0001437749-24-003516.txt : 20240208 0001437749-24-003516.hdr.sgml : 20240208 20240208160746 ACCESSION NUMBER: 0001437749-24-003516 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 74 CONFORMED PERIOD OF REPORT: 20231230 FILED AS OF DATE: 20240208 DATE AS OF CHANGE: 20240208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Seneca Foods Corp CENTRAL INDEX KEY: 0000088948 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FRUITS, VEG & PRESERVES, JAMS & JELLIES [2033] ORGANIZATION NAME: 04 Manufacturing IRS NUMBER: 160733425 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01989 FILM NUMBER: 24609071 BUSINESS ADDRESS: STREET 1: 3736 SOUTH MAIN STREET CITY: MARION STATE: NY ZIP: 14505 BUSINESS PHONE: 315 926 8100 MAIL ADDRESS: STREET 1: 3736 SOUTH MAIN STREET CITY: MARION STATE: NY ZIP: 14505 FORMER COMPANY: FORMER CONFORMED NAME: SENECA FOODS CORP /NY/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PIERCE S S COMPANY INC DATE OF NAME CHANGE: 19861210 FORMER COMPANY: FORMER CONFORMED NAME: SENECA FOODS CORP DATE OF NAME CHANGE: 19780425 10-Q 1 senea20231231_10q.htm FORM 10-Q senea20231231_10q.htm
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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

Form 10-Q

(Mark one)

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

For the quarterly period ended December 30, 2023

 

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 Corporation

(Exact name of Registrant as specified in its charter)

 

New York

16-0733425

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

  

350 WillowBrook Office Park, Fairport, New York

14450

(Address of principal executive offices)

(Zip code)

 

(585) 495-4100

(Registrant’s telephone number, including area code)

 

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

Title of Each Class

Trading Symbol

Name of Exchange on

Which Registered

Common Stock Class A, $.25 Par

SENEA

NASDAQ Global Select Market

Common Stock Class B, $.25 Par

SENEB

NASDAQ Global Select Market

 

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 (§232.405 of this chapter) 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 filerNon-accelerated filer ☐Smaller reporting company Emerging growth company

 

If an emerging growth company, indicate by checkmark if the Registrant 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 Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

The number of shares outstanding of each of the Registrant’s classes of common stock as of January 26, 2024, are as follows:

 

Class

Shares Outstanding

Common Stock Class A, $0.25 Par

5,456,549

Common Stock Class B, $0.25 Par

1,660,953

 

 

 

 

Seneca Foods Corporation

Quarterly Report on Form 10-Q

Table of Contents

 

PART I.  FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Condensed Consolidated Balance Sheets (Unaudited)

1

Condensed Consolidated Statements of Net Earnings (Unaudited)

2

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

2

Condensed Consolidated Statements of Cash Flows (Unaudited)

3

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

4

Notes to Condensed Consolidated Financial Statements (Unaudited)

5

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

16

Item 3. Quantitative and Qualitative Disclosures about Market Risk

23

Item 4. Controls and Procedures

23

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

24

Item 1A. Risk Factors

24

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

24

Item 3. Defaults Upon Senior Securities

24

Item 4. Mine Safety Disclosures

24

Item 5. Other Information

25

Item 6. Exhibits

25

SIGNATURES

26

  

 

 

 

 

SENECA FOODS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

  

 

  

 

     
  

December 30,
2023

  

December 31,
2022

  

March 31,
2023

 

Assets

            

Current assets:

            

Cash and cash equivalents

 $7,168  $5,579  $5,236 

Restricted cash

  7,251   6,937   7,020 

Accounts receivable, net of allowance for credit losses of $51, $77 and $34, respectively

  89,928   94,947   97,101 

Inventories

  968,889   774,121   670,898 

Refundable income taxes

  1,153   -   6,976 

Other current assets

  3,906   5,898   6,808 

Total current assets

  1,078,295   887,482   794,039 

Property, plant and equipment, net

  307,714   297,676   301,212 

Right-of-use assets operating, net

  20,538   26,012   23,235 

Right-of-use assets financing, net

  23,146   33,882   33,571 

Pension assets

  59,003   51,786   59,304 

Other assets

  841   1,670   1,360 

Total assets

 $1,489,537  $1,298,508  $1,212,721 
             
             

Liabilities and Stockholders' Equity

            

Current liabilities:

            

