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 JuneMarch 26, 20212022
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 |
At July 23, 2021April 29, 2022 there were 19,063,90319,174,920 shares of the Registrant’s Common Stock outstanding.
INDEX
Page | |
Part I. Financial Information | |
Item l. Consolidated Financial Statements | |
Consolidated Balance Sheets – | 3 |
Consolidated Statements of Earnings (unaudited) – Three and | 4 |
Consolidated Statements of Comprehensive Income (unaudited) – Three and | 5 |
Consolidated Statements of Changes In Stockholders’ Equity (unaudited) – Three and | 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 | 26 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 30 |
Item 4. Controls and Procedures | 30 |
Part II. Other Information | 31 |
Item 6. Exhibits | 31 |
J & J SNACK FOODS CORP. AND SUBSIDIARIES | |||
CONSOLIDATED BALANCE SHEETS | |||
|
June 26, | March 26, | |||||||||||||||
2021 | September 26, | 2022 | September 25, | |||||||||||||
(unaudited) | 2020 | (unaudited) | 2021 | |||||||||||||
Assets | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 276,268 | $ | 195,809 | $ | 221,017 | $ | 283,192 | ||||||||
Marketable securities held to maturity | 9,902 | 51,151 | 4,530 | 7,980 | ||||||||||||
Accounts receivable, net | 154,845 | 126,587 | 187,933 | 162,939 | ||||||||||||
Inventories | 114,822 | 108,923 | 158,991 | 123,160 | ||||||||||||
Prepaid expenses and other | 11,547 | 17,087 | 11,805 | 7,498 | ||||||||||||
Total current assets | 567,384 | 499,557 | 584,276 | 584,769 | ||||||||||||
Property, plant and equipment, at cost | ||||||||||||||||
Land | 2,494 | 2,494 | 2,494 | 2,494 | ||||||||||||
Buildings | 26,582 | 26,582 | 26,582 | 26,582 | ||||||||||||
Plant machinery and equipment | 340,693 | 330,168 | 340,534 | 343,716 | ||||||||||||
Marketing equipment | 253,199 | 250,914 | 263,494 | 258,624 | ||||||||||||
Transportation equipment | 10,232 | 9,966 | 10,912 | 10,315 | ||||||||||||
Office equipment | 34,291 | 33,878 | 44,641 | 34,648 | ||||||||||||
Improvements | 45,349 | 43,264 | 48,073 | 45,578 | ||||||||||||
Construction in progress | 28,134 | 19,995 | 45,418 | 35,285 | ||||||||||||
Total Property, plant and equipment, at cost | 740,974 | 717,261 | 782,148 | 757,242 | ||||||||||||
Less accumulated depreciation and amortization | 482,056 | 455,645 | 504,249 | 490,055 | ||||||||||||
Property, plant and equipment, net | 258,918 | 261,616 | 277,899 | 267,187 | ||||||||||||
Other assets | ||||||||||||||||
Goodwill | 121,833 | 121,833 | 121,833 | 121,833 | ||||||||||||
Other intangible assets, net | 79,676 | 81,622 | 76,599 | 77,776 | ||||||||||||
Marketable securities held to maturity | 7,568 | 16,927 | 0 | 4,047 | ||||||||||||
Marketable securities available for sale | 11,273 | 13,976 | 5,951 | 10,084 | ||||||||||||
Operating lease right-of-use assets | 51,811 | 58,110 | 53,892 | 54,555 | ||||||||||||
Other | 3,083 | 2,912 | 2,878 | 1,968 | ||||||||||||
Total other assets | 275,244 | 295,380 | 261,153 | 270,263 | ||||||||||||
Total Assets | $ | 1,101,546 | $ | 1,056,553 | $ | 1,123,328 | $ | 1,122,219 | ||||||||
Liabilities and Stockholders' Equity | ||||||||||||||||
Current Liabilities | ||||||||||||||||
Current finance lease liabilities | $ | 252 | $ | 349 | $ | 127 | $ | 182 | ||||||||
Accounts payable | 97,117 | 73,135 | 101,238 | 96,789 | ||||||||||||
Accrued insurance liability | 15,764 | 13,039 | 15,525 | 16,260 | ||||||||||||
Accrued liabilities | 6,890 | 7,420 | 6,456 | 10,955 | ||||||||||||
Current operating lease liabilities | 12,780 | 13,173 | 13,747 | 13,395 | ||||||||||||
Accrued compensation expense | 15,000 | 16,134 | 16,487 | 17,968 | ||||||||||||
Dividends payable | 12,064 | 10,876 | 12,136 | 12,080 | ||||||||||||
Total current liabilities | 159,867 | 134,126 | 165,716 | 167,629 | ||||||||||||
Noncurrent finance lease liabilities | 417 | 368 | 336 | 392 | ||||||||||||
Noncurrent operating lease liabilities | 41,573 | 47,688 | 45,501 | 46,557 | ||||||||||||
Deferred income taxes | 64,284 | 64,413 | 61,339 | 61,578 | ||||||||||||
Other long-term liabilities | 375 | 460 | 455 | 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 19,173,000 and 19,084,000 respectively | 87,688 | 73,597 | ||||||||||||||
Accumulated other comprehensive loss | (13,182 | ) | (15,587 | ) | (13,281 | ) | (13,383 | ) | ||||||||
Retained Earnings | 778,640 | 775,817 | 775,574 | 785,440 | ||||||||||||
Total stockholders' equity | 835,030 | 809,498 | 849,981 | 845,654 | ||||||||||||
Total Liabilities and Stockholders' Equity | $ | 1,101,546 | $ | 1,056,553 | $ | 1,123,328 | $ | 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 | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
March 26, | March 27, | March 26, | March 27, | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net sales | $ | 281,513 | $ | 256,178 | $ | 600,003 | $ | 497,175 | ||||||||
Cost of goods sold | 216,165 | 195,282 | 455,280 | 386,154 | ||||||||||||
Gross profit | 65,348 | 60,896 | 144,723 | 111,021 | ||||||||||||
Operating expenses | ||||||||||||||||
Marketing | 21,036 | 19,192 | 41,943 | 36,493 | ||||||||||||
Distribution | 28,349 | 25,443 | 61,664 | 48,332 | ||||||||||||
Administrative | 11,719 | 9,216 | 22,088 | 18,656 | ||||||||||||
Other general expense | 156 | (185 | ) | 95 | (268 | ) | ||||||||||
Total operating expenses | 61,260 | 53,666 | 125,790 | 103,213 | ||||||||||||
Operating income | 4,088 | 7,230 | 18,933 | 7,808 | ||||||||||||
Other income (expense) | ||||||||||||||||
Investment income | 160 | 579 | 431 | 1,949 | ||||||||||||
Interest expense & other | (57 | ) | 4 | (75 | ) | (11 | ) | |||||||||
Earnings before income taxes | 4,191 | 7,813 | 19,289 | 9,746 | ||||||||||||
Income taxes | 920 | 1,752 | 4,927 | 1,907 | ||||||||||||
NET EARNINGS | $ | 3,271 | $ | 6,061 | $ | 14,362 | $ | 7,839 | ||||||||
Earnings per diluted share | $ | 0.17 | $ | 0.32 | $ | 0.75 | $ | 0.41 | ||||||||
