--03-31 FY 2021
 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.D. C. 20549

FORM 10-K

10-K/A

(Amendment No. 1)

(Mark one)

 ☒

☑

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 20212023

OR

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File Number 0-01989

SENECA FOODS CORPORATION0-01989

Seneca Foods Corporation

(Exact name of registrantRegistrant as specified in its charter)

New York

16-0733425

(State or other jurisdiction of incorporation or organization)

organization

(I. R. S. Employer Identification No.

3736 South Main Street

Marion, 350 WillowBrook Office Park, Fairport, New York

14450

(Address of principal executive offices)

16-0733425
(I.R.S. Employer Identification No.)
14505

(Zip Code)

Registrant’s telephone number, including area code:(315(585) 495-4100) 926-8100

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class

Trading Symbol

Name of each exchangeExchange on which registeredWhich Registered

Common Stock Class A,, $.25 Par

SENEA

NASDAQ Global Select Market

Common Stock Class B,, $.25 Par

SENEB

NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒☑ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer ☐Accelerated filer ☒☑Non-accelerated filer ☐Smaller reporting company ☒☐Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Yes ☑ No ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

☑

The aggregate market value of the voting and non-voting common equity held by non‑affiliatesnon-affiliates of the Registrant as of September 25, 2020,30, 2022, the last business day of the Registrant’s most recently completed second fiscal quarter, was $232,133,327$300,641,214 (based on the closing share price per market reports generated from the NASDAQ Global Select Market System on September 25, 2020)30, 2022).

As of May 25, 2021,July 13, 2023, there were 7,343,7455,884,855 shares of Class A common stock and 1,705,9381,708,781 shares of Class B common stock outstanding.

 
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EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (“Amendment No. 1”) amends the Annual Report on Form 10-K of Seneca Foods Corporation (the “Company”) for the year ended March 31, 2023 as originally filed with the Securities and Exchange Commission (the “SEC”) on June 13, 2023 (the “Original Filing”).

This Amendment No. 1 amends the Original Filing to reflect the restatement of the Company’s audited Consolidated Financial Statements for the years ended March 31, 2023 and 2022 in order to correct an error related to the Company’s accounting for valuing inventory using the LIFO method, as more fully described in Note 2 to the Consolidated Financial Statements contained in this Amendment No. 1.

The restatement of the Company’s prior period financial statements to reflect this error (i) increases cost of products sold by $31.6 million and $6.3 million in fiscal years 2023 and 2022, respectively and (ii) reduces net earnings by $23.9 million and $4.8 million in fiscal years 2023 and 2022, respectively, from the amounts previously reported in the Original Filing.

The foregoing changes are solely related to the valuation of inventory under the LIFO method and have no impact on results under the first-in, first out (FIFO) method of inventory accounting. As such, the adjustments described above are entirely non-cash: there is no impact on the Company’s cash position, cash flow, revenues, or liquidity. There is no impact on the Company’s financial covenants contained within its credit agreements, which are based on FIFO results. There is no impact on Adjusted Annual Earnings, which the Company determined to be its most important financial performance measure in its most recently filed Proxy Statement.

In connection with the LIFO valuation error, the Company’s management identified a material weakness in its internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected and corrected on a timely basis. For a discussion of management’s consideration of the material weakness identified, see Item 9A. Controls and Procedures included in this Amendment.

Revisions to the Original Filing have been made to the following sections:

●

Part I, Item 1 – Business (specifically the information under the subheading “Seasonality”)

●

Part I, Item 1A – Risk Factors (specifically the information under the risk factor “Tax legislation could impact future cash flows.”

●

Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations (originally included in Exhibit 13 to the Original Filing)

●

Part II, Item 8 - Financial Statements and Supplementary Data (originally included in Exhibit 13 to the Original Filing)

●

Part II, Item 9A - Controls and Procedures

●

Part IV, Item 15 - Exhibits and Financial Statement Schedules

In addition, the Company’s principal executive officer and principal financial officer have provided new certifications dated as of the date of this filing in connection with this Amendment No. 1 (Exhibits 31.1, 31.2, and 32).

Except as described above, this Amendment No. 1 does not amend, update or change any other disclosures in the Original Filing. In addition, the information contained in this Amendment No. 1 does not reflect events occurring after the filing of the Original Filing and does not modify or update the disclosures therein, except as specifically identified above. Among other things, forward-looking statements made in the Original Filing have not been revised to reflect events, results or developments that occurred or facts that became known to us after the date of the Original Filing, other than the restatement, and such forward-looking statements should be read in conjunction with our filings with the SEC, including those subsequent to the filing of the Original Filing.

 
DOCUMENTS INCORPORATED BY REFERENCE:

 
(1)Portions of the Annual Report to shareholders for fiscal year ended March 31, 2021 (the “2021 Annual Report”) applicable to Part I, Item 1, Part II, Items 5‑9A and Part IV, Item 15 of Form 10‑K.
(2)Portion of the Proxy Statement to be issued in connection with the Registrant’s annual meeting of stockholders (the “Proxy Statement”) applicable to Part III, Items 10-14 of Form 10-K.

Table of Contents

SENECA FOODS CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2021
TABLE OF CONTENTS

PART I.
 Pages
Item 1.

PART I.

Business
1-4
Item 1A.
Risk Factors
5-10
Item 1B.
Unresolved Staff Comments
10
Item 2.
Properties
11
Item 3.
Legal Proceedings
12
Item 4.
Mine Safety Disclosures
12

Pages

   
PART II.

Item 1.

Business

1

Item 1A.

Risk Factors

1

  
Item 5.

PART II.

Market for Registrant’s Common Stock, Related Security Holder Matters and Issuer Purchases of Equity Securities
13
Item 6.
Selected Financial Data
13

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

2

Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
14

Item 8.

Financial Statements and Supplementary Data

14

12

Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
14

Item 9A.

Controls and Procedures

14-16
Item 9B.

Other Information40

16

   

PART III.

IV.

  
Item 10.
Directors, Executive Officers and Corporate Governance
17
Item 11.
Executive Compensation
17
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
17
Item 13.
Certain Relationships and Related Transactions, and Director Independence
17
Item 14.
Principal Accountant Fees and Services
17
   
PART IV.

Item 15.

Exhibits and Financial Statement Schedules

18-19
Item 16.

Form 10-K Summary42

19

   

SIGNATURES

21

44

 
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Forward-Looking Statements

 
Certain of the statements contained in this annual report on Form 10-K are forward-looking statements made within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (Exchange Act). Forward-looking statements involve numerous risks and uncertainties. Forward-looking statements are not in the present or past tense and, in some cases, can be identified by the use of the words "will," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "seeks," "should," "likely," "targets," "may", "can" and other expressions that indicate future trends and events. A forward-looking statement speaks only as of the date on which such statement is made and reflects management's analysis only as of the date thereof. Seneca Foods Corporation undertakes no obligation to update any forward-looking statement. The following factors, among others discussed herein and in the filings of Seneca Foods Corporation under the Exchange Act, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: the impact of the COVID-19 pandemic on our business, suppliers, customers, consumers and employees, costs and availability of raw materials, competition, cost controls, sales levels, governmental regulation, consumer preferences, industry trends, weather conditions, crop yields, natural disasters, recalls, litigation, reliance on third-parties, wage rates, and other factors. See also the factors described in "Part I, Item 1A. Risk Factors" and elsewhere in this report, and those described in the Company's filings under the Exchange Act.

PART I

Item 1

1. Business
History and Development of Seneca Foods Corporation
SENECA FOODS CORPORATION (the “Company”) is one of North America's leading providers of packaged vegetables with facilities located throughout the United States. The Company’s product offerings include canned, frozen and bottled produce and snack chips and its products are sold under private label as well as national and regional brands that the Company owns or licenses, including Seneca®, Libby’s®, Aunt Nellie’s®, READ®, Green Valley® and CherryMan®.
As of March 31, 2021, the Company’s facilities consisted of 22 packaging plants strategically located throughout the United States, two can manufacturing plants one of which also packages, three seed packaging operations, a farming operation and a logistical support network. The Company also maintains warehouses which are generally located adjacent to its packaging plants. The Company is a New York corporation and its headquarters is located at 3736 South Main Street, Marion, New York and its telephone number is (315) 926-8100.
The Company was founded in 1949 and has evolved through internal growth and strategic acquisitions. The Company pursues acquisitions when they are strategic and financially additive and meet its overall business needs. In 73 years of operation the Company has made over 50 strategic acquisitions, investments and alliances that have expanded its leadership in the packaged fruit and vegetable industry. Most recently, during 2021, the Company acquired a facility in Berlin, Wisconsin to aid its frozen business by expanding freezing capability and adding frozen celery production to the core fruit and vegetable business. The Company also engages in strategic sales of its assets from time to time, as it makes financial sense to do so. During 2021, the Company completed the sale of its prepared foods business as the nature of that business was not central to the Company’s primary business and the sale allowed for the continued focus and investment in the Company’s core fruit and vegetable business.
Available Information
The Company’s Internet address is www.senecafoods.com. The Company’s annual report on Form 10-K, the Company’s quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available on the Company’s web site, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. All such filings on the Company’s web site are available free of charge. Information on our website is not part of the Annual Report on Form 10-K.
In addition, the Company's website includes items related to corporate governance matters, including charters of various committees of the Board of Directors and the Company's Code of Business Conduct and Ethics. The Company intends to disclose on its website any amendment to or waiver of any provision of the Code of Business Conduct and Ethics that would otherwise be required to be disclosed under the rules of the SEC and NASDAQ.
1
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Financial Information about Industry Segments
Entering 2021, the Company managed its business on the basis of three reportable segments which makeup its food operation – the primary segment being the packaging and sale of fruit and vegetables, secondarily, the packaging and sale of prepared food products and third being the packaging and sale of snack products. Other nonfood products round out the Company’s operations. During December 2021, the Company completed the sale of its prepared foods business, leaving two remaining reportable segments. The Company’s food operation constituted 98% of total sales in 2021, of which approximately 81% is canned vegetable packaging, 6% is canned fruit packaging, 7% is frozen fruit and vegetable packaging, 5% is prepared foods prior to the sale, and 1% is chip packaging. The non-food operation, which is primarily related to the sale of cans and ends and outside revenue generated from our trucking and aircraft operations, represents 2% of the Company’s total sales.
Narrative Description of Business
Principal Products and Markets
Food Packaging
The Company’s principal products include canned fruit and vegetables, frozen vegetables and other food products. The products are sold nationwide by major grocery outlets, including supermarkets, mass merchandisers, limited assortment stores, club stores and dollar stores. Additionally, products are sold to food service distributors, industrial markets, other food packagers, export customers in 90 countries and federal, state and local governments for school and other feeding programs. Food packaging operations are primarily supported by plant locations in New York, Michigan, Oregon, Wisconsin, Washington, Idaho, Illinois, and Minnesota. See Note 14 of Item 8, Financial Statements and Supplementary Data, for additional information about the Company’s segments.
The following table summarizes net sales by major product category for the years ended March 31, 2021 and 2020:
  2021  2020 
  (In thousands) 
Canned vegetables $1,172,635  $986,080 
Frozen  102,339   119,044 
Fruit Products  88,289   97,393 
Prepared foods  71,866   105,044 
Chip Products  10,999   11,475 
Other  21,516   16,733 
Total $1,467,644  $1,335,769 
Source and Availability of Raw Materials
The Company’s food packaging plants are located in major vegetable producing states. Vegetables are primarily obtained through supply contracts with independent growers.
Intellectual Property
The Company's most significant brand name, Libby's®, is held pursuant to a trademark license granted to the Company in March 1982 and renewable by the Company every 10 years for an aggregate period expiring in March 2081. The original licensor was Libby, McNeill & Libby, Inc., then an indirect subsidiary of Nestlé, S. A. ("Nestlé") and the license was granted in connection with the Company's purchase of certain of the licensor's canned vegetable operations in the United States. Corlib Brands Management, LTD acquired the license from Nestlé during 2006. The license is limited to vegetables which are shelf-stable, frozen, and thermally packaged, and includes the Company's major vegetable varieties – corn, peas and green beans – as well as certain other thermally packaged vegetable varieties and sauerkraut.
The Company is required to pay an annual royalty to Corlib Brands now known as Libby's Brand Holding, Ltd., who may terminate the license for non-payment of royalty, use of the trademark in sales outside the licensed territory, failure to achieve a minimum level of sales under the licensed trademark during any calendar year or a material breach or default by the Company under the agreement (which is not cured within the specified cure period). With the purchase of Signature Fruit Company, LLC, which also uses the Libby’s® brand name, the Company re-negotiated the license agreement and created a new, combined agreement based on Libby’s® revenue dollars for fruits, vegetables, and dry beans. During 2021, the Company and Libby’s Brand Holding, Ltd. renegotiated again to remove fruit from the license agreement. A total of $114,000 was paid as a royalty fee for the year ended March 31, 2021.
The Company also sells canned vegetables, frozen vegetables and other food products under several other brands for which the Company has obtained registered trademarks, including, Aunt Nellie’s®, CherryMan®, Green Valley®, READ®, and Seneca® and other regional brands.
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Seasonal Business

Seasonality

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 vegetable,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 late in the fourth quarter/early in the 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.

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.

These seasonal fluctuations are illustrated in the following table, which presents certain unaudited quarterly financial information for the periods indicated:

  
First
Quarter
  
Second
Quarter
  
Third
Quarter
  
Fourth
Quarter
 
  (In thousands) 
Year ended March 31, 2021:                
Net sales $288,165  $390,294  $484,392  $304,793 
Gross margin  48,562   48,943   77,704   56,976 
Net earnings  20,706   18,105   72,460   14,829 
Revolver outstanding (at quarter end)  34,406   62,611   -   1,000 
                 
Year ended March 31, 2020:                
Net sales $264,925  $370,002  $392,971  $307,871 
Gross margin  19,174   24,055   52,277   46,382 
Net earnings  1,103   4,635   24,428   21,022 
Revolver outstanding (at quarter end)  136,014   133,338   114,689   106,924 
Backlog
In the food packaging business, an end of year sales order backlog is not considered meaningful. Traditionally, larger customers provide tentative bookings for their expected purchases for the upcoming season. These bookings are further developed as data on the expected size of the related national harvests becomes available. In general, these bookings serve as a yardstick rather than as a firm commitment, since actual harvest results can vary notably from early estimates. In actual practice, the Company has substantially all of its expected seasonal production identified to potential sales outlets before the seasonal production is completed.
Competition and Customers
Competition in the food business is substantial with brand recognition and promotion, quality, service, and pricing being the major determinants in the Company’s relative market position. The Company believes that it is a major producer of canned vegetables, but some producers of canned, frozen and other forms of vegetable products have sales which exceed the Company's sales. The Company is aware of at least 13 competitors in the U.S. packaged vegetable industry, many of which are privately held companies.
During the past year, approximately 10% of the Company’s packaged foods, excluding cherry products, were sold under its own brands, or licensed trademarks, including Seneca®, Libby's®, Aunt Nellie's®, Green Valley® and READ®. The remaining 90% of packaged foods were sold under private labels, food service, international, contracting packaging, industrial, prepared foods, chips, and cherry products (including the CherryMan® brand) segments.
The Company's principal branded products are its Libby’s canned vegetable products, which rate among the top three national brands according to a leading market research firm.
The information under the heading "Results of Operations in Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the 2021 Annual Report is incorporated by reference.
3
indicated (in thousands):

  

First
Quarter

  

Second

Quarter

  

Third
Quarter

  

Fourth

Quarter

 

 

             

(Restated)

 
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

  5,103   16,131   21,054   (33,057)
                 

Fiscal Year 2022:

                

Net sales

 $235,042  $372,256  $445,593  $332,389 

Gross margin

  33,623   42,728   44,985   20,260 

Net earnings

  14,136   11,654   18,664   1,746 

Table of Contents

Environmental Regulation
Environmental Protection
Environmental protection is an area that has been worked on diligently at each food packaging facility. In all locations, the Company has cooperated with federal, state, and local environmental protection authorities in developing and maintaining suitable antipollution facilities. In general, we believe our pollution control facilities are equal to or somewhat superior to those of our competitors and are within environmental protection standards. The Company does not expect any material capital expenditures to comply with environmental regulations in the near future.
There has been a broad range of proposed and promulgated state, national and international regulations aimed at reducing the effects of climate change. In the United States, there is a significant possibility that some form of regulation will be forthcoming at the federal level to address the effects of climate change. Such regulation could result in the creation of additional costs in the form of taxes, the restriction of output, investments of capital to maintain compliance with laws and regulations, or required acquisition or trading of emission allowances.
Environmental Litigation and 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, worker’s compensation and other employee claims, tort and other general liability claims, for which it carries insurance as well as patent infringement and related litigation. The Company is in a highly regulated industry and is also periodically involved in government actions for regulatory violations and other matters surrounding the manufacturing of its products, including, but not limited to, environmental, employee, and product safety issues. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company does not believe that an adverse decision in any of these legal proceedings would have a material adverse impact on its financial position, results of operations, or cash flows.
Employment
As of the end of December 2020, the Company had approximately 3,000 employees of which 2,900 full time and 100 seasonal employees work in food packaging and 100 full time employees work in other activities. The number of employees increases by approximately 4,000 due to an increase in seasonal employees during our peak pack season.
The Company has six collective bargaining agreements with three unions covering approximately 840 of its full-time employees.  The terms of these agreements result in wages and benefits which are substantially the same for comparable positions for the Company’s non-union employees.  There are two agreements that will expire in calendar 2022, two agreements that will expire in calendar 2023, one agreement that will expire in calendar 2024, and one agreement that will expire in calendar 2025.
Domestic and Export Sales
The following table sets forth domestic and export sales:
  Fiscal Year 
  2021  2020 
  (In thousands, except percentages) 
Net Sales:        
United States $1,372,679  $1,248,904 
Export  94,965   86,865 
Total Net Sales $1,467,644  $1,335,769 
         
