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 period ended June 26, 202125, 2022
or
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number: 0-14616
J&J & J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
New Jersey | 22-1935537 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
6000 Central Highway, Pennsauken, New Jersey 08109
(Address of principal executive offices)
Telephone (856) 665-9533
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
Common Stock, no par value | JJSF | The NASDAQ Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ | Yes | ☐ | No |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒ | Yes | ☐ | No |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer ☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | ||
Smaller reporting company | ☐ | ||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
At July 23, 202129, 2022 there were 19,063,90319,192,251 shares of the Registrant’s Common Stock outstanding.
INDEX
Page Number | |
Part I. Financial Information | |
Item l. Consolidated Financial Statements | |
Consolidated Balance Sheets – June | 4 |
Consolidated Statements of Earnings (unaudited) | |
Consolidated Statements of Comprehensive Income (unaudited) – Three and | |
Consolidated Statements of Changes In Stockholders’ Equity (unaudited) – Three and | |
Consolidated Statements of Cash Flows (unaudited) – Nine Months Ended June | |
Notes to the Consolidated Financial Statements (unaudited) | 9 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 36 |
Item 4. Controls and Procedures | 36 |
Part II. Other Information | 37 |
Item 6. Exhibits |
J & J SNACK FOODS CORP. AND SUBSIDIARIES | ||||
CONSOLIDATED BALANCE SHEETS | ||||
|
June 26, | June 25, | |||||||||||||||
2021 | September 26, | 2022 | September 25, | |||||||||||||
(unaudited) | 2020 | (unaudited) | 2021 | |||||||||||||
Assets | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 276,268 | $ | 195,809 | $ | 81,283 | $ | 283,192 | ||||||||
Marketable securities held to maturity | 9,902 | 51,151 | 4,520 | 7,980 | ||||||||||||
Accounts receivable, net | 154,845 | 126,587 | 253,469 | 162,939 | ||||||||||||
Inventories | 114,822 | 108,923 | 173,948 | 123,160 | ||||||||||||
Prepaid expenses and other | 11,547 | 17,087 | 10,519 | 7,498 | ||||||||||||
Total current assets | 567,384 | 499,557 | 523,739 | 584,769 | ||||||||||||
Property, plant and equipment, at cost | ||||||||||||||||
Land | 2,494 | 2,494 | 3,714 | 2,494 | ||||||||||||
Buildings | 26,582 | 26,582 | 34,742 | 26,582 | ||||||||||||
Plant machinery and equipment | 340,693 | 330,168 | 367,297 | 343,716 | ||||||||||||
Marketing equipment | 253,199 | 250,914 | 266,915 | 258,624 | ||||||||||||
Transportation equipment | 10,232 | 9,966 | 11,780 | 10,315 | ||||||||||||
Office equipment | 34,291 | 33,878 | 45,518 | 34,648 | ||||||||||||
Improvements | 45,349 | 43,264 | 47,922 | 45,578 | ||||||||||||
Construction in progress | 28,134 | 19,995 | 54,537 | 35,285 | ||||||||||||
Total Property, plant and equipment, at cost | 740,974 | 717,261 | 832,425 | 757,242 | ||||||||||||
Less accumulated depreciation and amortization | 482,056 | 455,645 | 513,851 | 490,055 | ||||||||||||
Property, plant and equipment, net | 258,918 | 261,616 | 318,574 | 267,187 | ||||||||||||
Other assets | ||||||||||||||||
Goodwill | 121,833 | 121,833 | 188,467 | 121,833 | ||||||||||||
Other intangible assets, net | 79,676 | 81,622 | 196,407 | 77,776 | ||||||||||||
Marketable securities held to maturity | 7,568 | 16,927 | 0 | 4,047 | ||||||||||||
Marketable securities available for sale | 11,273 | 13,976 | 5,608 | 10,084 | ||||||||||||
Operating lease right-of-use assets | 51,811 | 58,110 | 54,990 | 54,555 | ||||||||||||
Other | 3,083 | 2,912 | 3,457 | 1,968 | ||||||||||||
Total other assets | 275,244 | 295,380 | 448,929 | 270,263 | ||||||||||||
Total Assets | $ | 1,101,546 | $ | 1,056,553 | $ | 1,291,242 | $ | 1,122,219 | ||||||||
Liabilities and Stockholders' Equity | ||||||||||||||||
Current Liabilities | ||||||||||||||||
Current finance lease liabilities | $ | 252 | $ | 349 | $ | 189 | $ | 182 | ||||||||
Accounts payable | 97,117 | 73,135 | 128,551 | 96,789 | ||||||||||||
Accrued insurance liability | 15,764 | 13,039 | 14,892 | 16,260 | ||||||||||||
Accrued liabilities | 6,890 | 7,420 | 10,121 | 10,955 | ||||||||||||
Current operating lease liabilities | 12,780 | 13,173 | 14,062 | 13,395 | ||||||||||||
Accrued compensation expense | 15,000 | 16,134 | 19,038 | 17,968 | ||||||||||||
Dividends payable | 12,064 | 10,876 | 12,138 | 12,080 | ||||||||||||
Total current liabilities | 159,867 | 134,126 | 198,991 | 167,629 | ||||||||||||
Long-term debt | 125,000 | 0 | ||||||||||||||
Noncurrent finance lease liabilities | 417 | 368 | 318 | 392 | ||||||||||||
Noncurrent operating lease liabilities | 41,573 | 47,688 | 46,017 | 46,557 | ||||||||||||
Deferred income taxes | 64,284 | 64,413 | 61,350 | 61,578 | ||||||||||||
Other long-term liabilities | 375 | 460 | 3,667 | 409 | ||||||||||||
Stockholders' Equity | ||||||||||||||||
Preferred stock, $1 par value; authorized 10,000,000 shares; none issued | 0 | 0 | 0 | 0 | ||||||||||||
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding 19,061,000 and 18,915,000 respectively | 69,572 | 49,268 | ||||||||||||||
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding 19,184,000 and 19,084,000 respectively | 90,274 | 73,597 | ||||||||||||||
Accumulated other comprehensive loss | (13,182 | ) | (15,587 | ) | (13,374 | ) | (13,383 | ) | ||||||||
Retained Earnings | 778,640 | 775,817 | 778,999 | 785,440 | ||||||||||||
Total stockholders' equity | 835,030 | 809,498 | 855,899 | 845,654 | ||||||||||||
Total Liabilities and Stockholders' Equity | $ | 1,101,546 | $ | 1,056,553 | $ | 1,291,242 | $ | 1,122,219 |
The accompanying notes are an integral part of these statements.
J & J SNACK FOODS CORP. AND SUBSIDIARIES | |||||||
CONSOLIDATED STATEMENTS OF EARNINGS | |||||||
(Unaudited) | |||||||
(in thousands, except per share amounts) |
Three months ended | Nine months ended | |||||||||||||||
June 26, | June 27, | June 26, | June 27, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net Sales | $ | 324,344 | $ | 214,563 | $ | 821,519 | $ | 769,502 | ||||||||
Cost of goods sold | 228,170 | 177,367 | 614,324 | 585,002 | ||||||||||||
Gross Profit | 96,174 | 37,196 | 207,195 | 184,500 | ||||||||||||
Operating expenses | ||||||||||||||||
Marketing | 20,502 | 21,952 | 56,995 | 68,532 | ||||||||||||
Distribution | 27,311 | 21,272 | 75,643 | 69,648 | ||||||||||||
Administrative | 10,348 | 8,374 | 29,004 | 28,166 | ||||||||||||
Plant shutdown impairment costs | 0 | 5,072 | 0 | 5,072 | ||||||||||||
Other general (income) expense | (131 | ) | (54 | ) | (399 | ) | (183 | ) | ||||||||
Total Operating Expenses | 58,030 | 56,616 | 161,243 | 171,235 | ||||||||||||
Operating Income (loss) | 38,144 | (19,420 | ) | 45,952 | 13,265 | |||||||||||
Other (expense)income | ||||||||||||||||
Investment income (loss) | 470 | 1,300 | 2,419 | 2,673 | ||||||||||||
Interest (expense) & other | (8 | ) | (7 | ) | (19 | ) | (60 | ) | ||||||||
Earnings (loss) before income taxes | 38,606 | (18,127 | ) | 48,352 | 15,878 | |||||||||||
Income taxes (benefit) | 9,713 | (5,480 | ) | 11,620 | 4,157 | |||||||||||
NET EARNINGS (LOSS) | $ | 28,893 | $ | (12,647 | ) | $ | 36,732 | $ | 11,721 | |||||||
Earnings (loss) per diluted share | $ | 1.51 | $ | (0.67 | ) | $ | 1.92 | $ | 0.62 | |||||||
Weighted average number of diluted shares | 19,185 | 18,888 | 19,116 | 19,036 | ||||||||||||
Earnings (loss) per basic share | $ | 1.52 | $ | (0.67 | ) | $ | 1.93 | $ | 0.62 | |||||||
Weighted average number of basic shares | 19,045 | 18,888 | 18,996 | 18,902 |
The accompanying notes are an integral part of these statements.
