J & J Snack Foods Corp. (NASDAQ:JJSF) Q3 2020 Results Earnings Conference Call July 28, 2020 10:00 AM ET Company Participants Gerald Shreiber - Chairman and Chief Executive Officer Deb Kane - Director of Food Service Safety and Quality Assurance Dennis Moore - Chief Financial Officer Dan Fachner - President Conference Call Participants Jonathan Andersen - William Blair & Company Todd Brooks - CL King & Associates Ashish Mago - Jefferies Operator Welcome to the J & J Snack Foods Third Quarter Earnings Confer ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended March 28, 2020 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 0-14616 J&J SNACK FOODS CORP. (Exact name of registrant as specified in its charter) New Jersey 22-1935537 (State or other jurisdiction of (I.R.S. Employer incorporation or or ...

J&J Snack Foods Corp (NASDAQ:JJSF) Q2 2020 Earnings Conference Call April 28, 2020 10:00 AM ET Company Participants Gerry Shreiber - President and CEO Deb Kane - Director of Food Service Safety and Quality Assurance Dennis Moore - Senior VP, CFO, Treasurer & Director Dan Fachner - President of ICEE company Bob Pape - SVP of Sales Conference Call Participants Rob Dickerson - Jefferies Ryan Bell - Consumer Edge Research Jon Andersen - William Blair & Company Todd Brooks - CL King & Associates Robert Costello ...

[Part I. Financial Information](index=3&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements and accompanying notes for the period ended December 28, 2019 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) | Metric | Dec 28, 2019 (unaudited) (in thousands) | Sep 28, 2019 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Total current assets | $495,146 | $506,357 | | Property, plant and equipment, net | $263,630 | $253,448 | | Goodwill | $119,484 | $102,511 | | Other intangible assets, net | $75,848 | $54,922 | | Operating lease right-of-use assets | $67,376 | $- | | Total Assets | $1,096,106 | $1,019,339 | | **Liabilities and Stockholders' Equity** | | | | Total current liabilities | $134,260 | $121,234 | | Noncurrent operating lease liabilities | $56,465 | $- | | Total stockholders' equity | $842,520 | $833,751 | | Total Liabilities and Stockholders' Equity | $1,096,106 | $1,019,339 | - **Total Assets increased by $76.77 million (7.5%)** from September 28, 2019, to December 28, 2019, primarily driven by increases in goodwill and other intangible assets due to acquisitions, and the recognition of operating lease right-of-use assets[8](index=8&type=chunk)[10](index=10&type=chunk) [Consolidated Statements of Earnings](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings) | Metric | Three months ended Dec 28, 2019 (in thousands) | Three months ended Dec 29, 2018 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net Sales | $282,897 | $271,612 | +4.15% | | Cost of goods sold | $205,036 | $194,749 | +5.28% | | Gross Profit | $77,861 | $76,863 | +1.30% | | Total Operating Expenses | $56,158 | $54,781 | +2.51% | | Operating Income | $21,703 | $22,082 | -1.72% | | Earnings before income taxes | $23,463 | $23,095 | +1.60% | | Income tax expense | $6,404 | $5,569 | +14.99% | | NET EARNINGS | $17,059 | $17,526 | -2.66% | | Earnings per diluted share | $0.89 | $0.93 | -4.30% | | Weighted average diluted shares | 19,144 | 18,897 | +1.30% | - **Net Sales increased by 4%** year-over-year, but **Net Earnings decreased by 3%** due to higher cost of goods sold, increased income tax expense, and a slight decrease in operating income[13](index=13&type=chunk)[14](index=14&type=chunk)[102](index=102&type=chunk) [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) | Metric | Three months ended Dec 28, 2019 (in thousands) | Three months ended Dec 29, 2018 (in thousands) | | :--- | :--- | :--- | | Net Earnings | $17,059 | $17,526 | | Foreign currency translation adjustments | $810 | $(1,359) | | Total Other Comprehensive Loss | $810 | $(1,359) | | Comprehensive Income | $17,869 | $16,167 | - **Comprehensive Income increased by $1.7 million (10.5%)** year-over-year, primarily driven by a positive foreign currency translation adjustment of $810,000 in 2019 compared to a negative adjustment of $1,359,000 in 2018[16](index=16&type=chunk)[88](index=88&type=chunk) [Consolidated Statements of Changes In Stockholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20In%20Stockholders'%20Equity) | Metric | Balance at Sep 28, 2019 (in thousands) | Balance at Dec 28, 2019 (in thousands) | | :--- | :--- | :--- | | Common Stock Amount | $45,744 | $47,511 | | Accumulated Other Comprehensive Loss | $(12,988) | $(12,178) | | Retained Earnings | $800,995 | $807,187 | | Total Stockholders' Equity | $833,751 | $842,520 | - **Total Stockholders' Equity increased by $8.77 million** from September 28, 2019, to December 28, 2019, driven by net earnings of $17.06 million and share-based compensation, partially offset by dividends declared of $10.87 million[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) | Metric | Three months ended Dec 28, 2019 (in thousands) | Three months ended Dec 29, 2018 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $33,569 | $32,811 | | Net cash used in investing activities | $(46,857) | $(11,884) | | Net cash used in financing activities | $(9,065) | $(6,817) | | Net (decrease) increase in cash and cash equivalents | $(22,068) | $13,235 | | Cash and cash equivalents at end of period | $170,327 | $124,714 | - Net cash provided by operating activities remained stable year-over-year, however, a significant increase in cash used in investing activities, primarily due to **payments for purchases of companies ($44.97 million)**, led to a net decrease in cash[20](index=20&type=chunk)[21](index=21&type=chunk) [Notes to the Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) [Note 1 Basis of Presentation](index=7&type=section&id=Note%201%20Basis%20of%20Presentation) - The unaudited statements are prepared per GAAP for interim reporting and contain only normal recurring adjustments, with results not necessarily indicative of the full year due to seasonality[23](index=23&type=chunk)[24](index=24&type=chunk) [Note 2 Revenue Recognition](index=7&type=section&id=Note%202%20Revenue%20Recognition) - Revenue is recognized at a point-in-time when control transfers to the customer, while service contract revenue is recognized over