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

Our Business

Seneca is a leading provider of packaged fruits and vegetables, with facilities located throughout the United States. Its high-quality products are primarily sourced from more than 1,100 American farms. The Company’s product offerings include canned, frozen and jarred produce, and snack chips. Its products are sold under private label as well as national and regional brands that the Company owns or licenses, including Seneca®, Libby’s®, Green Giant®, Aunt Nellie’s®, CherryMan®, Green Valley® and READ®. The Company’s fruits and vegetables are sold nationwide by major grocery outlets, including supermarkets, mass merchandisers, limited assortment stores, club stores and dollar stores. The Company also sells its products to foodservice distributors, restaurant chains, industrial markets, other food processors, export customers in approximately 55 countries and federal, state and local governments for school and other food programs. Additionally, the Company packs canned and frozen vegetables under contract packing agreements.

The Company’s business strategies are designed to grow its market share and enhance sales and margins. These strategies include: 1) expand the Company’s leadership in the packaged fruit and vegetable industry; 2) provide low cost, high quality fruit and vegetable products to consumers through the elimination of costs from the Company’s supply chain and investment in state-of-the-art production and logistical technology; 3) invest in growth opportunities; and 4) pursue strategic acquisitions that leverage the Company’s core competencies.

All references to years are fiscal years ended March 31 unless otherwise indicated.

Fluctuations in Commodity, Production, Distribution and Labor Costs

We purchase raw materials, including raw produce, steel, ingredients and packaging materials from growers, commodity processors, steel producers and packaging suppliers. Raw materials and other input costs, such as labor, fuel, fertilizer, utilities and transportation, are subject to fluctuations in price attributable to a number of factors. Certain of the raw materials, namely steel, are subject to import tariffs and other restrictions, and the United States government may periodically impose new or revise existing duties, quotas, tariffs or other restrictions to which the Company may be subject. Fluctuations in commodity prices can lead to retail price volatility and can influence consumer and trade buying patterns. The cost of raw materials, fuel, labor, distribution and other costs related to our operations can increase from time to time significantly and unexpectedly, the impact of which could increase our cost of products sold and reduce our profitability.

We experienced material cost increases to various production inputs during the last several years due to a number of factors, including but not limited to, supply chain disruptions, steel supply and pricing, raw material shortages, inflationary pressure, and labor shortages. Additionally, foreign conflicts have disrupted the global economic environment during these years. While the Company has no direct exposure to these foreign conflicts, some of which are ongoing, they have had a negative impact on the global economy which has increased certain of our input costs. While some of the factors mentioned above have started to ease and stabilize, our costs remain elevated as compared to historical levels.

We attempt to manage costs by locking in prices through short-term supply contracts, advance grower purchase agreements, and by implementing cost saving measures. We also attempt to offset rising input costs by raising sales prices to our customers. However, increases in the prices we charge our customers may lag behind rising input costs. Competitive pressures and pricing methodologies employed in the various sales channels in which we compete may also limit our ability to raise prices in response to rising costs. To the extent we are unable to avoid or offset any present or future cost increases, our operating results could be materially adversely affected.

Results of Operations - Fiscal Year 2026 versus Fiscal Year 2025

The following discussion is a comparison between fiscal year 2026 and fiscal year 2025 results. For a discussion of the Company’s results of operations for the year ended March 31, 2025 compared to the year ended March 31, 2024, please refer to the information under the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2025, which was filed with the Securities and Exchange Commission (“SEC”) on June 12, 2025.

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

Net Sales:

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

Net sales for fiscal year 2026 totaled $1,659.7 million as compared to $1,578.9 million for fiscal year 2025. The overall net sales increase of $80.8 million, or 5.1%, was due to higher sales volumes contributing $67.3 million to net sales, complemented by higher selling prices and product mix, which provided favorability of $13.5 million, as compared to the prior fiscal year.

Net sales of canned vegetables, frozen vegetables, and fruit products increased over the prior fiscal year primarily driven by higher volume in each of these product categories. Elevated pricing implemented during the fiscal year also contributed to an increase in net sales for these product categories. Net sales of snack products remained consistent compared to the prior year. Lastly, net sales attributable to the other category increased slightly compared to the prior year for seed, cans and ends, and outside revenue from aircraft operations, which are ancillary to the Company’s main operations.

