NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(in
thousands except share and per share amounts, time periods, ratios and percentages)
NOTE
1 - The Company and Summary of Significant Accounting Policies:
Bridgford
Foods Corporation was organized in 1952. We originally began operations in 1932 as a retail meat market in San Diego, California
and evolved into a meat wholesaler for hotels and restaurants, a distributor of frozen food products, a processor and packer of
meat, and a manufacturer and distributor of frozen food products for sale on a retail and wholesale basis. We, including our subsidiaries,
are primarily engaged in the manufacturing, marketing and distribution of an extensive line of frozen, refrigerated, and snack
food products throughout the United States.
The
consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All
inter-company transactions have been eliminated.
Use
of estimates and assumptions
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements, as well as the reported revenues and expenses during the respective reporting periods.
Actual results could differ from those estimates. Amounts estimated related to liabilities for pension benefits, self-insured
workers’ compensation and employee healthcare benefits are subject to inherent uncertainties and these estimated liabilities
may ultimately settle at amounts which may vary from current estimates. Other areas with underlying estimates include realization
of deferred tax assets, cash surrender or contract value of life insurance policies, promotional allowances and the allowance
for doubtful accounts and inventory reserves. Management believes its current estimates are reasonable and based on the best information
available at the time.
We
test long-lived assets for recoverability whenever events or changes in circumstances indicate that the carrying amount may not
be recoverable. If an impairment is indicated, we measure the fair value of assets to determine if and when adjustments are recorded.
Subsequent
events
Management
has evaluated events subsequent to October 30, 2020 through the date the accompanying consolidated financial statements were filed
with the Securities and Exchange Commission for transactions and other events that may require adjustment of and/or disclosure
in such financial statements. The Company maintains a line of credit with Wells Fargo Bank, N.A. that expires on March 1, 2022.
Under the terms of this line of credit, we may borrow up to $7,500 at an interest rate equal to the bank’s prime rate or
LIBOR plus 1.5%. The Company borrowed an additional $2,000 under the line of credit on December 2, 2020.
Effective
November 3, 2020, Allan Bridgford Jr. resigned as a member of the Board of Directors of Bridgford Foods Corporation. The resignation
was not the result of a disagreement with management regarding operations, policies or practices of the Company. Mr. Bridgford
will continue to serve as a consultant to the Company.
As
previously reported, on March 16, 2020, Bridgford Food Processing Corporation (“BFPC”), a wholly-owned subsidiary
of the Company, entered into a Purchase and Sale Agreement (the “CRG Purchase Agreement”) with CRG Acquisition, LLC
(“CRG”), 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 immaterial.
On
November 2, 2020, the Company executed a fourth amendment to 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 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 escrow account has received
$1,350 in earnest money through October 30, 2020. We have received a total of $225 which is non-refundable earnest money and
thus not part of restricted cash.
Based
on management’s review, no other material subsequent events were identified that require adjustment to the financial statements
or additional disclosure.
Accounts
Receivable
Accounts
receivable are recorded at net realizable value. The value is presented net of allowance for doubtful accounts and promotional
incentives. Our accounts receivable consists mainly of trade receivables from customer sales. We evaluate the collectability of
our accounts receivable based on several factors. The provision for doubtful accounts receivable is based on historical trends
and current collectability risk. Our provision for doubtful accounts was $16 and $31 as of October 30, 2020 and November 1, 2019,
respectively.
Concentrations
of credit risk
Our
credit risk is diversified across a broad range of customers and geographic regions. Losses due to credit risk have recently been
immaterial. The carrying amount of cash equivalents, accounts and other receivables, accounts payable and accrued liabilities
approximate fair market value due to the short maturity of these instruments. We maintain cash balances at financial institutions,
which may at times exceed the amounts insured by the Federal Deposit Insurance Corporation. Management does not believe there
is significant credit risk associated with these financial institutions.
Sales
to Wal-Mart® comprised 36.9% of revenues in fiscal year 2020 and 19.8% of total accounts receivable was due from Wal-Mart®
as of October 30, 2020. Sales to Wal-Mart® comprised 35.7% of revenues in fiscal year 2019 and 31.9% of total accounts receivable
was due from Wal-Mart® as of November 1, 2019. Sales to Dollar General® comprised 13.6% of revenues in fiscal year 2020
and 31.1% of total accounts receivable was due from Dollar General® as of October 30, 2020. Sales to Dollar General® comprised
11.1% of revenues in fiscal year 2019 and 21.7% of total accounts receivable was due from Dollar General® as of November 1,
2019.
COVID-19
pandemic
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 consolidated financial statements. The business disruptions associated with the pandemic had
a significant negative impact on our consolidated financial statements for the fifty-two week period ended October 30, 2020. We
expect these events to have future business impact, 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, price and availability of ingredients and raw materials used
in our products and adjustments to reflect the market value of our inventory.
Business
segments
The
Company and subsidiaries operate in two business segments - the processing and distribution of frozen foods products, and the
processing and distribution of snack food products. See Note 7 for further information.
Fiscal
year
We
maintain our accounting records on a 52-53-week fiscal basis ending on the Friday closest to October 31. As part of the regular
accounting cycle, fiscal years 2020 and 2019 included 52 weeks.
Revenues
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. Products are delivered to customers
primarily through our own long-haul fleet, common carrier or through a Company owned direct store delivery system. These delivery
costs, $4,537 and $5,012 for fiscal years 2020 and 2019, respectively, are included in selling, general and administrative expenses
in the accompanying consolidated financial statements. Shipping and handling that occurs after the customer has obtained control
of the product is recorded as a fulfillment cost rather than an additional assured service. 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. Promotional allowances deducted from sales for fiscal years 2020
and 2019 were $11,418 and $11,105, respectively.
