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 March 30, 2024

or

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

Commission File Number:         0-14616

J&J SNACK FOODS CORP.

(Exact name of registrant as specified in its charter)

New Jersey	22-1935537
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer  Identification No.)

350 Fellowship Road, Mt. Laurel, New Jersey 08054

(Address of principal executive offices)

Telephone (856) 665-9533

Securities registered pursuant to Section 12(b) of the Exchange Act:

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

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

☒         Yes                                                ☐         No

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

☒         Yes                                                ☐         No

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

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

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

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

☐         Yes                                                ☒         No

At May 3, 2024 there were 19,386,215 shares of the Registrant’s Common Stock outstanding.

1

INDEX

		Page Number
Part I.	Financial Information
Item l.	Consolidated Financial Statements
Consolidated Balance Sheets – March 30, 2024 (unaudited) and September 30, 2023		3
Consolidated Statements of Earnings (unaudited) – Three and Six Months Ended March 30, 2024 and March 25, 2023		4
Consolidated Statements of Comprehensive Income (unaudited) – Three and Six Months Ended March 30, 2024 and March 25, 2023		5
Consolidated Statements of Changes In Stockholders’ Equity (unaudited) – Three and Six Months Ended March 30, 2024 and March 25, 2023		6
Consolidated Statements of Cash Flows (unaudited) –Six Months Ended March 30, 2024 and March 25, 2023		7
Notes to the Consolidated Financial Statements (unaudited)		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
Part II.	Other Information
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 5.	Other Information	28
Item 6.	Exhibits	28

2

PART I.         FINANCIAL INFORMATION

Item 1.           Consolidated Financial Statements

J & J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	March 30, 2024			September 30,
	(unaudited)			2023
Assets
Current assets
Cash and cash equivalents	$	43,645		$	49,581
Accounts receivable, net		178,312			198,129
Inventories		188,709			171,539
Prepaid expenses and other		9,944			10,963
Total current assets		420,610			430,212
Property, plant and equipment, at cost
Land		3,684			3,684
Buildings		50,075			45,538
Plant machinery and equipment		470,836			445,299
Marketing equipment		310,799			296,482
Transportation equipment		15,078			14,367
Office equipment		48,265			47,393
Improvements		64,823			51,319
Construction in progress		30,346			56,116
Total Property, plant and equipment, at cost		993,906			960,198
Less accumulated depreciation and amortization		601,876			574,295
Property, plant and equipment, net		392,030			385,903
Other assets
Goodwill		185,070			185,070
Other intangible assets, net		180,298			183,529
Operating lease right-of-use assets		154,104			88,868
Other		3,494			3,654
Total other assets		522,966			461,121
Total Assets	$	1,335,606		$	1,277,236
Liabilities and Stockholders' Equity
Current liabilities
Current finance lease liabilities	$	170		$	201
Accounts payable		95,844			90,758
Accrued insurance liability		16,980			15,743
Accrued liabilities		8,955			14,214
Current operating lease liabilities		19,179			16,478
Accrued compensation expense		19,218			23,341
Dividends payable		14,249			14,209
Total current liabilities		174,595			174,944
Long-term debt		17,000			27,000
Noncurrent finance lease liabilities		506			600
Noncurrent operating lease liabilities		141,726			77,631
Deferred income taxes		81,665			81,310
Other long-term liabilities		4,462			4,233
Stockholders' Equity
Preferred stock, $1 par value; authorized 10,000,000 shares; none issued		-			-
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding 19,386,000 and 19,332,000 respectively		124,280			114,556
Accumulated other comprehensive loss		(7,883	)		(10,166	)
Retained Earnings		799,255			807,128
Total stockholders' equity		915,652			911,518
Total Liabilities and Stockholders' Equity	$	1,335,606		$	1,277,236

The accompanying notes are an integral part of these statements.

