10-Q 1 vitl-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 001-39411

 

 

Vital Farms, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

27-0496985

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

3601 South Congress Avenue

Suite C100

Austin, Texas

78704

(Address of principal executive offices)

(Zip Code)

(877) 455-3063

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

VITL

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging Growth Company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of May 6, 2024 the registrant had 42,176,860 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

Page

 

Special Note Regarding Forward-Looking Statements

ii

 

 

 

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

 

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Income

2

 

Condensed Consolidated Statements of Comprehensive Income

3

Condensed Consolidated Statements of Stockholders’ Equity

4

Condensed Consolidated Statements of Cash Flows

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

34

PART II.

OTHER INFORMATION

35

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

63

Item 3.

Defaults Upon Senior Securities

63

Item 4.

Mine Safety Disclosures

63

Item 5.

Other Information

63

Item 6.

Exhibits

64

 

Signatures

65

 

 

 

 

i


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains “forward-looking statements” (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Annual Report, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

our expectations regarding our revenue, expenses and other operating results;
our ability to acquire new customers and successfully retain existing customers;
our ability to attract and retain our suppliers, distributors and co-manufacturers;
our ability to maintain relationships with our existing farm networks or further expand such networks;
our ability to sustain or increase our profitability;
our expectations regarding our future growth in the foodservice channel, including commercial and non-commercial foodservice business;
our ability to procure sufficient high-quality eggs, cream for our butter and other raw materials;
real or perceived quality or food safety issues with our products or other issues that adversely affect our brand and reputation;
changes in the tastes and preferences of our consumers;
the financial condition of, and our relationships with, our farmers, suppliers, co-manufacturers, distributors, retailers and foodservice customers, as well as the health of the foodservice industry generally;
the effects of outbreaks of agricultural diseases, such as avian influenza, or the perception that outbreaks may occur or regulatory or market responses to such outbreaks generally;
the ability of our farmers, suppliers and co-manufacturers to comply with food safety, environmental or other laws or regulations;
the effects of a public health pandemic or contagious disease, or fear of such outbreaks, on our supply chain, the demand for our products, and overall economic conditions, consumer confidence and spending levels;
the impact of the completed expansion of our Egg Central Station facility or future expansions of our processing capacity on our revenue, and specifications and timing regarding plans for our next egg packing facility;
future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;
anticipated changes in our product offerings and our ability to innovate to offer new products;
our ability to successfully enter new product categories;
the costs and success of our marketing efforts and our ability to promote our brand;
our reliance on key personnel and our ability to identify, recruit and retain personnel;
our ability to effectively manage our growth;
the potential influence of our focus on a specific public benefit purpose and producing a positive effect for society;
our environmental, sustainability and governance goals, opportunities and initiatives, as well as the standards and expectations of third parties regarding these matters;
our ability to compete effectively with existing competitors and new market entrants;
the impact of adverse economic conditions, including as a result of unfavorable global economic and political conditions, elevated interest rates and inflation;

ii


 

the sufficiency of our cash, cash equivalents, marketable securities and availability of credit under our credit facility to meet our liquidity needs;
seasonality; and
the growth rates of the markets in which we compete.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report. A summary of selected risks associated with our business is set forth at the beginning of the section titled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

iii


 

PART I – FINANCIAL INFORMATION

VITAL FARMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share amounts)

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

113,820

 

 

$

84,149

 

Investment securities, available-for-sale

 

 

23,724

 

 

 

32,667

 

Accounts receivable, net of allowance for credit losses of $266 and $550 as of March 31, 2024 and December 31, 2023, respectively

 

 

43,637

 

 

 

39,699

 

Inventories

 

 

30,813

 

 

 

32,895

 

Prepaid expenses and other current assets, net of allowance for credit losses of $135 and $227 as of March 31, 2024 and December 31, 2023, respectively

 

 

6,176

 

 

 

6,114

 

Total current assets

 

 

