NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(dollars
in thousands)
Note
1 – Summary of Significant Accounting Policies:
The
unaudited condensed consolidated financial statements of Bridgford Foods Corporation (the “Company”, “we”, “our”,
“us”) for the thirty-six weeks ended July 9, 2021 and July 10, 2020 have been prepared in conformity with the accounting
principles described in the Company’s Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended October 30, 2020 (the
“Annual Report”) and include all adjustments considered necessary by management for a fair presentation of the interim periods.
This Report should be read in conjunction with the Annual Report. Due to seasonality and other factors, interim results are not necessarily
indicative of the results for the full year. Recent accounting pronouncements and their effect on the Company are discussed in Management’s
Discussion and Analysis of Financial Condition and Results of Operations in this Report.
We
have considered the impact of federal, state, and local government actions related to the global novel coronavirus pandemic (“COVID-19”
or “pandemic”) on our condensed consolidated financial statements. The business disruptions associated with the pandemic
had a significant impact on our condensed consolidated financial statements for the thirty-six-week period ended July 9, 2021.
Due to restrictions associated with the pandemic, consumers went out less and consumed more food at home purchasing lower-margin items
like groceries from essential stores that remained open during the health crisis. The Company’s sales increased as a result of
strong consumer demand for food items during the thirty-six-week period ended July 9, 2021. We expect these events to have future business
impacts, the extent of which is uncertain and largely subject to whether the severity worsens, or the duration of current business shutdowns
continue. These impacts could include but may not be limited to risks and uncertainty related to shifts in demand between sales channels,
market volatility, constraints in our supply chain, our ability to operate production facilities and worker availability. These unknowns
may subject the Company to future risks related to long-lived asset impairments, increased reserves for uncollectible accounts, the price
and availability of ingredients and raw materials used in our products, and adjustments to reflect the market value of our inventory.
The
October 30, 2020 balance sheet amounts within these interim condensed consolidated financial statements were derived from the audited
fiscal year 2020 financial statements included in the Annual Report.
The
preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United
States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported
revenues and expenses during the reporting periods. Some of the estimates needed to be made by management include the allowance for doubtful
accounts, promotional and returns allowances, inventory reserves, the estimated useful lives of property, plant and equipment, and the
valuation allowance for the Company’s deferred tax assets. Actual results could materially differ from these estimates. Amounts
estimated related to liabilities for self-insured workers’ compensation, employee healthcare and pension benefits are especially
subject to inherent uncertainties and these estimated liabilities may ultimately settle at amounts which vary from our current estimates.
Market conditions and the volatility in stock markets may cause significant changes in the measurement of our pension fund liabilities
and the performance of our life insurance policies in future periods.
Financial
instruments that subject the Company to credit risk consist primarily of cash and cash equivalents, accounts receivable, accounts payable,
accrued payroll, advertising and other expenses and notes payable. The carrying amount of these instruments approximate fair market value
due to their short-term maturity or market interest rates. At times, the Company had accounts held with nationally recognized
financial institutions in excess of the Federal Deposit Insurance Corporation insurance coverage limit. As of July 9, 2021, the Company
had a book overdraft of $340. The book overdraft is recorded as a liability in accounts payable on the condensed consolidated balance
sheet. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk
with regard to its cash and cash equivalents. The Company grants payment terms to a significant number of customers that are diversified
over a wide geographic area. The Company monitors the payment histories of its customers and maintains an allowance for doubtful accounts
which is reviewed for adequacy on a quarterly basis. The Company does not require collateral from its customers.
Comprehensive
income or loss
Comprehensive
income or loss consists of net income (loss) and additional minimum pension liability adjustments. There were no differences between
net income and comprehensive income during the twelve and thirty-six weeks ended July 9, 2021, or July 10, 2020.
Customer
Concentration > 20% of AR or 10% of Sales *
The
table below shows customers that accounted for more than 20% of consolidated accounts receivable (“AR”) or 10% of consolidated
sales for the thirty-six weeks ended July 9, 2021, and July 10, 2020, respectively.
