BRIDGFORD FOODS CORP

Previous wording

Current accounting principles require that our pension benefit obligation be measured using an internal rate of return (“IRR”) analysis to be included in the discount rate selection process. The IRR calculation for the Retirement Plan for Employees of Bridgford Foods Corporation is measured annually and based on the Citigroup Pension Discount Rate. The Citigroup Pension Discount Rate as of April 30, 2024, was 5.56% as compared to 5.96% as of November 3, 2023. The discount rate applied can significantly affect the value of the projected benefit obligation as well as the net periodic benefit cost.

Current wording

Current accounting principles require that our pension benefit obligation be measured using an internal rate of return (“IRR”) analysis to be included in the discount rate selection process. The IRR calculation for the Retirement Plan for Employees of Bridgford Foods Corporation is measured annually and based on the Citigroup Pension Discount Rate. The Citigroup Pension Discount Rate as of July 31, 2024, was 5.22% as compared to 5.96% as of November 3, 2023. The discount rate applied can significantly affect the value of the projected benefit obligation as well as the net periodic benefit cost.

Previous wording

The table below shows customers that accounted for more than 20% of consolidated accounts receivable (“AR”) or 10% of consolidated sales for the twenty-four weeks ended April 19, 2024, and April 14, 2023, respectively.

Current wording

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 12, 2024, and July 7, 2023, respectively.

Previous wording

Net sales decreased by $8,196 (14.8%) to $47,314 in the second twelve-week period of the 2024 fiscal year compared to the same twelve-week period in fiscal year 2023. The changes in net sales were comprised as follows:

Current wording

Net sales decreased by $4,926 (9.1%) to $49,263 in the third twelve-week period of the 2024 fiscal year compared to the same twelve-week period in fiscal year 2023. The changes in net sales were comprised as follows:

Previous wording

Net sales for the Frozen Food Products segment increased due to higher unit sales volume in pounds and to a lesser extent higher selling prices per pound compared to the same period in the prior year. Other institutional Frozen Food Products dollar sales, including sheet dough and rolls, increased 11% and retail dollar sales volume increased by 1%. We believe demand increased due to continued willingness by consumers to visit foodservice establishments. Returns activity decreased compared to the same twelve-week period in the 2023 fiscal year. Promotional activity was lower during the fiscal year 2024 period as a percentage of sales but higher in absolute dollars.

Current wording

Net sales for the Frozen Food Products segment increased due to higher selling prices per pound partially offset by lower unit sales volume in pounds compared to the same period in the prior year. Other institutional Frozen Food Products dollar sales, including sheet dough and rolls, increased 11% and retail dollar sales volume decreased by 9%. We believe sales increased due to continued willingness by consumers to visit foodservice establishments despite inflationary conditions. Returns activity decreased slightly compared to the same twelve-week period in the 2023 fiscal year. Promotional activity was higher during the fiscal year 2024 period.

Previous wording

Net sales of Snack Food Products decreased due to lower unit sales volume in pounds through our direct-store-delivery distribution channel and lower selling prices per pound during the second quarter of fiscal year 2024. We believe demand decreased primarily due to inflationary pressures on consumer spending habits as consumers have pulled back on meat product purchases. The weighted average selling price per pound decreased compared to the same twelve-week period in the prior fiscal year due to changes in product mix. Returns activity increased compared to the same twelve-week period in the 2023 fiscal year. Promotional activity was lower than the same twelve-week period in fiscal year 2023.

Current wording

Net sales of Snack Food Products decreased due to lower unit sales volume in pounds through our direct-store-delivery distribution channel and lower selling prices per pound during the third quarter of fiscal year 2024. We believe demand decreased primarily due to inflationary pressures on consumer spending habits as consumers have pulled back on snack foods including meat product purchases. The weighted average selling price per pound decreased compared to the same twelve-week period in the prior fiscal year due to changes in product mix. Returns activity decreased compared to the same twelve-week period in the 2023 fiscal year. Promotional activity was higher than the same twelve-week period in fiscal year 2023 due to programs related to changes in packaging sizes.

Previous wording

Cost of products sold decreased by $3,465 (8.7%) to $36,588 in the second twelve-week period of the 2024 fiscal year compared to the same twelve-week period in fiscal year 2023. The gross margin decreased to 22.7% in the second twelve-weeks of fiscal year 2024 compared to 27.8% in the same twelve-week period in fiscal year 2023.

