UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 28, 2019
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Registrant's telephone number, including area code: (856) 665-9533
Commission File No. 000-14616
J&J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
New Jersey
(State or other jurisdiction of incorporation or organization)
22-1935537
(I.R.S. Employer Identification No.)
6000 Central Highway
Pennsauken, New Jersey
(Address of principal executive offices)
Securities Registered Pursuant to Section 12(b) of the Act:
08109
(Zip Code)
Title of Each Class
Common Stock, no par value
Trading Symbols(s)
JJSF
Name of Each Exchange on Which Registered
The NASDAQ Global Select Market
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes X No __
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ___ No X
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 such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ___
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. ___
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer (X)
Non-accelerated filer ( )
Accelerated filer ( )
Smaller reporting company ( )
Emerging growth company ( )
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes___ No X
March 29, 2019 was the last business day of the registrant’s most recently completed second fiscal quarter. The aggregate market value of
the registrant’s common stock held by non-affiliates was $2,393,370,414, based on the last sale price on March 29, 2019 of $158.54 per
share. As of November 11, 2019, 18,898,529 shares of the registrant’s common stock were issued and outstanding.
Portions of the registrant’s definitive proxy statement for its Annual Meeting of Shareholders scheduled for February 11, 2020
are incorporated by reference into Part III of this report.
DOCUMENTS INCORPORATED BY REFERENCE
J & J SNACK FOODS CORP.
2017 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Business
Note About Forward-Looking Statements
Item 1
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2
Item 3
Item 4 Mine Safety Disclosures
Properties
Legal Proceedings
PART I
PART II
Item 5 Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity
Securities
Selected Financial Data
Item 6
Item 7 Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
Item 7A Quantitative And Qualitative Disclosures About Market Risk
Item 8
Item 9
Item 9A Controls and Procedures
Item 9B Other Information
Financial Statements And Supplementary Data
Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
PART III
Item 10 Directors, Executive Officers and Corporate Governance
Item 11 Executive Compensation
Item 12
Item 13 Certain Relationships And Related Transactions, and Director Independence
Item 14
Principal Accountant Fees and Service
Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters
Item 15 Exhibits, Financial Statement Schedules
PART IV
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Note About Forward-Looking Statements
In addition to historical information, this report contains forward-looking statements. The forward-looking statements
contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those
projected in the forward-looking statements. Important factors that might cause such a difference include, but are not limited
to, those discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis
only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect
events or circumstances that arise after the date hereof.
Part I
Item 1.
Business
General
J & J Snack Foods Corp. (the “Company” or “J & J”) manufactures snack foods and distributes frozen beverages
which it markets nationally to the food service and retail supermarket industries. The Company’s principal snack food
products are soft pretzels marketed primarily under the brand names SUPERPRETZEL, BRAUHAUS, AUNTIE ANNE’S*
and BAVARIAN BAKERY, frozen juice treats and desserts marketed primarily under the LUIGI’S, WHOLE FRUIT, ICEE,
PHILLY SWIRL, SOUR PATCH** and MINUTE MAID*** brand names, churros marketed primarily under the TIO
PEPE’S and CALIFORNIA CHURROS brand names and bakery products sold primarily under the READI-BAKE,
COUNTRY HOME, MARY B’S, DADDY RAY’S and HILL & VALLEY brand names as well as for private label and
contract packing. J & J believes it is the largest manufacturer of soft pretzels in the United States. Other snack food products
include funnel cake sold under THE FUNNEL CAKE FACTORY brand and dough enrobed handheld products sold under
the PATIO brand and other smaller brands as well. 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 Beverages sales are made primarily to food service 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 theatres;
independent retailers; and schools, colleges and other institutions. The Company’s retail supermarket customers are primarily
supermarket chains.
The Company was incorporated in 1971 under the laws of the State of New Jersey.
The Company has made acquisitions as described in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our consolidated financial statements and related notes thereto.
The Company operates in three business segments: Food Service, Retail Supermarkets and Frozen Beverages. These
segments are described below.
The Chief Operating Decision Maker for Food Service and Retail Supermarkets and the Chief Operating Decision
Maker for Frozen Beverages monthly review detailed operating income statements and sales reports in order to assess
performance and allocate resources to each individual segment. Sales and operating income are key variables monitored by
the Chief Operating Decision Makers and management when determining each segment’s and the company’s financial
condition and operating performance. In addition, the Chief Operating Decision Makers review and evaluate depreciation,
capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment (see
Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8 – Financial
Statements and Supplementary Data for financial information about segments).
*
AUNTIE ANNE’S is a registered trademark of Auntie Anne’s LLC
** SOUR PATCH is a registered trademark of Mondelçz International Group
*** Minute Maid is a registered trademark of the Coca-Cola Company
1
Food Service
The primary products sold by the food service segment are soft pretzels, frozen juice treats and desserts, churros,
dough enrobed 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.
Retail Supermarkets
The primary products sold to the retail supermarket channel are soft pretzel products – including SUPERPRETZEL
and AUNTIE ANNE’S, frozen juice treats and desserts including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and
Soft Frozen Lemonade, WHOLE FRUIT frozen fruit bars and sorbet, PHILLY SWIRL cups and sticks, SOUR PATCH
sticks, ICEE Squeeze-Up Tubes and dough enrobed handheld products including PATIO burritos. Within the retail
supermarket channel, our frozen and prepackaged products are purchased by the consumer for consumption at home.
Frozen Beverages
We sell frozen beverages to the food service industry primarily under the names ICEE, SLUSH PUPPIE and
PARROT ICE in the United States, Mexico and Canada. We also provide repair and maintenance service to customers for
customers’ owned equipment.
Products
Soft Pretzels
The Company’s soft pretzels are sold under many brand names; some of which are: SUPERPRETZEL, PRETZEL
FILLERS, PRETZELFILS, GOURMET TWISTS, MR. TWISTER, SOFT PRETZEL BITES, SOFTSTIX, SOFT PRETZEL
BUNS, TEXAS TWIST, BAVARIAN BAKERY, SUPERPRETZEL BAVARIAN, NEW YORK PRETZEL, KIM &
SCOTT’S GOURMET PRETZELS, SERIOUSLY TWISTED!, BRAUHAUS, AUNTIE ANNE’S AND LABRIOLA; and,
to a lesser extent, under private labels.
Soft pretzels are sold in the Food Service and Retail Supermarket segments. Soft pretzel sales amounted to 21% of
the Company’s revenue in fiscal year 2019, 21% in 2018 and 20% in 2017
Certain of the Company’s soft pretzels qualify under USDA regulations as the nutritional equivalent of bread for
purposes of the USDA school lunch program, thereby enabling a participating school to obtain partial reimbursement of the
cost of the Company’s soft pretzels from the USDA.
The Company’s soft pretzels are manufactured according to a proprietary formula. Soft pretzels, ranging in size
from one to twenty-four ounces in weight, are shaped and formed by the Company’s twister machines. These soft pretzel
tying machines are automated, high-speed machines for twisting dough into the traditional pretzel shape. Additionally, we
make soft pretzels which are extruded or shaped by hand. Soft pretzels, after processing, are primarily quick-frozen in either
raw or baked form and packaged for delivery.
The Company’s principal marketing program in the Food Service segment includes supplying ovens, mobile
merchandisers, display cases, warmers and similar merchandising equipment to the retailer to prepare and promote the sale
of soft pretzels. Some of this equipment is proprietary, including combination warmer and display cases that reconstitute
frozen soft pretzels while displaying them, thus eliminating the need for an oven. The Company retains ownership of the
equipment placed in customer locations, and as a result, customers are not required to make an investment in equipment.
2
Frozen Juice Treats and Desserts
The Company’s frozen juice treats and desserts are marketed primarily under the LUIGI’S, WHOLE FRUIT,
PHILLY SWIRL, SOUR PATCH, ICEE and MINUTE MAID brand names. Frozen juice treats and desserts are sold in the
Food Service and Retail Supermarkets segments. Frozen juice treats and dessert sales were 10% of the Company’s revenue
in fiscal year 2019, 10% in 2018 and 11% in 2017.
The Company’s school food service LUIGI’S and WHOLE FRUIT frozen juice bars and cups contain three to four
ounces of 100% apple or pineapple juice with no added sugar and 100% of the daily US FDA value of vitamin C. The juice
bars are produced in various flavors and are packaged in a sealed push-up paper container referred to as the Milliken M-pak,
which the Company believes has certain sanitary and safety advantages.
The balance of the Company’s frozen juice treats and desserts products are manufactured from water, sweeteners
and fruit juice concentrates in various flavors and packaging including cups, tubes, sticks, M-paks and pints. Several of the
products contain ice cream and WHOLE FRUIT contains pieces of fruit.
Churros
The Company’s churros are sold primarily under the TIO PEPE’S and CALIFORNIA CHURROS brand names.
Churros are sold to the Food Service and Retail Supermarkets segments. Churro sales were 6% of the Company’s sales in
fiscal year 2019, 6% in 2018 and 6% in 2017. Churros are Hispanic pastries in stick form which the Company produces in
several sizes according to a proprietary formula. The churros are deep fried, frozen and packaged. At food service point-of-
sale they are reheated and topped with a cinnamon sugar mixture. The Company also sells fruit and crème-filled churros.
The Company supplies churro merchandising equipment similar to that used for its soft pretzels.
Handheld Products
The Company's dough enrobed handheld products are marketed under the PATIO, SUPREME STUFFERS and
SWEET STUFFERS brand names and under private labels. Handheld products are sold to the Food Service and Retail
Supermarket segments. Handheld product sales amounted to 4% of the Company’s sales in fiscal year 2019, 5% in 2018 and
5% in 2017.
Bakery Products
The Company’s bakery products are marketed under the MRS. GOODCOOKIE, READI-BAKE, COUNTRY
HOME, MARY B’S, DADDY RAY’S and HILL & VALLEY brand names, and under private labels. Bakery products
include primarily biscuits, fig and fruit bars, cookies, breads, rolls, crumb, muffins and donuts. Bakery products are sold to
the Food Service segment. Bakery products sales amounted to 32% of the Company’s sales in fiscal year 2019, 33% in 2018
and 32% in 2017.
Frozen Beverages
The Company markets frozen beverages primarily under the names ICEE, SLUSH PUPPIE and PARROT ICE
which are sold primarily in the United States, Mexico and Canada. Frozen beverages are sold in the Frozen Beverages
segment.
Frozen beverage sales amounted to 15% of the Company’s revenue in fiscal year 2019, 15% in 2018 and 15% in
2017.
Under the Company’s principal marketing program for frozen carbonated beverages, it installs frozen beverage
dispensers for its ICEE brand at customer locations and thereafter services the machines, arranges to supply customers with
ingredients required for production of the frozen beverages, and supports customer retail sales efforts with in-store
promotions and point-of-sale materials. The Company sells frozen non-carbonated beverages under the SLUSH PUPPIE and
PARROT ICE brands through a distributor network and through its own distribution network. The Company also provides
repair and maintenance service to customers for customers’ owned equipment and sells equipment in its Frozen Beverages
segment. Revenue from equipment sales and repair and maintenance services totaled 11% of the Company’s sales in fiscal
year 2019, 10% in 2018 and 9% in 2017.
3
Each new frozen carbonated customer location requires a frozen beverage dispenser supplied by the Company or
by the customer. Company-supplied frozen carbonated dispensers are purchased from outside vendors or rebuilt by the
Company.
The Company provides managed service and/or products to approximately 145,000 Company-owned and customer-
owned dispensers.
The Company has the rights to market and distribute frozen beverages under the name ICEE to the entire continental
United States (except for portions of two states) as well as internationally.
Other Products
Other products sold by the Company include funnel cakes sold under the FUNNEL CAKE FACTORY brand name
and smaller amounts of various other food products. These products are sold in the Food Service and Frozen Beverages
segments.
Customers
The Company sells its products to two principal channels: food service and retail supermarkets. The primary
products sold to the food service channel are soft pretzels, frozen beverages, frozen juice treats and desserts, churros, dough
enrobed handheld products and baked goods. The primary products sold to the retail supermarket channel are soft pretzels,
frozen juice treats and desserts and dough enrobed handheld products.
We have several large customers that account for a significant portion of our sales. Our top ten customers accounted
for 43%, 43% and 42% of our sales during fiscal years 2019, 2018 and 2017, respectively, with our largest customer
accounting for 11% of our sales in 2019, 9-1/2% of our sales in 2018 and 9-1/2% of our sales in 2017. Four of the ten
customers are food distributors who sell our product to many end users. The loss of one or more of our large customers could
adversely affect our results of operations. These customers typically do not enter into long-term contracts and make purchase
decisions based on a combination of price, product quality, consumer demand and customer service performance. If our sales
to one or more of these customers are reduced, this reduction may adversely affect our business. If receivables from one or
more of these customers become uncollectible, our operating income would be adversely impacted.
The Food Service and the Frozen Beverages segments sell primarily to food service channels. The Retail
Supermarkets segment sells primarily to the retail supermarket channel.
The Company’s customers in the food service segment include snack bars and food stands in chain, department and
mass merchandising stores, malls and shopping centers, fast food and casual dining restaurants, stadiums and sports arenas,
leisure and theme parks, convenience stores, movie theatres, warehouse club stores, schools, colleges and other institutions,
and independent retailers. Machines and machine parts are sold to other food and beverage companies. Within the food
service industry, the Company’s products are purchased by the consumer primarily for consumption at the point-of-sale.
The Company sells its products to an estimated 85-90% of supermarkets in the United States. Products sold to retail
supermarket customers are primarily soft pretzel products, including SUPERPRETZEL and AUNTIE ANNE’S, frozen juice
treats and desserts including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE
FRUIT frozen fruit bars, WHOLE FRUIT Sorbet, PHILLY SWIRL cups and sticks, MARY B’S biscuits and dumplings,
DADDY RAY’S fig and fruit bars, HILL & VALLEY baked goods, ICEE Squeeze-Up Tubes and PATIO burritos. Within
the retail supermarket industry, the Company’s frozen and prepackaged products are purchased by the consumer for
consumption at home.
Marketing and Distribution
The Company has developed a national marketing program for its products. For the Food Service and Frozen
Beverages segments’ customers, this marketing program includes providing ovens, mobile merchandisers, display cases,
warmers, frozen beverage dispensers and other merchandising equipment for the individual customer’s requirements and
point-of-sale materials as well as participating in trade shows and in-store demonstrations. The Company’s ongoing
advertising and promotional campaigns for its Retail Supermarket segment’s products include trade shows, newspaper
advertisements with coupons and consumer advertising campaigns.
4
The Company develops and introduces new products on a routine basis. The Company evaluates the success of new
product introductions on the basis of sales levels, which are reviewed no less frequently than monthly by the Company’s
Chief Operating Decision Makers.
The Company’s products are sold through a network of about 100 food brokers, independent sales distributors and
the Company’s own direct sales force. For its snack food products, the Company maintains warehouse and distribution
facilities in Pennsauken, Bellmawr and Bridgeport, New Jersey; Vernon (Los Angeles) and Colton, California; Brooklyn,
New York; Scranton, Pittsburgh, Hatfield and Lancaster, Pennsylvania; Carrollton (Dallas), Texas; Atlanta, Georgia;
Moscow Mills (St. Louis), Missouri; Pensacola and Tampa, Florida; Solon, Ohio; Weston, Oregon; Holly Ridge, North
Carolina; Alsip (Chicago) and Rock Island, Illinois. Frozen beverages and machine parts are distributed from 166 Company
managed warehouse and distribution facilities located in 43 states, Mexico and Canada, which allow the Company to directly
service its customers in the surrounding areas. The Company’s products are shipped in refrigerated and other vehicles from
the Company’s manufacturing and warehouse facilities on a fleet of Company operated tractor-trailers, trucks and vans, as
well as by independent carriers.
Seasonality
The Company’s sales are seasonal because frozen beverage sales and frozen juice treats and desserts sales are
generally higher during the warmer months.
Trademarks and Patents
The Company has numerous trademarks, the most important of which are SUPERPRETZEL, TEXAS TWIST,
NEW YORK PRETZEL, BAVARIAN BAKERY, MR. TWISTER, SOFT PRETZEL BITES, SOFTSTIX, PRETZEL
FILLERS, PRETZELFILS, BRAUHAUS and LABRIOLA for its pretzel products; SHAPE-UPS, WHOLE FRUIT, PHILLY
SWIRL and LUIGI’S for its frozen juice treats and desserts; TIO PEPE’S and CALIFORNIA CHURROS for its churros;
ARCTIC BLAST, SLUSH PUPPIE and PARROT ICE for its frozen beverages; FUNNEL CAKE FACTORY for its funnel
cake products, PATIO for its handheld burritos and MRS. GOODCOOKIE, READI-BAKE, COUNTRY HOME, CAMDEN
CREEK, MARY B’S, DADDY RAY’S and HILL & VALLEY for its bakery products.
The Company markets frozen beverages under a license to use the trademark ICEE in all of the continental United
States, except for portions of four states, and in Mexico and Canada. Additionally, the Company has the international rights
to the trademark ICEE.
The trademarks, when renewed and continuously used, have an indefinite term and are considered important to the
Company as a means of identifying its products. The Company considers its trademarks important to the success of its
business.
The Company has numerous patents related to the manufacturing and marketing of its product.
Supplies
The Company’s manufactured products are produced from raw materials which are readily available from numerous
sources. With the exception of the Company’s churro production equipment, funnel cake production equipment and soft
pretzel twisting equipment, all of which are made for J & J by independent third parties, and certain specialized packaging
equipment, the Company’s manufacturing equipment is readily available from various sources. Syrup for frozen beverages
is purchased primarily from The Coca-Cola Company, Dr Pepper Snapple Group, Inc., the Pepsi Cola Company, and Jogue,
Inc. Cups, straws and lids are readily available from various suppliers. Parts for frozen beverage dispensing machines are
purchased from several sources. Frozen beverage dispensers are purchased primarily from IMI Cornelius, Inc. and FBD
Partnership.
Competition
Snack food and bakery products markets are highly competitive. The Company’s principal products compete against
similar and different food products manufactured and sold by numerous other companies, some of which are substantially
larger and have greater resources than the Company. As the soft pretzel, frozen juice treat and dessert, bakery products and
related markets evolve, additional competitors and new competing products may enter the markets. Competitive factors in
these markets include product quality, customer service, taste, price, identity and brand name awareness, method of
distribution and sales promotions.
5
The Company believes it is the only national distributor of soft pretzels. However, there are numerous regional and
local manufacturers of food service and retail supermarket soft pretzels as well as several chains of retail pretzel stores.
In Frozen Beverages the Company competes directly with other frozen beverage companies. These include several
companies which have the right to use the ICEE name in portions of four states. There are many other regional frozen
beverage competitors throughout the country and one large retail chain which uses its own frozen beverage brand.