Weighted average number of diluted shares | 19,206 | 19,130 | 19,180 | 19,081 | ||||||||||||
Earnings per basic share | $ | 0.17 | $ | 0.32 | $ | 0.75 | $ | 0.41 | ||||||||
Weighted average number of basic shares | 19,134 | 19,006 | 19,110 | 18,971 | ||||||||||||
The accompanying notes are an integral part of these statements. |
J | ||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||
(Unaudited) | ||||||||
(in thousands) |
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 | Six months ended | |||||||||||||||
March 26, | March 27, | March 26, | March 27, | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net earnings | $ | 3,271 | $ | 6,061 | $ | 14,362 | $ | 7,839 | ||||||||
Foreign currency translation adjustments | 546 | (531 | ) | 102 | 1,748 | |||||||||||
Total other comprehensive income (loss), net of tax | 546 | (531 | ) | 102 | 1,748 | |||||||||||
Comprehensive income | $ | 3,817 | $ | 5,530 | $ | 14,464 | $ | 9,587 | ||||||||
The accompanying notes are an integral part of these statements. |
J & J | ||||||||||
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 | ||||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 27 | 3,564 | 0 | 0 | 3,564 | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | 0 | 657 | 0 | 657 | |||||||||||||||||||||||||||||||||||
Dividends declared | - | 0 | 0 | (12,066 | ) | (12,066 | ) | |||||||||||||||||||||||||||||||||
Share-based compensation | - | 982 | 0 | 0 | 982 | |||||||||||||||||||||||||||||||||||
Net earnings | - | 0 | 0 | 28,893 | 28,893 | |||||||||||||||||||||||||||||||||||
Balance at June 26, 2021 | 19,061 | 69,572 | (13,182 | ) | 778,640 | 835,030 | ||||||||||||||||||||||||||||||||||
Balance at March 26, 2022 | 19,173 | $ | 87,688 | $ | (13,281 | ) | $ | 775,574 | $ | 849,981 | ||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | 0 | 41 | 0 | 41 | |||||||||||||||||||||||||||||||||||
Dividends declared | - | 0 | 0 | (10,873 | ) | (10,873 | ) | |||||||||||||||||||||||||||||||||
Share-based compensation | - | 1,011 | 0 | 0 | 1,011 | |||||||||||||||||||||||||||||||||||
Net loss | - | 0 | 0 | (12,647 | ) | (12,647 | ) | |||||||||||||||||||||||||||||||||
Balance at June 27, 2020 | 18,888 | 46,560 | (16,058 | ) | 780,098 | 810,600 | ||||||||||||||||||||||||||||||||||
Balance at March 27, 2021 | 19,034 | $ | 65,026 | $ | (13,839 | ) | $ | 761,813 | $ | 813,000 | ||||||||||||||||||||||||||||||
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 | Six Months Ended | |||||||||||||||
June 26, | June 27, | March 26, | March 27, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Operating activities: | ||||||||||||||||
Net earnings | $ | 36,732 | $ | 11,721 | $ | 14,362 | $ | 7,839 | ||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||
Depreciation of fixed assets | 36,278 | 37,353 | 23,868 | 24,253 | ||||||||||||
Amortization of intangibles and deferred costs | 2,096 | 2,516 | 1,183 | 1,457 | ||||||||||||
Loss from disposals of property & equipment | 100 | 0 | ||||||||||||||
Share-based compensation | 3,252 | 3,421 | 2,350 | 2,270 | ||||||||||||
Deferred income taxes | (188 | ) | (426 | ) | (251 | ) | (4 | ) | ||||||||
(Gain) loss on marketable securities | (926 | ) | 1,746 | |||||||||||||
Plant shutdown impairment costs | 0 | 5,072 | ||||||||||||||
Loss (Gain) on marketable securities | 69 | (768 | ) | |||||||||||||
Other | (305 | ) | (309 | ) | (184 | ) | (163 | ) | ||||||||
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 | (25,031 | ) | (10,884 | ) | ||||||||||||
Increase in inventories | (5,964 | ) | (3,751 | ) | (36,538 | ) | (6,432 | ) | ||||||||
(Increase) decrease in prepaid expenses | 5,710 | (7,879 | ) | |||||||||||||
Increase (decrease) in accounts payable and accrued liabilities | 24,823 | (7,478 | ) | |||||||||||||
Net cash provided by operating activities | 73,568 | 66,620 | ||||||||||||||
Increase in prepaid expenses | (4,308 | ) | (118 | ) | ||||||||||||
(Decrease) increase in accounts payable and accrued liabilities | (2,055 | ) | 9,331 | |||||||||||||
Net cash (used in) provided by operating activities | (26,435 | ) | 26,781 | |||||||||||||
Investing activities: | ||||||||||||||||
Payments for purchases of companies, net of cash acquired | 0 | (57,197 | ) | |||||||||||||
Purchases of property, plant and equipment | (34,456 | ) | (47,637 | ) | (35,306 | ) | (18,829 | ) | ||||||||
Purchases of marketable securities | 0 | (6,103 | ) | |||||||||||||
Proceeds from redemption and sales of marketable securities | 54,191 | 54,125 | 11,526 | 41,337 | ||||||||||||
Proceeds from disposal of property and equipment | 2,079 | 2,852 | 589 | 1,262 | ||||||||||||
Other | 42 | (72 | ) | 0 | 18 | |||||||||||
Net cash provided by (used in) investing activities | 21,856 | (54,032 | ) | |||||||||||||
Net cash (used in) provided by investing activities | (23,191 | ) | 23,788 | |||||||||||||
Financing activities: | ||||||||||||||||
Payments to repurchase common stock | 0 | (8,972 | ) | |||||||||||||
Proceeds from issuance of stock | 17,178 | 6,300 | 11,741 | 13,582 | ||||||||||||
Payments on capitalized lease obligations | (48 | ) | (272 | ) | ||||||||||||
Payments on finance lease obligations | (111 | ) | (173 | ) | ||||||||||||
Payment of cash dividend | (32,719 | ) | (31,193 | ) | (24,163 | ) | (21,776 | ) | ||||||||
Net cash used in financing activities | (15,589 | ) | (34,137 | ) | (12,533 | ) | (8,367 | ) | ||||||||
Effect of exchange rate on cash and cash equivalents | 624 | (885 | ) | (16 | ) | 375 | ||||||||||
Net increase (decrease) in cash and cash equivalents | 80,459 | (22,434 | ) | |||||||||||||
Net (decrease) increase in cash and cash equivalents | (62,175 | ) | 42,577 | |||||||||||||
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 | $ | 221,017 | $ | 238,386 | ||||||||
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 financial position and the results of operations and cash flows.
