UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the period ended December 30, 2023
or
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the period ended March 25, 2023
or
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Commission File Number: 0-14616
J&J & J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
New Jersey | 22-1935537 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
6000 Central Highway, Pennsauken,350 Fellowship Road, Mt. Laurel, New Jersey 0810908054
(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.
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| ☒ 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).
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| ☒ 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 ☐ | ||
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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).
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| ☐ Yes ☒ No |
At May 1, 2023As of February 2, 2024 there were 19,252,28119,379,847 shares of the Registrant’s Common Stock outstanding.
INDEX
INDEX |
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Page Number | ||
| Financial | |
Item l. | Consolidated |
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Consolidated Balance Sheets – December 30, 2023 (unaudited) and September 30, 2023 | 3 | |
Consolidated Statements of Earnings (unaudited) - Three | 4 | |
Consolidated Statements of Comprehensive Income (unaudited) – Three | 5 | |
Consolidated Statements of Changes In Stockholders’ Equity (unaudited) – Three | 6 | |
Consolidated Statements of Cash Flows (unaudited) – Three | 7 | |
Notes to the Consolidated Financial Statements (unaudited) | 8 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
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Item 4. | Controls and Procedures |
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Part II. | Other Information | 28 |
Item 1. | Legal Proceedings | 28 |
Item 1A. | Risk Factors | 28 |
Item 2. | Unregistered Sales of Equity Securities and the Use of Proceeds | 28 |
Item 6. |
| 29 |
PART I. | FINANCIAL INFORMATION |
Item 1. | Consolidated Financial Statements |
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
March 25, | December 30, | |||||||||||||||
2023 | September 24, | 2023 | September 30, | |||||||||||||
(unaudited) | 2022 | (unaudited) | 2023 | |||||||||||||
Assets | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 43,283 | $ | 35,181 | $ | 50,020 | $ | 49,581 | ||||||||
Marketable securities held to maturity | - | 4,011 | ||||||||||||||
Accounts receivable, net | 198,442 | 208,178 | 166,156 | 198,129 | ||||||||||||
Inventories | 180,721 | 180,473 | 172,724 | 171,539 | ||||||||||||
Prepaid expenses and other | 12,062 | 16,794 | 8,379 | 10,963 | ||||||||||||
Total current assets | 434,508 | 444,637 | 397,279 | 430,212 | ||||||||||||
Property, plant and equipment, at cost | ||||||||||||||||
Land | 3,714 | 3,714 | 3,684 | 3,684 | ||||||||||||
Buildings | 34,232 | 34,232 | 45,538 | 45,538 | ||||||||||||
Plant machinery and equipment | 396,522 | 374,566 | 468,620 | 445,299 | ||||||||||||
Marketing equipment | 284,509 | 274,904 | 304,160 | 296,482 | ||||||||||||
Transportation equipment | 13,244 | 11,685 | 15,085 | 14,367 | ||||||||||||
Office equipment | 46,355 | 45,865 | 47,966 | 47,393 | ||||||||||||
Improvements | 49,733 | 49,331 | 51,423 | 51,319 | ||||||||||||
Construction in progress | 79,808 | 65,753 | 42,838 | 56,116 | ||||||||||||
Total Property, plant and equipment, at cost | 908,117 | 860,050 | 979,314 | 960,198 | ||||||||||||
Less accumulated depreciation and amortization | 550,000 | 524,683 | 588,241 | 574,295 | ||||||||||||
Property, plant and equipment, net | 358,117 | 335,367 | 391,073 | 385,903 | ||||||||||||
Other assets | ||||||||||||||||
Goodwill | 185,070 | 184,420 | 185,070 | 185,070 | ||||||||||||
Other intangible assets, net | 188,347 | 191,732 | 181,913 | 183,529 | ||||||||||||
Marketable securities available for sale | 4,429 | 5,708 | ||||||||||||||
Operating lease right-of-use assets | 50,252 | 51,137 | 133,715 | 88,868 | ||||||||||||
Other | 4,234 | 3,965 | 3,507 | 3,654 | ||||||||||||
Total other assets | 432,332 | 436,962 | 504,205 | 461,121 | ||||||||||||
Total Assets | $ | 1,224,957 | $ | 1,216,966 | $ | 1,292,557 | $ | 1,277,236 | ||||||||
Liabilities and Stockholders' Equity | ||||||||||||||||
Current Liabilities | ||||||||||||||||
Current liabilities | ||||||||||||||||
Current finance lease liabilities | $ | 226 | $ | 124 | $ | 159 | $ | 201 | ||||||||
Accounts payable | 85,507 | 108,146 | 85,293 | 90,758 | ||||||||||||
Accrued insurance liability | 16,831 | 15,678 | 16,460 | 15,743 | ||||||||||||
Accrued liabilities | 10,448 | 9,214 | 13,144 | 14,214 | ||||||||||||
Current operating lease liabilities | 13,507 | 13,524 | 17,934 | 16,478 | ||||||||||||
Accrued compensation expense | 19,117 | 21,700 | 18,090 | 23,341 | ||||||||||||
Dividends payable | 13,475 | 13,453 | 14,235 | 14,209 | ||||||||||||
Total current liabilities | 159,111 | 181,839 | 165,315 | 174,944 | ||||||||||||
Long-term debt | 92,000 | 55,000 | 7,000 | 27,000 | ||||||||||||
Noncurrent finance lease liabilities | 702 | 254 | 549 | 600 | ||||||||||||
Noncurrent operating lease liabilities | 41,642 | 42,660 | 121,626 | 77,631 | ||||||||||||
Deferred income taxes | 69,602 | 70,407 | 81,085 | 81,310 | ||||||||||||
Other long-term liabilities | 3,613 | 3,637 | 4,521 | 4,233 | ||||||||||||
Stockholders' Equity | ||||||||||||||||
Preferred stock, $1 par value; authorized 10,000,000 shares; none issued | - | - | - | - | ||||||||||||
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding 19,252,000 and 19,219,000 respectively | 100,637 | 94,026 | ||||||||||||||
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding 19,367,000 and 19,332,000 respectively | 120,517 | 114,556 | ||||||||||||||
Accumulated other comprehensive loss | (11,774 | ) | (13,713 | ) | (8,231 | ) | (10,166 | ) | ||||||||
Retained Earnings | 769,424 | 782,856 | 800,175 | 807,128 | ||||||||||||
Total stockholders' equity | 858,287 | 863,169 | 912,461 | 911,518 | ||||||||||||
Total Liabilities and Stockholders' Equity | $ | 1,224,957 | $ | 1,216,966 | $ | 1,292,557 | $ | 1,277,236 |
The accompanying notes are an integral part of these statements.