| |
| |
| |
|
Three months ended | Nine months ended | |||||||||||||||
June 26, | June 27, | June 26, | June 27, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net Earnings (loss) | $ | 28,893 | $ | (12,647 | ) | $ | 36,732 | $ | 11,721 | |||||||
Foreign currency translation adjustments | 657 | 41 | 2,405 | (3,070 | ) | |||||||||||
Total Other Comprehensive Income (loss) , net of tax | 657 | 41 | 2,405 | (3,070 | ) | |||||||||||
Comprehensive Income (loss) | $ | 29,550 | $ | (12,606 | ) | $ | 39,137 | $ | 8,651 |
Three Months Ended |
Nine Months Ended | |||||||||||||||
June 25, | June 26, | June 25, | June 26, | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net sales | $ | 380,227 | $ | 324,344 | $ | 980,230 | $ | 821,519 | ||||||||
Cost of goods sold | 271,151 | 228,170 | 726,431 | 614,324 | ||||||||||||
Gross profit | 109,076 | 96,174 | 253,799 | 207,195 | ||||||||||||
Operating expenses | ||||||||||||||||
Marketing | 24,002 | 20,502 | 65,945 | 56,995 | ||||||||||||
Distribution | 48,157 | 27,311 | 109,821 | 75,643 | ||||||||||||
Administrative | 15,724 | 10,348 | 37,812 | 29,004 | ||||||||||||
Other general expense | (67 | ) | (131 | ) | 28 | (399 | ) | |||||||||
Total operating expenses | 87,816 | 58,030 | 213,606 | 161,243 | ||||||||||||
Operating income | 21,260 | 38,144 | 40,193 | 45,952 | ||||||||||||
Other income (expense) | ||||||||||||||||
Investment income | 106 | 470 | 537 | 2,419 | ||||||||||||
Interest expense & other | (156 | ) | (8 | ) | (231 | ) | (19 | ) | ||||||||
Earnings before income taxes | 21,210 | 38,606 | 40,499 | 48,352 | ||||||||||||
Income taxes | 5,647 | 9,713 | 10,574 | 11,620 | ||||||||||||
NET EARNINGS | $ | 15,563 | $ | 28,893 | $ | 29,925 | $ | 36,732 | ||||||||
Earnings per diluted share | $ | 0.81 | $ | 1.51 | $ | 1.56 | $ | 1.92 | ||||||||
Weighted average number of diluted shares | 19,234 | 19,185 | 19,198 | 19,116 | ||||||||||||
Earnings per basic share | $ | 0.81 | $ | 1.52 | $ | 1.56 | $ | 1.93 | ||||||||
Weighted average number of basic shares | 19,174 | 19,045 | 19,131 | 18,996 |
The accompanying notes are an integral part of these statements.
J & J SNACK FOODS CORP. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||
(Unaudited) | ||||||||
(in thousands) |
Three Months Ended | Nine Months Ended | |||||||||||||||
June 25, | June 26, | June 25, | June 26, | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net earnings | $ | 15,563 | $ | 28,893 | $ | 29,925 | $ | 36,732 | ||||||||
Foreign currency translation adjustments | (93 | ) | 657 | 9 | 2,405 | |||||||||||
Total other comprehensive (loss) income | (93 | ) | 657 | 9 | 2,405 | |||||||||||
Comprehensive income | $ | 15,470 | $ | 29,550 | $ | 29,934 | $ | 39,137 |
The accompanying notes are an integral part of these statements.
J & J Snack Foods Corp. and Subsidiaries | ||||||||||
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY | ||||||||||
(in thousands) |
Accumulated | Accumulated | |||||||||||||||||||||||||||||||||||||||
Other | Other | |||||||||||||||||||||||||||||||||||||||
Common Stock | Comprehensive | Retained | Common Stock | Comprehensive | Retained | |||||||||||||||||||||||||||||||||||
Shares | Amount | Loss | Earnings | Total | Shares | Amount | Loss | Earnings | Total | |||||||||||||||||||||||||||||||
Balance as September 26, 2020 | 18,915 | $ | 49,268 | $ | (15,587 | ) | $ | 775,817 | $ | 809,498 | ||||||||||||||||||||||||||||||
Balance as September 25, 2021 | 19,084 | $ | 73,597 | $ | (13,383 | ) | $ | 785,440 | $ | 845,654 | ||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 41 | 4,390 | 0 | 0 | 4,390 | 5 | 706 | 0 | 0 | 706 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | 0 | 2,279 | 0 | 2,279 | - | 0 | (444 | ) | 0 | (444 | ) | ||||||||||||||||||||||||||||
Dividends declared | - | 0 | 0 | (10,900 | ) | (10,900 | ) | - | 0 | 0 | (12,092 | ) | (12,092 | ) | ||||||||||||||||||||||||||
Share-based compensation | - | 1,244 | 0 | 0 | 1,244 | - | 1,083 | 0 | 0 | 1,083 | ||||||||||||||||||||||||||||||
Net earnings | - | 0 | 0 | 1,778 | 1,778 | - | 0 | 0 | 11,091 | 11,091 | ||||||||||||||||||||||||||||||
Balance at December 26, 2020 | 18,956 | $ | 54,902 | $ | (13,308 | ) | $ | 766,695 | $ | 808,289 | ||||||||||||||||||||||||||||||
Balance at December 25, 2021 | 19,089 | $ | 75,386 | $ | (13,827 | ) | $ | 784,439 | $ | 845,998 | ||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 72 | 8,384 | 0 | 0 | 8,384 | 76 | 10,012 | 0 | 0 | 10,012 | ||||||||||||||||||||||||||||||
Issuance of common stock for employee stock purchase plan | 6 | 714 | 0 | 0 | 714 | 8 | 1,023 | 0 | 0 | 1,023 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | 0 | (531 | ) | 0 | (531 | ) | - | 0 | 546 | 0 | 546 | ||||||||||||||||||||||||||||
Dividends declared | - | 0 | 0 | (10,943 | ) | (10,943 | ) | - | 0 | 0 | (12,136 | ) | (12,136 | ) | ||||||||||||||||||||||||||
Share-based compensation | - | 1,026 | 0 | 0 | 1,026 | - | 1,267 | 0 | 0 | 1,267 | ||||||||||||||||||||||||||||||
Net earnings | - | 0 | 0 | 6,061 | 6,061 | - | 0 | 0 | 3,271 | 3,271 | ||||||||||||||||||||||||||||||
Balance at March 27, 2021 | 19,034 | 65,026 | (13,839 | ) | 761,813 | 813,000 | ||||||||||||||||||||||||||||||||||
Balance at March 26, 2022 | 19,173 | $ | 87,688 | $ | (13,281 | ) | $ | 775,574 | $ | 849,981 | ||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 27 | 3,564 | 0 | 0 | 3,564 | 11 | 1,452 | 0 | 0 | 1,452 | ||||||||||||||||||||||||||||||
Issuance of common stock for employee stock purchase plan | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | 0 | 657 | 0 | 657 | - | 0 | (93 | ) | 0 | (93 | ) | ||||||||||||||||||||||||||||
Dividends declared | - | 0 | 0 | (12,066 | ) | (12,066 | ) | - | 0 | 0 | (12,138 | ) | (12,138 | ) | ||||||||||||||||||||||||||
Share-based compensation | - | 982 | 0 | 0 | 982 | - | 1,134 | 0 | 0 | 1,134 | ||||||||||||||||||||||||||||||
Net earnings | - | 0 | 0 | 28,893 | 28,893 | - | 0 | 0 | 15,563 | 15,563 | ||||||||||||||||||||||||||||||
Balance at June 26, 2021 | 19,061 | 69,572 | (13,182 | ) | 778,640 | 835,030 | ||||||||||||||||||||||||||||||||||
Balance at June 25, 2022 | 19,184 | $ | 90,274 | $ | (13,374 | ) | $ | 778,999 | $ | 855,899 |
Accumulated | Accumulated | |||||||||||||||||||||||||||||||||||||||
Other | Other | |||||||||||||||||||||||||||||||||||||||
Common Stock | Comprehensive | Retained | Common Stock | Comprehensive | Retained | |||||||||||||||||||||||||||||||||||
Shares | Amount | Loss | Earnings | Total | Shares | Amount | Loss | Earnings | Total | |||||||||||||||||||||||||||||||
Balance at September 28, 2019 | 18,895 | $ | 45,744 | $ | (12,988 | ) | $ | 800,995 | $ | 833,751 | ||||||||||||||||||||||||||||||
Balance as September 26, 2020 | 18,915 | $ | 49,268 | $ | (15,587 | ) | $ | 775,817 | $ | 809,498 | ||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 5 | 468 | 0 | 0 | 468 | 41 | 4,390 | 0 | 0 | 4,390 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | 0 | 810 | 0 | 810 | - | 0 | 2,279 | 0 | 2,279 | ||||||||||||||||||||||||||||||
Dividends declared | - | 0 | 0 | (10,867 | ) | (10,867 | ) | - | 0 | 0 | (10,900 | ) | (10,900 | ) | ||||||||||||||||||||||||||
Share-based compensation | - | 1,299 | 0 | 0 | 1,299 | - | 1,244 | 0 | 0 | 1,244 | ||||||||||||||||||||||||||||||
Net earnings | - | 0 | 0 | 17,059 | 17,059 | - | 0 | 0 | 1,778 | 1,778 | ||||||||||||||||||||||||||||||
Balance at December 28, 2019 | 18,900 | $ | 47,511 | $ | (12,178 | ) | $ | 807,187 | $ | 842,520 | ||||||||||||||||||||||||||||||
Balance at December 26, 2020 | 18,956 | $ | 54,902 | $ | (13,308 | ) | $ | 766,695 | $ | 808,289 | ||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 47 | 5,049 | 0 | 0 | 5,049 | 72 | 8,384 | 0 | 0 | 8,384 | ||||||||||||||||||||||||||||||
Issuance of common stock for employee stock purchase plan | 6 | 783 | 0 | 0 | 783 | 6 | 714 | 0 | 0 | 714 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | 0 | (3,921 | ) | 0 | (3,921 | ) | - | 0 | (531 | ) | 0 | (531 | ) | ||||||||||||||||||||||||||
Issuance of common stock under deferred stock plan | 1 | 90 | 0 | 0 | 90 | |||||||||||||||||||||||||||||||||||
Dividends declared | - | 0 | 0 | (10,878 | ) | (10,878 | ) | - | 0 | 0 | (10,943 | ) | (10,943 | ) | ||||||||||||||||||||||||||
Share-based compensation | - | 1,088 | 0 | 0 | 1,088 | - | 1,026 | 0 | 0 | 1,026 | ||||||||||||||||||||||||||||||
Repurchase of common stock | (66 | ) | (8,972 | ) | 0 | 0 | (8,972 | ) | ||||||||||||||||||||||||||||||||
Net earnings | - | 0 | 0 | 7,309 | 7,309 | - | 0 | 0 | 6,061 | 6,061 | ||||||||||||||||||||||||||||||
Balance at March 28, 2020 | 18,888 | 45,549 | (16,099 | ) | 803,618 | 833,068 | ||||||||||||||||||||||||||||||||||
Balance at March 27, 2021 | 19,034 | $ | 65,026 | $ | (13,839 | ) | $ | 761,813 | $ | 813,000 | ||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 27 | 3,564 | 0 | 0 | 3,564 | |||||||||||||||||||||||||||||||||||
Issuance of common stock for employee stock purchase plan | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | 0 | 41 | 0 | 41 | - | 0 | 657 | 0 | 657 | ||||||||||||||||||||||||||||||
Dividends declared | - | 0 | 0 | (10,873 | ) | (10,873 | ) | - | 0 | 0 | (12,066 | ) | (12,066 | ) | ||||||||||||||||||||||||||
Share-based compensation | - | 1,011 | 0 | 0 | 1,011 | - | 982 | 0 | 0 | 982 | ||||||||||||||||||||||||||||||
Net loss | - | 0 | 0 | (12,647 | ) | (12,647 | ) | |||||||||||||||||||||||||||||||||
Net earnings | - | 0 | 0 | 28,893 | 28,893 | |||||||||||||||||||||||||||||||||||
Balance at June 27, 2020 | 18,888 | 46,560 | (16,058 | ) | 780,098 | 810,600 | ||||||||||||||||||||||||||||||||||
Balance at June 26, 2021 | 19,061 | $ | 69,572 | $ | (13,182 | ) | $ | 778,640 | $ | 835,030 |
The accompanying notes are an integral part of these statements.
