What changed in this filing

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Item 1. Financial Statements

2022-02-09 compared with 2021-11-10 · 229 added, 147 removed, 539 unchanged (41% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 26, 2021 (UNAUDITED) AND MARCH 28, 2021

DECEMBER 26, 2021 (UNAUDITED) AND MARCH 28, 2021

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

September 26, 2021

December 26, 2021

March 28, 2021

2 unchanged sentences

$ 2,052  

Accounts receivable (net of allowances of $ 1,490 at September 26, 2021 and $ 723 at March 28, 2021):

Accounts receivable (net of allowances of $1,525 at December 26, 2021 and $723 at March 28, 2021):

Due from factor

46 unchanged sentences

Common stock - $0.01 par value per share;

Authorized 40,000,000 shares at September 26, 2021 and March 28, 2021;

Issued 12,924,918 shares at September 26, 2021 and 12,809,753 shares at March 28, 2021

Authorized 40,000,000 shares at December 26, 2021 and March 28, 2021;

Issued 12,944,918 shares at December 26, 2021 and 12,809,753 shares at March 28, 2021

Additional paid-in capital

1 unchanged sentence

54,748  

Treasury stock - at cost - 2,849,846 shares at September 26, 2021 and 2,811,446 shares at March 28, 2021

Treasury stock - at cost - 2,864,698 shares at December 26, 2021 and 2,811,446 shares at March 28, 2021

( 15,614 )  

10 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

THREE AND SIX-MONTH PERIODS ENDED SEPTEMBER 26, 2021 AND SEPTEMBER 27, 2020

THREE- AND NINE-MONTH PERIODS ENDED DECEMBER 26, 2021 AND DECEMBER 27, 2020

(amounts in thousands, except per share amounts)

Three-Month Periods Ended

Six-Month Periods Ended

September 26, 2021

September 27, 2020

September 26, 2021

September 27, 2020

Nine-Month Periods Ended

December 26, 2021

December 27, 2020

December 26, 2021

December 27, 2020

$ 22,742  

$ 19,476  

$ 61,674  

$ 57,340  

Cost of products sold

16,572  

13,323  

44,780  

39,070  

16,894  

18,270  

Marketing and administrative expenses

10,602  

Income from operations

1 unchanged sentence

Interest expense - net of interest income

( 14 )  

( 30 )  

Gain on extinguishment of debt

Loss on sale of property, plant and equipment

( 25 )  

Income before income tax expense

Income tax expense

$ 2,432  

$ 2,141  

$ 7,483  

$ 5,843  

Weighted average shares outstanding:

10,078  

10,208  

10,045  

10,195  

Effect of dilutive securities

10,107  

10,224  

10,075  

10,200  

Earnings per share - basic and diluted

$ 0.24  

$ 0.21  

$ 0.74  

$ 0.57  

See notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

THREE AND SIX-MONTH PERIODS ENDED SEPTEMBER 26, 2021 AND SEPTEMBER 27, 2020

THREE- AND NINE-MONTH PERIODS ENDED DECEMBER 26, 2021 AND DECEMBER 27, 2020

Common Shares

Treasury Shares

Number of Shares

Shareholders'

1 unchanged sentence

Three-Month Periods

Balances - June 28, 2020

Balances - September 27, 2020

12,664,753  

8 unchanged sentences

Acquisition of treasury stock

( 330,095 )  

( 2,450 )  

Dividend declared on common stock - $0.33 per share

( 3,380 )  

Balances - September 27, 2020

Balances - December 27, 2020

12,759,753  

4 unchanged sentences

$ 42,441  

Balances - June 27, 2021

Balances - September 26, 2021

12,924,918  

12 unchanged sentences

( 4,334 )  

Balances - September 26, 2021

Balances - December 26, 2021

12,944,918  

4 unchanged sentences

$ 43,902  

Six-Month Periods

Nine-Month Periods

Balances - March 29, 2020

8 unchanged sentences

Stock-based compensation

Acquisition of treasury stock

( 330,095 )  

( 2,450 )  

Dividend declared on common stock - $0.41 per share

( 4,198 )  

Balances - September 27, 2020

Balances - December 27, 2020

12,759,753  

19 unchanged sentences

( 5,942 )  

Balances - September 26, 2021

Balances - December 26, 2021

12,944,918  

8 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX-MONTH PERIODS ENDED SEPTEMBER 26, 2021 AND SEPTEMBER 27, 2020

NINE-MONTH PERIODS ENDED DECEMBER 26, 2021 AND DECEMBER 27, 2020

(amounts in thousands)

Six-Month Periods Ended

September 26, 2021

September 27, 2020

Nine-Month Periods Ended

December 26, 2021

December 27, 2020

Operating activities:

$ 7,483  

$ 5,843  

Adjustments to reconcile net income to net cash provided by operating activities:

4 unchanged sentences

Gain on extinguishment of debt

( 1,985 )  

Loss on sale of property, plant and equipment

3 unchanged sentences

Accounts receivable

( 1,664 )  

( 4,132 )  

Prepaid expenses

( 210 )  

Lease liabilities

( 1,443 )  

