10-Q

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 April 1, 2017

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: 001-14556

INVENTURE FOODS, INC.

(Exact name of registrant as specified in its charter)

Delaware	86-0786101
(State or other jurisdiction of incorporation or	(I.R.S. Employer
organization)	Identification No.)
5415 East High Street, Suite #350, Phoenix, Arizona	85054
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:  (623) 932-6200

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 ☐ (Do not check if a smaller reporting company)	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 9, 2017, the total number of shares outstanding of the registrant’s Common Stock was 19,687,912 shares.

INVENTURE FOODS, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

Table of Contents

Part I — FINANCIAL INFORMATION
Item 1. Financial Statements.
	Condensed Consolidated Balance Sheets  – April 1, 2017 (Unaudited) and December 31, 2016	1
	Condensed Consolidated Statements of Operations (Unaudited) - quarters ended April 1, 2017 and March 26, 2016	2
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the quarters ended April 1, 2017 and March 26, 2016	3
	Notes to Condensed Consolidated Financial Statements (Unaudited)	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3. Quantitative and Qualitative Disclosures About Market Risk		26
Item 4. Controls and Procedures		26
Part II — OTHER INFORMATION
Item 1. Legal Proceedings		27
Item 1A. Risk Factors		27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		27
Item 6. Exhibits		27
Signatures		29

INVENTURE FOODS, INC. AND SUBSIDIARIES

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Our disclosure and analysis in this Quarterly Report on Form 10-Q (“Form 10-Q”), including all documents incorporated by reference, contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995.  From time to time, we also provide forward-looking statements in other materials we release to the public, as well as oral forward-looking statements.  We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “believe,” “expect,” “intend,” “estimate,” “project,” “may,” “should,” “will,” “likely,” “will likely result,” “will continue,” “future,” “plan,” “target,” “forecast,” “goal,” “observe,” “seek,” “strategy” and other words and terms of similar meaning.  The forward-looking statements in this Form 10-Q reflect the Company’s current views with respect to future events and financial performance.

Forward-looking statements are neither historical facts nor assurances of future performance.  Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to certain risks and uncertainties, including, without limitation, our ability to continue as a going concern, general economic conditions, increases in cost or availability of ingredients, packaging, energy and employees, price competition and industry consolidation, ability to execute strategic initiatives, product recalls or safety concerns, disruptions of supply chain or information technology systems, customer acceptance of new products and changes in consumer preferences, food industry and regulatory factors, interest rate risks, dependence upon major customers, dependence upon existing and future license agreements, the possibility that we will need additional financing and/or to refinance our existing indebtedness due to future operating losses, inability to meet the financial covenants under our term loan and revolving credit facilities, or in order to implement our business strategy, acquisition and divestiture-related risks, volatility of the market price of our common stock, par value $.01 per share (“Common Stock”), and those other risks and uncertainties discussed herein and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2017 (“2016 Form 10-K”) and any subsequent Form 10-Q that could cause actual results to differ materially from historical results or those anticipated.  In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this Form 10-Q will in fact transpire or prove to be accurate.  Readers are cautioned to consider the specific risk factors described herein and in “Item 1A. Risk Factors” of our 2016 Form 10-K, and not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof.

The Company undertakes no obligation to update or publicly revise any forward-looking statement, whether as a result of new information, future developments or otherwise.  All subsequent written or oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this paragraph.  You are advised, however, to consult any further disclosures we make on related subjects in our subsequently filed Form 10-Qs and Current Reports on Form 8-K and our other filings with the SEC.  Also note that we provide a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business in the “Risk Factors” section of our 2016 Form 10-K.  We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995.  You should understand it is not possible to predict or identify all such factors.

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements.

INVENTURE FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

	April 1,		December 31,
	2017		2016
ASSETS
Current assets:
Cash and cash equivalents	$	1,508	$	776
Accounts receivable, net of allowance for doubtful accounts of $198 and $160 at April 1, 2017 and December 31, 2016, respectively		15,901		16,334
Inventories		48,125		72,188
Other current assets		4,116		3,216
Total current assets		69,650		92,514
Property and equipment, net of accumulated depreciation of $52,488 and $53,116 at April 1, 2017 and December 31, 2016, respectively		53,148		65,484
Goodwill		14,985		14,985
Trademarks and other intangibles, net		4,831		7,243
Other assets		1,294		1,254
Total assets	$	143,908	$	181,480
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	25,896	$	29,462
Accrued liabilities		6,752		9,533
Line of credit		27,230		32,761
Current portion of term debt		68,739		82,380
Total current liabilities		128,617		154,136
Deferred income tax liability		3,366		1,376
Other liabilities		2,037		2,279
Total liabilities		134,020		157,791
Commitments and contingencies (see Note 7)
Stockholders’ equity:
Common stock, $.01 par value; 50,000 shares authorized; 20,056 and 20,040 shares issued and outstanding at April 1, 2017 and December 31, 2016, respectively		201		200
Additional paid-in capital		36,058		35,721
Accumulated deficit		(25,900)		(11,761)
		10,359		24,160
Less: treasury stock, at cost: 368 shares at April 1, 2017 and December 31, 2016		(471)		(471)
Total stockholders’ equity		9,888		23,689
Total liabilities and stockholders’ equity	$	143,908	$	181,480

See accompanying notes to condensed consolidated financial statements (unaudited).

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INVENTURE FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Quarter Ended
	April 1,		March 26,
	2017		2016
Net revenues	$	49,618	$	57,180
Cost of revenues		41,104		47,899
Gross profit		8,514		9,281
Operating expenses:
Selling, general and administrative expenses		7,255		7,155
Operating income		1,259		2,126
Non-operating expense:
Interest expense		2,362		2,002
Income (loss) from continuing operations before income tax expense		(1,103)		124
Income tax expense		(103)		(47)
Net income (loss) from continuing operations		(1,206)		77
Net loss from discontinued operations		(12,933)		(1,095)
Net loss	$	(14,139)	$	(1,018)
Income (loss) per common share:
Basic income (loss) from continuing operations	$	(0.06)	$	0.01
Basic loss from discontinued operations		(0.66)		(0.06)
Basic loss	$	(0.72)	$	(0.05)
Diluted income (loss) from continuing operations	$	(0.06)	$	0.01
Diluted loss from discontinued operations		(0.66)		(0.06)
Diluted loss	$	(0.72)	$	(0.05)
Weighted average number of common shares:
Basic		19,675		19,603
Diluted		19,675		19,859

See accompanying notes to condensed consolidated financial statements (unaudited).

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INVENTURE FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Quarter Ended
	April 1,		March 26,
	2017		2016
Cash flows from operating activities:
Net loss	$	(14,139)	$	(1,018)
Net loss from discontinued operations		(12,933)		(1,095)
Net income (loss) from continuing operations		(1,206)		77
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by (used in) operating activities:
Depreciation		1,484		1,454
Amortization		82		82
Deferred financing fee amortization		465		353
Provision for bad debts		38		32
Deferred income taxes		1,990		—
Stock-based compensation expense		377		345
Changes in assets and liabilities:
Accounts receivable		(1,245)		(3,553)
Inventories		7,743		11,486
Other assets and liabilities		(1,071)		(702)
Accounts payable and accrued liabilities		(2,291)		(6,540)
Net cash provided by operating activities - continuing operations		6,366		3,034
Net cash used in operating activities - discontinued operations		(4,281)		(805)
Net cash provided by operating activities		2,085		2,229
Cash flows from investing activities:
Purchase of property and equipment		(663)		(3,612)
Payment of contingent consideration for Willamette Valley Fruit Company		(230)		(340)
Payment of contingent consideration for Sin In A Tin		(4)		(1)
Net cash used in investing activities - continuing operations		(897)		(3,953)
Net cash provided by (used in) investing activities - discontinued operations		19,180		(520)
Net cash provided by (used in) investing activities		18,283		(4,473)
Cash flows from financing activities:
Net borrowings on Wells Fargo line of credit		(5,531)		814
Payments made on capital lease obligations		(5)		(6)
Borrowings on term loans		—		973
Repayments made on long term debt		(14,054)		(220)
Payment of loan financing fees		(7)		(900)
Payment of payroll taxes on stock-based compensation through shares withheld		(39)		(97)
Net cash provided by (used in) financing activities - continuing operations		(19,636)		564
Net cash provided by (used in) financing activities - discontinued operations		—		—
Net cash provided by (used in) financing activities		(19,636)		564
Net increase in cash and cash equivalents		732		(1,680)
Cash and cash equivalents at beginning of year period		776		2,319
Cash and cash equivalents at end of year period	$	1,508	$	639
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	2,231	$	2,015
Cash paid (refunded) during the period for income taxes	$	3	$	(24)

See accompanying notes to condensed consolidated financial statements (unaudited).

3

INVENTURE FOODS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.Organization and Summary of Significant Accounting Policies

Inventure Foods, Inc., a Delaware corporation (referred to herein as the “Company,” “Inventure Foods,” “we,” “our” or “us”), is a leading marketer and manufacturer of healthy/natural and indulgent specialty snack food brands with more than $269 million in annual net revenues for fiscal 2016.

We specialize in two primary product categories: healthy/natural food products and indulgent specialty snack products.  We sell our products nationally through a number of channels including: grocery stores, natural food stores, mass merchandisers, drug and convenience stores, club stores, value, vending, food service, industrial and international.  Our goal is to have a diversified portfolio of brands, products, customers and distribution channels.

In our healthy/natural food category, products include Rader Farms® frozen berries and frozen berry and vegetable blends, Boulder Canyon® brand kettle cooked potato chips, other snack and food items and frozen side dishes, Willamette Valley Fruit CompanyTM brand frozen berries, fruits, biscuits and other frozen snacks, Jamba® brand blend-and-serve smoothie kits under license from Jamba Juice Company (“Jamba Juice”), Sin In A TinTM  chocolate pate and other frozen desserts and private label frozen fruit and healthy/natural snacks.

In our indulgent specialty snack food category, products include T.G.I. Friday’s® brand snacks under license from T.G.I. Friday’s Inc. (“T.G.I. Friday’s”), Nathan’s Famous® brand snack products under license from Nathan’s Famous Corporation, Vidalia® brand snack products under license from Vidalia Brands, Inc., Poore Brothers® brand kettle cooked potato chips, Bob’s Texas Style® brand kettle cooked chips, and Tato Skins® brand potato snacks.  We also manufacture private label snacks for certain grocery retail chains and co-pack products for other snack manufacturers.

We operate in two segments: frozen products and snack products. The frozen products segment includes frozen fruits, fruit and vegetable blends, beverages, side dishes and desserts for sale primarily to grocery stores, club stores and mass merchandisers. All products sold under our frozen products segment are considered part of the healthy/natural food category. The snack products segment includes potato chips, kettle chips, potato crisps, potato skins, pellet snacks, sheeted dough products, popcorn and extruded products for sale primarily to snack food distributors and retailers. The products sold under our snack products segment include products considered part of the indulgent specialty snack food category, as well as products considered part of the healthy/natural food category.

We operate manufacturing facilities in seven locations. Our frozen berry products are processed in our Lynden, Washington, Bellingham, Washington and two Salem, Oregon facilities.  Our frozen berry business grows, processes and markets premium berry blends, raspberries, blueberries and rhubarb and purchases blackberries, cherries, cranberries, strawberries and other fruits from a select network of fruit growers for resale.  The fruit is processed, frozen and packaged for sale and distribution to wholesale customers.  Our frozen beverage products, including fruit and vegetable blends and frozen side dishes, are packaged at our Bellingham, Washington facility.  We also use third-party processors for certain frozen products and package certain frozen fruits and vegetables for other manufacturers.  Our frozen desserts products are produced in our Pensacola, Florida and Salem, Oregon facilities.  Our snack products are manufactured at our Phoenix, Arizona and Bluffton, Indiana facilities, as well as select third-party facilities for certain products.

Our fiscal year ends on the last Saturday occurring in the month of December of each calendar year.  Accordingly, the first quarter of fiscal 2017 commenced January 1, 2017 and ended April 1, 2017.

Strategic and Financial Review Process

In July 2016, we announced that our Board of Directors (“Board”) had commenced a strategic and financial review of the Company with the objective to increase shareholder value.  We engaged Rothschild Inc. to serve as our financial advisor and assist us in this process.  We remain actively involved in this process and are continuing to pursue various strategic alternatives.  As disclosed in our prior reports, no assurance can be given as to the outcome or timing of this process or that it will result in the consummation of any specific transaction.

4

Going Concern Uncertainty

We have incurred losses from operations in each of the quarterly periods since our voluntary product recall in April 2015 of certain varieties of the Company’s Fresh FrozenTM brand of frozen vegetables, as well as select varieties of our Jamba® “At Home” line of smoothie kits.  This fact, together with the projected near term outlook for our business and our inability to complete a strategic transaction by year end or demonstrate that such a transaction is imminent, raise substantial doubt about our ability to continue as a going concern.  In reaching such conclusion, management considered the following specific conditions: 

· Our five-year, $85.0 million term loan credit agreement with BSP Agency, LLC (“BSP”), as administrative agent, and the other lenders party thereto (with all related loan documents, and as amended from time to time, the “Term Loan Credit Facility”) requires us to, among other things, comply with Total Leverage Ratio and Fixed Charge Coverage Ratio (each as defined in the Term Loan Credit Facility) covenants by the end of the second quarter of fiscal 2017 and a minimum EBITDA target by the month ended April 30, 2017, which target we did not meet (the “EBITDA Covenant Default”).  The Total Leverage Ratio, measured at the end of our second fiscal quarter in 2017 must be 4.25:1, and the Fixed Charge Coverage Ratio, measured at the end of our second fiscal quarter in 2017 for the four quarterly periods then ended, must be 1.1:1.  Absent the completion of a strategic transaction yielding sufficient cash proceeds (in addition to the proceeds received from the sale of certain  assets, properties and rights of our wholly owned subsidiary, Fresh Frozen Foods, Inc. (now known as Inventure – GA, Inc.) (“Fresh Frozen Foods”) in March 2017) to pay down debt, waivers or amendments by our lenders, or a refinancing of our debt, we will not be able to comply with these covenants when required to do so.  Failure to meet these covenants would result in a default under such credit facility and, to the extent the applicable lenders so elect, an acceleration of the Company’s existing indebtedness, causing such debt of approximately $102.6 million at April 1, 2017 (including $4.9 million of other equipment financing indebtedness that includes cross-default provisions) to be immediately due and payable.  The Company does not have sufficient liquidity to repay all of its outstanding debt in full if such debt were accelerated.

· Our five-year, $50.0 million revolving credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent, and the other lenders party thereto (with all related loan documents, and as amended from time to time, the “ABL Credit Facility” and, together with the Term Loan Credit Facility, the “Credit Facilities”), contains requirements, that among other things, require us to comply with a Fixed Charge Coverage Ratio (as defined in the ABL Credit Facility) if our liquidity as of the date of any determination is less than the greater of (i) 12.5% of the Maximum Revolver Amount  ($50.0 million) and (ii) $6.125 million, subject to certain conditions.  As of the date this Form 10-Q was filed with the SEC, we would not be able to comply with the Fixed Charge Coverage Ratio covenant if our liquidity were deemed to have fallen below the applicable threshold.

· The Credit Facilities also require us to furnish our audited financial statements without a “going concern” uncertainty paragraph in the auditor’s opinion.  Our consolidated financial statements for the fiscal year ended December 31, 2016 in our 2016 Form 10-K contained a “going concern” explanatory paragraph.  Under the Credit Facilities, a going concern opinion with respect to our audited financial statements is an event of default (the “Going Concern Covenant Default”).  As of the date our 2016 Form 10-K was filed with the SEC, we had obtained a temporary waiver of the Going Concern Covenant Default until May 15, 2017 from the lenders under the Credit Facilities. 

· On May 10, 2017, we entered into a Limited Waiver and Third Amendment to the Credit Agreement with the lenders under the Term Loan Credit Facility (the “Third Amendment”).  Under the terms of the Third Amendment, the lenders granted the Company (i) an extension of the temporary waiver of the Going Concern Covenant Default from May 15, 2017 to July 17, 2017, and (ii) a temporary waiver of the EBITDA Covenant Default until July 17, 2017. The Third Amendment also requires that the Company comply with a minimum EBITDA target covenant commencing with the fiscal month ending June 30, 2017, measured over the 12-months then ended, and increases the Company’s prepayment fees in the event of a payment or prepayment of principal under the Term Loan Credit Facility (excluding regularly scheduled principal payments).

5

· We are currently in discussions with the lenders under the ABL Credit Facility regarding an extension of the temporary waiver of the Going Concern Covenant Default from May 15, 2017 to July 17, 2017, as well as certain other amendments to such Credit Facility.

The Company’s Board and management are continuing to explore various strategic alternatives.  There can be no assurance that we will be successful in our pursuit of any strategic transaction or that we will be able consummate a strategic transaction in time to address our financial covenant requirements and going concern qualification, or at all, or if we do complete a strategic transition it will be on commercially reasonable terms.  As a result, our liquidity and ability to timely pay our obligations when due could be adversely affected. 

The accompanying condensed consolidated financial statements are prepared on a going concern basis and do not include any adjustments that might result from uncertainty about our ability to continue as a going concern, other than the reclassification of certain long-term debt and the related debt issuance costs to current liabilities and current assets, respectively.

Our lenders may resist renegotiation or lengthening of payment and other terms through legal action or otherwise if we are unsuccessful in our efforts to complete a strategic transaction.  If we are not able to timely, successfully or efficiently implement the strategies that we are pursuing, we may need to seek voluntarily protection under Chapter 11 of the U.S. Bankruptcy Code.

Basis of Presentation

The condensed consolidated financial statements for the fiscal quarter ended April 1, 2017 are unaudited and include the accounts of Inventure Foods and all of its wholly owned subsidiaries. All significant intercompany amounts and transactions have been eliminated. The condensed consolidated financial statements, including the December 31, 2016 consolidated balance sheet data which was derived from audited financial statements, have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”).  In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary in order to make the condensed consolidated financial statements not misleading. A description of our accounting policies and other financial information is included in the audited financial statements filed with our 2016 Form 10-K. The results of operations for the fiscal quarter ended April 1, 2017 are not necessarily indicative of the results expected for the full year. Changes to the classification of certain prior year amounts on the cash flow statement were made to reflect current year classification between deferred income taxes and change in other assets and liabilities. 

Discontinued Operations

On March 23, 2017, the Company soldcertain  assets, properties and rights of our wholly owned subsidiary, Fresh Frozen Foods, to The Pictsweet Company (“Pictsweet”) pursuant to an Asset Purchase Agreement, dated as of such date, among the Company, Fresh Frozen Foods and Pictsweet (the “Purchase Agreement”).  In accordance with the Purchase Agreement, Pictsweet acquired Fresh Frozen Food’s frozen food processing equipment assets, certain real property and associated facilities located in Jefferson, Georgia and Thomasville, Georgia, and other intellectual property and inventory (the “Fresh Frozen Asset Sale”).  As consideration for the acquisition, Pictsweet paid the Company $23.7 million in cash.  The net proceeds from the Fresh Frozen Asset Sale were $19.5 million, after payment of professional fees and other transaction expenses, and were used to pay down amounts outstanding under the Credit Facilities.  The results of operations for the Fresh Frozen Foods business have been classified as discontinued operations for all periods presented.  As required by the terms of the Purchase Agreement, we have changed the name of our Fresh Frozen Foods subsidiary to Inventure – GA, Inc.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.  We classify our investments based upon an established fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or

6

liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).  The three levels of the fair value hierarchy are described as follows:

Level 1Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities

Level 2Quoted prices in markets that are not considered to be active or financial instruments without quoted market prices, but for which all significant inputs are observable, either directly or indirectly

Level 3Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

At April 1, 2017 and December 31, 2016, the carrying value of cash, accounts receivable, accounts payable and accrued liabilities approximate fair values since they are short term in nature.  The carrying value of the term debt approximates fair value based on the borrowing rates currently available to us for long-term borrowings with similar terms.  The following table summarizes the valuation of our assets and liabilities measured at fair value on a recurring basis  at the respective dates set forth below (in thousands):

		April 1, 2017				December 31, 2016
		Non-qualified				Non-qualified
		Deferred		Earn-out		Deferred		Earn-out
		Compensation		Contingent		Compensation		Contingent
		Plan		Consideration		Plan		Consideration
Balance Sheet Classification		Investments		Obligation		Investments		Obligation
Other assets	Level 1		671	$	—	$	650	$	—
Accrued liabilities	Level 3		—		(266)		—		(270)
Other liabilities	Level 3		—		(1,291)		—		(1,521)
		$	671	$	(1,557)	$	650	$	(1,791)

Considerable judgment is required in interpreting market data to develop the estimate of fair value of our assets and liabilities.  Accordingly, the estimate may not be indicative of the amounts that we could realize in a current market exchange.  The use of different market assumptions or valuation methodologies could have a material effect on the estimated fair value amounts.

The Company’s non-qualified deferred compensation plan assets consist of money market and mutual funds invested in domestic and international marketable securities that are directly observable in active markets.

The fair value measurement of the earn-out contingent consideration obligation relates to the acquisitions of Sin In A TinTM in September 2014 and Willamette Valley Fruit Company in May 2013, and is included in accrued liabilities and other long-term liabilities in the consolidated balance sheets.  The fair value measurement is based upon significant inputs not observable in the market.  Changes in the value of the obligation are recorded as income or expense in our consolidated statements of operations.  To determine the fair value, we valued the contingent consideration liability based on the expected probability weighted earn-out payments corresponding to the performance thresholds agreed to under the applicable purchase agreements.  The expected earn-out payments were then present valued by applying a discount rate that captures a market participants view of the risk associated with the expected earn-out payments. 

A summary of the activity of the fair value of the measurements using unobservable inputs (Level 3 liabilities) for the fiscal quarter ended April 1, 2017 is as follows (in thousands):

	Level 3
Balance at December 31, 2016	$	1,791
Earn-out compensation paid to Willamette Valley Fruit Company		(230)
Earn-out compensation paid to Sin In A Tin		(4)
Balance at April 1, 2017	$	1,557

7

Income Taxes

Income tax expense was $0.1 million for the fiscal quarter ended April 1, 2017, compared to a tax benefit of $0.1 million for the fiscal quarter ended March 26, 2016.  Our effective tax rate was (9.3)% and 38.1% for the fiscal quarters ended April 1, 2017 and March 26, 2016, respectively. Income tax expense for the fiscal quarter ended April 1, 2017 was impacted by the full valuation allowance which was initially recorded in the fourth quarter of 2016.  Therefore, income tax expenses was a result of certain state minimum taxes and deferred tax liabilities not subject to the valuation allowance.

Loss Per Common Share

Basic loss per common share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period.  Diluted loss per share is calculated by including all dilutive common shares, such as stock options and restricted stock.  Unvested restricted stock grants that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, require loss per share to be presented pursuant to the two-class method.  However, the application of this method would have no effect on basic and diluted loss per common share and is therefore not presented. 

For the fiscal quarter ended April 1, 2017 diluted loss per share is the same as basic loss per share, as the inclusion of potentially issuable Common Stock would be antidilutive. During the fiscal quarter ended April 1, 2017, 0.6 million shares of Common Stock underlying stock options and restricted stock units were not included in the computation of diluted earnings (loss) per share because inclusion of such shares would be antidilutive.  For the fiscal quarter ended March 26, 2016, 0.3 million shares of Common Stock underlying stock options and restricted stock units were not included in the computation of diluted earnings (loss) per share because inclusion of such shares would be antidilutive. Exercises of outstanding stock options are assumed to occur for purposes of calculating diluted earnings per share for periods in which their effect would not be antidilutive. 

Loss per common share was computed as follows for the fiscal quarters ended April 1, 2017 and March 26, 2016 (in thousands, except per share data):

	Quarter Ended
	April 1,		March 26,
	2017		2016
Basic Earnings (Loss) Per Share:
Net income (loss) from continuing operations	$	(1,206)	$	77
Net loss from discontinued operations		(12,933)		(1,095)
Net loss	$	(14,139)	$	(1,018)
Weighted average number of common shares		19,675		19,603
Loss per common share	$	(0.72)	$	(0.05)
Diluted Earnings (Loss) Per Share:
Net income (loss) from continuing operations	$	(1,206)	$	77
Net loss from discontinued operations		(12,933)		(1,095)
Net loss	$	(14,139)	$	(1,018)
Weighted average number of common shares		19,675		19,603
Incremental shares from assumed conversions of stock options and non-vested shares of restricted stock		—		256
Adjusted weighted average number of common shares		19,675		19,859
Loss per common share	$	(0.72)	$	(0.05)

Stock-Based Compensation

Compensation expense for restricted stock and stock option awards is adjusted for estimated attainment thresholds and forfeitures and is recognized on a straight-line basis over the requisite period of the award, which is currently one to five years.  We estimate future forfeiture rates based on our historical experience.

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Compensation costs related to all stock-based payment arrangements, including employee stock options, are recognized in the financial statements based on the fair value method of accounting.  Excess tax benefits related to stock-based payment arrangements are classified as cash inflows from financing activities and cash outflows from operating activities.  See “Note 9 - Stockholders’ Equity” for additional information.

Recent Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (the “FASB”) in the form of accounting standards updates (“ASU”) to the FASB’s Accounting Standards Codification.

We consider the applicability and impact of all ASUs.  ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

In May 2014, the FASB issued new guidance related to revenue recognition.  This new standard will replace all current GAAP guidance on this topic and eliminate all industry-specific guidance.  The new revenue recognition standard provides a unified model to determine when and how revenue is recognized.  The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services.  This guidance will be effective at the beginning of our 2018 fiscal year and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption.  As of April 1, 2017, we have not evaluated the impact of this new accounting standard on our financial statements.

In July 2015, the FASB issued an ASU to simplify the measurement of inventory.  This ASU requires inventory to be subsequently measured using the lower of cost and net realizable value, thereby eliminating the market value approach. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.”  This ASU is effective for reporting periods beginning after December 15, 2016 and is applied prospectively. Early adoption is permitted. We adopted this guidance in the first quarter of fiscal 2017, and it had no impact on our financial statements and disclosure.