time[27](index=27&type=chunk)[28](index=28&type=chunk)[31](index=31&type=chunk) - Variable consideration like sales discounts is treated as a revenue reduction, with the related liability at **approximately $15.1 million** as of December 28, 2019[34](index=34&type=chunk) | Contract Liability | Three Months Ended Dec 28, 2019 (in thousands) | Three Months Ended Dec 29, 2018 (in thousands) | | :--- | :--- | :--- | | Beginning Balance | $1,334 | $1,999 | | Additions | $1,275 | $372 | | Recognized as revenue | $(1,515) | $(448) | | Ending Balance | $1,094 | $1,923 | [Note 3 Depreciation and Amortization](index=10&type=section&id=Note%203%20Depreciation%20and%20Amortization) - Depreciation and amortization are calculated using the straight-line method over the assets' estimated useful lives or lease terms[40](index=40&type=chunk) | Metric | Three months ended Dec 28, 2019 (in thousands) | Three months ended Dec 29, 2018 (in thousands) | | :--- | :--- | :--- | | Depreciation expense | $11,887 | $10,774 | [Note 4 Earnings Per Share](index=11&type=section&id=Note%204%20Earnings%20Per%20Share) | Metric | Three months ended Dec 28, 2019 | Three months ended Dec 29, 2018 | | :--- | :--- | :--- | | Net Earnings available to common stockholders (in thousands) | $17,059 | $17,526 | | Weighted average basic shares (in thousands) | 18,898 | 18,765 | | Basic EPS | $0.90 | $0.93 | | Weighted average diluted shares (in thousands) | 19,144 | 18,897 | | Diluted EPS | $0.89 | $0.93 | - **Diluted EPS decreased to $0.89** from $0.93 in the prior year, reflecting lower net earnings and an increase in weighted average diluted shares[42](index=42&type=chunk) [Note 5 Share-Based Compensation](index=12&type=section&id=Note%205%20Share-Based%20Compensation) | Metric | Dec 28, 2019 (in thousands) | Dec 29, 2018 (in thousands) | | :--- | :--- | :--- | | Stock Options | $965 | $629 | | Stock purchase plan | $202 | $69 | | Total share-based compensation | $1,167 | $698 | | Net of tax benefits | $132 | $274 | - **Total share-based compensation expense increased by 67.2%** to $1.167 million for the quarter compared to the prior year[43](index=43&type=chunk) [Note 6 Income Taxes](index=12&type=section&id=Note%206%20Income%20Taxes) - The Company accounts for income taxes using the liability method, with unrecognized tax benefits totaling **$414,000** at quarter-end[44](index=44&type=chunk)[45](index=45&type=chunk) - The **effective tax rate was 27.3%** for the current quarter, compared to 28.0% in the prior year's quarter (excluding a one-time benefit in the prior year)[47](index=47&type=chunk)[102](index=102&type=chunk) [Note 7 New Accounting Pronouncements](index=13&type=section&id=Note%207%20New%20Accounting%20Pronouncements) - The Company adopted new lease accounting guidance, recognizing a **right-of-use asset of $71 million** and a **lease liability of $72 million** without impacting operations or cash flows[48](index=48&type=chunk) - The Company is currently evaluating the impact of new guidance on current expected credit losses (CECL), effective in Q1 fiscal year 2021[48](index=48&type=chunk) [Note 8 Inventories](index=13&type=section&id=Note%208%20Inventories) | Inventory Category | Dec 28, 2019 (in thousands) | Sep 28, 2019 (in thousands) | | :--- | :--- | :--- | | Finished goods | $61,374 | $53,225 | | Raw materials | $23,728 | $22,146 | | Packaging materials | $9,189 | $9,703 | | Equipment parts and other | $31,498 | $31,091 | | Total Inventories | $125,789 | $116,165 | - **Total inventories increased by $9.62 million (8.3%)** from the previous quarter, primarily driven by an increase in finished goods[49](index=49&type=chunk) [Note 9 Segment Information](index=13&type=section&id=Note%209%20Segment%20Information) - The Company operates in three segments: Food Service, Retail Supermarkets, and Frozen Beverages, with a recent reclassification of biscuit operations to the Retail Supermarket segment[50](index=50&type=chunk)[55](index=55&type=chunk) | Segment | Sales to External Customers (Dec 28, 2019, in thousands) | Sales to External Customers (Dec 29, 2018, in thousands) | Operating Income (Dec 28, 2019, in thousands) | Operating Income (Dec 29, 2018, in thousands) | | :--- | :--- | :--- | :--- | :--- | | Food Service | $183,448 | $180,026 | $18,034 | $17,697 | | Retail Supermarket | $29,426 | $31,279 | $2,217 | $2,211 | | Frozen Beverages | $70,023 | $60,307 | $1,452 | $2,174 | | Consolidated Sales | $282,897 | $271,612 | $21,703 | $22,082 | - **Food Service sales grew 2%**, Retail Supermarket sales fell 6% due to price increases, and **Frozen Beverages sales rose 16%** (12% organic), though its operating income declined[91](index=91&type=chunk)[95](index=95&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) [Note 10 Goodwill and Other Intangible Assets](index=17&type=section&id=Note%2010%20Goodwill%20and%20Other%20Intangible%20Assets) | Segment | Goodwill (Dec 28, 2019, in thousands) | Goodwill (Sep 28, 2019, in thousands) | | :--- | :--- | :--- | | Food Service | $61,189 | $61,189 | | Retail Supermarket | $4,146 | $4,146 | | Frozen Beverages | $54,149 | $37,176 | | Total Goodwill | $119,484 | $102,511 | - **Goodwill increased by $16.973 million** in the Frozen Beverages segment due to the acquisition of ICEE Distributors[57](index=57&type=chunk)[58](index=58&type=chunk)[61](index=61&type=chunk) - Aggregate amortization expense for intangible assets was **$843,000** for the quarter, with an estimated **$3.1 million** for fiscal year 2020[59](index=59&type=chunk)[60](index=60&type=chunk) [Note 11 Marketable Securities](index=18&type=section&id=Note%2011%20Marketable%20Securities) - Marketable securities are classified as held-to-maturity or available-for-sale, with fair values determined using Level 1 and Level 2 inputs[62](index=62&type=chunk)[63](index=63&type=chunk) | Security Type | Amortized Cost (Dec 28, 2019, in thousands) | Fair Market Value (Dec 28, 2019, in thousands) | | :--- | :--- | :--- | | **Held to Maturity** | | | | Corporate Bonds | $116,003 | $117,231 | | Certificates of Deposit | $2,880 | $2,885 | | Total held to maturity | $118,883 | $120,116 | | **Available for Sale** | | | | Mutual Funds | $3,588 | $3,199 | | Preferred Stock | $13,126 | $13,342 | | Total available for sale | $16,714 | $16,541 | - Proceeds from redemption and sale of marketable securities were **$18.782 million** for the quarter, resulting