What changed in this filing

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Item 1. Financial Statements

2021-02-10 compared with 2020-11-10 · 119 added, 110 removed, 405 unchanged (36% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

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

September 27, 2020

December 27, 2020

March 29, 2020

1 unchanged sentence

Cash and cash equivalents

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

Accounts receivable (net of allowances of $791 at December 27, 2020 and $530 at March 29, 2020):

Due from factor

22 unchanged sentences

Accrued royalties

Dividend payable

Dividends payable

Operating lease liabilities, current

9 unchanged sentences

Common stock - $0.01 par value per share;

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

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

Issued 12,759,753 shares at December 27, 2020 and 12,603,301 shares at March 29, 2020

Additional paid-in capital

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

Treasury stock - at cost - 2,766,589 shares at December 27, 2020 and 2,436,494 shares at March 29, 2020

Retained Earnings

5 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

THREE AND NINE-MONTH PERIODS ENDED DECEMBER 27, 2020 AND DECEMBER 29, 2019

(amounts in thousands, except per share amounts)

Three-Month Periods Ended

Six-Month Periods Ended

September 27, 2020

September 29, 2019

September 27, 2020

September 29, 2019

Nine-Month Periods Ended

December 27, 2020

December 29, 2019

December 27, 2020

December 29, 2019

Cost of products sold

3 unchanged sentences

Interest expense - net of interest income

Gain on sale of property, plant and equipment

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

THREE AND NINE-MONTH PERIODS ENDED DECEMBER 27, 2020 AND DECEMBER 29, 2019

Common Shares

3 unchanged sentences

Three-Month Periods

Balances - June 30, 2019

Balances - September 29, 2019

Issuance of shares

Stock-based compensation

Acquisition of treasury stock

Dividend declared on common stock - $0.33 per share

Balances - December 29, 2019

Balances - September 27, 2020

Balances - June 28, 2020

Issuance of shares

Stock-based compensation

Acquisition of treasury stock

Dividend declared on common stock - $0.33 per share

Balances - September 27, 2020

Six-Month Periods

Balances - December 27, 2020

Nine-Month Periods

Balances - March 31, 2019

3 unchanged sentences

Dividends declared on common stock - $0.49 per share

Balances - September 29, 2019

Balances - December 29, 2019

Balances - March 29, 2020

1 unchanged sentence

Stock-based compensation

Acquisition of treasury stock

Dividend declared on common stock - $0.41 per share

Balances - September 27, 2020

Balances - December 27, 2020

See notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

NINE-MONTH PERIODS ENDED DECEMBER 27, 2020 AND DECEMBER 29, 2019

(amounts in thousands)

Six-Month Periods Ended

September 27, 2020

September 29, 2019

Nine-Month Periods Ended

December 27, 2020

December 29, 2019

Operating activities:

4 unchanged sentences

Deferred income taxes

Gain on sale of property, plant and equipment

Loss (gain) on sale of property, plant and equipment

Reserve for unrecognized tax liabilities

15 unchanged sentences

Proceeds from long-term debt

Purchase of treasury stock

Purchase of treasury stock from related parties

Issuance of common stock

1 unchanged sentence

Net cash used in financing activities

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

10 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

FOR THE THREE AND NINE-MONTH PERIODS ENDED DECEMBER 27, 2020 AND DECEMBER 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 September 27, 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 December 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 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.

Operating results for the three and nine-month periods ended December 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.

16 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 $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.

Advertising expense is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income and amounted to $283,000 and $261,000 for the three months ended December 27, 2020 and December 29, 2019, respectively, and amounted to $942,000 and $805,000 for the nine months ended December 27, 2020 and December 29, 2019, respectively.

Revenue Recognition:

24 unchanged sentences

Credit Concentration:

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

The Company’s accounts receivable as of December 27, 2020 amounted to $18.2 million, net of allowances of $791,000.

Of this amount, $16.9 million was due from CIT under the factoring agreements;

4 unchanged sentences

Other Accrued Liabilities :

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

An amount of $347,000 was recorded as other accrued liabilities as of December 27, 2020.

Of this amount, $256,000 reflected unearned revenue recorded for payments from customers that were received before the products ordered were received by the customers.

