NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position and the results of operations and cash flows. Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported net earnings.
The results of operations for the three months and nine months ended June 29, 2013 and June 23, 2012 are not necessarily indicative of results for the full year. Sales of our frozen beverages and frozen juice bars and ices are generally higher in the third and fourth quarters due to warmer weather.
While we believe that the disclosures presented are adequate to make the information not misleading, it is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 29, 2012.
Note 2
We recognize revenue from our products when the products are shipped to our customers. Repair and maintenance equipment service revenue is recorded when it is performed provided the customer terms are that the customer is to be charged on a time and material basis or on a straight-line basis over the term of the contract when the customer has signed a service contract. Revenue is recognized only where persuasive evidence of an arrangement exists, our price is fixed or estimable and collectability is reasonably assured. We record offsets to revenue for allowances, end-user pricing adjustments, trade spending, coupon redemption costs and returned product. Customers generally do not have the right to return product unless it is damaged or defective. We provide an allowance for doubtful receivables after taking into consideration historical experience and other factors. The allowance for doubtful receivables was $853,000 and $685,000 at June 29, 2013 and September 29, 2012, respectively.
Note 3
Depreciation of equipment and buildings is provided for by the straight-line method over the assets’ estimated useful lives. Amortization of improvements is provided for by the straight-line method over the term of the lease or the assets’ estimated useful lives, whichever is shorter. Licenses and rights, customer relationships and non compete agreements arising from acquisitions are amortized by the straight-line method over periods ranging from 3 to 20 years. Depreciation expense was $7,434,000 and $6,620,000 for the three months ended June 29, 2013 and June 23, 2012, respectively, and for the nine months ended June 29, 2013 and June 23, 2012 was $21,298,000 and $19,332,000, respectively
Note 4
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:
|
|
Three Months Ended June 29, 2013
|
|
|
|
Income
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per Share
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings available to
common stockholders
|
|
$
|
21,172
|
|
|
|
18,807
|
|
|
$
|
1.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
-
|
|
|
|
106
|
|
|
|
(.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings available to
common stockholders plus
assumed conversions
|
|
$
|
21,172
|
|
|
|
18,913
|
|
|
$
|
1.12
|
|
|
|
Nine Months Ended June 29, 2013
|
|
|
|
Income
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per Share
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings available to
common stockholders
|
|
$
|
44,058
|
|
|
|
18,804
|
|
|
$
|
2.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
-
|
|
|
|
86
|
|
|
|
(.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings available to
common stockholders plus
assumed conversions
|
|
$
|
44,058
|
|
|
|
18,890
|
|
|
$
|
2.33
|
|
|
|
Three Months Ended June 23, 2012
|
|
|
|
Income
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per Sha
re
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings available to
common stockholders
|
|
$
|
18,672
|
|
|
|
18,886
|
|
|
$
|
0.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
-
|
|
|
|
61
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings available to
common stockholders plus
assumed conversions
|
|
$
|
18,672
|
|
|
|
18,947
|
|
|
$
|
0.99
|
|
|
|
Nine Months Ended June 23, 2012
|
|
|
|
Income
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per Share
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings available to
common stockholders
|
|
$
|
34,580
|
|
|
|
18,850
|
|
|
$
|
1.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
-
|
|
|
|
67
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings available to
common stockholders plus
assumed conversions
|
|
$
|
34,580
|
|
|
|
18,917
|
|
|
$
|
1.83
|
|
Note 5
At June 29, 2013, the Company has three stock-based employee compensation plans. Share-based compensation was recognized as follows:
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
June 29,
2013
|
|
|
June 23,
2012
|
|
|
June 29,
2013
|
|
|
June 23,
2012
|
|
|
|
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
$
|
206
|
|
|
$
|
191
|
|
|
$
|
596
|
|
|
$
|
484
|
|
Stock purchase plan
|
|
|
179
|
|
|
|
112
|
|
|
|
316
|
|
|
|
214
|
|
Stock issued to outside directors
|
|
|
11
|
|
|
|
-
|
|
|
|
35
|
|
|
|
-
|
|
Restricted stock issued to an employee
|
|
|
4
|
|
|
|
-
|
|
|
|
13
|
|
|
|
-
|
|
|
|
$
|
400
|
|
|
$
|
303
|
|
|
$
|
960
|
|
|
$
|
698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per diluted share
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
$
|
0.05
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The above compensation is net of tax benefits
|
|
$
|
142
|
|
|
$
|
47
|
|
|
$
|
498
|
|
|
$
|
221
|
|
The Company anticipates that share-based compensation will not exceed $1.4 million net of tax benefits, or approximately $.07 per share for the fiscal year ending September 28, 2013.