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
Three months ended | Six months ended | Three months ended | ||||||||||||||||||||||
March 25, | March 26, | March 25, | March 26, | December 30, | December 24, | |||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Net sales | $ | 337,854 | $ | 281,513 | $ | 689,197 | $ | 600,003 | $ | 348,308 | $ | 351,343 | ||||||||||||
Cost of goods sold | 247,470 | 216,165 | 507,958 | 455,280 | 253,723 | 260,488 | ||||||||||||||||||
Gross profit | 90,384 | 65,348 | 181,239 | 144,723 | 94,585 | 90,855 | ||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Marketing | 24,017 | 21,036 | 47,716 | 41,943 | 27,472 | 23,699 | ||||||||||||||||||
Distribution | 38,188 | 28,349 | 80,237 | 61,664 | 40,303 | 42,049 | ||||||||||||||||||
Administrative | 17,919 | 11,719 | 34,310 | 22,088 | 18,199 | 16,391 | ||||||||||||||||||
Other general expense | 67 | 156 | (545 | ) | 95 | |||||||||||||||||||
Other general (income) | (1,072 | ) | (612 | ) | ||||||||||||||||||||
Total operating expenses | 80,191 | 61,260 | 161,718 | 125,790 | 84,902 | 81,527 | ||||||||||||||||||
Operating income | 10,193 | 4,088 | 19,521 | 18,933 | ||||||||||||||||||||
Operating Income | 9,683 | 9,328 | ||||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||
Investment income | 401 | 160 | 1,086 | 431 | 798 | 685 | ||||||||||||||||||
Interest expense | (1,334 | ) | (57 | ) | (2,383 | ) | (75 | ) | (560 | ) | (1,049 | ) | ||||||||||||
Earnings before income taxes | 9,260 | 4,191 | 18,224 | 19,289 | 9,921 | 8,964 | ||||||||||||||||||
Income tax expense | 2,389 | 920 | 4,720 | 4,927 | 2,639 | 2,331 | ||||||||||||||||||
NET EARNINGS | $ | 6,871 | $ | 3,271 | $ | 13,504 | $ | 14,362 | $ | 7,282 | $ | 6,633 | ||||||||||||
Earnings per diluted share | $ | 0.36 | $ | 0.17 | $ | 0.70 | $ | 0.75 | $ | 0.37 | $ | 0.34 | ||||||||||||
Weighted average number of diluted shares | 19,295 | 19,206 | 19,285 | 19,180 | 19,423 | 19,274 | ||||||||||||||||||
Earnings per basic share | $ | 0.36 | $ | 0.17 | $ | 0.70 | $ | 0.75 | $ | 0.38 | $ | 0.35 | ||||||||||||
Weighted average number of basic shares | 19,238 | 19,134 | 19,230 | 19,110 | 19,344 | 19,222 |
The accompanying notes are an integral part of these statements.
J&J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands)
Three months ended | Six months Ended | |||||||||||||||
March 25, | March 26, | March 25, | March 26, | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net earnings | $ | 6,871 | $ | 3,271 | $ | 13,504 | $ | 14,362 | ||||||||
Foreign currency translation adjustments | 1,068 | 546 | 1,939 | 102 | ||||||||||||
Total other comprehensive income, net of tax | 1,068 | 546 | 1,939 | 102 | ||||||||||||
Comprehensive income | $ | 7,939 | $ | 3,817 | $ | 15,443 | $ | 14,464 |
Three months ended | ||||||||
December 30, | December 24, | |||||||
2023 | 2022 | |||||||
Net Earnings | $ | 7,282 | $ | 6,633 | ||||
Foreign currency translation adjustments | 1,935 | 871 | ||||||
Total Other Comprehensive Income (Loss) | 1,935 | 871 | ||||||
Comprehensive Income | $ | 9,217 | $ | 7,504 |
The accompanying notes are an integral part of these statements.
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited) (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 24, 2022 | 19,219 | $ | 94,026 | $ | (13,713 | ) | $ | 782,856 | $ | 863,169 | ||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 10 | 1,285 | - | - | 1,285 | |||||||||||||||||||||||||||||||||||
Balance as September 30, 2023 | 19,332 | $ | 114,556 | $ | (10,166 | ) | $ | 807,128 | $ | 911,518 | ||||||||||||||||||||||||||||||
Common Stock issued in connection with employee and director plans, net of tax withheld | 35 | 4,481 | - | - | 4,481 | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | 871 | - | 871 | - | - | 1,935 | - | 1,935 | ||||||||||||||||||||||||||||||
Dividends declared | - | - | - | (13,461 | ) | (13,461 | ) | - | - | - | (14,235 | ) | (14,235 | ) | ||||||||||||||||||||||||||
Share-based compensation | - | 1,239 | - | - | 1,239 | - | 1,480 | - | - | 1,480 | ||||||||||||||||||||||||||||||
Net earnings | - | - | - | 6,633 | 6,633 | - | - | - | 7,282 | 7,282 | ||||||||||||||||||||||||||||||
Balance at December 24, 2022 | 19,229 | $ | 96,550 | $ | (12,842 | ) | $ | 776,028 | $ | 859,736 | ||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 14 | 1,713 | - | - | 1,713 | |||||||||||||||||||||||||||||||||||
Issuance of common stock for employee stock purchase plan | 9 | 1,061 | - | - | 1,061 | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | 1,068 | - | 1,068 | |||||||||||||||||||||||||||||||||||
Dividends declared | - | - | - | (13,475 | ) | (13,475 | ) | |||||||||||||||||||||||||||||||||
Share-based compensation | - | 1,313 | - | - | 1,313 | |||||||||||||||||||||||||||||||||||
Net earnings | - | - | - | 6,871 | 6,871 | |||||||||||||||||||||||||||||||||||
Balance at March 25, 2023 | 19,252 | $ | 100,637 | $ | (11,774 | ) | $ | 769,424 | $ | 858,287 | ||||||||||||||||||||||||||||||
Balance at December 30, 2023 | 19,367 | $ | 120,517 | $ | (8,231 | ) | $ | 800,175 | $ | 912,461 |
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 25, 2021 | 19,084 | $ | 73,597 | $ | (13,383 | ) | $ | 785,440 | $ | 845,654 | ||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 5 | 706 | - | - | 706 | |||||||||||||||||||||||||||||||||||
Balance as September 24, 2022 | 19,219 | $ | 94,026 | $ | (13,713 | ) | $ | 782,856 | $ | 863,169 | ||||||||||||||||||||||||||||||
Common Stock issued in connection with employee and director plans, net of tax withheld | 10 | 1,285 | - | - | 1,285 | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | (444 | ) | - | (444 | ) | - | - | 871 | - | 871 | ||||||||||||||||||||||||||||
Dividends declared | - | - | - | (12,092 | ) | (12,092 | ) | - | - | - | (13,461 | ) | (13,461 | ) | ||||||||||||||||||||||||||
Share-based compensation | - | 1,083 | - | - | 1,083 | - | 1,239 | - | - | 1,239 | ||||||||||||||||||||||||||||||
Net earnings | - | - | - | 11,091 | 11,091 | - | - | - | 6,633 | 6,633 | ||||||||||||||||||||||||||||||
Balance at December 25, 2021 | 19,089 | $ | 75,386 | $ | (13,827 | ) | $ | 784,439 | $ | 845,998 | ||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 76 | 10,012 | - | - | 10,012 | |||||||||||||||||||||||||||||||||||
Issuance of common stock for employee stock purchase plan | 8 | 1,023 | - | - | 1,023 | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | 546 | - | 546 | |||||||||||||||||||||||||||||||||||
Dividends declared | - | - | - | (12,136 | ) | (12,136 | ) | |||||||||||||||||||||||||||||||||
Share-based compensation | - | 1,267 | - | - | 1,267 | |||||||||||||||||||||||||||||||||||
Net earnings | - | - | - | 3,271 | 3,271 | |||||||||||||||||||||||||||||||||||
Balance at March 26, 2022 | 19,173 | $ | 87,688 | $ | (13,281 | ) | $ | 775,574 | $ | 849,981 | ||||||||||||||||||||||||||||||
Balance at December 24, 2022 | 19,229 | $ | 96,550 | $ | (12,842 | ) | $ | 776,028 | $ | 859,736 |
The accompanying notes are an integral part of these statements.
