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 December 26, 2020March 27, 2021
or
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 0-14616
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 |
As January 19,At April 23, 2021 there were 18,979,63719,035,968 shares of the Registrant’s Common Stock outstanding.
INDEX
Page | ||
Number | ||
Part I. Financial Information | ||
Item l. | Consolidated Financial Statements | |
Consolidated Balance Sheets – | 3 | |
Consolidated Statements of Earnings (unaudited) – Three and six months | 4 | |
Consolidated Statements of Comprehensive Income (unaudited) – Three | 5 | |
Consolidated Statements of Changes In Stockholders’ Equity (unaudited) – Three | 6 | |
Consolidated Statements of Cash Flows (unaudited) – | 7 | |
Notes to the Consolidated Financial Statements (unaudited) | 8 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
|
Item 4. | Controls and Procedures |
|
Part II. Other Information | ||
Item 6. Exhibits |
|
|
J & J SNACK FOODS CORP. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(in thousands, except share amounts) |
March 27, | ||||||||
2021 | September 26, | |||||||
(unaudited) | 2020 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 238,386 | $ | 195,809 | ||||
Marketable securities held to maturity | 21,379 | 51,151 | ||||||
Accounts receivable, net | 137,683 | 126,587 | ||||||
Inventories | 115,590 | 108,923 | ||||||
Prepaid expenses and other | 17,231 | 17,087 | ||||||
Total current assets | 530,269 | 499,557 | ||||||
Property, plant and equipment, at cost | ||||||||
Land | 2,494 | 2,494 | ||||||
Buildings | 26,582 | 26,582 | ||||||
Plant machinery and equipment | 337,763 | 330,168 | ||||||
Marketing equipment | 248,461 | 250,914 | ||||||
Transportation equipment | 9,942 | 9,966 | ||||||
Office equipment | 34,186 | 33,878 | ||||||
Improvements | 44,797 | 43,264 | ||||||
Construction in progress | 23,484 | 19,995 | ||||||
Total Property, plant and equipment, at cost | 727,709 | 717,261 | ||||||
Less accumulated depreciation and amortization | 472,012 | 455,645 | ||||||
Property, plant and equipment, net | 255,697 | 261,616 | ||||||
Other assets | ||||||||
Goodwill | 121,833 | 121,833 | ||||||
Other intangible assets, net | 80,305 | 81,622 | ||||||
Marketable securities held to maturity | 7,580 | 16,927 | ||||||
Marketable securities available for sale | 12,518 | 13,976 | ||||||
Operating lease right-of-use assets | 53,994 | 58,110 | ||||||
Other | 2,719 | 2,912 | ||||||
Total other assets | 278,949 | 295,380 | ||||||
Total Assets | $ | 1,064,915 | $ | 1,056,553 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities | ||||||||
Current finance lease liabilities | $ | 288 | $ | 349 | ||||
Accounts payable | 83,460 | 73,135 | ||||||
Accrued insurance liability | 14,136 | 13,039 | ||||||
Accrued liabilities | 7,272 | 7,420 | ||||||
Current operating lease liabilities | 12,978 | 13,173 | ||||||
Accrued compensation expense | 14,120 | 16,134 | ||||||
Dividends payable | 10,943 | 10,876 | ||||||
Total current liabilities | 143,197 | 134,126 | ||||||
Noncurrent finance lease liabilities | 256 | 368 | ||||||
Noncurrent operating lease liabilities | 43,609 | 47,688 | ||||||
Deferred income taxes | 64,449 | 64,413 | ||||||
Other long-term liabilities | 404 | 460 | ||||||
Stockholders' Equity | ||||||||
Preferred stock, $1 par value; authorized 10,000,000 shares; none issued | 0 | 0 | ||||||
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding 19,034,000 and 18,915,000 respectively | 65,026 | 49,268 | ||||||
Accumulated other comprehensive loss | (13,839 | ) | (15,587 | ) | ||||
Retained Earnings | 761,813 | 775,817 | ||||||
Total stockholders' equity | 813,000 | 809,498 | ||||||
Total Liabilities and Stockholders' Equity | $ | 1,064,915 | $ | 1,056,553 | ||||
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 | Six months ended | |||||||||||||||
March 27, | March 28, | March 27, | March 28, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net Sales | $ | 256,178 | $ | 272,042 | $ | 497,175 | $ | 554,939 | ||||||||
Cost of goods sold | 195,282 | 202,599 | 386,154 | 407,635 | ||||||||||||
Gross Profit | 60,896 | 69,443 | 111,021 | 147,304 | ||||||||||||
Operating expenses | ||||||||||||||||
Marketing | 19,192 | 23,848 | 36,493 | 46,580 | ||||||||||||
Distribution | 25,443 | 24,834 | 48,332 | 48,376 | ||||||||||||
Administrative | 9,216 | 10,174 | 18,656 | 19,792 | ||||||||||||
Other general (income) expense | (185 | ) | (395 | ) | (268 | ) | (129 | ) | ||||||||
Total Operating Expenses | 53,666 | 58,461 | 103,213 | 114,619 | ||||||||||||
Operating Income | 7,230 | 10,982 | 7,808 | 32,685 | ||||||||||||
Other (expense)income | ||||||||||||||||
Investment(loss)income | 579 | (413 | ) | 1,949 | 1,373 | |||||||||||
Interest (expense) & other | 4 | (27 | ) | (11 | ) | (53 | ) | |||||||||
Earnings before income taxes | 7,813 | 10,542 | 9,746 | 34,005 | ||||||||||||
Income taxes | 1,752 | 3,233 | 1,907 | 9,637 | ||||||||||||
NET EARNINGS | $ | 6,061 | $ | 7,309 | $ | 7,839 | $ | 24,368 | ||||||||
Earnings per diluted share | $ | 0.32 | $ | 0.38 | $ | 0.41 | $ | 1.28 | ||||||||
Weighted average number of diluted shares | 19,130 | 19,014 | 19,081 | 19,079 | ||||||||||||
Earnings per basic share | $ | 0.32 | $ | 0.39 | $ | 0.41 | $ | 1.29 | ||||||||
Weighted average number of basic shares | 19,006 | 18,921 | 18,971 | 18,910 | ||||||||||||
The accompanying notes are an integral part of these statements. |
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
J&J SNACK FOODS CORP. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||
(Unaudited) | ||||||||
(in thousands) |
December 26, | ||||||||
2020 | September 26, | |||||||
(unaudited) | 2020 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 228,335 | $ | 195,809 | ||||
Marketable securities held to maturity | 34,286 | 51,151 | ||||||
Accounts receivable, net | 113,210 | 126,587 | ||||||
Inventories | 114,882 | 108,923 | ||||||
Prepaid expenses and other | 17,942 | 17,087 | ||||||
Total current assets | 508,655 | 499,557 | ||||||
Property, plant and equipment, at cost | ||||||||
Land | 2,494 | 2,494 | ||||||
Buildings | 26,582 | 26,582 | ||||||
Plant machinery and equipment | 331,357 | 330,168 | ||||||
Marketing equipment | 249,440 | 250,914 | ||||||
Transportation equipment | 10,251 | 9,966 | ||||||
Office equipment | 34,095 | 33,878 | ||||||
Improvements | 43,994 | 43,264 | ||||||
Construction in progress | 23,874 | 19,995 | ||||||
Total Property, plant and equipment, at cost | 722,087 | 717,261 | ||||||
Less accumulated depreciation and amortization | 462,873 | 455,645 | ||||||
Property, plant and equipment, net | 259,214 | 261,616 | ||||||
Other assets | ||||||||
Goodwill | 121,833 | 121,833 | ||||||
Other intangible assets, net | 80,947 | 81,622 | ||||||
Marketable securities held to maturity | 8,595 | 16,927 | ||||||
Marketable securities available for sale | 13,734 | 13,976 | ||||||
Operating lease right-of-use assets | 55,989 | 58,110 | ||||||
Other | 2,876 | 2,912 | ||||||
Total other assets | 283,974 | 295,380 | ||||||
Total Assets | $ | 1,051,843 | $ | 1,056,553 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities | ||||||||