Advertising
expenses
Advertising
and other promotional expenses are recorded as selling, general and administrative expenses. Advertising expenses for fiscal years
2020 and 2019 were $2,246 and $2,574, respectively.
Cash
and cash equivalents
We
consider all investments with original maturities of three months or less to be cash equivalents. Cash equivalents include money
market funds and treasury bills. Cash equivalents totaled $4,302 as of October 30, 2020 and $3,478 as of November 1, 2019. All
material cash and cash equivalents as of October 30, 2020 were held at Wells Fargo Bank N.A.
Restricted
cash
Proceeds
from deposits in escrow of $1,125 as of October 30, 2020 relate to the pending sale of 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. Refer
to Note 1 – Subsequent Events for more information.
Fair
value measurements
We
classify levels of inputs to measure the fair value of financial assets as follows:
●
|
Level
1 inputs: Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that are accessible
at the measurement date.
|
|
|
●
|
Level
2 inputs: Level 2 inputs are from other than quoted market prices included in Level 1 that are observable for the asset or
liability, either directly or indirectly.
|
|
|
●
|
Level
3 inputs: Level 3 inputs are unobservable and should be used to measure fair value to the extent that observable inputs are
not available.
|
The
hierarchy noted above requires us to minimize the use of unobservable inputs and to use observable market data, if available,
when determining fair value.
The
Company does not have any assets or liabilities measured at fair value on a recurring or non-recurring basis for the fiscal years
ended October 30, 2020 and November 1, 2019.
Inventories
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.
Property,
plant and equipment
Property,
plant and equipment are carried at cost less accumulated depreciation. Major renewals and improvements are charged to the asset
accounts while the cost of maintenance and repairs is charged to expense as incurred. When assets are sold or otherwise disposed
of, the cost and accumulated depreciation are removed from the respective accounts and the resulting gain or loss is credited
or charged to income. Depreciation is computed on a straight-line basis over 10 to 20 years for buildings and improvements, 5
to 10 years for machinery and equipment, and 3 to 5 years for transportation equipment. We built a processing plant from the ground
up and as such have attributed long useful lives accordingly to these types of assets employed at the new facility in Chicago.
The Company incurred interest costs of $879 for fiscal year 2020, all of which was capitalized in relation to the construction
of the new facility in Chicago.
Leases
Leases
are recognized in accordance with Accounting Standards Update (“ASU”) 2016-02 Leases (ASC 842) 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, equipment and parking vehicles. We analyze our agreements to evaluate whether
or not a lease exists by determining what assets exist for which we control usage 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 record
them on a straight-line basis over the lease term. The storage units rented for use by our Snack Food Product 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.
Finance
lease assets are recorded within property, plant and equipment, net of accumulated depreciation and amortization. The Company’s
leases of long-haul trucks used in its Frozen Food Products Segment qualify as finance leases. Finance lease liabilities are recorded
as a separate line item on the consolidated balance sheets reflecting both the current and long-term obligation. 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.
Life
insurance policies
We
record the cash surrender value or contract value for life insurance policies as an adjustment of premiums paid in determining
the expense or income to be recognized under the contract for the period. The cash surrender value is included in other non-current
assets in the accompanying Consolidated Balance Sheets.
Income
taxes
Deferred
taxes are provided for items whose financial and tax bases differ. A valuation allowance is provided against deferred tax assets
when it is expected that it is more likely than not that the related asset will not be fully realized. The determination as to
whether or not a deferred tax asset can be fully realized is subject to a significant degree of judgment, based at least partially
upon a projection of future taxable income, which takes into consideration past and future trends in profitability, customer demand,
supply costs, and multiple other factors, which are inherently difficult to predict.
We
provide tax accruals for federal, state and local exposures relating to audit results, tax planning initiatives and compliance
responsibilities. The development of these accruals requires judgments about tax issues, potential outcomes and timing. (See Note
4 for further information). Although the outcome of these tax audits is uncertain, in management’s opinion adequate provisions
for income taxes have been made for potential liabilities emanating from these reviews. If actual outcomes differ materially from
these estimates, they could have a material impact on our results of operations.
Stock-based
compensation
We
measure and recognize compensation expense for all share-based payments to employees, including grants of employee stock options,
in the financial statements based on the fair value at the date of the grant. We have not issued, awarded, granted or entered
into any stock-based payment agreements since April 29, 1999, and no such expense was recognized in fiscal years 2020 and 2019.
Comprehensive
income or loss
Comprehensive
income or loss consists of net income and additional minimum pension liability adjustments.
Recently
issued accounting pronouncements and regulations
In
May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014-09 “Revenue from Contracts with
Customers” to supersede previous revenue recognition guidance under current U.S. GAAP. The guidance presents a single five-step
model for comprehensive revenue recognition that requires an entity to recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. Two options are available for implementation of the standard which are either the retrospective approach
or cumulative effect adjustment approach. The guidance became effective for annual reporting periods beginning after December
15, 2017, including interim periods within that reporting period, with early adoption permitted. The Company adopted the modified
retrospective transition method beginning with the first quarter of fiscal 2019. The adoption did not have a material impact on
our consolidated financial statements. For further information please refer to Revenues above. Disaggregated revenue is disclosed
in Note 7 - Segment Information.
In
January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”
that requires most equity investments to be measured at fair value and subsequent changes in fair value to be recognized in net
income. The guidance covers presentation and disclosure requirements of financial liabilities and the classification and measurement
of financial instruments. The guidance is effective for annual reporting periods and interim periods within those annual reporting
periods beginning after December 15, 2017. We adopted this guidance in the first quarter of fiscal 2019. The adoption did not
have a material impact on our consolidated financial statements.
