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J&J Snack Foods Corp (NASDAQ:JJSF)
Q2 2020 Earnings Call
Apr 28, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the J&J Snack Foods Second Quarter Earnings Conference Call. My name is Richard, and I will be your operator for today's call. [Operator Instructions] Later, we will conduct a question-and-answer session. [Operator Instructions]

I will now turn the call over to Gerry Shreiber, President and CEO. Mr. Shreiber, you may begin.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Thank you. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof.

Results of operations. Net sales decreased 2% for the quarter, without sales from the acquisition of ICEE Distributors in October 2019 and BAMA ICEE in February 2020 sales also decreased 2% for the quarter. Food Service. Sales to Food Service customers decreased 2% for the quarter and decreased 1% for the six months. Our sales decreased for the quarter was due to decreased sales of soft pretzels down 8%, churros down 6%, funnel cake down 44%, and handheld down 7%. Bakery sales were up 6% and frozen juice and ices sales were up 6%.

Sales to restaurant chains, which were heavily hit during this period were down 15% this quarter, while sales to school were up. Operating income in our Food Service segment decreased 56% to $11 million from $24.8 million last year, primarily because of higher costs, product mix changes and lower volume throughout the quarter and due to decreased production at quarter's end, due to the effects of COVID-19 on demand.

Retail Supermarkets and grocery. Sales of products to Retail Supermarkets, were up 10% for the quarter. So pretzel sales were up 14% for the quarter. Sales of frozen juice and Italian Ices were up 8%, handheld sales were up 26%, and bakery and biscuit sales were up 4%. Operating income in our Retail Supermarket segment increase in the quarter to $4.3 million from $3.0 million a year ago. ICEE and Frozen Beverages. Frozen Beverage and related product sales were down 6% in the quarter and beverage related sales were down 5%. Without the sales of ICEE Distributors and BAMA ICEE two acquisitions of about a year ago. Overall, sales were down 10% and beverage related sales were down 14%.

Service revenue for others was up 9%. Machine revenue was $8.9 million, down from $13.2 million last year, as last year had a large installation project to one quick service restaurant chain. We had an operating loss in our Frozen Beverage segment of $1.3 million compared to $2.6 million operating income in last year's quarter, primarily due to relocation costs and expenses related to ICEE headquarters move to Tennessee of approximately $1.5 million this quarter and lower volume due to COVID-19.

In February, we purchased the assets of BAMA ICEE which does business in Alabama and Georgia with annual sales of approximately $3.5 million. With this purchase more significantly we now have distribution rights in the entire United States. Consolidated, gross profit as a percentage of sales was 25.53% in the three months period this year. This was down from 28.68% last year. Gross profit percentage decreased because of lower unit volume throughout our business, generally higher costs and unfavorable product mix changes.

Total operating expense as a percentage of sales was 21.5% in the quarter, up from last year's 19.7%. The percentage was -- increase was due to increased marketing spending in our Retail Supermarket and Frozen Beverage segment, largely ICEE relocation expense and higher distribution expenses primarily due to higher freight and storage costs and ICEE relocation expenses and because of lower sales in the second quarter. Our EBITDA, that's earnings before interest, taxes, depreciation and amortization for the past 12 months was a healthy $163 million.

Capital spending and cash flow. Our cash and investment securities balance of $267 million was down $29 million from our December balance, primarily because of the purchase of BAMA ICEE and buyback of common stock of $9 million. The $109 million of our investments are in corporate bonds with a purchase price yield to maturity of 2.8% of which $99 million mature within two years. Our bank preferred stock and mutual funds $13 million dropped in value by about 15% at the end of March. Our capital spending was $19 million in the quarter as we continue to invest in plant efficiencies and growing our business. Likely our spending for the year will be cut back due to other priorities at the present time.

A cash dividend of $0.575 per share, that's $0.575, was declared by our Board of Directors and paid on April 7, 2020. This was a 15% increase. As I mentioned earlier, we bought back $9 million of our stock during the quarter. We had an investment loss of $413,000 this year compared to investment income last year of $2.8 million primarily because of $2.1 million of unrealized losses this year compared to $760,000 of unrealized gains, a year ago.

Regarding, where we are now, net sales for the first-four weeks of our third quarter that will end in June are down approximately 45% from a year ago. Although we cannot estimate whether net sales will continue to be down at the same rate for the balance of the quarter. We estimate that we may have an operating loss in the quarter, which would compare to operating income of $39 million in the year ago June quarter. Approximately two-thirds of our sales are to venues and locations that have either shutdown or slightly curtailed their food service operations. So we anticipate COVID-19 will continue to have a negative impact on our business.

