UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the period ended
or
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of |
(I.R.S. Employer |
incorporation or organization) | Identification No.) |
(Address of principal executive offices)
Telephone (
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 | ||
The |
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.
☒
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).
☒
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.
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).
At August 2, 2024 there were
INDEX
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Page | |
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Number | |
Part I. |
Financial Information |
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Item l. |
Consolidated Financial Statements |
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Consolidated Balance Sheets – June 29, 2024 (unaudited) and September 30, 2023 |
3 | |
Consolidated Statements of Earnings (unaudited) - Three and Nine Months Ended June 29, 2024 and June 24, 2023 |
4 | |
Consolidated Statements of Comprehensive Income (unaudited) – Three and Nine Months Ended June 29, 2024 and June 24, 2023 |
5 | |
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Consolidated Statements of Changes In Stockholders’ Equity (unaudited) – Three and Nine Months Ended June 29, 2024 and June 24, 2023 |
6 | |
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Consolidated Statements of Cash Flows (unaudited) – Three and Nine Months Ended June 29, 2024 and June 24, 2023 |
7 | |
Notes to the Consolidated Financial Statements (unaudited) |
8 | |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
26 |
Item 4. |
Controls and Procedures |
26 |
Part II. |
Other Information |
26 |
Item 1. |
Legal Proceedings |
26 |
Item 1A. |
Risk Factors |
26 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
26 |
Item 5. |
Other Information |
26 |
Item 6. |
Exhibits |
26 |
Signatures |
|
27 |
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
J & J SNACK FOODS CORP. AND SUBSIDIARIES |
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CONSOLIDATED BALANCE SHEETS |
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(in thousands, except share amounts) |
June 29, |
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2024 |
September 30, |
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(unaudited) |
2023 |
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Assets |
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Current assets |
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Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, net |
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Inventories |
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Prepaid expenses and other |
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Total current assets |
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Property, plant and equipment, at cost |
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Land |
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Buildings |
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Plant machinery and equipment |
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Marketing equipment |
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Transportation equipment |
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Office equipment |
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Improvements |
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Construction in progress |
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Total Property, plant and equipment, at cost |
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Less accumulated depreciation and amortization |
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Property, plant and equipment, net |
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Other assets |
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Goodwill |
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Other intangible assets, net |
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Operating lease right-of-use assets |
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Other |
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Total other assets |
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Total Assets |
$ | $ | ||||||
Liabilities and Stockholders' Equity |
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Current liabilities |
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Current finance lease liabilities |
$ | $ | ||||||
Accounts payable |
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Accrued insurance liability |
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Accrued liabilities |
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Current operating lease liabilities |
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Accrued compensation expense |
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Dividends payable |
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Total current liabilities |
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Long-term debt |
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Noncurrent finance lease liabilities |
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Noncurrent operating lease liabilities |
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Deferred income taxes |
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Other long-term liabilities |
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Stockholders' Equity |
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Preferred stock, $ |
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Common stock, |
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Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
Retained Earnings |
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Total stockholders' equity |
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Total Liabilities and Stockholders' Equity |
$ | $ |
The accompanying notes are an integral part of these statements.
J & J SNACK FOODS CORP. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF EARNINGS |
(Unaudited) |
(in thousands, except per share amounts) |
Three months ended |
Nine months ended |
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June 29, |
June 24, |
June 29, |
June 24, |
|||||||||||||
2024 |
2023 |
2024 |
2023 |
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Net sales |
$ | $ | $ | $ | ||||||||||||
Cost of goods sold |
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Gross profit |
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Operating expenses |
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Marketing |
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Distribution |
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Administrative |
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Other general expense (income) |
( |
) | ( |
) | ||||||||||||
Total operating expenses |
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Operating income |
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Other income (expense) |
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Investment income |
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Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Earnings before income taxes |
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Income tax expense |
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NET EARNINGS |
$ | $ | $ | $ | ||||||||||||
Earnings per diluted share |
$ | $ | $ | $ | ||||||||||||
Weighted average number of diluted shares |
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Earnings per basic share |
$ | $ | $ | $ | ||||||||||||
Weighted average number of basic shares |
The accompanying notes are an integral part of these statements.