J & J SNACK FOODS CORP. AND SUBSIDIARIES | |||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(Unaudited) | |||||||
(in thousands) |
Nine Months Ended | Nine Months Ended | |||||||||||||||
June 26, | June 27, | June 25, | June 26, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Operating activities: | ||||||||||||||||
Net earnings | $ | 36,732 | $ | 11,721 | $ | 29,925 | $ | 36,732 | ||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: | ||||||||||||||||
Depreciation of fixed assets | 36,278 | 37,353 | 36,292 | 36,278 | ||||||||||||
Amortization of intangibles and deferred costs | 2,096 | 2,516 | 1,775 | 2,096 | ||||||||||||
Loss from disposals of property & equipment | 50 | 0 | ||||||||||||||
Share-based compensation | 3,252 | 3,421 | 3,484 | 3,252 | ||||||||||||
Deferred income taxes | (188 | ) | (426 | ) | (227 | ) | (188 | ) | ||||||||
(Gain) loss on marketable securities | (926 | ) | 1,746 | |||||||||||||
Plant shutdown impairment costs | 0 | 5,072 | ||||||||||||||
Loss (Gain) on marketable securities | 412 | (926 | ) | |||||||||||||
Other | (305 | ) | (309 | ) | (212 | ) | (305 | ) | ||||||||
Changes in assets and liabilities net of effects from purchase of companies | ||||||||||||||||
(Increase) decrease in accounts receivable | (27,940 | ) | 24,634 | |||||||||||||
Increase in accounts receivable | (78,058 | ) | (27,940 | ) | ||||||||||||
Increase in inventories | (5,964 | ) | (3,751 | ) | (42,784 | ) | (5,964 | ) | ||||||||
(Increase) decrease in prepaid expenses | 5,710 | (7,879 | ) | (102 | ) | 5,710 | ||||||||||
Increase (decrease) in accounts payable and accrued liabilities | 24,823 | (7,478 | ) | |||||||||||||
Net cash provided by operating activities | 73,568 | 66,620 | ||||||||||||||
Increase in accounts payable and accrued liabilities | 19,798 | 24,823 | ||||||||||||||
Net cash (used in) provided by operating activities | (29,647 | ) | 73,568 | |||||||||||||
Investing activities: | ||||||||||||||||
Payments for purchases of companies, net of cash acquired | 0 | (57,197 | ) | (221,301 | ) | 0 | ||||||||||
Purchases of property, plant and equipment | (34,456 | ) | (47,637 | ) | (64,231 | ) | (34,456 | ) | ||||||||
Purchases of marketable securities | 0 | (6,103 | ) | |||||||||||||
Proceeds from redemption and sales of marketable securities | 54,191 | 54,125 | 11,526 | 54,191 | ||||||||||||
Proceeds from disposal of property and equipment | 2,079 | 2,852 | 1,147 | 2,079 | ||||||||||||
Other | 42 | (72 | ) | 0 | 42 | |||||||||||
Net cash provided by (used in) investing activities | 21,856 | (54,032 | ) | |||||||||||||
Net cash (used in) provided by investing activities | (272,859 | ) | 21,856 | |||||||||||||
Financing activities: | ||||||||||||||||
Payments to repurchase common stock | 0 | (8,972 | ) | |||||||||||||
Proceeds from issuance of stock | 17,178 | 6,300 | 12,168 | 17,178 | ||||||||||||
Payments on capitalized lease obligations | (48 | ) | (272 | ) | ||||||||||||
Borrowings under credit facility | 125,000 | 0 | ||||||||||||||
Payments for debt issue costs | (225 | ) | 0 | |||||||||||||
Payments on finance lease obligations | (150 | ) | (48 | ) | ||||||||||||
Payment of cash dividend | (32,719 | ) | (31,193 | ) | (36,299 | ) | (32,719 | ) | ||||||||
Net cash used in financing activities | (15,589 | ) | (34,137 | ) | ||||||||||||
Net cash provided by (used in) financing activities | 100,494 | (15,589 | ) | |||||||||||||
Effect of exchange rate on cash and cash equivalents | 624 | (885 | ) | 103 | 624 | |||||||||||
Net increase (decrease) in cash and cash equivalents | 80,459 | (22,434 | ) | |||||||||||||
Net (decrease) increase in cash and cash equivalents | (201,909 | ) | 80,459 | |||||||||||||
Cash and cash equivalents at beginning of period | 195,809 | 192,395 | 283,192 | 195,809 | ||||||||||||
Cash and cash equivalents at end of period | $ | 276,268 | $ | 169,961 | $ | 81,283 | $ | 276,268 |
The accompanying notes are an integral part of these statements.
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 | The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended September
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In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position and the results of operations and cash flows.
The results of operations for the three and nine months ended June 25, 2022 and June 26, 2021 are not necessarily indicative of results for the full year. Sales of our frozen beverages and frozen novelties are generally higher in the third and fourth quarters due to warmer weather. Also, approximately 2/3 of our sales are to venues and locations that previously shut down or sharply curtailed their foodservice operations as a result of COVID-19. While the majority of these venues have reopened, the extent of the future impact of COVID-19 on our operations depends on future developments of the virus and its effects which are uncertain at this time.
While we believe that the disclosures presented are adequate to make the information not misleading, we suggest that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 25, 2021.
Note 2 | On June 21, 2022, J & J Snack Foods Corp. and its wholly-owned subsidiary, DD Acquisition Holdings, LLC, completed the acquisition of one hundred percent (100%) of the equity interests of Dippin’ Dots Holding, L.L.C. (“Dippin’ Dots”) which, through its wholly-owned subsidiaries, owns and operates the Dippin’ Dots and Doc Popcorn businesses. The purchase price was approximately $223,561,000, consisting entirely of cash, and may be modified for certain customary post-closing purchase price adjustments. |
Dippin’ Dots is a leading producer of flash-frozen beaded ice cream treats, and the acquisition will leverage synergies in entertainment and amusement locations, theaters, and convenience to continue to expand our business. The acquisition also includes the Doc Popcorn business operated by Dippin’ Dots.
The financial results of Dippin’ Dots have been included in our consolidated financial statements since the date of the acquisition. Sales and net earnings of Dippin’ Dots since the date of acquisition were $2,218,000 and $621,000 for the three and nine-months ended June 25, 2022. Dippin’ Dots is reported as part of our Food Service segment. Included within Administrative expenses for the quarter were $3,088,000 of acquisition costs.
Upon acquisition, the assets and liabilities of Dippin’ Dots were adjusted to their respective fair values as of the closing date of the transaction, including the identifiable intangible assets acquired. In addition, the excess of the purchase price over the fair value of the net assets acquired has been recorded as goodwill. The fair value estimates used in valuing certain acquired assets and liabilities are based, in part, on inputs that are unobservable. For intangible assets, these include, but are not limited to, forecasted future cash flows, revenue growth rates, attrition rates and discount rates.
The purchase price allocation as of the date of acquisition was based on a preliminary valuation and is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available.