218,170

 

 

 

195,524

 

Property, plant and equipment, net

 

 

66,231

 

 

 

66,839

 

Operating lease right-of-use assets

 

 

10,842

 

 

 

8,911

 

Goodwill and other assets

 

 

4,915

 

 

 

3,904

 

Total assets

 

$

300,158

 

 

$

275,178

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

33,119

 

 

$

33,485

 

Accrued liabilities

 

 

22,280

 

 

 

24,218

 

Operating lease liabilities, current

 

 

4,582

 

 

 

3,057

 

Finance lease liabilities, current

 

 

3,479

 

 

 

3,255

 

Income taxes payable

 

 

6,908

 

 

 

1,206

 

Total current liabilities

 

 

70,368

 

 

 

65,221

 

Operating lease liabilities, non-current

 

 

5,101

 

 

 

5,771

 

Finance lease liabilities, non-current

 

 

10,321

 

 

 

10,481

 

Other liabilities

 

 

1,064

 

 

 

1,028

 

Total liabilities

 

$

86,854

 

 

$

82,501

 

Commitments and contingencies (Note 18)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value per share, 10,000,000 shares authorized as of March 31, 2024 and December 31, 2023; no shares issued and outstanding as of March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.0001 par value per share, 310,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 42,003,656 and 41,684,649 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

164,821

 

 

 

163,325

 

Retained earnings

 

 

48,748

 

 

 

29,725

 

Accumulated other comprehensive loss

 

 

(269

)

 

 

(377

)

Total stockholders’ equity

 

$

213,304

 

 

$

192,677

 

Total liabilities and stockholders’ equity

 

$

300,158

 

 

$

275,178

 

See accompanying notes to the unaudited condensed consolidated financial statements.

1


 

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except share and per share data)

(Unaudited)

 

 

13-Weeks Ended

 

 

 

March 31,
2024

 

 

March 26,
2023

 

Net revenue

 

$

147,929

 

 

$

119,172

 

Cost of goods sold

 

 

89,032

 

 

 

76,504

 

Gross profit

 

 

58,897

 

 

 

42,668

 

Operating expenses:

 

 

 

 

 

 

Selling, general and administrative

 

 

27,132

 

 

 

23,946

 

Shipping and distribution

 

 

7,596

 

 

 

7,826

 

Total operating expenses

 

 

34,728

 

 

 

31,772

 

Income from operations

 

 

24,169

 

 

 

10,896

 

Other income (expense), net:

 

 

 

 

 

 

Interest expense

 

 

(255

)

 

 

(139

)

Interest income

 

 

1,088

 

 

 

340

 

Other expense, net

 

 

(277

)

 

 

(1,425

)

Total other income (expense), net

 

 

556

 

 

 

(1,224

)

Net income before income taxes

 

 

24,725

 

 

 

9,672

 

Income tax provision

 

 

5,702

 

 

 

2,522

 

Net income

 

 

19,023

 

 

 

7,150

 

Net income per share:

 

 

 

 

 

 

Basic:

 

$

0.46

 

 

$

0.18

 

Diluted:

 

$

0.43

 

 

$

0.16

 

Weighted average common shares outstanding:

 

 

 

 

 

 

Basic:

 

 

41,792,527

 

 

 

40,764,546

 

Diluted:

 

 

43,845,952

 

 

 

43,398,336

 

See accompanying notes to the unaudited condensed consolidated financial statements.

2


 

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

 

 

13-Weeks Ended

 

 

 

March 31,
2024

 

 

March 26,
2023

 

Net income

 

$

19,023

 

 

$

7,150

 

Other comprehensive income, before tax:

 

 

 

 

 

 

Available-for-sale debt securities:

 

 

 

 

 

 

Unrealized net holding gain

 

 

144

 

 

 

517

 

Amounts reclassified for realized (losses) gains to earnings

 

 

(1

)

 

 

34

 

Available-for-sale debt securities, before tax

 

 

143

 

 

 

551

 

Other comprehensive income, before tax

 

 

143

 

 

 

551

 

Income tax expense related to items of other comprehensive income

 

 

(35

)

 

 

(130

)

Other comprehensive income, net of tax

 

 

108

 

 

 

421

 

Comprehensive income

 

 

19,131

 

 

 

7,571

 

See accompanying notes to the unaudited condensed consolidated financial statements.