Operating Income:

The following table sets forth the percentages of net sales represented by selected items for fiscal year 2026 and fiscal year 2025 reflected in our Consolidated Statements of Net Earnings (percentages shown as absolute values):

Gross Margin – Gross margin is equal to net sales less cost of products sold. As a percentage of net sales, gross margin was 13.9% for fiscal year 2026 as compared to 9.5% for fiscal year 2025. Gross margin was higher for the current fiscal year, partially driven by the net sales increase further discussed in the section above and by a last-in, first-out ("LIFO") credit that decreased the cost of products sold on a GAAP basis year-over-year. Refer to the separate material cash requirements section for additional discussion of the factors impacting the respective seasonal packs. The Company recorded a LIFO credit of $22.3 million in fiscal year 2026 versus a LIFO charge of $34.5 million in fiscal year 2025, which equated to a year-over-year favorable impact to gross margin of $56.8 million.

Selling, General and Administrative Expense – Selling, general and administrative expense for fiscal year 2026 increased $7.6 million from fiscal year 2025. Selling, general and administrative expense was 5.0% of net sales in fiscal year 2026 and 4.8% of net sales in fiscal year 2025. The percentage remained relatively flat on a comparative basis as net sales increased and selling, general, and administrative expense increased mostly driven by workforce related costs.

Other Operating Income, net – The Company had net other operating income of $0.3 million in fiscal year 2026, which was primarily driven by gains of $0.7 million on the sale of a small parcel of land in the Midwest and various spare equipment. Partially offsetting that amount was $0.5 million of transition service fees incurred in connection with the acquisition further discussed in Note 16.

The Company had net other operating income of $3.0 million in fiscal year 2025, which was primarily driven by gains of $4.1 million on the sale of land in the Midwest, which was offset by $1.0 million for the disposal of various spare equipment.

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

Non-Operating Income (Expense):

Interest Expense, Net – Interest expense as a percentage of net sales was 1.1% for fiscal year 2026 as compared to 2.1% for fiscal year 2025. Interest expense decreased from $33.2 million in the prior fiscal year to $18.1 million for fiscal year 2026 as a result of lower average borrowings outstanding under the Company’s revolving credit facility and a lower weighted average interest rate in fiscal year 2026 as compared to fiscal year 2025.

Other Non-Operating Income – Other non-operating income totaled $18.8 million and $10.0 million in fiscal years 2026 and 2025, respectively. Partially comprising the amount was $8.8 million and $5.8 million of non-service related pension income in fiscal years 2026 and 2025, respectively. The non-service related pension income for each respective year is determined based on the results of independent actuarial calculations. Refer to Note 10 of the Notes to Consolidated Financial Statements for details of the calculation of the pension amounts. Other non-operating income also includes the patronage distribution associated with the Company’s term loans. The Company recorded $3.3 million and $4.2 million in fiscal years 2026 and 2025, respectively. The patronage distribution varies each year and there is no guarantee that an amount will be received by the Company; for further details refer to Note 6 of the Notes to Consolidated Financial Statements. Lastly, the Company recorded a bargain purchase gain of $6.7 million in fiscal year 2026 in connection with the acquisition further discussed in Note 16 of the Notes to Consolidated Financial Statements.

Income Taxes – As a result of the aforementioned factors, pre-tax earnings increased from $54.5 million in fiscal year 2025 to $149.1 million in fiscal year 2026. Income tax expense totaled $34.4 million and $13.3 million in fiscal years 2026 and 2025, respectively. The Company’s effective tax rate was 23.1% and 24.3% in fiscal years 2026 and 2025, respectively. For additional details on the calculation of the effective tax rate, refer to Note 8 of the Notes to Consolidated Financial Statements.

Earnings per Share:

For details of the calculation of these amounts, refer to Note 3 of the Notes to Consolidated Financial Statements.

Liquidity and Capital Resources:

Material Cash Requirements – The Company’s primary liquidity requirements include debt service, capital expenditures and working capital needs. The Company may also seek strategic acquisitions to leverage current capabilities and further build upon its existing business. Liquidity requirements are funded primarily through cash generated from operations and external sources of financing, including the revolving credit facility. The Company may also utilize its receivables purchase program to manage short-term liquidity and provide working capital flexibility, as needed.