The Company competes with large soft drink manufacturers for counter and floor space for its frozen beverage
dispensing machines at retail locations and with products which are more widely known than the ICEE, SLUSH PUPPIE
and PARROT ICE frozen beverages.
The Company competes with several other companies in the frozen juice treat and dessert and bakery products
markets.
Risks Associated with Foreign Operations
Foreign operations generally involve greater risk than doing business in the United States. Foreign economies differ
favorably or unfavorably from the United States’ economy in such respects as the level of inflation and debt, which may
result in fluctuations in the value of the country’s currency and real property. Sales of our foreign operations were
$33,906,000, $32,459,000 and $31,001,000 in fiscal years 2019, 2018 and 2017, respectively. At September 28, 2019, the
total assets of our foreign operations were approximately $26 million or 2.6% of total assets which was significantly less
than the prior year as we moved cash to the United States. At September 29, 2018, the total assets of our foreign operations
were approximately $45 million or 4.8% of total assets.
Employees
The Company has about 4,600 full and part time employees and approximately 1,500 workers employed by staffing
agencies as of September 28, 2019. About 1,200 production and distribution employees throughout the Company are covered
by collective bargaining agreements.
The Company considers its employee relations to be good.
Available Information
The Company’s internet address is www.jjsnack.com. On the investor relations section of its website, the Company
provides free access to its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
any amendments to these reports, as soon as reasonably practicable after such materials are electronically filed with, or
furnished to, the Securities and Exchange Commission (“SEC”). The information on the website listed above is not and
should not be considered part of this annual report on Form 10-K and is not incorporated by reference in this document.
Item 1A. Risk Factors
You should carefully consider the risks described below, together with all of the other information included in this
report, in considering our business and prospects. The risks and uncertainties described below are not the only ones facing
us. Additional risks and uncertainties not presently known to us or that we currently deem insignificant may also impair our
business operations. Following is a discussion of known potentially significant risks which could result in harm to our
business, financial condition or results of operations.
Risks of Shortages or Increased Cost of Raw Materials
We are exposed to the market risks arising from adverse changes in commodity prices, affecting the cost of our raw
materials and energy. The raw materials and energy which we use for the production and distribution of our products are
largely commodities that are subject to price volatility and fluctuations in availability caused by changes in global supply
and demand, weather conditions, agricultural uncertainty or governmental controls. We purchase these materials and energy
mainly in the open market. Our procurement practices are intended to reduce the risk of future price increases, but also may
potentially limit the ability to benefit from possible price decreases. If commodity price changes result in increases in raw
materials and energy costs, we may not be able to increase our prices to offset these increased costs without suffering reduced
volume, revenue and operating income.
6
General Risks of the Food Industry
Food processors are subject to the risks of adverse changes in general economic conditions; evolving consumer
preferences and nutritional and health-related concerns; changes in food distribution channels; federal, state and local food
processing controls or other mandates; changes in federal, state, local and international laws and regulations, or in the
application of such laws and regulations; consumer product liability claims; risks of product tampering and contamination;
and negative publicity surrounding actual or perceived product safety deficiencies. The increased buying power of large
supermarket chains, other retail outlets and wholesale food vendors could result in greater resistance to price increases and
could alter the pattern of customer inventory levels and access to shelf space.
Risks of Shortages or Increased Costs of Labor
Our businesses operate in highly competitive markets. The labor market in the United States is very competitive
and the unemployment rate is at historic lows. We depend on the skills, working relationships, and continued services of
key personnel, including our experienced management team. We must hire, train and develop effective employees. We
compete with other companies both within and outside of our industry for talented personnel, and we may lose key personnel
or fail to attract, train, and retain other talented personnel. In addition, our ability to achieve our operating goals depends on
our ability to identify, hire, train, and retain qualified individuals. Any such loss or failure could adversely affect our product
sales, financial condition, and operating results.
Environmental Risks
The disposal of solid and liquid waste material resulting from the preparation and processing of foods is subject to
various federal, state and local laws and regulations relating to the protection of the environment. Such laws and regulations
have an important effect on the food processing industry as a whole, requiring substantially all firms in the industry to incur
material expenditures for modification of existing processing facilities and for construction of upgraded or new waste
treatment facilities.
We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future
laws or regulations will be administered or interpreted or what environmental conditions may be found to exist. Enactment
of more stringent laws or regulations or more strict interpretation of existing laws and regulations may require additional
expenditures by us, some of which could be material.
Risks Resulting from Customer Concentration
We have several large customers that account for a significant portion of our sales. Our top ten customers accounted
for 43%, 43% and 42% of our sales during fiscal years 2019, 2018 and 2017, respectively, with our largest customer
accounting for 11% of our sales in 2019, 9-1/2% of our sales in 2018 and 9-1/2% of our sales in 2017.
Four of the ten customers are food distributors who sell our product to many end users. The loss of one or more of
our large customers could adversely affect our results of operations. These customers typically do not enter into long-term
contracts and make purchase decisions based on a combination of price, product quality, consumer demand and customer
service performance. If our sales to one or more of these customers are reduced, this reduction may adversely affect our
business. If receivables from one or more of these customers become uncollectible, our operating income would be adversely
impacted.
Competition
Our businesses operate in highly competitive markets. We compete against national and regional manufacturers and
distributors on the basis of price, quality, product variety and effective distribution. Many of our major competitors in the
market are larger and have greater financial and marketing resources than we do. Increased competition and anticipated
actions by our competitors could lead to downward pressure on prices and/or a decline in our market share, either of which
could adversely affect our results. See “Competition” in Item 1 for more information about our competitors.
7
Risks Relating to Manufacturing and Distribution
Our ability to purchase, manufacture and distribute products is critical to our success. Because we source certain
products from single manufacturing sites, it is possible that we could experience a production disruption that results in a
reduction or elimination of the availability of some of our products. If we are not able to obtain alternate production capability
in a timely manner, or on favorable terms, it could have a negative impact on our business, results of operations, financial
condition and cash flows, including the potential for long-term loss of product placement with various customers. We are
also subject to risks of other business disruptions associated with our dependence on production facilities and distribution
systems. Natural disasters, terrorist activity, cyberattacks or other unforeseen events could interrupt production or distribution
and have a material adverse effect on our business, results of operations, financial condition and cash flows, including the
potential for long-term loss of product placement with our customers.
Risks Relating to the Availability and Costs of Transportation
Our ability to obtain adequate and reasonably priced methods of transportation to distribute our products, including
refrigerated trailers for many of our products, is a key factor to our success. Delays in transportation, including weather-
related delays, could have a material adverse effect on our business and results of operations. Further, higher fuel costs and
increased line haul costs due to industry capacity constraints, customer delivery requirements and a more restrictive
regulatory environment could also negatively impact our financial results. We pay fuel surcharges that fluctuate with the
price of diesel fuel to third-party transporters of our products, and such surcharges can be substantial. Any sudden or dramatic
increases in the price of diesel fuel would serve to increase our fuel surcharges and our cost of goods sold. If we were unable
to pass higher freight costs to our customers in the form of price increases, those higher costs could have a material adverse
effect on our business, results of operations, financial condition and cash flows.
Risks Relating to Manufacturing Capacity Constraints
Our current manufacturing resources may be inadequate to meet significantly increased demand for some of our
food products. Our ability to increase our manufacturing capacity depends on many factors, including the equipment delivery,
construction lead-times, installation, qualification, regulatory permitting and regulatory requirements. A lack of sufficient
manufacturing capacity to meet demand could cause our customer service levels to decrease, which may negatively affect
customer demand for our products and customer relations generally, which in turn could have a material adverse effect on
our business, results of operations, financial condition and cash flows. In addition, operating facilities at or near capacity
may also increase production and distribution costs and negatively affect relations with our employees or contractors, which
could result in disruptions in our operations.
New Jersey Law and Provisions of Our Amended and Restated Certificate of Incorporation and Bylaws May Inhibit a Change
In Control
The New Jersey Shareholders' Protection Act, N.J.S.A. 14A:10A-1, et seq., may delay, deter or prevent a change in
control by prohibiting the Company from engaging in a business combination transaction with an interested shareholder for
a period of five years after the person becomes an interested stockholder, even if a majority of our shareholders believe a
change in control would be in the best interests of the Company and its shareholders. In addition, our Amended and Restated
Certificate of Incorporation and Bylaws contain provisions that may delay, deter or prevent a future acquisition of J & J
Snack Foods Corp. not approved by our Board of Directors. This could occur even if our shareholders are offered an attractive
value for their shares or if a substantial number or even a majority of our shareholders believe the takeover is in their best
interest. These provisions are intended to encourage any person interested in acquiring us to negotiate with and obtain the
approval of our Board of Directors in connection with the transaction. Provisions of our Amended and Restated Certificate
of Incorporation and Bylaws that could delay, deter or prevent a future acquisition include the following:
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a classified Board of Directors;
the requirement that our shareholders may only remove Directors for cause;
limitations on share holdings and voting of certain persons;
special Director voting rights;
the ability of the Board of Directors to consider the interests of various constituencies, including our employees,
customers, suppliers, creditors and the local communities in which we operate;
shareholders do not generally have the right to call special meetings or to act by written consent;
our Bylaws contain advance notice procedures for nominations of Directors or submission of shareholder proposals at an
annual meeting; and
our Bylaws contain a forum selection clause providing that certain litigation against the Company can only be brought in
New Jersey state or federal courts.
8
Risks Relating to Gerald B. Shreiber
Gerald B. Shreiber is the founder, President, Chief Executive Officer and Chairman of the Board of Directors of the
Company and the current beneficial owner of 19% of its outstanding common stock. Our Amended and Restated Certificate
of Incorporation provides that Mr. Shreiber has three votes on any matter to be acted upon by the Board of Directors (subject
to certain adjustments). Therefore, he and one other director would have the ability to approve any matter before the Board.
The performance of the Company is greatly impacted by his leadership and decisions.
Risk Related to Increases in our Health Insurance Costs
The costs of employee health care insurance have been increasing in recent years due to rising health care costs,
legislative changes, and general economic conditions. Because of the breadth and complexity of health care regulations as
well as other health care reform legislation considered by Congress and state legislatures, we cannot predict with certainty
the future effect of these laws on us. A continued increase in health care costs or additional costs incurred as a result of the
Health Care Reform Laws or the enforcement of the Health Care Reform Laws or other future health care reform laws
imposed by Congress or state legislations could have a negative impact on our financial position and results of operations.
Risk Related to Product Changes
There are risks in the marketplace related to trade and consumer acceptance of product improvements, packing
initiatives and new product introductions.
Risks Related to Changes in the Business
Our ability to successfully manage changes to our business processes, including selling, distribution, product
capacity, information management systems and the integration of acquisitions, will directly affect our results of operations.
Risks Associated with Foreign Operations
Foreign operations generally involve greater risk than doing business in the United States. Foreign economies differ
favorably or unfavorably from the United States’ economy in such respects as the level of inflation and debt, which may
result in fluctuations in the value of the country’s currency and real property. Further, there may be less government
regulation in various countries, and difficulty in enforcing legal rights outside the United States. Additionally, in some foreign
countries, there is the possibility of expropriation or confiscatory taxation limitations on the removal of property or other
assets, political or social instability or diplomatic developments which could affect the operations and assets of U.S.
companies doing business in that country. Sales of our foreign operations were $33,906,000, $32,459,000 and $31,001,000
in fiscal years 2019, 2018 and 2017, respectively. At September 28, 2019, the total assets of our foreign operations were
approximately $26 million or 2.6% of total assets which was significantly less than the prior year as we moved cash to the
United States. At September 29, 2018, the total assets of our foreign operations were approximately $45 million or 4.8% of
total assets.
Risks Associated with our Information Technology Systems
The efficient operation of our business depends on our information technology systems. We rely on our information
technology systems to effectively manage our business data, communications, supply chain, manufacturing, order entry and
fulfillment, and other business processes. The failure of our information technology systems (including those provided to us
by third parties) to perform as we anticipate could disrupt our business and could result in billing, collecting, and ordering
errors, processing inefficiencies, and the loss of sales and customers, causing our business and results of operations to suffer.
Our information technology systems may be vulnerable to damage or interruption from circumstances beyond our
control, including fire, natural disasters, systems failures, security breaches or intrusions (including theft of customer,
consumer or other confidential data), and viruses. If we are unable to prevent physical and electronic break-ins, cyber-attacks
and other information security breaches, we may suffer financial and reputational damage, be subject to litigation or incur
remediation costs or penalties because of the unauthorized disclosure of confidential information belonging to us or to our
partners, customers, suppliers or employees.
9
We may experience difficulties in implementing the final phases of our new enterprise resource planning system.
We are in the late stages of a multi-year implementation of a new enterprise resource planning system (“ERP”), which is
replacing our existing financial and operating systems. The design and implementation of this new ERP has required an
investment of significant personnel and financial resources, including substantial expenditures for outside consultants and
software. We may not be able to implement the ERP successfully without experiencing delays, increased costs and other
difficulties, including potential design defects, miscalculations, testing requirements, and the diversion of management’s
attention from day-to-day business operations. If we are unable to implement the new ERP as planned, the effectiveness of
our internal control over financial reporting could be adversely affected, our ability to assess those controls adequately could
be delayed, and our business, results of operations, financial condition and cash flows could be negatively impacted.
Risks Associated with Real or Perceived Safety Issues Regarding our Food Products
We sell food products for human consumption, which involves risks such as product contamination or spoilage,
product tampering, other adulteration of food products, mislabeling, and misbranding. We can be impacted by both real and
unfounded claims regarding the safety of our operations, or concerns regarding mislabeled, adulterated, contaminated or
spoiled food products. Any of these circumstances could necessitate a voluntary or mandatory recall due to a substantial
product hazard, a need to change a product’s labeling or other consumer safety concerns. A pervasive product recall may
result in significant loss due to the costs of a recall, related legal claims, including claims arising from bodily injury or illness
caused by our products, the destruction of product inventory, or lost sales due to product unavailability. A highly publicized
product recall, whether involving us or any related products made by third parties, also could result in a loss of customers or
an unfavorable change in consumer sentiment regarding our products or any category in which we operate. In addition, an
allegation of noncompliance with federal or state food laws and regulations could force us to cease production, stop selling
our products or create significant adverse publicity that could harm our credibility and decrease market acceptance of our
products. Any of these events could have a material adverse effect on our business, results of operations, financial condition
and cash flows.
Seasonality and Quarterly Fluctuations
Our sales are affected by the seasonal demand for our products. Demand is greater during the summer months
primarily as a result of the warm weather demand for our ICEE and frozen juice treats and desserts products. Because of
seasonal fluctuations, there can be no assurance that the results of any particular quarter will be indicative of results for the
full year or for future years.
Item 1B. Unresolved Staff Comments
We have no unresolved SEC staff comments to report.
Item 2.
Properties
The Company’s primary east coast manufacturing facility is located in Pennsauken, New Jersey in a 70,000 square
foot building on a two-acre lot. Soft pretzels, churros, and funnel cake are manufactured at this Company-owned facility
which also serves as the Company’s corporate headquarters. The Company owns a 128,000 square foot building adjacent to
this manufacturing facility which contains a large freezer for warehousing and distribution purposes. The Company leases,
through January 2022, 16,000 square feet of office and warehouse space located next to the Pennsauken, New Jersey plant
and owns a 43,000 square foot office and warehouse building in the same complex.
The Company owns a 150,000 square foot building on eight acres in Bellmawr, New Jersey. The facility is used by
the Company to manufacture soft pretzels.
The Company’s primary west coast manufacturing facility is located in Vernon (Los Angeles), California. It consists
of a 137,000 square foot facility in which soft pretzels, churros and various lines of baked goods are produced and
warehoused. Included in the 137,000 square foot facility is a 30,000 square foot freezer used for warehousing and distribution
purposes. The facility is leased through November 2030. The Company leases an additional 80,000 square feet of office and
warehouse space, adjacent to its manufacturing facility, through November 2030.
The Company leases a 22,000 square foot soft pretzel manufacturing facility located in Brooklyn, New York. The
lease runs through August 2023.
10
The Company leases through June 2030 a 45,000 square foot churros and funnel cake manufacturing facility located
in Colton, California.
The Company leases an 85,000 square foot bakery manufacturing facility located in Atlanta, Georgia. The lease
runs through December 2020.
The Company leases a 129,000 square foot bakery manufacturing facility located in Rock Island, Illinois. The lease
runs through December 2034.
The Company owns a 46,000 square foot frozen juice treat and dessert manufacturing facility and a 42,000 square
foot dry storage warehouse located on six acres in Scranton, Pennsylvania.
The Company leases a 29,600 square foot soft pretzel manufacturing facility located in Hatfield, Pennsylvania. The
lease runs through June 2032.
The Company leases a 48,000 square foot soft pretzel manufacturing facility located in Carrollton, Texas. The lease
runs through April 2026. The Company leases an additional property containing a 6,500 square foot storage freezer across
the street from the manufacturing facility, which lease expires May 2021.
The Company leases a 177,500 square foot soft pretzel manufacturing facility located in Alsip, Illinois. The lease
runs through March 2030.
The Company’s fresh bakery products manufacturing facility and offices are located in Bridgeport, New Jersey in
three buildings totaling 133,000 square feet. The buildings are leased through December 2025.
The Company owns a 165,000 square foot fig and fruit bar manufacturing facility located on 9-1/2 acres in Moscow
Mills (St. Louis), Missouri.
The Company owns an 84,000 square foot handheld products manufacturing facility in Holly Ridge, North Carolina.
The Company leases a 70,000 square foot handheld products manufacturing facility in Weston, Oregon which is
leased through May 13, 2021.
The Company leases a 39,000 square foot frozen juice treat and dessert manufacturing facility in Tampa, Florida
which is leased through September 2023.
The Company also leases approximately 160 warehouse and distribution facilities in 44 states, Mexico and Canada.
Item 3.
Legal Proceedings
The Company has no material pending legal proceedings, other than ordinary routine litigation incidental to the
business, to which the Company or any of its subsidiaries is a party or of which any of their property is subject.
Item 4.
Mine Safety Disclosures
Not Applicable
11
PART II
Item 5.
Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity
Securities
The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “JJSF.” The
following table sets forth the high and low sale price quotations as reported by NASDAQ and dividend information for the
common stock for each quarter of the years ended September 29, 2018 and September 28, 2019.
Fiscal 2018
First quarter
Second quarter
Third quarter
Fourth quarter
Fiscal 2019
First quarter
Second quarter
Third quarter
Fourth quarter
Common Stock Market Price
High
Low
Dividend
Declared
$
$
157.33 $
153.99
158.41
159.05
162.80 $
162.84
167.50
196.84
127.00 $
128.53
125.98
139.90
138.65 $
138.40
150.61
159.63
0.4500
0.4500
0.4500
0.4500
0.5000
0.5000
0.5000
0.5000
As of September 28, 2019, we had approximately 23,000 beneficial shareholders.
