SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File No. 0-14616
J & J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
New Jersey 22-1935537
(State or other jurisdication (I.R.S. Employer
of incorporation or organization) Identification No.)
6000 Central Highway
Pennsauken, New Jersey 08109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609-665-9533)
__________
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value: None None
(Title of each class) (Name of each exchange on which
registered)
__________
Securities registered pursuant to Section 12(g) of the Act: None
__________
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
and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
As of November 30, 1997, the latest practicable date,
8,872,067 shares of the Registrant's common stock were issued and
outstanding. The aggregate market value of shares held by non-
affiliates of the Registrant on such date was $94,612,310, based
on the last price on that date of $16.25 per share, which is an
average of bid and asked prices.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's 1997 Annual Report to Shareholders for the
fiscal year ended September 27, 1997 and Proxy Statement for its
Annual Meeting of Shareholders to be held on February 4, 1998 are
incorporated herein by reference into Parts I, II, III and IV as
set forth herein.
J & J SNACK FOODS CORP.
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Page
Item 1 Business ................................... 1
Item 2 Properties ................................. 8
Item 3 Legal Proceedings .......................... 9
Item 4 Submission Of Matters To A Vote Of
Security Holders ........................... 9
Executive Officers Of The Registrant ....... 10
PART II
Item 5 Market For Registrant's Common
Stock And Related Stockholder
Matters .................................... 11
Item 6 Selected Financial Data .................... 11
Item 7 Management's Discussion And Analysis
Of Financial Condition And Results
Of Operations .............................. 11
Item 8 Financial Statements And Supplementary
Data ....................................... 11
Item 9 Changes In And Disagreements With
Accountants On Accounting And
Financial Disclosure........................ 12
PART III
Item 10 Directors And Executive Officers Of
The Registrant ............................. 13
Item 11 Executive Compensation ..................... 13
Item 12 Security Ownership Of Certain Bene-
ficial Owners And Management ............... 13
Item 13 Certain Relationships And Related
Transactions ............................... 13
PART IV
Item 14 Exhibits, Financial Statement
Schedules And Reports On Form 8-K .......... 14
PART I
Item 1. Business
General
J & J Snack Foods Corp. (the "Company" or "J & J")
manufactures nutritional snack foods which it markets nationally
to the food service and retail supermarket industries. Its
principal snack food products are soft pretzels marketed
principally under the brand name SUPERPRETZEL. J & J believes it
is the largest manufacturer of soft pretzels in the United
States. The Company also markets frozen carbonated beverages to
the food service industry under the brand names ICEE and ARCTIC
BLAST in the Western United States, Mexico and Canada and under
the brand names FROZEN COKE and ARCTIC BLAST in midwestern and
eastern states. Other snack products include frozen juice treats
and desserts, churros (a Hispanic pastry), funnel cake, popcorn,
baked goods and whipped fruit drinks.
The Company's sales are made primarily to food service
customers including snack bar and food stand locations in leading
chain, department, discount, warehouse club and convenience
stores; malls and shopping centers; fast food outlets; stadiums
and sports arenas; leisure and theme parks; movie theatres;
independent retailers; and schools, colleges and other
institutions. The Company's retail supermarket customers are
primarily supermarket chains. The Company sells direct to the
public through its chains of specialty snack food retail outlets,
BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET, located primarily in
the Mid-Atlantic States.
The Company was incorporated in 1971 under the laws of the
State of New Jersey.
Products
Soft Pretzels
The Company's soft pretzels are sold under many brand names;
some of which are: SUPERPRETZEL, MR. TWISTER, SOFT PRETZEL BITES,
SOFTSTIX, SOFT PRETZEL BUNS, HOT KNOTS, DUTCH TWIST, TEXAS TWIST
and SANDWICH TWIST and; to a lesser extent, under private labels.
