What changed in this filing

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Item 1. Financial Statements

2020-11-10 compared with 2020-08-12 · 141 added, 99 removed, 374 unchanged (39% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 28, 2020 (UNAUDITED) AND MARCH 29, 2020

SEPTEMBER 27, 2020 (UNAUDITED) AND MARCH 29, 2020

(amounts in thousands, except share and per share amounts)

June 28, 2020

September 27, 2020

March 29, 2020

1 unchanged sentence

Cash and cash equivalents

Accounts receivable (net of allowances of $587 at June 28, 2020 and $530 at March 29, 2020):

Accounts receivable (net of allowances of $684 at September 27, 2020 and $530 at March 29, 2020):

Due from factor

22 unchanged sentences

Accrued royalties

Dividends payable

Income taxes payable

Dividend payable

Operating lease liabilities, current

Unearned revenue

Other accrued liabilities

8 unchanged sentences

Common stock - $0.01 par value per share;

Authorized 40,000,000 shares at June 28, 2020 and March 29, 2020;

Issued 12,623,301 shares at June 28, 2020 and 12,603,301 shares at March 29, 2020

Authorized 40,000,000 shares at September 27, 2020 and March 29, 2020;

Issued 12,664,753 shares at September 27, 2020 and 12,603,301 shares at March 29, 2020

Additional paid-in capital

Treasury stock - at cost - 2,436,494 shares at June 28, 2020 and March 29, 2020

Treasury stock - at cost - 2,436,494 shares at September 27, 2020 and March 29, 2020

Retained Earnings

5 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

THREE-MONTH PERIODS ENDED JUNE 28, 2020 AND JUNE 30, 2019

THREE AND SIX-MONTH PERIODS ENDED SEPTEMBER 27, 2020 AND SEPTEMBER 29, 2019

(amounts in thousands, except per share amounts)

Three-Month Periods Ended

June 28, 2020

June 30, 2019

Six-Month Periods Ended

September 27, 2020

September 29, 2019

September 27, 2020

September 29, 2019

Cost of products sold

3 unchanged sentences

Interest expense - net of interest income

Gain on sale of property, plant and equipment

Income before income tax expense

7 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

THREE-MONTH PERIODS ENDED JUNE 28, 2020 AND JUNE 30, 2019

THREE AND SIX-MONTH PERIODS ENDED SEPTEMBER 27, 2020 AND SEPTEMBER 29, 2019

Common Shares

Treasury Shares

Number of Shares

Retained Earnings

Shareholders' Equity

Shareholders'

(Dollar amounts in thousands)

Three-Month Periods

Balances - June 30, 2019

Issuance of shares

Stock-based compensation

Dividend declared on common stock - $0.08 per share

Balances - September 29, 2019

Balances - June 28, 2020

Issuance of shares

Stock-based compensation

Dividend declared on common stock - $0.08 per share

Balances - September 27, 2020

Six-Month Periods

Balances - March 31, 2019

Issuance of shares

Stock-based compensation

1 unchanged sentence

Dividends declared on common stock - $0.16 per share

Balances - June 30, 2019

Balances - September 29, 2019

Balances - March 29, 2020

1 unchanged sentence

Stock-based compensation

Balances - June 28, 2020

Dividend declared on common stock - $0.08 per share

Balances - September 27, 2020

See notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE-MONTH PERIODS ENDED JUNE 28, 2020 AND JUNE 30, 2019

SIX-MONTH PERIODS ENDED SEPTEMBER 27, 2020 AND SEPTEMBER 29, 2019

(amounts in thousands)

Three-Month Periods Ended

June 28, 2020

June 30, 2019

Six-Month Periods Ended

September 27, 2020

September 29, 2019

Operating activities:

4 unchanged sentences

Deferred income taxes

Gain on sale of property, plant and equipment

Reserve for unrecognized tax liabilities

9 unchanged sentences

Capital expenditures for property, plant and equipment

Proceeds from sale of property, plant and equipment

Net cash used in investing activities

Financing activities:

3 unchanged sentences

Purchase of treasury stock

Issuance of common stock

Dividends paid

13 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE-MONTH PERIODS ENDED JUNE 28, 2020 AND JUNE 30, 2019

FOR THE THREE AND SIX-MONTH PERIODS ENDED SEPTEMBER 27, 2020 AND SEPTEMBER 29, 2019

Note 1 – Summary of Significant Accounting Policies

4 unchanged sentences

References herein to GAAP are to topics within the FASB Accounting Standards Codification (the “FASB ASC”), which the FASB periodically revises through the issuance of an Accounting Standards Update (“ASU”) and which has been established by the FASB as the authoritative source for GAAP recognized by the FASB to be applied by nongovernmental entities.