In
February 2016, the FASB issued ASU 2016-02, “Leases”, which requires a lessee to recognize assets and liabilities
with lease terms of more than 12 months. Both capital and operating leases are to be recognized on the balance sheet. The guidance
is effective for annual reporting periods beginning after December 15, 2018 and interim periods within fiscal years beginning
after December 15, 2019 which is our first quarter of fiscal 2020. We have analyzed all lease transactions during fiscal year
2019 and 2020 to date. The Company elected not to reassess expired contracts or adjust comparative periods. The Company determined
that no change to current accounting treatment is warranted for most transactions due to the underlying nature of our leases.
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. The Company performed a detailed analysis and determined that the only
indication of a long-term lease was Hogshed Ventures, LLC. The accounting treatment of this lease for warehouse storage included
establishing a right-of-use asset and corresponding liability was recorded for Hogshed Ventures, LLC for 40th Street in Chicago
during the fourth quarter of fiscal 2020. The application of this pronouncement resulted in additional disclosures detailing our
lease arrangements. The Company adopted this guidance during the first quarter of fiscal 2020 and it did not have a material impact
on our consolidated financial statements.
In
October 2016, the FASB issued ASU 2016-16, “Income Taxes – Classification of Certain Cash Receipts and Cash Payments”.
The guidance involves eight specific cash flow issues and aims to unify accounting for these transactions. The guidance became
effective for annual reporting periods beginning after December 15, 2017 with early adoption permitted. The Company adopted this
guidance during the first quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.
In
March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits”. The guidance separates service
cost from other pension cost components changing the presentation of net periodic benefit cost related to company sponsored defined
benefit or other postretirement benefits. The guidance became effective for annual and interim reporting periods beginning after
December 15, 2017 with early adoption permitted. Additional disclosure reconciling net periodic benefit cost is detailed in Note
3 - Retirement and Other Benefit Plans. The Company adopted this guidance during the first quarter of fiscal 2019 and it did not
have a material impact on our consolidated financial statements.
In
December 2019, the FASB issued ASU 2019-12, “Income Taxes – Simplifying the Accounting for Income Taxes”. The
guidance removes exceptions to the general principles in Topic 740 for allocating tax expense between financial statement components,
accounting basis differences stemming from an ownership change in foreign investments and interim period income tax accounting
for year-to-date losses that exceed projected losses. The guidance becomes effective for annual reporting periods beginning after
December 15, 2020 and interim periods within those fiscal years with early adoption permitted. We do not expect the adoption of
this guidance to have a material impact on our consolidated financial statements.
NOTE
2 - Composition of Certain Financial Statement Captions:
|
|
2020
|
|
|
2019
|
|
Inventories, net:
|
|
|
|
|
|
|
|
|
Meat, ingredients and supplies
|
|
$
|
6,439
|
|
|
$
|
5,283
|
|
Work in process
|
|
|
1,860
|
|
|
|
1,562
|
|
Finished goods
|
|
|
20,997
|
|
|
|
19,522
|
|
|
|
$
|
29,296
|
|
|
$
|
26,367
|
|
Property, plant and equipment, net:
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
3,908
|
|
|
$
|
3,908
|
|
Buildings and improvements
|
|
|
27,518
|
|
|
|
21,044
|
|
Machinery and equipment
|
|
|
88,785
|
|
|
|
60,617
|
|
Capital leased trucks
|
|
|
513
|
|
|
|
473
|
|
Transportation equipment
|
|
|
8,846
|
|
|
|
8,391
|
|
Right of use assets
|
|
|
1,090
|
|
|
|
-
|
|
Construction in process
|
|
|
1,358
|
|
|
|
13,928
|
|
|
|
|
132,018
|
|
|
|
108,361
|
|
Accumulated depreciation and amortization
|
|
|
(58,686
|
)
|
|
|
(54,015
|
)
|
|
|
$
|
73,332
|
|
|
$
|
54,346
|
|
|
|
|
|
|
|
|
|
|
Other non-current assets:
|
|
|
|
|
|
|
|
|
Cash surrender value benefits
|
|
$
|
13,195
|
|
|
$
|
12,289
|
|
Other
|
|
|
6
|
|
|
|
6
|
|
|
|
$
|
13,201
|
|
|
$
|
12,295
|
|
Accrued payroll, advertising and other expenses:
|
|
|
|
|
|
|
|
|
Payroll, vacation, payroll taxes and employee benefits
|
|
$
|
4,287
|
|
|
$
|
4,063
|
|
Accrued advertising and broker commissions
|
|
|
863
|
|
|
|
648
|
|
Property taxes
|
|
|
566
|
|
|
|
520
|
|
Other
|
|
|
265
|
|
|
|
249
|
|
|
|
$
|
5,981
|
|
|
$
|
5,480
|
|
|
|
|
|
|
|
|
|
|
Current portion of non-current liabilities (Notes 3 and 6):
|
|
|
|
|
|
|
|
|
Defined benefit retirement plan
|
|
$
|
-
|
|
|
$
|
-
|
|
Executive retirement plans
|
|
|
163
|
|
|
|
10
|
|
Incentive compensation
|
|
|
3,074
|
|
|
|
4,264
|
|
Capital lease obligation
|
|
|
144
|
|
|
|
95
|
|
Escrow and customer deposits
|
|
|
1,360
|
|
|
|
10
|
|
Right-of-use leases
|
|
|
372
|
|
|
|
-
|
|
Postretirement healthcare benefits
|
|
|
83
|
|
|
|
55
|
|
|
|
$
|
5,196
|
|
|
$
|
4,434
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities (Note 3):
|
|
|
|
|
|
|
|
|
Defined benefit retirement plan
|
|
$
|
18,678
|
|
|
$
|
14,130
|
|
Executive retirement plans
|
|
|
6,380
|
|
|
|
6,418
|
|
Incentive compensation
|
|
|
2,996
|
|
|
|
3,655
|
|
Capital lease obligation
|
|
|
289
|
|
|
|
360
|
|
Right-of-use leases
|
|
|
719
|
|
|
|
-
|
|
Deferred payroll taxes
|
|
|
1,103
|
|
|
|
-
|
|
Postretirement healthcare benefits
|
|
|
639
|
|
|
|
665
|
|
|
|
$
|
30,804
|
|
|
$
|
25,228
|
|
NOTE
3 - Retirement and Other Benefit Plans:
Noncontributory-Trusteed
Defined Benefit Retirement Plans for Sales, Administrative, Supervisory and Certain Other Employees
We
have noncontributory-trusteed defined benefit retirement plans for sales, administrative, supervisory and certain other employees.