As a Percentage of Net Sales:        
United States  93.5%  93.5%
Export  6.5%  6.5%
Total  100.0%  100.0%
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Item 1A
1A. Risk Factors
The following factors as well as factors described elsewhere in this Form 10-K or in other filings by the Company with the Securities and Exchange Commission, could adversely affect the Company’s consolidated financial position, results of operations or cash flows. Other factors not presently known to us or that we presently believe are not material could also affect our business operations or financial results. The Company refers to itself as “we”, “our” or “us” in this section.
Vegetable Industry Risks
Excess capacity in the vegetable industry has a downward impact on selling price.
If canned vegetable categories decline, less shelf space will be devoted to these categories in the supermarkets. Fresh and perishable businesses are improving their delivery systems around the world and the availability of fresh produce is impacting the consumers purchasing patterns relating to processed vegetables. Our financial performance and growth are related to conditions in the United States’ vegetable packaging industry which is a mature industry with a modest growth rate during the last 10 years. Our net sales are a function of product availability and market pricing. In the vegetable packaging industry, product availability and market prices tend to have an inverse relationship: market prices tend to decrease as more product is available and to increase if less product is available. Product availability is a direct result of plantings, growing conditions, crop yields and inventory levels, all of which vary from year to year. Moreover, vegetable production outside the United States, particularly in Europe, Asia and South America, is increasing at a time when worldwide demand for certain products, is being impacted by the global economic slowdown. These factors may have a significant effect on supply and competition and create downward pressure on prices. In addition, market prices can be affected by the planting and inventory levels and individual pricing decisions of our competitors. Generally, market prices in the vegetable packaging industry adjust more quickly to variations in product availability than an individual packager can adjust its cost structure; thus, in an oversupply situation, a packager’s margins likely will weaken. We typically have experienced lower margins during times of industry oversupply.
In the past, the vegetable packaging industry has been characterized by excess capacity, with resulting pressure on our prices and profit margins. We have closed packaging plants in past years in response to the downward pressure on prices. There can be no assurance that our margins will improve in response to favorable market conditions or that we will be able to operate profitably during depressed market conditions.
Growing cycles and adverse weather conditions may decrease our results from operations.
Our operations are affected by the growing cycles of the vegetables we package. When the vegetables are ready to be picked, we must harvest and package them quickly or forego the opportunity to package fresh picked vegetables for an entire year. Most of our vegetables are grown by farmers under contract with us. Consequently, we must pay the contract grower for the vegetables even if we cannot or do not harvest or package them. Most of our production occurs during the second quarter (July through September) of our fiscal year, which corresponds with the quarter that the growing season ends for most of the produce packaged by us. A majority of our sales occur during the third and fourth quarters of each fiscal year due to seasonal consumption patterns for our products. Accordingly, inventory levels are highest during the second and third quarters, and accounts receivable levels are highest during the third and fourth quarters. Net sales generated during our third and fourth fiscal quarters have a significant impact on our results of operations. Because of these seasonal fluctuations, the results of any particular quarter, particularly in the first half of our fiscal year, will not necessarily be indicative of results for the full year or for future years.
We set our planting schedules without knowing the effect of the weather on the crops or on the entire industry’s production. Weather conditions during the course of each vegetable crop’s growing season will affect the volume and growing time of that crop. As most of our vegetables are produced in more than one part of the U.S., this somewhat reduces the risk that our entire crop will be subject to disastrous weather. The upper Midwest is the primary growing region for the principal vegetables which we pack, namely peas, green beans and corn, and it is also a substantial source of our competitors’ vegetable production. The adverse effects of weather-related reduced production may be partially mitigated by higher selling prices for the vegetables which are produced.
The commodity materials that we package or otherwise require are subject to price increases that could adversely affect our profitability.
The materials that we use, such as vegetables, steel (used to make cans), ingredients, pouches and other packaging materials as well as the electricity and natural gas used in our business, are commodities that may experience price volatility caused by external factors, including market fluctuations, availability, currency fluctuations and changes in governmental regulations and agricultural programs. General inventory positions of major commodities, such as field corn, soybeans and wheat, all commodities with which we must compete for acreage, can have dramatic effects on prices for those commodities, which can translate into similar swings in prices needed to be paid for our contracted commodities. These programs and other events can result in reduced supplies of these commodities, higher supply costs or interruptions in our production schedules. If prices of these commodities increase beyond what we can pass along to our customers, our operating income will decrease.
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Risks Associated With Our Operations
COVID-19: Pandemics or disease outbreaks, such as the COVID-19 pandemic, may disrupt our business, including among other things, our supply chain, our manufacturing operations and customer and consumer demand for our products, and could have a material adverse impact on our business.
The ultimate impact that the recent COVID-19 outbreak or any future pandemic or disease outbreak will have on our business and our consolidated results of operations is uncertain. To date we have seen increased customer and consumer demand for our products as the COVID-19 pandemic reached the United States and consumers began pantry loading and increasing their at-home consumption as a result of increased social distancing and stay-at-home mandates. Increases in net sales by our company to supermarkets, mass merchants, warehouse clubs, wholesalers and ecommerce customers have more than offset declines at foodservice customers. However, this increased customer and consumer demand may decrease in the coming months.
The spread of pandemics or disease outbreaks such as COVID-19 may negatively affect our operations. If a significant percentage of our workforce or the workforce of our third party business partners is unable to work, including because of illness or travel or government restrictions in connection with the COVID-19 pandemic or any future pandemic or disease outbreak, our operations may be negatively impacted. Some of our workforce dwell in company provided housing and therefore outbreaks such as COVID-19 would need to be managed, to the extent possible, to meet health care protocols. Pandemics or disease outbreaks could result in a widespread health crisis that could adversely affect economies and financial markets, consumer spending and confidence levels resulting in an economic downturn that could affect customer and consumer demand for our products.
Our efforts to manage and mitigate these factors may be unsuccessful, and the effectiveness of these efforts depends on factors beyond our control, including the duration and severity of any pandemic or disease outbreak, as well as third party actions taken to contain its spread and mitigate public health effects.
The ultimate impact of the COVID-19 pandemic on our business will depend on many factors, including, among others, the duration of social distancing and stay-at-home mandates and whether a second or third wave of COVID-19 will affect the United States and the rest of North America, our ability to continue to operate our manufacturing facilities and maintain the supply chain without material disruption, and the extent to which macroeconomic conditions resulting from the pandemic and the pace of the subsequent recovery may impact consumer eating habits. We cannot predict the duration or scope of the disruption. Therefore, the financial impact cannot be reasonably estimated at this time.
We depend upon key customers.
Our products are sold in a highly competitive marketplace, which includes increased concentration and a growing presence of large-format retailers and discounters. Dependence upon key customers could lead to increased pricing pressure by these customers. A relatively limited number of customers account for a large percentage of the Company’s total net sales. The top ten customers represented approximately 50%, and 49% of net sales for 2021 and 2020, respectively. If we lose a significant customer or if sales to a significant customer materially decrease, our business, financial condition and results of operations may be materially and adversely affected.
If we do not maintain the market shares of our products, our business and revenues may be adversely affected.
All of our products compete with those of other national and regional food packaging companies under highly competitive conditions. The vegetable products which we sell under our own brand names not only compete with vegetable products produced by vegetable packaging competitors, but also compete with products we produce and sell to other companies who market those products under their own brand names, such as the Green Giant and Del Monte vegetables we sell under contract packing agreements and the vegetables we sell to various retail grocery chains which carry our customer’s own brand names.
The customers who buy our products to sell under their own brand names control the marketing programs for those products. In recent years, many major retail food chains have been increasing their promotions, offerings and shelf space allocations for their own vegetable brands, to the detriment of vegetable brands owned by the packagers, including our own brands. We cannot predict the pricing or promotional activities of our customers/competitors or whether they will have a negative effect on us. There are competitive pressures and other factors, which could cause our products to lose market share or result in significant price erosion that could materially and adversely affect our business, financial condition and results of operations.
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Increases in logistics and other transportation-related costs could materially adversely impact our results of operations.
Our ability to competitively serve our customers depends on the availability of reliable and low-cost transportation. We use multiple forms of transportation to bring our products to market. They include trucks, intermodal, rail cars, and ships. Disruption to the timely supply of these services or increases in the cost of these services for any reason, including availability or cost of fuel, regulations affecting the industry, or labor shortages in the transportation industry, could have an adverse effect on our ability to serve our customers, and could materially and adversely affect our business, financial condition and results of operations.
If we are subject to product liability claims, we may incur significant and unexpected costs and our business reputation could be adversely affected.
Food packagers are subject to significant liability should the consumption of their products cause injury or illness. We work with regulators, the industry and suppliers to stay abreast of developments. A product liability judgment against us could also result in substantial and unexpected expenditures, affect consumer confidence in our products, and divert management’s attention from other responsibilities. Product liability claims may also lead to increased scrutiny by federal and state regulatory agencies and could have a material adverse effect on our financial condition and results of operation. Although we maintain comprehensive general liability insurance coverage, there can be no assurance that this level of coverage is adequate or that we will be able to continue to maintain our existing insurance or obtain comparable insurance at a reasonable cost, if at all. A product recall or a partially or completely uninsured judgment against us could materially and adversely affect our business, financial condition and results of operations.
We are increasingly dependent on information technology; disruptions, failures or security breaches of our information technology infrastructure could have a material adverse effect on our operations.
We may become exposed to potential liabilities with respect to the data that we collect, manage and process, and may incur legal costs if our information security policies and procedures are not effective or if we are required to defend our methods of collection, processing and storage of data. Future investigations, lawsuits or adverse publicity relating to our methods of handling data could adversely affect our business, results of operations, financial condition and cash flows due to the costs and negative market reaction relating to such developments. We may not have the resources or technical expertise to anticipate or prevent rapidly evolving types of cyber-attacks. Actual or anticipated attacks will cause us to incur increased costs, including costs to hire additional personnel, purchase additional protection technologies, train employees, and engage third-party experts and consultants. In addition, data and security breaches can also occur as a result of non-technical issues, including breach by us or by persons with whom we have commercial relationships that result in the unauthorized release of confidential information. Any compromise or breach of our security could result in violation of applicable privacy and other laws, significant legal and financial exposure, and a loss of confidence in our security measures, which could have a material adverse effect on our results of operations and our reputation.
We generate agricultural food packaging wastes and are subject to substantial environmental regulation.
As a food packager, we regularly dispose of produce wastes (silage) and processing water as well as materials used in plant operation and maintenance, and our plant boilers, which generate heat used in packaging, produce generally small emissions into the air. These activities and operations are regulated by federal and state laws and the respective federal and state environmental agencies. Occasionally, we may be required to remediate conditions found by the regulators to be in violation of environmental law or to contribute to the cost of remediating waste disposal sites, which we neither owned nor operated, but in which, we and other companies deposited waste materials, usually through independent waste disposal companies. Future possible costs of environmental remediation, contributions and penalties could materially and adversely affect our business, financial condition and results of operations.
Our production capacity for certain products and commodities is concentrated in a limited number of facilities, exposing us to a material disruption in production in the event that a disaster strikes.
We only have three plants that receive and produce fruit products and one plant that produces pumpkin products. We have two plants that manufacture empty cans, one with substantially more capacity than the other, which are not interchangeable since each plant cannot necessarily produce all the can sizes needed. Although we maintain property and business interruption insurance coverage, there can be no assurance that this level of coverage is adequate in the event of a catastrophe or significant disruption at these or other Company facilities. If such an event occurs, it could materially and adversely affect our business, financial condition and results of operations.
We may undertake acquisitions or product innovations and may have difficulties integrating them or may not realize the anticipated benefits.
In the future, we may undertake acquisitions of other businesses or introduce new products, although there can be no assurances that these will occur. Such undertakings involve numerous risks and significant investments. There can be no assurance that we will be able to identify and acquire acquisition candidates on favorable terms, to profitably manage or to successfully integrate future businesses that we may acquire or new products we may introduce without substantial costs, delays or problems. Any of these outcomes could materially and adversely affect our business, financial condition and results of operations.
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We are dependent upon a seasonal workforce and our inability to hire sufficient employees may adversely affect our business.
At the end of our 2021 fiscal year, we had approximately 3,000 employees of which 2,900 full time and 100 seasonal employees worked in food packaging and 100 employees worked in other activities. During the peak summer harvest period, we hire up to approximately 4,000 seasonal employees to help package vegetables. If there is a shortage of seasonal labor, especially during 2021 as a result of COVID-19 or if there is an increase to minimum wage rates, this could have a negative impact on our cost of operations. Many of our packaging operations are located in rural communities that may not have sufficient labor pools, requiring us to hire employees from other regions. An inability to hire and train sufficient employees during the critical harvest period could materially and adversely affect our business, financial condition and results of operations.
There may be increased governmental legislative and regulatory activity in reaction to consumer perception related to BPA.
There has been continued state legislative activity to ban Bisphenol-A ("BPA") from food contact packaging. These legislative decisions are predominantly driven by consumer perception that BPA may be harmful. These actions have been taken despite the scientific evidence and general consensus of United States and international government agencies that BPA is safe and does not pose a risk to human health. The legislative actions combined with growing public perception about food safety may require us to change some of the materials used as linings in our packaging materials. Failure to do so could result in a loss of sales as well as loss in value of the inventory utilizing BPA containing materials. The Company, in collaboration with other can makers as well as enamel suppliers, has decided to aggressively work to find alternative materials for can linings not manufactured using BPA. However, commercially acceptable alternatives are not immediately available for some applications and there can be no assurance that these steps will be successful. Less than 1% of our canned product volume (excluding and purchased canned products) still includes BPA.
The implementation of the Food Safety Modernization Act of 2011 may affect operations
The Food Safety Modernization Act ("FSMA") was enacted with the goal of enabling the Food and Drug Administration ("FDA") to better protect public health by strengthening the food safety system. FSMA was designed to focus the efforts of FDA on preventing food safety problems rather than relying primarily on reacting to problems after they occur. The law also provides FDA with new enforcement authorities designed to achieve higher rates of compliance with prevention and risk-based food safety standards and to better respond to and contain problems when they do occur.  The increased inspections, mandatory recall authority of the FDA, increased scrutiny of foreign sourced or supplied food products, and increased records access may have an impact on our business. As we are already in a highly regulated business, operating under the increased scrutiny of more FDA authority does not appear likely to negatively impact our business.  The law also gives FDA important new tools to hold imported foods to the same standards as domestic foods.
The Company’s results are dependent on successful marketplace initiatives and acceptance by consumers of the Company’s products.
The Company’s product introductions and product improvements, along with its other marketplace initiatives, are designed to capitalize on new customer or consumer trends.  The FDA recently issued a statement on sodium which referred to an Institute of Medicine statement that too much sodium is a major contributor to high blood pressure. Some of our products contain a moderate amount of sodium per recommended serving, which is based on consumer’s preferences for taste.  In order to remain successful, the Company must anticipate and react to these new trends and develop new products or packages to address them. While the Company devotes significant resources to meeting this goal, we may not be successful in developing new products or packages, or our new products or packages may not be accepted by customers or consumers.
Financing Risks
Global economic conditions may materially and adversely affect our business, financial condition and results of operations.
Unfavorable economic conditions, including the impact of recessions in the United States and throughout the world, may negatively affect our business and financial results. These economic conditions could negatively impact (i) consumer demand for our products, (ii) the mix of our products’ sales, (iii) our ability to collect accounts receivable on a timely basis, (iv) the ability of suppliers to provide the materials required in our operations and (v) our ability to obtain financing or to otherwise access the capital markets. The strength of the U.S. dollar versus other world currencies could result in increased competition from imported products and decreased sales to our international customers. A prolonged recession could result in decreased revenue, margins and earnings. Additionally, the economic situation could have an impact on our lenders or customers, causing them to fail to meet their obligations to us. The occurrence of any of these risks could materially and adversely affect our business, financial condition and results of operations.
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Our ability to manage our working capital and our Revolver is critical to our success.
As of March 31, 2021, we had approximately $169.4 million of total indebtedness, including various debt agreements and a $1.0 million outstanding balance on our revolving credit facility (“Revolver”).  Scheduled debt service for fiscal 2021 is $28.3 million. During our second and third fiscal quarters, our operations generally require more cash than is available from operations.  In these circumstances, it is necessary to borrow under our Revolver.  Our ability to obtain financing in the future through credit facilities will be affected by several factors, including our creditworthiness, our ability to operate in a profitable manner and general market and credit conditions.  Significant changes in our business or cash outflows from operations could create a need for additional working capital.  An inability to obtain additional working capital on terms reasonably acceptable to us or access the Revolver would materially and adversely affect our operations. Additionally, if we need to use a portion of our cash flows to pay principal and interest on our debt, it will reduce the amount of money we have for operations, working capital, capital expenditures, expansions, acquisitions or general corporate or other business activities. 
Failure to comply with the requirements of our debt agreements and Revolver could have a material adverse effect on our business.
Our debt agreements and Revolver contain financial and other restrictive covenants which, among other things, limit our ability to borrow money, including with respect to the refinancing of existing indebtedness. These provisions may limit our ability to conduct our business, take advantage of business opportunities and respond to changing business, market and economic conditions. In addition, they may place us at a competitive disadvantage relative to other companies that may be subject to fewer, if any, restrictions. Failure to comply with the requirements of our Revolver and debt agreements could materially and adversely affect our business, financial condition and results of operations. We have pledged our accounts receivable, inventory and the capital stock or other ownership interests that we own in our subsidiaries to secure the Revolver. If a default occurred and was not cured, secured lenders could foreclose on this collateral.
Risks Relating to Our Stock
Our existing shareholders, if acting together, may be able to exert control over matters requiring shareholder approval.
Holders of our Class B common stock are entitled to one vote per share, while holders of our Class A common stock are entitled to one-twentieth of a vote per share. In addition, holders of our 10% Cumulative Convertible Voting Preferred Stock, Series A, our 10% Cumulative Convertible Voting Preferred Stock, Series B and, solely with respect to the election of directors, our 6% Cumulative Voting Preferred Stock, which we refer to as our voting preferred stock, are entitled to one vote per share. As of March 31, 2021, holders of Class B common stock and voting preferred stock held 88.1% of the combined voting power of all shares of capital stock then outstanding and entitled to vote. These shareholders, if acting together, would be in a position to control the election of our directors and to effect or prevent certain corporate transactions that require majority or supermajority approval of the combined classes, including mergers and other business combinations. This may result in us taking corporate actions that you may not consider to be in your best interest and may affect the price of our common stock.
As of March 31, 2021, our current executive officers and directors beneficially owned 9.3% of our outstanding shares of Class A common stock, 44.2% of our outstanding shares of Class B common stock and 10.8% of our voting preferred stock, or 29.1% of the combined voting power of our outstanding shares of capital stock. This concentration of voting power may inhibit changes in control of the Company and may adversely affect the market price of our common stock.
Our certificate of incorporation and bylaws contain provisions that discourage corporate takeovers.
Certain provisions of our certificate of incorporation and bylaws and provisions of the New York Business Corporation Law may have the effect of delaying or preventing a change in control. Various provisions of our certificate of incorporation and bylaws may inhibit changes in control not approved by our directors and may have the effect of depriving shareholders of any opportunity to receive a premium over the prevailing market price of our common stock in the event of an attempted unsolicited takeover. In addition, the existence of these provisions may adversely affect the market price of our common stock. These provisions include:
●a classified board of directors;
●a requirement that special meetings of shareholders be called only by our directors or holders of 25% of the voting power of all shares outstanding and entitled to vote at the meeting;
●our board of directors has the power to classify and reclassify any of our unissued shares of capital stock into shares of capital stock with such preferences, rights, powers and restrictions as the board of directors may determine;
●the affirmative vote of two thirds of the shares present and entitled to vote is required to amend our bylaws or remove a director; and
●under the New York Business Corporation Law, in addition to certain restrictions which may apply to “business combinations” involving us and an “interested shareholder”, a plan for our merger or consolidation must be approved by two-thirds of the votes of all outstanding shares entitled to vote thereon. See “Our existing shareholders, if acting together, may be able to exert control over matters requiring shareholder approval.” 
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We have not paid dividends on our common stock in the past.
We have not declared or paid any cash dividends on our common stock in the past. In addition, payment of cash dividends on our common stock is not permitted by the terms of our revolving credit facility. This policy may be revisited under the correct circumstances in the future.
Other Risks