As we have $267 million of cash and marketable securities on our balance sheet, we do not expect to have any liquidity issues. We have good management in place, strong brands and a broad base of highly respected customers. We continue to monitor and adjust our cost and expenses as we evaluate our business on a daily, weekly and monthly basis. We are monitoring consumer behavior, customer shift and industry needs to adopt our product and marketing mix for the post pandemic landscape. And what is the true J&J Snack Food entrepreneurial spirit, we are ready to fight our way back to sales growth and business performance when customers begin to reopen this summer.

Keep in mind that all of our leisure and theme parks sports venues are either shut down or haven't begun the 2020 seasons yet. We are being careful not to reduce our costs so much that we won't be able to service our customers when they return making sure that we have the proper staffing and resources in place, but when business opens up again. And at the same, we are working around the clock, updating preventative measures to keep our employees safe. We have always been a company that has been cautious in the way we spend and use our cash. Today, as I mentioned, we have $267 million in cash and securities. We are protecting it and using it to prepare for the future as we monitor and shape what looks like -- well, it looks like in this changing landscape.

I will now introduce Deb Kane, our Director of Food Service, Safety and Quality Assurance. Deb has been with the company from -- for about three years and we recruited her from Campbell's. Deb?

Deb Kane -- Director, Food Safety, Quality & Regulatory

Thank you. So J&J Snack Foods Corporation is fully committed to maintaining operations amid the COVID-19 pandemic. We started implementing a number of precautionary measures as Gerry mentioned and mitigation strategies in all of our facilities as early as late January. We distribute through all our facilities a robust COVID-19 plan, which aligns with the latest recommendations of the CDC and local health departments. Our plant teams were very supportive of all our precautionary measures and because of their early adoption we are able to continue to operate and meet our customer orders.

Our crisis management teams and subcommittees be anywhere from daily to weekly -- we enhanced our hygiene protocols in all facilities and increased frequencies of cleaning and disinfection for all production lines and frequently touched surfaces. We practiced social distancing and when that practice is not feasible in certain production areas, for example, packing rooms, we've erected physical barriers between personnel. All non-essential manufacturing employees are working remotely. All visitors and travel is limited to business-critical. Procedures such as illness screening and temperature monitoring is being conducted at all doors for prior to entering our facilities. Employees are wearing facial covering, so those would be face masks and face shield to further reduced risk for exposure to COVID-19.

In addition to all the measures I just spoke about, we have active communications with our suppliers to monitor our inventory level and we've proactively identified alternate suppliers where needed to ensure supply chain continuity. Logistics and transportation schedules are being managed by our team to ensure the ability to transport through the -- throughout the J&J Snack Foods network. We monitor our positive COVID-19 employees or even those who coming close contact with a positive and we have strict protocols for 14 day quarantines to protect our other employees and keep our workplace safe. We follow our COVID-19 plan for when employees can safely return to work after an illness. And of our positive employees, there has been no direct link with linkage to workplace exposure. So that means the positives are likely due to external community spread from carpools or community interactions outside of the workplace. We've met with FDA and several local health departments as well as OSHA and all the agencies are satisfied with our actions and responses to keeping our workplace safe.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Thank you, Deb for a very detailed and safe analysis. I also wanted to comment that on the announcement, you might have seen recently regarding Dennis Moore. Dennis is retiring this July 30 and we are so grateful for all the years of dedication efforts and guidance that he has provided us over the years. We are truly sad to see him retire and we'll miss him. However, we wish him all the best in the next chapter of life. Thank you, Dennis.

Dennis G. Moore -- Chief Financial Officer

Okay. Thank you, [Indecipherable]. Thank you.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

You're welcome. I just want to add that this COVID stuff is another wrinkle in our life, in our history, which we are confident that we will deal with it well and it will just be a distant memory in years to come.

I will now turn it back to the listeners and entertain any questions or comments.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question on line comes from Rob Dickerson. Please go ahead.

Rob Dickerson -- Jefferies -- Analyst

Great. Thank you so much and thank you, Dennis as well, everything as Gerry said, I'd like to reiterate, you're a huge help and hopefully, you get to enjoy some of your life for the more. So Gerry, I just had a kind of couple -- a couple of larger kind of dramatic questions here, just kind of around business model. Obviously, coronavirus has changed a number of different games and we understand there is a fair amount of traffic decline obviously in the -- in the away from home space you play in the way from home space. You've heard from the likes of some larger CPG companies like Coke and Pepsi and there are a lot of questions out there, right and with a lot of the answers left really within the unknown.

