SECURITIES AND EXCHANGE COMMISSION Washington, D.C.D. C. 20549 FORM 10-K☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
10-K
(Mark one)
☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended March 31, 2020☐ TRANSITION REPORT PURSUANT TO SECTION 13 2022
--03-31 FY 2022
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ | 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 CORPORATIONSeneca Foods Corporation
(Exact name of
registrantRegistrant as specified in its charter)
| 16-0733425 |
| (State or other jurisdiction of | (I. R. S. Employer |
| incorporation or organization)
| Identification No.) |
3736 South Main Street, Marion, New York (Address
| 14505 |
| (Address of principal executive offices) Registrant’s telephone number, including area code
| | 16-0733425
(I.R.S. Employer Identification No.)
14505
(Zip Code) (315) 926-8100
|
Registrant’s telephone number, including area code:(315) 926-8100
Securities registered pursuant to Section 12(b) of the
Exchange Act:
Title of Each Class | Trading Symbol | Name of Each 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 |
Registrant’s telephone number, including area code:(315) 926-8100
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒☑ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer ☐ | Accelerated filer ☒ | Non-accelerated filer ☐ | Smaller reporting company ☒ | Emerging growth company ☐ |
Large accelerated filer ☐ Accelerated filer ☑ Non-accelerated filer ☐ Smaller reporting company ☑ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
. Yes ☐ No ☒
☑
The aggregate market value of the
Registrant’s voting and non-voting common equity held by
non-affiliates basednon affiliates of the Registrant as of October 1, 2021, the last business day of the Registrant’s most recently completed second fiscal quarter, was $354,877,691 (based on the closing
salesshare price per market reports
bygenerated from the NASDAQ Global
Select Market System on
September 27, 2019 was approximately $194,326,000.October 1, 2021).
As of May
26, 2020,24, 2022, there were
7,383,9936,467,697 shares of Class A common stock and
1,733,9021,709,930 shares of Class B common stock outstanding.
Documents Incorporated by Reference:
| (1)
| DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant’s definitive Proxy Statement for the 2022 Annual Meeting of Shareholders to be held hereafter, and the Annual Report to shareholders for fiscal year ended March 31, 2020 (the “2020 Annual Report”) applicable to Part I, Item 1, Part II, Items 5-9A and Part IV, Item 15 of Form 10-K. |
| (2)
| Portion of the Proxy Statement to be issued in connection with the Registrant’s annual meeting of stockholders (the “Proxy Statement”) applicable to Part III, Items 10-14 of Form 10-K.
|
Explanatory Note
This Annual Report on Form 10-Kto Shareholders of Seneca Foods Corporation for the fiscal year ended March 31, 2020 ("fiscal year 2020"2022 (the “Annual Report”) is being filed pursuant, included as Exhibit 13 to the order of the Securities and Exchange Commission contained in SEC Release No. 34-88465, dated March 25, 2020 (the "Order"). Seneca Foods Corporation filed a Form 8-K ("the Form 8-K") on June 12, 2020 indicating its reliance on the relief granted by the Order.
Consistent with the Company's statements made in the Form 8-K, the Company was unable to file its fiscal year 2020this Form 10-K, until July 2, 2020,are incorporated by reference in Parts I, II, III, and therefore relied on the Order due to circumstances related to the coronavirus pandemic ("COVID-19"). COVID-19 has caused disruptions to the Company's day-to-day activities including the temporary closure of the Company’s corporate office and other locations which caused certain employees of the Company as well as members of the audit engagement team to have limited access to the Company’s facilities and support staff. These disruptions impaired the Company’s ability to perform necessary work on the fiscal year 2020 Form 10-K and the financial statements include therein by its original due date of June 14, 2020.
IV hereof.
|
SENECA FOODS CORPORATION |
ANNUAL REPORT ON FORM 10-K |
FOR THE FISCAL YEAR ENDED MARCH 31, 2022 |
TABLE OF CONTENTS |
Forward-Looking StatementsCertain of the statements contained in this annual report
This Annual Report on Form 10-K are forward-looking statements made withincontains “forward-looking statements” as that term is used in the meaning of Section 27A of thePrivate Securities Litigation Reform Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (Exchange Act).1995. Forward-looking statements involve numerous risks and uncertainties. Forward-looking statements are not in the present or past tense and, in some cases, can be identified by the usefact that they address future events, developments, and results and do not relate strictly to historical facts. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain the words "will," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "seeks," "should," "likely," "targets," "may", "can" and variations thereof and similar expressions. Forward-looking statements are subject to known and unknown risks, uncertainties, and other expressionsimportant factors that indicate future trendscould cause actual results to differ materially from those expressed. We believe important factors that could cause actual results to differ materially from our expectations include, but are not limited to, the following:
| ● | the effects of rising costs and availability of raw fruit and vegetables, steel, ingredients, packaging, other raw materials, distribution and labor; |
| ● | crude oil prices and their impact on distribution, packaging and energy costs; |
| ● | an overall labor shortage, ability to retain a sufficient seasonal workforce, lack of skilled labor, labor inflation or increased turnover impacting our ability to recruit and retain employees; |
| ● | climate and weather affecting growing conditions and crop yields; |
| ● | our ability to successfully implement sales price increases and cost saving measures to offset cost increases; |
| ● | the loss of significant customers or a substantial reduction in orders from these customers; |
| ● | effectiveness of our marketing and trade promotion programs; |
| ● | competition, changes in consumer preferences, demand for our products and local economic and market conditions; |
| ● | the impact of a pandemic on our business, suppliers, customers, consumers and employees; |
| ● | unanticipated expenses, including, without limitation, litigation or legal settlement expenses; |
| ● | product liability claims; |
| ● | the anticipated needs for, and the availability of, cash; |
| ● | the availability of financing; |
| ● | leverage and the ability to service and reduce debt; |
| ● | foreign currency exchange and interest rate fluctuations; |
| ● | the risks associated with the expansion of our business; |
| ● | the ability to successfully integrate acquisitions into our operations; |
| ● | our ability to protect information systems against, or effectively respond to, a cybersecurity incident or other disruption; |
| ● | other factors that affect the food industry generally, including: |
| ■ | recalls if products become adulterated or misbranded, liability if product consumption causes injury, ingredient disclosure and labeling laws and regulations and the possibility that consumers could lose confidence in the safety and quality of certain food products; |
| ■ | competitors’ pricing practices and promotional spending levels; |
| ■ | fluctuations in the level of our customers’ inventories and credit and other business risks related to our customers operating in a challenging economic and competitive environment; and |
| ■ | the risks associated with third-party suppliers, including the risk that any failure by one or more of our third-party suppliers to comply with food safety or other laws and regulations may disrupt our supply of raw materials or certain finished goods products or injure our reputation; and |
| ● | changes in, or the failure or inability to comply with, U.S., foreign and local governmental regulations, including environmental and health and safety regulations. |
Any of these factors, as well as such other factors as discussed in (1) Part I, Item 1A., “Risk Factors” of this Form 10-K, (2) Part II, Item 7, “Management’s Discussion and events. AAnalysis of Financial Condition and Results of Operations” and (3) in our other periodic filings with the Securities and Exchange Commission (the “SEC”), could cause our actual results to differ materially from our anticipated results. The information provided in this Form 10-K is based upon the facts and circumstances known as of the date of this report, and any forward-looking statement speaksstatements made by us in this Form 10-K speak only as of the date on which such statement is made and reflects management's analysis onlythey are made. Except as of the date thereof. The Company undertakesrequired by law, we undertake no obligation to update anythese forward-looking statement. The following factors, among others discussed herein and instatements after the Company's filings underdate of this Form 10-K to reflect events or circumstances after such date, or to reflect the Exchange Act, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: the impactoccurrence of the COVID-19 pandemic on our business, suppliers, customers, consumers and employees, costs and availabilityunanticipated events.
1
Table of raw materials, competition, cost controls, sales levels, governmental regulation, consumer preferences, industry trends, weather conditions, crop yields, natural disasters, recalls, litigation, reliance on third-parties, wage rates, and other factors. See also the factors described in "Part I, Item 1A. Risk Factors" and elsewhere in this report, and those described in the Company's filings under the Exchange Act.Contents
PART I
BusinessHistory and Development of Seneca Foods Corporation
SENECA FOODS CORPORATION (the
Seneca Foods Corporation (“Seneca” or the “Company”)
is one of North America'swas founded in 1949 and has evolved through internal growth and strategic acquisitions into a leading
providersprovider of packaged
fruits and vegetables, with
26 facilities located throughout the United States.
The facilities are comprised of plants for packaging, can manufacuting, seed production, a farming operation and a logistical support network. The Company also maintains warehouses which are generally located adjacent to its packaging plants. The Company is incorporated in New York with its headquarters located at 3736 South Main Street, Marion, New York and its telephone number is (315) 926-8100. Its high quality products are primarily sourced from approximately 1,400 American farms. The Company’s product offerings include canned, frozen and bottled produce, and snack
chips and itschips. Its products are sold under private label as well as national and regional brands that the Company owns or licenses, including Seneca®, Libby’s®, Aunt Nellie’s®,
READ®Cherryman®, Green Valley® and
CherryMan®READ®. The
Company packs Green Giant, Le SueurCompany’s fruits 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.As of March 31, 2020, the Company’s facilities consisted of 23 packaging plants strategically located throughout the United States, one can manufacturing plant, three seed packaging operations, a farming operationare sold nationwide by major grocery outlets, including supermarkets, mass merchandisers, limited assortment stores, club stores and a logistical support network.dollar stores. The Company also maintains warehouses which are generally located adjacentsells its products to its packaging plants. foodservice distributors, restaurants chains, industrial markets, other food processors, export customers in over 90 countries and federal, state and local governments for school and other food programs. Additionally, the Company packs canned and frozen vegetables under contract packing agreements.
