UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended ~~June 29,~~December 28, 2019

Commission File Number 0-01989

Seneca Foods Corporation

(Exact name of Company as specified in its charter)

New York	16-0733425
(State or other jurisdiction of	(I. R. S. Employer
incorporation or organization)	Identification No.)

3736 South Main Street, Marion, New York	14505
(Address of principal executive offices)	(Zip Code)

Company's telephone number, including area code315/926-8100

~~315/926-8100~~

Not Applicable

Former name, former address and former fiscal year,

if changed since last report

~~Name of Exchange on~~

~~Title of Each ClassTrading SymbolWhich Registered~~

Common Stock Class A, $.25 Par SENEA NASDAQ Global Market

Common Stock Class B, $.25 Par SENEB NASDAQ Global Market

Indicate by check mark whether the Company (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 Company 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 Company is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and an ~~"emerging~~emerging growth ~~company"~~company in Rule 12b-2 of the Exchange ~~Act:~~Act. (Check one):

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

Indicate by check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ ~~Accelerated filer~~No ☑ ~~Non-accelerated filer ☐ Smaller reporting company ☑~~

~~Emerging growth company ☐~~

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

~~Indicate by check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act).~~

~~Yes ☐ No ☑~~
Name of Exchange on
Title of Each Class Trading Symbol Which Registered
Common Stock Class A, $.25 Par SENEA NASDAQ Global Market
Common Stock Class B, $.25 Par SENEB NASDAQ Global Market

The number of shares outstanding of each of the issuer's classes of common stock at the latest practical date are:

Class	Shares Outstanding at ~~July 31, 2019~~January 24, 2020
Common Stock Class A, $.25 Par	~~7,540,472~~7,418,535
Common Stock Class B, $.25 Par	~~1,753,361~~1,735,636

Table of Contents

Seneca~~Seneca~~ Foods Corporation
Quarterly Report on Form 10-Q
Table of Contents


		Page

PART 1	FINANCIAL INFORMATION

Item 1	Financial Statements:

	Condensed Consolidated Balance ~~Sheets-June~~Sheets-December 28, 2019, December 29, ~~2019, June 30,~~ 2018 and March 31, 2019	1

	Condensed Consolidated Statements of Net ~~Earnings (Loss)-Three~~Earnings-Three and Nine Months Ended ~~June 29,~~December 28, 2019 and ~~June 30,~~, December 29, 2018	2

	Condensed Consolidated Statements of Comprehensive ~~Income (Loss)-Three~~Income-Three and Nine Months Ended ~~June 29,~~December 28, 2019 and ~~June 30,~~, December 29, 2018	2

	Condensed Consolidated Statements of Cash ~~Flows-Three~~Flows-Nine Months Ended ~~June 29,~~December 28, 2019 and ~~June 30,~~, December 29, 2018	3

	Condensed Consolidated ~~Statements~~Statement of Stockholders' Equity-Three and Nine Months Ended ~~June 29,~~December 28, 2019 ~~and June 30, 2018~~	4

	Notes to Condensed Consolidated Financial Statements	56

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	1817

Item 3	Quantitative and Qualitative Disclosures about Market Risk	2423

Item 4	Controls and Procedures	2524

PART II	OTHER INFORMATION

Item 1	Legal Proceedings	2625

Item 1A	Risk Factors	2625

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	2625

Item 3	Defaults Upon Senior Securities	2625

Item 4	Mine Safety Disclosures	2625

Item 5	Other Information	2625

Item 6	Exhibits	2625

SIGNATURES		2726

Table of Contents

SENECA~~SENECA~~ FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Data)

	Unaudited			Unaudited						Unaudited			Unaudited
	June 29, 2019			June 30, 2018			March 31, 2019			December 28, 2019			December 29, 2018			March 31, 2019
ASSETS

Current Assets:
Cash and Cash Equivalents	$	16,901		$	12,626		$	11,480		$	13,858		$	12,828		$	11,480
Accounts Receivable, Net		74,000			73,743			84,122			79,040			82,892			84,122
Contracts Receivable		5,157			-			-			7,620			-			-
Current Assets Held For Sale		-			3,859			1,568			-			20,339			1,568
Current Assets Held For Sale-Discontinued Operations		98			16,696			98			98			12,063			98
Inventories		493,498			567,594			501,684			493,065			575,935			501,684
Refundable Income Taxes		441			1,505			1,221			-			1,422			1,221
Other Current Assets		3,577			3,277			3,075			6,272			4,520			3,075
Total Current Assets		593,672			679,300			603,248			599,953			709,999			603,248
Property, Plant and Equipment, Net		206,188			252,045			239,273			219,311			246,014			239,273
Right-of-Use Assets Operating Net		83,742			-			-			67,915			-			-
Right-of-Use Assets Financing, Net		34,294			-			-			34,784			-			-
Deferred Income Taxes, Net		3,722			7,805			2,417			-			1,417			2,417
Noncurrent Assets Held For Sale-Discontinued Operations		1,143			21,632			1,143			1,054			1,739			1,143
Other Assets		2,547			3,394			2,801			9,643			2,890			2,801
Total Assets	$	925,308		$	964,176		$	848,882		$	932,660		$	962,059		$	848,882

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts Payable	$	77,571		$	87,336		$	61,024		$	84,295		$	93,586		$	61,024
Deferred Revenue		1,936			3,080			4,098			12,105			6,829			4,098
Accrued Vacation		11,843			12,696			11,678			11,898			11,404			11,678
Accrued Payroll		6,002			7,748			5,105			6,157			5,350			5,105
Other Accrued Expenses		17,550			25,072			19,363			19,903			22,194			19,363
Income Taxes Payable											4,869			-			-
Current Liabilities Held For Sale		-			-			61			-			142			61
Current Liabilities Held For Sale-Discontinued Operations		3,653			33,656			4,285			2,744			8,697			4,285
Current Portion of Operating Lease Obligations		26,641			-			-			24,430			-			-
Current Portion of Financing Lease Obligations		6,573			-			-			6,584			-			-
Current Portion of Capital Lease Obligations		-			5,863			6,418			-			5,922			6,418
Current Portion of Long-Term Debt		88			4,873			345			-			314,657			345
Total Current Liabilities		151,857			180,324			112,377			172,985			468,781			112,377
Long-Term Debt, Less Current Portion		246,645			318,282			265,900			225,337			10,715			265,900
Operating Lease Obligations, Less Current Portion		60,979			-			-			47,965			-			-
Financing Lease Obligations, Less Current Portion		29,907			-			-			27,007			-			-
Capital Lease Obligations, Less Current Portion		-			32,835			31,286			-			29,730			31,286
Pension Liabilities		18,005			24,761			17,349			19,463			27,356			17,349
Deferred Income Taxes, Net											866			-			-
Noncurrent Liabilities Held For Sale		-			-			305			-			593			305
Noncurrent Liabilities Held For Sale-Discontinued Operations		-			624			-
Other Long-Term Liabilities		4,077			5,080			4,180			3,852			4,851			4,180
Total Liabilities		511,470			561,906			431,397			497,475			542,026			431,397
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock		707			707			707			703			707			707
Common Stock, $.25 Par Value Per Share		3,039			3,038			3,039			3,040			3,038			3,039
Additional Paid-in Capital		98,285			98,186			98,260			98,338			98,236			98,260
Treasury Stock, at Cost		(78,484	)		(69,556	)		(75,740	)		(87,194	)		(74,896	)		(75,740	)
Accumulated Other Comprehensive Loss		(18,285	)		(25,118	)		(18,285	)		(18,285	)		(25,186	)		(18,285	)
Retained Earnings		408,576			395,013			409,504			438,583			418,134			409,504
Total Stockholders' Equity		413,838			402,270			417,485			435,185			420,033			417,485
Total Liabilities and Stockholders’ Equity	$	925,308		$	964,176		$	848,882		$	932,660		$	962,059		$	848,882

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

SENECA~~SENECA~~ FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS ~~(LOSS)~~
(Unaudited)
(In Thousands, Except Per Share Data)

	Three Months Ended						Three Months Ended						Nine Months Ended
	June 29, 2019			June 30, 2018			December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018

Net Sales	$	264,925		$	244,093		$	392,971		$	372,238		$	1,027,898		$	936,991

Costs and Expenses:
Cost of Product Sold		245,751			227,305			340,694			374,334			932,392			911,291
Selling, General and Administrative		16,258			17,688			19,986			19,389			53,936			55,432
Plant Restructuring Charge		4,806			38			793			1,396			6,745			2,279
Other Operating Income		(4,827	)		(915	)
Other Operating (Income) Loss								(1,617	)		776			(8,618	)		(3,498	)
Total Costs and Expenses		261,988			244,116			359,856			395,895			984,455			965,504
Operating Income (Loss)		2,937			(23	)		33,115			(23,657	)		43,443			(28,513	)
Other Income		(1,803	)		(1,020	)		(1,656	)		(607	)		(5,263	)		(2,649	)
Interest Expense, Net		3,352			3,825			2,690			3,864			9,183			11,587
Earnings (Loss) From Continuing Operations Before Income Taxes		1,388			(2,828	)		32,081			(26,914	)		39,523			(37,451	)
Income Taxes (Benefit) From Continuing Operations		285			(668	)		7,653			(6,874	)		9,357			(9,617	)
Earnings (Loss) From Continuing Operations		1,103			(2,160	)		24,428			(20,040	)		30,166			(27,834	)
Earnings (Loss) From Discontinued Operations (net of income taxes)		-			(6,595	)
Net Earnings (Loss)	$	1,103		$	(8,755	)
Earnings From Discontinued Operations (net of income taxes)								955			34,056			955			42,211
Net Earnings							$	25,383		$	14,016		$	31,121		$	14,377