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 2013 first nine months: expected volatility of 26%; risk-free interest rate of .81%; dividend rate of .9% and expected lives of 5 years.
During the 2013 nine month period, the Company granted 1,600 stock options. The weighted-average grant date fair value of these options was $13.76. During the 2012 nine month period, the Company granted 2,000 stock options. The weighted-average grant date fair value of these options was $11.97.
Expected volatility is based on the historical volatility of the price of our common shares over the past 55 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.
Note 6
We account for our income taxes under the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities.
Additionally, we recognize a liability for income taxes and associated penalties and interest for tax positions taken or expected to be taken in a tax return which are more likely than not to be overturned by taxing authorities (“uncertain tax positions”).
We have not recognized a tax benefit in our financial statements for these uncertain tax positions.
The total amount of gross unrecognized tax benefits is
$425,000 and $541,000 on June 29, 2013 and September 29, 2012, 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. As of June 29, 2013 and September 29, 2012, respectively, the Company has $271,000 and $284,000 of accrued interest and penalties.
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 with virtually all open for examination for three to four years.
Note 7
In June 2011, the FASB issued guidance which gives us the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both options, we are required to present each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this guidance do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This guidance was adopted in our fiscal year 2013 first quarter and did not have a material impact on our financial statements.
Note 8 Inventories consist of the following:
|
|
June 29,
2013
|
|
|
September 29,
2012
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Finished goods
|
|
$
|
36,534
|
|
|
$
|
32,439
|
|
Raw Materials
|
|
|
15,154
|
|
|
|
14,584
|
|
Packaging materials
|
|
|
6,233
|
|
|
|
5,985
|
|
Equipment parts & other
|
|
|
17,392
|
|
|
|
16,753
|
|
|
|
$
|
75,313
|
|
|
$
|
69,761
|
|
|
|
|
|
|
|
|
|
|
The above inventories are net of reserves
|
|
$
|
4,815
|
|
|
$
|
3,883
|
|
Note 9
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 (loss). These segments are described below.
Food Service
The primary products sold by the food service group are soft pretzels, frozen juice treats and desserts, churros, dough enrobed handheld products and baked goods. Our customers in the food service industry include snack bars and food stands in chain, department and discount stores; malls and shopping centers; 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 by the retail supermarket segment 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, WHOLE FRUIT Sorbet, ICEE Squeeze-Up Tubes, dough enrobed handheld products and TIO PEPE’S Churros. 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 and related products 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.