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in thousands)
Six months ended | Three months ended | |||||||||||||||
March 25, | March 26, | December 30, | December 24, | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Operating activities: | ||||||||||||||||
Net earnings | $ | 13,504 | $ | 14,362 | $ | 7,282 | $ | 6,633 | ||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities | ||||||||||||||||
Depreciation of fixed assets | 27,236 | 23,868 | 15,176 | 13,476 | ||||||||||||
Amortization of intangibles and deferred costs | 3,385 | 1,183 | 1,616 | 1,705 | ||||||||||||
(Gain) loss from disposals of property & equipment | (354 | ) | 100 | |||||||||||||
Gains from disposals of property & equipment | (23 | ) | (711 | ) | ||||||||||||
Share-based compensation | 2,552 | 2,350 | 1,480 | 1,239 | ||||||||||||
Deferred income taxes | (787 | ) | (251 | ) | (192 | ) | (526 | ) | ||||||||
(Gain) loss on marketable securities | (22 | ) | 69 | |||||||||||||
Loss on marketable securities | - | 37 | ||||||||||||||
Other | (255 | ) | (184 | ) | 157 | (18 | ) | |||||||||
Changes in assets and liabilities, net of effects from purchase of companies | ||||||||||||||||
Decrease (increase) in accounts receivable | 10,541 | (25,031 | ) | |||||||||||||
Decrease (increase) in inventories | 823 | (36,538 | ) | |||||||||||||
Decrease (increase) in prepaid expenses | 4,787 | (4,308 | ) | |||||||||||||
Decrease in accounts receivable | 32,407 | 21,171 | ||||||||||||||
(Increase) in inventories | (971 | ) | (2,284 | ) | ||||||||||||
Decrease in prepaid expenses | 2,625 | 2,343 | ||||||||||||||
(Decrease) in accounts payable and accrued liabilities | (25,739 | ) | (2,055 | ) | (10,604 | ) | (21,655 | ) | ||||||||
Net cash provided by (used in) operating activities | 35,671 | (26,435 | ) | |||||||||||||
Net cash provided by operating activities | 48,953 | 21,410 | ||||||||||||||
Investing activities: | ||||||||||||||||
Purchases of property, plant and equipment | (49,124 | ) | (35,306 | ) | (19,930 | ) | (30,910 | ) | ||||||||
Proceeds from redemption and sales of marketable securities | 5,300 | 11,526 | - | 3,300 | ||||||||||||
Proceeds from disposal of property and equipment | 797 | 589 | 82 | 729 | ||||||||||||
Net cash (used in) investing activities | (43,027 | ) | (23,191 | ) | ||||||||||||
Net cash used in investing activities | (19,848 | ) | (26,881 | ) | ||||||||||||
Financing activities: | ||||||||||||||||
Proceeds from issuance of stock | 4,059 | 11,741 | 4,481 | 1,285 | ||||||||||||
Borrowings under credit facility | 92,000 | - | 15,000 | 72,000 | ||||||||||||
Repayment of borrowings under credit facility | (55,000 | ) | - | (35,000 | ) | (35,000 | ) | |||||||||
Payments on finance lease obligations | (71 | ) | (111 | ) | (85 | ) | (39 | ) | ||||||||
Payment of cash dividend | (26,914 | ) | (24,163 | ) | ||||||||||||
Payment of cash dividends | (14,209 | ) | (13,453 | ) | ||||||||||||
Net cash provided by (used in) financing activities | 14,074 | (12,533 | ) | (29,813 | ) | 24,793 | ||||||||||
Effect of exchange rates on cash and cash equivalents | 1,384 | (16 | ) | 1,147 | 363 | |||||||||||
Net increase in cash and cash equivalents | 439 | 19,685 | ||||||||||||||
Net increase (decrease) in cash and cash equivalents | 8,102 | (62,175 | ) | |||||||||||||
Cash and cash equivalents at beginning of period | 35,181 | 283,192 | 49,581 | 35,181 | ||||||||||||
Cash and cash equivalents at end of period | $ | 43,283 | $ | 221,017 | $ | 50,020 | $ | 54,866 |
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 | Basis of Presentation |
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 24, 2022.30, 2023.
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position and the results of operations and cash flows.
The results of operations for the three and six months ended March 25,December 30, 2023 and March 26,December 24, 2022 are not necessarily indicative of results for the full year. Sales of our frozen beverages and frozen novelties are generally higher in the fiscal third and fourth quarters due to warmer weather.
While we believe that the disclosures presented are adequate to make the information not misleading, it is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 24, 2022.30, 2023.
Note 2 |
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On June 21, 2022, J & J Snack Foods Corp. and its wholly-owned subsidiary, DD Acquisition Holdings, LLC, completed the acquisition of one hundred percent (100%) of the equity interests of Dippin’ Dots Holding, L.L.C. (“Dippin’ Dots”) which, through its wholly-owned subsidiaries, owns and operates the Dippin’ Dots and Doc Popcorn businesses. The purchase price was approximately $223.6 million, consisting entirely of cash, and may be modified for certain customary post-closing purchase price adjustments.
Dippin’ Dots is a leading producer of flash-frozen beaded ice cream treats, and the acquisition will leverage synergiesWe recognize revenue in entertainment and amusement locations, theaters, and convenience to continue to expand our business. The acquisition also includes the Doc Popcorn business operated by Dippin’ Dots.
The financial results of Dippin’ Dots have been included in our consolidated financial statements since the date of the acquisition. Sales and net earnings (loss) of Dippin’ Dots were $16.0 million and ($0.2) million for the three months ended March 25, 2023 and $29.3 million and ($0.8) million for the six months ended March 25, 2023. Dippin’ Dots is reported as part of our Food Service segment.