During the preceding fiscal years, working capital needs trended higher than previously experienced by the Company in part because of larger annual pack sizes needed to replenish the Company’s post-pandemic inventory levels to meet customer demand, and because of supply chain challenges and inflationary pressure in the steel industry which impacted can manufacturing operations. To successfully navigate the uncertainty driven by inflation and import tariffs, and a desire to diversify its steel supply, the Company employed a strategic approach during those fiscal years and increased steel coil purchases to better position itself for subsequent years. The higher cost of steel coil raw materials translated into an elevated container cost and ultimately resulted in an increased cost per unit for the associated finished good product. Working capital was likewise unfavorably impacted during the preceding fiscal years as the Company experienced material cost increases implemented by suppliers affecting various other production inputs aside from steel. These economic conditions contributed to higher cash outflows and an increased cost per unit for the associated finished good product.

During fiscal year 2025, the Company experienced an easing of working capital needs. However, adverse weather conditions during the planting and harvesting seasons had a notable impact, especially in the upper Midwest where the Company has its primary growing region. Challenging growing conditions and reduced crop yields resulted in a seasonal pack smaller than originally planned. This in turn resulted in a higher-cost seasonal pack on a per unit basis for fiscal year 2025; although, the overall cash requirements showed improvement as compared to the preceding fiscal years.

The Company’s current fiscal year 2026 seasonal pack benefited from improved crop yields and less challenging growing conditions in certain regions, which contributed to an overall larger pack size as compared to the prior year. The Company’s plant locations ran more steadily during the harvesting and production process without as many weather-related interruptions experienced in fiscal year 2025. These factors resulted in an overall lower-cost seasonal pack on a per unit basis for the current fiscal year.

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

A strong cash position leading into fiscal year 2026, coupled with continued positive cashflows provided by operating activities, allowed the Company to minimize use of its revolving credit facility during the year. Additionally, the Company utilized cash on hand to fund the acquisition discussed in Note 16 of the Notes to Consolidated Financial Statements and the paydown of Term Loan A-1 upon maturity during fiscal year 2026. The Company believes that its operations along with existing liquidity sources will satisfy its cash requirements for at least the next twelve months. The Company has borrowed funds and continues to believe that it has the ability to do so at reasonable interest rates; however additional borrowings would result in increased interest expense. The Company does not have any off-balance sheet financing arrangements.

Summary of Cash Flows – The following table presents a summary of the Company’s cash flows from operating, investing, and financing activities (in thousands):

Net Cash Provided by Operating Activities – For fiscal year 2026, cash provided by operating activities was $224.5 million, which consisted of $84.2 million from changes in operating assets and liabilities, coupled with net earnings of $114.7 million and non-cash charges of $25.6 million. The non-cash charges were largely driven by $44.0 million of depreciation and amortization, a $8.1 million impact of deferred taxes and $3.9 million of lease expense, partially offset by a $6.7 million gain on bargain purchase and $22.3 million LIFO credit. Although the fiscal year 2026 seasonal pack was larger than the prior fiscal year, continued strong sales momentum resulted in a moderate decrease in inventory levels. These factors drove the change in operating assets and liabilities during the current fiscal year. Refer to the material cash requirements section above for additional discussion.

For fiscal year 2025, cash provided by operating activities was $335.5 million, which consisted of $208.1 million from changes in operating assets and liabilities, coupled with net earnings of $41.2 million and non-cash charges of $86.2 million. The non-cash charges were largely driven by $44.8 million of depreciation and amortization, $5.0 million of lease expense, and a $34.5 million LIFO charge. The change in operating assets and liabilities was driven by a lower utilization of cash for inventories resulting from the higher inventory levels carried into fiscal year 2025, along with a reduced 2025 seasonal pack resulting from adverse weather conditions. Refer to the material cash requirements section above for additional discussion.

The cash requirements of the business fluctuate significantly throughout the year to coincide with the seasonal growing cycles of vegetables. The majority of the inventories are produced during the packing months, from June through November, and are then sold over the following twelve months. Cash flow from operating activities is one of the Company’s main sources of liquidity, excluding usual seasonal working capital swings.

Net Cash Used in Investing Activities – Net cash used in investing activities was $106.4 million for fiscal year 2026. The Company utilized $63.2 million for the acquisition discussed in Note 16 of the Notes to Consolidated Financial Statements. In addition, the Company used cash of $44.3 million for capital expenditures, partially offset by proceeds from the sale of assets totaling $1.1 million.