3

J & J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(in thousands, except per share amounts)

	Three months ended						Six months ended
	March 30,			March 25,			March 30,			March 25,
	2024			2023			2024			2023
Net sales	$	359,734		$	337,854		$	708,042		$	689,197
Cost of goods sold		251,491			247,470			505,214			507,958
Gross profit		108,243			90,384			202,828			181,239
Operating expenses
Marketing		27,650			24,017			55,122			47,716
Distribution		44,249			38,188			84,552			80,237
Administrative		18,521			17,919			36,720			34,310
Other general expense		(81	)		67			(1,153	)		(545	)
Total operating expenses		90,339			80,191			175,241			161,718
Operating income		17,904			10,193			27,587			19,521
Other income (expense)
Investment income		684			401			1,482			1,086
Interest expense		(429	)		(1,334	)		(989	)		(2,383	)
Earnings before income taxes		18,159			9,260			28,080			18,224
Income tax expense		4,830			2,389			7,469			4,720
NET EARNINGS	$	13,329		$	6,871		$	20,611		$	13,504
Earnings per diluted share	$	0.69		$	0.36		$	1.06		$	0.70
Weighted average number of diluted shares		19,418			19,295			19,411			19,285
Earnings per basic share	$	0.69		$	0.36		$	1.06		$	0.70
Weighted average number of basic shares		19,380			19,238			19,362			19,230

The accompanying notes are an integral part of these statements.

4

J&J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

	Three months ended				Six months ended
	March 30,		March 25,		March 30,		March 25,
	2024		2023		2024		2023
Net earnings	$	13,329	$	6,871	$	20,611	$	13,504
Foreign currency translation adjustments		348		1,068		2,283		1,939
Total other comprehensive income, net of tax		348		1,068		2,283		1,939
Comprehensive income	$	13,677	$	7,939	$	22,894	$	15,443

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

(Unaudited) (in thousands)

					Accumulated
					Other
	Common Stock				Comprehensive			Retained
	Shares		Amount		Loss			Earnings			Total
Balance at September 30, 2023		19,332	$	114,556	$	(10,166	)	$	807,128		$	911,518
Issuance of common stock upon exercise of stock options		35		4,481		-			-			4,481
Foreign currency translation adjustment		-		-		1,935			-			1,935
Dividends declared		-		-		-			(14,235	)		(14,235	)
Share-based compensation		-		1,480		-			-			1,480
Net earnings		-		-		-			7,282			7,282
Balance at December 30, 2023		19,367	$	120,517	$	(8,231	)	$	800,175		$	912,461
Issuance of common stock upon exercise of stock options		9		715		-			-			715
Issuance of common stock for employee stock purchase plan		10		1,320		-			-			1,320
Foreign currency translation adjustment		-		-		348			-			348
Dividends declared		-		-		-			(14,249	)		(14,249	)
Share-based compensation		-		1,728		-			-			1,728
Net earnings		-		-		-			13,329			13,329
Balance at March 30, 2024		19,386	$	124,280	$	(7,883	)	$	799,255		$	915,652

					Accumulated
					Other
	Common Stock				Comprehensive			Retained
	Shares		Amount		Loss			Earnings			Total
Balance at September 24, 2022		19,219	$	94,026	$	(13,713	)	$	782,856		$	863,169
Issuance of common stock upon exercise of stock options		10		1,285		-			-			1,285
Foreign currency translation adjustment		-		-		871			-			871
Dividends declared		-		-		-			(13,461	)		(13,461	)
Share-based compensation		-		1,239		-			-			1,239
Net earnings		-		-		-						6,633
Balance at December 24, 2022		19,229	$	96,550	$	(12,842	)	$	776,028		$	859,736
Issuance of common stock upon exercise of stock options		14		1,713		-			-			1,713
Issuance of common stock for employee stock purchase plan		9		1,061		-			-			1,061
Foreign currency translation adjustment		-		-		1,068			-			1,068
Dividends declared		-		-		-			(13,475	)		(13,475	)
Share-based compensation		-		1,313		-			-			1,313
Net earnings		-		-		-			6,871			6,871
Balance at March 25, 2023		19,252	$	100,637	$	(11,774	)	$	769,424		$	858,287

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)