Accounts payable

 $125,182  $156,065  $69,232 

Deferred revenue

  8,708   14,412   9,956 

Accrued vacation

  10,997   11,682   11,143 

Accrued payroll

  13,083   12,469   16,772 

Other accrued expenses

  29,530   26,921   23,293 

Income taxes payable

  5,967   2,427   - 

Current portion of long-term debt and lease obligations

  30,582   21,344   25,792 

Total current liabilities

  224,049   245,320   156,188 

Long-term debt, less current portion

  611,349   399,948   432,695 

Operating lease obligations, less current portion

  13,617   17,219   16,675 

Financing lease obligations, less current portion

  13,102   17,382   17,293 

Deferred income tax liability, net

  30,820   34,434   31,481 

Other liabilities

  3,162   3,933   3,639 

Total liabilities

  896,099   718,236   657,971 

Commitments and contingencies

               

Stockholders' equity:

            

Preferred stock

  351   607   351 

Common stock, $0.25 par value per share

  3,050   3,043   3,049 

Additional paid-in capital

  99,430   98,862   99,152 

Treasury stock, at cost

  (195,706)  (170,088)  (168,573)

Accumulated other comprehensive loss

  (20,488)  (26,468)  (20,488)

Retained earnings

  706,801   674,316   641,259 

Total stockholders' equity

  593,438   580,272   554,750 

Total liabilities and stockholders’ equity

 $1,489,537  $1,298,508  $1,212,721 

 

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

 

 

 

 

SENECA FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS

(In thousands, except per share data)

(Unaudited)

 

   

Three Months Ended

    Nine Months Ended  
   

December 30,
2023

   

December 31,
2022

   

December 30,
2023

   

December 31,
2022

 

Net sales

  $ 444,481     $ 473,254     $ 1,150,620     $ 1,178,289  
                                 

Costs and expenses:

                               

Cost of product sold

    390,448       419,465       983,180       1,059,878  

Selling, general and administrative

    22,921       21,914       63,801       60,636  

Plant restructuring

    (42 )     1,829       107       1,937  

Other operating expense (income), net

    392       229       (1,151 )     (2,411 )

Total costs and expenses

    413,719       443,437       1,045,937       1,120,040  

Operating income

    30,762       29,817       104,683       58,249  

Other income and expenses:

                               

Other non-operating income

    (1,825 )     (2,017 )     (4,500 )     (5,070 )

Interest expense, net

    9,388       4,277       23,146       8,037  

Earnings before income taxes

    23,199       27,557       86,037       55,282  

Income taxes

    5,524       6,503       20,472       12,994  

Net earnings

  $ 17,675     $ 21,054     $ 65,565     $ 42,288  
                                 

Earnings per share:

                               

Basic

  $ 2.47     $ 2.77     $ 8.86     $ 5.36  

Diluted

  $ 2.45     $ 2.74     $ 8.78     $ 5.31  
                                 

Weighted average common shares outstanding:

                               

Basic

    7,131       7,582       7,391       7,858  

Diluted

    7,202       7,655       7,462       7,931  

 

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

 

 

SENECA FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

   

Three Months Ended

   

Nine Months Ended

 
   

December 30,
2023

   

December 31,
2022

   

December 30,
2023

   

December 31,
2022

 
                                 

Comprehensive income:

                               

Net earnings

  $ 17,675     $ 21,054     $ 65,565     $ 42,288  

Total

  $ 17,675     $ 21,054     $ 65,565     $ 42,288  

 

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

 

 

 

SENECA FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

  

Nine Months Ended

 
  

December 30,
2023

  

December 31,
2022

 

Cash flows from operating activities:

        

Net earnings

 $65,565  $42,288 

Adjustments to reconcile net earnings to net cash from operating activities:

        

Depreciation and amortization

  38,070   39,721 

LIFO charge

  19,643   79,333 

Gain on the sale of assets

  (1,843)  (2,191)

Deferred income taxes

  (661)  1,418 
Stock-based compensation expense  207   109 
Pension expense  300   1,110 

Changes in operating assets and liabilities:

        

Accounts receivable

  7,173   24,722 

Inventories

  (317,634)  (449,459)

Other current assets

  (1,112)  910 

Income taxes

  11,790   7,873 

Accounts payable

  55,950   68,463 

Accrued expenses and other

  (5,574)  (3,777)

Net cash used in operating activities

  (128,126)  (189,480)

Cash flows from investing activities:

        

Additions to property, plant and equipment

  (31,843)  (56,509)

Proceeds from the sale of assets

  7,987   5,013 

Net cash used in investing activities

  (23,856)  (51,496)

Cash flows from financing activities:

        

Borrowings under revolving credit facility

  657,476   783,346 

Repayments under revolving credit facility

  (579,966)  (490,046)

Borrowings under term loans

  124,433   - 

Principal payments on term loans

  (14,252)  (2,976)

Payments on financing leases

  (6,401)  (6,515)

Purchase of treasury stock

  (27,133)  (41,209)

Dividends

  (12)  (12)