Net cash used in investing activities was $34.8 million for fiscal year 2025 and consisted of cash used for capital expenditures of $37.2 million and $2.7 million paid as deposits to vendors for the installation of a new can manufacturing line. Partially offsetting those amounts, the Company received proceeds from the sale of assets totaling $5.1 million.

Net Cash Used in Financing Activities – Net cash used in financing activities was $118.6 million for fiscal year 2026, driven mostly by payments of $98.6 million on its term loans and finance obligation. This included payment of $81.0 million for the Term Loan A-1 upon maturity during the fiscal year. The Company also used cash of $16.1 million to purchase treasury stock and made payments of $3.8 million on finance leases. The Company utilized its revolving credit facility, although borrowings and repayments both equated to $101.5 million during fiscal year 2026, thereby resulting in no change to the ending balance as compared to the beginning of the fiscal year.

Net cash used in financing activities was $262.1 million for fiscal year 2025, driven primarily by a net paydown on the Company’s revolving credit facility of $236.2 million. The Company paid $1.6 million of costs in connection with the refinancing of its revolving credit facility. The Company also made payments totaling $20.3 million on its term loans and finance obligation during fiscal year 2025. Additionally, the Company used cash of $11.6 million to purchase treasury stock and made payments of $4.8 million on finance leases. Partially offsetting the outflows was a $12.4 million increase in note payable borrowings associated with the Company’s new can manufacturing line which was converted to a finance obligation during the fiscal year.

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

Debt – The Company’s primary cash requirements are to make payments on the Company’s debt, finance seasonal working capital needs and to fund capital expenditures. Internally generated funds and amounts available under the revolving credit facility are the Company’s primary sources of liquidity, although the Company believes it has the ability to raise additional capital, if it desires.

Note Payable and Finance Obligation – During fiscal year 2024, the Company entered into an unsecured note payable with an individual lender for an interim financing arrangement associated with deposits paid to vendors for the installation of a new can manufacturing line located at one of the Company’s plant facilities. The note payable had a variable interest rate based upon the Secured Overnight Financing Rate (“SOFR”) plus 1.80% with interest payable monthly.

During fiscal year 2025, subsequent to the final installation of the can manufacturing line in September 2024, the Company took title and recorded an addition to property, plant and equipment of $21.3 million and a corresponding reduction of the vendor deposits which were recorded within other assets on the Consolidated Balance Sheet. After taking title to the equipment, the Company and the lender entered into a financing agreement for the can manufacturing line which commenced in September 2024 and is recorded as a finance obligation on the accompanying Consolidated Balance Sheets. In connection with this transaction, the note payable was cancelled. The finance obligation has a maturity date of September 14, 2031 and a monthly payment of $0.3 million which is comprised of principal and interest at a fixed rate of 5.56%.

Future minimum payments under the finance obligation are as follows (in thousands):

Revolving Credit Facility – On December 23, 2024, the Company entered into a Loan and Security Agreement (the “Agreement”), with Wells Fargo Bank, National Association as agent for the various lenders of a senior revolving credit facility of up to $450.0 million that is seasonally adjusted to a maximum of $400.0 million during the months of April through July (the “Revolver”).

The Agreement refinanced and replaced in its entirety the Fourth Amended and Restated Loan and Security Agreement dated as of March 24, 2021, as amended from time to time, with Bank of America, N.A. as agent, issuing bank, and syndication agent, and BofA Securities, Inc. as lead arranger (the “2021 Agreement”). The Agreement maintains many of the key characteristics of the 2021 Agreement including the variable interest rate based on SOFR plus an applicable margin, type of collateral, borrowing base requirements and financial covenant calculation, if applicable.

The Revolver is secured by substantially all of the Company’s accounts receivable and inventories and contains borrowing base requirements as well as a financial covenant, if certain circumstances apply. The Company utilizes its Revolver for general corporate purposes, including seasonal working capital needs, to pay debt principal and interest obligations, and to fund capital expenditures and acquisitions. Seasonal working capital needs are affected by the growing cycles of the vegetables the Company packages. The majority of vegetable inventories are produced during the months of June through November and are then sold over the following twelve months. Payment terms for vegetable produce are generally three months but may vary and range from approximately one to seven months. Therefore, the Company’s need to draw on the Revolver may fluctuate significantly throughout the year.