The Company
is a New York corporationpursues acquisitions when they are strategic and
financially additive and meet its
headquarters is located at 3736 South Main Street, Marion, New York and its telephone number is (315) 926-8100.The Company was founded in 1949 and during its 72overall business needs. In 73 years of operation, the Company has made over 50 strategic acquisitions, includinginvestments and alliances that have expanded its leadership in the purchasepackaged fruit and vegetable industry. The table below includes some of the long-term license for the Libby’s brandacquisitions and divestitures that have been completed in 1983, the purchase of General Mills’ Green Giant packaging assets and entry into an Alliance Agreement with General Mills Operations, LLC (“GMOL”) in 1995 and the acquisition of Chiquita Processed Foods in 2003. The Company believes that these acquisitions have enhanced the Company’s leadership position in the private label and foodservice canned vegetable markets in the United States and significantly increased its international sales. In August 2006, the Company acquired Signature Fruit Company, LLC, a leading producer of canned fruits located in Modesto, California which was sold during 2019. In 2013, the Company completed its acquisition of 100% of the membership interest in Independent Foods, LLC. In April 2014, the Company purchased a 50% equity interest in Truitt Bros. Inc. In 2016, the Company acquired Gray & Company and Diana Foods Co., Inc., each leading providers of maraschino cherries and other cherry products. The plants acquired are in Hart, Michigan and Dayton, Oregon. During 2018, the Company purchased the remaining 50% equity interest in Truitt Bros., Inc. making it a wholly-owned subsidiary. During 2019, the Company sold its Lebanon frozen packaging operation and its Marion Can Plant. During 2020, the Company sold part of its Rochester, Minnesota Plant and exchanged its Sunnyside, Washington Plant for part of its investment in CraftAg. Also during 2020, the Company acquired a plant from Del Monte Foods in Cambria, Wisconsin.
recent years:
Date | | Significant Event |
| March 2021 | | Acquisition of a processing facility in Berlin, Wisconsin for $7.1 million to aid the Company’s frozen business by expanding freezing capability and adding frozen celery production to the core fruit and vegetable business. |
| | |
| December 2020 | | Divestiture of the prepared foods business, resulting in a gain of $34.8 million. The nature of the prepared foods business was not central to Seneca’s primary business and the sale allowed for the continued focus and investment in the Company’s core fruit and vegetable business. |
| | |
| November 2020 | | Executed an agreement with a co-pack customer to process canned vegetables on a contractual basis, and as part of that arrangment, acquired a plant in Cambria, Wisconsin. As an additional part of the arragement, Seneca acquired two already closed facilities and the equipment therein which was relocated and utilized by existing Seneca facilities in order to improve efficiencies or expand production capacities. Any equipment that was unable to be utilized was disposed of in fiscal year 2021. The idle facilities were acquired with no plans of operation, one of which was sold during fiscal year 2022 and the remaining facility is expected be sold in fiscal year 2023. |
| | |
| October 2019 | | The Company ceased production at its fruit processing plant in Sunnyside, Washington but continued to store, case and label products at this facility until late in fiscal year 2020. In February 2020, the Company invested approximately $10 million and contributed the Sunnyside facility to acquire a 49% stake in CraftAg, LLC, a newly formed company which processed hemp. During fiscal yer 2022, the Company's investment was deemed to be other-than-temporarily impaired and the carrying value of the investment was written down to $0. |
The Company’s Internet address is
www.senecafoods.com. The Company’s annual report on Form 10-K,
the Company’s quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act
of 1934, as amended, are available on the Company’s web site, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. All such filings on the Company’s web site are available free of charge. Information on our website is not part of the
Annual Reportannual report on Form 10-K.
In addition, the Company's website includes items related to corporate governance matters, including charters of various committees of the Board of Directors and the Company's Code of Business Conduct and Ethics. The Company intends to disclose on its website any amendment to or waiver of any provision of the Code of Business Conduct and Ethics that would otherwise be required to be disclosed under the rules of the SEC and NASDAQ.
Financial Information about Industry Segments The Company
manageshas historically managed its business on the basis of three reportable
segments – the primary segment is thefood packaging
segments: (1) fruits and
sale of vegetables,
secondarily, the packaging and sale of(2) prepared food products and
third is the packaging and sale of(3) snack
products and finally other products. The
first three segments constitute the food operation. The food operation constitutes 99% of totalother category comprises non-food packaging sales
of which
approximately 74% is canned vegetable packaging, 7% is canned fruit packaging, 10% is frozen fruit and vegetable packaging and 1% is fruit chip packaging. Prepared Foods represents approximately 8% of the Company’s sales. The non-food operation, which is primarily relatedrelate to the sale of cans,
and ends,
seed, and outside revenue
generated from
ourthe Company's trucking and aircraft
operations, representsoperations. During fiscal year 2021, the Company sold its prepared foods business, leaving just two reportable segments along with the other category. The Company’s food operation constituted 98% of total net sales in fiscal year 2022. Canned vegetables represented 84%, frozen vegetables represented 9%, fruit products represented 6%, and chip products represented 1% of the
Company’s total
food packaging net sales.
Narrative Description of Business
Principal Productsproducts and MarketsFood Packaging
markets
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 90 countries, and federal, state and local governments for school and other feeding programs. Food packaging operations are primarily supported by plant locations in New York, Michigan,
Kentucky, Oregon, Wisconsin, Washington, Idaho, Illinois, and Minnesota.
SeeRefer to the information set forth under the heading “Segment Information” in Note 14 of
the Notes to Consolidated Financial Statements in Part II, Item 8,
Financial“Financial Statements and Supplementary
Data,Data”, for additional
informationdiscussion about the Company’s segments.
The following table summarizes net sales by major product category for
thefiscal years
ended March 31, 20202022 and
2019:Classes of similar products/services: | | 2020 | | | 2019 | |
| | | (In thousands) | |
Net Sales: | | | | | | | | |
Green Giant * | | $ | 122,764 | | | $ | 71,161 | |
Canned vegetables | | | 877,391 | | | | 815,780 | |
Frozen | | | 104,980 | | | | 113,115 | |
Fruit | | | 97,393 | | | | 91,941 | |
Prepared foods | | | 105,044 | | | | 79,593 | |
Snack | | | 11,475 | | | | 9,684 | |
Other | | | 16,722 | | | | 18,307 | |
Total | | $ | 1,335,769 | | | $ | 1,199,581 | |
* Green Giant includes canned and frozen vegetables exclusively for B&G Foods.
|
2021 (in thousands):
| | | Fiscal Year | |
| | | 2022 | | | | 2021 | |
| Canned vegetables | | $ | 1,135,983 | | | | $ | 1,172,635 | |
| Frozen vegetables | | | 123,895 | | | | | 102,197 | |
| Fruit products | | | 84,708 | | | | | 88,431 | |
| Snack products | | | 12,332 | | | | | 10,999 | |
| Prepared foods | | | - | | | | | 71,866 | |
| Other | | | 28,362 | | | | | 21,516 | |
| | | $ | 1,385,280 | | | | $ | 1,467,644 | |
Source and Availability of Raw Materials We purchase raw materials, including raw produce, steel, ingredients and packaging materials from growers, commodity processors, steel producers and packaging suppliers. Raw materials and other input costs, such as labor, fuel, utilities and transportation, are subject to fluctuations in price attributable to a number of factors. Fluctuations in commodity prices can lead to retail price volatility and can influence consumer and trade buying patterns. The Company’s food packaging plants are locatedcost of raw materials, fuel, labor, distribution and other costs related to our operations can increase from time to time significantly and unexpectedly.
We experienced material net cost increases for raw materials and other input costs during fiscal year 2022. We attempt to manage cost inflation risks by locking in
major vegetable producing states. Vegetables are primarily obtainedprices through
short-term supply contracts,
with independent growers.advance grower purchase agreements, and by implementing cost saving measures. We also attempt to offset rising input costs by raising sales prices to our customers. However, increases in the prices we charge our customers may lag behind rising input costs. Competitive pressures also may limit our ability to quickly raise prices in response to rising costs. To the extent we are unable to avoid or offset any present or future cost increases our operating results could be materially adversely affected.
The Company's most significant brand name,
Libby's®Libby's®, is held pursuant to a trademark license granted to the Company in March 1982 and renewable by the Company every 10 years for an aggregate period expiring in March 2081. The original licensor was Libby, McNeill & Libby, Inc., then an indirect subsidiary of Nestlé, S. A. ("Nestlé") and the license was granted in connection with the Company's purchase of certain of the licensor's canned vegetable operations in the United States. Corlib Brands Management, LTD acquired the license from Nestlé during 2006. The license is limited to vegetables which are shelf-stable, frozen, and thermally packaged, and includes the Company's major vegetable varieties – corn, peas and green beans – as well as certain other thermally packaged vegetable varieties and sauerkraut.
The Company is required to pay an annual royalty to Corlib Brands, now known as Libby's Brand Holding, Ltd., who may terminate the license for non-payment of royalty, use of the trademark in sales outside the licensed territory, failure to achieve a minimum level of sales under the licensed trademark during any calendar year or a material breach or default by the Company under the agreement (which is not cured within the specified cure period). With the purchase of Signature Fruit Company, LLC, which also uses the
Libby’s®Libby’s® brand name, the Company re-negotiated the license agreement and created a new, combined agreement based on
Libby’s®Libby’s® revenue dollars for fruits, vegetables, and dry beans.
During fiscal year 2021, the Company and Libby’s Brand Holding, Ltd. renegotiated again to remove fruit from the license agreement. A total of
$217,000$0.1 million was paid as a royalty fee for the
fiscal year ended March 31,
2020.2022.
The Company also sells canned vegetables, frozen vegetables,
jarred fruit, and other food products under several other brands for which the Company has obtained registered trademarks, including, Aunt
Nellie’s®Nellie’s®,
CherryMan®CherryMan®, Green
Valley®Valley®,
READ®READ®,
and Seneca®Seneca®, and other regional brands.
Seasonal Business
Seasonality
While individual vegetables have seasonal cycles of peak production and sales, the different cycles are somewhat offsetting. Minimal food packaging occurs in the Company's last fiscal quarter ending March 31, which is the optimal time for maintenance, repairs and equipment changes in its packaging plants. The supply of commodities, current pricing, and expected new crop quantity and quality affect the timing and amount of the Company’s sales and earnings. When the seasonal harvesting periods of the Company's major vegetables are newly completed, inventories for these packaged vegetables are at their highest levels. For peas, the peak inventory time is mid-summer and for corn
and green beans, the Company's highest volume
vegetable,vegetables, the peak inventory is in mid-autumn.