The major classes of assets and liabilities to which we have preliminarily allocated the purchase price were as follows:
Preliminary Dippin' Dots Purchase Price Allocation (1)
(in thousands) | ||||
June 21, | ||||
2022 | ||||
Cash and cash equivalents | $ | 2,259 | ||
Accounts receivable, net | 12,257 | |||
Inventories | 8,812 | |||
Prepaid expenses and other | 1,215 | |||
Property, plant and equipment, net | 24,622 | |||
Intangible assets | 120,400 | |||
Goodwill(2) | 66,634 | |||
Operating lease right-of-use assets | 3,514 | |||
Other noncurrent assets | 243 | |||
Total assets acquired | 239,956 | |||
Liabilities assumed: | ||||
Current lease liabilities | 619 | |||
Accounts payable | 6,005 | |||
Other current liabilities | 3,532 | |||
Noncurrent lease liabilities | 2,954 | |||
Other noncurrent liabilities | 3,285 | |||
Total liabilities acquired | 16,395 | |||
Purchase price | $ | 223,561 |
(1) | Due to the limited time since the date of the acquisition, the purchase price allocation remains preliminary. |
(2) | Goodwill was assigned to our Food Services segment and was primarily attributed to the assembled workforce of the acquired business and to our expectations of favorable growth opportunities in entertainment and amusement locations, theaters, and convenience based on increased synergies that are expected to be achieved from the integration of Dippin’ Dots. |
Acquired Intangible Assets | ||||||||
(in thousands) | ||||||||
Weighted average | June 21, | |||||||
life (years) | 2022 | |||||||
Amortizable | ||||||||
Trade name | indefinite | 76,900 | ||||||
Customer relationships | 10 | 12,100 | ||||||
Technology | 10 | 22,900 | ||||||
Franchise agreements | 10 | 8,500 | ||||||
Total acquired intangible assets | 120,400 |
Dippin' Dots Results Included in the Company's Consolidated Results
(in thousands) | ||||||||
Three Months ended | Nine Months ended | |||||||
June 25, | June 25, | |||||||
2022 | 2022 | |||||||
Net sales | $ | 2,218 | $ | 2,218 | ||||
Net earnings | $ | 621 | $ | 621 |
The following unaudited pro forma information presents the consolidated results of operations as if the business combination in 2022 had occurred as of September 27, 2020, after giving effect to acquisition-related adjustments, including: (1) depreciation and amortization of assets; (2) amortization of unfavorable contracts related to the fair value adjustments of the assets acquired; (3) change in the effective tax rate; (4) interest expense on any debt incurred to fund the acquisitions which would have been incurred had such acquisitions occurred as of September 27, 2020; and (5) merger and acquisition costs.
J & J Snack Foods Corp and Dippin' Dots Unaudited Pro Forma Combined Financial Information
(in thousands) | ||||||||||||||||
Three Months ended | Nine Months ended | |||||||||||||||
June 25, | June 26, | June 25, | June 26, | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net sales | $ | 404,182 | $ | 349,722 | $ | 1,028,079 | $ | 861,536 | ||||||||
Net earnings | $ | 17,838 | $ | 33,980 | $ | 31,501 | $ | 35,893 | ||||||||
Earnings per diluted share | $ | 0.93 | $ | 1.77 | $ | 1.64 | $ | 1.88 | ||||||||
Weighted average number of diluted shares | 19,234 | 19,185 | 19,198 | 19,116 |
The pro forma information does not reflect the potential benefits of cost and funding synergies, opportunities to earn additional revenues, or other factors, and therefore does not represent what the actual Net sales and Net earnings would have been had the companies actually been combined as of this date.
Note 23
Revenue Recognition
When Performance Obligations Are Satisfied A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. |
The singular performance obligation of our customer contracts for product and machine sales is determined by each individual purchase order and the respective products ordered, with revenue being recognized at a point-in-time when the obligation under the terms of the agreement is satisfied and product control is transferred to our customer. Specifically, control transfers to our customers when the product is delivered to, installed, or picked up by our customers based upon applicable shipping terms, as our customers can direct the use and obtain substantially all of the remaining benefits from the product at this point in time. The performance obligations in our customer contracts for product are generally satisfied within 30 days.
The singular performance obligation of our customer contracts for time and material repair and maintenance equipment service is the performance of the repair and maintenance with revenue being recognized at a point-in-time when the repair and maintenance is completed.
The singular performance obligation of our customer repair and maintenance equipment service contracts is the performance of the repair and maintenance with revenue being recognized over the time the service is expected to be performed. Our customers are billed for service contracts in advance of performance and therefore we have a contract liability recorded within Accrued liabilities on our balance sheet. The Company is entitled to royalties under its agreements with franchisees. Sales-based royalties are related entirely to the Company’s performance obligation under the franchise agreements and are recognized on a monthly basis. Purchase-based royalties are related entirely to the Company’s performance obligation under the franchise agreements and are recognized on a weekly basis. Under franchise agreements, the Company provides franchisees with a franchise license allowing the use of brand intellectual property and certain ongoing services. As the performance obligations are satisfied, over time, franchise, renewal and transfer fees are recognized on a straight-line basis over the terms of the franchise agreement.
Significant Payment Terms In general, within our customer contracts, the purchase order identifies the product, quantity, price, pick-up allowances, payment terms and final delivery terms. Although some payment terms may be more extended, presently the majority of our payment terms are 30 days. As a result, we have used the available practical expedient and, consequently, do not adjust our revenues for the effects of a significant financing component.
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Shipping All amounts billed to customers related to shipping and handling are classified as revenues; therefore, we recognize revenue for shipping and handling fees at the time the products are shipped or when services are performed. The cost of shipping products to the customer is recognized at the time the products are shipped to the customer and our policy is to classify them as Distribution expenses. Variable Consideration In addition to fixed contract consideration, our contracts include some form of variable consideration, including sales discounts, trade promotions and certain other sales and consumer incentives, including rebates and coupon redemptions. In general, variable consideration is treated as a reduction in revenue when the related revenue is recognized. Depending on the specific type of variable consideration, we use the most likely amount method to determine the variable consideration. We believe there will be no significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. We review and update our estimates and related accruals of variable consideration each period based on historical experience. Our recorded liability for allowances, end-user pricing adjustments and trade spending was $16,907,000 at June 25, 2022 and $14,646,000 at September 25, 2021. Warranties & Returns We provide all customers with a standard or assurance type warranty. Either stated or implied, we provide assurance the related products will comply with all agreed-upon specifications and other warranties provided under the law. No services beyond an assurance warranty are provided to our customers. We do not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. We do not estimate a right of return and related refund liability as returns of our products are rare. |
(in thousands) | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
June 26, | June 27, | June 26, | June 27, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Beginning Balance | $ | 1,090 | $ | 1,235 | $ | 1,327 | $ | 1,334 | ||||||||
Additions to contract liability | $ | 1,237 | 1,362 | 4,182 | 4,111 | |||||||||||
Amounts recognized as revenue | $ | (1,283 | ) | (1,311 | ) | (4,465 | ) | (4,159 | ) | |||||||
Ending Balance | $ | 1,044 | $ | 1,286 | $ | 1,044 | $ | 1,286 |
Disaggregation of Revenue
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Contract Balances Contract liabilities consist of deferred revenue resulting from service contracts in our Frozen Beverages segment where our customers are billed for service in advance of performance. Contract liabilities also consist of deferred revenue in our Food Service segment resulting from initial franchise fees paid by franchisees, as well as renewal and transfer fees paid by franchisees and license fees paid by licensees which are generally recognized on a straight-line basis over the term of the underlying agreement. Therefore, we have contract liabilities on our balance sheet as follows: (in thousands) Three Months Ended Nine Months Ended June 25, June 26, June 25, June 26, 2022 2021 2022 2021 Beginning Balance Additions to contract liability Amounts recognized as revenue Ending Balance Disaggregation of Revenue See Note 11 for disaggregation of our net sales by class of similar product and type of customer. Allowance for Doubtful Receivables We provide an allowance for doubtful receivables after taking into consideration historical experience and other factors. On September 27, 2020, the Company adopted guidance issued by the FASB in ASU 2016-13,Measurement of Credit Losses on Financial Instruments, which requires companies to recognize an allowance that reflects a current estimate of credit losses expected to be incurred over the life of the asset. Adoption of this new guidance did not have a material impact on the consolidated financial statements. The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses. The allowance for doubtful accounts considers a number of factors including the age of receivable balances, the history of losses, expectations of future credit losses and the customers’ ability to pay off obligations. The allowance for doubtful receivables was $1,629,000 and $1,405,000 on June 25, 2022 and September 25, 2021, |
Note | Depreciation of equipment and buildings is provided for by the straight-line method over the assets’ estimated useful lives. Amortization of improvements is provided for by the straight-line method over the term of the lease or the assets’ estimated useful lives, whichever is shorter. Licenses and rights, customer relationships, technology, and non-compete agreements arising from acquisitions are amortized by the straight-line method over periods ranging from 2 to 20 years. Depreciation expense was |
Note | Basic earnings per common share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period. Diluted EPS takes into consideration the potential dilution that could occur if securities (stock options) or other contracts to issue common stock were exercised and converted into common stock. Our calculation of EPS is as follows: |
Three Months Ended June 25, 2022 | ||||||||||||
Income | Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Basic EPS | ||||||||||||
Net earnings available to common stockholders | $ | 15,563 | 19,174 | $ | 0.81 | |||||||
Effect of dilutive securities | ||||||||||||
Options | 0 | 60 | 0 | |||||||||
Diluted EPS | ||||||||||||
Net earnings available to common stockholders plus assumed conversions | $ | 15,563 | 19,234 | $ | 0.81 |
382,431 anti-dilutive shares have been excluded in the computation of EPS for the three months ended June 25, 2022.
Nine Months ended June 25, 2022 | ||||||||||||
Income | Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Basic EPS | ||||||||||||
Net earnings available to common stockholders | $ | 29,925 | 19,131 | $ | 1.56 | |||||||
Effect of dilutive securities | ||||||||||||
Options | 0 | 67 | 0 | |||||||||
Diluted EPS | ||||||||||||
Net earnings available to common stockholders plus assumed conversions | $ | 29,925 | 19,198 | $ | 1.56 |
302,674 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 25, 2022.
Three Months Ended June 26, 2021 | Three Months Ended June 26, 2021 | |||||||||||||||||||||||
Income | Shares | Per Share | Income | Shares | Per Share | |||||||||||||||||||
(Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||||||||||||||
(in thousands, except per share amounts) | (in thousands, except per share amounts) | |||||||||||||||||||||||
Basic EPS | ||||||||||||||||||||||||
Net Earnings available to common stockholders | $ | 28,893 | 19,045 | $ | 1.52 | |||||||||||||||||||
Net earnings available to common stockholders | $ | 28,893 | 19,045 | $ | 1.52 | |||||||||||||||||||
Effect of Dilutive Securities | ||||||||||||||||||||||||
Effect of dilutive securities | ||||||||||||||||||||||||
Options | 0 | 140 | (0.01 | ) | 0 | 140 | 0 | |||||||||||||||||
Diluted EPS | ||||||||||||||||||||||||
Net Earnings available to common stockholders plus assumed conversions | $ | 28,893 | 19,185 | $ | 1.51 | |||||||||||||||||||
Net earnings available to common stockholders plus assumed conversions | $ | 28,893 | 19,185 | $ | 1.51 |
20,800 anti-dilutive shares have been excluded in the computation of EPS for the three months ended June 26, 20212021.