The interest rate benchmark for borrowings under the Revolver is based upon SOFR plus an applicable margin, as defined in the Agreement. In order to maintain availability of funds under the revolving credit facility, the Company pays a commitment fee on the unused portion of the Revolver. As of March 31, 2026, the unused portion of the Revolver was $448.6 million. The Revolver has a five-year term and matures on December 24, 2029. Accordingly, the Revolver balance is included in Long-Term Debt on the accompanying Consolidated Balance Sheets.

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

In connection with the Revolver refinance, certain lenders exited the syndicate and were replaced by new syndicate members. The portion of the transaction in which certain lenders exited was accounted for as an extinguishment resulting in the write-off of an immaterial amount of unamortized deferred costs. The portion of the transaction comprised of lenders that remained in the syndicate was accounted for as a modification, resulting in the Company continuing to defer the remaining unamortized costs over the term of the Revolver. Additionally, the Company incurred $1.6 million of new debt issuance costs which will be deferred over the term of the Revolver and amortized on a straight-line basis. On the closing date, a repayment of $70.0 million was made to satisfy the outstanding revolving credit facility obligations immediately prior to the refinance transaction, and a corresponding Revolver borrowing of the same amount was drawn to fund the payment. The Consolidated Statement of Cash Flows reflects the payment of debt issuance costs and the gross repayment and borrowing amounts for the Revolver within financing activities for fiscal year 2025.

The following table summarizes certain quantitative data for Revolver borrowings during fiscal year 2026 and fiscal year 2025 (in thousands, except for percentages):

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

Term Loan A-1: The Term Loan Agreement provides for the continuation of a $100.0 million unsecured term loan with a maturity date of June 1, 2025 and fixed interest rate of 3.3012%. Quarterly principal payments are $1.0 million on Term Loan A-1. Upon maturity during fiscal year 2026, the Company paid the Term Loan A-1 in full using available cash on hand of $81.0 million.

Term Loan A-2: The Term Loan Agreement adds an additional term loan in the amount of $175.0 million that will mature on January 20, 2028, and is secured by a portion of the Company’s property, plant and equipment. Term Loan A-2 bears interest at a variable interest rate based upon SOFR plus an additional margin determined by the Company’s leverage ratio. Quarterly payments of principal outstanding on Term Loan A-2 in the amount of $1.5 million commenced on March 1, 2023. The Company expects to maintain or have access to sufficient liquidity to retire or refinance long-term debt at maturity or otherwise, from operating cash flows, access to the capital markets, and its Revolver. The Company periodically evaluates opportunities to refinance its debt; however, any refinancing is subject to market conditions and other factors, including financing options that may be available to the Company from time to time, and there can be no assurance that the Company will be able to successfully refinance any debt on commercially acceptable terms, if at all.

On May 23, 2023, the Term Loan Agreement was amended by the Second Amended and Restated Loan and Guaranty Agreement Amendment which amended, restated and replaced in its entirety Term Loan A-2 (the “Amendment”). The Amendment provides a single advance term facility in the principal amount of $125.0 million to be combined with the outstanding principal balance of $173.5 million on Term Loan A-2 into one single $298.5 million term loan (“Amended Term Loan A-2”). Amended Loan Term A-2 is secured by a portion of the Company’s property, plant and equipment and bears interest at a variable interest rate based upon SOFR plus an additional margin determined by the Company’s leverage ratio. Quarterly payments of principal outstanding on Amended Term Loan A-2 in the amount of $3.75 million commenced on June 1, 2023. The Amendment continues all aspects of Term Loan A-1 as defined in the Term Loan Agreement. As of March 31, 2026, the interest rate on Amended Term Loan A-2 was 5.42%. 

The Amendment for Term Loan A-1 and Term Loan A-2 (collectively, the “Term Loans”) contains restrictive covenants usual and customary for loans of its type, in addition to financial covenants including minimum EBITDA and minimum tangible net worth which apply to both Terms Loans described above. In connection with the Amended Term Loan A-2, the Company incurred $1.1 million of financing costs which are deferred and amortized over the life of the term loan.

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

Debt repayment requirements in each of the five subsequent fiscal years are presented below (in thousands):

The Company believes that its cash flows from operations, availability under its Revolver, and cash and cash equivalents on hand will provide adequate funds for the Company’s working capital needs, planned capital expenditures, operating and administrative expenses, and debt service obligations for at least the next twelve months and the foreseeable future.