The Company sells its soft pretzels to the food service and the
retail supermarket industries and direct to the public through
BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET, its chains of
specialty snack food retail outlets. The Company's soft pretzels
qualify under USDA regulations as the nutritional equivalent of
bread for purposes of the USDA school lunch program, thereby
enabling a participating school to obtain partial reimbursement
of the cost of the Company's soft pretzels from the USDA. Soft
pretzel sales amounted to 40% and 45% of the Company's revenue in
fiscals 1997 and 1996, respectively.
The Company's soft pretzels are manufactured according to a
proprietary formula. Regular soft pretzels, approximately 2-1/2
ounces in weight, and jumbo or king size soft pretzels,
approximately 5-1/2 ounces in weight, are shaped and formed by
the Company's proprietary twister machines. These soft pretzel
tying machines are automated, high speed machines for twisting
dough into the traditional pretzel shape. Soft pretzel nuggets,
mini one ounce soft pretzels and soft pretzels in customized
shapes and sizes are extruded or shaped by hand. Soft pretzels,
after processing, are primarily quick-frozen in either raw or
baked form and packaged for delivery.
The Company's food service marketing program includes
supplying ovens, mobil merchandisers, display cases, warmers and
similar merchandising equipment to the retailer to prepare and
promote the sale of soft pretzels. Some of this equipment is
proprietary, including two models of a combination warmer and
display case that reconstitute frozen soft pretzels while
displaying them, thus eliminating the need for an oven. The
Company retains ownership of the equipment placed in customer
locations and, as a result, customers are not required to make an
investment in equipment.
Frozen Carbonated Beverages
The Company markets, through its direct sales force, frozen
carbonated beverages to the food service industry under the names
ICEE and ARCTIC BLAST in fifteen western states, Mexico and
Canada and under the trade names FROZEN COKE and ARCTIC BLAST in
thirty two midwestern and eastern states and direct to the public
through BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET, its chains
of specialty snack food retail outlets. Frozen carbonated
beverage sales amounted to 20% of revenue in fiscal 1997 and 23%
of revenue in fiscal 1996. Under the Company's marketing
program, it installs frozen carbonated beverage dispensers at
customer locations and thereafter services the machines, provides
customers with ingredients required for production of the frozen
carbonated beverages, and supports customer retail sales efforts
with in-store promotions and point-of-sale materials. In most
cases, the Company retains ownership of its dispensers and, as a
result, customers are not required to make an investment in
equipment or arrange for the ingredients and supplies necessary
to produce and market the frozen carbonated beverages.
Each new customer location requires a frozen carbonated
beverage dispenser supplied by the Company or by the customer.
Company supplied dispensers are purchased from outside vendors,
built new or rebuilt by the Company at an approximate cost of
$5,500 each. The following shows the number of Company owned and
customer owned frozen carbonated beverage dispensers at customer
locations at the dates indicated:
Company Owned Customer Owned Total
September 30, 1995 7,157 1,107 8,264
September 28, 1996 7,823 901 8,724
September 27, 1997 8,546 711 9,257
As a result of the acquisition of a controlling interest in
National ICEE Corporation on December 8, 1997, the Company now
has the rights to market and distribute frozen carbonated
beverages under the name ICEE to all of the Continental United
States, except for portions of four states. The Company now
services a total of approximately 17,500 Company owned and
customer owned dispensers.
Frozen Juice Treats and Desserts
The Company's frozen juice treats and desserts are marketed
under the SUPER JUICE, FROSTAR, SHAPE-UPS, MAZZONE'S, MAMA TISH'S
and LUIGI'S brand names to the food service and to the retail
supermarket industries. Frozen juice treat and dessert sales
were 19% and 15% of the Company's revenue in fiscal years 1997
and 1996, respectively.
The Company's SUPER JUICE, SHAPE-UPS and MAZZONE frozen
juice bars are manufactured from an apple or pear juice base to
which water, sweeteners, coloring (in some cases) and flavorings
are added. The juice bars contain two ounces of apple or pear
juice and the minimum daily requirement of vitamin C, and qualify
as reimbursable items under the USDA school lunch program. The
juice bars are produced in various flavors and are packaged in a
sealed push-up paper container referred to as the Milliken M-pak,
which the Company believes has certain sanitary and safety
advantages.