Basic Earnings (Loss) per Common Share:
Continuing Operations	$	0.12		$	(0.22	)	$	2.65		$	(2.07	)	$	3.23		$	(2.86	)
Discontinued Operations	$	-		$	(0.67	)	$	0.10		$	3.52		$	0.10		$	4.34
Net Basic Earnings (Loss) per Common Share	$	0.12		$	(0.90	)
Net Basic Earnings per Common Share							$	2.75		$	1.45		$	3.33		$	1.48

Diluted Earnings (Loss) per Common Share:
Continuing Operations	$	0.12		$	(0.22	)	$	2.63		$	(2.07	)	$	3.20		$	(2.86	)
Discontinued Operations	$	-		$	(0.67	)	$	0.10		$	3.50		$	0.10		$	4.31
Net Diluted Earnings (Loss) per Common Share	$	0.12		$	(0.90	)
Net Diluted Earnings per Common Share							$	2.73		$	1.43		$	3.31		$	1.45

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SENECA FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~
(Unaudited)
(In Thousands)

	Three Months Ended					Three Months Ended				Nine Months Ended
	June 29, 2019		June 30, 2018			December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018

Comprehensive income (loss):
Net earnings (loss)	$	1,103	$	(8,755	)
Comprehensive income:
Net earnings						$	25,383	$	14,016	$	31,121	$	14,377
Change in pension, post retirement benefits and other (net of tax)		-		51			-		17		-		119
Total	$	1,103	$	(8,704	)	$	25,383	$	14,033	$	31,121	$	14,496

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

SENECA~~SENECA~~ FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)

	Three Months Ended						Nine Months Ended
	June 29, 2019			June 30, 2018			December 28, 2019			December 29, 2018
Cash Flows from Operating Activities:
Net Earnings (Loss) From Continuing Operations	$	1,103		$	(2,160	)	$	30,166		$	(27,834	)
Net Loss From Discontinued Operations (Net of Tax)		-			(6,595	)
Net Earnings From Discontinued Operations (Net of Tax)								955			42,211

Adjustments to Reconcile Net Earnings (Loss) to
Net Cash Used In Operations:
Net Cash Provided By Operations:
Depreciation & Amortization		7,382			8,046			22,644			23,550
Gain on the Sale of Assets		(4,663	)		(6,444	)		(9,049	)		(55,863	)
Provision for Restructuring and Impairment		4,806			1,820			5,573			6,537
Deferred Income Tax Benefit		(1,305	)		(2,229	)		3,283			4,159
Changes in Operating Assets and Liabilities:
Accounts Receivable		4,965			(9,827	)		(2,538	)		(5,537	)
Inventories		8,186			74,622			8,619			52,836
Other Current Assets		(502	)		(1,210	)		(3,197	)		(8,353	)
Income Taxes		1,453			(363	)		6,763			(280	)
Accounts Payable, Accrued Expenses and Other Liabilities		16,418			31,290			52,101			15,004
Net Cash Provided By Operations		37,843			86,950			115,320			46,430
Cash Flows from Investing Activities:
Additions to Property, Plant and Equipment		(9,776	)		(10,462	)		(47,681	)		(30,468	)
Proceeds from the Sale of Assets		6,398			10,387			22,175			84,975
Net Cash Used In Investing Activities		(3,378	)		(75	)
Net Cash (Used In) Provided By Investing Activities								(25,506	)		54,507
Cash Flows from Financing Activities:
Long-Term Borrowing		93,600			89,546			401,053			419,102
Payments on Long-Term Debt and Lease Obligations		(118,272	)		(178,845	)		(465,099	)		(517,187	)
Other Assets		-			(40	)		(7,125	)		226
Payments on Financing Leases		(1,616	)		-			(4,799	)		-
Purchase of Treasury Stock		(2,744	)		-			(11,454	)		(5,340	)
Dividends		(12	)		(12	)		(12	)		(12	)
Net Cash Used In Financing Activities		(29,044	)		(89,351	)		(87,436	)		(103,211	)

Net Increase (Decrease) in Cash and Cash Equivalents		5,421			(2,476	)		2,378			(2,274	)
Cash and Cash Equivalents, Beginning of the Period		11,480			15,102			11,480			15,102
Cash and Cash Equivalents, End of the Period	$	16,901		$	12,626		$	13,858		$	12,828

Supplemental Disclosures of Cash Flow Information:
Noncash Transactions:
Property, Plant and Equipment Purchased Under Lease Obligations	$	4,775		$	-		$	9,782		$	258

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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SENECA~~SENECA~~ FOODS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENT OF STOCKHOLDERS' EQUITY

(Unaudited)

(In Thousands)

										Accumulated																	Accumulated
					Additional					Other											Additional						Other
	Preferred		Common		Paid-In		Treasury			Comprehensive			Retained			Preferred			Common		Paid-In		Treasury				Comprehensive			Retained
	Stock		Stock		Capital		Stock			Loss			Earnings			Stock			Stock		Capital		Stock				Loss			Earnings
First Quarter FY 2020:
Balance March 31, 2019	$	707	$	3,039	$	98,260	$	(75,740	)	$	(18,285	)	$	409,504		$	707		$	3,039	$	98,260	$	(75,740	)		$	(18,285	)	$	409,504

Net earnings		-		-		-		-			-			1,103			-			-		-		-				-			1,103
Cash dividends paid on preferred stock		-		-		-		-			-			(12	)		-			-		-		-		��		-			(12	)
Equity incentive program		-		-		25		-			-			-			-			-		25		-				-			-
Purchase treasury stock		-		-		-		(2,744	)		-			-			-			-		-		(2,744	)			-			-
Operating lease impairment adjustment upon the adoption of ASU 2016-02 "Leases" (net of tax)		-		-		-		-			-			(2,019	)		-			-		-		-				-			(2,019	)
Balance June 29, 2019	$	707	$	3,039	$	98,285	$	(78,484	)	$	(18,285	)	$	408,576		$	707		$	3,039	$	98,285	$	(78,484	)		$	(18,285	)	$	408,576
Second Quarter FY 2020:
Net earnings																	-			-		-		-				-			4,635
Equity incentive program																	-			-		25		-				-			-
Preferred stock conversion																	(4	)		1		3		-				-			-
Purchase treasury stock																	-			-		-		(5,836	)			-			-
Balance September 28, 2019																$	703		$	3,040	$	98,313	$	(84,320	)		$	(18,285	)	$	413,211
Third Quarter FY 2020:
Net earnings																	-			-		-		-				-			25,383
Cash dividends paid on preferred stock																	-			-		-		-				-			(11	)
Equity incentive program																	-			-		25		-				-			-
Purchase treasury stock																	-			-		-		(2,874	)			-			-
Balance December 28, 2019																$	703		$	3,040	$	98,338	$	(87,194	)		$	(18,285	)	$	438,583

First Quarter FY 2019:
Balance March 31, 2018	$	707	$	3,038	$	98,161	$	(69,556	)	$	(25,067	)	$	403,780		$	707		$	3,038	$	98,161	$	(69,556	)		$	(25,067	)	$	403,780

Net loss		-		-		-		-			-			(8,755	)		-			-		-		-				-			(8,755	)
Cash dividends paid on preferred stock																	-			-		-		-				-			(12	)
Equity incentive program																	-			-		25		-				-			-
Change in pension, post retirement benefits, other (net of tax)																	-			-		-		-				(51	)		-
Balance June 30, 2018																$	707		$	3,038	$	98,186	$	(69,556	)		$	(25,118	)	$	395,013
Second Quarter FY 2019:
Net earnings																	-			-		-		-				-			9,116
Equity incentive program																	-			-		25		-				-			-
Purchase treasury stock																	-			-		-		(1,579	)			-			-
Change in pension, post retirement benefits, other (net of tax)																	-			-		-		-				(51	)		-
Balance September 29, 2018																$	707		$	3,038	$	98,211	$	(71,135	)		$	(25,169	)	$	404,129
Third Quarter FY 2019:
Net earnings																	-			-		-		-				-			14,016
Cash dividends paid on preferred stock		-		-		-		-			-			(12	)		-			-		-		-				-			(11	)
Equity incentive program		-		-		25		-			-			-			-			-		25		-				-			-
Purchase treasury stock		-		-		-		-			-			-			-			-		-		(3,761	)			-			-
Change in pension, post retirement benefits, other (net of tax)		-		-		-		-			(51	)		-			-			-		-		-				(17	)		-
Balance June 30, 2018	$	707	$	3,038	$	98,186	$	(69,556	)	$	(25,118	)	$	395,013
Balance December 29, 2018																$	707		$	3,038	$	98,236	$	(74,896	)		$	(25,186	)	$	418,134

Preferred Stock

Common Stock

6% 10%

Cumulative Par

Cumulative Par

2003 Series

Value $.25

Value $.025

Participating

Participating

Class A

Class B

Callable at Par

Convertible

Convertible Par

Convertible Par

Common Stock

Common Stock

Voting

Voting

Value $.025

Value $.025

Par Value $.25

Par Value $.25

Shares authorized and designated:

June 29, 2019
200,000 1,400,000 37,529 500 20,000,000 10,000,000
Shares outstanding:

June 29, 2019
200,000 807,240 37,529 500 7,557,913 1,874,861

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

Table of Contents

Preferred Stock

Common Stock

10%

Cumulative Par

2003 Series

Value $.25

Value $.025

Participating

Class A

Class B

Callable at Par

Convertible

Convertible Par

Common Stock

Voting

Value $.025

Par Value $.25

Shares authorized and designated:

December 28, 2019

200,000

1,400,000

37,155

500

20,000,000

10,000,000

Shares outstanding:

December 28, 2019

200,000

807,240

37,155

500

7,416,735

1,735,636

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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SENECA~~SENECA~~ FOODS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~June 29,~~December 28, 2019

1.	Unaudited Condensed Consolidated Financial Statements

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which are normal and recurring in nature, necessary to present fairly the financial position of Seneca Foods Corporation (the “Company”) as of ~~June~~December 28, 2019 and December 29, ~~2019 and~~2018 results of its operations and its cash flows for the interim periods presented. All significant intercompany transactions and accounts have been eliminated in consolidation. The March 31, 2019 balance sheet was derived from the audited consolidated financial statements.