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. 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:
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
June 29,
2013
|
|
|
June 23,
2012
|
|
|
June 29,
2013
|
|
|
June 23,
2012
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
Sales to External Customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food Service
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soft pretzels
|
|
$
|
36,136
|
|
|
$
|
29,579
|
|
|
$
|
104,067
|
|
|
$
|
82,592
|
|
Frozen juices and ices
|
|
|
16,468
|
|
|
|
19,680
|
|
|
|
34,117
|
|
|
|
39,106
|
|
Churros
|
|
|
14,774
|
|
|
|
12,330
|
|
|
|
42,648
|
|
|
|
34,263
|
|
Handhelds
|
|
|
6,806
|
|
|
|
7,249
|
|
|
|
20,058
|
|
|
|
21,242
|
|
Bakery
|
|
|
68,099
|
|
|
|
66,754
|
|
|
|
203,488
|
|
|
|
191,938
|
|
Other
|
|
|
2,939
|
|
|
|
2,872
|
|
|
|
6,424
|
|
|
|
6,716
|
|
|
|
$
|
145,222
|
|
|
$
|
138,464
|
|
|
$
|
410,802
|
|
|
$
|
375,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Supermarket
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soft pretzels
|
|
$
|
8,576
|
|
|
$
|
7,635
|
|
|
$
|
27,200
|
|
|
$
|
24,242
|
|
Frozen juices and ices
|
|
|
18,226
|
|
|
|
17,629
|
|
|
|
33,694
|
|
|
|
34,204
|
|
Handhelds
|
|
|
4,995
|
|
|
|
5,193
|
|
|
|
16,425
|
|
|
|
16,861
|
|
Coupon redemption
|
|
|
(954
|
)
|
|
|
(857
|
)
|
|
|
(2,497
|
)
|
|
|
(2,183
|
)
|
Other
|
|
|
237
|
|
|
|
255
|
|
|
|
514
|
|
|
|
999
|
|
|
|
$
|
31,080
|
|
|
$
|
29,855
|
|
|
$
|
75,336
|
|
|
$
|
74,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frozen Beverages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beverages
|
|
$
|
40,996
|
|
|
$
|
41,238
|
|
|
$
|
91,476
|
|
|
$
|
91,616
|
|
Repair and
maintenance service
|
|
|
13,833
|
|
|
|
12,386
|
|
|
|
38,385
|
|
|
|
35,875
|
|
Machines sales
|
|
|
5,035
|
|
|
|
3,711
|
|
|
|
12,028
|
|
|
|
9,646
|
|
Other
|
|
|
870
|
|
|
|
681
|
|
|
|
1,743
|
|
|
|
1,458
|
|
|
|
$
|
60,734
|
|
|
$
|
58,016
|
|
|
$
|
143,632
|
|
|
$
|
138,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Sales
|
|
$
|
237,036
|
|
|
$
|
226,335
|
|
|
$
|
629,770
|
|
|
$
|
588,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food Service
|
|
$
|
4,943
|
|
|
$
|
4,342
|
|
|
$
|
14,169
|
|
|
$
|
12,746
|
|
Retail Supermarket
|
|
|
9
|
|
|
|
5
|
|
|
|
24
|
|
|
|
15
|
|
Frozen Beverages
|
|
|
3,671
|
|
|
|
3,452
|
|
|
|
10,682
|
|
|
|
10,143
|
|
|
|
$
|
8,623
|
|
|
$
|
7,799
|
|
|
$
|
24,875
|
|
|
$
|
22,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food Service
|
|
$
|
18,822
|
|
|
$
|
15,203
|
|
|
$
|
46,782
|
|
|
$
|
35,205
|
|
Retail Supermarket
|
|
|
2,883
|
|
|
|
4,115
|
|
|
|
6,857
|
|
|
|
7,597
|
|
Frozen Beverages
|
|
|
10,679
|
|
|
|
10,573
|
|
|
|
12,965
|
|
|
|
11,825
|
|
|
|
$
|
32,384
|
|
|
$
|
29,891
|
|
|
$
|
66,604
|
|
|
$
|
54,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food Service
|
|
$
|
4,798
|
|
|
$
|
6,315
|
|
|
$
|
14,740
|
|
|
$
|
19,207
|
|
Retail Supermarket
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Frozen Beverages
|
|
|
6,599
|
|
|
|
2,691
|
|
|
|
12,214
|
|
|
|
10,870
|
|
|
|
$
|
11,397
|
|
|
$
|
9,006
|
|
|
$
|
26,954
|
|
|
$
|
30,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food Service
|
|
$
|
478,203
|
|
|
$
|
441,785
|
|
|
$
|
478,203
|
|
|
$
|
441,785
|
|
Retail Supermarket
|
|
|
6,074
|
|
|
|
4,285
|
|
|
|
6,074
|
|
|
|
4,285
|
|
Frozen Beverages
|
|
|
155,360
|
|
|
|
147,389
|
|
|
|
155,360
|
|
|
|
147,389
|
|
|
|
$
|
639,637
|
|
|
$
|
593,459
|
|
|
$
|
639,637
|
|
|
$
|
593,459
|
|
Note 10
Our three reporting units, which are also reportable segments, are Food Service, Retail Supermarkets and Frozen Beverages.