These seasonal fluctuations are illustrated in the following table, which presents certain unaudited quarterly financial information for the periods
indicated:| | | First Quarter | | | Second Quarter | | | Third Quarter | | | Fourth Quarter | |
| | | (In thousands) | |
Year ended March 31, 2020: | | | | | | | | | | | | | | | | |
Net sales | | $ | 264,925 | | | $ | 370,002 | | | $ | 392,971 | | | $ | 307,871 | |
Gross margin | | | 19,174 | | | | 24,055 | | | | 52,277 | | | $ | 46,382 | |
Earnings from continuing operations | | | 1,103 | | | | 4,635 | | | | 24,428 | | | | 21,022 | |
Revolver outstanding (at quarter end) | | | 136,014 | | | | 133,338 | | | | 114,689 | | | | 106,924 | |
| | | | | | | | | | | | | | | | | |
Year ended March 31, 2019: | | | | | | | | | | | | | | | | |
Net sales | | $ | 244,093 | | | $ | 320,660 | | | $ | 372,238 | | | $ | 262,590 | |
Gross margin | | | 16,788 | | | | 11,008 | | | | (2,096 | ) | | | 13,796 | |
Loss from continuing operations | | | (2,160 | ) | | | (5,634 | ) | | | (20,040 | ) | | | (8,649 | ) |
Revolver outstanding (at quarter end) | | | 207,610 | | | | 242,947 | | | | 214,161 | | | | 155,278 | |
indicated (in thousands):
| | | First
Quarter | | | Second Quarter | | | Third
Quarter | | | Fourth Quarter | |
| Fiscal Year 2022: | | | | | | | | | | | | | | | | |
| Net sales | | $ | 235,042 | | | $ | 372,256 | | | $ | 445,593 | | | $ | 332,389 | |
| Gross margin | | | 33,623 | | | | 42,728 | | | | 44,985 | | | | 26,596 | |
| Net earnings | | | 14,136 | | | | 11,654 | | | | 18,664 | | | | 6,553 | |
| Revolver outstanding (at quarter end) | | | 1,000 | | | | 51,679 | | | | 33,711 | | | | 20,508 | |
| | | | | | | | | | | | | | | | | |
| Fiscal Year 2021: | | | | | | | | | | | | | | | | |
| Net sales | | $ | 288,165 | | | $ | 390,294 | | | $ | 484,392 | | | $ | 304,793 | |
| Gross margin | | | 48,562 | | | | 48,943 | | | | 77,704 | | | | 56,976 | |
| Net earnings | | | 20,706 | | | | 18,105 | | | | 72,460 | | | | 14,829 | |
| Revolver outstanding (at quarter end) | | | 34,406 | | | | 62,611 | | | | - | | | | 1,000 | |
In the food packaging business, an end of year sales order backlog is not considered meaningful. Traditionally, larger customers provide tentative bookings for their expected purchases for the upcoming season. These bookings are further developed as data on the expected size of the related national harvests becomes available. In general, these bookings serve as a yardstick rather than as a firm commitment, since actual harvest results can vary notably from early estimates. In actual practice, the Company has substantially all of its expected seasonal production identified to potential sales outlets before the seasonal production is completed.
Competition and Customers Competition in the
packaged food
businessindustry is substantial with brand recognition and promotion, quality, service, and pricing being the major determinants in the Company’s relative market position. The Company believes that it is a major producer of canned vegetables,
frozen vegetables, and jarred fruit but some producers of
canned, frozen and other forms of vegetablethese products have sales which exceed the Company's sales. The Company is aware of
approximatelyat least 13 competitors in the U.S. packaged
fruit and vegetable industry, many of which are privately held companies.
During the past year, approximately 9%
Environmental protection is an area that has been worked on diligently at each food packaging facility. In all locations, the Company has cooperated with federal, state, and local environmental protection authorities in developing and maintaining suitable antipollution facilities. In general, we believe our pollution control facilities are equal to or somewhat superior to those of our competitors and are within environmental protection standards. The Company does not expect any material capital expenditures to comply with environmental regulations in the near future.
There has been a broad range of proposed and promulgated state, national and international regulations aimed at reducing the effects of climate change. In the United States, there is a significant possibility that some form of regulation will be forthcoming at the federal level to address the effects of climate change. Such regulation could result in the creation of additional costs in the form of taxes,
consultant expenses, the restriction of output, investments of capital to maintain compliance with laws and regulations, or required acquisition or trading of emission allowances.
Environmental Litigation and Contingencies In the ordinary course of its business, the Company is made a party to certain legal proceedings seeking monetary damages, including proceedings involving product liability claims, worker’s compensation and other employee claims, tort and other general liability claims, for which it carries insurance as well as patent infringement and related litigation. The Company is in a highly regulated industry and is also periodically involved in government actions for regulatory violations and other matters surrounding the manufacturing of its products, including, but not limited to, environmental, employee, and product safety issues. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company does not believe that an adverse decision in any of these legal proceedings would have a material adverse impact on its financial position, results of operations, or cash flows.
Employment
3
Employment
As of the end of December 2019,2021, the Company had approximately 3,2003,000 employees of which 3,1002,800 are full time, and 100 seasonal employees work in food packaging, and 100 full time employees work in other activities. The number of employees increases by approximately 5,0004,000 due to an increase in seasonal employees during our peak pack season.
The Company has
sixseven collective bargaining agreements with three unions covering approximately
840787 of its full-time employees. The terms of these agreements result in wages and benefits which are substantially the same for comparable positions for the Company’s non-union employees. There
are two agreements that will expire in calendar 2022, two agreements that will expire in calendar 2023,is one agreement that will expire in calendar
2023, three agreements that will expire in calendar 2024,
one agreement that will expire in calendar 2025, one agreement that will expire in calendar 2026, and one agreement that will expire in calendar
2025.2027.
Domestic and Export SalesThe following table sets forth domestic and export sales:
|
| | | Fiscal Year | |
| | | 2020 | | | 2019 | |
| | | (In thousands, except percentages) | |
Net Sales: | | | | | | | | |
United States | | $ | 1,248,904 | | | $ | 1,109,704 | |
Export | | | 86,865 | | | | 89,877 | |
Total Net Sales | | $ | 1,335,769 | | | $ | 1,199,581 | |
| | | | | | | | | |
As a Percentage of Net Sales: | | | | | | | | |
United States | | | 93.5 | % | | | 92.5 | % |
Export | | | 6.5 | % | | | 7.5 | % |
Total | | | 100.0 | % | | | 100.0 | % |
The following table sets forth domestic and export sales (In thousands, except percentages):
| | | Fiscal Year | |
| | | 2022 | | | 2021 | |
| Net sales: | | | | | | | | |
| United States | | $ | 1,285,540 | | | $ | 1,372,679 | |
| Export | | | 99,740 | | | | 94,965 | |
| Total net sales | | $ | 1,385,280 | | | $ | 1,467,644 | |
| | | | | | | | | |
| As a percentage of net sales: | | | | | | | | |
| United States | | | 92.8 | % | | | 93.5 | % |
| Export | | | 7.2 | % | | | 6.5 | % |
| Total | | | 100.0 | % | | | 100.0 | % |
The following factors as well as factors described elsewhere in this Form 10-K or in other filings by the Company with the
Securities and Exchange Commission,SEC, could adversely affect the Company’s consolidated financial position, results of operations or cash flows. Other factors not presently known to us or that we presently believe are not material could also affect our business operations or financial results. The Company refers to itself as “we”, “our” or “us” in this section.
Fruit and Vegetable Industry Risks ExcessExcess capacity in the vegetablefruit and vegetable industry has a downward impact on selling price.Canned
If canned vegetable,
frozen vegetable, or jarred fruit categories
are declining, with that;decline, less shelf space
is beingwill be devoted to these categories in the supermarkets. Fresh and perishable businesses are improving their delivery systems around the world and the availability of fresh produce is impacting the consumers purchasing patterns relating to
processedpackaged fruit and vegetables. Our financial performance and growth are related to conditions in the United States’
fruit and vegetable packaging industry which is a mature industry with a modest growth rate during the last 10 years. Our net sales are a function of product availability and market pricing. In the
fruit and vegetable packaging industry, product availability and market prices tend to have an inverse relationship: market prices tend to decrease as more product is available and to increase if less product is available. Product availability is a direct result of plantings, growing conditions, crop yields and inventory levels, all of which vary from year to year. Moreover,
fruit and vegetable production outside the United States, particularly in Europe, Asia and South America, is increasing at a time when worldwide demand for certain products is being impacted by the global economic slowdown. These factors may have a significant effect on supply and competition and create downward pressure on prices. In addition, market prices can be affected by the planting and inventory levels and individual pricing decisions of our competitors. Generally, market prices in the
fruit and vegetable packaging industry adjust more quickly to variations in product availability than an individual packager can adjust its cost structure; thus, in an oversupply situation, a packager’s margins likely will weaken. We typically have experienced lower margins during times of industry oversupply.
In the past, the
fruit and vegetable packaging industry has been characterized by excess capacity, with resulting pressure on our prices and profit margins. We have closed packaging plants in past years in response to the downward pressure on prices. There can be no assurance that our margins will improve in response to favorable market conditions or that we will be able to operate profitably during depressed market conditions.
Growing cycles and adverse weather conditions may decrease our results from operations. Our operations are affected by the growing cycles of the vegetables we package. When the vegetables are ready to be picked, we must harvest and package them quickly or forego the opportunity to package fresh picked vegetables for an entire year. Most of our vegetables are grown by farmers under contract with us. Consequently, we must pay the contract grower for the vegetables even if we cannot or do not harvest or package them. Most of our production occurs during the second quarter (July through September) of our fiscal year, which corresponds with the quarter that the growing season ends for most of the produce packaged by us. A majority of our sales occur during the
thirdsecond and
fourththird quarters of each fiscal year due to seasonal consumption patterns for our products. Accordingly, inventory levels are highest during the second and third quarters, and accounts receivable levels are highest during the
thirdsecond and
fourththird quarters. Net sales generated during our
thirdsecond and
fourththird fiscal quarters have a significant impact on our results of operations. Because of these seasonal fluctuations, the results of any particular quarter, particularly in the first half of our fiscal year, will not necessarily be indicative of results for the full year or for future years.
We set our planting schedules without knowing the effect of the weather on the crops or on the entire industry’s production. Weather conditions during the course of each vegetable crop’s growing season will affect the volume and growing time of that crop. As most of our vegetables are produced in more than one part of the U.S., this somewhat reduces the risk that our entire crop will be subject to disastrous weather. The upper Midwest is the primary growing region for the principal vegetables which we pack, namely peas, green beans and corn, and it is also a substantial source of our competitors’ vegetable production. The adverse effects of weather-related reduced production may be partially mitigated by higher selling prices for the vegetables which are produced.