	Six months ended
	March 30,			March 25,
	2024			2023
Operating activities:
Net earnings	$	20,611		$	13,504
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation of fixed assets		30,960			27,236
Amortization of intangibles and deferred costs		3,232			3,385
(Gain) loss from disposals of property & equipment		(17	)		(354	)
Share-based compensation		3,208			2,552
Deferred income taxes		377			(787	)
(Gain) loss on marketable securities		-			(22	)
Other		160			(255	)
Changes in assets and liabilities, net of effects from purchase of companies
Decrease in accounts receivable		20,110			10,541
(Increase) Decrease in inventories		(17,027	)		823
Decrease in prepaid expenses		1,046			4,787
(Decrease) in accounts payable and accrued liabilities		(962	)		(25,739	)
Net cash provided by operating activities		61,698			35,671
Investing activities:
Purchases of property, plant and equipment		(36,626	)		(49,124	)
Proceeds from redemption and sales of marketable securities		-			5,300
Proceeds from disposal of property and equipment		152			797
Net cash used in investing activities		(36,474	)		(43,027	)
Financing activities:
Proceeds from issuance of stock		6,516			4,059
Borrowings under credit facility		35,000			92,000
Repayment of borrowings under credit facility		(45,000	)		(55,000	)
Payments on finance lease obligations		(110	)		(71	)
Payment of cash dividend		(28,444	)		(26,914	)
Net cash provided by (used in) financing activities		(32,038	)		14,074
Effect of exchange rates on cash and cash equivalents		878			1,384
Net increase (decrease) in cash and cash equivalents		(5,936	)		8,102
Cash and cash equivalents at beginning of period		49,581			35,181
Cash and cash equivalents at end of period	$	43,645		$	43,283

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 Basis of Presentation

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2023.

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

The results of operations for the three and six months ended March 30, 2024 and March 25, 2023 are not necessarily indicative of results for the full year. Sales of our frozen beverages and frozen novelties are generally higher in the fiscal third and fourth quarters due to warmer weather.

While we believe that the disclosures presented are adequate to make the information not misleading, it is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

Note 2 Revenue Recognition

We recognize revenue in accordance with ASC 606, “Revenue from Contracts with Customers.”

When Performance Obligations Are Satisfied

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

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

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

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

8

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 $21.9 million at March 30, 2024 and $18.9 million at September 30, 2023.

Warranties & Returns

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

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

Contract Balances

Our customers are billed for service contracts in advance of performance and therefore we have contract liability on our balance sheet as follows:

	Three months ended						Six months ended
	March 30,			March 25,			March 30,			March 25,
	2024			2023			2024			2023
	(in thousands)						(in thousands)
Beginning balance	$	4,935		$	4,767		$	5,306		$	4,926
Additions to contract liability		1,645			1,527			3,045			2,917
Amounts recognized as revenue		(1,831	)		(1,465	)		(3,602	)		(3,014	)
Ending balance	$	4,749		$	4,829		$	4,749		$	4,829

Disaggregation of Revenue

See Note 10 for disaggregation of our net sales by class of similar product and type of customer.

Allowance for Estimated Credit Losses

The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses. The allowance for estimated credit losses considers a number of factors including the age of receivable balances, the history of losses, expectations of future credit losses, and the customers’ ability to pay off obligations. The allowance for estimated credit losses was $3.6 million and $3.2 million on March 30, 2024 and September 30, 2023, respectively.

9

Note 3 Depreciation and Amortization Expense

Depreciation of equipment and buildings is provided for by the straight-line method over the assets’ estimated useful lives. Amortization of improvements is provided for by the straight-line method over the term of the lease or the assets’ estimated useful lives, whichever is shorter. Licenses and rights, customer relationships, franchise agreements and technology arising from acquisitions are amortized by the straight-line method over periods ranging from 2 to 20 years. Depreciation expense was $15.8 million and $13.8 million for the three months ended March 30, 2024 and March 25, 2023, respectively and $31.0 million and $27.2 million for the six months ended March 30, 2024 and March 25, 2023, respectively.

