2 0 2 4 A N N U A L R E P O R T
1
Financial Summary
Fiscal Year
(in thousands, except per share and ratio data)
2024
2023
Change
Net sales
$
1,458,603 $
1,509,352
-3.4 %
Operating income
107,231
21,359
402.0 %
Net earnings (see note 1)
63,318
9,231
585.9 %
Stockholders' equity
582,893
554,750
5.1 %
Diluted earnings per share (see note 1)
$
8.56 $
1.16
638.7 %
Total stockholders' equity per equivalent common share (see note 2)
$
81.69 $
71.94
13.6 %
Total debt/equity ratio
1.10
0.89
Current ratio
6.40
5.08
Note 1: The Company uses the last-in, first out (“LIFO”) accounting methodology for valuing inventory as it believes this method
allows for better matching of current production costs to current revenue. The LIFO accounting methodology decreased net
earnings by $16.8 million (a reduction of $2.28 per diluted share) and by $98.6 million (a reduction of $12.54 per diluted share)
in fiscal years 2024 and 2023, respectively. The net earnings impact is calculated by applying the statutory rate of 24.6% for
fiscal year 2024 and 25.1% for fiscal year 2023 to the pre-tax LIFO charge.
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
constituted 98% of the Company's total net sales in fiscal year 2024. Canned vegetables represented 83%, frozen vegetables
represented 8%, fruit products represented 6%, and snack products represented 1% of the total food packaging net sales. Non-
food packaging sales, which primarily related to the sale of cans, ends, seed and outside revenue from the Company's trucking
and aircraft operations, represented 2% of the Company's fiscal year 2024 net sales.
Approximately 11% of the Company’s packaged foods were sold under its own brands, or licensed trademarks, including
Seneca®, Libby's®, Green Giant®, Aunt Nellie's®, CherryMan®, Green Valley® and READ®. The remaining 89% of packaged
foods were sold under other channels including private labels, food service, restaurant chains, international, contracting
packaging, and industrial.
Fairport, New York
June 13, 2024
2
To Our Shareholders,
The Company recorded net earnings for fiscal 2024 of $63.3 million or $8.56 per diluted share on net sales of $1,458.6 million
versus net earnings of $9.2 million or $1.16 per diluted share on net sales of $1,509.4 million in fiscal 2023. As outlined in more
detail below, financially fiscal 2024 was a very good year, and in fact represented a top three result in our history as it relates to
FIFO earnings. It is important to note that included in our current year’s earnings is a $22.3 million non-cash charge to earnings
from our LIFO inventory accounting methodology. In fiscal 2023, the LIFO charge was a historic $131.6 million non-cash
charge. These LIFO charges were expected given the significant inflation in the past few years. Without the LIFO charge, the
Company’s fiscal 2024 and 2023 net earnings would be $80.1 million or $10.84 per diluted share and $107.8 million or $13.70
per diluted share, respectively.
The fiscal 2024 packing season was a further improvement in operational performance with relatively favorable growing
conditions and the operating challenges of the pandemic well behind us. While Mother Nature always delivers both good and
difficult periods throughout our long growing season, we were dealt a pretty good hand, landing at 92% of the budgeted crop.
With hedges built into our production plan to accommodate new business and weather risk, any crop over 90% is adequate to
cover our sales plan. The 2023 planting season had usual weather variability, impacting crops across the season during short
periods of time, but overall the crops were good to excellent. Across the board, our plants performed very well again this past
year as we reap the benefits of past investments and increased focus on plant efficiencies while maintaining or exceeding quality
standards. Our inventories are plentiful for almost all items to support the fifty-two week needs of our customers.
While the rate of inflation has moderated, the past year certainly saw challenges relating to historically high costs for many of
our inputs. Raw product contract prices for the 2023 crop to our more than 1,200 producer partners were essentially flat at the
near historic highs from the previous year, reflecting still strong commodity prices for competing crops. This follows pricing
increases over the 2021 and 2022 growing seasons that were cumulatively greater than 50%. In the 2024 season, our raw product
contract prices have dropped mid-single-digit percentages to as much as 23% depending upon the crop and growing region, with
our primary crops at the upper end of that range, reflecting recent weakness in competing agricultural commodity prices. Cost
for tinplated steel needed to make our cans remained at near peak levels created by steel tariffs and supply chain challenges over
the past few years. With the recent announcement of the closing of one of the two U.S. tinplated steel producing facilities and
the proposed acquisition by a Japanese-owned company of the other, there has never been more turmoil in the tinplate steel
supply situation. The only certainty is that our reliance on imported steel to meet our needs is going to increase. These dynamics,
as well as anti-dumping investigations and idling of additional tinplate infrastructure in the U.S. over the past several years, has
led us to expand our sourcing strategy and increase our planned inventory of steel needed to supply our can manufacturing
operations. As the situation settles, we fully expect to trim back steel inventory, but must always be conscious that our vertical
integration strategy in can making is a pillar of our success and cannot jeopardize our business due to lack of steel supply. While
utility costs, and particularly natural gas, moderated to more normalized levels, we continued to see relentless inflationary
increases across a broad range of packaging and ingredient supplies. Labor costs continued to increase at higher rates than a few
years ago in order to keep up with inflation and attract and retain the workforce that we must have to run our business.
Full-time staffing remains a challenge for a number of our locations, but we had another good year in recruiting and retention as
it relates to our critical seasonal workforce. As has been highlighted in the past and cannot be overemphasized, many of our
seasonal employees have been with us for decades and may represent third and even fourth generations working for the Company.
Without them, we cannot be successful. As stated, it remains a challenge to fill full-time openings at some locations in the tight
labor market that we all experience. However, recent plant closings in our area within our industry has created a windfall of
experienced new employees coming our way, a situation for which we are extremely grateful. We continuously evaluate what
we can do to remain attractive and competitive in order to recruit and retain the skilled workforce for which we heavily rely on
and appreciate.
Coming off the good pack season in 2023, and challenges in a couple of channels with sales volumes, we have reduced our 2024
pack plan in order to bring inventories back to a more optimum position. Inflation has required increased prices to consumers by
our retailer customers, along with reduced frequency of promotional activities and reduced the levels at which retailers have
promoted, which has in turn led to reduced unit sales. We did see a return over the past year by many retailers to again promote
our products at more normalized levels during the holiday periods, which had not been the case since pre-pandemic. We certainly
have encouraged them to promote our products and supported those efforts where possible; we see more discipline around
returning to focus on unit growth by our customers rather than just dollar growth. A dramatic increase in imports of canned foods,
while small in the grand scheme of things, has also negatively impacted our volumes. With inflation moderating and the customer
recognition of supply chain challenges and lower quality associated with imports, we are seeing a more favorable impact on
volumes in recent periods.
3
Our retail canned private label volumes suffered over the past year, particularly last summer and fall, as brands in the category
were more aggressive, leading to a shift toward brands in some cases. Our branded retail business benefited from increased unit
volume, although not entirely offsetting private label declines. It was our International and Co-pack channels that experienced
the most significant decreases. We view the Co-pack declines as nothing more than the timing of our customers pulling this
contractual volume and we actually will see increased commitments going forward with the recently announced closing of two
of our primary customer’s vegetable plants. When removing the impact of Co-pack, the rest of our business was up over 11% in
units in the fourth quarter vs. last year – an encouraging development. In the International channel, unfavorable exchange rates
in some of our markets as well as costs relating to steel have created challenges. However, we are determined to remain
disciplined to maintain unit volume and are taking appropriate steps to assure we do. Our canned Food Service, as well as Chain
Account channels, have shown good growth again this past year. If we remove the impact of International and Co-pack, our full-
year unit volumes are up just under 2% in a category that was down low single-digits.
One of the key developments over the past year was our acquisition of the Green Giant shelf-stable business and a perpetual,
royalty-free license to market and sell the brand. Having produced this brand for its previous owners over the past 29 years, we
are thrilled that we can now add it to our portfolio of products for our customers. The Green Giant brand is one of the most well-
recognized and highly thought of food brands by consumers. We have put in place strong promotional support, have already
announced the addition of several new items to the brand offering and have high expectations for the future of this iconic brand.
With input inflation moderating and raw material costs back to more normalized levels, our Seneca Snack business returned to
profitability. Previously implemented price adjustments helped offset the inflationary cost increases. Our branded Seneca Apple
Chip business remains extremely strong and continues to remain at historical highs in unit volume with additional opportunities
on the horizon. Past co-packing relationships have been an important factor in maintaining plant volume over the years; that
channel continues to be slow and remains a focus for improvement.
At our cherry business, Gray & Company, operations ran efficiently with our production expansion initiatives completed, and
we were pleased by improved performance. Previously, needed price adjustments were unable to keep up with cost increases,
posing significant challenges for the business. This past year saw better alignment of price and cost, resulting in better margins.
The previously completed plant expansion, new 100,000 square foot warehouse, as well as operational improvements, are helping
to boost efficiency. We are very pleased with our current position and expect to recoup the investments that have been made in
this business since it was acquired.
Our pension plan continues to be in a strong position under the guidance of our Outsourced Chief Investment Officer
arrangement. At the end of fiscal 2024, the plan funding status was at 122.2% and no contributions have been made since fiscal
2021.
Consistent with our view that our stock remains undervalued, we have continued to buy back shares after other capital needs are
met. During fiscal 2024 we repurchased 634,231 shares at an average price of $52.23 per share. This represents 8.3% of our
outstanding shares and impacted diluted earnings per share by $0.68 per share increasing to $8.56 per share. Beyond the Green
Giant shelf-stable transaction, limited acquisition opportunities of interest presented themselves over the past year. High working
capital requirements related to our inventory position limited opportunities to deploy capital elsewhere; therefore stock
repurchases were more modest than in the past couple of years. We are focused on returning inventories to more normalized
levels and are well-positioned to take advantage of whatever opportunities present themselves; our buyback program will
continue once other needs are met. We will continue to support the Company’s capex needs, but with significant investments
over the past three years totaling $215.5 million, including $61.0 million in fiscal year 2024, we will be taking a breather to allow
our facilities to implement current commitments. The notable exception is a significant investment in our can making operation
to upgrade older equipment and create capacity headspace. We remain committed to our vertical integration strategy in this area.
Our current capex budget will represent investment above depreciation but below recent prior levels.
As illustrated by the foregoing, a fundamental objective of the Company is to continue to focus on a strong balance sheet. In that
regard, at year-end the Company’s total debt-to-equity ratio was 1.10 and the current ratio was 6.40. During the year, we upsized
our term loan A-2 by $125.0 million in order to support higher pack needs, as well as steel inventory assuring that we maintain
a very solid balance sheet and liquidity position. In addition, as noted in the fiscal 2024 financial statements, the Company has
significant liquidity available under its Revolving Credit Facility. That said, to provide additional financial flexibility, we did
execute an Amendment to our Revolver to increase our offseason borrowing limit from $300.0 to $350.0 million. We continue
to take a very conservative approach as it relates to balance sheet management and believe that we have adequate capacity to
take advantage of any opportunities that might come along.
4
With the completion of what has been another very good year from an operating earnings perspective, we are reminded that we
are in a commodity business that is subject to inherent ups and downs. We fully expect cyclicality and do not get complacent
with past success. It has been our discipline to maintain our unit volume despite what is a shrinking market in some parts of our
business, and that discipline has contributed to our market leadership position. To reiterate, we continue to believe that a strong
balance sheet is key to having the financial wherewithal to ride out whatever challenges lie ahead.
As I conclude my comments and recognizing that we are now in our 75th year in business, I want to say a few words about and
take a moment to recognize why we are all here. That being the philosophy and entrepreneurial spirit of our Founder, Art Wolcott,
who we lost two and a half years ago at age 95. Art was a World War II veteran and a Cornell graduate who started the company
in 1949 when he leased an old bankrupt plant to begin the Dundee Grape Juice Company. Over 70 acquisitions later and with the
help of thousands of employees, we have become a leader in the fruit and vegetable processing industry. Through our
Fundamental Beliefs which guide us today and were developed almost 30 years ago based upon Art’s enduring philosophy, he
remains with us. He was a tireless advocate for our operations and always grateful for the enormous contributions of our dedicated
and loyal employees. Having had the opportunity myself to work with Art for over 20 years, I often think of the incredible
journey that he shepherded through the decades. I am grateful to have had the opportunity to have known him!
To our shareholders, as always, I would like to extend our sincere appreciation for your ongoing support and confidence in our
company. As an organization that provides safe and nutritious products to consumers, we take seriously our role in the food
supply and hope that you are as proud as we are to be part of such a worthwhile effort. What we do makes a real difference in
people’s lives.
Sincerely,
President & Chief Executive Officer
5
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
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 more than 1,200 American farms. The Company’s product offerings include canned,
frozen and jarred 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®, Green Giant®, Aunt Nellie’s®, CherryMan®, Green Valley® and
READ®. The Company’s 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, restaurant chains, industrial markets, other food processors, export customers in approximately 55 countries and
federal, state and local governments for school and other food programs. Additionally, the Company packs canned and frozen
vegetables under contract packing agreements.
The Company’s business strategies are designed to grow its market share and enhance sales and margins. These strategies include:
1) expand the Company’s leadership in the packaged fruit and vegetable industry; 2) provide low cost, high quality fruit and
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.
All references to years are fiscal years ended March 31 unless otherwise indicated.
Fluctuations in Commodity, Production, Distribution and Labor Costs
We purchase raw materials, including raw produce, steel, ingredients and packaging materials from growers, commodity
processors, steel producers and packaging suppliers. Raw materials and other input costs, such as labor, fuel, utilities and
transportation, are subject to fluctuations in price attributable to a number of factors. Fluctuations in commodity prices can lead
to retail price volatility and can influence consumer and trade buying patterns. The cost of raw materials, fuel, labor, distribution
and other costs related to our operations can increase from time to time significantly and unexpectedly.
We continue to experience material cost inflation for many of our raw materials and other input costs attributable to a number of
factors, including but not limited to, supply chain disruptions (including raw material shortages), labor shortages, the conflict
between Russia and Ukraine, and the conflict in Israel and Gaza. While we have no direct exposure to these conflicts, we have
continued to experience increased costs for transportation, energy, and raw materials due in part to the negative impact on the
global economy. We attempt to manage cost inflation risks by locking in prices through short-term supply contracts, advance
grower purchase agreements, and by implementing cost saving measures. We also attempt to offset rising input costs by raising
sales prices to our customers. However, increases in the prices we charge our customers may lag behind rising input costs.
Competitive pressures also may limit our ability to quickly raise prices in response to rising costs. To the extent we are unable
to avoid or offset any present or future cost increases, our operating results could be materially adversely affected.