Tax legislation could impact future cash flows.

The Company uses

We use the Last-In, First-Out (LIFO) method of inventory accounting. As of March 31, 2021,2023, we had a LIFO reserve of $128.7$302.4 million (restated) which, at the U.S. corporate tax rate, represents approximately $32.2$75.6 million (restated) of income taxes, payment of which is delayed to future dates based upon changes in inventory costs. From time-to-time, discussions regarding changes in U.S. tax laws have included the potential of LIFO being repealed. Should LIFO be repealed, the $32.2$75.6 million (restated) of postponed taxes, plus any future benefit realized prior to the date of repeal, would likely have to be repaid over some period of time. Repayment of these postponed taxes will reduce the amount of cash that we would have available to fund our operations, working capital, capital expenditures, expansions, acquisitions or general corporate or other business activities. This could materially and adversely affect our business, financial condition and results of operations.


The tax status of our insurance subsidiary could be challenged resulting in an acceleration of income tax payments.
In conjunction with our workers’ compensation program, we operate a wholly owned insurance subsidiary, Dundee Insurance Company, Inc. We recognize this subsidiary as an insurance company for federal income tax purposes with respect to our consolidated federal income tax return. In the event the Internal Revenue Service (“IRS”) were to determine that this subsidiary does not qualify as an insurance company, we could be required to make accelerated income tax payments to the IRS that we otherwise would have deferred until future periods.
Item 1B

Unresolved Staff Comments

None
 
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Item 2
Properties
The following table details the Company’s manufacturing plants and warehouses:
  Square     
  Footage  Acres 
  (000)     
Food Group
        
Nampa, Idaho  243   16 
Payette, Idaho  392   43 
Princeville, Illinois  288   496 
Hart, Michigan  361   78 
Traverse City, Michigan  58   43 
Blue Earth, Minnesota  286   429 
Glencoe, Minnesota  662   798 
LeSueur, Minnesota  82   7 
Montgomery, Minnesota  549   1,644 
Rochester, Minnesota  835   634 
Geneva, New York  769   594 
Leicester, New York  200   91 
Dayton, Oregon  82   19 
Dayton, Washington  250   28 
Yakima, Washington  122   8 
Baraboo, Wisconsin  625   13 
Berlin, Wisconsin  95   125 
Cambria East, Wisconsin  412   406 
Cambria West, Wisconsin  212   305 
Clyman, Wisconsin  438   724 
Cumberland, Wisconsin  400   307 
Gillett, Wisconsin  324   105 
Janesville, Wisconsin  1,228   342 
Mayville, Wisconsin  239   354 
Oakfield, Wisconsin  229   2,277 
Ripon, Wisconsin  634   87 
         
Non-Food Group
        
Marion, New York  6     
Penn Yan, New York  27   4 
Albany, Oregon  75   5 
         
Total  10,123   9,982 
These facilities primarily package various vegetable products. Most of the facilities are owned by the Company. The Company is a lessee under a number of operating leases for equipment and real property used for packaging and warehousing.
The Company believes that these facilities are suitable and adequate for the purposes for which they are currently intended. All locations, although highly utilized, have the ability to expand as sales requirements justify. Because of the seasonal production cycles, the exact extent of utilization is difficult to measure.
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Item 3
Legal Proceedings
See Note 15, "Legal Proceedings and Other Contingencies" to the Consolidated Financial Statements included in Item 8, Financial Statements and Supplemental Data.
See also Item 1, Business -- Environmental Regulation, for information regarding environmental legal proceedings.
Item 4
Mine Safety Disclosures
Not Applicable.
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PART II

Item 5

Market for Registrant’s Common Stock, Related Security Holder Matters and Issuer Purchases of Equity Securities
Each class of preferred stock receives preference as to dividend payment and declaration over any common stock. In addition, refer to the information in the 2021 Annual Report, “Shareholder Information”, which is incorporated by reference.
Securities Authorized for Issuance Under Equity Compensation Plans
The 2007 Equity Incentive Plan (the “2007 Equity Plan”) was approved by shareholders at the Company’s annual meeting on August 10, 2007 and extended on July 28, 2017. The 2007 Equity Plan expires in August 2027 and originally authorized the issuance of up to 100,000 shares of either Class A Common Stock and Class B Common Stock or a combination of the two classes of stock. 2,297 shares were awarded in fiscal year 2021 under the terms of the 2007 Equity Plan. As of March 31, 2021, there were 52,752 shares available for distribution as part of future awards under the 2007 Equity Plan. No additional shares have been awarded under the 2007 Equity Plan through the date of this Form 10-K. 
There are no equity compensation plans not approved by the Company’s shareholders.
Common Stock Performance Graph
As a smaller reporting company, we are not required to provide disclosure pursuant to this Item.
Issuer Purchases of Equity Securities
                      Maximum Number (or 
                      Approximate Dollar 
  Total Number of Shares  Average Price Paid per  Total Number of Shares  Value) of Shares that 
  Purchased (1)  Share  Purchased as Part of  May Yet Be Purchased 
  Class A  Class B  Class A  Class B  Publicly Announced  Under the Plans or 
Period Common  Common  Common  Common  Plans or Programs (2)(3)  Programs (2) 
1/01/21 - 1/31/21  -   -  $-  $-   -     
2/01/21 - 2/29/21  19,500   -  $51.53  $-   -     
3/01/21 - 3/31/21  15,031   -  $58.59  $-   531     
Total  34,531   -  $54.60  $-   531   - 
(1)No shares were purchased under the Company's share repurchase program. The purchases were made in open market transactions by the Trustees of the Seneca Foods Corporation Employees' Savings Plan, and the Seneca Foods, L.L.C. 401(k) Retirement Savings Plan to provide matching employee contributions under the Plans.
(2)In 2012 the Company's Board of Directors authorized the repurchase of the Company's stock. The number of shares authorized for repurchase increased from time to time, most recently on March 10, 2015 when the repurchase program was increased to 2,500,000 shares. During 2021, the share repurchase program was terminated. Prior to the termination of the program, the Company did not repurchase any shares in 2021.
(3)During 2021, the Company launched a tender offer to purchase from its stockholders up to $75 million in value of shares of its Class A common stock. The tender offer resulted in the Company purchase of 531 shares of common stock.
Item 6
Selected Financial Data
As a smaller reporting company, we are not required to provide disclosure pursuant to this Item.
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Item 7
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Refer

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 approximately 1,400 American farms. The Company’s product offerings include canned, frozen and bottled produce, and snack chips. Its products are sold under private label as well as national and regional brands that the Company owns or licenses, including Seneca®, Libby’s®, Aunt Nellie’s®, Cherryman®, Green Valley® and READ®. The Company’s 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, restaurants chains, industrial markets, other food processors, export customers in approximately 60 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 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.

Restatement of Previously Issued Financial Statements

On July 25, 2023, we reported that we had identified an error related to our accounting for valuing inventory using the LIFO method of accounting as of March 31, 2023 and 2022. 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. During the formulaic valuation of actual inventory values at fiscal year end, incorrect quantities were applied to the informationcalculation which resulted in an understatement of the LIFO reserve as of March 31, 2023 and 2022. Management determined that correct LIFO quantities were applied to the actual valuation of LIFO at year end prior to fiscal year 2022, as only trivial differences were noted during Management's examination. 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.

See Note 2 of the Notes to Consolidated Financial Statements for a summary of the effects of the restatement on the Company’s Consolidated Statements of Net Earnings and Consolidated Balance Sheets.

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, and the war in Ukraine. While we have no direct exposure to Russia and Ukraine, we have experienced increased costs for transportation, energy, and raw materials due in part to the negative impact of the Russia-Ukraine conflict 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 2023 versus Fiscal Year 2022

Net Sales:

The following table presents net sales by product category (in thousands):

  

Fiscal Year:

 
  

2023

  

2022

 

Canned vegetables

 $1,253,257  $1,135,983 

Frozen vegetables

  121,211   123,895 

Fruit products

  91,495   84,708 

Snack products

  12,661   12,332 

Other

  30,728   28,362 
  $1,509,352  $1,385,280 

Net sales for fiscal year 2023 totaled $1,509.4 million as compared to $1,385.3 million for fiscal year 2022. The overall net sales increase of $124.1 million, or 9.0%, was due to higher selling prices contributing favorability of $204.0 million offset by lower sales volumes having an unfavorable impact of $79.9 million to net sales, as compared to the prior fiscal year.

Net sales of canned vegetables, fruit products, and snack products increased over the prior fiscal year due to higher pricing necessitated by the material cost increases that the Company is experiencing. Volume in each of these product categories is down versus the prior fiscal year partially offsetting a portion of the favorability in net sales generated by increased pricing. Net sales in the frozen vegetable category decreased as compared to the prior fiscal year as increased pricing did not offset volume declines, primarily in the frozen contract packing sales channel.

Operating Income:

The following table sets forth the percentages of net sales represented by selected items for fiscal year 2023 and fiscal year 2022 reflected in our consolidated statements of net earnings:

  

Fiscal Year:

 
  

2023

  

2022

 
  

(Restated)

  

(Restated)

 

Gross margin

  6.9%  10.2%

Selling, general, and administrative expense

  5.4%  5.5%

Other operating (income) expense, net

  -0.1%  0.1%

Operating income

  1.4%  4.6%

Loss from equity investment

  0.0%  0.6%

Other non-operating income

  -0.4%  -0.7%

Interest expense, net

  0.9%  0.4%

Income taxes

  0.3%  1.0%

Gross Margin (restated) – Gross margin is equal to net sales less cost of products sold. As a percentage of net sales, gross margin was 6.9% for fiscal year 2023 as compared to 10.2% for fiscal year 2022. This decrease in gross margin was due primarily to a LIFO charge of $131.6 million in fiscal year 2023 versus a LIFO charge of $42.2 million in fiscal year 2022, a year over year negative impact to gross margin of $89.4 million. Fiscal year 2023’s large LIFO charge was driven by cost inflation for various inputs, including steel, commodities, labor, ingredients, packaging, fuel and transportation.

Selling, General and Administrative Expense– Selling, general and administrative expense was 5.4% of net sales in fiscal year 2023 and 5.5% of net sales in fiscal year 2022. The decrease as a percentage of net sales is primarily due to higher sales and the fixed nature of certain expenses.

Other Operating (Income) Expense, net– 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, along with a favorable true-up of the supplemental early retirement plan accrual. 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.

3

The Company had net other operating expense of $1.2 million in fiscal year 2022, which was driven by charges for supplemental early retirement plans and to maintain non-operating facilities classified as held for sale. These charges were partially offset by a net gain on the sale of assets and a gain from debt forgiveness on an economic development loan.

Restructuring – 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. The Company did not incur significant restructuring charges during fiscal year 2022.

Non-Operating Income:

Loss from Equity Investment – During fiscal year 2022, the Company incurred a pre-tax operating loss, including an impairment charge, of $7.8 million in connection with its equity investment that experienced a decline in value deemed other-than-temporary. The Company’s equity investment was written down to $0 as of March 31, 2022, and therefore no loss was incurred from equity investment during fiscal year 2023.

Interest Expense, Net– Interest expense as a percentage of net sales was 0.9% for fiscal year 2023 as compared to 0.4% for fiscal year 2022. Interest expense increased from $5.6 million in the prior fiscal year to $14.3 million for fiscal year 2023 as a result of higher interest rates and increased borrowing levels.

Other Non-Operating Income Expense – Other non-operating income totaled $6.8 million and $9.3 million in fiscal years 2023 and 2022, respectively, and is comprised of the non-service related pension amounts that are actuarially determined. The amounts can either be income or expense depending on the results of the actuarial calculations. For details of the calculation of these amounts, refer to Note 11 of the Notes to Consolidated Financial Statements.

Income Taxes (restated)– As a result of the aforementioned factors, pre-tax earnings decreased from $59.9 million in fiscal year 2022 to $13.8 million in fiscal year 2023. Income tax expense totaled $4.6 million and $13.7 million in fiscal years 2023 and 2022, respectively. The Company’s effective tax rate, as restated in fiscal years 2023 and 2022, was 33.1% and 22.9%, respectively. In fiscal year 2023, the Company added a valuation allowance against state tax credits because it was determined that it was more likely than not that the credits will not be used prior to expiration. This change, along with other current year increases in the existing valuation allowances, had 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. 

Earnings per Share:

  

Fiscal Year:

 
  

2023

  

2022

 
  

(Restated)

  

(Restated)

 

Basic earnings per common share

 $1.19  $5.28 

Diluted earnings per common share:

 $1.16  $5.24 

For details of the calculation of these amounts, refer to Note 4 of the Notes to Consolidated Financial Statements.

Results of Operations - Fiscal Year 2022 versus Fiscal Year 2021

Net Sales:

The following table presents net sales by product category (in thousands):

  

Fiscal Year

 
  

2022

  

2021

 

Canned vegetables

 $1,135,983  $1,172,635 

Frozen vegetables

  123,895   102,197 

Fruit products

  84,708   88,431 

Snack products

  12,332   10,999 

Prepared foods

  -   71,866 

Other

  28,362   21,516 
  $1,385,280  $1,467,644 

4

Net sales for fiscal year 2022 totaled $1,385.3 million as compared to $1,467.6 million for fiscal year 2021. The overall net sales decrease was $82.3 million, or 5.6%. Of the $82.3 million decrease in net sales, $71.9 million of the decrease resulted from the divestiture of the prepared foods business in fiscal year 2021. Excluding this divestiture, net sales decreased by $10.4 million year over year. This decrease was primarily due to lower sales volumes, which equated to a $93.0 million decrease in net sales that was partially offset by higher selling prices/improved sales mix generating a favorable impact to net sales of $82.6 million compared to the prior fiscal year.

When comparing net sales for fiscal year 2022 to fiscal year 2021, Annual Report, “Management’s Discussioncanned vegetable sales decreased $36.7 million, as there was extraordinary sales demand during fiscal year 2021, particularly the first nine months, due to consumer pantry loading that was experienced at the onset of the pandemic and Analysiscontinued throughout fiscal year 2021. Prepared foods decreased $71.9 million due to exiting the business in fiscal year 2021 after the sale of the prepared foods business. Additionally, there was a $3.7 million decrease in fruit product sales. The noted decreases to net sales were partially offset by a $21.7 million increase in frozen vegetable sales driven by increased sales volumes, a $1.3 million increase in snack product sales, and a $6.8 million increase in other sales.

Operating Income:

The following table sets forth the percentages of net sales represented by selected items for fiscal year 2022 and fiscal year 2021 reflected in our consolidated statements of net earnings:

  

Fiscal Year

 
  

2022

  

2021

 

Gross margin

  10.2%  15.8%

Selling, general, and administrative expense

  5.5%  5.4%

Other operating expense (income), net

  0.1%  -2.0%

Operating income

  4.6%  12.3%

Loss from equity investment

  0.6%  0.8%

Other non-operating (income) expense

  -0.7%  0.2%

Interest expense, net

  0.4%  0.4%

Income taxes

  1.0%  2.3%

Gross Margin (restated) – Gross margin is equal to net sales less cost of products sold. As a percentage of net sales, gross margin was 10.2% for fiscal year 2022 as compared to 15.8% for fiscal year 2021. This decrease in gross margin was due primarily to a LIFO charge of $42.2 million in fiscal year 2022 versus a LIFO credit of $15.6 million in fiscal year 2021, a year over year negative impact to gross margin of $57.8 million. Fiscal year 2022’s large LIFO charge was driven by cost inflation for various inputs, including steel, commodities, labor, ingredients, packaging, fuel and transportation.