Current wording

Cost of products sold decreased by $859 (2.2%) to $38,039 in the third twelve-week period of the 2024 fiscal year compared to the same twelve-week period in fiscal year 2023. The gross margin decreased to 22.8% in the third twelve-weeks of fiscal year 2024 compared to 28.2% in the same twelve-week period in fiscal year 2023.

Previous wording

Cost of products sold in the Frozen Food Products segment increased by $18 (0.2%) to $9,496 in the second twelve-week period of the 2024 fiscal year compared to the same twelve-week period in fiscal year 2023. The cost of purchased flour decreased approximately $134 in the second twelve-week period of fiscal year 2024 compared to the same twelve-week period in fiscal year 2023. Gross overhead increased as a result of continued upward pressures on input costs impacted by inflation. Higher unit sales volume in pounds contributed to the increase in cost of goods sold partially offset by lower commodity costs.

Current wording

Cost of products sold in the Frozen Food Products segment decreased by $139 (1.6%) to $8,670 in the third twelve-week period of the 2024 fiscal year compared to the same twelve-week period in fiscal year 2023. The cost of purchased flour decreased based on global economic conditions for approximately $114 in the third twelve-week period of fiscal year 2024 compared to the same twelve-week period in fiscal year 2023. The gross margin increased to 24.7% in the third twelve-weeks of fiscal year 2024 compared to 18.8% in the same twelve-week period in fiscal year 2023. Gross overhead increased as a result of continued upward pressures on input costs impacted by inflation.

Previous wording

Cost of products sold in the Snack Food Products segment decreased by $3,483 (11.4%) to $27,092 in the second twelve-week period of the 2024 fiscal year compared to the same twelve-week period in fiscal year 2023 due to lower sales volume in our direct store delivery distribution channel. The cost of significant meat commodities increased approximately $658 in the second twelve-week period of fiscal year 2024 compared to the same period in fiscal year 2023. We increased our net realizable value reserve by $327 during the twelve weeks ended April 19, 2024, in consideration of higher meat commodity costs and lower gross margins. We maintain a net realizable reserve of $385 on products as of April 19, 2024, after determining that the market value on some meat products could not cover the costs associated with completion and sale of the product.

Current wording

Cost of products sold in the Snack Food Products segment decreased by $720 (2.4%) to $29,369 in the third twelve-week period of the 2024 fiscal year compared to the same twelve-week period in fiscal year 2023 due to lower sales volume in our direct store delivery distribution channel. The cost of significant meat commodities increased partially due to a limited supply of cattle ready for market by approximately $1,171 in the third twelve-week period of fiscal year 2024 compared to the same period in fiscal year 2023. The gross margin decreased to 22.2% in the third twelve-weeks of fiscal year 2024 compared to 30.6% in the same twelve-week period in fiscal year 2023. We increased our net realizable value reserve by $991 during the twelve weeks ended July 12, 2024, in consideration of higher meat commodity costs and lower gross margins. We maintain a net realizable reserve of $1,343 on products as of July 12, 2024, after determining that the market value on some meat products could not cover the costs associated with completion and sale of the product.

Previous wording

Selling, general and administrative expenses (“SG&A”) decreased by $967 (6.5%) to $13,974 in the second twelve-week period of fiscal year 2024 compared to the same twelve-week period in the prior fiscal year. The table below summarizes the significant expense increases (decreases) included in this category:

Current wording

Selling, general and administrative expenses (“SG&A”) decreased by $212 (1.4%) to $14,445 in the third twelve-week period of fiscal year 2024 compared to the same twelve-week period in the prior fiscal year. The table below summarizes the significant expense increases (decreases) included in this category:

Previous wording

Lower sales commissions due to lower sales volume in pounds resulted in lower wages and bonus expenses in the second twelve weeks of the 2024 fiscal year compared to the same period in the prior year. Costs for product advertising decreased mainly as a result of lower payments under brand licensing agreements in the Snack Food Products segment during the twelve weeks ended April 19, 2024. Rent for storage units that house inventory increased due to inflationary price pressure. None of the changes individually or as a group of expenses in “Other SG&A” were significant enough to merit separate disclosure. The major components comprising the increase of “Other SG&A” expenses were higher vehicle maintenance costs, healthcare costs, legal fees and consulting fees partially offset by lower fuel and workers’ compensation costs.