3


 

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share amounts)

(Unaudited)

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Total
Stockholders’
Equity

 

Balances as of December 31, 2023

 

 

41,684,649

 

 

$

4

 

 

$

163,325

 

 

$

29,725

 

 

$

(377

)

 

$

192,677

 

Exercise of stock options

 

 

180,086

 

 

 

 

 

 

824

 

 

 

 

 

 

 

 

 

824

 

Vesting of restricted stock units

 

 

201,702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares withheld for tax liability on vested restricted stock units

 

 

(62,781

)

 

 

 

 

 

(1,310

)

 

 

 

 

 

 

 

 

(1,310

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,982

 

 

 

 

 

 

 

 

 

1,982

 

Other comprehensive income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

108

 

 

 

108

 

Net income

 

 

 

 

 

 

 

 

 

 

 

19,023

 

 

 

 

 

 

19,023

 

Balances as of March 31, 2024

 

 

42,003,656

 

 

$

4

 

 

$

164,821

 

 

$

48,748

 

 

$

(269

)

 

$

213,304

 

See accompanying notes to the unaudited condensed consolidated financial statements.

4


 

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share amounts)

(Unaudited)

 

 

Common
Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Total
Stockholders’
Equity

 

Balances as of December 25, 2022

 

 

40,746,990

 

 

$

4

 

 

$

155,716

 

 

$

4,159

 

 

$

(1,547

)

 

$

158,332

 

Vesting of restricted stock units

 

 

127,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

Shares withheld for tax liability on vested restricted stock units

 

 

(35,535

)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,627

 

 

 

 

 

 

 

 

$

1,627

 

Other comprehensive income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

421

 

 

$

421

 

Net income

 

 

 

 

 

 

 

 

 

 

 

7,150

 

 

 

 

 

$

7,150

 

Balances as of March 26, 2023

 

 

40,839,050

 

 

$

4

 

 

$

157,343

 

 

$

11,309

 

 

$

(1,126

)

 

$

167,530

 

See accompanying notes to the unaudited condensed consolidated financial statements.

5


 

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

 

 

13-Weeks Ended

 

 

 

March 31,
2024

 

 

March 26,
2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

19,023

 

 

$

7,150

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

2,297

 

 

 

1,693

 

Reduction in the carrying amount of right-of-use assets

 

 

1,673

 

 

 

793

 

Amortization of available-for-sale debt securities

 

 

65

 

 

 

163

 

Stock-based compensation expense

 

 

1,982

 

 

 

2,241

 

Deferred taxes

 

 

 

 

 

445

 

Net realized losses on derivative instruments

 

 

300

 

 

 

1,047

 

Other

 

 

(289

)

 

 

139

 

Net change in operating assets and liabilities

 

 

(1,102

)

 

 

(8,268

)

Net cash provided by operating activities

 

$

23,949

 

 

$

5,403

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(1,324

)

 

 

(1,802

)

Purchases of derivative instruments

 

 

(669

)

 

 

(220

)

Maturities and calls of available-for-sale debt securities

 

 

9,020

 

 

 

8,935

 

Proceeds from the sale of property, plant and equipment

 

 

 

 

 

1,054

 

Return of investment in variable interest entity

 

 

 

 

 

552

 

Net cash provided by investing activities

 

$

7,027

 

 

$

8,519

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from borrowing under revolving line of credit

 

 

 

 

 

7,500

 

Proceeds from exercise of stock options

 

 

824

 

 

 

 

Repayment of revolving line of credit

 