Restrictive Covenants – The Company’s debt agreements, including the Revolver and Term Loans, contain customary affirmative and negative covenants that restrict, with specified exceptions, the Company’s ability to incur additional indebtedness, incur liens, pay dividends on the Company’s capital stock, make other restricted payments, including investments, transfer all or substantially all of the Company’s assets, enter into consolidations or mergers, and enter into transactions with affiliates. The Company’s debt agreements also require the Company to meet certain financial covenants including a minimum EBITDA and minimum tangible net worth. The Revolver contains borrowing base requirements related to accounts receivable and inventories and also requires the Company to meet a financial covenant related to a minimum fixed charge coverage ratio if (a) an event of default under the Agreement has occurred or (b) availability on the Revolver is less than the greater of (i) 10% of the commitments then in effect and (ii) $30.0 million. The most restrictive financial covenant in the debt agreements is the minimum EBITDA within the Term Loans which for fiscal year 2026 was greater than $75.0 million in EBITDA. The Company computes its financial covenants as if the Company were on the first-in, first out (“FIFO”) method of inventory accounting. The Company has met all such financial covenants as of March 31, 2026.

The Company's debt agreements limit the payment of dividends and other distributions, subject to availability under the Revolver. There is an annual total distribution limitation of $50,000, less aggregate annual dividend payments totaling $23,181 that the Company presently pays on two outstanding classes of preferred stock. Refer to Note 11 of the Notes to Consolidated Financial Statements for additional information on the Company’s preferred stock.

Standby Letters of Credit – The Company has standby letters of credit for certain insurance-related requirements. The Company’s standby letters of credit are automatically renewed annually, unless the issuer gives cancellation notice in advance. On March 31, 2026, the Company had $0.4 million in outstanding standby letters of credit. These standby letters of credit are supported by the Company’s Revolver and reduce borrowings available under the Revolver.

Obligations and Commitments:

The Company is party to various contractual obligations involving commitments to make payments to third parties. These obligations impact the Company’s short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Consolidated Balance Sheet as of March 31, 2026, while others are considered future obligations. Contractual obligations primarily consist of operating leases, purchase obligations and commitments, principal payments on long-term debt and related interest payments, and income taxes. All of these arrangements require cash payments over varying periods of time. Certain of these arrangements are cancelable on short notice and others require additional payments as part of any early termination. Refer to Notes 6 and 7 of the Notes to Consolidated Financial Statements for information related to the Company’s debt and leases, respectively. Under the Company’s receivables purchase program, the Company has collection and administrative responsibilities in its role as servicer of the transferred receivables, including an obligation to remit the amounts collected which are generally settled within normal customer payment terms. Refer to Note 9 of the Notes to Consolidated Financial Statements for information on the receivables purchase program.

Purchase obligations and commitments consist of open purchase orders to purchase raw materials, including raw produce, steel, ingredients and packaging materials, as well as commitments for products and services used in the normal course of business. The Company expects that the majority of these purchase obligations and commitments will be settled within one year.

The Company’s contractual obligations related to income taxes are primarily related to unrecognized tax benefits. Refer to Note 8 of the Notes to Consolidated Financial Statements for information related to income taxes.

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

In the normal course of its business, the Company has posted a surety bond and a surety-backed letter of credit which serve as collateral for its workers’ compensation policy. The primary purpose of these instruments is to indemnify the beneficiary should the Company be unable to fulfill its obligations for claims asserted under the workers’ compensation policy. Both the surety bond and the surety-backed letter of credit are automatically renewed annually, unless the issuer gives cancellation notice in advance. As of March 31, 2026, the amount of the surety bond and the surety-backed letter of credit was $4.3 million and $13.8 million, respectively. The Company is not aware of any outstanding claims made against either of these instruments.

The Company has no off-balance sheet debt or other unrecorded obligations other than the commitments noted above.

Impact of Seasonality on Financial Position and Results of Operations:

The Company’s production cycle begins with planting in the spring followed by harvesting and packaging during the second and third fiscal quarters with sales spanning over the following twelve months. The last fiscal quarter ending March 31 is the optimal time for maintenance, repairs and equipment changes in the Company's seasonal 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 sweet corn and green beans, the Company's highest volume vegetables, the peak inventory is in mid-autumn. The seasonal nature of the Company’s production cycle results in inventory and accounts payable typically reaching their lowest point late in the fourth quarter prior to the new seasonal pack commencing. As the seasonal pack progresses, these components of working capital both increase until the pack is complete.