In our fiscal year ended September 30, 2017, we purchased and retired 142,665 shares of our common stock at a
cost of $18,228,763.
In our fiscal year ended September 29, 2018, we purchased and retired 20,604 shares of our common stock at a cost
of $2,794,027.
We did not purchase any shares of our common stock in our fiscal year ended September 28, 2019.
A plan to purchase 500,000 shares was announced on November 8, 2012. 500,000 shares were purchased under this
plan with the last purchase in August 2017. A plan to purchase 500,000 shares was announced on August 4, 2017 with no
expiration date. 384,506 shares remain to be purchased under this plan.
For information on the Company’s Equity Compensation Plans, please see Item 12 herein.
12
Stock Performance Graph
Item 6.
Selected Financial Data
The selected financial data for the last five years was derived from our audited consolidated financial statements.
The following selected financial data should be read in conjunction with “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto, especially
as the information pertains to fiscal 2017, 2018 and 2019.
Fiscal year ended in September
(In thousands except per share data)
2019
2018
2017
2016
2015
Net Sales
Net Earnings
Total Assets
Long-Term Debt
Capital Lease Obligations
Stockholders' Equity
Common Share Data
Earnings Per Diluted Share
Earnings Per Basic Share
Common Shares Outstanding At Year End
Cash Dividends Declared Per Common Share
94,819 $ 103,596 $
$ 1,186,487 $ 1,138,265 $ 1,084,224 $ 992,781 $ 976,256
$
70,183
$ 1,019,339 $ 932,013 $ 867,228 $ 790,487 $ 739,669
$
-
1,469
$
$ 833,751 $ 759,091 $ 682,322 $ 637,974 $ 599,919
- $
1,057 $
- $
1,244 $
- $
1,077 $
- $
1,600 $
79,174 $
75,975 $
$
$
$
5.00 $
5.04 $
18,895
2.00 $
5.51 $
5.54 $
18,754
1.80 $
4.21 $
4.23 $
18,663
1.68 $
4.05 $
4.07 $
18,668
1.56 $
3.73
3.76
18,676
1.44
13
Item 7.
Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
In addition to historical information, this document and analysis contains forward-looking statements. The forward-
looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ
materially from those projected in the forward-looking statements. Important factors that might cause such a difference
include, but are not limited to, those discussed in the “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.” Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect
management’s analysis only as of the date hereof. We undertake no obligation to publicly revise or update these forward-
looking statements to reflect events or circumstances that arise after the date hereof.
Critical Accounting Policies, Judgments and Estimates
We prepare our financial statements in conformity with accounting principles generally accepted in the United
States of America. The preparation of such financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of those
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
The Company discloses its significant accounting policies in the accompanying notes to its audited consolidated
financial statements.
Judgments and estimates of uncertainties are required in applying the Company’s accounting policies in certain
areas. Following are some of the areas requiring significant judgments and estimates: revenue recognition, accounts
receivable, cash flow and valuation assumptions in performing asset impairment tests of long-lived and intangible assets,
estimates of the value and useful lives of intangible assets, insurance reserves, inventories and income taxes.
There are numerous critical assumptions that may influence accounting estimates in these and other areas. We base
our critical assumptions on historical experience, third-party data and various other estimates we believe to be reasonable. A
description of the aforementioned policies follows:
Revenue Recognition - We adopted the new revenue recognition guidance on the first day of our fiscal 2019 year
using a modified retrospective approach; however, we did not record a cumulative-effect adjustment from initially applying
the standard as the adoption did not have a material impact on our financial position or results of operations. We completed
a review of customer contracts and evaluated the impact of the new standard on certain common practices currently employed
by us. We also finalized our assessment of the impact on our accounting policies, processes, system requirements, internal
controls and disclosures.
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.
14
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.
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:
Beginning Balance
Additions to contract liability
Amounts recognized as revenue
Ending Balance
Fiscal Year Ended
September 28,
2019
September 29,
2018
(in thousands)
$
$
1,865 $
6,308
(6,839 )
1,334 $
1,956
6,887
(6,978 )
1,865
Disaggregation of Revenue
See Note O of the Notes to our Consolidated Financial Statements, for disaggregation of our net sales by class of
similar product and type of customer.
Allowance for Doubtful Receivables
We provide an allowance for doubtful receivables after taking into consideration historical experience and other
factors. The allowance for doubtful receivables was $665,000 and $400,000 at June 29, 2019 and September 29,
2018, respectively.
15
Accounts Receivable - We record accounts receivable at the time revenue is recognized. Bad debt expense is
recorded in marketing and administrative expenses. The amount of the allowance for doubtful accounts is based on our
estimate of the accounts receivable amount that is uncollectable. It is comprised of a general reserve based on historical
experience and amounts for specific customers’ accounts receivable balances that we believe are at risk due to our knowledge
of facts regarding the customer(s). We continually monitor our estimate of the allowance for doubtful accounts and adjust it
monthly. We usually have approximately 15 customers with accounts receivable balances of between $1 million to $10
million. Failure of these customers, and others with lesser balances, to pay us the amounts owed, could have a material impact
on our consolidated financial statements.
Accounts receivable due from any of our customers is subject to risk. Our total bad debt expense was $389,000,
$259,000 and $122,000 for the fiscal years 2019, 2018 and 2017, respectively. At September 28, 2019 and September 29,
2018, our accounts receivables were $140,938,000 and $132,342,000 net of an allowance for doubtful accounts of $572,000
and $400,000.
Asset Impairment – We have three reporting units with goodwill totaling $102,511,000 as of September 28, 2019.
Goodwill is evaluated annually by the Company for impairment. We perform impairment tests at year end for our reporting
units, which is also the operating segment level, with recorded goodwill utilizing primarily the discounted cash flow method.
This methodology used to estimate the fair value of the total Company and its reporting units requires inputs and assumptions
(i.e. revenue growth, operating profit margins, capital spending requirements and discount rates) that reflect current market
conditions. The estimated fair value of each reporting unit is compared to the carrying value of the reporting unit. If the
carrying value of the reporting unit exceeds its fair value, the goodwill of the reporting unit is potentially impaired, and the
Company then determines the implied fair value of goodwill, which is compared to the carrying value of goodwill to
determine if impairment exists. Our tests at September 28, 2019 show that the fair value of each of our reporting units with
goodwill exceeded its carrying value. Therefore no further analysis was required. The inputs and assumptions used involve
future operating
considerable management
performance. Assumptions used in these forecasts are consistent with internal planning. The actual performance of the
reporting units could differ from management’s estimates due to changes in business conditions, operating performance,
economic conditions, competition and consumer preferences.
judgment and are based upon assumptions about expected
Licenses and rights, customer relationships and non- compete agreements are being amortized by the straight-line
method over periods ranging from 2 to 20 years and amortization expense is reflected throughout operating expenses. Long-
lived assets, including fixed assets and amortizing intangibles, are reviewed for impairment as events or changes in
circumstances occur indicating that the carrying amount of the asset may not be recoverable. Indefinite lived intangibles are
reviewed annually for impairment. Cash flow and sales analyses are used to assess impairment. The estimates of future cash
flows and sales involve considerable management judgment and are based upon assumptions about expected future operating
performance. Assumptions used in these forecasts are consistent with internal planning. The actual cash flows and sales
could differ from management’s estimates due to changes in business conditions, operating performance, economic
conditions, competition and consumer preferences.
Useful Lives of Intangible Assets - Most of our trade names which have carrying value have been assigned an
indefinite life and are not amortized because we plan to receive the benefit from them indefinitely. If we decide to curtail or
eliminate the use of any of the trade names or if sales that are generated from any particular trade name do not support the
carrying value of the trade name, then we would record impairment or assign an estimated useful life and amortize over the
remaining useful life. Rights such as prepaid licenses and non-compete agreements are amortized over contractual periods.
The useful lives of customer relationships are based on the discounted cash flows expected to be received from sales to the
customers adjusted for an attrition rate. The loss of a major customer or declining sales in general could create an impairment
charge.
Insurance Reserves - We have a self-insured medical plan which covers approximately 1,700 of our employees. We
record a liability for incurred but not yet reported or paid claims based on our historical experience of claims payments and
a calculated lag time period. We maintain a spreadsheet that includes claims payments made each month according to the
date the claim was incurred. This enables us to have an historical record of claims incurred but not yet paid at any point in
the past. We then compare our accrued liability to the more recent claims incurred but not yet paid amounts and adjust our
recorded liability up or down accordingly. Our recorded liability at September 28, 2019 and September 29, 2018 was
$1,392,000 and $2,058,000, respectively. Considering that we have stop loss coverage of $200,000 for each individual plan
subscriber, the general consistency of claims payments and the short time lag, we believe that there is not a material exposure
for this liability. Because of the foregoing, we do not engage a third party actuary to assist in this analysis.
16
We self-insure, up to loss limits, worker’s compensation and automobile liability claims. Accruals for claims under
our self-insurance program are recorded on a claims-incurred basis. Under this program, the estimated liability for claims
incurred but unpaid in fiscal years 2019 and 2018 was $3,300,000 and $4,100,000 respectively. Our total recorded liability
for all years’ claims incurred but not yet paid was $8,700,000 and $9,200,000 at September 28, 2019 and September 29,
2018, respectively. We estimate the liability based on total incurred claims and paid claims adjusting for loss development
factors which account for the development of open claims over time. We estimate the amounts we expect to pay for some
insurance years by multiplying incurred losses by a loss development factor which is based on insurance industry averages
and the age of the incurred claims; our estimated liability is then the difference between the amounts we expect to pay and
the amounts we have already paid for those years. Loss development factors that we use range from 1.0 to 2.0. However, for
some years, the estimated liability is the difference between the amounts we have already paid for that year and the maximum
we could pay under the program in effect for that particular year because the calculated amount we expect to pay is higher
than the maximum. For other years, where there are few claims open, the estimated liability we record is the amount the
insurance company has reserved for those claims. We evaluate our estimated liability on a continuing basis and adjust it
accordingly. Due to the multi-year length of these insurance programs, there is exposure to claims coming in lower or higher
than anticipated; however, due to constant monitoring and stop loss coverage of $350,000 on individual claims, we believe
our exposure is not material. Because of the foregoing, we do not engage a third party actuary to assist in this analysis. In
connection with these self-insurance agreements, we customarily enter into letters of credit arrangements with our insurers.
At both September 28, 2019 and September 29, 2018, we had outstanding letters of credit totaling $9,275,000.
Inventories - Inventories are valued at the lower of cost (determined by the first-in, first-out method) or market. We
recognize abnormal amounts of idle facilities, freight, handling costs, and spoilage as charges of the current
period. Additionally, we allocate fixed production overhead to inventories based on the normal capacity of our production
facilities. We calculate normal capacity as the production expected to be achieved over a number of periods or seasons under
normal circumstances, taking into account the loss of capacity resulting from planned maintenance. This requires us to use
judgment to determine when production is outside the range of expected variation in production (either abnormally low or
abnormally high). In periods of abnormally low production (for example, periods in which there is significantly lower
demand, labor and material shortages exist, or there is unplanned equipment downtime) the amount of fixed overhead
allocated to each unit of production is not increased. However, in periods of abnormally high production the amount of fixed
overhead allocated to each unit of production is decreased to assure inventories are not measured above cost.
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.
Refer to Note A to the accompanying consolidated financial statements for additional information on our accounting
policies.
RESULTS OF OPERATIONS:
Fiscal 2019 (52 weeks) Compared to Fiscal Year 2018 (52 weeks)
Net sales increased $48,222,000, or 4%, to $1,186,487,000 in fiscal 2019 from $1,138,265,000 in fiscal 2018.
We have three reportable segments, as disclosed in the accompanying notes to the consolidated financial statements:
Food Service, Retail Supermarkets and Frozen Beverages.
The Chief Operating Decision Maker for Food Service and Retail Supermarkets and the Chief Operating Decision
Maker for Frozen Beverages monthly review detailed operating income statements and sales reports in order to assess
performance and allocate resources to each individual segment. Sales and operating income are the key variables monitored
by the Chief Operating Decision Makers and management when determining each segment’s and the Company’s financial
condition and operating performance. In addition, the Chief Operating Decision Makers review and evaluate depreciation,
capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment.
17
FOOD SERVICE
Sales to food service customers increased $15,659,000, or 2 percent, to $761,603,000 in fiscal 2019. Soft pretzel
sales to the food service market increased about 1/3 of 1 percent to $209,227,000 for the year with higher sales to convenience
store chains offset by lower sales to restaurant chains and with sales increases and decreases throughout our customer base.
Our line of BRAUHAUS pretzels contributed to the increased sales. Frozen juice bar and ices sales increased $1,308,000, or
3%, to $43,672,000 for the year due primarily to higher sales to warehouse club stores. Churro sales to food service customers
were up 7% to $65,976,000 for the year with sales increases and decreases across our customer base but with particularly
strong sales to warehouse club stores. Sales of bakery products increased $13,245,000, or 4%, to $384,636,000 for the year
with increased sales to one customer accounting for all of the increase. Handheld sales to food service customers were down
19% to $31,685,000 in 2019 with sales decreases to three customers accounting for all of the decrease. Sales of funnel cake
increased $3,223,000, or 15% to $24,793,000 due primarily to increased sales to a quick service restaurant under a limited
time offer in our second quarter. Overall food service sales to restaurant chains were down about 2% for the year. Sales of
new products in the first twelve months since their introduction were approximately $13.5 million for the year. Price increases
accounted for approximately $15 million of sales for the year and net volume including new product sales were essentially
flat. Operating income in our Food Service segment increased from $74,056,000 in 2018 to $78,130,000 in 2019 resulting
from benefits of improved operations at several of our manufacturing facilities and increased pricing.
RETAIL SUPERMARKETS
Sales of products to retail supermarkets decreased $1,663,000 or 1% to $119,276,000 in fiscal year 2019. Soft
pretzel sales to retail supermarkets were $36,264,000 compared to $36,438,000 in 2018. Strong pretzel sales increases from
sales of AUNTIE ANNE’S products were offset by lower sales of our SUPER PRETZEL products. Sales of frozen juices
and ices decreased $684,000 or 1% to $73,751,000 as we lost some volume and placements due to price increases. Coupon
redemption costs, a reduction of sales, decreased 19% to $3,596,000 for the year. Handheld sales to retail supermarket
customers decreased 12% to $10,902,000 for the year as sales of this product line in retail supermarkets continues its long-
term decline.
Sales of new products in the first twelve months since their introduction were approximately $1 million in fiscal
year 2019. Price increases provided about $4 million of sales for the year and net volume decreased about $5.5 million for
the year. Operating income in our Retail Supermarkets segment increased from $8,304,000 to $8,876,000 for the year. The
primary contribution to the higher operating income this year was increased pricing.
FROZEN BEVERAGES
Frozen beverage and related product sales increased 13% to $305,608,000 in fiscal 2019. Beverage sales alone
increased 7% or $10,883,000 for the year with increases and decreases throughout our customer base. About one third of the
beverage sales increase was from increased flow through sales to one distributor which did not benefit operating income.
Gallon sales were up 3% in our base ICEE business, with sales increases spread throughout our customer base. Service
revenue increased 8% to $85,103,000 for the year with sales increases and decreases spread throughout our customer base.
Machines revenue, primarily sales of machines, increased from $28,652,000 in 2018 to $45,811,000 in 2019 with sales to
two customers accounting for most of the increase. The estimated number of Company owned frozen beverage dispensers
was 26,000 and 25,000 at September 28, 2019 and September 29, 2018, respectively. Operating income in our Frozen
Beverage segment increased from $28,415,000 in 2018 to $29,950,000 in 2019 as a result of higher sales.
CONSOLIDATED
Other than as commented upon above by segment, there are no material specific reasons for the reported sales
increases or decreases. Sales levels can be impacted by the appeal of our products to our customers and consumers and their
changing tastes, competitive and pricing pressures, sales execution, marketing programs, seasonal weather, customer stability
and general economic conditions.
Gross profit as a percentage of sales was essentially unchanged at 29.53% in 2019 and 29.54% in 2018 as the
benefits of improved operations at several of our manufacturing facilities and increased pricing were offset by increases in
lower margin sales of machines in our frozen beverages segment and increases in lower margin sales of bakery products in
our food service segment.
18
Total operating expenses increased $7,934,000 to $233,445,000 in fiscal 2019 and as a percentage of sales decreased
to 19.68% of sales from 19.81% in 2018. Marketing expenses decreased to 8.13% this year from 8.38% of sales in 2018
because of modest spending increases in all of our businesses. Distribution expenses as a percent of sales decreased to 8.00%
from 8.11% in 2018 because freight rates have dropped from last year. Administrative expenses were 3.43% and 3.32% of
sales in 2019 and 2018, respectively.
Operating income increased $6,181,000 or 6% to $116,956,000 in fiscal year 2019 as a result of the aforementioned
items.
Our investments generated before tax income of $7.7 million this year, up from $6.3 million last year due to
increases in the amount of investments and higher interest rates.
Other income in 2019 includes a $2.0 million payment received from a customer due to cancellation of production
under a co-manufacturing agreement.
Other income in 2018 includes $520,000 gain on a sale of property and $869,000 reimbursement of business
interruption losses due to the MARY B’s biscuits recall in January 2018.
Other expenses in 2017 include $1,070,000 of expenses incurred to acquire Hill & Valley, the ICEE distributor and
Labriola Bakery.
Net earnings for the year ended September 29, 2018 benefited from a $20.7 million gain, or $1.11 per diluted share,
on the remeasurement of deferred tax liabilities and a $8.8 million, or $0.47 per diluted share, reduction in income taxes
related primarily to the lower corporate tax rate enacted under the Tax Cuts and Jobs Act in December 2017 which was
partially offset by a $1.2 million, or $.06 per diluted share, provision for the one time repatriation tax, both of which resulted
from the Tax Cuts and Jobs Act enacted in December 2017. Net earnings for the year were also impacted by a $1.4 million,
or $.07 per diluted share, expense on the remeasurement of deferred tax liabilities due to changes in New Jersey tax
regulations effective July 2018. Excluding the deferred tax gain, the deferred tax expense and the one-time repatriation tax,
our effective tax rate was 27.7% in the year ended September 29, 2018. Net earnings this year benefitted by a reduction of
approximately $900,000 in tax as the provision for the one-time repatriation tax was reduced as the amount recorded last
year was an estimate. Excluding the reduction in the provision for the one-time repatriation tax, our effective tax rate was
25.8% for this year.
Net earnings decreased $8,777,000 or 8%, in fiscal 2019 to $94,819,000, or $5.00 per diluted share, from
$103,596,000, or $5.51 per diluted share, in fiscal 2018 as a result of 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.
RESULTS OF OPERATIONS:
Fiscal 2018 (52 weeks) Compared to Fiscal Year 2017 (53 weeks)
Net sales increased $54,041,000, or 5%, to $1,138,265,000 in fiscal 2018 from $1,084,224,000 in fiscal 2017.