In the opinion of management, the interim unaudited consolidated financial statements contained herein include all adjustments necessary to present fairly the financial position of the Company as of June 28, 2020 and the results of its operations and cash flows for the periods presented.

In the opinion of management, the interim unaudited consolidated financial statements contained herein include all adjustments necessary to present fairly the financial position of the Company as of September 27, 2020 and the results of its operations and cash flows for the periods presented.

Such adjustments include normal, recurring accruals, as well as the elimination of all significant intercompany balances and transactions.

Operating results for the three-month period ended June 28, 2020 are not necessarily indicative of the results that may be expected by the Company for its fiscal year ending March 28, 2021.

Operating results for the three and six-month periods ended September 27, 2020 are not necessarily indicative of the results that may be expected by the Company for its fiscal year ending March 28, 2021.

For further information, refer to the Company’s consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended March 29, 2020.

1 unchanged sentence

References herein to “fiscal year 2021” or “2021” represent the 52-week period ending March 28, 2021 and references herein to “fiscal year 2020” or “2020” represent the 52-week period ended March 29, 2020.

Reclassifications:

The Company has classified certain prior year information to conform to the amounts presented in the current year.

None of the changes impact the Company’s previously reported financial position or results of operations.

Use of Estimates :

13 unchanged sentences

Costs associated with advertising on websites such as Facebook and Google and which are associated with the Company’s online business are recorded as incurred.

Advertising expense is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income and amounted to $345,000 and $284,000 for the three months ended June 28, 2020 and June 30, 2019, respectively.

Advertising expense is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income and amounted to $314,000 and $260,000 for the three months ended September 27, 2020 and September 29, 2019, respectively, and amounted to $659,000 and $544,000 for the six months ended September 27, 2020 and September 29, 2019, respectively.

Revenue Recognition:

24 unchanged sentences

Credit Concentration:

The Company’s accounts receivable as of June 28, 2020 amounted to $15.1 million, net of allowances of $587,000.

Of this amount, $14.5 million was due from CIT under the factoring agreements and $6.2 million was due from CIT as a negative balance outstanding under the revolving line of credit.

The Company’s accounts receivable as of September 27, 2020 amounted to $18.8 million, net of allowances of $684,000.

Of this amount, $17.9 million was due from CIT under the factoring agreements;

an additional amount of $6.8 million was due from CIT as a negative balance outstanding under the revolving line of credit.

The combined amount of $24.7 million represents the maximum loss that the Company could incur if CIT failed completely to perform its obligations under the factoring agreements and the revolving line of credit.

The Company’s accounts receivable at March 29, 2020 amounted to $17.8 million, net of allowances of $530,000.

Of this amount, $17.1 million was due from CIT under the factoring agreements, which amount represents the maximum loss that the Company could incur if CIT failed completely to perform its obligations under the factoring agreements.

Unearned Revenue :

Unearned revenue reflecting payments from customers that were received before the products ordered were received by the customers was $524,000 and $155,000 as of June 28, 2020 and March 29, 2020, respectively.

Of this amount, $17.1 million was due from CIT under the factoring agreements.

Other Accrued Liabilities :

An amount of $465,000 was recorded as other accrued liabilities as of September 27, 2020.

Of this amount, $359,000 reflected unearned revenue recorded for payments from customers that were received before the products ordered were received by the customers.

An amount of $352,000 was recorded as other accrued liabilities as of March 29, 2020.

Of this amount, $155,000 reflected unearned revenue recorded for payments from customers that were received before the products ordered were received by the customers.

Segment and Related Information:

1 unchanged sentence

These products consist of infant and toddler bedding, bibs, soft bath products, disposable products, developmental and bath toys and accessories.