Net cash provided by financing activities

  154,145   242,588 
         

Net increase in cash, cash equivalents and restricted cash

  2,163   1,612 

Cash, cash equivalents and restricted cash, beginning of the period

  12,256   10,904 

Cash, cash equivalents and restricted cash, end of the period

 $14,419  $12,516 
         

Supplemental disclosures of cash flow information:

        

Cash paid for:

        

Interest, net of capitalized interest

 $22,112  $7,228 

Income taxes

 $8,791  $3,082 

Noncash transactions:

        

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

 $4,268  $8,237 

Right-of-use assets derecognized upon early lease termination

 $2,392  $2,874 

Assets acquired from exercise of finance lease purchase options, net of accumulated depreciation

 $5,183  $- 

Property, plant and equipment purchased on account

 $95  $970 

Sale of property, plant and equipment in exchange for note receivable

 $-  $750 

 

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

 

 

 

SENECA FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)

 

                  

Accumulated

     
          

Additional

      

Other

     
  

Preferred

  

Common

  

Paid-In

  

Treasury

  

Comprehensive

  

Retained

 
  

Stock

  

Stock

  

Capital

  

Stock

  

Loss

  

Earnings

 

First Quarter FY 2024:

                        

Balances, March 31, 2023

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

Net earnings

  -   -   -   -   -   23,111 

Cash dividends declared on preferred stock

  -   -   -   -   -   (12)

Issue stock for bonus program

  -   -   72   -   -   - 

Equity incentive program

  -   -   80   -   -   - 

Purchase treasury stock

  -   -   -   (2,177)  -   - 

Balances, July 1, 2023

 $351  $3,049  $99,304  $(170,750) $(20,488) $664,358 
                         

Second Quarter FY 2024:

                        

Net earnings

  -   -   -   -   -   24,779 

Equity incentive program

  -   1   88   -   -   - 

Purchase treasury stock

  -   -   -   (17,467)  -   - 

Balances, September 30, 2023

 $351  $3,050  $99,392  $(188,217) $(20,488) $689,137 
                         

Third Quarter FY 2024:

                        

Net earnings

  -   -   -   -   -   17,675 

Cash dividends declared on preferred stock

  -   -   -   -   -   (11)

Equity incentive program

  -   -   38   -   -   - 

Purchase treasury stock

  -   -   -   (7,489)  -   - 

Balances, December 30, 2023

 $351  $3,050  $99,430  $(195,706) $(20,488) $706,801 
                         
                         

First Quarter FY 2023:

                        

Balances, March 31, 2022

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

Net earnings

  -   -   -   -   -   5,103 

Cash dividends declared on preferred stock

  -   -   -   -   -   (12)

Issue stock for bonus program

  -   1   76   -   -   - 

Equity incentive program

  -   -   33   -   -   - 

Purchase treasury stock

  -   -   -   (15,923)  -   - 

Balances, July 2, 2022

 $644  $3,042  $98,750  $(144,802) $(26,468) $637,142 
                         

Second Quarter FY 2023:

                        

Net earnings

  -   -   -   -   -   16,131 

Equity incentive program

  -   -   37   -   -   - 

Preferred stock conversion

  (32)  1   31   -   -   - 

Purchase treasury stock

  -   -   -   (21,069)  -   - 

Balances, October 1, 2022

 $612  $3,043  $98,818  $(165,871) $(26,468) $653,273 
                         

Third Quarter FY 2023:

                        

Net earnings

  -   -   -   -   -   21,054 

Cash dividends declared on preferred stock

  -   -   -   -   -   (11)

Equity incentive program

  -   -   39   -   -   - 

Preferred stock conversion

  (5)  -   5   -   -   - 

Purchase treasury stock

  -   -   -   (4,217)  -   - 

Balances, December 31, 2022

 $607  $3,043  $98,862  $(170,088) $(26,468) $674,316 

 

   

6% Voting

   

10% Voting

                         
   

Cumulative

   

Cumulative

   

Participating

   

Class A

   

Class B

 
   

Callable

   

Convertible

   

Convertible

   

Common

   

Common

 
   

Par $0.25

   

Par $0.025

   

Par $0.025

   

Par $0.25

   

Par $0.25

 

Shares authorized and designated:

                                       

December 30, 2023

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

Shares outstanding:

                                       

December 30, 2023

    200,000       807,240       8,292       5,456,549       1,660,953  

 

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

 

  

4

 
SENECA FOODS CORPORATION
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(Unaudited)

 

 

1.

Basis of Preparation and Presentation

 

Seneca Foods Corporation (the “Company”) is a leading provider of packaged fruits and vegetables with 26 facilities in eight states in support of its operations. The Company’s principal products include canned vegetables, frozen vegetables, jarred fruit, 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, restaurant chains, industrial markets, other food packagers, export customers in approximately 60 countries, and federal, state and local governments for school and other food programs.