Excluding sales from the extra week in 2017, sales increased approximately 7% from 2017 to 2018.
Excluding sales from Hill & Valley, Inc., acquired in January 2017, an ICEE distributor located in the Southeast
acquired in June 2017 and Labriola Bakery which was acquired in August 2017 and the extra week in 2017, sales increased
approximately 4% for the year.
We have three reportable segments, as disclosed in the accompanying notes to the consolidated financial statements:
Food Service, Retail Supermarkets and Frozen Beverages.
19
The Chief Operating Decision Maker for Food Service and Retail Supermarkets and the Chief Operating Decision
Maker for Frozen Beverages monthly review detailed operating income statements and sales reports in order to assess
performance and allocate resources to each individual segment. Sales and operating income are the key variables monitored
by the Chief Operating Decision Makers and management when determining each segment’s and the Company’s financial
condition and operating performance. In addition, the Chief Operating Decision Makers review and evaluate depreciation,
capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment.
FOOD SERVICE
Sales to food service customers increased $44,150,000 or 6%, to $745,944,000 in fiscal 2018. Excluding the extra
week in 2017, sales increased approximately 9% from 2017 to 2018. Excluding Hill & Valley and Labriola sales and the
extra week in 2017, sales increased approximately 4% for the year. Soft pretzel sales to the food service market increased
16% to $208,544,000 for the year with strong sales to restaurant chains and movie theatres and with sales increases and
decreases throughout our customer base. Our new line of BRAUHAUS pretzels contributed to the increased sales. Excluding
Labriola sales, soft pretzel sales increased 10%. Frozen juice bar and ices sales decreased $7,105,000, or 14%, to $42,364,000
for the year due primarily to lower sales to warehouse club stores because of a loss of a promotion and because of reduced
distribution. Churro sales to food service customers were down 2% to $61,726,000 for the year with sales increases and
decreases across our customer base but with particularly low sales to one warehouse club store which last year had sales of
a new product since discontinued. Sales of bakery products increased $20,034,000, or 6%, for the year. Excluding Hill &
Valley and Labriola sales, bakery sales were down about 1/4 of 1% for the year with sales increases and decreases spread
across our customer base. Handheld sales to food service customers were up 5% to $38,928,000 in 2018 with sales increases
to two customers accounting all of the increase. Sales of funnel cake increased $1,611,000, or 8% to $21,570,000 due
primarily to increased sales to school food service. Overall food service sales to restaurant chains were strong for the year.
Sales of new products in the first twelve months since their introduction were approximately $20 million for the year. Price
increases accounted for approximately $8.5 million of sales for the year and net volume increases including new product
sales and sales of the acquired businesses accounted for approximately $36 million of sales for the year. Operating income
in our Food Service segment decreased from $81,208,000 in 2017 to $74,056,000 in 2018. Operating income this year was
impacted by approximately $5.3 million of higher distribution expenses primarily due to higher fuel costs and the January
2018 implementation of the electronic logging device mandate. Additionally, lower sales of our MARY B’s biscuits and
related costs due to our recall in early January impacted our operating income by approximately $1.8 million for the year.
Operating income was also impacted by generally higher costs for payroll and insurance, added personnel in the selling
function, product mix changes and significantly lower volume concentrated in specific facilities and higher cost of
ingredients. Operating income in the first quarter was impacted by inefficiencies at our Labriola production facility which
was acquired in the fourth quarter 2017 (compounded by the integration of products previously manufactured at other
facilities) and shutdown costs of our Chambersburg facility. Operating income was also impacted by idle overhead during
an upgrade of one of our production facilities. Hill & Valley contributed improved operating income of $1.7 million
compared to last year. Last year’s operating income included a $1.8 million gain on an insurance recovery related to product
quality issues in our 2016 fiscal year which was recorded as a reduction of cost of goods sold.
RETAIL SUPERMARKETS
Sales of products to retail supermarkets increased $1,692,000 or 1% to $120,939,000 in fiscal year 2018. Excluding
sales from the extra week in 2017, sales increased approximately 3% from 2017 to 2018. Soft pretzel sales to retail
supermarkets were $36,438,000 compared to $35,081,000 in 2017, an increase of 4%. All of the pretzel sales increase was
from sales of AUNTIE ANNE’S products, under a license agreement entered into midway in our 2017 year. Sales of frozen
juices and ices increased $3,110,000 or 4% to $74,435,000 primarily because of sales of SOUR PATCH KIDS frozen
novelties under a new license agreement. Coupon redemption costs, a reduction of sales, decreased 9% to $4,439,000 for the
year. Handheld sales to retail supermarket customers decreased 17% to $12,419,060 for the year as sales of this product line
in retail supermarkets continues its long-term decline.
Sales of new products in the first twelve months since their introduction were approximately $6 million in fiscal
year 2018. Price increases were negligible in 2018. Operating income in our Retail Supermarkets segment decreased from
$10,627,000 to $8,304,000 for the year. The primary contributions to the lower operating income this year were increases in
trade spending, distribution costs and product costs which offset a major contribution from the sales of SOUR PATCH KIDS
frozen novelties.
20
FROZEN BEVERAGES
Frozen beverage and related product sales increased 3% to $271,382,000 in fiscal 2018. Excluding sales from the
extra week in 2017, sales increased approximately 5% from 2017 to 2018. Excluding the acquired ICEE distributor and the
extra week in 2017, sales increased approximately 4% for the year. Beverage sales alone increased 5% or $7,470,000 for the
year with increases and decreases throughout our customer base. Gallon sales were up 6% in our base ICEE business, with
sales increases spread throughout our customer base. Service revenue increased 6% to $78,805,000 for the year with sales
increases and decreases spread throughout our customer base. Sales of beverage machines, which tend to fluctuate from year
to year while following no specific trend, decreased from $27,073,000 in 2017 to $23,781,000 in 2018. The estimated number
of Company owned frozen beverage dispensers was 24,000 and 25,000 at September 28, 2019 and September 29, 2018,
respectively. Operating income in our Frozen Beverage segment increased from $26,272,000 in 2017 to $28,415,000 in 2018
as a result of higher beverage sales and service revenue.
CONSOLIDATED
Other than as commented upon above by segment, there are no material specific reasons for the reported sales
increases or decreases. Sales levels can be impacted by the appeal of our products to our customers and consumers and their
changing tastes, competitive and pricing pressures, sales execution, marketing programs, seasonal weather, customer stability
and general economic conditions.
Gross profit as a percentage of sales decreased to 29.54% in 2018 from 30.53% in 2017. Although higher sales
benefited our gross margin, the decrease in gross profit margin was caused by a number of factors including higher costs for
payroll and workers compensation insurance, inefficiencies at our Labriola production facility, shutdown costs of our
Chambersburg facility, lower sales of our MARY B’S biscuits and related costs, idle overhead during an upgrade of one of
our production facilities as well as by about $500,000 of costs related to Hurricane Florence’s impact on our North Carolina
plant. Last year’s gross profit margin percentage benefitted from $1.8 million gain on an insurance recovery related to product
quality issues in our 2016 fiscal year which was recorded as a reduction of cost of goods sold.
Total operating expenses increased $12,595,000 to $225,511,000 in fiscal 2018 and as a percentage of sales
increased to 19.81% of sales from 19.64% in 2017. Marketing expenses decreased to 8.38% this year from 8.71% of sales in
2017 primarily because of lower spending to support warehouse club store sales in our foodservice business and lower
marketing expenses of the acquired Hill & Valley and Labriola businesses. Distribution expenses as a percent of sales
increased to 8.11% from 7.55% in 2018. Distribution expenses have increased due to higher fuel costs and the recent
implementation of the electronic logging device mandate. We expect distribution expenses to remain higher through at least
the first quarter of our 2019 fiscal year. Administrative expenses were 3.32% and 3.40% of sales in 2018 and 2017,
respectively.
Operating income decreased $7,332,000 or 6% to $110,775,000 in fiscal year 2018 as a result of the aforementioned
items.
Our investments generated before tax income of $6.3 million this year, up from $5.3 million last year due in
increases in the amount of investments and higher interest rates.
Other income this year includes $520,000 gain on a sale of property and $869,000 reimbursement of business
interruption losses due to the MARY B’s biscuits recall.
Other expenses in 2017 include $1,070,000 of expenses incurred to acquire Hill & Valley, the ICEE distributor and
Labriola Bakery.
Net earnings for the year ended September 28, 2019 benefited from a $20.7 million, or $1.11 per diluted share, gain
on the remeasurement of deferred tax liabilities and a $8.8 million, or $0.47 per diluted share, reduction in income taxes
related primarily to the lower corporate tax rate enacted under the Tax Cuts and Jobs Act in December 2017. Net earnings
for the year were impacted by a $1.2 million, or $.06 per diluted share, provision for the one-time repatriation tax required
under the new federal tax law and by a $1.4 million, or $.07 per diluted share, expense on the remeasurement of deferred tax
liabilities due to changes in New Jersey tax regulations effective July 2018. Excluding the deferred tax gain, the deferred
tax expense and the one-time repatriation tax, our effective tax rate decreased to 27.7% from 35.2% in the prior year reflecting
the reduction in the federal statutory rate to 21% from 35% on January 1, 2018. Last year’s effective tax rate benefited from
an unusually high tax benefit on share based compensation of $3,061,000 which compares to this year’s tax benefit of
$1,935,000. We are presently estimating an effective tax rate of 26-27% for our fiscal year 2019.
21
Net earnings increased $24,422,000 or 31%, in the 52 weeks fiscal 2018 to $103,596,000, or $5.51 per diluted share,
from $79,174,000, or $4.21 per diluted share, in the 53 weeks fiscal 2017 as a result of 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.
RESULTS OF OPERATIONS
ACQUISITIONS
On December 30, 2016, we acquired Hill & Valley Inc., a premium bakery located in Rock Island, Illinois, for
approximately $31 million. Hill & Valley, with sales of over $45 million annually, is a manufacturer of a variety of pre-
baked cakes, cookies, pies, muffins and other desserts selling to retail in-store bakeries. Hill & Valley is a leading brand of
Sugar Free and No Sugar Added pre-baked in-store bakery items. Additionally, Hill & Valley sustains strategic private
labeling partnerships with retailers nationwide. Sales and operating income of Hill & Valley included in our 2017 fiscal year
operating results were $35,770,000 and $653,000, respectively.
On May 22, 2017, we acquired an ICEE distributor doing business in Georgia and Tennessee for approximately $11
million. Sales and operating income of the acquired business included in our 2017 fiscal year operating results were
$1,689,000 and $395,000, respectively.
On August 16, 2017, we acquired Labriola Baking Company, a premium bakery of breads and artisan soft pretzels
located in Alsip, Illinois for approximately $6 million. Labriola Bakery, with sales of approximately $17 million annually,
is a manufacturer of pre-baked breads, rolls and soft pretzels for retail in-store bakery and foodservice outlets nationwide.
Sales of Labriola included in our 2017 fiscal year operating results were $2,061,000 with marginal operating income.
These acquisitions were accounted for under the purchase method of accounting, and their operations are included
in the accompanying consolidated financial statements from their respective acquisition dates.
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 fund future growth and expansion. See Note C to our financial statements for a
discussion of our investment securities.
Fluctuations in the value of the Mexican and Canadian currencies and the resulting translation of the net assets of
our Mexican and Canadian subsidiaries caused an increase of $909,000 in accumulated other comprehensive loss in 2019,
$2,738,000 in accumulated other comprehensive loss in 2018 and a decrease of $3,745,000 in accumulated other
comprehensive loss in 2017. In 2019, sales of the two subsidiaries were $33,906,000 as compared to $32,459,000 in 2018
and $31,001,000 in 2017.
In our fiscal year ended September 30, 2017, we purchased and retired 142,665 shares of our common stock at a
cost of $18,228,763.
In our fiscal year ended September 29, 2018, we purchased and retired 20,604 shares of our common stock at a cost
of $2,794,027.
We did not purchase any shares of our common stock in our fiscal year ended September 28, 2019.
22
In November 2016, we entered into an amendment and modification to an amended and restated loan agreement
with our existing banks which provides for up to a $50,000,000 revolving credit facility repayable in November 2021. The
agreement contains restrictive covenants and requires commitment fees in accordance with standard banking practice. There
were no outstanding balances under the facility at September 28, 2019 or at September 29, 2018. The significant financial
covenants are:
● Tangible net worth must initially be more than $465 million.
● Total funded indebtedness divided by earnings before interest expense, income taxes, depreciation and
amortization shall not be greater than 2.25 to 1.
We were in compliance with the financial covenants described above at September 28, 2019.
We self-insure, up to loss limits, certain insurable risks such as worker's compensation and automobile liability
claims. Accruals for claims under our self-insurance program are recorded on a claims-incurred basis. Under this program,
the estimated liability for claims incurred but unpaid in fiscal years 2019 and 2018 was $3,300,000 and $4,100,000,
respectively. In connection with certain self-insurance agreements, we customarily enter into letters of credit arrangements
with our insurers. At both September 28, 2019 and September 29, 2018, we had outstanding letters of credit totaling
$9,275,000.
The following table presents our contractual cash flow commitments on long-term debt, operating leases and
purchase commitments for raw materials and packaging. See Notes to the consolidated financial statements for additional
information on our long-term debt and operating leases.
Payments Due by Period
(in thousands)
Less
Than
1 Year
Total
1-3
4-5
Years
Years
After
5 Years
Long-term debt, including current maturities
Capital lease obligations
Purchase commitments
Operating leases
Total
$
- $
1,057
100,000
79,538
- $
339
97,000
14,814
$ 180,595 $ 112,153 $
- $
505
3,000
23,177
26,682 $
- $
213
-
15,959
16,172 $
-
-
-
25,588
25,588
The purchase commitments do not exceed our projected requirements over the related terms and are in the normal
course of business.
Fiscal 2019 Compared to Fiscal 2018
Cash and cash equivalents and marketable securities held to maturity and available for sale increased $66,714,000
or 24%, to $342,749,000 from a year ago for reasons described below.
Accounts receivables, net increased $8,596,000, or 6%, to $140,938,000 in 2019 because of higher sales in this
year’s September month and timing of collections. Inventories increased $3,281,000 or 3% to $116,165,000 in 2019 due to
higher sales this year and inventory build to support increased service revenue in our frozen beverages business.
Prepaid expenses and other was $5,768,000 compared to $5,044,000 last year, as prepaid income tax increased by
$787,000.
23
Net property, plant and equipment increased $10,775,000 to $253,448,000 because purchases of property, plant and
equipment for the improvement and expansion of our manufacturing capabilities and frozen carbonated beverage business
exceeded depreciation on existing assets. Although purchases of property, plant and equipment decreased to $57,128,000 in
2019 from $60,022,000 in 2018, we have completed and have ongoing several large projects across our manufacturing base
to modernize our facilities to have state-of-the-art systems to produce high quality products, increase capacity and move
some production closer to our customers. We are continually looking for opportunities to invest in projects at our
manufacturing facilities that have a financial payback on capital invested with the goal of improving efficiency and reducing
operating costs.
Goodwill was $102,511,000 for fiscal year 2019 and $102,511,000 in 2018.
Other intangible assets, less accumulated amortization decreased $2,840,000 to $54,922,000 due to amortization
during the year net of $480,000 of additions in our frozen beverage segment.
Marketable securities available for sale and held to maturity decreased by $14,202,000 to $150,354,000 as we
decreased our holdings of corporate bonds and available for sale securities.
Accounts Payables increased 4% to $72,029,000 from $69,592,000 in 2018.
Accrued insurance liability decreased 7% to $10,457,000 as our estimates for incurred but not yet paid claims under
our group insurance and insurance liability programs decreased from a year ago.
Accrued compensation expense increased 4% to $21,154,000 due to an increase in our bonus accrual.
Dividends payable increased to $9,447,000 as our quarterly dividend payment increased to $.50/share from
$.45/share.
Deferred income tax liabilities increased $9,598,000 to $61,920,000 from $52,322,000 because of increased
liabilities related to depreciation of property and equipment.
Common stock increased $18,404,000 to $45,744,000 in 2019 because of proceeds from the exercise of incentive
and nonqualified stock options and stock issued under our stock purchase plan for employees, stock issued under our deferred
stock plan and share-based compensation expense.
Net cash provided by operating activities increased $24,132,000 to $147,499,000 in 2019 primarily because of an
increase of accounts payable and accrued liabilities of $2,150,000 compared to an decrease of $1,736,000 in 2018, an increase
of $744,000 in prepaid expenses and other compared to an increase of prepaid expenses and other in 2018 of $1,120,000,
and an increase in inventories of $3,231,000 compared to an increase of $9,639,000 in 2018.
Net cash used in investing activities decreased $29,776,000 to $43,363,000 in 2019 from $73,139,000 in 2018
primarily because proceeds, net of purchases, of marketable securities of $13,067,000 in 2019 compared to purchases, net of
proceeds, of marketable securities of $15,810,000 in 2018.
Net cash used in financing activities of $27,336,000 in 2018 decreased to $22,826,000 in 2019 primarily because
we did not repurchase any common stock in 2019 and proceeds from the issuance of common stock for stock option exercises
was $5,288,000 higher in 2019 compared to 2018.
In 2019, the major variables in determining our net increase in cash and cash equivalents and marketable securities
were our net earnings, depreciation and amortization of fixed assets, changes in accounts receivable, accounts payable and
accrued liabilities and changes in deferred tax liabilities, purchases of property, plant and equipment and payments of cash
dividends. Other variables which in the past have had a significant impact on our change in cash and cash equivalents and
marketable securities are proceeds from borrowings, repurchases of our common stock, payments of long-term debt and
purchases of companies. As discussed in results of operations, our net earnings may be influenced by many factors.
Depreciation and amortization of fixed assets is primarily determined by past purchases of property, plant and equipment
although it could be impacted by a significant acquisition. Purchases of property, plant and equipment are primarily
determined by our ongoing normal manufacturing and marketing requirements but could be increased significantly for
manufacturing expansion requirements or large frozen beverage customer needs. From time to time, we have repurchased
common stock and we anticipate that we will do so again in the future. We are actively seeking acquisitions that could be a
24
significant use of cash. Although we have no long-term debt at September 28, 2019, we may borrow in the future depending
on our needs.
Fiscal 2018 Compared to Fiscal 2017
Cash and cash equivalents and marketable securities held to maturity and available for sale increased $34,792,000
or 14%, to $276,035,000 from a year ago for reasons described below.
Accounts receivables, net increased $7,789,000, or 6%, to $132,342,000 in 2018 because of higher weekly sales in
this year’s September month and timing of collections. Inventories increased $9,616,000 or 9% to $112,884,000 in 2018 due
to higher sales this year and inventory build for specific first quarter 2019 sales.
Prepaid expenses and other was $5,044,000 compared to $3,936,000 last year.