 

 

 

 

(7,500

)

Payment of tax withholding obligation on vested RSU shares

 

 

(1,310

)

 

 

(614

)

Principal payments under finance lease obligations

 

 

(819

)

 

 

(384

)

Net cash used in financing activities

 

$

(1,305

)

 

$

(998

)

Net increase in cash and cash equivalents

 

 

29,671

 

 

 

12,924

 

Cash and cash equivalents at beginning of the period

 

 

84,149

 

 

 

12,914

 

Cash and cash equivalents at end of the period

 

$

113,820

 

 

$

25,838

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

255

 

 

$

134

 

Cash paid for income taxes

 

 

 

 

$

2

 

Supplemental disclosure of non-cash investing and financing
   activities:

 

 

 

 

 

 

Purchases of property, plant and equipment included in accounts payable and accrued liabilities

 

$

623

 

 

$

891

 

See accompanying notes to the unaudited condensed consolidated financial statements.

6


 

VITAL FARMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

Note 1. Nature of the Business and Basis of Presentation

Vital Farms, Inc. (the “Company”) was incorporated in Delaware on June 6, 2013 and is headquartered in Austin, Texas. The Company packages, markets and distributes shell eggs, butter and other products. These products are principally sold under the name Vital Farms in addition to other trade names, primarily to retail and foodservice channels in the United States.

The accompanying unaudited condensed consolidated financial statements as of March 31, 2024 and for the 13-week periods ended March 31, 2024 and March 26, 2023 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Annual Report”).

In the opinion of management, the included disclosures are adequate, and the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for a fair statement of the Company’s consolidated financial position as of March 31, 2024, consolidated results of operations for the 13-week periods ended March 31, 2024 and March 26, 2023, and consolidated cash flows for the 13-week periods ended March 31, 2024 and March 26, 2023. Such adjustments are of a normal and recurring nature and certain reclassifications of previously reported amounts have been made to conform to the current year presentation. The condensed consolidated balance sheet as of December 31, 2023 was derived from audited annual financial statements but does not contain all of the footnote disclosures from the audited annual financial statements. The condensed consolidated results of operations for the 13-week period ended March 31, 2024 are not necessarily indicative of the consolidated results of operations that may be expected for the fiscal year ending December 29, 2024.

Fiscal Year: The Company’s fiscal year ends on the last Sunday in December and contains either 52 or 53 weeks. In a 52-week fiscal year, each of the Company’s fiscal quarters consist of 13 weeks. The additional week in a 53-week fiscal year is added to the fourth quarter, making such quarter consist of 14 weeks. Therefore, the financial results of certain 53-week fiscal years, and the associated 14-week quarters, will not be exactly comparable to the prior and subsequent 52-week fiscal years and the associated 13-week quarters. The fiscal quarters ended March 31, 2024 and March 26, 2023 both contain operating results for 13 weeks. The fiscal year ended December 31, 2023 consisted of 53 weeks.

Note 2. Summary of Significant Accounting Policies

The significant accounting policies and estimates used in preparation of the unaudited condensed consolidated financial statements are described in the Company’s audited consolidated financial statements as of and for the fiscal year ended December 31, 2023, and the notes thereto, which are included in the Company’s Annual Report. Other than the adoption of the new accounting pronouncements and standards as further described below, there have been no material changes to the Company’s significant accounting policies during the 13-week period ended March 31, 2024.

Recently Adopted Accounting Pronouncements

The new accounting pronouncements recently adopted by the Company are described in the Company’s audited consolidated financial statements as of and for the fiscal year ended December 31, 2023, and the notes thereto, which are included in the Annual Report. There have been no new accounting pronouncements adopted by the Company during the 13-week period ended March 31, 2024.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU 2023-07, Segment Reporting (Topic 280) — Improvements to Reportable Segment Disclosures (“ASU 2023-07”) in order to improve stockholders’ understanding of an entity’s business activities through enhanced disclosures around reportable segments. ASU 2023-07 will require incremental and more detailed disclosure regarding segment expenses on both an annual and interim basis. For public companies ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company plans to adopt the standard for the year ended December 29, 2024 and will thus include any additional disclosures, if necessary, in its annual report on Form 10-K for the current fiscal year.