Current finance lease liabilities | $ | 332 | $ | 349 | ||||
Accounts payable | 76,325 | 73,135 | ||||||
Accrued insurance liability | 13,842 | 13,039 | ||||||
Accrued liabilities | 6,924 | 7,420 | ||||||
Current operating lease liabilities | 12,981 | 13,173 | ||||||
Accrued compensation expense | 11,387 | 16,134 | ||||||
Dividends payable | 10,900 | 10,876 | ||||||
Total current liabilities | 132,691 | 134,126 | ||||||
Noncurrent finance lease liabilities | 299 | 368 | ||||||
Noncurrent operating lease liabilities | 45,641 | 47,688 | ||||||
Deferred income taxes | 64,469 | 64,413 | ||||||
Other long-term liabilities | 454 | 460 | ||||||
Stockholders' Equity | ||||||||
Preferred stock, $1 par value; authorized 10,000,000 shares; none issued | 0 | 0 | ||||||
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding 18,956,000 and 18,915,000 respectively | 54,902 | 49,268 | ||||||
Accumulated other comprehensive loss | (13,308 | ) | (15,587 | ) | ||||
Retained Earnings | 766,695 | 775,817 | ||||||
Total stockholders' equity | 808,289 | 809,498 | ||||||
Total Liabilities and Stockholders' Equity | $ | 1,051,843 | $ | 1,056,553 | ||||
Three months ended | Six months ended | |||||||||||||||
March 27, | March 28, | March 27, | March 28, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net Earnings | $ | 6,061 | $ | 7,309 | $ | 7,839 | $ | 24,368 | ||||||||
Foreign currency translation adjustments | (531 | ) | (3,921 | ) | 1,748 | (3,111 | ) | |||||||||
Total Other Comprehensive (Loss) income , net of tax | (531 | ) | (3,921 | ) | 1,748 | (3,111 | ) | |||||||||
Comprehensive Income | $ | 5,530 | $ | 3,388 | $ | 9,587 | $ | 21,257 | ||||||||
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)
J & J Snack Foods Corp. and Subsidiaries |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY |
(in thousands) |
Three months ended | ||||||||
December 26, | December 28, | |||||||
2020 | 2019 | |||||||
Net Sales | $ | 240,997 | $ | 282,897 | ||||
Cost of goods sold | 190,872 | 205,036 | ||||||
Gross Profit | 50,125 | 77,861 | ||||||
Operating expenses | ||||||||
Marketing | 17,301 | 22,732 | ||||||
Distribution | 22,889 | 23,542 | ||||||
Administrative | 9,440 | 9,618 | ||||||
Other general expense | (83 | ) | 266 | |||||
Total Operating Expenses | 49,547 | 56,158 | ||||||
Operating Income | 578 | 21,703 | ||||||
Other income (expense) | ||||||||
Investment income | 1,370 | 1,786 | ||||||
Interest expense & other | (15 | ) | (26 | ) | ||||
Earnings before income taxes | 1,933 | 23,463 | ||||||
Income tax expense | 155 | 6,404 | ||||||
NET EARNINGS | $ | 1,778 | $ | 17,059 | ||||
Earnings per diluted share | $ | 0.09 | $ | 0.89 | ||||
Weighted average number of diluted shares | 19,031 | 19,144 | ||||||
Earnings per basic share | $ | 0.09 | $ | 0.90 | ||||
Weighted average number of basic shares | 18,935 | 18,898 | ||||||
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 | ||||||||
December 26, | December 28, | |||||||
2020 | 2019 | |||||||
Net Earnings | $ | 1,778 | $ | 17,059 | ||||
Foreign currency translation adjustments | 2,279 | 810 | ||||||
Total Other Comprehensive Loss | 2,279 | 810 | ||||||
Comprehensive Income | $ | 4,057 | $ | 17,869 | ||||
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 | ||||||||||||||||||||||||||||||||||||||||
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 | 18,915 | $ | 49,268 | $ | (15,587 | ) | $ | 775,817 | $ | 809,498 | ||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 41 | 4,390 | 0 | 0 | 4,390 | 41 | 4,390 | 0 | 0 | 4,390 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | 0 | 2,279 | 0 | 2,279 | - | 0 | 2,279 | 0 | 2,279 | ||||||||||||||||||||||||||||||
Dividends declared | - | 0 | 0 | (10,900 | ) | (10,900 | ) | - | 0 | 0 | (10,900 | ) | (10,900 | ) | ||||||||||||||||||||||||||
Share-based compensation | - | 1,244 | 0 | 0 | 1,244 | - | 1,244 | 0 | 0 | 1,244 | ||||||||||||||||||||||||||||||
Net earnings | - | 0 | 0 | 1,778 | 1,778 | - | 0 | 0 | 1,778 | 1,778 | ||||||||||||||||||||||||||||||
Balance at December 26, 2020 | 18,956 | $ | 54,902 | $ | (13,308 | ) | $ | 766,695 | $ | 808,289 | 18,956 | $ | 54,902 | $ | (13,308 | ) | $ | 766,695 | $ | 808,289 | ||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 72 | 8,384 | 0 | 0 | 8,384 | |||||||||||||||||||||||||||||||||||
Issuance of common stock for employee stock purchase plan | 6 | 714 | 0 | 0 | 714 | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | 0 | (531 | ) | 0 | (531 | ) | |||||||||||||||||||||||||||||||||
Dividends declared | - | 0 | 0 | (10,943 | ) | (10,943 | ) | |||||||||||||||||||||||||||||||||
Share-based compensation | - | 1,026 | 0 | 0 | 1,026 | |||||||||||||||||||||||||||||||||||
Net earnings | - | 0 | 0 | 6,061 | 6,061 | |||||||||||||||||||||||||||||||||||
Balance at March 27, 2021 | 19,034 | $ | 65,026 | $ | (13,839 | ) | $ | 761,813 | $ | 813,000 | ||||||||||||||||||||||||||||||
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 | 18,895 | $ | 45,744 | $ | (12,988 | ) | $ | 800,995 | $ | 833,751 | ||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 5 | 468 | 0 | 0 | 468 | 5 | 468 | 0 | 0 | 468 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | 0 | 810 | 0 | 810 | - | 0 | 810 | 0 | 810 | ||||||||||||||||||||||||||||||
Dividends declared | - | 0 | 0 | (10,867 | ) | (10,867 | ) | - | 0 | 0 | (10,867 | ) | (10,867 | ) | ||||||||||||||||||||||||||
Share-based compensation | - | 1,299 | 0 | 0 | 1,299 | - | 1,299 | 0 | 0 | 1,299 | ||||||||||||||||||||||||||||||
Net earnings | - | 0 | 0 | 17,059 | 17,059 | - | 0 | 0 | 17,059 | 17,059 | ||||||||||||||||||||||||||||||
Balance at December 28, 2019 | 18,900 | $ | 47,511 | $ | (12,178 | ) | $ | 807,187 | $ | 842,520 | 18,900 | $ | 47,511 | $ | (12,178 | ) | $ | 807,187 | $ | 842,520 | ||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 47 | 5,049 | 0 | 0 | 5,049 | |||||||||||||||||||||||||||||||||||
Issuance of common stock for employee stock purchase plan | 6 | 783 | 0 | 0 | 783 | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | 0 | (3,921 | ) | 0 | (3,921 | ) | |||||||||||||||||||||||||||||||||
Issuance of common stock under deferred stock plan | 1 | 90 | 0 | 0 | 90 | |||||||||||||||||||||||||||||||||||
Dividends declared | - | 0 | 0 | (10,878 | ) | (10,878 | ) | |||||||||||||||||||||||||||||||||
Share-based compensation | - | 1,088 | 0 | 0 | 1,088 | |||||||||||||||||||||||||||||||||||
Repurchase of common stock | (66 | ) | (8,972 | ) | 0 | 0 | (8,972 | ) | ||||||||||||||||||||||||||||||||
Net earnings | - | 0 | 0 | 7,309 | 7,309 | |||||||||||||||||||||||||||||||||||
Balance at March 28, 2020 | 18,888 | $ | 45,549 | $ | (16,099 | ) | $ | 803,618 | $ | 833,068 | ||||||||||||||||||||||||||||||
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) |
Six Months Ended | ||||||||
March 27, | March 28, | |||||||
2021 | 2020 | |||||||
Operating activities: | ||||||||
Net earnings | $ | 7,839 | $ | 24,368 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
Depreciation of fixed assets | 24,253 | 24,810 | ||||||
Amortization of intangibles and deferred costs | 1,457 | 1,677 | ||||||
Share-based compensation | 2,270 | 2,432 | ||||||