So I guess the question I have for you is, if you've been in this business for so long maybe the frozen, pretzel piece of the business might not changes much, it actually could be better than it has been in the past couple of years, but in terms of that Frozen Beverage business that's largely away from home, do you already have to sit down and say, OK, well maybe the dynamics of that business, this business have changed and maybe we should start to think about putting them in bottles or selling them in a different manner through a different channel or should we be selling powder other just ways -- to try to almost very quickly change with market demand? And then, I just have a quick follow-up.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

That's a good question. However, if you look at our ICEE business, which includes ICEE, ARCTIC BLAST and SLUSH PUPPIE, it has been growing nicely year-after-year and...

Deb Kane -- Director, Food Safety, Quality & Regulatory

Perhaps I think, Dan Fachner is on the line, if he wants to comment on that.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Dan, do you want to comment on that?

Dan Fachner -- President of the ICEE Company Subsidiary

Sure. Hi, Rob. How are you? I think that's a great question and we are looking at other alternative ways to sell our product. The product lines, you mentioned is being sold in some great locations today that many people would love to be in, like amusement parks, theaters, wherever there is high-foot traffic. Unfortunately, because of that during the pandemic, many of those are shutdown. We believe that many of them are more open back up and it will still be a strong business at its core.

But in addition to that we are looking at other alternative ways to sell the product, may be around the take home section, how to do that properly. It's still a treat, it can be sold and locations and then delivered to the house. We do a lot of different licensing types of things with it, as you mentioned in a powder, how to have it at home and enjoy it at home more often and so we're looking at several different factors. But we do still feel bullish about the way that the business will come back and still be strong in those locations that we're in, as well.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Okay. And then just --

Dan Fachner -- President of the ICEE Company Subsidiary

Go ahead, Gerry.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

So I guess important dimension, it's not like we've lost any customers or business. Business is down, that's true, but a lot that's down because the people's feet -- foot traffic.

Dan Fachner -- President of the ICEE Company Subsidiary

Right. Rob, in addition to that, Rob, our service side of our business as we've continued to grow that is -- has been healthy during this time as well.

Rob Dickerson -- Jefferies -- Analyst

Okay. That's, that's a clear positive. And then I guess just in terms of kind of the go forward, you mentioned, what the kind of the sales trend has been upfront in the third quarter and where operating profit could actually set potentially get through the quarter. It sounds like you're doing the best you can to alleviate some cost potentially in your P&L. But at the same time, you are also -- it sounds like you're trying to hold on to pretty much in our view -- are very loyal employee base. And that's a sensitive topic. I would -- I feel like a lot of kind of the moving parts in your P&L or obviously contingent upon those venues opening up and then people actually going back to the venues and pretty much it sounds that you're trying to hold that cash to be able to hold on to your cost structure as it is as long as you can? Is that, does that make general sense can?

Dennis G. Moore -- Chief Financial Officer

Yeah. This is Dennis. Can I comment on that?

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Go ahead Danny.

Dennis G. Moore -- Chief Financial Officer

All right. First of all, I would say, we have had significant reduction in cost during the quarter. But you are correct in that there are some costs that we don't necessarily want to cut right now. And for a couple of reasons, one is, we have some valuable people that we will need once the business does turn around again and we also have a sense of loyalty to them as well. And on top of that, who now say, perhaps, another a couple of million dollars or whatever of costs during this particular quarter we will have no impact on performance than what we do a year from that, considering that we have the cash to do so. So we've taken into account, a lot of different factors. But I don't want, we shouldn't the giving the impression that we have not cut costs significantly during this time. And then if we are going to have a drop off in sales about $150 million in this quarter. We have to take step, otherwise, the drop in earnings will be a lot more than what we're anticipating it today.

Rob Dickerson -- Jefferies -- Analyst

Okay. That's fair answer. Thank you so much and please stay safe.

Dennis G. Moore -- Chief Financial Officer

Thank you.

Operator

Thank you. Our next question on line comes from Ryan Bell. Please go ahead.

Ryan Bell -- Consumer Edge -- Analyst

Hey. You said that the first-four weeks of your June quarter were down about 45%. Can you speak about the differential ways you're seeing the disruption impacting different parts of your business, the retail supermarkets, frozen beverages and food service? And are there any additional details you can provide on the composition of your on-premise exposure? And any differences that we see in the pockets of the channels and how they're performing?

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

This is -- [Speech Overlap] Before I turn it over to Bob Pape and Dennis. Keep in mind that we started our third quarter which is traditionally a good upswing with all of our sports teams inactive or the season being on hold. Additionally, many, many schools were closed and so we started off with a sizable limp. We do expect that the quarter heats up both by weather and opening that we will get past that quickly. Bob, do you want to add something?