The results of operations for the three and nine month ~~period~~periods ended ~~June 29,~~December 28, 2019 are not necessarily indicative of the results to be expected for the full year.

During the ~~three~~nine months ended ~~June 29,~~December 28, 2019, the Company sold ~~$5,706,000~~on a gross basis including casing and labeling and future warehousing $116,515,000 of Green Giant finished goods inventory to B&G Foods, Inc. for cash, on a bill and hold basis, as compared to ~~$6,885,000~~$65,741,000 for the ~~three~~nine months ended ~~June 30,~~December 29, 2018. Under the terms of the bill and hold agreement, title to the specified inventory is transferred to B&G. Under the new revenue recognition standard, this contract qualifies for bill and hold accounting treatment as the Company has concluded that control of the unlabeled products transfers to the customer at the time title transfers asand the ~~customer~~Company has the right to ~~control the inventory~~payment (prior to physical delivery) ~~and the Company has a right to payment,~~, which results in earlier revenue recognition. Labeling and storage services that are provided after control of the goods has transferred to the customer are accounted for as separate performance obligations for which revenue is deferred until the services are performed.

The accounting policies followed by the Company are set forth in Note 1 to the Company's Consolidated Financial Statements in the Company’s 2019 Annual Report on Form 10-K.

Other footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company's 2019 Annual Report on Form 10-K.

All references to years are fiscal years ended or ending March 31 unless otherwise indicated. Certain percentage tables may not foot due to rounding.

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

2.2.	Discontinued Operations

On July 13, 2018, the Company executed a nonbinding letter of intent with a perspective buyer of the Modesto facility. On October 9, 2018, the Company closed on the sale of the facility to this outside buyer with net proceeds of $63,326,000. During the second quarter of fiscal 2019, the Company ceased use of the Modesto facility. Based on its magnitude of revenue to the Company (approximately 15%) and because the Company was exiting the production of peaches, this sale represented a significant strategic shift that has a material effect on the Company’s operations and financial results. Accordingly, the Company has applied discontinued operations treatment for this sale as required by Accounting Standards Codification 210-05—Discontinued ~~Operations. The~~Operations. This business we ~~exited~~are exiting is part of the Fruit and Vegetable segment.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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The following table presents information related to the major classes of assets and liabilities of Modesto that are classified as Held For Sale-Discontinued Operations in the Company's Consolidated Condensed ~~Consolidated Balance Sheets~~balance sheets (in thousands):

	June 29		June 30		December 28		December 29		March 31
	2019		2018		2019		2018		2019
Accounts Receivable	$	-	$	14,880	$	-	$	1,441	$	-
Inventories		-		1,739		-		4,645		-
Other Current Assets		98		77		98		5,977		98

Current Assets Held For Sale-Discontinued Operations	$	98	$	16,696	$	98	$	12,063	$	98

Other Assets	$	1,143	$	1,656	$	1,054	$	1,739	$	1,143
Property, Plant and Equipment (net)		-		19,976

Noncurrent Assets Held For Sale-Discontinued Operations	$	1,143	$	21,632	$	1,054	$	1,739	$	1,143

Accounts Payable and Accrued Expenses	$	3,653	$	25,589	$	2,744	$	8,697	$	4,285
Long-Term Debt and Capital Leases Current Portion		-		8,067

Current Liabilities Held For Sale-Discontinued Operations	$	3,653	$	33,656	$	2,744	$	8,697	$	4,285

Long-Term Debt and Capital Lease Obligations	$	-	$	624
Noncurrent Liabilities Held For Sale Discontinued Operations	$	-	$	624

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~~SENECA FOODS CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~June 29, 2019~~

The operating results of the discontinued operations that are reflected in the Unaudited Condensed Consolidated Statements of Net Earnings (Loss) from discontinued operations are as ~~follows:~~follows (in thousands):

	Three Months Ended					Three Months Ended						Nine Months Ended
	June 29		June 30			December 28			December 29			December 28			December 29
	2019		2018			2019			2018			2019			2018

Net Sales	$	-	$	99,299		$	-		$	1,644		$	-		$	111,693

Costs and Expenses:

Cost of Product Sold		-		110,189			57			5,796			57			129,872
Selling, General and Administrative		-		780			-			137			-			1,135
Plant Restructuring Charge (a)		-		1,782
Interest (Income) Expense (b)		-		624
Plant Restructuring (Credit) Charge (a)							(902	)		854			(902	)		4,350
Interest Expense (b)							-			-			-			1,077
Total cost and expenses		-		113,375			(845	)		6,787			(845	)		136,434
Loss From Discontinued Operations Before Income Taxes		-		(14,076	)		845			(5,143	)		845			(24,741	)
Gain on the Sale of Assets Before Income Taxes (c) (d)		-		(5,638	)		(430	)		(50,411	)		(430	)		(80,677	)
Income Tax Benefit		-		(1,843	)
Net Loss From Discontinued Operations, Net of Tax	$	-	$	(6,595	)
Income Tax Expense							320			11,212			320			13,725
Net Earnings From Discontinued Operations, Net of Tax						$	955		$	34,056		$	955		$	42,211

Supplemental Information on Discontinued Operations:
Capital Expenditures							-			-			-			3,937
Depreciation							-			7			-			1,302

	(a)	~~Supplemental Information on Discontinued Operations:~~Includes $902,000 credit for pension termination in both the three and nine month periods of the current year.

~~Capital Expenditures~~			-	~~4,260~~
~~Depreciation~~			-	~~677~~

~~(a)~~	Includes ~~$1,653,000~~$278,000 and $3,579,000 of Modesto severance in ~~first quarter~~the three and nine month periods of ~~fiscal 2019.~~prior year, respectively.
	(b)	Includes interest on debt directly related to Modesto including the building mortgage and equipment capital leases and an allocation of the Company's line of credit ~~facility.~~facilty.
	(c)	Includes ~~$663,000~~a $24,211,000 gain onfrom LIFO layer liquidations from the ~~sale~~disposal of ~~Modesto equipment in first quarter of fiscal 2019.~~the inventory for both prior three and nine months.
	(d)	Includes a $4,975,000 gain on the sale of bins infor the ~~first quarter of fiscal 2019.~~prior nine months period.

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3.3.	Revenue Recognition

In the following table, segment revenue is disaggregated by product category groups (in millions):.

	Three Months Ended				Three Months Ended				Nine Months Ended
	June 29, 2019		June 30, 2018		December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Canned Vegetables	$	180.7	$	161.9	$	251.4	$	259.5	$	657.3	$	631.1
B&G*		7.0		7.3		48.7		27.7		117.5		66.7
Frozen		17.7		28.1		27.8		29.7		72.3		87.5
Fruit Products		22.7		21.2		32.2		27.2		81.8		70.7
Chip Products		2.9		2.0		2.9		2.5		8.9		7.7
Prepared Foods		29.8		17.3		25.5		22.0		78.9		59.2
Other		4.1		6.3		4.5		3.6		11.2		14.1
	$	264.9	$	244.1	$	393.0	$	372.2	$	1,027.9	$	937.0

*B
*B&G includes both canned and frozen vegetable sales exclusively for B&G.

4.4.	Inventories

First-In, First-Out (“FIFO”) based inventory costs exceeded LIFO based inventory costs by ~~$164,517,000~~$153,884,000 as of the end of the ~~first~~third quarter of fiscal 2020 as compared to ~~$121,607,000~~$160,727,000 as of the end of the ~~first~~third quarter of fiscal 2019. The change in the LIFO Reserve for the three months ended ~~June 29,~~December 28, 2019 was a decrease of $11,337,000 as compared to an increase of ~~$3,176,000 as compared to a decrease of $710,000~~$25,776,000 for the three months ended ~~June 30,~~December 29, 2018.

The change in the LIFO Reserve for the nine months ended December 28, 2019 was a decrease of $7,457,000 as compared to an increase of $15,722,000 for the nine months ended December 29, 2018. The ~~following table shows inventory~~prior year-to-date decrease includes a decrease of $24,211,000 related to the LIFO impact of gain on sale of Modesto Fruit which is included in Other Operating Income under Discontinued Operations. The $15,722,000 also includes an increase of $39,933,000 related to Continuing Operations included in Cost of Product Sold. This reflects the projected impact of the disposal of Modesto Fruit partially offset by ~~category and the related LIFO balance (in thousands):~~an overall cost increase expected in fiscal 2020 versus fiscal 2019.

	June 29, 2019		June 30, 2018		December 28, 2019		December 29, 2018		March 31, 2019

In Thousands

Finished products	$	405,372	$	468,236	$	465,306	$	557,652	$	454,920
In process		33,568		41,943		34,685		41,100		42,045
Raw materials and supplies		219,075		179,022		146,958		137,910		166,060
		658,015		689,201		646,949		736,662		663,025
Less excess of FIFO cost over LIFO cost		164,517		121,607		153,884		160,727		161,341
Total inventories	$	493,498	$	567,594	$	493,065	$	575,935	$	501,684

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(Unaudited)

December 28, 2019

Leases

The Company determines if an arrangement is a lease at inception of the agreement. Operating leases are included in right-of-use operating assets, and current and noncurrent operating lease obligations in the Company’s Condensed Consolidated Balance Sheets. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. If the lease does not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The right-of-use operating lease assets also include in its calculation any prepaid lease payments made and excludes any lease incentives received from the arrangement. The Company’s lease terms may include options to extend or terminate the lease, and the impact of these options are included in the lease liability and lease asset calculations when the exercise of the option is at the Company’s sole discretion and it is reasonably certain that the Company will exercise that option. The Company will not separate lease and nonlease components for its leases when it is impractical to separate the two, such as leases with variable payment arrangements. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~June 29, 2019~~

The Company has operating leases for land, machinery and equipment. The Company also has finance leases for machinery and equipment. The commencement date used for the calculation of the lease obligation is the latter of the commencement date of the new standard (April 1, 2019) or the lease start date. Certain of the leases have options to extend the life of the lease, which are included in the liability calculation when the option is at the sole discretion of the Company and it is reasonably certain that the Company will exercise the option. In addition, the Company has certain leases that have variable payments based solely on output or usage of the leased asset. These variable operating lease assets are excluded from the Company’s balance sheet presentation and expensed as incurred. Leases with an initial term of 12 months or less are not material. The Company currently has finance leases which were accounted for as capital leases under the previous standard and were unchanged as a result of this standard implementation.