The Company’s fruit and vegetable sales exhibit seasonal increases in the third fiscal quarter due to increased retail demand during the holiday season. In addition, the Company sells canned and frozen vegetables to co-pack customers on a bill and hold basis during the pack cycle, which typically occurs in the second and third quarters. Given the seasonal nature of the Company’s sales, the accounts receivable balance typically reaches its highest point at the end of the second fiscal quarter.

The following table shows quarterly information for selected financial statement items during fiscal years 2026 and 2025 to illustrate the Company’s seasonal business (in thousands):

Critical Accounting Estimates:

In certain circumstances, the preparation of the Consolidated Financial Statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to use judgment to make certain estimates and assumptions. Critical accounting estimates are defined as those that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on the financial condition or results of operations of the Company. These estimates affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of net sales and expenses during the reporting period. Actual results may differ from these estimates.

Management believes the accounting estimates listed below are those that are most critical to the portrayal of the Company’s financial condition and results of operations, and that require management’s most difficult, subjective, or complex judgments in estimating the effect of inherent uncertainties. Refer to Note 1 of the Notes to Consolidated Financial Statements for a detailed discussion of significant accounting policies.

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

Trade Promotion Expenses – The Company records both direct and estimated reductions to sales for trade promotions at the time of sale of the respective product. For estimated reductions, the Company maintains an accrual for customer promotional programs, in-store display incentives, and other sales and marketing expenses. This accrual requires management judgment regarding the volume of promotional offers that will be redeemed by the customer and is based on a combination of historical data on performance of similar programs and specific customer program activity. The amounts are subject to fluctuation due to the level of sales and marketing programs, and timing of deductions. Accrued trade promotions were $6.2 million and $7.0 million as of March 31, 2026 and 2025, respectively, and are included in other accrued expenses on the Consolidated Balance Sheets. 

Inventories – The Company uses the lower of cost, determined under the LIFO method, or market, to value substantially all of its inventories. In the high inflation environment that the Company has been experiencing, the Company believes that the LIFO method is preferable over the first-in, first-out (“FIFO”) method because it better matches the cost of current production to current revenue. An actual valuation of inventory under the LIFO method is made at the end of each fiscal year based on the inventory levels and costs at that time.

Pension Expense – The Company has a defined benefit plan (the “Plan”) which is subject to certain economic and demographic assumptions. The funded status of the Plan is dependent upon key assumptions, including the discount rate, mortality, and the rate of increase in compensation levels. Additionally, the Plan’s funded status is dependent on other factors such as the actual return on plan assets. Certain assumptions reflect the Company's historical experience and management’s best judgment regarding future expectations. Management reviews these assumptions at least annually and uses independent actuaries to assist in formulating assumptions and making estimates.

The discount rate used is determined in conjunction with the Company’s actuary by reference to a current yield curve and by considering the timing and amount of projected future benefit payments. The expected return on plan assets is determined by evaluating the mix of investments that comprise the asset portfolio and external forecasts of future long-term investment returns, along with input from independent pension consultants. With respect to the mortality assumption, the Society of Actuaries’ published mortality tables and projection scales are used in developing the estimates of mortality. Assumptions for increases in the rate of compensation are based on management estimates, which incorporate historical experience and overall compensation trends in the current business environment.

The Plan’s funded status increased $32.4 million during fiscal year 2026 reflecting the actual fair value of plan assets and the projected benefit obligation as of March 31, 2026. This funded status increase was primarily driven by a $2.5 million reduction to the projected benefit obligation, as described in more detail below, and a $29.9 million increase in the fair value of plan assets.

During fiscal year 2026, the actuarial gain in the Plan’s projected benefit obligation was driven by an increase in discount rates, partially offset by the annual update in plan census data resulting in demographic losses and the reflection of an assumed salary increase rate for fiscal year 2027 in excess of the long-term rate. During fiscal year 2025, the actuarial gain in the Plan’s projected benefit obligation was driven by an increase in discount rates and changes in demographic assumptions to better reflect future plan experience, partially offset by the reflection of an assumed salary increase rate for fiscal year 2026 in excess of the long-term rate. Additionally, the Company completed a lump-sum payout during fiscal year 2025 to certain terminated vested Plan participants which resulted in payments of $10.2 million. Plan assets increased from $293.1 million as of March 31, 2025 to $323.1 million as of March 31, 2026 primarily due to favorable return on plan assets which outpaced payments of benefits.