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

 

The unaudited condensed consolidated financial statements included herein have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial statements. While these statements reflect all adjustments (consisting of items of a normal recurring nature) that are, in the opinion of management, necessary for a fair presentation of the results of the interim period, they do not include all of the information and footnotes required by United States generally accepted accounting principles (“U.S. GAAP”) for complete financial statement presentation. The condensed consolidated financial statements should be read in conjunction with the financial statement disclosures in the Company’s Annual Report on Form 10-K/A (Amendment No. 1) for the fiscal year ended March 31, 2023.

 

Due to the seasonal nature of the business, quarterly operating results and cash flows are not necessarily indicative of the results that may be expected for other interim periods or the full year. All references to years are fiscal years ended or ending March 31 unless otherwise indicated. Certain percentage tables may not foot due to rounding. 

 

The preparation of financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances, including the current economic environment. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates.

 

The Company uses the same accounting policies in preparing quarterly and annual financial statements. A summary of significant accounting policies followed by the Company are set forth in Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K/A (Amendment No. 1) for the fiscal year ended March 31, 2023.

 

Reclassifications—Certain prior year amounts have been reclassified for consistency with the current year presentation within the condensed consolidated financial statements. There was no impact to any totals or subtotals previously reported on the condensed consolidated financial statements as a result of the reclassifications. In addition, the Company’s condensed consolidated balance sheet as of  December 31, 2022 has been adjusted to reflect the beginning balance of certain items in accordance with the restated March 31, 2022 consolidated balance sheet shown on the Company’s Annual Report on Form 10-K/A (Amendment No. 1) that was filed with SEC on July 31, 2023.

 

5

 
SENECA FOODS CORPORATION
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(Unaudited)
 

Recently Issued Accounting Pronouncements

 

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) related to income tax disclosures. The amendments in this update are intended to enhance the transparency and decision usefulness of income tax disclosures primarily through changes to the rate reconciliation and income taxes paid information. This update is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. The Company plans to adopt this pronouncement for its fiscal year beginning April 1, 2025, and is in the process of analyzing the impact on its consolidated financial statements.

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This update is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. Early adoption is permitted. The Company plans to adopt this pronouncement for its fiscal year beginning April 1, 2024, and is in the process of analyzing the impact on its consolidated financial statements.

 

All other newly issued accounting pronouncements not yet effective have been deemed either not applicable or were related to technical amendments or codification.

 

 

2.

Revenue Recognition

 

Revenue recognition is completed for most customers at a point in time 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 provide that title to the specified inventory is transferred to the customer 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.

 

6

 
SENECA FOODS CORPORATION
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(Unaudited)
 

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

 

  Three Months Ended  

Nine Months Ended

 
  

December 30,

  

December 31,

  

December 30,

  

December 31,

 
  

2023

  

2022

  

2023

  

2022

 

Canned vegetables

 $372,690  $392,942  $952,226  $976,026 

Frozen vegetables

  27,454   33,754   92,039   93,560 

Fruit products

  32,022   33,371   71,561   75,674 

Snack products

  3,463   3,360   10,817   10,035 

Other

  8,852   9,827   23,977   22,994 
  $444,481  $473,254  $1,150,620  $1,178,289 

 

As a result of certain contracts with customers, the Company has contract asset balances of $0.5 million, $0.7 million, and $0.6 million as of December 30, 2023, December 31, 2022, and March 31, 2023, respectively, which are included in other current assets on the condensed consolidated balance sheets. The Company records deferred revenue for prepaid case and labeling and storage services which have been collected from bill and hold sales. Amounts are recognized in revenue as the associated performance obligation is satisfied and control has transferred to the customer.

 

 

3.

Earnings per Common Share

 

Earnings per share for the three and nine months ended December 30, 2023 and December 31, 2022 are as follows (in thousands, except per share amounts):

 

  Three Months Ended  Nine Months Ended 
  

December 30,

  

December 31,

  

December 30,

  

December 31,

 
  

2023

  

2022

  

2023

  

2022

 

Basic

                

Net earnings

 $17,675  $21,054  $65,565  $42,288 

Deduct preferred stock dividends paid

  6   6   17   17 

Undistributed net earnings

  17,669   21,048   65,548   42,271 

Earnings attributable to participating preferred shareholders

  21   82   73   169 

Earnings attributable to common shareholders

 $17,648  $20,966  $65,475  $42,102 
                 

Weighted average common shares outstanding

  7,131   7,582   7,391   7,858 
                 

Basic earnings per common share

 $2.47  $2.77  $8.86  $5.36 
                 

Diluted

                

Earnings attributable to common shareholders

 $17,648  $20,966  $65,475  $42,102 

Add dividends on convertible preferred stock

  5   5   15   15 

Earnings attributable to common stock on a diluted basis

 $17,653  $20,971  $65,490  $42,117 

Weighted average common shares outstanding-basic

  7,131   7,582   7,391   7,858 

Additional shares issued related to the equity compensation plan

  4   6   4   6 

Additional shares to be issued under full conversion of preferred stock

  67   67   67   67 

Total shares for diluted

  7,202   7,655   7,462   7,931 
                 

Diluted earnings per common share

 $2.45  $2.74  $8.78  $5.31 

 

7

 
SENECA FOODS CORPORATION
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(Unaudited)

 

 

4.