Note 4 Earnings per Share

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 and service share units (“RSU”)’s) or other contracts to issue common stock were exercised and converted into common stock. Our calculation of EPS is as follows:

	Three months ended March 30, 2024
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(in thousands, except per share amounts)
Basic EPS
Net earnings available to common stockholders	$	13,329		19,380	$	0.69
Effect of dilutive securities
RSU's and options		-		38		-
Diluted EPS
Net earnings available to common stockholders plus assumed conversions	$	13,329		19,418	$	0.69

213,851 anti-dilutive shares have been excluded in the computation of EPS for the three months ended March 30, 2024.

	Six months ended March 30, 2024
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(in thousands, except per share amounts)
Basic EPS
Net earnings available to common stockholders	$	20,611		19,362	$	1.06
Effect of dilutive securities
RSU's and options		-		49		-
Diluted EPS
Net earnings available to common stockholders plus assumed conversions	$	20,611		19,411	$	1.06

214,932 anti-dilutive shares have been excluded in the computation of EPS for the six months ended March 30, 2024.

	Three months ended March 25, 2023
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(in thousands, except per share amounts)
Basic EPS
Net earnings available to common stockholders	$	6,871		19,238	$	0.36
Effect of dilutive securities
RSU's and options		-		57		-
Diluted EPS
Net earnings available to common stockholders plus assumed conversions	$	6,871		19,295	$	0.36

381,735 anti-dilutive shares have been excluded in the computation of EPS for the three months ended March 25, 2023.

10

	Six months ended March 25, 2023
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(in thousands, except per share amounts)
Basic EPS
Net earnings available to common stockholders	$	13,504		19,230	$	0.70
Effect of dilutive securities
RSU's and options		-		55		-
Diluted EPS
Net earnings available to common stockholders plus assumed conversions	$	13,504		19,285	$	0.70

386,510 anti-dilutive shares have been excluded in the computation of EPS for the six months ended March 25, 2023.

Note 5 Share-Based Compensation and Post-Retirement Benefits

At March 30, 2024, the Company has three stock-based employee compensation plans. Share-based compensation expense was recognized as follows:

	Three months ended				Six months ended
	March 30,		March 25,		March 30,		March 25,
	2024		2023		2024		2023
	(in thousands)				(in thousands)
Stock options	$	364	$	559	$	727	$	1,179
Stock purchase plan		139		197		238		424
Stock issued to outside directors		34		27		74		27
Service share units issued to employees		444		193		826		374
Performance share units issued to employees		372		171		647		243
Total share-based compensation	$	1,353	$	1,147	$	2,512	$	2,247
The above compensation is net of tax benefits	$	375	$	166	$	696	$	305

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

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

The Company did not grant any stock options during the six months ended March 30, 2024 or during the six months ended March 25, 2023.

During the three and six months ended March 30, 2024, the Company issued 1,795 and 11,546 service share units (“RSU”)’s, respectively. During the six months ended March 25, 2023, the Company issued 9,900 RSU’s. Each RSU entitles the awardee to one share of common stock upon vesting. The fair value of the RSU’s was determined based upon the closing price of the Company’s common stock on the date of grant. No such RSU’s were issued in the three months ended March 25, 2023.

During the three and six months ended March 30, 2024, the Company also issued 1,795 and 11,538 performance share units (“PSU”)’s, respectively. During the six months ended March 25, 2023, the Company issued 18,641 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 March 25, 2023.

11

Note 6 Income Taxes

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

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

The total amount of gross unrecognized tax benefits is $0.3 million on both March 30, 2024 and September 30, 2023, respectively, all of which would impact our effective tax rate over time, if recognized. We recognize interest and penalties related to uncertain tax positions as a part of the provision for income taxes. As of March 30, 2024 and September 30, 2023, the Company has $0.3 million of accrued interest and penalties, respectively.

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

Our effective tax rate was 26.6% for the three months ended March 30, 2024, as compared with 25.8% in the prior year period.