Net property, plant and equipment increased $15,092,000 to $242,673,000 because purchases of property, plant and
equipment for the improvement and expansion of our manufacturing capabilities and frozen carbonated beverage business
exceeded depreciation on existing assets. Although purchases of property, plant and equipment decreased to $60,022,000 in
2018 from $72,180,000 in 2017, we have completed and have ongoing several large projects across our manufacturing base
to modernize our facilities to have state-of-the-art systems to produce high quality products, increase capacity and move
some production closer to our customers. We are continually looking for opportunities to invest in projects at our
manufacturing facilities that have a financial payback on capital invested with the goal of improving efficiency and reducing
operating costs.
Goodwill was $102,511,000 at both year ends.
Other intangible assets, less accumulated amortization decreased $3,510,000 to $57,762,000 solely due to
amortization during the year.
Marketable securities available for sale and held to maturity increased by $14,275,000 to $164,556,000 as we
increased our holdings of corporate bonds.
Accounts Payables decreased 4% to $69,592,000 from $72,729,000 in 2017.
Accrued insurance liability increased 6% to $11,217,000 as our estimates for incurred but not yet paid claims under
our group insurance and insurance liability programs increased from a year ago.
Accrued compensation expense increased 2% to $20,297,000 due to an increase in our employee base and a general
increase in the level of pay rates net of a reduced accrual because of the change in timing due to this year having 52 weeks
compared to 53 weeks last year.
Dividends payable increased to $8,438,000 as our quarterly dividend payment increased to $.45/share from
$.42/share.
Deferred income tax liabilities decreased $10,383,000 to $52,322,000 from $62,705,000 because of the
remeasurement of deferred tax liabilities due to the lower corporate tax rate enacted under the Tax Cut and Jobs Act in
December 2017, net of higher corporate taxes enacted by New Jersey effective July 1,2008 and net of further increased
liabilities related to depreciation of property and equipment.
Common stock increased $9,958,000 to $27,340,000 in 2018 because repurchases of our common stock of
$2,794,000 were less than increases totaling $12,752,000 from the exercise of incentive and nonqualified stock options, stock
issued under our stock purchase plan for employees, stock issued under our deferred stock plan and share-based compensation
expense.
25
Net cash provided by operating activities decreased $1,982,000 to $123,367,000 in 2018 primarily because an
increase in net earnings of $24,422,000, an increase of accounts receivable, net of $7,917,000 in 2018 compared to an increase
of $20,370,000 in 2017 and higher depreciation of fixed assets of $4,728,000 in 2018 did not offset a decrease in deferred
tax liabilities of $10,392,000 compared to an increase of $7,847,000 in 2017, a decrease of accounts payable and accrued
liabilities of $918,000 compared to an increase of $9,521,000 in 2017, an increase of $1,120,000 in prepaid expenses and
other compared to a decrease of prepaid expenses and other in 2017 of $10,265,000, and an increase in inventories of
$9,639,000 compared to an increase of $7,410,000 in 2017.
Net cash used in investing activities decreased $62,180,000 to $73,139,000 in 2018 from $135,319,000 in 2017
because of payments for purchases of companies, net of cash acquired of $0 in 2018 compared to $47,698,000 in 2017 and
decreased purchases of property, plant and equipment of $12,158,000 from 2017 to 2018.
Net cash used in financing activities of $42,213,000 in 2017 decreased to $27,336,000 in 2018 primarily because
of lower repurchases of common stock of $15,435,000 in 2018 compared to 2017.
In 2018, the major variables in determining our net increase in cash and cash equivalents and marketable securities
were our net earnings, depreciation and amortization of fixed assets, changes in accounts receivable, accounts payable and
accrued liabilities and changes in deferred tax liabilities, purchases of property, plant and equipment, payments of cash
dividend and the repurchase of common stock. Other variables which in the past have had a significant impact on our change
in cash and cash equivalents and marketable securities are proceeds from borrowings, payments of long-term debt and
purchases of companies. As discussed in results of operations, our net earnings may be influenced by many factors.
Depreciation and amortization of fixed assets is primarily determined by past purchases of property, plant and equipment
although it could be impacted by a significant acquisition. Purchases of property, plant and equipment are primarily
determined by our ongoing normal manufacturing and marketing requirements but could be increased significantly for
manufacturing expansion requirements or large frozen beverage customer needs. From time to time, we have repurchased
common stock and we anticipate that we will do so again in the future. We are actively seeking acquisitions that could be a
significant use of cash. Although we have no long-term debt at September 28, 2019, we may borrow in the future depending
on our needs.
Off –Balance Sheet Arrangements
The Company has off-balance sheet arrangements for operating leases and purchase commitments as of September
28, 2019.
Item 7A. Quantitative And Qualitative Disclosures About Market Risk
The following is the Company’s quantitative and qualitative analysis of its financial market risk:
Interest Rate Sensitivity
The Company has in the past entered into interest rate swaps to limit its exposure to interest rate risk and may do so
in the future if the Board of Directors feels that such non-trading purpose is in the best interest of the Company and its
shareholders. As of September 28, 2019, the Company had no interest rate swap contracts.
Interest Rate Risk
At September 28, 2019, the Company had no long-term debt obligations.
Purchasing Risk
The Company’s most significant raw material requirements include flour, shortening, corn syrup, sugar, juice,
cheese, chocolate, and a variety of nuts. The Company attempts to minimize the effect of future price fluctuations related to
the purchase of raw materials primarily through forward purchasing to cover future manufacturing requirements, generally
for periods from 1 to 12 months. Future contracts are not used in combination with forward purchasing of these raw materials.
The Company’s procurement practices are intended to reduce the risk of future price increases, but also may potentially limit
the ability to benefit from possible price decreases.
26
Foreign Exchange Rate Risk
The Company has not entered into any forward exchange contracts to hedge its foreign currency rate risk as of
September 28, 2019, because it does not believe its foreign exchange exposure is significant.
Item 8.
Financial Statements And Supplementary Data
The financial statements of the Company are filed under this Item 8, beginning on page F-1 of this report.
Item 9.
Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
None.
Item 9A. Controls And Procedures
Disclosure Controls and Procedures
We carried out an evaluation under the supervision and with the participation of our management, including our
chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls
and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"), as amended for financial reporting, as of September 28, 2019. Based on that evaluation, our chief executive
officer and chief financial officer concluded that these controls and procedures are effective at a reasonable assurance level.
Our disclosure controls and procedures are designed to provide reasonable assurance that information required to
be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and
reported, within the time periods specified in the rules and forms of the SEC. These disclosure controls and procedures
include, among other things, controls and procedures designed to provide reasonable assurance that information required to
be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required
disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process
designed by, or under the supervision of, the chief executive officer and chief financial officer and effected by the board of
directors and management 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 and includes those
policies and procedures that:
● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of our assets;
● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of our management and board of directors;
● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of September 28,
2019. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in the 2013 Internal Control-Integrated Framework.
27
Based on our assessment, our management believes that, as of September 28, 2019, our internal control over
financial reporting is effective. There have been no changes that occurred during our fourth quarter that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Our independent registered public accounting firm, Grant Thornton LLP, audited our internal control over financial
reporting as of September 28, 2019. Their report, dated November 27, 2019, expressed an unqualified opinion on our internal
control over financial reporting. That report appears in Item 15 of Part IV of this Annual Report on Form 10-K and is
incorporated by reference to this Item 9A.
Item 9B. Other Information
There was no information required on Form 8-K during the quarter that was not reported.
28
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The following is a list of the executive officers of the Company and their principal past occupations or employment.
All such persons serve at the pleasure of the Board of Directors and have been elected to serve until the Annual Meeting of
Shareholders on February 11, 2020 or until their successors are duly elected.
Name
Age
Position
Gerald B. Shreiber
Dennis G. Moore
Robert M. Radano
Dan Fachner
Gerard G. Law
Robert J. Pape
77
63
70
59
45
62
Chairman of the Board, President, Chief Executive Officer and Director
Senior Vice President, Chief Financial Officer Treasurer and Director
Senior Vice President,Sales and Chief Operating Officer
President of The ICEE Company Subsidiary
Senior Vice President and Assistant to the President
Senior Vice President Sales
Gerald B. Shreiber is the founder of the Company and has served as its Chairman of the Board, President, and Chief
Executive Officer since its inception in 1971. His term as a director expires in 2020.
Dennis G. Moore joined the Company in 1984. He served in various controllership functions prior to becoming the
Chief Financial Officer in June 1992. His term as a director expires in 2022.
Robert M. Radano joined the Company in 1972 and in May 1996 was named Chief Operating Officer of the
Company. Prior to becoming Chief Operating Officer, he was Senior Vice President, Sales responsible for national food
service sales of J & J.
Dan Fachner has been an employee of ICEE-USA Corp., which was acquired by the Company in May 1987, since
1979. He was named Senior Vice President of The ICEE Company in April 1994 and became President in May 1997.
Gerard G. Law joined the Company in 1992. He served in various manufacturing and sales management capacities
prior to becoming Senior Vice President, Western Operations in 2009. He was named to his present position in 2011 in
which he has responsibility for marketing, research and development and overseeing a number of the manufacturing facilities
of J & J.
Robert J. Pape joined the Company in 1998. He served in various sales and sales management capacities prior to
becoming Senior Vice President Sales in 2010.
Portions of the information concerning directors and executive officers, appearing under the captions “Information
Concerning Nominees For Election To Board” and “Information Concerning Continuing Directors And Executive Officers”
and information concerning Section 16(a) Compliance appearing under the caption “Compliance with Section 16(a) of the
Securities Exchange Act of 1934” in the Company’s Proxy Statement filed with the SEC in connection with the Annual
Meeting of Shareholders to be held on February 11, 2020 (“2019 Proxy Statement”) is incorporated herein by reference.
Portions of the information concerning the Audit Committee, the requirement for an Audit Committee Financial
Expert and the Nominating Committee in the Company’s 2019 Proxy Statement filed with the SEC in connection with the
Annual Meeting of Shareholders to be held on February 11, 2020 is incorporated herein by reference.
The Company has adopted a Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act of 2002, which
applies to the Company’s principal executive officer and senior financial officers. The Company has also adopted a Code of
Business Conduct and Ethics which applies to all employees. The Company will furnish any person, without charge, a copy
of the Code of Ethics upon written request to J & J Snack Foods Corp., 6000 Central Highway, Pennsauken, New Jersey
08109, Attn: Marjorie S. Roshkoff, Esq. A copy of the Code of Ethics can also be found on our website at www.jjsnack.com.
Any waiver of any provision of the Code of Ethics granted to the principal executive officer or senior financial officer may
only be granted by a majority of the Company’s disinterested directors. If a waiver is granted, information concerning the
waiver will be posted on our website www.jjsnack.com for a period of 12 months.
29
Item 11.
Executive Compensation
Information concerning executive compensation appearing in the Company’s 2019 Proxy Statement under the
caption “Management Remuneration” is incorporated herein by reference.
Item 12.
Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters
Information concerning the security ownership of certain beneficial owners and management appearing in the
Company’s 2019 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management”
is incorporated herein by reference.
The following table details information regarding the Company’s existing equity compensation plans as of
September 28, 2019.
( a )
( b )
Number of
securities to
be issued upon
exercise of
outstanding
options,
Weighted-
average
exercise
price of
outstandng
options,
warrants and
warrants and
rights
rights
( c )
Number of
Securities
Remaining
available for
future
issuance
under
equity
compensation
plans
(excluding
securities
reflected in
column (a) )
Plan Category
Equity compensation plans approved by security holders
802,000 $
128.25
916,000
Equity compensation plans not approved by security holders
-
-
-
Total
802,000 $
128.25
916,000
Column A includes 436,000 from stock option plans that were replaced subsequent to September 30, 2017. Those
plans have been replaced by a plan, approved by shareholders in February 2018, that has 454,000 shares available for future
issuance as of the date of this Form 10-K.
Item 13. Certain Relationships And Related Transactions, and Director Independence
Information concerning the Certain Relationships and Related Transactions, and Director Independence in the
Company’s 2019 Proxy Statement is incorporated herein by reference.
Item 14.
Principal Accountant Fees And Services
Information concerning the Principal Accountant Fees and Services in the Company’s 2019 Proxy Statement is
incorporated herein by reference.
30
Item 15.
Exhibits, Financial Statement Schedules
(a)
The following documents are filed as part of this Report:
PART IV
(1) Financial Statements
The financial statements filed as part of this report are listed on the Index to Consolidated Financial Statements
and Financial Statements Schedule on page F-1.
(2) Financial Statement Schedule – Page S-1
Schedule II – Valuation and Qualifying Accounts
All other schedules are omitted either because they are not applicable or because the information required is contained
in the financial statements or notes thereto.
(b)
Exhibits
3.1
Amended and Restated Certificate of Incorporation filed February 28, 1990 (Incorporated by reference from the
Company’s Form 10-Q dated May 4, 1990).
3.2
Revised Bylaws adopted November 19, 2013 (Incorporated by reference from the Company’s Form 10-K dated
November 26, 2013).
4.3
Amended and Restated Loan Agreement dated December 1, 2006 by and among J & J Snack Foods Corp. and
Certain of its Subsidiaries and Citizens Bank of Pennsylvania, as Agent (Incorporated by reference from the
Company’s Form 10-K dated December 6, 2006).
4.4
First Amendment and Modification to Amendment and Restated Loan Agreement (Incorporated by reference from
the Company’s Form 10-K dated December 7, 2011).
4.5
Fourth Amendment and Modification to Amendment and Restated Loan Agreement (Incorporated by reference
from the Company’s Form 10-K dated November 21, 2016).
10.2*
J & J Snack Foods Corp. Stock Option Plan (Incorporated by reference from the Company’s Definitive Proxy
Statement dated December 22, 2017).
10.8*
J & J Snack Foods Corp. Employee Stock Purchase Plan (Incorporated by reference from the Company’s Form S-
8 dated May 16, 1996).
14.1
Code of Ethics Pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 (Incorporated by reference from the
Company’s 10-Q dated July 20, 2004).
21.1**
Subsidiaries of J & J Snack Foods Corp.
31
23.1**
Consent of Independent Registered Public Accounting Firm.
31.1**
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2**
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act
of 2002.
32.2**
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act
of 2002.
101**
The following financial information from J&J Snack Foods Corp.'s Form 10-K for the year ended September 28,
2019, formatted in Inline XBRL (eXtensible Business Reporting Language):
(i)
Consolidated Balance Sheets,
(ii) Consolidated Statements of Earnings,
(iii) Consolidated Statements of Comprehensive Income,
(iv) Consolidated Statements of Cash Flows,
(v) Consolidated Statement of Changes in Stockholders' Equity and
(vi) The Notes to the Consolidated Financial Statements
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
_____________
*Compensatory Plan
**Filed Herewith
32
SIGNATURES
Pursuant to the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused report to be signed on its behalf by the undersigned, thereunto duly authorized.
J & J SNACK FOODS CORP.
November 27, 2019
By:
/s/ Gerald B. Shreiber
Gerald B. Shreiber,
Chairman of the Board,
President, Chief Executive
Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated.
November 27, 2019
November 27, 2019
November 27, 2019
November 27, 2019
November 27, 2019
/s/ Gerald B. Shreiber
Gerald B. Shreiber,
Chairman of the Board,
President, Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ Dennis G. Moore
Dennis G. Moore, Senior Vice
President, Chief Financial
Officer and Director
(Principal Financial Officer)
(Principal Accounting Officer)
/s/ Sidney R. Brown
Sidney R. Brown, Director
/s/ Peter G. Stanley
Peter G. Stanley, Director
/s/ Vincent A. Melchiorre
Vincent A. Melchiorre, Director
33
J & J SNACK FOODS CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Financial Statements:
Report of Independent Registered Public Accounting Firm
Opinion of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Consolidated Balance Sheets as of September 28, 2019 and September 29, 2018
Consolidated Statements of Earnings for the fiscal years ended September 28, 2019, September 29, 2018
and September 30, 2017
Consolidated Statements of Comprehensive Income for the fiscal years ended September 28, 2019, September 29,
2018 and September 30, 2017
Consolidated Statement of Changes in Stockholders’ Equity for the fiscal years ended September 28, 2019,
September 29, 2018 and September 30, 2017
Consolidated Statements of Cash Flows for the fiscal years ended September 28, 2019, September 29, 2018 and
September 30, 2017
Notes to Consolidated Financial Statements
Financial Statement Schedule:
Schedule II – Valuation and Qualifying Accounts
F-2
F-4
F-5
F-6
F-7
F-8
F-9
F-10
S-1
F-1
Board of Directors and Shareholders
J&J Snack Foods Corp. and Subsidiaries
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of J&J Snack Foods Corp. (a New Jersey corporation) and
subsidiaries (the “Company”) as of September 28, 2019 and September 29, 2018, the related consolidated statements of
earnings, comprehensive income, changes in shareholders’ equity and cash flows for each of the three fiscal years in the
period ended September 28, 2019 (52 weeks, 52 weeks and 53 weeks, respectively), and the related notes and financial
statement schedule included under Item 15(a)(2) (collectively referred to as the “financial statements”). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of September 28, 2019
and September 29, 2018, and the results of its operations and its cash flows for each of the three fiscal years in the period
ended September 29, 2018 (52 weeks, 52 weeks and 53 weeks, respectively), in conformity with accounting principles
generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of September 28, 2019, based on criteria established
in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”), and our report dated November 27, 2019 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements
that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures
that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a
whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
Net Revenue Adjustments
As described in Note A to the consolidated financial statements, contracts with customers include some form of variable
consideration, including sales discounts, trade promotions and certain other sales and consumer incentives, including rebates
and coupon redemption. Variable consideration is treated as a reduction in revenue when the related revenue is recognized,
and is recorded using the most likely amount method, with updates to estimates and related accruals of variable consideration
occurring each period based on historical experience and changes in circumstances.
We identified the estimation of the reserves for these net revenue adjustments by management as a critical audit matter
because the inputs and assumptions utilized by management in estimating these reserves, including consistency of historical
data and contract pricing, require significant judgment and create a high degree of estimation uncertainty. Consequently,
auditing these assumptions requires subjective auditor judgment.
F-2
Our audit procedures related to the estimation of the reserves included the following, among others.
We obtained an understanding of management’s processes and controls over calculating the reserves for net revenue
adjustments, including understanding relevant inputs and assumptions.
We tested the design and operating effectiveness of key controls relating to the calculation of the reserves for net
revenue adjustments, including key management review controls over the period-end accrual of allowances, end-
user pricing adjustments, trade spending, coupon redemption costs, returned product and other adjustments.
We re-performed management’s process for calculating the reserves for net revenue adjustments.
We evaluated key inputs and assumptions relevant to the net revenue adjustments, including contractual pricing and
rebate arrangements with customers, historical allowance data and other contractual arrangements, which were
compared to source documents.
