property and equipment as held for sale when certain criteria are met. At
such time, the properties, including significant assets that are expected to be transferred as part of a sale transaction, are
presented separately on the consolidated balance sheet at the lower of carrying value or estimated fair value less costs to sell
and depreciation is no longer recognized. Assets classified as held for sale included buildings, land and equipment.
Discontinued Operations — Discontinued operations comprise those activities that have been disposed of during the period
or that have been classified as held for sale at the end of the period, and represent a separate major line of business or
geographical area that can be clearly distinguished for operational and financial reporting purposes. In fiscal 2019, the
Company sold its Modesto fruit operations and began reporting the results of operations, cash flows and the balance sheet
amounts pertaining to this as a component of discontinued operations in the consolidated financial statements.
Unless otherwise indicated, information in the notes to the consolidated financial statements relates to continuing
operations.
Advertising Costs — Advertising costs are expensed as incurred. Advertising costs charged to continuing operations were
$1.8 million and $2.2 million in 2021 and 2020, respectively.
Accounts Receivable and Doubtful Accounts — Accounts receivable is stated at invoice value, which is net of any off
invoice promotions. A provision for doubtful accounts is recorded based upon an assessment of credit risk within the accounts
receivable portfolio, experience of delinquencies (accounts over 15 days past due) and charge-offs (accounts removed from
accounts receivable for expectation of non-payment), and current market conditions. Management believes these provisions
are adequate based upon the relevant information presently available.
Earnings per Common Share — The Company has three series of convertible preferred stock, which are deemed to be
participating securities that are entitled to participate in any dividend on Class A common stock as if the preferred stock had
been converted into common stock immediately prior to the record date for such dividend. Basic earnings per share for
common stock is calculated using the “two-class” method by dividing the earnings attributable to common stockholders by
the weighted average of common shares outstanding during the period. Restricted stock is included in all earnings per share
calculations.
19
Notes to Consolidated Financial Statements
Diluted earnings per share is calculated by dividing earnings attributable to common stockholders by the sum of the weighted
average common shares outstanding plus the dilutive effect of convertible preferred stock using the “if-converted” method,
which treats the contingently-issuable shares of convertible preferred stock as common stock.
Years ended March 31,
Continuing Operations
Basic
Continuing operations earnings
Deduct preferred stock dividends
Undistributed earnings
Earnings attributable to participating preferred shareholders
Earnings attributable to common shareholders
Weighted average common shares outstanding
Basic earnings from continuing operations per common share
Diluted
Earnings attributable to common shareholders
Add dividends on convertible preferred stock
Earnings attributable to common stock on a diluted basis
Weighted average common shares outstanding-basic
Additional shares to be issued related to the equity compensation plan
Additional shares to be issued under full conversion of preferred stock
Total shares for diluted
Diluted earnings from continuing operations per share
Years ended March 31,
Discontinued Operations
Basic
Discontinued operations earnings
Deduct preferred stock dividends
Undistributed earnings
Earnings attributable to participating preferred shareholders
Earnings attributable to common shareholders
Weighted average common shares outstanding
Basic earnings from discontinued operations per common share
Diluted
Earnings attributable to common shareholders
Add dividends on convertible preferred stock
Earnings attributable to common stock on a diluted basis
Weighted average common shares outstanding-basic
Additional shares to be issued related to the equity compensation plan
Additional shares to be issued under full conversion of preferred stock
Total shares for diluted
Diluted earnings from discontinued operations per share
2020
(In thousands, except per share amounts)
2021
$126,100
23
126,077
493
$125,584
9,088
13.82
$
$125,584
20
$125,604
9,088
3
67
9,158
13.72
$
$51,188
23
51,165
206
$50,959
9,264
5.50
$
$50,959
20
$50,979
9,264
2
67
9,333
5.46
$
2020
(In thousands, except per share amounts)
2021
$
$
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$ 1,147
23
1,124
5
$ 1,119
9,264
$ 0.12
$ 1,119
20
$ 1,139
9,264
2
67
9,333
$ 0.12
Depreciation and Valuation — Property, plant, and equipment are stated at cost. Interest incurred during the construction
of major projects is capitalized. For financial reporting, the Company provides for depreciation on the straight-line method
at rates based upon the estimated useful lives of the various assets. Depreciation was $27.1 million and $26.1 million, in
2021, and 2020, respectively. The estimated useful lives are as follows: buildings and improvements — 30 years; machinery
and equipment — 10-15 years; computer software — 3-5 years; vehicles — 3-7 years; and land improvements — 10-
20 years.
20
Notes to Consolidated Financial Statements
The Company assesses its long-lived assets for impairment whenever there is an indicator of impairment. Impairment losses
are evaluated if the estimated undiscounted cash flows from using the assets are less than carrying value. A loss is recognized
when the carrying value of an asset exceeds its fair value.
Additionally, the Company’s assesses the potential for an other-than-temporary impairment of its equity method investment
when impairment indicators are identified. The Company considers all available information, including the recoverability of
the investment, the earnings and near-term prospects of the investment, factors related to the industry, amongst others relevant
information. If an investment is considered to be impaired and the decline in value is other than temporary, an impairment
charge is recorded. During 2021, the Company recorded an other-than-temporary impairment charge of $9.7 million to its
equity method investment representing the difference between the carrying value of the Company’s investment and its
proportionate share of the investment’s fair value. This charge was included in “Loss from equity investment” in the
Company’s Consolidated Statements of Net Earnings. There were no significant impairment losses in 2020.
Use of Estimates in the Preparation of Financial Statements — The preparation of financial statements in conformity with
accounting principles generally accepted in the United States ("GAAP") requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements, as well as the related revenues and expenses during the reporting period. Actual amounts
could differ from those estimates.
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 became effective for annual periods ending after December 15, 2020. The Company
adopted the standard for its fiscal year ended March 31, 2021 and the adoption of ASU 2018-14 did not have an impact on
the consolidated financial statements as this ASU only modified disclosure requirements. See Note 10 “Retirement Plants”
and related disclosures.
In May 2020, the SEC issued a final rule that amends the financial statement requirements for acquisitions and dispositions
of businesses. The amendments primarily relate to disclosures required by Rule 3-05 and Article 11 of Regulation S-X.
Among other things, the final rule modifies the tests provided in Rule 1-02(w) of Regulation S-X used to determine whether
a subsidiary or an acquired or disposed business is significant. The amendments took effect January 1, 2021 and the Company
elected not to early adopt the provisions of the final rule prior to that date. Therefore the final rule became effective January
1, 2021 and did not impact the Company’s financial statement disclosures in fiscal 2021.
In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform: Facilitation of
the Effects of Reference Rate Reform on Financial Reporting which provides optional guidance for a limited time to ease the
potential accounting burden associated with the expected market transition away from the London Interbank Offered Rate
(LIBOR) and other interbank offered rates to alternative reference rates. LIBOR is used to determine interest expense related
to the Company’s Revolver, which matures in 2026. This update was effective starting March 12, 2020 and the Company
may elect to apply the amendments prospectively through December 31, 2022. We are currently evaluating the effect that
ASU 2020-04 will have on our consolidated financial statements and related disclosures.