Upon acquisition, the assets and liabilities of Dippin’ Dots were adjusted to their respective fair values as of the closing date of the transaction, including the identifiable intangible assets acquired. In addition, the excess of the purchase price over the fair value of the net assets acquired has been recorded as goodwill. The fair value estimates used in valuing certain acquired assets and liabilities are based, in part, on inputs that are unobservable. For intangible assets, these include, but are not limited to, forecasted future cash flows, revenue growth rates, attrition rates and discount rates.
The purchase price allocation as of the date of acquisition was based on a preliminary valuation and is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available.
During the three months ended March 25, 2023, we recorded a measurement period adjustment to the estimated fair values initially recorded on June 21, 2022 which resulted in an increase in Other Current Liabilities of $0.7 million and an increase in Goodwill of $0.7 million. In fiscal year 2022, we previously recorded measurement period adjustments to the estimated fair values initially recorded on June 21, 2022, which resulted in an increase to Property, plant, and equipment, net of $6.5 million, and reductions in Goodwill, Identifiable intangible assets, and Inventories of $4.0 million, $2.2 million, and $0.3 million, respectively. The measurement period adjustments were recorded to better reflect market participant assumptions about facts and circumstances existing as of the acquisition date and did not have a material impact on our consolidated statement of income for the three months, or the six months, ended March 25, 2023.
The major classes of assets and liabilities to which we have preliminarily allocated the purchase price were as follows:
Preliminary Dippin' Dots Purchase Price Allocation (1)
Preliminary Value | ||||||||||||
as of acquisition | ||||||||||||
date (as previously | Measurement | |||||||||||
reported as of | Period | |||||||||||
June 25, 2022) | Adjustment | As Adjusted | ||||||||||
(in thousands) | ||||||||||||
Cash and cash equivalents | $ | 2,259 | $ | 2,259 | ||||||||
Accounts receivable, net | 12,257 | 12,257 | ||||||||||
Inventories | 8,812 | (301 | ) | 8,511 | ||||||||
Prepaid expenses and other | 1,215 | 1,215 | ||||||||||
Property, plant and equipment, net | 24,622 | 6,548 | 31,170 | |||||||||
Intangible assets | 120,400 | (2,200 | ) | 118,200 | ||||||||
Goodwill (2) | 66,634 | (3,397 | ) | 63,237 | ||||||||
Operating lease right-of-use assets | 3,514 | 3,514 | ||||||||||
Other noncurrent assets | 243 | 243 | ||||||||||
Total assets acquired | 239,956 | 650 | 240,606 | |||||||||
Liabilities assumed: | ||||||||||||
Current lease liabilities | 619 | 619 | ||||||||||
Accounts payable | 6,005 | 6,005 | ||||||||||
Other current liabilities | 3,532 | 650 | 4,182 | |||||||||
Noncurrent lease liabilities | 2,954 | 2,954 | ||||||||||
Other noncurrent liabilities | 3,285 | 3,285 | ||||||||||
Total liabilities acquired | 16,395 | 650 | 17,045 | |||||||||
Purchase price | $ | 223,561 | $ | - | $ | 223,561 |
(1) Due to the limited time since the date of the acquisition, the purchase price allocation remains preliminary.
(2) Goodwill was assigned to our Food Services segment and was primarily attributed to the assembled workforce of the acquired business and to our expectations of favorable growth opportunities in entertainment and amusement locations, theaters, and convenience based on increased synergies that are expected to be achievedaccordance with ASC 606, “Revenue from the integration of Dippin’ Dots.Contracts with Customers.”
Acquired Intangible Assets
Weighted average | June 21, | |||||||
life (years) | 2022 | |||||||
(in thousands) | ||||||||
Amortizable | ||||||||
Trade name | indefinite | $ | 76,900 | |||||
Developed technology | 10 | 22,900 | ||||||
Customer relationships | 10 | 9,900 | ||||||
Franchise agreements | 10 | 8,500 | ||||||
Total acquired intangible assets | $ | 118,200 |
Dippin' Dots Results Included in the Company's Consolidated Results
Three months ended | Six months ended | |||||||
March 25, | March 25, | |||||||
2023 | 2023 | |||||||
(in thousands) | (in thousands) | |||||||
Net sales | $ | 15,967 | $ | 29,345 | ||||
Net earnings (loss) | $ | (163 | ) | $ | (830 | ) |
|
|
When Performance Obligations Are Satisfied
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
The singular performance obligation of our customer contracts for product and machine sales is determined by each individual purchase order and the respective products ordered, with revenue being recognized at a point-in-time when the obligation under the terms of the agreement is satisfied and product control is transferred to our customer. Specifically, control transfers to our customers when the product is delivered to, installed or picked up by our customers based upon applicable shipping terms, as our customers can direct the use and obtain substantially all of the remaining benefits from the product at this point in time. The performance obligations in our customer contracts for product are generally satisfied within 30 days.
The singular performance obligation of our customer contracts for time and material repair and maintenance equipment service is the performance of the repair and maintenance with revenue being recognized at a point-in-time when the repair and maintenance is completed.
The singular performance obligation of our customer repair and maintenance equipment service contracts is the performance of the repair and maintenance with revenue being recognized over the time the service is expected to be performed. Our customers are billed for service contracts in advance of performance and therefore we have contract liability on our balance sheet.
Significant Payment Terms
In general, within our customer contracts, the purchase order identifies the product, quantity, price, pick-up allowances, payment terms and final delivery terms. Although some payment terms may be more extended, presently the majority of our payment terms are 30 days. As a result, we have used the available practical expedient and, consequently, do not adjust our revenues for the effects of a significant financing component.
Shipping
All amounts billed to customers related to shipping and handling are classified as revenues; therefore, we recognize revenue for shipping and handling fees at the time the products are shipped or when services are performed. The cost of shipping products to the customer is recognized at the time the products are shipped to the customer and our policy is to classify them as Distribution expenses.
Variable Consideration
In addition to fixed contract consideration, our contracts include some form of variable consideration, including sales discounts, trade promotions and certain other sales and consumer incentives, including rebates and coupon redemptions. In general, variable consideration is treated as a reduction in revenue when the related revenue is recognized. Depending on the specific type of variable consideration, we use the most likely amount method to determine the variable consideration. We believe there will be no significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. We review and update our estimates and related accruals of variable consideration each period based on historical experience. Our recorded liability for allowances, end-user pricing adjustments and trade spending was $13.8approximately $17.8 million at March 25,December 30, 2023 and $14.7$18.9 million at September 24, 2022.30, 2023.
Warranties & Returns
We provide all customers with a standard or assurance type warranty. Either stated or implied, we provide assurance the related products will comply with all agreed-upon specifications and other warranties provided under the law. No services beyond an assurance warranty are provided to our customers.
We do not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. We do not estimate a right of return and related refund liability as returns of our products are rare.