In February 2016, the FASB issued new guidance related to accounting for leases. The new standard requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of key information about leasing arrangements. Accordingly, a lessee will recognize a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. Both the asset and liability will initially be measured at the present value of the future minimum lease payments over the lease term. Subsequent measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. The new standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted.  As of April 1 2017, we have not evaluated the impact of this new accounting standard on our financial statements.

In March 2016, the FASB issued an ASU intended to simplify various aspects of the accounting for share-based payments. Excess tax benefits for share-based payments will be recorded as a reduction of income taxes and reflected in operating cash flows upon the adoption of this ASU. Excess tax benefits are currently recorded in equity and as financing activity under the current rules. This guidance is effective for reporting periods beginning after December 15, 2016. We adopted this guidance in the first quarter of fiscal 2017, and the adoption did not have a material impact on our financial statements and disclosure.

2.Discontinued Operations

On March 23, 2017, the Company soldcertain assets, properties and rights of our wholly owned subsidiary, Fresh Frozen Foods, to Pictsweet pursuant to the Purchase Agreement.  In accordance with the Purchase Agreement, Pictsweet acquired Fresh Frozen Food’s frozen food processing equipment assets, certain real property and associated facilities located in Jefferson, Georgia and Thomasville, Georgia, and other intellectual property and inventory.  As consideration for the acquisition, Pictsweet paid the Company $23.7 million in cash. The Fresh Frozen business was part of the Company’s frozen products segment.  The net proceeds from the Fresh Frozen Asset Sale were $19.5 million, after payment of professional fees and other transaction expenses, and were used to pay down amounts outstanding

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under the Credit Facilities.  As of December 31, 2016, total assets and total liabilities related to the Fresh Frozen Foods business were $32.2 million and $2 million, respectively.  The results of operations for the Fresh Frozen Foods business have been classified as discontinued operations for all periods presented.

The summary comparative financial results of the Fresh Frozen Foods business, included within discontinued operations, were as follows (in thousands):

	Quarter Ended
	April 1, 2017		March 26, 2016
Net revenues	$	8,677	$	12,674
Cost of revenues		8,594		13,139
Gross profit		83		(465)
Operating expenses:
Selling, general and administrative expenses		629		954
Operating loss		(546)		(1,419)
Loss on sale of Fresh Frozen Foods		10,146		—
Interest expense, net		332		353
Loss before income taxes		(11,024)		(1,772)
Income tax expense		(1,909)		677
Net loss from discontinued operations	$	(12,933)	$	(1,095)

3.Inventories

Inventories consisted of the following as of April 1, 2017 and December 31, 2016 (in thousands):

	April 1,		December 31,
	2017		2016
Finished goods	$	18,326	$	27,661
Raw materials		29,799		44,527
Inventories	$	48,125	$	72,188

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4.Goodwill, Trademarks and Other Intangibles

Goodwill, trademarks and other intangibles, net, consisted of the following as of April 1, 2017 and December 31, 2016 (in thousands):

	Estimated	April 1,		December 31,
	Useful Life	2017		2016
Goodwill:
Inventure Foods		$	5,986	$	5,986
Rader Farms			5,630		5,630
Willamette Valley Fruit Company			3,147		3,147
Sin In A Tin			222		222
Goodwill		$	14,985	$	14,985
Trademarks:
Inventure Foods		$	896	$	896
Rader Farms			1,070		1,070
Willamette Valley Fruit Company			740		740
Fresh Frozen Foods			—		2,330
Sin In A Tin			123		123
Other intangibles:
Rader Farms - Customer relationship, gross carrying amount	10 years		100		100
Rader Farms - Customer relationship, accum. amortization			(98)		(96)
Willamette Valley Fruit Company - Customer relationship, gross carrying amount	10 years		3,200		3,200
Willamette Valley Fruit Company - Customer relationship, accum. amortization			(1,200)		(1,120)
Trademarks and other intangibles, net		$	4,831	$	7,243

Our amortization expense related to these intangibles was $82,000 and $82,000 for the fiscal quarters ended April 1, 2017 and March 26, 2016, respectively.  The trademarks are deemed to have an indefinite useful life because they are expected to generate cash flows indefinitely.

5.Accrued Liabilities

Accrued liabilities consisted of the following as of April 1, 2017 and December 31, 2016 (in thousands):

	April 1,		December 31,
	2017		2016
Accrued payroll and payroll taxes		1,998	$	1,756
Accrued royalties and commissions		861		1,621
Accrued advertising and promotion		1,101		1,465
Accrued berry purchase payments		—		1,908
Accrued other		2,792		2,783
Accrued liabilities	$	6,752	$	9,533

6.Term Debt and Line of Credit

ABL Credit Facility

On November 18, 2015, the Company entered into the ABL Credit Facility. The ABL Credit Facility provides for a five-year, $50.0 million senior secured revolving credit facility.  The ABL Credit Facility also provides that, under certain conditions, we may increase the aggregate principal amount of loans outstanding thereunder by up to $10.0 million.  Borrowings under the ABL Credit Facility bear interest, at the Company’s option, at a base rate or the London interbank offered rate (“LIBOR”) plus, in each case, an applicable margin.  The ABL Credit Facility will mature, and the commitments thereunder will terminate, on November 17, 2020.

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Events of default under the ABL Credit Facility include customary events such as a cross-default provision with respect to other material debt.  The ABL Credit Facility requires us to, among other things, comply with a Fixed Charge Coverage Ratio (as defined in the ABL Credit Facility) if our liquidity as of the date of any determination is less than the greater of (i) 12.5% of the Maximum Revolver Amount  ($50.0 million) and (ii) $6.125 million, subject to certain conditions.  As of the date this Form 10-Q was filed with the SEC, we would not be able to comply with the Fixed Charge Coverage Ratio covenant if our liquidity were deemed to have fallen below the applicable threshold. 

At May 11, 2017, we were in discussions with the lenders under the ABL Credit Facility regarding an extension of the temporary waiver of the Going Concern Covenant Default from May 15, 2017 to July 17, 2017, as well as certain other amendment to such Credit Facility.

As of April 1, 2017, there was $27.2 million outstanding under the ABL Credit Facility and the net availability thereunder was $8.8 million.

Term debt consisted of the following as of April 1, 2017 and December 31, 2016 (in thousands):

	April 1,		December 31,
	2017		2016
Term loan credit facility through November 2020	$	70,471		84,150
Equipment term loan, Goodyear, Arizona, due monthly through April 2021		2,610		2,759
Equipment term loan, Rader Farms, due monthly through August 2019		1,290		1,420
Equipment term loan, Willamette Valley Fruit Company, due monthly through August 2019		958		1,054
Capital lease obligations, primarily due September 2017		40		44
Long-term debt		75,369		89,427
Less: deferred financing fees, net		(6,630)		(7,047)
Less: current portion of long-term debt		(68,739)		(82,380)
Long-term debt, less current portion	$	—	$	—

Term Loan Credit Facility

Also on November 18, 2015 and concurrent with the execution of the ABL Credit Facility, Inventure Foods and certain of its subsidiaries entered into the Term Loan Credit Facility.  The Term Loan Credit Facility provides for a $85.0 million senior secured term loan that matures on November 17, 2020.  The Term Loan Credit Facility also provides that, under certain conditions, we may increase the aggregate principal amount of term loans outstanding thereunder by up to $25.0 million.  Borrowings under the Term Loan Credit Facility bear interest, at the Company’s option, at a base rate or LIBOR plus, in each case, an applicable margin.

The Term Loan Credit Facility contains customary negative covenants and also requires the Company, together with its subsidiaries, to comply with a Fixed Charge Coverage Ratio and a Total Leverage Ratio. The first Fixed Charge Coverage Ratio and Total Leverage Ratio measurement period was the end of the first quarter of fiscal 2016.  On March 9, 2016, the Company entered into that certain First Amendment to Credit Agreement, with BSP, as administrative agent, and the other lenders party thereto (the “First Amendment”).  The First Amendment amended the Term Loan Credit Facility to defer the Company’s obligation to comply with the Total Leverage Ratio until the end of the third quarter of fiscal 2016.

On September 27, 2016, the Company entered into that certain Second Amendment to Credit Agreement with BSP, as the administrative agent, and the other lenders party thereto (the “Second Amendment”). The Second Amendment defers compliance with the Company’s Total Leverage Ratio and Fixed Charge Coverage Ratio covenants until the second quarter of fiscal 2017, requires the Company to comply with a minimum EBITDA target covenant commencing with the month ended April 30, 2017 (the “EBIDTA Covenant”), and increases the Base Rate Margin and the Libor Rate Margin, each as defined in the Term Loan Credit Facility) thereunder by 100 basis points.  The Second Amendment also amends the fees payable to the lenders in the event of prepayment and restricts the Company’s ability to raise Curative Equity (as defined in the Second Amendment) until the fourth quarter of fiscal 2017.

We did not meet the minimum EBITDA Covenant (the “EBIDTA Covenant Default”).  On May 10, 2017, we entered into the Third Amendment.  Under the terms of the Third Amendment, the lenders granted the Company (i) an extension of the temporary waiver of the Going Concern Covenant Default from May 15, 2017 to July 17, 2017, and (ii)

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a temporary waiver of the EBITDA Covenant Default, until July 17, 2017.  The Third Amendment also requires that the Company comply with a minimum EBITDA target covenant commencing with the fiscal month ending June 30, 2017, measured over the 12-months then ended, and increases the Company’s prepayment fees in the event of a payment or prepayment of principal under the Term Loan Credit Facility (excluding regularly scheduled principal payments).

Equipment Loans

In August 2015, we entered into an equipment term loan with Banc of America Leasing & Capital LLC for $3.1 million to finance new kettles and related equipment for our Goodyear, Arizona facility.  The equipment term loan accrues interest at a rate of 3.07% and will be repaid over 60 recurring monthly payments commencing May 2016. 

In August 2014, we entered into two separate equipment term loans with Banc of America Leasing & Capital LLC. One for $2.6 million to finance equipment to be used at the Company’s Rader Farms facility, and the other for $1.9 million to finance equipment to be used at Willamette Valley Fruit Company. Both of these equipment term loans accrue interest at a rate of 2.35% and will be repaid over 60 recurring monthly payments commencing September 15, 2014.

Debt Classification

In accordance with FASB Accounting Standard Codification (“ASC”) 470-10-45 on Debt Presentation, all of the Company’s outstanding debt has been reclassified in the accompanying condensed consolidated balance sheet as a current liability as of April 1, 2017 and December 31, 2016.  Absent the Second Amendment, the Company would not have been in compliance with the Total Leverage Ratio and Fixed Charge Ratio covenants as of April 1, 2017.  Unless we engage in a strategic transaction that enables us to pay down or refinance our debt, or we secure a waiver from our lenders or a further loan amendment to the Term Loan Credit Facility, we will not be in compliance with our financial covenants at the end of the second quarter of fiscal 2017 or, in the case of the minimum EBITDA target, by the month ending June 30, 2017 (as required by the Third Amendment).  As previously announced, the Company commenced a comprehensive strategic and financial review of the Company’s operations and engaged Rothschild Inc. to serve as its financial advisor to assist the Company in this process, including the pursuit of value-enhancing initiatives including, a sale of the Company, a sale of assets of the Company or other strategic business combination, or other capital structure optimization opportunities. This comprehensive strategic and financial review remains ongoing as of the date this Form 10-Q was filed with the SEC.  There can be no assurances that these efforts will result in a completion of a transaction or, if one is completed, that it will be on favorable terms.  A default under either the Term Loan Credit Facility or ABL Credit Facility would trigger a default under the other Credit Facility and certain of our equipment lease financing arrangements, as these facilities each contain cross-default provisions. As such, we classified all of our outstanding debt as a current liability.

7.Commitments and Contingencies

Contractual

Our future contractual obligations consist principally of long-term debt, operating leases, minimum commitments regarding third-party warehouse operations services, forward purchase agreements and remaining minimum royalty payments due to licensors pursuant to brand licensing agreements. 

In order to mitigate the risks of volatility in commodity markets to which we are exposed, we have entered into forward purchase agreements with certain suppliers based on market prices, forward price projections and expected usage levels.  Our purchase commitments for certain ingredients, packaging materials and energy are generally less than 12 months.

Legal Proceedings

We are periodically a party to various lawsuits arising in the ordinary course of business.  Management believes, based on discussions with legal counsel, that the resolution of any such lawsuits, individually and in the aggregate, will not have a material adverse effect on our financial position or results of operations.

Litigation

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On April 4, 2016, a purported class action captioned Westmoreland County Employee Retirement Fund (“Westmoreland”) v. Inventure Foods, Inc. et al., Case No. CV2016-002718, was filed in the Superior Court in Maricopa County, Arizona. Additional defendants are the Company’s Chief Executive Officer and Chief Financial Officer, and the underwriters of the secondary securities offering that closed September 14, 2014 (the “September 2014 Offering”).  The class action complaint, which was amended a second time on March 27, 2017, alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act and focuses on the conditions at the Company’s former frozen food facility in Jefferson, Georgia.  Westmoreland seeks certification as a class action, unspecified compensatory damages, rescission or a rescissory measure of damages, attorneys’ fees and costs, and other relief deemed appropriate by the court.  The Company, its Chief Executive Officer, its Chief Financial Officer and the September 2014 Offering underwriters have moved to dismiss the second amended complaint. The Company is vigorously defending against the claims.

On November 10, 2016, the Center for Environment Health (“CEH”), represented by Howard Hirsch of Lexington Law Group, filed a lawsuit against the Company under the California Safe Drinking Water and Toxic Enforcement Act (known as “Proposition 65”) (the “Act”).  CEH contends that the Company’s potato-based chip products contain amounts of acrylamide in excess of what is permitted under the Act.  A retailer of the Company, Bristol Farms, demanded indemnity in relation to the litigation.  The Company has answered the complaint and intends to vigorously defend the lawsuit.

On November 14, 2016, Michelle Blair (represented by Matthew Armstrong of Armstrong Law Firm LLC and Stuart Cochran of Cochran Law PLLC) filed a putative class action against the Company in St. Louis City Circuit Court.  Ms. Blair purports to represent a class of consumers who purchased one of nine Boulder Canyon® brand products listing “evaporated cane juice” as an ingredient.  Ms. Blair contends that the use of “evaporated cane juice” was misleading because evaporated cane juice is sugar.  In the complaint, Ms. Blair advances claims for violation of Missouri’s Merchandising Practices Act, Mo. Rev. Stat. § 407.020, et seq. and 15 C.S.R. 60-8.020, et seq., and unjust enrichment.  On February 3, 2017, the Company removed the action to the Eastern District of Missouri. Plaintiff dismissed the removed action without prejudice and refiled a substantially similar complaint in the Southern District of Illinois. The new complaint is brought by Ms. Blair and a new plaintiff, Shannah Burton, and asserts a nationwide putative class, as well as a putative class of Illinois and Missouri purchasers. Ms. Burton alleges claims under the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. Ann. 505/2, et seq. Both plaintiffs also assert claims for unjust enrichment and breach of express warranty. On April 24, 2017, the Company filed a motion to dismiss the complaint.  The Company intends to vigorously defend the lawsuit.

On March 9, 2017, a verified stockholder derivative complaint was filed under seal in the U.S. District Court for the District of Arizona, Case No. 2:17-cv-00727, against certain of its current and former officers and directors —Terry McDaniel, Steve Weinberger, Timothy A. Cole, Ashton D. Asensio, Macon Bryce Edmonson, Paul J. Lapadat, Harold S. Edwards, David I. Meyers, and Itzhak Reichman.  The lawsuit also names the Company as a nominal defendant.  The under seal complaint focuses on the conditions at the Company’s former frozen food facility in Jefferson, Georgia and the Company’s 2015 and 2016 proxy statements.  The plaintiff purports to derivatively assert on behalf of the Company claims for alleged violation of Section 14(a) of the Exchange Act, breach of fiduciary duty, waste of corporate assets and unjust enrichment.  According to the complaint, the plaintiff seeks an unspecified award of actual or compensatory damages in favor of the Company; an order directing the Company to take certain actions concerning its corporate governance and internal procedures, including putting forward certain proposals concerning its corporate governance policies and amendments to the Company’s Bylaws and Certificate of Incorporation for a stockholder vote; an award of extraordinary equitable and/or injunctive relief concerning the defendants’ trading activities or their assets; restitution from defendants to Inventure Foods consisting of a disgorgement of all profits, benefits and other compensation obtained by defendants; costs and disbursements of the action, including attorneys, accountant and experts’ fees, costs and expenses; and other and further relief as the court deems just and proper. The Company intends to vigorously defend the lawsuit.

On March 27, 2017, a purported class action captioned Glenn Schoenfeld v. Inventure Foods, Inc., et al., Case No. 2:17-cv-00910, was filed in the U.S. District Court for the District of Arizona purportedly on behalf of all persons and entities that acquired Inventure Foods securities between March 3, 2016 and March 16, 2017.  The Company’s Chief Executive Officer and Chief Financial Officer are also named as defendants.  The complaint asserts claims for alleged violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, and focuses on the Company’s internal controls over accounting and financial reporting, its statements of operations for fiscal year 2015, and public statements in press releases and SEC filings between March 3, 2016 and March 16, 2017.  Mr. Schoenfeld

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seeks certification as a class action, unspecified compensatory damages, attorneys’ fees, costs and expenses incurred in the action, and other relief deemed appropriate by the court. The Company intends to vigorously defend the lawsuit.

On April 27, 2017, a purported class action captioned John Robinson v. Inventure Foods, Inc., et al., Case No. 2:17-cv-01258, was filed in the U.S. District Court for the District of Arizona purportedly on behalf of all persons and entities that acquired Inventure Foods securities between March 3, 2016 and March 16, 2017.  The complaint alleges violations of Section 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder against the Company and the Company’s Chief Executive Officer and Chief Financial Officer.  The allegations focus on the Company’s internal controls over accounting and financial reporting, its statements of operations for fiscal year 2015, and public statements in press releases and SEC filings between March 3, 2016 and March 16, 2017. Mr. Robinson seeks certification as a class action, unspecified damages, prejudgment and post-judgment interest, reasonable attorneys’ fees, expert fees and other costs, and such other and further relief as the court may deem just and proper.  The Company intends to vigorously defend the lawsuit.

8.Business Segments

Our operations consist of two reportable segments: frozen products and snack products.  The frozen products segment includes frozen fruits, fruit and vegetable blends, beverages, side dishes and desserts for sale primarily to grocery stores, club stores and mass merchandisers.  The snack products segment produces potato chips, kettle chips, potato crisps, potato skins, pellet snacks, sheeted dough products, popcorn and extruded products for sale primarily to snack food distributors and retailers.  Our reportable segments offer different products and services.  The majority of our revenues are attributable to external customers in the United States.  We also sell to external customers internationally. However, the revenues attributable to such customers are immaterial.  All of our assets are located in the United States.

All products sold under our frozen products segment are considered part of the healthy/natural food category.  The products sold under our snack products segment include products considered part of the indulgent specialty snack food category, as well as products considered part of the healthy/natural food category. 

For the fiscal quarters ended April 1, 2017 and March 26, 2016, net revenues of our healthy/natural food category totaled $40.7 million and $47.3 million, respectively.  For the fiscal quarters ended April 1, 2017 and March 26, 2016, net revenues of our indulgent specialty snack food category totaled $8.9 million and $9.9 million, respectively.

We do not allocate assets, selling, general and administrative expenses, income taxes or other income and expense to our reportable segments.  The following table presents information about our reportable segments for the fiscal quarters ended April 1, 2017 and March 26, 2016 (in thousands):

	Frozen		Snack
	Products		Products		Consolidated
Quarter Ended April 1, 2017
Net revenues from external customers	$	23,462	$	26,156	$	49,618
Depreciation and amortization included in segment gross profit		226		579		805
Segment gross profit		4,741		3,773		8,514
Quarter Ended March 26, 2016
Net revenues from external customers	$	32,296	$	24,884	$	57,180
Depreciation and amortization included in segment gross profit		281		507		788
Segment gross profit		4,785		4,496		9,281

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The following table reconciles reportable segment gross profit to our consolidated income (loss) from continuing operations before income taxes for the fiscal quarters ended April 1, 2017 and March 26, 2016 (in thousands):

	Quarter Ended
	2017		2016
Segment gross profit	$	8,514	$	9,281
Unallocated amounts:
Operating expenses		(7,255)		(7,155)
Interest expense		(2,362)		(2,002)
Income (loss) from continuing operations before income tax provision	$	(1,103)	$	124

The table below presents information about revenues for each group of similar products within our reportable segments for the fiscal quarters ended April 1, 2017 and March 26, 2016 (in thousands):

	Quarter Ended April 1, 2017				Quarter Ended March 26, 2016
			% of Net				% of Net
	Net Revenue		Revenues		Net Revenue		Revenues
Frozen Products:
Berries, blends, beverages and desserts	$	23,078	46.5	%	$	32,296	56.5	%
Riced Vegetables		384	0.7	%		—	—	%
Total Frozen		23,462	47.2	%		32,296	56.5	%
Snack Products:
Indulgent specialty snacks (1)		8,931	18.0	%		9,926	17.4	%
Healthy/natural snacks (2)		17,225	34.8	%		14,958	26.1	%
Total Snack		26,156	52.8	%		24,884	43.5	%
Consolidated	$	49,618	100.0	%	$	57,180	100.0	%

(1) Indulgent specialty snacks includes T.G.I. Friday’s® brand snacks under license from T.G.I. Friday’s, Nathan’s Famous® brand snack products under license from Nathan’s Famous Corporation, Vidalia® brand snack products under license from Vidalia Brands, Inc., Poore Brothers® brand kettle cooked potato chips, Bob’s Texas Style® brand kettle cooked chips, and Tato Skins® brand potato snacks.

(2) Healthy/natural snacks includes Boulder Canyon® brand kettle cooked potato chips, other snack and food items and private label healthy/natural snacks.

9.Stockholders’ Equity

The Company’s 2015 Equity Incentive Plan (the “2015 Plan”) was approved at our 2015 annual meeting of stockholders. Under the 2015 Plan, we are authorized to issue up to 1,400,560 shares of our Common Stock, which number may be increased by up to 250,000 shares subject to any option or award outstanding under the Amended and Restated 2005 Equity Incentive Plan that are canceled or forfeited for any reason.  If any shares of our Common Stock subject to awards granted under the 2015 Plan are canceled, those shares will be available for future awards under such plan.   Awards granted under the 2015 Plan may include: nonqualified stock options, incentive stock options, restricted stock, restricted stock units, performance shares, performance units, and other stock-based awards and cash-based awards.  The 2015 Plan has a term of ten years and expires in May 2025.  As of April 1, 2017, there were 1,008,983 shares of Common Stock available for awards under the 2015 Plan.

Restricted Common Stock

We have issued shares of restricted Common Stock in the form of restricted stock awards and restricted stock units as incentives to certain employees, officers and members of our Board.  Restricted stock awards and restricted stock units granted to members of the Board are granted with a one-year service period.  Restricted stock awards and

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restricted stock units granted to the Company’s officers vest over three years and typically contain performance conditions that are required to be achieved over a three-year measurement period in order for the shares to be released.  The number of performance-based restricted stock awards and units that ultimately vest depend on whether we achieve certain financial results.  Restricted stock units granted to non-officer employees generally vest over three or five years.  We record compensation expense each period based on (i) the market price of our Common Stock at the time of grant, and (ii) for performance-based restricted stock awards and units, our estimate of the most probable number of shares that will ultimately be released.  The related stock-based compensation expense is included in selling, general and administrative expenses.  Additionally, the compensation expense is adjusted for our estimate of forfeitures.  Recipients of restricted stock awards are entitled to receive any dividends declared on our Common Stock and have voting rights, regardless of whether such shares have vested.  Recipients of restricted stock units have no voting rights or rights to receive cash dividends with respect to restricted stock unit awards until shares of Common Stock are issued in settlement of such awards.

During the fiscal quarters ended April 1, 2017 and March 26, 2016, the total stock-based compensation expense from restricted Common Stock recognized in the financial statements was $0.3 million and $0.3 million, respectively. There was no stock-based compensation costs capitalized. 

The following table summarizes activities related to restricted stock awards for the fiscal quarter ended April 1, 2017:

		Weighted
		Average Grant
	Number	Date Fair Value
Nonvested balance at December 31, 2016	8,333	$	12.78
Granted	—	$	—
Vested and released	—	$	—
Forfeited	—	$	—
Nonvested balance at April 1, 2017	8,333	$	12.78

As of April 1, 2017, the total unrecognized costs related to non-vested restricted stock awards was $0.1 million, which is expected to be recognized over a weighted average period of 0.2 years.  This expected compensation expense does not reflect any new awards, or modifications to existing awards, that could occur in the future.

The following table summarizes activities related to restricted stock units for the fiscal quarter ended April 1, 2017:

		Weighted
		Average Grant
	Number	Date Fair Value
Nonvested balance at December 31, 2016	541,346	$	8.40
Granted	—	$	—
Vested and released	(23,255)	$	13.21
Forfeited	(39,208)	$	10.26
Nonvested balance at April 1, 2017	478,883	$	8.02

As of April 1, 2017, the total unrecognized costs related to non-vested restricted stock units was $1.8 million, which is expected to be recognized over a weighted average period of 1.6 years.  This expected compensation expense does not reflect any new awards, or modifications to existing awards, that could occur in the future. 

Stock Options

Stock-based compensation expense from stock options recognized in the financial statements totaled $0.1 and $0.1 million for the fiscal quarters ended April 1, 2017 and March 26, 2016, respectively.  There was no stock-based compensation costs capitalized.

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The following table summarizes stock option activity during the fiscal quarter ended April 1, 2017:

				Aggregate		Weighted Average
		Weighted		Intrinsic Value		Remaining
	Options	Average		(in-the-money		Contractual Life
	Outstanding	Exercise Price		options)		(in years)
Outstanding at December 31, 2016	567,602	$	5.23
Granted	—	$	—
Exercised	—	$	—
Forfeited or expired	(13,687)	$	10.37
Outstanding at April 1, 2017	553,915	$	5.10	$	506,733	4.1

As of April 1, 2017, the total unrecognized costs related to non-vested stock options granted were $0.2 million.  We expect to recognize such costs in the financial statements over a weighted average period of 1.1 years.  This expected compensation expense does not reflect any new awards, or modifications to existing awards, that could occur in the future. 