Inventories

 

The Company uses the last-in, first-out (“LIFO”) method of valuing inventory. 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. Accordingly, 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.

 

As of December 30, 2023, December 31, 2022, and March 31, 2023, first-in, first-out (“FIFO”) based inventory costs exceeded LIFO based inventory costs, resulting in a LIFO reserve of $322.1 million, $250.2 million, and $302.4 million, respectively. In order to state inventories at LIFO, the Company recorded an increase to cost of products sold of $12.0 million and $30.9 million for the three months ended December 30, 2023 and December 31, 2022, respectively, and an increase to cost of products sold of $19.6 million and $79.3 million for the nine months ended December 30, 2023 and December 31, 2022, respectively.

 

The following table shows inventory by category and the related LIFO reserve (in thousands): 

 

  

As of:

 
  

December 30,

  

December 31,

  

March 31,

 
  

2023

  

2022

  

2023

 

Finished products

 $912,430  $738,331   613,622 

In process

  111,939   67,380   75,123 

Raw materials and supplies

  266,603   218,572   284,593 
   1,290,972   1,024,283   973,338 

Less excess of FIFO cost over LIFO cost

  322,083   250,162   302,440 

Total inventories

 $968,889  $774,121  $670,898 

 

 

5.

Property, Plant and Equipment

 

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

 

  

As of:

 
  

December 30,

  

December 31,

  

March 31,

 
  

2023

  

2022

  

2023

 
             

Land and land improvements

 $48,401  $46,832  $46,978 

Buildings and improvements

  233,255   210,991   214,110 

Machinery and equipment

  444,709   423,901   421,067 

Office furniture, vehicles and computer software

  13,934   11,397   11,738 

Construction in progress

  27,703   46,395   40,539 

Property, plant and equipment, cost

  768,002   739,516   734,432 

Less: accumulated depreciation

  (460,288)  (441,840)  (433,220)

Property, plant and equipment, net

 $307,714  $297,676  $301,212 

 

Depreciation expense totaled $9.3 million and $8.7 million for the three months ended December 30, 2023 and December 31, 2022, respectively. For the nine months ended December 30, 2023 and December 31, 2022, depreciation expense totaled $27.4 million and $25.1 million, respectively.

 

8

 
SENECA FOODS CORPORATION
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(Unaudited)

 

 

6.

Long-Term Debt

 

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

 

  As of: 
  

December 30,

  

December 31,

  

March 31,

 
  

2023

  

2022

  

2023

 

Revolving credit facility

 $258,108  $313,808  $180,598 
             

Term loans

            

Term Loan A-1

            

Outstanding principal

  86,000   90,000   89,000 

Unamortized debt issuance costs

  (45)  (76)  (68)

Term Loan A-1, net

  85,955   89,924   88,932 
             

Term Loan A-2

            

Outstanding principal

  287,250   -   173,500 

Unamortized debt issuance costs

  (964)  -   (551)

Term Loan A-2, net

  286,286   -   172,949 
             

Other

  214   216   216 

Total long-term debt

  630,563   403,948   442,695 

Less current portion

  19,214   4,000   10,000 

Long-term debt, less current portion

 $611,349  $399,948  $432,695 

 

Revolving Credit Facility

 

On March 24, 2021, the Company entered into a Fourth Amended and Restated Loan and Security Agreement that provides for a senior revolving credit facility of up to $400.0 million that is seasonally adjusted (the “Revolver”). Maximum borrowings under the Revolver total $300.0 million from April through July and $400.0 million from August through March. The Revolver balance is included in Long-Term Debt in the accompanying condensed consolidated balance sheets 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.

 

On September 14, 2022, the Company entered into a First Amendment to the Fourth Amended and Restated Loan and Security Agreement (the “Revolver Amendment”) which amended several provisions to replace LIBOR with SOFR plus a spread adjustment as the interest rate benchmark on the Revolver. The transition to SOFR did not materially impact the interest rates applied to the Company’s borrowings. No other material changes were made to the terms of the Company’s Revolver as a result of the Revolver Amendment.