Schedule of Customer Concentration
|
|
|
Walmart
(1)
|
|
|
Dollar General
|
|
|
|
|
Sales
|
|
|
AR
|
|
|
Sales
|
|
|
AR
|
|
|
July 9, 2021
|
|
|
37.3
|
%
|
|
|
5.7
|
%
|
|
|
14.7
|
%
|
|
|
45.7
|
%
|
|
July 10, 2020
|
|
|
38.7
|
%
|
|
|
33.9
|
%
|
|
|
11.9
|
%
|
|
|
22.7
|
%
|
|
*
|
No other customer accounted for more
than 20% of AR or 10% of consolidated sales for the thirty-six weeks ended July 9, 2021, or the thirty-six weeks ended July 10, 2020.
|
|
|
|
|
(1)
|
Walmart
accounts receivable represented a lower percentage of sales as of July 9, 2021, due to accelerated payments on outstanding accounts
receivable.
|
Revenue
recognition
Revenues
are recognized in accordance with Accounting Standards Codification (“ASC”) Topic 606 – Contracts with Customers
upon passage of title to the customer, typically upon product pick-up, shipment, or delivery to customers. Products are delivered
to customers primarily through our own long-haul fleet, common carrier, or through a Company-owned direct store delivery system.
The
Company recognizes revenue for the sale of the product at the point in time when our performance obligation has been satisfied and control
of the product has transferred to our customer, which generally occurs upon shipment, pickup or delivery to a customer based on terms
of the sale. Contracts with customers are typically short-term in nature with completion of a single performance obligation. Product
is sold to foodservice, retail, institutional and other distribution channels. Shipping and handling that occurs after the customer has
obtained control of the product is recorded as a fulfillment cost rather than an additional performance obligation. Costs paid to third
party brokers to obtain contracts are recognized as part of selling expenses. Other sundry items in context of the contract are also
recognized as selling expense. Any taxes collected on behalf of the government are excluded from net revenue.
We
record revenue at the transaction price which is measured as the amount of consideration we anticipate to receive in exchange for providing
product to our customers. Revenue is recognized as the net amount estimated to be received after deducting estimated or known amounts
including variable consideration for discounts, trade allowances, consumer incentives, coupons, volume-based incentives, cooperative
advertising, product returns and other such programs. Promotional allowances, including customer incentive and trade promotion activities,
are recorded as a reduction to sales based on amounts estimated being due to customers, based primarily on historical utilization and
redemption rates. Estimates are reviewed regularly until incentives or product returns are realized and the result of any such adjustments
are known.
Leases
Leases
are recognized in accordance with ASC Topic 842 - Leases which requires a lessee to recognize assets and liabilities with
lease terms of more than 12
months. We lease or rent property for such operations as storing
inventory, packaging, or processing product and renting equipment. We analyze our agreements to evaluate whether or not a lease exists
by determining what assets exist for which we control for a period of time in exchange for consideration. In the event a lease exists,
we classify it as a finance or operating lease and record a right-of-use (“ROU”) asset and the corresponding lease liability
at the inception of the lease. In the case of month-to-month lease or rental agreements with terms of 12 months or less, we made an accounting
policy election to not recognize lease assets and liabilities and instead to record them on a straight-line basis over the lease term.
The storage units rented for use by our Snack Food Products segment direct store delivery route system are not costly to relocate, contain
no significant leasehold improvements, no degree of integration over leased assets, orders can be fulfilled by another route storage
unit interchangeably, no specialized assets exist, market price is paid for storage units and there is no guarantee of debt.
ROU
assets are recorded within property, plant and equipment, net of accumulated depreciation and amortization in the accompanying
condensed consolidated balance sheets. The Company’s lease of long-haul trucks used in its Frozen Food Products segment
qualifies as a finance lease. Finance lease liabilities are recorded under other current and other non-current liabilities on
the condensed consolidated balance sheets. The classification as a finance or
operating lease determines whether the recognition, measurement and presentation of expenses and cash flows are considered operating
or financing.
Financial
statement reclassification
Certain
financial statement reclassifications have been recorded in 2020 to conform to the current year presentation of operating (loss) income
and (loss) income before taxes.
Subsequent
events
Management
has evaluated events subsequent to July 9, 2021, through the date that the accompanying condensed consolidated financial statements were
filed with the Securities and Exchange Commission for transactions and other events which may require adjustments of and/or disclosure
in such financial statements.
