J&J Snack Foods Corp 10-Q for FY2024 Q2
J&J Snack Foods Corp (JJSF)
About this 10-Q
J&J Snack Foods Corp filed this 10-Q on May 8, 2024, covering the quarter ended March 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended March 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $359.73M
- up 6.5% from $337.85M a year earlier
- Net income
- $13.33M
- up 94.0% from net income of $6.87M a year earlier
- Diluted EPS
- $0.69
- up 91.7% from $0.36 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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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)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer
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 May 3, 2024 there were
INDEX
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Page Number |
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Part I. |
Financial Information | |
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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 | |
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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 |
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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 |
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
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March 30, 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 |
$ | $ | ||||||
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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 |
$ | $ | ||||||
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Liabilities and Stockholders' Equity |
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Current liabilities |
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Current finance lease liabilities |
$ | $ | ||||||
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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, par value; authorized, |
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Accumulated other comprehensive loss |
( |
) | ( |
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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)
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Three months ended |
Six months ended |
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March 30, |
March 25, |
March 30, |
March 25, |
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2024 |
2023 |
2024 |
2023 |
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Net sales |
$ | $ | $ | $ | ||||||||||||
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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 |
( |
) | ( |
) | ( |
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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 |
( |
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Earnings before income taxes |
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Income tax expense |
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NET EARNINGS |
$ | $ | $ | $ | ||||||||||||
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Earnings per diluted share |
$ | $ | $ | $ | ||||||||||||
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Weighted average number of diluted shares |
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Earnings per basic share |
$ | $ | $ | $ | ||||||||||||
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Weighted average number of basic shares |
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The accompanying notes are an integral part of these statements.
J&J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands)
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Three months ended |
Six months ended |
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March 30, |
March 25, |
March 30, |
March 25, |
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2024 |
2023 |
2024 |
2023 |
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Net earnings |
$ | $ | $ | $ | ||||||||||||
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Foreign currency translation adjustments |
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| Total other comprehensive income, net of tax | ||||||||||||||||
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Comprehensive income |
$ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of these statements.
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited) (in thousands)
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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 |
$ | $ | ( |
) | $ | $ | ||||||||||||||
| Issuance of common stock upon exercise of stock options | ||||||||||||||||||||
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Foreign currency translation adjustment |
- | |||||||||||||||||||
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Dividends declared |
- | ( |
) | ( |
) | |||||||||||||||
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Share-based compensation |
- | |||||||||||||||||||
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Net earnings |
- | |||||||||||||||||||
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Balance at December 30, 2023 |
$ | $ | ( |
) | $ | $ | ||||||||||||||
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Issuance of common stock upon exercise of stock options |
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Issuance of common stock for employee stock purchase plan |
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Foreign currency translation adjustment |
- | |||||||||||||||||||
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Dividends declared |
- | ( |
) | ( |
) | |||||||||||||||
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Share-based compensation |
- | |||||||||||||||||||
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Net earnings |
- | |||||||||||||||||||
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Balance at March 30, 2024 |
$ | $ | ( |
) | $ | $ | ||||||||||||||
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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 24, 2022 |
$ | $ | ( |
) | $ | $ | ||||||||||||||
| Issuance of common stock upon exercise of stock options | ||||||||||||||||||||
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Foreign currency translation adjustment |
- | |||||||||||||||||||
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Dividends declared |
- | ( |
) | ( |
) | |||||||||||||||
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Share-based compensation |
- | |||||||||||||||||||
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Net earnings |
- | |||||||||||||||||||
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Balance at December 24, 2022 |
$ | $ | ( |
) | $ | $ | ||||||||||||||
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Issuance of common stock upon exercise of stock options |
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Issuance of common stock for employee stock purchase plan |
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Foreign currency translation adjustment |
- | |||||||||||||||||||
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Dividends declared |
- | ( |
) | ( |
) | |||||||||||||||
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Share-based compensation |
- | |||||||||||||||||||
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Net earnings |
- | |||||||||||||||||||
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Balance at March 25, 2023 |
$ | $ | ( |
) | $ | $ | ||||||||||||||
The accompanying notes are an integral part of these statements.
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in thousands)
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Six months ended |
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March 30, |
March 25, |
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2024 |
2023 |
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Operating activities: |
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Net earnings |
$ | $ | ||||||
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Adjustments to reconcile net earnings to net cash provided by operating activities |
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Depreciation of fixed assets |
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Amortization of intangibles and deferred costs |
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(Gain) loss from disposals of property & equipment |
( |
) | ( |
) | ||||
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Share-based compensation |
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Deferred income taxes |
( |
) | ||||||
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(Gain) loss on marketable securities |
( |
) | ||||||
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Other |
( |
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Changes in assets and liabilities, net of effects from purchase of companies |
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Decrease in accounts receivable |
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(Increase) Decrease in inventories |
( |
) | ||||||
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Decrease in prepaid expenses |
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(Decrease) in accounts payable and accrued liabilities |
( |
) | ( |
) | ||||
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Net cash provided by operating activities |
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Investing activities: |
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Purchases of property, plant and equipment |
( |
) | ( |
) | ||||
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Proceeds from redemption and sales of marketable securities |
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Proceeds from disposal of property and equipment |
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Net cash used in investing activities |
( |
) | ( |
) | ||||
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Financing activities: |
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Proceeds from issuance of stock |
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Borrowings under credit facility |
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Repayment of borrowings under credit facility |
( |
) | ( |
) | ||||
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Payments on finance lease obligations |
( |
) | ( |
) | ||||
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Payment of cash dividend |
( |
) | ( |
) | ||||
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Net cash provided by (used in) financing activities |
( |
) | ||||||
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Effect of exchange rates on cash and cash equivalents |
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| Net increase (decrease) in cash and cash equivalents | ( |
) | ||||||
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Cash and cash equivalents at beginning of period |
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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)
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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.