We considered transactions subsequent to year end occurring up to the date of our auditor’s opinion, which involved
inspecting customer contracts and relevant source documents submitted by customers in conjunction with the
allowance, including end-user pricing adjustment, trade spending, coupon redemption, return or other adjustments.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 1984.
Philadelphia, Pennsylvania
November 27, 2019
F-3
Board of Directors and Shareholders
J&J Snack Foods Corp. and Subsidiaries
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of J&J Snack Foods Corp. (a New Jersey corporation) and
subsidiaries (the “Company”) as of September 28, 2019, based on criteria established in the 2013 Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
September 28, 2019, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended September 28, 2019, and our
report dated November 26, 2019 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
Philadelphia, Pennsylvania
November 27, 2019
F-4
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
Assets
Current assets
Cash and cash equivalents
Marketable securities held to maturity
Accounts receivable, net
Inventories
Prepaid expenses and other
Total current assets
Property, plant and equipment, at cost
Less accumulated depreciation and amortization
Property, plant and equipment, net
Other assets
Goodwill
Other intangible assets, net
Marketable securities held to maturity
Marketable securities available for sale
Other
Total other assets
Total Assets
Liabilities and Stockholders' Equity
Current Liabilities
Current obligations under capital leases
Accounts payable
Accrued insurance liability
Accrued liabilities
Accrued compensation expense
Dividends payable
Total current liabilities
Long-term obligations under capital leases
Deferred income taxes
Other long-term liabilities
September 28, September 29,
2019
2018
$
$
$
192,395 $
51,091
140,938
116,165
5,768
506,357
676,724
423,276
253,448
102,511
54,922
79,360
19,903
2,838
259,534
1,019,339 $
339 $
72,029
10,457
7,808
21,154
9,447
121,234
718
61,920
1,716
111,479
21,048
132,342
112,884
5,044
382,797
570,295
327,622
242,673
102,511
57,762
118,765
24,743
2,762
306,543
932,013
324
69,592
11,217
8,031
20,297
8,438
117,899
753
52,322
1,948
Stockholders' Equity
Preferred stock, $1 par value; authorized 10,000,000 shares; none issued
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding
18,895,000 and 18,754,000 respectively
Accumulated other comprehensive loss
Retained Earnings
Total stockholders' equity
Total Liabilities and Stockholders' Equity
The accompanying notes are an integral part of these statements.
-
-
45,744
(12,988 )
800,995
833,751
1,019,339 $
27,340
(11,994 )
743,745
759,091
932,013
$
F-5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share information)
Fiscal Year Ended
September 28, September 29, September 30,
2018
(52 weeks)
2017
(53 weeks)
2019
(52 weeks)
Net Sales
Cost of goods sold
Gross Profit
Operating expenses
Marketing
Distribution
Administrative
Other expense (income)
Total operating expenses
Operating Income
Other income (expenses)
Investment income
Interest expense & other
$
1,186,487 $
836,086
350,401
1,138,265 $
801,979
336,286
1,084,224
753,201
331,023
96,428
94,888
40,721
1,408
233,445
116,956
95,405
92,281
37,757
68
225,511
110,775
94,394
81,824
36,843
(145 )
212,916
118,107
7,741
1,880
6,267
1,110
5,289
(1,196 )
Earnings before income taxes
126,577
118,152
122,200
Income taxes
NET EARNINGS
Earnings per diluted share
31,758
14,556
43,026
94,819 $
103,596 $
79,174
5.00 $
5.51 $
4.21
$
$
Weighted average number of diluted shares
18,959
18,817
18,816
Earnings per basic share
$
5.04 $
5.54 $
4.23
Weighted average number of basic shares
18,812
18,694
18,707
The accompanying notes are an integral part of these statements.
F-6
J&J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Fiscal Year Ended
September 28, September 29, September 30,
2018
(52 weeks)
2019
(52 weeks)
2017
(53 weeks)
Net Earnings
$
94,819 $
103,596 $
79,174
Foreign currency translation adjustments
Unrealized holding (loss) gain on marketable securities
Amount reclassified from accumulated other comprehensive
income
Total Other Comprehensive (Loss) income, net of tax
(909 )
-
-
(909 )
(2,738 )
(455 )
74
(3,119 )
3,745
795
-
4,540
Comprehensive Income
$
93,910 $
100,477 $
83,714
The accompanying notes are an integral part of these statements.
F-7
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
Accumulated
Other
Balance at September 24, 2016
Issuance of common stock upon exercise of stock
Common Stock
Shares Amount
18,668 $ 25,332 $
Comprehensive Retained
Loss
Earnings Total
(13,415 ) $ 626,057 $ 637,974
options
124
5,826
-
-
5,826
Issuance of common stock for employee stock
purchase plan
Foreign currency translation adjustment
Unrealized holding gain on marketable securities
Issuance of common stock under deferred stock
plan
Dividends declared
Share-based compensation
Repurchase of common stock
Net earnings
13
-
-
1,405
-
-
-
3,745
795
-
-
-
1,405
3,745
795
1
-
-
94
-
2,954
(143 ) (18,229 )
-
-
-
-
-
-
-
-
(31,416 )
-
-
79,174
94
(31,416 )
2,954
(18,229 )
79,174
Balance at September 30, 2017
18,663 $ 17,382 $
(8,875 ) $ 673,815 $ 682,322
Issuance of common stock upon exercise of stock
options
98
7,371
-
-
7,371
Issuance of common stock for employee stock
purchase plan
Foreign currency translation adjustment
Unrealized holding gain on marketable securities
Issuance of common stock under deferred stock
plan
Dividends declared
Share-based compensation
Repurchase of common stock
Net earnings
13
-
-
1,523
-
-
1
-
-
(21 )
-
97
-
3,761
(2,794 )
-
-
(2,738 )
(381 )
-
-
-
1,523
(2,738 )
(381 )
97
-
-
(33,666 )
(33,666 )
-
3,761
-
-
-
(2,794 )
-
- 103,596 103,596
Balance at September 29, 2018
18,754 $ 27,340 $
(11,994 ) $ 743,745 $ 759,091
Issuance of common stock upon exercise of stock
options
128 12,658
-
-
12,658
Issuance of common stock for employee stock
purchase plan
Foreign currency translation adjustment
Reclass from accumulated other comprehensive
gain
Issuance of common stock under deferred stock
12
-
1,516
-
-
(909 )
-
-
1,516
(909 )
-
-
(85 )
85
-
-
-
-
-
91
(37,654 )
4,139
94,819
(12,988 ) $ 800,995 $ 833,751
-
(37,654 )
-
94,819
plan
Dividends declared
Share-based compensation
Net earnings
Balance at September 28, 2019
1
-
-
-
91
-
4,139
-
18,895 $ 45,744 $
The accompanying notes are an integral part of these statements.
F-8
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Fiscal Year Ended
September 28, September 29, September 30,
2018
(52 weeks)
2017
(53 weeks)
2019
(52 weeks)
Operating activities:
Net earnings
$
94,819 $
103,596 $
79,174
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation of fixed assets
Amortization of intangibles and deferred costs
Gains from disposals of property & equipment
Amortization of bond premiums
Share-based compensation
Deferred income taxes
Loss (gain) on sale of marketable securities
Changes in assets and liabilities, net of effects from purchase
of companies:
Increase in accounts receivable, net
Increase in inventories
(Increase) decrease in prepaid expenses and other
Increase (decrease) in accounts payable and accrued
liabilities
Net cash provided by operating activities
Investing activities:
Payments for purchases of companies, net of cash acquired
Purchases of property, plant and equipment
Purchases of marketable securities
Proceeds from redemption and sales of marketable securities
Proceeds from disposal of property, plant and equipment
Other
Net cash used in investing activities
Financing activities:
Payments to repurchase common stock
Proceeds from issuance of common stock
Payments on capitalized lease obligations
Payment of cash dividend
Net cash used in financing activities
Effect of exchange rates on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
$
The accompanying notes are an integral part of these statements.
45,225
3,385
(347 )
730
4,230
9,637
404
42,939
3,538
(912 )
1,012
3,858
(10,392 )
140
(8,759 )
(3,231 )
(744 )
(7,917 )
(9,639 )
(1,120 )
2,150
147,499
(1,736 )
123,367
(1,156 )
(57,128 )
(26,091 )
39,158
2,050
(196 )
(43,363 )
-
14,174
(356 )
(36,644 )
(22,826 )
(394 )
80,916
111,479
192,395 $
-
(60,022 )
(91,112 )
75,302
2,639
54
(73,139 )
(2,794 )
8,894
(370 )
(33,066 )
(27,336 )
(2,375 )
20,517
90,962
111,479 $
38,211
4,234
(346 )
1,189
3,048
7,847
(14 )
(20,370 )
(7,410 )
10,265
9,521
125,349
(47,698 )
(72,180 )
(39,923 )
22,997
1,935
(450 )
(135,319 )
(18,229 )
7,231
(356 )
(30,859 )
(42,213 )
2,493
(49,690 )
140,652
90,962
F-9
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
J & J Snack Foods Corp. and Subsidiaries (the Company) manufactures, markets and distributes a variety of
nutritional snack foods and beverages to the food service and retail supermarket industries. A summary of the significant
accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows.
Our fiscal years 2019 and 2018 comprise 52 weeks. Our 2017 fiscal year comprised 53 weeks. All references to 2017 fiscal
year refer to that 53 week period.
1.
Principles of Consolidation
The consolidated financial statements were prepared in accordance with U.S. GAAP. These financial statements
include the accounts of J & J Snack Foods Corp. and its wholly-owned subsidiaries. Intercompany balances and transactions
have been eliminated in the consolidated financial statements.
2.
Revenue Recognition
On September 30, 2018, we adopted ASC 606, “Revenue from Contracts with Customers” and all the related
amendments to ASC 606 in relation to all contracts that were not completed or expired as of September 30, 2018, using the
modified retrospective method. There was no adjustment made to the opening balance of retained earnings as a result of
applying ASC 606. Results for reporting periods beginning September 30, 2018 are presented under ASC 606, while the
comparative information is not restated and will continue to be reported under the accounting standards in effect for those
periods.
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.
F-10
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Variable Consideration
In addition to fixed contract consideration, our contracts include some form of variable consideration, including
sales discounts, trade promotions and certain other sales and consumer incentives, including rebates and coupon
redemptions. In general, variable consideration is treated as a reduction in revenue when the related revenue is
recognized. Depending on the specific type of variable consideration, we use the most likely amount method to
determine the variable consideration. We believe there will be no significant changes to our estimates of variable
consideration when any related uncertainties are resolved with our customers. We review and update our estimates
and related accruals of variable consideration each period based on historical experience. Our recorded liability for
allowances, end-user pricing adjustments and trade spending was approximately $14.8 million at September 28,
2019 and $13.6 million at September 29, 2018.
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:
Beginning Balance
Additions to contract liability
Amounts recognized as revenue
Ending Balance
Fiscal Year Ended
September 28,
September 29,
2019
2018
$
$
(in thousands)
1,865 $
6,308
(6,839 )
1,334 $
1,956
6,887
(6,978 )
1,865
Disaggregation of Revenue
See Note O for disaggregation of our net sales by class of similar product and type of customer.
Allowance for Doubtful Receivables
We provide an allowance for doubtful receivables after taking into consideration historical experience and other
factors. The allowance for doubtful receivables was $665,000 and $400,000 at June 29, 2019 and September 29,
2018, respectively.
3.
Foreign Currency
Assets and liabilities in foreign currencies are translated into U.S. dollars at the rate of exchange prevailing at the
balance sheet date. Revenues and expenses are translated at the average rate of exchange for the period. The cumulative
translation adjustment is recorded as a separate component of stockholders’ equity and changes to such are included in
comprehensive income.
4.
Use of Estimates
In preparing financial statements in conformity with accounting principles generally accepted in the United States
of America, management is required to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those estimates.
F-11
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
5.
Cash Equivalents
Cash equivalents are short-term, highly liquid investments with original maturities of three months or less.
6.
Concentrations and related risks
We maintain cash balances at financial institutions located in various states. We have cash balances at two banks
totaling approximately $21 million that is in excess of FDIC insurance of $250,000 per bank.
Financial instruments that could potentially subject us to concentrations of credit risk are trade accounts receivable;
however, such risks are limited due to the large number of customers comprising our customer base and their dispersion
across geographic regions. We have approximately 15 customers with accounts receivable balances of between $1 million
and $10 million.
We have several large customers that account for a significant portion of our sales. Our top ten customers accounted
for 43%, 43% and 42% of our sales during fiscal years 2019, 2018 and 2017, respectively, with our largest customer
accounting for 11% of our sales in 2019, 9-1/2% of our sales in 2018 and 9-1/2% of our sales in 2017. Four of the ten
customers are food distributors who sell our product to many end users.
About 27% of our employees are covered by collective bargaining agreements.
None of our vendors supplied more than 10% of our ingredients and packaging in 2019, 2018 or 2017.
Virtually all of our accounts receivable are due from trade customers. Credit is extended based on evaluation of our
customers’ financial condition and collateral is not required. Accounts receivable payment terms vary and are stated in the
financial statements at amounts due from customers net of an allowance for doubtful accounts. At September 28, 2019 and
September 29, 2018, our accounts receivables were $140,938,000 and $132,342,000, net of an allowance for doubtful
accounts of $572,000 and $400,000. Accounts receivable outstanding longer than the payment terms are considered past due.
We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are
past due, our previous loss history, customers’ current ability to pay their obligations to us, and the condition of the general
economy and the industry as a whole. We write off accounts receivable when they become uncollectible, and payments
subsequently received on such receivables are credited to the allowance for doubtful accounts.
7.
Inventories
Inventories are valued at the lower of cost (determined by the first-in, first-out method) or net realizable value. We
recognize abnormal amounts of idle facilities, freight, handling costs, and spoilage as charges of the current
period. Additionally, we allocate fixed production overhead to inventories based on the normal capacity of our production
facilities. We calculate normal capacity as the production expected to be achieved over a number of periods or seasons under
normal circumstances, taking into account the loss of capacity resulting from planned maintenance. This requires us to use
judgment to determine when production is outside the range of expected variation in production (either abnormally low or
abnormally high). In periods of abnormally low production (for example, periods in which there is significantly lower
demand, labor and material shortages exist, or there is unplanned equipment downtime) the amount of fixed overhead
allocated to each unit of production is not increased. However, in periods of abnormally high production the amount of fixed
overhead allocated to each unit of production is decreased to assure inventories are not measured above cost.
F-12
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
8.
Investment Securities
We classify our investment securities in one of three categories: held to maturity, trading, or available for sale. Our
investment portfolio at September 28, 2019 consists of investments classified as held to maturity and available for sale. The
securities that we have the positive intent and ability to hold to maturity are classified as held to maturity and are stated at
amortized cost. Investments classified as available for sale are reported at fair market value with unrealized gains and losses
related to the changes in fair value of the securities recognized in investment income. The mutual funds and preferred stock
in our available for sale portfolio do not have contractual maturities; however, we classify them as long term assets as it is
our intent to hold them for a period of over one year, although we may sell some or all of them depending on presently
unanticipated needs for liquidity or market conditions. See Note C for further information on our holdings of investment
securities.
9.
Depreciation and Amortization
Depreciation of equipment and buildings is provided for by the straight-line method over the assets’ estimated useful
lives. We review our equipment and buildings to ensure that they provide economic benefit and are not impaired.
Amortization of leasehold 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, non-compete agreements
and certain tradenames are being amortized by the straight-line method over periods ranging from 2 to 20 years and
amortization expense is reflected throughout operating expenses.
Long-lived assets, including fixed assets and amortizing intangibles, are reviewed for impairment as events or
changes in circumstances occur indicating that the carrying amount of the asset may not be recoverable. Indefinite lived
intangibles are reviewed annually for impairment. Cash flow and sales analyses are used to assess impairment. The estimates
of future cash flows and sales involve considerable management judgment and are based upon assumptions about expected
future operating performance. Assumptions used in these forecasts are consistent with internal planning. The actual cash
flows and sales could differ from management’s estimates due to changes in business conditions, operating performance,
economic conditions, competition and consumer preferences.
10. Fair Value of Financial Instruments
The carrying value of our short-term financial instruments, such as accounts receivables and accounts payable,
approximate their fair values, based on the short-term maturities of these instruments.
11.
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.
F-13
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
As of September 28, 2019 and September 29, 2018, the total amount of gross unrecognized tax benefits is $414,000
and $394,000; respectively, all of which would impact our effective tax rate over time, if recognized. We recognize interest
and penalties related to income tax matters as a part of the provision for income taxes. We had $279,000 of accrued interest
and penalties as of September 28, 2019 and $259,000 as of September 29, 2018. We did not recognize any penalties and
interest resulting from tax settlements in the years ended September 28, 2019 and September 29, 2018. A reconciliation of
the beginning and ending amount of unrecognized tax benefits is as follows:
Balance at September 29, 2018
Additions based on tax positions related to the current year
Reductions for tax positions of prior years
Settlements
Balance at September 28, 2019
(in thousands)
$
$
394
20
-
-
414
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.
Net earnings for the year ended September 29, 2018 benefited from a $20.7 million gain on the remeasurement of
deferred tax liabilities and a $8.8 million reduction in income taxes related primarily to the lower corporate tax rate enacted
under the Tax Cuts and Jobs Act in December 2017 which was partially offset by a $1.2 million provision for the one time
repatriation tax, both of which resulted from the Tax Cuts and Jobs Act enacted in December 2017. Net earnings for the year
were also impacted by a $1.4 million expense on the remeasurement of deferred tax liabilities due to changes in New Jersey
tax regulations effective July 2018. Excluding the deferred tax gain, the deferred tax expense and the one-time repatriation
tax, our effective tax rate was 27.7% in the year ended September 29, 2018. Net earnings this year benefitted by a reduction
of $885,000 in tax as the provision for the one-time repatriation tax was reduced as the amount recorded last year was an
estimate. Excluding the reduction in the provision for the one-time repatriation tax, our effective tax rate was 25.8% for this
year.
12. Earnings Per Common 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) or other contracts to issue common stock were exercised
and converted into common stock.
Our calculation of EPS is as follows:
Earnings Per Basic Share
Net Income available to common stockholders
Effect of Dilutive Securities
Options
Fiscal Year Ended September 28, 2019
Shares
Income
Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
$
94,819
18,812 $
5.04
-
147
(0.04 )
Earnings Per Diluted Share
Net Income available to common stockholders plus assumed
conversions
$
94,819
18,959 $
5.00
162,070 anti-dilutive shares have been excluded in the computation of 2019 diluted EPS.
F-14
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings Per Basic Share
Net Income available to common stockholders
Effect of Dilutive Securities
Options
Fiscal Year Ended September 29, 2018
Shares
Income
Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
$
103,596
18,694 $
5.54
-
123
(0.03 )
Earnings Per Diluted Share
Net Income available to common stockholders plus assumed
conversions
$
103,596
18,817 $
5.51
1,000 anti-dilutive shares have been excluded in the computation of 2018 diluted EPS.