As
previously reported, on March 16, 2020, Bridgford Food Processing Corporation (“BFPC”), a wholly-owned subsidiary of the
Company and CRG Acquisition, LLC (“CRG“), entered into a Purchase and Sale Agreement (the “CRG Purchase Agreement),
pursuant to which BFPC agreed to sell to CRG, pursuant to the terms and conditions set forth in the CRG Purchase Agreement, a parcel
of land including an approximate 156,000
square foot four-story industrial food processing
building located at 170 N. Green Street in Chicago, Illinois (the “Property”). The purchase price for the Property is $60,000
subject to a due diligence period and certain
closing adjustments and prorations, and is conditioned upon, among other customary closing conditions, CRG receiving zoning and other
governmental approvals necessary for the construction and development of a mixed-use project on the Property in accordance with certain
development plans to be approved by the City of Chicago. The cost basis of the Property was insignificant.
On
July 30, 2021, the Company executed the seventh amendment to the CRG Purchase Agreement, dated as of July 30, 2021, of the CRG Purchase
Agreement. Under the original terms and conditions of the CRG Purchase Agreement, the closing of the sale of the Property to CRG would
occur on the date that is thirty (30) days after CRG’s receipt of the necessary zoning approvals, but in any event no earlier than
October 31, 2020, and no later than March 31, 2021. The first amendment dated as of April 10, 2020, extended the inspection period to
June 1, 2020. The second amendment dated as of June 1, 2020, extended the inspection period to July 31, 2020, zoning period to February
1, 2021, and closing date to February 5, 2021. The third amendment dated July 31, 2020, further extended the inspection period to October
31, 2020, zoning period to April 30, 2021, and closing date to May 6, 2021. The fourth amendment dated November 2, 2020, further extended
the inspection period to February 1, 2021, the zoning period to August 2, 2021, and closing date to August 31, 2021. The fifth amendment
dated February 1, 2021, further extended the inspection period to May 1, 2021, the zoning period to November 1, 2021, and closing date
to December 1, 2021. The sixth amendment dated April 28, 2021, further extended the inspection period to July 30, 2021, the zoning period
to February 1, 2022, and closing date to March 1, 2022. The escrow account for the transaction has received $1,650
in earnest money deposits through April 16, 2021.
The seventh amendment dated July 30, 2021, further extended the inspection period to September 30, 2021, the zoning period to March 30,
2022, and closing date to April 29, 2022. The seventh amendment also established that the parties acknowledged and agreed that
CRG shall commence demolition of certain portions of the improvements prior to the expiration of the inspection period and be
diligently completed in a commercially reasonable manner on or prior to the closing date. The escrow account for the transaction has
received $1,650
in earnest money deposits through July 9, 2021.
We have received a total of $1,050
which is non-refundable earnest money through July 9, 2021, which is thus not part of restricted cash. An additional $75
of non-refundable earnest money had been received as
of August 2, 2021, bringing that total to $1,125.
The total amount of earnest money deposited in the escrow account since the inception of the CRG Purchase Agreement increased to $1,650
as of February 2, 2021 and reduced to $1,500
on July 30, 2021.
Based
on Management’s review, no other material events were identified that require adjustment to the financial statements or additional
disclosure.
Basic
(loss) earnings per share
Basic (loss)
earnings per share are calculated based on the weighted average number
of shares outstanding for all periods presented. No
stock options, warrants, or other potentially
dilutive convertible securities were outstanding as of July 9, 2021, or July 10, 2020.