in minor losses[66](index=66&type=chunk) [Note 12 Accumulated Other Comprehensive Loss](index=21&type=section&id=Note%2012%20Accumulated%20Other%20Comprehensive%20Loss) | Metric | Three months ended Dec 28, 2019 (in thousands) | Three months ended Dec 29, 2018 (in thousands) | | :--- | :--- | :--- | | Beginning Balance | $(12,988) | $(11,994) | | Other comprehensive gain (loss) | $810 | $(1,359) | | Ending Balance | $(12,178) | $(13,438) | - Accumulated other comprehensive loss decreased during the quarter due to a **positive foreign currency translation adjustment of $810,000**[69](index=69&type=chunk) [Note 13 Acquisitions](index=22&type=section&id=Note%2013%20Acquisitions) - On October 1, 2019, the Company acquired ICEE Distributors LLC for **$44.97 million**, adding approximately **$13 million in annual sales**[72](index=72&type=chunk) | Acquired Assets (in thousands) | Amount | | :--- | :--- | | Accounts Receivable, net | $722 | | Inventories | $866 | | Property, plant & equipment, net | $4,851 | | Customer Relationships | $569 | | Distribution rights | $21,200 | | Goodwill | $16,973 | | Accounts Payable | $(210) | | Purchase Price | $44,970 | - The acquisition is not considered material, and proforma results were consistent with reported net sales and net earnings[73](index=73&type=chunk) [Note 14 Leases](index=22&type=section&id=Note%2014%20Leases) - The Company holds operating and finance leases for facilities and equipment with remaining terms of up to 13 years[74](index=74&type=chunk)[75](index=75&type=chunk)[80](index=80&type=chunk) | Lease Metric | Three Months Ended Dec 28, 2019 (in thousands) | | :--- | :--- | | Operating lease cost | $4,279 | | Finance lease cost | $93 | | Total net lease cost | $4,372 | | Operating lease right-of-use assets | $67,376 | | Total operating lease liabilities | $70,133 | | Finance lease right-of-use assets | $957 | | Total finance lease liabilities | $970 | - The weighted-average remaining term is **7.3 years for operating leases** and **4.0 years for finance leases** as of December 28, 2019[85](index=85&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes financial condition and results for the quarter, comparing performance across key business segments to the prior year [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) - Primary liquidity sources are cash, investments, and future cash from operations, which are deemed sufficient to fund growth[85](index=85&type=chunk)[86](index=86&type=chunk) - No common stock was repurchased, and a **$50 million revolving credit facility** remains unused[87](index=87&type=chunk)[89](index=89&type=chunk) - Foreign currency translation adjustments resulted in an **$810,000 decrease** in accumulated other comprehensive loss in Q1 2020[88](index=88&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) - **Net sales increased by 4%** to $282.897 million for the quarter, or 3% excluding the ICEE Distributors acquisition[90](index=90&type=chunk) - **Gross profit margin decreased to 27.52%** from 28.30% due to lower volumes, product mix changes, and higher costs in the frozen beverages segment[99](index=99&type=chunk) - **Operating income decreased by 2%** to $21.703 million, and **net earnings decreased by 3%** to $17.059 million[101](index=101&type=chunk)[102](index=102&type=chunk) [Food Service Segment Performance](index=26&type=section&id=Food%20Service%20Segment%20Performance) - **Sales increased by 2%** to $183.448 million, driven by a 2% rise in soft pretzel sales and an 8% increase in churro sales[91](index=91&type=chunk)[92](index=92&type=chunk) - Handheld sales decreased 18% due to lower co-pack sales[93](index=93&type=chunk) - **Operating income increased slightly** to $18.034 million, driven by higher volume and improved bakery operations[94](index=94&type=chunk) [Retail Supermarkets Segment Performance](index=27&type=section&id=Retail%20Supermarkets%20Segment%20Performance) - **Sales decreased by 6%** to $29.426 million, primarily due to volume and placement losses from price increases implemented a year ago[95](index=95&type=chunk) - **Operating income remained stable** at $2.217 million, as higher prices offset the negative impact of lower volume[95](index=95&type=chunk)[96](index=96&type=chunk) [Frozen Beverages Segment Performance](index=27&type=section&id=Frozen%20Beverages%20Segment%20Performance) - **Sales increased 16%** to $70.023 million, or 12% excluding the ICEE Distributors acquisition, with beverage and service revenue both up 13%[97](index=97&type=chunk) - **Operating income decreased** to $1.452 million from $2.174 million, primarily due to higher costs, including approximately **$1 million for headquarters relocation**[98](index=98&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company reported no material change in its assessment of sensitivity to market risk since its 2017 annual report - No material change in the Company's assessment of its sensitivity to market risk since the 2017 annual report on Form 10-K[103](index=103&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal financial reporting controls - The CEO and CFO concluded that the Company's disclosure controls and procedures were **effective** as of December 28, 2019[104](index=104&type=chunk) - **No material change** in the Company's internal control over financial reporting occurred during the quarter ended December 28, 2019[105](index=105&type=chunk) [Part II. Other Information](index=28&type=section&id=Part%20II.%20Other%20Information) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including Sarbanes-Oxley certifications and financial data in Inline XBRL format - Includes Certifications Pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002[110](index=110&type=chunk) - Financial information from the quarterly report is formatted in Inline XBRL[110](index=110&type=chunk)

J & J Snack Foods Corp. (NASDAQ:JJSF) Q1 2020 Results Earnings Conference Call January 28, 2020 10:00 AM ET Company Participants Gerald Shreiber - Chief Executive Officer Dan Fachner - President of the ICEE Company Dennis Moore - Chief Financial Officer Robert Radano - Chief Operations Officer Robert Pape - Vice President of Sales Gerard Law - Senior Vice President of Operations Marjorie Shreiber Roshkoff - Legal representative Bo Powell - Sales Manager, food service Conference Call Participants Rob Dickers ...