Our effective tax rate was 26.6% for the six months ended March 30, 2024, as compared with 25.9% in the prior year period.

Note 7 New Accounting Pronouncements and Policies

In December 2022, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848", to provide optional guidance to temporarily ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Preceding the issuance of ASU 2020-04, which established ASC 848, the United Kingdom's Financial Conduct Authority ("FCA") announced that it would no longer need to persuade or compel banks to submit to LIBOR after December 31, 2021. In response, the FASB established December 31, 2022 as the expiration date for ASC 848. In March 2021, the FCA announced the intended cessation date of the overnight 1-, 3-, 6-, and 12-month USD LIBOR would be June 30, 2023. Because the current relief in Topic 848 may not cover a period of time during which a significant number of modifications may take place, this update deferred the sunset date in Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. This guidance is not expected to have a material impact on our consolidated financial statements and disclosures.

In September 2022, the FASB issued ASU No. 2022-04 “Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations”. This guidance requires annual and interim disclosures for entities that use supplier finance programs in connection with the purchase of goods and services. These amendments are effective for fiscal years beginning after December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. The Company adopted this guidance during the three months ended December 30, 2023. The adoption of this guidance did not have a material impact on our consolidated financial statements and disclosures.

In November 2023, the FASB issued ASU No. 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This guidance requires all public entities to provide enhanced disclosures about significant segment expenses. The amendments in this ASU are to be applied retrospectively and are effective for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. We are currently assessing the impact of the guidance on our consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This guidance enhances the transparency around income tax information through improvements to income tax disclosures, primarily related to the effective rate reconciliation and income taxes paid, to improve the overall effectiveness of income tax disclosures. The amendments in the ASU are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently assessing the impact of the guidance on our consolidated financial statements and disclosures.

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In March 2024, the SEC adopted final rules to require disclosures about certain climate-related information in registration statements and annual reports. In April 2024, the SEC issued an order to stay the rules pending the completion of judicial review of multiple petitions challenging the rules. The rules will require disclosure of, amongst other things, material climate-related risks, how the board of directors and management oversee such risks, and the actual and potential material impacts of such risks. The rules also require disclosure around material climate-related targets and goals, Scope 1 and Scope 2 green-house gas emissions, and the financial impacts of severe weather events and other natural conditions. If the rules are ultimately implemented, their adoption will be phased, and accordingly, we would be required to begin to make certain disclosures for our annual period ending September 26, 2026, applied prospectively. We are currently assessing the impact of the guidance on our consolidated financial statements and disclosures.

Note 8 Long-Term Debt

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

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

The Credit Agreement requires the Company to comply with various affirmative and negative covenants, including without limitation (i) covenants to maintain a minimum specified interest coverage ratio and maximum specified net leverage ratio, and (ii) subject to certain exceptions, covenants that prevent or restrict the Company’s ability to pay dividends, engage in certain mergers or acquisitions, make certain investments or loans, incur future indebtedness, alter its capital structure or line of business, prepay subordinated indebtedness, engage in certain transactions with affiliates, or amend its organizational documents. As of March 30, 2024, the Company is in compliance with all financial covenant terms of the Credit Agreement.

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

As of March 30, 2024, $17.0 million was outstanding under the Amended Credit Agreement with a weighted average interest rate of 6.94%. These borrowings have been classified as Long-Term Debt on the Company’s Balance Sheet. As of March 30, 2024, the amount available under the Amended Credit Agreement was $198.2 million, after giving effect to the outstanding letters of credit. As of September 30, 2023, $27.0 million was outstanding under the Credit Agreement. As of September 30, 2023, the amount available under the Amended Agreement was $188.2 million, after giving effect to the outstanding letters of credit.

Note 9 Inventory

Inventories consist of the following:

	March 30,		September 30,
	2024		2023
	(unaudited)
	(in thousands)
Finished goods	$	100,638	$	86,472
Raw materials		31,001		30,537
Packaging materials		13,675		12,484
Equipment parts and other		43,395		42,046
Total inventories	$	188,709	$	171,539

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Note 10 Segment Information

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

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

Food Service

The primary products sold by the Food 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 and casual dining restaurants; 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 or for take-away.