Net sales of bedding, blankets and accessories and net sales of bibs, bath, developmental toy, feeding, baby care and disposable products for the three-month periods ended June 28, 2020 and June 30, 2019 are as follows (in thousands):

Net sales of bedding, blankets and accessories and net sales of bibs, bath, developmental toy, feeding, baby care and disposable products for the three and six-month periods ended September 27, 2020 and September 29, 2019 are as follows (in thousands):

Three-Month Periods Ended

June 28, 2020

June 30, 2019

Six-Month Periods Ended

September 27, 2020

September 29, 2019

September 27, 2020

September 29, 2019

Bedding, blankets and accessories

1 unchanged sentence

Total net sales

Invento ry Valuation:

Inventory Valuation:

The preparation of the Company's financial statements requires careful determination of the appropriate value of the Company's inventory balances.

13 unchanged sentences

These royalty amounts are accrued based upon historical sales rates adjusted for current sales trends by customers.

Royalty expense is included in cost of products sold in the accompanying unaudited consolidated statements of income and amounted to $1.2 million and $881,000 for the three-month periods ended June 28, 2020 and June 30, 2019, respectively.

Royalty expense is included in cost of products sold in the accompanying unaudited condensed consolidated statements of income and amounted to $1.6 million and $1.3 million for the three months ended September 27, 2020 and September 29, 2019, respectively, and amounted to $2.8 million and $2.2 million for the six months ended September 27, 2020 and September 29, 2019, respectively.

Depreciation and Amortization:

17 unchanged sentences

The statute of limitations varies by jurisdiction;

tax years open to federal or state audit or other adjustment as of June 28, 2020 were the tax years ended March 29, 2020, March 31, 2019, April 1, 2018, April 2, 2017, April 3, 2016 and March 30, 2014.

tax years open to federal or state audit or other adjustment as of September 27, 2020 were the tax years ended March 29, 2020, March 31, 2019, April 1, 2018, April 2, 2017, April 3, 2016 and March 30, 2014.

Management evaluates items of income, deductions and credits reported on the Company’s various federal and state income tax returns filed and recognizes the effect of positions taken on those income tax returns only if those positions are more likely than not to be sustained.

4 unchanged sentences

However, the Company also realizes that the ultimate resolution of such tax position could result in a tax charge that is more than the amount realized based upon the application of the tax position taken.

Therefore, the Company’s measurement regarding the tax impact of the revised state apportionment percentages resulted in the Company recording discrete reserves for unrecognized tax liabilities during the three-month periods ended June 28, 2020 and June 30, 2019 of $13,000 and $11,000, respectively, in the accompanying unaudited condensed consolidated statements of income.

Therefore, the Company’s measurement regarding the tax impact of the revised state apportionment percentages resulted in the Company recording discrete reserves for unrecognized tax liabilities of $20,000 and $31,000 during the three-month periods ended September 27, 2020 and September 29, 2019, respectively, and $33,000 and $42,000 during the six-month periods ended September 27, 2020 and September 29, 2019, respectively, in the accompanying unaudited condensed consolidated statements of income.

The Company’s policy is to accrue interest expense and penalties as appropriate on any estimated unrecognized tax liabilities as a charge to interest expense in the Company’s consolidated statements of income.

During the three-month periods ended June 28, 2020 and June 30, 2019, the Company accrued $17,000 and $26,000, respectively, for interest expense and penalties on the portion of the unrecognized tax liabilities for which the relevant statute of limitations remained unexpired.

The Company accrued interest and penalties associated with its reserve for unrecognized tax liabilities during the three-month periods ended September 27, 2020 and September 29, 2019 of $14,000 and $18,000, respectively, and during the six-month periods ended September 27, 2020 and September 29, 2019 of $31,000 and $29,000, respectively, in the accompanying unaudited condensed consolidated statements of income for interest expense and penalties on the unrecognized tax liabilities for which the relevant statute of limitations remained unexpired.

No interest expense or penalties are accrued with respect to estimated unrecognized tax liabilities that are associated with state income tax overpayments that remain receivable.