Selling, General and Administrative Expense– Selling, general and administrative expense was 5.5% of net sales in fiscal year 2022 and 5.4% of net sales in fiscal year 2021. The increase as a percentage of net sales is primarily due to lower sales and the fixed nature of certain expenses.

Other Operating Expense (Income), net– The Company had net other operating expense of $1.2 million in fiscal year 2022, which was driven by charges for supplemental early retirement plans of $2.5 million and $1.1 million of charges to maintain non-operating facilities classified as held for sale. These charges were offset by a net gain on the sale of assets of $1.6 million, a gain from debt forgiveness on an economic development loan of $0.5 million, and income from land rental of $0.3 million.

The Company had net other operating income of $29.0 million in fiscal year 2021, which was primarily comprised of a net gain on the sale of assets of $31.9 million, including the gain realized upon the divestiture of the prepared foods business. The gain was partially offset by charges to maintain non-operational plants acquired in the Midwest of $1.5 million, a charge for a supplemental early retirement plan of $1.2 million, and a charge for severance of $0.2 million.

Restructuring – The Company did not incur significant restructuring charges during fiscal years 2022 or 2021.

Non-Operating Income:

Loss from Equity Investment – The Company’s loss from equity investment was $7.8 million and $11.5 million for fiscal years 2022 and 2021, respectively. Management assesses the potential for an other-than-temporary impairment of its equity method investment when impairment indicators are identified by considering all available information, including the recoverability of the investment, the earnings and near-term prospects of the investment, factors related to the industry, amongst others relevant information. If an investment is considered to be impaired and the decline in value is other than temporary, an impairment charge is recorded. During fiscal year 2022, the Company recorded an impairment charge of $6.3 million to reduce the carrying value of the equity method investment to $0, as the value of the investment was determined to not be recoverable. During fiscal year 2021, the Company had recorded an other-than-temporary impairment charge of $9.7 million to its equity method investment representing the difference between the carrying value of the Company’s investment and its proportionate share of the investment’s fair value.

5

Interest Expense, Net– Interest expense, net, was $5.6 million in fiscal year 2022 as compared to $6.1 million in fiscal year 2021. The decrease of $0.5 million was due mostly to lower average outstanding borrowings on the Company’s revolving credit facility and lower average interest rates during fiscal year 2022 versus fiscal year 2021. 

Other Non-Operating (Income) Expense – Other non-operating (income) expense totaled ($9.3 million) and $3.5 million in fiscal years 2022 and 2021, respectively, and is comprised of the non-service related pension amounts that are actuarially determined. The amounts can either be income or expense depending on the results of the actuarial calculations. For details of the calculation of these amounts, refer to Note 11 of the Notes to Consolidated Financial ConditionStatements.

Income Taxes (restated)– As a result of the aforementioned factors, pre-tax earnings decreased from $160.0 million in fiscal year 2021 to $59.9 million in fiscal year 2022. Income tax expense totaled $13.7 million and $33.9 million in fiscal years 2022 and 2021, respectively. The effective tax rate was 22.9% and 21.2% in fiscal years 2022 and 2021, respectively. In fiscal year 2021, the Company was able to carryback the NOL generated in the 2019 tax year at a 21% corporate tax rate to the 2015 tax year at a 35% corporate tax rate. The NOL carryback had a 2.8% decrease on the fiscal year 2021 rate and without this impact in fiscal year 2022, the tax rate effectively increased by 2.8% when comparing fiscal year 2022 to 2021. The year over year increase in the effective tax rate was partially offset by a decrease of 0.6% due to the federal income tax credits having a larger impact on the effective tax rate in fiscal year 2022, amongst other decreases noted in the table above.

Earnings per Share:

  

Fiscal Year

 
  

2022

  

2021

 
  

(Restated)

     

Basic earnings per common share

 $5.28  $13.82 

Diluted earnings per common share:

 $5.24  $13.72 

For details of the calculation of these amounts, refer to Note 4 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. Liquidity requirements are funded primarily through cash generated from operations and external sources of financing, including the revolving credit facility. The Company does not have any off-balance sheet financing arrangements.

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:

 
  

2023

  

2022

 

Cash (used in) provided by operating activities

 $(212,796

)

 $30,152 

Cash used in investing activities

  (64,877

)

  (45,187

)

Cash provided by (used in) financing activities

  279,025   (33,898

)

Increase (decrease) in cash and cash equivalents

  1,352   (48,933

)

Cash and cash equivalents, beginning of year

  10,904   59,837 

Cash and cash equivalents, end of year

 $12,256  $10,904 

Net Cash (Used in) Provided by Operating Activities– For fiscal year 2023, cash used in operating activities was $212.8 million, which consisted of a use of cash of $262.5 million (restated) by operating assets and liabilities partially offset by net earnings of $9.2 million (restated), adjusted by non-cash charges of $40.5 million (restated). The non-cash charges were largely driven by $40.9 million of depreciation and amortization. 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.

6

For fiscal year 2022, cash provided by operating activities was $30.2 million, which consisted of net earnings of $46.2 million (restated), adjusted by non-cash charges of $50.5 million (restated), partially offset by a use of cash of $66.5 million (restated) in operating assets and liabilities. The non-cash charges were largely driven by $36.5 million of depreciation and amortization. The change in operating assets and liabilities was largely due to inventories being a use of cash driven by a planned effort to raise inventory levels after the increased sales demand stemming from the COVID-19 pandemic significantly reduced inventory levels in the prior year. In addition to planning a larger seasonal pack to replenish depleted inventory, the Company began to experience material input cost inflation during fiscal year 2022, making the seasonal pack more costly to the Company.

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.

Net Cash Used in Investing Activities – 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 used in investing activities was $45.2 million for fiscal year 2022 and consisted of cash used for capital expenditures of $53.4 million partially offset by proceeds from the sale of assets totaling $8.2 million.

Net Cash Provided by (Used in) 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 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.

Net cash used in financing activities was $33.9 million for fiscal year 2022, driven mostly by purchasing treasury stock of $38.8 million and by making payments of $7.9 million on financing leases. The use of cash in financing was partially offset by an increase in net borrowings on the Company’s revolving credit facility of $19.5 million.

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.

Revolving Credit Facility – On March 24, 2021, the Company entered into a Fourth Amended and Restated Loan and Security Agreement that provides for a senior revolving credit facility of up to $400.0 million that is seasonally adjusted (the “Revolver”).

Maximum borrowing availability under the Revolver totals $300.0 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 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 can vary from a few days to seven months. Accordingly, the Company’s need to draw on the Revolver may fluctuate significantly throughout the year.

As of March 31, 2023 and 2022, the Revolver balance was $180.6 million and $20.5 million, respectively, and is included in Long-Term Debt in the accompanying Consolidated Balance Sheet due to the Revolver’s March 24, 2026 maturity.

The following table documents the quantitative data for short-term borrowings on the Revolver during fiscal years 2023 and 2022 (in thousands, except for percentages): 

  

As of:

 
  

March 31,

  

March 31,

 
  

2023

  

2022

 

Outstanding borrowings

 $180,598  $20,508 

Interest rate

  6.34

%

  1.71

%


 

Fiscal Year:

 
 

2023

 

2022

 

Maximum amount of borrowings

$350,828 $58,323 

Average outstanding borrowings

$159,670 $22,357 

Weighted average interest rate

 5.03

%

 1.37

%

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 (“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 rather than a variable interest rate in addition to requiring quarterly principal payments of $1.0 million, which commenced during fiscal year 2021. The Company incurred financing costs totaling $0.2 million which have been classified as a discount to the debt and are amortized over the life of the Term Loan. 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 “Amended Agreement”). The Amended Agreement governs two term loans, summarized below:

Term Loan A-1: The Amended Agreement continues certain aspects of the $100 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.

Term Loan A-2: The Amended Agreement adds an additional term loan in the amount of $175 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 the Secured Overnight Financing Rate (SOFR) plus an additional margin determined by the Company’s leverage ratio.

The Amended Agreement 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 term loans described above. In connection with the Amended Agreement, the Company incurred $0.6 million of financing costs which will be deferred and amortized over the life of Term Loan A-2.

As of March 31, 2023, 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 the Revolver’s March 24, 2026 maturity date (in thousands):

2024

 $10,000 

2025

  10,000 

2026

  267,598 

2027

  6,000 

2028

  149,500 

Thereafter

  216 

Total

 $443,314 

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 12 months and the foreseeable future.

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) $25,000,000. The most restrictive financial covenant in the debt agreements is the minimum EBITDA within the Term Loans which for fiscal year 2023 was greater than $75 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, 2023.

The Company's debt agreements limit the payment of dividends and other distributions. There is an annual total distribution limitation of $50,000, less aggregate annual dividend payments totaling $23,000 that the Company presently pays on two outstanding classes of preferred stock.

8

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, 2023, the Company had $2.9 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, 2023, while others are considered future obligations. Our contractual obligations primarily consist of operating leases, purchase obligations and commitments, 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 8 and 9 of Notes to Consolidated Financial Statements for information related to the Company’s long-term debt and operating and financing 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 10 of 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”,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 incorporatedthe 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 late in the fourth quarter/early in the 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.

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 statements items during fiscal years 2023, and 2022 to illustrate the Company’s seasonal business (in thousands):

  

First
Quarter

  

Second

Quarter

  

Third
Quarter

  

Fourth

Quarter

 

 

             

(Restated)

 
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

  5,103   16,131   21,054   (33,057)

Revolver outstanding (at quarter end)

  78,965   229,213   313,808   180,598 
                 

Fiscal Year 2022:

                

Net sales

 $235,042  $372,256  $445,593  $332,389 

Gross margin

  33,623   42,728   44,985   20,260 

Net earnings

  14,136   11,654   18,664   1,746 

Revolver outstanding (at quarter end)

  1,000   51,679   33,711   20,508 

9

Critical Accounting Policies and Estimates:

Revenue Recognition and Trade Promotion Expenses – 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. During fiscal years 2023 and 2022, the Company sold certain finished goods inventory for cash on a bill and hold basis. The terms of the bill and hold agreement(s) provide that title to the specified inventory is transferred to the customer(s) prior to shipment and the Company has the right to payment (prior to physical delivery) which results in recorded revenue as determined under the revenue recognition standard.

Trade promotions are an important component of the sales and marketing of the Company’s branded products and are critical to the support of the business. Trade promotion costs, which are recorded as a reduction of net sales, include amounts paid to encourage retailers to offer temporary price reductions for the sale of the Company’s products to consumers, amounts paid to obtain favorable display positions in retail stores, and amounts paid to retailers for shelf space in retail stores. Accruals for trade promotions are recorded primarily at the time of sale of product to the retailer based on expected levels of performance. Settlement of these liabilities typically occurs in subsequent periods primarily through an authorized process for deductions taken by reference.

Item 7A
Quantitative and Qualitative Disclosures about Market Risk
a retailer from amounts otherwise due to the Company. As a smaller reporting company, weresult, the ultimate cost of a trade promotion program is dependent on the relative success of the events and the actions and level of deductions taken by retailers for amounts they consider due to them. Final determination of the permissible deductions may take extended periods of time.

Inventories – The Company uses the lower of cost, determined under the LIFO (last-in, first-out) method, or market, to value substantially all of its inventories. In a high inflation environment that the Company is experiencing, the Company believes that the LIFO method was preferable over the FIFO (first-in, first-out) 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. 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.

Long-Lived Assets – The Company assesses its long-lived assets for impairment whenever there is an indicator of impairment. Property, plant, and equipment are depreciated over their assigned lives. The assigned lives and the projected cash flows used to test impairment are subjective. If actual lives are shorter than anticipated or if future cash flows are less than anticipated, a future impairment charge or a loss on disposal of the assets could be incurred. Impairment losses are evaluated if the estimated undiscounted value of the cash flows is less than the carrying value. If such is the case, a loss is recognized when the carrying value of an asset exceeds its fair value.

Income Taxes – As part of the income tax provision process of preparing the consolidated financial statements, the Company estimates income taxes. This process involves estimating current tax expenses together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. The Company then assesses the likelihood that any deferred tax assets will be recovered from future taxable income and to the extent it is believed the recovery is not requiredlikely, a valuation allowance is established. Refer to provide disclosure pursuantNote 10 of the Notes to this Item.Consolidated Financial Statements for the full tax reconciliation.

Pension Expense – The Company has a defined benefit plan which is subject to certain actuarial assumptions. The funded status of the pension plan is dependent upon many factors, including returns on invested assets and the level of certain market interest rates, employee-related demographic factors, such as turnover, retirement age and mortality, and the rate of salary increases. Certain assumptions reflect the Company's historical experience and management’s best judgment regarding future expectations.  The pension plan’s funded status increased by $6.4 million during fiscal year 2023 reflecting the actual fair value of plan assets and the projected benefit obligation as of March 31, 2023. This funded status increase was primarily driven by actuarial gains on the projected benefit obligation, as described in more detail below, partially offset by a combination of growth in the plan’s projected benefit obligation due to service cost and interest cost and a negative return on plan assets.

-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 demographic gains, partially offset by an assumed salary increase rate for fiscal year 2024 in excess of the long-term rate. During fiscal year 2022, the actuarial gain in the pension plan’s projected benefit obligation was primarily driven by an increase in discount rates. The gain was partially offset by actuarial losses due to a combination of data revisions resulting in the demographic losses, a change in near-term assumed salary increases, and an update to the most recently released mortality projection scale by the Society of Actuaries (SOA). Plan assets decreased from $327.9 million as of March 31, 2022 to $294.3 million as of March 31, 2023 primarily due to normal payments of benefits and a negative return on plan assets. 

10
 

The pension plan was amended to freeze accruals to new hires and rehires effective January 1, 2020. Refer to Note 11 of the Notes to Consolidated Financial Statements for the full pension plan disclosures.

Non-GAAP Financial Measures:

Certain disclosures in this report include non-GAAP financial measures. A non-GAAP financial measure is defined as a numerical measure of our 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 our consolidated balance sheets and related consolidated statements of net earnings, comprehensive income (loss), stockholders’ equity and cash flows.

Adjusted net earnings is calculated on a FIFO basis and excludes the impact of the Company’s loss on equity investment. The Company believes this non-GAAP financial measure provides for a better comparison of year-over-year operating performance. The Company does not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP. Set forth below is a reconciliation of reported net earnings to adjusted net earnings (in thousands):

  

Fiscal Year:

 
  

2023

  

2022

 
  

(Restated)

  

(Restated)

 

Earnings before taxes, as reported

 $13,793  $59,895 

LIFO charge

  131,611   42,157 

Loss on equity investment

  -   7,775 

Adjusted earnings before taxes

  145,404   109,827 

Income taxes(1) 

  37,596   24,108 

Adjusted net earnings

 $107,808  $85,719 

(1) For fiscal years 2023 and 2022, income taxes on adjusted earnings before taxes were calculated using the restated income tax provision amounts of $4.6 million and $13.7 million, respectively, and applying the effective statutory tax rates of 25.1% and 24.7%, respectively, to the pre-tax LIFO charge.

Recently Issued Accounting Standards:

Effective April 1, 2022, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which was subsequently amended in November 2018 through ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses (“ASU 2016-13”). The amended guidance requires entities to estimate lifetime expected credit losses for trade and other receivables, including those that are current with respect to payment terms, along with other financial instruments which may result in earlier recognition of credit losses. The Company evaluated its existing methodology for estimating an allowance for doubtful accounts and the risk profile of its receivables portfolio and developed a model that includes the qualitative and forecasting aspects of the “expected loss” model under the amended guidance. 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. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides an optional expedient and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The optional guidance can be applied from March 12, 2020 through December 31, 2022. ASU 2020-04 eases the potential accounting burden associated with the expected discontinuance of the London Interbank Offered Rate (LIBOR) and other interbank offered rates, which are being replaced by alternative reference rates such as the Secured Overnight Financing Rate (SOFR). The interest rates associated with the Company’s previous borrowings under its senior revolving credit facility (as defined in Note 8, “Long-term Debt”) were tied to LIBOR. Subsequent to the amendment of the senior revolving credit facility agreement on September 14, 2022, the Company’s borrowings are tied to SOFR plus a spread adjustment (see Note 8, “Long-term Debt”). The adoption of ASU 2020-04 as a result of this amendment did not have a material impact on the Company’s consolidated financial statements. 

There were no other recently issued accounting pronouncements that impacted the Company’s consolidated financial statements. In addition, the Company did not adopt any other new accounting pronouncements during fiscal year 2023. 


Item 8

8. Financial Statements and Supplementary Data
Refer to the information in the 2021 Annual Report, "Consolidated Financial Statements and Notes thereto including

Report of Independent Registered Public Accounting Firm"

To the Stockholders and Board of Directors of Seneca Foods Corporation.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Seneca Foods Corporation (the “Company”) as of March 31, 2023 and 2022, the related statements of consolidated net earnings, comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended March 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have 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, 2023 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated June 13, 2023 (except for the material weakness discussed in Management’s Report on Internal Control over Financial Reporting, as to which the date is July 31, 2023) expressed an adverse opinion thereon.

Restatement of Previously Issued Financial Statements

As described in Note 2, the 2023 and 2022 consolidated financial statements have been restated to correct a misstatement.

Basis for Opinion

The Company's management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements. We believe that our audits provide 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 consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated 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 consolidated 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.