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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
Our customers are billed for service contracts in advance of performance and therefore we have contract liability on our balance sheet as follows:
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Three months ended |
Six months ended |
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March 30, |
March 25, |
March 30, |
March 25, |
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2024 |
2023 |
2024 |
2023 |
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(in thousands) |
(in thousands) |
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Beginning balance |
$ | $ | $ | $ | ||||||||||||
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Additions to contract liability |
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Amounts recognized as revenue |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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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 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 $
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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
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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:
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Three months ended March 30, 2024 |
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Income |
Shares |
Per Share |
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(Numerator) |
(Denominator) |
Amount |
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(in thousands, except per share amounts) |
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Basic EPS |
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Net earnings available to common stockholders |
$ | $ | ||||||||||
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Effect of dilutive securities |
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RSU's and options |
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Diluted EPS |
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Net earnings available to common stockholders plus assumed conversions |
$ | $ | ||||||||||
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Six months ended March 30, 2024 |
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Income |
Shares |
Per Share |
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(Numerator) |
(Denominator) |
Amount |
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(in thousands, except per share amounts) |
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Basic EPS |
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Net earnings available to common stockholders |
$ | $ | ||||||||||
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Effect of dilutive securities |
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RSU's and options |
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Diluted EPS |
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Net earnings available to common stockholders plus assumed conversions |
$ | $ | ||||||||||
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Three months ended March 25, 2023 |
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Income |
Shares |
Per Share |
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(Numerator) |
(Denominator) |
Amount |
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(in thousands, except per share amounts) |
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Basic EPS |
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Net earnings available to common stockholders |
$ | $ | ||||||||||
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Effect of dilutive securities |
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RSU's and options |
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Diluted EPS |
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Net earnings available to common stockholders plus assumed conversions |
$ | $ | ||||||||||
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Six months ended March 25, 2023 |
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Income |
Shares |
Per Share |
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(Numerator) |
(Denominator) |
Amount |
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(in thousands, except per share amounts) |
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Basic EPS |
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|
Net earnings available to common stockholders |
$ | $ | ||||||||||
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Effect of dilutive securities |
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RSU's and options |
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Diluted EPS |
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Net earnings available to common stockholders plus assumed conversions |
$ | $ | ||||||||||
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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:
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Three months ended |
Six months ended |
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March 30, |
March 25, |
March 30, |
March 25, |
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2024 |
2023 |
2024 |
2023 |
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(in thousands) |
(in thousands) |
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Stock options |
$ | $ | $ | $ | ||||||||||||
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Stock purchase plan |
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Stock issued to outside directors |
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Service share units issued to employees |
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Performance share units issued to employees |
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Total share-based compensation |
$ | $ | $ | $ | ||||||||||||
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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 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
During the three and six months ended March 30, 2024, the Company also issued
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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
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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 , plus
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 $
As of March 30, 2024, $
|
Note 9 |
Inventory |
Inventories consist of the following:
|
March 30, |
September 30, |
|||||||
|
2024 |
2023 |
|||||||
|
(unaudited) |
||||||||
|
(in thousands) |
||||||||
|
Finished goods |
$ | $ | ||||||
|
Raw materials |
||||||||
|
Packaging materials |
||||||||
|
Equipment parts and other |
||||||||
|
Total inventories |
$ | $ | ||||||
|
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 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.
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 |
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 |
$ | $ | $ | $ | ||||||||||||
|
Frozen novelties |
||||||||||||||||
|
Churros |
||||||||||||||||
|
Handhelds |
||||||||||||||||
|
Bakery |
||||||||||||||||
|
Other |
||||||||||||||||
|
Total Food Service |
$ | $ | $ | $ | ||||||||||||
|
Retail Supermarket |
||||||||||||||||
|
Soft pretzels |
$ | $ | $ | $ | ||||||||||||
|
Frozen novelties |
||||||||||||||||
|
Biscuits |
||||||||||||||||
|
Handhelds |
||||||||||||||||
|
Coupon redemption |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Other |
( |
) | ( |
) | ||||||||||||
|
Total Retail Supermarket |
$ | $ | $ | $ | ||||||||||||
|
Frozen Beverages |
||||||||||||||||
|
Beverages |
$ | $ | $ | $ | ||||||||||||
|
Repair and maintenance service |
||||||||||||||||
|
Machines revenue |
||||||||||||||||
|
Other |
||||||||||||||||
|
Total Frozen Beverages |
$ | $ | $ | $ | ||||||||||||
|
Consolidated sales |
$ | $ | $ | $ | ||||||||||||
|
Depreciation and amortization: |
||||||||||||||||
|
Food Service |
$ | $ | $ | $ | ||||||||||||
|
Retail Supermarket |
||||||||||||||||
|
Frozen Beverages |
||||||||||||||||
|
Total depreciation and amortization |
$ | $ | $ | $ | ||||||||||||
|
Operating Income: |
||||||||||||||||
|
Food Service |
$ | $ | $ | $ | ||||||||||||
|
Retail Supermarket |
||||||||||||||||
|
Frozen Beverages |
||||||||||||||||
|
Total operating income |
$ | $ | $ | $ | ||||||||||||
|
Capital expenditures: |
||||||||||||||||
|
Food Service |
$ | $ | $ | $ | ||||||||||||
|
Retail Supermarket |
||||||||||||||||
|
Frozen Beverages |
||||||||||||||||
|
Total capital expenditures |
$ | $ | $ | $ | ||||||||||||
|
Assets: |
||||||||||||||||
|
Food Service |
$ | $ | $ | $ | ||||||||||||
|
Retail Supermarket |
||||||||||||||||
|
Frozen Beverages |
||||||||||||||||
|
Total assets |
$ | $ | $ | $ | ||||||||||||
|
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 |
$ | $ | - | $ | $ | - | ||||||||||
|
Amortized intangible assets |
||||||||||||||||
|
Franchise agreements |
||||||||||||||||
|
Customer relationships |
||||||||||||||||
|
Technology |
||||||||||||||||
|
License and rights |
||||||||||||||||
|
TOTAL FOOD SERVICE |
$ | $ | $ | $ | ||||||||||||
|
RETAIL SUPERMARKETS |
||||||||||||||||
|
Indefinite lived intangible assets |
||||||||||||||||
|
Trade names |
$ | $ | $ | $ | ||||||||||||
|
Amortized intangible Assets |
||||||||||||||||
|
Customer relationships |
||||||||||||||||
|
TOTAL RETAIL SUPERMARKETS |
$ | $ | $ | $ | ||||||||||||
|
FROZEN BEVERAGES |
||||||||||||||||
|
Indefinite lived intangible assets |
||||||||||||||||
|
Trade names |
$ | $ | - | $ | $ | - | ||||||||||
|
Distribution rights |
||||||||||||||||
|
Amortized intangible assets |
||||||||||||||||
|
Customer relationships |
||||||||||||||||
|
Licenses and rights |
||||||||||||||||
|
TOTAL FROZEN BEVERAGES |
$ | $ | $ | $ | ||||||||||||
|
CONSOLIDATED |
$ | $ | $ | $ | ||||||||||||
Amortizing intangible assets are being amortized by the straight-line method over periods ranging from
Estimated amortization expense for the next five fiscal years is approximately $
The weighted amortization period of the intangible assets, in total, is
Goodwill
The carrying amounts of goodwill for the Food Service, Retail Supermarket and Frozen Beverage segments are as follows:
|
Food |
Retail |
Frozen |
||||||||||||||
|
Service |
Supermarket |
Beverages |
Total |
|||||||||||||
|
(in thousands) |
||||||||||||||||
|
March 30, 2024 |
$ | $ | $ | $ | ||||||||||||
|
September 30, 2023 |
$ | $ | $ | $ | ||||||||||||
|
Note 12 |
Investments |
We have classified our investment securities as marketable securities held to maturity and available for sale. The FASB defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the FASB has established three levels of inputs that may be used to measure fair value:
|
Level 1 |
Observable input such as quoted prices in active markets for identical assets or liabilities; |
|
Level 2 |
Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and |
|
Level 3 |
Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Marketable securities held to maturity and available for sale consist primarily of investments in mutual funds, preferred stock, and corporate bonds. The fair values of mutual funds are based on quoted market prices in active markets and are classified within Level 1 of the fair value hierarchy. The fair values of preferred stock and corporate bonds are based on quoted prices for identical or similar instruments in markets that are not active. As a result, preferred stock and corporate bonds are classified within Level 2 of the fair value hierarchy.