Accounts payable

3 unchanged sentences

Capital expenditures for property, plant and equipment

( 375 )  

Proceeds from sale of property, plant and equipment

Net cash used in investing activities

( 355 )  

Financing activities:

Repayments under revolving line of credit

( 5,809 )  

Borrowings under revolving line of credit

1 unchanged sentence

Purchase of treasury stock from related parties

( 412 )  

Issuance of common stock

Dividends paid

( 2,404 )  

Net cash used in financing activities

( 2,472 )  

Net increase in cash and cash equivalents

1 unchanged sentence

Cash and cash equivalents at end of period

$ 2,052  

$ 3,658  

Supplemental cash flow information:

Income taxes paid

$ 1,959  

Interest paid

1 unchanged sentence

Property, plant and equipment purchased but unpaid

( 17 )  

Dividends declared but unpaid

( 4,338 )  

See notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX-MONTH PERIODS ENDED SEPTEMBER 26, 2021 AND SEPTEMBER 27, 2020

FOR THE THREE- AND NINE-MONTH PERIODS ENDED DECEMBER 26, 2021 AND DECEMBER 27, 2020

Note 1 –

5 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 the Company’s 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 26, 2021 and the results of its operations and cash flows for the periods presented.

In the opinion of the Company’s 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 26, 2021 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 26, 2021 are not necessarily indicative of the results that may be expected by the Company for its fiscal year ending April 3, 2022.

Operating results for the three and nine months ended December 26, 2021 are not necessarily indicative of the results that may be expected by the Company for its fiscal year ending April 3, 2022.

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 28, 2021.

28 unchanged sentences

Although the Company has not determined the full impact of the adoption of ASU No.

2016 - 13, because the Company assigns the majority of its trade accounts receivable under factoring agreements with The CIT Group/Commercial Services, Inc.

2016 - 13, because the Company assigns substantially all of its trade accounts receivable under factoring agreements with The CIT Group/Commercial Services, Inc.

(“CIT”), a subsidiary of CIT Group Inc., 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.

6 unchanged sentences

2019 - 12 effective as of March 29, 2021, which did not have a significant impact on the Company’s financial position, results of operations and related disclosures.

The Company has determined that all other ASUs issued which had become effective as of September 26, 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.

The Company has determined that all other ASUs issued which had become effective as of December 26, 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 –

1 unchanged sentence

The Company’s advertising costs are primarily associated with cooperative advertising arrangements with certain of the Company’s customers and are recognized using the straight-line method based upon aggregate annual estimated amounts for these customers, with periodic adjustments to the actual amounts of authorized agreements.

Advertising expense is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income and amounted to $ 129,000 and $ 314,000 for the three months ended September 26, 2021 and September 27, 2020, respectively, and amounted to $ 350,000 and $ 659,000 for the six months ended September 26, 2021 and September 27, 2020, respectively.

Advertising expense is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income and amounted to $ 105,000 and $ 283,000 for the three months ended December 26, 2021 and December 27, 2020, respectively, and amounted to $ 455,000 and $ 942,000 for the nine months ended December 26, 2021 and December 27, 2020, respectively.

Note 3 –

Other Accrued Liabilities

Amounts of $ 152,000 and $ 215,000 were recorded as other accrued liabilities at September 26, 2021 and March 28, 2021, respectively.

Of these amounts, $ 63,000 and $ 85,000 at September 26, 2021 and March 28, 2021, respectively, reflected unearned revenue recorded for payments from customers that were received before the products ordered were received by the customers.

Amounts of $ 612,000 and $ 215,000 were recorded as other accrued liabilities at December 26, 2021 and March 28, 2021, respectively.

Of these amounts, $ 26,000 and $ 85,000 at December 26, 2021 and March 28, 2021, respectively, reflected unearned revenue recorded for payments from customers that were received before the products ordered were received by the customers.

Note 4 –

Segment and Related Information

The Company operates primarily in one principal segment, infant and toddler products.

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 26, 2021 and September 27, 2020 are as follows (in thousands):

The Company operates primarily in one principal segment, infant, toddler and juvenile products.

These products consist of infant and toddler bedding and blankets, 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 nine -month periods ended December 26, 2021 and December 27, 2020 are as follows (in thousands):

Three-Month Periods Ended

Six-Month Periods Ended

September 26, 2021

September 27, 2020

September 26, 2021

September 27, 2020

Nine-Month Periods Ended

December 26, 2021

December 27, 2020

December 26, 2021

December 27, 2020

Bedding, blankets and accessories

$ 11,780  

$ 11,431  

$ 32,838  

$ 34,490  

Bibs, bath, developmental toy, feeding, baby care and disposable products

10,962  

28,836  

22,850  

Total net sales

$ 22,742  

$ 19,476  

$ 61,674  

$ 57,340  

Note 5 –

2 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 $ 1.4 million and $ 1.6 million for the three -month periods ended September 26, 2021 and September 27, 2020, respectively, and amounted to $ 2.7 million and $ 2.8 million for the six -month periods ended September 26, 2021 and September 27, 2020, respectively.