The carrying amounts of acquired intangible assets for the Food Service, Retail Supermarkets and Frozen Beverage segments as of June 29, 2013 and September 29, 2012 are as follows:
|
|
June 29, 2013
|
|
|
September 29, 2012
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOOD SERVICE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite lived intangible
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade Names
|
|
$
|
12,880
|
|
|
$
|
-
|
|
|
$
|
12,880
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non compete agreements
|
|
|
545
|
|
|
|
472
|
|
|
|
545
|
|
|
|
456
|
|
Customer relationships
|
|
|
40,187
|
|
|
|
25,286
|
|
|
|
40,187
|
|
|
|
22,582
|
|
License and rights
|
|
|
3,606
|
|
|
|
2,590
|
|
|
|
3,606
|
|
|
|
2,519
|
|
|
|
$
|
57,218
|
|
|
$
|
28,348
|
|
|
$
|
57,218
|
|
|
$
|
25,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RETAIL SUPERMARKETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite lived intangible
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade Names
|
|
$
|
4,006
|
|
|
$
|
-
|
|
|
$
|
4,006
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
|
279
|
|
|
|
55
|
|
|
|
279
|
|
|
|
31
|
|
|
|
$
|
4,285
|
|
|
$
|
55
|
|
|
$
|
4,285
|
|
|
$
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FROZEN BEVERAGES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite lived intangible
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade Names
|
|
$
|
9,315
|
|
|
$
|
-
|
|
|
$
|
9,315
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non compete agreements
|
|
|
198
|
|
|
|
198
|
|
|
|
198
|
|
|
|
198
|
|
Customer relationships
|
|
|
6,478
|
|
|
|
4,676
|
|
|
|
6,478
|
|
|
|
4,201
|
|
Licenses and rights
|
|
|
1,601
|
|
|
|
696
|
|
|
|
1,601
|
|
|
|
644
|
|
|
|
$
|
17,592
|
|
|
$
|
5,570
|
|
|
$
|
17,592
|
|
|
$
|
5,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED
|
|
$
|
79,095
|
|
|
$
|
33,973
|
|
|
$
|
79,095
|
|
|
$
|
30,631
|
|
Amortized intangible assets are being amortized by the straight-line method over periods ranging from 3 to 20 years and amortization expense is reflected throughout operating expenses. No intangible assets were acquired in the nine months ended June 29, 2013. Aggregate amortization expense of intangible assets for the three months ended June 29, 2013 and June 23, 2012 was $1,110,000 and $1,109,000, respectively and for the nine months ended June 29, 2013 and June 23, 2012 was $3,342,000 and $3,355,000, respectively.
Estimated amortization expense for the next five fiscal years is approximately $4,500,000 in 2013, $4,400,000 in 2014 and 2015 and $4,200,000 in 2016 and $1,700,000 in 2017. The weighted average amortization period of the intangible assets is 10.1 years.
Goodwill
The carrying amounts of goodwill for the Food Service, Retail Supermarket and Frozen Beverage segments are as follows:
|
|
Food
Service
|
|
|
Retail
Supermarket
|
|
|
Frozen
Beverages
|
|
|
Total
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
June 29,
2013
|
|
$
|
39,115
|
|
|
$
|
1,844
|
|
|
$
|
35,940
|
|
|
$
|
76,899
|
|
There were no changes in the carrying amounts of goodwill for the three and nine months ended June 29, 2013.
Note 11
We have classified our investment securities as marketable securities held to maturity and available for sale. The FASB defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the FASB has established three levels of inputs that may be used to measure fair value:
Level 1
|
Observable input such as quoted prices in active markets for identical assets or liabilities;
|
Level 2
|
Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and
|
Level 3
|
Unobservable inputs for which there is little or no market data, which require the reporting entity to
develop its own assumptions.
|
Marketable securities held to maturity and available for sale values are derived solely from level 1 inputs.