Upon adoption of ASU 2016-02, the Company determined its right-of-use assets related to the operating leases for its plant equipment in Sunnyside, Washington were partially impaired and therefore were reduced with a corresponding charge to retained earnings of $2,019,000 (which is net of tax). ~~Lastly, the~~The estimated lives of these assets will be shortened due to the planned closure of the facility after the year’s pack.

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Lease expense for lease payments is recognized on a straight-line basis over the lease term. The components of lease expense were as ~~follows:~~follows (In thousands):

	Three Months		Three Months		Nine Months
	June 29, 2019		December 28, 2019		December 28, 2019
	(In thousands)
Lease cost:

Amortization of right of use asset	$	1,067	$	1,084	$	3,191
Interest on lease liabilities		368		321		1,033
Finance lease cost		1,435		1,405		4,224
Operating lease cost		7,900		7,545		23,234
Total lease cost	$	9,335	$	8,950	$	27,458

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	368			$	1,033
Operating cash flows from operating leases		8,961				24,531
Financing cash flows from finance leases		1,616				4,799
Total					$	30,363
	$	10,945

Right-of-use assets obtained in exchange for new finance lease liabilities for the three months ended June 29, 2019	$	237
Right-of-use assets obtained in exchange for new operating lease liabilities for the three months ended June 29, 2019	$	4,538
Right-of-use assets obtained in exchange for new finance lease liabilities					$	3,697
Right-of-use assets obtained in exchange for new operating lease liabilities					$	6,085
Weighted-average lease term (years):
Financing leases		5.7				5.4
Operating leases		4.1				3.9
Weighted-average discount rate (percentage):
Financing leases		4.2				4.2
Operating leases		4.6				4.6

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

December 28, 2019

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 ~~June 29,~~December 28, 2019 (in thousands) were as follows:

Years ending March 31:	Operating		Financing		Years ending March 31:	Operating		Financing
Balance of 2020	$	21,295	$	5,916	Balance of 2020	$	5,435	$	1,945
2021		27,507		7,888	2021		26,301		7,782
2022		19,738		7,888	2022		19,683		7,782
2023		13,623		7,888	2023		13,446		7,782
2024		6,834		6,141	2024		6,496		6,064
2025-2031		6,839		5,268	2025-2031		7,516		6,161
Total minimum payment required	$	95,836	$	40,989	Total minimum payment required	$	78,877	$	37,516
Less interest		8,216		4,509	Less interest		6,481		3,926
Present value of minimum lease payments		87,620		36,480	Present value of minimum lease payments		72,396		33,590
Amount due within one year		26,641		6,573	Amount due within one year		24,430		6,584
Long-term lease obligations	$	60,979	$	29,907
Long-term capital lease obligation					Long-term capital lease obligation	$	47,966	$	27,006

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~June 29, 2019~~

As the Company has not restated prior year information for its adoption of ASC Topic 842, the following presents its future minimum lease payments for operating and capital leases under ASC Topic 840 on March 31, 2019:

Years ending March 31:	Operating		Capital
2020	$	28,689	$	7,827
2021		24,938		7,827
2022		17,526		7,827
2023		12,062		7,827
2024		5,950		6,102
2025-2031		6,927		5,267
Total minimum payment required	$	96,092	$	42,677
Less interest				4,973
Present value of minimum lease payments				37,704
Amount due within one year				6,418
Long-term capital lease obligation			$	31,286

6.6.	Revolving Credit Facility

The Company ~~entered into~~has a five-year revolving credit facility (“Revolver”) ~~on July 5, 2016. Maximum~~with maximum borrowings ~~under the Revolver total~~totaling $400,000,000 from April through July and $500,000,000 from August through ~~March.~~March and the Revolver matures on July 5, 2021. The Revolver balance as of ~~June 29,~~December 28, 2019 was ~~$136,014,000~~$114,689,000 and is included in Long-Term Debt in the accompanying Condensed Consolidated Balance ~~Sheets since the Revolver matures on July 5, 2021.~~Sheet. 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 and fruits the Company processes. The majority of vegetable and fruit inventories are produced during the months of June through November and are then sold over the following year. Payment terms for vegetable and fruit 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 decrease in average amount of Revolver borrowings during the first three months of fiscal 2020 compared to the first three months of fiscal 2019 was attributable to the sale of certain Company facilities during the last year (mostly Modesto, California).

~~General terms of the Revolver include payment of interest at LIBOR plus a defined spread.~~

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(Unaudited)

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The decrease in the reported average outstanding Revolver borrowings during the first nine months of fiscal 2020 compared to the first nine months of fiscal 2019 was attributable to the sale of various Company facilities during the period.

General terms of the Revolver include payment of interest at LIBOR plus a defined spread.

The following table documents the quantitative data for Revolver borrowings during the ~~first~~third quarter and year-to-date of fiscal 2020 and fiscal 2019:

	First Quarter						Third Quarter						Year-to-Date
	2020			2019			2020			2019			2020			2019
	(In thousands)						(In thousands)						(In thousands)
Reported end of period:
Outstanding borrowings	$	136,014		$	207,610		$	114,689		$	214,161		$	114,689		$	214,161
Weighted average interest rate		4.00	%		3.62	%		3.27	%		4.02	%		3.27	%		4.02	%
Reported during the period:
Maximum amount of borrowings	$	151,107		$	294,062		$	137,418		$	242,947		$	151,477		$	294,062
Average outstanding borrowings	$	134,135		$	262,794		$	115,626		$	192,323		$	127,078		$	225,345
Weighted average interest rate		3.96	%		3.50	%		3.40	%		3.86	%		3.75	%		3.64	%

7.7.	Stockholders’ Equity

During the ~~three-month~~nine-month period ended ~~June 29,~~December 28, 2019 the Company repurchased ~~$2,744,000~~$7,571,000 of its Class A Common Stock and $3,883,000 of Class B Common Stock as Treasury Stock. As of ~~June 29,~~December 28, 2019, there are ~~2,864,133~~3,008,762 shares or ~~$78,484,000~~$87,194,000 of repurchased stock. These shares are not considered outstanding.

8.8.	Retirement Plans

The net periodic benefit cost for the Company’s pension plan consisted of:

	Three Months Ended						Three Months Ended						Nine Months Ended
	June 29, 2019			June 30, 2018			December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018
	(In thousands)						(In thousands)
Service Cost	$	2,288		$	2,442		$	2,283		$	1,831		$	6,848		$	6,716
Interest Cost		2,296			2,243			2,316			2,362			6,947			6,848
Expected Return on Plan Assets		(3,958	)		(3,596	)		(3,957	)		(3,593	)		(11,870	)		(10,785	)
Amortization of Prior Service Cost		30			30			30			30			90			90
Amortization of Net Loss		-			303			29			593			87			1,198
Net Periodic Benefit Cost	$	656		$	1,422		$	701		$	1,223		$	2,102		$	4,067

There ~~was~~were no ~~contribution~~contributions to the pension plan in the three and nine month periods ended ~~June~~December 28, 2019 and December 29, ~~2019 or June 30, 2018.~~2018, respectively.

Effective January 1, 2020, the Company closed its defined benefit pension plan to new participants. Employees excluded from the pension plan have a 3% match opportunity in the 401(k) plan.

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9.9.	Plant Restructuring

The following table summarizes the rollforward of continuing restructuring charges and ~~accelerated amortization of operating leases~~related asset impairment charges recorded and the accruals established:

	Restructuring Payable									Restructuring Payable
	Severance			Other Costs			Total			Severance			Other Costs			Total
	(In thousands)									(In thousands)

Balance March 31, 2019	$	225		$	1		$	226		$	225		$	1		$	226
First quarter charge		586			4,220			4,806			586			4,220			4,806
Second quarter charge											386			760			1,146
Third quarter charge											28			765			793
Cash payments/write offs		(170	)		(4,220	)		(4,390	)		(1,145	)		(5,746	)		(6,891	)
Balance June 29, 2019	$	641		$	1		$	642
Balance December 28, 2019										$	80		$	-		$	80

	Severance		Other Costs			Total		Severance			Other Costs			Total
	(In thousands)							(In thousands)

Balance March 31, 2018	$	-	$	-		$	-	$	-		$	-		$	-
First quarter charge		110		(72	)		38		110			(72	)		38
Second quarter charge									845			-			845
Third quarter charge									378			1,018			1,396
Cash payments/write offs		-		72			72		(976	)		72			(904	)
Balance June 30, 2018	$	110	$	-		$	110
Balance December 29, 2018								$	357		$	1,018		$	1,375

During the ~~quarter~~nine months ended ~~June 29,~~December 28, 2019 the Company recorded a restructuring charge of ~~$4,806,000~~$6,745,000 related to the closing of plants in the Midwest and Northwest of which ~~$1,975,000~~$5,266,000 was ~~mostly related to equipment moves and $586,000 was related to severance. In addition, the Company recorded $2,245,000~~ for accelerated amortization of right-of-use operating lease assets, ~~due~~$2,354,000 was mostly related to equipment moves and $1,000,000 was related to severance. The Company also recorded a credit of $1,875,000 for the ~~planned closure~~reduced lease liability of ~~Sunnyside this Fall.~~previously impaired leases.