7


 

In December 2023, the FASB issued ASU No 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures (“ASU 2023-09”) in order to enhance the transparency and usefulness of income tax disclosures. The guidance is applicable to all entities subject to income tax and it will require disclosure of certain categories within the rate reconciliation to improve consistency as well as disclosure of reconciling items which meet a certain quantitative threshold which will improve transparency. Additionally, entities must disclose the amount of taxes paid to federal, state and foreign municipalities. For public business entities ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company expects to adopt the standard for the fiscal year beginning December 30, 2024. The Company is currently evaluating the impact of its pending adoption of ASU 2023-09 on its consolidated financial statements.

In March 2024, the FASB issued ASU No 2024-01, Compensation — Stock Compensation (Topic 718) — Scope Application of Profits Interest and Similar Awards (“ASU 2024-01”) in order to drive consistency across entities in their application of guidance to profits interest and similar types of award grants. ASU 2024-01 seeks to improve consistency through additional examples and illustrations. The guidance is applicable to all entities that account for profits interest awards as compensation to employees or nonemployees and the guidance to be added in paragraph 718-10-15-3 is applicable to all entities that enter into share-based payment transactions. For public business entities ASU 2024-01 is effective for annual periods beginning after December 15, 2024 and interim periods within those annual periods. The Company expects to adopt the standard for the fiscal year beginning December 30, 2024. The Company is currently evaluating the impact of its pending adoption of ASU 2024-01 on its consolidated financial statements.

Note 3. Investment Securities

The following table summarizes the Company’s available-for-sale investment securities as of March 31, 2024:

 

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Allowance for Credit Losses

 

 

Fair Value

 

U.S. corporate bonds and U.S. dollar
   denominated foreign bonds

 

$

24,047

 

 

$

6

 

 

$

(329

)

 

$

 

 

$

23,724

 

Total

 

$

24,047

 

 

$

6

 

 

$

(329

)

 

$

 

 

$

23,724

 

The following table summarizes the Company’s available-for-sale investment securities as of December 31, 2023:

 

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Allowance for Credit Losses

 

 

Fair Value

 

U.S. corporate bonds and U.S. dollar
   denominated foreign bonds

 

$

33,134

 

 

$

10

 

 

$

(477

)

 

$

 

 

$

32,667

 

Total

 

$

33,134

 

 

$

10

 

 

$

(477

)

 

$

 

 

$

32,667

 

For the 13-week periods ended March 31, 2024 and March 26, 2023, there were no proceeds from the sale of available-for-sale securities.

Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay obligations with or without call or prepayment penalties. The amortized cost and fair value of the Company’s investments in available-for-sale securities as of March 31, 2024 by contractual maturity are as follows:

 

 

Amortized Cost

 

 

Fair Value

 

Due within one year

 

$

19,064

 

 

$

18,792

 

Due after one year through five years

 

 

4,983

 

 

 

4,932

 

Total available-for-sale

 

$

24,047

 

 

$

23,724

 

The following tables present the Company’s unrealized loss aging for available-for-sale securities by type and length of time the security was in a continuous unrealized loss position as of the periods presented:

8


 

 

 

March 31, 2024

 

 

 

Less than 12 months

 

 

12 months or longer

 

 

Total

 

 

 

Fair Value

 

 

Unrealized Losses

 

 

Fair Value

 

 

Unrealized Losses

 

 

Fair Value

 

 

Unrealized Losses

 

U.S. corporate bonds and U.S. dollar
   denominated foreign bonds

 

$

2,397

 

 

$

(10

)

 

$

20,315

 

 

$

(319

)