 

9

 
SENECA FOODS CORPORATION
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(Unaudited)
 

The following table illustrates certain quantitative data for Revolver borrowings during fiscal year 2024 and fiscal year 2023 (in thousands): 

 

  

As of:

 
  

December 30,

  

December 31,

  

March 31,

 
  

2023

  

2022

  

2023

 

Outstanding borrowings

 $258,108  $313,808  $180,598 

Weighted average interest rate

  6.70%  5.85%  6.34%

 

  Three Months Ended:  Nine Months Ended: 
  

December 30,

  

December 31,

  

December 30,

  

December 31,

 
  

2023

  

2022

  

2023

  

2022

 

Maximum amount of borrowings

 $275,912  $327,881  $275,912  $327,881 

Average outstanding borrowings

 $210,034  $269,833  $131,346  $140,996 

Weighted average interest rate

  6.76%  5.11%  6.77%  4.50%

 

 

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 amended and restated agreement has a maturity date of June 1, 2025 and converted the term loan to a fixed interest rate of 3.3012% until maturity in addition to requiring quarterly principal payments of $1.0 million, which commenced during fiscal year 2021. This agreement contains certain covenants, including maintaining a minimum EBITDA and minimum tangible net worth.

 

On January 20, 2023, the Company entered into a Second Amended and Restated Loan and Guaranty Agreement with Farm Credit East, ACA (the “Agreement”) which governs two term loans, as summarized below:

 

Term Loan A-1: The Agreement continues certain aspects of the existing $100.0 million term loan described above, namely Term Loan A-1 will continue to bear interest at a fixed interest rate of 3.3012%, mature on June 1, 2025, require quarterly principal payments of $1.0 million, and remain unsecured.

 

Term Loan A-2: The Agreement adds an additional term loan in the amount of $175.0 million that will mature on January 20, 2028, and is secured by a portion of the Company’s property, plant and equipment. Term Loan A-2 bears interest at a variable interest rate based upon SOFR plus an additional margin determined by the Company’s leverage ratio. Quarterly payments of principal outstanding on Term Loan A-2 in the amount of $1.5 million commenced on March 1, 2023.

 

On May 23, 2023, the Agreement was amended by the Second Amended and Restated Loan and Guaranty Agreement Amendment which amends, restates and replaces in its entirety Term Loan A-2 (the “Amendment”). The Amendment provides a single advance term facility in the principal amount of $125.0 million to be combined with the outstanding principal balance of $173.5 million on Term Loan A-2 into one single $298.5 million term loan (“Amended Term Loan A-2”). Amended Loan Term A-2 is secured by a portion of the Company’s property, plant and equipment and bears interest at a variable interest rate based upon SOFR plus an additional margin determined by the Company’s leverage ratio. Quarterly payments of principal outstanding on Amended Term Loan A-2 in the amount of $3.75 million commenced on June 1, 2023. The Amendment continues all aspects of Term Loan A-1 as defined in the Agreement. As of December 30, 2023, the interest rate on Amended Term Loan A-2 was 7.10%.

 

The Amendment contains restrictive covenants usual and customary for loans of its type, in addition to financial covenants including minimum EBITDA and minimum tangible net worth. In connection with Amended Term Loan A-2, the Company incurred $1.1 million of financing costs which will be deferred and amortized over the life of the term loan.

 

As of December 30, 2023, the Company was in compliance with all covenants for its revolving credit facility and term loan agreements.

 

10

 
SENECA FOODS CORPORATION
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(Unaudited)

 

 

7.

Leases

 

The Company determines whether an arrangement is a lease at inception of the agreement. Presently, the Company leases land, machinery and equipment under various operating and financing leases.

 

Right-of-Use (“ROU”) assets represent the Company’s right to use the underlying assets for the lease term, and lease obligations represent the net present value of the Company’s obligation to make payments arising from these leases. ROU assets and lease obligations are recognized at commencement date based on the present value of lease payments over the lease term using the implicit lease interest rate or, when unknown, an incremental borrowing rate based on the information available at commencement date or April 1, 2019 for leases that commenced prior to that date.

 

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 may have 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 condensed consolidated balance sheets.