Note
2 – Inventories, net
Inventories
are comprised of the following at the respective period ends:
Schedule of Inventories
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
July 9, 2021
|
|
|
October 30, 2020
|
|
|
Meat, ingredients, and supplies
|
|
$
|
9,453
|
|
|
$
|
6,439
|
|
|
Work in progress
|
|
|
3,484
|
|
|
|
1,860
|
|
|
Finished goods
|
|
|
21,580
|
|
|
|
20,997
|
|
|
Inventories, net
|
|
$
|
34,517
|
|
|
$
|
29,296
|
|
Inventories
are valued at the lower of cost (which approximates actual cost on a first-in, first-out basis) or net realizable value. Inventories
include the cost of raw materials, labor, and manufacturing overhead. We regularly review inventory quantities on hand and write down
any excess or obsolete inventories to net realizable value. An inventory reserve is created when potentially slow-moving or obsolete
inventories are identified in order to reflect the appropriate inventory value. Changes in economic conditions, production requirements,
and lower than expected customer demand could result in additional obsolete or slow-moving inventory that cannot be sold or must be sold
at reduced prices and could result in additional reserve provisions. A net realizable value reserve of $1,561 was recorded
during the thirty-six week period of the 2021 fiscal year after determining that the market value on some meat products was less than
the costs associated with completion and sale of the product.
Note
3 – Contingencies and Commitments:
The
Company leases warehouse and/or office facilities throughout the United States under month-to-month rental agreements. In the case of
month-to-month lease or rental agreements with terms of 12 months or less, the Company made an accounting policy election to not recognize
lease assets and liabilities and instead to record them on a straight-line basis over the lease term. For further information
regarding our lease accounting policy, please refer to Note 1 – Summary of Significant Accounting Policies, Leases.
The
Company performed a detailed analysis and determined that the only indication of a long-term lease in addition to transportation
lease for long haul trucks was Hogshed Ventures, LLC. A right-of-use asset and corresponding liability for warehouse storage
space was recorded in the amount of $1,091 for
the Company’s lease with Hogshed Ventures, LLC for property located on 40th Street in Chicago, Illinois as of October 30,
2020. We
lease this space under a non-cancelable operating lease. This lease does not have significant rent escalation holidays, concessions,
leasehold improvement incentives or other build-out clauses. Further this lease does not contain contingent rent
provisions. This
lease terminates on June 30, 2023. This lease
includes both lease (e.g., fixed rent) and non-lease components (e.g., real estate taxes, insurance, common-area, and other
maintenance costs). The non-lease components are deemed to be executory costs and are included in the minimum lease payments used to
determine the present value of the operating lease obligation and related right-of-use asset.
The
Hogshed lease does not provide an implicit rate and we estimated our incremental interest rate to be approximately 1.6%. We used our
estimated incremental borrowing rate and other information available at the lease commencement date in determining the present value
of the lease payments.
The
following is a schedule by years of future minimum lease payments for transportation leases and right-of-use assets:
Schedule of Future Minimum Lease Payments
|
Fiscal
Year
|
|
Financing
Obligations
|
|
|
2021
|
|
$
|
139
|
|
|
2022
|
|
|
550
|
|
|
2023
|
|
|
403
|
|
|
2024
|
|
|
102
|
|
|
2025
|
|
|
85
|
|
|
Later
Years
|
|
|
-
|
|
|
Total
Minimum Lease Payments(a)
|
|
$
|
1,279
|
|
|
Less:
Amount representing executory costs
|
|
|
(64
|
)
|
|
Less:
Amount representing interest(b)
|
|
|
(9
|
)
|
|
Present
value of future minimum lease payments(c)
|
|
$
|
1,206
|
|
|
(a)
|
Minimum payments exclude contingent
rentals based on actual mileage and adjustments of rental payments based on the Consumer Price Index.
|
|
|
|
|
(b)
|
Amount necessary to reduce net minimum lease payments
to present value calculated at the Company’s incremental borrowing rate at the inception of the leases.
|
|
|
|
|
(c)
|
Reflected in Part I. Financial Information Item 1. a.
condensed consolidated balance sheets as current and noncurrent obligations under capital leases of $154 and $237, and right-of-use
assets of $409 and $406, respectively as of July 9, 2021.
|
The
Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters is not expected to have a material adverse effect on the Company’s consolidated financial
position or results of operations.
Most
flour purchases are made at market price with contracts. However, the Company may purchase bulk flour at current market prices under
short-term (30 - 120 days) fixed price contracts during the normal course of business. Under these arrangements, the Company is obligated
to purchase specific quantities at fixed prices, within the specified contract period. These contracts provide for potential price increases
if agreed quantities are not purchased within the specified contract period. The contracts are not material. These contracts are typically
settled within a month’s time and no significant contracts remain open at the close of the quarterly or annual reporting period.