The Plan was amended to freeze accruals to new hires and rehires effective January 1, 2020. Refer to Note 10 of the Notes to Consolidated Financial Statements for the full defined benefit plan disclosures.

Non-GAAP Financial Measures:

Adjusted net earnings, EBITDA, and FIFO EBITDA are non-GAAP financial measures and are provided for informational purposes only. The Company believes these non-GAAP financial measures provide investors with helpful information to evaluate financial performance, perform comparisons from period to period, and compare results against the Company’s industry peers. A non-GAAP financial measure is defined as a numerical measure of the Company’s financial performance that excludes or includes amounts so as to be different from the most directly comparable measure calculated and presented in accordance with GAAP in the Consolidated Balance Sheets and related Consolidated Statements of Net Earnings, Comprehensive Income, Stockholders’ Equity and Cash Flows. The Company does not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP.

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

Adjusted net earnings are calculated on a FIFO basis which excludes the impact from the application of LIFO. Set forth below is a reconciliation of reported net earnings before income taxes to adjusted net earnings (in thousands):

The Company believes EBITDA is often a useful measure of a Company’s operating performance because EBITDA excludes charges for depreciation, amortization, non-cash lease expense, and interest expense as well as the Company’s provision for income tax expense. EBITDA is frequently used as one of the bases for comparing businesses in the Company’s industry. FIFO EBITDA also excludes non-cash charges related to the LIFO inventory valuation method. The Company’s revolving credit facility and term loan agreements use FIFO EBITDA in the financial covenants thereunder.

Set forth below is a reconciliation of reported net earnings to EBITDA and FIFO EBITDA (in thousands):

Recent Accounting Pronouncements:

The Company evaluates recent accounting pronouncements to determine the potential impact they may have on the consolidated financial statements. Refer to Note 1 of the Notes to Consolidated Financial Statements for additional information and discussion about recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to the amount of interest expense we expect to pay with respect to our Revolver and Amended Term Loan A-2 (collectively, “Variable Rate Debt”), which are tied to the variable market rate SOFR. The interest rate on the finance obligation is fixed and not subject to interest rate volatility. The Company uses its Variable Rate Debt for general corporate purposes, including seasonal working capital needs, to pay debt principal and interest obligations, and to fund capital expenditures and acquisitions. With $263.7 million in average Variable Rate Debt during fiscal year 2026, a hypothetical 1% change in interest rates would have had a $2.6 million impact on interest expense.

Commodity Risk

The materials that the Company uses, such as vegetables, fruits, steel, ingredients, and packaging materials, as well as the electricity and natural gas used in the Company’s business are commodities that may experience price volatility caused by external factors including but not limited to, market fluctuations, availability, weather, currency fluctuations, global conflicts, and changes in governmental regulations and agricultural programs. These events may result in reduced supplies of these materials, higher supply costs, or interruptions in the Company’s production schedules. If prices of these raw materials increase and the Company is not able to effectively pass such price increases along to its customers, operating income will decrease.

The principal effect of inflation in both commodity and consumer prices on the Company’s operating results is to increase costs, both for products sold and selling, general and administrative expenses. Although the Company may attempt to offset these cost increases by increasing selling prices for its products, consumers may not have the buying power to cover these increased costs and may reduce their volume of purchases of those products. In that event, selling price increases may not be sufficient to completely offset the Company’s cost increases.

The Company does not currently hedge or otherwise use derivative instruments to manage interest rate or commodity risks.

Consolidated Statements of Net Earnings

Seneca Foods Corporation

(In thousands, except per share amounts)

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income

Seneca Foods Corporation

(In thousands)

See accompanying Notes to Consolidated Financial Statements. 

Consolidated Balance Sheets

Seneca Foods Corporation

(In thousands)

See accompanying Notes to Consolidated Financial Statements. 

Consolidated Statements of Cash Flows

Seneca Foods Corporation

(In thousands)

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Stockholders' Equity

Seneca Foods Corporation

(In thousands, except share amounts)

See accompanying Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

Seneca Foods Corporation