For a complete understanding, this Management's Discussion and Analysis of
Financial Condition and Results of Operations should be read in conjunction with
the Consolidated Financial Statements and Notes to the Consolidated Financial
Statements contained in this Report.



Certain statements under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this Report constitute
"forward-looking statements" within the meaning of the Securities Act of 1933
and the Securities Exchange Act of 1934 (refer to Part I., Item 1. Business

for
more information).


Results of Operations (in thousands except percentages)

Fiscal Year Ended November 1, 2019 (52 weeks) Compared to Fiscal Year Ended November 2, 2018 (52 weeks)





Net Sales-Consolidated


Net sales in fiscal year 2019 increased $14,528 (8.3%) when compared to the prior fiscal year. The changes in net sales were comprised as follows:





Impact on Net Sales-Consolidated     %           $
Selling price per pound               2.7        4,991
Unit sales volume in pounds           6.8       12,582
Returns activity                     -0.2         (589 )
Promotional activity                 -1.0       (2,456 )
Increase in net sales                 8.3       14,528



Net Sales-Frozen Food Products Segment

Net sales in the Frozen Food Products segment in fiscal year 2019 increased $3,968 (8.4%) compared to the prior fiscal year. The changes in net sales were comprised as follows:





Impact on Net Sales-Frozen Food Products     %           $
Selling price per pound                       4.5        2,356
Unit sales volume in pounds                   5.3        2,788
Returns activity                             -0.2         (125 )
Promotional activity                         -1.2       (1,051 )
Increase in net sales                         8.4        3,968




The increase in net sales in fiscal year 2019 was attributable to higher unit
sales volume and higher selling price per pound. The increase in net sales was
primarily driven by a significant increase in volume in our shelf-stable
sandwich business to institutional and retail customers. Other institutional
Frozen Food Product sales, including sheet dough and rolls, increased 3% by
volume while retail sales volume decreased 4%. Changes in returns were slightly
higher compared to the prior fiscal year. Promotional activity increased due to
higher bid price reductions, rebates and menu allowances as a percentage of

sales.



11






Net Sales-Snack Food Products Segment

Net sales in the Snack Food Products segment in fiscal year 2019 increased $10,560 (8.3%) compared to the prior fiscal year. The changes in net sales were comprised as follows:





Impact on Net Sales-Snack Food Products     %           $
Selling price per pound                      2.0        2,635
Unit sales volume in pounds                  7.3        9,794
Returns activity                            -0.2         (463 )
Promotional activity                        -0.8       (1,406 )
Increase in net sales                        8.3       10,560




The increase in net sales in fiscal year 2019 was attributable to a significant
increase in new product offerings including smokehouse sausage sticks introduced
during the second quarter of fiscal year 2018. The increase in net sales
occurred mainly in our direct store delivery distribution channel while
warehouse shipments decreased. The weighted average selling price per pound
increased compared to the prior fiscal year due to higher per pound selling
prices for new items. Promotional offers increased corresponding to the increase
in unit sales volume. Returns activity increased slightly compared to the 2018
fiscal year.


Cost of Products Sold and Gross Margin-Consolidated


Cost of products sold from continuing operations increased by $9,370 (8.0%)
compared to the prior fiscal year. Higher unit sales volume in the Snack Food
Products segment was the primary contributing factor to the increase in cost of
products sold. Overhead spending increased due to significant increases in
hourly wages and bonus, insurance expenses, repairs and maintenance, healthcare
expenses and indirect operating supplies. Costs related to an additional
production facility currently under construction also increased overhead
expenses. A decrease in commodity costs during fiscal year 2019 partially offset
the increase in cost of goods sold. The gross margin increased from 32.4% to
32.7% during fiscal year 2019 compared to the prior fiscal year.



                                                                    Commodity $
Change in Cost of Products Sold by Segment      $          %         Decrease
Frozen Food Products Segment                   2,452       2.1              (111 )
Snack Food Products Segment                    6,918       5.9            (1,725 )
Total                                          9,370       8.0            (1,836 )



Cost of Products Sold and Gross Margin-Frozen Food Products Segment





Cost of products sold in the Frozen Food Products segment increased by $2,452
(7.9%) to $33,444 in fiscal year 2019 compared to the prior fiscal year.
Increased volume and changes in product mix were the primary contributing
factors to the increase. Cost of products sold was partially offset by lower
flour commodity costs of approximately $111. The gross margin percentage
increased from 34.4% to 34.7% during fiscal year 2019 compared to the prior
fiscal year.