In the third quarter of fiscal year 2006, we froze future benefit accruals under these plans for employees classified within the
administrative, sales or supervisory job classifications or within any non-bargaining class. The benefits under these plans are
primarily based on years of service and compensation levels. The funding policy of the plans requires contributions which are
at least equal to the minimum required contributions needed to avoid a funding deficiency. The measurement date for the plans
is our fiscal year end.
Net
pension cost consisted of the following:
|
|
October 30, 2020
|
|
|
November 1, 2019
|
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
Service cost
|
|
$
|
127
|
|
|
$
|
103
|
|
Interest cost
|
|
|
2,025
|
|
|
|
2,396
|
|
Expected return on plan assets
|
|
|
(3,688
|
)
|
|
|
(3,414
|
)
|
Amortization of unrecognized loss
|
|
|
2,163
|
|
|
|
1,236
|
|
Net pension cost
|
|
$
|
627
|
|
|
$
|
321
|
|
Net
pension costs and benefit obligations are determined using assumptions as of the beginning of each fiscal year.
Weighted
average assumptions for each fiscal year are as follows:
|
|
2020
|
|
|
2019
|
|
Discount rate
|
|
|
2.45
|
%
|
|
|
3.00
|
%
|
Rate of increase in salary levels
|
|
|
N/A
|
|
|
|
N/A
|
|
Expected return on plan assets
|
|
|
7.00
|
%
|
|
|
7.00
|
%
|
The
benefit obligation, plan assets, and funded status of these plans as of the fiscal years ended are as follows:
|
|
October 30, 2020
|
|
|
November 1, 2019
|
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets - beginning of year
|
|
$
|
53,892
|
|
|
$
|
49,434
|
|
Employer contributions
|
|
|
-
|
|
|
|
875
|
|
Actual return on plan assets
|
|
|
2,189
|
|
|
|
5,402
|
|
Benefits paid
|
|
|
(1,965
|
)
|
|
|
(1,819
|
)
|
Fair value of plan assets - end of year
|
|
$
|
54,116
|
|
|
$
|
53,892
|
|
Change in benefit obligations:
|
|
|
|
|
|
|
|
|
Benefit obligations - beginning of year
|
|
$
|
68,022
|
|
|
$
|
57,487
|
|
Service cost
|
|
|
127
|
|
|
|
103
|
|
Interest cost
|
|
|
2,025
|
|
|
|
2,396
|
|
Actuarial gain (loss)
|
|
|
4,585
|
|
|
|
9,856
|
|
Benefits paid
|
|
|
(1,965
|
)
|
|
|
(1,820
|
)
|
Benefit obligations - end of year
|
|
|
72,794
|
|
|
|
68,022
|
|
Funded status of the plans
|
|
|
(19,965
|
)
|
|
|
(14,130
|
)
|
Unrecognized prior service costs
|
|
|
-
|
|
|
|
-
|
|
Unrecognized net actuarial loss
|
|
|
27,373
|
|
|
|
23,453
|
|
Net amount recognized
|
|
$
|
7,408
|
|
|
$
|
9,323
|
|
We
perform an internal rate of return analysis when making the discount rate selection. The discount rates were based on FTSE Pension
Liability Index (formerly Citibank) as of October 31, 2020 and November 1, 2019, respectively.
Plan
assets are primarily invested in marketable equity securities, corporate and government debt securities and are administered by
an investment management company. The plans’ long-term return on assets is based on the weighted average of the plans’
investment allocation as of the measurement date and the published historical returns for those types of asset categories, taking
into consideration inflation rate forecasts. No expected employer contribution to the plans in fiscal year 2021 is planned.
For
fiscal year 2020, our actuary updated mortality tables from the RP-2014 Total Dataset Mortality Table with Scaling to Pri-2012
Total Dataset Mortality Table with MP-2020 Scaling. The expected rate of return on plan assets remained the same at 7.00% effective
for fiscal years 2020 and 2019, respectively.
The
actual and target allocation for plan assets are as follows:
Asset Class
|
|
2020
|
|
|
Target
Asset
Allocation
|
|
|
2019
|
|
|
Target
Asset
Allocation
|
|
Large Cap Equities
|
|
|
21.5
|
%
|
|
|
22.0
|
%
|
|
|
21.8
|
%
|
|
|
22.0
|
%
|
Mid Cap Equities
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Small Cap Equities
|
|
|
13.5
|
%
|
|
|
12.0
|
%
|
|
|
13.8
|
%
|
|
|
12.0
|
%
|
International (equities only)
|
|
|
25.7
|
%
|
|
|
26.0
|
%
|
|
|
25.2
|
%
|
|
|
26.0
|
%
|
Fixed Income
|
|
|
37.5
|
%
|
|
|
39.0
|
%
|
|
|
37.6
|
%
|
|
|
39.0
|
%
|
Cash
|
|
|
1.8
|
%
|
|
|
1.0
|
%
|
|
|
1.6
|
%
|
|
|
1.0
|
%
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
The
fair value of our pension plan assets as of October 30, 2020 and the level under which fair values were determined, using the
hierarchy described in Note 1, is as follows:
|
|
2020
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total plan assets
|
|
$
|
54,116
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
54,116
|
|
Expected
payments for the pension benefits are as follows:
Fiscal Years
|
|
Pension Benefits
|
|
2021
|
|
$
|
2,627
|
|
2022
|
|
$
|
2,770
|
|
2023
|
|
$
|
2,936
|
|
2024
|
|
$
|
3,091
|
|
2025
|
|
$
|
3,303
|
|
2026-2030
|
|
$
|
17,625
|
|
Executive
Retirement Plans
Non-Qualified
Deferred Compensation
Effective
January 1, 1991, we adopted a deferred compensation savings plan for certain key employees. Under this arrangement, selected employees
contribute a portion of their annual compensation to the plan. We contribute an amount to each participant’s account by
computing an investment return equal to Moody’s Average Seasoned Bond Rate plus 2%. Employees receive vested amounts upon
death, termination or attainment of retirement age. No benefit expense was recorded under this plan for fiscal years 2020 and
2019.