J&J SNACK FOODS CORP. AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
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(Unaudited) |
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(in thousands) |
Three months ended |
Nine months ended |
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June 29, |
June 24, |
June 29, |
June 24, |
|||||||||||||
2024 |
2023 |
2024 |
2023 |
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Net earnings |
$ | $ | $ | $ | ||||||||||||
Foreign currency translation adjustments |
( |
) | ( |
) | ||||||||||||
Total other comprehensive (loss) income, net of tax | ( |
) | ( |
) | ||||||||||||
Comprehensive income |
$ | $ | $ | $ |
The accompanying notes are an integral part of these statements.
J & J Snack Foods Corp. and Subsidiaries |
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY |
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(Unaudited) |
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(in thousands) |
Accumulated |
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Other |
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Common Stock |
Comprehensive |
Retained |
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Shares |
Amount |
Loss |
Earnings |
Total |
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Balance at September 30, 2023 |
$ | $ | ( |
) | $ | $ | ||||||||||||||
Common Stock issued in connection with employee and director plans, net of tax withheld | ||||||||||||||||||||
Foreign currency translation adjustment |
- | |||||||||||||||||||
Dividends declared |
- | ( |
) | ( |
) | |||||||||||||||
Share-based compensation |
- | |||||||||||||||||||
Net earnings |
- | |||||||||||||||||||
Balance at December 30, 2023 |
$ | $ | ( |
) | $ | $ | ||||||||||||||
Common Stock issued in connection with employee and director plans, net of tax withheld |
||||||||||||||||||||
Issuance of common stock for employee stock purchase plan |
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Foreign currency translation adjustment |
- | |||||||||||||||||||
Dividends declared |
- | ( |
) | ( |
) | |||||||||||||||
Share-based compensation |
- | |||||||||||||||||||
Net earnings |
- | |||||||||||||||||||
Balance at March 30, 2024 |
$ | $ | ( |
) | $ | $ | ||||||||||||||
Common Stock issued in connection with employee and director plans, net of tax withheld |
||||||||||||||||||||
Foreign currency translation adjustment |
- | ( |
) | ( |
) | |||||||||||||||
Dividends declared |
- | ( |
) | ( |
) | |||||||||||||||
Share-based compensation |
- | |||||||||||||||||||
Net earnings |
- | |||||||||||||||||||
Balance at June 29, 2024 |
$ | $ | ( |
) | $ | $ |
Accumulated |
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Other |
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Common Stock |
Comprehensive |
Retained |
||||||||||||||||||
Shares |
Amount |
Loss |
Earnings |
Total |
||||||||||||||||
Balance at September 24, 2022 |
$ | $ | ( |
) | $ | $ | ||||||||||||||
Common Stock issued in connection with employee and director plans, net of tax withheld | ||||||||||||||||||||
Foreign currency translation adjustment |
- | |||||||||||||||||||
Dividends declared |
- | ( |
) | ( |
) | |||||||||||||||
Share-based compensation |
- | |||||||||||||||||||
Net earnings |
- | 6,633 | ||||||||||||||||||
Balance at December 24, 2022 |
$ | $ | ( |
) | $ | $ | ||||||||||||||
Common Stock issued in connection with employee and director plans, net of tax withheld |
||||||||||||||||||||
Issuance of common stock for employee stock purchase plan |
||||||||||||||||||||
Foreign currency translation adjustment |
- | |||||||||||||||||||
Dividends declared |
- | ( |
) | ( |
) | |||||||||||||||
Share-based compensation |
- | |||||||||||||||||||
Net earnings |
- | |||||||||||||||||||
Balance at March 25, 2023 |
$ | $ | ( |
) | $ | $ | ||||||||||||||
Common Stock issued in connection with employee and director plans, net of tax withheld |
||||||||||||||||||||
Foreign currency translation adjustment |
- | |||||||||||||||||||
Dividends declared |
- | ( |
) | ( |
) | |||||||||||||||
Share-based compensation |
- | |||||||||||||||||||
Net earnings |
- | |||||||||||||||||||
Balance at June 24, 2023 |
$ | $ | ( |
) | $ | $ |
The accompanying notes are an integral part of these statements.