Nine Months Ended June 26, 2021 | Nine Months Ended June 26, 2021 | |||||||||||||||||||||||
Income | Shares | Per Share | Income | Shares | Per Share | |||||||||||||||||||
(Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||||||||||||||
(in thousands, except per share amounts) | (in thousands, except per share amounts) | |||||||||||||||||||||||
Basic EPS | ||||||||||||||||||||||||
Net Earnings available to common stockholders | $ | 36,732 | 18,996 | $ | 1.93 | |||||||||||||||||||
Net earnings available to common stockholders | $ | 36,732 | 18,996 | $ | 1.93 | |||||||||||||||||||
Effect of Dilutive Securities | ||||||||||||||||||||||||
Effect of dilutive securities | ||||||||||||||||||||||||
Options | 0 | 120 | (0.01 | ) | 0 | 120 | 0 | |||||||||||||||||
Diluted EPS | ||||||||||||||||||||||||
Net Earnings available to common stockholders plus assumed conversions | $ | 36,732 | 19,116 | $ | 1.92 | |||||||||||||||||||
Net earnings available to common stockholders plus assumed conversions | $ | 36,732 | 19,116 | $ | 1.92 |
289,692 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 26, 20212021.
Three Months Ended June 27, 2020 | ||||||||||||
Income | Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Basic EPS | ||||||||||||
Net Earnings available to common stockholders | $ | (12,647 | ) | 18,888 | $ | (0.67 | ) | |||||
Effect of Dilutive Securities | ||||||||||||
Options | 0 | 0 | 0 | |||||||||
Diluted EPS | ||||||||||||
Net Earnings available to common stockholders plus assumed conversions | $ | (12,647 | ) | 18,888 | $ | (0.67 | ) |
845,977 anti-dilutive shares have been excluded in the computation of EPS for the three months ended June 27, 2020
Nine Months Ended June 27, 2020 | ||||||||||||
Income | Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Basic EPS | ||||||||||||
Net Earnings available to common stockholders | $ | 11,721 | 18,902 | $ | 0.62 | |||||||
Effect of Dilutive Securities | ||||||||||||
Options | 0 | 134 | 0 | |||||||||
Diluted EPS | ||||||||||||
Net Earnings available to common stockholders plus assumed conversions | $ | 11,721 | 19,036 | $ | 0.62 |
169,246 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 27, 2020
Note | At June |
Three months ended | Nine months ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
June 26, | June 27, | June 26, | June 27, | June 25, | June 26, | June 25, | June 26, | |||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Stock Options | $ | 512 | $ | 890 | $ | 1,505 | $ | 2,267 | ||||||||||||||||||||||||
Stock options | $ | 693 | $ | 523 | $ | 2,115 | $ | 1,538 | ||||||||||||||||||||||||
Stock purchase plan | 171 | 57 | 513 | 328 | 90 | 171 | 240 | 513 | ||||||||||||||||||||||||
Stock issued to outside director | 11 | 17 | 33 | 50 | ||||||||||||||||||||||||||||
Restricted stock issued to an employee | 23 | 0 | 70 | 0 | ||||||||||||||||||||||||||||
Restricted stock issued to employees | 152 | 23 | 376 | 70 | ||||||||||||||||||||||||||||
Performance stock issued to employees | 83 | 0 | 204 | 0 | ||||||||||||||||||||||||||||
Total share-based compensation | $ | 717 | $ | 964 | $ | 2,121 | $ | 2,645 | $ | 1,018 | $ | 717 | $ | 2,935 | $ | 2,121 | ||||||||||||||||
The above compensation is net of tax benefits | $ | 265 | $ | 70 | $ | 1,131 | $ | 822 | $ | 116 | $ | 265 | $ | 549 | $ | 1,131 |
The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model.
During the fiscal year 2022nine-month period, the Company granted 115,700 stock options. The weighted-average grant date fair value of these options was $23.36.
During the fiscal year 2021nine-month period, the Company granted 138,432 stock options. The weighted-average grant date fair value of these options was $31.20.
The Company issued 327 service share units (“RSU”)’s in the three-months ended June 25, 2022, and 9,200 RSU’s in the nine-months ended June 25, 2022. Each RSU entitles the awardee to one share of common stock upon vesting. The fair value of RSU’s was determined based upon the closing price of the Company’s common stock on the date of grant. NaN such RSU’s were issued in the three or nine-months ended June 26, 2021.
In November 2021, the Company also issued 8,868 performance share units (“PSU”)’s. Each PSU may result in the issuance of up to two shares of common stock upon vesting, dependent upon the level of achievement of the applicable Performance Goal. The fair value of the PSU’s was determined based upon the closing price of the Company’s common stock on the date of grant. Additionally, the Company applies a quarterly probability assessment in computing this non-cash compensation expense, and any change in estimate is reflected as a cumulative adjustment to expense in the quarter of the change. NaN such PSU’s were issued in the three-months ended June 25, 2022 or in the three or nine-months ended June 26, 2021.
Expected volatility is based on the historical volatility of the price of our common shares over the past 51 months for 5-year options and 10 years for 10-year options. We use historical information to estimate expected life and forfeitures within the valuation model. The expected term of awards represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation cost is recognized using a straight-line method over the vesting or service period and is net of estimated forfeitures.
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Note | We account for our income taxes under the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities.
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Additionally, we recognize a liability for income taxes and associated penalties and interest for tax positions taken or expected to be taken in a tax return which are more likely than 14not
to be overturned by taxing authorities (“uncertain tax positions”). We have not recognized a tax benefit in our financial statements for these uncertain tax positions. The total amount of gross unrecognized tax benefits is $343,000 on both June 25, 2022 and September 25, 2021, respectively, all of which would impact our effective tax rate over time, if recognized. We recognize interest and penalties related to uncertain tax positions as a part of the provision for income taxes. As of June 25, 2022, and September 25, 2021, the Company has $267,000 of accrued interest and penalties. In addition to our federal tax return and tax returns for Mexico and Canada, we file tax returns in all states that have a corporate income tax with virtually all open for examination for three to four years. Our effective tax rate was 26% for the nine months ended June 25, 2022 and 24% for the nine months ended June 26, 2021. Our effective tax rate was 27% for the three months ended June 25, 2022 and 25% for the three months ended June 26, 2021.
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Note | In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which changes the impairment model used to measure credit losses for most financial assets. We are required to recognize an allowance that reflects the Company’s current estimate of credit losses expected to be incurred over the life of the financial asset, including trade receivables and held-to-maturity debt securities.
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The Company adopted this guidance in the first quarter of Fiscal 2021 using the modified retrospective transition method. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements.
Note | In December 2021, the Company entered into an amended and restated loan agreement (the “Credit Agreement”) with our existing banks which provided for up to a $50,000,000 revolving credit facility repayable in December 2026. |
Interest accrues, at the Company’s election at (i) the BSBY Rate (as defined in the Credit Agreement) plus an applicable margin, based upon the Consolidated Net Leverage Ratio, as defined in the Credit Agreement, or (ii) the Alternate Base Rate (a rate based on the higher of (a) the prime rate announced from time-to-time by the Administrative Agent, (b) the Federal Reserve System’s federal funds rate, plus 0.50% or (c) the Daily BSBY Rate, plus an applicable margin. The Alternate Base Rate is defined in the Credit Agreement.
The Credit Agreement requires the Company to comply with various affirmative and negative covenants, including without limitation (i) covenants to maintain a minimum specified interest coverage ratio and maximum specified net leverage ratio, and (ii) subject to certain exceptions, covenants that prevent or restrict the Company’s ability to pay dividends, engage in certain mergers or acquisitions, make certain investments or loans, incur future indebtedness, alter its capital structure or line of business, prepay subordinated indebtedness, engage in certain transactions with affiliates, or amend its organizational documents. As of June 25, 2022, the Company is in compliance with all financial covenants of the Credit Agreement.
On June 21, 2022, the Company entered into an amendment to the Credit Agreement, the “Amended Credit Agreement” which provided for an incremental increase of $175,000,000 in available borrowings. The Amended Credit Agreement also includes an option to increase the size of the revolving credit facility by up to an amount not to exceed in the aggregate the greater of $225,000,000 or, $50,000,000 plus the Consolidated EBITDA of the Borrowers, subject to the satisfaction of certain terms and conditions.
As of June 25, 2022, $125,000,000 was outstanding under the Amended Credit Agreement. These borrowings have been classified as Long-Term Debt on the Company’s Balance Sheet. As of June 25, 2022, the amount available under the Amended Credit Agreement was $91,225,000 million, after giving effect to the outstanding letters of credit. As of September 25, 2021, there were 0 outstanding balances under the Credit Agreement.
