J & J Snack Foods(US:JJSF)2024-11-26 22:00Revenue Composition - Soft pretzel sales accounted for 18% of the Company's revenue in fiscal year 2024, down from 19% in both fiscal years 2023 and 2022[17]. - Frozen novelties sales represented 17% of the Company's revenue in fiscal year 2024, consistent with fiscal year 2023, and up from 14% in fiscal year 2022[21]. - Churro sales were 7% of the Company's sales in fiscal years 2024 and 2023, and 6% in fiscal year 2022[26]. - Bakery products sales constituted 26% of the Company's sales in both fiscal years 2024 and 2023, down from 29% in fiscal year 2022[28]. - Frozen beverage sales increased to 15% of the Company's revenue in fiscal year 2024, compared to 14% in fiscal year 2023 and 13% in fiscal year 2022[29]. Customer Concentration - The Company's top ten customers accounted for 45% of sales in fiscal year 2024, with the largest customer contributing 9%[35]. - The company's top ten customers accounted for 45% of sales in fiscal year 2024, with the largest customer representing 9% of total sales[75]. Operational Segments - The Company operates in three segments: Food Service, Retail Supermarkets, and Frozen Beverages, with sales primarily to foodservice customers[12]. Product Development and Innovation - The Company develops and introduces new products routinely, evaluating their success based on sales and profit levels[41]. - Sales of new products reached approximately $24.7 million in the first twelve months since their introduction, primarily from churros[152]. - The company launched the Hola! Churros brand in fiscal year 2023 and expanded the SuperPretzel brand with Bavarian Sticks[131]. - The company acquired Thinsters in fiscal year 2024, enhancing its product portfolio[131]. Seasonal Sales Trends - The Company's sales are seasonal, with higher sales of frozen beverages and novelties during warmer months[43]. - The company’s sales are affected by seasonal demand, with higher demand during summer months for ICEE and frozen novelty products[101]. Foreign Operations - Sales from foreign operations were $73.4 million in fiscal year 2024, up from $70.2 million in 2023 and $45.2 million in 2022, indicating a growth trend[53]. - The company’s foreign operations accounted for 5.0% of total assets as of September 28, 2024, compared to 4.8% in the previous year[53]. - The company reported foreign operations sales of $73.4 million, $70.2 million, and $45.2 million for fiscal years 2024, 2023, and 2022, respectively, indicating a growth trend[90]. - Total assets of foreign operations were approximately $67.6 million, representing 5.0% of total assets as of September 28, 2024, compared to $61.5 million or 4.8% of total assets as of September 30, 2023[90]. Employee and Safety Metrics - Approximately 5,000 full and part-time employees are employed, with about 1,500 production and distribution employees covered by collective bargaining agreements[57]. - The company maintains a safety culture with Total Recordable Incident Rate (TRIR) and Days Away, Restricted or Transferred (DART) incident rates lower than food manufacturing averages[58]. Compliance and Risk Management - The company’s compliance with food safety regulations did not materially affect capital expenditures or earnings in fiscal 2024 and is not expected to impact fiscal 2025[54]. - The company has implemented Corporate Standards aligned with Global Food Safety Initiative (GFSI) standards to ensure product safety and quality[55]. - The company identified a material weakness in internal control over financial reporting related to ineffective information technology general controls, which could lead to material misstatements in financial statements[99]. - The company is developing a remediation plan to address the identified material weakness, which if insufficient, could adversely affect business and financial condition[100]. - The company faces risks related to manufacturing capacity constraints that could negatively impact customer service levels and demand for products[81]. - The company has a cybersecurity risk management program aligned with industry best practices to assess and manage material cybersecurity risks[104]. - The company has established a structured approach to investigate and mitigate cybersecurity incidents, including annual external penetration testing and employee training[106]. Financial Performance - Net sales increased by $15.9 million, or 1%, to $1,574.8 million in fiscal 2024, driven by growth across all business segments[136]. - Gross profit rose by $16.3 million, or 4%, to $486.1 million, with gross profit as a percentage of sales increasing to 30.9% from 30.1%[138]. - Total operating expenses increased by $8.2 million, or 2%, to $368.6 million, with operating expenses as a percentage of sales rising to 23.4%[139]. - Operating income increased by $8.0 million, or 7.3%, to $117.5 million, with operating income as a percentage of net sales improving to 7.5%[150]. - Net earnings increased by $7.6 million, or 10%, to $86.6 million, translating to $4.45 per diluted share[143]. - Investment income increased by $0.5 million, or 18%, to $3.2 million due to higher average cash balances and interest rates[141]. - Interest expense decreased by $2.9 million, or 62%, to $1.8 million due to reduced average outstanding borrowings[141]. Capital Expenditures and Investments - Cash flows from investing activities totaled $(77.7) million in fiscal 2024, compared to $(93.2) million in fiscal 2023, reflecting strategic investments[170]. - Cash and cash equivalents stood at $73.4 million as of September 28, 2024, indicating a solid liquidity position[176]. - Dividends paid increased to $56.96 million in fiscal 2024, reflecting a raised quarterly dividend[175]. - The company has material cash requirements including approximately $122 million in purchase commitments for raw materials, which are managed through forward purchasing to mitigate price fluctuations[182]. - The company has operating lease payment obligations of $159.8 million as of September 28, 2024, with $19.1 million payable within the next 12 months[183]. Manufacturing and Distribution - The company’s manufacturing equipment is primarily sourced from independent third parties, ensuring availability and reducing supply chain risks[49]. - A fire incident at the Holly Ridge plant in North Carolina on August 19, 2024, interrupted operations, highlighting risks associated with manufacturing and distribution[78]. - The company opened three regional distribution centers, projected to drive significant cost reductions in warehousing and distribution costs[131]. - Six new production lines were added, significantly expanding capacity to meet growth opportunities in core products[131]. - A new ERP system was implemented in fiscal 2022, creating efficiencies and streamlining internal processes[131]. - The company leases approximately 172 smaller warehouse and distribution facilities across 45 states and several countries[114]. Legal and Regulatory Matters - No material pending legal proceedings were reported, other than ordinary routine litigation incidental to the business[115]. Goodwill and Credit Losses - The company has evaluated goodwill for impairment and found that the fair value of each reporting unit with goodwill exceeded its carrying value by at least 50% as of September 28, 2024[196]. - The company maintains an allowance for estimated credit losses based on historical experience and other factors, continuously monitoring collections and payments from customers[194]. Accounting Policies - The company has not made any material changes in the accounting methodology used to recognize revenue during the past three fiscal years, with revenue recognized at a point-in-time when control is transferred to customers[193]. - The company has off-balance sheet arrangements for purchase commitments as of September 28, 2024[184]. - The company uses various models to determine the fair value of assets acquired and liabilities assumed in business combinations, including the net realizable value method and the relief of royalty method[208].