The results of operations for the three and six months ended March 26, 2022 and March 27, 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 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
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 830
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.
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. |
| (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 | ||||||||
DisaggregationVariable Consideration
In addition to fixed contract consideration, our contracts include some form of Revenuevariable 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 $15.2 million at March 26, 2022 and $14.6 million at September 25, 2021.
Warranties & Returns
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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 liabilities on our balance sheet as follows:
(in thousands) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
March 26, | March 27, | March 26, | March 27, | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Beginning Balance | $ | 1,030 | $ | 1,716 | $ | 1,097 | $ | 1,327 | ||||||||
Additions to contract liability | 1,374 | 1,201 | 2,573 | 2,945 | ||||||||||||
Amounts recognized as revenue | (1,312 | ) | (1,827 | ) | (2,578 | ) | (3,182 | ) | ||||||||
Ending Balance | $ | 1,092 | $ | 1,090 | $ | 1,092 | $ | 1,090 | ||||||||
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. 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 $1,564,000 and $1,405,000 on March 26, 2022 and September 25, 2021, |
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 June 26, 2021 | ||||||||||||
Income | Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Basic EPS | ||||||||||||
Net Earnings available to common stockholders | $ | 28,893 | 19,045 | $ | 1.52 | |||||||
Effect of Dilutive Securities | ||||||||||||
Options | 0 | 140 | (0.01 | ) | ||||||||
Diluted EPS | ||||||||||||
Net Earnings available to common stockholders plus assumed conversions | $ | 28,893 | 19,185 | $ | 1.51 | |||||||
Three Months Ended March 26, 2022 | ||||||||||||
Income | Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Basic EPS | ||||||||||||
Net earnings available to common stockholders | $ | 3,271 | 19,134 | $ | 0.17 | |||||||
Effect of dilutive securities | ||||||||||||
Options | 0 | 72 | 0 | |||||||||
Diluted EPS | ||||||||||||
Net earnings available to common stockholders plus assumed conversions | $ | 3,271 | 19,206 | $ | 0.17 | |||||||
270,352 anti-dilutive shares have been excluded in the computation of EPS for the three months ended March 26, 2022. |
Six Months ended March 26, 2022 | ||||||||||||
Income | Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Basic EPS | ||||||||||||
Net earnings available to common stockholders | $ | 14,362 | 19,110 | $ | 0.75 | |||||||
Effect of dilutive securities | ||||||||||||
Options | 0 | 70 | 0 | |||||||||
Diluted EPS | ||||||||||||
Net earnings available to common stockholders plus assumed conversions | $ | 14,362 | 19,180 | $ | 0.75 | |||||||
271,452 anti-dilutive shares have been excluded in the computation of EPS for the six months ended March 26, 2022. |
Three Months Ended March 27, 2021 | ||||||||||||
Income | Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Basic EPS | ||||||||||||
Net earnings available to common stockholders | $ | 6,061 | 19,006 | $ | 0.32 | |||||||
Effect of dilutive securities | ||||||||||||
Options | 0 | 124 | 0 | |||||||||
Diluted EPS | ||||||||||||
Net earnings available to common stockholders plus assumed conversions | $ | 6,061 | 19,130 | $ | 0.32 | |||||||
20,800163,072 anti-dilutive shares have been excluded in the computation of EPS for the three months ended June 26, 2021March 27, 2021.
Nine Months Ended June 26, 2021 | 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 | $ | 36,732 | 18,996 | $ | 1.93 | |||||||||||||||||||
Net earnings available to common stockholders | $ | 7,839 | 18,971 | $ | 0.41 | |||||||||||||||||||
Effect of Dilutive Securities | ||||||||||||||||||||||||
Effect of dilutive securities | ||||||||||||||||||||||||
Options | 0 | 120 | (0.01 | ) | 0 | 110 | 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 | $ | 7,839 | 19,081 | $ | 0.41 | |||||||||||||||||||
289,692 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 26, 2021
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 | |||||||
184,672 anti-dilutive shares have been excluded in the computation of EPS for the six months ended March 27, 2021. Note 5 At Three months ended Nine months ended Three Months Ended Six Months Ended June 26, June 27, June 26, June 27, March 26, March 27, March 26, March 27, 2021 2020 2021 2020 2022 2021 2022 2021 Stock Options Stock options Stock purchase plan Stock issued to outside director Stock issued to an outside director Restricted stock issued to an employee Performance stock issued to employees Total share-based compensation The above compensation is net of tax benefits The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model. The Company did not grant any stock options during the 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. In November 2021, the Company issued 8,873 service share units (“RSU”)’s. 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-months ended March 26, 2022 or in the three or six-months ended March 27, 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 March 26, 2022 or in the three or six-months ended March 27, 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. 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 on both March 26, 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 March 26, 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 for the six months ended March 26, 2022 was 26%. Our effective tax rate for the six months ended March 27, 2021 was 20%, and was favorably impacted by the tax benefits related to share-based compensation. Our effective tax rate was 22% for the three months ended March 26, 2022 and for the three months ended March 27, 2021 as both were favorably impacted by the tax benefits related to share-based compensation. 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 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 8 Inventories consist of the following: June 26, September 26, March 26, September 25, 2021 2020 2022 2021 (unaudited) (unaudited) (in thousands) (in thousands) Finished goods Raw materials Packaging materials Equipment parts and other Total Inventories 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 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 Frozen Beverages The Chief Operating Decision Maker for Food Service, Three Months Ended Six Months Ended March 26, March 27, March 26, March 27, 2022 2021 2022 2021 Sales to external customers: Food Service Soft pretzels Frozen novelties Churros Handhelds Bakery Other Total Food Service Retail Supermarket Soft pretzels Frozen novelties 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 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 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 (Loss) Capital Expenditures: Food Service Retail Supermarket Frozen Beverages Total Capital Expenditures Assets: Food Service Retail Supermarket Frozen Beverages Total Assets