Results of Operations - Fiscal Year 2024 versus Fiscal Year 2023
The following discussion is a comparison between fiscal year 2024 and fiscal year 2023 results. For a discussion of the
Company’s results of operations for the year ended March 31, 2023 compared to the year ended March 31, 2022, please refer to
the information under the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in
the Company’s Annual Report on Form 10-K/A (Amendment No. 1) for the fiscal year ended March 31, 2023, which was filed
with the Securities and Exchange Commission (“SEC”) on July 31, 2023.
Net Sales:
The following table presents net sales by product category (in thousands):
Fiscal Year:
2024
2023
Canned vegetables
$
1,204,823 $
1,253,257
Frozen vegetables
120,795
121,211
Fruit products
87,435
91,495
Snack products
13,400
12,661
Other
32,150
30,728
$
1,458,603 $
1,509,352
6
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Net sales for fiscal year 2024 totaled $1,458.6 million as compared to $1,509.4 million for fiscal year 2023. The overall net sales
decrease of $50.8 million, or 3.4%, was due to lower sales volumes having an unfavorable impact of $102.7 million to net sales,
partially offset by higher selling prices and favorable mix, contributing favorability of $51.9 million, as compared to the prior
fiscal year.
Net sales of canned vegetables, frozen vegetables, and fruit products decreased over the prior fiscal year as volume in each of
these product categories was down. Higher pricing necessitated by the material cost increases that the Company is experiencing
partially offset a portion of the unfavorable impact on net sales generated by the volume decline.
Net sales of snack products increased as compared to the prior fiscal year as increased pricing offset volume declines.
Operating Income:
The following table sets forth the percentages of net sales represented by selected items for fiscal year 2024 and fiscal year 2023
reflected in our Consolidated Statements of Net Earnings (percentages shown as absolute values):
Fiscal Year:
2024
2023
Gross margin
12.9%
6.9%
Selling, general, and administrative expense
5.6%
5.4%
Other operating income, net
0.0%
0.1%
Restructuring
0.0%
0.2%
Operating income
7.4%
1.4%
Other non-operating income
0.7%
0.4%
Interest expense, net
2.3%
0.9%
Income taxes
1.3%
0.3%
Gross Margin – Gross margin is equal to net sales less cost of products sold. As a percentage of net sales, gross margin was
12.9% for fiscal year 2024 as compared to 6.9% for fiscal year 2023. This increase in gross margin was due primarily to a LIFO
charge of $22.3 million in fiscal year 2024 versus a LIFO charge of $131.6 million in fiscal year 2023, which equated to a year-
over-year positive impact to gross margin of $109.3 million. The rate of inflation moderated during fiscal year 2024, however
the Company continued to experience historically high costs at or near fiscal year 2023 levels for various inputs including steel,
raw produce, packaging, ingredients, and labor. The continued high input costs, along with larger overall inventory levels in
fiscal year 2024 as compared to fiscal year 2023, contributed to the current year LIFO charge.
Selling, General and Administrative Expense – Selling, general and administrative expense for fiscal year 2024 increased $0.1
million from fiscal year 2023. Selling, general and administrative expense was 5.6% of net sales in fiscal year 2024 and 5.4% of
net sales in fiscal year 2023. The increase as a percentage of net sales is primarily due to lower sales, coupled with the fixed
nature of certain expenses.
Other Operating Income, net – The Company had net other operating income of $0.6 million in fiscal year 2024, which was
driven primarily by gains on the sale of non-operational assets in the Pacific Northwest, partially offset by transition service fees
incurred in connection with an asset acquisition. Refer to Note 17 of the Notes to Consolidated Financial Statements for further
details of that transaction.
The Company had net other operating income of $1.7 million in fiscal year 2023, which was driven primarily by gains on the
sale of the Company’s western trucking fleet and an aircraft. This other operating income was partially offset by a write down of
idle equipment to estimated selling price, less commission, as the assets met the criteria to be classified as held for sale.
Restructuring – The Company did not incur significant restructuring charges during fiscal year 2024. During fiscal year 2023,
the Company incurred restructuring charges of $3.6 million primarily due to ceasing production of green beans at a plant in the
Northeast. The charges mainly consisted of severance and write-downs of production equipment that was to be scrapped or sold.
Non-Operating Income (Expense):
Interest Expense, Net – Interest expense as a percentage of net sales was 2.3% for fiscal year 2024 as compared to 0.9% for
fiscal year 2023. Interest expense increased from $14.3 million in the prior fiscal year to $34.0 million for fiscal year 2024 as a
result of higher interest rates and increased long-term debt levels.
7
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Other Non-Operating Income – Other non-operating income totaled $9.8 million and $6.8 million in fiscal years 2024 and 2023,
respectively, and is comprised mainly of the non-service related pension amounts that are actuarially determined. The non-service
related pension amounts can either be income or expense depending on the results of the actuarial calculations. For details of the
calculation of the pension amounts, refer to Note 10 of the Notes to Consolidated Financial Statements. For fiscal year 2024,
other non-operating income also included the patronage distribution associated with the Company’s term loans. The patronage
distribution varies each year and there is no guarantee that an amount will be received by the Company; for further details refer
to Note 7 of the Notes to Consolidated Financial Statements.
Income Taxes – As a result of the aforementioned factors, pre-tax earnings increased from $13.8 million in fiscal year 2023 to
$83.0 million in fiscal year 2024. Income tax expense totaled $19.7 million and $4.6 million in fiscal years 2024 and 2023,
respectively. The Company’s effective tax rate was 23.7% and 33.1% in fiscal years 2024 and 2023, respectively. In fiscal year
2023, the Company added a valuation allowance against state tax credits as a result of a change in ordering of credit usage for
Wisconsin because it was determined that it was more likely than not that the tax credits would not be used prior to expiration.
This change in valuation allowance increased the fiscal year 2023 effective tax rate by 7.8%. There was not a similar change in
valuation allowance in fiscal year 2024, which provided the effect of reducing the effective tax rate year-over-year. The effective
tax rate was further decreased by 3.0% due to state rate changes which were mostly caused by changes in the Company’s business
activities that impact state apportionment. Offsetting those decreases was a 3.3% increase for various federal credits when
comparing fiscal year 2024 to fiscal year 2023. For additional details of the calculation of the effective tax rate, refer to Note 9
of the Notes to Consolidated Financial Statements.
Earnings per Share:
Fiscal Year:
2024
2023
Basic earnings per common share
$
8.64 $
1.19
Diluted earnings per common share
$
8.56 $
1.16
For details of the calculation of these amounts, refer to Note 3 of the Notes to Consolidated Financial Statements.
Liquidity and Capital Resources:
Material Cash Requirements – The Company’s primary liquidity requirements include debt service, capital expenditures and
working capital needs. The Company may also seek strategic acquisitions to leverage existing capabilities and further build upon
its existing business. Liquidity requirements are funded primarily through cash generated from operations and external sources
of financing, including the revolving credit facility.
During fiscal years 2024 and 2023, working capital needs trended higher than previously experienced by the Company in part
because of larger annual pack sizes needed to replenish the Company’s post-COVID inventory levels to meet customer demand,
and because of supply chain challenges in the steel industry which impacted can manufacturing operations. In order to
successfully navigate the uncertainty driven by inflation and import tariffs, and a desire to diversify its steel supply, the Company
employed a strategic approach during the recent fiscal years and increased its steel coil purchases to better position itself for
subsequent years. The Company’s larger seasonal pack sizes driven by favorable growing conditions, coupled with lower sales
in an industry that is experiencing negative sales category trends overall, have resulted in higher inventory levels for finished
goods, which will favorably impact the availability of products in the subsequent fiscal year and result in a lower planned seasonal
pack in fiscal year 2025.
The Company believes that its operations along with existing liquidity sources will satisfy its cash requirements for at least the
next twelve months. The Company has borrowed funds and continues to believe that it has the ability to do so at reasonable
interest rates, however additional borrowings would result in increased interest expense. The Company does not have any off-
balance sheet financing arrangements.
8
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Summary of Cash Flows – The following table presents a summary of the Company’s cash flows from operating, investing, and
financing activities (in thousands):
Fiscal Year:
2024
2023
Cash used in operating activities
$
(82,963) $
(212,796 )
Cash used in investing activities
(47,202)
(64,877 )
Cash provided by financing activities
129,762
279,025
(Decrease) increase in cash, cash equivalents and restricted cash
(403)
1,352
Cash, cash equivalents and restricted cash, beginning of year
12,256
10,904
Cash, cash equivalents and restricted cash, end of year
$
11,853 $
12,256
Net Cash Used in Operating Activities – For fiscal year 2024, cash used in operating activities was $83.0 million, which consisted
of a use of cash of $215.1 million by operating assets and liabilities partially offset by net earnings of $63.3 million, adjusted by
non-cash charges of $68.8 million. The non-cash charges were largely driven by $43.5 million of depreciation and amortization,
$7.3 million of non-cash lease expense, and a $22.3 million LIFO charge. The change in operating assets and liabilities was
largely due to inventories being a use of cash driven by higher finished goods inventory levels and by the material cost inflation
to various production inputs, as further discussed above within the material cash requirements section. The increase in inventories
was also impacted by finished goods acquired in the asset acquisition, refer to Note 17 of the Notes to Consolidated Financial
Statements for further details of that transaction.
For fiscal year 2023, cash used in operating activities was $212.8 million, which consisted of a use of cash of $407.2 million by
operating assets and liabilities partially offset by net earnings of $9.2 million, adjusted by non-cash charges of $185.2 million.
The non-cash charges were largely driven by $40.9 million of depreciation and amortization, $11.6 million of non-cash lease
expense, and a $131.6 million LIFO charge. The change in operating assets and liabilities was largely due to inventories being a
use of cash driven by the increased size of the fiscal year 2023 harvest in addition to material cost inflation to various production
inputs.
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,
excluding usual seasonal working capital swings.
Net Cash Used in Investing Activities – Net cash used in investing activities was $47.2 million for fiscal year 2024 and consisted
of cash used for capital expenditures of $36.6 million and $18.7 million paid as deposits to vendors for a new can manufacturing
line. Offsetting those amounts, the Company received proceeds from the sale of assets totaling $8.1 million.
Net cash used in investing activities was $64.9 million for fiscal year 2023 and consisted of cash used for capital expenditures of
$70.6 million partially offset by proceeds from the sale of assets totaling $5.7 million.
Net Cash Provided by Financing Activities – Net cash provided by financing activities was $129.8 million for fiscal year 2024,
driven primarily by a net $114.2 million increase on the Company’s term loan and note payable, as well as an increase in net
borrowings on the Company’s revolving credit facility of $56.6 million during fiscal year 2024. Cash used to purchase treasury
stock of $33.0 million and to make payments on financing leases of $8.0 million partially offset the cash provided by financing
activities.
Net cash provided by financing activities was $279.0 million for fiscal year 2023, driven primarily by receiving proceeds from a
new term loan of $175.0 million and an increase in net borrowings on the Company’s revolving credit facility of $160.1 million
during fiscal year 2023. Cash used to purchase treasury stock of $41.2 million and to make payments on financing leases of $8.8
million partially offset the cash provided by financing activities.
Debt – 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.
9
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
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”).
On September 14, 2022, the Company entered into a First Amendment to the Fourth Amended and Restated Loan and Security
Agreement (the “Revolver Amendment”) which amended several provisions to replace the London Interbank Offered Rate
(“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”) plus a spread adjustment as the interest rate benchmark on the
Revolver. The transition to SOFR did not materially impact the interest rates applied to the Company’s borrowings. No other
material changes were made to the terms of the Company’s Revolver as a result of the Revolver Amendment.
On May 5, 2023, the Company entered into a Second Amendment to the Fourth Amended and Restated Loan and Security
Agreement (the “2023 Revolver Amendment”) which updated certain provisions relating to permitted indebtedness. No other
material changes were made as a result of the 2023 Revolver Amendment.
On March 8, 2024, the Company entered into a Third Amendment to the Fourth Amended and Restated Loan and Security
Agreement (the “2024 Revolver Amendment”) which increased the seasonal borrowing amount for the period from April through
July by $50.0 million. No other material changes were made as a result of the 2024 Revolver Amendment.
Maximum borrowing availability under the Revolver totals $350.0 million from April through July and $400.0 million from
August through March. In order to maintain availability of funds under the facility, the Company pays a commitment fee on the
unused portion of the Revolver, which as of March 31, 2024 was $156.3 million. As of March 31, 2024 and 2023, the Revolver
balance was $237.2 million and $180.6 million, respectively, and is included in Long-Term Debt in the accompanying
Consolidated Balance Sheets due to the Revolver’s March 24, 2026 maturity.
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 fruits and 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 may vary and range from
approximately one to seven months. Accordingly, the Company’s need to draw on the Revolver may fluctuate significantly
throughout the year.
The following table documents the quantitative data for short-term borrowings on the Revolver during fiscal years 2024 and
2023 (in thousands, except for percentages):
As of:
March 31,
March 31,
2024
2023
Outstanding borrowings
$
237,225 $
180,598
Interest rate
6.93%
6.34%
Fiscal Year:
2024
2023
Maximum amount of borrowings drawn during the period
$
290,968 $
350,828
Average outstanding borrowings
$
162,780 $
159,670
Weighted average interest rate
6.78%
5.03%
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 “Term Loan”). The amended and restated
agreement has a maturity date of June 1, 2025 and converted the Term Loan to a fixed interest rate of 3.3012% until maturity
rather than a variable interest rate in addition to requiring quarterly principal payments of $1.0 million, which commenced during
fiscal year 2021. This agreement contains certain covenants, including maintaining a minimum EBITDA and minimum tangible
net worth.
10
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
On January 20, 2023, the Company entered into a Second Amended and Restated Loan and Guaranty Agreement with Farm
Credit East, ACA (the “Agreement”) which governs two term loans, summarized below:
Term Loan A-1: The Agreement continues certain aspects of the $100.0 million term loan described above, namely Term Loan
A-1 will continue to bear interest at a fixed interest rate of 3.3012%, mature on June 1, 2025, and remain unsecured. The
Company’s historical practice is to hold term debt until maturity. We expect to maintain or have access to sufficient liquidity to
retire or refinance long-term debt at maturity or otherwise, from operating cash flows, access to the capital markets, and our
Revolver. We continuously evaluate opportunities to refinance our debt; however, any refinancing is subject to market conditions
and other factors, including financing options that may be available to us from time to time, and there can be no assurance that
we will be able to successfully refinance any debt on commercially acceptable terms at all.
