Note 2 - Business Combinations

6 Months Ended

Mar. 25, 2023

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note 2 Business Combinations

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 $223.6 million, 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 (loss) of Dippin’ Dots were $16.0 million and ($0.2) million for the three months ended March 25, 2023 and $29.3 million and ($0.8) million for the six months ended March 25, 2023. Dippin’ Dots is reported as part of our Food Service segment.

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.

During the three months ended March 25, 2023, we recorded a measurement period adjustment to the estimated fair values initially recorded on June 21, 2022 which resulted in an increase in Other Current Liabilities of $0.7 million and an increase in Goodwill of $0.7 million. In fiscal year 2022, we previously recorded measurement period adjustments to the estimated fair values initially recorded on June 21, 2022, which resulted in an increase to Property, plant, and equipment, net of $6.5 million, and reductions in Goodwill, Identifiable intangible assets, and Inventories of $4.0 million, $2.2 million, and $0.3 million, respectively. The measurement period adjustments were recorded to better reflect market participant assumptions about facts and circumstances existing as of the acquisition date and did not have a material impact on our consolidated statement of income for the three months, or the six months, ended March 25, 2023.

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)

	Preliminary Value
	as of acquisition
	date (as previously		Measurement
	reported as of		Period
	June 25, 2022)		Adjustment			As Adjusted
	(in thousands)
Cash and cash equivalents	$	2,259				$	2,259
Accounts receivable, net		12,257					12,257
Inventories		8,812		(301	)		8,511
Prepaid expenses and other		1,215					1,215
Property, plant and equipment, net		24,622		6,548			31,170
Intangible assets		120,400		(2,200	)		118,200
Goodwill (2)		66,634		(3,397	)		63,237
Operating lease right-of-use assets		3,514					3,514
Other noncurrent assets		243					243
Total assets acquired		239,956		650			240,606
Liabilities assumed:
Current lease liabilities		619					619
Accounts payable		6,005					6,005
Other current liabilities		3,532		650			4,182
Noncurrent lease liabilities		2,954					2,954
Other noncurrent liabilities		3,285					3,285
Total liabilities acquired		16,395		650			17,045
Purchase price	$	223,561	$	-		$	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

	Weighted average		June 21,
	life (years)		2022
			(in thousands)
Amortizable
Trade name	indefinite		$	76,900
Developed technology		10		22,900
Customer relationships		10		9,900
Franchise agreements		10		8,500
Total acquired intangible assets			$	118,200

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

	Three months ended			Six months ended
	March 25,			March 25,
	2023			2023
	(in thousands)			(in thousands)
Net sales	$	15,967		$	29,345
Net earnings (loss)	$	(163	)	$	(830	)