Bridgford Foods (BRID) - 2019 Q3 - Quarterly Report

Part I. Financial Information Financial Statements Presents unaudited condensed consolidated financial statements, detailing balance sheets, operations, equity, and cash flows, reflecting asset growth and increased net income Condensed Consolidated Balance Sheets Total assets increased to $120.2 million, driven by property, plant, and equipment, while liabilities and equity also rose Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | July 12, 2019 (unaudited) | November 2, 2018 | | :--- | :--- | :--- | | Total Assets | $120,234 | $101,494 | | Property, plant and equipment, net | $49,644 | $32,638 | | Total Liabilities | $49,353 | $35,814 | | Long-term notes payable - equipment | $12,460 | $0 | | Total Shareholders' Equity | $70,881 | $65,680 | Condensed Consolidated Statements of Operations Net sales and income increased for the 36-week period, while the 12-week period saw sales growth but a slight income decrease Statement of Operations Summary (in thousands, except per share data) | Period | Net Sales | Gross Margin | Net Income | Basic EPS | | :--- | :--- | :--- | :--- | :--- | | 36 Weeks Ended | | | | | | July 12, 2019 | $129,321 | $43,470 | $5,201 | $0.57 | | July 13, 2018 | $117,560 | $38,453 | $4,455 | $0.49 | | 12 Weeks Ended | | | | | | July 12, 2019 | $42,837 | $13,415 | $1,105 | $0.12 | | July 13, 2018 | $38,468 | $12,434 | $1,448 | $0.16 | Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity increased to $70.9 million, solely driven by net income for the thirty-six-week period - For the 36 weeks ended July 12, 2019, total shareholders' equity increased by $5.2 million, from $65.7 million to $70.9 million, solely due to the net income earned during the period[18] Condensed Consolidated Statements of Cash Flows Operating activities provided $5.0 million, investing activities used $19.8 million, and financing provided $14.4 million, resulting in a net cash decrease Cash Flow Summary for 36 Weeks Ended (in thousands) | Cash Flow Activity | July 12, 2019 | July 13, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,042 | $5,000 | | Net cash used in investing activities | $(19,782) | $(3,702) | | Net cash provided by (used in) financing activities | $14,378 | $(82) | | Net (decrease) increase in cash | $(362) | $1,216 | - Additions to property, plant, and equipment significantly increased to $19.8 million in the 2019 period from $9.7 million in the 2018 period[23] - The company took on new bank borrowings of $17.0 million in the 2019 period, a significant financing activity compared to none in the prior year period[23] Notes to Condensed Consolidated Financial Statements Notes detail customer and segment concentration, new equipment financing for the Chicago facility, and prior year tax rate impact Customer Concentration (36 Weeks Ended July 12, 2019) | Customer | % of Sales | % of Accounts Receivable | | :--- | :--- | :--- | | Wal-Mart | 35.9% | 33.3% | | Dollar General | 10.7% | 25.1% | Segment Sales (36 Weeks Ended July 12, 2019, in thousands) | Segment | Sales | Income Before Taxes | | :--- | :--- | :--- | | Frozen Food Products | $34,691 | $1,575 | | Snack Food Products | $94,630 | $5,390 | - On December 26, 2018, the company entered into a master collateral loan agreement with Wells Fargo for up to $15 million in equipment financing for its new Chicago processing facility. As of July 12, 2019, the company had borrowed the full $15 million[58][119] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses sales growth driven by volume and price, improved gross margin from lower costs, increased expenses, and liquidity from operations and new financing Results of Operations (12-Week Period) Consolidated net sales increased 11.4% for the 12-week period, but gross margin and net income declined despite segment growth Consolidated Net Sales Change (12-Week Period) | Component | % Change | $ Change (in thousands) | | :--- | :--- | :--- | | Selling price per pound | 2.1% | $853 | | Unit sales volume in pounds | 11.1% | $4,528 | | Total Increase in net sales | 11.4% | $4,369 | - Frozen Food Products segment sales increased 17.7%, driven by higher volume in the shelf-stable sandwich business and price increases[82] - Snack Food Products segment sales increased 9.2%, primarily due to new product offerings like smokehouse sausage sticks[83][84] - Selling, general and administrative (SG&A) expenses increased by 10.1% ($1.1 million), with significant changes in gains on life insurance policies (decrease), healthcare costs (increase), and pension expense (decrease)[89] Results of Operations (36-Week Period) Consolidated net sales rose 10.0% for the 36-week period, with improved gross margin and increased net income despite a prior-year non-recurring gain Consolidated Net Sales Change (36-Week Period) | Component | % Change | $ Change (in thousands) | | :--- | :--- | :--- | | Selling price per pound | 2.5% | $3,178 | | Unit sales volume in pounds | 8.7% | $10,906 | | Total Increase in net sales | 10.0% | $11,761 | - The cost of significant meat commodities for the Snack Food segment decreased by approximately $2.1 million compared to the prior-year period, contributing to improved gross margin[100][102] - SG&A expenses increased by 6.7% ($2.3 million), primarily driven by a $2.3 million increase in wages and bonus expense from higher profit-sharing accruals[104] - The 2018 period's net income included a non-recurring pre-tax gain of $6.0 million on the sale of real property, making the year-over-year increase in 2019's operating profitability more significant[110][113] Liquidity and Capital Resources Liquidity is driven by operating cash flow and a new $15 million equipment loan, funding significant capital expenditures for the Chicago facility Cash Flow Summary (36 Weeks Ended, in thousands) | Activity | July 12, 2019 | July 13, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,042 | $5,000 | | Net cash used in investing activities | $(19,782) | $(3,702) | | Net cash provided by financing activities | $14,378 | $(82) | - Additions to property, plant, and equipment totaled $19.8 million, a significant increase from $9.7 million in the prior year period, with major investments in building improvements ($6.9M), temperature control ($3.3M), and packaging lines ($2.3M)[118] - The company entered into a $15 million equipment financing agreement with Wells Fargo, borrowing the full amount in two tranches to purchase equipment for its new Chicago facility. The company was in compliance with all loan covenants as of July 12, 2019[119][120] Quantitative and Qualitative Disclosures about Market Risk This section is not applicable as the company is classified as a smaller reporting company - Disclosure about market risk is not applicable to a smaller reporting company[133] Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal controls over financial reporting - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures are effective as of the end of the period covered by the report[134] - There have been no changes in internal controls over financial reporting during the fiscal quarter ended July 12, 2019, that have materially affected, or are reasonably likely to materially affect, internal controls[139] Part II. Other Information Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K - There have been no material changes to the risk factors as previously disclosed in the Annual Report[140] Exhibits Lists exhibits filed with Form 10-Q, including SOX certifications by officers and XBRL data files - Exhibits filed include certifications by the Chairman of the Board (Principal Executive Officer) and the Chief Financial Officer as required by Sarbanes-Oxley Sections 302 and 906[142][143] - The filing includes XBRL Instance, Schema, Calculation, Definition, Label, and Presentation documents[144][145][146]