Current wording

Lower sales commissions due to lower sales volume in pounds resulted in lower wages and bonus expenses in the third twelve weeks of the 2024 fiscal year compared to the same period in the prior fiscal year. The increase in the provision for bad debt was mainly the result of recent slowing in certain customer payments beyond terms. The decrease in insurance expenses was driven by exiting unfavorable insurance policies early to take advantage of more competitive pricing. Outside consulting costs increased due to higher legal fees, advisory services, inspection and product testing fees. Rental costs for storage units that house inventory decreased due to a sell down of inventory to meet lower demand in the direct store delivery route system. None of the changes individually or as a group of expenses in “Other SG&A” were significant enough to merit separate disclosure. The major components comprising the increase of “Other SG&A” expenses were higher product advertising and legal expenses partially offset by lower repairs and maintenance costs on production equipment.

Previous wording

SG&A expenses in the Frozen Food Products segment decreased by $20 (0.6%) to $3,224 in the second twelve-week period of fiscal year 2024 compared to the same twelve-week period in the prior fiscal year. The overall decrease in SG&A expenses was due to lower product advertising and lower building and equipment repairs and maintenance.

Current wording

SG&A expenses in the Frozen Food Products segment increased by $163 (5.6%) to $3,063 in the third twelve-week period of fiscal year 2024 compared to the same twelve-week period in the prior fiscal year. The overall increase in SG&A expenses was due to an increase in product advertising and healthcare expenses.

Previous wording

SG&A expenses in the Snack Food Products segment decreased by $947 (8.1%) to $10,750 in the second twelve-week period of fiscal year 2024 compared to the same twelve-week period in the prior fiscal year. Most of the decrease was due to lower wages and bonuses, decreased fees paid under brand licensing agreements, business travel, postage expenses and workers’ compensation costs partially offset by higher vehicle repairs, property insurance expenses and fuel costs.

Current wording

SG&A expenses in the Snack Food Products segment decreased by $375 (3.2%) to $11,382 in the third twelve-week period of fiscal year 2024 compared to the same twelve-week period in the prior fiscal year. Most of the decrease was due to lower wages and bonuses and decreased fees paid under brand licensing agreements partially offset by higher product advertising and healthcare expenses.

Previous wording

We recorded a benefit for income taxes of $877 for the twelve-week period ended April 19, 2024, and a provision for income taxes of $164 for the twelve-week period ended April 14, 2023, related to federal and state taxes, based on the Company’s expected annual effective tax rate. The effective income tax rate differed from the applicable mixed statutory rate of approximately 26.4% due to non-deductible meals and entertainment, non-taxable gains and losses on life insurance policies, and state income taxes.

Current wording

We recorded a benefit for income taxes of $752 for the twelve-week period ended July 12, 2024, and a provision for income taxes of $258 for the twelve-week period ended July 7, 2023, related to federal and state taxes, based on the Company’s expected annual effective tax rate. The effective income tax rate differed from the applicable mixed statutory rate of approximately 26.4% due to non-deductible meals and entertainment, non-taxable gains and losses on life insurance policies, and state income taxes.

Previous wording

Results of Operations for the Twenty-Four Weeks Ended April 19, 2024, and April 14, 2023

Current wording

Results of Operations for the Thirty-Six Weeks Ended July 12, 2024, and July 7, 2023

Previous wording

Net sales decreased by $14,976 (12.8%) to $102,156 in the twenty-four-week period ended April 19, 2024, compared to the same period twenty-four-week period in fiscal year 2023. The changes in net sales were comprised as follows:

Current wording

Net sales decreased by $19,902 (11.6%) to $151,419 in the thirty-six-week period ended July 12, 2024, compared to the same period thirty-six-week period in fiscal year 2023. The changes in net sales were comprised as follows:

Previous wording

The increase in net sales for the twenty-four-week period ended April 19, 2024, primarily relates to higher selling prices per pound coupled with a higher unit sales volume in pounds. The increase in net sales was primarily driven by an increase in volume to institutional customers and an increase in selling prices due to price increases implemented during the fourth quarter of fiscal year 2023. Other institutional Frozen Food Products sales, including sheet dough and rolls, increased 13% by volume while retail sales volume decreased by 11%. Returns activity decreased compared to the same twenty-four-week period in the 2023 fiscal year. Promotional activity was higher as a percentage of sales.