The commodity materials that we package or otherwise require are subject to price increases that could adversely affect our profitability. The materials that we use, such as
raw fruit and vegetables, steel,
(used to make cans), ingredients, pouches and other packaging materials as well as the electricity,
diesel fuel, and natural gas used in our business, are commodities that may experience price volatility caused by external factors, including market fluctuations, availability, currency fluctuations and changes in governmental regulations and agricultural programs. General inventory positions of major commodities, such as field corn, soybeans and wheat, all commodities with which we must compete for acreage, can have dramatic effects on prices for those commodities, which can translate into similar swings in prices needed to be paid for our contracted commodities. These programs and other events can result in reduced supplies of these commodities, higher supply costs or interruptions in our production schedules. If prices of these commodities increase beyond what we can pass along to our customers, our operating income will decrease.
Risks Associated With Our OperationsCOVID-19:
Pandemics or disease outbreaks, such as the COVID-19 pandemic, may disrupt our business, including among other things, our supply chain, our manufacturing operations and customer and consumer demand for our products, and could have a material adverse impact on our business.The ultimate impact that the recent COVID-19 outbreak or any future pandemic or disease outbreak will have on our business and our consolidated results of operations is uncertain. To date we have seen increased customer and consumer demand for our products as the COVID-19 pandemic reached the United States and consumers began pantry loading and increasing their at-home consumption as a result of increased social distancing and stay-at-home mandates. Increases in net sales by our company to supermarkets, mass merchants, warehouse clubs, wholesalers and ecommerce customers have more than offset declines at foodservice customers. However, this increased customer and consumer demand may decrease in the coming months if and when the need for social distancing and stay-at-home mandates decreases, and we are unable to predict the nature and timing of when that impact may occur.
The spread of pandemics or disease outbreaks, such as COVID-19, may negatively affect our operations. If a significant percentage of our workforce or the workforce of our third party business partners is unable to work, including because of illness or travel or government restrictions in connection with the COVID-19 pandemic or any future pandemic or disease outbreak, our operations may be negatively impacted.
As someSome of our
sizable seasonal migrant workforce
may dwell in company provided housing
and therefore outbreaks such as COVID-19
may be observed and would need to be managed, to the extent possible, to
avert more wide-ranging community spread, develop workforce availability, and meet health
protocols, which may negatively affect our operations.care protocols. Pandemics or disease outbreaks could result in a widespread health crisis that could adversely affect economies and financial markets, consumer spending and confidence levels resulting in an economic downturn that could affect customer and consumer demand for our products.
Our efforts to manage and mitigate these factors may be unsuccessful, and the effectiveness of these efforts depends on factors beyond our control, including the duration and severity of any pandemic or disease outbreak, as well as third party actions taken to contain its spread and mitigate public health effects.
The ultimate impact of
the COVID-19a pandemic on our business will depend on many factors, including, among others, the duration of social distancing and stay-at-home mandates,
and whether a second or third wave of COVID-19 will affect the United States and the rest of North America, our ability to continue to operate our manufacturing facilities and maintain the supply chain without material disruption, and the extent to which macroeconomic conditions resulting from the pandemic and the pace of the subsequent recovery may impact consumer eating habits.
We cannot predict the duration or scope of the disruption. Therefore, the financial impact cannot be reasonably estimated at this time.We depend upon key customers. Our products are sold in a highly competitive marketplace, which includes increased concentration and a growing presence of large-format retailers and discounters. Dependence upon key customers could lead to increased pricing pressure by these customers.
Green Giant products packed by us in A relatively limited number of customers account for a large percentage of the Company’s total net sales. The top ten customers represented approximately 53%, and 50% of net sales for fiscal years 20202022 and 2019 constituted approximately 9% and 6%, respectively, of our total sales. Our sales of Green Giant product and financial performance under the Contract Packing Agreement depend to a significant extent on our success in producing quality Green Giant vegetables at competitive costs and B&G Foods success in marketing the products produced by us. The ability of B&G Foods to successfully market these products will depend upon B&G Foods’ sales efforts as well as the factors described above under “Excess capacity in the vegetable industry has a downward impact on selling price.” We cannot give assurance as to the volume of B&G Foods’ sales and cannot control many of the key factors affecting that volume.
Additionally, purchases by the United Sates Department of Agriculture (“USDA”) in fiscal year 2020 and 2019 represented approximately 5.1% and 2.1%, respectively, of our total sales. . The purchase of our products by the USDA is done through the government’s competitive bid process. We bid on stated product requirements and needs as presented by the USDA and, if we are the successful bidder, we fulfill the contract and deliver the product. The government contracting process is complex and subject to numerous regulations and requirements. Failure by us to comply with the regulations and requirements for government contracts could jeopardize our ability to contract with the government and could result in reduced sales or prohibition on submitting bids to the USDA. The government procurement process could also change and result in our inability to meet the new requirements. Additionally, the government’s need for our products could decrease, which would result in reduced sales to the USDA.
2021, respectively. If we lose a significant customer or if sales to a significant customer materially decrease, our business, financial condition and results of operations may be materially and adversely affected.
If we do not maintain the market shares of our products, our business and revenues may be adversely affected. All of our products compete with those of other national and regional food packaging companies under highly competitive conditions. The
fruit and vegetable products which we sell under our own brand names not only compete with
fruit and vegetable products produced by
vegetablefood packaging competitors, but also compete with products we produce and sell
tounder contract packing agreements with other companies who market those products under their own brand names
such as the Green Giant vegetables we sell to B&G Foods under the Contract Packing Agreement and the vegetables we sell to various retail grocery chains which carry our customer’s own brand names.
The customers who buy our products to sell under their own brand names control the marketing programs for those products. In recent years, many major retail food chains have been increasing their promotions, offerings and shelf space allocations for their own
fruit and vegetable brands, to the detriment of
fruit and vegetable brands owned by the packagers, including our own brands. We cannot predict the pricing or promotional activities of our customers/competitors or whether they will have a negative effect on us. There are competitive pressures and other factors, which could cause our products to lose market share or result in significant price erosion that could materially and adversely affect our business, financial condition and results of operations.
Increases in logistics and other transportation-related costs could materially adversely impact our results of operations. Our ability to competitively serve our customers depends on the availability of reliable and low-cost transportation. We use multiple forms of transportation to bring our products to market. They include trucks, intermodal, rail cars, and ships. Disruption to the timely supply of these services or increases in the cost of these services for any reason, including availability or cost of fuel, regulations affecting the industry, or labor shortages in the transportation industry, could have an adverse effect on our ability to serve our customers, and could materially and adversely affect our business, financial condition and results of operations.
If we are subject to product liability claims,
A recall of our products could have a material adverse effect on our business. In addition, we may incur significant and unexpected costs and our business reputation could be adversely affected.Food packagers are subject to significant liability should the consumption of theirany of our products cause injury, illness or illness.death.
The sale of food products for human consumption involves the risk of injury to consumers. Such injuries may result from mislabeling, tampering by unauthorized third parties or product contamination or spoilage, including the presence of foreign objects, undeclared allergens, substances, chemicals, other agents or residues introduced during the growing, manufacturing, storage, handling or transportation phases of production. Under certain circumstances, we may be required to recall products, leading to a material adverse effect on our business, consolidated financial condition, results of operations or liquidity. Even if a situation does not necessitate a recall, product liability claims might be asserted against us. We
workhave from time to time been involved in product liability lawsuits, none of which have been material to our business. While we are subject to governmental inspection and regulations and believe our facilities comply in all material respects with
regulators,all applicable laws and regulations, if the
industryconsumption of any of our products causes, or is alleged to have caused, a health-related illness in the future we may become subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused injury, illness or death could adversely affect our reputation with existing and
supplierspotential customers and our corporate and brand image. Moreover, claims or liabilities of this sort might not be covered by our insurance or by any rights of indemnity or contribution that we may have against others. We maintain product liability insurance in an amount we believe to
stay abreastbe adequate. However, we cannot assure you that we will not incur claims or liabilities for which we are not insured or that exceed the amount of
developments.our insurance coverage. A product liability judgment against us
could also result in substantial and unexpected expenditures, affect consumer confidence inor a product recall or the damage to our
products, and divert management’s attention from other responsibilities. Product liability claims may also lead to increased scrutiny by federal and state regulatory agencies andreputation resulting therefrom could have a material adverse effect on our
business, consolidated financial condition,
and results of operation. Although we maintain comprehensive general liability insurance coverage, there can be no assurance that this level of coverage is adequate or that we will be able to continue to maintain our existing insurance or obtain comparable insurance at a reasonable cost, if at all. A product recall or a partially or completely uninsured judgment against us could materially and adversely affect our business, financial condition and results of operations.We are increasingly dependent on information technology; disruptions, failures or security breaches of our information technology infrastructure could have a material adverse effect on our operations.
We may become exposed to potential liabilities with respect to the data that we collect, manage and process, and may incur legal costs if our information security policies and procedures are not effective or if we are required to defend our methods of collection, processing and storage of data. Future investigations, lawsuits or adverse publicity relating to our methods of handling data could adversely affect our business, results of operations financial conditionor liquidity.
Pending and cash flows due to the costs and negative market reaction relating to such developments. Wefuture litigation may not have the resources or technical expertise to anticipate or prevent rapidly evolving types of cyber-attacks. Actual or anticipated attacks will causelead us to incur increased costs, including costssignificant costs.
We are, or may become, party to hire additional personnel, purchase additional protection technologies, train employees,various lawsuits and engage third-party expertsclaims arising in the normal course of business, which may include lawsuits or claims relating to contracts, intellectual property, product recalls, product liability, the marketing and consultants.labeling of products, employment matters, environmental matters or other aspects of our business. Even when not merited, the defense of these lawsuits may divert our management’s attention, and we may incur significant expenses in defending these lawsuits. In addition, data and security breaches can also occur as a result of non-technical issues, including breach by uswe may be required to pay damage awards or by persons with whom we have commercial relationships that result in the unauthorized release of confidential information. Any compromisesettlements or breach of our security could result in violation of applicable privacy andbecome subject to injunctions or other laws, significant legal and financial exposure, and a loss of confidence in our security measures,equitable remedies, which could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity. The outcome of litigation is often difficult to predict, and the outcome of pending or future litigation may have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.
We face risks associated with our defined benefit pension plan.