As of March 30, 2024, and September 30, 2023, the Company held held to maturity investment securities or marketable securities available for sale.
As of March 30, 2024, and September 30, 2023, the Company held mutual fund, preferred stock, or held to maturity investments. However, during the six months ended March 25, 2023, the Company held mutual funds which sought current income with an emphasis on maintaining low volatility and overall moderate duration, the Company held investments in Fixed-to-Floating Perpetual Preferred Stock which generated income to call dates in 2025, and the Company held corporate bonds which generated fixed income to a maturity dates in 2023.
There were proceeds from the redemption and sale of marketable securities in the three or six months ended March 30, 2024. Proceeds from the redemption and sale of marketable securities were $
|
Note 13 |
Accumulated Other Comprehensive Income (Loss) |
Changes to the components of accumulated other comprehensive loss are as follows:
|
Three months ended |
Six months ended |
|||||||
|
March 30, 2024 |
March 30, 2024 |
|||||||
|
(in thousands) |
(in thousands) |
|||||||
|
Foreign Currency |
Foreign Currency |
|||||||
|
Translation Adjustments |
Translation Adjustments |
|||||||
|
Beginning balance |
$ | ( |
) | $ | ( |
) | ||
| Other comprehensive income | ||||||||
|
Ending balance |
$ | ( |
) | $ | ( |
) | ||
|
Three months ended |
Six months ended |
|||||||
|
March 25, 2023 |
March 25, 2023 |
|||||||
|
(in thousands) |
(in thousands) |
|||||||
|
Foreign Currency |
Foreign Currency |
|||||||
|
Translation Adjustments |
Translation Adjustments |
|||||||
|
Beginning balance |
$ | ( |
) | $ | ( |
) | ||
| Other comprehensive income | ||||||||
|
Ending balance |
$ | ( |
) | $ | ( |
) | ||
|
Note 14 |
Leases |
General Lease Description
We have operating leases with initial noncancelable lease terms in excess of one year covering the rental of various facilities and equipment. Certain of these leases contain renewal options and some provide options to purchase during the lease term. Our operating leases include leases for real estate for some of our office and manufacturing facilities as well as manufacturing and non-manufacturing equipment used in our business. The remaining lease terms for these operating leases range from
We have finance leases with initial noncancelable lease terms in excess of one year covering the rental of various equipment. These leases are generally for manufacturing and non-manufacturing equipment used in our business. The remaining lease terms for these finance leases range from
Significant Assumptions and Judgments
Contract Contains a Lease
In evaluating our contracts to determine whether a contract is or contains a lease, we considered the following:
|
• |
Whether explicitly or implicitly identified assets have been deployed in the contract; and |
|
• |
Whether we obtain substantially all of the economic benefits from the use of that underlying asset, and we can direct how and for what purpose the asset is used during the term of the contract. |
Allocation of Consideration
In determining how to allocate consideration between lease and non-lease components in a contract that was deemed to contain a lease, we used judgment and consistent application of assumptions to reasonably allocate the consideration.
Options to Extend or Terminate Leases
We have leases which contain options to extend or terminate the leases. On a lease-by-lease basis, we have determined if the extension should be considered reasonably certain to be exercised and thus a right-of-use asset and a lease liability should be recorded.
Discount Rate
The discount rate for leases, if not explicitly stated in the lease, is the incremental borrowing rate, which is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
We used the discount rate to calculate the present value of the lease liability at the date of adoption. In the development of the discount rate, we considered our incremental borrowing rate as provided by our lender which was based on cash collateral and credit risk specific to us, and our lease portfolio characteristics.
As of March 30, 2024, the weighted-average discount rate of our operating and finance leases was
Practical Expedients and Accounting Policy Elections
We elected the package of practical expedients that permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs and made an accounting policy election to exclude short-term leases with an initial term of 12 months or less from our Consolidated Balance Sheets.
