Company Quick10K Filing
J&J Snack Foods
Price192.29 EPS5
Shares19 P/E38
MCap3,646 P/FCF25
Net Debt-192 EBIT127
TEV3,453 TEV/EBIT27
TTM 2019-09-28, in MM, except price, ratios
10-Q 2020-06-27 Filed 2020-07-31
10-Q 2020-03-28 Filed 2020-05-01
10-Q 2019-12-28 Filed 2020-01-31
10-K 2019-09-28 Filed 2019-11-27
10-Q 2019-06-29 Filed 2019-08-01
10-Q 2019-03-30 Filed 2019-05-02
10-Q 2018-12-29 Filed 2019-01-31
10-K 2018-09-29 Filed 2018-11-28
10-Q 2018-06-30 Filed 2018-08-02
10-Q 2018-03-31 Filed 2018-05-03
10-Q 2017-12-30 Filed 2018-02-01
10-K 2017-09-30 Filed 2017-11-28
10-Q 2017-06-24 Filed 2017-07-27
10-Q 2017-03-25 Filed 2017-04-27
10-Q 2016-12-24 Filed 2017-01-26
10-K 2016-09-24 Filed 2016-11-22
10-Q 2016-06-25 Filed 2016-07-28
10-Q 2016-03-26 Filed 2016-04-25
10-Q 2015-12-26 Filed 2016-01-25
10-K 2015-09-26 Filed 2015-11-23
10-Q 2015-06-27 Filed 2015-07-27
10-Q 2015-03-28 Filed 2015-04-27
10-Q 2014-12-27 Filed 2015-01-26
10-K 2014-09-27 Filed 2014-11-25
10-Q 2014-06-28 Filed 2014-07-28
10-Q 2014-03-29 Filed 2014-04-28
10-Q 2013-12-28 Filed 2014-01-27
10-K 2013-09-28 Filed 2013-11-26
10-Q 2013-06-29 Filed 2013-07-29
10-Q 2013-03-30 Filed 2013-04-29
10-Q 2012-12-29 Filed 2013-01-28
10-K 2012-09-29 Filed 2012-11-27
10-Q 2012-06-23 Filed 2012-07-23
10-Q 2012-03-24 Filed 2012-04-23
10-Q 2011-12-24 Filed 2012-01-23
10-K 2011-09-24 Filed 2011-12-06
10-Q 2011-06-25 Filed 2011-07-25
10-Q 2011-03-26 Filed 2011-04-25
10-Q 2010-12-25 Filed 2011-01-20
10-K 2010-09-25 Filed 2010-12-07
10-Q 2010-06-26 Filed 2010-07-22
10-Q 2010-03-27 Filed 2010-04-22
10-Q 2009-12-26 Filed 2010-01-21
8-K 2020-07-27 Earnings, Exhibits
8-K 2020-05-21
8-K 2020-05-01
8-K 2020-04-27
8-K 2020-04-19
8-K 2020-03-23
8-K 2020-03-12
8-K 2020-02-13
8-K 2020-02-11
8-K 2020-02-05
8-K 2020-01-27
8-K 2019-12-09
8-K 2019-11-07
8-K 2019-10-03
8-K 2019-09-05
8-K 2019-07-29
8-K 2019-05-16
8-K 2019-04-29
8-K 2019-02-06
8-K 2019-02-05
8-K 2019-01-28
8-K 2018-12-06
8-K 2018-11-08
8-K 2018-08-29
8-K 2018-07-30
8-K 2018-05-21
8-K 2018-04-30
8-K 2018-02-12
8-K 2018-02-09
8-K 2018-01-29
8-K 2018-01-08

JJSF 10Q Quarterly Report

Note 2
Note 5 At June 27, 2020, The Company Has Three Stock - Based Employee Compensation Plans. Share - Based Compensation Expense Was Recognized As Follows:
Note 10 Our Three Reporting Units, Which Are Also Reportable Segments, Are Food Service, Retail Supermarkets and Frozen Beverages.
Note 12 Changes To The Components of Accumulated Other Comprehensive Loss Are As Follows:
Note 14 – Leases
Note 15 – Subsequent Event
Item 2. Management’S Discussion and Analysis Of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 6. Exhibits
EX-31.1 ex_195173.htm
EX-31.2 ex_195174.htm
EX-99.5 ex_195175.htm
EX-99.6 ex_195176.htm