Robert Pape -- Senior Vice President Sales

Yeah. I mean from the, from the food service aspect of the business as Jerry mentioned with many of our partners shutdown at this time. Right now, we're formulating the plan to be able to get back in business with those customers as they start to recover. And then the other thing is on the retail side of the business are at-home consumption has been very strong, which we anticipate continuing to move forward in a positive direction, primarily obviously driven by the stay at home orders and so we're also figuring out how we can continue to grow that aspect of our business. And I'll let Dan comment on how you see as far as the moving forward.

Dan Fachner -- President of the ICEE Company Subsidiary

Yeah. Hey, Ryan. So the ICEE company continues to feel good about -- about what will happen in the future, right. And then, they -- in the third quarter, we're still measuring those accounts that are not opened at this point. I mentioned earlier on the call with Rob that our service side of our business continues to grow and is operating almost at the same pace that it had been and we see that growing in the third quarter as we start to open up these locations and more people need service for that, and even our outside service outside of the ICEE division that portion of it is growing as well and see that continuing to grow in the third quarter, although the core product will be hit during the third quarter.

Ryan Bell -- Consumer Edge -- Analyst

Great. Thank you. And given your strong balance sheet, it seems like you'll be able to ride out the storm. Are there any changes that you might think about in terms of your capital allocation over time and are there any ideas maybe about what could happen or any opportunities that could arise from the disruptions in terms of potential acquisitions as we exited?

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Well, this is Gerry. We have managed our finances well over the years. When we didn't have a lot of cash reserves. We will continue to manage our finances including cash just as we have in the past, so that will be a good sign.

Ryan Bell -- Consumer Edge -- Analyst

Okay. Great. Thank you.

Dennis G. Moore -- Chief Financial Officer

And to just does add to that, I mean, I think your comment regarding maybe there will be some acquisitions now that we're not available six months ago because other companies are hurting. As everyone is hurting and perhaps it will bring some additional opportunities to us and we will be looking and evaluating and hopefully be making some acquisitions over the next six months, or a year.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Dennis is right. We have the cash. We have the balance sheet. We have all of the things going forward to continue to build a healthy company and we've made acquisitions in the past. We've turned some down of more recent vintage, but we'll be looking to make acquisitions in the future.

Ryan Bell -- Consumer Edge -- Analyst

Great. Thank you. That's it from me.

Operator

And thank you. [Operator Instructions] Our next question on line comes from Jon Andersen. Please go ahead.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Hi, Jon.

Jon Andersen -- William Blair & Company -- Analyst

Hi, Gerry. I hope you're well and safe.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

I'm well [Indecipherable] the other day.

Jon Andersen -- William Blair & Company -- Analyst

Very good. You sound good. And I did want to say thanks to Dennis for all the help over the years and best of luck in your next phase and I look forward to staying in touch.

Dennis G. Moore -- Chief Financial Officer

All right. Thank you, John.

Jon Andersen -- William Blair & Company -- Analyst

You bet. Yeah. I guess I wanted to start with the retail business, which was strong in the quarter, the retail supermarket business. What -- could you comment a little bit on what you're seeing there in terms of overall consumption growth for your supermarket brands? And do you think the growth is kind of sustainable going forward or was there a large kind of one-time stock up component to that?

Robert M. Radano -- Chief Operating Officer

Well, Jon, as far as the business itself, I mean obviously, there's been increased consumption again in the -- at home segment. We saw that in the past couple of months. Our customers, which we're trying to support are focused on in-stock positions and supply chain, which we are working very diligently to fill as well. We have very strong brands and I think that as a result of that we are going to continue to be looked at by our customers as a good partner. And that, there will be opportunities moving for us forward.

With that said, we also have an unknown as far as what the consumer behavior will be and as mentioned in the conference call notes that Gerry mentioned, we are monitoring consumer behavior and we will go to what the new consumer need is once the new normal is established. So that requires some product development and it requires some modification of our marketing and all those things are being in process now to be able to answer that once the changes that the industry are undergoing happen. So that's really how we will be handling it and we're very positive about the product portfolio and what we can do with our product portfolio.

Jon Andersen -- William Blair & Company -- Analyst

That's helpful. Thank you. Do you -- could you talk a little bit about your ability to meet the demand. How is the supply chain working on the retail side of the business? Have you been able to keep retailers in stock? Are you able to maybe reallocate some production capacity from your food service business into retail to better service retail customers during this kind of demand surge that they're experiencing?