During the ~~quarter~~nine months ended ~~June 30,~~December 29, 2018, the Company recorded a restructuring charge of ~~$38,000~~$2,279,000 related to the closing and sale of ~~a plant~~plants in the ~~Northwest.~~East and Northwest of which $1,333,000 was related to severance cost, and $946,000 which was related to other costs (mostly equipment moves).

~~10.~~10.

Other Operating Income and Expense

During the ~~three~~nine months ended ~~June 29,~~December 28, 2019 the Company recorded a gain on the partial sale of a plant in the Midwest of ~~$4,075,000.~~$3,742,000 and a gain on the partial sale of a plant in the Northwest of $1,737,000. The Company also recorded a gain of on the sale of unused fixed assets of ~~$752,000.~~ $3,139,000.

During the ~~three~~nine months ended ~~June 30,~~December 29, 2018, the Company sold unused fixed assets which resulted in a gain of ~~$806,000.~~$3,920,000 mostly related to the sale of a closed plant in the Midwest. These items are included in other operating income (loss) in the Unaudited Condensed Consolidated Statements of Net ~~Earnings (Loss).~~Earnings.

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~~June 29,~~December 28, 2019

~~11.~~11.

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU 2016-02, “Leases.” ASU 2016-02 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. In July 2018, the FASB issued ASU No. 2018-11, Targeted Improvements – Leases (Topic 842)." This update provides an optional transition method that allows entities to elect to apply the standard retrospectively at the beginning of the period of adoption, versus recasting the prior periods presented. If elected, an entity would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This guidance is effective for annual periods beginning after December 15, 2018. We adopted ASU 2016-02 as of April 1, 2019, using the optional transition method provided by ASU 2018-11. The standard resulted in the initial recognition of $88,333,000 of total operating lease assets and $91,025,000 of net operating lease liabilities and a net adjustment to retained earnings totaling $2,019,000 ($2,692,000 less tax effect of ~~$673,000~~$673,000) on the Condensed Consolidated Balance Sheet on April 1, 2019. The standard did not materially impact the Condensed Consolidated Statement of Income or Condensed Consolidated Statement of Cash Flows. ~~The~~At adoption, the Company recorded an adjustment to retained earnings of $2,019,000, ~~was due to~~which includes an impairment loss that was related to a Northwest plant impairment which was incurred in March 2019 just prior to adoption of this standard. The disclosures required by the recently adopted accounting standard are included in Note 5 of the Notes to the Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans, which modifies the disclosure requirements for defined benefit pension plans and other postretirement plans. ASU 2018-14 is effective for annual periods beginning after December 15, 2020, with early adoption permitted. The amendments in this ASU should be applied on a retrospective basis to all periods presented. We are currently evaluating the effect that ASU 2018-14 will have on our condensed consolidated financial statements and related disclosures.

There were no other recently issued accounting pronouncements that impacted the Company’s condensed consolidated financial statements. In addition, the Company did not adopt any other new accounting pronouncements during the quarter ended ~~June 29,~~December 28, 2019.

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SENECA FOODS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~June 29,~~December 28, 2019

~~12.~~12.

Earnings per Common ShareFrom Continuing Operations

Earnings per share ~~from continuing and discontinued operations~~ for the ~~quarters~~three and nine months ended ~~June 29,~~December 28, 2019 and ~~June 30,~~December 29, 2018 are as follows:

	Q U A R T E R					Q U A R T E R					Y E A R T O D A T E
(Thousands, except per share amounts)	Fiscal 2020		Fiscal 2019			Fiscal 2020		Fiscal 2019			Fiscal 2020		Fiscal 2019
Continuing Operations
Basic

Earnings (loss) from continuing operations	$	1,103	$	(2,160	)	$	24,428	$	(20,040	)	$	30,166	$	(27,834	)
Deduct preferred stock dividends paid		6		6			6		6			17		17

Undistributed earnings (loss) from continuing operations		1,097		(2,166	)		24,422		(20,046	)		30,149		(27,851	)
Earnings (loss) from continuing operations attributable to participating preferred		4		(8	)		100		(79	)		122		(109	)

Earnings (loss) from continuing operations attributable to common shareholders	$	1,093	$	(2,158	)	$	24,322	$	(19,967	)	$	30,027	$	(27,742	)

Weighted average common shares outstanding		9,477		9,744			9,176		9,625			9,307		9,694

Basic earnings (loss) per common share from continuing operations	$	0.12	$	(0.22	)	$	2.65	$	(2.07	)	$	3.23	$	(2.86	)

Diluted

Earnings (loss) from continuing operations attributable to common shareholders	$	1,093	$	(2,158	)	$	24,322	$	(19,967	)	$	30,027	$	(27,742	)
Add dividends on convertible preferred stock		5		-			5		-			15		-

Earnings (loss) from continuing operations attributable to common stock on a diluted basis	$	1,098	$	(2,158	)	$	24,327	$	(19,967	)	$	30,042	$	(27,742	)

Weighted average common shares outstanding-basic		9,477		9,744			9,176		9,625			9,307		9,694
Additional shares issued related to the equity compensation plan		2		-			2		-			2		-
Additional shares to be issued under full conversion of preferred stock		67		-			67		-			67		-

Total shares for diluted		9,546		9,744			9,245		9,625			9,376		9,694

Diluted earnings (loss) per common share from continuing operations	$	0.12	$	(0.22	)	$	2.63	$	(2.07	)	$	3.20	$	(2.86	)

Note: For fiscal 2019 ~~add backs~~addbacks for equity compensation and additional shares that were anti-dilutive were excluded.

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SENECA FOODS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~June 29,~~December 28, 2019

Earnings per Common Share From Discontinued Operations

	Q U A R T E R					Q U A R T E R				Y E A R T O D A T E
(Thousands, except per share amounts)	Fiscal 2020		Fiscal 2019			Fiscal 2020		Fiscal 2019		Fiscal 2020		Fiscal 2019
Discontinued Operations
Basic

Loss from discontinued operations	$	-	$	(6,595	)
Earnings from discontinued operations						$	955	$	34,056	$	955	$	42,211
Deduct preferred stock dividends paid		-		6			6		6		17		17

Undistributed loss from continuing operations		-		(6,601	)
Loss from continuing operations attributable to participating preferred		-		(26	)
Undistributed earnings from discontinued operations							949		34,050		938		42,194
Earnings from discontinued operations attributable to participating preferred							4		134		4		165

Loss from continuing operations attributable to common shareholders	$	-	$	(6,575	)
Earnings from discontinued operations attributable to common shareholders						$	945	$	33,916	$	934	$	42,029

Weighted average common shares outstanding		9,477		9,744			9,176		9,625		9,307		9,694

Basic loss per common share from continuing operations	$	-	$	(0.67	)
Basic earnings per common share from discontinued operations						$	0.10	$	3.52	$	0.10	$	4.34

Diluted

Loss from continuing operations attributable to common shareholders	$	-	$	(6,575	)
Earnings from discontinued operations attributable to common shareholders						$	945	$	33,916	$	934	$	42,029
Add dividends on convertible preferred stock		-		-			5		5		15		15

Loss from continuing operations attributable to common stock on a diluted basis	$	-	$	(6,575	)
Earnings from discontinued operations attributable to common stock on a diluted basis						$	950	$	33,921	$	949	$	42,044

Weighted average common shares outstanding-basic		9,477		9,744			9,176		9,625		9,307		9,694
Additional shares issued related to the equity compensation plan		2		-			2		2		2		2
Additional shares to be issued under full conversion of preferred stock		67		-			67		67		67		67

Total shares for diluted		9,546		9,744			9,245		9,694		9,376		9,763

Diluted loss per common share from continuing operations	$	-	$	(0.67	)

Diluted earnings per common share from discontinued operations						$	0.10	$	3.50	$	0.10	$	4.31

Note: For fiscal 2019, add backs for equity compensation and additional shares that were anti-dilutive were excluded.

~~13.~~13.

Fair Value of Financial Instruments

As required by Accounting Standards Codification ("ASC") 825, “Financial Instruments,” the Company estimates the fair values of financial instruments on a quarterly basis. The estimated fair value for long-term debt (classified as Level 2 in the fair value hierarchy) 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. Long-term debt, including current portion had a carrying amount of ~~$246,733,000~~$225,337,000 and an estimated fair value of ~~$246,639,000~~$225,287,000 as of ~~June~~December 28, 2019. Long-term debt, including current portion had a carrying amount of $325,373,000 and an estimated fair value of $325,276,000 as of December 29, ~~2019.~~2018. As of March 31, 2019, the carrying amount was $266,245,000 and the estimated fair value was $266,140,000. The fair values of all the other financial instruments approximate their carrying value due to their short-term nature.

~~Table of Contents~~

~~SENECA FOODS CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~June 29, 2019~~

~~14.~~14.

Income Taxes

The effective tax rate ~~for~~from continuing operations was ~~20.5%~~23.7% and ~~23.6%~~25.7% for the ~~three~~nine month periods ended ~~June 29,~~December 28, 2019 and ~~June 30,~~December 29, 2018, respectively. The ~~change in tax rate resulting from federal credits and incentives is a 4.0 percentage point decrease. This change is a majority of the 3.1~~2.0 percentage point decrease in the effective tax ~~rate.~~rate is due primarily to federal income tax credits and incentives. The dollar amount of ~~these~~the federal credits and incentives did not change significantly from 2019 to 2020. The decrease is the result of ~~the change~~having a pre-tax loss in ~~projected~~2018 and pre-tax income ~~from 2019 to 2020. This resulted~~ in ~~the~~2019. The 2018 federal credits and incentives ~~having~~created a ~~larger impact on~~tax benefit which increased the tax rate because of the pre-tax loss. The 2019 federal credits and incentives also created a tax benefit. However, in ~~2020.~~

~~15\.~~

~~Legal Proceedings and Other Contingencies~~

In2019 the ~~ordinary course~~tax benefit decreased the tax rate because 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.

pre-tax income.