J&J Snack Foods Earnings 2020-06-27

Balance SheetIncome StatementCash Flow
1.10.90.70.40.20.02012201420172020
Assets, Equity
1.10.90.70.40.20.02012201420172020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12012201420172020
Ops, Inv, Fin

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UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the period ended June 27, 2020

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 Jersey22-1935537
(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 ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, no par valueJJSFThe 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 
  Smaller reporting company 
Non-accelerated filer  Emerging growth company

           

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

                   Yes                         ☒    No

 

As of July 24,2020 there were 18,894,908 shares of the Registrant’s Common Stock outstanding.

 

 

 

 

INDEX

   

Page

    Number

Part I.

Financial Information  
     

Item l.

Consolidated Financial Statements

 
     
  Consolidated Balance Sheets – June 27, 2020 (unaudited) and September 28, 2019 3

 

   

 

Consolidated Statements of (Loss) Earnings (unaudited) – Three and nine months ended June 27, 2020 and June 29, 2019

4

 

 

 

 

Consolidated Statements of Comprehensive (Loss) Income (unaudited) – Three and nine months Ended June 27, 2020 and June 29, 2019

5

 

   

 

Consolidated Statements of Changes In Stockholders’  Equity (unaudited) – Three and nine months Ended June 27, 2020 and June 29, 2019 6

 

   
  Consolidated Statements of Cash Flows (unaudited) – Nine Months Ended June 27, 2020 and June 29, 2019 7

 

   

 

Notes to the Consolidated Financial Statements (unaudited) 8
     

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

 

   

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31
     

Item 4.

Controls and Procedures

31

     

Part II.

Other Information

 
     

Item 6. 

Exhibits 32

 

2

 

 

 J & J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

 

  

June 27,

     
  

2020

  

September 28,

 
  

(unaudited)

  

2019

 

Assets

        

Current assets

        

Cash and cash equivalents

 $169,961  $192,395 

Marketable securities held to maturity

  58,268   51,091 

Accounts receivable, net

  116,488   140,938 

Inventories

  120,564   116,165 

Prepaid expenses and other

  13,660   5,768 

Total current assets

  478,941   506,357 
         

Property, plant and equipment, at cost

        

Land

  2,494   2,494 

Buildings

  26,582   26,582 

Plant machinery and equipment

  331,481   315,360 

Marketing equipment

  253,533   240,681 

Transportation equipment

  9,905   9,725 

Office equipment

  34,935   31,217 

Improvements

  42,291   40,626 

Construction in progress

  16,199   10,039 

Total Property, plant and equipment, at cost

  717,420   676,724 

Less accumulated depreciation and amortization

  452,707   423,276 

Property, plant and equipment, net

  264,713   253,448 
         

Long-term assets

        

Goodwill

  123,033   102,511 

Other intangible assets, net

  81,117   54,922 

Marketable securities held to maturity

  28,863   79,360 

Marketable securities available for sale

  13,232   19,903 

Operating lease right-of-use assets

  64,615   - 

Other

  2,772   2,838 

Total long-term assets

  313,632   259,534 

Total Assets

 $1,057,286  $1,019,339 
         

Liabilities and Stockholders' Equity

        

Current Liabilities

        

Current finance lease liabilities

 $329  $339 

Accounts payable

  68,829   72,029 

Accrued insurance liability

  12,131   10,457 

Accrued liabilities

  6,951   7,808 

Current operating lease liabilities

  13,913   - 

Accrued compensation expense

  14,814   21,154 

Dividends payable

  10,873   9,447 

Total current liabilities

  127,840   121,234 
         

Noncurrent finance lease liabilities

  456   718 

Noncurrent operating lease liabilities

  56,570   - 

Deferred income taxes

  61,348   61,920 

Other long-term liabilities

  472   1,716 
         

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 18,888,000 and 18,895,000 respectively

  46,560   45,744 

Accumulated other comprehensive loss

  (16,058)  (12,988)

Retained Earnings

  780,098   800,995 

Total stockholders' equity

  810,600   833,751 

Total Liabilities and Stockholders' Equity

 $1,057,286  $1,019,339 

 

The accompanying notes are an integral part of these statements.