In December 2016, the Company was notified by the Franchise Tax Board of the State of California (the “FTB”) of its intention to examine the Company’s claims for refund made in connection with amended consolidated income tax returns that the Company had filed for the fiscal years ended March 30, 2014, March 31, 2013, April 1, 2012 and April 3, 2011.

In December 2016, the Company was notified by the Franchise Tax Board of the State of California (the “FTB”) of its intention to examine the Company’s claims for refund made in connection with amended California consolidated income tax returns that the Company had filed for the fiscal years ended March 30, 2014, March 31, 2013, April 1, 2012 and April 3, 2011.

On July 31, 2019, the FTB notified the Company that it would take no further action with regard to the fiscal years ended March 31, 2013, April 1, 2012 and April 3, 2011.

Accordingly, the Company reversed the reserves for unrecognized tax liabilities that it had previously recorded for these fiscal years, which resulted in the recognition of a discrete income tax benefit of $232,000 during the three-month period ended June 30, 2019 in the unaudited condensed consolidated statements of income.

The Company also reversed the interest expense and penalties that it had accrued in respect of the unrecognized tax liabilities for these fiscal years, which resulted in the recognition of a credit to interest expense of $78,000 during the three-month period ended June 30, 2019.

As of July 27, 2020, the status of the Company’s claim for refund made in connection with the amended consolidated income tax return that the Company filed for the fiscal year ended March 30, 2014 was not resolved.

The ultimate resolution of this claim for refund could include administrative or legal proceedings.

Although management believes that the calculations and positions taken on the amended consolidated income tax return and all other filed income tax returns are reasonable and justifiable, the outcome of this or any other examination could result in an adjustment to the position that the Company took on such income tax returns.

Accordingly, the Company reversed the reserves for unrecognized tax liabilities that it had previously recorded for these fiscal years, which resulted in the recognition of a discrete income tax benefit of $232,000 during the six months ended September 29, 2019 in the unaudited condensed consolidated statements of income.

In August 2020, the Company was notified by the FTB of its intention to examine the Company’s consolidated income tax returns for the fiscal years ended March 31, 2019, April 1, 2018 and April 2, 2017.

As of October 27, 2020, the status of the Company’s claim for refund made in connection with the amended California consolidated income tax return for the fiscal year ended March 30, 2014, and the status of the examinations of the California consolidated income tax returns for the fiscal years ended March 31, 2019, April 1, 2018 and April 2, 2017, were not resolved.

The ultimate resolution of the claim for refund and the tax return examinations could include administrative or legal proceedings.

Although management believes that the calculations and positions taken on the amended consolidated income tax return and all other filed income tax returns are reasonable and justifiable, the outcome of these proceedings or any other examination could result in an adjustment to the position that the Company took on such income tax returns.

Such adjustment could also lead to adjustments to one or more other state income tax returns, or to income tax returns for subsequent fiscal years, or both.

1 unchanged sentence

Conversely, to the extent that the calculations and positions taken by the Company on the filed income tax returns under examination are sustained, or to the extent that the tax returns become closed to examination or other adjustment, another reversal of all or a portion of the Company’s reserve for unrecognized tax liabilities could result in a favorable impact on its future results of operations.

During the three-month period ended June 30, 2019, the Company recorded a discrete income tax charge of $2,000 to reflect the effects of the tax shortfalls arising from the vesting of non-vested stock during the period.

There was no such charge recorded during the three-month period ended June 28, 2020.

The Company recorded discrete income tax charges of $4,000 during each of the three months ended September 27, 2020 and September 29, 2019, and $4,000 and $6,000 during the six months ended September 27, 2020 and September 29, 2019, respectively, to reflect the net effects of tax shortfalls arising from the vesting of non-vested stock during the periods.

E arnings Per Share:

19 unchanged sentences

2016-13, because the Company assigns the majority of its trade accounts receivable under factoring agreements with CIT, the Company does not believe that the adoption of the ASU will have a significant impact on the Company’s financial position, results of operations and related disclosures.

The Company has determined that all other ASU’s issued which had become effective as of July 27, 2020, or which will become effective at some future date, are not expected to have a material impact on the Company’s consolidated financial statements.

The Company has determined that all other ASU’s issued which had become effective as of October 27, 2020, or which will become effective at some future date, are not expected to have a material impact on the Company’s consolidated financial statements.