[Company Overview](index=2&type=section&id=Company%20Overview) J&J Snack Foods Corp. operates in foodservice, frozen beverages, and retail, focusing on snack foods and achieving consistent revenue growth [Company Profile](index=2&type=section&id=Company%20Profile) J&J Snack Foods Corp. operates through three core business groups: foodservice, frozen beverages, and retail, with a growth strategy focused on new product innovation and market expansion - The company's product portfolio includes soft pretzels, frozen beverages, frozen juice treats, desserts, stuffed sandwiches, burritos, churros, and other bakery goods[6](index=6&type=chunk) - Growth is driven by a strategy of developing new products, increasing penetration in existing market channels, and expanding established products into new markets[6](index=6&type=chunk) Financial Highlights (2010-2019) (in thousands) | Indicator | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Net Sales | $1,186,487 | $1,138,265 | $1,084,224 | | Net Earnings | $94,819 | $103,596 | $79,174 | | Total Assets | $1,019,339 | $932,013 | $867,228 | | Stockholders' Equity | $833,751 | $759,091 | $682,322 | | EPS-Diluted | $5.00 | $5.51 | $4.21 | | Dividends/Share | $2.00 | $1.80 | $1.68 | [President's Letter](index=3&type=section&id=President's%20Letter) In fiscal year 2019, J&J Snack Foods Corp. achieved its 48th consecutive year of revenue growth, with sales increasing by 4% to $1.186 billion and operating income rising 6% to $117.0 million FY 2019 Performance Highlights | Metric | FY 2019 | Change | | :--- | :--- | :--- | | Sales | $1.186 Billion | +4% | | Operating Income | $117.0 Million | +6% | - Net earnings and EPS decreased in FY2019 as a result of benefits from the Tax Cuts and Jobs Act in the prior year[10](index=10&type=chunk) - The company's balance sheet remains strong, with over **$343 million** in cash, cash equivalents, and marketable securities at year-end[13](index=13&type=chunk) - Future strategy involves focusing on long-term investments to grow sales, add capabilities, and make operational improvements, while also searching for acquisitions[13](index=13&type=chunk) [Part I](index=5&type=section&id=PART%20I) Part I covers the company's business operations, key risk factors, property holdings, and legal proceedings [Item 1. Business](index=5&type=section&id=Item%201.%20Business) J&J Snack Foods Corp. manufactures and distributes snack foods and frozen beverages to foodservice and retail supermarket industries, operating in three segments with key products including soft pretzels, frozen treats, and bakery goods [Business Segments](index=6&type=section&id=Business%20Segments) The company operates through three business segments: Food Service, Retail Supermarkets, and Frozen Beverages, each focusing on distinct product distribution channels - The company operates in three business segments: Food Service, Retail Supermarkets, and Frozen Beverages[28](index=28&type=chunk) - Key performance variables monitored by management for each segment are sales and operating income, with depreciation, capital spending, and assets reviewed quarterly[29](index=29&type=chunk) [Products](index=6&type=section&id=Products) The company's product portfolio is diverse, with bakery products being the largest contributor to revenue at 32% in FY2019, followed by soft pretzels at 21% and frozen beverages at 15% Product Sales as a Percentage of Total Revenue | Product Category | FY 2019 | FY 2018 | FY 2017 | | :--- | :--- | :--- | :--- | | Bakery Products | 32% | 33% | 32% | | Soft Pretzels | 21% | 21% | 20% | | Frozen Beverages | 15% | 15% | 15% | | Frozen Juice Treats & Desserts | 10% | 10% | 11% | | Churros | 6% | 6% | 6% | | Handheld Products | 4% | 5% | 5% | - The company provides managed service and/or products to approximately **145,000** company-owned and customer-owned frozen beverage dispensers[47](index=47&type=chunk) [Customers](index=7&type=section&id=Customers) The company has a concentrated customer base, with its top ten customers accounting for 43% of sales in fiscal year 2019, and sells to an estimated 85-90% of supermarkets in the United States Customer Concentration | Customer Group | % of Sales (FY 2019) | % of Sales (FY 2018) | % of Sales (FY 2017) | | :--- | :--- | :--- | :--- | | Top 10 Customers | 43% | 43% | 42% | | Largest Customer | 11% | 9.5% | 9.5% | - The company sells its products to an estimated **85-90%** of supermarkets in the United States[53](index=53&type=chunk) [Competition and Other Business Aspects](index=8&type=section&id=Competition%20and%20Other%20Business%20Aspects) The snack food and bakery markets are highly competitive, with J&J facing competition from larger and regional players, and its sales are seasonal with higher demand for frozen products in warmer months - The company's sales are seasonal, as frozen beverage and frozen juice treat sales are generally higher during warmer months[57](index=57&type=chunk) - The snack food and bakery markets are highly competitive, with competition based on product quality, customer service, taste, price, brand awareness, and distribution[62](index=62&type=chunk) - As of September 28, 2019, the company had about **4,600** full and part-time employees and approximately **1,500** workers from staffing agencies, with about **1,200** employees covered by collective bargaining agreements[68](index=68&type=chunk) [Item 1A. Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) The company faces several risks, including volatility in raw material and energy costs, customer concentration, intense competition, potential manufacturing disruptions, rising transportation costs, labor shortages, and reliance on key leadership - The company is exposed to market risks from adverse changes in commodity prices for raw materials and energy, which could impact profitability if price increases cannot be passed on to customers[72](index=72&type=chunk) - Significant customer concentration exists, with the top ten customers accounting for **43%** of sales in FY2019, and the loss of one or more of these customers could adversely affect results[78](index=78&type=chunk) - The company's performance is greatly impacted by its founder, President, CEO, and Chairman, Gerald B. Shreiber, who beneficially owns **19%** of common stock and holds enhanced voting rights on the Board of Directors[86](index=86&type=chunk) - The company is in the late stages of a multi-year implementation of a new enterprise resource planning (ERP) system, which carries risks of delays, increased costs, and potential disruption to business operations[93](index=93&type=chunk) [Item 2. Properties](index=12&type=section&id=Item%202.%20Properties) J&J Snack Foods Corp. owns and leases numerous manufacturing, warehouse, and distribution facilities across the United States, Mexico, and Canada, including its corporate headquarters in Pennsauken, NJ - The company's corporate headquarters and primary east coast manufacturing facility for soft pretzels, churros, and funnel cake is an owned **70,000 sq. ft.** building in Pennsauken, New Jersey[98](index=98&type=chunk) - The primary west coast manufacturing facility is a leased **137,000 sq. ft.** building in Vernon, California, producing soft pretzels, churros, and baked goods[100](index=100&type=chunk) - In addition to manufacturing plants, the company leases approximately **160** warehouse and distribution facilities in **44** states, Mexico, and Canada[107](index=107&type=chunk) [Item 3. Legal Proceedings](index=12&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no material pending legal proceedings outside of ordinary routine litigation incidental to its business - The Company has no material pending legal proceedings, other than ordinary routine litigation incidental to the business[108](index=108&type=chunk) [Part II](index=13&type=section&id=PART%20II) Part II details the company's common stock market, selected financial data, management's discussion and analysis, and market risk disclosures [Item 5. Market For Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities](index=13&type=section&id=Item%205.%20Market%20For%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20And%20Issuer%20Purchases%20Of%20Equity%20Securities) The company's common stock trades on the NASDAQ Global Select Market under "JJSF", with fiscal 2019 stock prices ranging from $138.40 to $196.84 and quarterly dividends of $0.50 per share Fiscal 2019 Stock Price and Dividend Information | Quarter | High Price | Low Price | Dividend Declared | | :--- | :--- | :--- | :--- | | First | $162.80 | $138.65 | $0.5000 | | Second | $162.84 | $138.40 | $0.5000 | | Third | $167.50 | $150.61 | $0.5000 | | Fourth | $196.84 | $159.63 | $0.5000 | - The company did not purchase any of its common stock in fiscal year 2019, leaving **384,506** shares available for purchase under a plan announced in August 2017[114](index=114&type=chunk) [Item 6. Selected Financial Data](index=14&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides a five-year summary of key financial data from fiscal 2015 to 2019, showing net sales growth from **$976.3 million** to **$1.186 billion** and diluted EPS rising from **$3.73** to **$5.00** Five-Year Selected Financial Data (In thousands except per share data) | Indicator | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,186,487 | $1,138,265 | $1,084,224 | $992,781 | $976,256 | | Net Earnings | $94,819 | $103,596 | $79,174 | $75,975 | $70,183 | | Total Assets | $1,019,339 | $932,013 | $867,228 | $790,487 | $739,669 | | Stockholders' Equity | $833,751 | $759,091 | $682,322 | $637,974 | $599,919 | | Earnings Per Diluted Share | $5.00 | $5.51 | $4.21 | $4.05 | $3.73 | | Cash Dividends Declared Per Common Share | $2.00 | $1.80 | $1.68 | $1.56 | $1.44 | [Item 7. Management's Discussion And Analysis Of Financial Condition And Results Of Operations](index=14&type=section&id=Item%207.%20Management's%20Discussion%20And%20Analysis%20Of%20Financial%20Condition%20And%20Results%20Of%20Operations) In fiscal 2019, net sales increased **4%** to **$1.186 billion**, and operating income rose **6%** to **$117.0 million**, while net earnings decreased **8%** to **$94.8 million** due to prior-year tax benefits, with the company maintaining a strong liquidity position and investing in facilities [Critical Accounting Policies](index=14&type=section&id=Critical%20Accounting%20Policies) The company's critical accounting policies involve significant judgments and estimates in revenue recognition, allowance for doubtful receivables, asset impairment testing for goodwill and other intangibles, and insurance reserves - The company adopted the new ASC 606 revenue recognition guidance in fiscal 2019 using a modified retrospective approach, which did not have a material impact on financial results[124](index=124&type=chunk) - Goodwill, totaling **$102.5 million** as of September 28, 2019, is evaluated annually for impairment at the reporting unit level using a discounted cash flow method, with no impairment found in the latest test[140](index=140&type=chunk) - The company self-insures for its medical plan and, up to loss limits, for worker's compensation and automobile liability, with recorded liabilities of **$1.4 million** for medical claims and **$8.7 million** for worker's comp/auto at the end of fiscal 2019[143](index=143&type=chunk)[144](index=144&type=chunk) [Results of Operations: Fiscal 2019 vs. 2018](index=17&type=section&id=Results%20of%20Operations%3A%20Fiscal%202019%20vs.