Bridgford Foods (BRID) - 2022 Q3 - Quarterly Report

Part I. Financial Information Financial Statements The unaudited financial statements reflect a substantial increase in net income and equity, driven by a significant gain on a property sale Condensed Consolidated Balance Sheets Total assets increased while total liabilities decreased, primarily due to a rise in cash and a reduction in long-term debt Balance Sheet Highlights (in thousands) | Balance Sheet Highlights (in thousands) | July 8, 2022 | October 29, 2021 | | :--- | :--- | :--- | | Total Current Assets | $99,908 | $70,257 | | Total Assets | $180,594 | $156,790 | | Total Current Liabilities | $40,225 | $25,619 | | Total Liabilities | $63,206 | $81,812 | | Total Shareholders' Equity | $117,388 | $74,978 | - Total assets increased primarily due to a rise in cash and cash equivalents, from zero to $20.1 million[12] - Total liabilities decreased significantly, driven by a reduction in long-term notes payable from $36.0 million to $4.2 million[12] Condensed Consolidated Statements of Operations Profitability improved dramatically, swinging from a net loss to a significant net income due to a large gain on a property sale Statement of Operations (in thousands) | Statement of Operations (in thousands) | 36 Weeks Ended July 8, 2022 | 36 Weeks Ended July 9, 2021 | | :--- | :--- | :--- | | Net Sales | $183,591 | $161,708 | | Gross Margin | $50,096 | $37,149 | | Gain on sale of property | $57,663 | $378 | | Operating Income (Loss) | $62,630 | $(3,498) | | Net Income (Loss) | $42,410 | $(1,719) | | Basic Earnings (Loss) Per Share | $4.67 | $(0.19) | - The company's profitability dramatically improved, swinging from a net loss to a significant net income, primarily driven by a $57.7 million gain on the sale of property, plant, and equipment[14] Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity grew significantly, almost entirely driven by the net income recorded during the period - Total shareholders' equity increased from $75.0 million at the end of fiscal 2021 to $117.4 million as of July 8, 2022, an increase almost entirely attributable to the net income of $42.4 million[20] Condensed Consolidated Statements of Cash Flows A large cash inflow from investing activities, due to a property sale, was primarily used for debt repayment in financing activities Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | 36 Weeks Ended July 8, 2022 | 36 Weeks Ended July 9, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,988) | $(571) | | Net cash provided by (used in) investing activities | $56,922 | $(6,714) | | Net cash (used in) provided by financing activities | $(32,200) | $2,458 | | Net increase (decrease) in cash | $19,734 | $(4,827) | - Investing activities provided a significant cash inflow of $56.9 million, primarily from the $60.0 million proceeds from the sale of property, with a large portion used to repay $31.9 million in bank borrowings[25][151] Notes to Condensed Consolidated Financial Statements Notes reveal significant customer concentration, details of a major property sale, and segment-level sales performance - The company has significant customer concentration, with Walmart and Dollar General accounting for a large portion of sales and accounts receivable[35] Customer Concentration (36 Weeks Ended July 8, 2022) | Customer Concentration (36 Weeks Ended July 8, 2022) | % of Sales | % of Accounts Receivable | | :--- | :--- | :--- | | Walmart | 30.8% | 19.8% | | Dollar General | 18.2% | 32.3% | - On June 1, 2022, the company completed the sale of a property in Chicago for $60 million, resulting in a gain of $57.7 million, with proceeds used to repay approximately $18.7 million of a bridge loan and $18.0 million of its revolving credit facility[83][84] - The company operates in two segments, with the Snack Food Products segment generating $147.0 million in sales and the Frozen Food Products segment generating $36.6 million for the 36 weeks ended July 8, 2022[58][63] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting inflationary pressures, a property sale gain, and improved liquidity from debt reduction COVID-19 and Business Impact The company faces ongoing pandemic-related challenges, including increased costs, supply chain issues, and a demand shift to foodservice - The company continues to face challenges from the pandemic, including increased operating costs and supply chain volatility, with commodity costs increasing by