In December 2019, the FASB issued ASU No. 2019-12 to simplify the accounting for income taxes by removing certain
exceptions to the general principles and simplify areas such as franchise taxes, step-up in tax basis goodwill, separate entity
financial statements and interim recognition of enacted tax laws or rate changes. The new standard will be effective for the
Company in the first quarter 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
21
Notes to Consolidated Financial Statements
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.
Reclassifications — Certain previously reported amounts have been reclassified to conform to the current period
classification.
2. Assets Held For Sale
As of March 31, 2021, the Company has certain non-operating units in the Midwest and equipment in the Northwest that
have 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 recorded a charge of $0.6 million in fiscal
2021 in order to properly reflect the carrying value of the assets held for sale as equal to 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):
March 31, 2021
Property, Plant and Equipment (net)
Current Assets Held For Sale
$ 8,656
$ 8,656
3. 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. 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. This business we are exiting is part of the Fruit and Vegetable
segment.
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 Condensed balance sheets (in thousands):
March 31, 2021 March 31, 2020
Other Current Assets
Current Assets Held For Sale-Discontinued Operations
Other Assets
Noncurrent Assets Held For Sale-Discontinued Operations
Accounts Payable and Accrued Expenses
Current Liabilities Held For Sale-Discontinued Operations
$ 338
$ 338
$ 778
$ 778
$
$
-
-
$ 182
$ 182
$1,026
$1,026
$ 880
$ 880
22
Notes to Consolidated Financial Statements
The operating results of the discontinued operations that are reflected in the Unaudited Condensed Consolidated Statements
of Net Earnings from discontinued operations are as follows (in thousands):
Twelve Months Ended
March 31, 2021 March 31, 2020
-
-
$
$
-
-
-
-
-
-
-
-
-
57
-
(1,150)
-
(1,093)
1,093
(430)
376
$ 1,147
Net Sales
Costs and Expenses:
Cost of Product Sold
Selling, General and Administrative
Plant Restructuring Charge (a)
Interest Expense
Total cost and expenses
Earnings From Discontinued Operations Before Income Taxes
Gain on the Sale of Assets Before Income Taxes
Income Tax Expense
Net Earnings From Discontinued Operations, Net of Tax
$
(a) Includes $902,000 credit for pension termination in fiscal 2020.
4. Revenue Recognition
The Company applies the provisions of ASC 606-10, Revenue from Contracts with Customers, and recognizes revenue under
the core principle to depict the transfer of products to customers in an amount reflecting the consideration the Company
expects to receive. The Company conducts its business almost entirely in food packaging, which contributed approximately
98% of the Company's fiscal year 2021 net sales.
Nature of products
The Company manufactures and sells the following:
• private label products to retailers, such as supermarkets, mass merchandisers, and specialty retailers, for resale
under the retailers’ own or controlled labels;
• private label and branded products to the foodservice industry, including foodservice distributors and national
restaurant operators;
• branded products under our own proprietary brands, primarily on a national basis to retailers;
• branded products under co-pack agreements to other major branded companies for their distribution; and
• products to our industrial customer base for repackaging in portion control packages and for use as ingredients by
other food manufacturers.
23
Notes to Consolidated Financial Statements
Disaggregation of revenue
In the following table, segment revenue is disaggregated by product category groups (in thousands):
Canned Vegetables
Frozen
Fruit Products
Prepared Foods
Chip Products
Other
Total
Year Ended
March 31, 2021 March 31 ,2020
$ 986,080
119,044
97,393
105,044
11,475
16,733
$ 1,335,769
$ 1,172,635
102,339
88,289
71,866
10,999
21,516
$ 1,467,644
When Performance Obligations Are Satisfied
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of
account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and
recognized as revenue when, or as, the performance obligation is satisfied. The Company’s primary performance obligation
is the production of food products and secondarily case and labeling services and storage services for certain bill and hold
sales.
Revenue recognition is completed primarily at a point in time basis when product control is transferred to the customer. In
general, control transfers to the customer when the product is shipped or delivered to the customer based upon applicable
shipping terms, as the customer can direct the use and obtain substantially all of the remaining benefits from the asset at this
point in time.
Customer contracts generally do not include more than one performance obligation. When a contract does contain more than
one performance obligation, we allocate the contract’s transaction price to each performance obligation based on its relative
standalone selling price. The standalone selling price for each distinct good is generally determined by directly observable
data.
The performance obligations in our contracts are generally satisfied within one year. As such, we have not disclosed the
transaction price allocated to remaining performance obligations for labeling and storage as of March 31, 2021 which is
included in deferred revenue on the consolidated balance sheet.
Significant Payment Terms
Our customer contracts identify the product, quantity, price, payment and final delivery terms. Payment terms usually include
early pay discounts. We grant payment terms consistent with industry standards. Although some payment terms may be more
extended, no terms beyond one year are granted at contract inception. As a result, we do not adjust the promised amount of
consideration for the effects of a significant financing component because the period between our transfer of a promised good
or service to a customer and the customer’s payment for that good or service will be generally 30 days or less.
Shipping
All shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are included in
the cost of sales; this includes shipping and handling costs after control over a product has transferred to a customer.
Variable Consideration
In addition to fixed contract consideration, some contracts include some form of variable consideration. 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 sales, include amounts paid to retailers for shelf
space, to obtain favorable display positions and to offer temporary price reductions for the sale of our products to consumers.
Accruals for trade promotions are recorded primarily at the time of sale to the retailer based on expected levels of
performance. Settlement of these liabilities typically occurs in subsequent periods primarily through an authorized process
24
Notes to Consolidated Financial Statements
for deductions taken by a retailer from amounts otherwise due to the Company. 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.
Final determination of the permissible deductions may take extended periods of time.
Contract balances
The contract asset balances are $0.9 million and $7.6 million as of March 31, 2021 and 2020, respectively. The contract
liability balance is immaterial. The Company does not have significant deferred revenue or unbilled receivable balances
because of transactions with customers. The Company does have deferred revenue for prepaid case and labeling and storage
services which have been collected from bill and hold sales.
Contract Costs
We have identified certain incremental costs to obtain a contract, primarily sales commissions, requiring capitalization under
the new standard. The Company continues to expense these costs as incurred because the amortization period for the costs
would have been one year or less. The Company does not incur significant fulfillment costs requiring capitalization.
5. Revolving Credit Facility
On March 24, 2021, the Company entered into a Fourth Amended and Restated Loan and Security Agreement that provides
for a senior revolving credit facility of up to $400.0 million that is seasonally adjusted (the “Revolver”). Maximum
borrowings under the Revolver total $300.0 million from April through July and $400.0 million from August through March.
The Revolver balance as of March 31, 2021 was $1.0 million and is included in Long-Term Debt in the accompanying
Consolidated Balance Sheet due to the Revolver’s March 24, 2026 maturity. In order to maintain availability of funds under
the facility, the Company pays a commitment fee on the unused portion of the Revolver. The Revolver is secured by
substantially all of the Company’s accounts receivable and inventories and contains borrowing base requirements as well as
a financial covenant, if certain circumstances apply. 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 the Company packages.