The FROSTAR product line includes frozen juice and other
frozen desserts on a stick and in a cup. The juice bar and
FROSTAR products are sold primarily to the school portion of the
food service industry.
LUIGI'S Real Italian Ice and MAMA TISH'S Italian Ice and
Sorbets are sold to the foodservice and to the retail supermarket
industries. They are manufactured from water, sweeteners and
fruit juice concentrates in various flavors and are packaged in
plastic cups for retail supermarket and foodservice and in four
and eight ounce squeeze up tubes for foodservice.
Churros
The Company sells frozen churros under the TIO PEPE'S brand
name to both the food service and retail supermarket industries,
primarily in the Western and Southwestern United States. Churro
sales were 5% and 6% of the Company's sales in fiscal 1997 and
1996, respectively. Churros are Hispanic donuts in stick form
which the Company produces in several sizes according to a
proprietary formula. The churros are deep fried, frozen and
packaged. At food service point-of-sale they are reheated and
topped with a cinnamon sugar mixture. The Company also sells
fruit and creme filled churros. The Company supplies churro
merchandising equipment similar to that used for its soft
pretzels.
Baked Goods
The Company has a contract and private label bakery business
which manufactures cookies, muffins and other baked goods for
third parties. In addition, the Company produces and markets
these products under its own brand names, including DANISH MILL
and PRETZELCOOKIE. Baked goods sales amounted to 8% and 4% of
the Company's sales in fiscals 1997 and 1996, respectively.
Other Products
The Company also markets to the food service industry and
direct to the public other products including soft drinks, funnel
cakes sold under the FUNNEL CAKE FACTORY brand name, popcorn sold
under the AIRPOPT brand name, as well as smaller amounts of
various other food products. In addition, J & J manufactures and
markets machines and machine parts for sale primarily to other
food and beverage companies.
Customers
The Company sells its products to two principal customer
groups: food service and retail supermarkets. The primary
products sold to the food service group are soft pretzels, frozen
carbonated beverages, frozen juice treats and desserts, churros
and baked goods. The primary products sold to the retail
supermarket industry are soft pretzels and Italian ice.
Additionally, the Company sells soft pretzels, frozen carbonated
beverages and various other food products direct to the public
through BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET, its chains
of specialty snack food retail outlets.
The Company's customers in the food service industry include
snack bars and food stands in chain, department and discount
stores such as KMart, Walmart, Bradlees, Caldor, Target and
Venture Stores; malls and shopping centers; fast food outlets;
stadiums and sports arenas; leisure and theme parks such as
Disneyland, Walt Disney World, Opryland, Universal Studios, Sea
World, Six Flags, Hershey Park and Busch Gardens; convenience
stores such as 7-Eleven, Circle K, AM/PM, White Hen Pantry and
Wawa; movie theatres; warehouse club stores such as Sam's Club,
Price Costco and B.J.'s; schools, colleges and other
institutions; and independent retailers such as Hot Sam. Food
service concessionaires purchasing soft pretzels and other
products from the Company for use in sports arenas and for
institutional meal services include ARAMARK, Ogden, Service
America, Sportservice, Marriott and Volume Services. Machines
and machine parts are sold to other food and beverage companies.
Within the food service industry, the Company's products are
purchased by the consumer primarily for consumption at the
point-of-sale.
The Company sells its products to over 90% of supermarkets
in the United States. Products sold to retail supermarket
customers are primarily soft pretzel products, including
SUPERPRETZEL, LUIGI'S Real Italian Ice and MAMA TISH'S Italian
Ice and sorbets and various secondary brands. Within the retail
supermarket industry, the Company's frozen and prepackaged
products are purchased by the consumer for consumption at home.