Contract Balances
Our customers are billed for service contracts in advance of performance and therefore we have contract liability on our balance sheet as follows:
Three months ended | Six months ended | Three months ended | ||||||||||||||||||||||
March 25, | March 26, | March 25, | March 26, | December 30, | December 24, | |||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
(in thousands) | (in thousands) | (in thousands) | ||||||||||||||||||||||
Beginning balance | $ | 4,767 | $ | 1,030 | $ | 4,926 | $ | 1,097 | ||||||||||||||||
Beginning Balance | $ | 5,306 | $ | 4,926 | ||||||||||||||||||||
Additions to contract liability | 1,527 | 1,374 | 2,917 | 2,573 | 1,400 | 1,390 | ||||||||||||||||||
Amounts recognized as revenue | (1,465 | ) | (1,312 | ) | (3,014 | ) | (2,578 | ) | (1,771 | ) | (1,549 | ) | ||||||||||||
Ending balance | $ | 4,829 | $ | 1,092 | $ | 4,829 | $ | 1,092 | ||||||||||||||||
Ending Balance | $ | 4,935 | $ | 4,767 |
Disaggregation of Revenue
See Note 1110 for disaggregation of our net sales by class of similar product and type of customer.
Allowance for Doubtful ReceivablesEstimated Credit Losses
The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses. The allowance for doubtful accountsestimated credit losses 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 receivablesestimated credit losses was $2.3$3.3 million and $2.2$3.2 million on March 25,December 30, 2023 and September 24, 2022,30, 2023, respectively.
Note | Depreciation and Amortization Expense |
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, franchise agreements, technology and non-compete agreements arising from acquisitions are amortized by the straight-line method over periods ranging from 2 to 20 years. Depreciation expense was $13.8$15.2 million and $11.9$13.5 million for the three months ended March 25,December 30, 2023 and March 26,December 24, 2022, respectively and $27.2 million and $23.9 million for the six months ended March 25, 2023 and March 26, 2022, respectively.
Note | Earnings per Share |
Basic earnings per common share (EPS)("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 and restricted stock units (“RSU”)’s) or other contracts to issue common stock were exercised and converted into common stock. Our calculation of EPS is as follows:
Three months ended March 25, 2023 | ||||||||||||
Income | Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Basic EPS | ||||||||||||
Net earnings available to common stockholders | $ | 6,871 | 19,238 | $ | 0.36 | |||||||
Effect of dilutive securities | ||||||||||||
RSU's and options | - | 57 | - | |||||||||
Diluted EPS | ||||||||||||
Net earnings available to common stockholders plus assumed conversions | $ | 6,871 | 19,295 | $ | 0.36 |
Three months ended December 30, 2023 | ||||||||||||
Income | Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Basic EPS | ||||||||||||
Net Earnings available to common stockholders | $ | 7,282 | 19,344 | $ | 0.38 | |||||||
Effect of Dilutive Securities | ||||||||||||
RSU's and Options | - | 79 | (0.01 | ) | ||||||||
Diluted EPS | ||||||||||||
Net Earnings available to common stockholders plus assumed conversions | $ | 7,282 | 19,423 | $ | 0.37 |
381,735188,077 anti-dilutive shares have been excluded in the computation of EPS for the three months ended March 25,December 30, 2023.
Six months ended March 25, 2023 | ||||||||||||
Income | Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Basic EPS | ||||||||||||
Net earnings available to common stockholders | $ | 13,504 | 19,230 | $ | 0.70 | |||||||
Effect of dilutive securities | ||||||||||||
RSU's and options | - | 55 | - | |||||||||
Diluted EPS | ||||||||||||
Net earnings available to common stockholders plus assumed conversions | $ | 13,504 | 19,285 | $ | 0.70 |
Three months ended December 24, 2022 | ||||||||||||
Income | Shares | Per Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Basic EPS | ||||||||||||
Net Earnings available to common stockholders | $ | 6,633 | 19,222 | $ | 0.35 | |||||||
Effect of Dilutive Securities | ||||||||||||
RSU's and Options | - | 52 | (0.01 | ) | ||||||||
Diluted EPS | ||||||||||||
Net Earnings available to common stockholders plus assumed conversions | $ | 6,633 | 19,274 | $ | 0.34 |
386,510 anti-dilutive shares have been excluded in the computation of EPS for the six months ended March 25, 2023.
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 | ||||||||||||
RSU's and options | - | 72 | - | |||||||||
Diluted EPS | ||||||||||||
Net earnings available to common stockholders plus assumed conversions | $ | 3,271 | 19,206 | $ | 0.17 |
270,352394,077 anti-dilutive shares have been excluded in the computation of EPS for the three months ended March 26,December 24, 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 | ||||||||||||
RSU's and options | - | 70 | - | |||||||||
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.
Note | Share-Based Compensation and Post-Retirement Benefits |
At March 25,December 30, 2023, the Company has three stock-based employee compensation plans. Share-based compensation expense was recognized as follows:
Three months ended | ||||||||||||||||||||||||
Three months ended | Six months ended | December 30, | December 24, | |||||||||||||||||||||
March 25, | March 26, | March 25, | March 26, | 2023 | 2022 | |||||||||||||||||||
2023 | 2022 | 2023 | 2022 | (in thousands) | ||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
Stock options | $ | 559 | $ | 586 | $ | 1,179 | $ | 1,400 | $ | 363 | $ | 620 | ||||||||||||
Stock purchase plan | 197 | 90 | 424 | 150 | 99 | 227 | ||||||||||||||||||
Stock issued to outside directors | 27 | 11 | 27 | 22 | 40 | - | ||||||||||||||||||
Service share units issued to employees | 193 | 152 | 374 | 224 | 382 | 181 | ||||||||||||||||||
Performance share units issued to employees | 171 | 82 | 243 | 121 | 275 | 72 | ||||||||||||||||||
Total share-based compensation | $ | 1,147 | $ | 921 | $ | 2,247 | $ | 1,917 | $ | 1,159 | $ | 1,100 | ||||||||||||
The above compensation is net of tax benefits | $ | 166 | $ | 346 | $ | 305 | $ | 433 | $ | 321 | $ | 139 |
The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model.
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.
The Company did not grant any stock options during the sixthree months ended March 25,December 30, 2023, or during the sixthree months ended March 26,December 24, 2022.
During the sixthree months ended March 25,December 30, 2023, the Company issued 9,9009,751 service share units (“RSU”)’s. Each RSU entitles the awardee to one share of common stock upon vesting. During the sixthree months ended March 26,December 24, 2022, the Company issued 8,873 RSU’s.9,900 service share units (“RSU”)’s. The fair value of the RSU’s was determined based upon the closing price of the Company’s common stock on the date of grant.No such RSU’s were issued in
During the three months ended March 25, 2023 or March 26, 2022.