Note 10 Our 3 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 September 26, 2020 Gross Gross Carrying Accumulated Carrying Accumulated 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 Supermarket Balance at June 26, 2021 Balance at September 26, 2020 March 26, 2022 September 25, 2021 Gross Gross Carrying Accumulated Carrying Accumulated 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 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 March 26, 2022 and March 27, 2021 was $594,000 and $777,000, respectively. Aggregate amortization expense of intangible assets for the six months ended March 26, 2022 and March 27, 2021 was $1,174,000 and $1,457,000, respectively. Estimated amortization expense for the next five fiscal years is approximately $2,300,000 in 2022, $2,300,000 in 2023, $2,000,000 in 2024, $1,400,000 in 2025, and $1,400,000 in 2026. The weighted amortization period of the intangible assets, in total, is 11.2 years. The weighted amortization period by intangible asset class is 10.0 years for Customer relationships and 20.0 years for Licenses & rights. 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 (in thousands) Balance at March 26, 2022 Balance at September 25, 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 The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at March 26, 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 March 26, 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 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 26, 2022 and September 25, 2021 are summarized as follows: March 26, 2022 September 25, 2021 Fair Fair Amortized Market Amortized Market Cost Value Cost Value 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 $4,326,000 and $11,526,000 in Total marketable securities held to maturity as of March 26, 2022, with credit ratings of BBB/BB/B had an amortized cost basis totaling $4,530,000. This rating information was obtained March 31, 2022. Note 12 Changes to the components of accumulated other comprehensive loss are as follows: Three Months Ended Six Months Ended March 26, 2022 March 26, 2022 Foreign Currency Foreign Currency Translation Translation Adjustments Adjustments (unaudited) (in thousands) (unaudited) (in thousands) Beginning balance Other comprehensive income Ending balance Three Months Ended Six Months Ended March 27, 2021 March 27, 2021 Foreign Currency Foreign Currency Translation Translation Adjustments Adjustments (unaudited) (in thousands) (unaudited) (in thousands) Beginning balance Other comprehensive (loss) income Ending balance Note 13 – 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 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 (in thousands) ICEE BAMA Total Distributors ICEE Accounts Receivable, net Inventories Property, plant & equipment, net Customer Relationships Distribution rights Goodwill Accounts Payable Purchase Price 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 March 26, 2022, the weighted-average discount rate of our operating and finance leases was 3.3% and 3.2%, respectively. As of March 27, 2021, the weighted-average discount rate of our operating and finance leases was 3.3% 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 Financial Statements The components of lease expense were as follows: Three Months Ended Three Months Ended Six Months Ended Six Months Ended March 26, 2022 March 27, 2021 March 26, 2022 March 27, 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 Total finance lease cost Short-term lease cost in cost of goods sold and operating expenses Total net lease cost Supplemental balance sheet information related to leases is as follows: March 26, 2022 September 25, 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 Six Months Ended March 26, 2022 March 27, 2021 March 26, 2022 March 27, 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 March 26, 2022, the maturities of lease liabilities were as follows: (in thousands) Operating Leases Finance Leases Six months ending September 24, 2022 2023 2024 2025 2026 Thereafter Total minimum payments Less amount representing interest Present value of lease obligations 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 Note 14 We have related party expenses for distribution and shipping related costs with NFI Industries, Inc. Our director, Sidney R. Brown, is CEO of NFI Industries, Inc. The Company paid $2,871,000 and $3,980,000 to NFI in the three and six months ended March 26, 2022 and paid $96,000 and $96,000 through the three and six months ended March 27, 2021. The agreements with NFI include terms that are consistent with those that we believe would have been negotiated at an arm’s length with an independent party. As of March 26, 2022 our consolidated balance sheet included related party trade payables of approximately $424,000. We had 0 related party trade payable balance as of September 25, 2021. 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 harbors 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 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 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. We did not purchase any shares of our common stock in the six months ended March 26, 2022, nor did we purchase any shares of our common stock in fiscal year 2021. In the three months ended 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 six 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 Compared to prior year, Sales of new products FROZEN BEVERAGES we continue to see strong growth as visitation numbers continue to exceed pre-Covid levels. Service revenue increased by calls and additional growth in one of our larger customers. 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 Compared to prior year, operating income decreased by 43% to $4,088,000 in the Our investments generated before tax income of 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 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 March 26, 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 PART II. OTHER INFORMATION Item 6. Exhibit No. 31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 32.1 32.2 101.1 The following financial information from J&J Snack Foods Corp.'s Quarterly Report on Form 10-Q for the quarter ended (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 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. Dated: /s/ Dan Fachner Dan Fachner President and Chief Executive Officer (Principal Executive Officer) Dated: /s/ Ken A. Plunk Ken A. Plunk, Senior Vice President and Chief Financial (Principal Financial Officer) (Principal Accounting Officer) 169,246 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 27, 2020JuneMarch 26, 2021,2022, the Company has three stock-based employee compensation plans. Share-based compensation expense was recognized as follows: (in thousands) $ 512 $ 890 $ 1,505 $ 2,267 $ 586 $ 447 $ 1,400 $ 993 171 57 513 328 90 64 150 342 11 17 33 50 11 22 22 22 23 0 70 0 152 47 224 47 82 0 121 0 $ 717 $ 964 $ 2,121 $ 2,645 $ 921 $ 580 $ 1,917 $ 1,404 $ 265 $ 70 $ 1,131 $ 822 $ 346 $ 446 $ 433 $ 866 date of grant using the Black-Scholes options-pricing model with the following weighted average assumptions used for grants in fiscal year 2022six-month period.nine months: expected volatility of 25.8%; risk-free interest rate of 0.8%; dividend rate of 1.4% and expected lives of 51 months.