Amounts Recognized in the Financial Statements
The components of lease expense were as follows:
|
Three months ended |
Three months ended |
Six months ended |
Six months ended |
|||||||||||||
|
March 30, 2024 |
March 25, 2023 |
March 30, 2024 |
March 25, 2023 |
|||||||||||||
|
Operating lease cost in Cost of goods sold and Operating Expenses |
$ | $ | $ | $ | ||||||||||||
|
Finance lease cost: |
||||||||||||||||
|
Amortization of assets in Cost of goods sold and Operating Expenses |
$ | $ | $ | $ | ||||||||||||
|
Interest on lease liabilities in Interest expense & other |
||||||||||||||||
|
Total finance lease cost |
$ | $ | $ | $ | ||||||||||||
|
Short-term lease cost in Cost of goods sold and Operating Expenses |
||||||||||||||||
|
Total net lease cost |
$ | $ | $ | $ | ||||||||||||
Supplemental balance sheet information related to leases is as follows:
|
March 30, 2024 |
September 30, 2023 |
|||||||
|
Operating Leases |
||||||||
|
Operating lease right-of-use assets |
$ | $ | ||||||
|
Current operating lease liabilities |
$ | $ | ||||||
|
Noncurrent operating lease liabilities |
||||||||
|
Total operating lease liabilities |
$ | $ | ||||||
|
Finance Leases |
||||||||
|
Finance lease right-of-use assets in |
$ | $ | ||||||
|
Current finance lease liabilities |
$ | $ | ||||||
|
Noncurrent finance lease liabilities |
||||||||
|
Total finance lease liabilities |
$ | $ | ||||||
Supplemental cash flow information related to leases is as follows:
|
Three months ended |
Three months ended |
Six months ended |
Six months ended |
|||||||||||||
|
March 30, 2024 |
March 25, 2023 |
March 30, 2024 |
March 25, 2023 |
|||||||||||||
|
Cash paid for amounts included in the measurement of lease liabilities: |
||||||||||||||||
|
Operating cash flows from operating leases |
$ | $ | $ | $ | ||||||||||||
|
Operating cash flows from finance leases |
$ | $ | $ | $ | ||||||||||||
|
Financing cash flows from finance leases |
$ | $ | $ | $ | ||||||||||||
|
Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets |
$ | $ | $ | $ | ||||||||||||
|
Supplemental noncash information on lease liabilities removed due to purchase of leased asset |
$ | $ | $ | $ | ||||||||||||
As of March 30, 2024, the maturities of lease liabilities were as follows:
|
Operating Leases |
Finance Leases |
|||||||
|
Six months ending September 28, 2024 |
$ | $ | ||||||
|
2025 |
||||||||
|
2026 |
||||||||
|
2027 |
||||||||
|
2028 |
||||||||
|
Thereafter |
||||||||
|
Total minimum payments |
||||||||
|
Less amount representing interest |
( |
) | ( |
) | ||||
|
Present value of lease obligations |
$ | $ | ||||||
As of March 30, 2024 the weighted-average remaining term of our operating and finance leases was
As of September 30, 2023 the weighted-average remaining term of our operating and finance leases was
|
Note 15 |
Related Parties |
We have related party expenses for distribution and shipping related costs with NFI Industries, Inc. and its affiliated entities (“NFI”). Our director, Sidney R. Brown, is CEO and an owner of NFI Industries, Inc. The Company paid $
In June 2023, the Company began leasing a regional distribution center in Terrell, Texas that was constructed by, and is owned by, a subsidiary of NFI. The distribution center will be operated by NFI for the Company, pursuant to a Service Labor Management Agreement. Under the Service Labor Management Agreement, NFI will provide logistics and warehouse management services. NFI will continue to perform transportation-related management services for the Company as well. At the lease commencement date, $
In October 2023 and February 2024, the Company began leasing regional distribution centers in Woolwich Township, New Jersey, and Glendale, Arizona, respectively. The distribution centers are operated by NFI for the Company, pursuant to the Service Labor Management Agreement noted in the paragraph above.
All agreements with NFI include terms that are consistent with those that we believe would have been negotiated at an arm’s length with an independent party.
|
Note 16 |
Subsequent Events |
Events occurring after March 30, 2024, and through the date that these consolidated financial statements were issued, were evaluated to ensure that any subsequent events that met the criteria for recognition have been included, and are as follows:
On April 8, 2024, the Company acquired the Thinsters cookie business from Hain Celestial Group for approximately $
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to us, based on our current beliefs as well as assumptions made by us and information currently available to us. Forward-looking statements generally will be accompanied by words such as "anticipate," "if," "may," "believe," "plan,", "goals," "estimate," "expect," "project," "continue," "forecast," "intend," "may," "could," "should," "will," and other similar expressions. Statements addressing our future operating performance and statements addressing events and developments that we expect or anticipate will occur are also considered as forward-looking statements. This includes, without limitation, our statements and expectations regarding any current or future recovery in our industry, the success of new product innovations, and the future impact of our investments in additional production capacity and logistics and warehousing operations. Such forward-looking statements are inherently uncertain, and readers must recognize that actual results may differ materially from the expectations of management. We intend that such forward-looking statements be subject to the safe harbor provisions of the Securities Act and the Exchange Act.
We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties, and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation to revise, update, add or to otherwise correct, any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
Objective
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative form from the perspective of our management regarding our financial condition and results of operations, liquidity and certain other factors that may affect our future results. The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and within the Company’s Annual Report on Form 10-K filed for the fiscal year ended September 30, 2023.
Business Overview
The Company manufactures and sells snack foods and distributes frozen beverages which it markets nationally to the foodservice and retail supermarket industries. The Company’s principal snack food products are soft pretzels, frozen novelties, churros and bakery products. We believe we are the largest manufacturer of soft pretzels in the United States. Other snack food products include donuts, cookies, funnel cake and handheld products. The Company’s principal frozen beverage products are the ICEE brand frozen carbonated beverage and the SLUSH PUPPIE brand frozen non-carbonated beverage. The Company’s Food Service and Frozen Beverage sales are made principally to foodservice customers including snack bar and food stand locations in leading chain, department, discount, warehouse club and convenience stores; malls and shopping centers; fast food and casual dining restaurants; stadiums and sports arenas; leisure and theme parks; movie theaters; independent retailers; and schools, colleges and other institutions. The Company’s Retail Supermarket customers are primarily supermarket chains.