 

3

 


J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF (LOSS) EARNINGS
(Unaudited)

(in thousands, except per share amounts)

 

   

Three months ended

   

Nine months ended

 
   

June 27,

   

June 29,

   

June 27,

   

June 29,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

Net Sales

  $ 214,563     $ 326,701     $ 769,502     $ 874,615  
                                 

Cost of goods sold

    177,367       225,352       585,002       617,155  

Gross Profit

    37,196       101,349       184,500       257,460  
                                 

Operating expenses

                               

Marketing

    21,952       26,398       68,532       69,792  

Distribution

    21,272       24,447       69,648       70,521  

Administrative

    8,374       10,668       28,166       29,909  

Plant shutdown impairment costs

    5,072       -       5,072       -  

Other general (income) expense

    (54 )     794       (183 )     1,343  

Total operating expenses

    56,616       62,307       171,235       171,565  
                                 

Operating (loss) income

    (19,420 )     39,042       13,265       85,895  
                                 

Other income (expense)

                               

Investment income

    1,300       1,953       2,673       5,775  

Interest expense & other

    (7 )     1,972       (60 )     1,920  
                                 

(Loss) earnings before income taxes

    (18,127 )     42,967       15,878       93,590  
                                 

Income taxes

    (5,480 )     12,095       4,157       24,838  
                                 

NET (LOSS) EARNINGS

  $ (12,647 )   $ 30,872     $ 11,721     $ 68,752  
                                 

(Loss) earnings per diluted share

  $ (0.67 )   $ 1.63     $ 0.62     $ 3.64  
                                 

Weighted average number of diluted shares

    18,888       18,947       19,036       18,912  
                                 

(Loss) earnings per basic share

  $ (0.67 )   $ 1.64     $ 0.62     $ 3.66  
                                 

Weighted average number of basic shares

    18,888       18,823       18,902       18,794  

 

The accompanying notes are an integral part of these statements.

 

4

 

 

J&J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)

(in thousands)

 

   

Three months ended

   

Nine months ended

 
   

June 27,

   

June 29,

   

June 27,

   

June 29,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

Net (Loss) Earnings

  $ (12,647 )   $ 30,872     $ 11,721     $ 68,752  
                                 

Foreign currency translation adjustments

    41       496       (3,070 )     (469 )
                                 

Total Other Comprehensive Income (loss)

    41       496       (3,070 )     (469 )
                                 

Comprehensive (Loss) Income

  $ (12,606 )   $ 31,368     $ 8,651     $ 68,283  

 

 

The accompanying notes are an integral part of these statements.

 

5

 

 

 J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)

 

                   

Accumulated

                 
                   

Other

                 
   

Common Stock

   

Comprehensive

   

Retained

         
   

Shares

   

Amount

   

Loss

   

Earnings

   

Total

 
                                         

Balance at September 28, 2019

    18,895     $ 45,744     $ (12,988 )   $ 800,995     $ 833,751  

Issuance of common stock upon exercise of stock options

    5       468       -       -       468  

Foreign currency translation adjustment

    -       -       810       -       810  

Dividends declared

    -       -       -       (10,867 )     (10,867 )

Share-based compensation

    -       1,299       -       -       1,299  

Net earnings

    -       -       -       17,059       17,059  
                                         

Balance at December 28, 2019

    18,900       47,511       (12,178 )     807,187       842,520  

Issuance of common stock upon exercise of stock options

    47       5,049       -       -       5,049  

Issuance of common stock for employee stock purchase plan

    6       783       -       -       783  

Foreign currency translation adjustment

    -       -       (3,921 )     -       (3,921 )

Issuance of common stock under deferred stock plan

    1       90       -       -       90  

Dividends declared

    -       -       -       (10,878 )     (10,878 )