No significant contracts remained unfulfilled on July 9, 2021. The Company does not participate in the commodity futures market or hedging
to limit commodity exposure.
Note
4 – Segment Information:
The
Company has two reportable operating segments: Frozen Food Products (the processing and distribution of frozen food products) and Snack
Food Products (the processing and distribution of meat and other convenience foods).
We
evaluate each segment’s performance based on revenues and operating income. Selling, general and administrative (“SG&A”)
expenses include corporate accounting, information systems, human resource management and marketing, which are managed at the corporate
level. These activities are allocated to each operating segment based on revenues and/or actual usage. Assets managed at the corporate
level are not attributable to each operating segment and thus have been included as “other” in the accompanying segment information.
The
following segment information is presented for the twelve weeks ended July 9, 2021, and July 10, 2020.
Schedule of Segment Reporting Information, by Segment
|
Twelve weeks Ended July 9, 2021
|
|
Frozen Food Products
|
|
|
Snack Food Products
|
|
|
Other
|
|
|
Totals
|
|
|
Segment Information
|
|
Twelve weeks Ended July 9, 2021
|
|
Frozen Food Products
|
|
|
Snack Food Products
|
|
|
Other
|
|
|
Totals
|
|
|
Sales
|
|
$
|
8,321
|
|
|
$
|
48,217
|
|
|
$
|
-
|
|
|
$
|
56,538
|
|
|
Cost of products sold
|
|
|
5,858
|
|
|
|
38,669
|
|
|
|
-
|
|
|
|
44,527
|
|
|
Gross margin
|
|
|
2,463
|
|
|
|
9,548
|
|
|
|
-
|
|
|
|
12,011
|
|
|
SG&A
|
|
|
2,682
|
|
|
|
11,462
|
|
|
|
-
|
|
|
|
14,144
|
|
|
Gain on sale of property, plant, and equipment
|
|
|
(84
|
)
|
|
|
(212
|
)
|
|
|
-
|
|
|
|
(296
|
)
|
|
Operating loss
|
|
|
(135
|
)
|
|
|
(1,702
|
)
|
|
|
-
|
|
|
|
(1,837
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
10,613
|
|
|
$
|
122,850
|
|
|
$
|
23,694
|
|
|
$
|
157,157
|
|
|
Additions to PP&E
|
|
$
|
35
|
|
|
$
|
1,052
|
|
|
$
|
-
|
|
|
$
|
1,087
|
|
|
Twelve weeks Ended July 9, 2021
|
|
Frozen Food Products
|
|
|
Snack Food Products
|
|
|
Other
|
|
|
Totals
|
|
|
Twelve weeks Ended July 10, 2020
|
|
Frozen Food Products
|
|
|
Snack Food Products
|
|
|
Other
|
|
|
Totals
|
|
|
Sales
|
|
$
|
8,141
|
|
|
$
|
33,519
|
|
|
$
|
-
|
|
|
$
|
41,660
|
|
|
Cost of products sold
|
|
|
5,379
|
|
|
|
24,249
|
|
|
|
-
|
|
|
|
29,628
|
|
|
Gross margin
|
|
|
2,762
|
|
|
|
9,270
|
|
|
|
-
|
|
|
|
12,032
|
|
|
SG&A
|
|
|
2,439
|
|
|
|
8,598
|
|
|
|
-
|
|
|
|
11,037
|
|
|
Gain on sale of property, plant, and equipment
|
|
|
-
|
|
|
|
(5
|
)
|
|
|
-
|
|
|
|
(5
|
)
|
|
Operating income
|
|
|
323
|
|
|
|
677
|
|
|
|
-
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
11,033
|
|
|
$
|
100,244
|
|
|
$
|
35,371
|
|
|
$
|
146,648
|
|
|
Additions to PP&E
|
|
$
|
53
|
|
|
$
|
4,220
|
|
|
$
|
-
|
|
|
$
|
4,273
|
|
The
following segment information is presented for the thirty-six weeks ended July 9, 2021, and July 10, 2020.