During the six months ended March 25,December 30, 2023, the Company also issued 9,743 performance share units (“PSU”)’s. During the three months ended December 24, 2022, the Company issued 18,641 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. During the six months ended March 26, 2022, the Company issued 8,868 PSU’s. No such PSU’s were issued in the three months ended March 25, 2023 or March 26, 2022.
Note | Income Taxes |
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 $0.3$0.3 million on both March 25,December 30, 2023 and September 24, 2022, respectively,30, 2023, 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 25,December 30, 2023 and September 24, 2022,30, 2023, the Company has $0.3$0.3 million of accrued interest and penalties, respectively.
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 virtuallytax. Virtually all the returns noted above are open for examination for three to four years.
Our effective tax rate was 25.8% for the three months ended March 25,December 30, 2023 as compared with 21.9% in the prior year period, with the increase due to the impact of stock-based compensation expense in the prior year period.
was 27%. Our effective tax rate was 25.9% for the six months ended March 25, 2023, as compared with 25.5%26% in the prior year period.
last fiscal year’s quarter.
Note | New Accounting Pronouncements and Policies |
In December 2022, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU No. 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848", to provide optional guidance to temporarily ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Preceding the issuance of ASU 2020-04, which established ASC 848, the United Kingdom's Financial Conduct Authority ("FCA") announced that it would no longer need to persuade or compel banks to submit to LIBOR after December 31, 2021. In response, the FASB established December 31, 2022 as the expiration date for ASC 848. In March 2021, the FCA announced the intended cessation date of the overnight 1-, 3-, 6-, and 12-month USD LIBOR would be June 30, 2023. Because the current relief in Topic 848 may not cover a period of time during which a significant number of modifications may take place, this update deferred the sunset date in Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. This guidance is not expected to have a material impact on our consolidated financial statements and disclosures.
In September 2022, the FASB issued ASU No. 2022-04 “Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations”. This guidance requires annual and interim disclosures for entities that use supplier finance programs in connection with the purchase of goods and services. These amendments are effective for fiscal years beginning after December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. The Company adopted this guidance during the three months ended December 30, 2023. The adoption of this guidance did not have a material impact on our consolidated financial statements and disclosures.
In November 2023, the FASB issued ASU No. 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This guidance requires all public entities to provide enhanced disclosures about significant segment expenses. The amendments in this ASU are to be applied retrospectively and are effective for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. We are currently assessing the impact of the guidance on our consolidated financial statements and disclosures.
In December 2023, the FASB issued ASU No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This guidance enhances the transparency around income tax information through improvements to income tax disclosures, primarily related to the effective rate reconciliation and income taxes paid, to improve the overall effectiveness of income tax disclosures. The amendments in the ASU are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently assessing the impact of the guidance on our consolidated financial statements and disclosures.
Note |
|
In December 2021, the Company entered into an amended and restated loan agreement (the “Credit Agreement”) with our existing banks which provided for up to a $50 million revolving credit facility repayable in December 2026.
Interest accrues, at the Company’s election at (i) the BSBY Rate (as defined in the Credit Agreement), plus an applicable margin, based upon the Consolidated Net Leverage Ratio, as defined in the Credit Agreement, or (ii) the Alternate Base Rate (a rate based on the higher of (a) the prime rate announced from time-to-time by the Administrative Agent, (b) the Federal Reserve System’s federal funds rate, plus 0.50% or (c) the Daily BSBY Rate, plus an applicable margin). The Alternate Base Rate is defined in the Credit Agreement.
The Credit Agreement requires the Company to comply with various affirmative and negative covenants, including without limitation (i) covenants to maintain a minimum specified interest coverage ratio and maximum specified net leverage ratio, and (ii) subject to certain exceptions, covenants that prevent or restrict the Company’s ability to pay dividends, engage in certain mergers or acquisitions, make certain investments or loans, incur future indebtedness, alter its capital structure or line of business, prepay subordinated indebtedness, engage in certain transactions with affiliates, or amend its organizational documents. As of March 25,December 30, 2023, the Company is in compliance with all financial covenants terms of the Credit Agreement.
On June 21, 2022, the Company entered into an amendment to the Credit Agreement, the “Amended Credit Agreement” which provided for an incremental increase of $175 million in available borrowings. The Amended Credit Agreement also includes an option to increase the size of the revolving credit facility by up to an amount not to exceed in the aggregate the greater of $225 million or, $50 million plus the Consolidated EBITDA of the Borrowers, subject to the satisfaction of certain terms and conditions.
As of March 25,December 30, 2023, $92$7.0 million was outstanding under the Amended Credit Agreement with a weighted average interest rate of 5.50%6.33%. These borrowings have been classified as Long-Term Debt on the Company’s Balance Sheet. As of March 25,December 30, 2023, the amount available under the Amended Credit Agreement was $123.2$208.2 million, after giving effect to the outstanding letters of credit. As of September 24, 2022, $55.030, 2023, $27.0 million was outstanding balances under the Amended Credit Agreement. As of September 24, 2022,30, 2023, the amount available under the Amended Agreement was $160.2$188.2 million, after giving effect to the outstanding letters of credit.
Note | Inventory |
Inventories consist of the following:
March 25, | September 24, | |||||||
2023 | 2022 | |||||||
(unaudited) | ||||||||
(in thousands) | ||||||||
Finished goods | $ | 93,409 | $ | 86,464 | ||||
Raw materials | 35,142 | 41,505 | ||||||
Packaging materials | 14,610 | 16,637 | ||||||
Equipment parts and other | 37,560 | 35,867 | ||||||
Total inventories | $ | 180,721 | $ | 180,473 |
December 30, | September 30, | |||||||
2023 | 2023 | |||||||
(unaudited) | ||||||||
(in thousands) | ||||||||
Finished goods | $ | 88,030 | $ | 86,472 | ||||
Raw materials | 29,263 | 30,537 | ||||||
Packaging materials | 12,479 | 12,484 | ||||||
Equipment parts and other | 42,952 | 42,046 | ||||||
Total Inventories | $ | 172,724 | $ | 171,539 |
Note | Segment Information |
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 abovebelow which is available to our Chief Operating Decision Maker.
Our 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 serviceFood Service segment are soft pretzels, frozen novelties, churros, handheld products and baked goods. Our customers in the food serviceFood Service segment include snack bars and food stands in chain, department and discount stores; malls and shopping centers; casual dining restaurants,restaurants; fast food outlets;and casual dining restaurants; 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 or for take-away.
Retail Supermarkets
The primary products sold to the retail supermarket channel are soft pretzel products – including SUPERPRETZEL and AUNTIE ANNE’S, frozen novelties including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE FRUIT frozen fruit bars and sorbet, DOGSTERS ice cream style treats for dogs, PHILLY SWIRL cups and sticks, ICEE Squeeze-Up Tubes and handheld products. Within the retail supermarket channel, our frozen and prepackaged products are purchased by the consumer for consumption at home.