Supplemental
Executive Retirement Plan
Retirement
benefits otherwise available to certain key executives under the Primary Benefit Plan have been limited by the effects of the
Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) and the Tax Reform Act of 1986 (“TRA”). To
offset the loss of retirement benefits associated with TEFRA and TRA, the Company has adopted a non-qualified “makeup”
benefit plan (the “Supplemental Executive Retirement Plan”). Benefits will be provided under the Supplemental Executive
Retirement Plan in an amount equal to 60% of each participant’s final average earnings minus any pension benefits and primary
insurance amounts available to them under Social Security. However, in all cases the benefits are capped at $120,000 per year
for Allan L. Bridgford. Benefits provided under this plan for William L. Bridgford and Raymond F. Lancy are calculated at 50%
of final average earnings, capped at $200,000 per year, without offsets for other pension or Social Security benefits.
Benefits
payable related to these plans and included in the accompanying consolidated financial statements were $6,544 and $6,428
as of October 30, 2020 and November 1, 2019, respectively. In connection with these arrangements we are the beneficiary of
life insurance policies on the lives of certain key employees and retirees. The aggregate cash surrender value of these policies,
included in non-current assets, was $13,195 and $12,289 as of October 30, 2020 and November 1, 2019, respectively.
Expected
payments for executive postretirement benefits are as follows:
Fiscal Years
|
|
Executive Postretirement Benefits
|
|
2021
|
|
$
|
499
|
|
2022
|
|
$
|
533
|
|
2023
|
|
$
|
533
|
|
2024
|
|
$
|
533
|
|
2025
|
|
$
|
533
|
|
2026-2030
|
|
$
|
2,642
|
|
Incentive
Compensation Plan for Certain Key Executives
We
provide an incentive compensation plan for certain key executives, which is based upon our pretax income. The payment of these
amounts is generally deferred over three or five-year periods. The total amount payable related to this arrangement was $6,070
and $7,919 as of October 30, 2020 and November 1, 2019, respectively. Future payments are approximately $3,074, $1,996, $877,
$87 and $36 for fiscal years 2021 through 2025, respectively.
Postretirement
Healthcare Benefits for Selected Executive Employees
We
provide postretirement health care benefits for selected executive employees. Net periodic postretirement healthcare (benefit)
cost is determined using assumptions as of the beginning of each fiscal year, except for the total actual benefit payments and
the discount rate used to develop the net periodic postretirement benefit expense, which is determined at the end of the fiscal
year.
Net
periodic postretirement healthcare cost (benefit) consisted of the following:
|
|
October 30, 2020
|
|
|
November 1, 2019
|
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
Service cost
|
|
$
|
3
|
|
|
$
|
9
|
|
Interest cost
|
|
|
16
|
|
|
|
22
|
|
Amortization of prior service cost
|
|
|
-
|
|
|
|
(44
|
)
|
Amortization of actuarial gain
|
|
|
-
|
|
|
|
(7
|
)
|
Net periodic postretirement healthcare cost (benefit)
|
|
$
|
19
|
|
|
$
|
(20
|
)
|
Weighted
average assumptions for the fiscal years ended October 30, 2020 and November 1, 2019 are as follows:
|
|
2020
|
|
|
2019
|
|
Discount
rate
|
|
|
2.43
|
%
|
|
|
2.92
|
%
|
Medical
trend rate next year
|
|
|
8.00
|
%
|
|
|
7.50
|
%
|
Ultimate
trend rate
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Year
ultimate trend rate is achieved
|
|
|
2026
|
|
|
|
2025
|
|
The
table below shows the estimated effect of a 1% increase in healthcare cost trend rate on the following:
|
|
2020
|
|
|
2019
|
|
Interest cost plus service cost
|
|
$
|
2
|
|
|
$
|
3
|
|
Accumulated postretirement healthcare obligation
|
|
$
|
59
|
|
|
$
|
64
|
|
The
table below shows the estimated effect of a 1% decrease in healthcare cost trend rate on the following:
|
|
2020
|
|
|
2019
|
|
Interest cost plus service cost
|
|
$
|
(2
|
)
|
|
$
|
(3
|
)
|
Accumulated postretirement healthcare obligation
|
|
$
|
(50
|
)
|
|
$
|
(53
|
)
|
The
healthcare obligation and funded status of this plan as of the fiscal years ended are as follows:
|
|
2020
|
|
|
2019
|
|
Change in accumulated postretirement healthcare obligation:
|
|
|
|
|
|
|
|
|
Healthcare obligation - beginning of year
|
|
$
|
586
|
|
|
$
|
517
|
|
Service cost
|
|
|
3
|
|
|
|
9
|
|
Interest cost
|
|
|
16
|
|
|
|
22
|
|
Actuarial gain
|
|
|
(8
|
)
|
|
|
44
|
|
Benefits paid
|
|
|
(9
|
)
|
|
|
(6
|
)
|
Healthcare obligation – end of year
|
|
$
|
588
|
|
|
$
|
586
|
|
|
|
|
|
|
|
|
|
|
Funded status of the plans
|
|
|
588
|
|
|
|
586
|
|
Unrecognized prior service costs
|
|
|
-
|
|
|
|
-
|
|
Unrecognized net actuarial gain
|
|
|
(66
|
)
|
|
|
(58
|
)
|
Unrecognized amounts recorded in other comprehensive income
|
|
|
66
|
|
|
|
58
|
|
Postretirement healthcare liability
|
|
$
|
588
|
|
|
$
|
586
|
|
Expected
payments for the postretirement benefits are as follows:
Fiscal Years
|
|
Postretirement Healthcare
Benefits
|
|
2021
|
|
$
|
66
|
|
2022
|
|
$
|
46
|
|
2023
|
|
$
|
21
|
|
2024
|
|
$
|
22
|
|
2025-2029
|
|
$
|
108
|
|
401(K)
Plan for Sales, Administrative, Supervisory and Certain Other Employees
During
the fiscal year ended November 3, 2006, we implemented a qualified 401(K) retirement plan (the “401K Plan”) for our
sales, administrative, supervisory and certain other employees. During fiscal years 2020 and 2019, we made total employer contributions
to the 401K Plan in the amounts of $754 and $722, respectively.