Term Loan A-2: The Agreement adds an additional term loan in the amount of $175.0 million that will mature on January 20,
2028, and is secured by a portion of the Company’s property, plant and equipment. Term Loan A-2 bears interest at a variable
interest rate based upon SOFR plus an additional margin determined by the Company’s leverage ratio. Quarterly payments of
principal outstanding on Term Loan A-2 in the amount of $1.5 million commenced on March 1, 2023.
On May 23, 2023, the Agreement was amended by the Second Amended and Restated Loan and Guaranty Agreement
Amendment which amends, restates and replaces in its entirety Term Loan A-2 (the “Amendment”). The Amendment provides
a single advance term facility in the principal amount of $125.0 million to be combined with the outstanding principal balance
of $173.5 million on Term Loan A-2 into one single $298.5 million term loan (“Amended Term Loan A-2”). Amended Loan
Term A-2 is secured by a portion of the Company’s property, plant and equipment and bears interest at a variable interest rate
based upon SOFR plus an additional margin determined by the Company’s leverage ratio. Quarterly payments of principal
outstanding on Amended Term Loan A-2 in the amount of $3.75 million commenced on June 1, 2023. The Amendment continues
all aspects of Term Loan A-1 as defined in the Agreement. As of March 31, 2024, the interest rate on Amended Term Loan A-2
was 7.34%.
The Amendment for Term Loan A-1 and Term Loan A-2 (collectively, the “Term Loans”) contains restrictive covenants usual
and customary for loans of its type, in addition to financial covenants including minimum EBITDA and minimum tangible net
worth which apply to both Terms Loans described above. In connection with the Amended Term Loan A-2, the Company
incurred $1.1 million of financing costs which will be deferred and amortized over the life of the term loan.
As of March 31, 2024, scheduled maturities of long-term debt in each of the five succeeding fiscal years and thereafter are
presented below. The Revolver balance is presented as being due in fiscal year 2026, based upon its March 24, 2026 maturity
date (in thousands):
2025
$
19,000
2026
333,225
2027
15,000
2028
238,500
2029
-
Thereafter
-
Total
$
605,725
Note Payable — During fiscal year 2024, the Company entered into an unsecured note payable with an individual lender which
provides for an interim short-term financing arrangement with an expiration date of June 30, 2024. The balance of the note
payable as of March 31, 2024 was $8.9 million and is associated with certain deposits paid to vendors for a new can manufacturing
line located at one of the Company’s plant facilities. The note payable bears interest at a variable interest rate based upon SOFR
plus 1.80%. Interest is payable monthly and the interest rate as of March 31, 2024 was 7.13%.
The Company believes that its cash flows from operations, availability under its Revolver, and cash and cash equivalents on hand
will provide adequate funds for the Company’s working capital needs, planned capital expenditures, operating and administrative
expenses, and debt service obligations for at least the next twelve months and the foreseeable future.
11
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Restrictive Covenants – The Company’s debt agreements, including the Revolver and Term Loans, 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) $25.0 million. The most restrictive financial covenant in the debt agreements is the minimum EBITDA within
the Term Loans which for fiscal year 2024 was greater than $75.0 million in EBITDA. The Company computes its financial
covenants as if the Company were on the first-in, first out (“FIFO”) method of inventory accounting. The Company has met all
such financial covenants as of March 31, 2024.
The Company's debt agreements limit the payment of dividends and other distributions, subject to availability under the Revolver.
There is an annual total distribution limitation of $50,000, less aggregate annual dividend payments totaling $23,181 that the
Company presently pays on two outstanding classes of preferred stock. See Note 11 of the Notes to Consolidated Financial
Statements for additional information on the Company’s preferred stock.
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, 2024, the Company had $6.5 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.
Obligations and Commitments:
The Company is party to many contractual obligations involving commitments to make payments to third parties. These
obligations impact the Company’s short-term and long-term liquidity and capital resource needs. Certain contractual obligations
are reflected on the Consolidated Balance Sheet as of March 31, 2024, while others are considered future obligations. Contractual
obligations primarily consist of operating leases, purchase obligations and commitments, principal payments on long-term debt
and related interest payments, and income taxes. 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. See Notes 7 and 8 of the Notes to Consolidated Financial Statements for information related to the Company’s debt
and leases, respectively.
Purchase obligations and commitments consist of open purchase orders to purchase raw materials, including raw produce, steel,
ingredients and packaging materials, as well as commitments for products and services used in the normal course of business.
The Company expects that the majority of these purchase obligations and commitments will be settled within one year.
The Company’s contractual obligations related to income taxes are primarily related to unrecognized tax benefits. See Note 9 of
the Notes to Consolidated Financial Statements for information related to income taxes.
The Company has no off-balance sheet debt or other unrecorded obligations other than purchase commitments noted above.
Impact of Seasonality on Financial Position and Results of Operations:
While individual vegetables have seasonal cycles of peak production and sales, the different cycles are somewhat offsetting.
Minimal food packaging occurs in the Company's last fiscal quarter ending March 31, which is the optimal time for maintenance,
repairs and equipment changes in its packaging plants. The supply of commodities, current pricing, and expected new crop
quantity and quality affect the timing and amount of the Company’s sales and earnings. When the seasonal harvesting periods of
the Company's major vegetables are newly completed, inventories for these packaged vegetables are at their highest levels. For
peas, the peak inventory time is mid-summer and for corn and green beans, the Company's highest volume vegetables, the peak
inventory is in mid-autumn. The seasonal nature of the Company’s production cycle results in inventory and accounts payable
reaching their lowest point in mid-to-late first quarter prior to the new seasonal pack commencing. As the seasonal pack
progresses, these components of working capital both increase until the pack is complete.
12
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
The Company’s revenues typically are highest in the second and third fiscal quarters. This is due, in part, because the Company’s
fruit and vegetable sales exhibit seasonal increases in the third fiscal quarter due to increased retail demand during the holiday
season. In addition, 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. The following table shows quarterly information for selected
financial statement items during fiscal years 2024 and 2023 to illustrate the Company’s seasonal business (in thousands):
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Fiscal Year 2024:
Net sales
$
298,664 $
407,475 $
444,481 $
307,983
Gross margin
55,289
58,118
54,033
20,778
Net earnings (loss)
23,111
24,779
17,675
(2,247)
Revolver outstanding (at quarter end)
52,064
134,757
258,108
237,225
Fiscal Year 2023:
Net sales
$
265,193 $
439,842 $
473,254 $
331,063
Gross margin
22,843
41,779
53,789
(14,092)
Net earnings (loss)
5,103
16,131
21,054
(33,057)
Revolver outstanding (at quarter end)
78,965
229,213
313,808
180,598
Critical Accounting Estimates:
In certain circumstances, the preparation of the Consolidated Financial Statements in conformity with generally accepted
accounting principles in the United States (“GAAP”) requires management to use judgment to make certain estimates and
assumptions. Critical accounting estimates are defined as those that involve a significant level of estimation uncertainty and have
had, or are reasonably likely to have, a material impact on the financial condition or results of operations of the Company. These
estimates affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the
Consolidated Financial Statements and the reported amounts of net sales and expenses during the reporting period. Actual results
may differ from these estimates.
Management believes the accounting estimates listed below are those that are most critical to the portrayal of the Company’s
financial condition and results of operations, and that require management’s most difficult, subjective, or complex judgments in
estimating the effect of inherent uncertainties. Refer to Note 1 of the Notes to Consolidated Financial Statements for a detailed
discussion of significant accounting policies.
Trade Promotion Expenses – The Company records both direct and estimated reductions to sales for trade promotions at the
time of sale of the respective product. For estimated reductions, the Company maintains an accrual for customer promotional
programs, in-store display incentives, and other sales and marketing expenses. This accrual requires management judgment
regarding the volume of promotional offers that will be redeemed by the customer and is based on a combination of historical
data on performance of similar programs and specific customer program activity. The amounts are subject to fluctuation due to
the level of sales and marketing programs, and timing of deduction. Accrued trade promotions were $10.0 million and $5.3
million as of March 31, 2024 and 2023, respectively, and are included in other accrued expenses on the Consolidated Balance
Sheets.
Inventories – The Company uses the lower of cost, determined under the last-in, first-out (“LIFO”) method, or market, to value
substantially all of its inventories. In the high inflation environment that the Company has been experiencing, the Company
believes that the LIFO method was preferable over the first-in, first-out (“FIFO”) method because it better matches the cost of
current production to current revenue. An actual valuation of inventory under the LIFO method is made at the end of each fiscal
year based on the inventory levels and costs at that time.
Pension Expense – The Company has a defined benefit plan which is subject to certain economic and demographic
assumptions. The funded status of the pension plan is dependent upon key assumptions, including the discount rate, mortality,
and the rate of increase in compensation levels. Additionally, the plan's funded status is dependent on other factors such as the
actual return on plan assets. Certain assumptions reflect the Company's historical experience and management’s best judgment
regarding future expectations. Management reviews these assumptions at least annually and uses independent actuaries to assist
in formulating assumptions and making estimates.
13
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
The discount rate used is determined in conjunction with the Company’s actuary by reference to a current yield curve and by
considering the timing and amount of projected future benefit payments. The expected return on plan assets is determined by
evaluating the mix of investments that comprise the asset portfolio and external forecasts of future long-term investment returns,
along with input from independent pension consultants. With respect to the mortality assumption, the Society of Actuaries’
published mortality tables and projection scales are used in developing the estimates of mortality. Assumptions for increases in
the rate of compensation are based on management estimates, which incorporate historical experience and overall compensation
trends in the current business environment.
The pension plan’s funded status decreased $6.9 million during fiscal year 2024 reflecting the actual fair value of plan assets and
the projected benefit obligation as of March 31, 2024. This funded status decrease was primarily driven by a $5.4 million
reduction in the fair value of plan assets, as described in more detail below, and $1.5 million increase to the projected benefit
obligation.
During fiscal year 2024, the actuarial gain in the pension plan’s projected benefit obligation was driven by an increase in discount
rates, partially offset by the annual update in plan census data resulting in losses and the reflection of an assumed salary increase
rate for fiscal year 2025 in excess of the long-term rate. During fiscal year 2023, the actuarial gain in the pension plan’s projected
benefit obligation was driven by an increase in discount rates and the annual update in plan census data resulting in gains, partially
offset by an assumed salary increase rate for fiscal year 2024 in excess of the long-term rate. Plan assets decreased from $294.3
million as of March 31, 2023 to $288.9 million as of March 31, 2024 primarily due to normal payments of benefits which
outpaced the return on plan assets.
The pension plan was amended to freeze accruals to new hires and rehires effective January 1, 2020. Refer to Note 10 of the
Notes to Consolidated Financial Statements for the full pension plan disclosures.
Non-GAAP Financial Measures:
Adjusted net earnings, EBITDA, and FIFO EBITDA are non-GAAP financial measures and are provided for information
purposes only. The Company believes these non-GAAP financial measures provide investors with helpful information to evaluate
financial performance, perform comparisons from period to period, and to compare results against the Company’s industry peers.
A non-GAAP financial measure is defined as a numerical measure of the Company’s financial performance that excludes or
includes amounts so as to be different from the most directly comparable measure calculated and presented in accordance with
GAAP in the Consolidated Balance Sheets and related Consolidated Statements of Net Earnings, Comprehensive Income (Loss),
Stockholders’ Equity and Cash Flows. The Company does not intend for this information to be considered in isolation or as a
substitute for other measures prepared in accordance with GAAP.
Adjusted net earnings are calculated on a FIFO basis which excludes the impact from the application of LIFO. Set forth below
is a reconciliation of reported net earnings before income taxes to adjusted net earnings (in thousands):
Fiscal Year:
2024
2023
Earnings before income taxes, as reported
$
82,999 $
13,793
LIFO charge
22,342
131,611
Adjusted earnings before income taxes
105,341
145,404
Income taxes at statutory rates (1)
25,177
37,596
Adjusted net earnings
$
80,164 $
107,808
(1) For fiscal years 2024 and 2023, income taxes on adjusted earnings before income taxes were calculated using the
income tax provision amounts of $19.7 million and $4.6 million, respectively, and applying the statutory rates of 24.6%
and 25.1%, respectively, for each of the respective periods to the pre-tax LIFO charge.
14
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
The Company believes EBITDA is often a useful measure of a Company’s operating performance because EBITDA excludes
charges for depreciation, amortization, non-cash lease expense, and interest expense as well as the Company’s provision for
income tax expense. EBITDA is frequently used as one of the bases for comparing businesses in the Company’s industry. FIFO
EBITDA also excludes non-cash charges related to the LIFO inventory valuation method. The Company’s revolving credit
facility and term loan agreements use FIFO EBITDA in the financial covenants thereunder. Set forth below is a reconciliation of
reported net earnings to EBITDA and FIFO EBITDA (in thousands):
Fiscal Year:
2024
2023
Net earnings
$
63,318 $
9,231
Income taxes
19,681
4,562
Interest expense, net of interest income
34,020
14,325
Depreciation and amortization (1)
50,729
52,577
Interest amortization (2)
(447)
(271 )
EBITDA
167,301
80,424
LIFO charge
22,342
131,611
FIFO EBITDA
$
189,643 $
212,035
(1) Includes non-cash lease expense consistent with financial covenant calculations.
(2) Reconciling item needed to exclude debt issuance cost amortization from the amount shown for interest expense.
Recently Issued Accounting Standards:
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-
09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) related to income tax disclosures.
The amendments in this update are intended to enhance the transparency and decision usefulness of income tax disclosures
primarily through changes to the rate reconciliation and income taxes paid information. This update is effective for annual periods
beginning after December 15, 2024, though early adoption is permitted. The Company plans to adopt this pronouncement for its
fiscal year beginning April 1, 2025, and is in the process of analyzing the impact on its consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures (“ASU 2023-07”) to improve reportable segment disclosure requirements, primarily through enhanced disclosures
about significant segment expenses. This update is effective for annual periods beginning after December 15, 2023, and interim
periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods
presented in the financial statements. Early adoption is permitted. The Company plans to adopt this pronouncement for its fiscal
year beginning April 1, 2024, and is in the process of analyzing the impact on its consolidated financial statements.
All other newly issued accounting pronouncements not yet effective have been deemed either not applicable or were related to
technical amendments or codification. In addition, the Company did not adopt any other new accounting pronouncements during
fiscal year 2024.
15
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to the amount of interest expense we expect to pay with
respect to our Revolver, Amended Term Loan A-2 and note payable (collectively, “Variable Rate Debt”), which are tied to the
variable market rate SOFR. Interest rates on the remainder of our long-term debt, including Amended Term Loan A-1, are fixed
and not subject to interest rate volatility. The Company uses its Variable Rate Debt for general corporate purposes, including
seasonal working capital needs, to pay debt principal and interest obligations, and to fund capital expenditures and acquisitions.