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.During the fiscal year 2020nine-month period, the Company granted 161,682 stock options. The weighted-average grant date fair value of these options was $14.40.The total amount of gross unrecognized tax benefits is $343,000 and $360,000 on June 26, 2021 and September 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 June 26, 2021, and September 26, 2020, 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 for the nine months ended June 26, 2021 was 24%, primarily due to a $1,131,000 tax benefit Our effective tax rate for the nine months ended June 27, 2020 was 26%. $ 40,850 $ 40,184 $ 74,457 $ 49,756 29,171 24,550 38,023 29,529 12,080 10,545 13,130 11,168 32,721 33,644 33,381 32,707 $ 114,822 $ 108,923 $ 158,991 $ 123,160 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.Maker.15Food ServiceThe primary products sold by the food service group are soft pretzels, frozen juice treatsdesserts, 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.juice treats and dessertsnovelties 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. Within the retail supermarket channel, our frozen and prepackaged products are purchased by the consumer for consumption at home.We sellThe Company markets frozen beverages and related products to the food service industry primarily under the names ICEE, SLUSH PUPPIE and PARROT ICE which are sold primarily in the United States, Mexico and Canada. We also provide repair and maintenance service to customers for customers’ owned equipment.and Retail Supermarkets and the Chief Operating Decision Maker for Frozen Beverages reviews 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 MakersMaker and management when determining each segment’s, and the company’sCompany’s, financial condition and operating performance. In addition, the Chief Operating Decision Makers reviewMaker reviews and evaluateevaluates 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:16 $ 43,261 $ 36,776 $ 93,682 $ 69,463 7,305 10,590 15,762 16,885 17,447 14,720 36,936 26,262 20,506 19,992 39,001 37,603 83,967 82,910 191,798 171,874 3,854 4,336 10,893 7,662 $ 176,340 $ 169,324 $ 388,072 $ 329,749 $ 15,752 $ 15,789 $ 31,946 $ 29,677 18,919 19,386 36,721 34,702 5,687 6,495 13,958 14,155 1,069 2,243 2,345 5,023 (726 ) (608 ) (1,622 ) (1,683 ) 56 601 104 1,126 $ 40,757 $ 43,906 $ 83,452 $ 83,000 $ 35,365 $ 18,529 $ 69,128 $ 34,384 21,000 18,218 43,011 37,114 7,542 5,663 15,389 12,152 509 538 951 776 $ 64,416 $ 42,948 $ 128,479 $ 84,426 $ 281,513 $ 256,178 $ 600,003 $ 497,175 $ 6,670 $ 7,116 $ 13,339 $ 13,902 386 384 752 770 5,484 5,648 10,960 11,424 $ 12,540 $ 13,148 $ 25,051 $ 26,096 $ 536 $ 6,055 $ 9,537 $ 12,235 1,091 6,364 6,075 11,087 2,461 (5,189 ) 3,321 (15,514 ) $ 4,088 $ 7,230 $ 18,933 $ 7,808 $ 13,851 $ 7,246 $ 24,084 $ 15,532 1,094 80 3,623 101 4,261 1,827 7,599 3,196 $ 19,206 $ 9,153 $ 35,306 $ 18,829 $ 799,710 $ 760,557 $ 799,710 $ 760,557 33,206 33,395 33,206 33,395 290,412 270,963 290,412 270,963 $ 1,123,328 $ 1,064,915 $ 1,123,328 $ 1,064,915 $ 50,895 $ 21,384 $ 120,359 $ 116,985 13,927 8,688 30,812 25,222 20,096 7,321 46,358 38,466 18,971 7,448 56,574 22,084 85,706 69,237 257,580 255,016 6,884 2,543 14,546 13,628 $ 196,478 $ 116,621 $ 526,226 $ 471,401 $ 11,193 $ 12,716 $ 40,871 $ 34,874 36,898 33,322 71,600 59,279 4,562 8,151 18,717 21,759 1,191 3,257 6,215 9,135 (513 ) (807 ) (2,196 ) (2,216 ) 526 863 1,652 1,668 $ 53,857 $ 57,502 $ 136,859 $ 124,499 $ 42,279 $ 16,456 $ 76,663 $ 83,606 22,789 17,259 59,903 61,524 8,404 6,363 20,556 27,254 536 362 1,312 1,218 $ 74,009 $ 40,440 $ 158,434 $ 173,602 $ 324,344 $ 214,563 $ 821,519 $ 769,502 $ 6,817 $ 7,050 $ 20,334 $ 21,208 378 468 1,147 1,156 5,469 5,864 16,893 17,505 $ 12,664 $ 13,382 $ 38,374 $ 39,869 $ 17,644 $ (18,242 ) $ 29,879 $ 7,743 9,080 7,910 20,167 14,464 11,420 (9,088 ) (4,094 ) (8,942 ) $ 38,144 $ (19,420 ) $ 45,952 $ 13,265 $ 10,383 $ 7,865 $ 25,915 $ 26,599 93 390 194 1,625 5,151 2,397 8,347 19,413 $ 15,627 $ 10,652 $ 34,456 $ 47,637 $ 779,730 $ 729,331 $ 779,730 $ 729,331 33,405 33,766 33,405 33,766 288,411 294,189 288,411 294,189 $ 1,101,546 $ 1,057,286 $ 1,101,546 $ 1,057,286 17Note 10Our threeJuneMarch 26, 20212022 and September 26, 202025, 2021 are as follows: June 26, 2021 $ 10,408 $ - $ 10,408 $ - 670 670 670 645 13,000 5,863 19,737 11,595 1,690 1,375 1,690 1,312 $ 25,768 $ 7,908 $ 32,505 $ 13,552 $ 12,750 $ - $ 12,750 $ - 676 619 676 519 7,907 5,733 7,907 5,140 $ 21,333 $ 6,352 $ 21,333 $ 5,659 $ 9,315 $ - $ 9,315 $ - 36,100 - 36,100 - 1,439 365 1,439 257 1,400 1,054 1,400 1,002 $ 48,254 $ 1,420 $ 48,254 $ 1,259 $ 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.18Estimated 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 Beverages Total (in thousands) $ 61,189 $ 4,146 $ 56,498 $ 121,833 $ 61,189 $ 4,146 $ 56,498 $ 121,833 $ 9,596 $ 0 $ 10,408 $ 812 670 670 670 670 13,000 6,838 13,000 6,188 1,690 1,438 1,690 1,396 $ 24,956 $ 8,946 $ 25,768 $ 9,066 $ 12,316 $ 0 $ 12,777 $ 461 649 649 649 649 7,907 6,308 7,907 5,931 $ 20,872 $ 6,957 $ 21,333 $ 7,041 $ 9,315 $ - $ 9,315 $ - 36,100 - 36,100 - 1,439 473 1,439 400 1,400 1,107 1,400 1,072 $ 48,254 $ 1,580 $ 48,254 $ 1,472 $ 94,082 $ 17,483 $ 95,355 $ 17,579 Total $ 61,189 $ 4,146 $ 56,498 $ 121,833 $ 61,189 $ 4,146 $ 56,498 $ 121,833 sale.sale consist primarily of investments in mutual funds, preferred stock, and corporate bonds. The FASB definesfair values of mutual funds are based on quoted market prices in active markets and are classified within Level 1 of the fair value ashierarchy. The fair values of preferred stock and corporate bonds are based on quoted prices for identical or similar instruments in markets that are not active. As a result, preferred stock and corporate bonds are classified within Level 2 of 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 hierarchy. $ 4,530 $ 2 $ 59 $ 4,473 $ 4,530 $ 2 $ 59 $ 4,473 $ 3,588 $ 0 $ 549 $ 3,039 2,816 96 0 2,912 $ 6,404 $ 96 $ 549 $ 5,951 a market-based measurement that should be determined based on assumptionsa 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 2022 through 2023, with $4.5 million maturing within the next 12 months. Our expectation is that we will hold the corporate bonds to their maturity dates and redeem them at our amortized cost.participants would usevalues of our investment securities held to maturity at September 25, 2021 are summarized as follows: 12,027 123 18 12,132 $ 12,027 $ 123 $ 18 $ 12,132 (in thousands) $ 3,588 $ 0 $ 536 $ 3,052 6,892 175 35 7,032 $ 10,480 $ 175 $ 571 $ 10,084 (in thousands) $ 4,530 $ 4,473 $ 7,980 $ 8,080 - - 4,047 4,052 $ 4,530 $ 4,473 $ 12,027 $ 12,132 4,530 4,473 7,980 8,080 $ - $ - $ 4,047 $ 4,052 pricing an asset or liability. As a basis for considering such assumptions, the FASB has established three levelsand six months ended March 26, 2022 and were $15,189,000 and $41,337,000 in the three and six months ended March 27, 2021, respectively. Losses of inputs that$25,000 and $69,000 were recorded in the may threebe used and six months ended March 26, 