 

$

22,712

 

 

$

(329

)

Total

 

$

2,397

 

 

$

(10

)

 

$

20,315

 

 

$

(319

)

 

$

22,712

 

 

$

(329

)

 

 

 

December 31, 2023

 

 

 

Less than 12 months

 

 

12 months or longer

 

 

Total

 

 

 

Fair Value

 

 

Unrealized Losses

 

 

Fair Value

 

 

Unrealized Losses

 

 

Fair Value

 

 

Unrealized Losses

 

U.S. corporate bonds and U.S. dollar
   denominated foreign bonds

 

$

699

 

 

$

(3

)

 

$

29,247

 

 

$

(474

)

 

$

29,946

 

 

$

(477

)

Total

 

$

699

 

 

$

(3

)

 

$

29,247

 

 

$

(474

)

 

$

29,946

 

 

$

(477

)

As of March 31, 2024, there were 38 diversified issuances in the Company's securities portfolio in an unrealized loss position, with credit ratings ranging from BBB- to AA-. As of March 31, 2024, there are no individual bonds with unrealized losses exceeding $37, and 35 issuances have been in a loss position greater than 12 months.

The decline in fair value has resulted primarily from rising interest rates over the last 12 months, and the Company does not believe there has been any significant decline in the creditworthiness of the issuers. The Company also does not believe it is likely that a significant number of bonds will be called early, and it does not have current liquidity needs that would necessitate a sale of any material investments prior to maturity. Therefore, the Company has not recorded an allowance for credit losses on the investment securities as of March 31, 2024.

The fair value and location of all investment securities are included in “Fair Value Measurements” in Note 5 below.

9


 

Note 4. Derivative Financial Instruments

The Company enters into derivative instruments to mitigate the impact of commodity price volatility. Such instruments may include call options on commodity price contracts. Realized and unrealized gains and losses on the Company’s commodity derivatives not designated as hedging instruments are recorded in other expense, net. The Company recognizes all derivative instruments as either assets or liabilities.

The following table presents the aggregated outstanding notional amounts related to the Company’s derivative financial instruments for the periods presented:

 

 

Metric

 

March 31,
2024

 

 

December 31,
2023

 

Commodity:

 

 

 

 

 

 

 

 

Corn

 

Bushels (in thousands)

 

 

1,629

 

 

 

2,351

 

Soybean Meal

 

Tons

 

 

17

 

 

 

25

 

For the 13-week periods ended March 31, 2024 and March 26, 2023, the pre-tax amount of commodity contract derivative losses recognized in other expense, net was $300 and $1,415, respectively.

The fair value and location of all outstanding derivative financial instruments are included in “Fair Value Measurements” in Note 5 below.

Note 5. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels of inputs that may be used to measure fair value are defined below:

Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Assets Measured at Fair Value on a Recurring Basis

The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

10


 

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis for the periods presented:

 

 

Fair Value Measurements as of March 31, 2024, Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market

 

$

92,104

 

 

$

 

 

$

 

 

$

92,104

 

Investment securities, available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. corporate bonds and U.S. dollar
   denominated foreign bonds

 

 

 

 

 

23,724

 

 

 

 

 

 

23,724

 

Prepaid expenses and other current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

 

 

 

 

93

 

 

 

 

 

 

93

 

Total assets measured at fair value

 

$

92,104

 

 

$

23,817

 

 

$

 

 

$

115,921

 

 

 

 

Fair Value Measurements as of December 31, 2023, Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market

 

$

64,498

 

 

$

 

 

$

 

 

$

64,498

 

Investment securities, available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. corporate bonds and U.S. dollar
   denominated foreign bonds

 

 

 

 

 

32,667

 

 

 

 

 

 

32,667

 

U.S. Treasury

 

 

 

 

 

394

 

 

 

 

 

 

394

 

Total assets measured at fair value

 

$

64,498

 

 

$

33,061

 

 

$

 

 

$

97,559

 

During the 13-week period ended March 31, 2024, there were no transfers between fair value measurement levels. For additional information on concentrations of credit risk for the Company’s financial instruments, refer to “Investment Securities” in Note 3.