With $437.5 million in average Variable Rate Debt during fiscal 2024, a hypothetical 1% change in interest rates would have
had a $4.4 million impact on interest expense.
Commodity Risk
The materials that the Company uses, such as vegetables, fruits, steel, ingredients, and packaging materials, as well as the
electricity and natural gas used in the Company’s business are commodities that may experience price volatility caused by
external factors including but not limited to, market fluctuations, availability, weather, currency fluctuations, and changes in
governmental regulations and agricultural programs. These events may result in reduced supplies of these materials, higher
supply costs, or interruptions in the Company’s production schedules. If prices of these raw materials increase and the Company
is not able to effectively pass such price increases along to its customers, operating income will decrease. During fiscal year
2024, the Company purchased $211.2 million of steel and $191.9 million of raw produce, which are the two largest raw material
input costs. A hypothetical 1% change in the cost for both steel and raw produce would have impacted product costs by $2.1
million and $1.9 million, respectively, during fiscal year 2024.
The principal effect of inflation in both commodity and consumer prices on the Company’s operating results is to increase costs,
both for products sold and selling, general and administrative expenses. Although the Company may attempt to offset these cost
increases by increasing selling prices for its products, consumers may not have the buying power to cover these increased costs
and may reduce their volume of purchases of those products. In that event, selling price increases may not be sufficient to
completely offset the Company’s cost increases.
The Company does not currently hedge or otherwise use derivative instruments to manage interest rate or commodity risks.
16
Consolidated Statements of Net Earnings
Seneca Foods Corporation
(In thousands, except per share amounts)
Fiscal Year:
2024
2023
2022
Net sales
$ 1,458,603 $ 1,509,352 $ 1,385,280
Costs and expenses:
Cost of products sold
1,270,385 1,405,033 1,243,684
Selling, general, and administrative expense
81,209
81,072
76,343
Other operating (income) expense, net
(647 )
(1,662)
1,174
Plant restructuring
425
3,550
70
Total costs and expenses
1,351,372 1,487,993 1,321,271
Operating income
107,231
21,359
64,009
Other income and expenses:
Interest expense, net of interest income of $699, $528 and $63, respectively
34,020
14,325
5,641
Loss from equity investment
-
-
7,775
Other non-operating income
(9,788 )
(6,759)
(9,302)
Earnings before income taxes
82,999
13,793
59,895
Income taxes
19,681
4,562
13,695
Net earnings
$
63,318 $
9,231 $
46,200
Earnings per share:
Basic
$
8.64 $
1.19 $
5.28
Diluted
$
8.56 $
1.16 $
5.24
Weighted average common shares outstanding:
Basic
7,318
7,796
8,707
Diluted
7,385
7,863
8,774
See notes to consolidated financial statements.
17
Consolidated Statements of Comprehensive Income
Seneca Foods Corporation
(In thousands)
Fiscal Year:
2024
2023
2022
Comprehensive income:
Net earnings
$
63,318 $
9,231 $
46,200
Change in pension and postretirement benefits, net of tax (benefit)
expense of ($1,628), $1,999 and ($2,423), respectively
(4,892)
5,980
(7,401)
Total
$
58,426 $
15,211 $
38,799
See notes to consolidated financial statements.
18
Consolidated Balance Sheets
Seneca Foods Corporation
(In thousands)
As of:
March 31,
March 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents
$
4,483 $
5,236
Restricted cash
7,370
7,020
Accounts receivable, net of allowance for credit losses of $53 and $34, respectively
79,767
97,101
Inventories
872,692
670,898
Assets held for sale
64
4,358
Refundable income taxes
-
6,976
Other current assets
2,639
2,450
Total current assets
967,015
794,039
Property, plant, and equipment, net
305,016
301,212
Right-of-use assets operating, net
19,705
23,235
Right-of-use assets financing, net
20,386
33,571
Pension assets
52,442
59,304
Other assets
19,433
1,360
Total assets
$
1,383,997 $
1,212,721
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
40,326 $
69,232
Note payable
8,926
-
Deferred revenue
8,185
9,956
Accrued vacation
11,632
11,143
Accrued payroll
15,845
16,772
Income taxes payable
2,648
-
Other accrued expenses
33,383
23,293
Current portion of long-term debt and lease obligations
30,090
25,792
Total current liabilities
151,035
156,188
Long-term debt
585,786
432,695
Operating lease obligations
13,758
16,675
Financing lease obligations
12,259
17,293
Deferred income tax liability, net
24,320
31,481
Other liabilities
13,946
3,639
Total liabilities
801,104
657,971
Commitments and contingencies
Stockholders’ equity:
Preferred stock
351
351
Common stock
3,050
3,049
Additional paid-in capital
100,425
99,152
Treasury stock, at cost
(200,107)
(168,573)
Accumulated other comprehensive loss
(25,380)
(20,488)
Retained earnings
704,554
641,259
Total stockholders’ equity
582,893
554,750
Total liabilities and stockholders’ equity
$
1,383,997 $
1,212,721
See notes to consolidated financial statements.
19
Consolidated Statements of Cash Flows
Seneca Foods Corporation
(In thousands)
Fiscal Year:
2024
2023
2022
Cash flows from operating activities:
Net earnings
$
63,318 $
9,231 $
46,200
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
43,478
40,941
36,523
Non-cash lease expense
7,251
11,636
16,680
LIFO charge
22,342
131,611
42,157
Deferred income tax expense
(5,533)
(3,534)
7,134
Gain on the sale of assets
(2,331)
(2,872)
(1,861)
Provision for restructuring and impairments
567
4,333
284
Gain on debt forgiveness
-
-
(500)
Loss from equity investment
-
-
7,775
Stock-based compensation expense
246
76
120
Pension expense
354
1,481
206
401(k) match stock contribution
2,453
1,515
1,107
Changes in operating assets and liabilities:
Accounts receivable
17,334
22,098
(26,976)
Inventories
(224,136)
(398,514)
(103,008)
Other assets
91
2,743
(1,109)
Accounts payable
(29,213)
(18,370)
13,513
Accrued expenses and other
11,192
(13,641)
(11,032)
Income taxes
9,624
(1,530)
2,939
Net cash (used in) provided by operating activities
(82,963)
(212,796)
30,152
Cash flows from investing activities:
Additions to property, plant, and equipment
(36,637)
(70,628)
(53,367)
Proceeds from the sale of assets
8,089
5,751
8,180
Increase in non-current deposits
(18,654)
-
-
Net cash used in investing activities
(47,202)
(64,877)
(45,187)
Cash flows from financing activities:
Borrowings under revolving credit facility
783,650
777,083
398,550
Repayments under revolving credit facility
(727,023)
(616,939)
(379,011)
Borrowings under term loans and note payable
133,359
174,427
-
Principal payments on term loans
(19,215)
(5,500)
(4,000)
Other assets
-
-
(2,758)
Payments on financing leases
(7,956)
(8,814)
(7,868)
Purchase of treasury stock
(33,030)
(41,209)
(38,788)
Dividends
(23)
(23)
(23)
Net cash provided by (used in) financing activities
129,762
279,025
(33,898)
Net (decrease) increase in cash, cash equivalents and restricted cash
(403)
1,352
(48,933)
Cash, cash equivalents and restricted cash, beginning of year
12,256
10,904
59,837
Cash, cash equivalents and restricted cash, end of year
$
11,853 $
12,256 $
10,904
Supplemental disclosures of cash flow information:
Cash paid for:
Interest, net of capitalized interest
$
33,100 $
11,218 $
4,481
Income taxes
$
15,105 $
9,084 $
2,971
Noncash transactions:
Right-of-use assets obtained in exchange for lease obligations
$
5,746 $
10,187 $
20,304
Right-of-use assets derecognized upon early lease termination
$
2,286 $
3,588 $
1,570
Assets acquired from exercise of finance lease purchase options, net of
accumulated depreciation
$
6,681 $
- $
-
Property, plant and equipment purchased on account
$
307 $
1,177 $
1,267
See notes to consolidated financial statements.
20
Consolidated Statements of Stockholders' Equity
Seneca Foods Corporation
(In thousands, except share amounts)
Accumulated
Additional
Other
Preferred Common Paid-In Treasury Comprehensive Retained
Stock Stock Capital
Stock
Loss
Earnings
Total
Balance March 31, 2021
$
663 $
3,041 $ 98,502 $ (91,198) $
(19,067) $ 585,874 $577,815
Net earnings
-
-
-
-
- 46,200 46,200
Cash dividends paid on preferred
stock
-
-
-
-
-
(23)
(23)
Equity incentive program
-
-
120
-
-
-
120
Contribution of 401(k) match
-
-
-
1,107
-
-
1,107
Purchase of treasury stock
-
-
- (38,788)
-
- (38,788)
Preferred stock conversion
(19)
-
19
-
-
-
-
Change in pension and
postretirement benefits
adjustment (net of tax $2,423)
-
-
-
-
(7,401)
-
(7,401)
Balance March 31, 2022
644
3,041
98,641 (128,879)
(26,468) 632,051 579,030
Net earnings
-
-
-
-
-
9,231
9,231
Cash dividends paid on preferred
stock
-
-
-
-
-
(23)
(23)
Equity incentive program
-
-
150
-
-
-
150
Stock issued for profit sharing plan
-
-
76
-
-
-
76
Contribution of 401(k) match
-
-
-
1,515
-
-
1,515
Purchase of treasury stock
-
-
- (41,209)
-
- (41,209)
Preferred stock conversion
(293)
8
285
-
-
-
-
Change in pension and
postretirement benefits
adjustment (net of tax $1,999)
-
-
-
-
5,980
-
5,980
Balance March 31, 2023
351
3,049
99,152 (168,573)
(20,488) 641,259 554,750
Net earnings
-
-
-
-
- 63,318 63,318
Cash dividends paid on preferred
stock
-
-
-
-
-
(23)
(23)
Equity incentive program
-
1
245
-
-
-
246
Stock issued for profit sharing plan
-
-
71
-
-
-
71
Contribution of 401(k) match
-
-
957
1,496
-
-
2,453
Purchase of treasury stock
-
-
- (33,030)
-
- (33,030)
Change in pension and
postretirement benefits
adjustment (net of tax $1,628)
-
-
-
-
(4,892)
-
(4,892)
Balance March 31, 2024
$
351 $
3,050 $ 100,425 $ (200,107) $
(25,380) $ 704,554 $582,893
Preferred Stock
Common Stock
6% Voting 10% Voting
2003 Series
Cumulative Cumulative Participating Participating
Class A
Class B
Callable Convertible Convertible Convertible Common Common
Par $0.25 Par $0.025 Par $0.025 Par $0.025 Par $0.25 Par $0.25
Shares authorized and designated:
March 31, 2024
200,000 1,400,000
8,292
- 20,000,000 10,000,000
Shares outstanding:
March 31, 2022
200,000
807,240
32,256
500 6,627,318 1,705,930
March 31, 2023
200,000
807,240
8,292
- 5,928,424 1,707,241
March 31, 2024
200,000
807,240
8,292
- 5,400,429 1,659,411
Balance in Equity at March 31, 2024 $
50 $
202 $
99 $
- $
2,566 $
484
See notes to consolidated financial statements.
21
Notes to Consolidated Financial Statements
Seneca Foods Corporation
1. Summary of Significant Accounting Policies
Nature of Operations — Seneca Foods Corporation (the “Company”) currently has 26 facilities in eight states in support of its
main 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 of the Company and its wholly-
owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
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. Such estimates and assumptions affect the reported amounts of assets and liabilities as well as the disclosure of
contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and
expenses during the reporting period. The Company evaluates its estimates and assumptions on an ongoing basis using historical
experience and other factors that management believes to be reasonable under the circumstances, including the current economic
environment. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Actual results could
differ materially from those estimates.
Reclassification of Prior Year Balances — Certain prior year amounts have been reclassified for consistency with the current
year presentation. These reclassifications have no impact on the amount of total assets or liabilities, net sales, or net earnings.
Beginning in fiscal year 2024, the restricted cash line item was separately presented on the Consolidated Balance Sheets.
Cash, Cash Equivalents and Restricted Cash — The Company considers all highly liquid instruments purchased with an
original maturity of three months or less as cash equivalents. The Company’s primary workers’ compensation, general liability,
and automobile liability policies require deposits to be held in escrow related to the Company’s deductible. Accordingly, the
Company maintains the required deposit and records the amounts as restricted cash on the Consolidated Balance Sheets. These
balances are classified as restricted cash as they are not available for use by the Company to fund operations.
The following table reconciles cash, cash equivalents and restricted cash as reported on the Consolidated Balance Sheets to the
total amounts shown in the Company’s Consolidated Statements of Cash Flows (in thousands):
As of:
March 31,
March 31,
2024
2023
Cash and cash equivalents
$
4,483 $
5,236
Restricted cash
7,370
7,020
Total cash, cash equivalents and restricted cash
$
11,853 $
12,256
Fair Value of Financial Instruments — The carrying values of cash, cash equivalents and restricted cash, accounts receivable,
short-term debt, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term maturity
of these financial instruments. See Note 12, 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.
22
Notes to Consolidated Financial Statements
Seneca Foods Corporation
Accounts Receivable and Doubtful Accounts — Accounts receivable is stated at invoice value, which is net of any off-invoice
promotions. In determining the Company’s reserve for credit losses, receivables are assigned an expected loss based on historical
information adjusted for forward-looking economic factors. Management believes these provisions are adequate based upon the
relevant information presently available.
Inventories — Substantially all inventories are stated at the lower of cost or market with cost determined using the last-in, first-
out (“LIFO”) method. An actual valuation of inventory under the LIFO method is made at the end of each fiscal year based on
the inventory levels and costs at that time. In contrast, interim LIFO calculations are based on management’s estimates of
expected year-end inventory levels, production pack yields, sales and the expected rate of inflation or deflation for the year. The
interim LIFO calculations are subject to adjustment in the final year-end LIFO inventory valuation.
Assets Held for Sale — The Company classifies its assets as held for sale at the time management commits to a plan to sell the
asset, the asset is actively marketed and available for immediate sale, and the sale is expected to be completed within one year.
Due to market conditions, certain assets may be classified as held for sale for more than one year as the Company continues to
actively market the assets. Assets that meet the held for sale criteria are presented separately on the Consolidated Balance Sheets
at the lower of carrying value or estimated fair value less costs to sell and depreciation is no longer recognized.