2022, and a gain of $41,000 and $119,000 were recorded in the three and six months ended March 27, 2021. Included in the gains and losses were unrealized losses of $58,000 and unrealized gains of $649,000 in the six months ended March 26, 2022 and March 27, 2021, respectively. Unrealized losses of $53,000 and $46,000 were recorded in the three months ended March 26, 2022, and March 27, 2021, respectively. We use the specific identification method to measure fair value:determine the cost of securities sold. $ (13,827 ) $ (13,383 ) 546 102 $ (13,281 ) $ (13,281 ) Level $ (13,308 ) $ (15,587 ) (531 ) 1,748 $ (13,839 ) $ (13,839 ) 122Observable input suchquoted priceswell as manufacturing and non-manufacturing equipment used in active marketsour business. The remaining lease terms for identical assets or liabilities;these operating leases range from 1 month to 13 years. LevelWe have finance leases with initial noncancelable lease terms in excess of 2Observable inputs, other than Level 1one inputsyear covering the rental of various equipment. These leases are generally for manufacturing and non-manufacturing equipment used in active markets, that are observable either directly or indirectly; andour business. The remaining lease terms for these finance leases range from 1 year to 5 years.Level 3Unobservable 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 are based on quoted prices for identical or similar instruments in markets that are not active. As a result, preferred stock and corporate bonds are classified within Level 2 of the fair value hierarchy. 19The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at June 26, 2021 are summarized as follows: $ 17,470 $ 243 $ 6 $ 17,707 $ 17,470 $ 243 $ 6 $ 17,707 The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at June 26, 2021 are summarized as follows: $ 3,588 $ 0 $ 581 $ 3,007 8,107 213 54 8,266 $ 11,695 $ 213 $ 635 $ 11,273 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 $17.5 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.20The 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: 68,078 1,015 32 69,061 $ 68,078 $ 1,015 $ 32 $ 69,061 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: $ 3,588 $ 0 $ 738 $ 2,850 11,596 116 586 11,126 $ 15,184 $ 116 $ 1,324 $ 13,976 The amortized cost and fair value of the Company’s held to maturity securities by contractual maturity at June 26, 2021 and September 26, 2020 are summarized as follows: September 26, 2020 $ 9,902 $ 10,041 $ 51,151 $ 51,815 7,568 7,666 16,927 17,246 0 0 0 0 $ 17,470 $ 17,707 $ 68,078 $ 69,061 9,902 10,041 51,151 51,815 $ 7,568 $ 7,666 $ 16,927 $ 17,246 21Proceeds from the redemption and sale of marketable securities were $12,854,000 and $54,191,000 in the three and nine months ended June 26, 2021 and were $23,187,000 and $54,125,000 in the three and nine months ended June 27, 2020, respectively. Gains of $21,000 and $139,000 were recorded in the three and nine months ended June 26, 2021, respectively. A gain of $324,000 was recorded in the three months ended June 27, 2020 and losses of $1,746,000 were recorded in the nine months ended June 27, 2020. Included in the gains and losses were unrealized gains of $786,000 and unrealized losses of $1,708,000 in the nine months ended June 26, 2021 and June 27, 2020, respectively. Unrealized gains of $137,000 and $285,000 were recorded in the three months ended June 26, 2021 and June 27, 2020, respectively. We use the specific identification method to determine the cost of securities sold.Total marketable securities held to maturity as of June 26, 2021 with credit ratings of AAA/AA/A had an amortized cost basis totaling $4,970,000 and those with credit ratings of BBB/BB/B had an amortized cost basis totaling $12,500,000. This rating information was obtained June 30, 2021.Note 12 Changes to the components of accumulated other comprehensive loss are as follows: $ (13,839 ) $ (13,839 ) $ (15,587 ) $ (15,587 ) 657 $ 657 2,405 $ 2,405 $ (13,182 ) $ (13,182 ) $ (13,182 ) $ (13,182 ) $ (16,099 ) $ (16,099 ) $ (12,988 ) $ (12,988 ) 41 $ 41 (3,070 ) $ (3,070 ) $ (16,058 ) $ (16,058 ) $ (16,058 ) $ (16,058 ) 22Note 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 $3,163,000 and $1,099,000 for the three months ended June 26, 2021 and were $6,952,000 and $1,568,000 for the nine months ended June 26, 2021. Sales and operating income of ICEE Distributors were $3,200,000 and $1,100,000 for the three months ended June 27, 2020 and were $8,000,000 and $2,000,000 for the nine months ended June 27, 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 $632,000 and $221,000 for the three months ended June 26, 2021 and were $1,437,000 and $365,000 for nine months ended June 26, 2021. Sales and operating income of BAMA ICEE were $636,000 and $205,000 for the three months and were $975,000 and $281,000 for the nine months ended June 27, 2020.The purchase price allocations for the acquisitions are as follows: $ 721 $ 71 $ 792 866 77 943 4,851 1,722 6,573 569 133 702 22,400 6,800 29,200 15,773 3,549 19,322 (210 ) (110 ) (320 ) $ 44,970 $ 12,242 $ 57,212 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 nine months ended June 26, 2021. Acquisition costs of $76,000 are included in other general expense for the nine months ended June 27, 2020.23Note 14 – Leases General Lease DescriptionWe 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 6 years. Contract Contains a Lease 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. $ 3,922 $ 3,962 $ 7,920 $ 7,901 50 78 122 154 2 11 7 25 $ 52 $ 89 $ 129 $ 179 0 0 0 0 $ 3,974 $ 4,051 $ 8,049 $ 8,080 Allocation of Consideration $ 53,892 $ 54,555 $ 13,747 $ 13,395 45,501 46,557 $ 59,248 $ 59,952 $ 0 $ 561 $ 127 $ 182 336 392 $ 463 $ 574 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. $ 3,970 $ 4,001 $ 8,008 $ 7,987 $ 2 $ 87 $ 7 $ 173 $ 37 $ 11 $ 111 $ 25 $ 5,922 $ 578 $ 7,065 $ 1,354 $ - $ - $ - $ - Options to Extend or Terminate Leases $ 7,924 $ 68 14,304 136 11,663 136 8,266 65 5,354 39 18,419 33 $ 65,930 $ 477 (6,682 ) (14 ) $ 59,248 $ 463 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.24We 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 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 Financial Statements The components of lease expense were as follows: $ 3,846 $ 11,747 62 216 5 30 67 246 0 0 Total net lease cost $ 3,913 $ 11,993 25Supplemental balance sheet information related to leases is as follows: $ 51,811 $ 12,780 41,573 Total operating lease liabilities $ 54,353 $ 654 $ 252 417 Total finance lease liabilities $ 669 Supplemental cash flow information related to leases is as follows: $ 3,860 $ 11,847 $ 64 $ 237 $ 23 $ 48 $ 1,317 $ 2,671 $ - - As of June 26, 2021, the maturities of lease liabilities were as follows: $ 3,863 $ 117 13,804 203 11,681 133 8,967 133 5,726 61 16,480 70 $ 60,521 $ 717 (6,168 ) (48 ) $ 54,353 $ 669 As of June 26, 2021, the weighted-average remaining term of our operating and finance leases was 6.2 years and 4.2 years, respectively.26Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsStatements 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.