Note 2 – Financing Arrangements

5 unchanged sentences

If such a termination or limitation occurs, then the Company either assumes (and may seek to mitigate) the credit risk for shipments to the customer after the date of such termination or limitation or discontinues shipments to the customer.

Factoring fees, which are included in marketing and administrative expenses in the accompanying consolidated statements of income, were $45,000 and $51,000 during the three-month periods ended June 28, 2020 and June 30, 2019, respectively.

There were no advances on the factoring agreements at June 30, 2020 or March 29, 2020.

Factoring fees, which are included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income, amounted to $85,000 and $62,000 for the three-month periods ended September 27, 2020 and September 29, 2019, respectively, and amounted to $130,000 and $113,000 for the six-month periods ended September 27, 2020 and September 29, 2019, respectively.

Credit Facility:

The Company’s credit facility at June 28, 2020 consisted of a revolving line of credit under a financing agreement with CIT of up to $26.0 million, which includes a $1.5 million sub-limit for letters of credit, bearing interest at the rate of prime minus 0.5% or LIBOR plus 1.75%.

The Company’s credit facility at September 27, 2020 consisted of a revolving line of credit under a financing agreement with CIT of up to $26.0 million, which includes a $1.5 million sub-limit for letters of credit, bearing interest at the rate of prime minus 0.5% or LIBOR plus 1.75%.

The financing agreement matures on July 11, 2022 and is secured by a first lien on all assets of the Company.

At June 28, 2020, the Company had elected to pay interest on balances owed under the revolving line of credit, if any, under the LIBOR option, which was 2.74% as of June 28, 2020.

The financing agreement also provides for the payment by CIT to the Company of interest at the rate of prime as of the beginning of the calendar month minus 2.0%, which was 1.25% as of June 28, 2020, on daily negative balances, if any, held at CIT.

As of June 28, 2020, there was no balance owed on the revolving line of credit, there was no letter of credit outstanding and $20.6 million was available under the revolving line of credit based on the Company’s eligible accounts receivable and inventory balances.

At September 27, 2020, the Company had elected to pay interest on balances owed under the revolving line of credit, if any, under the LIBOR option, which was 1.91% as of September 27, 2020.

The financing agreement also provides for the payment by CIT to the Company of interest at the rate of prime as of the beginning of the calendar month minus 2.0%, which was 1.25% as of September 27, 2020, on daily negative balances, if any, held at CIT.

As of September 27, 2020, there was no balance owed on the revolving line of credit, there was no letter of credit outstanding and $24.2 million was available under the revolving line of credit based on the Company’s eligible accounts receivable and inventory balances.

As of March 29, 2020, there was a balance of $2.6 million owed on the revolving line of credit, there was no letter of credit outstanding and $20.1 million was available under the revolving line of credit based on the Company’s eligible accounts receivable and inventory balances.

The financing agreement contains usual and customary covenants for agreements of that type, including limitations on other indebtedness, liens, transfers of assets, investments and acquisitions, merger or consolidation transactions, transactions with affiliates, and changes in or amendments to the organizational documents for the Company and its subsidiaries.

The Company believes it was in compliance with these covenants as of June 28, 2020.

The Company believes it was in compliance with these covenants as of September 27, 2020.

Paycheck Protection Program Loan :

10 unchanged sentences

The Note may be prepaid at any time prior to maturity without penalty.

The Company intends to submit an application to the Lender for forgiveness of the full amount of the Loan.

The Company has made a preliminary projection that the amount, if any, of the Loan that is determined to be forgiven will be remitted to the Lender by the SBA in December 2020.

The Company has not presumed that any amount of such forgiveness of the Loan will be obtained, either in whole or in part, and has therefore made the assumption that monthly installments will commence in January 2021 of principal and interest in the amount necessary to amortize the full amount of the Loan through the maturity date.

The Company has accordingly classified principal payments in the aggregate amount of $737,000 as a current liability in the accompanying condensed consolidated balance sheet as of June 28, 2020.

The remaining balance of the Loan outstanding as of June 28, 2020 of $1.2 million has been presented as long-term debt in the accompanying condensed consolidated balance sheet, such amount being due and payable in monthly installments from July 2021 through March 2022.