 

ROU assets and lease obligations for the Company’s operating and financing leases are disclosed separately in the Company’s condensed consolidated balance sheets. The components of lease cost were as follows (in thousands):

 

  Three Months Ended  Nine Months Ended 
  

December 30,

  

December 31,

  

December 30,

  

December 31,

 
  

2023

  

2022

  

2023

  

2022

 

Lease cost:

                

Amortization of ROU assets

 $1,419  $1,703  $4,903  $4,960 

Interest on lease liabilities

  180   239   602   720 

Finance lease cost

  1,599   1,942   5,505   5,680 

Operating lease cost

  1,919   2,926   6,077   10,810 

Total lease cost

 $3,518  $4,868  $11,582  $16,490 

 

Cash paid for amounts included in the measurement of lease liabilities:

        

Operating cash flows from finance leases

 $602  $720 

Operating cash flows from operating leases

  7,880   12,343 

Financing cash flows from finance leases

  6,401   6,515 
  $14,883  $19,578 
         
         

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

 $106  $4,053 

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

 $4,162  $4,184 

Weighted-average lease term (years):

        

Financing leases

  4.5   4.6 

Operating leases

  4.6   4.6 

Weighted-average discount rate (percentage):

        

Financing leases

  3.9%  3.6%

Operating leases

  4.7%  4.4%

 

11

 
SENECA FOODS CORPORATION
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(Unaudited)
 

Undiscounted future lease payments under non-cancelable operating and financing leases, along with a reconciliation of undiscounted cash flows to operating and financing lease obligations, respectively, as of December 30, 2023 were as follows (in thousands):

 

Years ending March 31:

  

Operating

  

Financing

 

Balance of 2024

  $849  $1,713 

2025

   6,457   5,296 

2026

   4,661   4,210 

2027

   3,525   3,152 

2028

   3,269   2,774 
2029-2034   2,969   2,965 

Total minimum payment required

  $21,730  $20,110 

Less interest

   2,050   1,703 

Present value of minimum lease payments

   19,680   18,407 

Amount due within one year

   6,063   5,305 

Long-term lease obligations

  $13,617  $13,102 

 

 

8.

Income Taxes

 

The Company’s effective tax rate was 23.8% and 23.5% for the nine months ended December 30, 2023 and December 31, 2022, respectively. The effective tax rate increased in the current nine-month interim period primarily due to state rate changes having an unfavorable impact on the effective rate which increased the rate by 0.3%.

 

 

9.

Retirement Plans

 

The net periodic benefit (income) cost for the Company’s pension plan consisted of (in thousands):

 

  Three Months Ended  Nine Months Ended 
  

December 30,

  

December 31,

  

December 30,

  

December 31,

 
  

2023

  

2022

  

2023

  

2022

 

Service cost including administration

 $1,327  $1,310  $4,800  $6,180 

Interest cost

  2,914   2,193   8,550   6,941 

Expected return on plan assets

  (4,926)  (4,027)  (13,275)  (12,079)

Amortization of prior service cost

  22   22   60   68 

Amortization of net loss

  165   (205)  165   - 

Net periodic benefit (income) cost

 $(498) $(707) $300  $1,110 

 

There were no pension contributions made during the nine months ended December 30, 2023 and December 31, 2022.

 

12

 
SENECA FOODS CORPORATION
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(Unaudited)
 
 

10.

Stockholders’ Equity

 

During the nine months ended December 30, 2023, the Company repurchased 524,598 shares of its Class A Common Stock at a cost of $27.1 million, which are included in Treasury Stock. During the nine months ended December 31, 2022, the Company repurchased 766,071 shares of its Class A Common Stock at a cost of $41.2 million. The Company did not repurchase any of its Class B Common Stock in either nine-month interim period. As of December 30, 2023, there are 5,090,840 shares or $195.7 million of repurchased stock being held as Treasury Stock. These shares are not considered outstanding.

 

 

11.

Fair Value of Financial Instruments

 

Cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued expenses are reflected in the condensed consolidated balance sheets at carrying value, which approximates fair value due to the short-term maturity of these instruments.

 

On a quarterly basis, the Company estimates the fair values for financial instruments that are recorded at carrying value on the condensed consolidated balance sheets. 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. The fair value and carrying value of the Company’s long-term debt are as follows (in thousands):

 

  As of: 
  

December 30,

  

December 31,

  

March 31,

 
  

2023

  

2022

  

2023

 

Carrying value

 $630,563  $403,948  $442,695 

Fair value

 $624,896  $396,408  $436,293 

 

 

12.

Restructuring

 

The following table summarizes the rollforward of restructuring charges recorded and the accruals established (in thousands):

 

  Restructuring Payable 
  

Severance

  

Other Costs

  

Total

 

Balance March 31, 2023

 $117  $-  $117 

First quarter charge

  (42)  182   140 

Second quarter charge

  -   9   9 

Third quarter charge

  -   (42)  (42)

Cash payments/write offs

  (75)  (149)  (224)

Balance December 30, 2023

 $-  $-  $- 

 

  

Severance

  

Other Costs

  

Total

 

Balance March 31, 2022

 $-  $-  $- 

First quarter charge

  -   56   56 

Second quarter charge

  -   52   52 

Third quarter charge

  389   1,440   1,829 

Cash payments/write offs

  -   (1,548)  (1,548)

Balance December 31, 2022

 $389  $-  $389 

 

13

 
SENECA FOODS CORPORATION
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(Unaudited)
  

The restructuring charges pertain to the vegetable reportable segment. During the three and nine months ended December 30, 2023, respectively, the Company incurred restructuring charges primarily due to plants that were closed in previous periods. During the three and nine months ended December 31, 2022, respectively, the Company incurred restructuring charges primarily associated with ceasing production of green beans at a plant in the Northeast. The charges were comprised of severance costs and a write down of production equipment that was sold during the subsequent twelve months.