Frozen Beverages
The Company marketsWe sell frozen beverages to the foodservice 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 serviceservices to customers for customers’ ownedcustomer-owned equipment.
The Chief Operating Decision Maker for Food Service, Retail Supermarkets and Frozen Beverages reviews monthly 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 Maker and management when determining each segment’s and the Company’s,company’s financial condition and operating performance. In addition, the Chief Operating Decision Maker reviews and evaluates depreciation, capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment. Information regarding the operations in these three reportable segments is as follows:
Three months ended | Six months ended | Three months ended | ||||||||||||||||||||||
March 25, | March 26, | March 25, | March 26, | December 30, | December 24, | |||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
(unaudited) | (unaudited) | (in thousands) | ||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
Sales to external customers: | ||||||||||||||||||||||||
Sales to External Customers: | ||||||||||||||||||||||||
Food Service | ||||||||||||||||||||||||
Soft pretzels | $ | 55,492 | $ | 43,261 | $ | 107,715 | $ | 93,682 | $ | 50,128 | $ | 52,223 | ||||||||||||
Frozen novelties | 26,607 | 7,305 | 48,372 | 15,762 | 21,050 | 21,765 | ||||||||||||||||||
Churros | 24,920 | 17,447 | 50,677 | 36,936 | 28,061 | 25,757 | ||||||||||||||||||
Handhelds | 20,309 | 20,506 | 43,881 | 39,001 | 22,047 | 23,572 | ||||||||||||||||||
Bakery | 85,300 | 83,967 | 194,248 | 191,798 | 101,982 | 108,948 | ||||||||||||||||||
Other | 5,653 | 3,854 | 11,685 | 10,893 | 5,341 | 6,032 | ||||||||||||||||||
Total Food Service | $ | 218,281 | $ | 176,340 | $ | 456,578 | $ | 388,072 | $ | 228,609 | $ | 238,297 | ||||||||||||
Retail Supermarket | ||||||||||||||||||||||||
Soft pretzels | $ | 16,013 | $ | 15,752 | $ | 30,498 | $ | 31,946 | $ | 18,447 | $ | 14,485 | ||||||||||||
Frozen novelties | 20,770 | 18,919 | 38,739 | 36,721 | 12,861 | 17,969 | ||||||||||||||||||
Biscuits | 5,858 | 5,687 | 13,771 | 13,958 | 7,032 | 7,913 | ||||||||||||||||||
Handhelds | 4,099 | 1,069 | 6,991 | 2,345 | 5,510 | 2,892 | ||||||||||||||||||
Coupon redemption | (375 | ) | (726 | ) | (551 | ) | (1,622 | ) | (332 | ) | (176 | ) | ||||||||||||
Other | (5 | ) | 56 | (15 | ) | 104 | 241 | (10 | ) | |||||||||||||||
Total Retail Supermarket | $ | 46,360 | $ | 40,757 | $ | 89,433 | $ | 83,452 | $ | 43,759 | $ | 43,073 | ||||||||||||
Frozen Beverages | ||||||||||||||||||||||||
Beverages | $ | 41,799 | $ | 35,365 | $ | 80,458 | $ | 69,128 | $ | 41,950 | $ | 38,659 | ||||||||||||
Repair and maintenance service | 22,585 | 21,000 | 46,412 | 43,011 | 24,559 | 23,827 | ||||||||||||||||||
Machines revenue | 8,252 | 7,542 | 15,263 | 15,389 | 8,889 | 7,011 | ||||||||||||||||||
Other | 577 | 509 | 1,053 | 951 | 542 | 476 | ||||||||||||||||||
Total Frozen Beverages | $ | 73,213 | $ | 64,416 | $ | 143,186 | $ | 128,479 | $ | 75,940 | $ | 69,973 | ||||||||||||
Consolidated sales | $ | 337,854 | $ | 281,513 | $ | 689,197 | $ | 600,003 | ||||||||||||||||
Consolidated Sales | $ | 348,308 | $ | 351,343 | ||||||||||||||||||||
Depreciation and amortization: | ||||||||||||||||||||||||
Depreciation and Amortization: | ||||||||||||||||||||||||
Food Service | $ | 9,597 | $ | 6,670 | $ | 19,055 | $ | 13,339 | $ | 10,673 | $ | 9,458 | ||||||||||||
Retail Supermarket | 492 | 386 | 883 | 752 | 527 | 391 | ||||||||||||||||||
Frozen Beverages | 5,351 | 5,484 | 10,683 | 10,960 | 5,592 | 5,332 | ||||||||||||||||||
Total depreciation and amortization | $ | 15,440 | $ | 12,540 | $ | 30,621 | $ | 25,051 | ||||||||||||||||
Total Depreciation and Amortization | $ | 16,792 | $ | 15,181 | ||||||||||||||||||||
Operating Income: | ||||||||||||||||||||||||
Operating Income : | ||||||||||||||||||||||||
Food Service | $ | 5,133 | $ | 536 | $ | 11,520 | $ | 9,537 | $ | 6,016 | $ | 6,387 | ||||||||||||
Retail Supermarket | 487 | 1,091 | 1,598 | 6,075 | 452 | 1,111 | ||||||||||||||||||
Frozen Beverages | 4,573 | 2,461 | 6,403 | 3,321 | 3,215 | 1,830 | ||||||||||||||||||
Total operating income | $ | 10,193 | $ | 4,088 | $ | 19,521 | $ | 18,933 | ||||||||||||||||
Total Operating Income | $ | 9,683 | $ | 9,328 | ||||||||||||||||||||
Capital expenditures: | ||||||||||||||||||||||||
Capital Expenditures: | ||||||||||||||||||||||||
Food Service | $ | 13,744 | $ | 13,851 | $ | 38,606 | $ | 24,084 | $ | 11,865 | $ | 24,862 | ||||||||||||
Retail Supermarket | 105 | 1,094 | 1,479 | 3,623 | 2 | 1,374 | ||||||||||||||||||
Frozen Beverages | 4,365 | 4,261 | 9,039 | 7,599 | 8,063 | 4,674 | ||||||||||||||||||
Total capital expenditures | $ | 18,214 | $ | 19,206 | $ | 49,124 | $ | 35,306 | ||||||||||||||||
Total Capital Expenditures | $ | 19,930 | $ | 30,910 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Food Service | $ | 910,573 | $ | 799,710 | $ | 910,573 | $ | 799,710 | $ | 930,533 | $ | 907,736 | ||||||||||||
Retail Supermarket | 12,162 | 33,206 | 12,162 | 33,206 | 36,219 | 16,941 | ||||||||||||||||||
Frozen Beverages | 302,222 | 290,412 | 302,222 | 290,412 | 325,805 | 302,871 | ||||||||||||||||||
Total assets | $ | 1,224,957 | $ | 1,123,328 | $ | 1,224,957 | $ | 1,123,328 | ||||||||||||||||
Total Assets | $ | 1,292,557 | $ | 1,227,548 |
Note |
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Our 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 Beverages segments as of March 25, 2023 and September 24, 2022 are as follows:
March 25, 2023 | September 24, 2022 | |||||||||||||||
Gross | Gross | |||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