Valuation of Inventory – Refer to Notes 1, 2, and 5 in the consolidated financial statements

Critical Audit Matter Description

At March 31, 2023, the Company’s inventory was $670.9 million. As described in Notes 1, 2, and 5 to the consolidated financial statements, the Company accounts for substantially all its inventory at the lower of cost, determined using the last-in, first-out (LIFO) method, or market. As permitted by U.S. generally accepted accounting principles, the Company maintains its inventory costs and cost of goods sold on a first-in, first-out (FIFO) basis and adjusts total inventory and cost of goods sold from FIFO to LIFO at the end of each year. The Company values its inventory under the LIFO method based on the inventory levels and the prevailing inventory costs existing at that time.

We identified valuation of inventory as a critical audit matter because of the significant assumptions, manual calculations, and judgements in the LIFO reserve. Auditing management’s calculation was complex and required a high degree of auditor judgement and subjectivity when performing audit procedures and evaluating the audit evidence obtained.

12

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s LIFO reserve included the following, among others:

●

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s calculation of the adjustments to convert FIFO inventory balances to LIFO, including controls over management’s review of the manual calculations described above.

●

We tested the completeness, accuracy, and relevance of the underlying data used in management’s calculation to adjust the FIFO inventory balances to LIFO.

●

Tested the calculations and application of management’s methodologies related to the valuation estimates of the LIFO reserve.

●

Tested the mathematical accuracy of management’s manual calculation.

/s/ Plante Moran, P.C.          

We have served as the Company’s auditor since 2019.

Southfield, Michigan          

June 13, 2023 (except for the effect of the restatement disclosed in Notes 2 and 5, as to which the date is July 31, 2023)


SENECA FOODS CORPORATION AND SUBSIDIAIRIES

CONSOLIDATED STATEMENTS OF NET EARNINGS

(In thousands, except per share amounts)

  

Fiscal Year:

 
  

2023

  

2022

  

2021

 
  

(Restated)

  

(Restated)

     

Net sales

 $1,509,352  $1,385,280  $1,467,644 
             

Costs and expenses:

            

Cost of products sold

  1,405,033   1,243,684   1,235,459 

Selling, general, and administrative expense

  81,072   76,343   79,950 

Other operating (income) expense, net

  (1,662)  1,174   (29,014)

Plant restructuring

  3,550   70   182 

Total costs and expenses

  1,487,993   1,321,271   1,286,577 

Operating income

  21,359   64,009   181,067 

Other income and expenses:

            

Interest expense, net of interest income of $528, $63 and $42, respectively

  14,325   5,641   6,125 

Loss from equity investment

  -   7,775   11,453 

Other non-operating (income) expense

  (6,759)  (9,302)  3,473 

Earnings before income taxes

  13,793   59,895   160,016 

Income taxes

  4,562   13,695   33,916 

Net earnings

 $9,231  $46,200  $126,100 
             

Earnings per share:

            

Basic

 $1.19  $5.28  $13.82 

Diluted

 $1.16  $5.24  $13.72 
             

Weighted average common shares outstanding:

            

Basic

  7,796   8,707   9,088 

Diluted

  7,870   8,778   9,158 

See notes to consolidated financial statements.


SENECA FOODS CORPORATION AND SUBSIDIAIRIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

  

Fiscal Year:

 
  

2023

  

2022

  

2021

 

 

 

(Restated)

  

(Restated)

     
Comprehensive income:            

Net earnings

 $9,231  $46,200  $126,100 

Change in pension and postretirement benefits, net of tax expense (benefit) of $1,999, ($2,423) and $19,528, respectively

  5,980   (7,401)  60,153 

Total

 $15,211  $38,799  $186,253 

See notes to consolidated financial statements. 


SENECA FOODS CORPORATION AND SUBSIDIAIRIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

  As of: 
  

March 31,

  

March 31,

 
  

2023

  

2022

 

 

 

(Restated)

  

(Restated)

 
Assets      

Current assets:

        

Cash and cash equivalents

 $12,256  $10,904 

Accounts receivable, less allowance for doubtful accounts of $34 and $54, respectively

  97,101   119,169 

Inventories

  670,898   403,995 

Assets held for sale

  4,358   5,979 

Refundable income taxes

  6,976   5,446 

Other current assets

  2,450   5,193 

Total current assets

  794,039   550,686 

Property, plant, and equipment, net

  301,212   268,043 

Right-of-use assets operating, net

  23,235   34,008 

Right-of-use assets financing, net

  33,571   34,867 

Pension assets

  59,304   52,866 

Other assets

  1,360   1,804 

Total assets

 $1,212,721  $942,274 
         

Liabilities and Stockholders’ Equity

        

Current liabilities:

        

Accounts payable

 $69,232  $87,602 

Deferred revenue

  9,956   7,655 

Accrued vacation

  11,143   11,611 

Accrued payroll

  16,772   16,998 

Other accrued expenses

  23,293   23,269 

Current portion of long-term debt and lease obligations

  25,792   26,020 

Total current liabilities

  156,188   173,155 

Long-term debt, less current portion

  432,695   109,624 

Operating lease obligations, less current portion

  16,675   22,533 

Financing lease obligations, less current portion

  17,293   19,942 

Deferred income tax liability, net

  31,481   33,016 

Other liabilities

  3,639   4,974 

Total liabilities

  657,971   363,244 

Commitments and contingencies

          

Stockholders’ equity:

        

Preferred stock

  351   644 

Common stock

  3,049   3,041 

Additional paid-in capital

  99,152   98,641 

Treasury stock, at cost

  (168,573)  (128,879)

Accumulated other comprehensive loss

  (20,488)  (26,468)

Retained earnings

  641,259   632,051 

Total stockholders’ equity

  554,750   579,030 

Total liabilities and stockholders’ equity

 $1,212,721  $942,274 

See notes to consolidated financial statements.


SENECA FOODS CORPORATION AND SUBSIDIAIRIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

  

Fiscal Year:

 
  

2023

  

2022

  

2021

 

 

 

(Restated)

  

(Restated)

     
Cash flows from operating activities:          

Net earnings

 $9,231  $46,200  $126,100 

Adjustments to reconcile net earnings to net cash provided by operating activities:

            

Depreciation and amortization

  40,941   36,523   32,375 

Deferred income tax expense

  (3,534)  7,134   16,650 

Gain on the sale of assets

  (2,872)  (1,861)  (31,938)

Provision for restructuring and impairment

  4,333   284   182 

Gain on debt forgiveness

  -   (500)  - 

Loss from equity investment

  -   7,775   11,453 

401(k) match stock contribution

  1,515   1,107   1,479 

Changes in operating assets and liabilities (net of acquisitions):

            

Accounts receivable

  22,098   (26,976)  24,280 

Inventories

  (266,903)  (60,851)  68,487 

Other current assets

  2,743   (1,109)  4,083 

Accounts payable, accrued expenses, and other

  (18,818)  19,487   (65,936)

Income taxes

  (1,530)  2,939   (4,035)

Net cash (used in) provided by operating activities

  (212,796)  30,152   183,180 

Cash flows from investing activities:

            

Additions to property, plant, and equipment

  (70,628)  (53,367)  (71,431)

Proceeds from the sale of assets

  5,751   8,180   73,688 

Net cash (used in) provided by investing activities

  (64,877)  (45,187)  2,257 

Cash flows from financing activities:

            

Proceeds from issuance of long-term debt

  951,510   398,550   478,059 

Payments of long-term debt

  (622,439)  (383,011)  (597,055)

Payments on financing leases

  (8,814)  (7,868)  (6,321)

Change in other assets

  -   (2,758)  (6,604)

Purchase of treasury stock

  (41,209)  (38,788)  (4,358)

Preferred stock dividends paid

  (23)  (23)  (23)

Net cash provided by (used in) financing activities

  279,025   (33,898)  (136,302)
             

Net increase (decrease) in cash and cash equivalents

  1,352   (48,933)  49,135 

Cash and cash equivalents, beginning of year

  10,904   59,837   10,702 

Cash and cash equivalents, end of year

 $12,256  $10,904  $59,837 
             

Supplemental disclosures of cash flow information:

            

Cash paid during the year for:

            

Interest

 $11,218  $4,481  $5,094 

Income taxes

 $9,084  $2,971  $22,692 

Noncash transactions:

            

Right-of-use assets obtained in exchange for lease obligations

 $10,187  $20,304  $6,246 

Right-of-use assets derecognized upon early lease termination

 $3,588  $1,570  $2,497 

Property, plant and equipment purchased on account

 $1,177  $1,267  $19 

See notes to consolidated financial statements.

17

SENECA FOODS CORPORATION AND SUBSIDIAIRIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

                  

Accumulated

     
          

Additional

      

Other

     
  

Preferred

  

Common

  

Paid-In

  

Treasury

  

Comprehensive

  

Retained

 
  

Stock

  

Stock

  

Capital

  

Stock

  

Loss

  

Earnings

 
                      

(Restated)

 

Balance March 31, 2020

 $681  $3,041  $98,384  $(88,319) $(79,220) $459,797 

Net earnings

  -   -   -   -   -   126,100 

Cash dividends paid on preferred stock

  -   -   -   -   -   (23)

Equity incentive program

  -   -   100   -   -   - 

Contribution of 401(k) match

  -   -   -   1,479   -   - 

Purchase of treasury stock

  -   -   -   (4,358)  -   - 

Preferred stock conversion

  (18)  -   18   -   -   - 

Change in pension and postretirement benefits adjustment (net of tax $19,528)

  -   -   -   -   60,153   - 

Balance March 31, 2021

  663   3,041   98,502   (91,198)  (19,067)  585,874 

Net earnings

  -   -   -   -   -   46,200 

Cash dividends paid on preferred stock

  -   -   -   -   -   (23)

Equity incentive program

  -   -   120   -   -   - 

Contribution of 401(k) match

  -   -   -   1,107   -   - 

Purchase of treasury stock

  -   -   -   (38,788)  -   - 

Preferred stock conversion

  (19)  -   19   -   -   - 

Change in pension and postretirement benefits adjustment (net of tax $2,423)

  -   -   -   -   (7,401)  - 

Balance March 31, 2022

  644   3,041   98,641   (128,879)  (26,468)  632,051 

Net earnings

  -   -   -   -   -   9,231 

Cash dividends paid on preferred stock

  -   -   -   -   -   (23)

Equity incentive program

  -   -   150   -   -   - 

Stock issued for profit sharing plan

        76          

Contribution of 401(k) match

  -   -   -   1,515   -   - 

Purchase of treasury stock

  -   -   -   (41,209)  -   - 

Preferred stock conversion

  (293)  8   285   -   -   - 

Change in pension and postretirement benefits adjustment (net of tax $1,999)

  -   -   -   -   5,980   - 

Balance March 31, 2023

 $351  $3,049  $99,152  $(168,573) $(20,488) $641,259 

  

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, 2023

  200,000   1,400,000   8,292   -   20,000,000   10,000,000 

Shares outstanding:

                        

March 31, 2021

  200,000   807,240   33,855   500   7,353,545   1,709,638 

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 

Stock amount

 $50  $202  $99  $-  $2,554  $495 

See notes to consolidated financial statements.

18
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Nature of Operations —Seneca Foods Corporation (the “Parent Company”) and subsidiaries (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 for the Parent Company and all of its wholly-owned subsidiaries after elimination of intercompany transactions, profits, and balances.

Use of Estimates in the Preparation of Financial Statements — The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the related revenues and expenses during the reporting period. Actual amounts could differ from those estimates.

Subsequent Events — The Company has evaluated subsequent events for disclosure through the date of issuance of the accompanying consolidated financial statements.

Reclassifications — Certain previously reported amounts have been reclassified to conform to the current period classification.

Cash Equivalents — The Company considers all highly liquid instruments purchased with an original maturity of three months or less as cash equivalents.

Fair Value of Financial Instruments —The carrying values of cash and cash equivalents (Level 1), accounts receivable, short-term debt (Level 2) and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. See Note 13, 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.

Accounts Receivable and Doubtful Accounts — Accounts receivable is stated at invoice value, which is incorporatednet 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 sheet at the lower of carrying value or estimated fair value less costs to sell and depreciation is no longer recognized.

19
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, Plant and Equipment — Property, plant, and equipment are stated at cost. Interest incurred during the construction of major projects is capitalized. For financial reporting, the Company provides for depreciation on the straight-line method at rates based upon the estimated useful lives of the various assets. The estimated useful lives are as follows:

 

Years

Land improvements

10

-

20

Buildings and improvements

30

Machinery & equipment

10

-

15

Office furniture

3

-

5

Vehicles

3

-

7

Computer software

3

-

5

Long-Lived Assets — The Company assesses its long-lived assets for impairment whenever there is an indicator of impairment. Impairment losses are evaluated if the estimated undiscounted cash flows from using the assets are less than carrying value. A loss is recognized when the carrying value of an asset exceeds its fair value.

Additionally, the Company assesses the potential for an other-than-temporary impairment of its equity method investment when impairment indicators are identified by reference.considering all available information, including the recoverability of the investment, the earnings and near-term prospects of the investment, factors related to the industry, amongst others relevant information. If an investment is considered to be impaired and the decline in value is other than temporary, an impairment charge is recorded. During fiscal year 2022, the Company recorded an impairment charge of $6.3 million to reduce the carrying value of the equity method investment to $0, as the value of the investment was determined to not be recoverable.

Deferred Financing Costs — Deferred financing costs incurred in obtaining debt are amortized on a straight-line basis over the term of the debt, which is not materially different than using the effective interest rate method. As of March 31, 2023 there were $0.6 million of unamortized financing costs included in other assets related to the Company’s revolving credit facility and $0.6 million of unamortized financing costs related to its term loans that are included as a contra to long-term debt and current portion of 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. 

See Note 3, Revenue Recognition, for further discussion of the policy.

Trade promotions are an important component of the sales and marketing of the Company’s branded products, and are critical to the support of the business. Trade promotion costs, which are recorded as a reduction of sales, include amounts paid to retailers for shelf space, to obtain favorable display positions and to offer temporary price reductions for the sale of our products to consumers. Accruals for trade promotions are recorded primarily at the time of sale to the retailer based on expected levels of performance. Settlement of these liabilities typically occurs in subsequent periods primarily through an authorized process for deductions taken by a retailer from amounts otherwise due to the Company. As a result, the ultimate cost of a trade promotion program is dependent on the relative success of the events and the actions and level of deductions taken by retailers. Final determination of the permissible deductions may take extended periods of time.

Concentration of Credit Risk — Financial instruments that potentially subject the Company to credit risk consist of trade receivables, interest-bearing investments, and cash and cash equivalents. Wholesale and retail food distributors comprise a significant portion of the trade receivables; collateral is generally not required. A relatively limited number of customers account for a large percentage of the Company’s total net sales. The top ten customers represented approximately 55% and 53% of net sales for fiscal years 2023 and 2022, 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.

20
 
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advertising Costs — Advertising costs are expensed as incurred and totaled $2.2 million in each of fiscal years 2023 and 2022 and $1.8 million in fiscal year 2021.

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.

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. Restricted stock is included in the diluted earnings per share calculation.

Recently Issued Accounting Standards — Effective April 1, 2022, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which was subsequently amended in November 2018 through ASU No.2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses (“ASU 2016-13”). The amended guidance requires entities to estimate lifetime expected credit losses for trade and other receivables, including those that are current with respect to payment terms, along with other financial instruments which may result in earlier recognition of credit losses. The Company evaluated its existing methodology for estimating an allowance for doubtful accounts and the risk profile of its receivables portfolio and developed a model that includes the qualitative and forecasting aspects of the “expected loss” model under the amended guidance. 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. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides an optional expedient and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The optional guidance can be applied from March 12, 2020 through December 31, 2022. ASU 2020-04 eases the potential accounting burden associated with the expected discontinuance of the London Interbank Offered Rate (LIBOR) and other interbank offered rates, which are being replaced by alternative reference rates such as the Secured Overnight Financing Rate (SOFR). The interest rates associated with the Company’s previous borrowings under its senior revolving credit facility (as defined in Note 8, “Long-term Debt”) were tied to LIBOR. Subsequent to the amendment of the senior revolving credit facility agreement on September 14, 2022, the Company’s borrowings are tied to SOFR plus a spread adjustment (see Note 8, “Long-term Debt”). The adoption of ASU 2020-04 as a result of this amendment did not have a material impact on the Company’s consolidated financial statements.

There were no other recently issued accounting pronouncements that impacted the Company’s consolidated financial statements. In addition, the Company did not adopt any other new accounting pronouncements during fiscal year 2023.

21
 
Item 9
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Changes2. Restatement of Previously Issued Financial Statements

On July 25, 2023, we reported that we had identified an error related to our accounting for valuing inventory using the LIFO method of accounting as of March 31, 2023 and 2022. 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. During the formulaic valuation of actual inventory values at fiscal year end, incorrect quantities were applied to the calculation which resulted in an understatement of the LIFO reserve as of March 31, 2023 and Disagreements with Accountants2022. Management determined that correct LIFO quantities were applied to the actual valuation of LIFO at year end prior to fiscal year 2022, as only trivial differences were noted during Management's examination. In contrast, interim LIFO calculations are based on Accountingmanagement’s estimates of expected year-end inventory levels, production pack yields, sales and Financial Disclosurethe 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.