On October 15, 2020, the Company submitted an application to the Lender for forgiveness of the full amount of the Loan.

The Company has made a preliminary projection that the amount, if any, of the Loan that is determined to be forgiven will be remitted to the Lender by the SBA in March 2021.

The Company has not presumed that any amount of such forgiveness of the Loan will be obtained, either in whole or in part, and has therefore made the assumption that monthly installments will commence in April 2021 of principal and interest in the amount necessary to amortize the full amount of the Loan through the maturity date.

The Company has accordingly classified principal payments in the aggregate amount of $906,000 as a current liability in the accompanying condensed consolidated balance sheet as of September 27, 2020.

The remaining balance of the Loan outstanding as of September 27, 2020 of $1.1 million has been presented as long-term debt in the accompanying condensed consolidated balance sheet, such amount being due and payable in monthly installments from October 2021 through March 2022.

The Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the Note.

5 unchanged sentences

one that produces and markets infant and toddler bedding, blankets and accessories and another that produces and markets infant and toddler bibs, developmental toys, bath care and disposable products.

The goodwill of the reporting units of the Company as of June 28, 2020 and March 29, 2020 amounted to $30.0 million, which is reflected in the accompanying condensed consolidated balance sheets net of accumulated impairment charges of $22.9 million, for a net reported balance of $7.1 million.

The goodwill of the reporting units of the Company as of September 27, 2020 and March 29, 2020 amounted to $30.0 million, which is reflected in the accompanying condensed consolidated balance sheets net of accumulated impairment charges of $22.9 million, for a net reported balance of $7.1 million.

The Company measures for impairment the goodwill within its reporting units annually as of the first day of the Company’s fiscal year.

5 unchanged sentences

Note 4 – Other Intangible Assets

Other intangible assets as of June 28, 2020 and March 29, 2020 consisted primarily of the fair value of identifiable assets acquired in business combinations other than tangible assets and goodwill.

The gross amount and accumulated amortization of the Company’s other intangible assets as of June 28, 2020 and March 29, 2020, the amortization expense for the three-month periods ended June 28, 2020 and June 30, 2019 and the classification of such amortization expense within the accompanying unaudited condensed consolidated statements of income are as follows (in thousands):

Other intangible assets as of September 27, 2020 and March 29, 2020 consisted primarily of the fair value of identifiable assets acquired in business combinations other than tangible assets and goodwill.

The gross amount and accumulated amortization of the Company’s other intangible assets as of September 27, 2020 and March 29, 2020, the amortization expense for the three and six-month periods ended September 27, 2020 and September 29, 2019 and the classification of such amortization expense within the accompanying unaudited condensed consolidated statements of income are as follows (in thousands):

Amortization Expense

1 unchanged sentence

Three-Month Periods Ended

Six-Month Periods Ended

September 27,

September 29,

September 27,

September 29,

Tradename and trademarks

9 unchanged sentences

Major classes of inventory were as follows (in thousands):

June 28, 2020

September 27, 2020

March 29, 2020

11 unchanged sentences

For purposes of such estimates, a lease term includes the noncancellable period under the applicable lease.

The Company made cash payments related to its recognized operating leases of $408,000 and $352,000 during the three months ended June 28, 2020 and June 30, 2019, respectively.

The Company made cash payments related to its recognized operating leases of $403,000 and $811,000 during the three and six-months ended September 27, 2020, respectively, and $362,000 and $714,000 during the three and six-months ended September 29, 2019, respectively.

Such payments reduced the operating lease liabilities and were included in the cash flows provided by operating activities in the accompanying unaudited condensed consolidated statements of cash flows.

As of June 28, 2020, the Company’s operating leases have a weighted-average remaining lease term of 2.8 years and the weighted-average discount rate is 3.81%.

During the three-month periods ended June 28, 2020 and June 30, 2019, the Company classified its operating lease costs within the accompanying unaudited condensed consolidated statements of income as follows (in thousands):

As of September 27, 2020, the Company’s operating leases have a weighted-average remaining lease term of 2.6 years and the weighted-average discount rate is 3.79%.