J & J SNACK FOODS CORP. AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
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(Unaudited) |
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(in thousands) |
Nine months ended |
||||||||
June 29, |
June 24, |
|||||||
2024 |
2023 |
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Operating activities: |
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Net earnings |
$ | $ | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities |
||||||||
Depreciation of fixed assets |
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Amortization of intangibles and deferred costs |
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(Gain) from disposals of property & equipment |
( |
) | ( |
) | ||||
Share-based compensation |
||||||||
Deferred income taxes |
( |
) | ||||||
(Gain) on marketable securities |
( |
) | ||||||
Other |
( |
) | ||||||
Changes in assets and liabilities, net of effects from purchase of companies |
||||||||
(Increase) in accounts receivable |
( |
) | ( |
) | ||||
(Increase) decrease in inventories |
( |
) | ||||||
Decrease in prepaid expenses |
||||||||
Increase in accounts payable and accrued liabilities |
||||||||
Net cash provided by operating activities |
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Investing activities: |
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Payments for acquisitions |
( |
) | ||||||
Purchases of property, plant and equipment |
( |
) | ( |
) | ||||
Proceeds from redemption and sales of marketable securities |
||||||||
Proceeds from disposal of property and equipment |
||||||||
Net cash investing activities |
( |
) | ( |
) | ||||
Financing activities: |
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Proceeds from issuance of stock |
||||||||
Borrowings under credit facility |
||||||||
Repayment of borrowings under credit facility |
( |
) | ( |
) | ||||
Payments on finance lease obligations |
( |
) | ( |
) | ||||
Payment of cash dividend |
( |
) | ( |
) | ||||
Net cash (used in) financing activities |
( |
) | ( |
) | ||||
Effect of exchange rates on cash and cash equivalents |
( |
) | ||||||
Net increase in cash and cash equivalents |
||||||||
Cash and cash equivalents at beginning of period |
||||||||
Cash and cash equivalents at end of period |
$ | $ |
The accompanying notes are an integral part of these statements.
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 |
Basis of Presentation |
The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended September 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 nine months ended June 29, 2024 and June 24, 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.
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 $
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
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:
Three months ended |
Nine months ended |
|||||||||||||||
June 29, |
June 24, |
June 29, |
June 24, |
|||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
(in thousands) |
(in thousands) |
|||||||||||||||
Beginning Balance |
$ | $ | $ | $ | ||||||||||||
Additions to contract liability |
||||||||||||||||
Amounts recognized as revenue |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Ending Balance |
$ | $ | $ | $ |
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 numerous 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 $
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, technology, and amortizable trade names arising from acquisitions are amortized by the straight-line method over periods ranging from
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, service share units (“RSU”)’s, and performance share units (“PSU”)’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 June 29, 2024 |
||||||||||||
Income |
Shares |
Per Share |
||||||||||
(Numerator) |
(Denominator) |
Amount |
||||||||||
(in thousands, except per share amounts) |
||||||||||||
Basic EPS |
||||||||||||
Net earnings available to common stockholders |
$ | $ | ||||||||||
Effect of dilutive securities |
||||||||||||
RSU's, PSU’s and options | ||||||||||||
Diluted EPS |
||||||||||||
Net earnings available to common stockholders plus assumed conversions |
$ | $ |
Nine months ended June 29, 2024 |
||||||||||||
Income |
Shares |
Per Share |
||||||||||
(Numerator) |
(Denominator) |
Amount |
||||||||||
(in thousands, except per share amounts) |
||||||||||||
Basic EPS |
||||||||||||
Net earnings available to common stockholders |
$ | $ | ||||||||||
Effect of dilutive securities |
||||||||||||
RSU's, PSU’s and options | ( |
) | ||||||||||
Diluted EPS |
||||||||||||
Net earnings available to common stockholders plus assumed conversions |
$ | $ |
Three months ended June 24, 2023 |
||||||||||||
Income |
Shares |
Per Share |
||||||||||
(Numerator) |
(Denominator) |
Amount |
||||||||||
(in thousands, except per share amounts) |
||||||||||||
Basic EPS |
||||||||||||
Net earnings available to common stockholders |
$ | $ | ||||||||||
Effect of dilutive securities |
||||||||||||
RSU's, PSU’s and options | ( |
) | ||||||||||
Diluted EPS |
||||||||||||
Net earnings available to common stockholders plus assumed conversions |
$ | $ |
Nine months ended June 24, 2023 |
||||||||||||
Income |
Shares |
Per Share |
||||||||||
(Numerator) |
(Denominator) |
Amount |
||||||||||
(in thousands, except per share amounts) |
||||||||||||
Basic EPS |
||||||||||||
Net earnings available to common stockholders |
$ | $ | ||||||||||
Effect of dilutive securities |
||||||||||||
RSU's, PSU’s and options | ( |
) | ||||||||||
Diluted EPS |
||||||||||||
Net earnings available to common stockholders plus assumed conversions |
$ | $ |
Note 5 |
Share-Based Compensation |
At June 29, 2024, the Company has three stock-based employee compensation plans. Share-based compensation expense was recognized as follows:
Three months ended |
Nine months ended |
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June 29, |
June 24, |
June 29, |
June 24, |
|||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
(in thousands) |
(in thousands) |
|||||||||||||||
Stock options |
$ | $ | $ | $ | ||||||||||||
Stock purchase plan |
||||||||||||||||
Stock issued to outside directors |
||||||||||||||||
Service share units issued to employees |
||||||||||||||||
Performance share units issued to employees |
||||||||||||||||
Total share-based compensation |
$ | $ | $ | $ | ||||||||||||
The above compensation is net of tax benefits |
$ | $ | $ | $ |
The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model.