|
Thirty-six weeks Ended July 9, 2021
|
|
Frozen Food Products
|
|
|
Snack Food Products
|
|
|
Other
|
|
|
Totals
|
|
|
Thirty-six weeks Ended July 9, 2021
|
|
Frozen Food Products
|
|
|
Snack Food Products
|
|
|
Other
|
|
|
Totals
|
|
|
Sales
|
|
$
|
26,438
|
|
|
$
|
135,270
|
|
|
$
|
-
|
|
|
$
|
161,708
|
|
|
Cost of products sold
|
|
|
18,695
|
|
|
|
105,864
|
|
|
|
-
|
|
|
|
124,559
|
|
|
Gross margin
|
|
|
7,743
|
|
|
|
29,406
|
|
|
|
-
|
|
|
|
37,149
|
|
|
SG&A
|
|
|
8,097
|
|
|
|
32,928
|
|
|
|
-
|
|
|
|
41,025
|
|
|
Gain on sale of property, plant, and equipment
|
|
|
(111
|
)
|
|
|
(267
|
)
|
|
|
-
|
|
|
|
(378
|
)
|
|
Operating loss
|
|
|
(243
|
)
|
|
|
(3,255
|
)
|
|
|
-
|
|
|
|
(3,498
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
10,613
|
|
|
$
|
122,850
|
|
|
$
|
23,694
|
|
|
$
|
157,157
|
|
|
Additions to PP&E
|
|
$
|
156
|
|
|
$
|
6,686
|
|
|
$
|
-
|
|
|
$
|
6,842
|
|
|
Thirty-six weeks Ended July 10, 2020
|
|
Frozen Food Products
|
|
|
Snack Food Products
|
|
|
Other
|
|
|
Totals
|
|
|
Thirty-six weeks Ended July 10, 2020
|
|
Frozen Food Products
|
|
|
Snack Food Products
|
|
|
Other
|
|
|
Totals
|
|
|
Sales
|
|
$
|
28,440
|
|
|
$
|
102,861
|
|
|
$
|
-
|
|
|
$
|
131,301
|
|
|
Cost of products sold
|
|
|
19,434
|
|
|
|
71,871
|
|
|
|
-
|
|
|
|
91,305
|
|
|
Gross margin
|
|
|
9,006
|
|
|
|
30,990
|
|
|
|
-
|
|
|
|
39,996
|
|
|
SG&A
|
|
|
8,860
|
|
|
|
27,828
|
|
|
|
-
|
|
|
|
36,688
|
|
|
Gain on sale of property, plant, and equipment
|
|
|
-
|
|
|
|
(22
|
)
|
|
|
-
|
|
|
|
(22
|
)
|
|
Operating income
|
|
|
146
|
|
|
|
3,184
|
|
|
|
-
|
|
|
|
3,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
11,033
|
|
|
$
|
100,244
|
|
|
$
|
35,371
|
|
|
$
|
146,648
|
|
|
Additions to PP&E
|
|
$
|
157
|
|
|
$
|
15,100
|
|
|
$
|
-
|
|
|
$
|
15,257
|
|
The
following information further disaggregates our sales to customers by major distribution channel and customer type for the twelve weeks
ended July 9, 2021, and July10, 2020, respectively.
Schedule of Disaggregates Our Sales to Customers
Twelve
weeks Ended July 9, 2021
|
Distribution Channel
|
|
Retail (a)
|
|
|
Foodservice (b)
|
|
|
Totals
|
|
|
Direct store delivery
|
|
$
|
33,739
|
|
|
$
|
-
|
|
|
$
|
33,739
|
|
|
Direct customer warehouse
|
|
|
14,478
|
|
|
|
-
|
|
|
|
14,478
|
|
|
Total Snack Food Products
|
|
|
48,217
|
|
|
|
-
|
|
|
|
48,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributors
|
|
|
1,290
|
|
|
|
7,031
|
|
|
|
8,321
|
|
|
Total Frozen Food Products
|
|
|
1,290
|
|
|
|
7,031
|
|
|
|
8,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
49,507
|
|
|
$
|
7,031
|
|
|
$
|
56,538
|
|
Twelve
weeks Ended July 10, 2020
|
Distribution Channel
|
|
Retail (a)
|
|
|
Foodservice (b)
|
|
|
Totals
|
|
|
Direct store delivery
|
|
$
|
27,934
|
|
|
$
|
-
|
|
|
$
|
27,934
|
|
|
Direct customer warehouse
|
|
|
5,585
|
|
|
|
-
|
|
|
|
5,585
|
|
|
Total Snack Food Products
|
|
|
33,519
|
|
|
|
-
|
|
|
|
33,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributors
|
|
|
2,235
|
|
|
|
5,906
|
|
|
|
8,141
|
|
|
Total Frozen Food Products
|
|
|
2,235
|
|
|
|
5,906
|
|
|
|
8,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
35,754
|
|
|
$
|
5,906
|
|
|
$
|
41,660
|
|
|
(a)
|
Includes
sales to food retailers, such as grocery retailers, warehouse club stores, and internet-based retailers.