Royalty expense is included in cost of products sold in the accompanying unaudited consolidated statements of income and amounted to $ 1.5 million and $ 1.4 million for the three months ended December 26, 2021 and December 27, 2020, respectively, and amounted to $ 4.2 million for each of the nine months ended December 26, 2021 and December 27, 2020.

Note 6 –

2 unchanged sentences

The statute of limitations varies by jurisdiction;

tax years open to federal or state audit or other adjustment as of September 26, 2021 were the fiscal years ended March 28, 2021, March 29, 2020, March 31, 2019, April 1, 2018 and April 2, 2017.

tax years open to audit or other adjustment as of December 26, 2021 were the fiscal years ended March 28, 2021, March 29, 2020, March 31, 2019, April 1, 2018 and April 2, 2017.

After considering all relevant information regarding the calculation of the state portion of its income tax provision, the Company believes that the technical merits of the tax position that the Company has taken with respect to state apportionment percentages would more likely than not be sustained.

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 $ 22,000 and $ 20,000 during the three months ended September 26, 2021 and September 27, 2020, respectively, and $ 45,000 and $ 33,000 during the six months ended September 26, 2021 and September 27, 2020, 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 $ 22,000 and $ 25,000 during the three months ended December 26, 2021 and December 27, 2020, respectively, and $ 67,000 and $ 58,000 during the nine months ended December 26, 2021 and December 27, 2020, 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 expense and penalties on the unrecognized tax liabilities for which the relevant statute of limitations remained unexpired of $ 12,000 and $ 14,000 during the three -month periods ended September 26, 2021 and September 27, 2020, respectively, and $ 26,000 and $ 31,000 during the six -month periods ended September 26, 2021 and September 27, 2020, respectively, in the accompanying unaudited condensed consolidated statements.

The Company accrued interest expense and penalties on the unrecognized tax liabilities for which the relevant statute of limitations remained unexpired of $ 11,000 and $ 15,000 during the three -month periods ended December 26, 2021 and December 27, 2020, respectively, and $ 37,000 and $ 46,000 during the nine -month periods ended December 26, 2021 and December 27, 2020, respectively, in the accompanying unaudited condensed consolidated statements of income.

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

3 unchanged sentences

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

The Company recorded discrete income tax benefits of $ 28,000 and $ 72,000 during the three and six -month periods ended September 26, 2021, respectively, to reflect the aggregate effect of the excess tax benefits arising from the exercise of stock options and the vesting of non-vested stock.

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

The Company recorded discrete income tax benefits of $ 11,000 and $ 16,000 during the three -month periods ended December 26, 2021 and December 27, 2020, respectively, and $ 83,000 and $ 12,000 during the nine -month periods ended December 26, 2021 and December 27, 2020, respectively, to reflect the net effects of the excess tax benefits and tax shortfalls arising from the exercise of stock options and the vesting of non-vested stock.

Note 7 –

3 unchanged sentences

Accordingly, the operations of Carousel ceased on May 21, 2021.

During the three and six -month periods ended September 26, 2021, Carousel experienced a gross loss of $ 41,000 and $ 688,000 , respectively.

The gross loss was the result of the sale of inventory below cost and, for the three -month period ended June 27, 2021 and the six -month period ended September 26, 2021, the recognition of charges of $ 334,000 related to the settlement with a supplier of a commitment to purchase fabric and $ 265,000 associated with the liquidation of Carousel’s remaining inventory upon the closure of the business.

During the three - and nine -month periods ended December 26, 2021, Carousel experienced a gross loss of $ 1,000 and $ 689,000 , respectively.

The gross loss was the result of the sale of inventory below cost and, for the three -month period ended June 27, 2021 and the nine -month period ended December 26, 2021, the recognition of charges of $ 334,000 related to the settlement with a supplier of a commitment to purchase fabric and $ 265,000 associated with the liquidation of Carousel’s remaining inventory upon the closure of the business.

Note 8 –

1 unchanged sentence

Factoring Agreements:

         To reduce its exposure to credit losses, the Company assigns the majority of its trade accounts receivable to CIT pursuant to factoring agreements, which have expiration dates that are coterminous with that of the financing agreement described below.

    To reduce its exposure to credit losses, the Company assigns substantially all of its trade accounts receivable to CIT pursuant to factoring agreements, which have expiration dates that are coterminous with that of the financing agreement described below.

Under the terms of the factoring agreements, CIT remits customer payments to the Company as such payments are received by CIT.

3 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 during each of the three -month periods ended September 26, 2021 and September 27, 2020, and $ 149,000 and $ 130,000 during the six -month periods ended September 26, 2021 and September 27, 2020, respectively.

Factoring fees, which are included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income, amounted to $ 99,000 and $ 79,000 during the three -month periods ended December 26, 2021 and December 27, 2020, respectively, and $ 248,000 and $ 209,000 during the nine -month periods ended December 26, 2021 and December 27, 2020, respectively.

Credit Facility:

         The Company’s credit facility as of September 26, 2021 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 1.0 % or LIBOR plus 1.5 %, and which is secured by a first lien on all assets of the Company.

On May 13, 2021, the Company and CIT entered into an agreement whereby CIT’s lien on Carousel’s assets will be automatically released upon the sale of such assets.