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the closing price of $4.42 of our Common Stock as of April 1, 2017, which would have been received by the option holders had all option holders exercised options and sold the underlying shares on that date.  The intrinsic value related to vested stock options outstanding was $0.5 million as of April 1, 2017 based on the exercise price and closing price of $4.42 of our Common Stock as of April 1, 2017.

The following table summarizes information about stock options outstanding and exercisable at April 1, 2017:

						Weighted
						Average
						Remaining	Weighted			Weighted
						Contractual	Average			Average
Range of					Options	Life	Exercise		Options	Exercise
Exercise Prices					Outstanding	(in years)	Price		Exercisable	Price
$	1.70	-	$	1.86	138,600	1.5	$	1.75	138,600	$	1.75
$	2.4	-	$	4.16	156,450	3.4	$	3.55	156,450	$	3.55
$	4.28	-	$	7.21	213,400	5.7	$	6.88	148,900	$	6.82
$	7.61	-	$	13.21	45,465	7.1	$	12.36	28,465	$	12.47
					553,915	4.1	$	5.10	472,415	$	4.59

Prior to May 2008, all stock option grants had a five-year term.  The fair value of these stock option grants is amortized to expense over the service period, generally five years for employees and one year for members of the Board.  In May 2008, our Board approved a 10-year term for all future stock option grants, with service periods of five years for employees and one year for members of the Board.  We issue new shares upon the exercise of stock options, as opposed to reissuing treasury shares.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

For a description of the Company’s critical accounting policies and an understanding of the significant factors that influenced the Company’s performance during the fiscal quarter ended April 1, 2017, this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the other sections of this Form 10-Q, including the condensed consolidated financial statements and related notes appearing in Part I, Item 1, as well as  our 2016 Form 10-K.  The various sections of this MD&A contain a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described in the “Risk Factors” section of our 2016 Form 10-K.  Accordingly, the Company’s actual future results may differ materially from historical results or those currently anticipated.

Executive Overview

We are a leading marketer and manufacturer of healthy/natural and indulgent specialty snack food brands.  Our products are marketed under a strong portfolio of brands, including Boulder Canyon®, Rader Farms, Willamette Valley Fruit CompanyTM, T.G.I. Friday’s®, Jamba®, Vidalia®, Poore Brothers®, Nathan’s Famous®, Bob’s Texas Style®, Tato Skins® and Sin In A TinTM.  T.G.I. Friday’s®, Jamba®, Nathan’s Famous® and Vidalia® are licensed brand names.  We complement our branded product retail sales with private label retail sales and co-packing arrangements.

Our operations consist of two reportable segments: frozen products and snack products. The frozen products segment includes frozen fruits, beverages fruit and vegetable blends, beverages, side dishes and desserts for sale primarily to grocery stores, club stores and mass merchandisers. The snack products segment includes potato chips, kettle chips, potato crisps, potato skins, pellet snacks, sheeted dough products, popcorn and extruded products for sale primarily to snack food distributors and retailers.

For the fiscal quarters ended April 1, 2017 and March 26, 2016, net revenues of our healthy/natural food category totaled $40.7 million and $47.3 million, respectively.  For the fiscal quarters ended April 1, 2017 and March 26, 2016, net revenues of our indulgent specialty snack food category totaled $8.9 million and $9.9 million, respectively.

This MD&A is intended to assist in the understanding of our condensed consolidated financial statements, the changes in certain key items in those condensed consolidated financial statements from period to period and the primary factors that contributed to those changes, as well as how certain critical accounting estimates affect our condensed consolidated financial statements.

Recent Developments

On March 23, 2017, we announced the sale ofcertain assets, properties and rights of our wholly owned subsidiary, Fresh Frozen Foods, to Pictsweet, pursuant to the Purchase Agreement.  In accordance with the Purchase Agreement, Pictsweet acquired Fresh Frozen Food’s frozen food processing equipment assets, certain real property and associated facilities located in Jefferson, Georgia and Thomasville, Georgia, and other intellectual property and inventory.  The Fresh Frozen Foods facilities processed and packaged IQF vegetables and fruits sold primarily under the Fresh Frozen™ brand. As consideration for the acquisition, Pictsweet paid the Company $23.7 million in cash.  The Company’s net proceeds from the Fresh Frozen Asset Sale were $19.5 million, after payment of professional fees and other transaction expenses.  These proceeds were used to pay down amounts outstanding under the Credit Facilities.

Strategic and Financial Review Process

In July 2016, we announced that our Board had commenced a strategic and financial review of the Company, with the objective to increase shareholder value.  We engaged Rothschild Inc. to serve as our financial advisor and assist us in this process.  As reported in our 2016 Form 10-K, we remain actively involved in this process and are continuing to pursue various strategic alternatives.  No assurance can be given as to the outcome or timing of this process or that it will result in the consummation of any specific transaction.

Going Concern Uncertainty

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We have incurred losses from operations in each of the quarterly periods since our voluntary product recall in April 2015 of certain varieties of the Company’s Fresh FrozenTM brand of frozen vegetables, as well as select varieties of our Jamba® “At Home” line of smoothie kits.  This fact, together with the projected near term outlook for our business and our inability to complete a strategic transaction (other than the Fresh Frozen Asset Sale) by year end or demonstrate that such a transaction is imminent, raise substantial doubt about our ability to continue as a going concern.  We reported this going concern conclusion in our 2016 Form 10-K, together with the following specific conditions considered by management in reaching such conclusion:

· Our five-year, $85.0 million term loan credit agreement with BSP Agency, LLC (“BSP”), as administrative agent, and the other lenders party thereto (with all related loan documents, and as amended from time to time, the “Term Loan Credit Facility”) requires us to, among other things, comply with Total Leverage Ratio and Fixed Charge Coverage Ratio (each as defined in the Term Loan Credit Facility) covenants by the end of the second quarter of fiscal 2017 and a minimum EBITDA target by the month ended April 30, 2017, which target we did not meet (the “EBITDA Covenant Default”).  The Total Leverage Ratio, measured at the end of our second fiscal quarter in 2017 must be 4.25:1, and the Fixed Charge Coverage Ratio, measured at the end of our second fiscal quarter in 2017 for the four quarterly periods then ended, must be 1.1:1.  Absent the completion of a strategic transaction yielding sufficient cash proceeds (in addition to the proceeds received from the sale of certain  assets, properties and rights of our wholly owned subsidiary, Fresh Frozen Foods, Inc. (now known as Inventure – GA, Inc.) (“Fresh Frozen Foods”) in March 2017) to pay down debt, waivers or amendments by our lenders, or a refinancing of our debt, we will not be able to comply with these covenants when required to do so.  Failure to meet these covenants would result in a default under such credit facility and, to the extent the applicable lenders so elect, an acceleration of the Company’s existing indebtedness, causing such debt of approximately $102.6 million at April 1, 2017 (including $4.9 million of other equipment financing indebtedness that includes cross-default provisions) to be immediately due and payable.  The Company does not have sufficient liquidity to repay all of its outstanding debt in full if such debt were accelerated.

· Our five-year, $50.0 million revolving credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent, and the other lenders party thereto (with all related loan documents, and as amended from time to time, the “ABL Credit Facility” and, together with the Term Loan Credit Facility, the “Credit Facilities”), contains requirements, that among other things, require us to comply with a Fixed Charge Coverage Ratio (as defined in the ABL Credit Facility) if our liquidity as of the date of any determination is less than the greater of (i) 12.5% of the Maximum Revolver Amount  ($50.0 million) and (ii) $6.125 million, subject to certain conditions.  As of the date this Form 10-Q was filed with the SEC, we would not be able to comply with the Fixed Charge Coverage Ratio covenant if our liquidity were deemed to have fallen below the applicable threshold.

· The Credit Facilities also require us to furnish our audited financial statements without a “going concern” uncertainty paragraph in the auditor’s opinion.  Our consolidated financial statements for the fiscal year ended December 31, 2016 in our 2016 Form 10-K contained a “going concern” explanatory paragraph.  Under the Credit Facilities, a going concern opinion with respect to our audited financial statements is an event of default (the “Going Concern Covenant Default”).  As of the date our 2016 Form 10-K was filed with the SEC,  we had obtained a temporary waiver of the Going Concern Covenant Default until May 15, 2017 from the lenders under the Credit Facilities. 

· On May 10, 2017, we entered into a Limited Waiver and Third Amendment to the Credit Agreement with the lenders under the Term Loan Credit Facility (the “Third Amendment”).  Under the terms of the Third Amendment, the lenders granted the Company (i) an extension of the temporary waiver of the Going Concern Covenant Default from May 15, 2017 to July 17, 2017, and (ii) a temporary waiver of the EBITDA Covenant Default until July 17, 2017. The Third Amendment also requires that the Company comply with a minimum EBITDA target covenant commencing with the fiscal month ending June 30, 2017, measured over the 12-months then ended, and increases the Company’s prepayment fees in the event of a payment or prepayment of principal under the Term Loan Credit Facility (excluding regularly scheduled principal payments).

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· We are currently in discussions with the lenders under the ABL Credit Facility regarding an extension of the temporary waiver of the Going Concern Covenant Default from May 15, 2017 to July 17, 2017, as well as certain other amendments to such Credit Facility.

As noted above and as more fully described under “Liquidity and Capital Resources” below, the Company’s Board and management are continuing to explore various strategic transactions.  There can be no assurance that we will be successful in our pursuit of a strategic transaction or that we will be able consummate a strategic transaction in time to address our financial covenant requirements and going concern qualification, or at all, or if we do complete a strategic transaction it will be on commercially reasonable terms.  As a result, our liquidity and ability to timely pay our obligations when due could be adversely affected.   

The accompanying condensed consolidated financial statements are prepared on a going concern basis and do not include any adjustments that might result from uncertainty about our ability to continue as a going concern, other than the reclassification of certain long-term debt and the related debt issuance costs to current liabilities and current assets, respectively.  The report from our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 2016 includes an explanatory paragraph regarding our ability to continue as a going concern.

Our lenders may resist renegotiation or lengthening of payment and other terms through legal action or otherwise if we are unsuccessful in our efforts to complete a strategic transaction.  If we are not able to timely, successfully or efficiently implement the strategies that we are pursuing, we may need to voluntarily seek protection under Chapter 11 of the U.S. Bankruptcy Code.

Results of Operations

In addition to focusing on measurements calculated in accordance with GAAP, we focus on “selling, general and administrative expenses, excluding legal settlement gains,” which is a non-GAAP financial measure.  As such, we include in this Form 10-Q a reconciliation to its most directly comparable GAAP financial measure.  Non-GAAP financial measures have certain limitations as analytical tools and should not be used as substitutes for measurements prepared in accordance with GAAP.   This reconciliation and a description of the limitations of this non-GAAP financial measure are included in “Non-GAAP Data and Reconciliations” below.

The following table sets forth for the periods presented certain financial data as a percentage of net sales for the fiscal quarters ended April 1, 2017 and March 26, 2016:

	Quarter Ended
	April 1,		March 26,
	2017		2016
Net revenues	100.0	%	100.0	%
Cost of revenues	82.8		83.8
Gross profit	17.2		16.2
Selling, general and administrative expenses	14.6		12.5
Operating income (loss)	2.6		3.7
Interest expense, net	4.8		3.5
Loss before income taxes	(2.2)		0.2
Income tax expense (benefit)	0.2		0.1
Net (loss) income from continuing operations	(2.4)	%	0.1	%

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Net Revenues.  Consolidated net revenues decreased 13.2% to $49.6 million in the fiscal quarter ended April 1, 2017, a decrease of $7.6 million, compared to $57.2 million in the fiscal quarter ended March 26, 2016. Our net revenues by operating segment were as follows (in thousands):

	Quarter Ended
	April 1,		March 26,		%
	2017		2016		Change
Frozen products	$	23,462	$	32,296	(27.4)
Snack products		26,156		24,884	5.1
Consolidated	$	49,618	$	57,180	(13.2)	%

Our frozen products segment net revenues were $23.5 million in the fiscal quarter ended April 1, 2017, a decrease of $8.8 million, or 27.4%, compared to $32.3 million during the fiscal quarter ended March 26, 2016.  This decrease in our frozen products segment net revenues was driven by reduced sales distribution for private label accounts and a market price decrease as well as a reduction Jamba® “At Home” smoothie kit sales. 

Our snack products segment net revenues were $26.2 million for the fiscal quarter ended April 1, 2017, an increase of $1.3 million, or 5.1%, compared to $24.9 million for the fiscal quarter ended March 26, 2016.  This increase was driven by strong increases in both Boulder Canyon® and better-for-you private label sales increases, which was  partially offset by reduced license brand sales.

Gross Profit.  Gross profit was $8.5 million for the fiscal quarter ended April 1, 2017, compared to $9.3 million for the fiscal quarter ended March 26, 2016. 

Our gross profit and gross profit as a percentage of net sales by operating segment were as follows (in thousands):

	Quarter Ended
	April 1,		% of Net		March 26,		% of Net
	2017		Revenues		2016		Revenues
Frozen products	$	4,741	20.2	%	$	4,785	14.8	%
Snack products		3,773	14.4	%		4,496	18.1	%
Consolidated	$	8,514	17.2	%	$	9,281	16.2	%

Our frozen products segment gross profit was $4.7 million for the fiscal quarter ended April 1, 2017, compared to $4.8 million for the fiscal quarter ended March 26, 2016 and, as a percentage of net revenues, increased 540 basis points to 20.2% compared to 14.8% for the prior-year period.  The significant improvement in frozen products segment gross margin is driven by a reduction in purchases of higher priced frozen berries and lower 2016 harvest fruit prices. 

Our snack products segment gross profit was $3.7 million for the fiscal quarter ended April 1, 2017, compared to $4.5 million for the fiscal quarter ended March 26, 2016.  As a percentage of net revenues, our snack products segment gross margin decreased 370 basis points to 14.4% for the fiscal quarter ended April 1, 2017, compared to 18.1% for the fiscal quarter ended March 26, 2016.  This decrease in snack products segment gross margin was primarily due to increased trade promotion spend and reductions in inventory standard costs compared to the first quarter of fiscal 2016.

Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses was $7.3 million for the fiscal quarter ended April 1, 2017, compared to $7.2 the fiscal quarter ended March 26, 2016.  Excluding the $1.2 million gain related to a legal settlement in the first quarter of fiscal 2017, SG&A expenses, excluding legal settlement gains (as discussed below in “Non-GAAP Data and Reconciliations”) increased $1.3 million for the fiscal quarter ended April 1, 2017 compared to the prior-year period and, as a percentage of net revenues, increased 460 basis points to 17.1% compared to 12.5% for the prior-year period.  The increase is primarily due to increased legal fees associated with ongoing litigation and our previously announced strategic and financial review, as well as increased accrued bonus and medical expenses. 

Interest Expense.  Interest expense was $2.4 million for the fiscal quarter ended April 1, 2017, compared to $2.0 million for the fiscal quarter ended March 26, 2016. This increase in interest expense was primarily due to increased interest rates on our Term Loan Credit Facility implemented with the Second Amendment.

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Income Tax Benefit. Income tax expense was $0.1 million for the fiscal quarter ended April 1, 2017, compared to $0.1 million for the fiscal quarter ended March 26, 2016.  Our effective tax rate was (9.3)% and 38.1% for the fiscal quarters ended April 1, 2017 and March 26, 2016, respectively.  Income tax expense for the fiscal quarter ended April 1, 2017 was impacted by the full valuation allowance which was initially recorded in the fourth quarter of 2016. Therefore, income tax expenses was a result of certain state minimum taxes and deferred tax liabilities not subject to the valuation allowance.

Discontinued Operations. Discontinued operations represents the Fresh Frozen Foods business that was sold on March 23, 2017.  Discontinued operations generated a net loss of $12.9 million and $1.1 million for the fiscal quarters ended April 1, 2017 and March 26, 2016, respectively.  The fiscal quarter ended April 1, 2017 includes a loss on the sale of Fresh Frozen of $10.1 million. See “Note 2 -Discontinued Operations" in the condensed consolidated financial statements for more information.

Non-GAAP Data and Reconciliations

 “Selling, general and administrative expenses, excluding legal settlement gains” or “SG&A expenses, excluding legal settlement gains” is defined as SG&A expenses less gains from a legal settlement with the previous owners of Fresh Frozen Foods over purchase price hold back funds held in escrow.We present SG&A expenses, excluding legal settlement gains because we believe it provides useful information regarding the Company’s normal operating results and allows for better comparability with current period operating results.    

A reconciliation of SG&A expenses, excluding legal settlement gains to SG&A expenses is as follows (in thousands):

	Quarter Ended
	April 1, 2017		March 26, 2016
Selling, general and administrative expenses, excluding legal settlement gains	$	8,491	$	7,155
Gain from legal settlement		(1,236)		—
Selling, general and administrative expense	$	7,255	$	7,155

Liquidity and Capital Resources

Liquidity represents our ability to generate sufficient cash flows from operating activities to satisfy obligations, as well as our ability to obtain appropriate financing.  Therefore, liquidity cannot be considered separately from capital resources that consist primarily of current and potentially available funds for use in achieving our objectives.  Currently, our liquidity needs arise primarily from working capital requirements, capital expenditures and debt repayment.

Operating Cash Flows

Cash flows from operating activities reflect our net loss, adjusted for non-cash items such as depreciation, amortization, stock-based compensation expense, write-offs and write-downs of assets, as well as changes in accounts receivable, inventories, accounts payable and accrued liabilities, and other assets and liabilities.

Net cash provided by operating activities was $2.1 million for the fiscal quarter ended April 1, 2017, compared to $2.2 million for the fiscal quarter ended March 26, 2016. The year-over-year decrease was primarily a result of additional interest expense in the first quarter of 2017 compared to the prior-year period.

Investing Cash Flows

Net cash provided by investing activities was $18.3 million for the fiscal quarter ended April 1, 2017, compared to cash used of $4.5 million for the fiscal quarter ended March 26, 2016.  The first quarter of 2017 included $19.5 million in proceeds from the Fresh Frozen Asset Sale.  Capital expenditures of $0.9 million in the first quarter of fiscal 2017 primarily relate to building improvements and manufacturing equipment, of which $0.2 million is included in discontinued operations.  Capital expenditures of $4.1 million in the first quarter of fiscal 2016 primarily relate to manufacturing equipment and enterprise resource planning, or ERP, system integration, of which $0.5 million is included in discontinued operations.  During fiscal 2017, we plan to make approximately $3.0 million in capital

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expenditures, primarily at our manufacturing facilities.  Capital expenditures are funded by net cash flow from operating activities, cash on hand, available credit from our ABL Credit Facility and equipment term loans.  Payments of contingent consideration related to the acquisition of Willamette Valley Fruit Company totaled $0.2 million during the fiscal quarter ended April 1, 2017, compared to $0.3 million during the prior-year period. 

Financing Cash Flows

Net cash used in financing activities for the fiscal quarter ended April 1, 2017 was $19.6 million, compared to net cash provided by financing activities of $0.6 million in the fiscal quarter ended March 26, 2016.  This year-over-year decrease in cash provided by financing activities was primarily due to a pay down of the Term Loan Credit Facility of $13.7 million and of the ABL Credit Facility of $5.8 million from the proceeds of the Fresh Frozen Asset Sale.

Debt and Capital Resources

At April 1, 2017, there was $1.5 million in cash and $27.2 million borrowed on our ABL Credit Facility. At that date, $8.8 million of additional borrowings were available under the ABL Credit Facility. As is customary in such financings, Wells Fargo may terminate its commitments and accelerate the repayment of amounts outstanding and exercise other remedies upon the occurrence of an Event of Default (as defined in the ABL Credit Facility), subject, in certain instances, to the expiration of an applicable cure period. Certain events may trigger an acceleration of repayment of the amounts outstanding under the ABL Credit Facility as set forth in such credit facility. The ABL Credit Facility requires us to maintain compliance with certain financial covenants, including a Fixed Charge Coverage Ratio in the event liquidity as of the date of any determination is less than the greater of (i) 12.5% of the Maximum Revolver Amount  ($50.0 million) and (ii) $6.125 million, subject to certain conditions.  As of April 1, 2017, we would not be able to comply with the Fixed Charge Coverage Ratio covenant if our liquidity were deemed to have fallen below the applicable threshold.

Our Term Loan Credit Facility requires us to comply with a Fixed Charge Coverage Ratio, Total Leverage Ratio and a minimum EBITDA target covenant (each as defined in the Term Loan Credit Facility).  We must comply with the Fixed Charge Coverage Ratio and Total Leverage Ratio beginning in the second quarter of fiscal 2017.  We were required to comply with the minimum EBITDA target covenant commencing with the month ended April 30, 2017, which target we did not meet (the “EBITDA Covenant Default”), and as discussed below, have received a temporary waiver of such default.  Unless we engage in a strategic transaction that enables us to pay down our debt, or we secure a waiver or further loan amendment from our lender, we will not be in compliance with our financial covenants when required to meet such covenants.  Such a breach would constitute an Event of Default under (and as defined in) the Term Loan Credit Facility if it remained uncured or a modification or waiver is not agreed to (or, if applicable, extended) by the lenders under such credit facility.

The Credit Facilities also require us to furnish our audited financial statements without a “going concern” uncertainty paragraph in the auditor’s opinion.  Our consolidated financial statements for the fiscal year ended December 31, 2016 in our 2016 Form 10-K contained a “going concern” explanatory paragraph.  Under the Credit Facilities, a going concern opinion with respect to our audited financial statements is an event of default (the “Going Concern Covenant Default”).  As of the date our 2016 Form 10-K was filed with the SEC, we had obtained a temporary waiver of the Going Concern Covenant Default until May 15, 2017 from the lenders under the Credit Facilities.

On May 10, 2017, we entered into the Third Amendment, pursuant to which the lenders under the Term Loan Credit Facility granted the Company (i) an extension of the temporary waiver of the Going Concern Covenant Default from May 15, 2017 until July 17, 2017, and (ii) a temporary waiver of the Minimum EBITDA Covenant Default until July 17, 2017.  The Third Amendment also requires that the Company comply with a minimum EBITDA target covenant commencing with the fiscal month ending June 30, 2017, measured over the 12-months then ended, and increases the Company’s fees in the event of a payment or prepayment of principal under the Term Credit Facility (excluding regularly scheduled principal payments).

We are in discussions with the lenders under the ABL Credit Facility regarding an extension of the temporary waiver of the Going Concern Covenant Default from May 15, 2017 to July 17, 2017, as well as certain other amendment to such Credit Facility. Should we fail to reach agreement with such lenders on or before May 15, 2017, the Going Concern Covenant Default would be reinstated as if the waiver had never been provided, which would trigger an event of default under the ABL Credit Facility.

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A default under either the Term Loan Credit Facility or the ABL Credit Facility would trigger a default under the other Credit Facility and certain of our equipment lease financing arrangements, as these facilities each contain cross-default provisions.  In the event of non-compliance and if we are unable to secure necessary waivers or modifications to the applicable Credit Facility, the lenders under such Credit Facilities would have the right to accelerate the indebtedness thereunder.  In such an event, we would not have the liquidity sufficient to repay such indebtedness or meet our operating expenses, capital expenditures and other cash needs.

See “Note 6 - Term Debt and Line of Credit” of our condensed consolidated financial statements in Item 1 of this Form 10-Q for detail regarding our financing arrangements.

Outlook

All of the Company’s outstanding debt has been reclassified in the accompanying condensed consolidated balance sheet as a current liability as of April 1, 2017.  As previously reported, on July 27, 2016, the Company announced that it had commenced a strategic and financial review with the objective of increasing shareholder value.  The Company and its advisors have been actively involved in this process since the date of such announcement and, as of the filing of this Form 10-Q, are continuing to pursue various strategic alternatives.  On March 23, 2017, the Company completed the Fresh Frozen Asset Sale, which yielded net proceeds to the Company of $19.5 million.  Although such proceeds were used to pay down amounts outstanding under the Credit Facilities, additional capital is required to ensure compliance with the Total Leverage Ratio and Fixed Charge Coverage Ratio covenants under our Term Loan Credit Facility by the end of the second quarter of fiscal 2017. 

Absent the Third Amendment, the Company would have been in breach of the requirement to deliver audited financial statements without a going concern opinion at May 15, 2017, and the minimum EBITDA target covenant under the Term Loan Credit Facility.  Further, should the Company fail to reach agreement with the lenders under its ABL Credit Facility on or before May 15, 2017, regarding the further extension of the waiver of the Going Concern Covenant Default, such Default will be reinstated as if the waiver had never been provided, which will trigger an event of default under the ABL Credit Facility.  The waivers set forth in the Third Amendment, together with any waivers agreed to with the lenders under our ABL Credit Facility, will only provide the Company with  limited time to pursue various strategic alternatives.  However, unless we engage in a strategic transaction that enables us to pay down our debt, or we secure additional waivers or further loan amendments from our lenders, we will not be in compliance with our financial covenants when required to meet such covenants.  No assurance can be given as to the outcome or timing of our pursuit of a strategic transaction or that we will be able to successfully complete a transaction at all or, if completed, on terms reasonable to us.  A default under either the Term Loan Credit Facility or the ABL Credit Facility will trigger a default under the other Credit Facility and certain of our equipment lease financing arrangements, as these facilities each contain cross-default provisions.  It could also result in the termination of all commitments to extend further credit under our ABL Credit Facility. 

Our lenders may resist renegotiation or lengthening of payment and other terms through legal action or otherwise if we are unsuccessful in our efforts to complete a strategic transaction.  If we are not able to timely, successfully or efficiently implement the strategies that we are pursuing, we may need to seek voluntarily seek protection under Chapter 11 of the U.S. Bankruptcy Code.

We anticipate fiscal 2017 capital expenditures of approximately $3.0 million, funded through working capital and various purchase or financing arrangements.

Contractual Obligations

There have been no material changes in our reported contractual obligations, as described under “Contractual Obligations” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of  the 2016 Form 10-K.