We maintain a company-sponsored defined benefit pension plan. A deterioration in the value of plan assets resulting from poor market performance, a general financial downturn or otherwise could cause an increase in the amount of contributions we are required to make to these plans. For example, our defined benefit pension plan may from time to time move from an overfunded to underfunded status driven by decreases in plan asset values that may result from changes in long-term interest rates and disruptions in U.S. or global financial markets. Additionally, historically low interest rates coupled with poor market performance would have the effect of decreasing the funded status of these plans which would result in greater required contributions. For a more detailed description of the pension plan, refer to the information set forth under the heading “Retirement Plans”in Note 10 of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.” An obligation to make additional, unanticipated contributions to our defined benefit plans could reduce the cash available for working capital and other corporate uses, and may have a material adverse effect on our business, consolidated financial position, results of operations and liquidity.
Our business is dependent on our information technology systems and software, and failure to protect against or effectively respond to cyber-attacks, security breaches, or other incidents involving those systems, could adversely affect day-to-day operations and decision making processes and have an adverse effect on our performance and reputation. The efficient operation of our business depends on our information technology systems, which we rely on to effectively manage our business data, communications, logistics, accounting, regulatory and other business processes. If we do not allocate and effectively manage the resources necessary to build and sustain an appropriate technology environment, our business, reputation, or financial results could be negatively impacted. In addition, our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including systems failures, natural disasters, terrorist attacks, viruses, ransomware, security breaches or cyber incidents. Cyber-attacks are becoming more sophisticated and are increasing in the number of attempts and frequency by groups and individuals with a wide range of motives. A security breach of sensitive information could result in damage to our reputation and our relations with our customers or employees. Any such damage or interruption could have a material adverse effect on our business.
We generate agricultural food packagingpackaging wastes and are subject to substantial environmental regulation. As a food packager, we regularly dispose of produce wastes (silage) and processing water as well as materials used in plant operation and maintenance and our plant boilers, which generate heat used in packaging
produceand can manufacturing operations, producing generally small emissions into the air. These activities and operations are regulated by federal and state laws and the respective federal and state environmental agencies. Occasionally, we may be required to remediate conditions found by the regulators to be in violation of environmental law or to contribute to the cost of remediating waste disposal sites, which we neither owned nor operated, but in which, we and other companies deposited waste materials, usually through independent waste disposal companies. Future possible costs of environmental remediation, contributions and penalties could materially and adversely affect our business, financial condition and results of operations.
Our production capacity for certain products and commodities is concentrated in a limited number of facilities, exposing us to a material disruption in production in the event that a disaster strikes. We only have
three plantsone plant that
produceproduces fruit products and one plant that produces pumpkin products. We have two plants that manufacture empty cans, one with substantially more capacity than the other, which are not interchangeable since each plant cannot necessarily produce all the can sizes needed. Although we maintain property and business interruption insurance coverage, there can be no assurance that this level of coverage is adequate in the event of a catastrophe or significant disruption at these or other Company facilities. If such an event occurs, it could materially and adversely affect our business, financial condition and results of operations.
We may undertake acquisitions or product innovations and may have difficulties integrating them or may not realize the anticipated benefits.
In the future, we may undertake acquisitions of other businesses or introduce new products, although there can be no assurances that these will occur. Such undertakings involve numerous risks and significant investments. There can be no assurance that we will be able to identify and acquire acquisition candidates on favorable terms, to profitably manage or to successfully integrate future businesses that we may acquire or new products we may introduce without substantial costs, delays or problems. Any of these outcomes could materially and adversely affect our business, financial condition and results of operations.
We are dependent upon a seasonal workforce and our inability to hire sufficient employees may adversely affect our business. At the end of
our 2020 fiscal year,December 2021, we had approximately
3,2003,000 employees of which
3,1002,800 full time,
and 100 seasonal employees worked in food packaging, and 100 employees worked in other activities. During the peak summer harvest period, we hire up to approximately
5,0004,000 seasonal employees to help package
fruit and vegetables. If there is a shortage of seasonal labor,
especially during 2020 as a result of COVID-19 or if there is an increase to minimum wage rates, this could have a negative impact on our cost of operations. Many of our packaging operations are located in rural communities that may not have sufficient labor pools, requiring us to hire employees from other regions. An inability to hire and train sufficient employees during the critical harvest period could materially and adversely affect our business, financial condition and results of operations.
Increases in Labor Costs or Work Stoppages or Strikes Could Materially and Adversely Affect Our Financial Condition and Results of Operations
Personnel costs, including the costs of medical and other employee health and welfare benefits, have increased. These costs can vary substantially as a result of an increase in the number, mix and experience of our employees and changes in health care and other employment-related laws. There are no assurances that we will succeed in reducing future increases in such costs. Increases in personnel costs can also be amplified by low unemployment rates, preferences among workers in the labor market and general tight labor market conditions in any of the areas where we operate. Our inability to control such costs could materially and adversely affect our financial condition and results of operations. Although we consider our labor relations to be good, if a significant number of our employees engaged in a work slowdown, or other type of labor unrest, it could in some cases impair our ability to supply our products to customers, which could result in reduced sales, and may distract our management from focusing on our business and strategic priorities. Any of these activities could materially and adversely affect our financial condition and results of operations.
Environmental and other regulation of our business, including potential climate change regulation, could adversely impact us by increasing our production cost or restricting our ability to import certain products into the United States.
Climate change serves as a risk multiplier increasing both the frequency and severity of natural disasters that may affect our business operations. Moreover, there has been a broad range of proposed and promulgated state, national and international regulation aimed at reducing the effects of climate change. In the United States, there is a significant possibility that some form of regulation will be enacted at the federal level to address the effects of climate change. Such regulation could take several forms that could result in additional costs in the form of taxes, consultant costs, the restriction of output, investments of capital to maintain compliance with laws and regulations, or required acquisition or trading of emission allowances. Climate change regulation continues to evolve, and it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation.
There may be increased governmental legislative and regulatory activity in reaction to consumer perception related to BPA.enamels.
There has been continued state legislative activity to ban
certain enamals used to line cans; such as Bisphenol-A ("BPA")
from food contact packaging.. These legislative decisions are predominantly driven by consumer perception that BPA may be harmful. These actions have been taken despite the scientific evidence and general consensus of United States and international government agencies that BPA is safe and does not pose a risk to human health. The legislative actions combined with growing public perception about food safety may require us to change some of the materials used as linings in our packaging materials. Failure to do so could result in a loss of sales as well as loss in value of the inventory utilizing
BPA containingcertain materials.
The Company, inIn collaboration with other can makers as well as enamel suppliers,
has decided towe have aggressively
workworked to find alternative materials for can linings not manufactured using BPA.
However, commercially acceptable alternatives are not immediately available for some applicationsWe have transitioned to BPANI (BPA Non-intent) and
there can be no assurance that these steps will be successful. Lessless than 1% of our canned product volume
(excluding B&G Foods and purchased canned products) still includes BPA.
Even though BPANI has been fully approved by the Food and Drug Administration (“FDA”), there could be future legislative or regulatory actions that claim BPANI also poses a risk to human health.
The implementationimplementation of the Food Safety Modernization Act of 2011 may affect ooperationsperations The Food Safety Modernization Act ("FSMA") was enacted with the goal of enabling the
Food and Drug Administration ("FDA")FDA to better protect public health by strengthening the food safety system. FSMA was designed to focus the efforts of FDA on preventing food safety problems rather than relying primarily on reacting to problems after they occur. The law also provides
the FDA with new enforcement authorities designed to achieve higher rates of compliance with prevention and risk-based food safety standards and to better respond to and contain problems when they do occur. The increased inspections, mandatory recall authority of the FDA, increased scrutiny of foreign sourced or supplied food products, and increased records access may have an impact on our business. As we are already in a highly regulated business, operating under the increased scrutiny of more FDA authority does not appear likely to negatively impact our business. The law also gives FDA important new tools to hold imported foods to the same standards as domestic foods.
The Company’s
Our results are dependent on successful marketplace initiatives and acceptance by consumers of the Company’sour products.The Company’s
Our product introductions and product improvements, along with
its other marketplace initiatives, are designed to capitalize on new customer or consumer trends. The FDA
recentlyhas issued a statement on sodium which referred to an Institute of Medicine statement that too much sodium is a major contributor to high blood pressure. Some of our products contain a moderate amount of sodium per recommended serving, which is based on consumer’s preferences for taste. In order to remain successful,
the Companywe must anticipate and react to these new trends and develop new products or packages to address them. While
the Company devoteswe devote significant resources to meeting this goal, we may not be successful in developing new products or packages, or our new products or packages may not be accepted by customers or consumers.
Regulations related to “conflict minerals” may cause us to incur additional expenses and could limit the supply and increase the cost of certain metals used primarily in manufacturing our canned products.On August 22, 2012, the SEC adopted a new rule requiring disclosures of specified minerals, known as conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured by companies filing public reports. The rule, which requires a disclosure report to be filed by May 31 each year, requires companies to perform country of origin inquiries, due diligence as required, disclosure, and reporting whether such minerals originate from the Democratic Republic of Congo or an adjoining country. The conflict mineral rule could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals, including, tin, which is used primarily in the manufacture of our cans. The number of suppliers, who provide conflict-free minerals in steel production, or other components, may be limited. In addition, there may be significant costs associated with complying with the disclosure requirements, such as costs related to determining the source of certain minerals used in the manufacture of our cans, as well as costs of possible changes to products, packages, or sources of supply as a consequence of such verification activities. Since our supply chain is complex, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the procedures that we implement, which may hurt our business. In addition, we may encounter significant challenges to satisfy those customers who require that all of the components of our products be certified as conflict-free, which could place us, as well as our competitors, at a disadvantage if we are unable to do so.
Financing Risks
Global economic conditions may materially and adversely affect our business, financial condition and results of operations. Unfavorable economic conditions, including the impact of recessions in the United States and throughout the world, may negatively affect our business and financial results. These economic conditions could negatively impact (i) consumer demand for our products, (ii) the mix of our products’ sales, (iii) our ability to collect accounts receivable on a timely basis, (iv) the ability of suppliers to provide the materials required in our operations and (v) our ability to obtain financing or to otherwise access the capital markets. The strength of the U.S. dollar versus other world currencies could result in increased competition from imported products and decreased sales to our international customers. A prolonged recession could result in decreased revenue, margins and earnings. Additionally, the economic situation could have an impact on our lenders or customers, causing them to fail to meet their obligations to us. The occurrence of any of these risks could materially and adversely affect our business, financial condition and results of operations.