$.633$0.633 per share of its common stock payable on JulyApril 12, 2021,2022, to shareholders of record as of the close of business on June 21, 2021. The cash dividend of $.633 per share represents an increase of 10% from the previous quarterly dividend rate of $.575 per share.March 22, 2022.We purchased 65,648 shares of our common stock in fiscal year 2020, but did not purchase any shares in the nine months ended June 26, 2021. JuneMarch 26, 20212022 and JuneMarch 27, 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 decreases of $657,000 and $41,000 in accumulated other comprehensive loss, respectively. In the nine months ended June 26, 2021, and June 27, 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 $2,405,000$546,000 and an increase of $3,070,000$531,000 in accumulated other comprehensive loss, respectively. In the six months ended March 26, 2022 and March 27, 2021, 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 $102,000 and $1,748,000 in accumulated other comprehensive loss, respectively.27Our general-purpose bank credit line,In December 2021, we entered into an amendment and modification to an amended and restated loan agreement with our existing banks which expires in November 2021, provides for up to a $50,000,000 revolving credit facility.facility repayable in December 2026. The agreement contains restrictive covenants and requires commitment fees in accordance with standard banking practice. There were no outstanding balances under this facility at JuneMarch 26, 2022 or at September 25, 2021.51%10% to $324,344,000$281,513,000 in the thirdsecond quarter and by 7%21% to $821,519,000$600,003,000 for the ninesix months ended JuneMarch 26, 20212022 compared to the three and ninesix months ended JuneMarch 27, 2020,2021, respectively. Net sales in our fiscal second quarter were negatively impacted by unexpected challenges related to our early February implementation of a new enterprise resource planning (“ERP”) system. We experienced operational and supply chain challenges due to this implementation and estimated that these issues resulted in a negative, one-time impact, on fiscal second quarter sales of approximately $20 million, all within our Food Service and Retail segments.68%4% in the thirdsecond quarter to $196,478,000$176,340,000 and by 12%18% to $526,226,000$388,072,000 for the ninesix months, compared to respective prior year periods. Food serviceSales were up across most product lines as many of the venues and locations where our products are approaching pre-COVIDsold that were previously shut down or operating at reduced capacity levelsin the first and more confident consumers are leaving their homessecond quarters of 2021 have partially or fully re-opened in the first and spending more as the market normalizes. Sales accelerated throughoutsecond quarters of 2022. Customer venues including theaters, stadiums, amusement parks, schools, restaurants and strategic accounts continued to experience an increase in foot traffic and visitation, which helped drive strong sales in our key channels led by schools, amusement/recreation, restaurants, c-stores and theaters.core products.138%18% to $50,895,000$43,261,000 in the thirdsecond quarter and by 3%35% to $120,359,000$93,682,000 in the nine months.six months compared to respective prior year periods. Frozen juices and icesnovelties sales increaseddecreased by 60%31% to $13,927,000$7,305,000 in the thirdsecond quarter and increaseddecreased by 22%7% to $30,812,000$15,762,000 in the nine months.six months compared to respective prior year periods. Churro sales to food service customers increased by 174%19% to $20,096,00017,447,000 in the thirdsecond quarter and increased by 21%41% to $46,358,000$36,936,000 in the nine months.six months compared to respective prior year periods. Sales of bakery products increased by 24%1% in the thirdsecond quarter to $85,706,000$83,967,000 and increased by 1%12% to $257,580,000$191,798,000 for the nine months.by 155%3% in the thirdsecond quarter to $18,971,000$20,506,000 and by 156%4% to $39,001,000 in the ninesix months compared to $56,574,000 led by the continued success of a new product developed for one of our larger wholesale club customers.respective prior year periods.$11,762,000$2,000,000 in the thirdsecond quarter and $38,929,000$4,000,000 in the ninesix months, leddriven primarily by the previously noted handheld item.new bakery items, including a new empanada product with a major convenience customer. Price increases had a marginal impact on resultssales in the quarter as traffic and were somewhat offset by the volume drove almost all ofdecreases attributable to the sales decline comparednegative impacts associated with the ERP implementation.year.Operatingyear, operating income in our Food Service segment was $17,644,000decreased by 91% to $536,000 in the thirdsecond quarter compared with an operating loss of $18,242,000and by 22% to $9,537,000 in the six months reflecting the significant increase in ingredients, production and shipping costs as well as the impacts related to our ERP implementation.quarter. Operating incomesales of products to retail supermarkets decreased by 7% to $40,757,000 in our Food Service segmentthe second quarter and increased by 286%1% to $29,879,000$83,452,000 in the ninesix months. TheOur SUPERPRETZEL brand has performed well helping to drive an 8% increase in operating income was primarilysales of soft pretzels in the six months to $31,946,000 despite sales in the second quarter remaining relatively flat due to the increaseimpacts related to our ERP implementation. Sales of frozen novelties decreased by 2% to $18,919,000 in the second quarter, but increased by 6% to $36,721,000 in the six months compared to respective prior year periods. Sales of biscuits decreased by 12% to $5,687,000 in the second quarter and by 1% to $13,958,000 in the six months compared to respective prior year periods. Handheld sales which improved margin efficienciesto retail supermarket customers decreased by 52% to $1,069,000 in the second quarter and expense leverage.by 53% to $2,345,000 in the six months compared to respective prior year periods.RETAIL SUPERMARKETSSales of products to retail supermarkets decreased by 6% to $53,857,000 in the third quarter but increased by 10% to $136,859,000 in the nine months. The decrease in sales in the current quarter was primarily attributable to the stronger customer demand in the prior year third quarter resulting from the initial responses to the COVID-19 pandemic. During the prior year third quarter, a surge in demand and sales was experienced related to the effects of the rapid changes in consumer purchasing habits.Sales of soft pretzels decreased by 12% in the third quarter to $11,193,000 but increased by 17% in the nine months to $40,871,000. Sales of frozen juices and ices increased by 11% to $36,898,000 in the third quarter and by 21% to $71,600,000 in the nine months. Sales of biscuits decreased by 44% to $4,562,000 in the third quarter and by 14% to $18,717,000 in the nine months. Handheld sales to retail supermarket customers decreased by 63% to $1,191,000 in the third quarter and by 32% to $6,215,000 in the nine months.in the nine months were approximately $550,000$500,000 for the three and six months ended, and were