Cost of Products Sold and Gross Margin-Snack Food Products Segment





Cost of products sold in the Snack Food Products segment increased by $6,918
(8.0%) compared to the prior fiscal year due primarily to a substantial increase
in sales volume. Higher hourly wages including increased production labor
impacted the cost of products sold as did higher healthcare, insurance and
repair and maintenance expense. The cost of meat commodities decreased
approximately $1,725 during fiscal year 2019 compared to the prior fiscal year.
The gross margin earned in this segment increased from 31.7% to 31.9% during
fiscal year 2019 primarily as a result of lower commodity costs.



Selling, General and Administrative Expenses-Consolidated

Selling, general and administrative expenses ("SG&A") in fiscal year 2019 increased $2,908 (5.8%) when compared to the prior fiscal year. The increase in this category did not directly correspond to the change in sales.

The table below summarizes the primary expense variances in this category:





                                         November 1, 2019       November 2, 2018       Expense Increase
                                            (52 Weeks)             (52 Weeks)             (Decrease)
Wages and bonus                         $           23,399     $           21,212     $            2,187
Pension costs                                          232                    956                   (724 )
Insurance                                            1,116                    487                    629

Repairs and maintenance "SQF" expense                   31                 

  567                   (536 )
Healthcare costs                                     3,091                  2,661                    430
Travel                                               2,397                  2,113                    284
Product advertising                                  6,303                  6,136                    167
Other income/expense                                     3                   (158 )                  161

Cash surrender value gains                            (666 )               

 (816 )                  150
Other SG&A                                          16,931                 16,771                    160
Total - SG&A                                        52,837                 49,929                  2,908




12







Higher profit-sharing accruals resulted in higher wages and bonus expense in
fiscal year 2019 compared to the prior year. The decrease in pension expense was
due to higher pension discount rates being used to compute the future liability
estimate. Insurance costs increased due to higher claim activity and the
addition of a new production and warehousing facility. Repairs and maintenance
expense decreased as the Company prepared its Chicago facility in fiscal year
2018 to comply with Food Safety Certification requirements created and managed
by the SQF Institute. Healthcare benefit expense has increased due to recent
unfavorable claim activity compared to fiscal year 2018. Travel expenses
increased due to research related to construction of the new plant as well as
increased travel by business development managers. Costs for product advertising
increased mainly as a result of higher payments under brand licensing agreements
in the Snack Food Products segment during fiscal year 2019. Other income/expense
increased due to a miscellaneous gain that did not reoccur in the current fiscal
year. The gain on cash surrender value of life insurance policies decreased
substantially due to lower stock market gains compared to fiscal year 2018. The
major components comprising the increase of "Other SG&A" expenses were outside
consulting fees, utilities and property taxes.



Selling, General and Administrative Expenses-Frozen Food Products Segment


SG&A expenses in the Frozen Food Products segment increased by $641 (4.5%) to
$14,867 during fiscal year 2019 compared to the prior fiscal year. The overall
increase in SG&A expenses was due to higher unit sales volume, profit-sharing
accruals and product advertising.



Selling, General and Administrative Expenses-Refrigerated and Snack Food Products Segment


SG&A expenses in the Snack Food Products segment increased by $2,267 (6.3%) to
$37,970 during fiscal year 2019 compared to the prior fiscal year. Most of the
increase was due to higher unit sales volume in pounds and higher expenses
related to wages and bonuses including an increase in sales commissions.



Gain on Sale of Property, Plant and Equipment





On March 7, 2018, the Company sold a parcel of land in Chicago, Illinois for
approximately $5,977 and recognized a non-recurring pre-tax gain in fiscal year
2018. The cost basis of the land was insignificant. Any gain or loss during
fiscal year 2019 was due to ordinary gain or loss on disposal of assets.



Income Taxes



The Company's effective income tax rate was 24.0% and 49.1% in fiscal years 2019
and 2018, respectively. In fiscal year 2019, the effective income tax rate
differed from the applicable mixed statutory rate of approximately 23.1%
primarily due to tax reform adjustment of deferred income taxes, the Domestic
Production Activities Deduction and a change in the liability on unrecognized
benefits related to research and development tax credits (refer to Note 4 of
Notes to the Consolidated Financial Statements for more information).