Property, Plant and Equipment — Property, plant, and equipment are stated at cost. Interest incurred during the construction
of major projects is capitalized. During fiscal years 2024, 2023 and 2022, the Company capitalized interest of $0.7 million, $0.6
million and $0.4 million, respectively. 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. The estimated useful lives are as follows:
Years
Buildings and improvements
30
Land improvements
10 - 20
Machinery and equipment
5 - 15
Office equipment and furniture
3 - 5
Vehicles
3 - 5
Computer software
3 - 5
Long-Lived Assets — The Company evaluates its long-lived assets for recoverability whenever events or circumstances indicate
that the carrying value of such assets may not be fully recoverable. Recoverability is measured by a comparison of the carrying
value of an asset to estimated undiscounted future cash flows expected to be generated by the asset. Impairment losses are then
evaluated if the estimated future undiscounted cash flows are less than carrying value. A loss is recognized when the carrying
value of an asset exceeds its fair value. The Company did not record an impairment loss on long-lived assets during fiscal years
2024, 2023 and 2022.
Other Assets — Other assets is primarily comprised of non-current deposits. As of March 31, 2024, there was $18.7 million of
deposits paid to vendors for a new can manufacturing line located at one of the Company's plant facilities.
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. Amortization of deferred financing
costs is recorded as part of interest expense on the Consolidated Statements of Net Earnings. As of March 31, 2024 there were
$0.4 million of unamortized financing costs included in other assets related to the Company’s revolving credit facility and $0.9
million of unamortized financing costs related to its term loans that are included as a contra to long-term debt on the Consolidated
Balance Sheets.
Revenue Recognition — Revenue recognition is completed for most customers 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. The Company does sell 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. Refer to Note 2, Revenue Recognition, for further discussion of the policy.
23
Notes to Consolidated Financial Statements
Seneca Foods Corporation
Trade Promotions — 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 promotions represent a form of variable consideration, which is
recorded as a reduction of sales, and 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, interest-bearing investments, cash and cash equivalents, and restricted cash. Retailers, distributors, and co-pack
customers 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
52% and 55% of net sales for fiscal years 2024 and 2023, 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.
Advertising Costs — Advertising costs are expensed as incurred and totaled $2.7 million in fiscal year 2024 and $2.2 million
in each of fiscal years 2023 and 2022.
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.
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 the basic earnings per share calculation.
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.
Recently Issued Accounting Standards — In December 2023, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU
2023-09”) related to income tax disclosures. The amendments in this update are intended to enhance the transparency and
decision usefulness of income tax disclosures primarily through changes to the rate reconciliation and income taxes paid
information. This update is effective for annual periods beginning after December 15, 2024, though early adoption is permitted.
The Company plans to adopt this pronouncement for its fiscal year beginning April 1, 2025, and is in the process of analyzing
the impact on its consolidated financial statements.
24
Notes to Consolidated Financial Statements
Seneca Foods Corporation
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures (“ASU 2023-07”) to improve reportable segment disclosure requirements, primarily through enhanced disclosures
about significant segment expenses. This update is effective for annual periods beginning after December 15, 2023, and interim
periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods
presented in the financial statements. Early adoption is permitted. The Company plans to adopt this pronouncement for its fiscal
year beginning April 1, 2024, and is in the process of analyzing the impact on its consolidated financial statements.
All other newly issued accounting pronouncements not yet effective have been deemed either not applicable or were related to
technical amendments or codification. In addition, the Company did not adopt any other new accounting pronouncements during
fiscal year 2024.
Subsequent Events — The Company has evaluated subsequent events for disclosure through the date of issuance of the
accompanying consolidated financial statements.
2. Revenue Recognition
The Company applies the provisions of Accounting Standards Codification (“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 2024 net sales.
Nature of products — The Company’s product offerings include the following:
•
Canned and frozen vegetables which are sold under private label, and national and regional brands that the Company
owns or licenses, as well as under contract packing agreements;
•
Fruit products comprised of jarred and packaged products;
•
Snack products comprised of packaged fruit chips;
•
Other non-food operations which are ancillary to the Company’s main product offerings, such as the sale of cans and
ends, seed, and outside revenue from the Company’s aircraft operations.
Disaggregation of revenue — In the following table, segment revenue is disaggregated by product category groups (in
thousands):
Fiscal Year:
2024
2023
2022
Canned vegetables
$
1,204,823 $
1,253,257 $
1,135,983
Frozen vegetables
120,795
121,211
123,895
Fruit products
87,435
91,495
84,708
Snack products
13,400
12,661
12,332
Other
32,150
30,728
28,362
Total
$
1,458,603 $
1,509,352 $
1,385,280
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.
25
Notes to Consolidated Financial Statements
Seneca Foods Corporation
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.
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 apply
the available practical expedient and 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 products sold; this includes shipping and handling costs after control over a product has transferred to a
customer.
Variable Consideration — In addition to fixed contract consideration, certain 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 gross 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. 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. Accruals for trade promotions are
recorded primarily at the time of sale to the retailer based on expected levels of performance. The Company estimates variable
consideration using the expected value method to determine the total consideration which the Company expects to be entitled.
The Company updates its estimate of variable consideration each reporting period based on available information and the effect
is recognized as an adjustment to sales. Accrued trade promotions were $10.0 million and $5.3 million as of March 31, 2024 and
2023, respectively, and are included in other accrued expenses on the Consolidated Balance Sheets.
Contract Balances — The contract asset balances are $0.4 million and $0.6 million as of March 31, 2024 and 2023, respectively,
and are recorded as part of other current assets on the Consolidated Balance Sheets. The Company has contract liabilities in the
form of deferred revenue representing payments received from certain of its co-pack customers in advance of completion of the
Company's respective performance obligations. The majority of the balance is comprised of prepaid case and labeling and storage
services which have been collected from bill and hold sales, as well as amounts invoiced in accordance with the terms of a co-
pack agreement.
The deferred revenue activity during fiscal years 2024 and 2023 is shown in the following table (in thousands):
Fiscal Year:
2024
2023
Beginning balance
$
9,956 $
7,655
Deferral of revenue
19,200
19,857
Recognition of unearned revenue
(17,049)
(17,556)
Settlement of liability (1)
(3,922)
-
Ending balance
$
8,185 $
9,956
(1) Represents settlement of a portion of the deferred revenue liability in connection with the asset acquisition discussed in
Note 17.
Contract Costs — We have identified certain incremental costs to obtain a contract, primarily sales commissions, that would
require capitalization under the standard. The Company applies the available practical expedient to continue expensing 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.
26
Notes to Consolidated Financial Statements
Seneca Foods Corporation
3. Earnings per Share
Earnings per share for fiscal years 2024, 2023 and 2022 are as follows (in thousands, except per share amounts):
Fiscal Year:
2024
2023
2022
Basic
Net earnings
$
63,318 $
9,231 $
46,200
Deduct preferred stock dividends paid
23
23
23
Undistributed net earnings
63,295
9,208
46,177
Earnings attributable to participating preferred shareholders
72
30
178
Earnings attributable to common shareholders
$
63,223 $
9,178 $
45,999
Weighted average common shares outstanding
7,318
7,796
8,707
Basic earnings per common share
$
8.64 $
1.19 $
5.28
Diluted
Earnings attributable to common shareholders
$
63,223 $
9,178 $
45,999
Add dividends on convertible preferred stock
20
20
20
Earnings attributable to common stock on a diluted basis
$
63,243 $
9,198 $
46,019
Weighted average common shares outstanding-basic
7,318
7,796
8,707
Additional shares to be issued under full conversion of
preferred stock
67
67
67
Total shares for diluted
7,385
7,863
8,774
Diluted earnings per common share
$
8.56 $
1.16 $
5.24
4. Inventories
The Company uses the LIFO method of valuing inventory as it believes this method allows for better matching of current
production cost to current revenue. As of March 31, 2024 and 2023, first-in, first-out (“FIFO”) based inventory costs exceeded
LIFO based inventory costs, resulting in a LIFO reserve of $324.8 million and $302.4 million, respectively. In order to state
inventories at LIFO, the Company recorded an increase to cost of products sold of $22.3 million and $131.6 million for fiscal
years 2024 and 2023, respectively. The inventories by category and the impact of using the LIFO method are shown in the
following table (in thousands):
As of:
March 31,
March 31,
2024
2023
Finished products
$
795,993 $
613,622
In process
125,027
75,123
Raw materials and supplies
276,454
284,593
1,197,474
973,338
Less excess of FIFO cost over LIFO cost
324,782
302,440
Total inventories
$
872,692 $
670,898
27
Notes to Consolidated Financial Statements
Seneca Foods Corporation
5. Property, Plant and Equipment
Property, plant and equipment is comprised of the following (in thousands):
As of:
March 31,
March 31,
2024
2023
Land and land improvements
$
49,627 $
46,978
Buildings and improvements
236,141
214,110
Machinery and equipment
457,433
421,067
Office equipment, furniture, vehicles and computer software
14,971
11,738
Construction in progress
14,450
40,539
Property, plant and equipment, cost
772,622
734,432
Less: accumulated depreciation
(467,606)
(433,220 )
Property, plant and equipment, net
$
305,016 $
301,212
Depreciation expense totaled $36.8 million, $33.9 million, and $30.2 million for fiscal years 2024, 2023, and 2022, respectively.
6. Assets Held For Sale
As of March 31, 2024, the Company had approximately 20 acres of land in the Midwest with a carrying value of $0.1 million
that met the criteria to be classified as held for sale on the Consolidated Balance Sheet. The sale of the land is expected to close
within twelve months.
As of March 31, 2023, the Company had two non-operating facilities in the Pacific Northwest with a carrying value of $3.1
million and related idle production equipment with a carrying value of $1.2 million that have met the criteria to be classified as
held for sale on the Consolidated Balance Sheet. The Company recorded charges of $2.3 million and $0.1 million in fiscal years
2023 and 2022, respectively, 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.
As of March 31, 2023, the Company had executed sales agreements to sell one of the facilities and the related equipment therein
to two unaffiliated buyers. A deposit of $0.6 million was received from the buyer of the production equipment and recorded as a
contract liability as of March 31, 2023, as the Company maintained control of the equipment until the sale was finalized. The
contract liability is included in other accrued expenses on the Consolidated Balance Sheet. The sale closed during fiscal year
2024 and control of the equipment was transferred to the buyer.
The following table presents information related to the major classes of assets and liabilities that were held for sale on our
Consolidated Balance Sheets (in thousands):
As of:
March 31,
March 31,
2024
2023
Property, plant and equipment (net)
$
64 $
4,358
Current assets held for sale
$
64 $
4,358
28
Notes to Consolidated Financial Statements
Seneca Foods Corporation
7. Debt
Note payable — During fiscal year 2024, the Company entered into an unsecured note payable with an individual lender which
provides for an interim financing arrangement with an expiration date of June 30, 2024. The balance of the note payable as of
March 31, 2024 was $8.9 million and is associated with certain deposits paid to vendors for a new can manufacturing line located
at one of the Company’s plant facilities. The note payable bears interest at a variable interest rate based upon SOFR plus 1.80%.
Interest is payable monthly and the interest rate as of March 31, 2024 was 7.13%.
Long-term debt is comprised of the following (in thousands):
As of:
March 31,
March 31,
2024
2023
Revolving credit facility
$
237,225 $
180,598
Term loans
Term Loan A-1
Outstanding principal
85,000
89,000
Unamortized debt issuance costs
(37)
(68 )
Term Loan A-1, net
84,963
88,932
Term Loan A-2
Outstanding principal
283,500
173,500
Unamortized debt issuance costs
(902)
(551 )
Term Loan A-2, net
282,598
172,949
Other
-
216
Total long-term debt
604,786
442,695
Less current portion
19,000
10,000
Long-term debt, less current portion
$
585,786 $
432,695
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”).
On September 14, 2022, the Company entered into a First Amendment to the Fourth Amended and Restated Loan and Security
Agreement (the “Revolver Amendment”) which amended several provisions to replace the London Interbank Offered Rate
(“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”) plus a spread adjustment as the interest rate benchmark on the
Revolver. The transition to SOFR did not materially impact the interest rates applied to the Company’s borrowings. No other
material changes were made to the terms of the Company’s Revolver as a result of the Revolver Amendment.
On May 5, 2023, the Company entered into a Second Amendment to the Fourth Amended and Restated Loan and Security
Agreement (the “2023 Revolver Amendment”) which updated certain provisions relating to permitted indebtedness. No other
material changes were made as a result of the 2023 Revolver Amendment.
On March 8, 2024, the Company entered into a Third Amendment to the Fourth Amended and Restated Loan and Security
Agreement (the “2024 Revolver Amendment”) which increased the seasonal borrowing amount for the period from April through
July by $50.0 million. No other material changes were made as a result of the 2024 Revolver Amendment.
Maximum borrowing availability under the Revolver totals $350.0 million from April through July and $400.0 million from
August through March. 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 balance is included in Long-Term Debt in the accompanying Consolidated Balance
Sheets due to the Revolver’s March 24, 2026 maturity.
29
Notes to Consolidated Financial Statements
Seneca Foods Corporation
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 fruits and 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 may vary and range from
approximately one to seven months. Accordingly, the Company’s need to draw on the Revolver may fluctuate significantly
throughout the year.
The following table documents the quantitative data for short-term borrowings on the Revolver during fiscal years 2024 and
2023 (in thousands, except for percentages):
As of:
March 31,
March 31,
2024
2023
Outstanding borrowings
$
237,225 $
180,598
Interest rate
6.93%
6.34%
Fiscal Year:
2024
2023
Maximum amount of borrowings drawn during the period
$
290,968 $
350,828
Average outstanding borrowings
$
162,780 $
159,670
Weighted average interest rate
6.78%
5.03%
Term loans — 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 “Term Loan”). The amended and restated agreement
has a maturity date of June 1, 2025 and converted the Term Loan to a fixed interest rate of 3.3012% until maturity rather than a
variable interest rate in addition to requiring quarterly principal payments of $1.0 million, which commenced during fiscal year
2021. This agreement contains certain covenants, including maintaining a minimum EBITDA and minimum tangible net worth.
On January 20, 2023, the Company entered into a Second Amended and Restated Loan and Guaranty Agreement with Farm
Credit East, ACA (the “Agreement”) which governs two term loans, as summarized below:
Term Loan A-1: The Agreement continues certain aspects of the $100.0 million term loan described above, namely Term Loan
A-1 will continue to bear interest at a fixed interest rate of 3.3012%, mature on June 1, 2025, and remain unsecured. The
Company’s historical practice is to hold term debt until maturity. The Company expects to maintain or have access to sufficient
liquidity to retire or refinance long-term debt at maturity or otherwise, from operating cash flows, access to the capital markets,
and its Revolver. The Company continuously evaluates opportunities to refinance its debt; however, any refinancing is subject
to market conditions and other factors, including financing options that may be available to the Company from time to time, and
there can be no assurance that the Company will be able to successfully refinance any debt on commercially acceptable terms at
all.