Retail Supermarkets

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

Frozen Beverages

We sell frozen beverages to the foodservice industry primarily under the names ICEE, SLUSH PUPPIE and PARROT ICE in the United States, Mexico and Canada. We also provide repair and maintenance services to customers for customer-owned equipment.

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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						Six months ended
	March 30,			March 25,			March 30,			March 25,
	2024			2023			2024			2023
	(unaudited)						(unaudited)
	(in thousands)						(in thousands)
Sales to external customers:
Food Service
Soft pretzels	$	54,328		$	55,492		$	104,456		$	107,715
Frozen novelties		27,713			26,607			48,763			48,372
Churros		30,825			24,920			58,886			50,677
Handhelds		19,504			20,309			41,551			43,881
Bakery		91,907			85,300			193,889			194,248
Other		5,713			5,653			11,054			11,685
Total Food Service	$	229,990		$	218,281		$	458,599		$	456,578
Retail Supermarket
Soft pretzels	$	16,453		$	16,013		$	34,900		$	30,498
Frozen novelties		23,676			20,770			36,537			38,739
Biscuits		6,207			5,858			13,239			13,771
Handhelds		7,194			4,099			12,704			6,991
Coupon redemption		(769	)		(375	)		(1,101	)		(551	)
Other		129			(5	)		370			(15	)
Total Retail Supermarket	$	52,890		$	46,360		$	96,649		$	89,433
Frozen Beverages
Beverages	$	44,666		$	41,799		$	86,616		$	80,458
Repair and maintenance service		23,231			22,585			47,790			46,412
Machines revenue		8,221			8,252			17,110			15,263
Other		736			577			1,278			1,053
Total Frozen Beverages	$	76,854		$	73,213		$	152,794		$	143,186
Consolidated sales	$	359,734		$	337,854		$	708,042		$	689,197
Depreciation and amortization:
Food Service	$	11,173		$	9,597		$	21,846		$	19,055
Retail Supermarket		525			492			1,052			883
Frozen Beverages		5,702			5,351			11,294			10,683
Total depreciation and amortization	$	17,400		$	15,440		$	34,192		$	30,621
Operating Income:
Food Service	$	7,931		$	5,133		$	13,947		$	11,520
Retail Supermarket		5,110			487			5,562			1,598
Frozen Beverages		4,863			4,573			8,078			6,403
Total operating income	$	17,904		$	10,193		$	27,587		$	19,521
Capital expenditures:
Food Service	$	9,364		$	13,744		$	21,229		$	38,606
Retail Supermarket		-			105			2			1,479
Frozen Beverages		7,332			4,365			15,395			9,039
Total capital expenditures	$	16,696		$	18,214		$	36,626		$	49,124
Assets:
Food Service	$	963,870		$	910,573		$	963,870		$	910,573
Retail Supermarket		36,650			12,162			36,650			12,162
Frozen Beverages		335,086			302,222			335,086			302,222
Total assets	$	1,335,606		$	1,224,957		$	1,335,606		$	1,224,957

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Note 11 Goodwill and Intangible Assets

Intangible Assets

Our reportable segments are Food Service, Retail Supermarkets and Frozen Beverages.

The carrying amounts of acquired intangible assets for the Food Service, Retail Supermarkets and Frozen Beverages segments as of March 30, 2024 and September 30, 2023 are as follows:

	March 30, 2024				September 30, 2023
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
	(in thousands)
FOOD SERVICE
Indefinite lived intangible assets
Trade names	$	84,194	$	-	$	84,194	$	-
Amortized intangible assets
Franchise agreements		8,500		1,488		8,500		1,063
Customer relationships		22,900		11,224		22,900		10,080
Technology		23,110		4,024		23,110		2,879
License and rights		1,690		1,608		1,690		1,565
TOTAL FOOD SERVICE	$	140,394	$	18,344	$	140,394	$	15,587
RETAIL SUPERMARKETS
Indefinite lived intangible assets