Share-based compensation

    -       1,088       -       -       1,088  

Repurchase of common stock

    (66 )     (8,972 )     -       -       (8,972 )

Net earnings

    -       -       -       7,309       7,309  
                                         

Balance at March 28, 2020

    18,888       45,549       (16,099 )     803,618       833,068  

Foreign currency translation adjustment

    -       -       41       -       41  

Dividends declared

    -       -       -       (10,873 )     (10,873 )

Share-based compensation

    -       1,011       -       -       1,011  

Net loss

    -       -       -       (12,647 )     (12,647 )
                                         

Balance at June 27, 2020

    18,888     $ 46,560     $ (16,058 )   $ 780,098     $ 810,600  
                                         
                   

Accumulated

                 
                   

Other

                 
   

Common Stock

   

Comprehensive

   

Retained

         
   

Shares

   

Amount

   

Loss

   

Earnings

   

Total

 
                                         

Balance at September 29, 2018

    18,754     $ 27,340     $ (11,994 )   $ 743,745     $ 759,091  

Issuance of common stock upon exercise of stock options

    20       1,704       -       -       1,704  

Foreign currency translation adjustment

    -       -       (1,359 )     -       (1,359 )

Reclass from accumulated other comprehensive gain

    -       -       (85 )     85       -  

Dividends declared

    -       -       -       (9,389 )     (9,389 )

Share-based compensation

    -       972       -       -       972  

Net earnings

    -       -       -       17,526       17,526  
                                         

Balance at December 29, 2018

    18,774       30,016       (13,438 )     751,967       768,545  

Issuance of common stock upon exercise of stock options

    34       3,451       -       -       3,451  

Issuance of common stock for employee stock purchase plan

    6       772       -       -       772  

Foreign currency translation adjustment

    -       -       394       -       394  

Issuance of common stock under deferred stock plan

    1       90       -       -       90  

Dividends declared

    -       -       -       (9,405 )     (9,405 )

Share-based compensation

    -       914       -       -       914  

Repurchase of common stock

    -       -       -       -       -  

Net earnings

    -       -       -       20,354       20,354  
                                         

Balance at March 30, 2019

    18,815       35,243       (13,044 )     762,916       785,115  

Issuance of common stock upon exercise of stock options

    15       1,499       -       -       1,499  

Foreign currency translation adjustment

    -       -       496       -       496  

Dividends declared

    -       -       -       (9,413 )     (9,413 )

Share-based compensation

    -       1,098       -       -       1,098  

Repurchase of common stock

    -       -       -       -       -  

Net earnings

    -       -       -       30,872       30,872  
                                         

Balance at June 29, 2019

    18,830     $ 37,840     $ (12,548 )   $ 784,375     $ 809,667  

 

The accompanying notes are an integral part of these statements.

 

6

 

 

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

 

  

Nine months ended

 
  

June 27,

  

June 29,

 
  

2020

  

2019

 

Operating activities:

        

Net earnings

 $11,721  $68,752 

Adjustments to reconcile net earnings to net cash provided by operating activities:

        

Depreciation of property, plant and equipment

  37,353   33,374 

Amortization of intangibles and deferred costs

  2,516   2,586 

Share-based compensation

  3,421   3,006 

Deferred income taxes

  (426)  690 

Loss on marketable securities

  1,746   410 

Plant shutdown impairment costs

  5,072   - 

Other

  (309)  350 

Changes in assets and liabilities net of effects from purchase of companies

        

Decrease (increase) in accounts receivable

  24,634   (14,289)

Increase in inventories

  (3,751)  (6,257)

(Increase) decrease in prepaid expenses

  (7,879)  957 

(Decrease) increase in accounts payable and accrued liabilities

  (7,478)  11,584 

Net cash provided by operating activities

  66,620   101,163 

Investing activities:

        

Payment for purchases of companies, net of cash acquired

  (57,197)  (1,155)

Purchases of property, plant and equipment

  (47,637)  (42,136)

Purchases of marketable securities

  (6,103)  (24,056)