During the three and six-month periods ended September 27, 2020 and September 29, 2019, the Company classified its operating lease costs within the accompanying unaudited condensed consolidated statements of income as follows (in thousands):

Three-Month Periods Ended

June 28, 2020

June 30, 2019

Six-Month Periods Ended

September 27, 2020

September 29, 2019

September 27, 2020

September 29, 2019

Cost of products sold

1 unchanged sentence

Total operating lease costs

The maturities of the Company’s operating lease liabilities as of June 28, 2020 and March 29, 2020 are as follows (in thousands):

June 28, 2020

The maturities of the Company’s operating lease liabilities as of September 27, 2020 and March 29, 2020 are as follows (in thousands):

September 27, 2020

March 29, 2020

9 unchanged sentences

The 2014 Plan is administered by the Compensation Committee (the “Compensation Committee”) of the Company’s Board of Directors (the “Board”), which selects eligible employees, non-employee directors and other individuals to participate in the 2014 Plan and determines the type, amount, duration (such duration not to exceed a term of ten (10) years for grants of options) and other terms of individual awards.

At June 28, 2020, 310,000 shares of the Company’s common stock were available for future issuance under the 2014 Plan, which may be issued from authorized and unissued shares of the Company’s common stock or treasury shares.

At September 27, 2020, 268,000 shares of the Company’s common stock were available for future issuance under the 2014 Plan, which may be issued from authorized and unissued shares of the Company’s common stock or treasury shares.

Stock-based compensation is calculated according to FASB ASC Topic 718, Compensation – Stock Compensation , which requires stock-based compensation to be accounted for using a fair-value-based measurement.

During the three-month periods ended June 28, 2020 and June 30, 2019, the Company recorded $86,000 and $65,000 of stock-based compensation, respectively.

The Company recorded stock-based compensation expense of $100,000 and $75,000 for the three months ended September 27, 2020 and September 29, 2019, respectively, and recorded $186,000 and $140,000 for the six months ended September 27, 2020 and September 29, 2019, respectively.

The Company records the compensation expense associated with stock-based awards granted to individuals in the same expense classifications as the cash compensation paid to those same individuals.

No stock-based compensation costs were capitalized as part of the cost of an asset as of June 28, 2020.

No stock-based compensation costs were capitalized as part of the cost of an asset as of September 27, 2020.

Stock Options:

The following table represents stock option activity for the three-month periods ended June 28, 2020 and June 30, 2019:

Three-Month Periods Ended

June 28, 2020

June 30, 2019

The following table represents stock option activity for the six-month periods ended September 27, 2020 and September 29, 2019:

Six-Month Periods Ended

September 27, 2020

September 29, 2019

Outstanding at Beginning of Period

1 unchanged sentence

Exercisable at End of Period

As of June 28, 2020, the intrinsic value of the outstanding and exercisable stock options was each $1,000.

There were no options exercised during either of the three-month periods ended June 28, 2020 or June 30, 2019.

As of September 27, 2020, the intrinsic value of the outstanding and exercisable stock options was $164,000 and $52,000, respectively.

There were no options exercised during either of the three or six-month periods ended September 27, 2020 or September 29, 2019.

To determine the estimated fair value of stock options granted, the Company uses the Black-Scholes-Merton valuation formula, which is a closed-form model that uses an equation to estimate fair value.

The following table sets forth the assumptions used to determine the fair value of the non-qualified stock options that were awarded to certain employees during the three-month periods ended June 28, 2020 and June 30, 2019, which options vest over a two-year period, assuming continued service.

Three-Month Periods Ended

June 28, 2020

June 30, 2019

The following table sets forth the assumptions used to determine the fair value of the non-qualified stock options that were awarded to certain employees during the six-month periods ended September 27, 2020 and September 29, 2019, which options vest over a two-year period, assuming continued service.

Six-Month Periods Ended

September 27, 2020

September 29, 2019

Number of options issued

9 unchanged sentences

Fair value per option

During the three-month periods ended June 28, 2020 and June 30, 2019, the Company classified its compensation expense associated with stock options within the accompanying unaudited condensed consolidated statements of income as follows (in thousands):

Three-Month Period Ended June 28, 2020

Three-Month Period Ended June 30, 2019

During the three and six-month periods ended September 27, 2020 and September 29, 2019, the Company classified its compensation expense associated with stock options within the accompanying unaudited condensed consolidated statements of income as follows (in thousands):

Three-Month Period Ended September 27, 2020

Three-Month Period Ended September 29, 2019

Administrative

2 unchanged sentences

Total stock option compensation

As of June 28, 2020, total unrecognized stock option compensation expense amounted to $83,000, which will be recognized as the underlying stock options vest over a weighted-average period of 1.3 years.

