UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended June 29, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission File Number: 0-14616
J & J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
New Jersey 22-1935537
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6000 Central Highway, Pennsauken, NJ 08109
(Address of principal executive offices)
Telephone (609) 665-9533
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
As of July 26, 1996, there were 8,828,970 shares of the Registrant's Common
Stock outstanding.
INDEX
Page
Number
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - June 29, 1996 and
September 30, 1995................................. 3
Consolidated Statements of Earnings - Three Months and
Nine Months Ended June 29, 1996 and June 24, 1995.. 5
Consolidated Statements of Cash Flows - Nine Months
Ended June 29, 1996 and June 24, 1995.............. 6
Notes to the Consolidated Financial Statements........ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K................... 12
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS June 29, September 30,
1996 1995
(Unaudited)
Current assets
Cash and cash equivalents $ 4,540,000 $ 10,696,000
Marketable securities available
for sale 4,027,000 3,824,000
Accounts receivable 18,241,000 17,467,000
Inventories 12,116,000 11,009,000
Prepaid expenses and deposits 1,020,000 1,498,000
39,944,000 44,494,000
Property, plant and equipment,
at cost
Land 819,000 819,000
Buildings 5,119,000 5,119,000
Plant machinery and equipment 40,832,000 39,006,000
Marketing equipment 80,140,000 75,085,000
Transportation equipment 1,882,000 2,086,000
Office equipment 3,625,000 3,002,000
Improvements 7,088,000 5,036,000
Construction in progress 918,000 480,000
140,423,000 130,633,000
Less accumulated depreciation
and amortization 82,340,000 71,410,000
58,083,000 59,223,000
Other assets
Goodwill, trademarks and rights,
less accumulated amortization 9,545,000 8,644,000
Long term investments available
for sale 990,000 990,000
Long term investments held to
maturity 9,668,000 7,345,000
Sundry 2,818,000 2,613,000
23,021,000 19,592,000
$121,048,000 $123,309,000
See accompanying notes to the consolidated financial statements.
3
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND June 29, September 30,
STOCKHOLDERS' EQUITY 1996 1995
(Unaudited)
Current liabilities
Current maturities of long-
term debt $ 4,000 $ 16,000
Accounts payable 10,690,000 10,607,000
Accrued liabilities 4,534,000 5,922,000
15,228,000 16,545,000
Long-term debt, less current
maturities 5,005,000 5,011,000
Deferred income 832,000 666,000
Deferred income taxes 5,003,000 5,003,000
Stockholders' equity
Capital stock
Preferred, $1 par value;
authorized, 5,000,000
shares; none issued - -
Common, no par value;
authorized, 25,000,000
shares; issued and
outstanding, 8,829,000 and
9,359,000, respectively 36,637,000 40,802,000
Foreign currency translation
adjustment (1,362,000) (1,121,000)
Retained earnings 59,705,000 56,403,000
94,980,000 96,084,000
$121,048,000 $123,309,000
See accompanying notes to the consolidated financial statements.
4
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three months ended Nine months ended
June 29, June 24, June 29, June 24,
1996 1995 1996 1995
Net Sales $49,091,000 $47,876,000 $134,092,000 $129,410,000
Cost of goods sold 24,805,000 24,262,000 68,081,000 64,717,000
Gross profit 24,286,000 23,614,000 66,011,000 64,693,000
Operating expenses
Marketing 15,180,000 14,955,000 42,645,000 41,757,000
Distribution 4,439,000 4,570,000 12,923,000 13,589,000
Administrative 1,776,000 1,789,000 5,500,000 5,829,000
Amortization of
intangibles and
deferred costs 230,000 214,000 645,000 647,000
21,625,000 21,528,000 61,713,000 61,822,000
Operating income 2,661,000 2,086,000 4,298,000 2,871,000
Other income (deductions)
Investment income 328,000 353,000 1,104,000 944,000
Interest expense (89,000) (92,000) (280,000) (304,000)
Sundry (30,000) 823,000 (26,000) 1,289,000
Earnings before
income taxes 2,870,000 3,170,000 5,096,000 4,800,000
Income taxes 1,020,000 1,192,000 1,794,000 1,805,000
NET EARNINGS $ 1,850,000 $ 1,978,000 $ 3,302,000 $ 2,995,000
Earnings per common
share $ .21 $ .21 $ .36 $ .31
Weighted average number
of shares 8,921,000 9,482,000 9,144,000 9,660,000
See accompanying notes to the consolidated financial statements.