Deferred income taxes | (4 | ) | (298 | ) | ||||
(Gain) loss on marketable securities | (768 | ) | 2,070 | |||||
Other | (163 | ) | (286 | ) | ||||
Changes in assets and liabilities net of effects from purchase of companies | ||||||||
(Increase) decrease in accounts receivable | (10,884 | ) | 6,343 | |||||
Increase in inventories | (6,432 | ) | (11,328 | ) | ||||
Increase in prepaid expenses | (118 | ) | (1,598 | ) | ||||
Increase (decrease) in accounts payable and accrued liabilities | 9,331 | (5,920 | ) | |||||
Net cash provided by operating activities | 26,781 | 42,270 | ||||||
Investing activities: | ||||||||
Payments for purchases of companies, net of cash acquired | 0 | (57,197 | ) | |||||
Purchases of property, plant and equipment | (18,829 | ) | (36,985 | ) | ||||
Purchases of marketable securities | 0 | (6,103 | ) | |||||
Proceeds from redemption and sales of marketable securities | 41,337 | 30,938 | ||||||
Proceeds from disposal of property and equipment | 1,262 | 1,853 | ||||||
Other | 18 | (63 | ) | |||||
Net cash provided by (used in) investing activities | 23,788 | (67,557 | ) | |||||
Financing activities: | ||||||||
Payments to repurchase common stock | 0 | (8,972 | ) | |||||
Proceeds from issuance of stock | 13,582 | 6,300 | ||||||
Payments on capitalized lease obligations | (173 | ) | (168 | ) | ||||
Payment of cash dividend | (21,776 | ) | (20,314 | ) | ||||
Net cash used in financing activities | (8,367 | ) | (23,154 | ) | ||||
Effect of exchange rate on cash and cash equivalents | 375 | (985 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 42,577 | (49,426 | ) | |||||
Cash and cash equivalents at beginning of period | 195,809 | 192,395 | ||||||
Cash and cash equivalents at end of period | $ | 238,386 | $ | 142,969 | ||||
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in thousands)
Three months ended | ||||||||
December 26, | December 28, | |||||||
2020 | 2019 | |||||||
Operating activities: | ||||||||
Net earnings | $ | 1,778 | $ | 17,059 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
Depreciation of fixed assets | 12,269 | 11,887 | ||||||
Amortization of intangibles and deferred costs | 679 | 843 | ||||||
Share-based compensation | 1,244 | 1,299 | ||||||
Deferred income taxes | (8 | ) | (231 | ) | ||||
Loss on marketable securities | (681 | ) | 9 | |||||
Other | (80 | ) | 14 | |||||
Changes in assets and liabilities net of effects from purchase of companies | ||||||||
Decrease in accounts receivable | 13,701 | 10,254 | ||||||
Increase in inventories | (5,641 | ) | (8,524 | ) | ||||
(Increase) decrease in prepaid expenses | (889 | ) | 1,922 | |||||
Decrease in accounts payable and accrued liabilities | (1,068 | ) | (963 | ) | ||||
Net cash provided by operating activities | 21,304 | 33,569 | ||||||
Investing activities: | ||||||||
Payments for purchases of companies, net of cash acquired | 0 | (44,970 | ) | |||||
Purchases of property, plant and equipment | (9,676 | ) | (17,605 | ) | ||||
Purchases of marketable securities | 0 | (4,000 | ) | |||||
Proceeds from redemption and sales of marketable securities | 26,148 | 18,782 | ||||||
Proceeds from disposal of property and equipment | 880 | 898 | ||||||
Other | 15 | 38 | ||||||
Net cash provided by (used in) investing activities | 17,367 | (46,857 | ) | |||||
Financing activities: | ||||||||
Proceeds from issuance of stock | 4,390 | 468 | ||||||
Payments on finance lease obligations | (86 | ) | (86 | ) | ||||
Payment of cash dividend | (10,876 | ) | (9,447 | ) | ||||
Net cash used in financing activities | (6,572 | ) | (9,065 | ) | ||||
Effect of exchange rate on cash and cash equivalents | 427 | 285 | ||||||
Net increase (decrease) in cash and cash equivalents | 32,526 | (22,068 | ) | |||||
Cash and cash equivalents at beginning of period | 195,809 | 192,395 | ||||||
Cash and cash equivalents at end of period | $ | 228,335 | $ | 170,327 | ||||
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 |
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 financial position and the results of operations and cash flows. |
The results of operations for the three and six months ended March 27, 2021 and March 28, 2020 are not necessarily indicative of results for the full year. Sales of our frozen beverages and frozen juice bars and ices 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 have shut down or sharply curtailed their foodservice operations as a result of COVID-19 resulting in a negative impact on our business. Capacity at the venues started to improve towards the end of the second quarter, but the |
While we believe that the disclosures presented are adequate to make the information not misleading, it is suggested
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 consolidated financial statements and the notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 26, 2020. |
Note 2
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. |
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 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 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 contract liabilities on our balance sheet. |
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 contract liability on our balance sheet.
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. |
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.
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 approximately $14.7 million at December 26, 2020 and $14.3 million
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 $16,035,000 at March 27, 2021 and $14,345,000 at September 26, 2020. |
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. |
Contract Balances
Our customers are billed for service contracts in advance of performance and therefore we have contract liability
Contract Balances |
Our customers are billed for service contracts in advance of performance and therefore we have contract liabilities on our balance sheet as follows: |
Three Months Ended | ||||||||||||||||||||||||
December 26, | December 28, | (in thousands) | ||||||||||||||||||||||
2020 | 2019 | Three months ended | Six months ended | |||||||||||||||||||||
(in thousands) | March 27, | March 28, | March 27, | March 28, | ||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||
Beginning Balance | $ | 1,327 | $ | 1,334 | $ | 1,716 | $ | 1,094 | $ | 1,327 | $ | 1,334 | ||||||||||||
Additions to contract liability | 1,744 | 1,275 | $ | 1,201 | 1,474 | 2,945 | 2,749 | |||||||||||||||||
Amounts recognized as revenue | (1,355 | ) | (1,515 | ) | $ | (1,827 | ) | (1,333 | ) | (3,182 | ) | (2,848 | ) | |||||||||||
Ending Balance | $ | 1,716 | $ | 1,094 | $ | 1,090 | $ | 1,235 | $ | 1,090 | $ | 1,235 | ||||||||||||
Disaggregation of Revenue
See Note 9 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. For theOn firstSeptember 27, 2020, quarter ended December 26,2020,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 for this quarter.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 customer’sthe customers’ ability to pay off obligations. The allowance for doubtful receivables was $1,388,000$1,381,000 and $1,388,000 on December 26, 2020March 27, 2021 and September 26, 2020, respectively.