Note 10 | Inventories consist of the following: |
June 26, | September 26, | June 25, | September 25, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Finished goods | $ | 40,850 | $ | 40,184 | $ | 83,201 | $ | 49,756 | ||||||||
Raw materials | 29,171 | 24,550 | 39,856 | 29,529 | ||||||||||||
Packaging materials | 12,080 | 10,545 | 15,832 | 11,168 | ||||||||||||
Equipment parts and other | 32,721 | 33,644 | 35,059 | 32,707 | ||||||||||||
Total Inventories | $ | 114,822 | $ | 108,923 | ||||||||||||
Total inventories | $ | 173,948 | $ | 123,160 |
Note | We principally sell our products to the food service and retail supermarket industries. Sales and results of our frozen beverages business are monitored separately from the balance of our food service business because of different distribution and capital requirements. We maintain separate and discrete financial information for the three operating segments mentioned above which is available to our Chief Operating Decision
|
Our 3 reportable segments are Food Service, Retail Supermarkets and Frozen Beverages. All inter-segment net sales and expenses have been eliminated in computing net sales and operating income. These segments are described below. Food Service The primary products sold by the food service segment are soft pretzels, frozen novelties, churros, handheld products and baked goods. Our customers in the food service segment include snack bars and food stands in chain, department and discount stores; malls and shopping centers; casual dining restaurants, fast food outlets; stadiums and sports arenas; leisure and
Retail Supermarkets
The primary products sold to the retail supermarket channel are soft pretzel products – including SUPERPRETZEL, frozen
21 Frozen Beverages
The Chief Operating Decision Maker for Food Service, |
Three Months Ended | Nine Months Ended | |||||||||||||||
June 25, | June 26, | June 25, | June 26, | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Sales to external customers: | ||||||||||||||||
Food Service | ||||||||||||||||
Soft pretzels | $ | 55,946 | $ | 50,895 | $ | 149,628 | $ | 120,356 | ||||||||
Frozen novelties | 17,155 | 13,927 | 32,917 | 30,812 | ||||||||||||
Churros | 25,614 | 20,096 | 62,550 | 46,358 | ||||||||||||
Handhelds | 25,740 | 18,971 | 64,741 | 56,574 | ||||||||||||
Bakery | 95,495 | 85,706 | 287,293 | 257,580 | ||||||||||||
Other | 7,892 | 6,884 | 18,785 | 14,546 | ||||||||||||
Total Food Service | $ | 227,842 | $ | 196,479 | $ | 615,914 | $ | 526,226 | ||||||||
Retail Supermarket | ||||||||||||||||
Soft pretzels | $ | 11,696 | $ | 11,193 | $ | 43,642 | $ | 40,871 | ||||||||
Frozen novelties | 41,865 | 36,898 | 78,586 | 71,600 | ||||||||||||
Biscuits | 6,066 | 4,562 | 20,024 | 18,717 | ||||||||||||
Handhelds | 1,589 | 1,191 | 3,934 | 6,215 | ||||||||||||
Coupon redemption | (605 | ) | (513 | ) | (2,227 | ) | (2,196 | ) | ||||||||
Other | 397 | 526 | 501 | 1,652 | ||||||||||||
Total Retail Supermarket | $ | 61,008 | $ | 53,857 | $ | 144,460 | $ | 136,859 | ||||||||
Frozen Beverages | ||||||||||||||||
Beverages | $ | 57,791 | $ | 42,279 | $ | 126,919 | $ | 76,663 | ||||||||
Repair and | ||||||||||||||||
maintenance service | 22,892 | 22,789 | 65,903 | 59,903 | ||||||||||||
Machines revenue | 9,868 | 8,404 | 25,257 | 20,556 | ||||||||||||
Other | 826 | 536 | 1,777 | 1,312 | ||||||||||||
Total Frozen Beverages | $ | 91,377 | $ | 74,008 | $ | 219,856 | $ | 158,434 | ||||||||
Consolidated sales | $ | 380,227 | $ | 324,344 | $ | 980,230 | $ | 821,519 | ||||||||
Depreciation and amortization: | ||||||||||||||||
Food Service | $ | 7,097 | $ | 6,817 | $ | 20,436 | $ | 20,334 | ||||||||
Retail Supermarket | 405 | 378 | 1,157 | 1,147 | ||||||||||||
Frozen Beverages | 5,514 | 5,469 | 16,474 | 16,893 | ||||||||||||
Total depreciation and amortization | $ | 13,016 | $ | 12,664 | $ | 38,067 | $ | 38,374 | ||||||||
Operating income: | ||||||||||||||||
Food Service | $ | 2,640 | $ | 17,644 | $ | 12,177 | $ | 29,879 | ||||||||
Retail Supermarket | 2,341 | 9,080 | 8,416 | 20,167 | ||||||||||||
Frozen Beverages | 16,279 | 11,420 | 19,600 | (4,094 | ) | |||||||||||
Total operating income | $ | 21,260 | $ | 38,144 | $ | 40,193 | $ | 45,952 | ||||||||
Capital expenditures: | ||||||||||||||||
Food Service | $ | 21,673 | $ | 10,383 | $ | 45,757 | $ | 25,915 | ||||||||
Retail Supermarket | 2,815 | 93 | 6,438 | 194 | ||||||||||||
Frozen Beverages | 4,437 | 5,151 | 12,036 | 8,347 | ||||||||||||
Total capital expenditures | $ | 28,925 | $ | 15,627 | $ | 64,231 | $ | 34,456 | ||||||||
Assets: | ||||||||||||||||
Food Service | $ | 957,719 | $ | 779,730 | $ | 957,719 | $ | 779,730 | ||||||||
Retail Supermarket | 29,147 | 33,405 | 29,147 | 33,405 | ||||||||||||
Frozen Beverages | 304,376 | 288,411 | 304,376 | 288,411 | ||||||||||||
Total assets | $ | 1,291,242 | $ | 1,101,546 | $ | 1,291,242 | $ | 1,101,546 |
Three months ended | Nine months ended | |||||||||||||||
June 26 | June 27 | June 26 | June 27 | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Sales to External Customers: | ||||||||||||||||
Food Service | ||||||||||||||||
Soft pretzels | $ | 50,895 | $ | 21,384 | $ | 120,359 | $ | 116,985 | ||||||||
Frozen juices and ices | 13,927 | 8,688 | 30,812 | 25,222 | ||||||||||||
Churros | 20,096 | 7,321 | 46,358 | 38,466 | ||||||||||||
Handhelds | 18,971 | 7,448 | 56,574 | 22,084 | ||||||||||||
Bakery | 85,706 | 69,237 | 257,580 | 255,016 | ||||||||||||
Other | 6,884 | 2,543 | 14,546 | 13,628 | ||||||||||||
Total Food Service | $ | 196,478 | $ | 116,621 | $ | 526,226 | $ | 471,401 | ||||||||
Retail Supermarket | ||||||||||||||||
Soft pretzels | $ | 11,193 | $ | 12,716 | $ | 40,871 | $ | 34,874 | ||||||||
Frozen juices and ices | 36,898 | 33,322 | 71,600 | 59,279 | ||||||||||||
Biscuits | 4,562 | 8,151 | 18,717 | 21,759 | ||||||||||||
Handhelds | 1,191 | 3,257 | 6,215 | 9,135 | ||||||||||||
Coupon redemption | (513 | ) | (807 | ) | (2,196 | ) | (2,216 | ) | ||||||||
Other | 526 | 863 | 1,652 | 1,668 | ||||||||||||
Total Retail Supermarket | $ | 53,857 | $ | 57,502 | $ | 136,859 | $ | 124,499 | ||||||||
Frozen Beverages | ||||||||||||||||
Beverages | $ | 42,279 | $ | 16,456 | $ | 76,663 | $ | 83,606 | ||||||||
Repair and maintenance service | 22,789 | 17,259 | 59,903 | 61,524 | ||||||||||||
Machines revenue | 8,404 | 6,363 | 20,556 | 27,254 | ||||||||||||
Other | 536 | 362 | 1,312 | 1,218 | ||||||||||||
Total Frozen Beverages | $ | 74,009 | $ | 40,440 | $ | 158,434 | $ | 173,602 | ||||||||
Consolidated Sales | $ | 324,344 | $ | 214,563 | $ | 821,519 | $ | 769,502 | ||||||||
Depreciation and Amortization: | ||||||||||||||||
Food Service | $ | 6,817 | $ | 7,050 | $ | 20,334 | $ | 21,208 | ||||||||
Retail Supermarket | 378 | 468 | 1,147 | 1,156 | ||||||||||||
Frozen Beverages | 5,469 | 5,864 | 16,893 | 17,505 | ||||||||||||
Total Depreciation and Amortization | $ | 12,664 | $ | 13,382 | $ | 38,374 | $ | 39,869 | ||||||||
Operating Income : | ||||||||||||||||
Food Service | $ | 17,644 | $ | (18,242 | ) | $ | 29,879 | $ | 7,743 | |||||||
Retail Supermarket | 9,080 | 7,910 | 20,167 | 14,464 | ||||||||||||
Frozen Beverages | 11,420 | (9,088 | ) | (4,094 | ) | (8,942 | ) | |||||||||
Total Operating Income (Loss) | $ | 38,144 | $ | (19,420 | ) | $ | 45,952 | $ | 13,265 | |||||||
Capital Expenditures: | ||||||||||||||||
Food Service | $ | 10,383 | $ | 7,865 | $ | 25,915 | $ | 26,599 | ||||||||
Retail Supermarket | 93 | 390 | 194 | 1,625 | ||||||||||||
Frozen Beverages | 5,151 | 2,397 | 8,347 | 19,413 | ||||||||||||
Total Capital Expenditures | $ | 15,627 | $ | 10,652 | $ | 34,456 | $ | 47,637 | ||||||||
Assets: | ||||||||||||||||
Food Service | $ | 779,730 | $ | 729,331 | $ | 779,730 | $ | 729,331 | ||||||||
Retail Supermarket | 33,405 | 33,766 | 33,405 | 33,766 | ||||||||||||
Frozen Beverages | 288,411 | 294,189 | 288,411 | 294,189 | ||||||||||||
Total Assets | $ | 1,101,546 | $ | 1,057,286 | $ | 1,101,546 | $ | 1,057,286 |
Note 12 Our The carrying amounts of acquired intangible assets for the Food Service, Retail Supermarkets and Frozen |
June 26, 2021 | September 26, 2020 | |||||||||||||||
Gross | Gross | |||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
(in thousands) | ||||||||||||||||
FOOD SERVICE | ||||||||||||||||
Indefinite lived intangible assets | ||||||||||||||||
Trade names | $ | 10,408 | $ | - | $ | 10,408 | $ | - | ||||||||
Amortized intangible assets | ||||||||||||||||
Non compete agreements | 670 | 670 | 670 | 645 | ||||||||||||
Customer relationships | 13,000 | 5,863 | 19,737 | 11,595 | ||||||||||||
License and rights | 1,690 | 1,375 | 1,690 | 1,312 | ||||||||||||
TOTAL FOOD SERVICE | $ | 25,768 | $ | 7,908 | $ | 32,505 | $ | 13,552 | ||||||||
RETAIL SUPERMARKETS | ||||||||||||||||
Indefinite lived intangible assets | ||||||||||||||||
Trade names | $ | 12,750 | $ | - | $ | 12,750 | $ | - | ||||||||
Amortized Intangible Assets | ||||||||||||||||
Trade names | 676 | 619 | 676 | 519 | ||||||||||||
Customer relationships | 7,907 | 5,733 | 7,907 | 5,140 | ||||||||||||
TOTAL RETAIL SUPERMARKETS | $ | 21,333 | $ | 6,352 | $ | 21,333 | $ | 5,659 | ||||||||
FROZEN BEVERAGES | ||||||||||||||||
Indefinite lived intangible assets | ||||||||||||||||
Trade names | $ | 9,315 | $ | - | $ | 9,315 | $ | - | ||||||||
Distribution rights | 36,100 | - | 36,100 | - | ||||||||||||
Amortized intangible assets | ||||||||||||||||
Customer relationships | 1,439 | 365 | 1,439 | 257 | ||||||||||||
Licenses and rights | 1,400 | 1,054 | 1,400 | 1,002 | ||||||||||||
TOTAL FROZEN BEVERAGES | $ | 48,254 | $ | 1,420 | $ | 48,254 | $ | 1,259 | ||||||||
CONSOLIDATED | $ | 95,355 | $ | 15,680 | $ | 102,092 | $ | 20,470 |
Fully amortized intangible assets have been removed from the June 26, 2021 amounts.