5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
June 29, June 24,
1996 1995
Cash flows from operating activities:
Net earnings $ 3,302,000 $ 2,995,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization of fixed
assets 11,566,000 11,101,000
Amortization of intangibles and deferred
costs 900,000 762,000
Gain from disposals of property &
equipment (17,000) (1,132,000)
(Decrease) in deferred income taxes - (17,000)
Other adjustments 221,000 (104,000)
Changes in assets and liabilities
Increase in accounts receivable (495,000) (55,000)
Increase in inventories (780,000) (168,000)
Decrease (increase) in prepaid expenses 559,000 (199,000)
(Decrease) increase in accounts payable
and accrued liabilities (1,621,000) 975,000
Net cash provided by operating activities 13,635,000 14,158,000
Cash flows from investing activities:
Capital expenditures (10,214,000) (9,933,000)
Proceeds from sale of company - 405,000
Payments for purchase of companies, net of
cash acquired and debt assumed (2,637,000) -
Proceeds from investments held to maturity 410,000 375,000
Payments for investments held to maturity (2,750,000) (500,000)
Proceeds from investments available for sale 4,152,000 5,610,000
Payments for investments available for sale (4,393,000) (2,981,000)
Proceeds from disposals of property &
equipment 156,000 1,351,000
Decrease in bond trust fund 1,000 655,000
Other (476,000) (106,000)
Net cash used in investing activities (15,751,000) (5,124,000)
Cash flows from financing activities:
Proceeds from issuance of common stock 139,000 273,000
Payments to repurchase common stock (4,149,000) (6,607,000)
Payments of long-term debt (30,000) (11,000)
Net cash used in financing activities (4,040,000) (6,345,000)
Net increase (decrease) in cash and
cash equivalents (6,156,000) 2,689,000
Cash and cash equivalents at beginning of period 10,696,000 6,621,000
Cash and cash equivalents at end of period $ 4,540,000 $ 9,310,000
See accompanying notes to the consolidated financial statements.
6
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
The results of operations for the three months and nine
months ended June 29, 1996 and June 24, 1995 are not
necessarily indicative of results for the full year. Sales
of the Company's retail stores are generally higher in the
first quarter due to the holiday shopping season. Sales of
the Company's frozen carbonated beverages are generally
higher in the third and fourth quarters due to seasonal
factors.
While the Company believes 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 year ended September 30, 1995.
Note 2 Earnings per share are based on the weighted average number
of common shares outstanding, including common stock
equivalents (stock options).
Note 3 Inventories consist of the following:
June 29, September 30,
1996 1995
Finished goods $ 6,270,000 $ 5,669,000
Raw materials 1,512,000 1,019,000
Packaging materials 2,229,000 1,947,000
Equipment parts & other 2,105,000 2,374,000
$12,116,000 $11,009,000
Note 4 The amortized cost, unrealized gains and losses, and fair
market values of the Company's available for sale and held
to maturity securities held at June 24, 1995 are summarized
as follows:
7
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Available for Sale Securities
Equity Securities $ - $12,000 $ - $ 12,000
Corporate Debt Securities 495,000 - 52,000 443,000
Municipal Government Securities 4,522,000 7,000 4,000 4,525,000
$5,017,000 $19,000 $ 56,000 $4,980,000
Held to Maturity Securities
Corporate Debt Securities $ 998,000 $ 9,000 $ 10,000 $ 997,000
Municipal Government Securities 8,170,000 6,000 190,000 7,986,000
Other 500,000 - - 500,000
$9,668,000 $15,000 $200,000 $9,483,000
The amortized cost, unrealized gains and losses, and fair market values
of the Company's available for sale and held to maturity securities
held at September 30, 1995 are summarized as follows:
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Available for sale securities
Equity securities $ - $12,000 $ - $ 12,000
Corporate debt securities 996,000 - 46,000 950,000
Municipal government securities 3,818,000 6,000 8,000 3,816,000
$4,814,000 $18,000 $ 54,000 $4,778,000
Held to maturity securities
Corporate debt securities $1,015,000 $ 8,000 $ 15,000 $1,008,000
Municipal government securities 5,830,000 11,000 195,000 5,646,000
Other 500,000 - - 500,000
$7,345 000 $ 19,000 $210,000 $7,154,000
Note 5 The FASB issued a new standard, FAS No. 107, "Disclosure About
Fair Value of Financial Instruments," which requires all
entities to disclose the estimated fair value of their financial
instrument assets and liabilities. The Company will provide
these new disclosures at September 29, 1996.