Proceeds from redemption and sales of marketable securities

  54,125   29,721 

Proceeds from disposal of property, plant and equipment

  2,852   1,463 

Other

  (72)  (212)

Net cash used in investing activities

  (54,032)  (36,375)

Financing activities:

        

Payments to repurchase common stock

  (8,972)  - 

Proceeds from issuance of stock

  6,300   7,426 

Payments on capitalized lease obligations

  (272)  (33)

Payment of cash dividend

  (31,193)  (27,230)

Net cash used in financing activities

  (34,137)  (19,837)

Effect of exchange rate on cash and cash equivalents

  (885)  (333)

Net (decrease) increase in cash and cash equivalents

  (22,434)  44,618 

Cash and cash equivalents at beginning of period

  192,395   111,479 

Cash and cash equivalents at end of period

 $169,961  $156,097 

 

The accompanying notes are an integral part of these statements.

 

7

 

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 28, 2019.

 

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 nine months ended June 27, 2020 and June 29, 2019 are not necessarily indicative of results for the full year. Sales of our frozen beverages and frozen juice bars and ices are generally higher in the third and fourth quarters due to warmer weather. Additionally, approximately 2/3 of our sales are to venues and locations that have shut down or sharply curtailed their foodservice operations as a result of COVID-19 resulting in a negative impact on our business beginning in March 2020 which we anticipate will continue to have a negative impact on our business for an undetermined length of time.

 

Certain prior year financial statement amounts have been reclassified to be consistent with the presentation for the current year.

 

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 consolidated financial statements and the notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 28, 2019.

 

 

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.

 

8

 

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 approximately $15.9 million at June 27, 2020 and $14.8 million at September 28, 2019.

 

9

 

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:

 

  (in thousands) 
  

Three months ended

  Nine months ended 
  

June 27,

  

June 29,

  

June 27,

  

June 29,

 
  

2020

  

2019

  

2020

  

2019

 
                 

Beginning Balance

 $1,235  $1,655  $1,334  $1,865 

Additions to contract liability

  1,362   1,271   4,111   4,299 

Amounts recognized as revenue

  (1,311)  (1,499)  (4,159)  (4,737)

Ending Balance

 $1,286  $1,427  $1,286  $1,427 

 

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. The allowance for doubtful receivables was $1,340,000 and $572,000 at June 27, 2020 and September 28, 2019, respectively. Our allowance has increased based on our assessment of collectability considering the impact of COVID-19 on some of our customers.

  

10

 
 

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 $12,543,000 and $11,484,000 for the three months ended June 27, 2020 and June 29, 2019, respectively and $37,353,000 and $33,374,000 for the nine months ended June 27, 2020 and June 29, 2019, respectively. $1,854,000 of equipment, at cost net of accumulated depreciation, was impaired in our foodservice segment as a result of the pending shutdown of our Midwest manufacturing plant.

 

 

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 27, 2020

 
  

Loss

  

Shares

  

Per Share

 
  

(Numerator)

  

(Denominator)

  

Amount

 
             
  

(in thousands, except per share amounts)

 

Basic EPS

            

Net Loss available to common stockholders

 $(12,647)  18,888  $(0.67)
             

Effect of Dilutive Securities

            

Options

  -   -   - 
             

Diluted EPS

            

Net Loss 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.

 

11

 
  

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

  -   134   - 
             

Diluted EPS

            

Net Earnings available to common stockholders plus assumed conversions

 $11,721   19,036  $0.62 

 

169,246 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 27, 2020

 

  

Three Months Ended June 29, 2019

 
  

Income

  

Shares

  

Per Share

 
  

(Numerator)

  

(Denominator)

  

Amount

 
             
  

(in thousands, except per share amounts)

 

Basic EPS

            

Net Earnings available to common stockholders

 $30,872   18,823  $1.64 
             

Effect of Dilutive Securities

            

Options

  -   124   (0.01)
             

Diluted EPS

            

Net Earnings available to common stockholders plus assumed conversions

 $30,872   18,947  $1.63 

 

163,670 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 29, 2019

 

12

 
  

Nine Months Ended June 29, 2019

 
  