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Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies and estimates since the filing of the 2016 Form 10-K.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

There have been no material changes in our reported market risks, as described in “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our 2016 Form 10-K.

Item 4.  Controls and Procedures. 

Evaluation of Disclosure Controls and Procedures

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the reporting period covered by this Form 10-Q.  Based upon that evaluation and as a result of the material weakness in internal control over financial reporting described in “Controls and Procedures” in Part II, Item 9A of the 2016 Form 10-K, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of April 1, 2017 for the purpose of providing reasonable assurance that the information required to be disclosed in the reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Remediation Efforts to Address Material Weakness

As previously described in “Controls and Procedures” in Part II, Item 9A of the 2016 Form 10-K, the Company began implementing a remediation plan to address the control deficiency that led to the material weakness mentioned above. The remediation plan includes the following:

· An upgrade of the software used to help monitor trade spend liabilities.  This new software upgrade is already complete and pulls actual sales data into the sales volume input estimates for open sales promotion plans to improve the accuracy of sales volume estimates. 

· The creation of a Task Force to help identify further improvements, including a more diligent review of key critical accounts to validate sales plans are accurate. 

The Company’s enhanced review and control procedures were in place and operating during the first quarter of fiscal 2017. The Company is in the process of testing the newly implemented internal controls and related procedures. The material weakness cannot be considered remediated until the control has operated for a sufficient period of time and until management has concluded, through testing, that the control is operating effectively. Our goal is to remediate this material weakness by the end of fiscal 2017.

Changes in Internal Control Over Financial Reporting

Except as described above, there were no changes to the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended April 1, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.Legal Proceedings.

For a discussion of legal proceedings, see “Note 7 - Commitments and Contingencies - Legal Proceedings” to our condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors.

During the fiscal quarter ended April 1, 2017, there were no material changes from the risk factors as previously disclosed in our  2016 Form 10-K.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

The following table contains information for shares repurchased during the fiscal quarter ended April 1, 2017.

				Total number of	Approximate dollar
				shares purchased as	value of shares that
				part of publicly	may yet be
	Total number of	Average price paid		announced plans or	purchased under the
Fiscal period	shares purchased(1)	per share		programs	plans or programs
January 1, 2017 - February 5, 2017	—	$	—	—	$	—
February 6, 2017 - March 5, 2017	—	$	—	—	$	—
March 6, 2017 - April 1, 2017	7,760	$	5.04	—	$	—
Total	7,760	$	5.04	—	$	—

(1) Shares of restricted stock withheld, at the election of certain holders of restricted stock, by the Company from the vested portion of a restricted stock award with a market value approximating the amount of the withholding taxes due from such restricted stockholders.

Item 6.Exhibits.

2.1+	Asset Purchase Agreement, dated as of March 23, 2017, by and among Inventure Foods, Inc., Fresh Frozen Foods, Inc. and The Pictsweet Company (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 29, 2017).
10.1*	Limited Waiver and Third Amendment to Credit Agreement, dated as of May 10, 2017, by and among the Company and certain of its subsidiaries, as the borrowers, each of the lenders from time to time a party thereto, and BSP Agency, LLC, as the administrative agent for each member of the Lender Group (as defined therein).
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a).
31.2 *		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a).
32**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		XBRL Instance Document.
101.SCH*		XBRL Taxonomy Extension Scheme Document.
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*		XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

27

*     Filed herewith.

**   Furnished herewith.

+     The schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K.  Inventure Foods  agrees to furnish supplementally a copy of such schedules and exhibits, or any section thereof, to the SEC upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:	May 11, 2017	INVENTURE FOODS, INC.
		By:	/s/ Steve Weinberger
			Steve Weinberger
			Chief Financial Officer
			(Principal Financial Officer and Principal Accounting Officer)

29

EX-10.1

EXECUTION VERSION

LIMITED WAIVER AND THIRD AMENDMENT TO CREDIT AGREEMENT

THIS LIMITED WAIVER AND THIRD AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of May 10, 2017, is by and among Inventure Foods, Inc., a Delaware corporation(the “Parent Borrower”),the Subsidiaries of the Parent Borrower identified on the signature pages hereof (such Subsidiaries, together with the Parent Borrower, are referred to herein each individually as a “Borrower” and individually and collectively, jointly and severally, as “Borrowers”), the lenders from time to time party to the Credit Agreement defined below (the “Lenders”) and BSP AGENCY, LLC, a Delaware limited liability company, in its capacity as agent for each member of the Lender Group (in such capacity, together with its successors and assigns in such capacity, the “Agent”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement.

W I T N E S S E T H

WHEREAS, the Borrowers, the Lenders and the Agent are parties to that certain Credit Agreement dated as of November 18, 2015 (as amended by that certain First Amendment to Credit Agreement dated as of March 9, 2016, as amended by that certain Second Amendment to Credit Agreement dated as of September 27, 2016 and as may be further amended, modified, extended, restated, replaced, or supplemented from time to time, the “Credit Agreement”);

WHEREAS, certain Events of Default have occurred, are continuing or will result under the Credit Agreement as a result of: (i) the Parent Borrower’s and the other Loan Parties’ failure to comply with the financial statement covenant contained in Section 5.1 of the Credit Agreement because of a “going concern” qualification to the certification by the Parent Borrower’s auditor of the audited financial statements of the Parent Borrower and its Subsidiaries for the fiscal year ended December 31, 2016, which constitutes an Event of Default under Section 8.2(a) of the Credit Agreement (the “2016 Audit Covenant Event of Default”) and (ii) the Parent Borrower’s and the other Loan Parties’ failure to comply with the financial covenant contained in Section 7.3 of the Credit Agreement for the fiscal month ended April 30, 2017, which constitutes an Event of Default under Section 8.2(a) of the Credit Agreement (the “EBITDA Event of Default” and collectively with the 2016 Audit Covenant Event of Default, the “Specified Events of Default”);

WHEREAS, the Borrowers, the Lenders and the Agent are parties to that certain Limited Waiver dated as of March 29, 2017 (as amended, modified, extended, restated, replaced, or supplemented from time to time, the “Limited Waiver”) whereby the Agent and the Lenders agreed to waive the 2016 Audit Covenant Event of Default until May 15, 2017 (the “2016 Audit Covenant Waiver Deadline”);

WHEREAS, the Borrowers have requested that the Agent and the Lenders (a) extend the 2016 Audit Covenant Waiver Deadline until July 17, 2017, (b) waive the EBITDA Event of Default until July 17, 2017 and (c) amend certain provisions of the Credit Agreement; and

WHEREAS, the Agent and the Lenders are willing to (a) provide the extension of the 2016 Audit Covenant Waiver Deadline, (b) provide the waiver of the EBITDA Event of Default and (c) make such amendments to the Credit Agreement in accordance with and subject to the terms and conditions set forth herein and in accordance with the applicable provisions of the Intercreditor Agreement.

NOW, THEREFORE, in consideration of the agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

AMENDMENTS TO CREDIT AGREEMENT

LIMITED WAIVER

1.1Waiver of Specified Events of Default.  Notwithstanding the provisions of the Credit Agreement to the contrary, the Agent and the Lenders hereby agree to extend the 2016 Audit Covenant Waiver Deadline and waive the EBITDA Event of Default until the date (the “Waiver Deadline”) that is the earlier of (a) the occurrence and continuation of a Default or Event of Default other than any Specified Event of Default and (b) July 17, 2017.  On the date constituting the Waiver Deadline, the Specified Events of Default will be reinstated as if the waiver set forth above had never been provided and failure of the Parent Borrower to be in compliance therewith shall constitute an immediate Event of Default.

1.1Effectiveness of Limited Waiver.  This Limited Waiver shall be effective only to the extent specifically set forth herein and shall not (a) be construed as a waiver of any breach, Default or Event of Default other than as specifically waived herein nor as a waiver of any breach, Default or Event of Default of which the Lenders have not been informed by the Borrowers, (b) affect the right of the Lenders to demand compliance by the Borrowers with all terms and conditions of the Loan Documents, except as specifically modified or waived by this Limited Waiver, (c) be deemed a waiver of any transaction or future action on the part of the Borrowers requiring the Lenders’ consent or approval under the Loan Documents, or (d) except as waived hereby, be deemed or construed to be a waiver or release of, or a limitation upon, the Lenders’ exercise of any rights or remedies under the Credit Agreement or any other Loan Document, whether arising as a consequence of any Default or Event of Default (other than a Specified Event of Default) which may now exist or otherwise, all such rights and remedies hereby being expressly reserved.

ARTICLE II

AMENDMENTS TO CREDIT AGREEMENT

2.1Amendment to Section 2.4(g).  Section 2.4(g) of the Credit Agreement is hereby amended by deleting the existing Section 2.4(g) in its entirety, and in lieu thereof substituting the following:

(g)[Reserved].

From and after the date hereof, each reference to Section 2.4(g) in the Credit Agreement and the other Loan Documents shall be deemed to be deleted and hereafter shall be disregarded.

2.2Amendment to Section 2.10(b).  Section 2.10(b) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(b)(i) To the extent the Borrowers make any payment or prepayment of principal with respect to the Loans after the Third Amendment Effective Date and prior to June 30, 2017 (including any prepayment pursuant to Section 2.4(d) or (e)), other than regularly scheduled principal payments pursuant to Section 2.1(a) (excluding any such principal payment on the Maturity Date), the Borrowers shall pay to the Agent for the ratable account of each of the Lenders, a non-refundable fee in the amount of 6.00% of the aggregate principal amount of all such Loans paid or prepaid and (ii) to the extent the Borrowers make any payment or prepayment of principal with respect to the Loans on or after June 30, 2017 (including any prepayment pursuant to Section 2.4(d) or (e)),  other than regularly scheduled principal payments pursuant to Section 2.1(a) (excluding any such principal payment on the Maturity Date), the Borrowers shall pay to the Agent

2

for the ratable account of each of the Lenders, a non-refundable fee in the amount of 7.00% of the aggregate principal amount of all such Loans paid or prepaid (any fee paid pursuant to clause (i) or (ii) above, the “Third Amendment Fee”).  Such Third Amendment Fee shall be due and payable on the date of payment or prepayment (whether or not an Event of Default is occurring and prior to and after acceleration of the Loans).

2.3Amendment to Section 7.3.  Section 7.3 is hereby amended and restated in its entirety to read as follows:

7.3 Consolidated EBITDA.  Commencing with the fiscal month ending June 30, 2017, Borrowers will have EBITDA, measured at the end of each fiscal month for the twelve (12) months then ended, of at least $18,000,000. 

2.4Amendment to Section 9.1.  The final paragraph of Section 9.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

Without limiting the generality of Section2.10(b), and notwithstanding anything to the contrary in this Agreement or any Loan Document, it is understood and agreed that if the Obligations are accelerated hereunder pursuant to this Section 9.1, the Third Amendment Fee determined as of the date of acceleration, will also be due and payable and will be treated and deemed as though the applicable Loans were prepaid and the applicable Commitments were terminated as of such date and shall constitute part of the Obligations for all purposes herein.  The Third Amendment Fee shall also be payable in the event the Obligations (and/or this Agreement) are satisfied or released by foreclosure (whether by power of judicial proceeding), deed in lieu of foreclosure or by any other means.  THE LOAN PARTIES EXPRESSLY WAIVE THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE FOREGOING THIRD AMENDMENT FEE IN CONNECTION WITH ANY SUCH ACCELERATION.  The Loan Parties expressly agree that (i) the Third Amendment Fee is reasonable and is the product of an arm’s length transaction between sophisticated business people, ably represented by counsel, (ii) the Third Amendment Fee shall be payable notwithstanding the then prevailing market rates at the time payment is made, (iii) there has been a course of conduct between Lenders and the Loan Parties giving specific consideration in this transaction for such agreement to pay the Third Amendment Fee, (iv) the Loan Parties shall be estopped hereafter from claiming differently than as agreed to in this Section 9.1, (v) their agreement to pay the Third Amendment Fee is a material inducement to the Lenders to make the Loans, and (vi) (A) the Third Amendment Fee represents a good faith, reasonable estimate and calculation of the lost profits or damages of the Lenders, (B) it would be impractical and extremely difficult to ascertain the actual amount of damages to the Lenders or profits lost by the Lenders as a result of such payment or prepayment and (C) the Third Amendment Fee represents liquidated damages and compensation for the costs of making funds available hereunder.

2.5Amendment to Section 14.1(a)(iii).  Section 14.1(a)(iii) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

reduce the principal of, or the rate of interest on, any Loan or other extension of credit hereunder, or reduce any fees or other amounts payable hereunder or under any other Loan Document (except in connection with the waiver of applicability of Section 2.6(c) (which waiver shall be effective with the written consent of the Required Lenders) but including the Third Amendment Fee)),

2.6New Definitions.  The following definitions are hereby added to Schedule 1.1 to the Credit Agreement in the appropriate alphabetical order:

“Third Amendment Effective Date” shall mean May 10, 2017.

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“Third Amendment Fee” has the meaning specified therefore in Section 2.10(b).

2.7Deleted Definitions.  Schedule 1.1 to the Credit Agreement is hereby amended by deleting the existing definitions of “Call Premium”, “Make-Whole Premium” and “Treasury Rate” in their entirety.  From and after the date hereof, each reference to any of such terms in the Credit Agreement and the other Loan Documents shall be deemed to be deleted and hereafter shall be disregarded.

2.8Amendment to Schedule 5.1.  Schedule 5.1 to the Credit Agreement is hereby amended and restated in its entirety as set forth on Schedule 5.1 hereto.

ARTICLE III
CONDITIONS TO EFFECTIVENESS

3.1Closing Conditions.  This Amendment shall become effective as of the day and year set forth above (the “Amendment Effective Date”) upon satisfaction of the following conditions (in each case, in form and substance reasonably acceptable to the Agent):

(a)Executed Amendment.  The Agent shall have received a copy of this Amendment duly executed by each of the Loan Parties, the Required Lenders and the Agent.

(b)Default.  After giving effect to this Amendment, no Default or Event of Default shall exist.

(c)Fees and Expenses.  The Agent shall have received from the Parent Borrower such other fees and expenses that are payable in connection with the consummation of the transactions contemplated hereby and King & Spalding LLP shall have received from the Parent Borrower payment of all outstanding fees and expenses previously incurred and all fees and expenses incurred in connection with this Amendment.

(d)Miscellaneous.  All other documents and legal matters in connection with the transactions contemplated by this Amendment shall be reasonably satisfactory in form and substance to the Agent and its counsel.

ARTICLE IV
MISCELLANEOUS

4.1Amended Terms.  On and after the Amendment Effective Date, all references to the Credit Agreement in each of the Loan Documents shall hereafter mean the Credit Agreement as amended by this Amendment.  Except as specifically amended hereby or otherwise agreed, the Credit Agreement is hereby ratified and confirmed and shall remain in full force and effect according to its terms.

4.2Representations and Warranties of the Loan Parties.  Each of the Loan Parties represents and warrants as follows:

(a)It has taken all necessary action to authorize the execution, delivery and performance of this Amendment.

(b)This Amendment has been duly executed and delivered by such Person and constitutes such Person’s legal, valid and binding obligation, enforceable in accordance with its terms, except as such enforceability may be subject to (i) bankruptcy, insolvency, reorganization,

4

fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).

(c)No consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental authority or third party is required in connection with the execution, delivery or performance by such Person of this Amendment.

(d)After giving effect to this Amendment, the representations and warranties set forth in Article 4 of the Credit Agreement are true and correct as of the date hereof (except for those which expressly relate to an earlier date).

(e)After giving effect to this Amendment, no event has occurred and is continuing which constitutes a Default or an Event of Default.

(f)The Loan Documents continue to create a valid security interest in, and Lien upon, the Collateral, in favor of the Agent, for the benefit of the Lenders, which security interests and Liens are perfected in accordance with the terms of the Loan Documents and prior to all Liens other than Permitted Liens.

(g)The Obligations are not reduced or modified by this Amendment and are not subject to any offsets, defenses or counterclaims.

4.3Reaffirmation of Obligations.  Each Loan Party hereby ratifies the Credit Agreement and acknowledges and reaffirms (a) that it is bound by all terms of the Credit Agreement applicable to it and (b) that it is responsible for the observance and full performance of its respective Obligations.

4.4Loan Document.  This Amendment shall constitute a Loan Document under the terms of the Credit Agreement.

4.5Expenses.  Each Borrower agrees to pay all reasonable costs and expenses of the Agent in connection with the preparation, execution and delivery of this Amendment, including without limitation the reasonable fees and expenses of the Agent’s legal counsel.

4.6Further Assurances.  The Loan Parties agree to promptly take such action, upon the request of the Agent, as is necessary to carry out the intent of this Amendment.

4.7Entirety.  This Amendment and the other Loan Documents embody the entire agreement among the parties hereto and supersede all prior agreements and understandings, oral or written, if any, relating to the subject matter hereof.

4.8Counterparts; Telecopy.  This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument.  Delivery of an executed counterpart to this Amendment by telecopy or other electronic means shall be effective as an original and shall constitute a representation that an original will be delivered. 

4.9No Actions, Claims, Etc.  As of the date hereof, each of the Loan Parties hereby acknowledges and confirms that it has no knowledge of any actions, causes of action, claims, demands, damages and liabilities of whatever kind or nature, in law or in equity, against the Agent, the Lenders, or the Agent’s or the Lenders’ respective officers, employees, representatives, agents, counsel or directors

5

arising from any action by such Persons, or failure of such Persons to act under the Credit Agreement on or prior to the date hereof. 

4.10GOVERNING LAW.THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

4.11Successors and Assigns.  This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

4.12General Release.  In consideration of the Agent’s and the Required Lenders’ willingness to enter into this Amendment, each Loan Party hereby releases and forever discharges the Agent, the Lenders and the Agent’s, and the Lender’s respective predecessors, successors, assigns, officers, managers, members, partners, equityholders, directors, employees, agents, attorneys, representatives, and affiliates (hereinafter all of the above collectively referred to as the “Bank Group”), from any and all claims, counterclaims, demands, damages, debts, suits, liabilities, actions and causes of action of any nature whatsoever, including, without limitation, all claims, demands, and causes of action for contribution and indemnity, whether arising at law or in equity, whether known or unknown, whether liability be direct or indirect, liquidated or unliquidated, whether absolute or contingent, foreseen or unforeseen, and whether or not heretofore asserted, which any Loan Party may have or claim to have against any of the Bank Group in any way related to or connected with the Loan Documents and the transactions contemplated thereby.

4.13Consent to Jurisdiction; Service of Process; Waiver of Jury Trial.  The jurisdiction, service of process and waiver of jury trial provisions set forth in Section 12 of the Credit Agreement are hereby incorporated by reference, mutatis mutandis.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF the parties hereto have caused this Amendment to be duly executed on the date first above written.

BORROWERS:INVENTURE FOODS, INC.,  

a Delaware corporation

By:  /s/ Steve Weinberger

Name:  Steve Weinberger

Title:  Chief Financial Officer

RADER FARMS, INC.,

a Delaware corporation

By:  /s/ Steve Weinberger

Name:  Steve Weinberger

Title:  Chief Financial Officer

INVENTURE - GA, INC.,  

a Delaware corporation

By:  /s/ Steve Weinberger

Name:  Steve Weinberger

Title:  Chief Financial Officer

WILLAMETTE VALLEY FRUIT COMPANY,  

a Delaware corporation

By:  /s/ Steve Weinberger

Name:  Steve Weinberger

Title:  Chief Financial Officer

SIGNATURE PAGE TO

LIMITED WAIVER AND THIRD AMENDMENT TO CREDIT AGREEMENT

POORE BROTHERS-BLUFFTON, LLC,  

a Delaware limited liability company

By:  /s/ Steve Weinberger

Name:  Steve Weinberger

Title:  Chief Financial Officer

BOULDER NATURAL FOODS, INC.,  

an Arizona corporation

By:  /s/ Steve Weinberger

Name:  Steve Weinberger

Title:  Chief Financial Officer

Tejas pb distributing, INC.,  

an Arizona corporation

By:  /s/ Steve Weinberger

Name:  Steve Weinberger

Title:  Chief Financial Officer

LA COMETA PROPERTIES, INC.,  

an Arizona corporation

By:  /s/ Steve Weinberger

Name:  Steve Weinberger

Title:  Chief Financial Officer

BN FOODS, INC.,  

a Colorado corporation

By:  /s/ Steve Weinberger

Name:  Steve Weinberger

Title:  Chief Financial Officer

SIGNATURE PAGE TO

LIMITED WAIVER AND THIRD AMENDMENT TO CREDIT AGREEMENT

DMSLIBRARY01\30373416.v10

AGENT AND LENDERS:BSP AGENCY, LLC, a Delaware limited liability company, as Agent

By:  /s/ Bryan Martoken                            

Name:  Bryan Martoken

Title:  Chief Financial Officer

PECM STRATEGIC FUNDING L.P.,

as a Lender

By: PECM Strategic Funding GP, L.P., its

general partner

By: PECM Strategic Funding GP Ltd.,

its general partner

By:  /s/ Bryan Martoken    

Name:  Bryan Martoken

Title:  Chief Financial Officer 

GRIFFIN-BENEFIT STREET PARTNERS BDC CORP, as a Lender

By: /s/ Randy Anderson

Name:  Randy Anderson

Title:  Authorized Signer

BENEFIT STREET PARTNERS SMA-CL.P., as a Lender

By: /s/ Bryan Martoken

Name:  Bryan Martoken

Title:  Chief Financial Officer

SIGNATURE PAGE TO

LIMITED WAIVER AND THIRD AMENDMENT TO CREDIT AGREEMENT

PROVIDENCE DEBT FUND III L.P.,  

as a Lender

By: Providence Debt Fund III GP L.P., its general

partner

By: Providence Debt Fund III Ultimate GP Ltd., its

general partner

By: /s/ Bryan Martoken

Name:  Bryan Martoken

Title:  Chief Financial Officer    

BENEFIT STREET PARTNERS CAPITAL OPPORTUNITY FUND SPV LLC, as a Lender

By: Benefit Street Partners Capital Opportunity Fund L.P., its managing member

By: Benefit Street Partners Capital Opportunity Fund GP L.P., its general partner

By: Benefit Street Partners Capital Opportunity Fund Ultimate GP LLC, its general partner

By: /s/ Bryan Martoken

Name:  Bryan Martoken

Title:  Chief Financial Officer

SIGNATURE PAGE TO

LIMITED WAIVER AND THIRD AMENDMENT TO CREDIT AGREEMENT

DMSLIBRARY01\30373416.v10

Schedule 5.1

Financial Statements, Reports, Certificates

Deliver to Agent (and if so requested by Agent, with copies for each Lender) each of the financial statements, reports, or other items set forth below at the following times in form satisfactory to Agent:

	(a) (b) (c)
if an Event of Default has occurred and is continuing and in any event, commencing with the fiscal month ending June 30, 2017, as soon as available, but in any event within 15 days after the end of each month during each of Borrower’s fiscal years,	an unaudited consolidated and consolidating balance sheet, income statement, statement of cash flow and statement of shareholder’s equity covering Parent Borrower’s and its Subsidiaries’ operations during such period and compared to the prior period and plan, together with a corresponding discussion and analysis of results from management, (d)a Compliance Certificate along with the underlying calculations, including the calculations to arrive at EBITDA, (e)to the extent applicable, a calculation of the Fixed Charge Coverage Ratio and the Total Leverage Ratio that is required to be delivered under the Agreement, and (f)any compliance certificate delivered under the ABL Credit Agreement.
as soon as available, but in any event within 45 days after the end of each quarter during each of Parent Borrower’s fiscal years,	an unaudited consolidated and consolidating balance sheet, income statement, statement of cash flow and statement of shareholder’s equity covering Parent Borrower’s and its Subsidiaries’ operations during such period and compared to the prior period and plan, prepared in accordance with GAAP as well as on an internally-determined “mark-to-market” basis, together with a corresponding discussion and analysis of results from management, (a)a Compliance Certificate along with the underlying calculations, including the calculations to arrive at EBITDA to the extent applicable, (b)a calculation of the Fixed Charge Coverage Ratio and Total Leverage Ratio that is required to be delivered under the Agreement, (c)a certification of compliance with all applicable United States Department of Agriculture and the Food and Drug Administration rules and policies and rules and policies of any other Governmental Authority relating to Food Security Laws, including, if requested by Agent, a third-party expert certification audit or Food and Drug Administration inspection of the Loan Parties quality system, and (d)any compliance certificate delivered under the ABL Credit Agreement.

as soon as available, but in any event within 90 days after the end of each of Parent Borrower’s fiscal years,	(a)consolidated and consolidating financial statements of Parent Borrower and its Subsidiaries for each such fiscal year, audited by independent certified public accountants reasonably acceptable to Agent and certified, without any qualifications (including any (A) “going concern” or like qualification or exception, (B) qualification or exception as to the scope of such audit, or (C) qualification which relates to the treatment or classification of any item and which, as a condition to the removal of such qualification, would require an adjustment to such item, the effect of which would be to cause any noncompliance with Article 7 of the Agreement (other than any qualification or exception attributable solely to the occurrence of the stated maturity of any Revolving Loans within 12 months after the date of such opinion)), by such accountants to have been prepared in accordance with GAAP (such audited financial statements to include a balance sheet, income statement, statement of cash flow, and statement of shareholder’s equity, and, if prepared, such accountants’ letter to management), as well as on an internally-determined “mark-to-market” basis, (b)a Compliance Certificate along with the underlying calculations, including the calculations to arrive at EBITDA to the extent applicable, (c)a calculation of the Fixed Charge Coverage Ratio and Total Leverage Ratio that is required to be delivered under the Agreement, and (d)any compliance certificate delivered under the ABL Credit Agreement.
as soon as available, but in any event within 15 days after the start of each of Parent Borrower’s fiscal years,	(e)copies of Parent Borrower’s Projections, in form and substance (including as to scope and underlying assumptions) satisfactory to Agent, exercising reasonable (from the perspective of a secured term-based lender) business judgment, for the forthcoming 3 years, certified by the chief financial officer of Parent Borrower as being such officer’s good faith estimate of the financial performance of Parent Borrower during the period covered thereby.
if and when filed by Parent Borrower,	(f)Form 10-Q quarterly reports, Form 10-K annual reports, and Form 8-K current reports (if any when requested by Agent), (g)any other filings made by Parent Borrower with the SEC, and (h)any other information that is provided by Parent Borrower to its shareholders generally.

promptly, but in any event within 5 days after any Loan Party has knowledge of any event or condition that constitutes a Default or an Event of Default,	(i)notice of such event or condition and a statement of the curative action that the Borrowers propose to take with respect thereto.
promptly after the commencement thereof, but in any event within 5 days after the service of process with respect thereto on Parent Borrower or any of its Subsidiaries,	(j)notice of all actions, suits, or proceedings brought by or against Parent Borrower or any of its Subsidiaries before any Governmental Authority which reasonably could be expected to result in a Material Adverse Effect.
upon the request of Agent,	(a)any other information reasonably requested relating to the financial condition of Parent Borrower or its Subsidiaries.