NOTE
4 - Income Taxes:
The
benefit on or provision for income taxes includes the following:
|
|
October 30, 2020
|
|
|
November 1, 2019
|
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(9,517
|
)
|
|
$
|
(177
|
)
|
State
|
|
|
135
|
|
|
|
342
|
|
|
|
|
(9,382
|
)
|
|
|
165
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
7,097
|
|
|
|
1,667
|
|
State
|
|
|
92
|
|
|
|
221
|
|
|
|
|
7,189
|
|
|
|
1,888
|
|
|
|
$
|
(2,193
|
)
|
|
$
|
2,053
|
|
The
total tax (benefit) provision differs from the expected amount computed by applying the statutory federal income tax rate to income
before income taxes as follows:
|
|
October 30, 2020
|
|
|
November 1, 2019
|
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
Provision for federal income taxes at the applicable statutory rate
|
|
$
|
1,052
|
|
|
$
|
1,790
|
|
Increase in provision resulting from state income taxes, net of federal income tax benefit
|
|
|
179
|
|
|
|
445
|
|
Change in federal rate – NOL carryback
|
|
|
(2,868
|
)
|
|
|
-
|
|
Research and development tax credit
|
|
|
(358
|
)
|
|
|
-
|
|
Non-taxable life insurance gain
|
|
|
(190
|
)
|
|
|
(140
|
)
|
Other, net
|
|
|
(8
|
)
|
|
|
(42
|
)
|
|
|
$
|
(2,193
|
)
|
|
$
|
2,053
|
|
Deferred
income taxes result from differences in the bases of assets and liabilities for tax and accounting purposes.
|
|
2020
|
|
|
2019
|
|
Receivables allowance
|
|
$
|
4
|
|
|
$
|
8
|
|
Returns allowance
|
|
|
70
|
|
|
|
160
|
|
Inventory packaging reserve
|
|
|
33
|
|
|
|
90
|
|
Inventory overhead capitalization
|
|
|
427
|
|
|
|
394
|
|
Employee benefits
|
|
|
525
|
|
|
|
467
|
|
Deferred payroll tax
|
|
|
290
|
|
|
|
-
|
|
Other
|
|
|
120
|
|
|
|
25
|
|
State taxes
|
|
|
(182
|
)
|
|
|
(281
|
)
|
Incentive compensation
|
|
|
1,387
|
|
|
|
1,794
|
|
Pension and health care benefits
|
|
|
6,752
|
|
|
|
5,604
|
|
Depreciation
|
|
|
(12,944
|
)
|
|
|
(6,310
|
)
|
Net operating loss carry-forward and credits
|
|
|
1,273
|
|
|
|
2,173
|
|
Valuation allowance established against state NOL
|
|
|
(77
|
)
|
|
|
(77
|
)
|
Deferred income tax assets, net
|
|
$
|
(2,322
|
)
|
|
$
|
4,047
|
|
Management
is required to evaluate whether a valuation allowance should be established against its deferred tax assets based on the consideration
of all available evidence using a “more likely than not” standard. Realization of deferred tax assets is dependent
upon taxable income in prior carryback years, estimates of future taxable income, tax planning strategies, and reversals of existing
taxable temporary differences.
As
of October 30, 2020, the Company did not have any valuation allowance against its federal net deferred tax assets.
Management
reevaluated the need for a valuation allowance at the end of fiscal 2020 and 2019 and determined that some of its California net
operating loss (“NOL”) may not be utilized. Therefore, a valuation allowance of $77 has been retained for such portion
of California NOL.
As
of October 30, 2020, the Company had NOL carryforwards of approximately $2,934 for federal and $4,233 for state
purposes. The federal loss will be carried forward indefinitely until it can be utilized against future taxable income. The state
loss carryforwards will expire at various dates from 2023 through 2040.
As
of October 30, 2020, we have provided a liability of $169 for unrecognized tax benefits related to various federal and state income
tax matters. None of this liability will reduce our effective income tax rate if the asset is recognized in future reporting periods.
We have not identified any new unrecognized tax benefits.
As
of November 1, 2019, we have provided a liability of $90 for unrecognized tax benefits related to various federal and state income
tax matters. None of this liability will reduce our effective income tax rate if the asset is recognized in future reporting periods.
We have not identified any new unrecognized tax benefits.