Marketing and Distribution
The Company has developed a national marketing program for
its products. For food service customers, this marketing program
includes providing ovens, mobile merchandisers, display cases,
warmers, frozen carbonated beverage dispensers and other
merchandising equipment for the individual customer's
requirements and point-of-sale materials as well as participating
in trade shows and in-store demonstrations. The Company's
ongoing advertising and promotional campaigns for its retail
supermarket products include trade shows, newspaper
advertisements with coupons, and in-store demonstrations and,
periodically, television advertisements.
The Company's products are sold through a network of about
160 food brokers and over 1,000 independent sales distributors
and the Company's own direct sales force. The Company maintains
warehouse and distribution facilities in Pennsauken, New Jersey;
Vernon (Los Angeles) California; Cicero, Illinois; Scranton,
Pittsburgh, Hatfield and Lancaster, Pennsylvania; and Solon,
Ohio. Frozen carbonated beverages are distributed from 38
warehouse and distribution facilities located in 22 states,
Mexico and Canada which allow the Company to directly service its
customers in the surrounding areas. As a result of the
acquisition of a controlling interest in National ICEE
Corporation on December 8, 1997, frozen carbonated beverages are
distributed from an additional 60 warehouse and distribution
facilities located in 21 states. The Company's products are
shipped in refrigerated and other vehicles from the Company's
manufacturing and warehouse facilities on a fleet of Company
operated tractor-trailers, trucks and vans, as well as by
independent carriers.
Seasonality
The Company's sales are seasonal because frozen carbonated
beverage sales and Italian ice sales are generally higher during
the warmer months and sales of the Company's retail stores are
generally higher in the Company's first quarter during the
holiday shopping season.
Trademarks and Patents
The Company has numerous trademarks, the most important of
which are SUPERPRETZEL, DUTCH TWIST, TEXAS TWIST, MR. TWISTER,
SOFT PRETZEL BITES and SOFTSTIX for its soft pretzel products;
FROSTAR, SHAPE-UPS, MAZZONE'S, MAMA TISH'S and LUIGI'S for its
frozen juice treats and desserts; TIO PEPE'S for its churros;
ARCTIC BLAST for its frozen carbonated beverages; FUNNEL CAKE
FACTORY for its funnel cake products, PRIDE O' THE FARM for its
cookies, muffins and other baked goods; and TANGO WHIP for its
whipped fruit drinks. The trademarks, when renewed and
continuously used, have an indefinite term and are considered
important to the Company as a means of identifying its products.
Taking into account the acquisition of a controlling
interest in National ICEE Corporation on December 8, 1997, the
Company markets frozen carbonated beverages under the trademark
ICEE in all of the Continental United States, except for portions
of four states, and in Mexico and Canada. Additionally, the
Company has the international rights to the trademark ICEE.
The Company has four patents related to frozen carbonated
beverage dispensers, including a countertop unit. One expires in
2005 and three expire in 2006. The Company also has two process
patents for dessert products which expire in 2010 and 2012.
Supplies
The Company's manufactured products are produced from raw
materials which are readily available from numerous sources.
With the exception of the Company's soft pretzel twisting
equipment and funnel cake production equipment, which are made
for J & J by independent third parties, and certain specialized
packaging equipment, the Company's manufacturing equipment is
readily available from various sources. Syrup for frozen
carbonated beverages is purchased from the Coca Cola Company, the
Pepsi Cola Company, and Western Syrup Company. Cups, straws and
lids are readily available from various suppliers. Parts for
frozen carbonated beverage dispensing machines are manufactured
internally and purchased from other sources. Frozen carbonated
beverage dispensers are purchased from IMI Cornelius, Inc.
Competition
Snack food and baked goods markets are highly competitive.
The Company's principal products compete against similar and
different food products manufactured and sold by numerous other
companies, some of which are substantially larger and have
greater resources than the Company. As the soft pretzel, frozen
juice treat and dessert, baked goods and related markets grow,
additional competitors and new competing products may enter the
markets. Competitive factors in these markets include product
quality, customer service, taste, price, identity and brand name
awareness, method of distribution and sales promotions.
The Company believes it is the only national distributor of
soft pretzels. However, there are numerous regional and local
manufacturers of food service and retail supermarket soft
pretzels. Competition is also increasing in that there are
several chains of retail pretzel stores which have been
aggressively expanding over the past several years. These chains
compete with the Company's products.