EX-31.1

EXHIBIT 31.1

Certification of Principal Executive Officer

Pursuant to Exchange Act Rule 13a-14(a) and 15d-14(a)

as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Terry McDaniel, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Inventure Foods, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Pril

Date: May 11, 2017

/s/ Terry McDaniel

Terry McDaniel

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

Certification of Principal Financial Officer

Pursuant to Exchange Act Rule 13a-14(a) and 15d-14(a)

as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Steve Weinberger, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Inventure Foods, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

ugust

Date: May 11, 2017

/s/ Steve Weinberger

Steve Weinberger

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

EX-32

EXHIBIT 32

Certification of Principal Executive Officer and Principal Financial Officer

Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned hereby certify, in his capacity as an officer of Inventure Foods, Inc. (the “Company”), that, to his knowledge:

1. The Quarterly Report on Form 10-Q for the period ended April 1, 2017 of the Company (the “Report”), fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Ug

Date: May 11, 2017

/s/ Terry McDaniel

Terry McDaniel

Chief Executive Officer

(Principal Executive Officer)

/s/ Steve Weinberger

Steve Weinberger

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by Inventure Foods, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that Section.  Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that Inventure Foods, Inc. specifically incorporates it by reference.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Inventure Foods, Inc. and will be retained by Inventure Foods, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	3 Months Ended
	Apr. 01, 2017	May 09, 2017
Document and Entity Information
Entity Registrant Name	INVENTURE FOODS, INC.
Entity Central Index Key	0000944508
Document Type	10-Q
Document Period End Date	Apr. 01, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-30
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		19,687,912
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Apr. 01, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 1,508	$ 776
Accounts receivable, net of allowance for doubtful accounts of $198 and $160 at April 1, 2017 and December 31, 2016, respectively	15,901	16,334
Inventories	48,125	72,188
Other current assets	4,116	3,216
Total current assets	69,650	92,514
Property and equipment, net of accumulated depreciation of $52,488 and $53,116 at April 1, 2017 and December 31, 2016, respectively	53,148	65,484
Goodwill	14,985	14,985
Trademarks and other intangibles, net	4,831	7,243
Other assets	1,294	1,254
Total assets	143,908	181,480
Current liabilities:
Accounts payable	25,896	29,462
Accrued liabilities	6,752	9,533
Line of credit	27,230	32,761
Current portion of term debt	68,739	82,380
Total current liabilities	128,617	154,136
Deferred income tax liability	3,366	1,376
Other liabilities	2,037	2,279
Total liabilities	134,020	157,791
Commitments and contingencies (see Note 7)
Stockholders' equity:
Common stock, $.01 par value; 50,000 shares authorized; 20,056 and 20,040 shares issued and outstanding at April 1, 2017 and December 31, 2016, respectively	201	200
Additional paid-in capital	36,058	35,721
Accumulated deficit	(25,900)	(11,761)
Total stockholders' equity before treasury stock	10,359	24,160
Less: treasury stock, at cost: 368 shares at April 1, 2017 and December 31, 2016	(471)	(471)
Total stockholders' equity	9,888	23,689
Total liabilities and stockholders' equity	$ 143,908	$ 181,480

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Apr. 01, 2017	Dec. 31, 2016
CONDENSED CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 198	$ 160
Property and equipment, net of accumulated depreciation	$ 52,488	$ 53,116
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	50,000	50,000
Common stock, shares issued	20,056	20,040
Common stock, shares outstanding	20,056	20,040
Treasury stock, shares	368	368

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Apr. 01, 2017	Mar. 26, 2016
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Net revenues	$ 49,618	$ 57,180
Cost of revenues	41,104	47,899
Gross profit	8,514	9,281
Operating expenses:
Selling, general and administrative expenses	7,255	7,155
Operating income	1,259	2,126
Non-operating expense:
Interest expense	2,362	2,002
Income (loss) from continuing operations before income tax expense	(1,103)	124
Income tax expense	(103)	(47)
Net income (loss) from continuing operations	(1,206)	77
Net loss from discontinued operations	(12,933)	(1,095)
Net loss	$ (14,139)	$ (1,018)
Income (loss) per common share:
Basic income (loss) from continuing operations (in dollars per share)	$ (0.06)	$ 0.01
Basic loss from discontinued operations (in dollars per share)	(0.66)	(0.06)
Basic loss (in dollars per share)	(0.72)	(0.05)
Diluted income (loss) from continuing operations (In dollars per share)	(0.06)	0.01
Diluted loss from discontinued operations (in dollars per share)	(0.66)	(0.06)
Diluted loss (in dollars per share)	$ (0.72)	$ (0.05)
Weighted average number of common shares:
Basic (in shares)	19,675	19,603
Diluted (in shares)	19,675	19,859

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2017	Mar. 26, 2016
Cash flows from operating activities:
Net loss	$ (14,139)	$ (1,018)
Net loss from discontinued operations	(12,933)	(1,095)
Net income (loss) from continuing operations	(1,206)	77
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by (used in) operating activities
Depreciation	1,484	1,454
Amortization	82	82
Deferred financing fee amortization	465	353
Provision for bad debts	38	32
Deferred income taxes	1,990
Stock-based compensation expense	377	345
Changes in assets and liabilities:
Accounts receivable	(1,245)	(3,553)
Inventories	7,743	11,486
Other assets and liabilities	(1,071)	(702)
Accounts payable and accrued liabilities	(2,291)	(6,540)
Net cash provided by operating activities - continuing operations	6,366	3,034
Net cash used in operating activities - discontinued operations	(4,281)	(805)
Net cash provided by operating activities	2,085	2,229
Cash flows from investing activities:
Purchase of property and equipment	(663)	(3,612)
Payment of contingent consideration for Willamette Valley Fruit Company	(230)	(340)
Payment of contingent consideration for Sin In A Tin	(4)	(1)
Net cash used in investing activities - continuing operations	(897)	(3,953)
Net cash provided by (used in) investing activities - discontinued operations	19,180	(520)
Net cash provided by (used in) investing activities	18,283	(4,473)
Cash flows from financing activities:
Net borrowings on Wells Fargo line of credit	(5,531)	814
Payments made on capital lease obligations	(5)	(6)
Borrowings on term loans		973
Repayments made on long term debt	(14,054)	(220)
Payment of loan financing fees	(7)	(900)
Payment of payroll taxes on stock-based compensation through shares withheld	(39)	(97)
Net cash provided by (used in) financing activities - continuing operations	(19,636)	564
Net cash provided by (used in) financing activities	(19,636)	564
Net increase in cash and cash equivalents	732	(1,680)
Cash and cash equivalents at beginning of period	776	2,319
Cash and cash equivalents at end of period	1,508	639
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	2,231	2,015
Cash paid (refunded) during the period for income taxes	$ 3	$ (24)

XML

Organization and Summary of Significant Accounting Policies

3 Months Ended

Apr. 01, 2017

Organization and Summary of Significant Accounting Policies

Organization and Summary of Significant Accounting Policies

1.Organization and Summary of Significant Accounting Policies

Inventure Foods, Inc., a Delaware corporation (referred to herein as the “Company,” “Inventure Foods,” “we,” “our” or “us”), is a leading marketer and manufacturer of healthy/natural and indulgent specialty snack food brands with more than $269 million in annual net revenues for fiscal 2016.

We specialize in two primary product categories: healthy/natural food products and indulgent specialty snack products.  We sell our products nationally through a number of channels including: grocery stores, natural food stores, mass merchandisers, drug and convenience stores, club stores, value, vending, food service, industrial and international.  Our goal is to have a diversified portfolio of brands, products, customers and distribution channels.

In our healthy/natural food category, products include Rader Farms® frozen berries and frozen berry and vegetable blends, Boulder Canyon® brand kettle cooked potato chips, other snack and food items and frozen side dishes, Willamette Valley Fruit CompanyTM brand frozen berries, fruits, biscuits and other frozen snacks, Jamba® brand blend-and-serve smoothie kits under license from Jamba Juice Company (“Jamba Juice”), Sin In A TinTM  chocolate pate and other frozen desserts and private label frozen fruit and healthy/natural snacks.

In our indulgent specialty snack food category, products include T.G.I. Friday’s® brand snacks under license from T.G.I. Friday’s Inc. (“T.G.I. Friday’s”), Nathan’s Famous® brand snack products under license from Nathan’s Famous Corporation, Vidalia® brand snack products under license from Vidalia Brands, Inc., Poore Brothers® brand kettle cooked potato chips, Bob’s Texas Style® brand kettle cooked chips, and Tato Skins® brand potato snacks.  We also manufacture private label snacks for certain grocery retail chains and co-pack products for other snack manufacturers.

We operate in two segments: frozen products and snack products. The frozen products segment includes frozen fruits, fruit and vegetable blends, beverages, side dishes and desserts for sale primarily to grocery stores, club stores and mass merchandisers. All products sold under our frozen products segment are considered part of the healthy/natural food category. The snack products segment includes potato chips, kettle chips, potato crisps, potato skins, pellet snacks, sheeted dough products, popcorn and extruded products for sale primarily to snack food distributors and retailers. The products sold under our snack products segment include products considered part of the indulgent specialty snack food category, as well as products considered part of the healthy/natural food category.

We operate manufacturing facilities in seven locations. Our frozen berry products are processed in our Lynden, Washington, Bellingham, Washington and two Salem, Oregon facilities.  Our frozen berry business grows, processes and markets premium berry blends, raspberries, blueberries and rhubarb and purchases blackberries, cherries, cranberries, strawberries and other fruits from a select network of fruit growers for resale.  The fruit is processed, frozen and packaged for sale and distribution to wholesale customers.  Our frozen beverage products, including fruit and vegetable blends and frozen side dishes, are packaged at our Bellingham, Washington facility.  We also use third-party processors for certain frozen products and package certain frozen fruits and vegetables for other manufacturers.  Our frozen desserts products are produced in our Pensacola, Florida and Salem, Oregon facilities.  Our snack products are manufactured at our Phoenix, Arizona and Bluffton, Indiana facilities, as well as select third-party facilities for certain products.

Our fiscal year ends on the last Saturday occurring in the month of December of each calendar year.  Accordingly, the first quarter of fiscal 2017 commenced January 1, 2017 and ended April 1, 2017.

Strategic and Financial Review Process

In July 2016, we announced that our Board of Directors (“Board”) had commenced a strategic and financial review of the Company with the objective to increase shareholder value.  We engaged Rothschild Inc. to serve as our financial advisor and assist us in this process.  We remain actively involved in this process and are continuing to pursue various strategic alternatives.  As disclosed in our prior reports, no assurance can be given as to the outcome or timing of this process or that it will result in the consummation of any specific transaction. 

Going Concern Uncertainty

We have incurred losses from operations in each of the quarterly periods since our voluntary product recall in April 2015 of certain varieties of the Company’s Fresh FrozenTM brand of frozen vegetables, as well as select varieties of our Jamba® “At Home” line of smoothie kits.  This fact, together with the projected near term outlook for our business and our inability to complete a strategic transaction by year end or demonstrate that such a transaction is imminent, raise substantial doubt about our ability to continue as a going concern.  In reaching such conclusion, management considered the following specific conditions: 

· Our five-year, $85.0 million term loan credit agreement with BSP Agency, LLC (“BSP”), as administrative agent, and the other lenders party thereto (with all related loan documents, and as amended from time to time, the “Term Loan Credit Facility”) requires us to, among other things, comply with Total Leverage Ratio and Fixed Charge Coverage Ratio (each as defined in the Term Loan Credit Facility) covenants by the end of the second quarter of fiscal 2017 and a minimum EBITDA target by the month ended April 30, 2017, which target we did not meet (the “EBITDA Covenant Default”).  The Total Leverage Ratio, measured at the end of our second fiscal quarter in 2017 must be 4.25:1, and the Fixed Charge Coverage Ratio, measured at the end of our second fiscal quarter in 2017 for the four quarterly periods then ended, must be 1.1:1.  Absent the completion of a strategic transaction yielding sufficient cash proceeds (in addition to the proceeds received from the sale of certain  assets, properties and rights of our wholly owned subsidiary, Fresh Frozen Foods, Inc. (now known as Inventure – GA, Inc.) (“Fresh Frozen Foods”) in March 2017) to pay down debt, waivers or amendments by our lenders, or a refinancing of our debt, we will not be able to comply with these covenants when required to do so.  Failure to meet these covenants would result in a default under such credit facility and, to the extent the applicable lenders so elect, an acceleration of the Company’s existing indebtedness, causing such debt of approximately $102.6 million at April 1, 2017 (including $4.9 million of other equipment financing indebtedness that includes cross-default provisions) to be immediately due and payable.  The Company does not have sufficient liquidity to repay all of its outstanding debt in full if such debt were accelerated.

· Our five-year, $50.0 million revolving credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent, and the other lenders party thereto (with all related loan documents, and as amended from time to time, the “ABL Credit Facility” and, together with the Term Loan Credit Facility, the “Credit Facilities”), contains requirements, that among other things, require us to comply with a Fixed Charge Coverage Ratio (as defined in the ABL Credit Facility) if our liquidity as of the date of any determination is less than the greater of (i) 12.5% of the Maximum Revolver Amount  ($50.0 million) and (ii) $6.125 million, subject to certain conditions.  As of the date this Form 10-Q was filed with the SEC, we would not be able to comply with the Fixed Charge Coverage Ratio covenant if our liquidity were deemed to have fallen below the applicable threshold.

· The Credit Facilities also require us to furnish our audited financial statements without a “going concern” uncertainty paragraph in the auditor’s opinion.  Our consolidated financial statements for the fiscal year ended December 31, 2016 in our 2016 Form 10-K contained a “going concern” explanatory paragraph.  Under the Credit Facilities, a going concern opinion with respect to our audited financial statements is an event of default (the “Going Concern Covenant Default”).  As of the date our 2016 Form 10-K was filed with the SEC, we had obtained a temporary waiver of the Going Concern Covenant Default until May 15, 2017 from the lenders under the Credit Facilities. 

· On May 10, 2017, we entered into a Limited Waiver and Third Amendment to the Credit Agreement with the lenders under the Term Loan Credit Facility (the “Third Amendment”).  Under the terms of the Third Amendment, the lenders granted the Company (i) an extension of the temporary waiver of the Going Concern Covenant Default from May 15, 2017 to July 17, 2017, and (ii) a temporary waiver of the EBITDA Covenant Default until July 17, 2017. The Third Amendment also requires that the Company comply with a minimum EBITDA target covenant commencing with the fiscal month ending June 30, 2017, measured over the 12-months then ended, and increases the Company’s prepayment fees in the event of a payment or prepayment of principal under the Term Loan Credit Facility (excluding regularly scheduled principal payments).

· We are currently in discussions with the lenders under the ABL Credit Facility regarding an extension of the temporary waiver of the Going Concern Covenant Default from May 15, 2017 to July 17, 2017, as well as certain other amendments to such Credit Facility.

The Company’s Board and management are continuing to explore various strategic alternatives.  There can be no assurance that we will be successful in our pursuit of any strategic transaction or that we will be able consummate a strategic transaction in time to address our financial covenant requirements and going concern qualification, or at all, or if we do complete a strategic transition it will be on commercially reasonable terms.  As a result, our liquidity and ability to timely pay our obligations when due could be adversely affected. 

The accompanying condensed consolidated financial statements are prepared on a going concern basis and do not include any adjustments that might result from uncertainty about our ability to continue as a going concern, other than the reclassification of certain long-term debt and the related debt issuance costs to current liabilities and current assets, respectively.

Our lenders may resist renegotiation or lengthening of payment and other terms through legal action or otherwise if we are unsuccessful in our efforts to complete a strategic transaction.  If we are not able to timely, successfully or efficiently implement the strategies that we are pursuing, we may need to seek voluntarily protection under Chapter 11 of the U.S. Bankruptcy Code.

Basis of Presentation

The condensed consolidated financial statements for the fiscal quarter ended April 1, 2017 are unaudited and include the accounts of Inventure Foods and all of its wholly owned subsidiaries. All significant intercompany amounts and transactions have been eliminated. The condensed consolidated financial statements, including the December 31, 2016 consolidated balance sheet data which was derived from audited financial statements, have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”).  In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary in order to make the condensed consolidated financial statements not misleading. A description of our accounting policies and other financial information is included in the audited financial statements filed with our 2016 Form 10-K. The results of operations for the fiscal quarter ended April 1, 2017 are not necessarily indicative of the results expected for the full year. Changes to the classification of certain prior year amounts on the cash flow statement were made to reflect current year classification between deferred income taxes and change in other assets and liabilities. 

Discontinued Operations

On March 23, 2017, the Company soldcertain  assets, properties and rights of our wholly owned subsidiary, Fresh Frozen Foods, to The Pictsweet Company (“Pictsweet”) pursuant to an Asset Purchase Agreement, dated as of such date, among the Company, Fresh Frozen Foods and Pictsweet (the “Purchase Agreement”).  In accordance with the Purchase Agreement, Pictsweet acquired Fresh Frozen Food’s frozen food processing equipment assets, certain real property and associated facilities located in Jefferson, Georgia and Thomasville, Georgia, and other intellectual property and inventory (the “Fresh Frozen Asset Sale”).  As consideration for the acquisition, Pictsweet paid the Company $23.7 million in cash.  The net proceeds from the Fresh Frozen Asset Sale were $19.5 million, after payment of professional fees and other transaction expenses, and were used to pay down amounts outstanding under the Credit Facilities.  The results of operations for the Fresh Frozen Foods business have been classified as discontinued operations for all periods presented.  As required by the terms of the Purchase Agreement, we have changed the name of our Fresh Frozen Foods subsidiary to Inventure – GA, Inc.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.  We classify our investments based upon an established fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).  The three levels of the fair value hierarchy are described as follows:

Level 1Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities

Level 2Quoted prices in markets that are not considered to be active or financial instruments without quoted market prices, but for which all significant inputs are observable, either directly or indirectly

Level 3Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

At April 1, 2017 and December 31, 2016, the carrying value of cash, accounts receivable, accounts payable and accrued liabilities approximate fair values since they are short term in nature.  The carrying value of the term debt approximates fair value based on the borrowing rates currently available to us for long-term borrowings with similar terms.  The following table summarizes the valuation of our assets and liabilities measured at fair value on a recurring basis  at the respective dates set forth below (in thousands):

		April 1, 2017				December 31, 2016
		Non-qualified				Non-qualified
		Deferred		Earn-out		Deferred		Earn-out
		Compensation		Contingent		Compensation		Contingent
		Plan		Consideration		Plan		Consideration
Balance Sheet Classification		Investments		Obligation		Investments		Obligation
Other assets	Level 1		671	$	—	$	650	$	—
Accrued liabilities	Level 3		—		(266)		—		(270)
Other liabilities	Level 3		—		(1,291)		—		(1,521)
		$	671	$	(1,557)	$	650	$	(1,791)

Considerable judgment is required in interpreting market data to develop the estimate of fair value of our assets and liabilities.  Accordingly, the estimate may not be indicative of the amounts that we could realize in a current market exchange.  The use of different market assumptions or valuation methodologies could have a material effect on the estimated fair value amounts.

The Company’s non-qualified deferred compensation plan assets consist of money market and mutual funds invested in domestic and international marketable securities that are directly observable in active markets.

The fair value measurement of the earn-out contingent consideration obligation relates to the acquisitions of Sin In A TinTM in September 2014 and Willamette Valley Fruit Company in May 2013, and is included in accrued liabilities and other long-term liabilities in the consolidated balance sheets.  The fair value measurement is based upon significant inputs not observable in the market.  Changes in the value of the obligation are recorded as income or expense in our consolidated statements of operations.  To determine the fair value, we valued the contingent consideration liability based on the expected probability weighted earn-out payments corresponding to the performance thresholds agreed to under the applicable purchase agreements.  The expected earn-out payments were then present valued by applying a discount rate that captures a market participants view of the risk associated with the expected earn-out payments. 

A summary of the activity of the fair value of the measurements using unobservable inputs (Level 3 liabilities) for the fiscal quarter ended April 1, 2017 is as follows (in thousands):

	Level 3
Balance at December 31, 2016	$	1,791
Earn-out compensation paid to Willamette Valley Fruit Company		(230)
Earn-out compensation paid to Sin In A Tin		(4)
Balance at April 1, 2017	$	1,557

Income Taxes

Income tax expense was $0.1 million for the fiscal quarter ended April 1, 2017, compared to a tax benefit of $0.1 million for the fiscal quarter ended March 26, 2016.  Our effective tax rate was (9.3)% and 38.1% for the fiscal quarters ended April 1, 2017 and March 26, 2016, respectively. Income tax expense for the fiscal quarter ended April 1, 2017 was impacted by the full valuation allowance which was initially recorded in the fourth quarter of 2016.  Therefore, income tax expenses was a result of certain state minimum taxes and deferred tax liabilities not subject to the valuation allowance.

Loss Per Common Share

Basic loss per common share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period.  Diluted loss per share is calculated by including all dilutive common shares, such as stock options and restricted stock.  Unvested restricted stock grants that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, require loss per share to be presented pursuant to the two-class method.  However, the application of this method would have no effect on basic and diluted loss per common share and is therefore not presented. 

For the fiscal quarter ended April 1, 2017 diluted loss per share is the same as basic loss per share, as the inclusion of potentially issuable Common Stock would be antidilutive. During the fiscal quarter ended April 1, 2017, 0.6 million shares of Common Stock underlying stock options and restricted stock units were not included in the computation of diluted earnings (loss) per share because inclusion of such shares would be antidilutive.  For the fiscal quarter ended March 26, 2016, 0.3 million shares of Common Stock underlying stock options and restricted stock units were not included in the computation of diluted earnings (loss) per share because inclusion of such shares would be antidilutive. Exercises of outstanding stock options are assumed to occur for purposes of calculating diluted earnings per share for periods in which their effect would not be antidilutive. 

Loss per common share was computed as follows for the fiscal quarters ended April 1, 2017 and March 26, 2016 (in thousands, except per share data):

	Quarter Ended
	April 1,		March 26,
	2017		2016
Basic Earnings (Loss) Per Share:
Net income (loss) from continuing operations	$	(1,206)	$	77
Net loss from discontinued operations		(12,933)		(1,095)
Net loss	$	(14,139)	$	(1,018)
Weighted average number of common shares		19,675		19,603
Loss per common share	$	(0.72)	$	(0.05)
Diluted Earnings (Loss) Per Share:
Net income (loss) from continuing operations	$	(1,206)	$	77
Net loss from discontinued operations		(12,933)		(1,095)
Net loss	$	(14,139)	$	(1,018)
Weighted average number of common shares		19,675		19,603
Incremental shares from assumed conversions of stock options and non-vested shares of restricted stock		—		256
Adjusted weighted average number of common shares		19,675		19,859
Loss per common share	$	(0.72)	$	(0.05)

Stock-Based Compensation

Compensation expense for restricted stock and stock option awards is adjusted for estimated attainment thresholds and forfeitures and is recognized on a straight-line basis over the requisite period of the award, which is currently one to five years.  We estimate future forfeiture rates based on our historical experience.

Compensation costs related to all stock-based payment arrangements, including employee stock options, are recognized in the financial statements based on the fair value method of accounting.  Excess tax benefits related to stock-based payment arrangements are classified as cash inflows from financing activities and cash outflows from operating activities.  See “Note 9 - Stockholders’ Equity” for additional information.

Recent Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (the “FASB”) in the form of accounting standards updates (“ASU”) to the FASB’s Accounting Standards Codification.

We consider the applicability and impact of all ASUs.  ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

In May 2014, the FASB issued new guidance related to revenue recognition.  This new standard will replace all current GAAP guidance on this topic and eliminate all industry-specific guidance.  The new revenue recognition standard provides a unified model to determine when and how revenue is recognized.  The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services.  This guidance will be effective at the beginning of our 2018 fiscal year and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption.  As of April 1, 2017, we have not evaluated the impact of this new accounting standard on our financial statements.

In July 2015, the FASB issued an ASU to simplify the measurement of inventory.  This ASU requires inventory to be subsequently measured using the lower of cost and net realizable value, thereby eliminating the market value approach. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.”  This ASU is effective for reporting periods beginning after December 15, 2016 and is applied prospectively. Early adoption is permitted. We adopted this guidance in the first quarter of fiscal 2017, and it had no impact on our financial statements and disclosure.

In February 2016, the FASB issued new guidance related to accounting for leases. The new standard requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of key information about leasing arrangements. Accordingly, a lessee will recognize a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. Both the asset and liability will initially be measured at the present value of the future minimum lease payments over the lease term. Subsequent measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. The new standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted.  As of April 1 2017, we have not evaluated the impact of this new accounting standard on our financial statements.

In March 2016, the FASB issued an ASU intended to simplify various aspects of the accounting for share-based payments. Excess tax benefits for share-based payments will be recorded as a reduction of income taxes and reflected in operating cash flows upon the adoption of this ASU. Excess tax benefits are currently recorded in equity and as financing activity under the current rules. This guidance is effective for reporting periods beginning after December 15, 2016. We adopted this guidance in the first quarter of fiscal 2017, and the adoption did not have a material impact on our financial statements and disclosure.