Robert M. Radano -- Chief Operating Officer

I think, again tied into the fact that we took the very proactive steps on the COVID-19 sanitary procedures and employee safety that we started back in January that's allowed us to have a stable supply chain. And quite honestly, I think some of the issues are our customers in terms of their outbound freight to their stores and servicing their stores. And obviously, some panic buying on the part of the consumers that seems to have started to abate a bit. So those are the issues. We have not really experienced any significant supply chain issues in terms of our manufacture.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Where there were issues with some of the retailers, we fill that gap with our own trucks, getting product to them. And they appreciate that very much. Somebody Elias Jensen, said [Phonetic] to Bob, your companies make the products, you get it here, you build this, you stock the shelves. You deserve an award.

Jon Andersen -- William Blair & Company -- Analyst

Yeah, I'm sure. I'm sure if you see it's going to help your customers out in ways like that during a difficult time they appreciate it.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

They appreciate it and they appreciate it.

Jon Andersen -- William Blair & Company -- Analyst

Yes, absolutely. So maybe I could ask about the 40 -- the trend that you commented on in April. Am I right to say that that the most difficult kind of situation right now is within the Food Service segment, not be Frozen Beverage segment but within food service because of the nature of the locations where that is sold? Is that seeing the biggest downtrend at present?

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

I think it may be all over, if you look back a year ago, April comes, yes, it's spring. The birds are chirping, but there is baseball. There is playoff hockey. There is playoff basketball. There is all of these little sports leagues in there. So that adds a nice little boost to business. We were completely shut down if not surprised by the restrictions this year. Now, we know that's not going to continue, but we expect that it will be a while till we have to get back onto the field, so to speak and enjoy those benefits of those sales. We have a team that is dedicated to that. We have a team that enjoys working with youth and the major sports arenas and we are good at it and that business has been growing every year.

Dennis G. Moore -- Chief Financial Officer

But with regard to what you to play you mentioned on the Frozen Beverage segment, the Frozen Beverages product sales are severely impacted by this. I mean, the portion of the Frozen Beverage business as Dan mentioned service component is continuing to perform well, but the beverage side of it is down, well over 80%.

Jon Andersen -- William Blair & Company -- Analyst

Okay. All right. So it's -- OK. So it's affecting beverages as significantly. It sounds like as the Food Service segment as well.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

A few periods ago, let me make a comment. A few years ago, and we were spearheaded by Dan Fachner, we discovered movie theaters. And we started putting equipment and movie theaters all around the country. And we enjoyed plus sales in that many years. Now I understand almost every movie theater is closed or has restricted hours for cartoons on a Saturday morning and whatnot, but that business will come back. We're confident as well and will start enjoying the benefits of that business hopefully not too distant future.

Jon Andersen -- William Blair & Company -- Analyst

Okay. Just a couple of -- a couple of additional ones if I might. So you talked about this balance you're trying to strike of keeping the people and the capabilities and the capacity intact as you work through this temporary kind of issue, but how much have you, would you say you've -- but you also said, you've taken, some actions already, I mean if you -- how much have you kind of done in terms of, kind of, cost discipline to this point and do you have a kind of an additional slate of potential actions depending on the timing of some of that your customer reopenings. Just trying to get a feel for how much you maybe already done and how much is potentially yet to come?

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Well, we have 18 facilities across the country. And we are really dedicated to our people and our plants in our business. We did have a layoff that affected 221 people, a couple of weeks ago. We don't anticipate growing or having another round of it.

Dennis G. Moore -- Chief Financial Officer

And there are significant cuts that we've had in payroll due to hours reductions as well in our manufacturing plant.

Jon Andersen -- William Blair & Company -- Analyst

Okay. Just a last question...

Dan Fachner -- President of the ICEE Company Subsidiary

Jon, I'll add to that. This is Dan Fachner. We've looked at it in several different fashions. We've had some layoffs. We've had some salary reductions. We've had some furloughs. We've had hour reductions and so we're monitoring it really close with some scenario planning based on where the business is today and where we expect it to be and where it might end up and we're watching that really closely.

Jon Andersen -- William Blair & Company -- Analyst

Okay. And the last one, I guess for me, I mean would it be fair to assume that or you bought some stock back in the quarter, raised the dividend should -- what should we expect going forward in that front? I'm assuming you're going to go into more of maybe a defensive posture regarding those uses of capital going forward. And will you -- how much would you think of optimizing capital expenditure on a full-year basis at this point?

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Well, I think, we spent about $50 million to $60 million last year and we probably were on target for that this year. We may trim that a bit because of need. But right now, we have adequate supply of products that we have adequate cash reserves. And we meet regularly on that and we're going to pay careful attention to that because we don't want to go either side of the tracks.

Jon Andersen -- William Blair & Company -- Analyst

Okay. Thanks, everybody. I really appreciate all the color and stay safe and talk soon.

Operator

And thank you. Our next question -- not a problem, we have Todd Brooks online with the question. Please go ahead.