Term Loan A-2: The Agreement adds an additional term loan in the amount of $175.0 million that will mature on January 20,
2028, and is secured by a portion of the Company’s property, plant and equipment. Term Loan A-2 bears interest at a variable
interest rate based upon SOFR plus an additional margin determined by the Company’s leverage ratio. Quarterly payments of
principal outstanding on Term Loan A-2 in the amount of $1.5 million commenced on March 1, 2023.
30
Notes to Consolidated Financial Statements
Seneca Foods Corporation
On May 23, 2023, the Agreement was amended by the Second Amended and Restated Loan and Guaranty Agreement
Amendment which amends, restates and replaces in its entirety Term Loan A-2 (the “Amendment”). The Amendment provides
a single advance term facility in the principal amount of $125.0 million to be combined with the outstanding principal balance
of $173.5 million on Term Loan A-2 into one single $298.5 million term loan (“Amended Term Loan A-2”). Amended Loan
Term A-2 is secured by a portion of the Company’s property, plant and equipment and bears interest at a variable interest rate
based upon SOFR plus an additional margin determined by the Company’s leverage ratio. Quarterly payments of principal
outstanding on Amended Term Loan A-2 in the amount of $3.75 million commenced on June 1, 2023. The Amendment continues
all aspects of Term Loan A-1 as defined in the Agreement. As of March 31, 2024, the interest rate on Amended Term Loan A-2
was 7.34%.
The Amendment for Term Loan A-1 and Term Loan A-2 (collectively, the “Term Loans”) contains restrictive covenants usual
and customary for loans of its type, in addition to financial covenants including minimum EBITDA and minimum tangible net
worth which apply to both Terms Loans described above. In connection with the Amended Term Loan A-2, the Company
incurred $1.1 million of financing costs which will be deferred and amortized over the life of the term loan.
The Term Loans permit the Company to participate in a patronage program. The program allows the Company to receive an
annual patronage distribution from Farm Credit East, ACA, which is earned during a given calendar year period based on its
eligible borrowings. The distribution is not guaranteed and if declared by Farm Credit East, ACA, the amount will be received
by the Company during the fourth quarter of each fiscal year. The Company received $3.7 million, $0.9 million, and $1.1 million
of patronage distributions in fiscal years 2024, 2023 and 2022, respectively. For fiscal year 2024, the patronage distribution is
included within other non-operating income in the Consolidated Statements of Net Earnings.
Debt repayment requirements for the next five fiscal years are (in thousands):
2025
$
19,000
2026
333,225
2027
15,000
2028
238,500
2029
-
Thereafter
-
Total
$
605,725
Covenants and other debt matters — The Company’s debt agreements, including the Revolver and Term Loans, 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) $25.0 million. The most restrictive financial covenant in the debt agreements is the minimum EBITDA within
the Term Loan which for fiscal year 2024 was greater than $75.0 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, 2024.
The Company's debt agreements limit the payment of dividends and other distributions, subject to availability under the Revolver.
There is an annual total distribution limitation of $50,000, less aggregate annual dividend payments totaling $23,181 that the
Company presently pays on two outstanding classes of preferred stock. The carrying value of assets pledged for secured debt,
including the Revolver, Term Loan A-2, and lease obligations, is $1,074.1 million as of March 31, 2024.
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, 2024, the Company had $6.5 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.
31
Notes to Consolidated Financial Statements
Seneca Foods Corporation
8. Leases
The Company determines whether an arrangement is a lease at inception of the agreement. Presently, the Company leases land,
machinery and equipment under various operating and financing leases.
Right-of-Use (“ROU”) assets represent the Company’s right to use the underlying assets for the lease term and lease obligations
represent the net present value of the Company’s obligation to make payments arising from these leases. ROU assets and lease
obligations are recognized at commencement date based on the present value of lease payments over the lease term using the
implicit lease interest rate or, when unknown, an incremental borrowing rate based on the information available at
commencement date or April 1, 2019 for leases that commenced prior to that date. ROU assets and lease obligations for the
Company’s operating and financing leases are disclosed separately in the Company’s Consolidated Balance Sheets.
Lease terms may include options to extend or terminate the lease, and the impact of these options are included in the calculation
of the ROU asset and lease obligation only 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 non-lease components for its leases
when it is impractical to separate the two. In addition, the Company has certain leases that have variable payments based solely
on output or usage of the leased asset. These variable operating leases are excluded from the Company’s Consolidated Balance
Sheet presentation and expensed as incurred. Leases with an initial term of 12 months or less, or short-term leases, are not
recorded on the accompanying Consolidated Balance Sheets and are expensed as incurred.
The components of lease cost were as follows (in thousands):
Fiscal Year:
2024
2023
2022
Lease cost:
Amortization of right of use assets
$
6,134 $
6,715 $
5,970
Interest on lease liabilities
767
959
1,048
Finance lease cost
6,901
7,674
7,018
Operating lease cost
8,222
13,506
19,250
Short-term lease cost
5,335
5,589
5,879
Total lease cost
$
20,458 $
26,769 $
32,147
Fiscal Year:
2024
2023
2022
Cash paid for amounts included in the measurement of lease
liabilities:
Operating cash flows from finance leases
$
767 $
959 $
1,048
Operating cash flows from operating leases
8,849
13,736
19,010
Financing cash flows from finance leases
7,956
8,814
7,868
$
17,572 $
23,509 $
27,926
Right-of-use assets obtained in exchange for new finance lease
liabilities
$
337 $
5,825 $
9,754
Right-of-use assets obtained in exchange for new operating lease
liabilities
$
5,409 $
4,362 $
10,550
Weighted-average lease term (years):
Financing leases
4.4
4.7
4.6
Operating leases
4.3
4.6
4.3
Weighted-average discount rate:
Financing leases
4.0%
3.8 %
3.4 %
Operating leases
4.7%
4.4 %
4.2 %
32
Notes to Consolidated Financial Statements
Seneca Foods Corporation
Undiscounted future lease payments under non-cancelable operating and financing leases, along with a reconciliation of
undiscounted cash flows to operating and financing lease obligations, respectively, as of March 31, 2024 were as follows (in
thousands):
Years ending March 31:
Operating
Financing
2025
$
6,995 $
5,371
2026
4,822
4,280
2027
3,692
3,218
2028
3,430
2,811
2029
973
1,659
2030-2034
2,003
1,306
Total minimum payment required
$
21,915 $
18,645
Less interest
1,891
1,562
Present value of minimum lease payments
20,024
17,083
Amount due within one year
6,266
4,824
Long-term lease obligations
$
13,758 $
12,259
9. Income Taxes
The Company files a consolidated federal and various state income tax returns. The provision for income taxes is as follows (in
thousands):
Fiscal Year:
2024
2023
2022
Current:
Federal
$
20,850 $
5,819 $
3,454
State
4,364
2,277
3,107
Total
25,214
8,096
6,561
Deferred:
Federal
$
(5,010) $
(3,886) $
7,084
State
(523)
352
50
Total
(5,533)
(3,534)
7,134
Total income taxes
$
19,681 $
4,562 $
13,695
33
Notes to Consolidated Financial Statements
Seneca Foods Corporation
A reconciliation of the expected U.S. statutory rate to the effective rate is as follows:
Fiscal Year:
2024
2023
2022
Computed (expected tax rate)
21.0%
21.0%
21.0%
State income taxes (net of federal tax benefit)
3.6%
4.1%
3.7%
Federal credits
-0.6%
-3.9%
-0.9%
State rate changes
-0.2%
2.8%
0.3%
State credit expiration
0.0%
2.1%
0.9%
Change in valuation allowance
0.0%
7.8%
-1.2%
Other
-0.1%
-0.8%
-0.9%
Effective income tax rate
23.7%
33.1%
22.9%
The Company’s effective tax rate was 23.7%, 33.1%, and 22.9% in fiscal years 2024, 2023, and 2022, respectively. In fiscal year
2023, the Company added a valuation allowance against state tax credits as a result of a change in ordering of credit usage for
Wisconsin because it was determined that it was more likely than not that the tax credits would not be used prior to expiration.
This change to the existing valuation allowance increased the fiscal year 2023 effective tax rate by 7.8%. There was not a similar
change in valuation allowance in fiscal year 2024, which provided the effect of reducing the effective tax rate year-over-year.
The fiscal year 2024 effective tax rate was further decreased by 3.0% versus fiscal year 2023 due to the impact on the deferred
tax balances of the state rate changes which were mostly caused by changes in the Company’s business activities that impact
state apportionment. Offsetting those decreases was a 3.3% increase for various federal credits when comparing fiscal year 2024
to fiscal year 2023.
In fiscal year 2023, the Company added a valuation allowance against state tax credits as a result of a change in ordering of credit
usage for Wisconsin because it was determined that it was more likely than not that the credits will not be used prior to expiration.
This change to the existing valuation allowance, along with other current year increases in the existing valuation allowances,
resulted in a 9.0% increase on the fiscal year 2023 effective tax rate as compared to fiscal year 2022. The fiscal year 2023
effective tax rate was further increased by 2.5% versus fiscal year 2022 due to state rate changes which were mostly caused by
changes in the Company’s business activities that impact state apportionment.
34
Notes to Consolidated Financial Statements
Seneca Foods Corporation
The following is a summary of the significant components of the Company's deferred income tax assets and liabilities (in
thousands):
As of:
March 31,
March 31,
2024
2023
Deferred income tax assets:
Future tax credits
$
4,884 $
5,007
Inventory valuation
9,951
8,364
Employee benefits
2,739
2,335
Insurance
922
471
State depreciation basis differences
3,344
3,218
Operating leases
190
942
Intangibles
2,760
1,514
Pension and post-retirement benefits
8,734
7,117
Interest
18
8
Deferred revenue
260
296
Net operating loss and other tax attribute carryovers
558
1,233
Other
427
327
Total assets
34,787
30,832
Valuation allowance - noncurrent
(4,884)
(5,007 )
Total deferred income tax assets, net
29,903
25,825
Deferred income tax liabilities:
Property basis and depreciation difference
25,260
26,450
Inventory reserve
3,091
2,101
Right-of-use assets
3,971
7,045
Pension
21,682
21,528
Other
219
182
Total liabilities
54,223
57,306
Deferred income tax liability, net
$
(24,320) $
(31,481 )
Net deferred income tax liabilities of $24.3 million and $31.5 million as of March 31, 2024 and 2023, respectively, are recognized
as noncurrent liabilities in the Consolidated Balance Sheets.
The Company has State tax credit carryforwards amounting to $1.5 million (California, net of Federal impact), $1.3 million (New
York, net of Federal impact), and $2.1 million (Wisconsin, net of Federal impact), which are available to reduce future taxes
payable in each respective state through 2028 (California), through 2035 (New York), and through 2038 (Wisconsin). The
Company has performed the required assessment regarding the realization of deferred tax assets and as of March 31, 2024, the
Company has recorded a valuation allowance amounting to $4.9 million, which relates primarily to tax credit carryforwards
which management has concluded it is more likely than not that 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 tax 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.
35
Notes to Consolidated Financial Statements
Seneca Foods Corporation
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 long-term liabilities on the
Consolidated Balance Sheets which is reflective of their expected settlement date. The change in the liability for fiscal years
2024 and 2023 consists of the following (in thousands):
As of:
March 31,
March 31,
2024
2023
Beginning balance
$
742 $
655
Tax positions related to current year:
Additions
120
96
Tax positions related to prior years:
Reductions
(19 )
-
Lapses in statues of limitations
(13 )
(9 )
Ending balance
$
830 $
742
The liability balances as of March 31, 2024 and 2023 do not include tax positions that are highly certain but for which there is
uncertainty about the timing. 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 fiscal years 2024 and 2023, the accrued interest and penalties balance and change
during the respective fiscal years was not significant 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 net earnings of the Company. Conversely, if resolved favorably in the
future, the related provisions would be reduced, thus having a positive impact on net earnings. During fiscal year 2024, the statute
of limitations lapsed on one uncertain tax position, which results in the position no longer being uncertain. As a result of this
lapse and in accordance with its accounting policies, the Company recorded an insignificant decrease to the liability and tax
expense. During the next twelve months there could be a decrease in the uncertain tax positions of approximately $0.5 million
due to a lapse in the statute of limitations.
The federal income tax returns for fiscal years after 2021 are subject to examination. The Company is current on its federal and
state tax returns.
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. The Plan was adequately funded as of March 31, 2024 and 2023, respectively, and no
contributions were required to meet legal funding requirements.
36
Notes to Consolidated Financial Statements
Seneca Foods Corporation
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, 2024 and a statement of the funded status as of March 31, 2024 and 2023 (in thousands):
Fiscal Year:
2024
2023
Change in benefit obligation
Benefit obligation at beginning of year
$
235,038 $
275,001
Service cost (excluding expenses)
5,505
7,429
Interest cost
11,388
9,254
Actuarial gain
(4,674)
(47,403 )
Benefit payments
(10,750)
(9,243 )
Benefit obligation at end of year
$
236,507 $
235,038
Change in plan assets
Fair value of plan assets at beginning of year
$
294,342 $
327,867
Actual return on plan assets
6,428
(23,169 )
Benefit payments and expenses
(11,821)
(10,356 )
Fair value of plan assets at end of year
$
288,949 $
294,342
Funded status
$
52,442 $
59,304
The Plan’s funded status decreased by $6.9 million during fiscal year 2024 reflecting the actual fair value of plan assets and the
projected benefit obligation as of March 31, 2024. This funded status decrease was primarily driven by a $5.4 million reduction
in the fair value of plan assets, as described in more detail below, and $1.5 million increase to the projected benefit obligation.
The Plan's accumulated benefit obligation was $219.3 million as of March 31, 2024 and $217.4 million as of March 31, 2023.
During fiscal year 2024, the actuarial gain in the pension plan’s projected benefit obligation was driven by an increase in discount
rates, partially offset by the annual update in plan census data resulting in losses and the reflection of an assumed salary increase
rate for fiscal year 2025 in excess of the long-term rate. During fiscal year 2023, the actuarial gain in the pension plan’s projected
benefit obligation was driven by an increase in discount rates and the annual update in plan census data resulting in gains, partially
offset by an assumed salary increase rate for fiscal year 2024 in excess of the long-term rate. Plan assets decreased from $294.3
million as of March 31, 2023 to $288.9 million as of March 31, 2024 primarily due to normal payments of benefits which
outpaced the return on plan assets.