Current wording

The increase in net sales for the thirty-six-week period ended July 12, 2024 primarily relates to higher selling prices per pound coupled with a higher unit sales volume in pounds. The increase in net sales was primarily driven by an increase in volume to institutional customers and an increase in selling prices due to price increases implemented during the fourth quarter of fiscal year 2023. Other institutional Frozen Food Products sales, including sheet dough and rolls, increased 7% by volume while retail sales volume was flat. Returns activity decreased compared to the same thirty-six-week period in the 2023 fiscal year. Promotional activity was higher as a percentage of sales.

Previous wording

Net sales of Snack Food Products decreased due to lower unit sales volume in pounds through our direct-store-delivery distribution channel and lower selling prices per pound during the twenty-four weeks ended April 19, 2024. We believe demand decreased primarily due to inflationary pressures on consumer spending habits as consumers have pulled back on meat product purchases. The weighted average selling price per pound decreased compared to the same twenty-four-week period in the prior fiscal year due to changes in product mix. Returns activity compared to the same twenty-four-week-period in the 2023 fiscal year. Promotional activity during the fiscal year 2024 period was higher as a percentage of sales but lower in absolute dollars.

Current wording

Net sales of Snack Food Products decreased due to lower unit sales volume in pounds through our direct-store-delivery distribution channel and lower selling prices per pound during the thirty-six weeks period ended July 12, 2024. We believe demand decreased primarily due to inflationary pressures on consumer spending habits as consumers have pulled back on meat product purchases. The weighted average selling price per pound decreased compared to the same thirty-six-week period in the prior fiscal year due to changes in product mix. Returns activity decreased as a percent of sales but was lower in absolute dollars compared to the same thirty-six-week-period in the 2023 fiscal year. Promotional activity increased during the first thirty-six-week period in fiscal year 2024 compared to the same period in the prior fiscal year.

Previous wording

Cost of products sold decreased by $9,217 (10.9%) to $75,392 in the twenty-four-week period ended April 19, 2024, compared to the same twenty-four-week period in fiscal year 2023. The gross margin decreased to 26.2% during the fiscal year 2024 period compared to 27.8% in the comparable fiscal year.

Current wording

Cost of products sold decreased by $10,076 (8.2%) to $113,431 in the thirty-six-week period ended July 12, 2024 compared to the same thirty-six-week period in fiscal year 2023. The gross margin decreased to 25.1% during the fiscal year 2024 period compared to 27.9% in the comparable prior fiscal year period.

Previous wording

Cost of products sold in the Frozen Food Products segment decreased by $441 (2.2%) to $19,782 in the first twenty-four-week period of the 2024 fiscal year compared to the same twenty-four-week period in fiscal year 2023. Changes in the product mix and lower commodity costs were the primary contributing factors to this decrease. The cost of purchased flour decreased approximately $273 in the first twenty-four-week period of fiscal year 2024 compared to the same twenty-four-week period in fiscal year 2023.

Current wording

Cost of products sold in the Frozen Food Products segment decreased by $579 (2.0%) to $28,453 in the first thirty-six-week period of the 2024 fiscal year compared to the same thirty-six-week period in fiscal year 2023. Changes in the product mix and lower commodity costs were the primary contributing factors to this decrease. The cost of purchased flour decreased approximately $387 in the first thirty-six-week period of fiscal year 2024 compared to the same thirty-six-week period in fiscal year 2023.

Previous wording

Cost of products sold in the Snack Food Products segment decreased by $8,776 (13.6%) to $55,610 in the first twenty-four-week period of the 2024 fiscal year compared to the same twenty-four-week period in fiscal year 2023 due to lower sales volume in our direct store delivery distribution channel. The decrease in cost of goods sold due to the volume decrease was partially offset by an increase in the cost of meat commodities of approximately $2,880 in the twenty-four-week period of fiscal year 2024 compared to the same period in fiscal year 2023 due to higher pressure on the commodity market. We increased our net realizable value reserve by $60 during the twenty-four weeks ended April 19, 2024, in consideration of higher meat commodity costs and lower gross margins. We maintain a net realizable reserve of $385 on products as of April 19, 2024, after determining that the market value on some meat products could not cover the costs associated with completion and sale of the product.