Earnings Per Basic Share
Net Income available to common stockholders
Effect of Dilutive Securities
Options
Fiscal Year Ended September 30, 2017
Shares
Income
Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
$
79,174
18,707 $
4.23
-
109
(0.02 )
Earnings Per Diluted Share
Net Income available to common stockholders plus assumed
conversions
$
79,174
18,816 $
4.21
157,994 anti-dilutive shares have been excluded in the computation of 2017 diluted EPS.
13.
Accounting for Stock-Based Compensation
At September 28, 2019, the Company has three stock-based employee compensation plans. Share-based
compensation was recognized as follows:
Fiscal year ended
September 28, September 29, September 30,
2018
(in thousands)
2019
2017
Stock options
Stock purchase plan
Stock issued to an outside director
Restricted stock issued to employees
Total share-based compensation
The above compensation is net of tax benefits
$
$
$
1,743 $
390
66
-
2,199 $
1,432 $
423
64
4
1,923 $
(436 )
363
56
4
(13 )
2,030 $
1,935 $
3,061
F-15
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
At September 28, 2019, the Company has unrecognized compensation expense of approximately $7.8 million to be
recognized over the next three fiscal years.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model
with the following weighted average assumptions used for grants in fiscal 2019, 2018 and 2017: expected volatility of 17.2%
for fiscal year 2019, 17.4% for fiscal year 2018 and expected volatility of 16.6% for fiscal year 2017: weighted average risk-
free interest rates of 2.1%, 2.7% and 2.0%; dividend rate of 1.2%, 1.3% and 1.3% and expected lives ranging between 5 and
10 years for all years. An expected forfeiture rate of 8% was used for 2019, 10% was used for 2018 and 13% was used for
2017.
Expected volatility is based on the historical volatility of the price of our common shares over the past 49 to 51
months for 5 year options and 10 years for 10 year options. We use historical information to estimate expected life and
forfeitures within the valuation model. The expected term of awards represents the period of time that options granted are
expected to be outstanding. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury
yield curve in effect at the time of grant. Compensation cost is recognized using a straight-line method over the vesting or
service period and is net of estimated forfeitures.
14.
Advertising Costs
Advertising costs are expensed as incurred. Total advertising expense was $5,938,000, $5,805,000 and $6,095,000
for the fiscal years 2019, 2018 and 2017, respectively.
15.
Commodity Price Risk Management
Our most significant raw material requirements include flour, packaging, shortening, corn syrup, sugar, juice,
cheese, chocolate, and a variety of nuts. We attempt to minimize the effect of future price fluctuations related to the purchase
of raw materials primarily through forward purchasing to cover future manufacturing requirements, generally for periods
from 1 to 12 months. As of September 28, 2019, we have approximately $100 million of such commitments. Futures contracts
are not used in combination with forward purchasing of these raw materials. Our procurement practices are intended to reduce
the risk of future price increases, but also may potentially limit the ability to benefit from possible price decreases. Our policy
is to recognize estimated losses on purchase commitments when they occur. At each of the last three fiscal year ends, we did
not have any material losses on our purchase commitments.
16.
Research and Development Costs
Research and development costs are expensed as incurred. Total research and development expense was $645,000,
$623,000 and $674,000 for the fiscal years 2019, 2018 and 2017, respectively.
17.
Recent Accounting Pronouncements
In May 2014 and in subsequent updates, the FASB issued guidance on revenue recognition which requires that we
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration which we expect to be entitled in exchange for those goods or services. We performed a review of the
requirements of the new revenue standard, including reviewing customer contracts and applying the five-step model of this
new guidance to each contract category we identified. We adopted this guidance on the first day of our fiscal 2019 year using
a modified retrospective approach; however, we did not record a cumulative-effect adjustment from initially applying the
standard as the adoption did not have a material impact on our financial position or results of operations. See additional
revenue recognition disclosures in Note 2.
F-16
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
In January 2016, the FASB issued guidance which requires an entity to measure equity investments at fair value
with changes in fair value recognized in net income , to use the price that would be received by a seller when measuring the
fair value of financial instruments for disclosure purposes, and which eliminates the requirement to disclose the method(s)
and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured
at amortized cost on the balance sheet. Under prior guidance, changes in fair value of equity investments available for sale
were recognized in Stockholders’ Equity. We adopted this guidance on the first day of our 2019 fiscal year. The adoption of
this guidance on our consolidated financial statements was not material.
In February 2016, the FASB issued guidance on lease accounting which requires that an entity recognize most leases
on its balance sheet. The guidance retains a dual lease accounting model for purposes of income statement recognition,
continuing the distinction between what are currently known as “capital” and “operating” leases for lessees. This guidance
is effective for our fiscal year ended September 2020. Our operating leases, as disclosed in Note J — Commitments and
Contingencies, will be subject to the new standard. We will recognize right-of-use assets and operating lease liabilities of
between $65 million and $78 million on our consolidated balance sheet upon adoption, which will materially increase our
total assets and liabilities.
18.
Reclassifications
Certain prior year financial statement amounts have been reclassified to be consistent with the presentation for the
current year.
NOTE B – ACQUISITIONS
On December 30, 2016, we acquired Hill & Valley Inc., a premium bakery located in Rock Island, IL for
approximately $31 million. Hill & Valley, with sales of over $45 million annually, is a manufacturer of a variety of pre-
baked cakes, cookies, pies, muffins and other desserts selling to retail in-store bakeries. Hill & Valley is a brand of Sugar
Free and No Sugar Added pre-baked in-store bakery items. Additionally, Hill & Valley sustains strategic private labeling
partnerships with retailers nationwide. Sales and operating income of Hill & Valley included in our operating results for
2018 were $59.9 million and $2.4 million, respectively; and for 2017 were $35.8 million and $653,000, respectively.
On May 22, 2017, we acquired an ICEE distributor doing business in Georgia and Tennessee for approximately $11
million. Sales of the acquired business included in our operating results for 2018 and 2017 were $3.5 million and $1.7
million, respectively.
On August 16, 2017, we acquired Labriola Baking Company, a bakery of breads and artisan soft pretzels located in
Alsip, IL for approximately $6 million. Labriola Bakery, with sales of approximately $17 million annually, is a manufacturer
of pre-baked breads, rolls and soft pretzels for retail in-store bakery and foodservice outlets nationwide. Sales of Labriola
included in our operating results for 2018 and 2017 were $14 million and $2 million, respectively.
Acquisition costs of $1,070,000 for the acquisitions are included in other general expense in the consolidated
statements of earnings for the year ended September 29, 2018.
F-17
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE B – ACQUISITIONS (continued)
The purchase price allocations for the three acquisitions are as follows:
Accounts Receivable, net
Inventories
Prepaid expenses and other
Property, plant & equipment, net
Trade Names
Customer Relationships
Distibution rights
Goodwill
Covenant not to compete
Accounts Payable
Accrued Liabilities
Accrued compensation expense
Other long-term liabilities
Deferred income taxes
Purchase Price
Hill & Valley Distributor
ICEE
Labriola
Baking Co
(in thousands)
$
$
4,054 $
6,088
122
4,398
2,090
13,000
-
14,175
670
(2,260 )
(2,162 )
(650 )
(1,782 )
(6,632 )
31,111 $
340 $
217
25
2,277
-
57
6,900
1,236
-
(79 )
(26 )
-
-
-
10,947 $
1,165
779
102
3,598
388
-
-
658
188
(1,110 )
(128 )
-
-
-
5,640
The goodwill and intangible assets acquired in the business combinations are recorded at estimated fair value. To
measure fair value for such assets, we use techniques including discounted expected future cash flows (Level 3 input). The
goodwill recognized is attributable to the assembled workforce of each acquired business and certain other strategic
intangible assets that do not meet the requirements for recognition separate and apart from goodwill.
Our unaudited proforma results, giving effect to these three acquisitions and assuming an acquisition date of
September 28, 2014, would have been:
Fiscal Year Ended
(in thousands)
September 30,
2017
(53 weeks)
Unaudited
$
$
1,116,599
79,082
Net Sales
Net Earnings
F-18
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE C – INVESTMENT SECURITIES
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 inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2
Level 3
Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly;
and
Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its
own assumptions.
Our 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, corporate bonds and
certificates of deposits are based on quoted prices for identical or similar instruments in markets that are not active. As a
result, preferred stock, corporate bonds and certificates of deposits are classified within Level 2 of the fair value hierarchy.
The amortized cost, unrealized gains and losses, and fair market values of our marketable securities held to maturity
at September 28, 2019 are summarized as follows:
Gross
Gross
Fair
Amortized Unrealized Unrealized Market
Value
Cost
Losses
Gains
Corporate Bonds
Certificates of Deposit
Total marketable securities held to maturity
$ 127,571 $
2,880
$ 130,451 $
(in thousands)
1,204 $
6
1,210 $
36 $ 128,739
2,886
36 $ 131,625
-
The amortized cost, unrealized gains and losses, and fair market values of our marketable securities available for
sale at September 28, 2019 are summarized as follows:
Gross
Gross
Fair
Amortized Unrealized Unrealized Market
Value
Cost
Losses
Gains
(in thousands)
Mutual Funds
Preferred Stock
Total marketable securities available for sale
$
$
5,549 $
14,598
20,147 $
- $
266
266 $
495 $
15
510 $
5,054
14,849
19,903
The mutual funds seek current income with an emphasis on maintaining low volatility and overall moderate
duration. The mutual funds presently generate income of 4.5% per year. We have invested $15 million in Fixed-to-Floating
Perpetual Preferred Stock which generates fixed income to call dates in 2020 and 2025 and then income is based on a spread
above LIBOR if the securities are not called. The annual yield from these investments is presently 5.4%, of which 50% is
not subject to income tax. The mutual funds and the Fixed-to-Floating Perpetual Preferred Stock investment securities do
not have contractual maturities; however, we classify them as long term assets as it is our intent to hold them for a period of
over one year, although we may sell some or all of them depending on presently unanticipated needs for liquidity or market
conditions. We have invested $128 million in corporate bonds which generate fixed income to maturity dates in 2020 through
2022, with $115 million maturing prior to the end of our fiscal year 2021. The bonds presently generate income of about
2.8% per year based on purchase price. Our expectation is that we will hold the corporate bonds to their maturity dates and
redeem them at our amortized cost.
F-19
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE C – INVESTMENT SECURITIES (continued)
The amortized cost, unrealized gains and losses, and fair market values of our marketable securities held to maturity
at September 29, 2018 are summarized as follows:
Gross
Gross
Fair
Amortized Unrealized Unrealized Market
Value
Cost
Losses
Gains
Corporate Bonds
Certificates of Deposit
Total marketable securities held to maturity
$ 136,933 $
2,880
$ 139,813 $
(in thousands)
28 $
-
28 $
1,520 $ 135,441
2,873
1,527 $ 138,314
7
The amortized cost, unrealized gains and losses, and fair market values of our marketable securities available for
sale at September 29, 2018 are summarized as follows:
Gross
Gross
Fair
Amortized Unrealized Unrealized Market
Value
Cost
Losses
Gains
Mutual Funds
Preferred Stock
Total marketable securities available for sale
$
$
8,978 $
15,680
24,658 $
- $
380
380 $
295 $
-
295 $
8,683
16,060
24,743
The amortized cost and fair value of the Company’s held to maturity securities by contractual maturity at September
28, 2019 and September 29, 2018 are summarized as follows:
(in thousands)
September 28, 2019
September 29, 2018
Fair
Fair
Amortized Market
Value
Cost
Amortized Market
Value
Cost
Due in one year or less
Due after one year through five years
Due after five years through ten years
Total held to maturity securities
Less current portion
Long term held to maturity securities
$
51,091 $
79,360
-
(in thousands)
21,001
51,325 $
117,313
80,300
-
-
$ 130,451 $ 131,625 $ 139,813 $ 138,314
51,325
21,001
21,048
80,300 $ 118,765 $ 117,313
21,048 $
118,765
-
51,091
79,360 $
$
Proceeds from the sale and redemption of marketable securities were $39,158,000, $75,302,000 and $22,997,000
in the years ended September 28, 2019, September 29, 2018 and September 30, 2017 respectively; with a gain of $27,000 in
2019, loss of $140,000 in 2018 and a gain of $14,000 in 2017. We use the specific identification method to determine the
cost of securities sold. Unrealized losses of $431,000 were recorded in 2019.
F-20
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE D – INVENTORIES
Inventories consist of the following:
Finished goods
Raw materials
Packaging materials
Equipment parts and other
Total Inventories
NOTE E – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
September 28, September 29,
2019
2018
(in thousands)
$
$
53,225 $
22,146
9,703
31,091
116,165 $
52,221
23,173
9,780
27,710
112,884
Estimated
September 28, September 29, Useful Lives
2018
(in years)
2019
Land
Buildings
Plant machinery and equipment
Marketing equipment
Transportation equipment
Office equipment
Improvements
Construction in Progress
Less accumulated depreciation and amortization
Property, plant and equipment, net
(in thousands)
$
$
2,494 $
26,582
315,360
240,681
9,725
31,217
40,626
10,039
676,724
423,276
253,448 $
-
15 - 39.5
5 - 20
5 - 7
5
3 - 5
5 - 20
-
2,494
26,582
290,396
163,733
8,929
30,752
38,941
8,468
570,295
327,622
242,673
Depreciation expense was $45,225,000, $42,939,000 and $38,211,000 for fiscal years 2019, 2018 and 2017, respectively.
F-21
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE F – GOODWILL AND INTANGIBLE ASSETS
Our three reporting units, which are also reportable segments, are Food Service, Retail Supermarket and Frozen
Beverages.
The carrying amount of acquired intangible assets for the reportable segments are as follows:
FOOD SERVICE
Indefinite lived intangible assets
Trade Names
Amortized intangible assets
Non compete agreements
Customer relationships
License and rights
TOTAL FOOD SERVICE
RETAIL SUPERMARKETS
Indefinite lived intangible assets
Trade Names
Amortized Intangible Assets
Trade names
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
September 28, 2019
September 29, 2018
Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
Gross
(in thousands)
$ 16,628 $
- $ 16,628 $
-
858
19,900
1,690
$ 39,076 $
665
980
9,954
20,510
1,690
1,227
11,846 $ 39,808 $
538
8,600
1,143
10,281
$
6,530 $
- $
6,557 $
-
676
7,979
$ 15,185 $
649
389
4,421
7,979
4,810 $ 15,185 $
260
3,623
3,883
$
9,315 $
6,900
- $
-
9,315 $
6,900
737
1,400
$ 18,352 $
102
933
257
1,400
1,035 $ 17,872 $
-
-
76
863
939
CONSOLIDATED
$ 72,613 $
17,691 $ 72,865 $
15,103
The gross carrying amount of intangible assets is determined by applying a discounted cash flow model to the future
sales and earnings associated with each intangible asset or is set by contract cost. The amortization period used for definite
lived intangible assets is set by contract period or by the period over which the bulk of the discounted cash flow is expected
to be generated. We currently believe that we will receive the benefit from the use of the trade names and distribution rights
classified as indefinite lived intangible assets indefinitely and they are therefore not amortized.
F-22
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE F – GOODWILL AND INTANGIBLE ASSETS (continued)
Licenses and rights, customer relationships and non-compete agreements are being amortized by the straight-line
method over periods ranging from 2 to 20 years and amortization expense is reflected throughout operating expenses.
Amortizing intangibles are reviewed for impairment as events or changes in circumstances occur indicating that the
carrying amount of the asset may not be recoverable. Indefinite lived intangibles are reviewed annually at year end for
impairment. Cash flow and sales analyses are used to assess impairment. The estimates of future cash flows and sales involve
considerable management judgment and are based upon assumptions about expected future operating performance which
include Level 3 inputs such as annual growth rates and discount rates. Assumptions used in these forecasts are consistent
with internal planning. The actual cash flows and sales could differ from management’s estimates due to changes in business
conditions, operating performance, economic conditions, competition and consumer preferences. There were no impairments
of intangible assets in 2019, 2018 or 2017.
In fiscal year 2017, intangible assets of $6,957,000 were acquired in our ICEE distributor acquisition in our frozen
beverage segment and intangible assets of $15,760,000 were acquired in the Hill & Valley acquisition in our food service
segment and intangible assets of $576,000 were acquired in the Labriola Baking acquisition, also in our food service segment.
There were no intangible assets acquired in fiscal year 2018 and intangible assets of $480,000 were acquired in the Frozen
Beverage segment in fiscal year 2019.
Aggregate amortization expense of intangible assets for the fiscal years 2019, 2018 and 2017 was $3,320,000,
$3,510,000 and $3,840,000, respectively.
Estimated amortization expense for the next five fiscal years is approximately $3,100,000 in 2020, $2,500,000 in
2021, $2,300,000 in 2022 and 2023 and $2,000,000 in 2024. The weighted average amortization period of the intangible
assets is 10.6 years.
Goodwill
The carrying amounts of goodwill for the reportable segments are as follows:
Balance at
September 28, 2019
September 29, 2018
Food
Service
Retail
Frozen
Supermarkets Beverages
Total
(in thousands)
$
$
61,665 $
3,670 $
37,176 $
102,511
61,665 $
3,670 $
37,176 $
102,511
The carrying value of goodwill is determined based on the excess of the purchase price of acquisitions over the
estimated fair value of tangible and intangible net assets. Goodwill is not amortized but is evaluated annually at year end by
management for impairment. Our impairment analysis for 2018, 2017 and 2016 was based on a combination of the income
approach, which estimates the fair value of reporting units based on discounted cash flows, and the market approach, which
estimates the fair value of reporting units based on comparable market prices and multiples. Under the income approach the
Company used a discounted cash flow which requires Level 3 inputs such as: annual growth rates, discount rates based upon
the weighted average cost of capital and terminal values based upon current stock market multiples. There were no
impairment charges in 2019, 2018 and 2017.
In 2017, goodwill of $1,236,000 was acquired in the ICEE distributor acquisition in our frozen beverage segment,
goodwill of $14,175,000 was acquired in the Hill & Valley acquisition in our food service segment and goodwill of $658,000
was acquired in the Labriola Baking acquisition, also in our food service segment.
No goodwill was acquired in fiscal years 2018 and 2019.
F-23
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE G – LONG-TERM DEBT
In November 2016, we entered into an amended and restated loan agreement with our existing banks which provides
for up to a $50,000,000 revolving credit facility repayable in November 2021, with the availability of repayments without
penalty. Interest is calculated based on LIBOR plus an applicable margin. The agreement contains financial covenants and
requires commitment fees in accordance with standard banking practice. As of September 28, 2019 and September 29, 2018,
there were no outstanding balances under the facility. We were in compliance with the financial covenants at September 28,
2019.