The following table provides the components of the Plan’s accumulated other comprehensive loss, pre-tax (in thousands):
Fiscal Year:
2024
2023
2022
Amounts Recognized in Accumulated Other
Comprehensive Pre-Tax Loss
Prior service cost
$
(9) $
(75) $
(167)
Net loss
(34,883)
(28,310)
(36,136)
Accumulated other comprehensive pre-tax loss
$
(34,892) $
(28,385) $
(36,303)
37
Notes to Consolidated Financial Statements
Seneca Foods Corporation
The following table provides the components of net periodic benefit cost for the Plan for fiscal years 2024, 2023, and 2022 (in
thousands):
Fiscal Year:
2024
2023
2022
Service cost including administrative expenses
$
6,405 $
8,240 $
9,508
Interest cost
11,388
9,254
7,721
Expected return on plan assets
(17,725)
(16,104)
(17,114 )
Amortization of net loss
220
-
-
Amortization of prior service cost
66
91
91
Net periodic benefit cost
$
354 $
1,481 $
206
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.
The following table provides the components of other changes in plan assets and benefit obligation for fiscal years 2024, 2023,
and 2022 (in thousands):
Fiscal Year:
2024
2023
2022
Other Changes in Plan Assets and Benefit Obligation
Recognized in Other Comprehensive Income
Net actuarial loss (gain)
$
6,792 $
(7,827) $
9,871
Amortization of:
Prior service (cost) credit
(65)
(91)
(91)
Actuarial (loss) gain
(220)
-
-
Total recognized in other comprehensive income
$
6,507 $
(7,918) $
9,780
38
Notes to Consolidated Financial Statements
Seneca Foods Corporation
The assumptions used to measure the Company’s benefit obligation and pension expense are shown in the following table:
Fiscal Year:
2024
2023
2022
Weighted Average Assumptions for Balance Sheet
Liability at End of Year:
Discount rate - projected benefit obligation
5.31%
5.04%
3.81 %
Rate of compensation increase
3.00%
3.00%
3.00 %
Mortality table
Pri-2012 Blue Collar
Generational Table
Improvement Scale
MP-2021
Pri-2012 Blue Collar
Generational Table
Improvement Scale
MP-2021
Pri-2012 Blue Collar
Generational Table
Improvement Scale
MP-2021
Weighted Average Assumptions for Benefit Cost
at Beginning of Year:
Discount rate - benefit obligations
5.04%
3.81%
3.43 %
Discount rate - interest cost
4.90%
3.52%
2.68 %
Discount rate - service cost
5.16%
3.93%
3.75 %
Expected return on plan assets
6.15%
5.00%
5.00 %
Rate of compensation increase
3.00%
3.00%
3.00 %
Plan Assets
Investment Policy and Strategy - The Company maintains an investment policy that utilizes a liability-driven investments
approach to reduce the ongoing volatility of the Plan’s funded status. During fiscal year 2023, the Company updated its current
target allocation to be 20% allocated to a diversified mix of return-seeking investments including equities and alternative
investments and 80% allocated to liability-hedging fixed income investments. No changes were made to the target allocation
during fiscal year 2024.
The Company's plan assets consist of the following:
Target
Allocation for:
Percentage of Plan
Assets as of:
Fiscal Year
2025
March 31,
2024
March 31,
2023
Equity securities
16%
15%
13%
Debt securities
80%
80%
75%
Real estate
2%
2%
8%
Cash
1%
1%
1%
Other
1%
2%
3%
Total
100%
100%
100%
39
Notes to Consolidated Financial Statements
Seneca Foods Corporation
The following tables set forth the Company’s plan assets at fair value, by level within the fair value hierarchy (as defined in
Note 1), as of March 31, 2024 and 2023, (in thousands):
As of March 31, 2024
Level 1
Level 2 and
Level 3
Subtotal
Measured
at NAV (1)
Total
Equity securities
$
26,371 $
- $
26,371 $
- $
26,371
Held in common/collective trusts:
Equity securities
-
-
-
17,730
17,730
Real estate
-
-
-
4,509
4,509
Debt securities
-
-
-
231,904
231,904
Cash/short-term investments (2)
-
-
-
3,388
3,388
Other investments
-
-
-
5,047
5,047
Fair value of plan assets
$
26,371 $
- $
26,371 $
262,578 $
288,949
As of March 31, 2023
Level 1
Level 2 and
Level 3
Subtotal
Measured
at NAV (1)
Total
Equity securities
$
25,045 $
- $
25,045 $
- $
25,045
Held in common/collective trusts:
Equity securities
-
-
-
12,639
12,639
Real estate
-
-
-
24,766
24,766
Debt securities
-
-
-
219,767
219,767
Cash/short-term investments (2)
-
-
-
2,799
2,799
Other investments
-
-
-
9,326
9,326
Fair value of plan assets
$
25,045 $
- $
25,045 $
269,297 $
294,342
(1) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical
expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented
in our benefit obligations and funded status table.
(2) The cash/short term investments consist of a money market fund that holds individual, high quality, short duration fixed
income investments, however the fund does not trade on public markets. The Company elected to consistently apply
the practical expedient to all investments within common/collective trusts, and therefore, the fair value of this fund is
measured at net asset value per share.
40
Notes to Consolidated Financial Statements
Seneca Foods Corporation
Expected Return on Plan Assets
For fiscal year 2024, the expected long-term rate of return on Plan assets was 6.15%. For fiscal year 2025, the Company will
increase the expected long-term rate of return on Plan assets to 6.55%. The Company expected 6.15% and 6.55% 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 years 2024 and 2025, respectively.
Cash Flows
Expected contributions for fiscal year ending March 31, 2025 (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):
2025
$
11,422
2026
12,231
2027
13,041
2028
13,807
2029
14,465
2030 - 2034
79,850
401(k) Plan
The Company also has an employees’ savings 401(k) plan 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. The Company made matching contributions of $2.5 million, $1.5 million, and $1.1
million in fiscal years 2024, 2023, and 2022, respectively. In each of the aforementioned fiscal years, 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 that are
ineligible to receive company contributions under the 401(k) plan. As of March 31, 2024 and 2023, the Company has accrued
$2.5 million and $1.7 million, respectively, in connection with the unfunded deferred compensation plan.
11. Stockholders’ Equity
Preferred Stock — The Company has authorized three classes of preferred stock: Class A Preferred Stock, 6% Voting
Cumulative Preferred Stock, and Preferred Stock Without Par Value.
Class A Preferred Stock — There are 8,200,000 shares of Class A Preferred Stock which have been authorized with a par value
of $0.025. The Class A Preferred Stock is designated in series by the Board of Directors, and as of March 31, 2024, there are
four designated series.
●
10% Voting Cumulative Convertible Preferred Stock - Series A — There are 1,000,000 shares of 10% Series A
Preferred Stock that have been designated by the Board of Directors, with 407,240 shares outstanding as of March 31,
2024. The shares have a par value of $0.025 and a stated value of $0.25 and 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 Stock. During fiscal
years 2024 and 2023, the Company paid dividends of $10,181, equating to $0.025 per share, on the Series A Preferred
Stock.
41
Notes to Consolidated Financial Statements
Seneca Foods Corporation
●
10% Voting Cumulative Convertible Preferred Stock - Series B — There are 400,000 shares of 10% Series B Preferred
Stock that have been designated by the Board of Directors, with 400,000 shares outstanding as of March 31, 2024. The
shares have a par value of $0.025 and a stated value of $0.25 and 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 Stock. During fiscal years
2024 and 2023, the Company paid dividends of $10,000, equating to $0.025 per share, on the Series B Preferred Stock.
●
Participating Convertible Preferred Stock, Series 1998 — The shares of Participating Convertible Preferred Stock,
Series 1998 are convertible at the holders’ option on a one-for-one basis into shares of Class A Common Stock, subject
to antidilution adjustments. This series of preferred stock has 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 year 2024 or 2023. In addition, this series of preferred stock has
a liquidation preference equal to the stated value of $12.00 per share or, if greater, the total distribution which a holder
would have received if all outstanding shares of this series were converted into shares of Class A Common Stock
immediately prior to the date for calculating the total liquidation distribution. There were 8,292 shares of Participating
Convertible Preferred Stock, Series 1998 designated and outstanding as of March 31, 2024 and no conversions took
place during the fiscal year. Shares of this series may not be reissued by the Company once they have been converted
or acquired by the Company, rather they became authorized but unissued shares of Class A Preferred and may be issued
as part of another series of Class A Preferred Stock.
●
Participating Convertible Preferred Stock, Series 2003 — 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 no shares designated or outstanding as of March 31, 2024. Shares of this series
may not be reissued by the Company once they have been converted or acquired by the Company, rather they became
authorized but unissued shares of Class A Preferred and may be issued as part of another series of Class A Preferred
Stock.
As of March 31, 2024, the Company has an aggregate of 6,791,708 shares of non-designated Class A Preferred Stock authorized
for issuance.
6% Voting Cumulative Preferred Stock — There are 200,000 shares of 6% Preferred Stock that are authorized and outstanding
as of March 31, 2024. This class of preferred stock is callable at their par value of $0.25 at any time at the option of the Company.
The Company paid dividends of $3,000, equating to $0.015 per share, on the 6% Preferred Stock during each of fiscal years 2024
and 2023.
Preferred Stock Without Par Value — There are 30,000 shares of Preferred Stock Without Par Value which have been
authorized. This class of preferred stock is to be issued in series by the Board of Directors, none of which are designated or
outstanding as of March 31, 2024.
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 fiscal year 2024, there were 1,571 shares of Class B Common Stock issued in lieu of
cash compensation under the Company's Profit Sharing Bonus Plan and 4,864 shares of Class A Common Stock issued under
the Company's Equity Incentive 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, 2024 and 2023. Additionally, there were 8,292 shares of Class A reserved for
conversion of the Participating Preferred Stock as of March 31, 2024 and 2023.
42
Notes to Consolidated Financial Statements
Seneca Foods Corporation
Treasury Stock — During fiscal year 2024 the Company repurchased $33.0 million, or 634,231 shares of its Class A Common
Stock and none of its Class B Common Stock. The majority of the shares were repurchased under the Company's stock repurchase
program and a small portion of the shares were repurchased for purposes of funding the cash needs for transfers and payments
in connection with the employer stock investment fund under the 401(k) plan. As of March 31, 2024, there is a total of $200.1
million, or 5,145,418 shares, of repurchased stock. These shares are not considered outstanding and the Company accounts for
treasury stock under the cost method. The Company contributed 55,055 treasury shares with a historical cost of $1.5 million for
the 401(k) match in fiscal year 2024 as described in Note 10, Retirement Plans.
12. Fair Value of Financial Instruments
Cash and cash equivalents, restricted cash, accounts receivable, accounts payable, note payable, and accrued expenses are
reflected in the Consolidated Balance Sheets at carrying value, which approximates fair value due to the short-term maturity of
these instruments.
The carrying amount and estimated fair values of the Company's long-term debt are summarized as follows (in thousands):
As of:
March 31, 2024
March 31, 2023
Carrying Estimated
Carrying Estimated
Amount
Fair Value
Amount
Fair Value
Long-term debt, including current portion
$
604,786 $
599,408 $
442,695 $
436,293
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.
13. Segment Information
The Company conducts its business almost entirely in food packaging with two reportable segments: Vegetable and Fruit/Snack.
The reportable segments reflect how the Company's Chief Executive Officer, who is the Chief Operating Decision Maker
(“CODM”), allocates resources and evaluates performance, and how the Company's internal management financial reporting is
structured. The Company's CODM evaluates the performance of these reportable segments with a focus on earnings (loss) before
income taxes as the measure of segment profit or loss.
The Other category consists of the Company's non-food operations including revenue derived from the sale of cans, ends, seed,
outside revenue from the Company's trucking and aircraft operations, and certain corporate items. These ancillary activities do
not qualify as an operating segment and are not eligible for aggregation with one of the identified operating segments; therefore
they are combined and presented within the “Other” category.
During the Company’s fiscal year 2024 reassessment, the Company updated how its existing operating segments (Vegetable,
Fruit, Snack) are reported. A primary factor of the reassessment was the Company's Vegetable operations which have become a
larger strategic focus of the Company, as evidenced by the recent asset acquisition described in Note 17. Fruit was previously
reported with Vegetable. The Fruit and Snack segments are now managed together as one reportable segment, leaving Vegetable
as its own reportable segment. The update reflects the products offered within the segments and the manner in which the business
is currently managed. The prior year amounts within the segment disclosure information have been recast to conform to the
current year presentation.
43
Notes to Consolidated Financial Statements
Seneca Foods Corporation
Segment information is provided on a FIFO basis which is consistent with how financial information is prepared internally and
provided to the CODM. The LIFO impact on earnings (loss) before income taxes and total assets is shown separately for purposes
of reconciling to the GAAP financial statement measure shown on the Consolidated Statements of Net Earnings and Consolidated
Balance Sheets.
Export sales represented 5.7%, 6.7% and 7.2% of total net sales in fiscal 2024, 2023 and 2022, respectively.
The following table summarizes certain financial data for the Company’s reportable segments (in thousands):
Fruit and
Subtotal
LIFO
Vegetable
Snack
Other
(FIFO basis)
Impact
Total
Fiscal Year 2024:
Net sales
$ 1,325,618 $
100,835 $
32,150 $
1,458,603 $
- $
1,458,603
Earnings (loss) before income
taxes
92,852
3,264
9,225
105,341
(22,342 )
82,999
Interest expense, net of interest
income
31,607
2,347
66
34,020
-
34,020
Capital expenditures
42,089
1,536
-
43,625
-
43,625
Depreciation and amortization
39,364
3,480
634
43,478
-
43,478
Total assets
1,604,449
100,627
3,703
1,708,779
(324,782 )
1,383,997
Fiscal Year 2023:
Net sales
$ 1,374,468 $
104,156 $
30,728 $
1,509,352 $
- $
1,509,352
Earnings (loss) before income
taxes
137,555
(3,935)
11,784
145,404
(131,611 )
13,793
Interest expense, net of interest
income
12,684
1,180
461
14,325
-
14,325
Capital expenditures
57,593
13,406
806
71,805
-
71,805
Depreciation and amortization
37,359
3,024
558
40,941
-
40,941
Total assets
1,415,857
95,658
3,646
1,515,161
(302,440 )
1,212,721
Fiscal Year 2022:
Net sales
$ 1,259,878 $
97,040 $
28,362 $
1,385,280 $
- $
1,385,280
Earnings (loss) before income
taxes
103,899
(7,623)
5,776
102,052
(42,157 )
59,895
Interest expense, net of interest
income
4,477
473
691
5,641
-
5,641
Capital expenditures
43,490
5,705
2,905
52,100
-
52,100
Depreciation and amortization
33,730
2,542
251
36,523
-
36,523
Total assets
1,025,840
84,087
3,176
1,113,103
(170,829 )
942,274
14. 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 impact on its financial position, results of operations,
or cash flows.