|
|
(b)
|
Includes
sales to foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools,
convenience stores, healthcare facilities and the military.
|
The
following information further disaggregates our sales to customers by major distribution channel and customer type for the thirty-six
weeks ended July 9, 2021, and July 10, 2020, respectively.
|
Thirty-six weeks Ended July 9, 2021
Distribution Channel
|
|
Retail (a)
|
|
|
Foodservice (b)
|
|
|
Totals
|
|
|
Direct store delivery
|
|
$
|
100,914
|
|
|
$
|
-
|
|
|
$
|
100,914
|
|
|
Direct customer warehouse
|
|
|
34,356
|
|
|
|
-
|
|
|
|
34,356
|
|
|
Total Snack Food Products
|
|
|
135,270
|
|
|
|
-
|
|
|
|
135,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributors
|
|
|
6,086
|
|
|
|
20,352
|
|
|
|
26,438
|
|
|
Total Frozen Food Products
|
|
|
6,086
|
|
|
|
20,352
|
|
|
|
26,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
141,356
|
|
|
$
|
20,352
|
|
|
$
|
161,708
|
|
|
Thirty-six weeks Ended July 10, 2020
Distribution Channel
|
|
Retail (a)
|
|
|
Foodservice (b)
|
|
|
Totals
|
|
|
Direct store delivery
|
|
$
|
78,929
|
|
|
$
|
-
|
|
|
$
|
78,929
|
|
|
Direct customer warehouse
|
|
|
23,932
|
|
|
|
-
|
|
|
|
23,932
|
|
|
Total Snack Food Products
|
|
|
102,861
|
|
|
|
-
|
|
|
|
102,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributors
|
|
|
6,902
|
|
|
|
21,538
|
|
|
|
28,440
|
|
|
Total Frozen Food Products
|
|
|
6,902
|
|
|
|
21,538
|
|
|
|
28,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
109,763
|
|
|
$
|
21,538
|
|
|
$
|
131,301
|
|
|
(a)
|
Includes sales to food retailers, such as grocery retailers, warehouse club stores, and internet-based retailers.
|
|
(b)
|
Includes sales to foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools,
convenience stores, healthcare facilities and the military.
|
Note
5 – Income Taxes:
On
March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19
pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years
beginning before January 1, 2021. In addition, the CARES
Act allows NOLs incurred in taxable years beginning after December 31, 2017 and before January 1, 2021 to be carried back to each of
the five preceding taxable years to generate a refund of previously paid income taxes The Company has filed a federal income tax return
for tax year 2018 and 2019 (fiscal year 2019 and 2020) and carried back a taxable loss of $34,405
to tax years 2013 (fiscal 2014), 2014 (fiscal
year 2015), 2015 (fiscal year 2016), 2016 (fiscal year 2017) and 2018 (fiscal year 2019).
On
December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. Among other significant changes, the Tax
Act reduced the corporate federal income tax rate from 35% to 21%. The carryback of NOLs from tax years 2018 and 2019 under the CARES
Act to pre-Tax Act years generated an income tax benefit due to the differential in income tax rates which was recorded in fiscal year
2020.
The
Company’s effective tax rate was 28.0%
and -49.0% for
the third quarter of fiscal 2021 and 2020, respectively. The effective tax rate for the third quarter of fiscal year 2021 was
impacted by such items as non-deductible meals and entertainment, non-taxable gains and losses on life insurance policies and state
income taxes.