Fair Value of Other Financial Instruments

The carrying values of the Company’s short-term financial instruments not included above, including cash, trade receivables, other receivables and accounts payable, approximate their fair value due to their short-term nature.

Note 6. Revenue Recognition

The following table summarizes the Company’s net revenue by primary product for the periods presented:

 

 

13-Weeks Ended

 

 

 

March 31,
2024

 

 

March 26,
2023

 

Net Revenue:

 

 

 

 

 

 

Eggs and egg-related products

 

$

143,761

 

 

$

112,790

 

Butter and butter-related products

 

 

4,168

 

 

 

6,382

 

Net Revenue

 

$

147,929

 

 

$

119,172

 

 

11


 

Net revenue is primarily generated from the sale of eggs and butter. The Company’s product offerings include shell eggs, hard-boiled eggs, liquid whole eggs and stick butter. The Company’s previous convenient breakfast product line (including egg bites and egg-based breakfast bars) was discontinued in 2022, and the Company’s ghee and spreadable tub butter product offerings were discontinued during the fiscal year ended December 31, 2023. The revenues related to the discontinued product lines were immaterial for the 13-week periods ended March 31, 2024 and March 26, 2023.

During the 13-week periods ended March 31, 2024 and March 26, 2023, the Company had a customer that individually exceeded 10% or more of the Company’s net revenue. The percentage of net revenue from significant customers during the 13-week periods ended March 31, 2024 and March 26, 2023 is as follows:

 

 

Net Revenue
for the
13-Weeks Ended March 31, 2024

 

Net Revenue
for the
13-Weeks Ended March 26, 2023

Customer A

 

24%

 

25%

Customer B

 

*

 

*

Customer C

 

*

 

*

Customer D

 

*

 

*

* Revenue was less than 10%

 

 

 

 

As of March 31, 2024 and December 31, 2023, the Company had customers that individually exceeded 10% or more of the Company’s accounts receivable. The percentage of accounts receivable, net due from significant customers as of March 31, 2024 and December 31, 2023 is as follows:

 

 

Accounts Receivable, Net as of March 31, 2024

 

Accounts Receivable, Net as of December 31, 2023

Customer A

 

20%

 

18%

Customer B

 

12%

 

12%

Customer C

 

*

 

11%

Customer D

 

12%

 

11%

* Accounts receivable, net was less than 10%

 

 

 

 

 

Note 7. Allowance for Credit Losses

As of March 31, 2024 and December 31, 2023, the Company had an allowance for credit losses of $401 and $777, respectively.

The Company recognizes current estimated credit losses (“CECL”) for accounts receivable and other receivables. The CECL for trade receivables are estimated based on the trade receivable aging category, credit risk of specific customers, past collection history, and management’s evaluation of accounts receivable. The Company also has other receivables which are classified within prepaid expenses and other current assets. The CECL for other receivables are estimated based on the other receivables aging category and the probability of default. Provisions for CECL are classified within selling, general and administrative costs

12


 

Changes in the allowance for credit losses for the 13-week period ended March 31, 2024 were as follows:

 

 

Accounts Receivable

 

 

Prepaid Expenses and other Current Assets

 

 

Total

 

As of December 31, 2023

 

$

(550

)

 

$

(227

)

 

$

(777

)

Provisions charged to operating results

 

 

284

 

 

 

(48

)

 

 

236

 

Account write-offs

 

 

 

 

 

140

 

 

 

140

 

As of March 31, 2024

 

$

(266

)

 

$

(135

)

 

$

(401

)

 

Note 8. Inventories

Inventory consisted of the following as of the periods presented:

 

 

March 31,
2024

 

 

December 31,
2023

 

Eggs and egg-related products

 

$

21,346

 

 

$

25,521

 

Butter and butter-related products

 

 

5,084

 

 

 

1,697

 

Packaging

 

 

3,672

 

 

 

4,988

 

Pullets

 

 

221

 

 

 

289

 

Other

 

 

936

 

 

 

896

 

Reserve for inventory obsolescence

 

 

(446

)

 

 

(496

)

Inventories

 

$

30,813

 

 

$

32,895

 

On a periodic basis, the Company compares the amount of inventory on hand with its latest forecasted requirements to determine whether provisions for excess or obsolete inventory reserves are required.