Liquidity and Capital Resources (in thousands except share amounts, percentages and ratios)





The principal source of our operating cash flow is cash receipts from the sale
of our products, net of costs to manufacture, store, market and deliver such
products. We normally fund our operations from cash balances and cash flow
generated from operations. We borrowed $7,500 during the first quarter of fiscal
year 2019 to purchase specific equipment for our new Chicago processing
facility. We borrowed a second $7,500 subsequent to the end of the second
quarter of fiscal year 2019. Historically, we expect positive operating cash
flows in the first quarter of our fiscal year from the liquidation of inventory
and accounts receivable balances related to holiday season sales. Anticipated
commodity price trends may affect future cash balances. Certain commodities may
be purchased in advance of our immediate needs to lower the ultimate cost of
processing.


Cash flows from operating activities:





                                                    November 1, 2019       November 2, 2018
                                                       (52 Weeks)             (52 Weeks)

Net income                                         $            6,484     $            6,517
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation                                                    4,153                  3,940
Provision for losses on accounts receivable                        44                     24
(Provision for) reduction in promotional
allowances                                                       (852 )                   94
Loss (Gain) on sale of property, plant and
equipment                                                         290                 (6,236 )
Deferred income taxes, net                                      1,889                  4,940
Changes in operating working capital                           (4,761 )               (1,014 )
Net cash provided by operating activities          $            7,247     $

           8,265




13







For the fifty-two weeks ended November 1, 2019, net cash provided by operating
activities was $7,247, a decrease of $1,018 compared to the fifty-two weeks
ended November 1, 2018. The net decrease in cash provided by operating
activities primarily related to an increase in inventory of $2,954, lower net
income of $6,484 and deferred income taxes of $1,889 partially offset by an
increase in the current portion of non-current liabilities of $1,643 and
payments for estimated taxes of $697. During fiscal year 2019, we funded $875
towards our defined benefit pension plan. Plan funding strategies may be
adjusted depending upon economic conditions, investment options, tax
deductibility, or legislative changes in funding requirements.



Our cash conversion cycle (defined as days of inventory and trade receivables
less days of trade payables outstanding) was equal to 67 days for the fifty-two
weeks ended November 1, 2019 and 64 days for the fifty-two weeks ended November
2, 2018. Significant customers increased the length of payment terms during
fiscal year 2018 which increased the prior fiscal year's cash conversion cycle.



For the fifty-two weeks ended November 2, 2018, net cash provided by operating
activities was $8,265. This result was primarily related to net income and a
decrease in non-current liabilities. During fiscal year 2018, we funded $3,150
towards our defined benefit pension plan.



Cash used in investing activities:

November 1, 2019      November 2, 2018
                                                         (52 Weeks)            (52 Weeks)

Proceeds from sale of property, plant and equipment   $              61     $           6,035
Additions to property, plant and equipment                      (25,739 )             (18,147 )
Net cash used in investing activities                 $         (25,678 )  

$         (12,112 )




Expenditures for property, plant and equipment include the acquisition of
equipment, upgrading of facilities to maintain operating efficiency and
investments in cost effective technologies to lower costs. In general, we
capitalize the cost of additions and improvements and expense the cost for
repairs and maintenance. We may also capitalize costs related to improvements
that extend the life, increase the capacity, or improve the efficiency of
existing machinery and equipment. Specifically, capitalization of upgrades of
facilities to maintain operating efficiency include acquisitions of machinery
and equipment used on packaging lines and refrigeration equipment used to
process food products.



The table below highlights the additions to property, plant and equipment for
the fifty-two weeks ended:



                                                    November 1, 2019       November 2, 2018
                                                       (52 Weeks)             (52 Weeks)
Land                                               $                -     $               55
Building                                                            -                    141
Building improvements                                          10,103                    702
Leasehold improvements                                              -                      9
Temperature control                                             3,285                      -
Processing equipment                                            2,019                  7,915
Packaging lines                                                 2,641                    181

Vehicles for sales and/or delivery                              1,585                    953
Quality control and communication systems                         156                     43
Computer software and hardware                                    861                     18
Forklifts                                                          57                    253
Change in projects in process                                   5,032                  7,877
Additions to property, plant and equipment         $           25,739     $

          18,147




Expenditures for additions to property, plant and equipment during the fifty-two
weeks ended November 1, 2019 include projects in process of $13,723 related

to
the new facility in Chicago.


Cash provided by (used in) financing activities:

November 1, 2019      November 2, 2018
                                                          (52 Weeks)            (52 Weeks)

Payments of capital lease obligations                 $              (17 )   $             (83 )
Proceeds from bank borrowings                                     17,000                     -
Repayments of bank borrowings                                     (3,253 )                   -
Net cash provided by (used in) financing activities   $           13,730   

 $             (83 )




14







Our stock repurchase program was approved by the Board of Directors in November
1999 and was expanded in June 2005. Under the stock repurchase program, we were
authorized, at the discretion of management and the Board of Directors, to
purchase up to an aggregate of 2,000,000 shares of our common stock on the open
market. As of the end of fiscal year 2019, 120,113 shares remained authorized
for repurchase under the program. However, our agreement with Citigroup lapsed
on its own (by its terms) on October 14, 2019.



