2019 marked the third year since the creation of our Employee Stock Ownership Plan (ESOP). For those of you that were eligible for the 2017 distribution and have qualified for each of the subsequent years, you have had three (3) contributions to your stock account made on your behalf by the Company. All 2019 or prior eligible participants should have received your latest statement in June of 2020 showing your 2019 contribution and statement of value.

We are proud to be employee owned and want to make sure you see both the value Tanimura & Antle sees in its employees and the value in your individual accounts.

Over the next 5 weeks, you’ll learn about ESOP topics such as:

• What an ESOP is and how it works
• Who is eligible for the ESOP and what a plan year is
• What vesting means and how distributions work
• What employer contributions and valuations mean for ESOPs
• How to understand your annual statements

Common ESOP Terms You Will See Over the Next Few Weeks:

Plan Year – The twelve month period ending December 31st each year

Allocation – When and how the Company’s annual contribution to the ESOP is distributed to eligible employees as ESOP shares (company stocks).

We look forward to providing an overview of employee ownership and the ESOP over the coming weeks. Next week, we will be giving you an overview on what an ESOP is, how it works, and why the Tanimura and Antle families decided to offer an ESOP program. Stay tuned!

Hello employee owners!

The first topic of our ESOP educational series will be Basics of an Employee Stock Ownership Plan (ESOP).  Today’s communication will cover what an ESOP is, how an ESOP works and why the Tanimura and Antle families decided to become an ESOP in 2017. Let’s dive in.

What is an Employee Stock Ownership Plan (ESOP)?

An ESOP is a plan that allows our employees to earn ownership of the company through company stock, simply by continued employment year after year. An ESOP is a secondary retirement plan, similar to other plans like profit sharing or a 401(k) plan.

How does our Employee Stock Ownership Plan (ESOP) work?

In 2017, the Tanimura and Antle families decided to sell part of the company to our employees, to recognize how much you are appreciated. Employees receive ownership simply by continually working for the company—no contribution of your own money is needed. Each year, the company makes a contribution to the ESOP, which is then allocated to eligible employees’ accounts. Employees gain ownership of their stock based on a vesting schedule. An employee becomes fully vested—meaning, fully owns their stock—after six years of eligible employment starting in 2017.

Each year, the company is evaluated to determine how much our company, and in turn, our stock, is worth. As your years of service with the company grow, so will the number and value of your shares. Eligible participants receive annual statements around July of each calendar year.

Employees must meet certain requirements to qualify for our Employee Stock Ownership Plan (ESOP). This week, we will be covering what requirements employees must meet to participate in our ESOP.

U.S. domestic employees become eligible on the first day of the Plan Year (January 1 – December 31) after they complete one full year of service (12 consecutive months of active employment with at least 1,000 work hours) and are at least 18 years old. The period of 12 consecutive months begins on the employee’s initial hire date and credited with their first hour.

Once eligible, the hours the employee works during the Plan Year are credited to the participation in the same plan year that the employee becomes eligible.

Participation vs. Eligibility is a complex topic.  Let’s look at an example.  

When is Marissa eligible to participate in the ESOP?

Marissa is eligible to participate in the ESOP for the 2020 Plan Year since she met all the requirements in the 2020 Plan Year. She is at least 18-years of age, a domestic employee, completed an active status for 12 consecutive months (even though she was on seasonal layoff), and worked a minimum of 1000 hours (800 + 600 = 1400) during her first 12-months of service (June 15, 2019 to June 15, 2020)

Is Marissa eligible to participate in the 2019 Plan Year contribution?

No—during the 2019 Plan Year, she did not meet the 12-month service or the 1,000 hours requirements.

Is Marissa eligible to participate in the 2020 Plan Year contribution?

Yes—Marissa became eligible to participate in the ESOP on June 15, 2020. Because she obtained more than 1,000 hours in 2020, she is eligible for a 2020 Plan Year contribution. She worked 600 hours from January 1, 2020, to June 15, 2020. Remember, June 15^th was the date she obtained her 12-months of consecutive service and became eligible to participate in the ESOP. She then worked another 750 hours between June 15, 2020, and December 31, 2020. Therefore, Marissa accumulated, and will be credited for, a total of 1,350 hours (600 + 750) for the 2020 Plan Year.

Next week, we will be learning about Vesting & Distributions.

To get a head start, let’s understand what vesting means. Employees earn ownership of an increasing percentage of their ESOP shares over their years of service; vesting is the amount of time an employee must work for our Company before owning the full amount of their benefit.

In our first few communications, we learned about the Basics of an ESOP and Eligibility.  This week, we will be learning about Vesting.  The Company highly values its employees and their choice to invest their time and effort as part of the Tanimura & Antle family.  Providing the additional benefit of Employee Ownership is a way for us to compensate our employees beyond the wages they receive for their loyalty in years of service. 

What does vesting mean? How long do I have to wait to be fully vested?

Vesting is the process that compensates employees who continue their years of service and defines how long an employee must work for our company before owning the full amount of their shares. An employee becomes fully vested—meaning, fully owns their shares—after six years of Credited Service from when they first became eligible to participate in the ESOP. If you missed the communication on eligibility, click here Participant and Plan Year Eligibility.