NOTE H – OBLIGATIONS UNDER CAPITAL LEASES
The following is a schedule by years of future minimum lease payments under capital leases:
2020
2021
2022
2023
2024
2025 and thereafter
Total minimum capital lease payments
NOTE I – INCOME TAXES
Income tax expense (benefit) is as follows:
(in thousands)
$
$
339
349
156
91
95
27
1,057
Fiscal year ended
September 28, September 29, September 30,
2018
(in thousands)
2019
2017
Current
U.S. Federal
Foreign
State
Total current expense
Deferred
U.S. Federal
Foreign
State
Total deferred benefit
Total expense
$
$
$
14,078 $
2,111
5,971
22,160
6,285 $
849
2,464
9,598
31,758 $
16,591 $
2,512
5,836
24,939
(14,613 ) $
514
3,716
(10,383 )
14,556 $
27,142
2,770
5,227
35,139
6,857
(422 )
1,452
7,887
43,026
F-24
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE I – INCOME TAXES (continued)
The provisions for income taxes differ from the amounts computed by applying the statutory federal income tax
rate of 21.0% for the fiscal year ended September 28, 2019, approximately 24.5% for the fiscal year ended September 29,
2018 and 35% for fiscal year ended September 30, 2017 to earnings before income taxes for the following reasons:
Fiscal year ended
September 28, September 29, September 30,
2018
(in thousands)
2019
2017
Income taxes at federal statutory rates
Increase (decrease)in taxes resulting from:
$
26,581 $
28,947 $
42,770
State income taxes, net of federal income tax benefit
Domestic production activities deduction
Impact of rate change due to Tax Cuts and Jobs Act
Impact of rate differential-current and deferred
One-time repatriation tax
Increase in gross unrecognized tax benefits
Share based compensation
Non deductible employee compensation
Other, net
Income tax expense
$
6,664
-
-
-
(885 )
20
(777 )
490
(335 )
31,758 $
7,212
(1,470 )
(20,670 )
(1,236 )
1,200
20
(696 )
514
735
14,556 $
4,341
(1,820 )
-
-
-
20
(1,923 )
-
(362 )
43,026
Net earnings for the year ended September 29, 2018 benefited from a $20.7 million gain on the remeasurement of
deferred tax liabilities and a $8.8 million reduction in income taxes related primarily to the lower corporate tax rate enacted
under the U.S. Tax Cuts and Jobs Act (“Tax Act”) on December 22, 2017 which was partially offset by a $1.2 million
provision for the one time repatriation tax, which also resulted from the Tax Act. Net earnings for the year were also impacted
by a $1.4 million expense on the remeasurement of deferred tax liabilities due to changes in New Jersey tax regulations
effective July 2018. Excluding the deferred tax gain, the deferred tax expense and the one-time repatriation tax, our effective
tax rate was 27.7% in the year ended September 29, 2018. Net earnings this year benefitted by a reduction of $885,000 in
tax as the provision for the one-time repatriation tax was reduced as the amount recorded last year was an estimate. Excluding
the reduction in the provision for the one-time repatriation tax, our effective tax rate was 25.8% for this year.
F-25
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE I – INCOME TAXES (continued)
Deferred tax assets and liabilities consist of the following:
Deferred tax assets
Vacation accrual
Capital loss carry forwards
Insurance accrual
Deferred income
Allowances
Inventory capitalization
Share-based compensation
Net Operating Loss
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net
Deferred tax liabilities
Amortization of goodwill and other intangible assets
Depreciation of property and equipment
Total deferred tax liabilities
Total deferred tax liabilities, net
September 28, September 29,
2019
2018
(in thousands)
$
$
1,281 $
1,038
2,454
485
1,554
994
1,607
776
10,189
(1,038 )
9,151
27,267
43,804
71,071
61,920 $
1,254
960
2,480
638
1,585
1,051
1,368
856
10,192
(960 )
9,232
25,565
35,989
61,554
52,322
As of September 28, 2019, we have federal and state capital loss carry forwards of approximately $4.5 million
primarily from the sale of marketable securities in fiscal years 2015 and 2016. These carry forwards will begin to expire in
2020. Except for current year usage, we have no foreseeable capital gains that would allow us to use this asset. Accordingly,
we have recorded a valuation allowance for the full amount of this deferred tax asset.
As of September 29, 2018, we have a federal net operating loss carry forward of approximately $4 million from the
PHILLY SWIRL acquisition. These carry forwards are subject to an annual limitation under Code Section 382 of
approximately $378,000 and will expire in 2033. We have determined there are no limitations to the total use of this tax asset
and accordingly, have not recorded a valuation allowance for this deferred tax asset.
We have undistributed earnings of our Mexican and Canadian subsidiaries. As a result of the Tax Act, we changed
our assertion with respect to foreign earnings. We are no longer permanently reinvested in earnings of our foreign subsidiaries
for any year. However, due to the impact of the Tax Act and the deemed repatriation of positive accumulated earnings and
profits from our foreign subsidiaries in 2017, which resulted in a Sec. 965 liability of $315,000 for our fiscal year ended
September 2018, no additional U.S. federal income taxes are anticipated if our undistributed earnings in our Mexican and
Canadian subsidiaries were repatriated to the U.S. However, if such funds were repatriated, a portion of the funds remitted
may be subject to applicable state income taxes and non-U.S. income and withholding taxes. The amount of unrecognized
deferred income tax liabilities related to potential state income tax and foreign withholding taxes is immaterial.
The Tax Act was enacted on December 22, 2017 and introduced significant changes to U.S. income tax law.
Effective in 2018, the Tax Act reduced the U.S. statutory tax rate from 35% to 21%. We have updated any provisional
amounts related to the Tax Act and accounting for this is now final.
F-26
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE J - COMMITMENTS
1.
Lease Commitments
The following is a summary of approximate future minimum rental commitments for non-cancelable operating
leases with terms of more than one year as of September 28, 2019:
2020
2021
2022
2023
2024
2025 and thereafter
Total minimal rental commitments
Plants
and Offices
Equipment
Total
(in thousands)
$
$
8,763 $
7,919
7,403
7,218
6,165
25,545
63,013 $
6,051 $
4,767
3,088
1,753
823
43
16,525 $
14,814
12,686
10,491
8,971
6,988
25,588
79,538
Total rent expense was $21,167,000, $21,760,000 and $20,354,000 fiscal years 2019, 2018 and 2017, respectively.
2.
Other Commitments
We are a party to litigation which has arisen in the normal course of business which management currently believes
will not have a material adverse effect on our financial condition or results of operations.
We self-insure, up to loss limits, certain insurable risks such as worker’s compensation and automobile liability
claims. Accruals for claims under our self-insurance program are recorded on a claims incurred basis. Our total recorded
liability for all years’ claims incurred but not yet paid was $8,700,000 and $9,200,000 at September 28, 2019 and September
29, 2018, respectively. In connection with certain self-insurance agreements, we customarily enter into letters of credit
arrangements with our insurers. At both September 28, 2019 and September 29, 2018, we had outstanding letters of credit
totaling $9,275,000.
We have a self-insured medical plan which covers approximately 1,700 of our employees. We record a liability for
incurred but not yet reported or paid claims based on our historical experience of claims payments and a calculated lag time
period. Our recorded liability at September 28, 2019 and September 29, 2018 was $1,392,000 and $2,058,000, respectively.
NOTE K - CAPITAL STOCK
In our fiscal year ended September 30, 2017, we purchased and retired 142,665 shares of our common stock at a
cost of $18,228,763.
In our fiscal year ended September 29, 2018, we purchased and retired 20,604 shares of our common stock at a cost
of $2,794,027.
We did not purchase any shares of our common stock in our fiscal year ended September 28, 2019.
F-27
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE L – STOCK OPTIONS
We have a Stock Option Plan (the “Plan”). Pursuant to the Plan, stock options may be granted to officers and our
key employees which qualify as incentive stock options as well as stock options which are nonqualified. The exercise price
of incentive stock options is at least the fair market value of the common stock on the date of grant. The exercise price for
nonqualified options is determined by a committee of the Board of Directors. The options are generally exercisable after
three years and expire no later than ten years from date of grant. There are 454,000 shares reserved under the Plan for which
options have not yet been issued. There are options that were issued under prior option plans that have since been replaced
that are still outstanding.
We have an Employee Stock Purchase Plan (“ESPP”) whereby employees purchase stock by making contributions
through payroll deductions for six month periods. The purchase price of the stock is 85% of the lower of the market price of
the stock at the beginning of the six-month period or the end of the six-month period. In fiscal years 2019, 2018 and 2017
employees purchased 12,492, 12,763 and 13,271 shares at average purchase prices of $121.37, $119.39 and $105.85,
respectively. ESPP expense of $390,000, $423,000 and $363,000 was recognized for fiscal years 2019, 2018 and 2017,
respectively.
A summary of the status of our stock option plans as of fiscal years 2019, 2018 and 2017 and the changes during
the years ended on those dates is represented below:
Incentive Stock Options
Weighted-
Average
Exercise
Price
Nonqualified Stock Options
Weighted-
Average
Exercise
Stock
Options
Outstanding
Stock
Options
Outstanding
Price
75.56
129.94
41.46
-
92.58
144.41
56.85
-
105.66
171.78
101.03
-
Balance, September 24, 2016
Granted
Exercised
Canceled
Balance, September 30, 2017
Granted
Exercised
Canceled
Balance, September 29, 2018
Granted
Exercised
Canceled
355,787 $
121,508
(78,114 )
(6,200 )
392,981
122,595
(64,470 )
(17,550 )
433,556
118,934
(100,018 )
(18,320 )
92.81
129.35
65.49
100.93
109.41
141.07
90.75
115.21
120.90
163.14
102.01
127.88
311,884 $
59,786
(60,156 )
-
311,514
58,083
(37,328 )
-
332,269
66,236
(35,763 )
-
Balance, September 28, 2019
434,152 $
136.53
362,742 $
118.19
Exercisable Options
September 28, 2019
94,492 $
106.36
179,428 $
86.10
The weighted-average fair value of incentive stock options granted during fiscal years ended September 28, 2019,
September 29, 2018 and September 30, 2017 was $26.29, $23.68 an $18.84, respectively. The weighted-average fair value
of non-qualified stock options granted during the fiscal years ended September 28, 2019, September 29, 2018 and September
30, 2017 was $33.11, $31.44 and $24.82, respectively. The total intrinsic value of stock options exercised was $9.4 million,
$6.8 million and $10.1 million in fiscal years 2019, 2018 and 2017, respectively.
The total cash received from these option exercises was $12.7 million, $7.4 million and $5.8 million in fiscal years
2019, 2018 and 2017, respectively; and the actual tax benefit realized from the tax deductions from these option exercises
was $1.8 million, $1.7 million and $3.0 million in fiscal years 2019, 2018 and 2017, respectively.
F-28
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE L – STOCK OPTIONS (continued)
The following table summarizes information about incentive stock options outstanding as of September 28, 2019:
Number
Outstanding
at
Options Outstanding
Weighted-
Average
Remaining
Weighted-
Average
Exercise
Price
Options Exercisable
Number
Exercisable
at
September 28,
2019
Weighted-
Average
Exercise
Price
Range of
September 28, Contractual
2019
Life
317,018
117,134
434,152
2.4 $
4.6
3.0
126.67
163.20
136.53
94,492 $
-
94,492
106.36
-
106.36
The following table summarizes information about nonqualified stock options outstanding as of September 28,
Number
Outstanding
at
Options Outstanding
Weighted-
Average
Remaining
September 28, Contractual
2019
Life
Weighted-
Average
Exercise
Price
Options Exercisable
Number
Exercisable
at
September 28,
2019
Weighted-
Average
Exercise
Price
60,000
119,428
183,314
362,742
2.0 $
4.1
5.3
4.4
48.89
104.79
149.60
118.19
60,000 $
119,428
-
179,428
48.89
104.79
-
86.10
Exercise Prices
$100.76 - $143.69
$153.42 - $163.29
Total options
2019:
Range of
Exercise Prices
$41.75 - $57.33
$80.79 - $119.44
$129.26 - $191.40
Total options
NOTE M – 401(k) PROFIT-SHARING PLAN
We maintain a 401(k) profit-sharing plan for our employees. Under this plan, we may make discretionary profit-
sharing and matching 401(k) contributions. Contributions of $2,433,000, $2,106,000 and $2,084,000 were made in fiscal
years 2019, 2018 and 2017, respectively.
NOTE N – CASH FLOW INFORMATION
The following is supplemental cash flow information:
Fiscal Year Ended
September 28, September 29, September 30,
2018
(in thousands)
2017
2019
Cash paid for:
Interest
Income taxes
Non cash items:
Capital leases
$
36 $
23,002
43 $
25,820
52
25,024
$
356 $
203 $
-
F-29
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE O – SEGMENT REPORTING
We principally sell our products to the food service and retail supermarket industries. Sales and results of our frozen
beverages business are monitored separately from the balance of our food service business because of different distribution
and capital requirements. We maintain separate and discrete financial information for the three operating segments mentioned
above which is available to our Chief Operating Decision Makers. We have applied no aggregation criteria to any of these
operating segments in order to determine reportable segments. Our three reportable segments are Food Service, Retail
Supermarkets and Frozen Beverages. All inter-segment net sales and expenses have been eliminated in computing net sales
and operating income. These segments are described below.
Food Service
The primary products sold by the food service segment are soft pretzels, frozen juice treats and desserts, churros,
dough enrobed handheld products and baked goods. Our customers in the food service segment include snack bars and food
stands in chain, department and discount stores; malls and shopping centers; casual dining restaurants; fast food outlets;
stadiums and sports arenas; leisure and theme parks; convenience stores; movie theatres; warehouse club stores; schools,
colleges and other institutions. Within the food service industry, our products are purchased by the consumer primarily for
consumption at the point-of-sale.
Retail Supermarkets
The primary products sold to the retail supermarket channel are soft pretzel products – including SUPERPRETZEL,
frozen juice treats and desserts including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade,
WHOLE FRUIT frozen fruit bars and sorbet, PHILLY SWIRL cups and sticks, ICEE Squeeze-Up Tubes and dough enrobed
handheld products including PATIO burritos. Within the retail supermarket channel, our frozen and prepackaged products
are purchased by the consumer for consumption at home.
Frozen Beverages
The Company markets frozen beverages primarily under the names ICEE, SLUSH PUPPIE and PARROT ICE
which are sold primarily in the United States, Mexico and Canada. We also provide repair and maintenance service to
customers for customers’ owned equipment.
The Chief Operating Decision Maker for Food Service and Retail Supermarkets and the Chief Operating Decision
Maker for Frozen Beverages monthly review detailed operating income statements and sales reports in order to assess
performance and allocate resources to each individual segment. Sales and operating income are key variables monitored by
the Chief Operating Decision Makers and management when determining each segment’s and the company’s financial
condition and operating performance. In addition, the Chief Operating Decision Makers review and evaluate depreciation,
capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment.
Information regarding the operations in these three reportable segments is as follows:
F-30
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE O - SEGMENT REPORTING (continued)
September 28, September 29, September 30,
2018
(52 weeks)
(in thousands)
2017
(53 weeks)
2019
(52 weeks)
Sales to External Customers:
Food Service
Soft pretzels
Frozen juices and ices
Churros
Handhelds
Bakery
Other
Total Food Service
Retail Supermarket
Soft pretzels
Frozen juices and ices
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
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
209,227 $
43,672
65,976
31,685
384,636
26,407
761,603 $
36,264 $
73,751
10,902
(3,596 )
1,955
119,276 $
171,820 $
85,103
45,811
2,874
305,608 $
208,544 $
42,364
61,726
38,928
371,391
22,991
745,944 $
36,438 $
74,435
12,419
(4,439 )
2,086
120,939 $
160,937 $
78,805
28,652
2,988
271,382 $
180,138
49,469
62,809
36,913
351,357
21,108
701,794
35,081
71,325
14,892
(4,898 )
2,847
119,247
154,157
74,594
31,497
2,935
263,183
1,186,487 $
1,138,265 $
1,084,224
26,978 $
1,418
20,214
48,610 $
25,983 $
1,313
19,181
46,477 $
24,629
949
16,867
42,445
78,130 $
8,876
29,950
116,956 $
74,056 $
8,304
28,415
110,775 $
81,208
10,627
26,272
118,107
29,197 $
1,979
25,952
57,128 $
36,325 $
928
22,769
60,022 $
44,067
239
27,874
72,180
772,777 $
22,673
223,889
1,019,339 $
693,098 $
21,366
217,549
932,013 $
635,709
21,129
210,390
867,228
F-31
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE P - ACCUMULATED OTHER COMPREHENSIVE LOSS:
Changes to the components of accumulated other comprehensive loss are as follows:
Fiscal Year Ended September 28, 2019
(in thousands)
Foreign
Currency
Translation
Adjustments Securities
Unrealized
Holding Gain
on Marketable
Total
Beginning Balance
$
(12,079 ) $
85 $
(11,994 )
Other comprehensive loss before reclassifications
(909 )
-
(909 )
Amounts reclassified from accumulated other comprehensive
income
Ending Balance
-
(85 )
(85 )
$
(12,988 ) $
- $
(12,988 )
Fiscal Year Ended September 29, 2018
(in thousands)
Foreign
Currency
Translation
Adjustments Securities
Unrealized
Holding Gain
on Marketable
Total
Beginning Balance
$
(9,341 ) $
466 $
(8,875 )
Other comprehensive loss before reclassifications
(2,738 )
(455 )
(3,193 )
Amounts reclassified from accumulated other comprehensive
income
Ending Balance
-
74
74
$
(12,079 ) $
85 $
(11,994 )
F-32
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE Q - QUARTERLY FINANCIAL DATA (UNAUDITED)
Fiscal Year Ended September 28, 2019
Net Sales
Gross
Profit
Net
Earnings
Net Earnings
Per
Diluted
Share(1)
(in thousands, except per share information)
$
$
271,612 $
276,302
326,701
311,872
1,186,487 $
76,863 $
79,248
101,349
92,941
350,401 $
17,526 $
20,354
30,872
26,067
94,819 $
0.93
1.08
1.63
1.36
5.00
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total
NOTE R: SUBSEQUENT EVENT:
On October 1, 2019, we acquired the assets of ICEE Distributors LLC, based in Bossier City, Louisiana. ICEE
Distributors does business in Arkansas, Louisiana and Texas with annual sales of approximately $13 million. The purchase
price was approximately $45 million. We have not yet completed our preliminary valuation and thus a purchase price
allocation is not available.
F-33
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Year
Description
Opening
Balance
Charged to
Expense
Deductions
Closing
Balance
2019
Allowance for doubtful accounts
2018
Allowance for doubtful accounts
2017
Allowance for doubtful accounts
$
$
$
400,000 $
389,000 $
217,000 (1) $
572,000
359,000 $
259,000 $
218,000 (1) $
400,000
571,000 $
122,000 $
334,000 (1) $
359,000
(1) Write-offs of uncollectible accounts receivable.
S-1