As
of July 9, 2021, the Company has a federal net operating loss carry forward of approximately $2,818
and state net operating loss carry forwards of
approximately $4,233.
Our
federal income tax returns are open to audit under the statute of limitations for the fiscal years 2018 through 2020. We
are subject to income tax in California and various other state taxing jurisdictions. Our state income tax returns are open to audit
under the statute of limitations for the fiscal years 2017 through 2020.
Note
6 – Equipment Notes Payable and Financial Arrangements:
The
Company maintains a line of credit with Wells Fargo Bank, N.A. that extends through March
1, 2022. Under the terms of this line of credit,
we may borrow up to $15,000
at an interest rate equal to the bank’s
prime rate or LIBOR plus 2.0%.
The line of credit has an unused commitment fee of 0.25%
of the available loan amount. We
borrowed $6,000
under
this line of credit in $2,000
increments
on December 2, 2020, April 27, 2021 and July 1, 2021, respectively, which remains outstanding as of July 9, 2021.
We borrowed an additional $3,000
under this line of credit on July 19, 2021. The
line of credit is presented under the current portion of non-current liabilities in the Condensed Consolidated Balance Sheets. The line
of credit contains various covenants, the more significant of which require us to maintain a minimum tangible net worth, a minimum quick
ratio, and a fixed charge coverage ratio. The Company was in violation of the minimum quick ratio covenant which was subsequently waived
(per letter dated August 12, 2021). The Company was in compliance with all other covenants under the Wells Fargo Loan Agreements
as of July 9, 2021.
On
December 26, 2018, we entered into a master collateral loan and security agreement with Wells Fargo Bank, N.A. (the “Original Wells
Fargo Loan Agreement”) for up to $15,000 in equipment financing which was amended and expanded as detailed below. We subsequently
entered into additional master collateral loan and security agreements with Wells Fargo Bank, N.A. on each of December 19, 2019, March
5, 2020, and April 17, 2020 (collectively the Original Wells Fargo Loan Agreement and the subsequent agreements referred to as the “Wells
Fargo Loan Agreements”). Pursuant to the Wells Fargo Loan Agreements, we borrowed the following amounts:
Schedule of Borrowing Loan
|
Type and Number (1)
|
|
Date Funds Received
|
|
Rate
|
|
|
Original
Principal
Amount
|
|
|
Monthly Principal
Payment Amount
and Payment Start Date
|
|
|
Equipment Loan No. 01
|
|
12/26/18
|
|
|
4.13
|
%
|
|
$
|
7,500
|
|
|
$
|
103
|
|
|
|
01/31/19
|
|
|
Equipment Loan No. 02
|
|
04/23/19
|
|
|
3.98
|
%
|
|
|
7,500
|
|
|
|
102
|
|
|
|
05/31/19
|
|
|
Equipment Loan No. 03
|
|
12/23/19
|
|
|
3.70
|
%
|
|
|
3,750
|
|
|
|
54
|
|
|
|
02/03/20
|
|
|
Equipment Loan No. 04
|
|
03/06/20
|
|
|
3.29
|
%
|
|
|
7,500
|
|
|
|
100
|
|
|
|
03/13/20
|
|
|
Equipment Loan No. 05
|
|
04/17/20
|
|
|
3.68
|
%
|
|
|
7,200
|
|
|
|
97
|
|
|
|
05/15/20
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
33,450
|
|
|
$
|
456
|
|
|
|
|
|
|
|
(1)
|
Term:
7 years for 84 installment payments.
|
The
Company was in violation of the minimum quick ratio covenant which was subsequently waived (per letter dated August 12, 2021).
The
Company was in compliance with all other covenants under the Wells Fargo Loan Agreements as of July 9, 2021
Schedule of Long Term Notes Payable
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
July 9, 2021
|
|
|
October 30, 2020
|
|
|
Secured equipment notes payable to Wells Fargo Bank, N.A. collateralized by equipment for the new Chicago processing facility.
|
|
$
|
25,898
|
|
|
$
|
29,122
|
|
|
Less current portion of notes payable
|
|
|
(4,553
|
)
|
|
|
(4,430
|
)
|
|
Total long-term notes payable - equipment
|
|
$
|
21,345
|
|
|
$
|
24,692
|
|