Our ability to manage our working capital and our Revolver is critical to our success. As of March 31,
2020,2022, we had
approximately $312.5 million of total indebtedness, including various debt agreements and a
$106.9$20.5 million outstanding balance on our revolving credit facility (“Revolver”).
Scheduled debt service for fiscal 2020 is $28.3 million. During our second and third fiscal quarters, our operations generally require more cash than is available from operations. In these circumstances, it is necessary to borrow under our Revolver. Our ability to obtain financing in the future through credit facilities will be affected by several factors, including our creditworthiness, our ability to operate in a profitable manner and general market and credit conditions. Significant changes in our business or cash outflows from operations could create a need for additional working capital. An inability to obtain additional working capital on terms reasonably acceptable to us or access the Revolver would materially and adversely affect our operations. Additionally, if we need to use a portion of our cash flows to pay principal and interest on our debt, it will reduce the amount of money we have for operations, working capital, capital expenditures, expansions, acquisitions or general corporate or other business activities.
Failure to comply with the requirements of our debtdebt agreements and Revolver could have a material adverse effect on our business. Our debt agreements
and Revolver contain financial and other restrictive covenants which, among other things, limit our ability to borrow money, including with respect to the refinancing of existing indebtedness. These provisions may limit our ability to conduct our business, take advantage of business opportunities and respond to changing business, market and economic conditions. In addition, they may place us at a competitive disadvantage relative to other companies that may be subject to fewer, if any, restrictions. Failure to comply with the requirements of our
Revolver and debt agreements could materially and adversely affect our business, financial condition and results of operations. We have pledged our accounts receivable, inventory,
and theequipment, capital stock, or other ownership interests that we own in our subsidiaries to secure
the credit facility.certain debt. If a default occurred and was not cured, secured lenders could foreclose on this collateral.
Risks Relating to Our Stock Our existing shareholders, if acting together, may be able to exert control over matters requiring shareholder approval. Holders of our Class B common stock are entitled to one vote per share, while holders of our Class A common stock are entitled to one-twentieth of a vote per share. In addition, holders of our 10% Cumulative Convertible Voting Preferred Stock, Series A, our 10% Cumulative Convertible Voting Preferred Stock, Series B and, solely with respect to the election of directors, our 6% Cumulative Voting Preferred Stock, which we refer to as our voting preferred stock, are entitled to one vote per share. As of March 31,
2020,2022, holders of Class B common stock and voting preferred stock held
88.1%89.1% of the combined voting power of all shares of capital stock then outstanding and entitled to vote. These shareholders, if acting together, would be in a position to control the election of our directors and to effect or prevent certain corporate transactions that require majority or supermajority approval of the combined classes, including mergers and other business combinations. This may result in us taking corporate actions that you may not consider to be in your best interest and may affect the price of our common stock.
As of March 31,
2020,2022, our current executive officers and directors beneficially owned
12.1%10.4% of our outstanding shares of Class A common stock,
54.5%49.7% of our outstanding shares of Class B common stock and
53.5%14.0% of our voting preferred stock, or
49.1%31.8% of the combined voting power of our outstanding shares of capital stock. This concentration of voting power may inhibit changes in control of the Company and may adversely affect the market price of our common stock.
Our certificate of incorporation and bylaws contain provisions that discourage corporate takeovers. Certain provisions of our certificate of incorporation and bylaws and provisions of the New York Business Corporation Law may have the effect of delaying or preventing a change in control. Various provisions of our certificate of incorporation and bylaws may inhibit changes in control not approved by our directors and may have the effect of depriving shareholders of any opportunity to receive a premium over the prevailing market price of our common stock in the event of an attempted unsolicited takeover. In addition, the existence of these provisions may adversely affect the market price of our common stock. These provisions include:
| | ● | a classified board of directors; |
| | |
| | ● | a requirement that special meetings of shareholders be called only by our directors or holders of 25% of the voting power of all shares outstanding and entitled to vote at the meeting; |
| | |
| | ● | our board of directors has the power to classify and reclassify any of our unissued shares of capital stock into shares of capital stock with such preferences, rights, powers and restrictions as the board of directors may determine; |
| | |
| | ● | the affirmative vote of two thirds of the shares present and entitled to vote is required to amend our bylaws or remove a director; and |
| | |
| | ● | under the New York Business Corporation Law, in addition to certain restrictions which may apply to “business combinations” involving us and an “interested shareholder”, a plan for our merger or consolidation must be approved by two-thirds of the votes of all outstanding shares entitled to vote thereon. See “Our existing shareholders, if acting together, may be able to exert control over matters requiring shareholder approval.” |
We dohave not paypaid dividends on our common stock and do not expect to pay common dividends in the future.
past.
We have not declared or paid any cash dividends on our common stock in
more than 25 years and we have no intention to do so in the
near future.past. In addition, payment of cash dividends on our common stock is not permitted by the terms of our revolving credit facility.
This policy may be revisited under the correct circumstances in the future.
Tax legislation could impact future cash flows.The Company uses
We use the Last-In, First-Out (LIFO) method of inventory accounting. As of March 31,
2020,2022, we had a LIFO reserve of
$144.3$164.5 million which, at the U.S. corporate tax rate, represents approximately
$36.1$41.4 million of income taxes, payment of which is delayed to future dates based upon changes in inventory costs. From time-to-time, discussions regarding changes in U.S. tax laws have included the potential of LIFO being repealed. Should LIFO be repealed, the
$36.1$41.4 million of postponed taxes, plus any future benefit realized prior to the date of repeal, would likely have to be repaid over some period of time. Repayment of these postponed taxes will reduce the amount of cash that we would have available to fund our operations, working capital, capital expenditures, expansions, acquisitions or general corporate or other business activities. This could materially and adversely affect our business, financial condition and results of operations.
The tax status of our insurance subsidiary could be challenged resulting in an acceleration of income tax payments. In conjunction with our workers’ compensation program, we operate a wholly owned insurance subsidiary, Dundee Insurance Company, Inc. We recognize this subsidiary as an insurance company for federal income tax purposes with respect to our consolidated federal income tax return. In the event the Internal Revenue Service (“IRS”) were to determine that this subsidiary does not qualify as an insurance company, we could be required to make accelerated income tax payments to the IRS that we otherwise would have deferred until future periods.
Item 1B1B. Unresolved Staff Comments
As a smaller reporting company, we are not required to provide disclosure pursuant to this Item.
None
9
12
Item 22. PropertiesProperties
The following table details the Company’s manufacturing plants and warehouses:
| | | Square | | | | | |
| | | Footage | | | Acres | |
| | | (000) | | | | | |
Food Group | | | | | | | | |
Nampa, Idaho | | | 243 | | | | 16 | |
Payette, Idaho | | | 392 | | | | 43 | |
Princeville, Illinois | | | 286 | | | | 478 | |
East Bernstadt, Kentucky | | | 246 | | | | 15 | |
Hart, Michigan | | | 289 | | | | 92 | |
Traverse City, Michigan | | | 58 | | | | 43 | |
Blue Earth, Minnesota | | | 286 | | | | 350 | |
Glencoe, Minnesota | | | 646 | | | | 1,278 | |
LeSueur, Minnesota | | | 82 | | | | 7 | |
Montgomery, Minnesota | | | 549 | | | | 1,162 | |
Rochester, Minnesota | | | 835 | | | | 634 | |
Geneva, New York | | | 769 | | | | 602 | |
Leicester, New York | | | 200 | | | | 91 | |
Dayton, Oregon | | | 82 | | | | 19 | |
Salem, Oregon | | | 469 | | | | 22 | |
Dayton, Washington | | | 250 | | | | 28 | |
Yakima, Washington | | | 122 | | | | 8 | |
Baraboo, Wisconsin | | | 584 | | | | 11 | |
Cambria East, Wisconsin | | | 412 | | | | 406 | |
Cambria West, Wisconsin | | | 210 | | | | 295 | |
Clyman, Wisconsin | | | 437 | | | | 724 | |
Cumberland, Wisconsin | | | 389 | | | | 305 | |
Gillett, Wisconsin | | | 324 | | | | 105 | |
Janesville, Wisconsin | | | 1,227 | | | | 342 | |
Mayville, Wisconsin | | | 297 | | | | 367 | |
Oakfield, Wisconsin | | | 229 | | | | 2,277 | |
Ripon, Wisconsin | | | 589 | | | | 75 | |
| | | | | | | | | |
Non-Food Group | | | | | | | | |
Marion, New York | | | 6 | | | | | |
Penn Yan, New York | | | 27 | | | | 4 | |
| | | | | | | | | |
Total | | | 10,535 | | | | 9,799 | |
These facilities primarily package various vegetable products. Most of the facilities are owned by the Company. The Company is a lessee under a number of operating leases for equipment and real property used for packaging and warehousing.
| | | Square | | | | | |
| | | Footage | | | Acres | |
| | | (000) | | | | | |
Food Group | | | | | | | | |
| Nampa, Idaho | | | 243 | | | | 16 | |
| Payette, Idaho | | | 392 | | | | 43 | |
| Princeville, Illinois | | | 288 | | | | 518 | |
| Hart, Michigan | | | 351 | | | | 78 | |
| Traverse City, Michigan | | | 58 | | | | 43 | |
| Blue Earth, Minnesota | | | 286 | | | | 429 | |
| Glencoe, Minnesota | | | 674 | | | | 798 | |
| LeSueur, Minnesota | | | 82 | | | | 7 | |
| Montgomery, Minnesota | | | 561 | | | | 1,652 | |
| Rochester, Minnesota | | | 835 | | | | 620 | |
| Geneva, New York | | | 769 | | | | 594 | |
| Leicester, New York | | | 200 | | | | 91 | |
| Dayton, Oregon | | | 82 | | | | 19 | |
| Dayton, Washington | | | 250 | | | | 28 | |
| Yakima, Washington | | | 122 | | | | 8 | |
| Baraboo, Wisconsin | | | 625 | | | | 13 | |
| Berlin, Wisconsin | | | 89 | | | | 125 | |
| Cambria East, Wisconsin | | | 399 | | | | 401 | |
| Cambria West, Wisconsin | | | 212 | | | | 321 | |
| Clyman, Wisconsin | | | 438 | | | | 724 | |
| Cumberland, Wisconsin | | | 400 | | | | 307 | |
| Gillett, Wisconsin | | | 324 | | | | 105 | |
| Janesville, Wisconsin | | | 1,234 | | | | 341 | |
| Mayville, Wisconsin | | | 239 | | | | 353 | |
| Oakfield, Wisconsin | | | 229 | | | | 2,135 | |
| Ripon, Wisconsin | | | 634 | | | | 87 | |
| | | | | | | | | |
Non-Food Group (1) | | | | | | | | |
| Marion, New York | | | 6 | | | | - | |
| Penn Yan, New York | | | 27 | | | | 4 | |
| Total | | | 10,049 | | | | 9,860 | |
| (1) | The table does not include facilities in Albany, Oregon and Beverly, Washington that were idle and classified as an asset held for sale on our consolidated balance sheet as of March 31, 2022. The table also does not include a non-operational facilty in Mendota, Illinois. |
The Company believes that these facilities are suitable and adequate for the purposes for which they are currently intended. All locations, although highly utilized, have the ability to expand as sales requirements justify. Because of the seasonal production cycles, the exact extent of utilization is difficult to measure.