1716

Table of Contents

ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~June 29,~~(Unaudited)

December 28, 2019

Seneca Foods Corporation (the “Company”) is a leading provider of packaged fruits and vegetables, with facilities located throughout the United States. 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®, ~~Libby’s®, Aunt Nellie’s®, Cherryman®, Green Valley® and~~ READ® and Seneca Farms®. The Company’s canned fruits and vegetables are sold nationwide by major grocery outlets, including supermarkets, mass merchandisers, limited assortment stores, club stores and dollar stores. The Company also sells its products to foodservice distributors, industrial markets, other food processors, export customers in over 90 countries and federal, state and local governments for school and other food programs. The Company packs Green Giant®, Le Sueur® and other brands of canned vegetables as well as select Green Giant® frozen vegetables for B&G Foods North America (“B&G”) under a contract packing agreement. In addition, Seneca provides contract packing services mostly through its wholly owned subsidiary Truitt Bros., Inc.

During April 2019, the Company announced production at its fruit processing plant in Sunnyside, Washington will cease after the end of the 2019 production season. The Company will continue to store, case and label products at this facility until sometime later this year. ~~Therefore, this facility will not be available~~The plant restructuring charge for ~~immediate sale until sometime later this year.~~ Sunnyside right-of-use assets is being amortized over seven months.

The Company’s raw product is harvested mainly between June through November.

Results of Operations:

Sales:

The ~~first~~third fiscal quarter 2020 results include net continuing sales of ~~$264,925,000,~~$392,971,000, which represents ~~an 8.5%~~a 5.6% increase, or ~~$20,832,000,~~$20,733,000, from the ~~first~~third quarter of fiscal 2019. The net increase in sales is ~~due to volume increases of $10,414,000 and to~~ higher selling prices/sales mix of ~~$10,418,000.~~$23,937,000 partially offset by a sales volume decrease of $3,204,000. The increase in sales is primarily from a ~~$18,758,000~~$20,980,000 increase in B&G sales, a $4,924,000 increase in other Canned Fruit sales, a $3,506,000 increase in Prepared Food sales, an $877,000 increase in Other sales, and a $429,000 increase in Snack sales which was partially offset by a $8,050,000 decrease in Canned Vegetable sales, and a $1,933,000 decrease in Frozen sales.

The nine months ended 2020 results include net continuing sales of $1,027,898,000, which represents a 9.7% increase, or $90,907,000, from the third quarter of fiscal 2019. The net increase in sales is higher selling prices/sales mix of $57,967,000 and a sales volume increase of $32,940,000. The increase in sales is primarily from a $50,875,000 increase in B&G sales, a $26,205,000 increase in Canned Vegetable sales, a ~~$12,449,000~~$19,713,000 increase in Prepared Food sales, a ~~$1,527,000~~$11,012,000 increase in ~~other~~ Canned Fruit sales, a $1,224,000 increase in Snack sales which was partially offset by and a ~~$10,444,000~~$15,273,000 decrease in Frozen sales a ~~$2,140,000~~$2,849,000 decrease in Other sales.

Table of Contents

ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Unaudited)

December 28, 2019

The following table presents continuing sales by product category (in millions):

	Three Months Ended				Nine Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Canned Vegetables	$	251.4	$	259.5	$	657.3	$	631.1
B&G*		48.7		27.7		117.5		66.7
Frozen		27.8		29.7		72.3		87.5
Fruit Products		32.2		27.2		81.8		70.7
Chip Products		2.9		2.5		8.9		7.7	��
Prepared Foods		25.5		22.0		78.9		59.2
Other		4.5		3.6		11.2		14.1
	$	393.0	$	372.2	$	1,027.9	$	937.0

*B&G includes canned and frozen vegetable sales exclusively for B&G.

Operating Income:

The following table presents components of continuing operating income as a percentage of net sales:

	Three Months Ended						Nine Months Ended
	December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018
Gross Margin		13.3	%		-0.6	%		9.3	%		2.7	%

Selling		2.4	%		2.6	%		2.5	%		2.8	%
Administrative		2.7	%		2.6	%		2.8	%		3.1	%
Plant Restructuring		0.2	%		0.4	%		0.7	%		0.2	%
Other Operating Income		-0.4	%		0.2	%		-0.8	%		-0.4	%

Operating Income		8.4	%		-6.4	%		4.2	%		-3.0	%

Interest Expense, Net		0.7	%		1.0	%		0.9	%		1.2	%

For the three month period ended December 28, 2019, the gross margin increased from the prior year quarter from (0.6)% to 13.3% due primarily to a lower LIFO charge in the third quarter of 2020. The LIFO credit for continuing operations for the third quarter ended December 28, 2019 was $11,337,000 or 2.9% of sales as compared to a charge of $25,776,000 or 6.9% of sales for the third quarter ended December 29, 2018 and reflects the impact on the quarter of lower cost increases and lower yields for certain commodities in fiscal 2020, compared with fiscal 2019. On an after-tax basis, LIFO net earnings increased by $8,503,000 for the quarter ended December 28, 2019 and LIFO net earnings decreased by $19,332,000 for the quarter ended December 29, 2018, based on the historical statutory federal income tax rate.

For the nine month period ended December 28, 2019, the gross margin increased from the prior year period from 2.7% to 9.3% due primarily to a ~~$227,000 decrease~~lower LIFO charge in ~~B&G Foods, Inc. sales.~~the current year. The LIFO credit for the first nine months ended December 28, 2019 was $7,457,000 or 0.7% of sales as compared to a charge of $39,933,000 or 4.3% of sales for the nine months ended December 29, 2018 and reflects the impact on the nine months of lower cost increases and lower yields for certain commodities in fiscal 2020, compared with fiscal 2019. On an after-tax basis, LIFO net earnings increased by $5,593,000 for the nine months ended December 29, 2018 and LIFO net earnings decreased by $29,950,000 for the nine months ended December 29, 2018, based on the historical statutory federal income tax rate.

Table of Contents

ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~June 29,~~(Unaudited)

December 28, 2019

~~The following table presents sales by product category (in millions):~~

Three Months Ended

June 29,
2019

June 30,
2018

Canned Vegetables
$ 180.7 $ 161.9
B&G*
7.0 7.3
Frozen
17.7 28.1
Fruit Products
22.7 21.2
Chip Products
2.9 2.0
Prepared Foods
29.8 17.3
Other
4.1 6.3
$ 264.9 $ 244.1

*B&G includes canned and frozen vegetable sales exclusively for B&G.

~~Operating Income:~~

~~The following table presents components of operating income as a percentage of net sales:~~

Three Months Ended

June 29,
2019

June 30,
2018

Gross Margin
7.2 % 6.9 %

Selling
2.8 % 3.2 %
Administrative
3.3 % 4.0 %
Plant Restructuring
1.8 % 0.0 %
Other Operating Income
-1.8 % -0.4 %

Operating Income
1.1 % 0.0 %

Interest Expense, Net
1.3 % 1.6 %

For the three month period ended June 29, 2019, the gross margin increased from the prior year quarter from 6.9% to 7.2% due primarily to higher prices in the first quarter of 2020. The Company’s LIFO charge for the first quarter ended June 29, 2019 was $3,176,000 as compared to a credit of $710,000 for the first quarter ended June 30, 2018. This reflects the impact on the quarter of higher cost increases incurred in fiscal 2020, compared with to fiscal 2019. On an after-tax basis, LIFO decreased net earnings by $2,382,000 for the quarter ended June 29, 2019 and LIFO increased net earnings by $533,000 for the quarter ended June 30, 2018, based on the historical statutory federal income tax rates.

For the three month period ended ~~June 29,~~December 28, 2019, selling costs as a percentage of sales decreased from 2.6% to ~~2.8% from 3.2% for~~2.4%. For the ~~same~~nine month period ~~in the prior year. This decrease is primarily~~ended December 28, 2019, selling costs as a ~~result~~percentage of ~~higher~~ sales ~~of product which don’t incur selling costs.~~decreased from 2.8% to 2.5%.

For the three month period ended ~~June 29,~~December 28, 2019, administrative expense as a percentage of sales increased from 2.6% to 2.7%. For the nine month period ended December 28, 2019, administrative expense as a percentage of sales decreased from ~~4.0%~~3.1% to ~~3.3%~~2.8%. This is primarily due to higher sales during the ~~quarter~~nine month period compared to same period in the prior year and the fixed nature of these administrative costs.

During the nine months ended December 28, 2019 the Company recorded a gain on the partial sale of a plant in the Midwest of $3,742,000 and a gain on the partial sale of a plant in the Northwest of $1,737,000. The Company also recorded a gain of on the sale of unused fixed assets of $3,139,000. During the nine months ended December 29, 2018, the Company sold unused fixed assets which resulted in a gain of $3,920,000 mostly related to the sale of a closed plant in the Midwest. These items are included in other operating income (loss) in the Unaudited Condensed Consolidated Statements of Net Earnings.

Interest expense for the third quarter ended December 28, 2019, as a percentage of sales, decreased to 0.7% from 1.0% in third quarter ended December 29, 2018. Interest expense for the nine months ended December 28, 2019, as a percentage of sales, decreased to 0.9% from 1.2% in nine months ended December 29, 2018. During fiscal 2020, overall borrowings and interest rates were lower than the previous year.