8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
The Company's current cash and marketable securities balances and
cash expected to be provided by future operations are its primary sources
of liquidity. The Company believes that these sources, along with its
borrowing capacity, are sufficient to fund future growth and expansion.
In the nine months ended June 29, 1996, the devaluation of the
Mexican peso caused a reduction of $241,000 in stockholders' equity
because of the revaluation of the net assets of the Company's Mexican
frozen carbonated beverage subsidiary.
During the nine months ended June 29, 1996, the Company purchased
and retired 346,000 shares of its common stock at a cost of $4,149,000.
During the third quarter, the Company acquired the assets of Pretzel
Gourmet Corp. for cash. Pretzel Gourmet is a chain of retail stores
specializing in freshly baked hand-rolled soft pretzels. Sales of the
five existing Pretzel Gourmet stores totalled $1.5 million in 1995.
During the third quarter, the Company acquired the assets of Mazzone
Enterprises, Inc. for cash and the assumption of liabilities. Mazzone
Enterprises is a manufacturer and distributor of Italian ices and other
speciality frozen desserts with annual sales of approximately $4 million.
During the third quarter of fiscal year 1995, the Company sold its
syrup and flavor manufacturing subsidiary, Western Syrup Company, to an
unrelated third party for cash and notes. During the nine months ended
June 24, 1995 Western Syrup Company generated an after tax loss of
approximately $280,000. The Company does not anticipate that the sale of
Western will have a material impact on its operations or financial
position.
Available to the Company are unsecured general purpose bank lines of
credit totalling $30,000,000.
Results of Operations
Net sales increased $1,215,000 or 3% to $49,091,000 for the three
months and $4,682,000 or 4% to $134,092,000 for the nine months ended June
29, 1996. Sales of acquired businesses accounted for over 40% of the
three months sales increase.
Sales to food service customers increased $1,551,000 or 8% in the
third quarter to $21,174,000 and $6,725,000 or 12% to $63,250,000 in the
nine months.
9
Soft pretzel sales to the food service market increased 5% to $13,125,000
in the third quarter and 11% to $41,070,000 in the nine months due to
increased distribution. Two customers accounted for over 75% and 85% of
the soft pretzel sales increase in the three and nine month periods,
respectively. Frozen juice treat and dessert sales increased 27% to
$4,375,000 in the three months and 14% to $10,266,000 in the nine months.
Approximately one third of the three month sales increase and one quarter
of the nine month sales increase resulted from sales of an acquired
business. Churro sales to food service customers increased 1% to
$2,575,000 in the third quarter and 10% to $7,519,000 in the nine months.
All foodservice sales increases were due primarily to changes in unit
volume. Approximately 13% of the overall nine month increase in sales to
foodservice customers was accounted for by equipment sales.
Sales of products to retail supermarkets decreased $407,000 or 4% to
$10,461,000 in the third quarter and 5% to $26,948,000 in the nine months.