Current wording

Cost of products sold in the Snack Food Products segment decreased by $9,497 (10.1%) to $84,978 in the first thirty-six-week period of the 2024 fiscal year compared to the same thirty-six-week period in fiscal year 2023 due to lower sales volume in our direct store delivery distribution channel. The decrease in cost of products sold was primarily due to a decrease in sales volume was partially offset by an increase in the cost of meat commodities of approximately $4,050 in the thirty-six-week period of fiscal year 2024 compared to the same period in fiscal year 2023. We increased our net realizable value reserve by $1,050 during the thirty-six weeks ended July 12, 2024 in consideration of higher meat commodity costs and lower gross margins. We maintain a net realizable reserve of $1,343 on products as of July 12, 2024 after determining that the market value on some meat products could not cover the costs associated with completion and sale of the product.

Previous wording

Selling, general and administrative expenses decreased by $1,734 (5.6%) to $29,001 in the twenty-four-week period ended April 19, 2024, compared to the same twenty-four-week period in the prior fiscal year. The table below summarizes the significant expense increases (decreases) included in this category:

Current wording

Selling, general and administrative expenses decreased by $1,946 (4.3%) to $43,446 in the thirty-six-week period ended July 12, 2024 compared to the same thirty-six-week period in the prior fiscal year. The table below summarizes the significant expense increases (decreases) included in this category:

Previous wording

Lower sales commissions resulted in lower wages and bonus expenses in the first twenty-four weeks of the 2024 fiscal year compared to the same period in the prior year. Costs for product advertising decreased mainly as a result of lower payments under brand licensing agreements in the Snack Food Products segment during the twenty-four weeks ended April 19, 2024. The decrease in the provision forbad debtwas mainly the result of recoveries of losses on older balances. The increase in insurance expenses was driven by higher premiums on property insurance and increased reserves on aged claims. Rent for storage units that house inventory increased due to inflationary price pressure. Vehicle repairs and maintenance on vehicles have increased compared to the prior year period mainly due to an aging fleet. Outside consulting costs increased due to higher advisory services, inspection and product testing fees. Workers’ compensation costs decreased due to favorable trends in claims experience in the current fiscal year. None of the changes individually or as a group of expenses in “Other SG&A” were significant enough to merit separate disclosure. The major components comprising the increase of “Other SG&A” expenses were higher travel expenses and overnight postage and lower other income.

Current wording

Lower sales commissions resulted in lower wages and bonus expenses in the first thirty-six weeks of the 2024 fiscal year compared to the same period in the prior fiscal year. Costs for product advertising decreased mainly as a result of lower payments under brand licensing agreements in the Snack Food Products segment during the thirty-six weeks ended July 12, 2024. Outside consulting costs increased due to higher legal fees, advisory services, inspection and product testing fees. Healthcare costs have increased due to unfavorable claim trends. Vehicle repairs and maintenance on vehicles have increased compared to the prior fiscal year period mainly due to an aging fleet. None of the changes individually or as a group of expenses in “Other SG&A” were significant enough to merit separate disclosure. The major components comprising the increase of “Other SG&A” expenses were higher provision for bad debt, higher travel expenses and lower other income.

Previous wording

SG&A expenses in the Frozen Food Products segment decreased by $222 (3.2%) to $6,666 in the first twenty-four-week period of fiscal year 2024 compared to the same twenty-four-week period in the prior fiscal year. The overall decrease in SG&A expenses was due to lower vehicle repairs and maintenance, fuel and computer maintenance and workers’ compensation costs partially offset by higher healthcare costs.

Current wording

SG&A expenses in the Frozen Food Products segment decreased by $57 (0.6%) to $9,729 in the first thirty-six-week period of fiscal year 2024 compared to the same thirty-six-week period in the prior fiscal year. The overall decrease in SG&A expenses was due to lower vehicle repairs and maintenance as a result of shifting away from Company-leased vehicles towards less costly transportation methods such as common carriers, lower fuel and computer maintenance and workers’ compensation costs partially offset by higher healthcare costs.