Todd Brooks -- CL King & Associates, Inc. -- Analyst

Hey. Good morning, everybody. Quick question, Gerry, if you talk about the down 45% sales trend that you're seeing quarter-to-date. You pointed out a couple of things. One, schools were widespread closures in April, but I imagine the education business becomes less important as you get into again to May and June. And then additionally you do have a big convenience store business part of the -- it's outside of the venue closures and event cancellations, it's been the shelter-in-place and people not being free to move around.

As you look out over the course of this quarter and you're starting to see states open up a bit and people getting some freedom of movement back. If you could talk about maybe this down 45% that we've seen for the first-four weeks. If there is an element that that could moderate as people are out moving -- outside of their homes and driving hitting the convenience stores and the drag year-over-year should moderate from education over the next two months?

Dennis G. Moore -- Chief Financial Officer

Yeah. This is Dennis. I'll answer that. Yeah, I guess, if you look at who we're selling to now in the Food Service segment and the Frozen Beverages, non-service component of the business was basically selling right now to restaurants, chains to a limited extent and to convenience stores. There really is not much else that is open and selling our products and most of the other venues are going to probably, in all likelihood would remain shut throughout the balance of the quarter. The amusement parks, the baseball stadiums and many of the snack bars that we sell to that had -- that have been down so far this quarter. So there may be some opening up and there may be some improvements, but to think that at this point, at least to think that there'll be anything of significance, we don't see that.

Todd Brooks -- CL King & Associates, Inc. -- Analyst

Fair enough. And then, in that environment, Dennis, if you can talk about maybe what we're doing on the marketing spend side and how distribution cost, I mean, it sounds like distribution costs you're going the extra mile for your customers now, but just what should we be seeing, I know marketing and distribution were up year-over-year about 10% in aggregate over the prior year. But what are the outlooks for marketing and distribution costs in the current environment? Thanks.

Dennis G. Moore -- Chief Financial Officer

A good portion of that will obviously drop off considerably with the drop off in volume. I mean, there is some component of it that is fit. And -- but, however we do continue to work with our customers on projects that we've been working on and are working on -- and that they want to continue to work on for when they open up and perhaps have new menu items and new products to sell, so -- but spending should be down significantly. In terms of distribution, costs were higher for a lot of different reasons in the first quarter. We've just had some changes in our prior distribution. We changed the way. We took on distribution that previously had been done. We are selling through distributors.

Part of the chunk in the marketing and distribution costs was -- the increase was $1.5 million of ICEE relocation costs, which had to do with their warehouse relocation and their customer service relocations. And we're also looking and actually before all this began, we're looking at changing perhaps some of the where we warehouse our [Indecipherable] assets actually to reduce our cost regarding that. So what I can say is, we're looking to drive those costs down and forward and we should be able to, to some extent.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

All we need is a little bit of nice weather together with the ball meeting the bat and the fielder fielding the ball. That is going to have a significant change in our business.

Dennis G. Moore -- Chief Financial Officer

Gerry is right. The only question is hopefully it to be sooner rather than later, right/

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Do we have a next question.

Dennis G. Moore -- Chief Financial Officer

Richard, are you there? Moderator?

Operator

We have Jeff [Indecipherable] with a question. Please go ahead.

Jeff -- Analyst

Yeah. Good morning, gentlemen. Just two quick questions. Dennis, can you just share the composition is finished and raw, as it relates to inventory?

Dennis G. Moore -- Chief Financial Officer

Hang on a second.

Jeff -- Analyst

Sure.

Dennis G. Moore -- Chief Financial Officer

Roughly half of our inventory is a little less than half is finished goods.

Jeff -- Analyst

Yeah.

Dennis G. Moore -- Chief Financial Officer

As raw materials and packaging that we use to manufacture the products in our factory business, factory side of the business is a little -- is about a quarter of the inventory and then another quarter is the equipment parts that are primarily in our ICEE business related to service.

Jeff -- Analyst

Got it. And just refresh my memory.

Dennis G. Moore -- Chief Financial Officer

And that's pretty much more [Indecipherable].

Jeff -- Analyst

Yes. That's very consistent with where you've been historically. So when we think about spoilage cost and cost allocation across far fewer units looking into Q2 and potentially Q3, hopefully not, but potentially Q3. How do we think about the potential for spoilage costs in that finished goods inventory in the context of sales.

Dennis G. Moore -- Chief Financial Officer

Less than 1%

Jeff -- Analyst

At least to date or -- less than 1%?Okay.

Dennis G. Moore -- Chief Financial Officer

Most of our products...

Jeff -- Analyst

Sorry, less than 1% of finished growth....

