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Note 2

9 Months Ended

Jun. 25, 2022

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note 2

On June 21, 2022, J & J Snack Foods Corp. and its wholly-owned subsidiary, DD Acquisition Holdings, LLC, completed the acquisition of one hundred percent (100%) of the equity interests of Dippin’ Dots Holding, L.L.C. (“Dippin’ Dots”) which, through its wholly-owned subsidiaries, owns and operates the Dippin’ Dots and Doc Popcorn businesses. The purchase price was approximately $223,561,000, consisting entirely of cash, and may be modified for certain customary post-closing purchase price adjustments.

Dippin’ Dots is a leading producer of flash-frozen beaded ice cream treats, and the acquisition will leverage synergies in entertainment and amusement locations, theaters, and convenience to continue to expand our business. The acquisition also includes the Doc Popcorn business operated by Dippin’ Dots.

The financial results of Dippin’ Dots have been included in our consolidated financial statements since the date of the acquisition. Sales and net earnings of Dippin’ Dots since the date of acquisition were $2,218,000 and $621,000 for the three and nine-months ended June 25, 2022. Dippin’ Dots is reported as part of our Food Service segment. Included within Administrative expenses for the quarter were $3,088,000 of acquisition costs.

Upon acquisition, the assets and liabilities of Dippin’ Dots were adjusted to their respective fair values as of the closing date of the transaction, including the identifiable intangible assets acquired. In addition, the excess of the purchase price over the fair value of the net assets acquired has been recorded as goodwill. The fair value estimates used in valuing certain acquired assets and liabilities are based, in part, on inputs that are unobservable. For intangible assets, these include, but are not limited to, forecasted future cash flows, revenue growth rates, attrition rates and discount rates.

The purchase price allocation as of the date of acquisition was based on a preliminary valuation and is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available.

The major classes of assets and liabilities to which we have preliminarily allocated the purchase price were as follows:

Preliminary Dippin' Dots Purchase Price Allocation (1)

		(in thousands)
		June 21,
		2022

Cash and cash equivalents		$	2,259
Accounts receivable, net			12,257
Inventories			8,812
Prepaid expenses and other			1,215
Property, plant and equipment, net			24,622
Intangible assets			120,400
Goodwill⁽²⁾			66,634
Operating lease right-of-use assets			3,514
Other noncurrent assets			243
Total assets acquired			239,956
Liabilities assumed:
Current lease liabilities			619
Accounts payable			6,005
Other current liabilities			3,532
Noncurrent lease liabilities			2,954
Other noncurrent liabilities			3,285
Total liabilities acquired			16,395
Purchase price		$	223,561

(1)	Due to the limited time since the date of the acquisition, the purchase price allocation remains preliminary.
(2)	Goodwill was assigned to our Food Services segment and was primarily attributed to the assembled workforce of the acquired business and to our expectations of favorable growth opportunities in entertainment and amusement locations, theaters, and convenience based on increased synergies that are expected to be achieved from the integration of Dippin’ Dots.

Acquired Intangible Assets

						(in thousands)
		*Weighted average*				*June 21,*
		*life (years)*				*2022*
Amortizable
Trade name		indefinite					76,900
Customer relationships			10				12,100
Technology			10				22,900
Franchise agreements			10				8,500
Total acquired intangible assets							120,400

Dippin' Dots Results Included in the Company's Consolidated Results

		(in thousands)
		Three Months ended				Nine Months ended
		June 25,				June 25,
		2022				2022

Net sales		$	2,218			$	2,218
Net earnings		$	621			$	621

The following unaudited pro forma information presents the consolidated results of operations as if the business combination in 2022 had occurred as of September 27, 2020, after giving effect to acquisition-related adjustments, including: (1) depreciation and amortization of assets; (2) amortization of unfavorable contracts related to the fair value adjustments of the assets acquired; (3) change in the effective tax rate; (4) interest expense on any debt incurred to fund the acquisitions which would have been incurred had such acquisitions occurred as of September 27, 2020; and (5) merger and acquisition costs.

J & J Snack Foods Corp and Dippin' Dots Unaudited Pro Forma Combined Financial Information

		(in thousands)
		Three Months ended								Nine Months ended
		June 25,				June 26,				June 25,				June 26,
		2022				2021				2022				2021

Net sales		$	404,182			$	349,722			$	1,028,079			$	861,536
Net earnings		$	17,838			$	33,980			$	31,501			$	35,893

Earnings per diluted share		$	0.93			$	1.77			$	1.64			$	1.88
Weighted average number of diluted shares			19,234				19,185				19,198				19,116

The pro forma information does not reflect the potential benefits of cost and funding synergies, opportunities to earn additional revenues, or other factors, and therefore does not represent what the actual Net sales and Net earnings would have been had the companies actually been combined as of this date.