Previous wording

SG&A expenses in the Snack Food Products segment decreased by $1,512 (6.3%) to $22,335 in the first twenty-four-week period of fiscal year 2024 compared to the same twenty-four-week period in the prior fiscal year. Most of the decrease was due to the significantly lower unit sales volume in pounds and the corresponding decrease in wages and bonus.

Current wording

SG&A expenses in the Snack Food Products segment decreased by $1,889 (5.3%) to $33,717 in the first thirty-six-week period of fiscal year 2024 compared to the same thirty-six-week period in the prior fiscal year. Most of the decrease was due to the significantly lower unit sales volume in pounds and the corresponding decrease in wages and bonuses.

Previous wording

Income tax for the twenty-four weeks ended April 19, 2024, and April 14, 2023, respectively, was as follows:

Current wording

Income tax for the thirty-six weeks ended July 12, 2024, and July 7, 2023, respectively, was as follows:

Previous wording

We recorded a benefit for income taxes of $367 for the twenty-four-week period ended April 19, 2024, and a provision for income taxes of $562 for the twenty-four-week period ended April 14, 2023, related to federal and state taxes, based on the Company’s expected annual effective tax rate. The effective income tax rate differed from the applicable mixed statutory rate of approximately 26.4% due to non-deductible meals and entertainment, non-taxable gains and losses on life insurance policies and state income taxes.

Current wording

We recorded a benefit for income taxes of $1,119 for the thirty-six-week period ended July 12, 2024, and a provision for income taxes of $820 for the thirty-six-week period ended July 7, 2023, related to federal and state taxes, based on the Company’s expected annual effective tax rate. The effective income tax rate differed from the applicable mixed statutory rate of approximately 26.4% due to non-deductible meals and entertainment, non-taxable gains and losses on life insurance policies and state income taxes.

Previous wording

On November 30, 2023, we entered into a fifth amendment to the credit agreement with Wells Fargo Bank, N.A., and also executed a new revolving line of credit note pursuant to the amendment. Under the terms of this amendment and the revolving line of credit note, we may borrow up to $7,500 from time to time up to November 30, 2024. As of April 19, 2024, we had $1,061 of current debt on equipment loans, $66,238 of net working capital and $7,500 available under our revolving line of credit with Wells Fargo Bank, N.A. Refer to Note 6 to the Condensed Consolidated Financial Statements included within this Report for further information. The Company was in compliance with all loan covenants as of April 19, 2024.

Current wording

The principal source of operating cash flows is cash receipts from the sale of our products, net of costs to manufacture, store, market and deliver such products. We normally fund our operations from cash balances and cash flow generated from operations. Additionally, we have maintained a revolving line of credit with Wells Fargo Bank, N.A. pursuant to the terms of the credit agreement dated March 1, 2018, as amended to date. On November 30, 2023, we entered into a fifth amendment to the credit agreement with Wells Fargo Bank, N.A., and also executed a new revolving line of credit note pursuant to the amendment. Under the terms of this amendment and the revolving line of credit note, we may borrow up to $7,500 from time to time up to November 30, 2024. As of July 12, 2024, we had $1,075 of current debt on equipment loans, $64,180 of net working capital and $7,500 available under our revolving line of credit with Wells Fargo Bank, N.A. Refer to Note 6 to the Condensed Consolidated Financial Statements included within this Report for further information. The Company was in compliance with all loan covenants as of July 12, 2024.