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Discontinued Operations

3 Months Ended

Apr. 01, 2017

Discontinued Operations

Discontinued Operations

2.Discontinued Operations

On March 23, 2017, the Company soldcertain assets, properties and rights of our wholly owned subsidiary, Fresh Frozen Foods, to Pictsweet pursuant to the Purchase Agreement.  In accordance with the Purchase Agreement, Pictsweet acquired Fresh Frozen Food’s frozen food processing equipment assets, certain real property and associated facilities located in Jefferson, Georgia and Thomasville, Georgia, and other intellectual property and inventory.  As consideration for the acquisition, Pictsweet paid the Company $23.7 million in cash. The Fresh Frozen business was part of the Company’s frozen products segment.  The net proceeds from the Fresh Frozen Asset Sale were $19.5 million, after payment of professional fees and other transaction expenses, and were used to pay down amounts outstanding under the Credit Facilities.  As of December 31, 2016, total assets and total liabilities related to the Fresh Frozen Foods business were $32.2 million and $2 million, respectively.  The results of operations for the Fresh Frozen Foods business have been classified as discontinued operations for all periods presented.

The summary comparative financial results of the Fresh Frozen Foods business, included within discontinued operations, were as follows (in thousands):

	Quarter Ended
	April 1, 2017		March 26, 2016
Net revenues	$	8,677	$	12,674
Cost of revenues		8,594		13,139
Gross profit		83		(465)
Operating expenses:
Selling, general and administrative expenses		629		954
Operating loss		(546)		(1,419)
Loss on sale of Fresh Frozen Foods		10,146		—
Interest expense, net		332		353
Loss before income taxes		(11,024)		(1,772)
Income tax expense		(1,909)		677
Net loss from discontinued operations	$	(12,933)	$	(1,095)

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Inventories

3 Months Ended

Apr. 01, 2017

Inventories

Inventories

3.Inventories

Inventories consisted of the following as of April 1, 2017 and December 31, 2016 (in thousands):

	April 1,		December 31,
	2017		2016
Finished goods	$	18,326	$	27,661
Raw materials		29,799		44,527
Inventories	$	48,125	$	72,188

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Goodwill, Trademarks and Other Intangibles

3 Months Ended

Apr. 01, 2017

Goodwill, Trademarks, and Other Intangible Assets

Goodwill, Trademarks and Other Intangibles

4.Goodwill, Trademarks and Other Intangibles

Goodwill, trademarks and other intangibles, net, consisted of the following as of April 1, 2017 and December 31, 2016 (in thousands):

	Estimated	April 1,		December 31,
	Useful Life	2017		2016
Goodwill:
Inventure Foods		$	5,986	$	5,986
Rader Farms			5,630		5,630
Willamette Valley Fruit Company			3,147		3,147
Sin In A Tin			222		222
Goodwill		$	14,985	$	14,985
Trademarks:
Inventure Foods		$	896	$	896
Rader Farms			1,070		1,070
Willamette Valley Fruit Company			740		740
Fresh Frozen Foods			—		2,330
Sin In A Tin			123		123
Other intangibles:
Rader Farms - Customer relationship, gross carrying amount	10 years		100		100
Rader Farms - Customer relationship, accum. amortization			(98)		(96)
Willamette Valley Fruit Company - Customer relationship, gross carrying amount	10 years		3,200		3,200
Willamette Valley Fruit Company - Customer relationship, accum. amortization			(1,200)		(1,120)
Trademarks and other intangibles, net		$	4,831	$	7,243

Our amortization expense related to these intangibles was $82,000 and $82,000 for the fiscal quarters ended April 1, 2017 and March 26, 2016, respectively.  The trademarks are deemed to have an indefinite useful life because they are expected to generate cash flows indefinitely.

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Accrued Liabilities

3 Months Ended

Apr. 01, 2017

Accrued Liabilities.

Accrued Liabilities

5.Accrued Liabilities

Accrued liabilities consisted of the following as of April 1, 2017 and December 31, 2016 (in thousands):

	April 1,		December 31,
	2017		2016
Accrued payroll and payroll taxes		1,998	$	1,756
Accrued royalties and commissions		861		1,621
Accrued advertising and promotion		1,101		1,465
Accrued berry purchase payments		—		1,908
Accrued other		2,792		2,783
Accrued liabilities	$	6,752	$	9,533

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Term Debt and Line of Credit

3 Months Ended

Apr. 01, 2017

Term Debt and Line of Credit

Term Debt and Line of Credit

6.Term Debt and Line of Credit

ABL Credit Facility

On November 18, 2015, the Company entered into the ABL Credit Facility. The ABL Credit Facility provides for a five-year, $50.0 million senior secured revolving credit facility.  The ABL Credit Facility also provides that, under certain conditions, we may increase the aggregate principal amount of loans outstanding thereunder by up to $10.0 million.  Borrowings under the ABL Credit Facility bear interest, at the Company’s option, at a base rate or the London interbank offered rate (“LIBOR”) plus, in each case, an applicable margin.  The ABL Credit Facility will mature, and the commitments thereunder will terminate, on November 17, 2020.

Events of default under the ABL Credit Facility include customary events such as a cross-default provision with respect to other material debt.  The ABL Credit Facility requires us to, among other things, comply with a Fixed Charge Coverage Ratio (as defined in the ABL Credit Facility) if our liquidity as of the date of any determination is less than the greater of (i) 12.5% of the Maximum Revolver Amount  ($50.0 million) and (ii) $6.125 million, subject to certain conditions.  As of the date this Form 10-Q was filed with the SEC, we would not be able to comply with the Fixed Charge Coverage Ratio covenant if our liquidity were deemed to have fallen below the applicable threshold. 

At May 11, 2017, we were in discussions with the lenders under the ABL Credit Facility regarding an extension of the temporary waiver of the Going Concern Covenant Default from May 15, 2017 to July 17, 2017, as well as certain other amendment to such Credit Facility.

As of April 1, 2017, there was $27.2 million outstanding under the ABL Credit Facility and the net availability thereunder was $8.8 million.

Term debt consisted of the following as of April 1, 2017 and December 31, 2016 (in thousands):

	April 1,		December 31,
	2017		2016
Term loan credit facility through November 2020	$	70,471		84,150
Equipment term loan, Goodyear, Arizona, due monthly through April 2021		2,610		2,759
Equipment term loan, Rader Farms, due monthly through August 2019		1,290		1,420
Equipment term loan, Willamette Valley Fruit Company, due monthly through August 2019		958		1,054
Capital lease obligations, primarily due September 2017		40		44
Long-term debt		75,369		89,427
Less: deferred financing fees, net		(6,630)		(7,047)
Less: current portion of long-term debt		(68,739)		(82,380)
Long-term debt, less current portion	$	—	$	—

Term Loan Credit Facility

Also on November 18, 2015 and concurrent with the execution of the ABL Credit Facility, Inventure Foods and certain of its subsidiaries entered into the Term Loan Credit Facility.  The Term Loan Credit Facility provides for a $85.0 million senior secured term loan that matures on November 17, 2020.  The Term Loan Credit Facility also provides that, under certain conditions, we may increase the aggregate principal amount of term loans outstanding thereunder by up to $25.0 million.  Borrowings under the Term Loan Credit Facility bear interest, at the Company’s option, at a base rate or LIBOR plus, in each case, an applicable margin.

The Term Loan Credit Facility contains customary negative covenants and also requires the Company, together with its subsidiaries, to comply with a Fixed Charge Coverage Ratio and a Total Leverage Ratio. The first Fixed Charge Coverage Ratio and Total Leverage Ratio measurement period was the end of the first quarter of fiscal 2016.  On March 9, 2016, the Company entered into that certain First Amendment to Credit Agreement, with BSP, as administrative agent, and the other lenders party thereto (the “First Amendment”).  The First Amendment amended the Term Loan Credit Facility to defer the Company’s obligation to comply with the Total Leverage Ratio until the end of the third quarter of fiscal 2016.

On September 27, 2016, the Company entered into that certain Second Amendment to Credit Agreement with BSP, as the administrative agent, and the other lenders party thereto (the “Second Amendment”). The Second Amendment defers compliance with the Company’s Total Leverage Ratio and Fixed Charge Coverage Ratio covenants until the second quarter of fiscal 2017, requires the Company to comply with a minimum EBITDA target covenant commencing with the month ended April 30, 2017 (the “EBIDTA Covenant”), and increases the Base Rate Margin and the Libor Rate Margin, each as defined in the Term Loan Credit Facility) thereunder by 100 basis points.  The Second Amendment also amends the fees payable to the lenders in the event of prepayment and restricts the Company’s ability to raise Curative Equity (as defined in the Second Amendment) until the fourth quarter of fiscal 2017.

We did not meet the minimum EBITDA Covenant (the “EBIDTA Covenant Default”).  On May 10, 2017, we entered into the Third Amendment.  Under the terms of the Third Amendment, the lenders granted the Company (i) an extension of the temporary waiver of the Going Concern Covenant Default from May 15, 2017 to July 17, 2017, and (ii) a temporary waiver of the EBITDA Covenant Default, until July 17, 2017.  The Third Amendment also requires that the Company comply with a minimum EBITDA target covenant commencing with the fiscal month ending June 30, 2017, measured over the 12-months then ended, and increases the Company’s prepayment fees in the event of a payment or prepayment of principal under the Term Loan Credit Facility (excluding regularly scheduled principal payments).

Equipment Loans

In August 2015, we entered into an equipment term loan with Banc of America Leasing & Capital LLC for $3.1 million to finance new kettles and related equipment for our Goodyear, Arizona facility.  The equipment term loan accrues interest at a rate of 3.07% and will be repaid over 60 recurring monthly payments commencing May 2016. 

In August 2014, we entered into two separate equipment term loans with Banc of America Leasing & Capital LLC. One for $2.6 million to finance equipment to be used at the Company’s Rader Farms facility, and the other for $1.9 million to finance equipment to be used at Willamette Valley Fruit Company. Both of these equipment term loans accrue interest at a rate of 2.35% and will be repaid over 60 recurring monthly payments commencing September 15, 2014.

Debt Classification

In accordance with FASB Accounting Standard Codification (“ASC”) 470-10-45 on Debt Presentation, all of the Company’s outstanding debt has been reclassified in the accompanying condensed consolidated balance sheet as a current liability as of April 1, 2017 and December 31, 2016.  Absent the Second Amendment, the Company would not have been in compliance with the Total Leverage Ratio and Fixed Charge Ratio covenants as of April 1, 2017.  Unless we engage in a strategic transaction that enables us to pay down or refinance our debt, or we secure a waiver from our lenders or a further loan amendment to the Term Loan Credit Facility, we will not be in compliance with our financial covenants at the end of the second quarter of fiscal 2017 or, in the case of the minimum EBITDA target, by the month ending June 30, 2017 (as required by the Third Amendment).  As previously announced, the Company commenced a comprehensive strategic and financial review of the Company’s operations and engaged Rothschild Inc. to serve as its financial advisor to assist the Company in this process, including the pursuit of value-enhancing initiatives including, a sale of the Company, a sale of assets of the Company or other strategic business combination, or other capital structure optimization opportunities. This comprehensive strategic and financial review remains ongoing as of the date this Form 10-Q was filed with the SEC.  There can be no assurances that these efforts will result in a completion of a transaction or, if one is completed, that it will be on favorable terms.  A default under either the Term Loan Credit Facility or ABL Credit Facility would trigger a default under the other Credit Facility and certain of our equipment lease financing arrangements, as these facilities each contain cross-default provisions. As such, we classified all of our outstanding debt as a current liability.

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Commitments and Contingencies

3 Months Ended

Apr. 01, 2017

Commitments and Contingencies

Commitments and Contingencies

7.Commitments and Contingencies

Contractual

Our future contractual obligations consist principally of long-term debt, operating leases, minimum commitments regarding third-party warehouse operations services, forward purchase agreements and remaining minimum royalty payments due to licensors pursuant to brand licensing agreements. 

In order to mitigate the risks of volatility in commodity markets to which we are exposed, we have entered into forward purchase agreements with certain suppliers based on market prices, forward price projections and expected usage levels.  Our purchase commitments for certain ingredients, packaging materials and energy are generally less than 12 months.

Legal Proceedings

We are periodically a party to various lawsuits arising in the ordinary course of business.  Management believes, based on discussions with legal counsel, that the resolution of any such lawsuits, individually and in the aggregate, will not have a material adverse effect on our financial position or results of operations.

Litigation

On April 4, 2016, a purported class action captioned Westmoreland County Employee Retirement Fund (“Westmoreland”) v. Inventure Foods, Inc. et al., Case No. CV2016-002718, was filed in the Superior Court in Maricopa County, Arizona. Additional defendants are the Company’s Chief Executive Officer and Chief Financial Officer, and the underwriters of the secondary securities offering that closed September 14, 2014 (the “September 2014 Offering”).  The class action complaint, which was amended a second time on March 27, 2017, alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act and focuses on the conditions at the Company’s former frozen food facility in Jefferson, Georgia.  Westmoreland seeks certification as a class action, unspecified compensatory damages, rescission or a rescissory measure of damages, attorneys’ fees and costs, and other relief deemed appropriate by the court.  The Company, its Chief Executive Officer, its Chief Financial Officer and the September 2014 Offering underwriters have moved to dismiss the second amended complaint. The Company is vigorously defending against the claims.

On November 10, 2016, the Center for Environment Health (“CEH”), represented by Howard Hirsch of Lexington Law Group, filed a lawsuit against the Company under the California Safe Drinking Water and Toxic Enforcement Act (known as “Proposition 65”) (the “Act”).  CEH contends that the Company’s potato-based chip products contain amounts of acrylamide in excess of what is permitted under the Act.  A retailer of the Company, Bristol Farms, demanded indemnity in relation to the litigation.  The Company has answered the complaint and intends to vigorously defend the lawsuit.

On November 14, 2016, Michelle Blair (represented by Matthew Armstrong of Armstrong Law Firm LLC and Stuart Cochran of Cochran Law PLLC) filed a putative class action against the Company in St. Louis City Circuit Court.  Ms. Blair purports to represent a class of consumers who purchased one of nine Boulder Canyon® brand products listing “evaporated cane juice” as an ingredient.  Ms. Blair contends that the use of “evaporated cane juice” was misleading because evaporated cane juice is sugar.  In the complaint, Ms. Blair advances claims for violation of Missouri’s Merchandising Practices Act, Mo. Rev. Stat. § 407.020, et seq. and 15 C.S.R. 60-8.020, et seq., and unjust enrichment.  On February 3, 2017, the Company removed the action to the Eastern District of Missouri. Plaintiff dismissed the removed action without prejudice and refiled a substantially similar complaint in the Southern District of Illinois. The new complaint is brought by Ms. Blair and a new plaintiff, Shannah Burton, and asserts a nationwide putative class, as well as a putative class of Illinois and Missouri purchasers. Ms. Burton alleges claims under the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. Ann. 505/2, et seq. Both plaintiffs also assert claims for unjust enrichment and breach of express warranty. On April 24, 2017, the Company filed a motion to dismiss the complaint.  The Company intends to vigorously defend the lawsuit.

On March 9, 2017, a verified stockholder derivative complaint was filed under seal in the U.S. District Court for the District of Arizona, Case No. 2:17-cv-00727, against certain of its current and former officers and directors —Terry McDaniel, Steve Weinberger, Timothy A. Cole, Ashton D. Asensio, Macon Bryce Edmonson, Paul J. Lapadat, Harold S. Edwards, David I. Meyers, and Itzhak Reichman.  The lawsuit also names the Company as a nominal defendant.  The under seal complaint focuses on the conditions at the Company’s former frozen food facility in Jefferson, Georgia and the Company’s 2015 and 2016 proxy statements.  The plaintiff purports to derivatively assert on behalf of the Company claims for alleged violation of Section 14(a) of the Exchange Act, breach of fiduciary duty, waste of corporate assets and unjust enrichment.  According to the complaint, the plaintiff seeks an unspecified award of actual or compensatory damages in favor of the Company; an order directing the Company to take certain actions concerning its corporate governance and internal procedures, including putting forward certain proposals concerning its corporate governance policies and amendments to the Company’s Bylaws and Certificate of Incorporation for a stockholder vote; an award of extraordinary equitable and/or injunctive relief concerning the defendants’ trading activities or their assets; restitution from defendants to Inventure Foods consisting of a disgorgement of all profits, benefits and other compensation obtained by defendants; costs and disbursements of the action, including attorneys, accountant and experts’ fees, costs and expenses; and other and further relief as the court deems just and proper. The Company intends to vigorously defend the lawsuit.

On March 27, 2017, a purported class action captioned Glenn Schoenfeld v. Inventure Foods, Inc., et al., Case No. 2:17-cv-00910, was filed in the U.S. District Court for the District of Arizona purportedly on behalf of all persons and entities that acquired Inventure Foods securities between March 3, 2016 and March 16, 2017.  The Company’s Chief Executive Officer and Chief Financial Officer are also named as defendants.  The complaint asserts claims for alleged violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, and focuses on the Company’s internal controls over accounting and financial reporting, its statements of operations for fiscal year 2015, and public statements in press releases and SEC filings between March 3, 2016 and March 16, 2017.  Mr. Schoenfeld seeks certification as a class action, unspecified compensatory damages, attorneys’ fees, costs and expenses incurred in the action, and other relief deemed appropriate by the court. The Company intends to vigorously defend the lawsuit.

On April 27, 2017, a purported class action captioned John Robinson v. Inventure Foods, Inc., et al., Case No. 2:17-cv-01258, was filed in the U.S. District Court for the District of Arizona purportedly on behalf of all persons and entities that acquired Inventure Foods securities between March 3, 2016 and March 16, 2017.  The complaint alleges violations of Section 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder against the Company and the Company’s Chief Executive Officer and Chief Financial Officer.  The allegations focus on the Company’s internal controls over accounting and financial reporting, its statements of operations for fiscal year 2015, and public statements in press releases and SEC filings between March 3, 2016 and March 16, 2017. Mr. Robinson seeks certification as a class action, unspecified damages, prejudgment and post-judgment interest, reasonable attorneys’ fees, expert fees and other costs, and such other and further relief as the court may deem just and proper.  The Company intends to vigorously defend the lawsuit.

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Business Segments

3 Months Ended

Apr. 01, 2017

Business Segments and Significant Customers

Business Segments and Significant Customers

8.Business Segments

Our operations consist of two reportable segments: frozen products and snack products.  The frozen products segment includes frozen fruits, fruit and vegetable blends, beverages, side dishes and desserts for sale primarily to grocery stores, club stores and mass merchandisers.  The snack products segment produces potato chips, kettle chips, potato crisps, potato skins, pellet snacks, sheeted dough products, popcorn and extruded products for sale primarily to snack food distributors and retailers.  Our reportable segments offer different products and services.  The majority of our revenues are attributable to external customers in the United States.  We also sell to external customers internationally. However, the revenues attributable to such customers are immaterial.  All of our assets are located in the United States.

All products sold under our frozen products segment are considered part of the healthy/natural food category.  The products sold under our snack products segment include products considered part of the indulgent specialty snack food category, as well as products considered part of the healthy/natural food category. 

For the fiscal quarters ended April 1, 2017 and March 26, 2016, net revenues of our healthy/natural food category totaled $40.7 million and $47.3 million, respectively.  For the fiscal quarters ended April 1, 2017 and March 26, 2016, net revenues of our indulgent specialty snack food category totaled $8.9 million and $9.9 million, respectively.

We do not allocate assets, selling, general and administrative expenses, income taxes or other income and expense to our reportable segments.  The following table presents information about our reportable segments for the fiscal quarters ended April 1, 2017 and March 26, 2016 (in thousands):

	Frozen		Snack
	Products		Products		Consolidated
Quarter Ended April 1, 2017
Net revenues from external customers	$	23,462	$	26,156	$	49,618
Depreciation and amortization included in segment gross profit		226		579		805
Segment gross profit		4,741		3,773		8,514
Quarter Ended March 26, 2016
Net revenues from external customers	$	32,296	$	24,884	$	57,180
Depreciation and amortization included in segment gross profit		281		507		788
Segment gross profit		4,785		4,496		9,281

The following table reconciles reportable segment gross profit to our consolidated income (loss) from continuing operations before income taxes for the fiscal quarters ended April 1, 2017 and March 26, 2016 (in thousands):

	Quarter Ended
	2017		2016
Segment gross profit	$	8,514	$	9,281
Unallocated amounts:
Operating expenses		(7,255)		(7,155)
Interest expense		(2,362)		(2,002)
Income (loss) from continuing operations before income tax provision	$	(1,103)	$	124

The table below presents information about revenues for each group of similar products within our reportable segments for the fiscal quarters ended April 1, 2017 and March 26, 2016 (in thousands):

	Quarter Ended April 1, 2017				Quarter Ended March 26, 2016
			% of Net				% of Net
	Net Revenue		Revenues		Net Revenue		Revenues
Frozen Products:
Berries, blends, beverages and desserts	$	23,078	46.5	%	$	32,296	56.5	%
Riced Vegetables		384	0.7	%		—	—	%
Total Frozen		23,462	47.2	%		32,296	56.5	%
Snack Products:
Indulgent specialty snacks (1)		8,931	18.0	%		9,926	17.4	%
Healthy/natural snacks (2)		17,225	34.8	%		14,958	26.1	%
Total Snack		26,156	52.8	%		24,884	43.5	%
Consolidated	$	49,618	100.0	%	$	57,180	100.0	%

(1) Indulgent specialty snacks includes T.G.I. Friday’s® brand snacks under license from T.G.I. Friday’s, Nathan’s Famous® brand snack products under license from Nathan’s Famous Corporation, Vidalia® brand snack products under license from Vidalia Brands, Inc., Poore Brothers® brand kettle cooked potato chips, Bob’s Texas Style® brand kettle cooked chips, and Tato Skins® brand potato snacks.

(2) Healthy/natural snacks includes Boulder Canyon® brand kettle cooked potato chips, other snack and food items and private label healthy/natural snacks.

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Stockholders' Equity

3 Months Ended

Apr. 01, 2017

Stockholders' Equity

Stockholders' Equity

9.Stockholders’ Equity

The Company’s 2015 Equity Incentive Plan (the “2015 Plan”) was approved at our 2015 annual meeting of stockholders. Under the 2015 Plan, we are authorized to issue up to 1,400,560 shares of our Common Stock, which number may be increased by up to 250,000 shares subject to any option or award outstanding under the Amended and Restated 2005 Equity Incentive Plan that are canceled or forfeited for any reason.  If any shares of our Common Stock subject to awards granted under the 2015 Plan are canceled, those shares will be available for future awards under such plan.   Awards granted under the 2015 Plan may include: nonqualified stock options, incentive stock options, restricted stock, restricted stock units, performance shares, performance units, and other stock-based awards and cash-based awards.  The 2015 Plan has a term of ten years and expires in May 2025.  As of April 1, 2017, there were 1,008,983 shares of Common Stock available for awards under the 2015 Plan.

Restricted Common Stock

We have issued shares of restricted Common Stock in the form of restricted stock awards and restricted stock units as incentives to certain employees, officers and members of our Board.  Restricted stock awards and restricted stock units granted to members of the Board are granted with a one-year service period.  Restricted stock awards and restricted stock units granted to the Company’s officers vest over three years and typically contain performance conditions that are required to be achieved over a three-year measurement period in order for the shares to be released.  The number of performance-based restricted stock awards and units that ultimately vest depend on whether we achieve certain financial results.  Restricted stock units granted to non-officer employees generally vest over three or five years.  We record compensation expense each period based on (i) the market price of our Common Stock at the time of grant, and (ii) for performance-based restricted stock awards and units, our estimate of the most probable number of shares that will ultimately be released.  The related stock-based compensation expense is included in selling, general and administrative expenses.  Additionally, the compensation expense is adjusted for our estimate of forfeitures.  Recipients of restricted stock awards are entitled to receive any dividends declared on our Common Stock and have voting rights, regardless of whether such shares have vested.  Recipients of restricted stock units have no voting rights or rights to receive cash dividends with respect to restricted stock unit awards until shares of Common Stock are issued in settlement of such awards.

During the fiscal quarters ended April 1, 2017 and March 26, 2016, the total stock-based compensation expense from restricted Common Stock recognized in the financial statements was $0.3 million and $0.3 million, respectively. There was no stock-based compensation costs capitalized. 

The following table summarizes activities related to restricted stock awards for the fiscal quarter ended April 1, 2017:

		Weighted
		Average Grant
	Number	Date Fair Value
Nonvested balance at December 31, 2016	8,333	$	12.78
Granted	—	$	—
Vested and released	—	$	—
Forfeited	—	$	—
Nonvested balance at April 1, 2017	8,333	$	12.78

As of April 1, 2017, the total unrecognized costs related to non-vested restricted stock awards was $0.1 million, which is expected to be recognized over a weighted average period of 0.2 years.  This expected compensation expense does not reflect any new awards, or modifications to existing awards, that could occur in the future.

The following table summarizes activities related to restricted stock units for the fiscal quarter ended April 1, 2017:

		Weighted
		Average Grant
	Number	Date Fair Value
Nonvested balance at December 31, 2016	541,346	$	8.40
Granted	—	$	—
Vested and released	(23,255)	$	13.21
Forfeited	(39,208)	$	10.26
Nonvested balance at April 1, 2017	478,883	$	8.02

As of April 1, 2017, the total unrecognized costs related to non-vested restricted stock units was $1.8 million, which is expected to be recognized over a weighted average period of 1.6 years.  This expected compensation expense does not reflect any new awards, or modifications to existing awards, that could occur in the future. 

Stock Options

Stock-based compensation expense from stock options recognized in the financial statements totaled $0.1 and $0.1 million for the fiscal quarters ended April 1, 2017 and March 26, 2016, respectively.  There was no stock-based compensation costs capitalized.

The following table summarizes stock option activity during the fiscal quarter ended April 1, 2017:

				Aggregate		Weighted Average
		Weighted		Intrinsic Value		Remaining
	Options	Average		(in-the-money		Contractual Life
	Outstanding	Exercise Price		options)		(in years)
Outstanding at December 31, 2016	567,602	$	5.23
Granted	—	$	—
Exercised	—	$	—
Forfeited or expired	(13,687)	$	10.37
Outstanding at April 1, 2017	553,915	$	5.10	$	506,733	4.1

As of April 1, 2017, the total unrecognized costs related to non-vested stock options granted were $0.2 million.  We expect to recognize such costs in the financial statements over a weighted average period of 1.1 years.  This expected compensation expense does not reflect any new awards, or modifications to existing awards, that could occur in the future. 

