Seneca Foods Reports Sales and Earnings for the Nine Months Ended December 31, 2022
February 08 2023 - 4:10PM
Seneca Foods Corporation (NASDAQ: SENEA, SENEB) today announced
financial results for the third quarter and nine months ended
December 31, 2022.
Executive Summary (vs. year-ago, second quarter
results):
- Net sales for the third quarter of
fiscal 2023 totaled $473.3 million compared to $445.6 million for
the third quarter of fiscal 2022. The year-over-year increase of
$27.7 million is mostly from higher selling prices/improved sales
mix.
- Gross margin as a percentage of net
sales for the three months ended December 31, 2022 was 11.4% as
compared to 10.1% in the prior year. The year-over-year increase
was due primarily to an increase in selling prices and favorable
sales mix.
“Third quarter results delivered solid sales and
earnings growth despite persistent inflationary pressures that led
to another large non-cash LIFO charge." stated Paul Palmby,
President and Chief Executive Officer of Seneca Foods. "Cost
increases, particularly for raw materials and labor, have
necessitated pricing actions to minimize the impact of inflation on
our results. Additionally, our team has worked diligently to
mitigate the supply chain challenges we have faced.”
Executive Summary (vs. year-ago, year-to-date
results):
- Net sales for the nine months ended
December 31, 2022 totaled $1,178.3 million compared to $1,052.9
million for the nine months ended January 1, 2022. The
year-over-year increase of $125.4 million was mainly due to higher
selling prices partially offset by lower sales volumes.
- Gross margin as a percentage of net
sales for the nine months ended December 31, 2022 was 10.0% as
compared to 11.5% in the prior year. The year-over-year decrease is
mainly due to a $48.7 million increase in the LIFO charge.
About Seneca Foods Corporation
Seneca Foods is one of North America’s leading
providers of packaged fruits and vegetables, with facilities
located throughout the United States. Its high quality products are
primarily sourced from over 1,400 American farms and are
distributed to over 80 countries. Seneca holds a large share of the
market for retail private label, food service, restaurant chains,
international, contracting packaging, industrial, chips and cherry
products. Products are also sold under the highly regarded
brands of Libby’s®, Aunt Nellie’s®, Green Valley®, CherryMan®,
READ®, and Seneca labels, including Seneca snack chips.
Seneca’s common stock is traded on the Nasdaq Global Select Market
under the symbols “SENEA” and “SENEB”. SENEA is included in the
S&P SmallCap 600, Russell 2000 and Russell 3000 indices.
Non-GAAP Financial Measures
Adjusted net earnings is calculated on a FIFO
basis and excludes the impact of the Company’s loss on equity
investment. The Company believes this non-GAAP financial measure
provides for a better comparison of year over year operating
performance. 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. Set forth below is a
reconciliation of reported net earnings to adjusted net earnings
(in thousands).
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Three Months Ended |
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Nine Months Ended |
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December 31, |
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January 1, |
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December 31, |
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January 1, |
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2022 |
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2022 |
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2022 |
|
2022 |
Earnings before income taxes, as reported |
$ |
27,557 |
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$ |
24,377 |
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$ |
55,282 |
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$ |
58,221 |
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LIFO charge |
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30,898 |
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|
19,015 |
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|
79,333 |
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30,654 |
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Loss on equity investment |
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- |
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- |
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- |
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7,775 |
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Adjusted earnings before income taxes |
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58,455 |
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43,392 |
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134,615 |
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|
96,650 |
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Income taxes at effective tax rates |
|
13,737 |
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|
10,241 |
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31,635 |
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22,809 |
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Adjusted net earnings |
$ |
44,718 |
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$ |
33,151 |
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$ |
102,980 |
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$ |
73,841 |
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Set forth below is a reconciliation of reported
net earnings to EBITDA and FIFO EBITDA (earnings before interest,
income taxes, depreciation, amortization and non-cash charges
related to the LIFO inventory valuation method). 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
(in thousands).
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Three Months Ended |
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Nine Months Ended |
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December 31, |
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January 1, |
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December 31, |
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January 1, |
EBITDA and
FIFO EBITDA: |
|
2022 |
|
2022 |
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2022 |
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2022 |
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Net earnings |
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$ |
21,054 |
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$ |
18,664 |
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$ |
42,288 |
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$ |
44,454 |
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Income tax expense |
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6,503 |
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|
5,713 |
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12,994 |
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13,767 |
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Interest expense, net of interest income |
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4,277 |
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|
1,505 |
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8,037 |
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|
4,183 |
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Depreciation and amortization |
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10,500 |
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|
9,357 |
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|
30,344 |
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|
27,048 |
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Interest amortization |
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(60 |
) |
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(60 |
) |
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(181 |
) |
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(181 |
) |
EBITDA |
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42,274 |
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35,179 |
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93,482 |
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89,271 |
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LIFO charge |
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30,898 |
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19,015 |
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79,333 |
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30,654 |
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FIFO EBITDA |
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$ |
73,172 |
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$ |
54,194 |
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$ |
172,815 |
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$ |
119,925 |
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Forward-Looking Information
This release contains “forward-looking
statements” as that term is used in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements can be
identified by the fact 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 important factors that could 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.