Previous wording

All of our operating segments have been impacted by inflation, including higher costs for labor, freight and specific materials. We expect this trend to continue through the remainder of fiscal year 2024. Additionally, commodity costs have and may continue to fluctuate due to both political and economic conditions, including the ongoing conflict between Ukraine and Russia. Despite higher commodity costs like we experienced in fiscal year 2022 and again in the first and second quarters of fiscal 2024, we may not be able to increase our product prices in a timely manner or sufficiently to offset such increased commodity or other costs due to consumer price sensitivity, pricing in relation to competitors and the reluctance of retailers to accept the price increase. Instances of higher interest rates, general price inflation or deflation, raw materials costs, labor shortages or supply chain issues could adversely affect the Company’s financial results and its liquidity. Higher product prices could potentially lower demand for our product and decrease volume. Management believes there are various options available to generate additional liquidity to repay debt or fund operations such as mortgaging real estate, should that be necessary. Our ability to increase liquidity will depend upon, among other things, our business plans and the performance of operating divisions and economic conditions of capital markets. If we are unable to increase liquidity through mortgaging real estate or additional borrowing, or generate positive cash flow necessary to fund operations, we may not be able to compete successfully, which could negatively impact our business, operations, and financial condition. With the cash expected to be generated from the Company’s operations, we anticipate that we will maintain sufficient liquidity to operate our business for at least the next twelve months. We will continue to monitor the impact of inflation and interest rate volatility on our liquidity and, if necessary, take action to preserve liquidity and ensure that our business can operate during these uncertain times.

Current wording

All of our operating segments have been impacted by inflation, including higher costs for labor, freight and specific materials related to product manufacturing and delivery. We expect this trend to continue through the remainder of fiscal year 2024. Additionally, commodity costs, including meat and flour costs, have and may continue to fluctuate due to both political and economic conditions, including the ongoing conflict between Ukraine and Russia. Despite higher commodity costs like we experienced in fiscal year 2022 and again in the first and second quarters of fiscal 2024, we may not be able to increase our product prices in a timely manner or sufficiently to offset such increased commodity or other costs due to consumer price sensitivity, pricing in relation to competitors and the reluctance of retailers to accept the price increase. Instances of higher interest rates, general price inflation or deflation, raw materials costs, labor shortages or supply chain issues could adversely affect the Company’s financial results and its liquidity. Higher product prices could potentially lower demand for our product and decrease volume. Management believes there are various options available to generate additional liquidity to repay debt or fund operations such as mortgaging real estate, should that be necessary. Our ability to increase liquidity will depend upon, among other things, our business plans and the performance of operating divisions and economic conditions of capital markets. If we are unable to increase liquidity through mortgaging real estate or additional borrowing, or generate positive cash flow necessary to fund operations, we may not be able to compete successfully, which could negatively impact our business, operations, and financial condition. With the cash expected to be generated from the Company’s operations, we anticipate that we will maintain sufficient liquidity to operate our business for at least the next twelve months. We will continue to monitor the impact of inflation and interest rate volatility on our liquidity and, if necessary, take action to preserve liquidity and ensure that our business can operate during these uncertain times.

Previous wording

Cash flows from operating activities for the twenty-four weeks ended:

Current wording

Cash flows from operating activities for the thirty-six weeks ended:

Previous wording

For the twenty-four weeks ended April 19, 2024, net cash provided by operating activities was $1,002, $295 less cash used than during the same period in fiscal year 2023. The decrease in net cash provided by operating activities primarily relates to a decrease in accounts receivable of $2,962 and a decrease in inventory of $1,298, partially offset by a net loss of $960 and an increase in prepaid expenses and other current assets of $1,373. During the twenty-four-week period ended April 19, 2024, we did not contribute towards our defined benefit pension plan. Plan funding strategies may be adjusted depending upon economic conditions, investment options, tax deductibility, or recent legislative changes in funding requirements.

Current wording

For the thirty-six weeks ended July 12, 2024, net cash provided by operating activities was $3,202, $3,107 less cash used than during the same period in fiscal year 2023. The increase in net cash provided by operating activities primarily relates to a decrease in inventory of $5,661 and a decrease in accounts receivable of $2,809, partially offset by a net loss of $2,730, an increase in refundable income taxes of $2,452 and an increase in other non-current assets of $2,704. During the thirty-six-week period ended July 12, 2024, we did not contribute towards our defined benefit pension plan. Plan funding strategies may be adjusted depending upon economic conditions, investment options, tax deductibility, or recent legislative changes in funding requirements.

Previous wording

Our cash conversion cycle (defined as days of inventory and trade receivables less days of trade payables outstanding) was equal to 91 days for the twenty-four-week period ended April 19, 2024. The increase in the cash conversion cycle from 80 days for the twenty-four-week period ended April 14, 2023 to 91 days was mainly due to higher average days in inventory and higher days sales outstanding. We have increased credit terms to Wal-Mart from 45 days to 65 days during the first quarter of fiscal year 2024 with no changes to terms during the second quarter of fiscal year 2024.