Income

  

Shares

  

Per Share

 
  

(Numerator)

  

(Denominator)

  

Amount

 
             
  

(in thousands, except per share amounts)

 

Basic EPS

            

Net Earnings available to common stockholders

 $68,752   18,794  $3.66 
             

Effect of Dilutive Securities

            

Options

  -   118   (0.02)
             

Diluted EPS

            

Net Earnings available to common stockholders plus assumed conversions

 $68,752   18,912  $3.64 

 

163,670 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 29, 2019

 

 

Note 5

At June 27, 2020, the Company has three stock-based employee compensation plans. Share-based compensation expense was recognized as follows:

 

  

Three months ended

  

Nine months ended

 
  

June 27,

  

June 29,

  

June 27,

  

June 29,

 
  

2020

  

2019

  

2020

  

2019

 
                 

Stock Options

 $890  $663  $2,267  $1,741 

Stock purchase plan

  57   187   328   324 

Stock issued to an outside director

  17   17   50   50 

Total share-based compensation

 $964  $867  $2,645  $2,115 
                 

The above compensation is net of tax benefits

 $70  $254  $822  $937 

 

The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model with the following weighted average assumptions used for grants in fiscal 2020 nine months: expected volatility of 17.4%; risk-free interest rate of 0.3%; dividend rate of 1.8% and expected lives of 51 months.

 

During the fiscal year 2020 nine month period, the Company granted 161,682 stock options. The weighted-average grant date fair value of these options was $14.40.

 

During the fiscal year 2019 nine month period, the Company granted 165,170 stock options. The weighted-average grant date fair value of these options was $26.29.

 

13

 

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 $360,000 and $414,000 on June 27, 2020 and September 28, 2019, 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 27, 2020, and September 28, 2019, respectively, the Company has $263,000 and $279,000 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.

 

Net earnings in last year’s nine months benefitted by a reduction of approximately $900,000 in tax as the provision for the one time repatriation tax as a result of the Tax Cuts and Job Act of 2017 was reduced as the amount recorded the year prior was an estimate. Excluding the reduction in the provision for the one-time repatriation tax, our effective tax rate was 27.5% in last year’s nine months.   

 

 

Note 7

In February 2016, the FASB issued guidance on lease accounting which requires that an entity recognize most leases on its balance sheet. The guidance retains a dual lease accounting model for purposes of income statement recognition, continuing the distinction between what are currently known as “capital” and “operating” leases for lessees. We adopted the guidance on September 29, 2019 using this alternate transition method, but we did not record a cumulative-effect adjustment from initially applying the standard. 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. We have completed the implementation of a lease accounting system to enable the preparation of financial information and have implemented relevant accounting policies and internal controls surrounding the lease accounting process. As a result of adoption, we recognized a right-of-use asset and lease liability of $71 million and $72 million, respectively. The right-of-use asset balance reflects the reclassification of deferred rent and prepaid rent against the initial asset. The adoption did not impact our results of operations or cash flows. See additional lease disclosures in Note 14.

 

14

 

In June 2016, the FASB issued guidance to update the methodology used to measure current expected credit losses (CECL). This guidance applies to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet credit exposures, such as loan commitments. This guidance replaces the current incurred loss impairment methodology with a methodology to reflect CECL and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. This guidance will be effective beginning in the first quarter of our fiscal year 2021.  Early adoption is permitted. We are currently evaluating the impact this guidance will have on our financial statements and related disclosures.

 

 

Note 8

Inventories consist of the following:

 

  

June 27,

  

September 28,

 
  

2020

  

2019

 
  

(unaudited)

     
  

(in thousands)

 
         

Finished goods

 $51,456  $53,225 

Raw materials

  24,679   22,146 

Packaging materials

  10,525   9,703 

Equipment parts and other

  33,904   31,091 

Total Inventories

 $120,564  $116,165 

 

       $2.0 million of inventory was written down in the quarter as we consider it to be unsaleable.