Six-Month Period Ended September 27, 2020

Six-Month Period Ended September 29, 2019

Administrative

Options Granted in Fiscal Year

Total stock option compensation

As of September 27, 2020, total unrecognized stock option compensation expense amounted to $71,000, which will be recognized as the underlying stock options vest over a weighted-average period of 12.3 months.

The amount of future stock option compensation expense could be affected by any future stock option grants and by the separation from the Company of any individual who has received stock options that are unvested as of such individual’s separation date.

6 unchanged sentences

August 8, 2018

August 9, 2017

These shares vest over a two-year period, assuming continued service.

The fair value of the non-vested stock granted to the Company’s non-employee directors was based on the closing price of the Company’s common stock on the date of each grant.

In August 2020 and August 2019, 37,256 and 28,000 shares that had been granted to the Company’s non-employee directors vested, having an aggregate value of $179,000 and $135,000, respectively.

Non-vested Stock Granted to Employees:

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Under the 2012 Plan, certain executive officers were eligible to receive awards of shares of the Company’s common stock if the aggregate average market value of the Company’s common stock during the relevant fiscal year, plus the amount of regular cash dividends paid in respect of the Company’s common stock during such period, increased.

No shares were granted and no compensation expense was recorded during the three-month periods ended June 28, 2020 or June 30, 2019 in connection with the 2012 Plan.

During the three-month period ended June 30, 2019, 21,125 shares that had been granted during fiscal year 2018 vested, with such shares having an aggregate value of $109,000.

No shares were granted and no compensation expense was recorded during either of the three or six-month periods ended September 27, 2020 or September 29, 2019 in connection with the 2012 Plan.

During the six-month period ended September 29, 2019, 21,125 shares that had been granted during fiscal year 2018 vested, with such shares having an aggregate value of $109,000.

Individuals holding shares that vested surrendered to the Company the number of shares necessary to satisfy the income tax withholding obligations that arose from the vesting of the shares, and the Company remitted $17,000 to the appropriate taxing authorities on behalf of such individuals.

For the three-month periods ended June 28, 2020 and June 30, 2019, the Company recorded compensation expense associated with stock grants, which is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income, as follows (in thousands):

Three-Month Period Ended June 28, 2020

Three-Month Period Ended June 30, 2019

For the three and six-month periods ended September 27, 2020 and September 29, 2019, the Company recorded compensation expense associated with stock grants, which is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income, as follows (in thousands):

Three-Month Period Ended September 27, 2020

Three-Month Period Ended September 29, 2019

Stock Granted in Fiscal Year

Total stock grant compensation

As of June 28, 2020, total unrecognized compensation expense related to the Company’s non-vested stock grants amounted to $273,000, which will be recognized over the respective vesting terms associated with each block of non-vested stock indicated above, such grants having an aggregate weighted-average vesting term of 9.5 months.

Six-Month Period Ended September 27, 2020

Six-Month Period Ended September 29, 2019

Stock Granted in Fiscal Year

Total stock grant compensation

As of September 27, 2020, total unrecognized compensation expense related to the Company’s non-vested stock grants amounted to $426,000, which will be recognized over the respective vesting terms associated with each block of non-vested stock indicated above, such grants having an aggregate weighted-average vesting term of 11.9 months.

The amount of future compensation expense related to the Company’s non-vested stock grants could be affected by any future non-vested stock grants and by the separation from the Company of any individual who has non-vested stock grants as of such individual’s separation date.

N ote 8 – Subsequent Event s

The Company has evaluated events which have occurred between June 28, 2020 and the date that the accompanying consolidated financial statements were issued, and has determined that there are no material subsequent events that require disclosure.

The Company has evaluated events which have occurred between September 27, 2020 and the date that the accompanying consolidated financial statements were issued, and has determined that there are no material subsequent events that require disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements