10-Q 1 jjsf20220625_10q.htm FORM 10-Q jjsf20220625_10q.htm
0000785956 J&J SNACK FOODS CORP false --09-25 Q3 2022 1 1 10,000,000 10,000,000 0 0 0 0 50,000,000 50,000,000 19,184,000 19,184,000 19,084,000 19,084,000 2,218,000 621,000 0 0 0 343,000 267,000 Goodwill was assigned to our Food Services segment and was primarily attributed to the assembled workforce of the acquired business and to our expectations of favorable growth opportunities in entertainment and amusement locations, theaters, and convenience based on increased synergies that are expected to be achieved from the integration of Dippin’ Dots. (1) Due to the limited time since the date of the acquisition, the purchase price allocation remains preliminary. 00007859562021-09-262022-06-25 xbrli:shares 00007859562022-07-29 iso4217:USD 00007859562022-06-25 00007859562021-09-25 iso4217:USDxbrli:shares 00007859562022-03-272022-06-25 00007859562021-03-282021-06-26 00007859562020-09-272021-06-26 0000785956us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-09-25 0000785956us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-25 0000785956us-gaap:RetainedEarningsMember2021-09-25 0000785956us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-09-262021-12-25 0000785956us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-262021-12-25 0000785956us-gaap:RetainedEarningsMember2021-09-262021-12-25 00007859562021-09-262021-12-25 0000785956us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-12-25 0000785956us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-25 0000785956us-gaap:RetainedEarningsMember2021-12-25 00007859562021-12-25 0000785956us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-12-262022-03-26 0000785956us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-262022-03-26 0000785956us-gaap:RetainedEarningsMember2021-12-262022-03-26 00007859562021-12-262022-03-26 0000785956us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-03-26 0000785956us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-26 0000785956us-gaap:RetainedEarningsMember2022-03-26 00007859562022-03-26 0000785956us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-03-272022-06-25 0000785956us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-272022-06-25 0000785956us-gaap:RetainedEarningsMember2022-03-272022-06-25 0000785956us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-06-25 0000785956us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-25 0000785956us-gaap:RetainedEarningsMember2022-06-25 0000785956us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2020-09-26 0000785956us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-26 0000785956us-gaap:RetainedEarningsMember2020-09-26 00007859562020-09-26 0000785956us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2020-09-272020-12-26 0000785956us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-272020-12-26 0000785956us-gaap:RetainedEarningsMember2020-09-272020-12-26 00007859562020-09-272020-12-26 0000785956us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2020-12-26 0000785956us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-26 0000785956us-gaap:RetainedEarningsMember2020-12-26 00007859562020-12-26 0000785956us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2020-12-272021-03-27 0000785956us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-272021-03-27 0000785956us-gaap:RetainedEarningsMember2020-12-272021-03-27 00007859562020-12-272021-03-27 0000785956us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-03-27 0000785956us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-27 0000785956us-gaap:RetainedEarningsMember2021-03-27 00007859562021-03-27 0000785956us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-03-282021-06-26 0000785956us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-282021-06-26 0000785956us-gaap:RetainedEarningsMember2021-03-282021-06-26 0000785956us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-06-26 0000785956us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-26 0000785956us-gaap:RetainedEarningsMember2021-06-26 00007859562021-06-26 xbrli:pure 0000785956jjsf:DippinDotsHoldingLlcMember2022-06-21 0000785956jjsf:DippinDotsHoldingLlcMember2022-06-212022-06-21 0000785956jjsf:DippinDotsHoldingLlcMember2022-03-272022-06-25 0000785956jjsf:DippinDotsHoldingLlcMember2021-09-262022-06-25 0000785956jjsf:DippinDotsHoldingLlcMemberus-gaap:GeneralAndAdministrativeExpenseMember2022-03-272022-06-25 0000785956jjsf:DippinDotsHoldingLlcMember2022-06-20 0000785956jjsf:DippinDotsHoldingLlcMemberus-gaap:TradeNamesMember2022-06-202022-06-20 utr:Y 0000785956jjsf:DippinDotsHoldingLlcMemberus-gaap:CustomerRelationshipsMember2022-06-202022-06-20 0000785956jjsf:DippinDotsHoldingLlcMemberus-gaap:TechnologyBasedIntangibleAssetsMember2022-06-202022-06-20 0000785956jjsf:DippinDotsHoldingLlcMemberus-gaap:FranchiseRightsMember2022-06-202022-06-20 0000785956jjsf:DippinDotsHoldingLlcMember2021-03-282021-06-26 0000785956jjsf:DippinDotsHoldingLlcMember2020-09-272021-06-26 0000785956srt:MinimumMember2021-09-262022-06-25 0000785956srt:MaximumMember2021-09-262022-06-25 0000785956us-gaap:EmployeeStockOptionMember2022-03-272022-06-25 0000785956us-gaap:EmployeeStockOptionMember2021-03-282021-06-26 0000785956us-gaap:EmployeeStockOptionMember2021-09-262022-06-25 0000785956us-gaap:EmployeeStockOptionMember2020-09-272021-06-26 0000785956jjsf:StockPurchasePlanMember2022-03-272022-06-25 0000785956jjsf:StockPurchasePlanMember2021-03-282021-06-26 0000785956jjsf:StockPurchasePlanMember2021-09-262022-06-25 0000785956jjsf:StockPurchasePlanMember2020-09-272021-06-26 0000785956us-gaap:RestrictedStockMember2022-03-272022-06-25 0000785956us-gaap:RestrictedStockMember2021-03-282021-06-26 0000785956us-gaap:RestrictedStockMember2021-09-262022-06-25 0000785956us-gaap:RestrictedStockMember2020-09-272021-06-26 0000785956us-gaap:PerformanceSharesMember2022-03-272022-06-25 0000785956us-gaap:PerformanceSharesMember2021-03-282021-06-26 0000785956us-gaap:PerformanceSharesMember2021-09-262022-06-25 0000785956us-gaap:PerformanceSharesMember2020-09-272021-06-26 0000785956us-gaap:RestrictedStockUnitsRSUMember2022-03-272022-06-25 0000785956us-gaap:RestrictedStockUnitsRSUMember2021-09-262022-06-25 0000785956us-gaap:RestrictedStockUnitsRSUMember2020-09-272021-06-26 0000785956us-gaap:RestrictedStockUnitsRSUMember2021-03-282021-06-26 0000785956us-gaap:PerformanceSharesMember2021-11-012021-11-30 utr:M utr:Rate 0000785956us-gaap:RevolvingCreditFacilityMemberjjsf:TheCreditAgreementMember2021-12-31 0000785956jjsf:TheCreditAgreementMemberjjsf:FederalFundsRateMember2022-03-272022-06-25 0000785956us-gaap:RevolvingCreditFacilityMemberjjsf:TheAmendedCreditAgreementMember2022-06-21 0000785956jjsf:TheAmendedCreditAgreementMember2022-06-25 0000785956jjsf:TheCreditAgreementMember2021-09-25 0000785956jjsf:SoftPretzelsMemberjjsf:FoodServiceMember2022-03-272022-06-25 0000785956jjsf:SoftPretzelsMemberjjsf:FoodServiceMember2021-03-282021-06-26 0000785956jjsf:SoftPretzelsMemberjjsf:FoodServiceMember2021-09-262022-06-25 0000785956jjsf:SoftPretzelsMemberjjsf:FoodServiceMember2020-09-272021-06-26 0000785956jjsf:FrozenJuicesAndIcesMemberjjsf:FoodServiceMember2022-03-272022-06-25 0000785956jjsf:FrozenJuicesAndIcesMemberjjsf:FoodServiceMember2021-03-282021-06-26 0000785956jjsf:FrozenJuicesAndIcesMemberjjsf:FoodServiceMember2021-09-262022-06-25 0000785956jjsf:FrozenJuicesAndIcesMemberjjsf:FoodServiceMember2020-09-272021-06-26 0000785956jjsf:ChurrosMemberjjsf:FoodServiceMember2022-03-272022-06-25 0000785956jjsf:ChurrosMemberjjsf:FoodServiceMember2021-03-282021-06-26 0000785956jjsf:ChurrosMemberjjsf:FoodServiceMember2021-09-262022-06-25 0000785956jjsf:ChurrosMemberjjsf:FoodServiceMember2020-09-272021-06-26 0000785956jjsf:HandheldsMemberjjsf:FoodServiceMember2022-03-272022-06-25 0000785956jjsf:HandheldsMemberjjsf:FoodServiceMember2021-03-282021-06-26 0000785956jjsf:HandheldsMemberjjsf:FoodServiceMember2021-09-262022-06-25 0000785956jjsf:HandheldsMemberjjsf:FoodServiceMember2020-09-272021-06-26 0000785956jjsf:BakeryMemberjjsf:FoodServiceMember2022-03-272022-06-25 0000785956jjsf:BakeryMemberjjsf:FoodServiceMember2021-03-282021-06-26 0000785956jjsf:BakeryMemberjjsf:FoodServiceMember2021-09-262022-06-25 0000785956jjsf:BakeryMemberjjsf:FoodServiceMember2020-09-272021-06-26 0000785956jjsf:OtherProductsMemberjjsf:FoodServiceMember2022-03-272022-06-25 0000785956jjsf:OtherProductsMemberjjsf:FoodServiceMember2021-03-282021-06-26 0000785956jjsf:OtherProductsMemberjjsf:FoodServiceMember2021-09-262022-06-25 0000785956jjsf:OtherProductsMemberjjsf:FoodServiceMember2020-09-272021-06-26 0000785956jjsf:FoodServiceMember2022-03-272022-06-25 0000785956jjsf:FoodServiceMember2021-03-282021-06-26 0000785956jjsf:FoodServiceMember2021-09-262022-06-25 0000785956jjsf:FoodServiceMember2020-09-272021-06-26 0000785956jjsf:SoftPretzelsMemberjjsf:RetailSupermarketMember2022-03-272022-06-25 0000785956jjsf:SoftPretzelsMemberjjsf:RetailSupermarketMember2021-03-282021-06-26 0000785956jjsf:SoftPretzelsMemberjjsf:RetailSupermarketMember2021-09-262022-06-25 0000785956jjsf:SoftPretzelsMemberjjsf:RetailSupermarketMember2020-09-272021-06-26 0000785956jjsf:FrozenJuicesAndIcesMemberjjsf:RetailSupermarketMember2022-03-272022-06-25 0000785956jjsf:FrozenJuicesAndIcesMemberjjsf:RetailSupermarketMember2021-03-282021-06-26 0000785956jjsf:FrozenJuicesAndIcesMemberjjsf:RetailSupermarketMember2021-09-262022-06-25 0000785956jjsf:FrozenJuicesAndIcesMemberjjsf:RetailSupermarketMember2020-09-272021-06-26 0000785956jjsf:BiscuitsMemberjjsf:RetailSupermarketMember2022-03-272022-06-25 0000785956jjsf:BiscuitsMemberjjsf:RetailSupermarketMember2021-03-282021-06-26 0000785956jjsf:BiscuitsMemberjjsf:RetailSupermarketMember2021-09-262022-06-25 0000785956jjsf:BiscuitsMemberjjsf:RetailSupermarketMember2020-09-272021-06-26 0000785956jjsf:HandheldsMemberjjsf:RetailSupermarketMember2022-03-272022-06-25 0000785956jjsf:HandheldsMemberjjsf:RetailSupermarketMember2021-03-282021-06-26 0000785956jjsf:HandheldsMemberjjsf:RetailSupermarketMember2021-09-262022-06-25 0000785956jjsf:HandheldsMemberjjsf:RetailSupermarketMember2020-09-272021-06-26 0000785956jjsf:CouponRedemtionMemberjjsf:RetailSupermarketMember2022-03-272022-06-25 0000785956jjsf:CouponRedemtionMemberjjsf:RetailSupermarketMember2021-03-282021-06-26 0000785956jjsf:CouponRedemtionMemberjjsf:RetailSupermarketMember2021-09-262022-06-25 0000785956jjsf:CouponRedemtionMemberjjsf:RetailSupermarketMember2020-09-272021-06-26 0000785956jjsf:OtherProductsMemberjjsf:RetailSupermarketMember2022-03-272022-06-25 0000785956jjsf:OtherProductsMemberjjsf:RetailSupermarketMember2021-03-282021-06-26 0000785956jjsf:OtherProductsMemberjjsf:RetailSupermarketMember2021-09-262022-06-25 0000785956jjsf:OtherProductsMemberjjsf:RetailSupermarketMember2020-09-272021-06-26 0000785956jjsf:RetailSupermarketMember2022-03-272022-06-25 0000785956jjsf:RetailSupermarketMember2021-03-282021-06-26 0000785956jjsf:RetailSupermarketMember2021-09-262022-06-25 0000785956jjsf:RetailSupermarketMember2020-09-272021-06-26 0000785956jjsf:BeverageMemberjjsf:FrozenBeveragesMember2022-03-272022-06-25 0000785956jjsf:BeverageMemberjjsf:FrozenBeveragesMember2021-03-282021-06-26 0000785956jjsf:BeverageMemberjjsf:FrozenBeveragesMember2021-09-262022-06-25 0000785956jjsf:BeverageMemberjjsf:FrozenBeveragesMember2020-09-272021-06-26 0000785956jjsf:RepairAndMaintenanceServiceMemberjjsf:FrozenBeveragesMember2022-03-272022-06-25 0000785956jjsf:RepairAndMaintenanceServiceMemberjjsf:FrozenBeveragesMember2021-03-282021-06-26 0000785956jjsf:RepairAndMaintenanceServiceMemberjjsf:FrozenBeveragesMember2021-09-262022-06-25 0000785956jjsf:RepairAndMaintenanceServiceMemberjjsf:FrozenBeveragesMember2020-09-272021-06-26 0000785956jjsf:MachineSalesMemberjjsf:FrozenBeveragesMember2022-03-272022-06-25 0000785956jjsf:MachineSalesMemberjjsf:FrozenBeveragesMember2021-03-282021-06-26 0000785956jjsf:MachineSalesMemberjjsf:FrozenBeveragesMember2021-09-262022-06-25 0000785956jjsf:MachineSalesMemberjjsf:FrozenBeveragesMember2020-09-272021-06-26 0000785956jjsf:OtherProductsMemberjjsf:FrozenBeveragesMember2022-03-272022-06-25 0000785956jjsf:OtherProductsMemberjjsf:FrozenBeveragesMember2021-03-282021-06-26 0000785956jjsf:OtherProductsMemberjjsf:FrozenBeveragesMember2021-09-262022-06-25 0000785956jjsf:OtherProductsMemberjjsf:FrozenBeveragesMember2020-09-272021-06-26 0000785956jjsf:FrozenBeveragesMember2022-03-272022-06-25 0000785956jjsf:FrozenBeveragesMember2021-03-282021-06-26 0000785956jjsf:FrozenBeveragesMember2021-09-262022-06-25 0000785956jjsf:FrozenBeveragesMember2020-09-272021-06-26 0000785956jjsf:FoodServiceMember2022-06-25 0000785956jjsf:FoodServiceMember2021-06-26 0000785956jjsf:RetailSupermarketMember2022-06-25 0000785956jjsf:RetailSupermarketMember2021-06-26 0000785956jjsf:FrozenBeveragesMember2022-06-25 0000785956jjsf:FrozenBeveragesMember2021-06-26 0000785956us-gaap:TradeNamesMemberjjsf:FoodServiceMember2022-06-25 0000785956us-gaap:TradeNamesMemberjjsf:FoodServiceMember2021-09-25 0000785956us-gaap:NoncompeteAgreementsMemberjjsf:FoodServiceMember2022-06-25 0000785956us-gaap:NoncompeteAgreementsMemberjjsf:FoodServiceMember2021-09-25 0000785956us-gaap:FranchiseRightsMemberjjsf:FoodServiceMember2022-06-25 0000785956us-gaap:FranchiseRightsMemberjjsf:FoodServiceMember2021-09-25 0000785956us-gaap:CustomerRelationshipsMemberjjsf:FoodServiceMember2022-06-25 0000785956us-gaap:CustomerRelationshipsMemberjjsf:FoodServiceMember2021-09-25 0000785956us-gaap:TechnologyBasedIntangibleAssetsMemberjjsf:FoodServiceMember2022-06-25 0000785956us-gaap:TechnologyBasedIntangibleAssetsMemberjjsf:FoodServiceMember2021-09-25 0000785956jjsf:LicenseAndRightsMemberjjsf:FoodServiceMember2022-06-25 0000785956jjsf:LicenseAndRightsMemberjjsf:FoodServiceMember2021-09-25 0000785956jjsf:FoodServiceMember2021-09-25 0000785956us-gaap:TradeNamesMemberjjsf:RetailSupermarketMember2022-06-25 0000785956us-gaap:TradeNamesMemberjjsf:RetailSupermarketMember2021-09-25 0000785956jjsf:FiniteLivedTradeNamesMemberjjsf:RetailSupermarketMember2022-06-25 0000785956jjsf:FiniteLivedTradeNamesMemberjjsf:RetailSupermarketMember2021-09-25 0000785956us-gaap:CustomerRelationshipsMemberjjsf:RetailSupermarketMember2022-06-25 0000785956us-gaap:CustomerRelationshipsMemberjjsf:RetailSupermarketMember2021-09-25 0000785956jjsf:RetailSupermarketMember2021-09-25 0000785956us-gaap:TradeNamesMemberjjsf:FrozenBeveragesMember2022-06-25 0000785956us-gaap:TradeNamesMemberjjsf:FrozenBeveragesMember2021-09-25 0000785956jjsf:DistributionRightsIndefinitelivedMemberjjsf:FrozenBeveragesMember2022-06-25 0000785956jjsf:DistributionRightsIndefinitelivedMemberjjsf:FrozenBeveragesMember2021-09-25 0000785956us-gaap:CustomerRelationshipsMemberjjsf:FrozenBeveragesMember2022-06-25 0000785956us-gaap:CustomerRelationshipsMemberjjsf:FrozenBeveragesMember2021-09-25 0000785956jjsf:LicenseAndRightsMemberjjsf:FrozenBeveragesMember2022-06-25 0000785956jjsf:LicenseAndRightsMemberjjsf:FrozenBeveragesMember2021-09-25 0000785956jjsf:FrozenBeveragesMember2021-09-25 00007859562021-09-262022-03-26 00007859562020-09-272021-03-27 0000785956us-gaap:TechnologyBasedIntangibleAssetsMember2021-09-262022-06-25 0000785956us-gaap:CustomerRelationshipsMember2021-09-262022-06-25 0000785956jjsf:LicenseAndRightsMember2021-09-262022-06-25 0000785956us-gaap:FranchiseRightsMember2021-09-262022-06-25 0000785956us-gaap:CorporateBondSecuritiesMember2022-06-25 0000785956jjsf:MutualFundsMember2022-06-25 0000785956us-gaap:PreferredStockMember2022-06-25 0000785956us-gaap:CorporateBondSecuritiesMember2021-09-262022-06-25 0000785956us-gaap:CorporateBondSecuritiesMember2021-09-25 0000785956jjsf:MutualFundsMember2021-09-25 0000785956us-gaap:PreferredStockMember2021-09-25 0000785956us-gaap:ExternalCreditRatingInvestmentGradeMember2022-06-25 0000785956us-gaap:AccumulatedTranslationAdjustmentMember2022-03-26 0000785956us-gaap:AccumulatedTranslationAdjustmentMember2021-09-25 0000785956us-gaap:AccumulatedTranslationAdjustmentMember2022-03-272022-06-25 0000785956us-gaap:AccumulatedTranslationAdjustmentMember2021-09-262022-06-25 0000785956us-gaap:AccumulatedTranslationAdjustmentMember2022-06-25 0000785956us-gaap:AccumulatedTranslationAdjustmentMember2021-03-27 0000785956us-gaap:AccumulatedTranslationAdjustmentMember2020-09-26 0000785956us-gaap:AccumulatedTranslationAdjustmentMember2021-03-282021-06-26 0000785956us-gaap:AccumulatedTranslationAdjustmentMember2020-09-272021-06-26 0000785956us-gaap:AccumulatedTranslationAdjustmentMember2021-06-26 0000785956srt:MinimumMember2022-06-25 0000785956srt:MaximumMember2022-06-25 00007859562022-06-30 0000785956jjsf:PropertyPlantAndEquipmentNetMember2022-06-30 0000785956jjsf:PropertyPlantAndEquipmentNetMember2021-09-25 0000785956jjsf:DistributionAndShippingCostsMemberjjsf:NFIMember2022-03-272022-06-25 0000785956jjsf:DistributionAndShippingCostsMemberjjsf:NFIMember2021-03-282021-06-26 0000785956jjsf:DistributionAndShippingCostsMemberjjsf:NFIMember2021-09-262022-06-25 0000785956jjsf:DistributionAndShippingCostsMemberjjsf:NFIMember2020-09-272021-06-26 0000785956jjsf:ManagementServicesMemberjjsf:NFIMember2022-03-272022-06-25 0000785956jjsf:ManagementServicesMemberjjsf:NFIMember2021-09-262022-06-25 0000785956jjsf:ManagementServicesMemberjjsf:NFIMember2021-03-282021-06-26 0000785956jjsf:ManagementServicesMemberjjsf:NFIMember2020-09-272021-06-26
 
 

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 25, 2022

or

 

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

 

Commission File Number:         0-14616

 

J & J 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 Class Trading Symbol(s) Name of Each Exchange on Which Registered
Common Stock, no par value JJSF The NASDAQ Global Select Market

     

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes No

                                                              

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated filer Accelerated filer ☐
   
Non-accelerated filer ☐  
  Smaller reporting company
  Emerging growth company

                                             

1

 

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

 

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

    Yes                                             ☒         No

 

At July 29, 2022 there were 19,192,251 shares of the Registrant’s Common Stock outstanding.

 

2

 
 

  

 

INDEX

 

 

 

Page

Number

Part I. Financial Information

 

   

Item l. Consolidated Financial Statements 

 

   

Consolidated Balance Sheets – June 25, 2022 (unaudited) and September 25, 2021

4

   

Consolidated Statements of Earnings (unaudited) -   Three and Nine Months Ended June 25, 2022 and June 26, 2021

5
   

Consolidated Statements of Comprehensive Income (unaudited) – Three and Nine Months Ended June 25, 2022 and June 26, 2021

6
   

Consolidated Statements of Changes In Stockholders’ Equity (unaudited) – Three and Nine Months Ended June 25, 2022 and June 26, 2021

7

 

 

Consolidated Statements of Cash Flows (unaudited) – Nine Months Ended June 25, 2022 and June 26, 2021

8

 

 

Notes to the Consolidated Financial Statements (unaudited)

9

   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

36

   

Item 4. Controls and Procedures

36

   

Part II. Other Information

37

   

Item 6.  Exhibits

37

 

3

 

  

 

J & J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

 

  

June 25,

     
  

2022

  

September 25,

 
  

(unaudited)

  

2021

 

Assets

        

Current assets

        

Cash and cash equivalents

 $81,283  $283,192 

Marketable securities held to maturity

  4,520   7,980 

Accounts receivable, net

  253,469   162,939 

Inventories

  173,948   123,160 

Prepaid expenses and other

  10,519   7,498 

Total current assets

  523,739   584,769 
         

Property, plant and equipment, at cost

        

Land

  3,714   2,494 

Buildings

  34,742   26,582 

Plant machinery and equipment

  367,297   343,716 

Marketing equipment

  266,915   258,624 

Transportation equipment

  11,780   10,315 

Office equipment

  45,518   34,648 

Improvements

  47,922   45,578 

Construction in progress

  54,537   35,285 

Total Property, plant and equipment, at cost

  832,425   757,242 

Less accumulated depreciation and amortization

  513,851   490,055 

Property, plant and equipment, net

  318,574   267,187 
         

Other assets

        

Goodwill

  188,467   121,833 

Other intangible assets, net

  196,407   77,776 

Marketable securities held to maturity

  -   4,047 

Marketable securities available for sale

  5,608   10,084 

Operating lease right-of-use assets

  54,990   54,555 

Other

  3,457   1,968 

Total other assets

  448,929   270,263 

Total Assets

 $1,291,242  $1,122,219 
         

Liabilities and Stockholders' Equity

        

Current Liabilities

        

Current finance lease liabilities

 $189  $182 

Accounts payable

  128,551   96,789 

Accrued insurance liability

  14,892   16,260 

Accrued liabilities

  10,121   10,955 

Current operating lease liabilities

  14,062   13,395 

Accrued compensation expense

  19,038   17,968 

Dividends payable

  12,138   12,080 

Total current liabilities

  198,991   167,629 
         

Long-term debt

  125,000   - 

Noncurrent finance lease liabilities

  318   392 

Noncurrent operating lease liabilities

  46,017   46,557 

Deferred income taxes

  61,350   61,578 

Other long-term liabilities

  3,667   409 
         

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 19,184,000 and 19,084,000 respectively

  90,274   73,597 

Accumulated other comprehensive loss

  (13,374)  (13,383)

Retained Earnings

  778,999   785,440 

Total stockholders' equity

  855,899   845,654 

Total Liabilities and Stockholders' Equity

 $1,291,242  $1,122,219 

 

The accompanying notes are an integral part of these statements.

 

4

 

 

 J & J SNACK FOODS CORP. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF EARNINGS

 (Unaudited)

 (in thousands, except per share amounts)

 

   

Three Months Ended

   

 

Nine Months Ended

 
   

June 25,

   

June 26,

   

June 25,

   

June 26,

 
   

2022

   

2021

   

2022

   

2021

 
                                 

Net sales

  $ 380,227     $ 324,344     $ 980,230     $ 821,519  
                                 

Cost of goods sold

    271,151       228,170       726,431       614,324  

Gross profit

    109,076       96,174       253,799       207,195  
                                 

Operating expenses

                               

Marketing

    24,002       20,502       65,945       56,995  

Distribution

    48,157       27,311       109,821       75,643  

Administrative

    15,724       10,348       37,812       29,004  

Other general expense

    (67 )     (131 )     28       (399 )

Total operating expenses

    87,816       58,030       213,606       161,243  
                                 

Operating income

    21,260       38,144       40,193       45,952  
                                 

Other income (expense)

                               

Investment income

    106       470       537       2,419  

Interest expense & other

    (156 )     (8 )     (231 )     (19 )
                                 

Earnings before income taxes

    21,210       38,606       40,499       48,352  
                                 

Income taxes

    5,647       9,713       10,574       11,620  
                                 

NET EARNINGS

  $ 15,563     $ 28,893     $ 29,925     $ 36,732  
                                 

Earnings per diluted share

  $ 0.81     $ 1.51     $ 1.56     $ 1.92  
                                 

Weighted average number of diluted shares

    19,234       19,185       19,198       19,116  
                                 

Earnings per basic share

  $ 0.81     $ 1.52     $ 1.56     $ 1.93  
                                 

Weighted average number of basic shares

    19,174       19,045       19,131       18,996  

 

The accompanying notes are an integral part of these statements.

 

5

 

 

J & J SNACK FOODS CORP. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

 

   

Three Months Ended

   

Nine Months Ended

 
   

June 25,

   

June 26,

   

June 25,

   

June 26,

 
   

2022

   

2021

   

2022

   

2021

 
                                 

Net earnings

  $ 15,563     $ 28,893     $ 29,925     $ 36,732  
                                 

Foreign currency translation adjustments

    (93 )     657       9       2,405  

Total other comprehensive (loss) income

    (93 )     657       9       2,405  
                                 

Comprehensive income

  $ 15,470     $ 29,550     $ 29,934     $ 39,137  

 

The accompanying notes are an integral part of these statements.

 

6

 

 

 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 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  

Foreign currency translation adjustment

    -       -       (444 )     -       (444 )

Dividends declared

    -       -       -       (12,092 )     (12,092 )

Share-based compensation

    -       1,083       -       -       1,083  

Net earnings

    -       -       -       11,091       11,091  
                                         

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  

Issuance of common stock upon exercise of stock options

    11       1,452       -       -       1,452  

Issuance of common stock for employee stock purchase plan

    -       -       -       -       -  

Foreign currency translation adjustment

    -       -       (93 )     -       (93 )

Dividends declared

    -       -       -       (12,138 )     (12,138 )

Share-based compensation

    -       1,134       -       -       1,134  

Net earnings

    -       -       -       15,563       15,563  
                                         

Balance at June 25, 2022

    19,184     $ 90,274     $ (13,374 )   $ 778,999     $ 855,899  

 

                   

Accumulated

                 
                   

Other

                 
   

Common Stock

   

Comprehensive

   

Retained

         
   

Shares

   

Amount

   

Loss

   

Earnings

   

Total

 
                                         

Balance as September 26, 2020

    18,915     $ 49,268     $ (15,587 )   $ 775,817     $ 809,498  

Issuance of common stock upon exercise of stock options

    41       4,390       -       -       4,390  

Foreign currency translation adjustment

    -       -       2,279       -       2,279  

Dividends declared

    -       -       -       (10,900 )     (10,900 )

Share-based compensation

    -       1,244       -       -       1,244  

Net earnings

    -       -       -       1,778       1,778  
                                         

Balance at December 26, 2020

    18,956     $ 54,902     $ (13,308 )   $ 766,695     $ 808,289  

Issuance of common stock upon exercise of stock options

    72       8,384       -       -       8,384  

Issuance of common stock for employee stock purchase plan

    6       714       -       -       714  

Foreign currency translation adjustment

    -       -       (531 )     -       (531 )

Dividends declared

    -       -       -       (10,943 )     (10,943 )

Share-based compensation

    -       1,026       -       -       1,026  

Net earnings

    -       -       -       6,061       6,061  
                                         

Balance at March 27, 2021

    19,034     $ 65,026     $ (13,839 )   $ 761,813     $ 813,000  

Issuance of common stock upon exercise of stock options

    27       3,564       -       -       3,564  

Issuance of common stock for employee stock purchase plan

    -       -       -       -       -  

Foreign currency translation adjustment

    -       -       657       -       657  

Dividends declared

    -       -       -       (12,066 )     (12,066 )

Share-based compensation

    -       982       -       -       982  

Net earnings

    -       -       -       28,893       28,893  
                                         

Balance at June 26, 2021

    19,061     $ 69,572     $ (13,182 )   $ 778,640     $ 835,030  

 

The accompanying notes are an integral part of these statements.

 

7

 

 

J & J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

   

Nine Months Ended

 
   

June 25,

   

June 26,

 
   

2022

   

2021

 

Operating activities:

               

Net earnings

  $ 29,925     $ 36,732  

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

               

Depreciation of fixed assets

    36,292       36,278  

Amortization of intangibles and deferred costs

    1,775       2,096  

Loss from disposals of property & equipment

    50       -  

Share-based compensation

    3,484       3,252  

Deferred income taxes

    (227 )     (188 )

Loss (Gain) on marketable securities

    412       (926 )

Other

    (212 )     (305 )

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

               

Increase in accounts receivable

    (78,058 )     (27,940 )

Increase in inventories

    (42,784 )     (5,964 )

(Increase) decrease in prepaid expenses

    (102 )     5,710  

Increase in accounts payable and accrued liabilities

    19,798       24,823  

Net cash (used in) provided by operating activities

    (29,647 )     73,568  

Investing activities:

               

Payments for purchases of companies, net of cash acquired

    (221,301 )     -  

Purchases of property, plant and equipment

    (64,231 )     (34,456 )

Proceeds from redemption and sales of marketable securities

    11,526       54,191  

Proceeds from disposal of property and equipment

    1,147       2,079  

Other

    -       42  

Net cash (used in) provided by investing activities

    (272,859 )     21,856  

Financing activities:

               

Proceeds from issuance of stock

    12,168       17,178  
Borrowings under credit facility     125,000       -  

Payments for debt issue costs

    (225 )     -  

Payments on finance lease obligations

    (150 )     (48 )

Payment of cash dividend

    (36,299 )     (32,719 )

Net cash provided by (used in) financing activities

    100,494       (15,589 )

Effect of exchange rate on cash and cash equivalents

    103       624  

Net (decrease) increase in cash and cash equivalents

    (201,909 )     80,459  

Cash and cash equivalents at beginning of period

    283,192       195,809  

Cash and cash equivalents at end of period

  $ 81,283     $ 276,268  

 

The accompanying notes are an integral part of these statements.

 

8

 

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 25, 2021.

 

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position and the results of operations and cash flows.

 

The results of operations for the three and nine months ended June 25, 2022 and June 26, 2021 are not necessarily indicative of results for the full year. Sales of our frozen beverages and frozen novelties are generally higher in the third and fourth quarters due to warmer weather. Also, approximately 2/3 of our sales are to venues and locations that previously shut down or sharply curtailed their foodservice operations as a result of COVID-19. While the majority of these venues have reopened, the extent of the future impact of COVID-19 on our operations depends on future developments of the virus and its effects which are uncertain at this time.

 

While we believe that the disclosures presented are adequate to make the information not misleading, we suggest that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 25, 2021.

 

 

Note 2

On June 21, 2022, J & J Snack Foods Corp. and its wholly-owned subsidiary, DD Acquisition Holdings, LLC, completed the acquisition of one hundred percent (100%) of the equity interests of Dippin’ Dots Holding, L.L.C. (“Dippin’ Dots”) which, through its wholly-owned subsidiaries, owns and operates the Dippin’ Dots and Doc Popcorn businesses. The purchase price was approximately $223,561,000, consisting entirely of cash, and may be modified for certain customary post-closing purchase price adjustments.

 

9

 

Dippin’ Dots is a leading producer of flash-frozen beaded ice cream treats, and the acquisition will leverage synergies in entertainment and amusement locations, theaters, and convenience to continue to expand our business. The acquisition also includes the Doc Popcorn business operated by Dippin’ Dots.

 

The financial results of Dippin’ Dots have been included in our consolidated financial statements since the date of the acquisition. Sales and net earnings of Dippin’ Dots since the date of acquisition were $2,218,000 and $621,000 for the three and nine-months ended June 25, 2022. Dippin’ Dots is reported as part of our Food Service segment. Included within Administrative expenses for the quarter were $3,088,000 of acquisition costs.

 

Upon acquisition, the assets and liabilities of Dippin’ Dots were adjusted to their respective fair values as of the closing date of the transaction, including the identifiable intangible assets acquired. In addition, the excess of the purchase price over the fair value of the net assets acquired has been recorded as goodwill. The fair value estimates used in valuing certain acquired assets and liabilities are based, in part, on inputs that are unobservable. For intangible assets, these include, but are not limited to, forecasted future cash flows, revenue growth rates, attrition rates and discount rates.

 

The purchase price allocation as of the date of acquisition was based on a preliminary valuation and is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available.

 

10

 

The major classes of assets and liabilities to which we have preliminarily allocated the purchase price were as follows:

 

Preliminary Dippin' Dots Purchase Price Allocation (1)

 

  

(in thousands)

 
  

June 21,

 
  

2022

 
     

Cash and cash equivalents

 $2,259 

Accounts receivable, net

  12,257 

Inventories

  8,812 

Prepaid expenses and other

  1,215 

Property, plant and equipment, net

  24,622 

Intangible assets

  120,400 

Goodwill(2)

  66,634 

Operating lease right-of-use assets

  3,514 

Other noncurrent assets

  243 

Total assets acquired

  239,956 

Liabilities assumed:

    

Current lease liabilities

  619 

Accounts payable

  6,005 

Other current liabilities

  3,532 

Noncurrent lease liabilities

  2,954 

Other noncurrent liabilities

  3,285 

Total liabilities acquired

  16,395 

Purchase price

 $223,561 

 

(1)

Due to the limited time since the date of the acquisition, the purchase price allocation remains preliminary.

(2)Goodwill was assigned to our Food Services segment and was primarily attributed to the assembled workforce of the acquired business and to our expectations of favorable growth opportunities in entertainment and amusement locations, theaters, and convenience based on increased synergies that are expected to be achieved from the integration of Dippin’ Dots.

 

Acquired Intangible Assets

        
         
      

(in thousands)

 
  

Weighted average

  

June 21,

 
  

life (years)

  

2022

 

Amortizable

        

Trade name

 

indefinite

   76,900 

Customer relationships

  10   12,100 

Technology

  10   22,900 

Franchise agreements 

  10   8,500 

Total acquired intangible assets

      120,400 

 

11

 

Dippin' Dots Results Included in the Company's Consolidated Results

 

  

(in thousands)

 
  

Three Months ended

  

Nine Months ended

 
  

June 25,

  

June 25,

 
  

2022

  

2022

 
         

Net sales

 $2,218  $2,218 

Net earnings

 $621  $621 

 

The following unaudited pro forma information presents the consolidated results of operations as if the business combination in 2022 had occurred as of September 27, 2020, after giving effect to acquisition-related adjustments, including: (1) depreciation and amortization of assets; (2) amortization of unfavorable contracts related to the fair value adjustments of the assets acquired; (3) change in the effective tax rate; (4) interest expense on any debt incurred to fund the acquisitions which would have been incurred had such acquisitions occurred as of September 27, 2020; and (5) merger and acquisition costs.

 

J & J Snack Foods Corp and Dippin' Dots Unaudited Pro Forma Combined Financial Information

 

  

(in thousands)

 
  

Three Months ended

  

Nine Months ended

 
  

June 25,

  

June 26,

  

June 25,

  

June 26,

 
  

2022

  

2021

  

2022

  

2021

 
                 

Net sales

 $404,182  $349,722  $1,028,079  $861,536 

Net earnings

 $17,838  $33,980  $31,501  $35,893 
                 

Earnings per diluted share

 $0.93  $1.77  $1.64  $1.88 

Weighted average number of diluted shares

  19,234   19,185   19,198   19,116 

 

The pro forma information does not reflect the potential benefits of cost and funding synergies, opportunities to earn additional revenues, or other factors, and therefore does not represent what the actual Net sales and Net earnings would have been had the companies actually been combined as of this date.

 

 

Note 3

 

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.

 

12

 

The singular performance obligation of our customer contracts for product and machine sales is determined by each individual purchase order and the respective products ordered, with revenue being recognized at a point-in-time when the obligation under the terms of the agreement is satisfied and product control is transferred to our customer. Specifically, control transfers to our customers when the product is delivered to, installed, or picked up by our customers based upon applicable shipping terms, as our customers can direct the use and obtain substantially all of the remaining benefits from the product at this point in time. The performance obligations in our customer contracts for product are generally satisfied within 30 days.

 

The singular performance obligation of our customer contracts for time and material repair and maintenance equipment service is the performance of the repair and maintenance with revenue being recognized at a point-in-time when the repair and maintenance is completed.

 

The singular performance obligation of our customer repair and maintenance equipment service contracts is the performance of the repair and maintenance with revenue being recognized over the time the service is expected to be performed. Our customers are billed for service contracts in advance of performance and therefore we have a contract liability recorded within Accrued liabilities on our balance sheet.

 

The Company is entitled to royalties under its agreements with franchisees. Sales-based royalties are related entirely to the Company’s performance obligation under the franchise agreements and are recognized on a monthly basis. Purchase-based royalties are related entirely to the Company’s performance obligation under the franchise agreements and are recognized on a weekly basis.

 

Under franchise agreements, the Company provides franchisees with a franchise license allowing the use of brand intellectual property and certain ongoing services. As the performance obligations are satisfied, over time, franchise, renewal and transfer fees are recognized on a straight-line basis over the terms of the franchise agreement.

 

Significant Payment Terms

In general, within our customer contracts, the purchase order identifies the product, quantity, price, pick-up allowances, payment terms and final delivery terms. Although some payment terms may be more extended, presently the majority of our payment terms are 30 days. As a result, we have used the available practical expedient and, consequently, do not adjust our revenues for the effects of a significant financing component.

 

13

 

Shipping

All amounts billed to customers related to shipping and handling are classified as revenues; therefore, we recognize revenue for shipping and handling fees at the time the products are shipped or when services are performed. The cost of shipping products to the customer is recognized at the time the products are shipped to the customer and our policy is to classify them as Distribution expenses.

 

Variable Consideration

In addition to fixed contract consideration, our contracts include some form of variable consideration, including sales discounts, trade promotions and certain other sales and consumer incentives, including rebates and coupon redemptions. In general, variable consideration is treated as a reduction in revenue when the related revenue is recognized. Depending on the specific type of variable consideration, we use the most likely amount method to determine the variable consideration. We believe there will be no significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. We review and update our estimates and related accruals of variable consideration each period based on historical experience. Our recorded liability for allowances, end-user pricing adjustments and trade spending was $16,907,000 at June 25, 2022 and $14,646,000 at September 25, 2021.

 

Warranties & Returns

We provide all customers with a standard or assurance type warranty. Either stated or implied, we provide assurance the related products will comply with all agreed-upon specifications and other warranties provided under the law. No services beyond an assurance warranty are provided to our customers.

 

We do not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. We do not estimate a right of return and related refund liability as returns of our products are rare.

 

14

 

Contract Balances

Contract liabilities consist of deferred revenue resulting from service contracts in our Frozen Beverages segment where our customers are billed for service in advance of performance. Contract liabilities also consist of deferred revenue in our Food Service segment resulting from initial franchise fees paid by franchisees, as well as renewal and transfer fees paid by franchisees and license fees paid by licensees which are generally recognized on a straight-line basis over the term of the underlying agreement. Therefore, we have contract liabilities on our balance sheet as follows:

 

   

(in thousands)

 
   

Three Months Ended

   

Nine Months Ended

 
   

June 25,

   

June 26,

   

June 25,

   

June 26,

 
   

2022

   

2021

   

2022

   

2021

 
                                 

Beginning Balance

  $ 1,092     $ 1,090     $ 1,097     $ 1,327  

Additions to contract liability

    2,270       1,237       4,843       4,182  

Amounts recognized as revenue

    (1,276 )     (1,283 )     (3,854 )     (4,465 )

Ending Balance

  $ 2,086     $ 1,044     $ 2,086     $ 1,044  

 

Disaggregation of Revenue

See Note 11 for disaggregation of our net sales by class of similar product and type of customer.

 

Allowance for Doubtful Receivables

 

We provide an allowance for doubtful receivables after taking into consideration historical experience and other factors. On September 27, 2020, the Company adopted guidance issued by the FASB in ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which requires companies to recognize an allowance that reflects a current estimate of credit losses expected to be incurred over the life of the asset. Adoption of this new guidance did not have a material impact on the consolidated financial statements. The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses. The allowance for doubtful accounts considers a number of factors including the age of receivable balances, the history of losses, expectations of future credit losses and the customers’ ability to pay off obligations. The allowance for doubtful receivables was $1,629,000 and $1,405,000 on June 25, 2022 and September 25, 2021, respectively.

 

 

Note 4

Depreciation of equipment and buildings is provided for by the straight-line method over the assets’ estimated useful lives. Amortization of improvements is provided for by the straight-line method over the term of the lease or the assets’ estimated useful lives, whichever is shorter. Licenses and rights, customer relationships, technology, and non-compete agreements arising from acquisitions are amortized by the straight-line method over periods ranging from 2 to 20 years. Depreciation expense was $12,424,000 and $12,025,000 for the three months ended June 25, 2022 and June 26, 2021, respectively and $36,292,000 and $36,278,000 for the nine months ended June 25, 2022 and June 26, 2021, respectively.

 

15

  
 

Note 5

Basic earnings per common share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period. Diluted EPS takes into consideration the potential dilution that could occur if securities (stock options) or other contracts to issue common stock were exercised and converted into common stock. Our calculation of EPS is as follows:

 

   

Three Months Ended June 25, 2022

         
   

Income

   

Shares

   

Per Share

 
   

(Numerator)

   

(Denominator)

   

Amount

 
                         
   

(in thousands, except per share amounts)

 

Basic EPS

                       

Net earnings available to common stockholders

  $ 15,563       19,174     $ 0.81  
                         

Effect of dilutive securities

                       

Options

    -       60       -  
                         

Diluted EPS

                       

Net earnings available to common stockholders plus assumed conversions

  $ 15,563       19,234     $ 0.81  

 

382,431 anti-dilutive shares have been excluded in the computation of EPS for  the three months ended June 25, 2022.

 

   

Nine Months ended June 25, 2022

         
   

Income

   

Shares

   

Per Share

 
   

(Numerator)

   

(Denominator)

   

Amount

 
                         
   

(in thousands, except per share amounts)

 

Basic EPS

                       

Net earnings available to common stockholders

  $ 29,925       19,131     $ 1.56  
                         

Effect of dilutive securities

                       

Options

    -       67       -  
                         

Diluted EPS

                       

Net earnings available to common stockholders plus assumed conversions

  $ 29,925       19,198     $ 1.56  

 

302,674 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 25, 2022.

 

16

 
   

Three Months Ended June 26, 2021

         
   

Income

   

Shares

   

Per Share

 
   

(Numerator)

   

(Denominator)

   

Amount

 
                         
   

(in thousands, except per share amounts)

 

Basic EPS

                       

Net earnings available to common stockholders

  $ 28,893       19,045     $ 1.52  
                         

Effect of dilutive securities

                       

Options

    -       140       -  
                         

Diluted EPS

                       

Net earnings available to common stockholders plus assumed conversions

  $ 28,893       19,185     $ 1.51  

 

20,800 anti-dilutive shares have been excluded in the computation of EPS for the three months ended June 26, 2021.

 

   

Nine Months Ended June 26, 2021

         
   

Income

   

Shares

   

Per Share

 
   

(Numerator)

   

(Denominator)

   

Amount

 
                         
   

(in thousands, except per share amounts)

 

Basic EPS

                       

Net earnings available to common stockholders

  $ 36,732       18,996     $ 1.93  
                         

Effect of dilutive securities

                       

Options

    -       120       -  
                         

Diluted EPS

                       

Net earnings available to common stockholders plus assumed conversions

  $ 36,732       19,116     $ 1.92  

 

289,692 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 26, 2021.

 

17

  
 

Note 6

At June 25, 2022, the Company has three stock-based employee compensation plans. Share-based compensation expense was recognized as follows:

 

  

Three Months Ended

  

Nine Months Ended

 
  

June 25,

  

June 26,

  

June 25,

  

June 26,

 
  

2022

  

2021

  

2022

  

2021

 
                 

Stock options

 $693  $523  $2,115  $1,538 

Stock purchase plan

  90   171   240   513 

Restricted stock issued to employees

  152   23   376   70 

Performance stock issued to employees

  83   -   204   - 

Total share-based compensation

 $1,018  $717  $2,935  $2,121 
                 

The above compensation is net of tax benefits

 $116  $265  $549  $1,131 

 

The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model.

 

During the fiscal year 2022 nine-month period, the Company granted 115,700 stock options. The weighted-average grant date fair value of these options was $23.36.

 

During the fiscal year 2021 nine-month period, the Company granted 138,432 stock options. The weighted-average grant date fair value of these options was $31.20.

 

The Company issued 327 service share units (“RSU”)’s in the three-months ended June 25, 2022, and 9,200 RSU’s in the nine-months ended June 25, 2022. Each RSU entitles the awardee to one share of common stock upon vesting. The fair value of RSU’s was determined based upon the closing price of the Company’s common stock on the date of grant. No such RSU’s were issued in the three or nine-months ended June 26, 2021.

 

In November 2021, the Company also issued 8,868 performance share units (“PSU”)’s. Each PSU may result in the issuance of up to two shares of common stock upon vesting, dependent upon the level of achievement of the applicable Performance Goal. The fair value of the PSU’s was determined based upon the closing price of the Company’s common stock on the date of grant. Additionally, the Company applies a quarterly probability assessment in computing this non-cash compensation expense, and any change in estimate is reflected as a cumulative adjustment to expense in the quarter of the change. No such PSU’s were issued in the three-months ended June 25, 2022 or in the three or nine-months ended June 26, 2021.

 

Expected volatility is based on the historical volatility of the price of our common shares over the past 51 months for 5-year options and 10 years for 10-year options. We use historical information to estimate expected life and forfeitures within the valuation model. The expected term of awards represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation cost is recognized using a straight-line method over the vesting or service period and is net of estimated forfeitures.

 

18

  
 

Note 7

We account for our income taxes under the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities.

 

Additionally, we recognize a liability for income taxes and associated penalties and interest for tax positions taken or expected to be taken in a tax return which are more likely than not to be overturned by taxing authorities (“uncertain tax positions”).  We have not recognized a tax benefit in our financial statements for these uncertain tax positions.  

 

The total amount of gross unrecognized tax benefits is $343,000 on both June 25, 2022 and September 25, 2021, respectively, all of which would impact our effective tax rate over time, if recognized. We recognize interest and penalties related to uncertain tax positions as a part of the provision for income taxes. As of June 25, 2022, and September 25, 2021, the Company has $267,000 of accrued interest and penalties.

 

In addition to our federal tax return and tax returns for Mexico and Canada, we file tax returns in all states that have a corporate income tax with virtually all open for examination for three to four years.

 

Our effective tax rate was 26% for the nine months ended June 25, 2022 and 24% for the nine months ended June 26, 2021. Our effective tax rate was 27% for the three months ended June 25, 2022 and 25% for the three months ended June 26, 2021.

 

 

Note 8

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which changes the impairment model used to measure credit losses for most financial assets. We are required to recognize an allowance that reflects the Company’s current estimate of credit losses expected to be incurred over the life of the financial asset, including trade receivables and held-to-maturity debt securities.

 

The Company adopted this guidance in the first quarter of Fiscal 2021 using the modified retrospective transition method. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements.

 

19

  
 

Note 9

In December 2021, the Company entered into an amended and restated loan agreement (the “Credit Agreement”) with our existing banks which provided for up to a $50,000,000 revolving credit facility repayable in December 2026.

 

Interest accrues, at the Company’s election at (i) the BSBY Rate (as defined in the Credit Agreement) plus an applicable margin, based upon the Consolidated Net Leverage Ratio, as defined in the Credit Agreement, or (ii) the Alternate Base Rate (a rate based on the higher of (a) the prime rate announced from time-to-time by the Administrative Agent, (b) the Federal Reserve System’s federal funds rate, plus 0.50% or (c) the Daily BSBY Rate, plus an applicable margin. The Alternate Base Rate is defined in the Credit Agreement.

 

The Credit Agreement requires the Company to comply with various affirmative and negative covenants, including without limitation (i) covenants to maintain a minimum specified interest coverage ratio and maximum specified net leverage ratio, and (ii) subject to certain exceptions, covenants that prevent or restrict the Company’s ability to pay dividends, engage in certain mergers or acquisitions, make certain investments or loans, incur future indebtedness, alter its capital structure or line of business, prepay subordinated indebtedness, engage in certain transactions with affiliates, or amend its organizational documents. As of June 25, 2022, the Company is in compliance with all financial covenants of the Credit Agreement.

 

On June 21, 2022, the Company entered into an amendment to the Credit Agreement, the “Amended Credit Agreement” which provided for an incremental increase of $175,000,000 in available borrowings. The Amended Credit Agreement also includes an option to increase the size of the revolving credit facility by up to an amount not to exceed in the aggregate the greater of $225,000,000 or, $50,000,000 plus the Consolidated EBITDA of the Borrowers, subject to the satisfaction of certain terms and conditions.

 

As of June 25, 2022, $125,000,000 was outstanding under the Amended Credit Agreement. These borrowings have been classified as Long-Term Debt on the Company’s Balance Sheet. As of June 25, 2022, the amount available under the Amended Credit Agreement was $91,225,000 million, after giving effect to the outstanding letters of credit. As of September 25, 2021, there were no outstanding balances under the Credit Agreement.

 

20

  
 

Note 10

Inventories consist of the following:

 

   

June 25,

   

September 25,

 
   

2022

   

2021

 
   

(unaudited)

         
   

(in thousands)

 
                 

Finished goods

  $ 83,201     $ 49,756  

Raw materials

    39,856       29,529  

Packaging materials

    15,832       11,168  

Equipment parts and other

    35,059       32,707  

Total inventories

  $ 173,948     $ 123,160  

  

 

Note 11

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 Maker.

 

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 segment are soft pretzels, frozen novelties, churros, handheld products and baked goods. Our customers in the food service segment include snack bars and food stands in chain, department and discount stores; malls and shopping centers; casual dining restaurants, fast food outlets; stadiums and sports arenas; leisure and 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 novelties 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 handheld products. Within the retail supermarket channel, our frozen and prepackaged products are purchased by the consumer for consumption at home.

 

21

 

Frozen Beverages

 

The Company markets frozen beverages primarily under the names ICEE, SLUSH PUPPIE and PARROT ICE which are sold primarily in the United States, Mexico and Canada. We also provide repair and maintenance service to customers for customers’ owned equipment.

 

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, 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

   

Nine Months Ended

 
   

June 25,

   

June 26,

   

June 25,

   

June 26,

 
   

2022

   

2021

   

2022

   

2021

 
                                 
                                 

Sales to external customers:

                               

Food Service

                               

Soft pretzels

  $ 55,946     $ 50,895     $ 149,628     $ 120,356  

Frozen novelties

    17,155       13,927       32,917       30,812  

Churros

    25,614       20,096       62,550       46,358  

Handhelds

    25,740       18,971       64,741       56,574  

Bakery

    95,495       85,706       287,293       257,580  

Other

    7,892       6,884       18,785       14,546  

Total Food Service

  $ 227,842     $ 196,479     $ 615,914     $ 526,226  
                                 

Retail Supermarket

                               

Soft pretzels

  $ 11,696     $ 11,193     $ 43,642     $ 40,871  

Frozen novelties

    41,865       36,898       78,586       71,600  

Biscuits

    6,066       4,562       20,024       18,717  

Handhelds

    1,589       1,191       3,934       6,215  

Coupon redemption

    (605 )     (513 )     (2,227 )     (2,196 )

Other

    397       526       501       1,652  

Total Retail Supermarket

  $ 61,008     $ 53,857     $ 144,460     $ 136,859  
                                 

Frozen Beverages

                               

Beverages

  $ 57,791     $ 42,279     $ 126,919     $ 76,663  

Repair and

                               

maintenance service

    22,892       22,789       65,903       59,903  

Machines revenue

    9,868       8,404       25,257       20,556  

Other

    826       536       1,777       1,312  

Total Frozen Beverages

  $ 91,377     $ 74,008     $ 219,856     $ 158,434  
                                 

Consolidated sales

  $ 380,227     $ 324,344     $ 980,230     $ 821,519  
                                 

Depreciation and amortization:

                               

Food Service

  $ 7,097     $ 6,817     $ 20,436     $ 20,334  

Retail Supermarket

    405       378       1,157       1,147  

Frozen Beverages

    5,514       5,469       16,474       16,893  

Total depreciation and amortization

  $ 13,016     $ 12,664     $ 38,067     $ 38,374  
                                 

Operating income:

                               

Food Service

  $ 2,640     $ 17,644     $ 12,177     $ 29,879  

Retail Supermarket

    2,341       9,080       8,416       20,167  

Frozen Beverages

    16,279       11,420       19,600       (4,094 )

Total operating income

  $ 21,260     $ 38,144     $ 40,193     $ 45,952  
                                 

Capital expenditures:

                               

Food Service

  $ 21,673     $ 10,383     $ 45,757     $ 25,915  

Retail Supermarket

    2,815       93       6,438       194  

Frozen Beverages

    4,437       5,151       12,036       8,347  

Total capital expenditures

  $ 28,925     $ 15,627     $ 64,231     $ 34,456  
                                 

Assets:

                               

Food Service

  $ 957,719     $ 779,730     $ 957,719     $ 779,730  

Retail Supermarket

    29,147       33,405       29,147       33,405  

Frozen Beverages

    304,376       288,411       304,376       288,411  

Total assets

  $ 1,291,242     $ 1,101,546     $ 1,291,242     $ 1,101,546  

 

22

  
 

Note 12

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 June 25, 2022 and September 25, 2021 are as follows:

 

   

June 25, 2022

   

 

 

September 25, 2021

 
   

Gross

           

Gross

         
   

Carrying

   

Accumulated

   

Carrying

   

Accumulated