Current wording

Our cash conversion cycle (defined as days of inventory and trade receivables less days of trade payables outstanding) was equal to 85 days for the thirty-six-week period ended July 12, 2024. The increase in the cash conversion cycle from 84 days for the thirty-six-week period ended July 7, 2023 was minimal and overall was consistent with performance in the prior fiscal year period.

Previous wording

Cash flows from investing activities for the twenty-four weeks ended:

Current wording

Cash flows from investing activities for the thirty-six weeks ended:

Previous wording

The table below highlights additions to property, plant and equipment for the twenty-four weeks ended:

Current wording

The table below highlights additions to property, plant and equipment for the thirty-six weeks ended:

Previous wording

Cash flows from financing activities for the twenty-four weeks ended:

Current wording

Cash flows from financing activities for the thirty-six weeks ended:

Previous wording

On November 30, 2023, we entered into a fifth amendment to the credit agreement with Wells Fargo Bank, N.A. dated March 1, 2018, as amended, and also executed a revolving line of credit note pursuant to the amendment. The revolving line of credit note replaces the existing note that expired by its terms on November 30, 2023. Under the terms of this amendment and the revolving line of credit note, we may borrow up to $7,500 from time to time up to November 30, 2024, at an interest rate equal to (a) the daily simple secured overnight financing rate plus 2.0%, or if unavailable, (b) the prime rate, in each case as determined by the bank. The line of credit has an unused commitment fee of 0.35% of the available loan amount, payable on a quarterly basis. Amounts may be repaid and reborrowed during the term of the note. Accrued interest is payable on the first day of each month and the outstanding principal balance and remaining interest are due and payable on November 30, 2024.

Current wording

On November 30, 2023, we entered into a fifth amendment to the credit agreement with Wells Fargo Bank, N.A. dated March 1, 2018, as amended, and also executed a revolving line of credit note pursuant to the amendment. The revolving line of credit note replaces the existing note that expired by its terms on November 30, 2023. Under the terms of this amendment and the revolving line of credit note, we may borrow up to $7,500 from time to time up to November 30, 2024, at an interest rate equal to (a) the daily simple secured overnight financing rate plus 2.0%, or if unavailable, or (b) the prime rate, in each case as determined by the bank. The line of credit has an unused commitment fee of 0.35% of the available loan amount, payable on a quarterly basis. Amounts may be repaid and reborrowed during the term of the note. Accrued interest is payable on the first day of each month and the outstanding principal balance and remaining interest are due and payable on November 30, 2024.

Previous wording

On each of December 26, 2018, April 18, 2019, December 19, 2019, March 5, 2020, and April 17, 2020, we entered into master collateral loan and security agreements with Wells Fargo Bank, N.A. Pursuant to the Wells Fargo Loan Agreements (collectively referred to as the “Wells Fargo Loan Agreements”), we owe the amounts as stated as equipment notes in the table below.

Current wording

On each of December 26, 2018, April 18, 2019, December 19, 2019, March 5, 2020, and April 17, 2020, we entered into master collateral loan and security agreements with Wells Fargo Bank, N.A. (collectively referred to as the “Wells Fargo Loan Agreements”).

Previous wording

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (ASC 326), which provides guidance on measurement of credit losses on financial instruments. This ASU adds a current expected credit loss impairment model to GAAP that is based on expected losses rather than incurred losses whereby a broader range of reasonable and supportable information is required to be utilized in order to derive credit loss estimates. The effective date of the new guidance as amended by ASU No. 2019-10 is fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of ASU No. 2019 did not have a material or significant impact on its Consolidated Financial Statements as it has been our policy to estimate and record credit losses on trade accounts receivable.

Current wording

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (ASC 326), which provides guidance on measurement of credit losses on financial instruments. This ASU adds a current expected credit loss impairment model to GAAP that is based on expected losses rather than incurred losses whereby a broader range of reasonable and supportable information is required to be utilized in order to derive credit loss estimates. The effective date of the new guidance as amended by ASU No. 2019-10 is fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of ASU No. 2019 did not have a material or significant impact on the Company’s Consolidated Financial Statements as it has been our policy to estimate and record credit losses on trade accounts receivable.