 

 

13.

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.

 

 

 

14.

Asset Acquisition

 

On November 8, 2023, the Company executed an Asset Purchase Agreement and associated License Agreement with B&G Foods, Inc., (the “Seller”) to acquire certain assets from the Seller relating to its Green Giant® shelf-stable vegetable product line (the “transaction”). The acquired assets include inventory and an associated license which allows the Company to manufacture, market, distribute, and sell Green Giant® shelf-stable vegetable products within the United States in perpetuity. The preliminary purchase price was approximately $55.6 million in cash and was funded from borrowings under the Company’s Revolver. The purchase price is subject to contingent consideration in the form of certain post-closing adjustments which are expected to be finalized prior to the Company’s fiscal year ending on March 31, 2024.

 

The transaction was accounted for as an asset acquisition in accordance with Accounting Standards Codification (“ASC”) 805-50, Business Combinations Related Issues, because substantially all of the fair value of the gross assets acquired were concentrated in a singular asset, the acquired inventory, which was recorded at a value of $52.9 million. Additionally, a portion of the purchase price was used to settle preexisting liabilities of $2.7 million comprised mainly of deferred revenue for which the associated performance obligation had not yet been performed by the Company for the Seller prior to the transaction date.

 

14

 
SENECA FOODS CORPORATION
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(Unaudited)
 
 

15.

Segment Information

 

The Company conducts its business almost entirely in food packaging with two reportable segments: vegetable and fruit/snack. The reportable segments reflect how the Company's Chief Executive Officer, who is the Chief Operating Decision Maker (“CODM”), allocates resources and evaluates performance, and how the Company's internal management financial reporting is structured. The Company's CODM evaluates the performance of these reportable segments with a focus on earnings (loss) before income taxes as the measure of segment profit or loss.

 

The other category consists of the Company's non-food operations including revenue derived from the sale of cans, ends, seed, outside revenue from the Company's trucking and aircraft operations, and certain corporate items. These ancillary activities do not qualify as an operating segment and are not eligible for aggregation with one of the identified operating segments; therefore they are combined and presented within the “other” category.

 

During the Company’s fiscal year 2024 reassessment, the Company updated how its existing operating segments (vegetable, fruit, snack) are reported. A primary factor of the reassessment was the Company's vegetable operations which have become a larger strategic focus of the Company, as evidenced by the recent asset acquisition described in Note 14 to the Condensed Consolidated Financial Statements. Fruit was previously reported with vegetable. The fruit and snack segments are now managed together as one reportable segment, leaving vegetable as its own reportable segment. The update reflects the products offered within the segments and the manner in which the business is currently managed. The prior year amounts within the segment disclosure information have been recast to conform to the current year presentation.

 

Segment information is provided on a FIFO basis which is consistent with how financial information is prepared internally and provided to the CODM. The LIFO impact on earnings (loss) before income taxes and total assets is shown separately for purposes of reconciling to the U.S. GAAP financial statement measure shown on the condensed consolidated statements of net earnings and condensed consolidated balance sheets.

 

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

 

       Three Months Ended December 30, 2023 
      

Fruit and

      

LIFO

     
  

Vegetable

  

Snack

  

Other

  

Impact

  

Total

 

Net sales

 $400,144  $35,485  $8,852  $-  $444,481 

Earnings (loss) before income taxes

  33,304   2,217   (295)  (12,027)  23,199 

Total assets

  1,705,008   103,542   3,070   (322,083)  1,489,537 
                     

 

        Three Months Ended December 31, 2022 
      

Fruit and

      

LIFO

     
  

Vegetable

  

Snack

  

Other

  

Impact

  

Total

 

Net sales

 $426,696  $36,731  $9,827  $-  $473,254 

Earnings (loss) before income taxes

  56,300   34   2,121   (30,898)  27,557 

Total assets

  1,454,204   90,855   3,611   (250,162)  1,298,508 
                     

 

        Nine Months Ended December 30, 2023      
      

Fruit and

      

LIFO

     
  

Vegetable

  

Snack

  

Other

  

Impact

  

Total

 

Net sales

 $1,044,265  $82,378  $23,977  $-  $1,150,620 

Earnings (loss) before income taxes