RESULTS OF OPERATIONS – Three and six months ended March 30, 2024
The following discussion provides a review of results for the three and six months ended March 30, 2024 as compared with the three and six months ended March 25, 2023.
|
Summary of Results |
Three months ended |
Six months ended |
||||||||||||||||||||||
|
March 30, |
March 25, |
March 30, |
March 25, |
|||||||||||||||||||||
|
2024 |
2023 |
% Change |
2024 |
2023 |
% Change |
|||||||||||||||||||
|
(in thousands) |
(in thousands) |
|||||||||||||||||||||||
|
Net sales |
$ | 359,734 | $ | 337,854 | 6.5 | % | $ | 708,042 | $ | 689,197 | 2.7 | % | ||||||||||||
|
Cost of goods sold |
251,491 | 247,470 | 1.6 | % | 505,214 | 507,958 | (0.5 | )% | ||||||||||||||||
|
Gross profit |
108,243 | 90,384 | 19.8 | % | 202,828 | 181,239 | 11.9 | % | ||||||||||||||||
|
Operating expenses |
||||||||||||||||||||||||
|
Marketing |
27,650 | 24,017 | 15.1 | % | 55,122 | 47,716 | 15.5 | % | ||||||||||||||||
|
Distribution |
44,249 | 38,188 | 15.9 | % | 84,552 | 80,237 | 5.4 | % | ||||||||||||||||
|
Administrative |
18,521 | 17,919 | 3.4 | % | 36,720 | 34,310 | 7.0 | % | ||||||||||||||||
|
Other general expense (income) |
(81 | ) | 67 | (220.9 | )% | (1,153 | ) | (545 | ) | 111.6 | % | |||||||||||||
|
Total operating expenses |
90,339 | 80,191 | 12.7 | % | 175,241 | 161,718 | 8.4 | % | ||||||||||||||||
|
Operating income |
17,904 | 10,193 | 75.6 | % | 27,587 | 19,521 | 41.3 | % | ||||||||||||||||
|
Other income (expense) |
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|
Investment income |
684 | 401 | 70.6 | % | 1,482 | 1,086 | 36.5 | % | ||||||||||||||||
|
Interest expense |
(429 | ) | (1,334 | ) | (67.8 | )% | (989 | ) | (2,383 | ) | (58.5 | )% | ||||||||||||
|
Earnings before income taxes |
18,159 | 9,260 | 96.1 | % | 28,080 | 18,224 | 54.1 | % | ||||||||||||||||
|
Income tax expense |
4,830 | 2,389 | 102.2 | % | 7,469 | 4,720 | 58.2 | % | ||||||||||||||||
|
NET EARNINGS |
$ | 13,329 | $ | 6,871 | 94.0 | % | $ | 20,611 | $ | 13,504 | 52.6 | % | ||||||||||||
|
Comparisons as a Percentage of Net Sales |
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|
Gross profit |
30.1 | % | 26.8 | % | 330 | 28.6 | % | 26.3 | % | 230 | ||||||||||||||
|
Marketing |
7.7 | % | 7.1 | % | 60 | 7.8 | % | 6.9 | % | 90 | ||||||||||||||
|
Distribution |
12.3 | % | 11.3 | % | 100 | 11.9 | % | 11.6 | % | 30 | ||||||||||||||
|
Administrative |
5.1 | % | 5.3 | % | (20 | ) | 5.2 | % | 5.0 | % | 20 | |||||||||||||
|
Operating income |
5.0 | % | 3.0 | % | 200 | 3.9 | % | 2.8 | % | 110 | ||||||||||||||
|
Earnings before income taxes |
5.0 | % | 2.7 | % | 230 | 4.0 | % | 2.6 | % | 140 | ||||||||||||||
|
Net earnings |
3.7 | % | 2.0 | % | 170 | 2.9 | % | 2.0 | % | 90 | ||||||||||||||
Net Sales
Net sales increased by $21.9 million, or 6.5%, to $359.7 million for the three months ended March 30, 2024. Net sales increased by $18.8 million, or 2.7%, to $708.0 million for the six months ended March 30, 2024. Organic sales growth, across both the three months and six months ended March 30, 2024, was driven by growth across all three of the Company’s business segments.
Gross Profit
Gross Profit increased by $17.9 million, or 19.8%, to $108.2 million for the three months ended March 30, 2024. As a percentage of sales, gross profit increased from 26.8% to 30.1%. This increase reflected the impact of improved product and pricing mix along with ongoing productivity improvements and a stabilization of inflationary pressures across the majority of our input costs. Deflationary costs were seen in certain raw materials during the quarter, led by flour, oils, dairy and eggs, with this benefit being somewhat offset by double digit inflationary increases seen in chocolates, and to a lessor extent, inflationary increases seen in sugars/sweeteners, mixes, and meats.
Gross Profit increased by $21.6 million, or 11.9%, to $202.8 million for the six months ended March 30, 2024. As a percentage of sales, gross profit increased from 26.3% to 28.6%. This increase reflected the impact of improved product and pricing mix along with ongoing productivity improvements and a stabilization of inflationary pressures across the majority of our input costs. Deflationary costs were seen in certain raw materials, led by flour, oils, dairy and eggs, with this benefit being somewhat offset by double digit inflationary increases seen in chocolates, and to a lessor extent, inflationary increases seen in sugars/sweeteners, mixes, and meats.
Operating Expenses
Operating Expenses increased $10.1 million, or 12.7%, to $90.3 million for the three months ended March 30, 2024. As a percentage of sales, operating expenses increased from 23.7% to 25.1%. As a percentage of sales, distribution expenses increased from 11.3% to 12.3%, with the increase largely driven by $2.3 million of one-time transition expenses related to the opening of our regional distribution centers. As a percentage of sales, marketing expenses increased from 7.1% to 7.7%, with the increase largely driven by incremental licensing fees on new churro business and additional strategic promotional and marketing spend to support our core brands and new product launches. As a percentage of sales, general and administrative expenses remained relatively flat, slightly decreasing from 5.3% to 5.1%.
Operating Expenses increased $13.5 million, or 8.4%, to $175.2 million for the six months ended March 30, 2024. As a percentage of sales, operating expenses increased from 23.5% to 24.8%. As a percentage of sales, distribution expenses increased from 11.6% to 11.9%, with the increase largely driven by $4.5 million of one-time transition expenses related to the opening of our regional distribution centers. As a percentage of sales, marketing expenses increased from 6.9% to 7.8% with the increase largely driven by incremental licensing fees on new churro business and additional strategic promotional and marketing spend to support our core brands and new product launches. As a percentage of sales, general and administrative expenses remained relatively flat, slightly increasing from 5.0% to 5.2%.