Note 3 | 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 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 4 | 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 December 26, 2020 | Three Months Ended March 27, 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 | $ | 1,778 | 18,935 | $ | 0.09 | $ | 6,061 | 19,006 | $ | 0.32 | ||||||||||||||
Effect of Dilutive Securities | ||||||||||||||||||||||||
Options | 0 | 96 | 0 | 0 | 124 | 0 | ||||||||||||||||||
Diluted EPS | ||||||||||||||||||||||||
Net Earnings available to common stockholders plus assumed conversions | $ | 1,778 | 19,031 | $ | 0.09 | $ | 6,061 | 19,130 | $ | 0.32 | ||||||||||||||
187,722163,072 anti-dilutive shares have been excluded in the computation of EPS for the three months ended December 26, 2020March 27, 2021
Three Months Ended December 28, 2019 | Six Months Ended March 27, 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 | $ | 17,059 | 18,898 | $ | 0.90 | $ | 7,839 | 18,971 | $ | 0.41 | ||||||||||||||
Effect of Dilutive Securities | ||||||||||||||||||||||||
Options | 0 | 246 | (0.01 | ) | 0 | 110 | 0 | |||||||||||||||||
Diluted EPS | ||||||||||||||||||||||||
Net Earnings available to common stockholders plus assumed conversions | $ | 17,059 | 19,144 | $ | 0.89 | $ | 7,839 | 19,081 | $ | 0.41 | ||||||||||||||
20,000184,672 anti-dilutive shares have been excluded in the computation of EPS for the six months ended March 27, 2021
Three Months Ended March 28, 2020 | ||||||||||||
Income | Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Basic EPS | ||||||||||||
Net Earnings available to common stockholders | $ | 7,309 | 18,921 | $ | 0.39 | |||||||
Effect of Dilutive Securities | ||||||||||||
Options | 0 | 93 | (0.01 | ) | ||||||||
Diluted EPS | ||||||||||||
Net Earnings available to common stockholders plus assumed conversions | $ | 7,309 | 19,014 | $ | 0.38 | |||||||
180,258 anti-dilutive shares have been excluded in the computation of EPS for the three months ended DecemberMarch 28, 20192020
Six Months Ended March 28, 2020 | ||||||||||||
Income | Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Basic EPS | ||||||||||||
Net Earnings available to common stockholders | $ | 24,368 | 18,910 | $ | 1.29 | |||||||
Effect of Dilutive Securities | ||||||||||||
Options | 0 | 169 | (0.01 | ) | ||||||||
Diluted EPS | ||||||||||||
Net Earnings available to common stockholders plus assumed conversions | $ | 24,368 | 19,079 | $ | 1.28 | |||||||
180,258 anti-dilutive shares have been excluded in the computation of EPS for the six months ended March 28, 2020
Note 5 | At |
Three months ended | ||||||||||||||||||||||||
December 26, | December 28, | Three months ended | Six months ended | |||||||||||||||||||||
2020 | 2019 | March 27, | March 28, | March 27, | March 28, | |||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Stock Options | $ | 546 | $ | 965 | $ | 447 | $ | 412 | $ | 993 | $ | 1,377 | ||||||||||||
Stock purchase plan | 278 | 202 | 64 | 69 | 342 | 271 | ||||||||||||||||||
Stock issued to an outside director | 22 | 33 | 22 | 33 | ||||||||||||||||||||
Restricted stock issued to an employee | 47 | 0 | 47 | 0 | ||||||||||||||||||||
Total share-based compensation | $ | 824 | $ | 1,167 | $ | 580 | $ | 514 | $ | 1,404 | $ | 1,681 | ||||||||||||
The above compensation is net of tax benefits | $ | 420 | $ | 132 | $ | 446 | $ | 620 | $ | 866 | $ | 751 | ||||||||||||
The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model with the following weighted average assumptions used for grants in fiscal 2021six months: expected volatility of 25.8%; risk-free interest rate of 0.5%; dividend rate of 1.5% and expected lives of 51 months. |
The Company did not grant any stock options during the fiscal years 2021 and 2020three-month periods, respectively.
During the fiscal year 2021six-month period, the Company granted 300 stock options. The weighted-average grant date fair value of these options was $29.54. |
During the fiscal year 2020six-month period, the Company granted 1,300 stock options. The weighted-average grant date fair value of these options was $24.67. |
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
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. |
Note 6 | 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. |
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 not 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 and $360,000 on March 27, 2021 and September Our effective tax rate for the six months ended March 27, 2021 was 20%, primarily due to a $866,000 tax benefit related to share-based compensation. Our effective tax rate for the six months ended March 28, 2020 was 28%. Note 7 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. The Company adopted this guidance in the first Note 8 Inventories consist of the following: December 26, September 26, March 27, September 26, 2020 2020 2021 2020 (unaudited) (unaudited) (in thousands) (in thousands) Finished goods Raw materials Packaging materials Equipment parts and other Total Inventories Note 9 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 Makers. Our three 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. Three months ended December 26, December 28, 2020 2019 Sales to External Customers: Food Service Soft pretzels Frozen juices and ices Churros Handhelds Bakery Other Total Food Service Retail Supermarket Soft pretzels Frozen juices and ices Biscuits Handhelds Coupon redemption Other Total Retail Supermarket Frozen Beverages Beverages Repair and maintenance service Machines revenue Other Total Frozen Beverages Consolidated Sales Depreciation and Amortization: Food Service Retail Supermarket Frozen Beverages Total Depreciation and Amortization Operating Income : Food Service Retail Supermarket Frozen Beverages Total Operating Income Capital Expenditures: Food Service Retail Supermarket Frozen Beverages Total Capital Expenditures Assets: Food Service Retail Supermarket Frozen Beverages Total Assets The primary products sold by the food service group are soft pretzels, frozen juice treats and desserts, churros, dough enrobed handheld products and baked goods. Our customers in the food service industry include snack bars and food stands in chain, department and discount stores; malls and shopping centers; fast food outlets; stadiums and sports arenas; leisure andtheme parks; convenience stores; movie theatres; warehouse club stores; schools, colleges and other institutions. Within the food service industry, our products are purchased by the consumer primarily for consumption at the point-of-sale. Retail Supermarkets The primary products sold to the retail supermarket channel are soft pretzel products – including SUPERPRETZEL, frozen juice treats and desserts including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE FRUIT frozen fruit bars and sorbet, PHILLY SWIRL cups and sticks, ICEE Squeeze-Up Tubes and dough enrobed handheld products including PATIO burritos. Within the retail supermarket channel, our frozen and prepackaged products are purchased by the consumer for consumption at home. Frozen Beverages We sell frozen beverages and related products to the food service industry primarily under the names ICEE, SLUSH PUPPIE and PARROT ICE in the United States, Mexico and Canada. We also provide repair and maintenance service to customers for customers’ owned equipment. The Chief Operating Decision Maker for Food Service and Retail Supermarkets and the Chief Operating Decision Maker for Frozen Beverages monthly review detailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales and operating income are key variables monitored by the Chief Operating Decision Makers and management when determining each segment’s and the company’s financial condition and operating performance. In addition, the Chief Operating Decision Makers review and evaluate depreciation, capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment. Information regarding the operations in these three reportable segments is as follows: Three months ended Six months ended March 27, March 28, March 27, March 28, 2021 2020 2021 2020 Sales to External Customers: Food Service Soft pretzels Frozen juices and ices Churros Handhelds Bakery Other Total Food Service Retail Supermarket Soft pretzels Frozen juices and ices Biscuits Handhelds Coupon redemption Other Total Retail Supermarket Frozen Beverages