The majority of vegetable inventories are produced during the months of June through November and are then sold over the
following year. Payment terms for vegetable 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.
6. Long-Term Debt
Revolving credit facility, 1.38% and 2.59%, due through 2026
Farm Credit term loan, 3.30% and 4.54%, due 2026
Bluegrass tax exempt bonds, 0% and 3.01%
Economic development note, 2.00%, due through 2022
Other
Total
Less current portion
Long-term debt
2020
2021
(In thousands)
$ 1,000 $ 106,924
96,869 99,941
- 10,000
500
216
98,585 217,581
500
4,500
$94,085 $ 217,081
500
216
See Note 5, Revolving Credit Facility, for discussion of the Revolver.
The Company’s debt agreements, including the Revolver and term loan, contain customary affirmative and negative
covenants that restrict, with specified exceptions, the Company’s ability to incur additional indebtedness, incur liens, pay
dividends on the Company’s capital stock, make other restricted payments, including investments, transfer all or substantially
all of the Company’s assets, enter into consolidations or mergers, and enter into transactions with affiliates. The Company’s
debt agreements also require the Company to meet certain financial covenants including a minimum EBITDA and minimum
tangible net worth. The Revolver contains borrowing base requirements related to accounts receivable and inventories and
also requires the Company to meet a financial covenant related to a minimum fixed charge coverage ratio if (a) an event of
25
Notes to Consolidated Financial Statements
default has occurred or (b) availability on the Revolver is less than the greater of (i) 10% of the commitments then in effect
and (ii) $25,000,000. The most restrictive financial covenant in the debt agreements is the minimum EBITDA within the
Farm Credit term loan which for fiscal year end 2021 will be greater than $50 million. The Company computes its financial
covenants as if the Company were on the FIFO method of inventory accounting. The Company has met all such financial
covenants as of March 31, 2021.
The Company's debt agreements limit the payment of dividends and other distributions. There is an annual total distribution
limitation of $50,000, less aggregate annual dividend payments totaling $23,000 that the Company presently pays on two
outstanding classes of preferred stock.
On May 28, 2020 the Company entered into an Amended and Restated Loan and Guaranty Agreement with Farm Credit East,
ACA that provides for a $100.0 million unsecured term loan. The amended and restated agreement with Farm Credit East
has a maturity date of June 1, 2025 and converted the term loan to a fixed interest rate rather than a variable interest rate in
addition to requiring quarterly principal payments of $1.0 million, which commenced during fiscal 2021. The Company
incurred financing costs totaling $0.2 million which have been classified as a discount to the debt. This agreement contains
certain covenants, including maintaining a minimum EBITDA and minimum tangible net worth.
The carrying value of assets pledged for secured debt, including the Revolver, is $508.2 million.
Debt repayment requirements for the next five fiscal years are (in thousands):
Years ending March 31:
2022
2023
2024
2025
2026
Thereafter
Total
7. Leases
$ 4,500
4,000
4,000
4,000
81,869
216
$ 98,585
The Company determines if an arrangement is a lease at inception of the agreement. Operating leases are included in right-
of-use operating assets, current portion of long-term debt and lease obligations, and noncurrent operating lease obligations in
the Company’s 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 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.
26
Notes to Consolidated Financial Statements
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 to align with the
closure of the facility.
Lease expense for lease payments is recognized on a straight-line basis over the lease term. The components of lease expense
were as follows (In thousands):
Year Ended
March 31, 2021 March 31, 2020
Year Ended
Lease cost:
Amortization of right of use asset
Interest on lease liabilities
Finance lease cost
Operating lease cost
Total lease cost
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases
Operating cash flows from operating leases
Financing cash flows from finance leases
Total
Right-of-use assets obtained in exchange for new finance lease liabilities
Right-of-use assets obtained in exchange for new operating lease liabilities
Weighted-average lease term (years):
Financing leases
Operating leases
Weighted-average discount rate (percentage):
Financing leases
Operating leases
$ 4,746
1,102
5,848
23,736
$ 29,584
$ 1,102
23,864
6,321
$ 31,287
$ 1,740
$ 2,009
4.5
3.5
4.1
4.4
$ 4,335
1,353
5,688
30,190
$ 35,878
$ 1,353
29,845
6,437
$ 37,635
$ 4,424
$ 6,419
5.3
3.8
4.1
4.5
27
Notes to Consolidated Financial Statements
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 March 31, 2021 were as follows
(in thousands):
Years ending March 31:
2022
2023
2024
2025
2026
2027-2032
Total minimum payment required
Less interest
Present value of minimum lease payments
Amount due within one year
Long-term lease obligation
Operating
$ 18,606
14,042
7,118
3,572
1,729
3,151
$ 48,218
3,402
44,816
17,047
$ 27,769
Financing
$ 7,665
7,665
6,096
2,713
1,625
2,786
$ 28,550
2,540
26,010
6,778
$ 19,232
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 March 31, 2020 were as follows
(in thousands):
Years ending March 31:
2021
2022
2023
2024
2025
2026-2031
Total minimum payment required
Less interest
Present value of minimum lease payments
Amount due within one year
Long-term lease obligation
Operating
$ 23,896
18,820
13,022
6,510
3,023
4,597
$ 69,868
5,559
64,309
21,549
$ 42,760
Financing
$ 7,313
7,313
7,313
5,786
2,395
3,995
$ 34,115
3,524
30,591
6,225
$ 24,366
28
Notes to Consolidated Financial Statements
8. Income Taxes
The Company files a consolidated federal and various state income tax returns. The provision for income taxes is as follows
(in thousands):
Current:
Federal
State
Total
Deferred:
Federal
State
Total
Total income taxes (1)
2021
2020
$ 13,121 $ (1,912)
1,187
(725)
4,145
17,266
3,164
$ 13,486 $ 14,251
1,278
16,650 15,529
$ 33,916 $ 14,804
(1) Income tax expense (benefit) included in the financial statements is comprised of $14.4 million from continuing
operations and $0.4 million from discontinued operations in 2020. There was no income tax effect in 2021 as a result of
discontinued operations.