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the closing price of $4.42 of our Common Stock as of April 1, 2017, which would have been received by the option holders had all option holders exercised options and sold the underlying shares on that date.  The intrinsic value related to vested stock options outstanding was $0.5 million as of April 1, 2017 based on the exercise price and closing price of $4.42 of our Common Stock as of April 1, 2017.

The following table summarizes information about stock options outstanding and exercisable at April 1, 2017:

						Weighted
						Average
						Remaining	Weighted			Weighted
						Contractual	Average			Average
Range of					Options	Life	Exercise		Options	Exercise
Exercise Prices					Outstanding	(in years)	Price		Exercisable	Price
$	1.70	-	$	1.86	138,600	1.5	$	1.75	138,600	$	1.75
$	2.4	-	$	4.16	156,450	3.4	$	3.55	156,450	$	3.55
$	4.28	-	$	7.21	213,400	5.7	$	6.88	148,900	$	6.82
$	7.61	-	$	13.21	45,465	7.1	$	12.36	28,465	$	12.47
					553,915	4.1	$	5.10	472,415	$	4.59

Prior to May 2008, all stock option grants had a five-year term.  The fair value of these stock option grants is amortized to expense over the service period, generally five years for employees and one year for members of the Board.  In May 2008, our Board approved a 10-year term for all future stock option grants, with service periods of five years for employees and one year for members of the Board.  We issue new shares upon the exercise of stock options, as opposed to reissuing treasury shares.

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Organization and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Apr. 01, 2017

Organization and Summary of Significant Accounting Policies

Description of Business

Inventure Foods, Inc., a Delaware corporation (referred to herein as the “Company,” “Inventure Foods,” “we,” “our” or “us”), is a leading marketer and manufacturer of healthy/natural and indulgent specialty snack food brands with more than $269 million in annual net revenues for fiscal 2016.

We specialize in two primary product categories: healthy/natural food products and indulgent specialty snack products.  We sell our products nationally through a number of channels including: grocery stores, natural food stores, mass merchandisers, drug and convenience stores, club stores, value, vending, food service, industrial and international.  Our goal is to have a diversified portfolio of brands, products, customers and distribution channels.

In our healthy/natural food category, products include Rader Farms® frozen berries and frozen berry and vegetable blends, Boulder Canyon® brand kettle cooked potato chips, other snack and food items and frozen side dishes, Willamette Valley Fruit CompanyTM brand frozen berries, fruits, biscuits and other frozen snacks, Jamba® brand blend-and-serve smoothie kits under license from Jamba Juice Company (“Jamba Juice”), Sin In A TinTM  chocolate pate and other frozen desserts and private label frozen fruit and healthy/natural snacks.

In our indulgent specialty snack food category, products include T.G.I. Friday’s® brand snacks under license from T.G.I. Friday’s Inc. (“T.G.I. Friday’s”), Nathan’s Famous® brand snack products under license from Nathan’s Famous Corporation, Vidalia® brand snack products under license from Vidalia Brands, Inc., Poore Brothers® brand kettle cooked potato chips, Bob’s Texas Style® brand kettle cooked chips, and Tato Skins® brand potato snacks.  We also manufacture private label snacks for certain grocery retail chains and co-pack products for other snack manufacturers.

We operate in two segments: frozen products and snack products. The frozen products segment includes frozen fruits, fruit and vegetable blends, beverages, side dishes and desserts for sale primarily to grocery stores, club stores and mass merchandisers. All products sold under our frozen products segment are considered part of the healthy/natural food category. The snack products segment includes potato chips, kettle chips, potato crisps, potato skins, pellet snacks, sheeted dough products, popcorn and extruded products for sale primarily to snack food distributors and retailers. The products sold under our snack products segment include products considered part of the indulgent specialty snack food category, as well as products considered part of the healthy/natural food category.

We operate manufacturing facilities in seven locations. Our frozen berry products are processed in our Lynden, Washington, Bellingham, Washington and two Salem, Oregon facilities.  Our frozen berry business grows, processes and markets premium berry blends, raspberries, blueberries and rhubarb and purchases blackberries, cherries, cranberries, strawberries and other fruits from a select network of fruit growers for resale.  The fruit is processed, frozen and packaged for sale and distribution to wholesale customers.  Our frozen beverage products, including fruit and vegetable blends and frozen side dishes, are packaged at our Bellingham, Washington facility.  We also use third-party processors for certain frozen products and package certain frozen fruits and vegetables for other manufacturers.  Our frozen desserts products are produced in our Pensacola, Florida and Salem, Oregon facilities.  Our snack products are manufactured at our Phoenix, Arizona and Bluffton, Indiana facilities, as well as select third-party facilities for certain products.

Our fiscal year ends on the last Saturday occurring in the month of December of each calendar year.  Accordingly, the first quarter of fiscal 2017 commenced January 1, 2017 and ended April 1, 2017.

Strategic and Financial Review Process

Strategic and Financial Review Process

In July 2016, we announced that our Board of Directors (“Board”) had commenced a strategic and financial review of the Company with the objective to increase shareholder value.  We engaged Rothschild Inc. to serve as our financial advisor and assist us in this process.  We remain actively involved in this process and are continuing to pursue various strategic alternatives.  As disclosed in our prior reports, no assurance can be given as to the outcome or timing of this process or that it will result in the consummation of any specific transaction.

Going Concern Uncertainty

Going Concern Uncertainty

We have incurred losses from operations in each of the quarterly periods since our voluntary product recall in April 2015 of certain varieties of the Company’s Fresh FrozenTM brand of frozen vegetables, as well as select varieties of our Jamba® “At Home” line of smoothie kits.  This fact, together with the projected near term outlook for our business and our inability to complete a strategic transaction by year end or demonstrate that such a transaction is imminent, raise substantial doubt about our ability to continue as a going concern.  In reaching such conclusion, management considered the following specific conditions: 

· Our five-year, $85.0 million term loan credit agreement with BSP Agency, LLC (“BSP”), as administrative agent, and the other lenders party thereto (with all related loan documents, and as amended from time to time, the “Term Loan Credit Facility”) requires us to, among other things, comply with Total Leverage Ratio and Fixed Charge Coverage Ratio (each as defined in the Term Loan Credit Facility) covenants by the end of the second quarter of fiscal 2017 and a minimum EBITDA target by the month ended April 30, 2017, which target we did not meet (the “EBITDA Covenant Default”).  The Total Leverage Ratio, measured at the end of our second fiscal quarter in 2017 must be 4.25:1, and the Fixed Charge Coverage Ratio, measured at the end of our second fiscal quarter in 2017 for the four quarterly periods then ended, must be 1.1:1.  Absent the completion of a strategic transaction yielding sufficient cash proceeds (in addition to the proceeds received from the sale of certain  assets, properties and rights of our wholly owned subsidiary, Fresh Frozen Foods, Inc. (now known as Inventure – GA, Inc.) (“Fresh Frozen Foods”) in March 2017) to pay down debt, waivers or amendments by our lenders, or a refinancing of our debt, we will not be able to comply with these covenants when required to do so.  Failure to meet these covenants would result in a default under such credit facility and, to the extent the applicable lenders so elect, an acceleration of the Company’s existing indebtedness, causing such debt of approximately $102.6 million at April 1, 2017 (including $4.9 million of other equipment financing indebtedness that includes cross-default provisions) to be immediately due and payable.  The Company does not have sufficient liquidity to repay all of its outstanding debt in full if such debt were accelerated.

· Our five-year, $50.0 million revolving credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent, and the other lenders party thereto (with all related loan documents, and as amended from time to time, the “ABL Credit Facility” and, together with the Term Loan Credit Facility, the “Credit Facilities”), contains requirements, that among other things, require us to comply with a Fixed Charge Coverage Ratio (as defined in the ABL Credit Facility) if our liquidity as of the date of any determination is less than the greater of (i) 12.5% of the Maximum Revolver Amount  ($50.0 million) and (ii) $6.125 million, subject to certain conditions.  As of the date this Form 10-Q was filed with the SEC, we would not be able to comply with the Fixed Charge Coverage Ratio covenant if our liquidity were deemed to have fallen below the applicable threshold.

· The Credit Facilities also require us to furnish our audited financial statements without a “going concern” uncertainty paragraph in the auditor’s opinion.  Our consolidated financial statements for the fiscal year ended December 31, 2016 in our 2016 Form 10-K contained a “going concern” explanatory paragraph.  Under the Credit Facilities, a going concern opinion with respect to our audited financial statements is an event of default (the “Going Concern Covenant Default”).  As of the date our 2016 Form 10-K was filed with the SEC, we had obtained a temporary waiver of the Going Concern Covenant Default until May 15, 2017 from the lenders under the Credit Facilities. 

· On May 10, 2017, we entered into a Limited Waiver and Third Amendment to the Credit Agreement with the lenders under the Term Loan Credit Facility (the “Third Amendment”).  Under the terms of the Third Amendment, the lenders granted the Company (i) an extension of the temporary waiver of the Going Concern Covenant Default from May 15, 2017 to July 17, 2017, and (ii) a temporary waiver of the EBITDA Covenant Default until July 17, 2017. The Third Amendment also requires that the Company comply with a minimum EBITDA target covenant commencing with the fiscal month ending June 30, 2017, measured over the 12-months then ended, and increases the Company’s prepayment fees in the event of a payment or prepayment of principal under the Term Loan Credit Facility (excluding regularly scheduled principal payments).

· We are currently in discussions with the lenders under the ABL Credit Facility regarding an extension of the temporary waiver of the Going Concern Covenant Default from May 15, 2017 to July 17, 2017, as well as certain other amendments to such Credit Facility.

The Company’s Board and management are continuing to explore various strategic alternatives.  There can be no assurance that we will be successful in our pursuit of any strategic transaction or that we will be able consummate a strategic transaction in time to address our financial covenant requirements and going concern qualification, or at all, or if we do complete a strategic transition it will be on commercially reasonable terms.  As a result, our liquidity and ability to timely pay our obligations when due could be adversely affected. 

The accompanying condensed consolidated financial statements are prepared on a going concern basis and do not include any adjustments that might result from uncertainty about our ability to continue as a going concern, other than the reclassification of certain long-term debt and the related debt issuance costs to current liabilities and current assets, respectively.

Our lenders may resist renegotiation or lengthening of payment and other terms through legal action or otherwise if we are unsuccessful in our efforts to complete a strategic transaction.  If we are not able to timely, successfully or efficiently implement the strategies that we are pursuing, we may need to seek voluntarily protection under Chapter 11 of the U.S. Bankruptcy Code.

Basis of Presentation

Basis of Presentation

The condensed consolidated financial statements for the fiscal quarter ended April 1, 2017 are unaudited and include the accounts of Inventure Foods and all of its wholly owned subsidiaries. All significant intercompany amounts and transactions have been eliminated. The condensed consolidated financial statements, including the December 31, 2016 consolidated balance sheet data which was derived from audited financial statements, have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”).  In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary in order to make the condensed consolidated financial statements not misleading. A description of our accounting policies and other financial information is included in the audited financial statements filed with our 2016 Form 10-K. The results of operations for the fiscal quarter ended April 1, 2017 are not necessarily indicative of the results expected for the full year. Changes to the classification of certain prior year amounts on the cash flow statement were made to reflect current year classification between deferred income taxes and change in other assets and liabilities. 

Discontinued Operations

Discontinued Operations

On March 23, 2017, the Company soldcertain  assets, properties and rights of our wholly owned subsidiary, Fresh Frozen Foods, to The Pictsweet Company (“Pictsweet”) pursuant to an Asset Purchase Agreement, dated as of such date, among the Company, Fresh Frozen Foods and Pictsweet (the “Purchase Agreement”).  In accordance with the Purchase Agreement, Pictsweet acquired Fresh Frozen Food’s frozen food processing equipment assets, certain real property and associated facilities located in Jefferson, Georgia and Thomasville, Georgia, and other intellectual property and inventory (the “Fresh Frozen Asset Sale”).  As consideration for the acquisition, Pictsweet paid the Company $23.7 million in cash.  The net proceeds from the Fresh Frozen Asset Sale were $19.5 million, after payment of professional fees and other transaction expenses, and were used to pay down amounts outstanding under the Credit Facilities.  The results of operations for the Fresh Frozen Foods business have been classified as discontinued operations for all periods presented.  As required by the terms of the Purchase Agreement, we have changed the name of our Fresh Frozen Foods subsidiary to Inventure – GA, Inc.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.  We classify our investments based upon an established fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).  The three levels of the fair value hierarchy are described as follows:

Level 1Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities

Level 2Quoted prices in markets that are not considered to be active or financial instruments without quoted market prices, but for which all significant inputs are observable, either directly or indirectly

Level 3Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

At April 1, 2017 and December 31, 2016, the carrying value of cash, accounts receivable, accounts payable and accrued liabilities approximate fair values since they are short term in nature.  The carrying value of the term debt approximates fair value based on the borrowing rates currently available to us for long-term borrowings with similar terms.  The following table summarizes the valuation of our assets and liabilities measured at fair value on a recurring basis  at the respective dates set forth below (in thousands):

		April 1, 2017				December 31, 2016
		Non-qualified				Non-qualified
		Deferred		Earn-out		Deferred		Earn-out
		Compensation		Contingent		Compensation		Contingent
		Plan		Consideration		Plan		Consideration
Balance Sheet Classification		Investments		Obligation		Investments		Obligation
Other assets	Level 1		671	$	—	$	650	$	—
Accrued liabilities	Level 3		—		(266)		—		(270)
Other liabilities	Level 3		—		(1,291)		—		(1,521)
		$	671	$	(1,557)	$	650	$	(1,791)

Considerable judgment is required in interpreting market data to develop the estimate of fair value of our assets and liabilities.  Accordingly, the estimate may not be indicative of the amounts that we could realize in a current market exchange.  The use of different market assumptions or valuation methodologies could have a material effect on the estimated fair value amounts.

The Company’s non-qualified deferred compensation plan assets consist of money market and mutual funds invested in domestic and international marketable securities that are directly observable in active markets.

The fair value measurement of the earn-out contingent consideration obligation relates to the acquisitions of Sin In A TinTM in September 2014 and Willamette Valley Fruit Company in May 2013, and is included in accrued liabilities and other long-term liabilities in the consolidated balance sheets.  The fair value measurement is based upon significant inputs not observable in the market.  Changes in the value of the obligation are recorded as income or expense in our consolidated statements of operations.  To determine the fair value, we valued the contingent consideration liability based on the expected probability weighted earn-out payments corresponding to the performance thresholds agreed to under the applicable purchase agreements.  The expected earn-out payments were then present valued by applying a discount rate that captures a market participants view of the risk associated with the expected earn-out payments. 

A summary of the activity of the fair value of the measurements using unobservable inputs (Level 3 liabilities) for the fiscal quarter ended April 1, 2017 is as follows (in thousands):

	Level 3
Balance at December 31, 2016	$	1,791
Earn-out compensation paid to Willamette Valley Fruit Company		(230)
Earn-out compensation paid to Sin In A Tin		(4)
Balance at April 1, 2017	$	1,557

Income Taxes

Income Taxes

Income tax expense was $0.1 million for the fiscal quarter ended April 1, 2017, compared to a tax benefit of $0.1 million for the fiscal quarter ended March 26, 2016.  Our effective tax rate was (9.3)% and 38.1% for the fiscal quarters ended April 1, 2017 and March 26, 2016, respectively. Income tax expense for the fiscal quarter ended April 1, 2017 was impacted by the full valuation allowance which was initially recorded in the fourth quarter of 2016.  Therefore, income tax expenses was a result of certain state minimum taxes and deferred tax liabilities not subject to the valuation allowance.

Loss Per Common Share

Loss Per Common Share

Basic loss per common share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period.  Diluted loss per share is calculated by including all dilutive common shares, such as stock options and restricted stock.  Unvested restricted stock grants that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, require loss per share to be presented pursuant to the two-class method.  However, the application of this method would have no effect on basic and diluted loss per common share and is therefore not presented. 

For the fiscal quarter ended April 1, 2017 diluted loss per share is the same as basic loss per share, as the inclusion of potentially issuable Common Stock would be antidilutive. During the fiscal quarter ended April 1, 2017, 0.6 million shares of Common Stock underlying stock options and restricted stock units were not included in the computation of diluted earnings (loss) per share because inclusion of such shares would be antidilutive.  For the fiscal quarter ended March 26, 2016, 0.3 million shares of Common Stock underlying stock options and restricted stock units were not included in the computation of diluted earnings (loss) per share because inclusion of such shares would be antidilutive. Exercises of outstanding stock options are assumed to occur for purposes of calculating diluted earnings per share for periods in which their effect would not be antidilutive. 

Loss per common share was computed as follows for the fiscal quarters ended April 1, 2017 and March 26, 2016 (in thousands, except per share data):

	Quarter Ended
	April 1,		March 26,
	2017		2016
Basic Earnings (Loss) Per Share:
Net income (loss) from continuing operations	$	(1,206)	$	77
Net loss from discontinued operations		(12,933)		(1,095)
Net loss	$	(14,139)	$	(1,018)
Weighted average number of common shares		19,675		19,603
Loss per common share	$	(0.72)	$	(0.05)
Diluted Earnings (Loss) Per Share:
Net income (loss) from continuing operations	$	(1,206)	$	77
Net loss from discontinued operations		(12,933)		(1,095)
Net loss	$	(14,139)	$	(1,018)
Weighted average number of common shares		19,675		19,603
Incremental shares from assumed conversions of stock options and non-vested shares of restricted stock		—		256
Adjusted weighted average number of common shares		19,675		19,859
Loss per common share	$	(0.72)	$	(0.05)

Stock-Based Compensation

Stock-Based Compensation

Compensation expense for restricted stock and stock option awards is adjusted for estimated attainment thresholds and forfeitures and is recognized on a straight-line basis over the requisite period of the award, which is currently one to five years.  We estimate future forfeiture rates based on our historical experience.

Compensation costs related to all stock-based payment arrangements, including employee stock options, are recognized in the financial statements based on the fair value method of accounting.  Excess tax benefits related to stock-based payment arrangements are classified as cash inflows from financing activities and cash outflows from operating activities.  See “Note 9 - Stockholders’ Equity” for additional information.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (the “FASB”) in the form of accounting standards updates (“ASU”) to the FASB’s Accounting Standards Codification.

We consider the applicability and impact of all ASUs.  ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

In May 2014, the FASB issued new guidance related to revenue recognition.  This new standard will replace all current GAAP guidance on this topic and eliminate all industry-specific guidance.  The new revenue recognition standard provides a unified model to determine when and how revenue is recognized.  The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services.  This guidance will be effective at the beginning of our 2018 fiscal year and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption.  As of April 1, 2017, we have not evaluated the impact of this new accounting standard on our financial statements.

In July 2015, the FASB issued an ASU to simplify the measurement of inventory.  This ASU requires inventory to be subsequently measured using the lower of cost and net realizable value, thereby eliminating the market value approach. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.”  This ASU is effective for reporting periods beginning after December 15, 2016 and is applied prospectively. Early adoption is permitted. We adopted this guidance in the first quarter of fiscal 2017, and it had no impact on our financial statements and disclosure.

In February 2016, the FASB issued new guidance related to accounting for leases. The new standard requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of key information about leasing arrangements. Accordingly, a lessee will recognize a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. Both the asset and liability will initially be measured at the present value of the future minimum lease payments over the lease term. Subsequent measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. The new standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted.  As of April 1 2017, we have not evaluated the impact of this new accounting standard on our financial statements.

In March 2016, the FASB issued an ASU intended to simplify various aspects of the accounting for share-based payments. Excess tax benefits for share-based payments will be recorded as a reduction of income taxes and reflected in operating cash flows upon the adoption of this ASU. Excess tax benefits are currently recorded in equity and as financing activity under the current rules. This guidance is effective for reporting periods beginning after December 15, 2016. We adopted this guidance in the first quarter of fiscal 2017, and the adoption did not have a material impact on our financial statements and disclosure.

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Organization and Summary of Significant Accounting Policies (Tables)

3 Months Ended

Apr. 01, 2017

Organization and Summary of Significant Accounting Policies

Summary of the valuation assets and liabilities measured at fair value on a recurring basis

The following table summarizes the valuation of our assets and liabilities measured at fair value on a recurring basis  at the respective dates set forth below (in thousands):

		April 1, 2017				December 31, 2016
		Non-qualified				Non-qualified
		Deferred		Earn-out		Deferred		Earn-out
		Compensation		Contingent		Compensation		Contingent
		Plan		Consideration		Plan		Consideration
Balance Sheet Classification		Investments		Obligation		Investments		Obligation
Other assets	Level 1		671	$	—	$	650	$	—
Accrued liabilities	Level 3		—		(266)		—		(270)
Other liabilities	Level 3		—		(1,291)		—		(1,521)
		$	671	$	(1,557)	$	650	$	(1,791)

Activity of the fair value of the measurements using unobservable inputs (Level 3 Liabilities)

A summary of the activity of the fair value of the measurements using unobservable inputs (Level 3 liabilities) for the fiscal quarter ended April 1, 2017 is as follows (in thousands):

	Level 3
Balance at December 31, 2016	$	1,791
Earn-out compensation paid to Willamette Valley Fruit Company		(230)
Earn-out compensation paid to Sin In A Tin		(4)
Balance at April 1, 2017	$	1,557

Schedules of basic and diluted earnings (loss) per common share

Loss per common share was computed as follows for the fiscal quarters ended April 1, 2017 and March 26, 2016 (in thousands, except per share data):

	Quarter Ended
	April 1,		March 26,
	2017		2016
Basic Earnings (Loss) Per Share:
Net income (loss) from continuing operations	$	(1,206)	$	77
Net loss from discontinued operations		(12,933)		(1,095)
Net loss	$	(14,139)	$	(1,018)
Weighted average number of common shares		19,675		19,603
Loss per common share	$	(0.72)	$	(0.05)
Diluted Earnings (Loss) Per Share:
Net income (loss) from continuing operations	$	(1,206)	$	77
Net loss from discontinued operations		(12,933)		(1,095)
Net loss	$	(14,139)	$	(1,018)
Weighted average number of common shares		19,675		19,603
Incremental shares from assumed conversions of stock options and non-vested shares of restricted stock		—		256
Adjusted weighted average number of common shares		19,675		19,859
Loss per common share	$	(0.72)	$	(0.05)

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Discontinued Operations (Tables)

3 Months Ended

Apr. 01, 2017

Discontinued Operations

Schedule of comparative financial results of Fresh Frozen Foods Business included in discontinued operations

	Quarter Ended
	April 1, 2017		March 26, 2016
Net revenues	$	8,677	$	12,674
Cost of revenues		8,594		13,139
Gross profit		83		(465)
Operating expenses:
Selling, general and administrative expenses		629		954
Operating loss		(546)		(1,419)
Loss on sale of Fresh Frozen Foods		10,146		—
Interest expense, net		332		353
Loss before income taxes		(11,024)		(1,772)
Income tax expense		(1,909)		677
Net loss from discontinued operations	$	(12,933)	$	(1,095)

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Inventories (Tables)

3 Months Ended

Apr. 01, 2017

Inventories

Schedule of inventories

Inventories consisted of the following as of April 1, 2017 and December 31, 2016 (in thousands):

	April 1,		December 31,
	2017		2016
Finished goods	$	18,326	$	27,661
Raw materials		29,799		44,527
Inventories	$	48,125	$	72,188

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Goodwill, Trademarks and Other Intangibles (Tables)

3 Months Ended

Apr. 01, 2017

Goodwill, Trademarks, and Other Intangible Assets

Schedule of goodwill, trademarks and other intangibles, net

Goodwill, trademarks and other intangibles, net, consisted of the following as of April 1, 2017 and December 31, 2016 (in thousands):

	Estimated	April 1,		December 31,
	Useful Life	2017		2016
Goodwill:
Inventure Foods		$	5,986	$	5,986
Rader Farms			5,630		5,630
Willamette Valley Fruit Company			3,147		3,147
Sin In A Tin			222		222
Goodwill		$	14,985	$	14,985
Trademarks:
Inventure Foods		$	896	$	896
Rader Farms			1,070		1,070
Willamette Valley Fruit Company			740		740
Fresh Frozen Foods			—		2,330
Sin In A Tin			123		123
Other intangibles:
Rader Farms - Customer relationship, gross carrying amount	10 years		100		100
Rader Farms - Customer relationship, accum. amortization			(98)		(96)
Willamette Valley Fruit Company - Customer relationship, gross carrying amount	10 years		3,200		3,200
Willamette Valley Fruit Company - Customer relationship, accum. amortization			(1,200)		(1,120)
Trademarks and other intangibles, net		$	4,831	$	7,243

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Accrued Liabilities (Tables)

3 Months Ended

Apr. 01, 2017

Accrued Liabilities.