Dennis G. Moore -- Chief Financial Officer

Well, most of our prior --

Jeff -- Analyst

[Speech Overlap] Or 1% of inventory.

Dennis G. Moore -- Chief Financial Officer

Yeah. Most of our product is, most of our finished good products is frozen. So it has been extended shelf life. So at this point, at least we don't see that there would be a large amount of spoilage related to that.

Jeff -- Analyst

Great. Thank you. That's very helpful. And any -- as you guys were talking about earlier, are there extensions with customers with regard to the existing receivable balance and maybe just walk through how we can expect as the year progresses, receivables and if we need any bad debt reserves against receivables?

Dennis G. Moore -- Chief Financial Officer

Well, this is Dennis again. At this point, we are sure there'll be some amount of customers that will end up not being able to pay us, but at this point, and again, it will be our much smaller customers. And at this point, today, we don't have -- we haven't seen any of that. So most of our customer, almost all of our customers continue to pay us in the normal course. We do have a handful of customers who are not -- who are shutdown now, we have asked for extended term. And -- but again, it's relatively small portion, surprisingly small portion from what I would have expected a month ago that have ask for extended term.

Jeff -- Analyst

Got it. Makes sense. And did you take -- last question for me, did you take the bad reserve against those customers that you're anticipating will have problems? Did you take an [Indecipherable]

Dennis G. Moore -- Chief Financial Officer

Well, like I said, while we did not, we did not, and like I said, when I say [Indecipherable] I'm talking about really small customers. So at this point, at least, we were not anticipating anything of significance.

Jeff -- Analyst

Okay. Best of luck. Thank you and stay safe.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

One of the benefits of having dominant brands is that, we have dominant shares. So there is a continuous relationship between us and the customer, and everybody realizes what we have an 80% share or whatnot. There's not many alternatives for the other guys. It's certainly not many alternatives that's equal value and economy. So we're satisfied with our receivables management and our current positions.

Jeff -- Analyst

Okay. Thank you. Stay safe and appreciate the update.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Thank you.

Operator

And thank you. [Operator Instructions] We have question on line with Howard Bryerman [Phonetic]. Please go ahead.

Howard Bryerman -- Analyst

Yes. Thank you for taking my call. I don't think there's any doubt that you have a very solid business model, excellent brands and a very solid management team. In my humble opinion, this was a liquidity exercise and I apologize, if you gave us at the beginning of the call. I couldn't get on so quickly. Did you -- have you disclosed what a monthly burn rate is at this point and that would be all inclusive of you thinking through inventory spoilage? Hello?

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Dennis, you want to answer that, Dennis?

Dennis G. Moore -- Chief Financial Officer

Well, what we said is that, we may have an operating loss in the quarter, which would also mean that we may not. So when you look at that and you consider that as the amount of depreciation that we have and capital spending, you would see that's pretty much is an offset. So, at this point, we do not have a cash burn and we haven't since the beginning of this episode, back in the middle of March.

Howard Bryerman -- Analyst

So, that's great. So looking forward, going six -- assuming things go the way they are, you should be breakeven for the next -- for the foreseeable future and then I wasn't able to finish my question. What is your cash balance and your availability on your revolver?

Dennis G. Moore -- Chief Financial Officer

Well, we've a revolver that can go from $50 million to $100 million, but we have cash and investments of $267 million. So, we anticipate no liquidity issues at -- going forward unless things are dramatically different from what everyone is anticipating, which we don't expect.

Howard Bryerman -- Analyst

And then just finally, would there be other levers that you could pull or I mean, it sounds like liquidity is very, very strong, which comes back to your point of a strong balance sheet. Should you need to go into the revolver and/or the cash balance, are there other levers you can pull for additional liquidity? [Speech Overlap]

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

There are banks that would line up to push money toward us. And Dennis has done a good job managing that over the years, but we're in a far different financial condition that we were two years ago, five years ago, twenty years ago. So we have plenty of resources available to us and we're glad to have that but we don't expect to have to extend.

Howard Bryerman -- Analyst

Okay. Very good. So, it seems like it shouldn't be in, I mean, we eventually will see the light at the end of the tunnel. I agree with you guys. It could be six months before a therapeutic comes out in a year before a vaccine comes out, which would be the ultimate safety net. So, you wouldn't have any problem running for 12-months and coming out the other side of this without a look?

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Not at all.

Howard Bryerman -- Analyst

Very good. Excellent. Thank you. Thank you very much.

Operator

And our final question comes from Robert Costello. Please go ahead.

Robert Costello -- Costello Asset Management -- Analyst

Hi.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Hi, Bob.