The Consolidated Statements of Cash Flows are not presented in the following tables because there is no impact on total cash flows from operating activities, investing activities and financing activities. The impact from the restatements within the operating activities section of the cash flow statement are illustrated in the balance sheet and net earnings adjustments below. The following tables present a summary of the effects of these restatements:

  

Consolidated Statements of Net Earnings

 
  

Fiscal Year Ended

 
  

March 31, 2023

  

March 31, 2022

 
  

As Reported

  

Correction

  

As Restated

  

As Reported

  

Correction

  

As Restated

 

Cost of products sold

 $1,373,456  $31,577  $1,405,033  $1,237,348  $6,336  $1,243,684 

Total costs and expenses

  1,456,416   31,577   1,487,993   1,314,935   6,336   1,321,271 

Operating income

  52,936   (31,577)  21,359   70,345   (6,336)  64,009 

Earnings before income taxes

  45,370   (31,577)  13,793   66,231   (6,336)  59,895 

Income taxes

  12,232   (7,670)  4,562   15,224   (1,529)  13,695 

Net earnings

  33,138   (23,907)  9,231   51,007   (4,807)  46,200 

Earnings per share:

                        

Earnings per share - basic

 $4.23  $(3.04) $1.19  $5.83  $(0.55) $5.28 

Earnings per share - diluted

 $4.20  $(3.04) $1.16  $5.79  $(0.55) $5.24 

  

Consolidated Balance Sheets

 
  

As of:

 
  

March 31, 2023

  

March 31, 2022

 
  

As Reported

  

Correction

  

As Restated

  

As Reported

  

Correction

  

As Restated

 

Assets

                        

Inventories

 $708,811  $(37,913) $670,898  $410,331  $(6,336) $403,995 

Refundable income taxes

  -   6,976   6,976   3,866   1,580   5,446 

Total current assets

  824,976   (30,937)  794,039   555,442   (4,756) $550,686 

Total assets

  1,243,658   (30,937)  1,212,721   947,030   (4,756)  942,274 
                         

Liabilities and Stockholders’ Equity

                        

Income taxes payable

  2,018   (2,018) $-   -   -  $- 

Total current liabilities

  158,206   (2,018)  156,188   173,155   -   173,155 

Deferred income tax liability, net

 $31,625  $(144) $31,481  $32,944  $72   33,016 

Other liabilities

  3,700   (61)  3,639   4,995   (21)  4,974 

Total liabilities

  660,194   (2,223)  657,971   363,193   51   363,244 

Retained earnings

  669,973   (28,714)  641,259   636,858   (4,807)  632,051 

Total stockholders’ equity

  583,464   (28,714)  554,750   583,837   (4,807)  579,030 

Total liabilities and stockholders’ equity

  1,243,658   (30,937)  1,212,721   947,030   (4,756)  942,274 

Additionally, Notes 4,5,10, and 15 were impacted and restated as result of the error related to our accounting for valuing inventory using the LIFO method of accounting.

22
 
None.
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

3.Revenue Recognition

The Company applies the provisions of ASC 606-10, "Revenue from Contracts with Customers", and recognizes revenue under the core principle to depict the transfer of products to customers in an amount reflecting the consideration the Company expects to receive. The Company conducts its business almost entirely in food packaging, which contributed approximately 98% of the Company's fiscal year 2023 net sales.

Nature of products— The Company manufactures and sells the following:

•

private label products to retailers, such as supermarkets, mass merchandisers, and specialty retailers, for resale under the retailers’ own or controlled labels;

•

private label and branded products to the foodservice industry, including foodservice distributors and national restaurant operators;

•

branded products under our own proprietary brands, primarily on a national basis to retailers;

•

branded products under co-pack agreements to other major branded companies for their distribution; and

•

products to our industrial customer base for repackaging in portion control packages and for use as ingredients by other food manufacturers.

Disaggregation of revenue— In the following table, segment revenue is disaggregated by product category groups (in thousands):

  

Fiscal Year:

 
  

2023

  

2022

  

2021

 

Canned vegetables

 $1,253,257  $1,135,983  $1,172,635 

Frozen vegetables

  121,211   123,895   102,197 

Fruit products

  91,495   84,708   88,431 

Snack products

  12,661   12,332   10,999 

Prepared foods

  -   -   71,866 

Other

  30,728   28,362   21,516 

Total

 $1,509,352  $1,385,280  $1,467,644 

When Performance Obligations Are Satisfied — A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition.  A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.  The Company’s primary performance obligation is the production of food products and secondarily case and labeling services and storage services for certain bill and hold sales.

Revenue recognition is completed primarily at a point in time basis when product control is transferred to the customer.  In general, control transfers to the customer when the product is shipped or delivered to the customer based upon applicable shipping terms, as the customer can direct the use and obtain substantially all of the remaining benefits from the asset at this point in time.   

Customer contracts generally do not include more than one performance obligation.  When a contract does contain more than one performance obligation, we allocate the contract’s transaction price to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by directly observable data.  

The performance obligations in our contracts are generally satisfied within one year. As such, we have not disclosed the transaction price allocated to remaining performance obligations for labeling and storage as of March 31, 2023 which is included in deferred revenue on the Consolidated Balance Sheet.

Significant Payment Terms— Our customer contracts identify the product, quantity, price, payment and final delivery terms.  Payment terms usually include early pay discounts.  We grant payment terms consistent with industry standards. Although some payment terms may be more extended, no terms beyond one year are granted at contract inception.  As a result, we do not adjust the promised amount of consideration for the effects of a significant financing component because the period between our transfer of a promised good or service to a customer and the customer’s payment for that good or service will be generally 30 days or less.  

Shipping — All shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are included in the cost of sales; this includes shipping and handling costs after control over a product has transferred to a customer.

23
 
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Item 9AVariable Consideration

— In addition to fixed contract consideration, some contracts include some form of variable consideration.  Trade promotions are an important component of the sales and marketing of the Company’s branded products, and are critical to the support of the business. Trade promotion costs, which are recorded as a reduction of sales, include amounts paid to retailers for shelf space, to obtain favorable display positions and to offer temporary price reductions for the sale of our products to consumers. Accruals for trade promotions are recorded primarily at the time of sale to the retailer based on expected levels of performance. Settlement of these liabilities typically occurs in subsequent periods primarily through an authorized process for deductions taken by a retailer from amounts otherwise due to the Company. As a result, the ultimate cost of a trade promotion program is dependent on the relative success of the events and the actions and level of deductions taken by retailers. Final determination of the permissible deductions may take extended periods of time.

Contract Balances— The contract asset balances are $0.6 million and $0.9 million as of March 31, 2023 and 2022, respectively. Refer to Note 7, Assets Held for Sale, for contract liabilities.  The Company does not have significant deferred revenue or unbilled receivable balances because of transactions with customers.  The Company does have deferred revenue for prepaid case and labeling and storage services which have been collected from bill and hold sales.

Contract Costs — We have identified certain incremental costs to obtain a contract, primarily sales commissions, requiring capitalization under the standard. The Company continues to expense these costs as incurred because the amortization period for the costs would have been one year or less. The Company does not incur significant fulfillment costs requiring capitalization.

 

4. Earnings per Share

Earnings per share for fiscal years 2023,2022 and 2021 are as follows (in thousands, except per share amounts):

  

Fiscal Year:

 
  

2023

  

2022

  

2021

 

 

 

(Restated)

  

(Restated)

     
Basic            

Net earnings

 $9,231  $46,200  $126,100 

Deduct preferred stock dividends

  23   23   23 

Undistributed earnings

  9,208   46,177   126,077 

Earnings attributable to participating preferred shareholders

  30   178   493 

Earnings attributable to common shareholders

 $9,178  $45,999  $125,584 

Weighted average common shares outstanding

  7,796   8,707   9,088 

Basic earnings per common share

 $1.19  $5.28  $13.82 

Diluted

            

Earnings attributable to common shareholders

 $9,178  $45,999  $125,584 

Add dividends on convertible preferred stock

  20   20   20 

Earnings attributable to common stock on a diluted basis

 $9,198  $46,019  $125,604 

Weighted average common shares outstanding-basic

  7,796   8,707   9,088 

Additional shares to be issued related to the equity compensation plan

  7   4   3 

Additional shares to be issued under full conversion of preferred stock

  67   67   67 

Total shares for diluted

  7,870   8,778   9,158 

Diluted earnings per share

 $1.16  $5.24  $13.72 

24
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. 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, 2023 and 2022,first-in, first-out (“FIFO”) based inventory costs exceeded LIFO based inventory costs, resulting in a LIFO reserve of $302.4 million and $170.8 million, respectively. In order to state inventories at LIFO, the Company recorded an increase to cost of products sold of $131.6 million and $42.2 million for fiscal years 2023 and 2022, 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,

 
  

2023

  

2022

 
  

(Restated)

  

(Restated)

 

Finished products

 $613,622  $385,681 

In process

  75,123   23,652 

Raw materials and supplies

  284,593   165,491 
   973,338   574,824 

Less excess of FIFO cost over LIFO cost

  302,440   170,829 

Total inventories

 $670,898  $403,995 

6. Property, Plant and Equipment

Property, plant and equipment is comprised of the following (in thousands):

  

As of:

 
  

March 31,

  

March 31,

 
  

2023

  

2022

 
         

Land and land improvements

 $46,978  $42,981 

Buildings and improvements

  214,110   202,444 

Machinery and equipment

  421,067   403,192 

Office furniture, vehicles and computer software

  11,738   10,003 

Construction in progress

  40,539   29,976 

Property, plant and equipment, cost

  734,432   688,596 

Less: accumulated depreciation

  (433,220

)

  (420,553

)

Property, plant and equipment, net

 $301,212  $268,043 

Depreciation expense totaled $33.9 million, $30.2 million, and $27.1 million for fiscal years 2023,2022, and 2021, respectively.

7. Assets Held For Sale

As of March 31, 2023, the Company has 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 in our Consolidated Balance Sheets. 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 has executed sales agreements to sell one of the facilities and the related equipment therein to two unaffiliated buyers. A deposit of $0.6 million has been received from the buyer of the production equipment and is recorded as a contract liability as of March 31, 2023, as the Company maintains control of the equipment until the sale is finalized. The contract liability is included in other accrued expenses on the Consolidated Balance Sheet as the sale is expected to close and control of the equipment transferred to the buyer within twelve months.

The following table presents information related to the major classes of assets and liabilities that were held for sale in our Consolidated Balance Sheets (in thousands):

  

As of:

 
  

March 31,

  

March 31,

 
  

2023

  

2022

 

Property, plant and equipment (net)

 $4,358  $5,979 

Current assets held for sale

 $4,358  $5,979 

25
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Long-Term Debt

Long-term debt is comprised of the following (in thousands):         

  

As of:

 
  

March 31,

  

March 31,

 
  

2023

  

2022

 

Revolving credit facility

 $180,598  $20,508 
         

Term loans

        

Term Loan A-1

        

Outstanding principal

  89,000   93,000 

Unamortized debt issuance costs

  (68

)

  (100

)

Term Loan A-1, net

  88,932   92,900 
         

Term Loan A-2

        

Outstanding principal

  173,500   - 

Unamortized debt issuance costs

  (551

)

  - 

Term Loan A-2, net

  172,949   - 
         

Other

  216   216 

Total long-term debt

  442,695   113,624 

Less current portion

  10,000   4,000 

Long-term debt, less current portion

 $432,695  $109,624 

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 million that is seasonally adjusted (the “Revolver”). Maximum borrowing availability under the Revolver totals $300.0 million from April through July and $400.0 million from August through March. The Revolver balance as of March 31, 2023 was $180.6 million and is included in Long-Term Debt in the accompanying Consolidated Balance Sheet due to the Revolver’s March 24, 2026 maturity. In order to maintain availability of funds under the facility, the Company pays a commitment fee on the unused portion of the Revolver. The Revolver is secured by substantially all of the Company’s accounts receivable and inventories and contains borrowing base requirements as well as a financial covenant, if certain circumstances apply. The Company utilizes its Revolver for general corporate purposes, including seasonal working capital needs, to pay debt principal and interest obligations, and to fund capital expenditures and acquisitions. Seasonal working capital needs are affected by the growing cycles of the vegetables the Company packages. The majority of vegetable inventories are produced during the months of June through November and are then sold over the following year. Payment terms for vegetable produce are generally three months but can vary from a few days to seven months. Accordingly, the Company’s need to draw on the Revolver may fluctuate significantly throughout the year.

the following table documents the quantitative data for short-term borrowings on the Revolver during fiscal years 2023 and 2022 (in thousands, except for percentages):

  

As of:

 
  

March 31,

  

March 31,

 
  

2023

  

2022

 

Outstanding borrowings

 $180,598  $20,508 

Interest rate

  6.34

%

  1.71

%

  

Fiscal Year:

 
  

2023

  

2022

 

Maximum amount of borrowings

 $350,828  $58,323 

Average outstanding borrowings

 $159,670  $22,357 

Weighted average interest rate

  5.03

%

  1.37

%

26
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 3.30% 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 “Amended Agreement”). The Amended Agreement governs two term loans, summarized below:

Term Loan A-1: The Amended Agreement continues certain aspects of the $100 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.

Term Loan A-2: The Amended Agreement adds an additional term loan in the amount of $175 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.

The Amended Agreement 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 Agreement, the Company incurred $0.6 million of financing costs which will be deferred and amortized over the life of Term Loan A-2.

Covenants & other debt matters — The Company’s debt agreements, including the Revolver and term loan, contain customary affirmative and negative covenants that restrict, with specified exceptions, the Company’s ability to incur additional indebtedness, incur liens, pay dividends on the Company’s capital stock, make other restricted payments, including investments, transfer all or substantially all of the Company’s assets, enter into consolidations or mergers, and enter into transactions with affiliates. The Company’s debt agreements also require the Company to meet certain financial covenants including a minimum EBITDA and minimum tangible net worth. The Revolver contains borrowing base requirements related to accounts receivable and inventories and also requires the Company to meet a financial covenant related to a minimum fixed charge coverage ratio if (a) an event of default has occurred or (b) availability on the Revolver is less than the greater of (i) 10% of the commitments then in effect and (ii) $25,000,000. The most restrictive financial covenant in the debt agreements is the minimum EBITDA within the Term Loan which for fiscal year 2023 was greater than $75 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, 2023.  

The Company's debt agreements limit the payment of dividends and other distributions. There is an annual total distribution limitation of $50,000, less aggregate annual dividend payments totaling $23,000 that the Company presently pays on two outstanding classes of preferred stock. The carrying value of assets pledged for secured debt, including the Revolver, is $949.7 million as of March 31, 2023. Debt repayment requirements for the next five fiscal years are (in thousands):

2024

 $10,000 

2025

  10,000 

2026

  267,598 

2027

  6,000 

2028

  149,500 

Thereafter

  216 

Total

 $443,314 

9. 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, or 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.

27
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 lease assets are excluded from the Company’s balance sheet presentation and expensed as incurred. Leases with an initial term of 12 months or less, or short-term leases, are not recorded on the accompanying Consolidated Balance Sheets. ROU assets and lease obligations for the Company’s operating and financing leases are disclosed separately in the Company’s Consolidated Balance Sheets. The components of lease cost were as follows (in thousands):

  

Fiscal Year:

 
  

2023

  

2022

  

2021

 

Lease cost:

            

Amortization of right of use asset

 $6,715  $5,970  $4,746 

Interest on lease liabilities

  959   1,048   1,102 

Finance lease cost

  7,674   7,018   5,848 

Operating lease cost

  13,506   19,250   23,736 

Total lease cost

 $21,180  $26,268  $29,584 

  

Fiscal Year:

 
  

2023

  

2022

  

2021

 

Cash paid for amounts included in the measurement of lease liabilities

            

Operating cash flows from finance leases

 $959  $1,048  $1,102 

Operating cash flows from operating leases

  13,736   19,010   23,864 

Financing cash flows from finance leases

  8,814   7,868   6,321 

Total

 $23,509  $27,926  $31,287 
             

Right-of-use assets obtained in exchange for new finance lease liabilities

 $5,825  $9,754  $1,985 

Right-of-use assets obtained in exchange for new operating lease liabilities

 $4,362  $10,550  $4,261 

Weighted-average lease term (years):

            

Financing leases

  4.7   4.6   4.5 

Operating leases

  4.6   4.3   3.5 

Weighted-average discount rate:

            

Financing leases

  3.8

%

  3.4

%

  4.1

%

Operating leases

  4.4

%

  4.2

%

  4.4

%

Undiscounted future lease payments under non-cancelable operating leases and financial leases, along with a reconciliation of undiscounted cash flows to operating and financing lease liabilities, respectively, as of March 31, 2023 were as follows (in thousands):

Years ending March 31:

 

Operating

  

Financing

 

2024

 $8,627  $8,784 

2025

  6,092   5,353 

2026

  3,544   4,261 

2027

  3,028   3,203 

2028

  2,819   2,826 

2029-2033

  2,709   3,248 

Total minimum payment required

 $26,819  $27,675 

Less interest

  2,359   2,375 

Present value of minimum lease payments

  24,460   25,300 

Amount due within one year

  7,785   8,007 

Long-term lease obligation

 $16,675  $17,293 

28
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. 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:

 
  

2023

  

2022

  

2021

 

 

 

(Restated)

  

(Restated)

     
Current:            

Federal

 $5,819  $3,454  $13,121 

State

  2,277   3,107   4,145 

Total

  8,096   6,561   17,266 
             

Deferred:

            

Federal

 $(3,886) $7,084  $13,486 

State

  352   50   3,164 

Total

  (3,534)  7,134   16,650 

Total income taxes

 $4,562  $13,695  $33,916 

A reconciliation of the expected U.S. statutory rate to the effective rate follows:

  

Fiscal Year:

 
  

2023

  

2022

  

2021

 
  

(Restated)

  

(Restated)

     

Computed (expected tax rate)

  21.0%  21.0%  21.0%

State income taxes (net of federal tax benefit)

  4.1%  3.7%  3.1%

Federal credits

  -3.9%  -0.9%  -0.3%

State rate changes

  2.8%  0.3%  0.0%

State credit expiration

  2.1%  0.9%  0.0%

Change in valuation allowance

  7.8%  -1.2%  0.2%

Federal return to accrual

  -0.3%  -1.0%  0.0%

State return to accrual

  -0.6%  0.1%  0.0%

Permanent differences

  0.8%  0.2%  0.0%

Federal net operating loss (NOL) carryback rate difference

  0.0%  0.0%  -2.8%

Interest received on federal NOL carryback

  0.0%  -0.3%  -0.2%

Uncertain tax benefits return to accrual

  0.0%  0.3%  0.0%

Other

  -0.7%  -0.2%  0.2%

Effective income tax rate

  33.1%  22.9%  21.2%

The Company’s effective tax rate, as restated in fiscal years 2023 and 2022, was 33.1% and 22.9%, respectively and was 21.2% in fiscal year 2021. In fiscal year 2023, the Company added a valuation allowance against state tax credits because it was determined that it was more likely than not that the credits will not be used prior to expiration. This change, along with other current year increases in the existing valuation allowances, had 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. 