Vesting Schedule

The schedule below outlines the percentage of your shares that you own leading up to your sixth year of Credited Service, when you own 100% of your ESOP shares.  Credited Service is the number of Plan Years that a participant is credited with at least 1,000 Hours of Service.

Let’s look at Marissa’s example again.

Marissa began working for the Company in 2019 and became eligible for the ESOP in 2020.  She had 1,350 credited hours of service for the 2020 Plan Year.  In July of 2021, Marissa received her first annual statement, and it shows she received 171 shares for the 2020 Company Annual Contribution.  Her statement also tells her these shares are worth $10.80 each, and $1,847 total. 

What is the value in Marissa’s ESOP account?

Marissa has $1,847 in her account.  The value in Marissa’s account is the number of shares times the value of those shares at the end of that plan year.

What percent of the value is Marissa’s account vested?

Marissa is vested at 0%.  She started in 2019 and became eligible to participate in 2020.  Because she became eligible in 2020, she gets credit for the full 2020 year.  2020 will count as her first year and she has vested at 0%.

So, what is the value in being 0% vested as a first-year participant?  As a reminder, the value is reserved for long-term returning employees.  Marissa returns to work for the next 5 years and receives the same number of shares each year.  Let’s look at her account after 5 years.

For Marissa as a seasonal employee, she is well on her way to building additional funds towards her retirement—another great benefit of being a Tanimura & Antle Employee Owner!

Coming Up Next Week

In our next communication, we will be learning more about Employer Contributions & Valuations.  As a preview, the more hours you work in the year, the higher contribution the company makes to your account.  Plus, the better job that we all do, the higher the share price can be.  Both have an effect on the balance of your account.

You’re eligible for the Employee Stock Ownership Plan (ESOP) and your account is growing year after year. But how do you gain more shares of stock and how do those shares increase (or decrease) in value? This week, we will learn more about how Tanimura & Antle makes an annual contribution to our ESOP and how our share value is calculated during an annual valuation.

How do I gain stocks of the company? 

Each year the Company makes a contribution to the ESOP in appreciation of our hard-working employees.  The contribution is allocated and shared based on your efforts and time worked during that year.  The more time you work in a year, the more stock you are allocated. 

Marissa, from our previous examples, lives in Madera and is a seasonal employee that worked 1,350 hours during the 2020 Salinas season.  In 2021, she received her 2020 Annual Statement which showed she received 171 shares of the company stock. 

How could Marissa have received a larger number of stocks? 

Tanimura & Antle is a year-round shipper of fresh produce by utilizing a rotation of seasons. Each fall, we have up to 5 weeks after the Salinas season for additional work in the San Joaquin Valley of California. Transportation is available from some locations to assist our employees with working this additional season. Some employees also choose to work the Yuma, Arizona, season and/or again in the spring in the San Joaquin Valley for up to five weeks before returning for the Salinas season. For those willing to travel, there is plenty of opportunity. Opportunities to work and earn more hours towards our ESOP include (this varies by commodity):

• Yuma, AZ – November 20th through March 27th
• San Joaquin Valley, CA (Huron) – March 27th through April 24th
• Salinas, CA – April 24th through October 30th
• San Joaquin Valley, CA (Huron) – October 30th through November 20th
• Oxnard, CA – November 6th through June 16th of the next year

If Marissa worked both the San Joaquin Valley (Huron) spring and fall seasons, she could have earned up to another 450 hours to her plan year, which would approximately provide her with a 25% increase to her ESOP stock received for that year.  Domestic Yuma employees who may worry about meeting the 1,000-hour requirement for the year can also utilize working in our other seasons to ensure they qualify and make the most of each year.

What is a valuation?

A valuation is the process which determines how much our company stock is worth. Each year, the company hires an independent appraiser to research our business, industry and financial position to determine our stock value.  There are many factors that can affect the value of our stock, just like the value of stocks traded on the stock market such as Apple, IBM or Netflix.  Market pricing, growth, new product offerings and innovating on how we operate all contribute to the value of our company.  The stock value goes up when the company does well and down when the company does not.  The valuation amount is then divided by the number of shares owned to determine the value of the stock. 

How can I help the stock value increase?

The stock value is dependent on the success of the company, and the success of the company is dependent on our hard work, innovation and years of service.  The longer you work for the company the greater the amount you earn.  Likewise, the longer you work for the company, the more knowledgeable and skilled you become at your job, which helps the company succeed.  We both benefit in the success together as partners. 

How do I know how the number of shares of stocks I have and the value? 

Employees participating in the ESOP will receive an ESOP statement once a year after the annual contribution and valuation is complete—typically midway through the following year. You can also log onto Principal.com at any time to see your current account value; however, keep in mind that your account will only change once a year after the contribution and valuation is completed.  

Coming Up Next Week

Next week, we will be reviewing our annual statement. To prepare for next week, have your annual statement handy. If you’ve misplaced it, you can log into Principal.com to view your current account data.