Bridgford Foods (BRID) - 2020 Q4 - Annual Report

Part I Business Bridgford Foods operates in frozen and snack food segments, with snack foods comprising 79% of 2020 sales, facing COVID-19 impacts and high customer concentration with Wal-Mart® and Dollar General® - The COVID-19 pandemic shifted demand from foodservice to retail, boosting Snack Food volume but negatively impacting Frozen Food sales[14][16] Sales by Business Segment (as a percentage of consolidated sales) | Business Segment | 2020 | 2019 | | :--- | :--- | :--- | | Frozen Food Products | 21% | 27% | | Snack Food Products | 79% | 73% | | Total | 100% | 100% | - Wal-Mart® and Dollar General® accounted for 36.9% and 13.6% of fiscal year 2020 revenues, respectively, indicating high customer concentration[46] - Operations are subject to extensive regulation and inspection by the USDA and FDA regarding processing, packaging, and labeling standards[41] - As of October 30, 2020, the company employed 563 individuals, with approximately 35% under collective bargaining agreements[50] Risk Factors The company faces material risks including volatile raw material prices, extensive government regulation, dependence on key customers and personnel, significant influence from the Bridgford family's majority ownership, and ongoing COVID-19 impacts - Fluctuations in pork, beef, and flour raw material prices pose risks, as selling price adjustments do not align with commodity market volatility[57] - Revenue is highly concentrated with Wal-Mart® (36.9%) and Dollar General® (13.6%) of fiscal 2020 sales, making the loss of either a significant profitability risk[62] - The Bridgford family's beneficial ownership of over 80% of the company's stock grants substantial control and allows for "controlled company" exemption from NASDAQ governance rules[63][64] - The COVID-19 pandemic continues to pose risks, including demand shifts, supply chain constraints, and potential asset impairments, impacting future operations and financial condition[69] Unresolved Staff Comments This section is not applicable to the company - There are no unresolved staff comments[70] Properties The company owns eight properties across four states for processing, warehousing, distribution, and administration, with one Chicago property currently pending sale Owned Properties | Location | Approx. Sq. Footage | Approx. Acreage | | :--- | :--- | :--- | | Anaheim, California | 100,000 | 5.0 | | Dallas, Texas | 94,000 | 4.0 | | Dallas, Texas | 30,000 | 2.0 | | Dallas, Texas | 16,000 | 1.0 | | Dallas, Texas | 3,200 | 1.5 | | Statesville, North Carolina | 42,000 | 8.0 | | Chicago, Illinois (sale pending) | 156,000 | 1.5 | | Chicago, Illinois | 177,000 | 8.0 | Legal Proceedings No material legal proceedings were pending against the company as of the filing date, though ordinary course claims may arise - No material legal proceedings were pending against the company as of October 30, 2020, or the report filing date[74] Mine Safety Disclosures This section is not applicable to the company - This item is not applicable[75] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under "BRID", with 718 shareholders of record as of January 12, 2021, and no share repurchases in fiscal year 2020 - The company's common stock trades on the Nasdaq Global Market under the symbol "BRID"[78] - No common stock shares were repurchased in fiscal year 2020, leaving 120,113 shares authorized for repurchase as of October 30, 2020[81][83] Selected Financial Data This section is not applicable as the company is a smaller reporting company - This item is not applicable for a smaller reporting company[84] Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal year 2020 saw consolidated net sales increase by 4.9% to $198.0 million, driven by snack food growth offsetting frozen food decline, while gross margin decreased and net income rose due to a CARES Act tax benefit Consolidated Net Sales Change (FY 2020 vs. FY 2019) | Component | Impact on Net Sales (%) | | :--- | :--- | | Selling price per pound | -1.0% | | Unit sales volume in pounds | 5.3% | | Returns activity | 0.5% | | Promotional activity | 0.1% | | Total Increase in net sales | 4.9% | - Frozen Food Products segment sales decreased 19.5% due to a 23.5% drop in unit sales volume, primarily from institutional customers, driven by COVID-19 demand shifts to retail[89] - Snack Food Products segment sales increased 13.9%, primarily from a 16.6% rise in unit sales volume via the direct store delivery channel[90] - Consolidated gross margin declined from 32.7% in FY 2019 to 30.1% in FY 2020, mainly due to increased commodity, production labor, and inbound freight costs[92] - The effective income tax rate was -42.7% in FY 2020, compared to 24.0% in FY 2019, primarily due to the net operating loss carryback provisions available under the CARES Act[102] - An agreement was made to sell a Chicago property for $60 million, with $1.35 million in earnest money received by October 30, 2020[104] Cash Flow Summary (in thousands) | Activity | FY 2020 | FY 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $9,917 | $7,247 | | Net cash used in investing activities | ($23,318) | ($25,678) | | Net cash provided by financing activities | $15,350 | $13,730 | Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company is a smaller reporting company - This item is not applicable for a smaller reporting company[131] Consolidated Financial Statements and Supplementary Data Required consolidated financial statements are provided in Part IV, Item 15 of this report - The consolidated financial statements are located in Part IV, Item 15 of this Form 10-K[132] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure This section is not applicable to the company - This item is not applicable[133] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of