Note 9. Property, Plant and Equipment

Property, plant and equipment consisted of the following as of the periods presented:

 

 

March 31,
2024

 

 

December 31,
2023

 

Land

 

$

552

 

 

$

552

 

Land improvements

 

 

818

 

 

 

818

 

Buildings and improvements

 

 

30,532

 

 

 

30,532

 

Vehicles

 

 

1,055

 

 

 

1,055

 

Machinery and equipment

 

 

54,355

 

 

 

50,979

 

Leasehold improvements

 

 

491

 

 

 

492

 

Furniture and fixtures

 

 

479

 

 

 

461

 

Construction in progress

 

 

2,211

 

 

 

3,001

 

 

 

90,493

 

 

 

87,890

 

Less: Accumulated depreciation and amortization

 

 

(24,262

)

 

 

(21,051

)

Property, plant and equipment, net

 

$

66,231

 

 

$

66,839

 

During the 13-week periods ended March 31, 2024 and March 26, 2023, depreciation and amortization of property, plant and equipment was approximately $2,297 and $1,693, respectively.

Note 10. Leases

Operating lease cost is recognized on a straight-line basis over the lease term and finance lease cost is recognized as amortization expense for the right-of-use (“ROU”) assets and interest expense associated with the finance lease liabilities.

13


 

The components of lease cost, classified within cost of goods sold, selling, general and administrative and interest expense for the 13-week periods ended March 31, 2024 and March 26, 2023 are below:

 

 

13-Weeks Ended

 

 

 

March 31,
2024

 

 

March 26,
2023

 

Operating lease cost

 

$

922

 

 

$

361

 

Finance lease cost – amortization of right-of-use assets

 

 

914

 

 

 

447

 

Finance lease cost – interest on lease liabilities

 

 

246

 

 

 

132

 

Short-term lease cost

 

 

32

 

 

 

117

 

Variable lease cost

 

 

2,507

 

 

 

1,563

 

Variable lease cost – long-term supply contracts

 

 

25,340

 

 

 

43,086

 

Total lease cost

 

$

29,961

 

 

$

45,706

 

Future undiscounted cash flows are as follows:

 

 

As of March 31, 2024

 

 

 

Operating Leases

 

 

Finance Leases

 

2024

 

$

4,227

 

 

$

3,238

 

2025

 

 

3,234

 

 

 

4,356

 

2026

 

 

3,018

 

 

 

4,387

 

2027

 

 

 

 

 

3,611

 

2028

 

 

 

 

 

 

Thereafter

 

 

 

 

 

 

Total lease payments

 

 

10,479

 

 

 

15,592

 

Less imputed interest

 

 

(796

)

 

 

(1,792

)

Total present value of lease liabilities

 

$

9,683

 

 

$

13,800

 

During the 13-week periods ended March 31, 2024 and March 26, 2023, ROU assets obtained in exchange for new finance lease obligations were $907 and $4, respectively. During the 13-week periods ended March 31, 2024 and March 26, 2023, ROU assets obtained in exchange for new operating lease obligations were $2,489 and $0, respectively.

Note 11. Accrued Liabilities

Accrued liabilities consisted of the following as of the periods presented:

 

 

March 31,
2024

 

 

December 31,
2023

 

Employee-related costs

 

$

4,788

 

 

$

9,131

 

Promotions and customer deductions