A
reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
|
|
October 30, 2020
|
|
|
November 1, 2019
|
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
90
|
|
|
$
|
155
|
|
Additions based on tax positions related to the current year
|
|
|
-
|
|
|
|
-
|
|
Additions for tax positions of prior years
|
|
|
-
|
|
|
|
-
|
|
Reductions for tax positions of prior years
|
|
|
79
|
|
|
|
(65
|
)
|
Settlements
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
169
|
|
|
$
|
90
|
|
We
recognize any future accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of October
30, 2020, we had approximately $21 in accrued interest and penalties which is included as a component of the $169 unrecognized
tax benefit noted above.
Our
federal income tax returns are open to audit under the statute of limitations for the fiscal years 2017 through 2019.
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 ended 2017 through 2019.
We
do not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months.
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 01, 2021. In addition, the CARES Act allows NOLs incurred in taxable years beginning after
December 31, 2017 and before January 01, 2021 to be carried back to each of the five preceding taxable years to generate a refund
of previously paid income taxes. The Company is currently evaluating the impact of various provisions of the CARES Act, but at
present, expects that the NOL carryback provision of the CARES Act would result in a material cash benefit to us. The Company
has filed a federal income tax return for tax year 2019 (fiscal year 2020) and carried back a taxable loss of $9,900 to tax years
2014 (fiscal year 2015) and 2015 (fiscal year 2016). Furthermore, the Company estimates additional taxable loss for tax year 2020
(current fiscal year 2021) which can be carried back to remaining taxable income of tax year 2015 (fiscal year 2016) and taxable
income of tax years 2016 (fiscal year 2017) and 2018 (fiscal year 2019).
On
December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Tax Act”). 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 2019
and 2020 under the CARES Act to pre- Tax Act years will generate an income tax benefit due to the differential in income tax rates.
Under
U.S. GAAP, specifically ASC Topic 740, Income Taxes, the tax effects of changes in tax laws must be recognized in the period
in which the law is enacted, or March 27, 2020, for the CARES Act. Thus, at the date of enactment, in the second quarter, the
Company recorded an income tax benefit of $1,100 which represented the impact of the carryback of NOL related to tax year 2019
(fiscal year 2020) which could be estimated with reasonable certainty at that time. The tax benefit
on account of the current year NOL carryback is recorded as a component of the annual effective tax rate per guidance provided
in ASC Topic 740.
The
effective tax rate was -47.2% and 24.0% for fiscal years 2020 and 2019, respectively. The effective tax rate for fiscal year 2020
was impacted by the rate differential on NOL carryback available under the CARES Act discussed in the paragraphs above. In addition,
the effective tax rates for fiscal years 2020 and 2019 were impacted by such items as non-deductible meals and entertainment,
non-taxable gains and losses on life insurance policies and state income taxes.
NOTE
5 - Line of Credit and Borrowing Agreement:
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 $7,500 at an interest rate equal to the bank’s prime rate or LIBOR plus 1.5%. We borrowed
$2,000 under this line of credit on November 24, 2019 and $2,500 on January 24, 2020 for a combined total of $4,500. We repaid
the balance on this line of credit with Wells Fargo Bank, N.A. on May 13, 2020 of $4,500 with the proceeds from the fifth borrowing
of $7,200 under the master collateral loan and security agreement with Wells Fargo Bank, N.A. described below. 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, a minimum net income after tax and total capital expenditures less than $7,500. The Company was in compliance with all
covenants as of October 30, 2020. Subsequent to October 30, 2020, we borrowed $2,000 under the line of credit on December 2, 2020.
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. Pursuant to the Wells Fargo Loan Agreement, we borrowed
the following amounts.
Type
and Number (1)
|
|
Date
Funds Received
|
|
|
Rate
|
|
|
Amount
|
|
|
Payment
Amount and 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.
|
|
|
October 30, 2020
|
|
|
November 1, 2019
|
|
Secured equipment notes payable to Wells Fargo Bank, N.A. collateralized by equipment for the new Chicago processing facility.
|
|
$
|
29,122
|
|
|
$
|
13,747
|
|
Less current portion of notes payable
|
|
|
(4,430
|
)
|
|
|
(1,943
|
)
|
Total long-term notes payable
|
|
$
|
24,692
|
|
|
$
|
11,804
|
|
The
Wells Fargo Loan Agreement as amended, contains various affirmative and negative covenants that limit the use of funds and define
other provisions of the loan. The main financial covenants are listed below:
|
●
|
Total
Liabilities divided by Tangible Net Worth not greater than 2.5 to 1.0 at each fiscal quarter,
|
|
●
|
Quick
Ratio not less than 1.0 to 1.0 at each fiscal quarter end, and
|
|
●
|
Fixed
Charge Coverage Ratio not less than 1.25 to 1.0 as of each fiscal quarter end, determined on a trailing 4-quarter basis.
|
Aggregate contractual
maturities of debt in future fiscal years are as follows:
Fiscal
Years
|
|
Debt
Payable
|
|
2021
|
|
$
|
4,429
|
|
2022
|
|
$
|
4,599
|
|
2023
|
|
$
|
4,775
|
|
2024
|
|
$
|
4,958
|
|
2025
|
|
$
|
5,148
|
|
2026-2027
|
|
$
|
5,213
|
|
The
Company was in compliance with all covenants under the Wells Fargo Loan Agreement as of October 30, 2020.
NOTE
6- Contingencies and Commitments:
The
Company leases warehouse and/or office facilities throughout the United States through 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 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 leases three long-haul trucks received during fiscal year 2019. The six-year leases for these trucks expire in 2025. Amortization
of equipment under capital lease was $71 in 2020. The Company leased one long-haul truck for $40 received during fiscal
year 2020, and that lease term is two years.
The
Company performed a detailed analysis and determined that the only indication of a long-term lease was Hogshed Ventures, LLC.