In fiscal year 2021, the Company was able to carryback the NOL generated in the 2019 tax year at a 21% corporate tax rate to the 2015 tax year at a 35% corporate tax rate. The NOL carryback had a 2.8% decrease on the fiscal year 2021 rate and without this impact in fiscal year 2022, the tax rate effectively increased by 2.8% when comparing fiscal year 2022 to 2021. The year over year increase in the effective tax rate was partially offset by a decrease of 0.6% due to the federal income tax credits having a larger impact on the effective tax rate in fiscal year 2022, amongst other decreases noted in the table above.

29
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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,

 
  

2023

  

2022

 

 

 

(Restated)

  

(Restated)

 
Deferred income tax assets:        

Future tax credits

 $5,007  $5,245 

Inventory valuation

  8,364   3,024 

Employee benefits

  2,335   2,191 

Insurance

  471   345 

State depreciation basis differences

  3,218   - 

Operating leases

  942   - 

Intangibles

  1,514   - 

Other comprehensive loss

  7,117   8,975 

Interest

  8   3 

Prepaid revenue

  296   374 

Net operating loss and other tax attribute carryovers

  1,233   614 

Other

  327   - 

Total assets

  30,832   20,771 

Deferred income tax liabilities:

        

Property basis and depreciation difference

  26,450   21,805 

Inventory reserve

  2,101   - 

Intangibles

  -   17 

Right-of-use assets

  7,045   5,764 

Pension

  21,528   21,253 

Other

  182   1,017 

Total liabilities

  57,306   49,856 

Valuation allowance - noncurrent

  5,007   3,931 

Deferred income tax liability, net

 $(31,481) $(33,016)

Net deferred income tax liabilities, as restated, of $31.5 million and $33.0 million as of March 31,2023 and 2022, 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 $2.2 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, 2023, the Company has recorded a valuation allowance amounting to $5.0 million, which relates primarily to tax credit carryforwards which management has concluded it is more likely than not they will not be realized in the ordinary course of operations. Although realization is not assured, management has concluded that it is more likely than not that the deferred tax assets for which a valuation allowance was determined to be unnecessary will be realized in the ordinary course of operations. The amount of net deferred tax assets considered realizable, however, could be reduced if actual future income or income 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. 

30
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Current rules on the accounting for uncertainty on income taxes prescribe a minimum recognition threshold for a tax position taken or expected to be taken in a tax return that is required to be met before being recognized in the financial statements. Those rules also provide guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company classifies the liability for uncertain tax positions in other accrued expenses or other long-term liabilities on the Consolidated Balance Sheets depending on their expected settlement date. The change in the liability for fiscal years 2023 and 2022 consists of the following (in thousands):

  

As of:

 
  

March 31,

  

March 31,

 
  

2023

  

2022

 
  

(Restated)

  

(Restated)

 

Beginning balance

 $655  $376 

Tax positions related to current year:

        

Additions

  96   139 

Tax positions related to prior years:

        

Additions

  -   215 

Reductions

  -   - 

Lapses in statues of limitations

  (9)  (75)

Ending balance

 $742  $655 

The liability balances as of March 31, 2023 and 2022 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 2023 and 2022, 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 2023, 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.

The federal income tax returns for fiscal years after 2015 are open because the Company claimed refunds on taxable income for fiscal years 2017 and 2016. These years will remain open until fiscal years 2018 and 2020, which were taxable loss years, are closed however the exposure is limited to the refund amounts for each fiscal year. Fiscal years 2018,2019, and 2020 are currently under audit with the Internal Revenue Service. 

31
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. 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, 2023 and 2022 and no contributions were required to meet legal funding requirements.

The following tables provide a reconciliation of the changes in the Plan’s benefit obligation and fair value of plan assets over the two-year period ended March 31,2023 and a statement of the funded status as of March 31,2023 and 2022 (in thousands):

  

Fiscal Year:

 
  

2023

  

2022

 

Change in benefit obligation

        

Benefit obligation at beginning of year

 $275,001  $286,063 

Service cost

  7,429   8,483 

Interest cost

  9,254   7,721 

Actuarial gain

  (47,403

)

  (972

)

Benefit payments and expenses

  (9,243

)

  (26,294

)

Benefit obligation at end of year

 $235,038  $275,001 
         

Change in plan assets

        

Fair value of plan assets at beginning of year

 $327,867  $348,914 

Actual return on plan assets

  (23,169

)

  6,666 

Benefit payments and expenses

  (10,356

)

  (27,713

)

Fair value of plan assets at end of year

 $294,342  $327,867 
         

Funded status

 $59,304  $52,866 

The Plan’s funded status increased by $6.4 million during fiscal year 2023 reflecting the actual fair value of plan assets and the projected benefit obligation as of March 31, 2023. This funded status increase was primarily driven by actuarial gains on the projected benefit obligation, as described in more detail below, partially offset by a combination of growth in the Plan’s projected benefit obligation due to service cost and interest cost and a negative return on plan assets.

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 demographic gains, partially offset by an assumed salary increase rate for fiscal year 2024 in excess of the long-term rate. During fiscal year 2022, the actuarial gain in the pension plan’s projected benefit obligation was primarily driven by an increase in discount rates. The gain was partially offset by actuarial losses due to a combination of data revisions resulting in the demographic losses, a change in near-term assumed salary increases, and an update to the most recently released mortality projection scale by the Society of Actuaries (SOA). Plan assets decreased from $327.9 million as of March 31,2022 to $294.3 million as of March 31, 2023 primarily due to normal payments of benefits and a negative return on plan assets.

The following table provides the components of the Plan’s accumulated other comprehensive loss, pre-tax (in thousands):

  

Fiscal Year:

 
  

2023

  

2022

  

2021

 

Amounts Recognized in Accumulated Other Comprehensive Pre-Tax Loss

            
             

Prior service cost

 $(75

)

 $(167

)

 $(258

)

Net loss

  (28,310

)

  (36,136

)

  (26,265

)

Accumulated other comprehensive pre-tax loss

 $(28,385

)

 $(36,303

)

 $(26,523

)

32
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides the components of net periodic benefit cost for the Plan for fiscal years 2023,2022, and 2021 (in thousands):

  

Fiscal Year:

 
  

2023

  

2022

  

2021

 

Service cost including administration

 $8,240  $9,508  $10,627 

Interest cost

  9,254   7,721   9,266 

Expected return on plan assets

  (16,104

)

  (17,114

)

  (15,804

)

Amortization of net loss

  -   -   9,919 

Prior service cost

  91   91   91 

Net periodic benefit cost

 $1,481  $206  $14,099 

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 assumptions used to measure the Company’s benefit obligation and pension expense are shown in the following table:

  

Fiscal Year:

 
  

2023

  

2022

  

2021

 

Weighted Average Assumptions for Balance Sheet Liability at End of Year:

            
             

Discount rate - projected benefit obligation

  5.04

%

  3.81

%

  3.43

%

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-2020

 
             

Weighted Average Assumptions for Benefit Cost at Beginning of Year:

            
             

Discount rate - benefit obligations

  3.81

%

  3.43

%

  3.69

%

Discount rate - interest cost

  3.52

%

  2.68

%

  3.30

%

Discount rate - service cost

  3.93

%

  3.75

%

  3.87

%

Expected return on plan assets

  5.00

%

  5.00

%

  7.25

%

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.

33
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company's plan assets consist of the following:

  

Target

Allocation for:

  

Percentage of Plan

Assets as of:

 
  

Fiscal Year
2024

  

March 31,

2023

  

March 31,

2022

 

Equity securities

  16

%

  13

%

  21

%

Debt securities

  80

%

  75

%

  61

%

Real estate

  2

%

  8

%

  7

%

Cash

  1

%

  1

%

  7

%

Other

  1

%

  3

%

  4

%

Total

  100

%

  100

%

  100

%

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, 2023 and 2022, (in thousands):

  

As of March 31, 2023

 
  

Level 1

  

Level 2

  

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 

  

As of March 31, 2022

 
  

Level 1

  

Level 2

  

Level 3

 

`

 

Subtotal

  

Measured
at NAV (1)

  

Total

 

Equity securities

 $29,427  $-  $-   $29,427  $-  $29,427 

Held in common/collective trusts

                         

Equity securities

  -   -   -    -   40,969   40,969 

Real estate

  -   -   -    -   23,200   23,200 

Debt securities

  -   -   -    -   200,224   200,225 

Cash/short-term investments (2)

  -   -   -    -   22,224   22,224 

Other investments

  -   -   -    -   11,822   11,822 

Fair value of plan assets

 $29,427  $-  $-   $29,427  $298,439  $327,867 

(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 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.

34
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Expected Return on Plan Assets

For fiscal year 2023, the expected long-term rate of return on Plan assets was 5.00%. For fiscal year 2024, the Company will increase the expected long-term rate of return on Plan assets to 6.15%. The Company expected 5.00% and 6.15% 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 2023 and 2024, respectively.

Cash Flows

Expected contributions for fiscal year ending March 31,2024 (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):

2024

  

$

10,706

 

2025

   

11,446

 

2026

   

12,210

 

2027

   

12,975

 

2028

   

13,648

 

2029 

-

2033 

  

76,496

 

401(k) Plans

The Company also has employees’ savings 401(k) plans covering all employees who meet certain age-entry requirements and work a stated minimum number of hours per year. Participants may make contributions up to the legal limit. The Company’s matching contributions are discretionary. Costs charged to operations for the Company’s matching contributions amounted to $1.5 million, $1.1 million, and $1.6 million in fiscal years 2023,2022, and 2021, 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 for any loss of company contributions under the 401(k) plans. As of March 31, 2023 and 2022, the Company has accrued $1.7 million and $0.9 million, respectively, in connection with the unfunded deferred compensation plan.

12. Stockholders’ Equity

Preferred Stock — The Company has authorized three classes of preferred stock consisting of 200,000 shares of Six Percent (6%) Voting Cumulative Preferred Stock, par value $0.25 (“6% Preferred”); 30,000 shares of Preferred Stock Without Par Value to be issued in series by the Board of Directors, none of which are currently designated or outstanding; and 8,200,000 shares of Preferred Stock with $0.025 par value, Class A, to be issued in series by the Board of Directors (“Class A Preferred”). The Board of Directors has designated four series of Class A Preferred including 10% Cumulative Convertible Voting Preferred Stock—Series A (“Series A Preferred”); 10% Cumulative Convertible Voting Preferred Stock—Series B (“Series B Preferred”); Convertible Participating Preferred Stock; and Convertible Participating Preferred Stock, Series 2003.

35
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Convertible Participating Preferred Stock and Convertible Participating Preferred Stock, Series 2003 are convertible at the holders’ option on a one-for-one basis into shares of Class A Common Stock, subject to antidilution adjustments. These series of preferred stock have the right to receive dividends and distributions at a rate equal to the amount of any dividends and distributions declared or made on the Class A Common Stock. No dividends were declared or paid on this preferred stock in fiscal year 2023 or 2022. In addition, these series of preferred stock have certain distribution rights upon liquidation. Upon conversion, shares of these series of preferred stock become authorized but unissued shares of Class A Preferred and may be reissued as part of another series of Class A Preferred. As of March 31,2023, the Company has an aggregate of 6,791,708 shares of non-designated Class A Preferred authorized for issuance.

The Convertible Participating Preferred Stock has a liquidation preference of $12 per share and a stated value of $11.931 per share. There were 8,292 shares outstanding as of March 31,2023 and 23,964 conversions during the fiscal year. The Convertible Participating Preferred Stock, Series 2003 was issued as partial consideration of the purchase price in the Chiquita Processed Foods acquisition. The 967,742 shares issued in that 2003 acquisition were valued at $16.60 per share which represented the then market value of the Class A Common Stock into which the preferred shares were immediately convertible. This series has a liquidation preference of $15.50 per share and has no shares outstanding as of March 31,2023.

There are 407,240 shares of Series A Preferred outstanding as of March 31,2023 which are convertible into one share of Class A Common Stock and one share of Class B Common stock for every 20 shares of Series A Preferred. There are 400,000 shares of Series B Preferred outstanding as of March 31,2023 which are convertible into one share of Class A Common Stock and one share of Class B Common Stock for every 30 shares of Series B preferred. There are 200,000 shares of 6% Preferred outstanding as of March 31,2023 which are callable at their par value at any time at the option of the Company. The Company paid dividends of $20,000 on the Series A and Series B Preferred and $3,000 on the 6% Preferred during each of fiscal year 2023 and 2022.

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 2023, there were 1,319 shares of Class B Common Stock issued in lieu of cash compensation under the Company's Profit Sharing Bonus Plan.

Unissued shares of common stock reserved for conversion privileges of designated non-participating preferred stock were 33,695 of both Class A and Class B as of March 31,2023 and 2022. Additionally, there were 8,292 and 32,756 shares of Class A reserved for conversion of the Participating Preferred Stock as of March 31,2023 and 2022, respectively.

Treasury Stock — During fiscal year 2023 the Company repurchased $41.2 million, or 766,071 shares of its Class A Common Stock and none of its Class B Common Stock. As of March 31, 2023, there is a total of $168.6 million, or 4,566,242 shares, of repurchased stock. These shares are not considered outstanding. The Company contributed $1.5 million or 39,177 treasury shares for the 401(k) match in fiscal year 2023 as described in Note 11, Retirement Plans.

13. Fair Value of Financial 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,

  

March 31,

 
  

2023

  

2022

 
  

Carrying

  

Estimated

  

Carrying

  

Estimated

 
  

Amount

  

Fair Value

  

Amount

  

Fair Value

 
                 

Long-term debt, including current portion

 $442,695  $436,293  $113,624  $108,608 

The estimated fair value for long-term debt is determined by the quoted market prices for similar debt (comparable to the Company’s financial strength) or current rates offered to the Company for debt with the same maturities which is Level 2 from the fair value hierarchy. Since quoted prices for identical instruments in active markets are not available (Level 1), the Company makes use of observable market based inputs to calculate fair value, which is Level 2.

36
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. Other Operating Income and Expense

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, along with a favorable true-up of the supplemental early retirement plan accrual. 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.

The Company had net other operating expense of $1.2 million in fiscal year 2022, which was driven by charges for supplemental early retirement plans and to maintain non-operating facilities classified as held for sale. These charges were partially offset by a net gain on the sale of assets and a gain from debt forgiveness on an economic development loan.

The Company had net other operating income of $29.0 million in fiscal year 2021, which was primarily comprised of a net gain on the sale of assets, due largely to the gain realized upon the divestiture of the Company’s prepared foods business. The gain was partially offset by charges to maintain non-operational plants acquired in the Midwest, a charge for a supplemental early retirement plan, and a charge for severance.

15. Segment Information

The Company has historically managed its business on the basis of three reportable food packaging segments: (1) fruits and vegetables, (2) prepared food products and (3) snack products, with non-food packaging sales comprising the other category. The other category includes the sale of cans, ends, seed, and outside revenue from the Company's trucking and aircraft operations. During fiscal year 2021, the Company sold its prepared foods business, leaving just two reportable segments along with the other category. Export sales represented 6.7%, 7.2% and 7.2% of total sales in fiscal 2023,2022 and 2021, respectively. 

The following table summarizes certain financial data for the Company’s reportable segments (in thousands):

  

Fruit and

  

Prepared

  

Snack

         
  

Vegetable

  

Foods

  

Products

  

Other

  

Total

 

 

 

(Restated)

              

(Restated)

 
Fiscal Year 2023:                    

Net sales

 $1,465,963  $-  $12,661  $30,728  $1,509,352 

Operating income

  19,695   -   (1,241)  2,905   21,359 

Capital expenditures

  64,192   -   131   7,482   71,805 

Depreciation and amortization

  40,256   -   102   583   40,941 
                     

Fiscal Year 2022:

                    

Net sales

 $1,344,586  $-  $12,332  $28,362  $1,385,280 

Operating income

  60,414   -   75   3,520   64,009 

Capital expenditures

  47,421   -   67   4,612   52,100 

Depreciation and amortization

  36,126   -   121   276   36,523 
                     

Fiscal Year 2021:

                    

Net sales

 $1,363,263  $71,866  $10,999  $21,516  $1,467,644 

Operating income

  175,810   1,967   705   2,585   181,067 

Capital expenditures

  67,963   1,451   508   1,528   71,450 

Depreciation and amortization

  29,533   2,299   194   349   32,376 

After the sale of the prepared foods business in fiscal year 2021, over 99% of the Company’s total assets from the Consolidated Balance Sheets belong to the fruit and vegetable segment and this information is no longer necessary.

37
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Legal Proceedings and Other Contingencies

In the ordinary course of its business, the Company is made a party to certain legal proceedings seeking monetary damages, including proceedings involving product liability claims, workers’ compensation along with other employee claims, tort and other general liability claims, for which it carries insurance, as well as patent infringement and related litigation. The Company is in a highly regulated industry and is also periodically involved in government actions for regulatory violations and other matters surrounding the manufacturing of its products, including, but not limited to, environmental, employee, and product safety issues. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company does not believe that an adverse decision in any of these legal proceedings would have a material adverse impact on its financial position, results of operations, or cash flows.