Other Income and Expense
Investment income increased by $0.3 million to $0.7 million and by $0.4 million to $1.5 million for the three months and six months, ended March 30, 2024, respectively. The increases were primary due to the improving interest rate environment in fiscal 2024.
Interest expense decreased by $0.9 million to $0.4 million and by $1.4 million to $1.0 million for the three months and six months, ended March 30, 2024, respectively, due to the decrease in the Company’s average outstanding borrowings on the Amended Credit Agreement for the three and six month periods ended March 30, 2024, as compared to the prior year periods.
Income Tax Expense
Income tax expense increased by $2.4 million, or 102.2%, to $4.8 million for the three months ended March 30, 2024. The effective tax rate was 26.6% as compared with 25.8% in the prior year period.
Income tax expense increased by $2.7 million, or 58.2%, to $7.5 million for the six months ended March 30, 2024. The effective tax rate was 26.6% as compared with 25.9% in the prior year period.
Net Earnings
Net earnings increased by $6.5 million, or 94.0%, for the three months ended March 30, 2024, due to the aforementioned items.
Net earnings increased by $7.1 million, or 52.6%, for the six months ended March 30, 2024, due to the aforementioned items.
There are many factors which can impact our net earnings from year to year and in the long run, among which are the supply and cost of raw materials and labor, insurance costs, factors impacting sales as noted above, the continuing consolidation of our customers, our ability to manage our manufacturing, marketing and distribution activities, our ability to make and integrate acquisitions and changes in tax laws and interest rates.
Business Segment Discussion
We operate in three segments: Food Service, Retail Supermarket, and Frozen Beverages. The following table is a summary of sales and operating income, which is how we measure segment profit.
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Food Service |
$ | 229,990 | $ | 218,281 | 5.4 | % | $ | 458,599 | $ | 456,578 | 0.4 | % | ||||||||||||
|
Retail Supermarket |
52,890 | 46,360 | 14.1 | % | 96,649 | 89,433 | 8.1 | % | ||||||||||||||||
|
Frozen Beverages |
76,854 | 73,213 | 5.0 | % | 152,794 | 143,186 | 6.7 | % | ||||||||||||||||
|
Total sales |
$ | 359,734 | $ | 337,854 | 6.5 | % | $ | 708,042 | $ | 689,197 | 2.7 | % | ||||||||||||
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|
Food Service |
$ | 7,931 | $ | 5,133 | 54.5 | % | $ | 13,947 | $ | 11,520 | 21.1 | % | ||||||||||||
|
Retail Supermarket |
5,110 | 487 | 949.3 | % | 5,562 | 1,598 | 248.1 | % | ||||||||||||||||
|
Frozen Beverages |
4,863 | 4,573 | 6.3 | % | 8,078 | 6,403 | 26.2 | % | ||||||||||||||||
|
Total operating income |
$ | 17,904 | $ | 10,193 | 75.6 | % | $ | 27,587 | $ | 19,521 | 41.3 | % | ||||||||||||
Food Service Segment Results
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Food Service sales to external customers |
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Soft pretzels |
$ | 54,328 | $ | 55,492 | (2.1 | )% | $ | 104,456 | $ | 107,715 | (3.0 | )% | ||||||||||||
|
Frozen novelties |
27,713 | 26,607 | 4.2 | % | 48,763 | 48,372 | 0.8 | % | ||||||||||||||||
|
Churros |
30,825 | 24,920 | 23.7 | % | 58,886 | 50,677 | 16.2 | % | ||||||||||||||||
|
Handhelds |
19,504 | 20,309 | (4.0 | )% | 41,551 | 43,881 | (5.3 | )% | ||||||||||||||||
|
Bakery |
91,907 | 85,300 | 7.7 | % | 193,889 | 194,248 | (0.2 | )% | ||||||||||||||||
|
Other |
5,713 | 5,653 | 1.1 | % | 11,054 | 11,685 | (5.4 | )% | ||||||||||||||||
|
Total Food Service sales |
$ | 229,990 | $ | 218,281 | 5.4 | % | $ | 458,599 | $ | 456,578 | 0.4 | % | ||||||||||||
|
Food Service operating income |
$ | 7,931 | $ | 5,133 | 54.5 | % | $ | 13,947 | $ | 11,520 | 21.1 | % | ||||||||||||
Sales to food service customers increased $11.7 million, or 5.4%, to $230.0 million for the three months ended March 30, 2024. Soft pretzels sales to food service customers decreased 2.1% to $54.3 million, with the decrease largely due to soft consumer trends. Frozen novelties sales increased 4.2% to $27.7 million, led by an approximate 5% increase in Dippin’ Dots sales. Churro sales increased 23.7% to $30.8 million with the increase largely driven by new business growth with a major QSR customer. Sales of bakery products increased by 7.7% to $91.9 million with the growth largely attributable to strong unit volume growth in cookies. Sales of handhelds decreased by 4.0% to $19.5 million driven by softer consumer trends, although, volume sales of our core food service handhelds remained strong in the quarter.
Sales of new products in the first twelve months since their introduction were approximately $12.1 million for the three months ended March 30, 2024, driven primarily by the addition of churros to the menu of a major QSR customer. Sales in the quarter benefited minimally from the impact of the prior fiscal year’s price increases, along with modest increases in volume.
Operating income in our Food Service segment increased $2.8 million in the quarter to $7.9 million, driven by sales growth as well as improved product mix and gross margin performance.
Sales to food service customers increased $2.0 million, or 0.4%, to $458.6 million for the six months ended March 30, 2024. Soft pretzels sales to food service customers decreased 3.0% to $104.5 million with the decrease largely due to soft consumer trends. Frozen novelties sales increased 0.8% to $48.8 million with the increase driven by an increase in Dippin’ Dots sales mostly offset by some volume decreases seen within the category. Churro sales increased 16.2% to $58.9 million with the increase largely driven by new business growth with a major QSR customer. Sales of bakery products remained relatively flat, decreasing by 0.2% to $193.9 million, with a softer first fiscal quarter mostly offset by category growth seen in the second fiscal quarter that was primarily attributable to unit volume growth in cookies. Sales of handhelds decreased by 5.3% to $41.6 million with some of the decrease attributable to pricing declines related to the contractual pricing true-up of certain raw material ingredients seen in the first fiscal quarter.