Soft pretzel sales for the third quarter were down 6% to $4,988,000 and
for the nine months were down 8% to $17,965,000. The sales decline for
the third quarter and nine months was due to increased competition and a
decline in overall supermarket soft pretzel sales. Sales of the flagship
SUPERPRETZEL brand soft pretzels, excluding SOFTSTIX, decreased 10% in the
third quarter and 8% for the nine months. Softstix sales decreased
$196,000 or 33% to $404,000 in the third quarter and $995,000 or 33% to
$2,016,000 in the nine months. Sales of Luigi's Real Italian Ice
decreased $69,000 or 1% to $5,270,000 in the third quarter and increased
$59,000 or less than 1% to $8,333,000 in the nine months. Excepting
Luigi's Real Italian Ice, the retail supermarket increases and decreases
were due primarily to changes in unit volume. A price increase accounted
for approximately $500,000 of Luigi's Real Italian Ice sales in the third
quarter and $560,000 in the nine months.
Frozen carbonated beverage and related product sales increased
$591,000 or 5% to $12,813,000 in the third quarter and $1,708,000 or 6%
to $30,179,000 in the nine months. Beverage sales alone increased 3% to
$11,989,000 in the third quarter and increased 5% to $28,358,000 in the
nine months. A pricing adjustment and increased sales of promotional cups
to one customer accounted for approximately two thirds of the nine month
sales increases. For the nine months ended June 1996, dollar sales of the
Company's Mexican frozen carbonated beverage subsidiary were about 12%,
or $170,000, lower than a year ago due to the devaluation and continuing
economic problems in Mexico; however, for the three months ended June
1996, dollar sales increased 6%, or $30,000, from the year earlier period.
Bakery sales decreased $635,000 or 23% to $2,163,000 in the third
quarter and $1,239,000 or 17% to $5,845,000 in the nine months. The
decrease in sales resulted from decreases in unit volume.
10
Sales of our Bavarian Pretzel Bakery increased 5% to $2,480,000 in
the third quarter and decreased 2% to $7,870,000 in the nine month period.
Excluding sales of an acquired business, sales were down 5% in both
periods.
Gross profit as a percentage of sales was 49% in the both year's
three month periods and decreased to 49% in the current nine month period
from 50% in the year ago period. This gross profit percentage decrease
in the nine month period is primarily attributable to higher raw material
costs.
Total operating expenses increased $97,000 in the third quarter and
as a percentage of sales decreased to 44% from 45% in last year's same
quarter. For the nine months, operating expenses decreased $109,000 and
as a percentage of sales decreased to 46% from 48% last year. Marketing
expenses were 31% and 32% of sales in both year's three and nine month
periods, respectively. Distribution expenses decreased to 9% of sales in
this year's third quarter from 10% of sales last year and to 10% of sales
in this year's nine month period from 11% in the year ago period due
primarily to changes in methods of distribution in our frozen carbonated
beverage subsidiary. Administration expenses were 4% of sales in both
year's third quarter and decreased less than one half of a percentage
point to 4% in the current nine month period from 5% a year ago due to a
combination of lower overall expenses and an increase in sales volume.
Operating income increased $575,000 or 28% to $2,661,000 in the
third quarter and $1,427,000 or 50% to $4,298,000 in the nine months.
Investment income decreased $25,000 or 7% in the third quarter and
increased $160,000 or 17% in the nine months. Investment income decreased
in the third quarter because of a decrease in the level of invested funds.
The increase for the nine months resulted from higher levels of invested
funds for the nine month period. Interest expense was essentially
unchanged in the two third quarter periods and declined slightly in this
year's nine months.
Sundry expense of $30,000 in the third quarter compared to sundry
income of $823,000 in last year's quarter, and for the nine months, sundry
expense of $26,000 this year compared to sundry income of $1,289,000 last
year. The sundry income last year included gains on insurance
settlements, gains on sales of land and a gain on the sale of Western
Syrup Company.
The effective income tax rate has been estimated at 36% and 35% in
the current year three and nine month periods compared to 38% in both
periods last year.
Net earnings decreased $128,000 or 6% in the current three month
period to $1,850,000 and increased $307,000 or 10% in the current nine
month period to $3,302,000.
11
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None
b) Reports on Form 8-K - There were no reports on Form 8-K
for the three months ended June 29, 1996.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
J & J SNACK FOODS CORP.
Dated: August 6, 1996 /s/ Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: August 6, 1996 /s/ Dennis G. Moore
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
J & J SNACK FOODS CORP.
Dated: August 6, 1996
Gerald B. Shreiber
President
Dated: August 6, 1996
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
13
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