Schedule of accrued liabilities

Accrued liabilities consisted of the following as of April 1, 2017 and December 31, 2016 (in thousands):

	April 1,		December 31,
	2017		2016
Accrued payroll and payroll taxes		1,998	$	1,756
Accrued royalties and commissions		861		1,621
Accrued advertising and promotion		1,101		1,465
Accrued berry purchase payments		—		1,908
Accrued other		2,792		2,783
Accrued liabilities	$	6,752	$	9,533

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Term Debt and Line of Credit (Tables)

3 Months Ended

Apr. 01, 2017

Term Debt and Line of Credit

Schedule term debt

Term debt consisted of the following as of April 1, 2017 and December 31, 2016 (in thousands):

	April 1,		December 31,
	2017		2016
Term loan credit facility through November 2020	$	70,471		84,150
Equipment term loan, Goodyear, Arizona, due monthly through April 2021		2,610		2,759
Equipment term loan, Rader Farms, due monthly through August 2019		1,290		1,420
Equipment term loan, Willamette Valley Fruit Company, due monthly through August 2019		958		1,054
Capital lease obligations, primarily due September 2017		40		44
Long-term debt		75,369		89,427
Less: deferred financing fees, net		(6,630)		(7,047)
Less: current portion of long-term debt		(68,739)		(82,380)
Long-term debt, less current portion	$	—	$	—

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Business Segments (Tables)

3 Months Ended

Apr. 01, 2017

Business Segments and Significant Customers

Schedule of information by reportable segments

The following table presents information about our reportable segments for the fiscal quarters ended April 1, 2017 and March 26, 2016 (in thousands):

	Frozen		Snack
	Products		Products		Consolidated
Quarter Ended April 1, 2017
Net revenues from external customers	$	23,462	$	26,156	$	49,618
Depreciation and amortization included in segment gross profit		226		579		805
Segment gross profit		4,741		3,773		8,514
Quarter Ended March 26, 2016
Net revenues from external customers	$	32,296	$	24,884	$	57,180
Depreciation and amortization included in segment gross profit		281		507		788
Segment gross profit		4,785		4,496		9,281

Schedule of reconciliation of reportable segment gross profit to consolidated income before income tax provision

The following table reconciles reportable segment gross profit to our consolidated income (loss) from continuing operations before income taxes for the fiscal quarters ended April 1, 2017 and March 26, 2016 (in thousands):

	Quarter Ended
	2017		2016
Segment gross profit	$	8,514	$	9,281
Unallocated amounts:
Operating expenses		(7,255)		(7,155)
Interest expense		(2,362)		(2,002)
Income (loss) from continuing operations before income tax provision	$	(1,103)	$	124

Schedule of revenues for each group of similar products within reportable segments

The table below presents information about revenues for each group of similar products within our reportable segments for the fiscal quarters ended April 1, 2017 and March 26, 2016 (in thousands):

	Quarter Ended April 1, 2017				Quarter Ended March 26, 2016
			% of Net				% of Net
	Net Revenue		Revenues		Net Revenue		Revenues
Frozen Products:
Berries, blends, beverages and desserts	$	23,078	46.5	%	$	32,296	56.5	%
Riced Vegetables		384	0.7	%		—	—	%
Total Frozen		23,462	47.2	%		32,296	56.5	%
Snack Products:
Indulgent specialty snacks (1)		8,931	18.0	%		9,926	17.4	%
Healthy/natural snacks (2)		17,225	34.8	%		14,958	26.1	%
Total Snack		26,156	52.8	%		24,884	43.5	%
Consolidated	$	49,618	100.0	%	$	57,180	100.0	%

(1) Indulgent specialty snacks includes T.G.I. Friday’s® brand snacks under license from T.G.I. Friday’s, Nathan’s Famous® brand snack products under license from Nathan’s Famous Corporation, Vidalia® brand snack products under license from Vidalia Brands, Inc., Poore Brothers® brand kettle cooked potato chips, Bob’s Texas Style® brand kettle cooked chips, and Tato Skins® brand potato snacks.

Healthy/natural snacks includes Boulder Canyon® brand kettle cooked potato chips, other snack and food items and private label healthy/natural snacks.

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Stockholders' Equity (Tables)

3 Months Ended

Apr. 01, 2017

Stockholders' Equity

Schedule of restricted share awards activity

		Weighted
		Average Grant
	Number	Date Fair Value
Nonvested balance at December 31, 2016	8,333	$	12.78
Granted	—	$	—
Vested and released	—	$	—
Forfeited	—	$	—
Nonvested balance at April 1, 2017	8,333	$	12.78

Summary of restricted stock units activity

		Weighted
		Average Grant
	Number	Date Fair Value
Nonvested balance at December 31, 2016	541,346	$	8.40
Granted	—	$	—
Vested and released	(23,255)	$	13.21
Forfeited	(39,208)	$	10.26
Nonvested balance at April 1, 2017	478,883	$	8.02

Summary of stock option activity

				Aggregate		Weighted Average
		Weighted		Intrinsic Value		Remaining
	Options	Average		(in-the-money		Contractual Life
	Outstanding	Exercise Price		options)		(in years)
Outstanding at December 31, 2016	567,602	$	5.23
Granted	—	$	—
Exercised	—	$	—
Forfeited or expired	(13,687)	$	10.37
Outstanding at April 1, 2017	553,915	$	5.10	$	506,733	4.1

Summary of stock options outstanding and exercisable

						Weighted
						Average
						Remaining	Weighted			Weighted
						Contractual	Average			Average
Range of					Options	Life	Exercise		Options	Exercise
Exercise Prices					Outstanding	(in years)	Price		Exercisable	Price
$	1.70	-	$	1.86	138,600	1.5	$	1.75	138,600	$	1.75
$	2.4	-	$	4.16	156,450	3.4	$	3.55	156,450	$	3.55
$	4.28	-	$	7.21	213,400	5.7	$	6.88	148,900	$	6.82
$	7.61	-	$	13.21	45,465	7.1	$	12.36	28,465	$	12.47
					553,915	4.1	$	5.10	472,415	$	4.59

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Operations and Summary of Significant Accounting Policies (Details) $ in Millions	3 Months Ended
	Apr. 01, 2017 segment item location	Apr. 01, 2017 product item location	Apr. 01, 2017 item location	Dec. 31, 2016 USD ($)
Organization Consolidation and Summary of Significant Accounting Policies
Minimum annual net revenues | $				$ 269
Number of product categories | product		2
Number of reporting units	2		2
Number of locations in which manufacturing facilities are operated | location	7	7	7
Number of manufacturing facilities in Salem, Oregon | item	2	2	2

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Organization and Summary of Significant Accounting Policies - Going Concerns Uncertainty (Details) $ in Thousands	3 Months Ended
	Apr. 01, 2017 USD ($)
Leverage ratio	4.25
Fixed charge coverage ratio	1.1
Default amount	$ 102,600
BSP Agency, LLC, a Delaware limited liability company
Debt instrument term	5 years
Maximum borrowing capacity	$ 85,000
Equipment Financing Debt
Default amount	$ 4,900
ABL Credit Facility
Debt instrument term	5 years
Maximum borrowing capacity	$ 50,000
Percentage of maximum revolver amount	12.50%
ABL Credit Facility | Minimum
Maximum Revolver Amount	$ 50,000
ABL Credit Facility | Maximum
Threshold Limit For Liquidity Amount	$ 6,125

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Organization and Summary of Significant Accounting Policies - Discontinued Operations (Details) - Fresh Frozen Foods $ in Millions	Mar. 23, 2017 USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Consideration received	$ 23.7
Proceeds from sale of Fresh Frozen	$ 19.5

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Organization and Summary of Significant Accounting Policies - Fair Value and Income Tax (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2017	Mar. 26, 2016	Dec. 31, 2016
Assets:
Non-qualified Deferred Compensation Plan Investments	$ 671		$ 650
Liabilities:
Earn-out contingent consideration obligation	(1,557)		(1,791)
Income Taxes
Income tax expense	$ (103)	$ (47)
Effective tax rate (as a percent)	(9.30%)	38.10%
Fair Value, Inputs, Level 1 | Other Assets
Assets:
Non-qualified Deferred Compensation Plan Investments	$ 671		650
Level 3 | Accrued Liabilities
Liabilities:
Earn-out contingent consideration obligation	(266)		(270)
Level 3 | Other Liabilities
Liabilities:
Earn-out contingent consideration obligation	$ (1,291)		$ (1,521)

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Organization and Summary of Significant Accounting Policies - Fair Value Unobservable Inputs (Details) - Earn out Compensation due $ in Thousands	3 Months Ended
	Apr. 01, 2017 USD ($)
Fair value of the measurements using unobservable inputs (Level 3 Liabilities)
Balance at beginning of period	$ 1,791
Balance at end of period	1,557
Willamette Valley Fruit Company
Fair value of the measurements using unobservable inputs (Level 3 Liabilities)
Earn-out compensation paid	(230)
Sin In A Tin
Fair value of the measurements using unobservable inputs (Level 3 Liabilities)
Earn-out compensation paid	$ (4)

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Organization and Summary of Significant Accounting Policies - Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Apr. 01, 2017	Mar. 26, 2016
Income (loss) per common share:
Anti-dilutive options excluded from computation of diluted earnings per share (in shares)	600	300
Basic Earnings (Loss) Per Share:
Net income (loss) from continuing operation	$ (1,206)	$ 77
Net loss from discontinued operations	(12,933)	(1,095)
Net loss	$ (14,139)	$ (1,018)
Weighted average number of common shares	19,675	19,603
Loss per common share (in dollars per share)	$ (0.72)	$ (0.05)
Diluted Earnings (Loss) Per Share:
Net income (loss) from continuing operation	$ (1,206)	$ 77
Net loss from discontinued operations	(12,933)	(1,095)
Net loss	$ (14,139)	$ (1,018)
Weighted average number of common shares	19,675	19,603
Incremental shares from assumed conversions of stock options and non-vested shares of restricted stock		256
Adjusted weighted average number of common shares	19,675	19,859
Loss per common share (in dollars per share)	$ (0.72)	$ (0.05)

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Organization and Summary of Significant Accounting Policies - Stock-based Compensations and Accounting Standards Update (Details) - Restricted Stock	3 Months Ended
	Apr. 01, 2017
Minimum
Stock Options and Stock-Based Compensation
Requisite period of the award over which stock based compensation award expenses are recognized	1 year
Maximum
Stock Options and Stock-Based Compensation
Requisite period of the award over which stock based compensation award expenses are recognized	5 years

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Discontinued Operations (Details) - USD ($) $ in Thousands		3 Months Ended
	Mar. 23, 2017	Apr. 01, 2017	Mar. 26, 2016	Dec. 31, 2016
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total assets		$ 143,908		$ 181,480
Total liabilities		134,020		157,791
Operating expenses:
Net loss from discontinued operations		(12,933)	$ (1,095)
Fresh Frozen Foods
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Consideration received	$ 23,700
Proceeds from sale of Fresh Frozen	$ 19,500
Total assets				32,200
Total liabilities				$ 2,000
Comparative financial results
Net revenues		8,677	12,674
Cost of revenues		8,594	13,139
Gross profit		83	(465)
Operating expenses:
Selling, general and administrative expenses		629	954
Operating loss		(546)	(1,419)
Loss on sale of Fresh Frozen		10,146
Interest expense, net		332	353
Loss before income taxes		(11,024)	(1,772)
Income tax expenses		1,909	(677)
Net loss from discontinued operations		$ (12,933)	$ (1,095)

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Inventories (Details) - USD ($) $ in Thousands	Apr. 01, 2017	Dec. 31, 2016
Inventories
Finished goods	$ 18,326	$ 27,661
Raw materials	29,799	44,527
Total inventories	$ 48,125	$ 72,188

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Goodwill, Trademarks and Other Intangibles (Details) - USD ($)	3 Months Ended
	Apr. 01, 2017	Mar. 26, 2016	Dec. 31, 2016
Goodwill, trademarks and other intangible assets
Goodwill	$ 14,985,000		$ 14,985,000
Other intangibles:
Total trademarks and other intangibles, net	4,831,000		7,243,000
Amortization expense related to intangibles	82,000	$ 82,000
Inventure Foods
Goodwill, trademarks and other intangible assets
Goodwill	5,986,000		5,986,000
Inventure Foods | Trademarks
Goodwill, trademarks and other intangible assets
Trademarks	896,000		896,000
Rader Farms
Goodwill, trademarks and other intangible assets
Goodwill	$ 5,630,000		5,630,000
Rader Farms | Customer Relationships
Other intangibles:
Estimated useful life	10 years
Intangible assets, gross	$ 100,000		100,000
Accumulated amortization	(98,000)		(96,000)
Rader Farms | Trademarks
Goodwill, trademarks and other intangible assets
Trademarks	1,070,000		1,070,000
Willamette Valley Fruit Company
Goodwill, trademarks and other intangible assets
Goodwill	$ 3,147,000		3,147,000
Willamette Valley Fruit Company | Customer Relationships
Other intangibles:
Estimated useful life	10 years
Intangible assets, gross	$ 3,200,000		3,200,000
Accumulated amortization	(1,200,000)		(1,120,000)
Willamette Valley Fruit Company | Trademarks
Goodwill, trademarks and other intangible assets
Trademarks	740,000		740,000
Fresh Frozen Foods | Trademarks
Goodwill, trademarks and other intangible assets
Trademarks			2,330,000
Sin In A Tin
Goodwill, trademarks and other intangible assets
Goodwill	222,000		222,000
Sin In A Tin | Trademarks
Goodwill, trademarks and other intangible assets
Trademarks	$ 123,000		$ 123,000

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Accrued Liabilities (Details) - USD ($) $ in Thousands	Apr. 01, 2017	Dec. 31, 2016
Accrued Liabilities.
Accrued payroll and payroll taxes	$ 1,998	$ 1,756
Accrued royalties and commissions	861	1,621
Accrued advertising and promotion	1,101	1,465
Accrued berry purchase payments		1,908
Accrued other	2,792	2,783
Accrued liabilities	$ 6,752	$ 9,533

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Term Debt and Line of Credit (Details) $ in Thousands						3 Months Ended
	Sep. 27, 2016	May 31, 2016	Nov. 18, 2015 USD ($)	Nov. 08, 2015 USD ($)	Sep. 15, 2014	Apr. 01, 2017 USD ($)	Dec. 31, 2016 USD ($)	Aug. 29, 2015 USD ($)	Aug. 30, 2014 USD ($) location
Long-term debt and line of credit
Long-term debt						$ 75,369	$ 89,427
Less deferred financing fees, net						(6,630)	(7,047)
Less current portion of long-term debt						$ (68,739)	(82,380)
Leverage ratio						4.25
Senior Secured Term Loan Due Quarterly Through November 2020
Long-term debt and line of credit
Long-term debt						$ 70,471	84,150
Maximum borrowing capacity			$ 85,000
Equipment Term Loan, Goodyear, Due Monthly Through March 2021
Long-term debt and line of credit
Long-term debt						2,610	2,759
Equipment Term Loan For Rader Farms Facilities Due Monthly Through August 2019
Long-term debt and line of credit
Long-term debt						1,290	1,420
Equipment Term Loan For Willamette Valley Fruit Company Due Monthly Through August 2019
Long-term debt and line of credit
Long-term debt						958	1,054
Capital lease obligations, primarily due September 2017
Long-term debt and line of credit
Long-term debt						$ 40	$ 44
ABL Credit Facility
Long-term debt and line of credit
Debt instrument term						5 years
Percentage of maximum revolver amount						12.50%
Maximum borrowing capacity						$ 50,000
ABL Credit Facility | Minimum
Long-term debt and line of credit
Maximum Revolver Amount						50,000
ABL Credit Facility | Maximum
Long-term debt and line of credit
Threshold Limit For Liquidity Amount						6,125
Wells Fargo Bank National Association And Other Lenders Party
Long-term debt and line of credit
Outstanding credit facility						27,200
Capacity borrowing availability						$ 8,800
Wells Fargo Bank National Association And Other Lenders Party | Senior Secured Term Loan Due Quarterly Through November 2020
Long-term debt and line of credit
Debt instrument term			5 years
Maximum borrowing capacity			$ 50,000
Amount increase of maximum borrowing capacity			$ 10,000
BSP Agency, LLC, a Delaware limited liability company
Long-term debt and line of credit
Debt instrument term						5 years
Maximum borrowing capacity						$ 85,000
BSP Agency, LLC, a Delaware limited liability company | Senior Secured Term Loan Due Quarterly Through November 2020
Long-term debt and line of credit
Amount increase of maximum borrowing capacity				$ 25,000		$ 25,000
BSP Agency, LLC, a Delaware limited liability company | Senior Secured Term Loan Due Quarterly Through November 2020 | Base Rate
Long-term debt and line of credit
Variable rate basis			base rate			base rate
Basis points added to base rate (as a percent)	0.01%
BSP Agency, LLC, a Delaware limited liability company | Senior Secured Term Loan Due Quarterly Through November 2020 | London Interbank Offered Rate (LIBOR) [Member]
Long-term debt and line of credit
Variable rate basis			LIBOR			LIBOR
Banc of America Leasing and Capital LLC
Long-term debt and line of credit
Number of manufacturing facilities containing equipment used to secure credit | location									2
Banc of America Leasing and Capital LLC | Equipment Term Loan, Goodyear, Due Monthly Through March 2021
Long-term debt and line of credit
Debt instrument term		60 months
Stated interest rate (as a percent)						3.07%		3.07%
Banc of America Leasing and Capital LLC | Equipment Term Loan, Goodyear, Due Monthly Through March 2021 | Maximum
Long-term debt and line of credit
Term loan amount								$ 3,100
Banc of America Leasing and Capital LLC | Equipment Term Loan For Rader Farms Facilities Due Monthly Through August 2019
Long-term debt and line of credit
Term loan amount									$ 2,600
Debt instrument term					60 months
Stated interest rate (as a percent)						2.35%			2.35%
Banc of America Leasing and Capital LLC | Equipment Term Loan For Willamette Valley Fruit Company Due Monthly Through August 2019
Long-term debt and line of credit
Term loan amount									$ 1,900
Debt instrument term					60 months
Stated interest rate (as a percent)						2.35%			2.35%

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Business Segments - Reportable Segments Information (Details) $ in Thousands	3 Months Ended
	Apr. 01, 2017 segment	Apr. 01, 2017 item	Apr. 01, 2017	Apr. 01, 2017 USD ($)	Mar. 26, 2016 USD ($)
Business segments revenue by products
Number of reportable segments	2	2
Net revenues from external customers				$ 49,618	$ 57,180
Depreciation and amortization included in segment gross profit				805	788
Segment gross profit				8,514	9,281
Reconciliation of reportable segment gross profit to consolidated income before income tax provision
Segment gross profit				8,514	9,281
Operating expenses				7,255	7,155
Operating expenses				7,255	7,155
Interest expense				(2,362)	(2,002)
Income (loss) from continuing operations before income tax expense				(1,103)	124
Frozen Products
Business segments revenue by products
Net revenues from external customers				23,462	$ 32,296
Percentage of net revenue			47.20%		56.50%
Depreciation and amortization included in segment gross profit				226	$ 281
Segment gross profit				4,741	4,785
Reconciliation of reportable segment gross profit to consolidated income before income tax provision
Segment gross profit				4,741	4,785
Snack Products
Business segments revenue by products
Net revenues from external customers				26,156	$ 24,884
Percentage of net revenue			52.80%		43.50%
Depreciation and amortization included in segment gross profit				579	$ 507
Segment gross profit				3,773	4,496
Reconciliation of reportable segment gross profit to consolidated income before income tax provision
Segment gross profit				3,773	4,496
Berries, Blends, Beverage and Desserts Product | Frozen Products
Business segments revenue by products
Net revenues from external customers				23,078	$ 32,296
Percentage of net revenue			46.50%		56.50%
Riced Vegetables | Frozen Products
Business segments revenue by products
Net revenues from external customers				384
Percentage of net revenue			0.70%
Indulgent Specialty Snacks Product | Snack Products
Business segments revenue by products
Net revenues from external customers				8,931	$ 9,926
Percentage of net revenue			18.00%		17.40%
Healthy And Natural Food Product
Business segments revenue by products
Net revenues from external customers				40,700	$ 47,300
Healthy Natural Snacks Product | Snack Products
Business segments revenue by products
Net revenues from external customers				17,225	$ 14,958
Percentage of net revenue			34.80%		26.10%
Consolidated
Business segments revenue by products
Net revenues from external customers				$ 49,618	$ 57,180
Percentage of net revenue			100.00%		100.00%

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Stockholders' Equity (Details) - USD ($)	3 Months Ended		12 Months Ended
	Apr. 01, 2017	Mar. 26, 2016	Dec. 31, 2016
Equity Incentive 2015 Plan
Weighted Average Grant Date Fair Value Per Share
Number of shares available for awards	1,008,983
Expiration term of awards			10 years
Equity Incentive 2015 Plan | Maximum
Weighted Average Grant Date Fair Value Per Share
Number of shares authorized			1,400,560
Number of additional shares available for future issuance			250,000
Restricted Stock
Number of Shares
Nonvested at the beginning of the period (in shares)	8,333
Nonvested at the end of the period (in shares)	8,333		8,333
Weighted Average Grant Date Fair Value Per Share
Nonvested at the beginning of the period (in dollars per share)	$ 12.78
Nonvested at the end of the period (in dollars per share)	$ 12.78		$ 12.78
Additional disclosures
Stock-based compensation costs which were capitalized	$ 0
Unrecognized costs related to non-vested stock awards granted	$ 100,000
Weighted average period for recognition of unrecognized compensation costs	2 months 12 days
Restricted Stock | Minimum
Shareholders equity
Vesting period	1 year
Restricted Stock | Maximum
Shareholders equity
Vesting period	5 years
Restricted Stock Units RSU
Number of Shares
Nonvested at the beginning of the period (in shares)	541,346
Vested, including shares withheld to cover taxes (in shares)	(23,255)
Forfeited (in shares)	(39,208)
Nonvested at the end of the period (in shares)	478,883		541,346
Weighted Average Grant Date Fair Value Per Share
Nonvested at the beginning of the period (in dollars per share)	$ 8.40
Vested, including shares withheld to cover taxes (in dollars per share)	13.21
Forfeited (in dollars per share)	10.26
Nonvested at the end of the period (in dollars per share)	$ 8.02		$ 8.40
Additional disclosures
Unrecognized costs related to non-vested stock awards granted	$ 1,800,000
Weighted average period for recognition of unrecognized compensation costs	1 year 7 months 6 days
Restricted Stock Units RSU | Employees | Minimum
Shareholders equity
Vesting period	3 years
Restricted Stock Units RSU | Employees | Maximum
Shareholders equity
Vesting period	5 years
restricted stock awards and units
Additional disclosures
Stock-based compensation expense	$ 300,000	$ 300,000
restricted stock awards and units | Officers
Shareholders equity
Vesting period	3 years
restricted stock awards and units | Directors
Shareholders equity
Vesting period	1 year
Stock Options
Options Outstanding
Outstanding at the beginning of the period (in shares)	567,602
Forfeited or expired (in shares)	(13,687)
Outstanding at the end of the period (in shares)	553,915		567,602
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 5.23
Forfeited or expired (in dollars per share)	10.37
Outstanding at the end of the period (in dollars per share)	$ 5.10		$ 5.23
Aggregate Intrinsic Value (in-the-money option)
Intrinsic value related to options outstanding	$ 506,733
Closing stock price (in dollars per share)	$ 4.42
Intrinsic value related to vested options outstanding	$ 500,000
Weighted Average Remaining Contractual Life
Weighted Average Remaining Contractual Life	4 years 1 month 6 days
Additional disclosures
Stock-based compensation expense	$ 100,000	$ 100,000
Stock-based compensation costs which were capitalized	0
Unrecognized costs related to non-vested stock options awards granted	$ 200,000
Weighted average period for recognition of unrecognized compensation costs	1 year 1 month 6 days
Stock Options Prior to May 2008
Weighted Average Grant Date Fair Value Per Share
Expiration term of awards	5 years
Stock Options Prior to May 2008 | Employees
Shareholders equity
Amortization period for fair value of stock options granted (in years)	5 years
Stock Options Prior to May 2008 | Directors
Shareholders equity
Amortization period for fair value of stock options granted (in years)	1 year
Stock Options after May 2008
Weighted Average Grant Date Fair Value Per Share
Expiration term of awards	10 years
Stock Options after May 2008 | Employees
Shareholders equity
Vesting period	5 years
Stock Options after May 2008 | Directors
Shareholders equity
Vesting period	1 year

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Stockholders' Equity - Exercise Price (Details)	3 Months Ended
	Apr. 01, 2017 USD ($) $ / shares shares
Shareholders' Equity
Options Outstanding (in shares) | shares	553,915
Weighted Average Remaining Contractual Life	4 years 1 month 6 days
Weighted Average Exercise Price (in dollars per share)	$ 5.10
Options Exercisable (in shares) | shares	472,415
Weighted Average Exercise Price (in dollars per share)	$ 4.59
Stock Options
Intrinsic value
Intrinsic value related to options outstanding | $	$ 506,733
Intrinsic value related to vested options outstanding | $	$ 500,000
Closing stock price (in dollars per share)	$ 4.42
Stock Options | Exercise Price Range From Dollars 1.70 to Dollars 3.20
Shareholders' Equity
Exercise price, low end of range (in dollars per share)	1.70
Exercise price, high end of range (in dollars per share)	$ 1.86
Options Outstanding (in shares) | shares	138,600
Weighted Average Remaining Contractual Life	1 year 6 months
Weighted Average Exercise Price (in dollars per share)	$ 1.75
Options Exercisable (in shares) | shares	138,600
Weighted Average Exercise Price (in dollars per share)	$ 1.75
Stock Options | Exercise Price Range From Dollars 3.44 to Dollars 6.55
Shareholders' Equity
Exercise price, low end of range (in dollars per share)	2.40
Exercise price, high end of range (in dollars per share)	$ 4.16
Options Outstanding (in shares) | shares	156,450
Weighted Average Remaining Contractual Life	3 years 4 months 24 days
Weighted Average Exercise Price (in dollars per share)	$ 3.55
Options Exercisable (in shares) | shares	156,450
Weighted Average Exercise Price (in dollars per share)	$ 3.55
Stock Options | Exercise Price Range From Dollars 7.21 to Dollars 12.78
Shareholders' Equity
Exercise price, low end of range (in dollars per share)	4.28
Exercise price, high end of range (in dollars per share)	$ 7.21
Options Outstanding (in shares) | shares	213,400
Weighted Average Remaining Contractual Life	5 years 8 months 12 days
Weighted Average Exercise Price (in dollars per share)	$ 6.88
Options Exercisable (in shares) | shares	148,900
Weighted Average Exercise Price (in dollars per share)	$ 6.82
Stock Options | Exercise Price Range From Dollars 13.21 to Dollars 13.21
Shareholders' Equity
Exercise price, low end of range (in dollars per share)	7.61
Exercise price, high end of range (in dollars per share)	$ 13.21
Options Outstanding (in shares) | shares	45,465
Weighted Average Remaining Contractual Life	7 years 1 month 6 days
Weighted Average Exercise Price (in dollars per share)	$ 12.36
Options Exercisable (in shares) | shares	28,465
Weighted Average Exercise Price (in dollars per share)	$ 12.47