 The Company’s credit facility as of December 26, 2021 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 1.0 % or LIBOR plus 1.5 %, and which is secured by a first lien on all assets of the Company.

On May 13, 2021, the Company and CIT entered into an agreement whereby CIT’s lien on Carousel’s assets would be automatically released upon the sale of such assets.

The financing agreement was scheduled to mature on July 11, 2022, but on May 31, 2021 the financing agreement was amended to extend the maturity date to July 11, 2025 and to change the interest rates as reflected in the preceding paragraph.

The financing agreement was also amended to provide for a transition from the LIBOR reference rate to its replacement at the appropriate time.

At September 26, 2021, the Company had elected to pay interest on balances owed under the revolving line of credit, if any, under the LIBOR option, which was 1.58 % as of September 26, 2021.

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 26, 2021, on daily negative balances, if any, held at CIT.

At September 26, 2021 and March 28, 2021, 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.

At December 26, 2021, the Company had elected to pay interest on balances owed under the revolving line of credit, if any, under the LIBOR option, which was 1.59 % as of December 26, 2021.

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 26, 2021, on daily negative balances, if any, held at CIT.

At December 26, 2021 and March 28, 2021, 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.

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 26, 2021.

The Company believes it was in compliance with these covenants as of December 26, 2021.

Credit Concentration:

The Company’s accounts receivable as of September 26, 2021 amounted to $ 18.5 million, net of allowances of $ 1.5 million.

The Company’s accounts receivable as of December 26, 2021 amounted to $ 21.0 million, net of allowances of $ 1.5 million.

Of this amount, $ 19.8 million was due from CIT under the factoring agreements;

12 unchanged sentences

The Note would have matured on April 20, 2022, but on May 20, 2021, the PPP Loan was forgiven in full and the SBA remitted to the Lender on that date the principal amount of the Note of $ 1,963,800 and interest of $ 21,000 that had accrued from the funding date of April 20, 2020 through the forgiveness date of May 20, 2021.

During the three months ended June 27, 2021 and the six months ended September 26, 2021, the Company recorded a gain on extinguishment of debt in the amount of $ 1,985,000 associated with the forgiveness of the PPP Loan, which has been presented below income from operations in the accompanying unaudited condensed consolidated statements of income.

During the three months ended June 27, 2021 and the nine months ended December 26, 2021, the Company recorded a gain on extinguishment of debt in the amount of $ 1,985,000 associated with the forgiveness of the PPP Loan, which has been presented below income from operations in the accompanying unaudited condensed consolidated statements of income.

Note 9 –

2 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 26, 2021 and March 28, 2021 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 26, 2021 and March 28, 2021 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.

6 unchanged sentences

Other Intangible Assets

Other intangible assets as of September 26, 2021 and March 28, 2021 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 26, 2021 and March 28, 2021, the amortization expense for the three and six -month periods ended September 26, 2021 and September 27, 2020, 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 26, 2021 and March 28, 2021 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 26, 2021 and March 28, 2021, the amortization expense for the three - and nine -month periods ended December 26, 2021 and December 27, 2020, 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

Nine-Month Periods Ended

Tradename and trademarks

$ 2,567  

$ 1,850  

$ 1,722  

Developed technology

2 unchanged sentences

Total other intangible assets

$ 11,640  

$ 8,866  

$ 8,477  

Classification within the accompanying unaudited condensed consolidated statements of income:

4 unchanged sentences

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

September 26, 2021

December 26, 2021

March 28, 2021

2 unchanged sentences

Finished Goods

24,440  

19,863  

Total inventory

$ 24,467  

$ 20,335  

Note 12 –

The Company made cash payments related to its recognized operating leases of $ 487,000 and $ 403,000 during the three months ended September 26, 2021 and September 27, 2020, respectively, and $ 984,000 and $ 811,000 during the six months ended September 26, 2021 and September 27, 2020, respectively.

The Company made cash payments related to its recognized operating leases of $ 460,000 and $ 493,000 during the three months ended December 26, 2021 and December 27, 2020, respectively, and $ 1.4 million and $ 1.3 million during the nine months ended December 26, 2021 and December 27, 2020, 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 26, 2021, the Company’s operating leases have a weighted-average remaining lease term of 

As of December 26, 2021, the Company’s operating leases have a weighted-average remaining lease term of 

2.0 years and the weighted-average discount rate is 

During the three and six -month periods ended September 26, 2021 and September 27, 2020, the Company classified its operating lease costs within the accompanying unaudited condensed consolidated statements of income as follows (in thousands):

During the three - and nine -month periods ended December 26, 2021 and December 27, 2020, 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 26, 2021

September 27, 2020

September 26, 2021

September 27, 2020

Nine-Month Periods Ended

December 26, 2021

December 27, 2020

December 26, 2021

December 27, 2020

Cost of products sold

$ 1,197  

$ 1,269  

Marketing and administrative expenses

Total operating lease costs

The maturities of the Company’s operating lease liabilities as of September 26, 2021 are as follows (in thousands):

$ 1,320  

$ 1,421  

The maturities of the Company’s operating lease liabilities as of December 26, 2021 are as follows (in thousands):

Total undiscounted operating lease payments

1 unchanged sentence

Operating lease liabilities - net

$ 3,090  

Note 13 –

2 unchanged sentences

As a result of the approval of the 2014 Plan by the Company’s stockholders at the Company’s 2014 annual meeting and the 2021 Plan by the Company’s stockholders at the Company’s 2021 annual meeting, grants may no longer be issued under either the 2006 Plan or the 2014 Plan.