Robert Costello -- Costello Asset Management -- Analyst

How are you doing? At Wawa, some of the convenience stores have changed where your products are made available now like the pretzels and obviously the ICEE and you shrink wrap the bakery products. Those costs, have they added anything to what your manufacturing costs are?

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Wawa is one of our premier customers, and we have a great relationship with them. We're in contact them regularly. Both of those projects particularly the wrap, they came to us a few months ago and our people worked it out. We charge them for the wrapping. And the only problem we had with Wawa is that the self service machines have been shutdown at least temporarily, while they managed through their issues. But we work with them closely and we don't expect to have any significant downturn.

Robert Costello -- Costello Asset Management -- Analyst

Right. What about the pretzel business in the convenience stores? Has that been impacted plus or minus by this or has it just stayed the way?

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Actually, it's up because we wrap pretzels. And at their request, we wrapped them two or three at a time. And they're selling them in units now, which gives us a little bit of benefit on individual sales. You can no longer can have a pretzel. I'll have the pretzels.

Robert Costello -- Costello Asset Management -- Analyst

Right. You talked about 18 facilities. Is there any talk in the near future given what's going on with consolidation of more going forward into say, half that number or is that cost not something right now that you're...

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

It's not half that number but we are closing one in the Midwest and we'll probably do that at some point this third quarter.

Robert Costello -- Costello Asset Management -- Analyst

Right. The $260 million cash. Could you break that out, like how much is liquid? How much is invested in? Who manages it? Is it done internally or externally?

Dennis G. Moore -- Chief Financial Officer

This is Dennis. I mean, in terms of the investments, we essentially managed it ourselves, but we do use brokers and who do advise us on what we're doing. [Phonetic] In terms of liquidity, if we -- not that need we would have to, but if we needed to we could liquidate all of it, probably at very close to what was carrying it on our books for. But under the normal course of time, we have about $99 million about -- close to $100 million of corporate bonds that mature within next two years.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

What are we earning on those bonds Dennis about 3%?

Dennis G. Moore -- Chief Financial Officer

No. Roughly 2.8% based on net purchase price, which essentially is what it's trading at today.

Robert Costello -- Costello Asset Management -- Analyst

Right. Last question, Gerry, a couple years ago, you on a call talked about the growth rate and the different industry segments that you service and you mentioned the food services being your best opportunity at the time for growth percentage wise. Is that you still hold to that as your industry segment that offers the best upside?

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

For long term, yes. Short-term probably retail, where we seem to be getting a nice little boost. One, because we're -- our core products, pretzel and ICEE and whatnot have dominant shares. And most of the -- we're in 35,000 to 40,000 retail grocery supermarket. Our packaging is good. The product is good. It's priced right.

Robert Costello -- Costello Asset Management -- Analyst

Right. Last question, how come the churros product is not sold in the supermarket category like, it was the...

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

That's a good question. And we keep addressing that among ourselves every quarter, that has plenty of opportunity for growth. Sometimes, it's a matter of space and just getting it in there, we don't want to lose any feature space in there.

Robert Pape -- Senior Vice President Sales

I think also -- this is Bob. The other thing that we're looking at is food services, as it continues to grow and be popular within food service venues, usually, the axiom is that the retail at-home consumption will follow. So more and more consumers are becoming aware of the product. It's a very strong product category for us on the food service side. And as that continues to happen, we would anticipate that we will look at the viability of our retail product and recreating the experience that people are having in a food service environment. All right. Thank you.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Thank you, gentlemen and ladies.

Operator

And we have no further questions at this time. I'd like to turn the call over to our presenters for closing comments.

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

I want to thank everybody for participating in this -- our second quarter conference call. We're not happy that we have to go through these kind of adjustments as they are, but long term our business is in strong conditions. We have plenty of cash reserves. We have popular brands. Some of our brands are 80% of the category. So the long term outlet -- outlook is good, and we expect it will continue to be good or perhaps even gets better. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 59 minutes

Call participants:

Gerald B. Shreiber -- Chairman of the Board, President, Chief Executive Officer and Director

Deb Kane -- Director, Food Safety, Quality & Regulatory

Dennis G. Moore -- Chief Financial Officer

Dan Fachner -- President of the ICEE Company Subsidiary

Robert Pape -- Senior Vice President Sales

Robert M. Radano -- Chief Operating Officer

Rob Dickerson -- Jefferies -- Analyst

Ryan Bell -- Consumer Edge -- Analyst

Jon Andersen -- William Blair & Company -- Analyst

Todd Brooks -- CL King & Associates, Inc. -- Analyst

Jeff -- Analyst

Howard Bryerman -- Analyst

Robert Costello -- Costello Asset Management -- Analyst

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