In Frozen Carbonated Beverages the Company competes directly
with other frozen carbonated beverage companies. These include
several companies which have the right to use the ICEE name in
portions of four states. There are many other regional frozen
carbonated beverage competitors throughout the country and one
large retail chain which uses its own frozen carbonated beverage
brand.
The Company competes with large soft drink manufacturers for
counter and floor space for its frozen carbonated beverage
dispensing machines at retail locations and with products which
are more widely known than the ICEE and ARCTIC BLAST frozen
carbonated beverages.
The Company competes with a number of other companies in the
frozen juice treat and dessert and baked goods markets.
Divestitures
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. The
Company does not anticipate that the sale of Western will have a
material impact on its operations or financial position.
Employees
The Company had approximately 1,700 full and part time
employees as of September 27, 1997. Certain production and
distribution employees at the Pennsauken plant are covered by a
collective bargaining agreement which expires in September 1999.
Production employees at the Cicero plant are covered by a
collective bargaining agreement which expires in September 1998.
The Company considers its employee relations to be good.
Year 2000
The Company anticipates that its computer systems and
applications will be modified for the year 2000 by the end of
calendar year 1998. The Company anticipates the cost of
conversion to be included as part of its normal ongoing systems'
maintenance cost.
Item 2. Properties
The Company's primary east coast manufacturing facility is
located in Pennsauken, New Jersey in a 70,000 square foot
building on a two acre lot. Soft pretzels and churros are
manufactured at this company-owned facility which also serves as
the Company's corporate headquarters. This facility operates at
approximately 80% of capacity. The Company leases a 101,200
square foot building adjacent to its manufacturing facility in
Pennsauken, New Jersey through March 2012. The Company has
constructed a large freezer within this facility for warehousing
and distribution purposes. The warehouse has a utilization rate
of 60-90% depending on product demand. The Company also leases
through September 1998 16,000 square feet of office and warehouse
space located next to the Pennsauken, New Jersey plant.
The Company owns a 150,000 square foot building on eight
acres in Bellmawr, New Jersey. Approximately 60% of the facility
is leased to a third party. The remainder is used by the Company
to manufacture some of its products including funnel cake and
pretzels.
The Company's primary west coast manufacturing facility is
located in Vernon (Los Angeles), California. It consists of a
137,000 square foot facility in which soft pretzels, churros and
various lines of baked goods are produced and warehoused.
Included in the 137,000 square foot facility is a 30,000 square
foot freezer used for warehousing and distribution purposes which
was constructed in 1996. The facility is leased through November
2010. The manufacturing facility operates at approximately 60% of
capacity.
The Company owns a 52,700 square foot building located on
five acres in Chicago Heights, Illinois which is leased to a
third party.
The Company owns a 26,000 square foot frozen juice treat and
dessert manufacturing facility located on three acres in
Scranton, Pennsylvania. Construction to expand the facility to
45,000 square feet began in October 1997 with an expected
completion date of Spring 1998.
The Company leases a 9,000 square foot Italian ice and
frozen dessert manufacturing facility in Cicero, Illinois through
May 1998. The facility operates at approximately 50% of
capacity.
The Company leases a 29,635 square foot soft pretzel
manufacturing facility located in Hatfield, Pennsylvania. The
lease runs through June 2017. The facility operates at
approximately two thirds of capacity.
The Company leases a 19,200 square foot soft pretzel
manufacturing facility located in Carrollton, Texas. The lease
runs through February 1999. The facility operates at less than
50% of capacity.
The Company's Bavarian Pretzel Bakery headquarters and
warehouse and distribution facilities are located in a 11,000
square foot owned building in Lancaster, Pennsylvania.
The Company owns a 25,000 square foot facility located on 11
acres in Hatfield, Pennsylvania which is currently vacant.
The Company also leases 100 warehouse and distribution
facilities.