At September 26, 2021, 1,159,835 shares of the Company’s common stock were available for future issuance under the 2021 Plan, which may be issued from authorized and unissued shares of the Company’s common stock or treasury shares.

The Company recorded stock-based compensation expense of $ 208,000 and $ 100,000 during the three -month periods ended September 26, 2021 and September 27, 2020, respectively, and $ 340,000 and $ 186,000 during the six -month periods ended September 26, 2021 and September 27, 2020, respectively.

At December 26, 2021, 1,159,835 shares of the Company’s common stock were available for future issuance under the 2021 Plan, which may be issued from authorized and unissued shares of the Company’s common stock or treasury shares.

The Company recorded stock-based compensation expense of $ 224,000 and $ 103,000 during the three -month periods ended December 26, 2021 and December 27, 2020, respectively, and $ 564,000 and $ 289,000 during the nine -month periods ended December 26, 2021 and December 27, 2020, 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 26, 2021.

No stock-based compensation costs were capitalized as part of the cost of an asset as of December 26, 2021.

Stock Options:

The following table represents stock option activity for the six -month periods ended September 26, 2021 and September 27, 2020:

Six-Month Periods Ended

September 26, 2021

September 27, 2020

The following table represents stock option activity for the nine -month periods ended December 26, 2021 and December 27, 2020:

Nine-Month Periods Ended

December 26, 2021

December 27, 2020

Outstanding at Beginning of Period

13 unchanged sentences

360,000  

As of September 26, 2021, the intrinsic value of the outstanding and exercisable stock options was $ 429,000 and $ 292,000 , respectively.

The intrinsic value of the stock options exercised during the three and six months ended September 26, 2021 was $ 49,000 and $ 138,000 , respectively.

The Company did not receive any cash from the exercise of stock options during either of the three or six -month periods ended September 26, 2021.

As of December 26, 2021, the intrinsic value of the outstanding and exercisable stock options was $ 283,000 and $ 177,000 , respectively.

The intrinsic value of the stock options exercised during the three and nine months ended December 26, 2021 was $ 58,000 and $ 196,000 , respectively.

The Company did not receive any cash from the exercise of stock options during any of the three - or nine -month periods ended December 26, 2021 and December 27, 2020.

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.

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The Company used cash to remit the required income tax withholding amounts from “cashless”

option exercises of $ 14,000 and $ 48,000 during the three and six -month periods ended September 26, 2021, respectively.

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

option exercises of $ 19,000 and $ 67,000 during the three - and nine -month periods ended December 26, 2021, respectively, and $ 43,000 during each of the three - and nine -month periods ended December 27, 2020.

Stock-based compensation is calculated according to FASB ASC Topic 718, Compensation –

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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 months ended September 26, 2021 and September 27, 2020, which options vest over a two -year period, assuming continued service.                  

Six-Month Periods Ended

September 26, 2021

September 27, 2020

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 months ended December 26, 2021 and December 27, 2020, which options vest over a two -year period, assuming continued service.                  

Nine-Month Periods Ended

December 26, 2021

December 27, 2020

Number of options issued

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$ 0.56  

During the three -month periods ended September 26, 2021 and September 27, 2020, 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 26, 2021

Three-Month Period Ended September 27, 2020

During the three - and nine -month periods ended December 26, 2021 and December 27, 2020, 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 26, 2021

Three-Month Period Ended December 27, 2020

Administrative

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Total stock option compensation

During the six -month periods ended September 26, 2021 and September 27, 2020, the Company classified its compensation expense associated with stock options within the accompanying unaudited condensed consolidated statements of income as follows (in thousands):

Six-Month Period Ended September 26, 2021

Six-Month Period Ended September 27, 2020

Nine-Month Period Ended December 26, 2021

Nine-Month Period Ended December 27, 2020

Administrative

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Total stock option compensation

As of September 26, 2021, total unrecognized stock option compensation expense amounted to $ 303,000 , which will be recognized as the underlying stock options vest over a weighted-average period of 15.0 months.

As of December 26, 2021, total unrecognized stock option compensation expense amounted to $ 256,000 , which will be recognized as the underlying stock options vest over a weighted-average period of 9.0 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.

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

In August 2021 and August 2020, 43,984 and 37,256 shares that had been granted to the Company’s directors vested, having an aggregate value of $ 327,000 and $ 179,000 , respectively.

In August 2021 and August 2020, 43,984 and 37,256 shares, respectively, that had been granted to the Company’s directors vested, having an aggregate value of $ 327,000 and $ 179,000 , respectively.