A reconciliation for continuing operations of the expected U.S. statutory rate to the effective rate follows:
Computed (expected tax rate)
State income taxes (net of federal tax benefit)
Federal credits
Addition/(reduction) to uncertain tax positions
Other permanent differences not deductible
Change in valuation allowance
Tax law change
Federal NOL carryback rate difference
Other
Effective income tax rate
2021
21.0 %
3.1
(0.3 )
(0.1 )
-
0.2
-
(2.8 )
0.1
21.2 %
2020
21.0 %
2.8
(0.8 )
0.3
0.2
0.7
(2.8 )
-
0.6
22.0 %
The effective tax rate was 21.2% and 22.0% in 2021 and 2020, respectively. On March 27, 2020, The Coronavirus Aid,
Relief, and Economic Security Act (CARES Act) was enacted. The CARES Act, among other things, allows NOLs incurred
in taxable years beginning after December 31, 2017 and before January 01, 2021 to be carried back to each of the five
preceding taxable years to generate a refund of previously paid income taxes. The Company was able to carryback the NOL
generated in the 2019 tax year at a 21% corporate tax rate to the 2015 tax year at a 35% corporate tax rate. The tax rate
difference realized for the NOL carryback decreased the Company’s effective tax rate by 2.8% in 2021 as compared to the
prior year. The 2020 overall effective tax rate included a 2.8% rate benefit that was realized during 2020 as a result of tax
law changes. This rate benefit due to a tax law change did not impact 2021. The NOL carrybacks resulted in a benefit of $4.5
million and $1.7 million in 2021 and 2020, respectively.
29
Notes to Consolidated Financial Statements
The following is a summary of the significant components of the Company's deferred income tax assets and liabilities as of
March 31:
Deferred income tax assets:
Future tax credits
Inventory valuation
Restructuring reserve
Employee benefits
Insurance
Other comprehensive loss
Interest
Prepaid revenue
Other
Equity investment basis difference
Net operating loss and other tax attribute carryovers
Total assets
Deferred income tax liabilities:
Property basis and depreciation difference
Intangibles
Equity investment basis difference
Right of use assets
Pension
Total liabilities
Valuation allowance - non-current
Net deferred income tax (liability)/asset
2021
2020
(In thousands)
$ 5,884
2,204
-
2,063
685
6,511
4
463
815
1,589
85
20,303
17,975
33
-
4,371
21,556
43,935
4,674
$ (28,306)
$ 5,581
163
220
2,219
616
26,562
24
565
186
-
2,233
38,369
12,664
208
1,239
4,373
7,540
26,024
4,473
$ 7,872
Net non-current deferred income tax liabilities of $28.3 million as of March 31, 2021 and net non-current deferred income
tax assets of $7.9 million as of March 31, 2020 are recognized in the Consolidated Balance Sheets.
The Company has State tax credit carryforwards amounting to $1.5 million (California, net of Federal impact), $2.1 million
(New York, net of Federal impact), and $2.3 million (Wisconsin, net of Federal impact), which are available to reduce future
taxes payable in each respective state through 2036 (Wisconsin), through 2036 (New York), and through 2028 (California).
The Company has performed the required assessment regarding the realization of deferred tax assets and at March 31, 2021,
the Company has recorded a valuation allowance amounting to $4.7 million, which relates primarily to tax credit
carryforwards which management has concluded it is more likely than not they will not be realized in the ordinary course of
operations. Although realization is not assured, management has concluded that it is more likely than not that the deferred
tax assets for which a valuation allowance was determined to be unnecessary will be realized in the ordinary course of
operations. The amount of net deferred tax assets considered realizable, however, could be reduced if actual future income
or income taxes rates are lower than estimated or if there are differences in the timing or amount of future reversals of existing
taxable or deductible temporary differences.
30
Notes to Consolidated Financial Statements
Current rules on the accounting for uncertainty on income taxes prescribe a minimum recognition threshold for a tax position
taken or expected to be taken in a tax return that is required to be met before being recognized in the financial statements.
Those rules also provide guidance on derecognition, measurement, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The Company classifies the liability for uncertain tax positions in other accrued expenses
or other long-term liabilities depending on their expected settlement. The change in the liability for the years ended March 31,
2021 and 2020 consists of the following:
Beginning balance
2021
2020
(In thousands)
$ 2,065
$ 396
Tax positions related to current year:
Additions
279
1,123
Tax positions related to prior years:
Additions
Reductions
Lapses in statues of limitations
Balance as of March 31,
34
(1,626)
(376)
376
$
569
(16)
(7)
$2,065
As of March 31, 2021 and 2020 unrecognized tax benefits include $0.0 million and $1.6 million of tax positions that are
highly certain but for which there is uncertainty about the timing. Due to the new regulations issued in 2021 the position is
no longer uncertain and the 2021 decrease is the reversal of the tax liability related to the UTB created in prior years. Because
of the impact of deferred tax accounting, other than interest and penalties, the disallowance of these positions would not
impact the annual effective tax rate but would accelerate the payment of cash to the tax authority to an earlier period.
The Company recognizes interest and penalties accrued on unrecognized tax benefits as well as interest received from
favorable settlements within income tax expense. During the years ended March 31, 2021 and 2020, the Company recognized
approximately $0.2 million decrease and $0.2 million increase, respectively, in interest and penalties. As of March 31, 2021
and 2020, the Company had approximately $0.0 million and $0.2 million of interest and penalties accrued, respectively,
associated with unrecognized tax benefits.
Although management believes that an adequate position has been made for uncertain tax positions, there is the possibility
that the ultimate resolution could have an adverse effect on the earnings of the Company. Conversely, if resolved favorably
in the future, the related provisions would be reduced, thus having a positive impact on earnings. During 2021 the statute of
limitations lapsed on one uncertain tax position. The lapse results in the position no longer being uncertain. As a result of the
statute of limitations lapse and in accordance with its accounting policies, the Company recorded a decrease to the liability
and a decrease to tax expense of $0.4 million.
The federal income tax returns for years after March 31, 2015 are open because we claimed a refund on the 3/31/16 taxable
income. The tax year ending March 31, 2017 is currently under audit with the IRS.
9. Stockholders’ Equity
Preferred Stock — The Company has authorized three classes of preferred stock consisting of 200,000 shares of Six Percent
(6%) Voting Cumulative Preferred Stock, par value $0.25 (“6% Preferred”); 30,000 shares of Preferred Stock Without Par
Value to be issued in series by the Board of Directors, none of which are currently designated or outstanding; and 8,200,000
shares of Preferred Stock with $.025 par value, Class A, to be issued in series by the Board of Directors (“Class A Preferred”).
The Board of Directors has designated four series of Class A Preferred including 10% Cumulative Convertible Voting
Preferred Stock—Series A (“Series A Preferred”); 10% Cumulative Convertible Voting Preferred Stock—Series B
(“Series B Preferred”); Convertible Participating Preferred Stock; and Convertible Participating Preferred Stock, Series 2003.
31
Notes to Consolidated Financial Statements
The Convertible Participating Preferred Stock and Convertible Participating Preferred Stock, Series 2003 are convertible at
the holders’ option on a one-for-one basis into shares of Class A Common Stock, subject to antidilution adjustments. These
series of preferred stock have the right to receive dividends and distributions at a rate equal to the amount of any dividends
and distributions declared or made on the Class A Common Stock. No dividends were declared or paid on this preferred stock
in fiscal 2021 or 2020. In addition, these series of preferred stock have certain distribution rights upon liquidation. Upon
conversion, shares of these series of preferred stock become authorized but unissued shares of Class A Preferred and may be
reissued as part of another series of Class A Preferred. As of March 31, 2021, the Company has an aggregate of 6,765,645
shares of non-designated Class A Preferred authorized for issuance.