Except for ongoing obligations to disclose material information
as required by the federal securities laws, the Company does not
undertake any obligation to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after
the date of the filing of this report or to reflect the occurrence
of unanticipated events.
Contact: Timothy J. Benjamin, Chief Financial
Officer585-495-4100
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Seneca Foods
Corporation |
Unaudited Selected
Financial Data |
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For the Periods
Ended December 31, 2022 and January 1, 2022 |
(In thousands of
dollars, except share data) |
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Three Months Ended |
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Nine Months Ended |
|
December 31, |
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January 1, |
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December 31, |
|
January 1, |
|
2022 |
|
2022 |
|
2022 |
|
2022 |
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Net sales |
$ |
473,254 |
|
|
$ |
445,593 |
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$ |
1,178,289 |
|
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$ |
1,052,891 |
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Plant restructuring charge (credit) (note 2) |
$ |
1,829 |
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$ |
(110 |
) |
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$ |
1,937 |
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$ |
3 |
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Other operating expense (income) , net (note 3) |
$ |
229 |
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$ |
399 |
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$ |
(2,411 |
) |
|
$ |
681 |
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Operating income (note 1) |
$ |
29,817 |
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$ |
23,664 |
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$ |
58,249 |
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$ |
63,210 |
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Loss from equity investment |
|
- |
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- |
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- |
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|
7,775 |
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Other non-operating income |
|
(2,017 |
) |
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|
(2,218 |
) |
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|
(5,070 |
) |
|
|
(6,969 |
) |
Interest expense, net |
|
4,277 |
|
|
|
1,505 |
|
|
|
8,037 |
|
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|
4,183 |
|
Earnings before income taxes |
$ |
27,557 |
|
|
$ |
24,377 |
|
|
$ |
55,282 |
|
|
$ |
58,221 |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
6,503 |
|
|
|
5,713 |
|
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|
12,994 |
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|
13,767 |
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Net earnings |
$ |
21,054 |
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$ |
18,664 |
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$ |
42,288 |
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$ |
44,454 |
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Basic earnings per common share |
$ |
2.77 |
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$ |
2.16 |
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$ |
5.36 |
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$ |
5.02 |
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Diluted earnings per common share |
$ |
2.74 |
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$ |
2.14 |
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$ |
5.31 |
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$ |
4.98 |
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Note 1: |
The effect of the LIFO inventory valuation method on the third
quarter pre-tax results decreased operating earnings by $30.9
million and $19.0 million for the three month periods ended
December 31, 2022 and January 1, 2022, respectively. The effect of
the LIFO inventory valuation method on YTD nine month pre-tax
results decreased operating earnings by $79.3 million and $30.7
million for the nine month periods ended December 31, 2022 and
January 1, 2022, respectively. |
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Note 2: |
During the three months ended December 31, 2022, the Company ceased
production of green beans at one of its New York facilities. As a
result, the Company incurred severance costs and also a write down
of production equipment that will be sold in the next twelve
months. |
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Note 3: |
The Company had net other operating expense of $0.2 million during
the three months ended December 31, 2022, which was driven
primarily by a write down of idle production equipment to estimated
selling price, less commission, as the assets met the criteria to
be classified as held for sale at December 31, 2022. The write down
was partially offset by a gain on the sale of an aircraft. During
the three months ended January 1, 2022, the Company had net other
operating expense of $0.4 million, driven mostly by various
miscellaneous expenses related to properties that were classified
as held for sale during the prior year interim period. During the
nine months ended December 31, 2022, the Company had net other
operating income of $2.4 million, which was driven primarily by a
gain on the sale of the Company’s western trucking fleet amongst
other fixed assets and a true-up of the supplemental early
retirement plan accrual, partially offset by the aforementioned
write down of production equipment. During the nine months ended
January 1, 2022, the Company had net other operating expense of
$0.7 million, driven mostly by a charge for a supplemental early
retirement plan offset by a gain on the sale of an aircraft. |
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Note 4: |
The Company used the “two-class” method for basic earnings per
share by dividing the earning attributable to common shareholders
by the weighted average of common shares outstanding during the
period. |
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