Non-vested Stock Granted to Employees:

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25,000  

During the three and six -month periods ended September 26, 2021 and September 27, 2020, 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):

During the three - and nine -month periods ended December 26, 2021 and December 27, 2020, 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 Periods Ended

Six-Month Periods Ended

Nine-Month Periods Ended

Stock Granted in Fiscal Year

September 26, 2021

September 27, 2020

September 26, 2021

September 27, 2020

December 26, 2021

December 27, 2020

December 26, 2021

December 27, 2020

Total stock grant compensation

As of September 26, 2021, total unrecognized compensation expense related to the Company’s non-vested stock grants amounted to $ 570,000 , 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 10.2 months.

As of December 26, 2021, total unrecognized compensation expense related to the Company’s non-vested stock grants amounted to $ 393,000 , 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 7.3 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.

Note 14 –

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 represented the trailing 10 -trading day volume weighted average closing price of the Company’s common stock ending, and including December 16, 2020.

Note 15 –

Subsequent Events

The Company has evaluated all events which have occurred between September 26, 2021 and the date that the accompanying unaudited condensed consolidated financial statements were issued, and has determined that there are no material subsequent events that require disclosure.

The Company has evaluated all events which have occurred between December 26, 2021 and the date that the accompanying unaudited condensed consolidated financial statements were issued, and has determined that there are no material subsequent events that require disclosure.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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and Sassy Baby, Inc., in the infant, toddler and juvenile products segment within the consumer products industry.

The infant, toddler and juvenile products segment consists of infant and toddler bedding and blankets, bibs, soft bath products, disposable products, developmental toys and accessories.

The infant, toddler and juvenile products segment consists of infant, toddler and juvenile bedding and blankets, bibs, soft bath products, disposable products, developmental toys and accessories.

The Company’s products are marketed under Company-owned trademarks, under trademarks licensed from others and as private label goods.

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and Bentonville, Arkansas and by independent commissioned sales representatives located throughout the United States.

The infant and toddler consumer products industry is highly competitive.

The Company competes with a variety of distributors and manufacturers (both branded and private label), including large infant and juvenile product companies and specialty infant and juvenile product manufacturers, on the basis of quality, design, price, brand name recognition, service and packaging.

The infant, toddler and juvenile consumer products industry is highly competitive.

The Company competes with a variety of distributors and manufacturers (both branded and private label), including large infant, toddler and juvenile product companies and specialty infant, toddler and juvenile product manufacturers, on the basis of quality, design, price, brand name recognition, service and packaging.

The Company’s ability to compete depends principally on styling, price, service to the retailer and continued high regard for the Company’s products and trade names.

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RESULTS OF OPERATIONS

The following table contains the results of operations for the three and six-month periods ended September 26, 2021 and September 27, 2020 and the dollar and percentage changes for those periods (in thousands, except percentages):

The following table contains the results of operations for the three- and nine-month periods ended December 26, 2021 and December 27, 2020 and the dollar and percentage changes for those periods (in thousands, except percentages):

Three-Month Periods Ended

Six-Month Periods Ended

September 26, 2021

September 27, 2020

September 26, 2021

September 27, 2020

Nine-Month Periods Ended

December 26, 2021

December 27, 2020

December 26, 2021

December 27, 2020

Net sales by category:

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% of net sales

Sales decreased to $20.2 million for the three months ended September 26, 2021, compared with $21.7 million for the three months ended September 27, 2020, a decrease of $1.4 million, or 6.6%.

Sales of bedding, blankets and accessories decreased by $1.9 million, which included a decrease of $1.5 million due to the closure of Carousel.

These decreases were partially offset by an increase of $502,000 in sales of bibs, bath, developmental toys, feeding, baby care and disposable products.

Sales increased to $38.9 million for the six-month period ended September 26, 2021, compared with $37.9 million for the six-month period ended September 27, 2020, an increase of $1.1 million, or 2.8%.

Sales increased to $22.7 million for the three months ended December 26, 2021, compared with $19.5 million for the three months ended December 27, 2020, an increase of $3.3 million, or 16.8%.

Sales of bedding, blankets and accessories increased by $349,000, which is net of a decrease of $1.1 million due to the closure of Carousel.

Sales of bibs, bath, developmental toys, feeding, baby care and disposable products increased by $2.9 million.

During the nine-month period ended December 26, 2021, sales increased to $61.7 million, compared with $57.3 million for the nine-month period ended December 27, 2020, an increase of $4.3 million, or 7.6%.

Sales of bibs, bath, developmental toys, feeding, baby care and disposable products increased by $6.0 million.

This increase was partially offset by a decrease of $1.7 million in sales of bedding, blankets and accessories, which included a decrease of $3.5 million due to the closure of Carousel.

The increases in sales during the comparable six-month periods are due to a strong new modular set and higher replenishment orders at a major retailer.

The increases in sales during the comparable three- and nine-month periods are partially due to a strong new modular set and higher replenishment orders at a major retailer, and are somewhat offset by declines in sales to online retailers as consumers have begun to return to stores.

Gross Profit:

Gross profit decreased by $1.0 million and decreased from 32.8% of net sales for the three-month period ended September 27, 2020 to 30.0% of net sales for the three-month period ended September 26, 2021.