A right-of-use asset and corresponding liability for warehouse storage space was recorded for $1,091 for Hogshed
Ventures, LLC for 40th Street 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.
This
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:
Fiscal Year
|
|
Financing
Obligations
|
|
2022
|
|
$
|
504
|
|
2023
|
|
|
550
|
|
2024
|
|
|
405
|
|
2025
|
|
|
102
|
|
2026
|
|
|
59
|
|
Later Years
|
|
|
-
|
|
Total minimum lease payments(a)
|
|
$
|
1,620
|
|
Less: Amount representing executory costs
|
|
|
(82
|
)
|
Less: Amount representing interest(b)
|
|
|
(14
|
)
|
Present value of future minimum lease payments(c)
|
|
$
|
1,524
|
|
(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 Note 2, as current and noncurrent obligations under capital leases of $144 and $289, respectively and right-of-use
assets of $372 and $719, respectively.
NOTE
7 - Segment Information:
We
have two reportable operating segments, Frozen Food Products (the processing and distribution of frozen 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 expenses
include corporate accounting, information systems, human resource and marketing management at the corporate level. These activities
are allocated to each operating segment based on revenues and/or actual usage.
The
following segment information is for the fiscal years ended October 30, 2020 (52 weeks) and November 1, 2019 (52 weeks):
Segment Information
|
2020
|
|
Frozen Food
Products
|
|
|
Snack Food
Products
|
|
|
Other
|
|
|
Totals
|
|
Net sales
|
|
$
|
41,241
|
|
|
$
|
156,729
|
|
|
$
|
-
|
|
|
$
|
197,970
|
|
Cost of products sold
|
|
|
27,687
|
|
|
|
110,765
|
|
|
|
-
|
|
|
|
138,452
|
|
Gross margin
|
|
|
13,554
|
|
|
|
45,964
|
|
|
|
-
|
|
|
|
59,518
|
|
SG&A
|
|
|
12,566
|
|
|
|
41,880
|
|
|
|
-
|
|
|
|
54,446
|
|
(Gain) on sale of property, plant and equipment
|
|
|
-
|
|
|
|
(58
|
)
|
|
|
-
|
|
|
|
(58
|
)
|
Income before taxes
|
|
$
|
988
|
|
|
$
|
4,142
|
|
|
$
|
-
|
|
|
$
|
5,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
11,490
|
|
|
$
|
115,657
|
|
|
$
|
28,136
|
|
|
$
|
155,283
|
|
Additions to PP&E
|
|
$
|
284
|
|
|
$
|
24,198
|
|
|
$
|
-
|
|
|
$
|
24,482
|
|
Segment Information
|
2019
|
|
Frozen Food
Products
|
|
|
Snack Food
Products
|
|
|
Other
|
|
|
Totals
|
|
Net sales
|
|
$
|
51,234
|
|
|
$
|
137,551
|
|
|
$
|
-
|
|
|
$
|
188,785
|
|
Cost of products sold
|
|
|
33,444
|
|
|
|
93,677
|
|
|
|
-
|
|
|
|
127,121
|
|
Gross margin
|
|
|
17,790
|
|
|
|
43,874
|
|
|
|
-
|
|
|
|
61,664
|
|
SG&A
|
|
|
14,867
|
|
|
|
37,970
|
|
|
|
-
|
|
|
|
52,837
|
|
(Gain) loss on sale of property, plant and equipment
|
|
|
(4
|
)
|
|
|
294
|
|
|
|
-
|
|
|
|
290
|
|
Income before taxes
|
|
$
|
2,927
|
|
|
$
|
5,610
|
|
|
$
|
-
|
|
|
$
|
8,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
12,198
|
|
|
$
|
90,221
|
|
|
$
|
21,037
|
|
|
$
|
123,456
|
|
Additions to PP&E
|
|
$
|
654
|
|
|
$
|
25,085
|
|
|
$
|
-
|
|
|
$
|
25,739
|
|
The
following information further disaggregates our sales to customers by major distribution channel and customer type for the fiscal
years ended October 30, 2020 and November 1, 2019, respectively.
2020
Distribution Channel
|
|
Retail (a)
|
|
|
Foodservice (b)
|
|
|
Totals
|
|
Direct store delivery
|
|
$
|
117,386
|
|
|
$
|
-
|
|
|
$
|
117,386
|
|
Direct customer warehouse
|
|
|
39,343
|
|
|
|
-
|
|
|
|
39,343
|
|
Total Snack Food Products
|
|
|
156,729
|
|
|
|
-
|
|
|
|
156,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributors
|
|
|
9,639
|
|
|
|
31,602
|
|
|
|
41,241
|
|
Total Frozen Food Products
|
|
|
9,639
|
|
|
|
31,602
|
|
|
|
41,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Sales
|
|
$
|
166,368
|
|
|
$
|
31,602
|
|
|
$
|
197,970
|
|
(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.
2019
Distribution
Channel
|
|
Retail
(a)
|
|
|
Foodservice
(b)
|
|
|
Totals
|
|
Direct
store delivery
|
|
$
|
100,936
|
|
|
$
|
-
|
|
|
$
|
100,936
|
|
Direct
customer warehouse
|
|
|
36,615
|
|
|
|
-
|
|
|
|
36,615
|
|
Total
Snack Food Products
|
|
|
137,551
|
|
|
|
-
|
|
|
|
137,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributors
|
|
|
6,915
|
|
|
|
44,319
|
|
|
|
51,234
|
|
Total
Frozen Food Products
|
|
|
6,915
|
|
|
|
44,319
|
|
|
|
51,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Net Sales
|
|
$
|
144,466
|
|
|
$
|
44,319
|
|
|
$
|
188,785
|
|
(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
8 - Unaudited Interim Financial Information:
Not
applicable for a smaller reporting company.