We invested in OTR (over-the-road) tractors during fiscal year 2012 financed by
a capital lease obligation in the amount of $1,848. The total capital lease
obligation was settled as of November 1, 2019 with no remaining lease liability.
We bought several of the tractors and converted to month-to-month arrangements
on other tractors as needed. We plan to invest in new capital lease arrangements
in fiscal 2020.



We maintain a line of credit with Wells Fargo Bank, N.A. that expires on March
1, 2020. Under the terms of this line of credit, we may borrow up to $7,500 at
an interest rate equal to the bank's prime rate or Libor plus 1.5%. The
borrowing agreement contains various covenants, the more significant of which
require us to maintain a minimum tangible net worth, a minimum quick ratio, a
minimum net income after tax and total capital expenditures less than $7,500.
The Company was in violation of the capital expenditure covenant which was
subsequently waived by letter dated December 16, 2019. The Company was in
compliance with all other covenants as of November 1, 2019.



On December 26, 2018, we entered into a master collateral loan and security
agreement with Wells Fargo Bank, N.A for up to $15,000 in equipment financing.
Pursuant to the loan agreement, we made two borrowings of $7,500 each, to
purchase specific equipment for our new Chicago processing facility at a fixed
rate of 4.13% and 3.98%, respectively, per annum. The loan terms are seven years
and are secured by the purchased equipment. The first funding of $7,500 was
received on December 28, 2018. The second funding was received on April 23,
2019. The master collateral loan and security agreement with Wells Fargo Bank,
N.A. contains various affirmative and negative covenants that limit the use of
funds and define other provisions of the loan. The main financial covenants

are
listed below:


? Total Liabilities divided by Tangible Net Worth (as defined) not greater than

2.5 to 1.0 at each fiscal quarter,

? Quick Ratio (as defined) not less than 1.0 to 1.0 at each fiscal quarter end,


    and

  ? Net income after taxes not less than one dollar on a quarterly basis,
    determined as of each fiscal quarter end.



The Company was in compliance with all covenants under the master collateral loan and security agreement as of November 1, 2019.





Impact of Inflation



Our operating results are heavily dependent upon the prices paid for raw
materials. The marketing of our value-added products does not lend itself to
instantaneous changes in selling prices. Changes in selling prices are
relatively infrequent and do not compare with the volatility of commodity
markets. While fluctuations in significant cost structure components, such as
ingredient commodities and fuel prices, have had a significant impact on
profitability over the last two fiscal years, the impact of general price
inflation on our financial position and results of operations has not been
significant. However, future volatility of general price inflation or deflation
and raw material cost and availability could adversely affect our financial
results.



Management is of the opinion that our strong financial position and our capital resources are sufficient to provide for our operating needs and capital expenditures for fiscal year 2020.

Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements within the meaning of Item 303(a)(4) of Regulation S-K.





Contractual Obligations


We had no other debt or other contractual obligations within the meaning of Item 303(a)(5) of Regulation S-K, as of November 1, 2019.

Our expected future liability related to construction of the new Chicago processing facility for the purchase of smokehouses and chillers is approximately $13,900 as of January 8, 2020.





15







Critical Accounting Policies



The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported revenues and expenses during the respective
reporting periods. Actual results could differ from those estimates. Amounts
estimated related to liabilities for self-insured workers' compensation,
employee healthcare and pension benefits are especially subject to inherent
uncertainties and these estimated liabilities may ultimately settle at amounts
not originally estimated. We record promotions, returns allowances, bad debt and
inventory allowances based on recent and historical trends. Management believes
its current estimates are reasonable and based on the best information available
at the time.



Disclosure concerning our policies on credit risk, revenue recognition, cash
surrender or contract value for life insurance policies, deferred income tax and
the recoverability of our long-lived assets are provided in Notes 1 and 4 of the
Notes to the Consolidated Financial Statements.



Recently Issued Accounting Pronouncements and Regulations

Various accounting standard-setting bodies have been active in soliciting comments and issuing statements, interpretations and exposure drafts. For information on new accounting pronouncements and the impact, if any, on our financial position or results of operations, see Note 1 of the Notes to the Consolidated Financial Statements.

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