4 unchanged sentences

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 and six-month periods ended September 27, 2020 and September 29, 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 nine-month periods ended December 27, 2020 and December 29, 2019 are as follows (in thousands):

Three-Month Periods Ended

Six-Month Periods Ended

September 27, 2020

September 29, 2019

September 27, 2020

September 29, 2019

Nine-Month Periods Ended

December 27, 2020

December 29, 2019

December 27, 2020

December 29, 2019

Bedding, blankets and accessories

3 unchanged sentences

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

Such amounts are presented as a current asset in the accompanying condensed consolidated balance sheets and are a direct determinant of cost of products sold in the accompanying condensed consolidated statements of income and, therefore, have a significant impact on the amount of net income reported in the accounting periods.

Such amounts are presented as a current asset in the accompanying condensed consolidated balance sheets and are a direct determinant of cost of products sold in the accompanying unaudited condensed consolidated statements of income and, therefore, have a significant impact on the amount of net income reported in the accounting periods.

The basis of accounting for inventories is cost, which includes the direct supplier acquisition cost, duties, taxes and freight, and the indirect costs to design, develop, source and store the product until it is sold.

11 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 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.

Royalty expense is included in cost of products sold in the accompanying unaudited condensed consolidated statements of income and amounted to $ 1.4 million and $1.3 million for the three months ended December 27, 2020 and December 29, 2019, respectively, and amounted to $4.2 million and $3.5 million for the nine months ended December 27, 2020 and December 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 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.

tax years open to federal or state audit or other adjustment as of December 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 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.

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 $25,000 and $29,000 during the three months ended December 27, 2020 and December 29, 2019, respectively, and $58,000 and $71,000 during the nine months ended December 27, 2020 and December 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.

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.

The Company accrued interest and penalties associated with its reserve for unrecognized tax liabilities during the three months ended December 27, 2020 and December 29, 2019 of $15,000 and $18,000, respectively, and during the nine months ended December 27, 2020 and December 29, 2019 of $46,000 and $62,000, 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.

1 unchanged sentence

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 six months ended September 29, 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 six months ended September 29, 2019.

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 nine-month period ended December 29, 2019 in the accompanying 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.

As of January 27, 2021, 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.

3 unchanged sentences

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.

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.

The Company recorded a discrete income tax benefit of $74,000 during each of the three and nine-month periods ended December 27, 2020, and $274,000 during each of the three and nine-month periods ended December 29, 2019, to reflect the aggregate effect of certain tax credits.

The Company recorded net discrete income tax benefits of $16,000 and $12,000 during the three and nine-month periods ended December 27, 2020, respectively, to reflect the net effects of the excess tax benefits and tax shortfalls arising from the vesting of non-vested stock and the exercise of stock options during the periods.

During the three and nine-month periods ended December 29, 2019, the Company recorded a discrete income tax benefit of $1,000 and a net discrete income tax charge of $5,000, respectively, to reflect the effects of the excess tax benefits and tax shortfalls arising from the exercise of stock options and 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 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.

The Company has determined that all other ASUs issued which had become effective as of January 27, 2021, 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 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.

Factoring fees, which are included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income, amounted to $79,000 and $75,000 for the three-month periods ended December 27, 2020 and December 29, 2019, respectively, and amounted to $209,000 and $188,000 for the nine-month periods ended December 27, 2020 and December 29, 2019, respectively.

Credit Facility:

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 Company’s credit facility at December 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 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.

At December 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 1.9% as of December 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 December 27, 2020, on daily negative balances, if any, held at CIT.

As of December 27, 2020, there was no balance owed on the revolving line of credit, there was no letter of credit outstanding and $26.0 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 September 27, 2020.

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

Paycheck Protection Program Loan :

11 unchanged sentences

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 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 January 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 February 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 $1.4 million as a current liability in the accompanying unaudited condensed consolidated balance sheet as of December 27, 2020.

The remaining balance of the Loan outstanding as of December 27, 2020 of $524,000 has been presented as long-term debt in the accompanying unaudited condensed consolidated balance sheet, such amount being due and payable in monthly installments from January 2022 through April 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 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 goodwill of the reporting units of the Company as of December 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 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):

Other intangible assets as of December 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 December 27, 2020 and March 29, 2020, the amortization expense for the three and nine-month periods ended December 27, 2020 and December 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,

Nine-Month Periods Ended

Tradename and trademarks

9 unchanged sentences

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

September 27, 2020

December 27, 2020

March 29, 2020

3 unchanged sentences

Total inventory

N ote 6 – Leases

Note 6 – Leases

The Company is a party to various operating leases for offices, warehousing facilities and certain office equipment.

5 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 $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.