Beverages Repair and maintenance service Machines revenue Other Total Frozen Beverages Consolidated Sales Depreciation and Amortization: Food Service Retail Supermarket Frozen Beverages Total Depreciation and Amortization Operating Income : Food Service Retail Supermarket Frozen Beverages Total Operating Income Capital Expenditures: Food Service Retail Supermarket Frozen Beverages Total Capital Expenditures Assets: Food Service Retail Supermarket Frozen Beverages Total Assets Note 10 Our three reporting units, which are also reportable segments, are Food Service, Retail Supermarkets and Frozen Beverages. The carrying amounts of acquired intangible assets for the Food Service, Retail Supermarkets and Frozen Beverage segments as of March 27, 2021 and September 26, 2020 are as follows: December 26, 2020 September 26, 2020 March 27, 2021 September 26, 2020 Gross Gross Gross Gross Carrying Accumulated Carrying Accumulated Carrying Accumulated Carrying Accumulated Amount Amortization Amount Amortization Amount Amortization Amount Amortization (in thousands) FOOD SERVICE Indefinite lived intangible assets Trade names Amortized intangible assets Non compete agreements Customer relationships License and rights TOTAL FOOD SERVICE RETAIL SUPERMARKETS Indefinite lived intangible assets Trade names Amortized Intangible Assets Trade names Customer relationships TOTAL RETAIL SUPERMARKETS FROZEN BEVERAGES Indefinite lived intangible assets Trade names Distribution rights Amortized intangible assets Customer relationships Licenses and rights TOTAL FROZEN BEVERAGES CONSOLIDATED Fully amortized intangible assets have been removed from the 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 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 Service Retail Supermarket Frozen Beverages Balance at March 27, 2021 Note 11 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 sale consist primarily of investments in mutual funds, preferred stock, and corporate bonds. The fair values of mutual funds are based on quoted market prices in active markets and are classified within Level 1 of the fair value hierarchy. The fair values of preferred stock and corporate bonds The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at Gross Gross Fair Gross Gross Fair Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market Cost Gains Losses Value Cost Gains Losses Value (in thousands) (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 Gross Gross Fair Gross Gross Fair Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market Cost Gains Losses Value Cost Gains Losses Value (in thousands) (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 2021 and 2025 and then income is based on a spread above LIBOR if the securities are not called. The mutual funds and Fixed-to-Floating Perpetual Preferred Stock do not have contractual maturities; however, we classify them as long-term assets as it is our intent to hold them for a period of over one year, although we may sell some or all of them depending on presently unanticipated needs for liquidity or market conditions. The corporate bonds generate fixed income to maturity dates in 2021 through 2023, with The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at September 26, 2020 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 September 26, 2020 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 March 27, 2021 September 26, 2020 December 26, 2020 September 26, 2020 Fair Fair Fair Fair Amortized Market Amortized Market Amortized Market Amortized Market Cost Value Cost Value 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 Proceeds from the redemption and sale of marketable securities were Total marketable securities held to maturity as of Note 12Changes to the components of accumulated other comprehensive loss are as follows: Foreign Currency Translation Adjustments Total Beginning Balance Other comprehensive income Ending Balance Three Months Ended March 27, 2021 Six Months Ended March 27, 2021 (unaudited) (unaudited) (in thousands) (in thousands) Foreign Currency Foreign Currency Foreign Currency Translation Translation Translation Adjustments Total Adjustments Total Adjustments Total Beginning Balance Other comprehensive income Other comprehensive income (loss) before reclassifications Ending Balance Three Months Ended March 28,2020 Six Months Ended March 28,2020 (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 13 On October 1, 2019, we acquired the assets of ICEE Distributors LLC, based in Bossier City, Louisiana. ICEE Distributors does business in Arkansas, Louisiana and Texas with annual sales of approximately $13 million. Sales and operating income of ICEE Distributors were $1,768,000 and $203,000 for the three months ended March 27, 2021 and were $3,789,000 and $469,000 for the six months ended March 27, 2021. Sales and operating income of ICEE Distributors were $2,500,000 and $400,000 for the three months ended March 28, 2020 and were $5,000,000 and $900,000 for the six months ended March 28, 2020. On February 4, 2020, we acquired the assets of BAMA ICEE, based in Birmingham, Alabama. BAMA ICEE does business in Alabama and Georgia with annual sales of approximately $3.5 million. Sales and operating income of BAMA ICEE were The purchase price allocations for the acquisitions are as follows: (in thousands) (in thousands) ICEE ICEE BAMA Total Distributors BAMA ICEE Total Distributors ICEE Accounts Receivable, net Inventories Property, plant & equipment, net Customer Relationships Distribution Rights Distribution rights Goodwill Accounts Payable Purchase Price The goodwill recognized is attributable to the assembled workforce of ICEE Distributors and certain other strategic intangible assets that do not meet the requirements for recognition separate and apart from goodwill. The Company incurred 0 acquisitions costs during the three or six months ended March 27, 2021. Acquisition costs of $62,000 and $98,000 are included in other general expense for the three and six months ended March 28, 2020, Note 14 – Leases General Lease Description We have operating leases with initial noncancelable lease terms in excess of one year covering the rental of various facilities and equipment. Certain of these leases contain renewal options and some provide options to purchase during the lease term. Our operating leases include leases for real estate for some of our office and manufacturing facilities as well as manufacturing and non-manufacturing equipment used in our business. The remaining lease terms for these operating leases range from 1 month to 14 years. 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 contain options to extend or terminate the leases. On a lease-by-lease basis, we have determined if the extension should be considered reasonably certain to be exercised and thus a right-of-use asset and a lease liability should be recorded. Discount Rate The discount rate for leases, if not explicitly stated in the lease, is the incremental borrowing rate, which is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. 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 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 Financial Statements The components of lease expense were as follows: Three Months Ended Three Months Ended Six Months Ended December 26, 2020 March 27, 2021 March 27, 2021 (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 Total finance lease cost Short-term lease cost in Cost of goods sold and Operating Expenses Supplemental balance sheet information related to leases is as follows: December 26, 2020 March 27, 2021 (in thousands) (in thousands) Operating Leases Operating lease right-of-use assets Current operating lease liabilities Noncurrent operating lease liabilities Total 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 Total finance lease liabilities Supplemental cash flow information related to leases is as follows: Three Months Ended Three Months Ended Six Months Ended December 26, 2020 March 27, 2021 March 27, 2021 (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 March 27, 2021, the maturities of lease liabilities were as follows: Operating Leases Finance Leases Operating Leases Finance Leases Nine months ending June 30, 2020 2021 Six months ending September 25, 2021 2022 2023 2024 2025 Thereafter Total minimum payments Less amount representing interest Present value of lease obligations Item 2. 