The decrease in gross profit included the effect of the closure of Carousel, which recognized a gross profit of $629,000 in the prior year period.

Gross profit decreased by $1.4 million and decreased from 32.0% of net sales for the six-month period ended September 27, 2020 to 27.5% of net sales for the six-month period ended September 26, 2021.

Gross profit increased slightly in amount but decreased from 31.6% of net sales for the three-month period ended December 27, 2020 to 27.1% of net sales for the three-month period ended December 26, 2021.

The increase in the gross profit amount is net of the effect of the closure of Carousel, which recognized a gross profit of $319,000 in the prior-year period.

Gross profit decreased by $1.4 million and decreased from 31.9% of net sales for the nine-month period ended December 27, 2020 to 27.4% of net sales for the nine-month period ended December 26, 2021.

The closure of Carousel resulted in a $2.2 million decrease in gross profit, which in the current-year period included the sale of inventory below cost and the recognition of charges of $334,000 associated with the settlement with a supplier of a commitment to purchase fabric and $265,000 associated with the liquidation of Carousel’s remaining inventory upon the closure of the business.

The Company’s gross profit has also been impacted in both the three and six-month periods of the current year because of increases in ocean-going freight costs.

The Company’s gross profit has also been impacted in both the three- and nine-month periods of the current year by increases in costs across the entire supply chain.

Marketing and Administrative Expenses:

Marketing and administrative expenses decreased by $638,000, and decreased from 17.6% of net sales for the three-month period ended September 27, 2020 to 15.6% of net sales for the three-month period ended September 26, 2021.

Marketing and administrative expenses decreased by $652,000, and decreased from 19.0% of net sales for the six months ended September 27, 2020 to 16.8% of net sales for the six months ended September 26, 2021.

The decrease in amounts for the current year periods included lower charges incurred by Carousel of $547,000 for the three-month period and $807,000 for the six-month period.

Marketing and administrative expenses decreased by $326,000, and decreased from 17.6% of net sales for the three-month period ended December 27, 2020 to 13.6% of net sales for the three-month period ended December 26, 2021.

Marketing and administrative expenses decreased by $978,000, and decreased from 18.5% of net sales for the nine months ended December 27, 2020 to 15.6% of net sales for the nine months ended December 26, 2021.

The decrease in amounts for the current-year periods included lower charges incurred by Carousel of $494,000 for the three-month period and $1.3 million for the nine-month period.

Gain on extinguishment of debt:

On May 20, 2021, the PPP Loan was forgiven in full, which resulted in a gain on extinguishment of debt in the amount of $1,985,000 during the three-month period ended June 27, 2021 and the six-month period ended September 26, 2021.

Income Tax Expense:

The Company’s provision for income taxes is based upon an estimated annual effective tax rate (“ETR”) from continuing operations of 19.6% for the six-month period ended September 26, 2021.

This estimated annual ETR includes no income tax expense from the gain on extinguishment of debt associated with the forgiveness of the PPP Loan, which will be permitted to be excluded from taxable income, the effect of which is expected to lower the estimated annual ETR for fiscal year 2022 by approximately four percentage points.

The Company’s provision for income taxes is based upon an estimated annual effective tax rate (“ETR”) from continuing operations of 20.0% for the nine-month period ended December 26, 2021.

This estimated annual ETR includes no income tax expense from the gain on extinguishment of debt associated with the forgiveness of the PPP Loan, which will be permitted to be excluded from taxable income, the effect of which lowers the estimated annual ETR for fiscal year 2022 by approximately four percentage points.

The Company applies the provisions of FASB ASC Sub-topic 740-10-25, which requires a minimum recognition threshold that a tax benefit must meet before being recognized in the financial statements.

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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 $22,000 and $20,000 during the three-month periods ended September 26, 2021 and September 27, 2020, respectively, and $45,000 and $33,000 during the six-month periods ended September 26, 2021 and September 27, 2020, respectively, in the accompanying unaudited condensed consolidated statements of income.

The Company recorded discrete income tax benefits of $28,000 and $72,000 during the three and six-month periods ended September 26, 2021, respectively, to reflect the aggregate effect of the excess tax benefits arising from the exercise of stock options and the vesting of non-vested stock.

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

The ETR on continuing operations and the discrete income tax charges and benefits set forth above resulted in an overall provision for income taxes of 19.2% and 24.9% for the six-month periods ended September 26, 2021 and September 27, 2020, respectively.

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 $22,000 and $25,000 during the three months ended December 26, 2021 and December 27, 2020, respectively, and $67,000 and $58,000 during the nine months ended December 26, 2021 and December 27, 2020, respectively, in the accompanying unaudited condensed consolidated statements of income.

The Company recorded discrete income tax benefits of $11,000 and $16,000 during the three-month periods ended December 26, 2021 and December 27, 2020, respectively, and $83,000 and $12,000 during the nine-month periods ended December 26, 2021 and December 27, 2020, respectively, to reflect the net effects of the excess tax benefits and tax shortfalls arising from the exercise of stock options and the vesting of non-vested stock.

