# To Our Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NASDAQ_SENEA_2021/NASDAQ_SENEA_2021.mmd` · pages 3-9_

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To Our Shareholders,

The Company recorded net earnings for fiscal 2021 of \(126.1 million or \)13.72 per diluted share on sales of \(1,467.6 million versus net earnings of \)52.3 million or \(5.58 per diluted share on sales of \)1,335.8 million in fiscal 2020. As outlined in more detail below, financially, fiscal 2021 was an impressive year.

However, fiscal 2021 began with perhaps the most significant challenge of our lifetime in the form of the COVID-19 pandemic. It is hard to overstate the stress on our organization in dealing with significantly increased demand leading to out of stock situations while at the same time operating in an environment of fear and uncertainty related to protecting our employees, families and communities as guidance from CDC and other government institutions evolved. Add to that the enormous undertaking that comes with the hiring of 5,000 seasonal employees to work with our 3,500 full time employees to process hundreds of thousands of tons of raw product into the billions of cans of nutritious fruits and vegetables that we provide. It was truly an effort like never before and more than ever our people came through and made the difference.

As is always the case in our agriculturally based company, our expectations hinge on the uncertainty of the growing season and what Mother Nature delivers. The crop actually started out better than it had in the past several years but it still fell somewhat short of meeting our needs as a result of weather stress reducing yields in some cases, as well as the inability to process available tonnage in other cases, driven by reduced production capacity a result of labor shortages with COVID infections and quarantine. The timing of the unexpected sales lift from the pandemic did not allow adjustments to the 2020 planting and production leading to the shortages.

The Company's canned vegetable business showed improved margins as a result of increased sales volume, mostly from the pandemic, and higher selling prices. The increased selling prices have been implemented across our businesses as inflationary costs driven by steel and raw product affected costs. Digging down into our vegetable business, it can be stated that while overall our retail channels are very strong and sales have returned to pre-pandemic levels, foodservice and chain accounts remained challenged through fiscal 2021. Our frozen business has performed well and has stabilized with a core group of customers that we serve. Our Seneca Snack business was impacted significantly when a large customer was closed for a period of time, but that business has largely rebounded to pre-pandemic levels and the Snack business was profitable. Our candied fruit business continues to work through integration of our Paradise asset acquisition with production now fully transitioned. We have moved through high cost inventory as a result of the acquisition and integration at the plant is largely complete. Sales overall were also heavily impacted by the foodservice down turn, also a result of the pandemic. We are pleased where we are with this business and look forward to a more consistent performance as we emerge from pandemic related impacts.

Our Truitt business had been performing well and the team there had developed a strong core base of customers with a pipeline of opportunities making the decision to divest a difficult one. However, in the end, the nature of the business was not core to our primary business and we were able to get a value that made sense, allowing us to remain focused on investment in our core fruit and vegetable business. Included in the fiscal 2021 figures is a pre-tax gain of $34.8 million from the sale of the Truitt business which was reported as "Other Operating Income" within our income statement.

The Company also incurred a pre-tax impairment charge of \(9.7 million related to its CraftAg investment, reported in the "Loss from Equity Investment" line within the income statement. The Company's 2021 net earnings would be \)106.3 million or $11.56 per diluted share without the one-time items, Truitt gain and the CraftAg impairment.

With the fall of the equity markets associated with the pandemic last March, as well as very low interest rates, the funding status of our pension plan was impacted negatively. The decision was made that we would use cash generated from earnings and the Truitt deal to make a $73.0 million pension contribution. This contribution plus a gain on plan assets of $103.2 million brought our pension to a 122.2% funding status at year end. We believe that we have taken significant steps over the past year to stabilize our pension plan despite volatile times.

Also in an effort to leverage our cash position, and to maximize shareholder value, we undertook a formal Tender Offer in an effort to repurchase a significant number of our outstanding shares. Our view was that given the value that our stock was trading, the best use of capital was to repurchase shares. Despite our Tender Price being a 10.8% premium to the closing price of the previous full trading day prior to the Tender Offer and a 14.3% premium to the trailing 50 day trading price, we were not able to repurchase significant shares. It seemed clear that investors agreed that our stock was undervalued and decided to hold rather than Tender their shares.

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We continue, in support of our longstanding philosophy, to upgrade our facilities to improve our operations and during the last year invested 220.6% of depreciation in capital expenditures in addition to 5.2% financed through capital leases. In March, we completed the acquisition of a processing facility in central Wisconsin. This acquisition not only expands our freezing capability, but gets us into the frozen celery business. It also adds migrant worker housing assets which have been another source of investment over the past couple of years and are fundamental to the success of our seasonal operations.

It is also important to note that a portion of the current year earnings were due to a non-cash credit to earnings from our inventory accounting methodology. Our Last In, First Out (LIFO) inventory accounting methodology added another $15.6 million to pre-tax profits as strong sales coming on the heels of a smaller than anticipated pack resulted in lower overall inventory levels.

As mentioned previously, the planting and growing season was improved over the past several years but still had its challenges with record breaking frost early in the season, excessive heat later in the summer and several severe storms throughout the season. The net effect was that our company was only able to can and freeze about 92% of the crops we had originally planned.

This outcome came on the heels of reduced packs the last couple of years, and with the impact of the pandemic, further challenged inventory levels to accomplish our goal of being the 52 week supplier that our customers expect.

This past year we renewed our efforts to expand the co-pack-ing segment of our business. We entered into a couple of agreements during the year in which we process canned vegetables on a contractual basis. We are pleased with how things went with these new agreements and will continue to work closely with counterparties to meet their needs. We also continue to work closely with our preexisting co-pack partners under our agreement to produce products for them and completed the year packing those products for them and predecessor companies. These are important relationships that remain a focus for us.

A fundamental objective of the Company is to continue to strengthen our balance sheet. In that regard, during fiscal year 2021 we have paid down $192.2 million of debt, net of cash, and lease obligations. In addition, we just refinanced our $400 million revolver for a new 5 year term. We believe Seneca has a strong balance sheet that provides us the opportunity to continue to grow in the future.

While last year's results were encouraging, we are in a business that has its up and downs. As mentioned above, we believe a key is that the Company has a strong balance sheet and the financial wherewithal to ride out whatever challenges lie ahead but it is our people who will make the difference. We are fortunate to have a team whose experience, strength and capabilities have been clearly demonstrated in the months since the pandemic started. As shareholders, we should all be proud of their efforts in the face of what is an unprecedented period in our 73 year history.

Keeping our employees safe and our plants operating is a major endeavor which has been, and will continue to be, consuming most of our time and effort over the coming months.

In closing, we would like to recognize the immeasurable contributions of Kraig Kayser who retired from the Company after 35 years of combined service on the Board of Directors and as an employee, including 27 years as President and CEO. His calm and steady leadership was a model for those of us who worked closely with him and has left the company in a very strong position.

Sincerely,

Chairman

Chairman

Tom Paley

President & Chief Executive Officer