The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at June 29, 2013 are summarized as follows:
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Market
Value
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
Guaranteed Investment Certificate
|
|
$
|
3,243
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,243
|
|
US Government Agency Debt
|
|
|
2,000
|
|
|
|
-
|
|
|
|
36
|
|
|
|
1,964
|
|
Certificates of Deposit
|
|
|
255
|
|
|
|
-
|
|
|
|
-
|
|
|
|
255
|
|
|
|
$
|
5,498
|
|
|
$
|
-
|
|
|
$
|
36
|
|
|
$
|
5,462
|
|
The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at June 29, 2013 are summarized as follows:
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Market
Value
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual Funds
|
|
$
|
110,000
|
|
|
$
|
70
|
|
|
$
|
2,558
|
|
|
$
|
107,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
110,000
|
|
|
$
|
70
|
|
|
$
|
2,558
|
|
|
$
|
107,512
|
|
The mutual funds seek current income with an emphasis on maintaining low volatility and overall moderate duration.
All of the certificates of deposit are within the FDIC limits for insurance coverage.
The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at September 29, 2012 are summarized as follows:
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Market
Value
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
US Government Agency Debt
|
|
$
|
24,998
|
|
|
$
|
126
|
|
|
$
|
-
|
|
|
$
|
25,124
|
|
Certificates of Deposit
|
|
|
1,214
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,214
|
|
|
|
$
|
26,212
|
|
|
$
|
126
|
|
|
$
|
-
|
|
|
$
|
26,338
|
|
All of the certificates of deposit are within the FDIC limits for insurance coverage.
The amortized cost and fair value of the Company’s held to maturity securities by contractual maturity at June 29, 2013 and September 29, 2012 are summarized as follows:
|
|
June 29, 2013
|
|
|
September 29, 2012
|
|
|
|
Amortized
Cost
|
|
|
Fair
Market
Value
|
|
|
Amortized
Cost
|
|
|
Fair
Market
Value
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
Due in one year or less
|
|
$
|
3,498
|
|
|
$
|
3,498
|
|
|
$
|
1,214
|
|
|
$
|
1,214
|
|
Due after one year through
five years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Due after five years through
ten years
|
|
|
2,000
|
|
|
|
1,964
|
|
|
|
24,998
|
|
|
|
25,124
|
|
Total held to maturity
securities
|
|
$
|
5,498
|
|
|
$
|
5,462
|
|
|
$
|
26,212
|
|
|
$
|
26,338
|
|
Less current portion
|
|
|
3,498
|
|
|
|
3,498
|
|
|
|
1,214
|
|
|
|
1,214
|
|
Long term held to maturity
securities
|
|
$
|
2,000
|
|
|
$
|
1,964
|
|
|
$
|
24,998
|
|
|
$
|
25,124
|
|
Proceeds from the redemption and sale of marketable securities were $480,000 and $23,958,000 in the three months and nine months ended June 29, 2013, respectively; and $21,000,000 and $81,023,000 in the three months and nine months ended June 23, 2012, respectively, with no gain or loss recorded. We use the specific identification method to determine the cost of securities sold.
Note 12
In June 2012, we acquired the assets of Kim & Scott’s Gourmet Pretzels, Inc., a manufacturer and seller of a premium brand soft pretzel. This business had sales of approximately $8 million over the prior twelve months to food service and retail supermarket customers and had sales of approximately $1.8 million in our 2012 fiscal year from the acquisition date.
This acquisition was and will be accounted for under the purchase method of accounting, and its operations are and will be included in the consolidated financial statements from the acquisition date.
The purchase price allocation for the Kim and Scott’s acquisition is as follows:
|
|
(in thousands)
|
|
|
|
|
|
|
Working Capital
|
|
$
|
(89
|
)
|
Property, plant & equipment
|
|
|
724
|
|
Trade Names
|
|
|
126
|
|
Customer Relationships
|
|
|
235
|
|
Non Compete Agreement
|
|
|
75
|
|
Goodwill
|
|
|
6,829
|
|
|
|
|
|
|
Purchase Price
|
|
$
|
7,900
|
|
Acquisition costs of $155,000 for the Kim & Scott’s acquisition are included in other general expense in the consolidated statements of earnings for the year ended September 29, 2012.
The goodwill and intangible assets acquired in the business combination are recorded at fair value. To measure fair value for such assets, we use techniques including discounted expected future cash flows (Level 3 input).