The Company recorded a discrete income tax benefit of $33,000 during each of the three- and nine-month periods ended

December 26, 2021, and $74,000 during each of the three- and nine-month periods ended December 27, 2020, to reflect the

aggregate effect of certain tax credits.

The ETR on continuing operations and the discrete income tax charges and benefits set forth above resulted in an overall provision for income taxes of 19.4% and 23.7% for the nine-month periods ended December 26, 2021 and December 27, 2020, respectively.

Although the Company does not anticipate a material change to the ETR from continuing operations for the remainder of fiscal year 2022, several factors could impact the ETR, including variations from the Company’s estimates of the amount and source of its pre-tax income, and the actual ETR for the year could differ materially from the Company’s estimates.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities decreased from $8.3 million for the six-month period ended September 27, 2020 to $3.2 million for the six-month period ended September 26, 2021.

Net cash provided by operating activities decreased from $8.1 million for the nine-month period ended December 27, 2020 to $4.3 million for the nine-month period ended December 26, 2021.

The decrease in the current year was the result of an increase in accounts payable in the current year that was $3.7 million lower than the increase in the prior year;

an increase of inventory in the current year that was $2.4 million higher than the increase the prior year;

and the non-cash gain on extinguishment of debt of $1,985,000 in the current year that was associated with the forgiveness of the PPP Loan.

These decreases were offset by an increase in accounts receivable in the current year of $853,000 compared with a decrease in the prior year of $994,000, and an increase in net income of $1.3 million.

Net cash used in investing activities was nearly flat, decreasing from $312,000 in the prior year to $253,000 in the current year.

Net cash used in financing activities increased from $1.4 million in the prior year to $1.7 million in the current year.

Financing activities in the prior year included the receipt of $1,964,000 in proceeds from the PPP Loan that were not repeated in the current year.

Also, dividends paid in the current year were $789,000 higher than in the prior year.

These financing activities were offset by net repayments under the revolving line of credit in the prior year of $2.6 million that were not repeated in the current year.

At September 26, 2021, there was no balance owed on the Company’s revolving line of credit with CIT, 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.

To reduce its exposure to credit losses and to enhance the predictability of its cash flow, the Company assigns the majority of its trade accounts receivable to CIT under factoring agreements.

the non-cash gain on extinguishment of debt of $1,985,000 in the current year that was associated with the forgiveness of the PPP Loan;

and an increase in accounts receivable in the current year that was $1.2 million higher than the increase in the prior year.

These items were partially offset by an increase in net income of $1.6 million and an increase of inventory in the current year that was $978,000 lower than the increase the prior year.

Net cash used in investing activities, which were primarily associated with capital expenditures for property, plant and equipment, decreased from $528,000 in the prior year to $352,000 in the current year.

Net cash used in financing activities decreased from $4.2 million in the prior year to $2.5 million in the current year.

Financing activities included net repayments under the revolving line of credit in the prior year of $2.6 million that were not repeated in the current year and the purchase of treasury stock in the prior year from a related party amounting to $1.9 million that was not repeated in the current year.

These financing activities were partially offset by the receipt in the prior year of $1,964,000 in proceeds from the PPP Loan that was not repeated in the current year and dividends paid in the current year were $772,000 higher than in the prior year.

At December 26, 2021, there was no balance owed on the Company’s revolving line of credit with CIT, 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.

To reduce its exposure to credit losses and to enhance the predictability of its cash flow, the Company assigns substantially all of its trade accounts receivable to CIT under factoring agreements.

Under the terms of the factoring agreements, CIT remits customer payments to the Company as such payments are received by CIT.

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If such a termination or limitation were to occur, then the Company must choose to either assume the credit risk for shipments after the date of such termination or limitation or discontinue 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 during each of the three-month periods ended September 26, 2021 and September 27, 2020, and $149,000 and $130,000 during the six-month periods ended September 26, 2021 and September 27, 2020, respectively.

Factoring fees, which are included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income, amounted to $99,000 and $79,000 during the three-month periods ended December 26, 2021 and December 27, 2020, respectively, and $248,000 and $209,000 during the nine-month periods ended December 26, 2021 and December 27, 2020, respectively.

The Company continues to monitor the impact of the COVID-19 pandemic on its supply chain, manufacturing and distribution operations, customers and employees, as well as the U.S.

economy in general.

However, due to the uncertainty as to the duration and widespread nature of the COVID-19 pandemic, the success rates of the vaccines on COVID-19 and the variants thereof, and the extent to which the vaccines will be accepted and effectively administered, the Company cannot currently predict the long-term impact of the COVID-19 pandemic on its operations and financial results.

However, due to the uncertainty as to the duration and widespread nature of the COVID-19 pandemic, the success rates of vaccines for COVID-19 and the variants thereof, and the extent to which the vaccines are accepted and effectively administered, the Company cannot currently predict the long-term impact of the COVID-19 pandemic on its operations and financial results.

The uncertainties associated with the COVID-19 pandemic include potential adverse effects on the overall economy, the Company’s supply chain, transportation services, employees and customers, consumer sentiment in general, and traffic within the retail stores that carry the Company’s products.

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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