J&J Snack Foods Corp. — FY2022 Form 10-K
Reporting period: Fiscal year ended September 24, 2022 (52 weeks), compared with fiscal 2021 (52 weeks). This is an annual report, not a standalone fourth-quarter filing. The company manufactures snack foods and distributes frozen beverages through Food Service, Retail Supermarkets, and Frozen Beverages segments.
Financial performance
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Net sales | $1,380.7 million | $1,144.6 million | Up 21% |
| Gross profit | $369.6 million; 26.8% of sales | $298.9 million; 26.1% of sales | Margin up 0.7 percentage points |
| Operating income | $61.8 million | $71.2 million | Down 13% |
| Net earnings | $47.2 million | $55.6 million | Down 15% |
| Diluted EPS | $2.46 | $2.91 | Down 15% |
| Cash from operations | $26.1 million | $101.5 million | Down $75.4 million |
| Capital expenditures | $87.3 million | $53.6 million | Up $33.7 million |
Sales benefited from reopening foodservice venues, new customers and product placements, pricing, and the Dippin’ Dots acquisition. Inflation in ingredients, packaging, freight, fuel, warehousing, and labor pressured costs. Operating expenses rose $80.1 million and increased to 22.3% of sales from 19.9%; distribution costs were a notable driver. Pricing and favorable product mix helped gross margin, but did not prevent operating income and earnings from falling.
Segments
| Segment | FY2022 sales | FY2022 operating income | Comparison with FY2021 |
|---|---|---|---|
| Food Service | $872.7 million | $18.5 million | Sales up 20%; operating income down from $39.2 million |
| Retail Supermarkets | $197.9 million | $9.5 million | Sales up 7%; operating income down from $25.9 million |
| Frozen Beverages | $310.0 million | $33.8 million | Sales up 32%; operating income up from $6.1 million |
Food Service and Retail Supermarkets operating income declined primarily on higher product, labor, shipping, and distribution costs. Frozen Beverages benefited from higher beverage volumes as theaters, amusement parks, convenience stores, and restaurants recovered.
Liquidity, debt, and capital allocation
At year-end, cash and cash equivalents were $35.2 million, marketable securities were approximately $9.7 million, and outstanding credit-facility borrowings were $55.0 million. The company reported $160.2 million of additional borrowing capacity after letters of credit and compliance with its financial covenants. Variable-rate debt carried a 3.87% weighted-average rate; management estimated a 1 percentage-point rate increase would add approximately $0.6 million in annual interest expense.
Operating cash flow fell substantially, with the company citing higher accounts receivable, inventory, and prepaid balances. The company paid $48.4 million in cash dividends and spent $87.3 million on capital expenditures. It reported that cash, investments, expected operating cash flow, and borrowing capacity should be sufficient for requirements over the next 12 months and beyond.
Material changes, outlook, and risks
- Dippin’ Dots acquisition: Completed June 21, 2022 for approximately $223.6 million in cash, including the Dippin’ Dots and Doc Popcorn businesses. The acquired business contributed $33.7 million in sales after acquisition. The purchase-price allocation remained preliminary at year-end; the company recorded $3.1 million of acquisition costs.
- Investment and capacity: Capital expenditures rose to $87.3 million, including spending on new production lines and capacity. Goodwill impairment testing found no impairment; a $1.0 million intangible-asset impairment charge was recorded in the fourth quarter.
- Outlook: The filing provides no specific quantified sales or earnings guidance. Management described demand recovery in foodservice and frozen beverages and cited pricing actions to offset inflation, while noting ongoing cost pressures and production and distribution constraints.
- Principal risks: Commodity and energy price volatility, labor availability and costs, freight and fuel costs, customer concentration, intense competition, food safety and recalls, manufacturing or distribution disruptions, cyber and IT risks, and uncertain economic and post-pandemic demand. The top ten customers represented 43% of sales; the largest represented 8%. Sales are seasonal, with frozen beverages and novelties generally stronger in warmer months.
- Other disclosures: Approximately $130 million of raw-material purchase commitments were outstanding, generally covering expected needs for one to 12 months. No material pending legal proceedings were reported. The financial statement auditor issued an unqualified opinion; management and the auditor reported effective internal controls, with Dippin’ Dots excluded from the control assessment for the acquisition year.
Important facts for investors to verify
- Whether pricing and product mix can continue to offset inflation without materially weakening volume or demand.
- Whether cash generation improves as receivables and inventory normalize, given FY2022 operating cash flow of $26.1 million against $87.3 million of capital spending.
- Progress integrating Dippin’ Dots, final purchase-price allocation, and the acquisition’s contribution to segment profitability.
- Debt-facility availability, variable interest-rate exposure, and compliance with leverage and interest-coverage covenants.
- Exposure to major customers and ongoing foodservice recovery, as well as the impact of seasonality on quarterly results.