Expected volatility is based on the historical volatility of the price of our common shares over the past
The Company did
grant any stock options during the nine months ended June 29, 2024 or during the nine months ended June 24, 2023.
During the three and nine months ended June 29, 2024, the Company issued
During the three and nine months ended June 29, 2024, the Company issued
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 $
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
Our effective tax rate was
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.
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 $
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
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 29, 2024, the Company is in compliance with all financial covenants terms of the Credit Agreement.
On June 21, 2022, the Company entered into an amendment to the Credit Agreement, the “Amended Credit Agreement” which provided for an incremental increase of $
As of June 29, 2024, $
Note 9 |
Inventory |
Inventories consist of the following:
June 29, |
September 30, |
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2024 |
2023 |
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(unaudited) |
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(in thousands) |
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Finished goods |
$ | $ | ||||||
Raw materials |
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Packaging materials |
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Equipment parts and other |
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Total inventories |
$ | $ |
On April 8, 2024, the Company acquired the Thinsters cookie business from Hain Celestial Group. Under the Company’s framework for evaluating acquisitions and in accordance with Generally Accepted Accounting Principles, the Company is in process of evaluating whether the transaction will be accounted for as an asset acquisition or a business combination. The acquisition included inventory with a preliminary fair value of $
Note 10 |
Segment Information |
Our reportable segments are Food Service, Retail Supermarkets and Frozen Beverages. 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
operating segments mentioned above which is available to our Chief Operating Decision Maker. 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; 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, 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.
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
reportable segments is as follows:
Three months ended |
Nine months ended |
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June 29, |
June 24, |
June 29, |
June 24, |
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2024 |
2023 |
2024 |
2023 |
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Sales to external customers: |
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Food Service |
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Soft pretzels |
$ | $ | $ | $ | ||||||||||||
Frozen novelties |
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Churros |
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Handhelds |
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Bakery |
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Other |
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Total Food Service |
$ | $ | $ | $ | ||||||||||||
Retail Supermarket |
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Soft pretzels |
$ | $ | $ | $ | ||||||||||||
Frozen novelties |
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Biscuits |
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Handhelds |
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Coupon redemption |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Other |
( |
) | ( |
) | ( |
) | ||||||||||
Total Retail Supermarket |
$ | $ | $ | $ | ||||||||||||
Frozen Beverages |
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Beverages |
$ | $ | $ | $ | ||||||||||||
Repair and maintenance service |
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Machines revenue |
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Other |
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Total Frozen Beverages |
$ | $ | $ | $ | ||||||||||||
Consolidated sales |
$ | $ | $ | $ | ||||||||||||
Depreciation and amortization: |
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Food Service |
$ | $ | $ | $ | ||||||||||||
Retail Supermarket |
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Frozen Beverages |
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Total depreciation and amortization |
$ | $ | $ | $ | ||||||||||||
Operating Income: |
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Food Service |
$ | $ | $ | $ | ||||||||||||
Retail Supermarket |
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Frozen Beverages |
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Total operating income |
$ | $ | $ | $ | ||||||||||||
Capital expenditures: |
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Food Service |
$ | $ | $ | $ | ||||||||||||
Retail Supermarket |
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Frozen Beverages |
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Total capital expenditures |
$ | $ | $ | $ | ||||||||||||
Assets: |
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