(in thousands) | ||||||||||||||||
FOOD SERVICE | ||||||||||||||||
Indefinite lived intangible assets | ||||||||||||||||
Trade names | $ | 85,872 | $ | - | $ | 85,872 | $ | - | ||||||||
Amortized intangible assets | ||||||||||||||||
Non-compete agreements | - | - | 670 | 670 | ||||||||||||
Franchise agreements | 8,500 | 638 | 8,500 | 212 | ||||||||||||
Customer relationships | 22,900 | 9,044 | 22,900 | 7,790 | ||||||||||||
Technology | 23,110 | 1,735 | 23,110 | 576 | ||||||||||||
License and rights | 1,690 | 1,523 | 1,690 | 1,481 | ||||||||||||
TOTAL FOOD SERVICE | $ | 142,072 | $ | 12,940 | $ | 142,742 | $ | 10,729 | ||||||||
RETAIL SUPERMARKETS | ||||||||||||||||
Indefinite lived intangible assets | ||||||||||||||||
Trade names | $ | 11,938 | $ | - | $ | 11,938 | $ | - | ||||||||
Amortized intangible Assets | ||||||||||||||||
Trade names | - | - | 649 | 649 | ||||||||||||
Customer relationships | 7,688 | 6,871 | 7,907 | 6,693 | ||||||||||||
TOTAL RETAIL SUPERMARKETS | $ | 19,626 | $ | 6,871 | $ | 20,494 | $ | 7,342 | ||||||||
FROZEN BEVERAGES | ||||||||||||||||
Indefinite lived intangible assets | ||||||||||||||||
Trade names | $ | 9,315 | $ | - | $ | 9,315 | $ | - | ||||||||
Distribution rights | 36,100 | - | 36,100 | - | ||||||||||||
Amortized intangible assets | ||||||||||||||||
Customer relationships | 1,439 | 617 | 1,439 | 545 | ||||||||||||
Licenses and rights | 1,400 | 1,177 | 1,400 | 1,142 | ||||||||||||
TOTAL FROZEN BEVERAGES | $ | 48,254 | $ | 1,794 | $ | 48,254 | $ | 1,687 | ||||||||
CONSOLIDATED | $ | 209,952 | $ | 21,605 | $ | 211,490 | $ | 19,758 |
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 25, 2023 and March 26, 2022 was $1.7 million and $0.6 million, respectively. Aggregate amortization expense of intangible assets for the six months ended March 25, 2023 and March 26, 2022 was $3.4 million and $1.2 million, respectively.
Estimated amortization expense for the next five fiscal years is approximately $3.3 million in 2023 (excluding the six months ended March 25, 2023), $6.2 million in 2024, $5.6 million in 2025, and 2026, and $4.6 million in 2027.
The weighted amortization period of the intangible assets, in total, is 10.4 years. The weighted amortization period by intangible asset class is 10 years for Technology, 10 years for Customer relationships, 20 years for Licenses & rights, and 10 years for Franchise agreements.
Goodwill
The carrying amounts of goodwill for the Food Service, Retail Supermarket and Frozen Beverage segments are as follows:
Goodwill and Intangible Assets
Food | Retail | Frozen | ||||||||||||||
Service | Supermarket | Beverages | Total | |||||||||||||
(in thousands) | ||||||||||||||||
March 25, 2023 | $ | 124,426 | $ | 4,146 | $ | 56,498 | $ | 185,070 | ||||||||
September 24, 2022 | $ | 123,776 | $ | 4,146 | $ | 56,498 | $ | 184,420 |
Intangible Assets
Our 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 Beverages segments as of December 30, 2023 and September 30, 2023 are as follows:
December 30, 2023 | September 30, 2023 | |||||||||||||||
Gross | Gross | |||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
(in thousands) | ||||||||||||||||
FOOD SERVICE | ||||||||||||||||
| ||||||||||||||||
Indefinite lived intangible assets | ||||||||||||||||
Trade names | $ | 84,194 | $ | - | $ | 84,194 | $ | - | ||||||||
Amortized intangible assets | ||||||||||||||||
Non compete agreements | - | - | - | - | ||||||||||||
Franchise agreements | 8,500 | 1,275 | 8,500 | 1,063 | ||||||||||||
Customer relationships | 22,900 | 10,653 | 22,900 | 10,080 | ||||||||||||
Technology | 23,110 | 3,452 | 23,110 | 2,879 | ||||||||||||
License and rights | 1,690 | 1,587 | 1,690 | 1,565 | ||||||||||||
TOTAL FOOD SERVICE | $ | 140,394 | $ | 16,967 | $ | 140,394 | $ | 15,587 | ||||||||
RETAIL SUPERMARKETS | ||||||||||||||||
Indefinite lived intangible assets | ||||||||||||||||
Trade names | $ | 11,938 | $ | - | $ | 11,938 | $ | - | ||||||||
Amortized Intangible Assets | ||||||||||||||||
Trade names | - | - | - | - | ||||||||||||
Customer relationships | 7,687 | 7,439 | 7,687 | 7,256 | ||||||||||||
TOTAL RETAIL SUPERMARKETS | $ | 19,625 | $ | 7,439 | $ | 19,625 | $ | 7,256 | ||||||||
FROZEN BEVERAGES | ||||||||||||||||
Indefinite lived intangible assets | ||||||||||||||||
Trade names | $ | 9,315 | $ | - | $ | 9,315 | $ | - | ||||||||
Distribution rights | 36,100 | - | 36,100 | - | ||||||||||||
Amortized intangible assets | ||||||||||||||||
Customer relationships | 1,439 | 725 | 1,439 | 689 | ||||||||||||
Licenses and rights | 1,400 | 1,229 | 1,400 | 1,212 | ||||||||||||
TOTAL FROZEN BEVERAGES | $ | 48,254 | $ | 1,954 | $ | 48,254 | $ | 1,901 | ||||||||
CONSOLIDATED | $ | 208,273 | $ | 26,360 | $ | 208,273 | $ | 24,744 |
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 December 30, 2023 and December 24, 2022 was $1.6 million and $1.7 million, respectively.
Estimated amortization expense for the next five fiscal years is approximately $4.7 million in 2024 (excluding the three months ended December 30, 2023), $5.6 million in 2025 and 2026, $4.6 million in 2027, and $4.2 million in 2028.
The weighted amortization period of the intangible assets, in total, is 10.4 years. The weighted amortization period by intangible asset class is 10 years for Technology, 10 years for Customer relationships, 20 years for Licenses & rights, and 10 years for Franchise agreements.
Goodwill The carrying amounts of goodwill for the Food Service, Retail Supermarket and Frozen Beverages segments are as follows:
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:
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