Amortizing intangible assets are being amortized by the straight-line method over periods ranging from 2 to 20 years and amortization expense is reflected throughout operating expenses. Aggregate amortization expense of intangible assets for the three months ended June 26, 2021 and June 27, 2020 was $639,000 and $831,000, respectively. Aggregate amortization expense of intangible assets for the nine months ended June 26, 2021 and June 27, 2020 was $2,096,000 and $2,507,000, respectively.
June 25, 2022 |
September 25, 2021 | |||||||||||||||
Gross | Gross | |||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
(in thousands) | ||||||||||||||||
FOOD SERVICE | ||||||||||||||||
Indefinite lived intangible assets | ||||||||||||||||
Trade names | $ | 86,496 | $ | 0 | $ | 10,408 | $ | 812 | ||||||||
Amortized intangible assets | ||||||||||||||||
Non compete agreements | 670 | 670 | 670 | 670 | ||||||||||||
Franchise agreements | 8,500 | 0 | 0 | 0 | ||||||||||||
Customer relationships | 25,100 | 7,163 | 13,000 | 6,188 | ||||||||||||
Technology | 22,900 | 0 | 0 | 0 | ||||||||||||
License and rights | 1,690 | 1,460 | 1,690 | 1,396 | ||||||||||||
TOTAL FOOD SERVICE | $ | 145,356 | $ | 9,293 | $ | 25,768 | $ | 9,066 | ||||||||
RETAIL SUPERMARKETS | ||||||||||||||||
Indefinite lived intangible assets | ||||||||||||||||
Trade names | $ | 12,316 | $ | 0 | $ | 12,777 | $ | 461 | ||||||||
Amortized intangible Assets | ||||||||||||||||
Trade names | 649 | 649 | 649 | 649 | ||||||||||||
Customer relationships | 7,907 | 6,500 | 7,907 | 5,931 | ||||||||||||
TOTAL RETAIL SUPERMARKETS | $ | 20,872 | $ | 7,149 | $ | 21,333 | $ | 7,041 | ||||||||
FROZEN BEVERAGES | ||||||||||||||||
Indefinite lived intangible assets | ||||||||||||||||
Trade names | $ | 9,315 | $ | - | $ | 9,315 | $ | - | ||||||||
Distribution rights | 36,100 | - | 36,100 | - | ||||||||||||
Amortized intangible assets | ||||||||||||||||
Customer relationships | 1,439 | 509 | 1,439 | 400 | ||||||||||||
Licenses and rights | 1,400 | 1,124 | 1,400 | 1,072 | ||||||||||||
TOTAL FROZEN BEVERAGES | $ | 48,254 | $ | 1,633 | $ | 48,254 | $ | 1,472 | ||||||||
CONSOLIDATED | $ | 214,482 | $ | 18,075 | $ | 95,355 | $ | 17,579 |
Amortizing intangible assets are being amortized by the straight-line method over periods ranging from 2 to 20 years and amortization expense is reflected throughout operating expenses. Aggregate amortization expense of intangible assets for the three months ended June 25, 2022 and June 26, 2021 was $584,000 and $639,000, respectively. Aggregate amortization expense of intangible assets for the nine months ended June 25, 2022 and June 26, 2021 was $1,766,000 and $2,096,000, respectively
Estimated amortization expense for the next five fiscal years is approximately $3,500,000 in 2022, $6,700,000 in 2023, $6,400,000 in 2024, $5,800,000 in 2025, and $5,800,000 in 2026.
The weighted amortization period of the intangible assets, in total, is 10.4 years. The weighted amortization period by intangible asset class is 10 years for Technology, 10 years for Customer relationships, 20 years for Licenses & rights, and 10 years for Franchise agreements.
Goodwill
The carrying amounts of goodwill for the Food Service, Retail Supermarket and Frozen Beverages segments are as follows:
Food | Retail | Frozen | ||||||||||||||
Service | Supermarket | Beverages | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at June 25, 2022 | $ | 127,823 | $ | 4,146 | $ | 56,498 | $ | 188,467 | ||||||||
Balance at September 25, 2021 | $ | 61,189 | $ | 4,146 | $ | 56,498 | $ | 121,833 |
Estimated amortization expense for the next five fiscal years is approximately $2,500,000 in 2021, $2,300,000 in 2022, $2,300,000 in 2023, $2,000,000 in 2024, and $1,400,000 in 2025. The weighted amortization period of the intangible assets is 10.9 years.
Goodwill
The carrying amounts of goodwill for the Food Service, Retail Supermarket and Frozen Beverage segments are as follows:
Food | Retail | Frozen | ||||||||||||||
Service | Supermarket | Beverages | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at June 26, 2021 | $ | 61,189 | $ | 4,146 | $ | 56,498 | $ | 121,833 | ||||||||
Balance at September 26, 2020 | $ | 61,189 | $ | 4,146 | $ | 56,498 | $ | 121,833 |
Note 13 We have classified our investment securities as marketable securities held to maturity and available for sale. The FASB defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the FASB has established three levels of inputs that may be used to measure fair value: Level 1 Observable input such as quoted prices in active markets for identical assets or liabilities; Level 2 Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and Level 3 Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. Marketable securities held to maturity and available for The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at June 25, 2022 are summarized as follows: Gross Gross Fair Amortized Unrealized Unrealized Market Cost Gains Losses Value (in thousands) Corporate bonds Total marketable securities held to maturity The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at June 25, 2022 are summarized as follows: Gross Gross Fair Amortized Unrealized Unrealized Market Cost Gains Losses Value (in thousands) Mutual funds Preferred stock Total marketable securities available for sale The mutual funds seek current income with an emphasis on maintaining low volatility and overall moderate duration. The Fixed-to-Floating Perpetual Preferred Stock generate fixed income to call dates in 2025 and then income is The amortized cost, unrealized gains and losses, and fair market Gross Gross Fair Amortized Unrealized Unrealized Market Cost Gains Losses Value (in thousands) Corporate bonds Total marketable securities held to maturity The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at September 25, 2021 are summarized as follows: Gross Gross Fair Amortized Unrealized Unrealized Market Cost Gains Losses Value (in thousands) Mutual funds Preferred stock Total marketable securities available for sale The amortized cost and fair value of the Company’s held to maturity securities by contractual maturity at June 25, 2022 and September 25, 2021 are summarized as follows: June 25, 2022 September 25, 2021 Fair Fair Amortized Market Amortized Market Cost Value Cost Value (in thousands) Due in one year or less Due after one year through five years Total held to maturity securities Less current portion Long term held to maturity securities Proceeds from the redemption and sale of marketable securities were $0 and $11,526,000 in Total marketable securities held to maturity as of June 25, 2022, with credit ratings of BBB/BB/B had an amortized cost basis totaling $4,520,000. This rating information was obtained June 30, 2022. Note 14 Changes to the components of accumulated other comprehensive loss are as follows: Three Months Ended Nine Months Ended June 25, 2022 June 25, 2022 Foreign Currency Foreign Currency Translation Translation Adjustments Adjustments (unaudited) (unaudited) (in thousands) (in thousands) Beginning balance Ending balance Three Months Ended Nine Months Ended June 26, 2021 June 26, 2021 Foreign Currency Foreign Currency Translation Translation Adjustments Adjustments (unaudited) (unaudited) (in thousands) (in thousands) Beginning balance Other comprehensive income Ending balance Note 15 – Leases We have finance leases with initial noncancelable lease terms in excess of one year covering the rental of various equipment. These leases are generally for manufacturing and non-manufacturing equipment used in our business. The remaining lease terms for these finance leases range from 1 year to 5 years. Significant Assumptions and Judgments Contract Contains a Lease In evaluating our contracts to determine whether a contract is or contains a lease, we considered the following: • Whether explicitly or implicitly identified assets have been deployed in the contract; and • Whether we obtain substantially all of the economic benefits from the use of that underlying asset, and we can direct how and for what purpose the asset is used during the term of the contract. Allocation of Consideration In determining how to allocate consideration between lease and non-lease components in a contract that was deemed to contain a lease, we used judgment and consistent application of assumptions to reasonably allocate the consideration. Options to Extend or Terminate Leases We have leases which Discount Rate The discount rate for leases, if not explicitly stated in the lease, is We used the discount rate to calculate the present value of the lease liability at the date of adoption. In the development of the discount rate, we considered our incremental borrowing rate as provided by our lender which was based on cash collateral and credit risk specific to us, and our lease portfolio characteristics. As of June 25, 2022, the weighted-average discount rate of our operating and finance leases was 3.3% and 3.2%, respectively. As of June 26, 2021, the weighted-average discount rate of our operating and finance leases was 3.2% and 3.2%, respectively. Practical Expedients and Accounting Policy Elections We elected the package of practical expedients that permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs and made an accounting policy election to exclude short-term leases with an initial term of 12 months or less from our Consolidated Balance Sheets. Amounts Recognized in the The components of lease expense were as follows: Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 (in thousands) (in thousands) (in thousands) (in thousands) Operating lease cost in cost of goods sold and operating expenses Finance lease cost: Amortization of assets in cost of goods sold and operating expenses Interest on lease liabilities in Interest expense & other Short-term lease cost in cost of goods sold and operating expenses Supplemental balance sheet information related to June 25, 2022 September 25, 2021 (in thousands) (in thousands) Operating Leases Operating lease right-of-use assets Current operating lease liabilities Noncurrent operating lease liabilities Finance Leases Finance lease right-of-use assets in property, plant and equipment, net Current finance lease liabilities Noncurrent finance lease liabilities Supplemental cash flow information related to leases is as follows: Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended June 25, 2022 June 26, 2021 June 25, 2022 June 26, 2021 (in thousands) (in thousands) (in thousands) (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases Operating cash flows from finance leases Financing cash flows from finance leases Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets Supplemental noncash information on lease liabilities removed due to purchase of leased asset As of June 25, 2022, the maturities of lease liabilities were as follows: (in thousands) Operating Leases Finance Leases Three months ending September 24, 2022 2023 2024 2025 2026 Thereafter Total minimum payments Less amount representing interest Present value of lease obligations Gross Gross Fair Amortized Unrealized Unrealized Market Cost Gains Losses Value (in thousands) Corporate Bonds Total marketable securities held to maturity Gross Gross Fair Amortized Unrealized Unrealized Market Cost Gains Losses Value (in thousands) Mutual Funds Preferred Stock Total marketable securities available for sale Gross Gross Fair Amortized Unrealized Unrealized Market Cost Gains Losses Value (in thousands) Corporate Bonds Total marketable securities held to maturity Gross Gross Fair Amortized Unrealized Unrealized Market Cost Gains Losses Value (in thousands) Mutual Funds Preferred Stock Total marketable securities available for sale June 26, 2021 Fair Fair Amortized Market Amortized Market Cost Value Cost Value (in thousands) Due in one year or less Due after one year through five years Due after five years through ten years Total held to maturity securities Less current portion Long term held to maturity securities Three Months Ended June 26, 2021 Nine Months Ended June 26, 2021 (unaudited) (unaudited) (in thousands) (in thousands) Foreign Currency Foreign Currency Translation Translation Adjustments Total Adjustments Total Beginning Balance Other comprehensive income (loss) before reclassifications Ending Balance Three Months Ended June 27, 2020 Nine Months Ended June 27, 2020 (unaudited) (unaudited) (in thousands) (in thousands) Foreign Currency Foreign Currency Translation Translation Adjustments Total Adjustments Total Beginning Balance Other comprehensive income (loss) before reclassifications Ending Balance Note 16 (in thousands) ICEE BAMA Total Distributors ICEE Accounts Receivable, net Inventories Property, plant & equipment, net Customer Relationships Distribution rights Goodwill Accounts Payable Purchase Price Three Months Ended Nine Months Ended June 26, 2021 June 26, 2021 (in thousands) (in thousands) Operating lease cost in Cost of goods sold and Operating Expenses Finance lease cost: Amortization of assets in Cost of goods sold and Operating Expenses Interest on lease liabilities in Interest expense & other Total finance lease cost Short-term lease cost in Cost of goods sold and Operating Expenses June 26, 2021 (in thousands) Operating Leases Operating lease right-of-use assets Current operating lease liabilities Noncurrent operating lease liabilities Finance Leases Finance lease right-of-use assets in Property, plant and equipment, net Current finance lease liabilities Noncurrent finance lease liabilities Three Months Ended Nine Months Ended June 26, 2021 June 26, 2021 (in thousands) (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases Operating cash flows from finance leases Financing cash flows from finance leases Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets Supplemental noncash information on lease liabilities removed due to purchase of leased asset (in thousands) Operating Leases Finance Leases Three months ending September 25, 2021 2022 2023 2024 2025 Thereafter Total minimum payments Less amount representing interest Present value of lease obligations Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the “Act”) and Section 21E of the Securities Exchange Act of 1934 “the Exchange Act”. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate,” “intend” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbor provisions of the Act and the Exchange Act. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties, assumptions, and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events. Liquidity and Capital Resources Our current cash and cash equivalents balances, investments and cash expected to be provided by future operations are our primary sources of liquidity. We believe that these sources, along with our borrowing capacity, are sufficient to fund working capital, capital spending, debt service requirements and future growth and The Company’s Board of Directors declared a regular quarterly cash dividend of In the three months ended June On June 21, 2022, the Company entered into an amendment to the Credit Agreement, the “Amended Credit Agreement” which provided for an incremental increase of $175,000,000 in available borrowings. The As of June 25, 2022, $125,000,000 was outstanding under the Amended Credit Agreement. These borrowings have been classified as Long-Term Debt on the Company’s Balance Sheet. As of June 25, 2022, the amount available under the Amended Credit Agreement was $91,225,000, after giving effect to the outstanding letters of credit. As of September 25, 2021, there were no outstanding balances under Critical Accounting Policies, Judgments and Estimates There have been no material changes to our critical accounting policies, judgments and estimates from the information provided in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies, Judgments and Estimates, in our Annual Report on Form 10-K for the year ended September 25, 2021, as filed with the SEC on November 23, 2021. RESULTS OF OPERATIONS Net sales increased by FOOD SERVICE Sales to food service customers increased by Soft pretzel sales to the food service market increased by months compared to respective prior year periods. Sales of handhelds increased Sales of new products in the first twelve months since their introduction were approximately Compared to prior RETAIL SUPERMARKETS Sales of new products were approximately $400,000 for the third quarter and $900,000 in the nine months, primarily related to frozen novelty items. Price increases and volume increases both had a marginal impact on sales in the quarter. Compared to prior year periods, operating income in our Retail Supermarkets segment decreased by 74% to $2,341,000 in the third quarter and by 58% to $8,416,000 in the nine months. The decreases in operating income were primarily attributable to higher cost of goods sold as well as higher shipping and distribution related costs, as well as our ERP implementation which previously impacted our results in the fiscal second quarter.. FROZEN BEVERAGES Compared to prior year periods, frozen beverage and related product sales increased by 23% to $91,377,000 in the third quarter and by 39% to $219,856,000 in the nine months. Beverage related sales increased by 37% to $57,791,000 in the third quarter and by 66% to $126,919,000 in the nine months compared to respective prior year periods. Gallon sales were up 28% in the quarter and up 56% in the nine months compared to respective prior year periods. The increase in gallon sales reflects the strong demand across theaters, amusement parks, convenience and restaurants. In the amusement parks channel, we continue to see strong growth as both domestic and international visitation numbers continue to recover, and exceed, pre-COVID-19 levels. Theater sales continue on their upward trajectory as movie goers indulge in their favorite snacks and view highly anticipated movie releases. Service revenue remained relatively flat in the third quarter, but increased by 10% to fiscal year. Machines revenue (primarily sales of frozen beverage machines) increased by Our Frozen Beverage segment CONSOLIDATED Gross profit as a percentage of sales was Total operating expenses increased by Marketing expenses Our investments generated before tax income of Compared to prior year, net earnings decreased by 46% to $15,563,000 in There are many factors which can impact our net earnings from Item 3. Quantitative and Qualitative Disclosures About Market Risk There has been no material change in the Company’s assessment of its sensitivity to market risk since its presentation set forth, in item 7a. “Quantitative and Qualitative Disclosures About Market Risk,” in its 2021 annual report on Form 10-K filed with the SEC. Item 4. Controls and Procedures The Chief Executive Officer and the Chief Financial Officer of the Company (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of June 25, 2022, that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. |
There has been no change in the Company’s internal control over financial reporting during the quarter ended June 26,2021,25, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. During the third quarter of 2022, the Company completed the acquisition of Dippin’ Dots. As permitted by SEC staff interpretive guidance that an assessment of a recently acquired business may be omitted from the scope of evaluation for a period of up to one year following the acquisition, management excluded Dippin’ Dots from its interim evaluation of internal controls over financial reporting.
PART II. OTHER INFORMATION
Item 6. |
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Exhibit No.
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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101.1 The following financial information from J&J Snack Foods Corp.'s Quarterly Report on Form 10-Q for the quarter ended June 25, 2022, formatted in inline XBRL (extensible Business Reporting Language): |
(i) Consolidated Balance Sheets,
(ii) Consolidated Statements of Earnings,
(iii)Consolidated Statements of Comprehensive Income,
(iv) Consolidated Statements of Cash Flows and
(v) the Notes to the Consolidated Financial Statements
104 Cover Page Interactive Data File (formatted as(embedded within the Inline XBRL and contained in Exhibit 101)
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.
J & J SNACK FOODS CORP.
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Dated: August 4, 2022 | /s/ Dan Fachner |
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| Dan Fachner |
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| President and Chief Executive Officer |
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(Principal Executive Officer) |
Dated: | /s/ Ken A. Plunk | ||
Ken A. Plunk, Senior Vice | |||
President and Chief Financial Officer | |||
(Principal Financial Officer) | |||
(Principal Accounting Officer) |