Income Taxes:

The effective tax rate from continuing operations was 23.7% and 25.7% for the nine month periods ended December 28, 2019 and December 29, 2018, respectively. The 2.0 percentage point decrease in the effective tax rate is due primarily to federal income tax credits and incentives. The dollar amount of the federal credits and incentives did not change significantly from 2019 to 2020. The decrease is the result of having a pre-tax loss in 2018 and pre-tax income in 2019. The 2018 federal credits and incentives created a tax benefit which increased the tax rate because of the pre-tax loss. The 2019 federal credits and incentives also created a tax benefit. However, in 2019 the tax benefit decreased the tax rate because of the pre-tax income.

Earnings (Loss) per Share:

Continuing basic earnings (loss) per share were $2.65 and $(2.07) for the three months ended December 28, 2019 and December 29, 2018, respectively. Continuing diluted earnings (loss) per share were $2.63 and $(2.07) for the three months ended December 28, 2019 and December 29, 2018, respectively. Continuing basic earnings (loss) per share were $3.23 and $(2.86) for the nine months ended December 28, 2019 and December 29, 2018, respectively. Continuing diluted earnings (loss) per share were $3.20 and $(2.86) for the nine months ended December 28, 2019 and December 29, 2018, respectively. For details of the calculation of these amounts, refer to footnote 12 of the Notes to Condensed Consolidated Financial Statements.

Table of Contents

ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~June 29,~~(Unaudited)

December 28, 2019

During the three months ended June 29, 2019, the Company recorded a gain on the partial sale of a plant in the Midwest of $4,075,000. The Company also recorded a gain of on the sale of unused fixed assets of $752,000. During the three months ended June 30, 2018, the Company sold unused fixed assets which resulted in a gain of $806,000. These items are included in other operating income in the Unaudited Condensed Consolidated Statements of Net Earnings (Loss).

Interest expense for the first quarter ended June 29, 2019, as a percentage of sales, decreased to 1.3% from 1.6% in first quarter ended June 30, 2018. During fiscal 2020, overall borrowings were lower than the previous year along with higher sales for the current period.

~~Income Taxes:~~

The effective tax rate for continuing operations was 20.5% and 23.6% for the three month periods ended June 29, 2019 and June 30, 2018, respectively. The change in tax rate resulting from federal credits and incentives is a 4.0 percentage point decrease. This change is a majority of the 3.1 percentage point decrease in the effective tax rate. The dollar amount of these credits and incentives did not change significantly from 2019 to 2020. The decrease is the result of the change in projected pre-tax income from 2019 to 2020. This resulted in the federal credits and incentives having a larger impact on the tax rate in 2020.

~~Earnings (Loss)~~ ~~per Share~~:

Basic and diluted continuing earnings (loss) per share were $0.12 and $(0.22) for the three months ended June 29, 2019 and June 30, 2018, respectively. For details of the calculation of these amounts, refer to footnote 12 of the Notes to Condensed Consolidated Financial Statements.

Liquidity and Capital Resources:

The financial condition of the Company is summarized in the following table and explanatory review:

June 29,

June 30,

March 31,

March 31,

2019

2018

2019

2018

Working Capital:

Balance
$ 441,815 $ 498,976 $ 490,871 $ 602,504
Change in Quarter
(49,056 ) (103,528 )
Long-Term Debt, Less Current Portion
246,645 318,282 265,900 407,733
Operating Lease Obligations, Less Current Portion
60,979 - - -
Financing Lease Obligations, Less Current Portion
29,907 - - -
Capital Lease Obligations, Less Current Portion
- 32,835 31,286 34,331
Total Stockholders' Equity Per Equivalent Common Share (see Note below)
43.39 40.84 43.27 41.73
Stockholders' Equity Per Common Share
43.80 41.21 43.67 42.11
Current Ratio
3.91 3.77 5.37 5.35

	December 28,			December 29,			March 31,		March 31,
	2019			2018			2019		2018
Working Capital:
Balance	$	426,968		$	241,218		$	490,871	$	602,504
Change in Quarter		(10,305	)		(313,541	)
Current Portion of Long-Term Debt and Capital Lease Obligations		-			314,657			6,763		7,468
Long-Term Debt, Less Current Portion		225,337			10,715			265,900		407,733
Operating Lease Obligations, Less Current Portion		47,965			-			-		-
Financing Lease Obligations, Less Current Portion		27,007			-			-		-
Capital Lease Obligations, Less Current Portion		-			29,730			31,286		34,331
Total Stockholders' Equity Per Equivalent
Common Share (see Note below)		47.01			43.39			43.27		41.73
Stockholders' Equity Per Common Share		47.47			43.79			43.67		42.11
Current Ratio		3.47			1.52			5.37		5.35

Note: Equivalent common shares are either common shares or, for convertible preferred shares, the number of common shares that the preferred shares are convertible into. See Note 9 of the Notes to Consolidated Financial Statements of the Company’s 2019 Annual Report on Form 10-K for conversion details.

~~Table of Contents~~

~~ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS~~

~~OF FINANCIAL CONDITION AND RESULTS OPERATIONS~~

~~June 29, 2019~~

As shown in the Condensed Consolidated Statements of Cash Flows, net cash provided by operating activities was ~~$37,843,000~~$115,320,000 in the first ~~three~~nine months of fiscal 2020, compared to ~~$86,950,000~~$46,430,000 in the first ~~three~~nine months of fiscal 2019. The ~~$49,107,000 decrease~~$68,890,000 increase in cash provided is ~~a $66,436,000 decrease in cash provided for inventory in the first three months of fiscal 2020 as compared~~primarily attributable to the ~~first three months of fiscal 2019, a $14,792,000~~following items: an increase in cash provided by ~~accounts receivable,~~net earnings from continuing operations of $58,000,000, a ~~$1,816,000~~$37,097,000 increase ~~in cash provided by income taxes, a $708,000 increase in cash provided by other current assets partially offset by a $14,872,000 decrease~~ in cash provided by accounts payable, accrued expenses and other liabilities, a $7,043,000 increase in cash provided by income taxes, a $5,156,000 increase in cash provided by other current assets, and ~~an increased net earnings of $9,858,000.~~a $2,999,000 increase in cash provided by account receivable. These increases were offset by a $44,217,000 decrease in cash provided by inventory.

As compared to ~~June 30,~~December 29, 2018, inventory decreased ~~$74,096,000~~$82,870,000 to ~~$493,498,000~~$493,065,000 at ~~June 29,~~December 28, 2019. The components of the inventory decrease (excluding LIFO) reflect a ~~$62,864,000~~$92,346,000 decrease in finished goods, ~~an $8,375,000~~a $6,415,000 decrease in work in process and a ~~$40,053,000~~$9,048,000 increase in raw materials and supplies. The finished goods ~~decrease primarily~~increase reflects lower inventory quantities attributable to the lower calendar year ~~2018~~2019 pack versus the calendar year ~~2017~~2018 pack. The raw materials and supplies increase is primarily due to an increase in cans and raw steel quantities compared to the prior year. FIFO based inventory costs exceeded LIFO based inventory costs by ~~$164,517,000~~$153,884,000 as of the end of the ~~first~~third quarter of 2020 as compared to ~~$121,607,000~~$160,727,000 as of the end of the ~~first~~third quarter of 2019.

Cash used in investing activities was ~~$3,378,000~~$25,506,000 in the first ~~three~~nine months of fiscal 2020 compared to cash ~~used~~provided in investing activities of ~~$75,000~~$54,507,000 in the first ~~three~~nine months of fiscal 2019. Additions to property, plant and equipment were ~~$9,776,000~~$47,681,000 in the first ~~three~~nine months of fiscal 2020 as compared to ~~$10,462,000~~$30,468,000 in first ~~three~~nine months of fiscal 2019. ~~Proceeds~~The Company received cash proceeds from the sale of various assets ~~were $6,398,000 for~~which totaled $22,175,000 during the ~~first three~~nine months ended December 28, 2019. The Company received cash proceeds from the sale of ~~fiscal 2020 as compared to $10,387,000 in first three~~various assets from divested plants which totaled $84,975,000 during the nine months ~~of fiscal 2019.~~ended December 29, 2018.

Cash used in financing activities was ~~$29,044,000~~$87,436,000 in the first ~~three~~nine months of fiscal 2020, which included borrowings of ~~$93,600,000~~$401,053,000 and the repayment of ~~$118,272,000~~$465,099,000 of long-term debt, principally consisting of borrowings and repayments on the revolving credit facility (“Revolver”). The Company made additional repayments on the Revolver from cash proceeds received from the sale of various assets. Other than borrowings under the Revolver, there was no new long-term debt during the first ~~three~~nine months of fiscal ~~2019.~~2019 The Company repurchased ~~treasury stock~~$11,454,000 and $5,340,000 of ~~$2,744,000 in the first three months of fiscal 2020 but did not repurchase any~~ stock during the first ~~quarter~~nine months of fiscal year ~~2019.~~2020 and 2019, respectively.

Table of Contents

ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Unaudited)

December 28, 2019

The Company entered into a five-year revolving credit facility on July 5, 2016. Available borrowings on the Revolver total $400,000,000 from April through July and $500,000,000 from August through March with a maturity date of July 5, 2021. The interest rate on the Revolver is based on LIBOR plus an applicable margin based on excess availability and the Company's fixed charge coverage ratio. As of ~~June 29,~~December 28, 2019, the interest rate was approximately ~~4.00%~~3.27% on a balance of ~~$136,014,000.~~$114,689,000. We believe that cash flows from operations, availability under our Revolver and other financing sources will provide adequate funds for our working capital needs, planned capital expenditures, and debt obligations for at least the next 12 months.

The Company’s credit facilities contain standard representations and warranties, events of default, and certain affirmative and negative covenants, including various financial covenants. ~~At June 29, 2019, the Company was in compliance with all such financial covenants.~~

New Accounting Standards

Refer to footnote 11 of the Notes to Condensed Consolidated Financial Statements.