Sales of new products in the first twelve months since their introduction were approximately $15.7 million for the six months ended March 30, 2024, driven primarily by the addition of churros to the menu of a major QSR customer. Sales in the six-month period benefited minimally from the impact of the prior fiscal year’s price increases, along with modest increases in volume.
Operating income in our Food Service segment increased $2.4 million in the six months ended March 30, 2024, to $13.9 million, driven by sales growth as well as improved product mix and gross margin performance.
Retail Supermarket Segment Results
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Retail Supermarket sales to external customers |
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|
Soft pretzels |
$ | 16,453 | $ | 16,013 | 2.7 | % | $ | 34,900 | $ | 30,498 | 14.4 | % | ||||||||||||
|
Frozen novelties |
23,676 | 20,770 | 14.0 | % | 36,537 | 38,739 | (5.7 | )% | ||||||||||||||||
|
Biscuits |
6,207 | 5,858 | 6.0 | % | 13,239 | 13,771 | (3.9 | )% | ||||||||||||||||
|
Handhelds |
7,194 | 4,099 | 75.5 | % | 12,704 | 6,991 | 81.7 | % | ||||||||||||||||
|
Coupon redemption |
(769 | ) | (375 | ) | 105.1 | % | (1,101 | ) | (551 | ) | 99.8 | % | ||||||||||||
|
Other |
129 | (5 | ) | (2680.0 | )% | 370 | (15 | ) | (2566.7 | )% | ||||||||||||||
|
Total Retail Supermarket sales |
$ | 52,890 | $ | 46,360 | 14.1 | % | $ | 96,649 | $ | 89,433 | 8.1 | % | ||||||||||||
|
Retail Supermarket operating income |
$ | 5,110 | $ | 487 | 949.3 | % | $ | 5,562 | $ | 1,598 | 248.1 | % | ||||||||||||
Sales of products to retail customers increased $6.5 million, or 14.1%, to $52.9 million for the three months ended March 30, 2024. Soft pretzel sales increased 2.7% to $16.5 million with the increase largely attributable to our continued expansion of our core brands into retail. Frozen novelties sales increased 14.0% to $23.7 million, with the increase largely attributable to growth within our Dogsters and ICEE novelties. Biscuit sales increased 6.0% to $6.2 million, and Handheld sales increased 75.5% to $7.2 million with the increase in handheld sales largely driven by expanded placement of product with a major retailer. Sales of new products in retail supermarkets were minimal in the quarter. Sales in the quarter benefited from the impact of the prior fiscal year’s price increases, along with modest increases in volume.
Operating income in our Retail Supermarkets segment increased $4.6 million in the quarter to $5.1 million, primarily driven by sales growth as well as improved product mix and gross margin performance.
Sales of products to retail customers increased $7.2 million, or 8.1%, to $96.6 million for the six months ended March 30, 2024. Soft pretzel sales increased 14.4% to $34.9 million with the increase largely attributable to the incremental distribution of our core soft pretzel brands. Frozen novelties sales decreased 5.7% to $36.5 million, with the decrease largely due to the decreases in the majority of our retail frozen novelty brands seen during our first fiscal quarter. Biscuit sales decreased 3.9% to $13.2 million, and handheld sales increased 81.7% to $12.7 million with the increase in handheld sales largely driven by expanded placement of product with a major retailer. Sales of new products in retail supermarkets were minimal in the six months ended March 30, 2024. Sales in the six-month period benefited minimally from the impact of the prior fiscal year’s price increases, along with modest increases in volume.
Operating income in our Retail Supermarkets segment increased $4.0 million in the six months ended March 30, 2024 to $5.6 million, primarily driven by sales growth as well as improved product mix and gross margin performance.
Frozen Beverages Segment Results
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Frozen Beverages sales to external customers |
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|
Beverages |
$ | 44,666 | $ | 41,799 | 6.9 | % | $ | 86,616 | $ | 80,458 | 7.7 | % | ||||||||||||
|
Repair and maintenance service |
23,231 | 22,585 | 2.9 | % | 47,790 | 46,412 | 3.0 | % | ||||||||||||||||
|
Machines revenue |
8,221 | 8,252 | (0.4 | )% | 17,110 | 15,263 | 12.1 | % | ||||||||||||||||
|
Other |
736 | 577 | 27.6 | % | 1,278 | 1,053 | 21.4 | % | ||||||||||||||||
|
Total Frozen Beverages sales |
$ | 76,854 | $ | 73,213 | 5.0 | % | $ | 152,794 | $ | 143,186 | 6.7 | % | ||||||||||||
|
Frozen Beverages operating income |
$ | 4,863 | $ | 4,573 | 6.3 | % | $ | 8,078 | $ | 6,403 | 26.2 | % | ||||||||||||
Frozen beverage and related product sales increased $3.6 million, or 5.0%, in the three months ended March 30, 2024. Beverage-related sales increased 6.9% to $44.7 million, with the increase driven by consistent consumer trends across most customer channels. Gallon sales were up approximately 1% for the three months ended March 30, 2024. Service revenue increased 2.9% to $23.2 million and machine revenue (primarily sales of frozen beverage machines) remained relatively flat, decreasing by 0.4% to $8.2 million.
Operating income in our Frozen Beverage segment increased $0.3 million in the quarter to $4.9 million, as strong sales drove leverage across the business.
Frozen beverage and related product sales increased $9.6 million, or 6.7% in the six months ended March 30, 2024. Beverage-related sales increased 7.7% to $86.6 million. Gallon sales remained flat for the six months ended March 30, 2024. Service revenue increased 3.0% to $47.8 million. Machine revenue (primarily sales of frozen beverage machines) increased 12.1% to $17.1 million, primarily driven by the strong growth from new clients and convenience customers seen in the first fiscal quarter.
Operating income in our Frozen Beverage segment increased $1.7 million in the six months ended March 30, 2024 to $8.1 million, as strong sales drove leverage across the business.
Liquidity and Capital Resources
Although there are many factors that could impact our operating cash flow, most notably net earnings, we believe that our future operating cash flow, along with our borrowing capacity, our current cash and cash equivalent balances and our investment securities is sufficient to satisfy our cash requirements over the next twelve months and beyond, as well as to fund future growth and expansion.