  

15

 
 

Note 9

We principally sell our products to the food service and retail supermarket industries. Sales and results of our frozen beverages business are monitored separately from the balance of our food service business because of different distribution and capital requirements. We maintain separate and discrete financial information for the three operating segments mentioned above which is available to our Chief Operating Decision Makers.

 

Our three reportable segments are Food Service, Retail Supermarkets and Frozen Beverages. All inter-segment net sales and expenses have been eliminated in computing net sales and operating income. These segments are described below.

 

Food Service

 

The primary products sold by the food service group are soft pretzels, frozen juice treats and desserts, churros, dough enrobed handheld products and baked goods. Our customers in the food service industry include snack bars and food stands in chain, department and discount stores; malls and shopping centers; fast food outlets; stadiums and sports arenas; leisure and theme parks; convenience stores; movie theatres; warehouse club stores; schools, colleges and other institutions. Within the food service industry, our products are purchased by the consumer primarily for consumption at the point-of-sale.

 

Retail Supermarkets

 

The primary products sold to the retail supermarket channel are soft pretzel products – including SUPERPRETZEL, frozen juice treats and desserts including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE FRUIT frozen fruit bars and sorbet, PHILLY SWIRL cups and sticks, ICEE Squeeze-Up Tubes and dough enrobed handheld products including PATIO burritos. Within the retail supermarket channel, our frozen and prepackaged products are purchased by the consumer for consumption at home.

 

Frozen Beverages

 

We sell frozen beverages and related products to the food service industry primarily under the names ICEE, SLUSH PUPPIE and PARROT ICE in the United States, Mexico and Canada. We also provide repair and maintenance service to customers for customers’ owned equipment.

 

16

 

The Chief Operating Decision Maker for Food Service and Retail Supermarkets and the Chief Operating Decision Maker for Frozen Beverages monthly review detailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales and operating income are key variables monitored by the Chief Operating Decision Makers and management when determining each segment’s and the company’s financial condition and operating performance. In addition, the Chief Operating Decision Makers review and evaluate depreciation, capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment. Due to a change in management and the reporting of our MARYB’s biscuit operations, which had sales and operating income of $25,316,000 and $1,584,000, respectively, in our 2019 fiscal year, we have reclassified the operations from our Food Service segment to our Retail Supermarket segment, which is reflected in both periods reported. Information regarding the operations in these three reportable segments is as follows:

 

  

Three months ended

  

Nine months ended

 
  

June 27,

  

June 29,

  

June 27,

  

June 29,

 
  

2020

  

2019

  

2020

  

2019

 
                 

Sales to External Customers:

                

Food Service

                

Soft pretzels

 $21,384  $55,867  $116,985  $154,670 

Frozen juices and ices

  8,688   13,862   25,222   30,336 

Churros

  7,321   18,888   38,466   49,793 

Handhelds

  7,448   8,550   22,084   25,339 

Bakery

  69,237   90,084   255,016   268,735 

Other

  2,543   6,105   13,628   19,576 

Total Food Service

 $116,621  $193,356  $471,401  $548,449 
                 

Retail Supermarket

                

Soft pretzels

 $12,716  $7,294  $34,874  $28,309 

Frozen juices and ices

  33,322   26,515   59,279   52,179 

Biscuits

  8,151   5,215   21,759   19,437 

Handhelds

  3,257   3,063   9,135   8,110 

Coupon redemption

  (807)  (962)  (2,216)  (2,163)

Other

  863   642   1,668   1,341 

Total Retail Supermarket

 $57,502  $41,767  $124,499  $107,213 
                 

Frozen Beverages

                

Beverages

 $16,456  $56,937  $83,606  $121,976 

Repair and maintenance service

  17,259   22,514   61,524   62,291 

Machines revenue

  6,363   11,810   27,254   33,875 

Other

  362   317   1,218   811 

Total Frozen Beverages

 $40,440  $91,578  $173,602  $218,953 
                 

Consolidated Sales

 $214,563  $326,701  $769,502  $874,615 
                 

Depreciation and Amortization:

                

Food Service

 $7,050  $6,973  $21,208  $19,911 

Retail Supermarket

  468   335   1,156   990 

Frozen Beverages

  5,864