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. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate,” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. 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, 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 future growth and expansion. See Note 11 to these financial statements for a discussion of our investment securities. The Company’s Board of Directors declared a regular quarterly cash dividend of $.575 per share of its common stock payable on We purchased 65,648 shares of our common stock in fiscal year 2020, but did not purchase any shares in the Our general-purpose bank credit line, which expires in November 2021, provides for up to a $50,000,000 revolving credit facility. The agreement contains restrictive covenants and requires commitment fees in accordance with standard banking practice. There were no outstanding balances under this facility at RESULTS OF OPERATIONS Net sales decreased three and six months ended March 28, 2020, respectively. FOOD SERVICE Sales to food service customers decreased Soft pretzel sales to the food service market decreased Frozen juices and ices sales Churro sales to food service customers were Sales of bakery products decreased Sales of handhelds increased Sales of new products in the first twelve months since their introduction were approximately Operating income in our Food Service segment decreased RETAIL SUPERMARKETS Sales of products to retail supermarkets increased Sales Price increases had Operating income in our Retail Supermarkets segment increased FROZEN BEVERAGES Frozen beverage and related product sales decreased Machines revenue (primarily sales of frozen beverage machines) Our Frozen Beverage segment incurred an operating loss CONSOLIDATED Gross profit as a percentage of sales was Total operating expenses decreased Marketing expenses decreased to Operating income decreased Our investments generated before tax income of Net earnings decreased There are many factors which can impact our net earnings from year to year and in the long run, among which are the supply and cost of raw materials and labor, insurance costs, factors impacting sales as noted above, the continuing consolidation of our customers, our ability to manage our manufacturing, marketing and distribution activities, our ability to make and integrate acquisitions and changes in tax laws and interest rates. 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 2020 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 March 27, 2021, 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 PART II. OTHER INFORMATION Item 6. Exhibits Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 32.1 Certification Pursuant to the 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 101.1 The following financial information from J&J Snack Foods Corp.'s Quarterly Report on Form 10-Q for the quarter ended Consolidated Balance Sheets, Consolidated Statements of Earnings, Consolidated Statements of Comprehensive Income, Consolidated Statements of Cash Flows and the Notes to the Consolidated Financial Statements 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 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. Dan Fachner Ken A. Plunk, Senior Vice (Principal The total amount of gross unrecognized tax benefits is $360,000 on both December 26, 2020 26, 2020, 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 December 26, 2020,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 March 27, 2021, and September 26, 2020, the Company has $267,000 of accrued interest and penalties.1314Our effective tax rate for the three months ended December 26, 2020 was 8% primarily due to a $420,000 tax benefit related to share based compensation. Our effective tax rate was 28.0% in last year’s quarter. 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 for the three months ended December 26, 2020. 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. $ 40,789 $ 40,184 $ 41,803 $ 40,184 28,645 24,550 28,066 24,550 11,749 10,545 12,069 10,545 33,699 33,644 33,652 33,644 $ 114,882 $ 108,923 $ 115,590 $ 108,923 14Food ServiceThe primary products sold by the food service group are soft pretzels, frozen juice treats and desserts, churros, dough enrobed handheld products and baked goods. Our customers in the food service industry include snack bars and food stands in chain, department and discount stores; malls and shopping centers; fast food outlets; stadiums and sports arenas; leisure andtheme parks; convenience stores; movie theatres; warehouse club stores; schools, colleges and other institutions. Within the food service industry, our products are purchased by the consumer primarily for consumption at the point-of-sale.Retail SupermarketsThe primary products sold to the retail supermarket channel are soft pretzel products – including SUPERPRETZEL, frozen juice treats and desserts including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE FRUIT frozen fruit bars and sorbet, PHILLY SWIRL cups and sticks, ICEE Squeeze-Up Tubes and dough enrobed handheld products including PATIO burritos. Within the retail supermarket channel, our frozen and prepackaged products are purchased by the consumer for consumption at home.Frozen BeveragesWe sell frozen beverages and related products to the food service industry primarily under the names ICEE, SLUSH PUPPIE and PARROT ICE in the United States, Mexico and Canada. We also provide repair and maintenance service to customers for customers’ owned equipment.The Chief Operating Decision Maker for Food Service and Retail Supermarkets and the Chief Operating Decision Maker for Frozen Beverages monthly review detailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales and operating income are key variables monitored by the Chief Operating Decision Makers and management when determining each segment’s and the company’s financial condition and operating performance. In addition, the Chief Operating Decision Makers review and evaluate depreciation, capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment. Information regarding the operations in these three reportable segments is as follows: (unaudited) (in thousands) $ 32,687 $ 49,941 6,295 7,043 11,542 16,391 17,611 7,189 88,964 96,372 3,326 6,512 $ 160,425 $ 183,448 $ 13,888 $ 9,826 15,316 10,093 7,660 6,978 2,780 2,761 (1,075 ) (543 ) 525 311 $ 39,094 $ 29,426 $ 15,855 $ 35,255 18,896 22,486 6,489 11,981 238 301 $ 41,478 $ 70,023 $ 240,997 $ 282,897 $ 6,786 $ 6,918 386 359 5,776 5,453 $ 12,948 $ 12,730 $ 6,180 $ 18,034 4,723 2,217 (10,325 ) 1,452 $ 578 $ 21,703 $ 8,286 $ 8,403 21 960 1,369 8,242 $ 9,676 $ 17,605 $ 744,277 $ 760,852 31,668 30,963 275,898 304,291 $ 1,051,843 $ 1,096,106 $ 36,776 $ 45,660 $ 69,463 $ 95,601 10,590 9,491 16,885 16,534 14,720 14,754 26,262 31,145 19,992 7,447 37,603 14,636 82,910 89,407 171,874 185,779 4,336 4,573 7,662 11,085 $ 169,324 $ 171,332 $ 329,749 $ 354,780 $ 15,789 $ 12,332 $ 29,677 $ 22,158 19,386 15,864 34,702 25,957 6,495 6,630 14,155 13,608 2,243 3,117 5,023 5,878 (608 ) (866 ) (1,683 ) (1,409 ) 601 494 1,126 805 $ 43,906 $ 37,571 $ 83,000 $ 66,997 $ 18,529 $ 31,895 $ 34,384 $ 67,150 18,218 21,779 37,114 44,265 5,663 8,910 12,152 20,891 538 555 776 856 $ 42,948 $ 63,139 $ 84,426 $ 133,162 $ 256,178 $ 272,042 $ 497,175 $ 554,939 $ 7,116 $ 7,240 $ 13,902 $ 14,158 384 329 770 688 5,648 6,188 11,424 11,641 $ 13,148 $ 13,757 $ 26,096 $ 26,487 $ 6,055 $ 7,951 $ 12,235 $ 25,985 6,364 4,337 11,087 6,554 (5,189 ) (1,306 ) (15,514 ) 146 $ 7,230 $ 10,982 $ 7,808 $ 32,685 $ 7,246 $ 10,331 $ 15,532 $ 18,734 80 275 101 1,235 1,827 8,774 3,196 17,016 $ 9,153 $ 19,380 $ 18,829 $ 36,985 $ 760,557 $ 740,318 $ 760,557 $ 740,318 33,395 31,636 33,395 31,636 270,963 305,983 270,963 305,983 $ 1,064,915 $ 1,077,937 $ 1,064,915 $ 1,077,937 The carrying amounts of acquired intangible assets for the Food Service, Retail Supermarkets and Frozen Beverage segments as of December 26, 2020 (in thousands) $ 10,408 $ - $ 10,408 $ - $ 10,408 $ - $ 10,408 $ - 670 658 670 645 670 670 670 645 13,000 5,213 19,737 11,595 13,000 5,538 19,737 11,595 1,690 1,333 1,690 1,312 1,690 1,354 1,690 1,312 $ 25,768 $ 7,204 $ 32,505 $ 13,552 $ 25,768 $ 7,562 $ 32,505 $ 13,552 $ 12,750 $ - $ 12,750 $ - $ 12,750 $ - $ 12,750 $ - 676 554 676 519 676 587 676 519 7,907 