October 30, 2020, with the company exempt from external audit requirements as a smaller reporting company - Management concluded the company's disclosure controls and procedures were effective as of fiscal year 2020 end[134] - No material changes occurred in internal control over financial reporting during the last fiscal quarter[139] - Management assessed and believes internal control over financial reporting was effective for the fiscal year ended October 30, 2020[145] - The company is exempt from external audit requirements for internal financial reporting controls under the Dodd-Frank Act[142] Other Information This section is not applicable to the company - This item is not applicable[146] Part III Directors, Executive Officers and Corporate Governance Required information on directors, executive officers, and corporate governance is incorporated by reference from the company's Proxy Statement - Required information will be included in the Proxy Statement and is incorporated by reference[149] Executive Compensation Information regarding executive compensation is incorporated by reference from the company's Proxy Statement - Required information will be included in the Proxy Statement and is incorporated by reference[150] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership is incorporated by reference from the company's Proxy Statement, and the company has no equity compensation plans - Required information will be included in the Proxy Statement and is incorporated by reference[151] - The company has no compensation plans authorizing the issuance of its equity securities[152] Certain Relationships and Related Transactions, and Director Independence The company is a "controlled company" under NASDAQ rules due to the Bridgford family's ownership, with several related party transactions disclosed - The company is a "controlled company" under NASDAQ rules due to approximately 80% beneficial ownership by Bridgford Industries Incorporated[154] - The general legal counsel's firm received approximately $292,700 for legal services in fiscal year 2020[155] - Former director Allan Bridgford Jr. received approximately $169,000 for consulting services and accrued approximately $279,400 in profit sharing in fiscal year 2020[156] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's Proxy Statement - Required information will be included in the Proxy Statement and is incorporated by reference[158] Part IV Exhibits and Financial Statement Schedules This section lists the financial statements and all exhibits filed with or incorporated by reference into the report - This section provides a list of the financial statements and exhibits included in the Form 10-K filing[164][165] Form 10-K Summary This section is not applicable to the company - This item is not applicable[167] Consolidated Financial Statements Audited consolidated financial statements for fiscal years 2020 and 2019 are presented, showing total assets growing to $155.3 million and net income rising to $7.3 million, with detailed notes on policies and impacts Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, as of October 30, 2020, and November 1, 2019 Consolidated Balance Sheet Highlights (in thousands) | Account | Oct 30, 2020 | Nov 1, 2019 | | :--- | :--- | :--- | | Total Current Assets | $68,750 | $52,768 | | Property, plant and equipment, net | $73,332 | $54,346 | | Total Assets | $155,283 | $123,456 | | Total Current Liabilities | $26,203 | $19,940 | | Total Liabilities | $84,037 | $56,972 | | Total Shareholders' Equity | $71,246 | $66,484 | Consolidated Statements of Operations Details the company's revenues, expenses, and net income for the fiscal years ended October 30, 2020, and November 1, 2019 Consolidated Statement of Operations (in thousands) | Account | FY 2020 | FY 2019 | | :--- | :--- | :--- | | Net sales | $197,970 | $188,785 | | Cost of products sold | $138,452 | $127,121 | | Gross margin | $59,518 | $61,664 | | Selling, general and administrative expenses | $54,446 | $52,837 | | Income before taxes | $5,130 | $8,537 | | (Benefit on) provision for income taxes | ($2,193) | $2,053 | | Net income | $7,323 | $6,484 | | Basic earnings per share | $0.81 | $0.71 | Consolidated Statements of Cash Flows Summarizes the cash inflows and outflows from operating, investing, and financing activities for the fiscal years ended October 30, 2020, and November 1, 2019 Consolidated Statement of Cash Flows (in thousands) | Cash Flow Activity | FY 2020 | FY 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $9,917 | $7,249 | | Net cash used in investing activities | ($23,318) | ($25,678) | | Net cash provided by financing activities | $15,350 | $13,730 | | Net increase (decrease) in cash | $1,949 | ($4,699) | | Cash at beginning of year | $3,478 | $8,179 | | Cash at end of year | $5,427 | $3,478 | Notes to Consolidated Financial Statements Provides detailed explanations and supplementary information for the figures presented in the consolidated financial statements - Subsequent to fiscal year-end, the Chicago property sale closing was extended to August 31, 2021, and an additional $2.0 million was borrowed under the line of credit on December 2, 2020[199][202] - The CARES Act enabled a $9.9 million net operating loss carryback from tax year 2019, yielding a significant tax benefit and expected cash refund[271][272] Segment Performance (FY 2020, in thousands) | Segment | Net Sales | Gross Margin | Income Before Taxes | | :--- | :--- | :--- | :--- | | Frozen Food Products | $41,241 | $13,554 | $988 | | Snack Food Products | $156,729 | $45,964 | $4,142 | | Total | $197,970 | $59,518 | $5,130 | - The company borrowed $33.45 million from Wells Fargo Bank, N.A. under a master collateral loan agreement for equipment financing for its new Chicago facility[277][278]