In certain circumstances, the theoretical full efficiency levels are being reached; however, expansion of the number of production days or hours could increase the output by up to 20% for a season.Certain of the Company’s facilities are mortgaged to financial institutions to secure long-term debt. See Notes 5, 6 and 7 of Item 8, Financial Statements and Supplementary Data, for additional information about the Company’s long-term debt and lease commitments.
Item 33. Legal Proceedings
See Note 15, "Legal
The information set forth under the heading “Legal Proceedings and Other Contingencies"Contingencies” in Note 15 of Notes to
the Consolidated Financial Statements
included in
Part II, Item 8
Financial Statements and Supplemental Data.See also Item 1, Business -- Environmental Regulation, for information regarding environmental legal proceedings.
of this Annual Report on Form 10-K is incorporated herein by reference. Item 44. Mine Safety Disclosures
Item 55. Market for Registrant’sRegistrant’s Common Stock, Related Security HolderStockholder Matters and Issuer Purchases of Equity Securities
Each class
The information set forth under the heading “Stockholders’ Equity”in Note 11 of
preferred stock receives preference asNotes to
dividend payment and declaration over any common stock. In addition, refer to the informationConsolidated Financial Statements in
the 2020Part II, Item 8 of this Annual Report
“Shareholder Information”, whichon Form 10-K is incorporated
herein by reference.
Securities Authorized for Issuance Under Equity Compensation PlansThe 2007 Equity Incentive Plan (the “2007 Equity Plan”) was approved by shareholders at the Company’s annual meeting on August 10, 2007 and extended on July 28, 2017. The 2007 Equity Plan expires in August 2027 and originally authorized the issuance of up to 100,000 shares of either Class A Common Stock and Class B Common Stock or a combination of the two classes of stock. 4,064 shares were awarded in fiscal year 2020 under the terms of the 2007 Equity Plan. As of March 31, 2020, there were 55,049 shares available for distribution as part of future awards under the 2007 Equity Plan. No additional shares have been awarded under the 2007 Equity Plan through the date of this Form 10-K.
There are no equity compensation plans not approved by the Company’s shareholders.
Common Stock Performance Graph
As a smaller reporting company, we are not required to provide disclosure pursuant to this Item.
Issuer Purchases of Equity Securities
| | | | | | | | | | | | | | | | | | | | | | | Maximum Number (or | |
| | | | | | | | | | | | | | | | | | | | | | | Approximate Dollar | |
| | | Total Number of Shares | | | Average Price Paid per | | | Total Number of Shares | | | Value) of Shares that | |
| | | Purchased (1) | | | Share | | | Purchased as Part of | | | May Yet Be Purchased | |
| | | Class A | | | Class B | | | Class A | | | Class B | | | Publicly Announced | | | Under the Plans or | |
Period | | Common | | | Common | | | Common | | | Common | | | Plans or Programs (2) | | | Programs (2) | |
1/01/20 - 1/31/20 | | | - | | | | - | | | $ | - | | | $ | - | | | | - | | | | | |
2/01/20 - 2/29/20 | | | 13,500 | | | | 480 | | | $ | 39.46 | | | $ | 39.80 | | | | 13,980 | | | | | |
3/01/20 - 3/31/20 | | | 22,196 | | | | 100 | | | $ | 29.91 | | | $ | 33.79 | | | | 8,796 | | | | | |
Total | | | 35,696 | | | | 580 | | | $ | 33.52 | | | $ | 38.76 | | | | 22,776 | | | | 516,287 | |
On June 11, 2021, the Board authorized a stock repurchase program for the repurchase of up to 1,500,000 shares of the Company's Class A and/or Class B Common Stock, including the shares of convertible participating preferred stock of the Company, (collectively, the “Common Stock”). Under the authorization, the Company may purchase shares of Common Stock from time to time in the open market or in privately negotiated transactions in compliance with the applicable rules and regulations of the Securities and Exchange Commission. The Board also authorized the establishment of a stock trading plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, to make purchases of Common Stock pursuant to the stock repurchase program. The timing and amount of stock repurchases under the program, if any, will be at the discretion of management, and will depend on available cash, market conditions and other considerations. Therefore, we cannot assure you as to the number or aggregate dollar amount of shares, if any, that will be repurchased under the repurchase program. We may discontinue the program at any time.
| | | | Total Number of | | Average Price | | |
| | | | Shares Purchased | | Paid per Share | | Maximum Number |
| | | | | | | | | Total Number of Shares | (or Approximate Dollar Value) of |
| | | | Class A | Class B | | Class A | Class B | Purchased as Part of Publicly | Shares that May Yet Be Purchased |
| Period | Common | Common | | Common | Common | Announced Plans or Programs | Under the Plans or Programs |
| 01/01/2022 | – | 01/31/2022 | 66,688 | - | $ | 47.22 | - | 66,688 | |
| 02/01/2022 | – | 02/28/2022 | 52,071 | - | $ | 48.10 | - | 52,071 | |
| 03/01/2022 | – | 03/31/2022 (1) | 91,948 | - | $ | 51.21 | - | 80,070 | |
| | Total | | 210,707 | - | $ | 49.18 | - | 198,829 | 782,281 |
(1) | No(1)
| Includes 11,878 shares that were purchased under the Company's share repurchase program. The purchases were made in open market transactions by the Trustees oftrustees under the Seneca Foods Corporation Employees' Savings Plan and the Seneca Foods, L.L.C. 401(k) Retirement Savings Plan to provide employee matching employee contributions under the Plans.plan. |
(2) | In 2012 the Company's Board of Directors authorized the repurchase of the Company's stock. The number of shares authorized for repurchase has been increased from time to time, most recently on March 10, 2015 when the repurchase program was increased to 2,500,000 shares. As of March 31, 2020, the Company has purchased 1,983,716 shares and there remains 516,287 shares available to purchase under the program.
|
Selected Financial DataAs a smaller reporting company, we are not required to provide disclosure pursuant to this Item.
Item 77. Management
’Management’ss Discussion and Analysis of Financial Condition and Results of Operations
Refer to the information in the 20202022 Annual Report, attached as Exhibit 13 to this Annual Report on Form 10-K, under the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, which is incorporated by reference.
Item 7A7A. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide disclosure pursuant to this Item.
Item 88. Financial Statements and Supplementary Data
Refer to the information in the 20202022 Annual Report, "Consolidated Financial Statements and Notes thereto includingattached as Exhibit 13 to this Annual Report of Independent Registered Public Accounting Firm,"on Form 10-K, which is incorporated herein by reference.
Item 99. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of March 31,
2020.2022. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31,
2020,2022, the Company’s disclosure controls and procedures: (1) were designed to ensure that material information relating to the Company is made known to our Chief Executive Officer and Chief Financial Officer by others within those entities, particularly during the period in which this report was being prepared, so as to allow timely decisions regarding required disclosure and (2) were effective, in that they provide reasonable assurance that information required to be disclosed by the Company in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Management’s
Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31,
2020.2022. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control-Integrated Framework (2013) (2013). Based on our assessment, management believes that, as of March 31,
2020,2022, our internal control over financial reporting is effective based on those criteria.
The Company’s independent registered public accountant has issued its report on the effectiveness of the Company’s internal control over financial reporting. The report appears on the next page.
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
To the Stockholders and Board of Directors of Seneca Foods Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting as of March 31, 2020 of Seneca Foods Corporation (the “Company”), based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO framework”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2020 based on criteria established in the COSO framework.
We also have audited the accompanying consolidated balance sheet of the Company as of March 31, 2020, the related consolidated statements of net earnings, comprehensive income (loss), stockholders' equity, and cash flows for the year ended March 31, 2020, and the related notes (collectively referred to as the “financial statements”), in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our report dated July 2, 2020, expresses an unqualified opinion.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Item 9A, Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Plante Moran, PC
We have served as the Company’s auditor since 2020.
Southfield, Michigan
July 2, 2020
Changes in Internal Control over Financial Reporting
Other than the changes in internal controls related to ASC 842 Accounting for Leases, there
There was no changeschange in our internal control over financial reporting (as defined in rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the yearquarter ended March 31, 20202022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B9B. Other Information
PART III
Certain information required by Part III is incorporated by reference from the Company’s Definitive Proxy Statement for its 2022 Annual Meeting of Shareholders to be held on August 10, 2022 (“Proxy Statement”). The Proxy Statement will be filed within 120 days after the end of the Company’s fiscal year ended March 31, 2022.
Item 1010. Directors, Executive Officers and Corporate Governance
The
information regarding directors isfollowing sections of the Proxy Statement are incorporated herein by
reference from the section entitled “Information Concerning Directors” in the Company’s definitive Proxy Statement (“Proxy Statement”) to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, for the Company’s Annual Meeting of Stockholders to be held on August 18, 2020. The Proxy Statement will be filed within 120 days after the end of the Company’s fiscal year ended March 31, 2020.The information regarding executive officers is incorporated herein by reference from the section entitled “Executive Officers” in the Proxy Statement.
The information regarding compliance with Section 16(a) of the Exchange Act is incorporated herein by reference from the section entitled “Delinquent Section 16(a) Reports” in the Proxy Statement.
Information regarding the Company’s code of business conduct and ethics found in the subsection captioned “Available Information” in Item 1 of Part I hereof is also incorporated herein by reference into this Item 10.