5,338 7,907 5,140 7,907 5,535 7,907 5,140 $ 21,333 $ 5,892 $ 21,333 $ 5,659 $ 21,333 $ 6,122 $ 21,333 $ 5,659 $ 9,315 $ - $ 9,315 $ - $ 9,315 $ - $ 9,315 $ - 36,100 - 36,100 - 36,100 - 36,100 - 1,439 293 1,439 257 1,439 329 1,439 257 1,400 1,019 1,400 1,002 1,400 1,037 1,400 1,002 $ 48,254 $ 1,312 $ 48,254 $ 1,259 $ 48,254 $ 1,366 $ 48,254 $ 1,259 $ 95,355 $ 14,408 $ 102,092 $ 20,470 $ 95,355 $ 15,050 $ 102,092 $ 20,470 December 26, 2020March 27, 2021 amounts.17December 26,March 27, 2021 and March 28, 2020 was $777,000 and $833,000, respectively. Aggregate amortization expense of intangible assets for the six months ended March 27, 2021 and DecemberMarch 28, 20192020 was $679,000$1,457,000 and $843,000,$1,676,000, respectively. Total Food Retail Frozen (in thousands) Service Supermarket Beverages Total Balance at December 26, 2020 $ 61,189 $ 4,146 $ 56,498 $ 121,833 (in thousands) $ 61,189 $ 4,146 $ 56,498 $ 121,833 Balance at September 26, 2020 $ 61,189 $ 4,146 $ 56,498 $ 121,833 $ 61,189 $ 4,146 $ 56,498 $ 121,833 1819 and certificates of deposit are based on quoted prices for identical or similar instruments in markets that are not active. As a result, preferred stock and corporate bonds and certificates of deposit are classified within Level 2 of the fair value hierarchy. December 26, 2020March 27, 2021 are summarized as follows: 42,881 606 15 43,472 $ 28,959 $ 381 $ 15 $ 29,325 $ 42,881 $ 606 $ 15 $ 43,472 $ 28,959 $ 381 $ 15 $ 29,325 December 26, 2020March 27, 2021 are summarized as follows: $ 3,588 $ 0 $ 672 $ 2,916 $ 3,588 $ 0 $ 638 $ 2,950 10,751 206 139 10,818 9,489 160 81 9,568 $ 14,339 $ 206 $ 811 $ 13,734 $ 13,077 $ 160 $ 719 $ 12,518 $41$29 million maturing within 2 years. Our expectation is that we will hold the corporate bonds to their maturity dates and redeem them at our amortized cost.1920 68,078 1,015 32 69,061 $ 68,078 $ 1,015 $ 32 $ 69,061 $ 3,588 $ 0 $ 738 $ 2,850 11,596 116 586 11,126 $ 15,184 $ 116 $ 1,324 $ 13,976 December 26, 2020March 27, 2021 and September 26, 2020 are summarized as follows: (in thousands) $ 34,286 $ 34,745 $ 51,151 $ 51,815 $ 21,379 $ 21,640 $ 51,151 $ 51,815 8,595 8,727 16,927 17,246 7,580 7,685 16,927 17,246 0 0 0 0 0 0 0 0 $ 42,881 $ 43,472 $ 68,078 $ 69,061 $ 28,959 $ 29,325 $ 68,078 $ 69,061 34,286 34,745 51,151 51,815 21,379 21,640 51,151 51,815 $ 8,595 $ 8,727 $ 16,927 $ 17,246 $ 7,580 $ 7,685 $ 16,927 $ 17,246 $26,148,000$15,189,000 and $41,337,000 in the three and sixmonths ended December 26, 2020March 27, 2021 and $18,782,000were $12,156,000 and $30,938,000 in the three and six months ended DecemberMarch 28, 2019,2020, respectively. LossesA gain of $78,000$41,000 and $11,000$119,000 were recorded in the three and six months ended March 27, 2021 and losses of $2,059,000 and $2,070,000 were recorded in the three and six months ended March 28, 2020. Included in the gains and losses were unrealized gains of $649,000 and unrealized losses of $1,993,000 in the six months ended March 27, 2021 and March 28, 2020, respectively. Unrealized losses of $46,000 and $2,064,000 were recorded in the three months ended December 26, 2020March 27, 2021 and DecemberMarch 28, 2019, respectively, which included unrealized gains on marketable securities of $603,000 and $71,000 in the three months ended December 26, 2020,and December 28, 2019, respectively. We use the specific identification method to determine the cost of securities sold.20December 26, 2020March 27, 2021 with credit ratings of AAA/AA/A had an amortized cost basis totaling $16,866,000$7,966,000 and those with credit ratings of BBB/BB/B had an amortized cost basis totaling $26,015,000.$20,993,000. This rating information was obtained DecemberMarch 31, 2020.2021.Note 12 Three Months ended December 26, 2020 (unaudited) (in thousands) $ (15,587 ) $ (15,587 ) 2,279 2,279 $ (13,308 ) $ (13,308 ) Three Months ended December 28, 2019 (unaudited) (in thousands) $ (12,988 ) $ (12,988 ) $ (13,308 ) $ (13,308 ) $ (15,587 ) $ (15,587 ) 810 810 (531 ) (531 ) 1,748 $ 1,748 $ (12,178 ) $ (12,178 ) $ (13,839 ) $ (13,839 ) $ (13,839 ) $ (13,839 ) $ (12,178 ) $ (12,178 ) $ (12,988 ) $ (12,988 ) (3,921 ) (3,921 ) (3,111 ) $ (3,111 ) $ (16,099 ) $ (16,099 ) $ (16,099 ) $ (16,099 ) On October 1, 2019, we acquired the assets of ICEE Distributors LLC, based in Bossier City, Louisiana. ICEE Distributors does business in Arkansas, Louisiana and Texas with annual sales of approximately $13 million. Sales and operating income of ICEE Distributors were $2.1 million and $0.3 million for the three months ended December 26, 2020. Sales and operating income of ICEE Distributors were $2.5 million and $0.5 million for the three months ended December 28, 2019.$400,000$399,000 and $75,000$69,000 for the three months ended December 26,March 27, 2021 and were $805,000 and $144,000 for six months ended March 27, 2021. Sales and operating income of BAMA ICEE were $300,000 and $100,000 for both the three and six months ended March 28, 2020.21 $ 721 $ 71 $ 792 $ 721 $ 71 $ 792 866 77 943 866 77 943 4,851 1,722 6,573 4,851 1,722 6,573 569 133 702 569 133 702 22,400 6,800 29,200 22,400 6,800 29,200 15,773 3,549 19,322 15,773 3,549 19,322 (210 ) (110 ) (320 ) (210 ) (110 ) (320 ) $ 44,970 $ 12,242 $ 57,212 $ 44,970 $ 12,242 $ 57,212 Acquisition costs of $0 and $36,000 are included in other general expense for the three months ended December 26,and December 28, 2019, respectively.22Whether 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.December 26, 2020,March 27, 2021, the weighted-average discount rate of our operating and finance leases was 3.3% and 3.1%3.2%, respectively.2324 $ 1,356 $ 3,962 $ 7,901 412 78 154 14 11 25 426 89 179 0 0 0 Total net lease cost $ 1,782 $ 4,051 $ 8,080 $ 55,989 $ 53,994 $ 12,981 $ 12,978 45,641 43,609 $ 58,622 $ 56,587 $ 600 $ 516 $ 332 $ 288 299 256 $ 631 $ 544 $ 1,427 $ 4,001 $ 7,987 $ 86 $ 87 $ 173 $ 14 $ 11 $ 25 $ 776 $ 578 $ 1,354 $ 0 $ - - As of December 26, 2020, (in thousands) (in thousands) 14,484 280 $ 7,639 $ 184 12,205 168 13,496 168 10,362 98 11,379 98 8,093 98 8,722 98 5,217 26 5,522 26 16,172 0 16,355 0 $ 66,533 $ 670 $ 63,113 $ 574 (7,911 ) (39 ) (6,526 ) (30 ) $ 58,622 $ 631 $ 56,587 $ 544 2425Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsJanuary 12,April 13, 2021, to shareholders of record as of the close of business on December 21, 2020.March 22, 2021.threesix months ended December 26, 2020.March 27, 2021. On August 4, 2017 the Company’s Board of Directors authorized the purchase and retirement of 500,000 shares of the Company’s common stock; 318,858 shares remain to be purchased under this authorization.FluctuationsIn the three months ended March 27, 2021 and March 28, 2020, fluctuations in the valuation of the Mexican and Canadian currencies and the resulting translation of the net assets of our Mexican and Canadian subsidiaries caused an increase of $531,000 and $3,921,000 in accumulated other comprehensive loss, respectively. In the six months ended March 27, 2021 and March 28, 2020, fluctuations in the valuation of the Mexican and Canadian currencies and the resulting translation of the net assets of our Mexican and Canadian subsidiaries caused a decrease of $2,279,000$1,748,000 and an increase of $3,111,000 in accumulated other comprehensive loss, in the 2021 first quarter and a decrease of $810,000 in accumulated other comprehensive loss in the 2020 first quarter.respectively.December 26, 2020.March 27, 2021.$41,900,000 or 15%by 6% to $240,997,000$256,178,000 in the second quarter and by 10% to $497,175,000 for the threesix months ended December 26, 2020. Operating income decreased $21,125,000 or 97% forMarch 27, 2021 compared to the quarter to $578,000.