approximately $13.0 million in the first 36 weeks of fiscal 2022[88][93] - A notable shift in demand from retail to foodservice channels has occurred as pandemic-related restrictions have eased, benefiting the Frozen Food Products segment[92] Results of Operations for the Twelve Weeks Ended July 8, 2022 Net sales increased due to higher selling prices, with significant volume recovery in the Frozen Food Products segment Consolidated Net Sales Change (12 Weeks) | Consolidated Net Sales Change (12 Weeks) | % Change | $ Change (in thousands) | | :--- | :--- | :--- | | Selling price per pound | 10.8% | $6,505 | | Unit sales volume in pounds | -4.8% | $(2,904) | | Total Increase in Net Sales | 5.3% | $2,981 | - The Frozen Food Products segment saw a substantial 40.8% increase in net sales, driven by a 33.3% rise in unit sales volume as the foodservice channel recovered[117] - The Snack Food Products segment experienced a slight 0.9% decrease in net sales, as an 11.0% increase in selling price was more than offset by an 11.8% decline in sales volume[118] - Consolidated gross margin improved from 21.2% to 28.6% year-over-year for the 12-week period[119] - Selling, general and administrative (SG&A) expenses increased by 7.6% to $15.2 million, primarily due to higher wages, advertising, and fuel costs[124] Results of Operations for the Thirty-Six Weeks Ended July 8, 2022 Net sales grew significantly over 36 weeks, driven by price increases and volume growth in the Frozen Food Products segment Consolidated Net Sales Change (36 Weeks) | Consolidated Net Sales Change (36 Weeks) | % Change | $ Change (in thousands) | | :--- | :--- | :--- | | Selling price per pound | 11.8% | $20,425 | | Unit sales volume in pounds | 2.1% | $3,590 | | Total Increase in Net Sales | 13.5% | $21,883 | - The Frozen Food Products segment's net sales grew by 38.3%, driven by a 31.4% increase in volume and an 8.0% increase in price[130] - The Snack Food Products segment's net sales increased by 8.7%, with a 12.6% price increase offsetting a 4.0% volume decline[131] - Consolidated gross margin for the 36-week period improved to 27.3% from 23.0% in the prior year, despite a $13.0 million increase in commodity costs[134][135] Liquidity and Capital Resources Liquidity was substantially improved by a major property sale, enabling significant repayment of debt facilities - The company's liquidity position was significantly strengthened by the $60 million in proceeds from the sale of its Chicago property on June 1, 2022[143] - Proceeds from the sale were used to pay off the $18.0 million balance on the revolving credit facility and to repay and terminate an $18.7 million bridge loan[143][84] Debt Summary (in thousands) | Debt Summary (in thousands) | July 8, 2022 | October 29, 2021 | | :--- | :--- | :--- | | Revolving credit facility | $0 | $12,000 | | Equipment notes & Bridge loan | $5,159 | $25,069 | | Total Debt | $5,159 | $37,069 | - As of July 8, 2022, the company had $59.9 million of net working capital and $15.0 million available under its revolving line of credit[143][144] Quantitative and Qualitative Disclosures about Market Risk This section is omitted as the company qualifies as a smaller reporting company - The company has omitted this section as it is not applicable to a smaller reporting company[163] Controls and Procedures Management concluded that disclosure controls and procedures are effective, with no material changes to internal controls during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of July 8, 2022[164] - No changes in internal controls over financial reporting occurred during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[170] Part II. Other Information Risk Factors No material changes to previously disclosed risk factors are reported, though uncertainty from the COVID-19 pandemic remains - There have been no material changes to the risk factors as previously disclosed in the Annual Report[171] - Potential future risks related to COVID-19 include shifts in demand, market volatility, supply chain constraints, and impacts on the ability to operate production facilities[173] Exhibits This section lists filed exhibits, including officer certifications required by the Sarbanes-Oxley Act and Inline XBRL documents - The report includes certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[175] - Inline XBRL instance, schema, and related linkbase documents are filed as exhibits with this report[175]