The Company made cash payments related to its recognized operating leases of $493,000 and $1.3 million during the three and nine-months ended December 27, 2020, respectively, and $362,000 and $1.1 million during the three and nine-months ended December 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 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):

As of December 27, 2020, the Company’s operating leases have a weighted-average remaining lease term of 2.9 years and the weighted-average discount rate is 3.67%.

During the three and nine-month periods ended December 27, 2020 and December 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

Six-Month Periods Ended

September 27, 2020

September 29, 2019

September 27, 2020

September 29, 2019

Nine-Month Periods Ended

December 27, 2020

December 29, 2019

December 27, 2020

December 29, 2019

Cost of products sold

1 unchanged sentence

Total operating lease costs

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

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

December 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 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.

At December 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.

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 recorded stock-based compensation expense of $103,000 and $79,000 for the three months ended December 27, 2020 and December 29, 2019, respectively, and recorded $289,000 and $219,000 for the nine months ended December 27, 2020 and December 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 September 27, 2020.

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

Stock Options:

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

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

Nine-Month Periods Ended

December 27, 2020

December 29, 2019

Outstanding at Beginning of Period

1 unchanged sentence

Exercisable at End of Period

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.

As of December 27, 2020, the intrinsic value of the outstanding and exercisable stock options was $562,000 and $165,000, respectively.

The Company did not receive any cash from the exercise of stock options during the three and nine months ended December 27, 2020 and December 29, 2019.

Upon the exercise of stock options, participants may choose to surrender to the Company those shares from the option exercise necessary to satisfy the exercise amount and their income tax withholding obligations that arise from the option exercise.

The effect on the cash flow of the Company from these “cashless” option exercises is that the Company remits cash on behalf of the participant to satisfy his or her income tax withholding obligations.

The Company used cash to remit the required income tax withholding amounts from “cashless” option exercises of $43,000 during each of the three and nine-month periods ended December 27, 2020 and $3,000 during each of the three and nine-month periods ended December 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 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

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 nine-month periods ended December 27, 2020 and December 29, 2019, which options vest over a two-year period, assuming continued service.

Nine-Month Periods Ended

December 27, 2020

December 29, 2019

Number of options issued

9 unchanged sentences

Fair value per option

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

During the three and nine-month periods ended December 27, 2020 and December 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 December 27, 2020

Three-Month Period Ended December 29, 2019

Administrative

2 unchanged sentences

Total stock option compensation

Six-Month Period Ended September 27, 2020

Six-Month Period Ended September 29, 2019

Nine-Month Period Ended December 27, 2020

Nine-Month Period Ended December 29, 2019

Administrative

2 unchanged sentences

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.

As of December 27, 2020, total unrecognized stock option compensation expense amounted to $58,000, which will be recognized as the underlying stock options vest over a weighted-average period of 9.3 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.

21 unchanged sentences

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 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.

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

During the nine-month period ended December 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 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

For the three and nine-month periods ended December 27, 2020 and December 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 December 27, 2020

Three-Month Period Ended December 29, 2019

Stock Granted in Fiscal Year

Total stock grant compensation

Six-Month Period Ended September 27, 2020

Six-Month Period Ended September 29, 2019

Nine-Month Period Ended December 27, 2020

Nine-Month Period Ended December 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.

As of December 27, 2020, total unrecognized compensation expense related to the Company’s non-vested stock grants amounted to $336,000, 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 9.2 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 – Related Party Transaction

On December 16, 2020, the Company purchased 250,000 shares of its common stock from E.

Randall Chestnut, the Company’s Chief Executive Officer.

The shares were purchased at a purchase price of $7.5435 per share, which represents the trailing 10-trading day volume weighted average closing price of the Company’s common stock ending, and including December 16, 2020.

N ote 9 – Subsequent Event s

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.

On January 10, 2021, the Company’s California consolidated income tax return for the fiscal year ended April 3, 2016 became closed to examination or other adjustment.

Accordingly, the Company intends to reverse the reserve for the unrecognized tax liability for that fiscal year, which will result in the recognition of a discrete income tax benefit of $233,000 during the three-month period ending March 28, 2021.

The Company also intends to reverse the accumulated interest expense and penalties that it has accrued in respect of the unrecognized tax liability for the fiscal year ended April 3, 2016, which will result in the recognition of a credit to interest expense of $107,000 during the three-month period ending March 28, 2021.

The Company has evaluated all other events which have occurred between December 27, 2020 and the date that the accompanying consolidated financial statements were issued, and has determined that there are no other 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