The Convertible Participating Preferred Stock has a liquidation preference of $12 per share and a stated value of $11.931 per
share. There were 33,855 shares outstanding as of March 31, 2021 and 1,500 conversions during the year. The Convertible
Participating Preferred Stock, Series 2003 was issued as partial consideration of the purchase price in the Chiquita Processed
Foods acquisition. The 967,742 shares issued in that 2003 acquisition were valued at $16.60 per share which represented the
then market value of the Class A Common Stock into which the preferred shares were immediately convertible. This series
has a liquidation preference of $15.50 per share and has 500 shares outstanding as of March 31, 2021.
There are 407,240 shares of Series A Preferred outstanding as of March 31, 2021which are convertible into one share of
Class A Common Stock and one share of Class B Common stock for every 20 shares of Series A Preferred. There are 400,000
shares of Series B Preferred outstanding as of March 31, 2021 which are convertible into one share of Class A Common
Stock and one share of Class B Common Stock for every 30 shares of Series B preferred. There are 200,000 shares of 6%
Preferred outstanding as of March 31, 2021 which are callable at their par value at any time at the option of the Company.
The Company paid dividends of $20,000 on the Series A and Series B Preferred and $3,000 on the 6% Preferred during each
of fiscal 2021 and 2020.
Common Stock — The Class A Common Stock and the Class B Common Stock have substantially identical rights with
respect to any dividends or distributions of cash or property declared on shares of common stock, and rank equally as to the
right to receive proceeds on liquidation or dissolution of the Company after payment of the Company’s indebtedness and
liquidation right to the holders of preferred shares. However, holders of Class B Common Stock retain a full vote per share,
whereas the holders of Class A Common Stock have voting rights of 1/20th of one vote per share on all matters as to which
shareholders of the Company are entitled to vote. During 2021, there were no shares of Class B Common Stock issued in lieu
of cash compensation under the Company's Profit Sharing Bonus Plan.
Unissued shares of common stock reserved for conversion privileges of designated non-participating preferred stock were
33,695 of both Class A and Class B as of March 31, 2021 and 2020. Additionally, there were 34,355 and 35,855 shares of
Class A reserved for conversion of the Participating Preferred Stock as of March 31, 2021 and 2020, respectively.
Treasury Stock — During 2021 the Company repurchased $4.4 million, or 89,731 shares of its Class A Common Stock and
none of its Class B Common Stock. As of March 31, 2021, there is a total of $91.2 million, or 3,103,547 shares, of repurchased
stock. These shares are not considered outstanding. The Company contributed $1.5 million or 28,276 treasury shares for the
401(k) match in 2021 as described in Note 10, Retirement Plans.
32
Notes to Consolidated Financial Statements
10. Retirement Plans
The Company has a noncontributory defined benefit pension plan (the “Plan”) covering most employees who meet certain
age-entry requirements and work a stated minimum number of hours per year. The Plan was amended to freeze accruals to
new hires and rehires effective January 1, 2020. Annual contributions made to the Plan are sufficient to satisfy legal funding
requirements.
The following tables provide a reconciliation of the changes in the Plan’s benefit obligation and fair value of plan assets over
the two-year period ended March 31, 2021 and a statement of the funded (unfunded) status as of March 31, 2021 and 2020:
Change in Benefit Obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Liability gain due to curtailment
Actuarial loss
Benefit payments and expenses
Benefit obligation at end of year
Change in Plan Assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefit payments and expenses
Fair value of plan assets at end of year
Funded (Unfunded) Status
2021
2020
(In thousands)
$278,227 $ 250,461
9,244
9,326
9,064
9,266
(1,114)
-
20,146
17,712
(28,468 )
(9,574)
$286,063 $ 278,227
$202,485 $ 233,112
(46,325)
103,166
26,000
73,000
(29,737 )
(10,302)
$348,914 $ 202,485
$ 62,851 $ (75,742)
The funded status increased by $138.6 million during 2021 reflecting the actual fair value of plan assets and the projected
benefit obligation as of March 31, 2021. This funded status increase was recognized via the actual gain on plan assets and the
decrease in accumulated other comprehensive loss of $59.8 million after the income tax expense of $19.9 million. During
fiscal years 2021 and 2020, the actuarial loss in the pension plan’s projected benefit obligation was primarily driven by data
revisions resulting in demographic losses as well as a decline in discount rates. Additionally, the Society of Actuaries released
an updated mortality table for fiscal year 2020 and an updated mortality projection scale for both fiscal years 2020 and 2021
which partially offset the actuarial loss.
Plan assets increased from $202.5 million as of March 31, 2020 to $348.9 million as of March 31, 2021 due primarily to a
gain on plan assets of $103.2 million and a $73.0 million contribution by the Company.
Amounts Recognized in Accumulated Other Comprehensive Pre-Tax Loss
2021
(In thousands)
2020
Prior service cost
Net loss
Accumulated other comprehensive pre-tax loss
33
$
(258) $
(349)
(26,265) (105,866)
$ (26,523) $ (106,215)
Notes to Consolidated Financial Statements
Accumulated Other Comprehensive Loss
Balance at March 31, 2020
Other comprehensive income
Balance at March 31, 2021
Pension and
post retirement plan
adjustments, net
of tax
(In thousands)
$(79,220)
60,153
$(19,067)
The following table provides the components of net periodic benefit cost for the Plan for fiscal years 2021 and 2020:
2021
2020
(In thousands)
Service cost including administration
Interest cost
Expected return on plan assets
Amortization of net loss
Prior service cost
Net periodic benefit cost
Settlement/curtailment expense
Net periodic benefit cost with curtailment
$ 10,627 $
9,266
(15,804 )
9,919
91
$ 14,099 $
-
$ 14,099 $
9,935
9,064
(16,746)
579
120
2,952
118
3,070
The Company utilizes a full yield curve approach in the estimation of net periodic benefit cost components by applying the
specific spot rates along the yield curve used in determination of the benefit obligation to their underlying projected cash
flows.
Prior service costs are amortized on a straight-line basis over the average remaining service period of active participants.
Gains and losses in excess of 10% of the greater of the benefit obligation and the market-related value of assets are amortized
over the average remaining service period of active participants.
34
Notes to Consolidated Financial Statements
The assumptions used to measure the Company’s benefit obligation and pension expense are shown in the following table:
Weighted Average Assumptions for Balance Sheet Liability at End of
Year:
Discount rate - projected benefit obligation
Rate of compensation increase
Mortality table
2021
2020
3.43%
3.00%
3.69%
3.00%
Pri-2012 Blue
Collar
Generational Table
Improvement Scale
MP-2020
Pri-2012 Blue
Collar
Generational Table
Improvement Scale
MP-2019
Weighted Average Assumptions for Benefit Cost at Beginning of Year:
Discount rate - benefit obligations
Discount rate - interest cost
Discount rate - service cost
Discount rate - interest on service cost
Expected return on plan assets
Rate of compensation increase
The Company's plan assets consist of the following:
3.69%
3.30%
3.87%
3.43%
7.25%
3.00%
4.14%
3.74%
4.34%
3.69%
7.25%
3.00%
Target
Percentage of Plan
Allocation Assets at March 31,
2020
2022
2021
Plan Assets
Equity securities
Debt securities
Real estate
Cash
Total
50%
50%
-
-
100%
48%
50%
-
2%
100%
97%
-
-
3%
100%
All securities, which are valued at fair market value, are considered to be level 1, due to their public active market.
Expected Return on Plan Assets
For fiscal 2021, the expected long term rate of return on Plan assets was 7.25%. The Company expected 7.25% to fall within
the 35 to 65 percentile range of returns on investment portfolios with asset diversification similar to that of the Plan's target
asset allocation for fiscal 2021. The Company will review the long term rate of return on Plan assets for fiscal 2022 in light
of changes that were made to the asset allocation in March of 2021.
Investment Policy and Strategy
Historically, the Company maintained an investment policy designed to achieve a long-term rate of return by investing in a
diversified portfolio of public company equities seeking to provide long-term growth consistent with the performance of
relevant market indices, as well as maintain an adequate level of liquidity for pension distributions as they fall due. The
Company is currently in the process of reviewing its investment policy and shifting towards more liability-driven investments
to reduce the ongoing volatility of the Plan’s funded status. As an initial step, in March 2021, the Company adjusted the
allocation of the Plan assets by moving 50% of the assets into liability-hedging investment grade fixed income investments,
35
Notes to Consolidated Financial Statements
while maintaining 50% of the assets in diversified public company equities. Additionally, in FY 2022, the Company intends
to implement a glide path approach that will adjust the asset allocation as the Plan’s funded status changes, with more assets
being allocated to fixed income investments as the funded status improves to continue to reduce the Plan’s funded status
volatility.
Cash Flows
Expected contributions for fiscal year ending March 31, 2022 (in thousands):
Expected Employer Contributions
Expected Employee Contributions
$
$
-
-
Estimated future benefit payments reflecting expected future service for the fiscal years ending March 31 (in thousands):
2022
2023
2024
2025
2026
2027-2031
401(k) Plans
$ 11,178
11,290
11,913
12,640
13,342
75,496
The Company also has employees’ savings 401(k) plans covering all employees who meet certain age-entry requirements
and work a stated minimum number of hours per year. Participants may make contributions up to the legal limit. The
Company’s matching contributions are discretionary. Costs charged to operations for the Company’s matching contributions
amounted to $1.6 million and $0.4 million in fiscal 2021 and 2020, respectively. In fiscal 2021 and 2020, the matching
contribution was entirely treasury stock. This stock portion of the matching contribution is valued at current market value
while the treasury stock is valued at cost.
Unfunded Deferred Compensation Plan
The Company sponsors an unfunded nonqualified deferred compensation plan to permit certain eligible employees to defer
receipt of a portion of their compensation to a future date. This plan was designed to compensate the plan participants for any
loss of company contributions under the 401(k) plans. The total cost for this plan was not significant in fiscal 2021 or 2020.
11. Fair Value of Financial Instruments
The carrying amount and estimated fair values of the Company's debt are summarized as follows (in thousands):
2021
2020
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
Long-term debt, including current portion
$ 98,585 $ 97,226 $ 217,581 $ 217,559
The estimated fair value for long-term debt 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 which is Level 2
from the fair value hierarchy. Since quoted prices for identical instruments in active markets are not available (Level 1), the
Company makes use of observable market based inputs to calculate fair value, which is Level 2.
36
Notes to Consolidated Financial Statements
12. Inventories
Effective December 30, 2007, the Company changed its inventory valuation method from the lower of cost, determined under
the FIFO method, or market to the lower of cost, determined under the LIFO method, or market. In the high inflation
environment that the Company was experiencing, the Company believed that the LIFO inventory method was preferable over
the FIFO method because it better compares the cost of current production to current revenue. The effect of LIFO was to
increase continuing net earnings by $11.7 million and $12.8 million in 2021 and 2020, respectively, compared to what would
have been reported using the FIFO inventory method. The increase in earnings per share was $1.29 ($1.28 diluted) and $1.38
($1.37 diluted) in 2021 and 2020, respectively. There was a LIFO liquidation of $6.6 million in 2020, which eliminated all
but the base LIFO layer as of March 31, 2020. There were no LIFO liquidations in 2021 as only the base LIFO layer remains.
The inventories by category and the impact of using the LIFO method are shown in the following table (in thousands):
Finished products
In process
Raw materials and supplies
Less excess of FIFO cost over LIFO cost
Total inventories
2021
2020
$ 317,654 $ 351,251
31,173
173,474
555,898
144,267
$ 343,144 $ 411,631
25,175
128,987
471,816
128,672
13. Other Operating Income and Expense
Other operating income in 2021 includes a gain on the sale of the prepared food business of $34.8 million. Additionally the
company recorded a loss of $0.8 million on the disposal of equipment from a sold Northwest plant, a loss on the sale of
unused fixed assets of $0.4 million, a loss of $3.2 million on the disposition of equipment that was previously held for sale,
and a charge of $0.2 for severance. The company also recorded a charge of $1.2 million for a supplemental early retirement
plan.
Other operating income in 2020 includes a gain on the partial sale of a plant in the Midwest of $3.3 million and a gain on the
sale of a plant in the Northwest of $8.2 million. The Company also recorded a gain on the sale of unused fixed assets of $1.2
million.
37
Notes to Consolidated Financial Statements
14. Segment Information
The Company manages its business on the basis of three reportable segments — the primary segment is the packaging and
sale of fruits and vegetables, secondarily, the packaging and sale of prepared food products, third, the sale of snack products
and finally, other products. The Company markets its product almost entirely in the United States. Export sales represented
6.5% of total sales in both 2021 and 2020. “Other” in the table below represents activity related to can sales, trucking, seed
sales, and flight operations.
Fruit and Prepared
Vegetable
Foods
Snack
(In thousands)
Other
Total
2021:
Net sales
Operating income
Identifiable assets
Capital expenditures
Depreciation and amortization
$ 1,363,263 $ 71,866
1,967
175,810
51,803
853,602
1,451
67,963
2,299
29,534
$ 10,999
705
2,054
508
194
$ 21,516 $1,467,644
2,585 181,067
773 908,232
71,450
32,376
1,528
349
2020:
Net sales
Operating income (loss)
Identifiable assets
Capital expenditures
Depreciation and amortization
$ 1,202,528 $ 105,044
3,774
51,803
2,122
3,564
65,921
853,438
63,543
26,486
$ 11,475
837
2,054
19
207
(8)
$ 16,722 $1,335,769
70,524
773 908,068
66,440
756
30,933
676
15. Legal Proceedings and Other Contingencies
In the ordinary course of its business, the Company is made a party to certain legal proceedings seeking monetary damages,
including proceedings involving product liability claims, workers’ compensation along with other employee claims, tort and
other general liability claims, for which it carries insurance, as well as patent infringement and related litigation. The
Company is in a highly regulated industry and is also periodically involved in government actions for regulatory violations
and other matters surrounding the manufacturing of its products, including, but not limited to, environmental, employee, and
product safety issues. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company
does not believe that an adverse decision in any of these legal proceedings would have a material adverse impact on its
financial position, results of operations, or cash flows.
16. Plant Restructuring
During 2021, the Company recorded a restructuring charge of $0.2 related to closed plants mostly for severance.
During 2020, the Company recorded a restructuring charge of $7.0 million related to the closing of plants in the Midwest and
Northwest of which $5.3 million was for accelerated amortization of right-of-use operating lease assets, $2.4 million was
mostly related to equipment moves and $1.2 million was related to severance. The Company also recorded a credit of $1.9
million for the reduced lease liability of previously impaired leases.
38
Notes to Consolidated Financial Statements
These charges are included under Plant Restructuring Charge in the Consolidated Statements of Net Earnings. Severance
Payable and Other Costs Payable are included in Other Accrued Expenses on the Consolidated Balance Sheets.
The following table summarizes the restructuring and related asset impairment charges recorded and the accruals established
during 2021 and 2020 (in thousands):
Other
Severance
Cost
Payable Payable
Balance March 31, 2019
Charge to expense
Cash payments/write offs
Balance March 31, 2020
Charge to expense
Cash payments/write offs
Balance March 31, 2021
$
225
1,229
(1,252 )
202
227
(429 )
-
$
$
1
5,817
(5,818 )
-
(45 )
45
-
$
17. Related Party Transactions
Total
$ 226
7,046
(7,070 )
202
182
(384 )
-
$
During fiscal 2021 and 2020, less than 1% of vegetables supplied to the Company are grown by a Director of Seneca Foods
Corporation. The Director supplied the Company approximately $2.2 million and $2.3 million, pursuant to a raw vegetable
grower contract in fiscal 2021 and 2020, respectively. The Chairman of the Audit Committee reviewed the relationship and
determined that the contract was negotiated at arm's length and on no more favorable terms than to other growers in the
marketplace.
During the years ended March 31, 2021 and 2020, the Company made charitable contributions to a related party foundation
in the amount of approximately $1.0 million and $0.3 million, respectively. The Foundation is a nonprofit entity that supports
charitable activities by making grants to unrelated organizations or institutions. This Foundation is managed by current
employees of the Company.
39
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of Seneca Foods Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Seneca Foods Corporation (the “Company”) as of March
31, 2021 and 2020, the related statements of consolidated net earnings, comprehensive income (loss), stockholders' equity,
and cash flows for each of the years in the two-year period ended March 31, 2021, and the related notes (collectively referred
to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of March 31, 2021 and 2020, and the results of its operations and its cash
flows for each of the years in the two-year period ended March 31, 2021, in conformity with accounting principles generally
accepted in the United States of America.
We also have audited the Company’s internal control over financial reporting as of March 31, 2021, in accordance with the
standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), based on criteria established in
Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Our report dated June 11, 2021, expresses an unqualified opinion.
Basis for Opinion
The Company's management is responsible for these consolidated financial statements. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
40
Report of Independent Registered Public Accounting Firm
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or
on the accounts or disclosures to which it relates.
Valuation of Inventory – Refer to Notes 1 and 12 in the financial statements
Critical Audit Matter Description
At March 31, 2021, the Company’s inventory was $343.1 million. As described in Notes 1 and 12 to the consolidated financial
statements, the Company accounts for substantially all its inventory at the lower of cost, determined using the last-in, first-
out (LIFO) method, or market. As permitted by U.S. generally accepted accounting principles, the Company maintains its
inventory costs and cost of goods sold on a first-in, first-out (FIFO) basis and adjusts total inventory and cost of goods sold
from FIFO to LIFO at the end of each year. The Company values its inventory under the LIFO method based on the inventory
levels and the prevailing inventory costs existing at that time.
We identified valuation of inventory as a critical audit matter because of the significant assumptions, manual calculations,
and judgements in the LIFO reserve. Auditing management’s calculation was complex and required a high degree of auditor
judgement and subjectivity when performing audit procedures and evaluating the audit evidence obtained.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s LIFO reserve included the following, among others:
● We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the
Company’s calculation of the adjustments to convert FIFO inventory balances to LIFO, including controls over
management’s review of the manual calculations described above.
● Tested the completeness, accuracy, and relevance of the underlying data used in management’s calculation to adjust
the FIFO inventory balances to LIFO.
● Tested the calculations and application of management’s methodologies related to the valuation estimates of the
LIFO reserve.
● Tested the mathematical accuracy of management’s manual calculation.
We have served as the Company’s auditor since 2019.
Southfield, Michigan
June 11, 2021
41
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance at Charged/ Charged to Deductions
beginning (credited)
of period
to income
other
accounts
from
reserve
Balance
at end
of period
Year-ended March 31, 2021:
Allowance for doubtful accounts
Income tax valuation allowance
Year-ended March 31, 2020:
Allowance for doubtful accounts
Income tax valuation allowance
(a) Accounts written off, net of recoveries.
$1,598
$4,473
$(1,304)
201
$
$
57
$3,988
$ 1,627
485
$
$
$
$
$
-
-
-
-
$ (45) (a)
-
$
$ 339
$4,674
$
$
86 (a)
-
$1,598
$4,473
42
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Seneca Foods Corporation
Marion, New York
The audit referred to in our report dated June 11, 2021 relating to the consolidated financial statements of Seneca Foods
Corporation, which is incorporated in Item 8 of Form 10-K by reference to the Annual Report to Shareholders for the years
ended March 31, 2021 and 2020 also included the audit of the consolidated financial statement schedule listed in the
accompanying index. This consolidated financial statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this consolidated financial statement schedule based on our audit.
In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We have served as the Company’s auditor since 2019.
Southfield, Michigan
June 11. 2021
43
Management’s Annual Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining adequate internal control over the Company’s financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Because of its inherent limitations, internal
control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2021.
In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on our assessment, management
believes that, as of March 31, 2021, our internal control over financial reporting is effective based on those criteria.
The Company’s independent registered public accountant has issued its report on the effectiveness of the Company’s internal
control over financial reporting. Their report appears on the next page.
44
Report of Independent Registered Public Accounting Firm on
Internal Control Over Financial Reporting
To the Stockholders and Board of Directors of Seneca Foods Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting as of March 31, 2021 of Seneca Foods Corporation (the
“Company”), based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the “COSO framework”). In our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of March 31, 2021, based on criteria established
in the COSO framework.
We also have audited the accompanying consolidated balance sheets of the Company as of March 31, 2021 and 2020, the
related consolidated statements of net earnings, comprehensive income (loss), stockholders' equity, and cash flows for each
of the years in the two-year period ended March 31, 2021, and the related notes (collectively referred to as the “financial
statements”), in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our
report dated June 11, 2021, expresses an unqualified opinion.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Item 9A,
Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
We have served as the Company’s auditor since 2019.
Southfield, Michigan
June 11, 2021
45
Corporate Information
The Company’s common stock is traded on The NASDAQ Global Stock Market. The 7.4 million Class A outstanding shares
and 1.7 million Class B outstanding shares are owned by131 and 140 shareholders of record, as of March 31, 2021 and 2020,
respectively.
As of March 31, 2021, the most restrictive credit agreement limitation on the Company’s payment of dividends, to holders
of Class A or Class B Common Stock is an annual total limitation of $50,000, reduced by aggregate annual dividend payments
totaling $23,000 that the Company presently pays on two outstanding classes of preferred stock. Payment of dividends to
common stockholders is made at the discretion of the Company’s Board of Directors and depends, among other factors, on
earnings; capital requirements; and the operating and financial condition of the Company. The Company has not declared or
paid a common dividend in many years.
Manufacturing Plants and Warehouses
Food Group
Nampa, Idaho
Payette, Idaho
Princeville, Illinois
Hart, Michigan
Traverse City, Michigan
Blue Earth, Minnesota
Glencoe, Minnesota
LeSueur, Minnesota
Montgomery, Minnesota
Rochester, Minnesota
Geneva, New York
Leicester, New York
Dayton, Oregon
Dayton, Washington
Yakima, Washington
Baraboo, Wisconsin
Berlin, Wisconsin
Cambria East, Wisconsin
Cambria West, Wisconsin
Clyman, Wisconsin
Cumberland, Wisconsin
Gillett, Wisconsin
Janesville, Wisconsin
Mayville, Wisconsin
Oakfield, Wisconsin
Ripon, Wisconsin
Non-Food Group
Marion, New York
Penn Yan, New York
Albany, Oregon
Square
Footage Acres
(000)
16
243
43
392
496
288
78
361
43
58
429
286
798
662
82
7
549 1,644
634
835
594
769
91
200
19
82
28
250
8
122
13
625
125
95
406
412
305
212
724
438
307
400
105
324
342
1,228
239
354
229 2,277
87
634
6
27
75
4
5
Total
10,123 9,982
46
Corporate Information
Directors
Kathryn J. Boor, Ph.D.
Dean, College of Agriculture and Life Sciences
Cornell University
Peter R. Call
President
My-T Acres, Inc.
John P. Gaylord
President
Jacintoport Terminal Company
Officers
Arthur S. Wolcott
Chairman
Paul L. Palmby
President and Chief Executive Officer
Timothy J. Benjamin
Senior Vice President
Chief Financial Officer and Treasurer
Timothy R. Nelson
Senior Vice President
Operations
Operations
Western Vegetable Operations
Jon A. Brekken
Vice President
Human Resources
Amiee Jo Castleberry
Vice President
Human Resources
Diane Marciano
Vice President
Procurement and Contract Manufacturing
Mark W. Forsting
Vice President
Customer Service
Richard L. Waldorf
Vice President
Sales and Marketing Groups
Branded Sales
Carl B. Bowling
Vice President
Foodservice Dry Grocery
Beau P. Simonson
Vice President
Private Label Retail
George E. Hopkins, III
Vice President
Linda K. Nelson
Former Chief Financial Officer
Birds Eye Foods, Inc.
Michael F. Nozzolio
Partner
Harris Beach PLLC
Donald Stuart
Managing Partner/Founder
Cadent Consulting Group
Dean E. Erstad
Senior Vice President -
Sales and Marketing
Matt J. Henschler
Senior Vice President
Technical Services and Development
Aaron M. Girard
Senior Vice President of Logistics
Carl A. Cichetti
Senior Vice President - Technology and
Planning and Chief Information Officer
Accounting
Mary Sagona
Vice President
Technical Services
Steven F. Lammers
Vice President
Technical Services
Benjamin M. Scherwitz
Vice President
Technology Operations
Timothy Nolan
Vice President
Seneca Snack
Beth Newell
General Manager
International
Kevin F. Lipps
Vice President
Industrial and Ingredient Sales
Victoria A. Ninneman
Vice President
Frozen Sales
Stephen J. Ott
Vice President
47
Arthur S. Wolcott
Chairman
Keith A. Woodward
Former Chief Financial Officer
Tennant Company
Cynthia L. Fohrd
Senior Vice President and
Chief Administrative Officer
John D. Exner
General Counsel and Secretary
Gregory Ide
Vice President, Controller and
Assistant Secretary
Strategic Sourcing
Leon Lindsay
Vice President
Eastern Vegetable Operations
Eric E. Martin
Vice President
Process Excellence
Paul Hendrickson
Vice President
Seneca Flight
Richard Leppert
General Manager
E-Business
Aaron L. Wadell
Vice President
Marketing
Bruce S. Wolcott
Vice President
Glace Sales
Tracy Shhulis
Vice President
Corporate Information
Forward Looking Statements
Except for the historical information contained herein, the matters discussed in this annual report are forward-looking statements as defined in the Private
Securities Litigation Reform Act (PSLRA) of 1995. The Company wishes to take advantage of the “safe harbor” provisions of the PSLRA by cautioning
that numerous important factors, which involve risks and uncertainties, including but not limited to economic, competitive, governmental, and technological
factors affecting the Company’s operations, markets, products, services and prices, and other factors discussed in the Company’s filings with the Securities
and Exchange Commission, in the future, could affect the Company’s actual results and could cause its actual consolidated results to differ materially from
those expressed in any forward-looking statement made by, or on behalf of, the Company.
Shareholder Information
For investor information, including comprehensive earnings releases: http://www.senecafoods.com/investors
Annual Meeting
The 2021 Annual Meeting of Shareholders will be held on Wednesday, August 11, 2021, beginning at 1:00 PM (CDT) at the Company’s offices at 418 East
Conde Street, Janesville, Wisconsin. A formal notice of the meeting, together with a proxy statement and proxy form, will be mailed to shareholders of
record as of July 12, 2021.
How To Reach Us
Seneca Foods Corporation
3736 South Main Street
Marion, New York 14505
(315) 926-8100
www.senecafoods.com/investors
investors@senecafoods.com
Additional Information
Annual Report and Other Investor Information
A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021, as filed with the Securities and Exchange Commission,
will be provided by the Company to any shareholder who so requests in writing to:
Gregory Ide
Seneca Foods Corporation
3736 South Main Street
Marion, New York 14505
(315) 926-8100
This annual report is also available online at http://www.senecafoods.com/investors
Foundation/Contribution Requests
Seneca Foods Foundation
Cynthia L. Fohrd
3736 South Main Street
Marion, New York 14505
(315) 926-8100
foundation@senecafoods.com
Independent Registered Public Accounting Firm
Plante Moran, P.C.
Southfield, Michigan
General Counsel
Bond, Schoeneck & King, PLLC
Buffalo, New York
Transfer Agent and Registrar
Computershare
211 Quality Circle, Suite 210
College Station, TX 77845
(800) 622-6757 (US, Canada, Puerto Rico)
(781) 575-4735 (Non-US)
www.computershare.com/investor
Corporate Governance
www.senecafoods.com/investors/corporate-governance
Code of Business Ethic
www.senecafoods.com/code-ethics
Hotline (800) 213-9185
48