44
Notes to Consolidated Financial Statements
Seneca Foods Corporation
15. Plant Restructuring
The following table summarizes the restructuring charges recorded and the accruals established during fiscal years 2024, 2023
and 2022 (in thousands):
Severance
Other
Payable
Costs
Total
Balance March 31, 2021
$
- $
- $
-
Charge to expense
-
70
70
Cash payments/write offs
-
(70)
(70 )
Balance March 31, 2022
-
-
-
Charge to expense
361
3,189
3,550
Cash payments/write offs
(244)
(3,189)
(3,433 )
Balance March 31, 2023
117
-
117
Charge to expense
213
212
425
Cash payments/write offs
(330)
(212)
(542 )
Balance March 31, 2024
$
- $
- $
-
The restructuring charges pertain to the Vegetable reportable segment. During fiscal year 2024, the Company incurred minimal
restructuring charges which were partly driven by the Company’s decision to cease its Northeast trucking fleet operations, in
addition to charges associated with plants that were closed in previous periods. During fiscal year 2023, the Company incurred
restructuring charges primarily due to ceasing production of green beans at a plant in the Northeast. The charges mainly consisted
of severance and write-downs of production equipment that was to be scrapped or sold. During fiscal year 2022, the Company
incurred restructuring charges primarily related to plants that were closed in previous periods, including severance, health care
costs, and lease impairments, amongst other minor changes.
16. Related Party Transactions
During fiscal years 2024, 2023, and 2022, approximately 1% of vegetables supplied to the Company are grown by a Director of
Seneca Foods Corporation. The Company’s grower purchases from the Director were $3.0 million, $3.1 million, and $2.9 million
in fiscal years 2024, 2023, and 2022, respectively, pursuant to a raw vegetable grower contract. 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.
The Company made charitable contributions to the Seneca Foods Foundation (the “Foundation”), a related party, in the amount
of $1.0 million, $0.5 million and $1.0 million in fiscal years 2024, 2023 and 2022, respectively. The Foundation is a nonprofit
entity that supports charitable activities by making grants to unrelated organizations or institutions and is managed by current
employees of the Company.
The Company maintains a liability for retirement arrangements to beneficiaries that have family relationships to two of the
Company’s current Directors. As of March 31, 2024 and 2023, the liability for these benefits totaled $1.0 million and $1.0
million, respectively. Payments are made monthly over the beneficiary’s lifetime.
45
Notes to Consolidated Financial Statements
Seneca Foods Corporation
17. Asset Acquisition
On November 8, 2023, the Company executed an Asset Purchase Agreement and associated License Agreement with B&G
Foods, Inc., (the “Seller”) to acquire certain assets from the Seller relating to its Green Giant® shelf-stable vegetable product line
(the “transaction”). The acquired assets include inventory and an associated license which allows the Company to manufacture,
market, distribute, and sell Green Giant® shelf-stable vegetable products within the United States in perpetuity. The purchase
price was $55.2 million in cash and was funded from borrowings under the Company’s Revolver.
The transaction was accounted for as an asset acquisition in accordance with ASC 805, Business Combinations, because
substantially all of the fair value of the gross assets acquired were concentrated in a singular asset, the acquired inventory, which
was recorded at a value of $52.5 million. Additionally, a portion of the purchase price was used to settle preexisting liabilities of
$2.7 million. The amount was comprised of $3.9 million of deferred revenue for which the associated performance obligation
had not yet been performed by the Company for the Seller prior to the transaction date, offset by $1.2 million of accompanying
deferred costs.
46
Report of Independent Registered Public Accounting Firm
To the stockholders and the Board of Directors of Seneca Foods Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Seneca Foods Corporation and subsidiaries (the "Company")
as of March 31, 2024, the related consolidated statements of net earnings, comprehensive income, stockholders' equity, and
cash flows, for the year ended March 31, 2024, and the related notes and the schedules listed in the Index at Item 15
(collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of March 31, 2024, and the results of its operations and its cash
flows for the year ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of
America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of March 31, 2024, based on criteria established in
Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated June 13, 2024 expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements 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 the financial statements are free of material misstatement, whether due to
error or fraud. Our audit 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 audit 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 audit provides a reasonable basis for our opinion.
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) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters 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 a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Inventories — Refer to Notes 1 and 4 to the financial statements
Critical Audit Matter Description
Substantially all inventories are stated at the lower of cost or market with cost determined using the last in, first out (“LIFO”)
method. An actual valuation of inventory under the LIFO method is made at the end of each fiscal year based on inventory
levels and costs at that time to adjust the inventory balance from First in, first out (“FIFO”) cost to LIFO cost. On March 31,
2024, the Company's inventory balance was $872.7 million, determined using LIFO cost. The excess of inventory valuation
calculated using FIFO cost over LIFO cost amounted to $324.8 million. Management performs manual calculations using
significant assumptions and judgments regarding inventory quantities and costs to estimate the amount of excess FIFO cost
over LIFO cost.
47
Report of Independent Registered Public Accounting Firm
We identified valuation of inventories at LIFO cost as a critical audit matter because of the significant assumptions, manual
calculations, and judgments in the calculation of the excess of FIFO cost over LIFO cost, specifically due to the changes in
current costs and quantities of materials. Auditing management’s calculations was complex and required a high degree of
auditor judgment and subjectivity when performing audit procedures and evaluating the audit evidence obtained, due to the
sensitivity of the calculation to quantity and price fluctuations.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to LIFO inventories included the following, among others:
We tested the design, implementation, and effectiveness of the control over the calculation of the excess of FIFO cost
over LIFO cost, including management's control over the key inputs of the calculation for inventory valuation.
We tested the completeness, accuracy, and relevance of the underlying data used in management’s calculation of the
excess of FIFO cost over LIFO cost.
Tested the calculations and application of management’s methodologies related to the calculation of the excess of
FIFO cost over LIFO cost.
Tested the mathematical accuracy of management’s manual calculation.
Rochester, NY
June 13, 2024
We have served as the Company's auditor since 2023.
48
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Seneca Foods Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Seneca Foods Corporation (the “Company”) as of March 31,
2023, the related consolidated statements of net earnings, comprehensive income, stockholders' equity, and cash flows for each
of the years in the two-year period ended March 31, 2023, and the related notes and the schedules listed in the Index at Item
15 (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, 2023, and the results of its operations and its cash
flows for each of the years in the two-year period ended March 31, 2023, in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
The Company's management is responsible for these financial statements. Our responsibility is to express an opinion on the
Company’s 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.
We served as the Company's auditor from 2019 to 2023.
Southfield, Michigan
June 13, 2023
(except for Note 4, as to which the date is July 31, 2023 and except for Note 13, as to which the date is June 13, 2024)
49
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Seneca Foods Corporation
Balance at Charged/ Charged to Deductions
Balance
beginning (credited)
other
from
at end
of period to income
accounts
reserve
of period
Year-ended March 31, 2024:
Allowance for doubtful accounts
$
34 $
289 $
- $
270 (a) $
53
Income tax valuation allowance
$
5,007 $
(123) $
- $
- $
4,884
Year-ended March 31, 2023:
Allowance for doubtful accounts
$
54 $
(20) $
- $
- (a) $
34
Income tax valuation allowance
$
3,931 $
1,076 $
- $
- $
5,007
Year-ended March 31, 2022:
Allowance for doubtful accounts
$
339 $
(291) $
- $
(6) (a) $
54
Income tax valuation allowance
$
4,674 $
(743) $
- $
- $
3,931
(a) Accounts written off, net of recoveries.
50
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, 2024. 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, 2024, our internal control over financial reporting is effective based on those criteria.
The Company’s independent registered public accounting firm, Deloitte & Touche LLP, has issued its report on the effectiveness
of the Company’s internal control over financial reporting. Their report appears on the next page.
51
Report of Independent Registered Public Accounting Firm
To the stockholders and the Board of Directors of Seneca Foods Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Seneca Foods Corporation and subsidiaries (the “Company”) as
of March 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control
— Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended March 31, 2024, of the Company and our report
dated June 13, 2024, expressed an unqualified opinion on those financial statements.
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 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 included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and 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.
Rochester, NY
June 13, 2024
52
Shareholder Information
Seneca Foods Corporation
The Company’s common stock is traded on The NASDAQ Global Select Market. The 5.4 million Class A outstanding shares
and 1.7 million Class B outstanding shares are owned by 110 and 116 shareholders of record, as of March 31, 2024, respectively.
As of March 31, 2024, 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 $23,181 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.
Stock Performance Graph
The graph below compares the cumulative total shareholder return on the Company’s Class A Common Stock (SENEA) for the
last five fiscal years ended March 31 with (1) the cumulative return on the S&P SmallCap 600 and (2) the cumulative return on
the S&P Packaged Foods & Meats Index for this same time period. The graph assumes the investment of $100 on March 31,
2019 and reinvestment of all dividends. The common stock price performance shown on the graph only reflects the change in
the Company’s SENEA price relative to the noted indices and is not necessarily indicative of future price performance.
For the Fiscal Year Ended March 31,
2019
2020
2021
2022
2023
2024
Seneca Foods Corporation
$ 100.00 $ 161.71 $ 191.42 $ 209.51 $ 212.48 $ 231.30
S&P SmallCap 600
$ 100.00 $
74.11 $ 144.76 $ 146.54 $ 133.62 $ 154.90
S&P Packaged Foods and Meats Index
$ 100.00 $ 100.20 $ 124.28 $ 137.02 $ 150.56 $ 140.14
53
Corporate Information
Seneca Foods Corporation
Manufacturing Plants and Warehouses
Square
Footage
Acres
(000)
Food Group
Nampa, Idaho
244
16
Payette, Idaho
404
43
Princeville, Illinois
278
568
Hart, Michigan
365
83
Traverse City, Michigan
58
43
Blue Earth, Minnesota
287
429
Glencoe, Minnesota
699
921
LeSueur, Minnesota
81
497
Montgomery, Minnesota
572
1,172
Rochester, Minnesota
835
620
Geneva, New York
762
593
Leicester, New York
228
91
Dayton, Oregon
82
19
Dayton, Washington
250
29
Yakima, Washington
122
8
Baraboo, Wisconsin
641
13
Berlin, Wisconsin
96
125
Cambria East, Wisconsin
399
401
Cambria West, Wisconsin
365
321
Clyman, Wisconsin
474
724
Cumberland, Wisconsin
437
307
Gillett, Wisconsin
329
90
Janesville, Wisconsin
1,298
342
Mayville, Wisconsin
239
354
Oakfield, Wisconsin
231
2,135
Ripon, Wisconsin
647
87
Non-Food Group (1)
Fairport, New York
12
-
Penn Yan, New York
27
4
Total
10,462
10,035
54
Corporate Information
Seneca Foods Corporation
Directors
Kraig H. Kayser, Chairman
John P. Gaylord
Donald J. Stuart
Former President and Chief Executive Officer
President
Managing Partner/Founder
Seneca Foods Corporation
Jacintoport Terminal Company
Cadent Consulting Group
Kathryn J. Boor, Ph.D.
Linda K. Nelson
Bruce E. Ware
Dean of the Graduate School and Vice Provost Former Chief Financial Officer
Corporate Vice President
for Graduate Education at Cornell University
Birds Eye Foods
DaVita Inc.
Peter R. Call
Paul L. Palmby
Keith A. Woodward
President
President and Chief Executive Officer
Former Chief Financial Officer
My-T Acres, Inc.
Seneca Foods Corporation
Tennant Company
Executive Officers
Paul L. Palmby, President
Timothy R. Nelson, Senior Vice President
Chief Executive Officer
Operations
Dean E. Erstad, Senior Vice President
Michael S. Wolcott, Senior Vice President
Sales and Marketing
Chief Financial Officer and Treasurer
Officers
Carl A. Cichetti, Senior Vice President
Aaron M. Girard, Senior Vice President
Gregory R. Ide, Vice President
Technology and Planning, Chief Information
Officer
Logistics
Corporate Controller and Assistant Secretary
John D. Exner, General Counsel
Matt J. Henschler, Senior Vice President Julie A. Roloson, Senior Vice President
Secretary
Technical Services and Development
Human Resources, Chief Administrative Officer
Operations
Jon A. Brekken, Vice President
Leon Lindsay, Vice President
James Quinlan, Vice President
Western Vegetable Operations
Strategic Sourcing
Can Manufacturing
Aimee Jo Castleberry, Vice President
Eric E. Martin, Vice President
Mary Sagona, Vice President
Human Resources
Eastern Vegetable Operations
Accounting
Paul Hendrickson, Vice President
Janelle Murphy, Vice President
Benjamin M. Scherwitz, Vice President
Process Excellence
Procurement
Technical Services
Steven F. Lammers, Vice President
Beth Newell, General Manager
Richard L. Waldorf, Vice President
Technical Services
Seneca Snack
Customer Service
Richard Leppert, General Manager
Timothy Nolan, Vice President
Seneca Flight
Information Technology
Sales and Marketing Groups
Carl B. Bowling, Vice President
George E. Hopkins, III, Vice President
Beau P. Simonson, Vice President
Branded Sales
Private Label Retail
Foodservice Dry Grocery
David A. Carter, Vice President
Kevin F. Lipps, Vice President
Courtney Schulis, Vice President
Marketing and National Accounts
International Sales
Glace Sales
Jesse Hayes, Vice President
Victoria A. Ninneman, Vice President
Aaron L. Wadell, Vice President
Frozen Sales and Chain Accounts
Industrial and Ingredient Sales
E-Business
55
Corporate Information
Seneca Foods Corporation
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 2024 Annual Meeting of Shareholders will be held on Thursday, August 8, 2024, beginning at 1:00 PM (CDT) at the Company’s
offices at 600 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 June 14, 2024.
How To Reach Us
Seneca Foods Corporation
350 WillowBrook Office Park
Fairport, New York 14450
(585) 495-4100
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, 2024, as filed with the Securities and
Exchange Commission, will be provided by the Company to any shareholder who so requests in writing to:
Gregory R. Ide
Seneca Foods Corporation
350 WillowBrook Office Park
Fairport, New York 14450
(585) 495-4100
This annual report is also available online at http://www.senecafoods.com/investors
Foundation/Contribution Requests
Seneca Foods Foundation
Julie A. Roloson
350 WillowBrook Office Park
Fairport, New York 14450
(585) 495-4100
foundation@senecafoods.com
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
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Rochester, New York
Corporate Governance
www.senecafoods.com/corporate-governance
General Counsel
Bond, Schoeneck & King, PLLC
Buffalo, New York
Code of Business Ethics
www.senecafoods.com/code-ethics
Hotline (800) 213-9185
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