Seneca(SENEA) - 2024 Q4 - Annual Report

Forward-Looking Statements This section details forward-looking statements, their inherent risks, and factors that could cause actual results to differ materially - This Annual Report on Form 10-K contains forward-looking statements addressing future events, developments, and results, identifiable by words like 'will,' 'anticipate,' 'estimate,' 'expect,' and 'project'[13] - Forward-looking statements are subject to known and unknown risks, uncertainties, and other important factors that could cause actual results to differ materially from expectations[13] - Key factors that could cause actual results to differ include rising costs of raw materials, distribution, and labor; crude oil prices; labor shortages; climate and weather impacts; ability to implement price increases; loss of significant customers; competition; and the impact of pandemics[14] PART I Item 1. Business Seneca Foods Corporation is a leading packaged fruit and vegetable provider, focusing on market share growth, cost efficiency, and strategic acquisitions, with food operations constituting 98% of FY2024 net sales Overview Seneca Foods Corporation is a leading packaged fruit and vegetable provider, operating 26 facilities across the U.S., with strategies focused on market leadership and efficiency - Seneca Foods Corporation, founded in 1949, is a leading provider of packaged fruits and vegetables, operating 26 main facilities across the United States[16] - The Company's business strategies include expanding leadership in the packaged fruit and vegetable industry, providing low-cost, high-quality products through supply chain efficiency and technology investment, focusing on growth opportunities, and pursuing strategic acquisitions[17] Available Information The Company's SEC filings and corporate governance information are publicly accessible on its website - The Company's SEC filings (10-K, 10-Q, 8-K) and corporate governance information are available free of charge on its website, www.senecafoods.com[18](index=18&type=chunk)[19] Financial Information about Industry Segments Seneca manages its business through two primary food packaging segments: Vegetable and Fruit/Snack, with food operations comprising 98% of total net sales - Seneca manages its business primarily through two food packaging segments: Vegetable and Fruit/Snack. Non-food operations are categorized as 'Other'[20] Fiscal Year 2024 Net Sales by Segment | Segment | Percentage of Total Food Packaging Net Sales | Percentage of Total Net Sales | | :---------------- | :------------------------------------------- | :---------------------------- | | Canned vegetables | 83% | 81.34% (approx) | | Frozen vegetables | 8% | 7.84% (approx) | | Fruit products | 6% | 5.88% (approx) | | Snack products | 1% | 0.98% (approx) | | Food Operations | 98% (of total net sales) | 98% | | Non-food packaging| - | 2% | Principal Products and Markets The Company offers canned, frozen, and jarred produce, and snack chips, sold under private labels, owned/licensed brands, and to industrial customers - The Company's main product offerings include canned, frozen, and jarred produce, and snack chips[21] - Products are sold as private label to retailers, private label and branded to foodservice, under owned/licensed brands (e.g., Seneca®, Libby's®, Green Giant®), co-packed for other major brands, and to industrial customers[21] Net Sales by Major Product Category (in thousands) | Product Category | Fiscal Year 2024 | Fiscal Year 2023 | | :--------------- | :--------------- | :--------------- | | Canned vegetables| $1,204,823 | $1,253,257 | | Frozen vegetables| $120,795 | $121,211 | | Fruit products | $87,435 | $91,495 | | Snack products | $13,400 | $12,661 | | Other | $32,150 | $30,728 | | Total Net Sales | $1,458,603 | $1,509,352 | Domestic and International Sales (in thousands, except percentages) | Sales Type | Fiscal Year 2024 | % of Net Sales 2024 | Fiscal Year 2023 | % of Net Sales 2023 | | :------------ | :--------------- | :------------------ | :--------------- | :------------------ | | Domestic | $1,374,774 | 94.3% | $1,408,710 | 93.3% | | International | $83,829 | 5.7% | $100,642 | 6.7% | | Total Net Sales | $1,458,603 | 100.0% | $1,509,352 | 100.0% | Source and Availability of Raw Materials The Company sources raw materials primarily from American farms and manages cost inflation through various strategies, including price increases - The Company sources high-quality products primarily from over 1,200 American farms and purchases other raw materials (steel, ingredients, packaging) from various suppliers[23] - Material cost inflation for raw materials and input costs (labor, fuel, utilities, transportation) continues due to supply chain disruptions, labor shortages, and global conflicts[24] - Seneca manages cost inflation risks through short-term supply contracts, advance grower agreements, cost-saving measures, and raising sales prices, though price increases may lag behind rising costs due to competitive pressures[24] Intellectual Property Seneca holds perpetual and renewable licenses for key brands like Green Giant® and Libby's®, alongside its own registered trademarks - The Company holds a perpetual, royalty-free license for the Green Giant® brand name for shelf-stable vegetable products in the U.S. and certain Caribbean islands[26] - Seneca holds a renewable trademark license for the Libby's® brand name for shelf-stable, frozen, and thermally packaged vegetables, paying an annual royalty of $0.1 million for fiscal year ended March 31, 2024[27][29] - The Company also sells products under its own registered trademarks, including Aunt Nellie's®, CherryMan®, Green Valley®, READ®, and Seneca®[30] Seasonality The Company's production and sales cycles are seasonal, with peak revenues typically occurring in the second and third fiscal quarters - The Company's production cycle is seasonal, with minimal food packaging in the last fiscal quarter (ending March 31) and peak inventory levels for peas in mid-summer, and for corn and green beans in mid-autumn[31] - Revenues are typically highest in the second and third fiscal quarters due to increased retail demand during the holiday season and bill-and-hold sales to co-pack customers[32] Unaudited Quarterly Financial Information (in thousands) | Metric | Q1 FY2024 | Q2 FY2024 | Q3 FY2024 | Q4 FY2024 | Q1 FY2023 | Q2 FY2023 | Q3 FY2023 | Q4 FY2023 | | :------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Net sales | $298,664 | $407,475 | $444,481 | $307,983 | $265,193 | $439,842 | $473,254 | $331,063 | | Gross margin | $55,289 | $58,118 | $54,033 | $20,778 | $22,843 | $41,779 | $53,789 | $(14,092) | | Net earnings (loss) | $23,111 | $24,779 | $17,675 | $(2,247) | $5,103 | $16,131 | $21,054 | $(33,057) | | Revolver outstanding (Q-end)| $52,064 | $134,757 | $258,108 | $237,225 | $78,965 | $229,213 | $313,808 | $180,598 | Competition The packaged food industry is highly competitive, with Seneca facing numerous national and regional producers, including those with higher sales - The packaged food industry is highly competitive, with brand recognition, promotion, quality, service, and pricing as major determinants of market position[34] - Seneca is a major producer of canned vegetables, frozen vegetables, and jarred fruit, but faces competition from at least 13 other U.S. producers, some with higher sales[34] Government Regulation The Company is subject to extensive federal, state, and local regulations concerning