The information regarding the Company’s audit committee, its members and the audit committee financial experts is incorporated herein by reference from the subsection entitled “Audit Committee” in the section entitled “Board Governance” in the Proxy Statement.
reference: | ● | Information Concerning Directors |
| ● | Delinquent Section 16(a) Reports |
Item 1111. Executive Compensation
The information included under the following captions insections of the Proxy Statement isare incorporated herein by reference: “Compensation Discussion and Analysis,” “Summary Compensation Table,” “Outstanding Equity Awards at 2020 Fiscal Year-End,” “Pension Benefits,” “Compensation of Directors” and “Compensation Committee Interlocks.”
| ● | Compensation Discussion and Analysis |
| ● | Summary Compensation Table |
| ● | Outstanding Equity Awards at 2022 Fiscal Year-End |
| ● | Compensation of Directors |
| ● | Compensation Committee Interlocks |
The information included under the heading “Compensation Committee Report” in the Proxy Statement is also incorporated herein by reference; however, this information shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.
Item 1212. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information regarding security ownership
Securities Authorized for Issuance Under Equity Compensation Plans
The 2007 Equity Incentive Plan (the “2007 Equity Plan”) was approved by shareholders at the Company’s annual meeting on August 10, 2007 and extended on July 28, 2017. The 2007 Equity Plan expires in August 2027 and originally authorized the issuance of certain beneficial ownersup to 100,000 shares of either Class A Common Stock and management isClass B Common Stock or a combination of the two classes of stock. 4,266 shares were awarded in fiscal year 2022 under the terms of the 2007 Equity Plan. As of March 31, 2022, there were 48,486 shares available for distribution as part of future awards under the 2007 Equity Plan. No additional shares have been awarded under the 2007 Equity Plan through the date of this Form 10-K.
There are no equity compensation plans not approved by the Company’s shareholders.
The following sections of the Proxy Statement are incorporated herein by reference from the sections entitled “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management and Directors” in the Proxy Statement.reference:
| ● | Security Ownership of Certain Beneficial Owners |
| ● | Security Ownership of Management and Directors. |
Item 1313. Certain Relationships and Related Transactions, and Director Independence
The information regarding transactions with related parties and director independence isfollowing sections of the Proxy Statement are incorporated herein by reference from the sections entitled “Independent Directors” and “Certain Transactions and Relationships” in the Proxy Statement.reference:
| ● | Certain Transactions and Relationships Security Ownership of Management and Directors |
Item 1414. Principal Accountant Fees and Services
The
information regarding principal accountant fees and services isfollowing sections of the Proxy Statement are incorporated herein by
reference from the section entitled “Principal Accountant Fees and Services” in the Proxy Statement.reference: | ● | Principal Accountant Fees and Services |
PART IV
Item 1515. Exhibits and Financial Statement Schedule
| A. | Exhibits, Financial Statements, and Supplemental Schedule | |
| | | | |
| | 1. | Financial Statements - ‑ the following consolidated financial statements of the Registrant, included in the 20202022 Annual Report to Shareholders, are incorporated by reference in Part II, Item 8: | 8 “Financial Statements and Supplementary Data”: |
Consolidated Statements of Net Earnings – Years ended March 31, 2022 and 2021
Consolidated Statements of Comprehensive Income (Loss) – Years ended March 31, 2022 and 2021
Consolidated Balance Sheets ‑ March 31, 2022 and 2021
Consolidated Statements of Cash Flows – Years ended March 31, 2022 and 2021
Consolidated Statements of Stockholders’ Equity – Years ended March 31, 2022 and 2021
Notes to Consolidated Financial Statements – Years ended March 31, 2022 and 2021
Reports of Independent Registered Public Accounting Firm (PCAOB ID 6581)
| | 2. | Consolidated Statements of Net Earnings – Years ended March 31, 2020 and 2019 | Supplemental Schedule: |
Other schedules have not been filed because the conditions requiring the filing do not exist or the required information is included in the consolidated financial statements, including the notes thereto.
Exhibit Number Description
| | | | |
| Exhibit NumberDescription | |
| | | | |
| | 3.1 | |
| | | | |
| | 10.1 | ThirdFourth Amended and Restated Loan and Security Agreement dated as of July 5, 2016March 24, 2021 by and among Seneca Foods Corporation, Seneca Foods, LLC, Seneca Snack Company, Green Valley Foods, LLC and certain other subsidiaries of Seneca Foods Corporation, the financial institutions party thereto as lenders, Bank of America, N.A., as agent, issuing bank, and syndication agent, and BofA Securities, Inc. as lead arranger (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated July 5, 2016)March 26, 2021). |
| | | | |
| | 101 | The following materials from Seneca Foods Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020,2022, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) consolidated balance sheets, (ii) consolidated statements of net earnings, (iii) consolidated statements of comprehensive income (loss), (iv) consolidated statements of cash flows, (v) consolidated statementsstatement of cash flows, (v)stockholders’ equity and (vi) the notes to the consolidated statement of stockholders’ equity and (vi) the notes to the consolidated financial statements |
| 104 | Cover page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*) |
* Indicates management or compensatory agreement
Item 1616. Form 10-K Summary
None.
None
18
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Seneca Foods Corporation
Marion, New York
The audit referred to in our report dated July 2, 2020 relating to the financial statements of Seneca Foods Corporation, which is incorporated in Item 8 of Form 10-K by reference to the Annual Report to Shareholders for the year ended March 31, 2020 also included the audit of the financial statement schedule listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ Plante Moran, PC
We have served as the Company’s auditor since 2020.
Southfield, Michigan
July 2, 2020
Report of Independent Registered Public Accounting FirmSIGNATURESShareholders and Board of Directors
Seneca Foods Corporation
Marion, New York
The audit referred to in our report dated June 13, 2019 relating to the consolidated financial statements of Seneca Foods Corporation, which is incorporated in Item 8 of Seneca Foods Corporation’s Form 10-K for the year ended March 31, 2019 by reference to the annual report to shareholders for the year ended March 31, 2019 also included the audit of the financial statement schedule listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when read in connection with the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
/s/ BDO USA, LLP
Milwaukee, Wisconsin
June 13, 2019
Schedule II
|
VALUATION AND QUALIFYING ACCOUNTS
|
(In thousands)
|
| | | Balance at | | | Charged/ | | | Charged to | | | Deductions | | | | Balance | |
| | | beginning | | | (credited) | | | other | | | from | | | | at end | |
| | | of period | | | to income | | | accounts | | | reserve | | | | of period | |
| | | | | | | | | | | | | | | | | | | | | | |
Year-ended March 31, 2020: | | | | | | | | | | | | | | | | | | | | | |
Allowance for doubtful accounts | | $ | 57 | | | $ | 1,627 | | | $ | - | | | $ | 86 | | (a) | | $ | 1,598 | |
Income tax valuation allowance | | $ | 3,988 | | | $ | 485 | | | $ | - | | | $ | - | | | | $ | 4,473 | |
| | | | | | | | | | | | | | | | | | | | | | |
Year-ended March 31, 2019: | | | | | | | | | | | | | | | | | | | | | |
Allowance for doubtful accounts | | $ | 56 | | | $ | 1 | | | $ | - | | | $ | - | | (a) | | $ | 57 | |
Income tax valuation allowance | | $ | 3,865 | | | $ | 6 | | | $ | 117 | | | $ | - | | | | $ | 3,988 | |
(a) Accounts written off, net of recoveries.
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SENECA FOODS CORPORATION
/s/Timothy J. Benjamin
Timothy J. Benjamin
Senior Vice President, Chief Financial
Officer and Treasurer
| July 2, 2020
|
SENECA FOODS CORPORATION
By: /s/ Timothy J. Benjamin
Timothy J. Benjamin
Senior Vice President, Chief Financial Officer and Treasurer
June 10, 2022
Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature | | Title | | Date |
| | | | | |
/s/Arthur S. Wolcott Paul L. Palmby | | ChairmanPresident and Director
Chief Executive Officer | | July 2, 2020
June 10, 2022 |
Arthur S. WolcottPaul L. Palmby | | Director | | |
| | (Principal Executive Officer) | | |
| | | | | |
/s/Timothy J. Benjamin | | Senior Vice President, Chief Financial Officer, | | June 10, 2022 |
| Timothy J. Benjamin | | and Treasurer | | |
| | (Principal Financial Officer) | | |
| | | | |
| /s/Gregory R. Ide | | Vice President, Controller, | | June 10, 2022 |
| Gregory R. Ide | | and Assistant Secretary | | |
| | (Principal Accounting Officer) | | |
| | | | |
| /s/Kraig H. Kayser | | President, Chief Executive Officer, Director
(Chairman) | | July 2, 2020
June 10, 2022 |
| Kraig H. Kayser | | | | |
| | | | | |
/s/TimothyKathryn J. Benjamin Boor | | Senior Vice President,
Director | | July 2, 2020
June 10, 2022 |
Timothy J. Benjamin | | Chief Financial Officer and Treasurer | | |
| | | | |
/s/ Jeffrey L. Van Riper
| | Vice President, Controller,
| | July 2, 2020
|
Jeffrey L. Van Riper | | and Secretary (Principal Accounting Officer) | | |
| | | | |
/s/ Kathryn J. Boor
| | Director
| | July 2, 2020
|
Kathryn J. Boor
| | | | |
| | | | | |
/s/Peter R. Call | | Director | | July 2, 2020
June 10, 2022 |
Peter R. Call | | | | |
| | | | | |
/s/John P. Gaylord | | Director | | July 2, 2020
June 10, 2022 |
| John P. Gaylord | | | | |
| | | | | |
/s/Samuel T. Hubbard, Jr. Linda K. Nelson | | Director | | July 2, 2020
June 10, 2022 |
Samuel T. Hubbard, Jr.
Linda K. Nelson | | | | |
| | | | | |
/s/ Thomas Paulson Michael R. Nozzolio | | Director | | July 2, 2020
June 10, 2022 |
Thomas Paulson
Michael R. Nozzolio | | | | |
| | | | | |
/s/ Susan W.Donald J. Stuart | | Director | | July 2, 2020
June 10, 2022 |
Susan W.Donald J. Stuart
| | | | |
| | | | | |
/s/Keith A. Woodward | | Director | | July 2, 2020
June 10, 2022 |
Keith A. Woodward
| | | | |
Keith A. Woodward