17. Plant Restructuring

The following table summarizes the restructuring charges recorded and the accruals established during fiscal years 2023,2022 and 2021 (in thousands):

  

Severance

  

Other

     
  

Payable

  

Costs

  

Total

 
             

Balance March 31, 2020

 $202  $-   202 

Charge to expense

  227   (45

)

  182 

Cash payments/write offs

  (429

)

  45   (384

)

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 

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 years 2022 and 2021, 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.

18. Related Party Transactions

During fiscal years 2023,2022, and 2021, less than 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 $3.1 million, $2.9 million, and $2.2 million in fiscal years 2023,2022, and 2021, 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, a related party, in the amount of $0.5 million, $1.0 million and $1.0 million in fiscal years 2023,2022 and 2021, 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.

During fiscal year 2022, the Company recorded a liability for retirement arrangements to beneficiaries of certain former employees of the Company that have family relationships to two of the Company’s current Directors. As of March 31, 2023 and 2022, the liability for these benefits totaled $1.0 million and $1.9 million, respectively. Payments are made monthly over the beneficiary’s lifetime.

38
SENECA FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. Subsequent Event

On May 23, 2023, the Company entered into Second Amended and Restated Loan and Guaranty Agreement Amendment 1 with Farm Credit East, ACA (“the Amendment”). The Amendment amends, restates and replaces in its entirety Term Loan A-2 (as defined in Note 8, Long-Term Debt) and provides a single advance term facility in the principal amount of $125.0 million to be combined with the existing $173.5 million 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. 

39

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our

Prior to the filing of our Form 10-K for the fiscal year ended March 31, 2023 (the “Original Filing”), our management, with the participation of our ChiefPrincipal Executive Officer and ChiefCo-Principal Financial Officer,Officers, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of March 31, 2021.2023. Based upon this evaluation, our ChiefPrincipal Executive Officer and ChiefCo-Principal Financial OfficerOfficers concluded that, as of March 31, 2021,2023, the Company’s disclosure controls and procedures: (1) were designed to ensure that material information relating to the Company is made known to our ChiefPrincipal Executive Officer and ChiefCo-Principal Financial OfficerOfficers by others within those entities, particularly during the period in which this report was being prepared, so as to allow timely decisions regarding required disclosure and (2) were effective, in that they provide reasonable assurance that information required to be disclosed by the Company in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Subsequent to this evaluation and conclusion, on July 25, 2023, we reported that we had identified an error related to our accounting for valuing inventory using the LIFO method. As a result of this error, our Principal Executive Officer and Principal Financial Officer have now concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of March 31, 2023, solely as a result of the material weakness identified in Management's Report on our Internal Control over Financial Reporting related to accounting for valuing inventory using the LIFO method as discussed below.

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

Prior to the filing of our Original Filing, our management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2021.2023. 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 this assessment, our assessment, management believesbelieved that, as of March 31, 2021,2023, our internal control over financial reporting iswas effective based on those criteria.

Subsequently, we identified a material weakness in our internal control over financial reporting relating to the accounting for valuing inventory using the LIFO method. Specifically, the review controls in place with respect to a year-end adjustment to the calculation of the LIFO reserve were not effective. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The Company’smaterial weakness in our internal controls resulted in the restatement of our fiscal 2023 and 2022 financial statements included in this report. As a result, management has now concluded that our internal control over financial reporting was not effective as of March 31, 2023, based on the COSO criteria.

Plante Moran, P.C., an independent registered public accountantaccounting firm, has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K/A and, as part of its audit, has issued itsan attestation report, included herein, on the effectiveness of our internal control over financial reporting.

Changes in Internal Control over Financial Reporting

The material weakness described above, which related to the accounting for valuing inventory using the LIFO method, was identified after the end of the period covered by the Original Filing. We have implemented certain remedial measures including the installation of software to recalculate the LIFO reserve and also provide analytic features to identify potential abnormalities in the underlying data coupled with strengthening our review controls with improved documentation standards, technical oversight and training to ensure the accounting valuing inventory was in compliance with U.S. generally accepted accounting principles. The material weakness cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Except as otherwise discussed above, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The report appears on the next page.

14
reporting, including any corrective actions with regard to significant deficiencies and material weaknesses.

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

To the Stockholders and Board of Directors of Seneca Foods Corporation

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting as of March 31, 20212023 of Seneca Foods Corporation (the “Company”), based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO framework”). In our opinion, because of the effect of the material weakness described in the following paragraph on the achievement of the objectives of the control criteria, the Company has not maintained in all material respects, effective internal control over financial reporting as of March 31, 2021,2023, based on criteria established in the COSO framework.

In our report dated June 13, 2023, we expressed an unqualified opinion on the Company’s internal control over financial reporting. The material weakness described below was subsequently identified in connection with the restatement of the Company’s previously issued consolidated financial statements. Accordingly, management has revised its assessment about the effectiveness of the Company’s internal control over financial reporting, and our present opinion on the effectiveness of the Company’s internal control over financial reporting as of March 31, 2023, as expressed herein, is different from that expressed in our previous report. The material weakness was considered in connection with the aforementioned restatement, and this report does not affect our opinion on the Company’s consolidated financial statements.

A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment. Management identified a deficiency in its review controls related to the Company’s valuation of inventory under the LIFO method.  

We also have audited the accompanying consolidated balance sheets of the Company as of March 31, 20212023 and 2020,2022, the related consolidated statements of net earnings, comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the two-yearthree-year period ended March 31, 2021,2023, and the related notes (collectively referred to as the “financial statements”), in accordance with the standards of the Public Company Accounting Oversight Board (United States). OurThe material weakness described above was considered in connection with the aforementioned restatement and in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2023 financial statements, and this report does not affect our report dated June 11, 2021, expresses13, 2023 (except for the effect of the restatement disclosed in Notes 2 and 5, as to which the date is July 31, 2023), which expressed an unqualified opinion.

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 Item 9A, Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Plante Moran, P.C.

We have served as the Company’s auditor since 2019.

Southfield, Michigan          

June 13, 2023 (except for the material weakness described above as to which the date is July 31, 2023)

 
Southfield, Michigan


June 11. 2021

15
41
Table of Contents
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as defined in rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B

Other Information

None.
16
Table of Contents
PART III
Item 10
Directors, Executive Officers and Corporate Governance
The information regarding directors is incorporated herein by reference from the section entitled “Information Concerning Directors” in the Company’s definitive Proxy Statement (“Proxy Statement”) to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, for the Company’s Annual Meeting of Stockholders to be held on August 11, 2021. The Proxy Statement will be filed within 120 days after the end of the Company’s fiscal year ended March 31, 2021.
The information regarding executive officers is incorporated herein by reference from the section entitled “Executive Officers” in the Proxy Statement.
The information regarding compliance with Section 16(a) of the Exchange Act is incorporated herein by reference from the section entitled “Delinquent Section 16(a) Reports” in the Proxy Statement.
Information regarding the Company’s code of business conduct and ethics found in the subsection captioned “Available Information” in Item 1 of Part I hereof is also incorporated herein by reference into this Item 10.
The information regarding the Company’s audit committee, its members and the audit committee financial experts is incorporated herein by reference from the subsection entitled “Audit Committee” in the section entitled “Board Governance” in the Proxy Statement.
Item 11
Executive Compensation
The information included under the following captions in the Proxy Statement is incorporated herein by reference: “Compensation Discussion and Analysis,” “Summary Compensation Table,” “Outstanding Equity Awards at 2021 Fiscal Year-End,” “Pension Benefits,” “Compensation of Directors” and “Compensation Committee Interlocks.” The information included under the heading “Compensation Committee Report” in the Proxy Statement is incorporated herein by reference; however, this information shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information regarding security ownership of certain beneficial owners and management is incorporated herein by reference from the sections entitled “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management and Directors” in the Proxy Statement.
Item 13
Certain Relationships and Related Transactions, and Director Independence
The information regarding transactions with related parties and director independence is incorporated herein by reference from the sections entitled “Independent Directors” and “Certain Transactions and Relationships” in the Proxy Statement.
Item 14
Principal Accountant Fees and Services
The information regarding principal accountant fees and services is incorporated herein by reference from the section entitled “Principal Accountant Fees and Services” in the Proxy Statement.
17
Table of Contents
PART IV

Item 15

15. Exhibits and Financial Statement ScheduleSchedu

A.

A.

Exhibits, Financial Statements, and Supplemental Schedule

 

1.

Financial Statements ‑ – the following consolidated financial statements of the Registrant, included in the 2021 Annual Report,, are incorporated by reference in Part II, Item 8:

8 “Financial Statements and Supplementary Data”:

 

a.

Consolidated Statements of Net Earnings – Years ended March 31, 20212023, 2022, and 20202021

 

b.

Consolidated Statements of Comprehensive Income (Loss) – Years ended March 31, 20212023, 2022, and 20202021

 

c.

Consolidated Balance Sheets ‑– As of March 31, 20212023 and 20202022

 

d.

Consolidated Statements of Cash Flows – Years ended March 31, 20212023, 2022, and 20202021

 

e.

Consolidated Statements of Stockholders’ Equity – Years ended March 31, 20212023, 2022, and 20202021

 

f.

Notes to Consolidated Financial Statements – Years ended March 31, 20212023, 2022, and 20202021

 

g.

Reports of Independent Registered Public Accounting Firm (PCAOB ID 6581)

 

2.

Supplemental Schedule:

 2.

a.

Supplemental Schedule - the following financial statement schedule, included in the 2021 Annual Report, is incorporated by reference in this item 15. 
Schedule II—Valuation and Qualifying Accounts
 

Report of Independent Registered Public Accounting Firm on Schedule

b.

Schedule II—Valuation and Qualifying Accounts

Other schedules have not been filed because the conditions requiring the filing do not exist or the required information is included in the consolidated financial statements, including the notes thereto.

Exhibit

Number

Description

 3.
Exhibits:
Exhibit Number              Description
 

3.1

The Company’s Restated Certificate of Incorporation, (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K dated August 11, 2010).

 3.2

3.2

The Company’s Bylaws (incorporated by reference to Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q/A filed August 18, 1995 for the quarterquarterly period ended July 1, 1995 filed with the SEC on August 18, 1995)

 3.3

3.3

Amendment to the Company’s Bylaws (incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K dated November 6, 2007)

 4.1

4.1

Description of Capital Stock (incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019)

 10.1

10.1

Fourth Amended and Restated Loan and Security Agreement dated as of March 24, 2021 by and among Seneca Foods Corporation, Seneca Foods, LLC, Seneca Snack Company, Green Valley Foods, LLC and certain other subsidiaries of Seneca Foods Corporation, the financial institutions party thereto as lenders, as agent, issuing bank, and syndication agent, and BofA Securities, Inc. as lead arranger (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated March 26, 2021).

 10.2

10.2

First Amendment to Fourth Amended and Restated Loan and Security Agreement dated as of September 14, 2022 by and among Seneca Foods Corporation, Seneca Foods, LLC, Seneca Snack Company, Green Valley Foods, LLC and certain other subsidiaries of Seneca Foods Corporation, the financial institutions party thereto as lenders, as agent, issuing bank, and syndication agent, and BofA Securities, Inc. as lead arranger (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended October 1, 2022, filed with the SEC on November 9, 2022)

10.3

Second Amended and Restated Loan and Guaranty Agreement as of May 28, 2020January 20, 2023 by and among Seneca Foods Corporation, Seneca Foods, LLC, Seneca Snack Company, Green Valley Foods, LLC and certain other subsidiaries of Seneca Foods Corporation and Farm Credit East, ACA (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 1, 2020).January 26, 2023)

42
 

 10.3

10.4

Amendment 1 to Second Amended and Restated Loan and Guaranty Agreement as of May 23, 2023 by and among Seneca Foods Corporation, Seneca Foods, LLC, Seneca Snack Company, Green Valley Foods, LLC and certain other subsidiaries of Seneca Foods Corporation and Farm Credit East, ACA (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 30, 2023

10.5

Indemnification Agreement between the Company and the directors of the Company (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterquarterly period ended September 26, 2020, filed with the SEC on November 4, 2020)

18
Table of Contents
 10.4*

10.6*

Amended and Restated Seneca Foods Corporation Executive Profit Sharing Bonus Plan (incorporated by reference to Exhibit 10.110.4 to the Company’s CurrentAnnual Report on Form 8-K dated January 27, 2017)10-K for the fiscal year ended March 31, 2022, filed with the SEC on June 10, 2022)

 10.5*

10.7*

Amended and Restated Seneca Foods Corporation Manager Profit Sharing Bonus Plan (incorporated by reference to Exhibit 10.210.5 to the Company’s CurrentAnnual Report on Form 8-K dated January 27, 2017)10-K for the fiscal year ended March 31, 2022, filed with the SEC on June 10, 2022)

 10.6*

10.8*

2007 Equity Incentive Plan effective August 3, 2007 as extended on July 28, 2017 (incorporated by reference to Appendix A to the Company’s Proxy Statement dated June 28, 2007)

 10.7*

10.9*

Seneca Foods Corporation Division Management Bonus Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 5, 2020)

 10.8*

10.10* 

Executive Transition Services Agreement dated as of August 31, 2020 between the Company and Kraig H. Kayser (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterquarterly period ended September 26, 2020, filed with the SEC on November 4, 2020)

 10.9*

10.11*

Supplemental Retirement Agreement between Seneca Foods Corporation and Kraig H. Kayser (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterquarterly period ended September 26, 2020, filed with the SEC on November 4, 2020).

 13
The material contained in the 2021 Annual Report to Shareholders under the following headings: “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, Consolidated Financial Statements and Notes thereto including Independent Auditors’ Report, and “Shareholder Information” (filed herewith)
 21

10.12*

Supplemental Retirement Agreement between Seneca Foods Corporation and Timothy J. Benjamin (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 11, 2021)

21

List of Subsidiaries (filed herewith)(incorporated by reference to Exhibit 21 of the Company’s Annual Report on Form 10-K filed with the SEC on June 13, 2023)

 23.1

23.1

Consent of Plante Moran, P.C. (filed herewith)

 31.1

31.1

Certification of Paul L. Palmby as Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

 31.2

31.2

Certification of Timothy J. BenjaminMichael S. Wolcott as Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

 32

32

Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

 101

101.INS

.INS

Inline XBRL Instance Document (filed herewith).

101.1.SCH

Inline XBRL Taxonomy Extension Calculation Schema Document (filed herewith)

101.2.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)

101.3.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)

101.4.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith)

101.5

Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)

104

Cover page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*) (filed herewith)

101.1.SCH Inline XBRL Taxonomy Extension Schema Document (filed herewith).
101.2.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
101.3.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).
101.4.LAB Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith).
101.5.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).
104 Cover page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)

* Indicates management or compensatory agreement

Item 16
Form 10-K Summary
None.

19
43
 

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SENECA FOODS CORPORATION

By: /s/ Michael S. Wolcott          

Michael S. Wolcott

Senior Vice President, Chief Financial Officer and Treasurer

July 31, 2023 

44
 

Schedule II

VALUATION AND QUALIFYING ACCOUNTS

(In thousands)

Seneca Foods Corporation and Subsidiaries

      

Charged/

           

Balance

 
  

Balance at

  

(credited)

  

Charged to

  

Deductions

   

at end

 
  

beginning

  

to income

  

other

  

from

   

of period

 
  

of period

  

(Restated)

  

accounts

  

reserve

   

(Restated)

 

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 
                      

Year-ended March 31, 2021:

                     

Allowance for doubtful accounts

 $1,598  $(1,304) $-  $(45)

(a)

 $339 

Income tax valuation allowance

 $4,473  $201  $-  $-   $4,674 

SENECA FOODS CORPORATION
/s/Timothy J. Benjamin 
Timothy J. Benjamin
Senior Vice President, Chief Financial
Officer and Treasurer
June 11, 2021

(a) Accounts written off, net of recoveries.

45
Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
SignatureTitleDate
/s/Arthur S. Wolcott Chairman and DirectorJune 11, 2021
Arthur S. Wolcott
/s/Paul L. PalmbyPresident, Chief Executive Officer, DirectorJune 11, 2021
Paul L. Palmby
/s/Timothy J. Benjamin Senior Vice President, Chief Financial OfficerJune 11, 2021
Timothy J. Benjaminand Treasurer
/s/Gregory R. IdeVice President, Controller, and Assistant SecretaryJune 11, 2021
 Gregory R. Ide(Principal Accounting Officer)
/s/Kathryn J. BoorDirectorJune 11, 2021
Kathryn J. Boor
/s/Peter R. CallDirectorJune 11, 2021
Peter R. Call
/s/John P. GaylordDirectorJune 11, 2021
John P. Gaylord
/s/Linda K. NelsonDirectorJune 11, 2021
Linda K. Nelson
/s/Michael R. NozzolioDirectorJune 11, 2021
Michael R. Nozzolio
/s/Donald StuartDirectorJune 11, 2021
Donald Stuart
/s/Keith A. WoodwardDirectorJune 11, 2021
Keith A. Woodward
 
 

Report of Independent Registered Public Accounting Firm 

Board of Directors and Stockholders
Seneca Foods Corporation
Fairport, New York

The audit referred to in our report dated June 13, 2023 (except for the effect of the restatement disclosed in Notes 2 and 5, as to which the date is July 31, 2023) relating to the consolidated financial statements of Seneca Foods Corporation also included the audit of the consolidated financial statement schedule listed in the accompanying index. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this consolidated financial statement schedule based on our audit.

In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Plante Moran, P.C.

We have served as the Company’s auditor since 2019.

Southfield, Michigan
June 13, 2023 (except for the March 31, 2023 income tax valuation allowance as to which the date is July 31, 2023)

20
46