Item 3. Legal Proceedings
The Company has no material pending legal proceedings, other
than ordinary routine litigation incidental to the business, to
which the Company or any of its subsidiaries is a party or of
which any of their property is subject.
Item 4. Submission Of Matters To A Vote Of Security Holders
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the executive officers of the
Company and their principal past occupations or employment. All
such persons serve at the pleasure of the Board of Directors and
have been elected to serve until the Annual Meeting of
Shareholders on February 4, 1998 or until their successors are
duly elected.
Name Age Position
Gerald B. Shreiber 56 Chairman of the Board, President,
Chief Executive Officer and
Director
Dennis G. Moore 42 Senior Vice President, Chief
Financial Officer, Secretary,
Treasurer and Director
Robert M. Radano 48 Senior Vice President, Sales,
Chief Operating Officer and
Director
Robyn Shreiber Cook 37 Senior Vice President
Dan Fachner 37 President of ICEE-USA Corp.
Subsidiary
Gerald B. Shreiber is the founder of the Company and has
served as its Chairman of the Board, President, and Chief
Executive Officer since its inception in 1971. His term as a
director expires in 2000.
Dennis G. Moore joined the Company in 1984. He served in
various controllership functions prior to becoming the Chief
Financial Officer in June 1992. His term as a director expires
in 2002.
Robert M. Radano joined the Company in 1972 and in May 1996
was named Chief Operating Officer of the Company. Prior to
becoming Chief Operating Officer, he was Senior Vice President,
Sales responsible for national foodservice sales of J & J. His
term as a director expires in 2001.
Robyn Shreiber Cook joined the Company in 1982 and in
February 1996 was named Senior Vice President, West with
operating and sales responsibilities for the Company's West Coast
foodservice and bakery business. Prior to becoming Senior Vice
President, West she was responsible for Western region food
service sales.
Dan Fachner has been an employee of ICEE-USA Corp., which
was acquired by the Company in May 1987, since 1979. He was named
Senior Vice President of ICEE-USA Corp. in April 1994 and became
President in May 1997.
PART II
Item 5. Market For Registrant's Common Stock And
Related Stockholder Matters
The Company's common stock is traded on the over-the-counter
market on the NASDAQ National Market System under the symbol
JJSF. The following table sets forth the high and low final sale
price quotations as reported by NASDAQ for the common stock for
each quarter of the years ended September 28, 1996 and September
27, 1997.
High Low
Fiscal 1996
First qarter ended December 30, 1995 13-1/4 11
Second quarter ended March 30, 1996 12-3/4 11
Third quarter ended June 29, 1996 13-3/4 11-3/8
Fourth quarter ended September 28, 1996 12-1/8 9-7/8
Fiscal 1997
First quarter ended December 28, 1996 14-1/8 10-5/8
Second quarter ended March 29, 1997 14-1/8 10-1/2
Third quarter ended June 28, 1996 16-1/8 11-1/4
Fourth quarter ended September 27, 1997 17-1/4 14-1/2
On November 30, 1997, there were 8,872,067 shares of common
stock outstanding. Those shares were held by approximately 2,200
beneficial shareholders and shareholders of record.
The Company has never paid a cash dividend on its common
stock and does not anticipate paying cash dividends in the
foreseeable future.
Item 6. Selected Financial Data
The information set forth under the caption "Financial
Highlights" of the 1997 Annual Report to Shareholders is
incorporated herein by reference.
Item 7. Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
The information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" of the 1997 Annual Report to Shareholders is
incorporated herein by reference.
Item 8. Financial Statements And Supplementary Data
The following consolidated financial statements of the
Company set forth in the 1997 Annual Report to Shareholders are
incorporated herein by reference:
Consolidated Balance Sheets as of September 27, 1997 and
September 28, 1996
Consolidated Statements of Earnings for the fiscal years
ended September 27, 1997, September 28, 1996 and
September 30, 1995
Consolidated Statement of Stockholders' Equity for the
three fiscal years ended September 27, 1997
Consolidated Statements of Cash Flows for the fiscal years
ended September 27, 1997, September 28, 1996 and
September 30, 1995
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
Item 9. Changes In And Disagreements With Accountants On
Accounting And Financial Disclosure
None.