$23,023,000 or 13%by 1% in the firstsecond quarter to $160,425,000. Key customer$169,324,000 and by 7% to $329,749,000 for the six months, compared to respective prior year periods. Sales to food service customers were negatively impacted by COVID-19 during the current year periods as many venues and channels like theme parks, schools and theaters continue to operate at limited capacity impactinglocations shut down or sharply curtailed their food service sales. operations. However, traffic across our food service customers continues to improve as theatres re-open, more schools open their doors, entertainment and amusement venues increase capacity, and growth continues to strengthen across quick serve and casual dining restaurants.35%by 19% to $32,687,000. $36,776,000 in the second quarter and by 27% to $69,463,000 in the six months.decreased 11%increased by 12% to $6,295,000$10,590,000 in the second quarter and increased by 2% to $16,885,000 in the six months.down 30%relatively flat in the second quarter as compared with prior year at $14,720,000 but decreased by 16% to $11,542,000. Sales of funnel cake decreased $3,050,000 or 49%$26,262,000 in the quarter.six months.25$7,408,000 or 8%by 7% in the firstsecond quarter to $88,964,000,$82,910,000 and decreased 7% to $171,874,000 for the six months as the virusCOVID-19 impacted traffic, purchase choices and frequency in this part of our business.$10,422,000 or 145%168% in the second quarter to $19,992,000 and by 157% in the six months led by the continued success of a new product developed for one of our larger wholesale club customers.$12,200,000$14,928,000 in thisthe second quarter and $27,167,000 in the six months led by the previously noted handheld item. Price increases had a marginal impact on results in the quarter as traffic and volume drove almost all of the sales decline compared to lastprior year.$11,854,000by 24% to $6,055,000 in the second quarter and by 53% to $6,180,000$12,235,000 in the six months primarily because ofdue to sales declines which impacted margin efficiencies and expense leverage.$9,668,000 or 33%by 17% to $39,094,000$43,906,000 in the first quarter.second quarter and increased by 24% to $83,000,000 in the six months. Our SUPERPRETZEL brand has performed well in the quarter driving anhelping to drive a 28% increase in soft pretzelpretzels sales of 41%in the second quarter to $13,888,000.$15,789,000 and a 34% increase in the six months to $29,677,000. Sales of frozen juices and ices were up 52%increased by 22% to $15,316,000$19,386,000 in the firstsecond quarter and salesby 34% to $34,702,000 in the six months. Sales of biscuits were up 10% to7,660,000.decreased by 2% to $6,495,000 in the second quarter, but increased by 4% to $14,155,000 in the six months. Handheld sales to retail supermarket customers increased 1%decreased by 28% to $2,243,000 in the quarter. second quarter and by 15% to $5,023,000 in the six months.fromof new products, increased an estimated $400,000which in the second quarter driven bywere approximately $150,000, and were approximately $550,000 for the six months, were primarily related to frozen novelty items.minimuma minimal impact on growth in the second quarter and in the six months, as sales were driven by increased consumer traffic and volume in retail outlets.$2,506,000 or 113%by 47% to $4,723,000$6,364,000 in this year’s firstthe second quarter drivenand by sales69% to $11,087,000 in the six months. The increases andin operating income margins of 12%, over 400 basis points better than last year.was primarily attributable to the increase in sales and the improvement in operating margins. $28,545,000 or 41%by 32% to $41,478,000$42,948,000 in the first quarter. Beverage relatedsecond quarter and by 37% to $84,426,000 in the six months. Beverages sales declined 55%decreased by 42% to $15,855,000.$18,529,000 in the second quarter and by 49% to $34,384,000 in the six months. Gallon sales were down 56% for40% in the three months as we continue to see traffic impacted from Covid-19 related concernsquarter and down 46% in theaters, amusement venues and key retailers. These venues also rely on incremental seasonal sales in December that was impacted from reduced operating capacity and consumers staying home.the six months. Service revenue decreased by 16% to $18,896,000$18,218,000 in the firstsecond quarter driven almost entirely fromand by 16% to $37,114,000 in the six months, with the decreases primarily attributable to the cancellation of a key customer’s planned maintenance program. Machinewas $6,489,000, a decrease of 46% due mainly from lapping $5,000,000decreased by 36% to $5,663,000 in non-recurring salesthe second quarter and by 42% to $12,152,000 in last year's quarter.the six months. The decreases were primarily attributable to slower customer expansion and replacement during the periods.26forof $5,189,000 in the second quarter compared with an operating loss of $10,325,000$1,306,000 in the prior year second quarter. In the six months, our Frozen Beverage segment incurred an operating loss of $15,514,000 compared towith operating income of $1,452,000 last$146,000 in the prior year six-month period. The comparative performance was impacted due to the challenging COVID-19 sales environment as a result of the COVID-19 pandemic which also impacts our gross margin efficiency and ability to leverage fixed expenses.20.8%23.8% in the three-monthsecond quarter and 25.5% last year. Gross profit as a percentage of sales was 22.3% in the six-month period this year and 27.5%26.5% last year. Gross profit percentage decreased because of continued Covid-19COVID-19 sales pressure from our food service and frozen beverages segments. This creates margin leverage challenges as we manage lower production volumes on businesses with large-fixed expenselarge fixed-expense bases.$6,611,000by 8% to $53,666,000 in the firstsecond quarter but asand by 10% to $103,213,000 in the six months. As a percentage of net sales, operating expenses decreased from 21.5% to 20.9% in the second quarter but increased slightly in the six months from 20.7% to 20.6% from 19.9% last year. 20.8%.7.2%7.5% of net sales in this year’sthe second quarter from 8% last year.8.8% in prior year and to 7.3% in the six months compared with 8.4% in prior year’s six-month period. Distribution expenses were 9.5%increased to 9.9% of net sales in thisthe second quarter from 9.1% in the prior year and to 9.7% in the six months compared with 8.7% in prior year’s quarter compared to 8.3% of sales last year.six-month period. Administrative expenses were 3.9%decreased to 3.6% of net sales thisin the second quarter from 3.7% in prior year, but increased to 3.8% in the six months compared to 3.4% last year.with 3.6% in prior year’s six-month period.$21,125,000 or 97%by 34% to $578,000$7,230,000 in the firstsecond quarter and by 76% to $7,808,000 in the six months as a result of the aforementioned items.$1,370,000 this quarter, down from $1,760,000 last year due to decreases$579,000 in the amountsecond quarter, a $992,000 increase over prior year. In the six months, our investments generated before tax income of investments and lower interest rates.$1,949,000, a 42% increase over the prior year period. The increase in before tax investment income compared with prior year was primarily attributable to improved market conditions.$15,281,000, or 90%,by 17% to $6,061,000 in the current three-month periodsecond quarter and by 68% to $1,778,000.$7,839,000 in the six months. Our effective tax rate was 8%20% in thisthe six months compared with 28% in the prior year’s quarter. six- month period.2729The 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 December 26, 2020,December 26, 2020,March 27,2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.2830Exhibit No. Exhibit No. 10.1 Amended and Restated Long Term Incentive Plan (Incorporated by reference from the Company’s Form 8-K filed on February 12, 2021). 31.1 &200231.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.3 Certification Pursuant to Section of 302 of the Sarbanes-Oxley Act of 2020. 99.5 &2002 99.732.2 Certification Pursuant to the 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.3 Certification Pursuant to the 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. December 26, 2020,March 27, 2021, formatted in iXBRL (Inline 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(i)(ii) (iii) (iv) (v) 101.1)101)2931Dated: April 29, 2021 /s/ Gerald B. Shreiber J & J SNACK FOODS CORP.Gerald B. Shreiber Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer) Dated: January 28,April 29, 2021/s/ Gerald B. ShreiberDan Fachner Gerald B. ShreiberChairman of the Board,Chief ExecutiveOfficer and DirectorPresident (Principal Executive Officer) Dated: January 28,April 29, 2021/s/ Ken A. Plunk President and Chief Financial Officer (Principal Financial Officer)(Principal Accounting Officer) Dated: January 28, 2021/s/ Dan Fachner Dan FachnerPresidentExecutiveFinancial Officer)(Principal Accounting Officer) 3032