%202018) In fiscal 2019, net sales grew **4%** to **$1.186 billion**, driven by increases in Food Service and Frozen Beverages sales, while net earnings fell **8%** to **$94.8 million** due to prior-year tax benefits FY 2019 vs. FY 2018 Performance (in millions) | Metric | FY 2019 | FY 2018 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,186.5M | $1,138.3M | +4% | | Operating Income | $117.0M | $110.8M | +6% | | Net Earnings | $94.8M | $103.6M | -8% | | Diluted EPS | $5.00 | $5.51 | -9% | - Food Service sales rose **2%** to **$761.6 million**, with churro sales up **7%** and bakery sales up **4%**, while handheld sales declined **19%**[151](index=151&type=chunk) - Frozen Beverages sales increased **13%** to **$305.6 million**, with machine revenue growing significantly from **$28.7 million** in 2018 to **$45.8 million** in 2019[154](index=154&type=chunk) - The decrease in net earnings was primarily due to a **$20.7 million** gain on the remeasurement of deferred tax liabilities in FY2018 following the Tax Cuts and Jobs Act[161](index=161&type=chunk) [Results of Operations: Fiscal 2018 vs. 2017](index=18&type=section&id=Results%20of%20Operations%3A%20Fiscal%202018%20vs.%202017) Fiscal 2018 net sales increased **5%** to **$1.138 billion**, driven by growth across segments, but operating income decreased **6%** to **$110.8 million** due to higher costs, while net earnings surged **31%** to **$103.6 million** due to tax benefits FY 2018 vs. FY 2017 Performance (in millions) | Metric | FY 2018 (52 wks) | FY 2017 (53 wks) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,138.3M | $1,084.2M | +5% | | Operating Income | $110.8M | $118.1M | -6% | | Net Earnings | $103.6M | $79.2M | +31% | | Diluted EPS | $5.51 | $4.21 | +31% | - Operating income in 2018 was negatively impacted by approximately **$5.3 million** in higher distribution costs and **$1.8 million** from the MARY B's biscuits recall[168](index=168&type=chunk) - The significant increase in net earnings was driven by a **$20.7 million** gain on remeasurement of deferred tax liabilities and an **$8.8 million** reduction in income taxes due to the Tax Cuts and Jobs Act[177](index=177&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity position strengthened in fiscal 2019, with cash and marketable securities increasing by **$66.7 million** to **$342.7 million**, supported by strong operating cash flow and a $50 million undrawn revolving credit facility Cash Flow Summary (FY 2019 vs. FY 2018) (in millions) | Cash Flow Activity (in millions) | FY 2019 | FY 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $147.5 | $123.4 | | Net cash used in investing activities | ($43.4) | ($73.1) | | Net cash used in financing activities | ($22.8) | ($27.3) | - Cash and marketable securities increased by **$66.7 million** (**24%**) to **$342.7 million** at the end of fiscal 2019[193](index=193&type=chunk) - The company has a **$50 million** revolving credit facility that was undrawn at the end of fiscal 2019 and 2018[188](index=188&type=chunk) Contractual Cash Flow Commitments (in thousands) | Commitment | Total | Less Than 1 Year | 1-3 Years | 4-5 Years | After 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Capital lease obligations | $1,057 | $339 | $505 | $213 | $ - | | Purchase commitments | $100,000 | $97,000 | $3,000 | $ - | $ - | | Operating leases | $79,538 | $14,814 | $23,177 | $15,959 | $25,588 | | **Total** | **$180,595** | **$112,153** | **$26,682** | **$16,172** | **$25,588** | [Item 7A. Quantitative And Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%207A.%20Quantitative%20And%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk stems from commodity price volatility for raw materials, mitigated by forward purchasing contracts, with no significant interest rate or foreign exchange rate risk due to the absence of long-term debt or hedging contracts - The company's primary market risk is from commodity price volatility for its raw materials, mitigated through forward purchasing contracts, generally for **1 to 12 months**[225](index=225&type=chunk) - As of September 28, 2019, the company had no long-term debt obligations, minimizing its exposure to interest rate risk[224](index=224&type=chunk) [Item 9A. Controls and Procedures](index=23&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of September 28, 2019, with an unqualified opinion from Grant Thornton LLP - Management concluded that the company's disclosure controls and procedures were effective as of the fiscal year-end, September 28, 2019[229](index=229&type=chunk) - Based on an assessment using the COSO 2013 framework, management believes the company's internal control over financial reporting was effective as of September 28, 2019[234](index=234&type=chunk) [Part III](index=24&type=section&id=PART%20III) Part III outlines the company's directors, executive officers, corporate governance practices, and security ownership [Item 10. Directors, Executive Officers and Corporate Governance](index=24&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) This section lists the company's executive officers, including founder Gerald B. Shreiber as Chairman, President, and CEO, with further details on directors and governance incorporated by reference from the proxy statement Executive Officers | Name | Age | Position | | :--- | :--- | :--- | | Gerald B. Shreiber | 77 | Chairman of the Board, President, Chief Executive Officer and Director | | Dennis G. Moore | 63 | Senior Vice President, Chief Financial Officer Treasurer and Director | | Robert M. Radano | 70 | Senior Vice President,Sales and Chief Operating Officer | | Dan Fachner | 59 | President of The ICEE Company Subsidiary | | Gerard G. Law | 45 | Senior Vice President and Assistant to the President | | Robert J. Pape | 62 | Senior Vice President Sales | [Item 12. Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters](index=25&type=section&id=Item%2012.%20Security%20Ownership%20Of%20Certain%20Beneficial%20Owners%20And%20Management%20And%20Related%20Stockholder%20Matters) As of September 28, 2019, **802,000** securities were to be issued upon the exercise of outstanding options under equity compensation plans, with a weighted-average exercise price of **$128.25**, and **916,000** additional securities remained available for future issuance Equity Compensation Plan Information (as of September 28, 2019) | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 802,000 | $128.25 | 916,000 | [Part IV](index=25&type=section&id=PART%20IV) Part IV lists the exhibits and financial statement schedules, including the consolidated financial statements and notes [Item 15. Exhibits, Financial Statement Schedules](index=25&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section lists the documents filed as part of the Form 10-K report, including consolidated financial statements, schedules, and various exhibits - This section provides a list of all financial statements, schedules, and exhibits filed with the Form 10-K, including governance documents, material contracts, and certifications[254](index=254&type=chunk)[256](index=256&type=chunk) [Financial Statements and Notes](index=27&type=section&id=Financial%20Statements%20and%20Notes) The audited consolidated financial statements for fiscal years 2017-2019 are presented, showing total assets grew to **$1.019 billion** in 2019 from **$932 million** in 2018, with detailed disclosures on accounting policies and segment performance [Consolidated Balance Sheets](index=29&type=section&id=Consolidated%20Balance%20Sheets) As of September 28, 2019, total assets were **$1.019 billion**, driven by a significant increase in cash and cash equivalents to **$192.4 million**, with total liabilities at **$185.6 million** and stockholders' equity at **$833.8 million** Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 28, 2019 | Sep 29, 2018 | | :--- | :--- | :--- | | **Total Current Assets** | **$506,357** | **$382,797** | | Cash and cash equivalents | $192,395 | $111,479 | | **Total Assets** | **$1,019,339** | **$932,013** | | **Total Current Liabilities** | **$121,234** | **$117,899** | | **Total Liabilities** | **$185,618** | **$172,922** | | **Total Stockholders' Equity** | **$833,751** | **$759,091** | [Consolidated Statements of Earnings](index=30&type=section&id=Consolidated%20Statements%20of%20Earnings) For fiscal year 2019, net sales were **$1.186 billion**, with operating income rising to **$117.0 million**, but net earnings decreased to **$94.8 million** or **$5.00** per diluted share, primarily due to differences in income tax provisions Consolidated Statement of Earnings (in thousands, except per share) | Metric | FY 2019 (52 wks) | FY 2018 (52 wks) | FY 2017 (53 wks) | | :--- | :--- | :--- | :--- | | Net Sales | $1,186,487 | $1,138,265 | $1,084,224 | | Gross Profit | $350,401 | $336,286 | $331,023 | | Operating Income | $116,956 | $110,775 | $118,107 | | Net Earnings | $94,819 | $103,596 | $79,174 | | Earnings per diluted share | $5.00 | $5.51 | $4.21 | [Consolidated Statements of Cash Flows](index=32&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For fiscal year 2019, net cash provided by operating activities was **$147.5 million**, with net cash used in investing activities at **$43.4 million** and financing activities at **$22.8 million**, resulting in an **$80.9 million** net increase in cash and cash equivalents Consolidated Statement of Cash Flows (in thousands) | Cash Flow Activity | FY 2019 | FY 2018 | FY 2017 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $147,499 | $123,367 | $125,349 | | Net cash used in investing activities | ($43,363) | ($73,139) | ($135,319) | | Net cash used in financing activities | ($22,826) | ($27,336) | ($42,213) | | Net increase (decrease) in cash | $80,916 | $20,517 | ($49,690) | | Cash at end of year | $192,395 | $111,479 | $90,962 | [Note O – Segment Reporting](index=53&type=section&id=Note%20O%20%E2%80%93%20Segment%20Reporting) In fiscal 2019, the Food Service segment was the largest contributor to sales with **$761.6 million** and operating income at **$78.1 million**, followed by Frozen Beverages and Retail Supermarket segments Segment Performance for Fiscal Year 2019 (in thousands) | Segment | Sales to External Customers | Operating Income | Capital Expenditures | Total Assets | | :--- | :--- | :--- | :--- | :--- | | Food Service | $761,603 | $78,130 | $29,197 | $772,777 | | Retail Supermarket | $119,276 | $8,876 | $1,979 | $22,673 | | Frozen Beverages | $305,608 | $29,950 | $25,952 | $223,889 | | **Total** | **$1,186,487** | **$116,956** | **$57,128** | **$1,019,339** |

J & J Snack Foods Corp. (NASDAQ:JJSF) Q4 2019 Earnings Conference Call November 8, 2019 10:00 AM ET Corporate Participants Gerry Shreiber - Chief Executive Officer Jerry Law - Senior Vice President Dennis Moore - Senior Vice President of Accounting and Administration Dan Fachner - President, ICEE Conference Call Participants Jon Andersen - William Blair Debra Manche - Lakewood Capital Operator Good morning. And welcome to the J&J Snack Foods Fourth Quarter Earnings Conference Call. My name is Cheryl and I w ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended June 29, 2019 or Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 0-14616 J & J SNACK FOODS CORP. (Exact name of registrant as specified in its charter) New Jersey 22-1935537 (State or other jurisdiction of (I.R.S. Employer incorporation or org ...