~~Table of Contents~~

~~ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS~~

~~OF FINANCIAL CONDITION AND RESULTS OPERATIONS~~

~~June 29, 2019~~

Seasonality

The Company's revenues are typically higher in the second and third ~~fiscal~~ quarters. This is due in part because the Company sells, on a bill and hold basis, Green Giant canned and frozen vegetables to B&G either weekly during production for specialty items, or at the end of each pack cycle, which typically occurs during ~~the months of June to October.~~these quarters. B&G buys the product from the Company at cost plus a specified fee for each equivalent case. See the Critical Accounting Policies section below for further details. The Company’s non-Green Giant sales also exhibit seasonality with the third fiscal quarter generating the highest retail sales due to holidays that occur during that quarter.

Forward-Looking Information

The information contained in this report contains, or may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this report and include statements regarding the intent, belief or current expectations of the Company or its officers (including statements preceded by, followed by or that include the words “believes,” “expects,” “anticipates” or similar expressions) with respect to various matters, including (i) the Company’s anticipated needs for, and the availability of, cash, (ii) the Company’s liquidity and financing plans, (iii) the Company’s ability to successfully integrate acquisitions into its operations, (iv) trends affecting the Company’s financial condition or results of operations, including anticipated sales price levels and anticipated expense levels, in particular higher production, fuel and transportation costs, (v) the Company’s plans for expansion of its business (including through acquisitions) and cost savings, and (vi) the impact of competition.

Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Investors are cautioned not to place undue reliance on such statements, which speak only to events as of the date the statements were made. Among the factors that could cause actual results to differ materially are:

●

general economic and business conditions;

Table of Contents

ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Unaudited)

December 28, 2019

●

cost and availability of commodities and other raw materials such as vegetables, steel and packaging materials;

●

transportation costs;

●

climate and weather affecting growing conditions and crop yields;

●

the availability of financing;

●

leverage and the Company’s ability to service and reduce its debt;

●

foreign currency exchange and interest rate fluctuations;

●

effectiveness of the Company’s marketing and trade promotion programs;

●

changing consumer preferences;

●

competition;

●

product liability claims;

●

the loss of significant customers or a substantial reduction in orders from these customers;

●

changes in, or the failure or inability to comply with, U.S., foreign and local governmental regulations, including environmental and health and safety regulations; and

●

other risks detailed from time to time in the reports filed by the Company with the SEC.

Except for ongoing obligations to disclose material information as required by the federal securities laws, the Company does not undertake any obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of the filing of this report or to reflect the occurrence of unanticipated events.

~~Table of Contents~~

~~ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS~~

~~OF FINANCIAL CONDITION AND RESULTS OPERATIONS~~

~~June 29, 2019~~

Critical Accounting Policies

During the ~~three~~nine months ended ~~June 29,~~December 28, 2019, the Company sold ~~$5,706,000~~$116,515,000 of Green Giant finished goods inventory to B&G Foods ~~Inc.~~North America (“B&G”) for cash, on a bill and hold basis, as compared to ~~$6,885,000~~$65,741,000 for the ~~three~~nine months ended ~~June 30,~~December 29, 2018. Under the terms of the bill and hold agreement, title to the specified inventory transferred to B&G. Under the new revenue recognition standard, this contract qualifies for bill and hold accounting treatment as the Company has concluded that control of the unlabeled products transfers to the customer at the time title transfers asand the ~~customer~~Company has the right to ~~control the inventory~~payment (prior to physical delivery) ~~and the Company has a right to payment,~~, which results in earlier revenue recognition. Labeling and storage services that are provided after control of the goods has transferred to the customer are accounted for as separate performance obligations for which revenue is deferred until the services are performed.

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 our products to consumers, amounts paid to obtain favorable display positions in retailers’ stores, and amounts paid to retailers for shelf space in retail stores. Accruals for trade promotions are recorded primarily at the time of sale of product to the retailer based on expected levels of performance. Settlement of these liabilities typically occurs in subsequent periods primarily through an authorized process for deductions taken by a retailer from amounts otherwise due to us. As a result, the ultimate cost of a trade promotion program is dependent on the relative success of the events and the actions and level of deductions taken by retailers for amounts they consider due to them. Final determination of the permissible deductions may take extended periods of time.

The Company 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 iswas experiencing, the Company believes that the LIFO method was preferable over the FIFO method because it better compares the cost of current production to current revenue.

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.

2322

Table of Contents

ITEM 3 Quantitative and Qualitative Disclosures About Market Risk

In the ordinary course of business, the Company is exposed to various market risk factors, including changes in general economic conditions, competition and raw material pricing and availability. In addition, the Company is exposed to fluctuations in interest rates, primarily related to its revolving credit facility and the $100,000,000 term loan. To manage interest rate risk, the Company uses both fixed and variable interest rate debt plus fixed interest rate capital lease obligations. There have been no material changes to the Company’s exposure to market risk since March 31, 2019.

2423

Table of Contents

ITEM 4 Controls and Procedures

The Company maintains a system of internal and disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported on a timely basis. The Company’s Board of

Directors, operating through its Audit Committee, which is composed entirely of independent outside directors, provides oversight to the financial reporting process.

An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of ~~June 29,~~December 28, 2019, our disclosure controls and procedures were effective. The Company continues to examine, refine and formalize its disclosure controls and procedures and to monitor ongoing developments in this area.

There have been no changes during the period covered by this report to the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

2524

Table of Contents

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

Refer to footnote 15 to the Consolidated Financial Statements included in Part II Item 8 of the Annual Report on Form 10-K.

Item 1A.

Risk Factors

There have been no material changes to the risk factors disclosed in the Company’s Form 10-K for the period ended March 31, 2019 except to the extent factual information disclosed elsewhere in this Form 10-Q relates to such risk factors.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Total Number of

Average Price Paid

Total Number

Maximum Number

Shares Purchased

per Share

of Shares

(or Approximate

Purchased as

Dollar Value) of

Part of Publicly

Shares that May

Announced

Yet Be Purchased

Class A

Class B

Class A

Class B

Plans or

Under the Plans or

Period

Common

Common

Common

Common

Programs

Programs

4/01/2019 – 4/30/2019 (1)
31,326 - $ 24.39 $ - 31,326
5/01/2019 – 5/31/2019
37,173 - $ 24.12 $ - 37,173
6/01/2019 – 6/30/2019 (2)
41,501 - $ 26.12 $ - 41,501
Total
110,000 - $ 24.95 $ - 110,000 770,304

	Total Number of				Average Price Paid				Total Number		Maximum Number
	Shares Purchased				per Share				of Shares		(or Approximate
									Purchased as		Dollar Value) of
									Part of Publicly		Shares that May
									Announced		Yet Be Purchased
	Class A		Class B		Class A		Class B		Plans or		Under the Plans or
Period	Common		Common		Common		Common		Programs		Programs
10/01/2019 –
10/31/2019		32,144		-	$	32.80	$	-		32,144
11/01/2019 –
11/30/2019 (1)		20,700		10,000	$	34.79	$	35.72		13,800
12/01/2019 –
12/31/2019 (2)		19,000		-	$	38.41	$	-		-
Total		71,844		10,000	$	34.86	$	35.72		45,944		539,063

Note 1: 16,900 of these shares were purchased in open market transactions by the trustees under the Seneca Foods Corporation Employees' Savings Plan 401(k) Retirement Savings Plan to provide employee matching contributions under the plan.

Note 2: These shares were purchased in open market transactions by the trustees under the Seneca Foods Corporation Employees' Savings Plan 401(k) Retirement Savings Plan to provide employee matching contributions under the plan.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

Item 5.

Other Information

None.

Item 6.

Exhibits

31.1	Certification of Kraig H. Kayser pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2	Certification of Timothy J. Benjamin pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

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

101

The following materials from Seneca Foods Corporation’s Quarterly Report on Form 10-Q for the ~~three~~nine months ended ~~June 29,~~December 28, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of net earnings, ~~(loss),~~ (iii) condensed consolidated statements of comprehensive income, ~~(loss),~~ (iv) condensed consolidated statements of cash flows, (v) condensed consolidated ~~statements~~statement of stockholders’ equity and (vi) the notes to condensed consolidated financial statements.

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Table of Contents

SIGNATURES~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Seneca Foods Corporation
		(Company)




	/s/Kraig H. Kayser
~~August 7, 2019~~ February 5, 2020
	Kraig H. Kayser
	President and
	Chief Executive Officer



	~~/s/Timothy J. Benjamin~~
~~August 7, 2019~~
	~~Timothy J. Benjamin~~
	~~Chief Financial Officer~~ /s/ Timothy J. Benjamin
February 5, 2020
	Timothy J. Benjamin
	Chief Financial Officer

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

		Name of Exchange on
Title of Each Class	Trading Symbol	Which Registered
Common Stock Class A, $.25 Par	SENEA	NASDAQ Global Market
Common Stock Class B, $.25 Par	SENEB	NASDAQ Global Market

	June 29,			June 30,			March 31,		March 31,
	2019			2018			2019		2018
Working Capital:
Balance	$	441,815		$	498,976		$	490,871	$	602,504
Change in Quarter		(49,056	)		(103,528	)
Long-Term Debt, Less Current Portion		246,645			318,282			265,900		407,733
Operating Lease Obligations, Less Current Portion		60,979			-			-		-
Financing Lease Obligations, Less Current Portion		29,907			-			-		-
Capital Lease Obligations, Less Current Portion		-			32,835			31,286		34,331
Total Stockholders' Equity Per Equivalent Common Share (see Note below)		43.39			40.84			43.27		41.73
Stockholders' Equity Per Common Share		43.80			41.21			43.67		42.11
Current Ratio		3.91			3.77			5.37		5.35