primarily related to frozen novelty items. Price increases had a minimal impact on sales in the thirdsecond quarter and in the ninesix months, as sales were driven primarilyand this increase was more than offset by consumer traffic andthe volume trends in retail outlets.decreases attributable to the negative impacts associated with the ERP implementation.OperatingCompared to prior year periods, operating income in our Retail Supermarkets segment increaseddecreased by 15%83% to $9,080,000$1,091,000 in the thirdsecond quarter and by 39%45% to $20,167,000$6,075,000 in the ninesix months. The increasesdecreases in operating income waswere primarily attributable to higher cost of goods sold as well as the improvement in operating margins.impacts related to our ERP implementation. FrozenCompared to prior year periods, frozen beverage and related product sales increased by 83%50% to $74,009,000$64,416,000 in the thirdsecond quarter but decreasedand by 9%52% to $158,434,000$128,479,000 in the ninesix months.Beverages Beverage related sales increased by 157%91% to $42,279,000$35,365,000 in the thirdsecond quarter but decreasedand by 8%101% to $76,663,000$69,128,000 in the ninesix months withcompared to respective prior year periods. Gallon sales were up 88% in the majority ofquarter and up 98% in the fluctuations attributablesix months compared to gallon sales.respective prior year periods. The increase in gallon sales inreflects the current quarter was led bygrowing momentum across theaters, amusement parks, convenience, and restaurant channels. In the amusement parks channel, that experienced sales above pre-COVID 19 levels, and continued traffic increases in the mass merchandise, QSR and theater channels.32%15% to $22,789,000$21,000,000 in the thirdsecond quarter but decreasedand by 3%16% to $59,903,000$43,011,000 in the nine months. The increasesix months, compared to respective prior year periods, led by an acceleration in the quarter was largely due to customers accelerating equipment maintenance to support the post COVID-19 recovery.2932%33% to $8,404,000$7,542,000 in the thirdsecond quarter but decreasedand by 25%27% to $20,556,000$15,389,000 in the nine months. Retailers are beginningsix months, compared to re-invest again which helped to accelerate machine revenues in the quarter.respective prior year periods, driven mainly by growth from large quick service restaurant (QSR) and convenience customers.generatedhad operating income of $11,420,000$2,461,000 in the thirdsecond quarter compared with an operating loss of $9,088,000$5,189,000 in the prior year thirdsecond quarter. In the ninesix months, our Frozen Beverage segment incurred anhad operating lossincome of $4,094,000$3,321,000 compared with an operating loss of $8,942,000$15,514,000 in the prior year nine-monthsix-month period. The comparative performance was impacted byprimarily a result of higher beverage sales volume which drove leverage across the challenging sales environment in the prior year quarter due to the COVID-19 pandemic.business.29.7%23.2% in the third quarterthree-month period this year and 17.3% in the prior year quarter.23.8% last year. Gross profit as a percentage of sales was 25.2%24.1% in the nine-monthsix-month period this year and 24.0%22.3% last year. Inflation continued to build over the quarter and six-month period which has significantly pressured margins. The increase is largely attributableimpact was especially pronounced in key raw material purchases like flour, eggs, dairy, chocolates and meats, as well as packaging and fuel. We have pricing and cost initiatives in place to offset these cost pressures, though we do not expect to see most of the benefit of increased sales, favorable product mix and corresponding margin efficiencies.benefits on gross profit until later in the fiscal year.2.5%14% to $58,030,000$61,260,000 in the thirdsecond quarter but decreasedand by 5.8%22% to $161,243,000$125,790,000 in the nine months.six months compared to respective prior year periods. As a percentage of net sales, operating expenses decreasedincreased from 26.4%20.9% to 17.9%21.8% in the thirdsecond quarter and increasedfrom 20.8% to 21.0% in the nine months from 22.2% to 19.6%.six months.decreased to 6.3%remained flat at 7.5% of net sales in the thirdsecond quarter from 10.2% in prior year and decreased to 6.9%7.0% in the ninesix months compared with 8.9%7.3% in prior year’s nine-monthsix-month period. Distribution expenses decreasedincreased to 8.4%10.1% of net sales in the thirdsecond quarter from 9.9% in the prior year but increased slightlyand to 9.2%10.3% in the ninesix months compared with 9.1%9.7% in prior year’s nine-monthsix-month period. Administrative expenses decreasedincreased to 3.2%4.2% of net sales in the thirdsecond quarter from 3.9%3.6% in prior year andbut decreased to 3.5%3.7% in the ninesix months compared with 3.7%3.8% in prior year’s nine-monthsix-month period. Operating expensesprior year were impactedsecond quarter but increased by $5.1 million of plant shutdown impairment costs in both the three month, and nine-month periods.Operating income was $38,144,000142% to $18,933,000 in the third quarter compared with an operating loss of $19,420,000 in the prior year. Operating income increased by 246% to $45,952,000 in the ninesix months as a result of the aforementioned items.$470,000$160,000 in the thirdsecond quarter, a $830,000$419,000 decrease fromover prior year. In the ninesix months, our investments generated before tax income of $2,419,000,$431,000, a 10%78% decrease from the prior year period. The decrease in before tax investment income compared with prior year was primarily attributabledue to decreases in the decrease in investments held between periods.amount of investments.30NetCompared to prior year, net earnings decreased by 46% to $3,271,000 in the thirdsecond quarter were $28,893,000 compared with a loss of $12,647,000 in prior year. Net earningsbut increased by 213%83% to $14,362,000 in the nine months to $36,732,000.six months. Our effective tax rate was 24%26% in the ninesix months compared with 26%20% in the prior year’s nine-month period.six- month period, as prior year’s six-month period effective tax rate was favorably impacted by tax benefits related to share-based compensation. Our effective tax rate was 22% in the second quarter and was also 22% in the prior year second quarter, as both were favorably impacted by the tax benefits related to share-based compensation.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 2020The 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 26, 2021,June 26,2021,March 26, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.3130Item 6. Exhibits31.1 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. JuneMarch 26, 2021,2022, formatted in iXBRL (Inline extensibleinline XBRL (extensible Business Reporting Language):104 Cover Page Interactive Data File (formatted as Inline XBRL and containing in Exhibit 101) (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 Statements104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)3231July 29, 2021May 5, 2022 July 29, 2021May 5, 2022President and Chief Financial Officer (PrincipalOfficer)Officer 3332