Financial Data and Key Metrics Changes - Net sales increased by 7% for the quarter and 4% for the nine months [6] - Net earnings rose by 18% to $30.9 million or $1.63 per share for the quarter, compared to $26.1 million or $1.39 per share a year ago [6] - Operating income increased by 12% for the quarter and 8% for the nine months [7] - EBITDA reached a record $175 million for the past 12 months [7] Business Line Data and Key Metrics Changes - Foodservice sales were up 4% for the quarter and 3% for the nine months, driven by strong sales in soft pretzels, churros, funnel cakes, and frozen juice bars [8] - Retail supermarket sales decreased by 5% for the quarter and 2% for the nine months, with soft pretzel sales remaining flat [9] - Frozen beverages sales increased by 20% for the quarter and 13% for the nine months, with beverage-related sales up 16% for the quarter [10] - Service revenue grew by 14% for the quarter and 7% for the nine months [11] Market Data and Key Metrics Changes - Gross profit as a percentage of sales improved to 31.02% from 30.85% year-over-year [12] - Total operating expenses as a percentage of sales decreased to 19.1% from 19.5% year-over-year [12] Company Strategy and Development Direction - The company is actively looking for acquisitions as a use of its cash balance of $314 million, which is the highest in recent years [13][35] - Capital spending for the year is estimated to be about $60 million, focusing on plant efficiencies and business growth [13] - The company has made significant inroads in convenience stores and continues to focus on the restaurant channel for growth [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pricing strategy implemented earlier in the year, indicating that they remain competitive [23] - The company is optimistic about the growth of churros, which have seen double-digit growth across major chains [25] - Management acknowledged challenges in the co-packing agreement but noted that the financial impact has been mitigated [30][31] Other Important Information - The company declared a cash dividend of $0.50 per share, paid on July 3, 2019 [13] - The effective tax rate for the quarter was 28.1%, in line with expectations [17] Q&A Session Summary Question: Pricing Strategy - Inquiry about the recent pricing strategy and consumer response [22] - Management confirmed a slight increase in pricing and noted that they remain competitive [23] Question: Food Service Strength - Question regarding the growth drivers for churros [24] - Management attributed growth to increased consumer awareness and demand [25] Question: Convenience Stores and Restaurants - Inquiry about efforts in convenience stores and restaurant channels [26] - Management confirmed significant progress in convenience stores and ongoing efforts in restaurants [27][28] Question: Co-Packing Agreement Impact - Question about the financial impact of a co-packing agreement cancellation [30] - Management clarified that the revenue loss was offset by a reimbursement for capital outlay [31] Question: Cash and Investments Plans - Inquiry about plans for the cash balance [34] - Management indicated intentions to use cash for acquisitions and business improvements [35][36] Question: Manufacturing and Capital Spend - Question about manufacturing plans and capital spending [40] - Management confirmed the closure of an undersized plant and ongoing investments in larger projects [41] Question: Bakery Capital Costs - Inquiry about the cost to establish a large-scale bakery [43] - Management estimated the cost at around $40 million [43] Question: Weather Impact on Sales - Question regarding the impact of weather on sales [44] - Management noted that warm weather positively affected the ICEE business [44] Question: M&A Environment - Inquiry about the current M&A environment and asset valuations [50] - Management acknowledged that while valuations can be high, they remain confident in finding suitable acquisition targets [50] Question: Innovation and New Products - Question about expectations for new product contributions [51] - Management indicated ongoing efforts in R&D and new product development [52][54]

Financial Data and Key Metrics Changes - Net sales increased by 4% for the quarter and 3% for the six months [5] - Net earnings rose by 14% to $20.4 million or $1.08 per share from $17.8 million or $0.95 per share a year ago [5] - Operating income increased by 5% for both the quarter and the six months [6] - EBITDA for the past 12 months was $168 million [6] - Gross profit as a percentage of sales decreased to 28.7% from 29.04% last year [11] - Total operating expense as a percentage of sales decreased to 19.7% from 20.2% last year [11] Business Line Data and Key Metrics Changes - Food Service sales increased by 1% for the quarter and 2% for the six months, driven by soft pretzels, churros, and funnel cakes [7][8] - Retail Supermarkets sales decreased by 1% for the quarter but remained unchanged for the six months, with soft pretzel sales up 7% for the quarter [9] - ICEE and Frozen Beverages sales increased by 15% for the quarter and 8% for the six months, with beverage machine sales up significantly [10] Market Data and Key Metrics Changes - Sales of frozen juice bars and ices were down 5% for the quarter and up 3% for the six months [9] - Sales of handhelds were down 14% for the quarter [7] - Operating income in the Food Service segment increased from $18.5 million to $19.6 million due to lower marketing and distribution expenses [14] Company Strategy and Development Direction - The company is focused on acquisitions as a use of cash, with $287 million in cash and investment securities [12] - Management is optimistic about the Food Service segment, particularly soft pretzels, and is exploring ways to grow sales in this area [19][21] - The company is continuously developing new products and has several projects in the pipeline [54] Management's Comments on Operating Environment and Future Outlook - Management expects a good performance in the third and fourth quarters, benefiting from warmer weather and increased outdoor activities [67] - The company has not experienced a down earnings quarter historically and does not expect one in the near future [68] Other Important Information - Capital spending was $15 million in the quarter, with an estimated total of about $50 million for the year [12] - A cash dividend of $0.50 per share was declared and paid [12] Q&A Session Summary Question: Insights on Food Service business growth - Management noted that while soft pretzel sales have stabilized, they remain bullish on growth opportunities in the restaurant sector [19][21] Question: Bakery business performance - The bakery business was flat due to tough comparisons and co-packing opportunities shifting [22][23] Question: Frozen Beverages machine sales - Management acknowledged the unpredictability of machine sales but emphasized the importance of influencing customers to use their brands [29][30] Question: Pricing impact - Management expects pricing changes to have a more significant impact in the second half of the fiscal year [31] Question: Distribution costs - Management reported a decrease in distribution costs, attributing it to a plateauing effect [38] Question: Cash and securities management - Management confirmed that cash reserves are primarily intended for acquisitions rather than special dividends [45] Question: Supply chain improvements - Management provided an update on ongoing projects aimed at improving margins through better logistics and production capacity [62][64]