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|
Cash flows from operating activities |
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|
Net earnings |
$ | 20,611 | $ | 13,504 | ||||
|
Non-cash items in net income: |
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|
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 |
3,167 | (9,588 | ) | |||||
|
Net cash provided by operating activities |
$ | 61,698 | $ | 35,671 | ||||
|
● |
The increase in depreciation of fixed assets was largely due to prior year purchases of property plant and equipment. |
|
● |
The net cash inflow of $3.2 million in cash flows associated with changes in assets and liabilities, net of effects from purchase of companies, in the six months ended March 30, 2024, was primarily driven by a decrease in accounts receivable of $20.1 million, offset by a $17.0 million increase in inventories. In the prior year, the net cash outflow of $9.6 million was primarily driven by a decrease in accounts payable and accrued liabilities of $25.7 million, offset somewhat by a $10.5 million decrease in accounts receivable and a $4.8 million decrease in prepaid expenses. |
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|
Cash flows from investing activities |
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|
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 | ) | ||
|
● |
Purchases of property, plant and equipment include spending for production growth, in addition to acquiring new equipment, infrastructure replacements, and upgrades to maintain competitive standing and position us for future opportunities. The decrease over prior year period was primarily due to the higher rate of strategic spending in the prior year period for new lines at various plants aimed at increasing capacity. |
|
● |
The decrease in proceeds from redemption and sales of marketable securities from prior year period was due to a strategic decision in prior years to no longer re-invest redeemed proceeds into marketable securities given the low interest rate environment that existed in those years. |
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|
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|
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 dividends |
(28,444 | ) | (26,914 | ) | ||||
|
Net cash provided by (used in) financing activities |
$ | (32,038 | ) | $ | 14,074 | |||
|
● |
Borrowings under credit facility and repayment of borrowings under credit facility relate to the Company’s cash draws and repayments made in the six months ended March 30, 2024 to primarily fund working capital needs. The decrease in borrowings from prior year was due to the Company’s increase in cash provided by operations, which lowered its borrowing needs in the six months ended March 30, 2024. |
|
● |
The increase in payment of cash dividends from prior year period was due to the raising of our quarterly dividend during fiscal 2023. |
Liquidity
As of March 30, 2024, we had $43.6 million of Cash and Cash Equivalents.
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.
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.
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 covenants of the Credit Agreement.
As of March 30, 2024, $17.0 million was outstanding under the Amended Credit Agreement. As of March 30, 2024, the amount available under the Amended Credit Agreement was $198.2 million, after giving effect to the $9.8 million of letters of credit outstanding.
Critical Accounting Policies, Judgments and Estimates
There have been no material changes to our critical accounting policies, judgments and estimates from the information provided in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies, Judgments and Estimates, in our Annual Report on Form 10-K for the year ended September 30, 2023, as filed with the SEC on November 28, 2023.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in the Company’s assessment of its sensitivity to market risk since its presentation set forth, in item 7a. “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended September 30, 2023, as filed with the SEC on November 28, 2023.
Item 4. Controls and Procedures
The Chief Executive Officer and the Chief Financial Officer of the Company (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of March 30, 2024, that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There has been no change in the Company’s internal control over financial reporting during the quarter ended March 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject, from time to time, to certain legal proceedings and claims that arise from our business. As of the date of this Quarterly Report on Form 10-Q, the Company does not expect that any such proceedings will have a material adverse effect on the Company’s financial position or results of operations.
Item 1A. Risk Factors
For information on risk factors, please refer to “Risk Factors” in Part I, Item 1A of the Company’s Form 10-K for the fiscal year ended September 30, 2023. The risks identified in that report have not changed in any material respect.
Item 2. Unregistered Sales of Equity Securities and the Use of Proceeds
None.
Item 5. Other Information
During the three months ended March 30, 2024, of our directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K.
Item 6. Exhibits
Exhibit No.
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31.1 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1 |
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32.2 |
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101.1 |
The following financial information from J&J Snack Foods Corp.'s Quarterly Report on Form 10-Q for the quarter ended March 30, 2024, formatted in XBRL (extensible Business Reporting Language): |
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(i) |
Consolidated Balance Sheets, |
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(ii) |
Consolidated Statements of Earnings, |
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(iii) |
Consolidated Statements of Comprehensive Income, |
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(iv) |
Consolidated Statements of Cash Flows and |
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(iv) |
the Notes to the Consolidated Financial Statements |
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104 |
Cover Page Interactive Data File (formatted as Inline XBRL and containing in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| J & J SNACK FOODS CORP. | |
| Dated: May 8, 2024 | /s/ Dan Fachner |
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Dan Fachner Chairman, President and Chief Executive Officer (Principal Executive Officer) |
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| Dated: May 8, 2024 | /s/ Ken A. Plunk |
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Ken A. Plunk, Senior Vice President and Chief Financial Officer (Principal Financial Officer) (Principal Accounting Officer) |
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Dan Fachner, certify that:
1. I have reviewed this report on Form 10-Q of J & J Snack Foods Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls and procedures for financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal controls and procedures for financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
Date: May 8, 2024
| /s/ Dan Fachner | |
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Dan Fachner Chairman, President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Ken A. Plunk, certify that:
1. I have reviewed this report on Form 10-Q of J & J Snack Foods Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls and procedures for financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal controls and procedures for financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
Date: May 8, 2024
| /s/ Ken A. Plunk | |
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Ken A. Plunk, Senior Vice President and Chief Financial Officer (Principal Financial Officer) (Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), each of the undersigned officers of J & J Snack Foods Corp. (the “Company”), does hereby certify with respect to the Quarterly Report of the Company on Form 10-Q for the quarter ended March 30, 2024 (the “Report”) that:
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(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: May 8, 2024
| /s/ Dan Fachner | |
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Dan Fachner Chairman, President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), each of the undersigned officers of J & J Snack Foods Corp. (the “Company”), does hereby certify with respect to the Quarterly Report of the Company on Form 10-Q for the quarter ended March 30, 2024 (the “Report”) that:
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(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: May 8, 2024
| /s/ Ken A. Plunk | |
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Ken A. Plunk, Senior Vice President and Chief Financial Officer (Principal Financial Officer) (Principal Accounting Officer) |