PART III
Item 10. Directors And Executive Officers Of The Registrant
Information concerning directors, appearing under the
captions "Information Concerning Nominee For Election To Board"
and "Information Concerning Continuing Directors And Executive
Officers" in the Company's Proxy Statement filed with the
Securities and Exchange Commission in connection with the Annual
Meeting of Shareholders to be held on February 4, 1998, is
incorporated herein by reference. Information concerning the
executive officers is included on page 10 following Item 4 in
Part I hereof.
Item 11. Executive Compensation
Information concerning executive compensation appearing in
the Company's Proxy Statement under the caption "Management
Remuneration" is incorporated herein by reference.
Item 12. Security Ownership Of Certain Beneficial Owners And
Management
Information concerning the security ownership of certain
beneficial owners and management appearing in the Company's Proxy
Statement under the caption "Principal Shareholders" is
incorporated herein by reference.
Item 13. Certain Relationships And Related Transactions
Not applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules And
Reports On Form 8-K
(a)Financial Statements
The following are incorporated by reference in Part II
of this report:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of September 27, 1997 and
September 28, 1996
Consolidated Statements of Earnings for the fiscal years
ended September 27, 1997, September 28, 1996 and
September 30, 1995
Consolidated Statement of Stockholders' Equity for the
three fiscal years ended September 27, 1997
Consolidated Statements of Cash Flows for the fiscal
years ended September 27, 1997, September 28, 1996
and September 30, 1995
Notes to Consolidated Financial Statements
Financial Statement Schedule
The following are included in Part IV of this report:
Page
Report of Independent Certified Public Account-
ants on Schedule 17
Schedule:
II. Valuation and Qualifying Accounts 18
All other schedules are omitted either because they are not
applicable or because the information required is contained in
the financial statements or notes thereto.
Exhibits
3.1 Amended and Restated Certificate of Incorporation
filed February 28, 1990. (Incorporated by reference
from the Company's Form 10-Q dated May 4, 1990.)
3.2 Amended and Restated Bylaws adopted May 15, 1990.
(Incorporated by reference from the Company's Form
10-Q dated August 3, 1990.)
4.1 New Jersey Economic Development Authority Economic
Development Revenue Bonds Trust Indenture dated as
of December 1, 1991. (Incorporated by reference
from the Company's 10-K dated December 18, 1992.)
10.1 Proprietary Exclusive Manufacturing Agreement dated
July 17, 1984 between J & J Snack Foods Corp. and
Wisco Industries, Inc. (Incorporated by reference
from the Company's Form S-1 dated February 4, 1986,
file no. 33-2296.)
10.2* J & J Snack Foods Corp. Stock Option Plan.
(Incorporated by reference from the Company's Form
S-8 dated July 24, 1992, file no. 33-50036.)
10.3* J & J Snack Foods Corp. 401(K) Profit Sharing Plan,
As Amended, Effective January 1, 1989. Incorporated
by reference from the Company's 10-K dated December
18, 1992.)
10.4* First, Second and Third Amendments to the J&J Snack
Foods Corp. 401(k)Profit Sharing Plan. (Incorporated
by reference from the Company's 10-K dated December
19, 1996).
10.6 Lease dated September 24, 1991 between J & J Snack
Foods Corp. of New Jersey and A & H Bloom
Construction Co. for the 101,200 square foot
building next to the Company's manufacturing
facility in Pennsauken, New Jersey. (Incorporated
by reference from the Company's Form 10-K dated
December 17, 1991).
10.7 Lease dated August 29, 1995 between J & J Snack
Foods Corp. and 5353 Downey Associates Ltd for the
lease of the Vernon, CA facility. (Incorporated by
reference from the Company's Form 10-K dated
December 21, 1995).
10.8* J & J Snack Foods Corp. Employee Stock Purchase Plan
(Incorporated by reference from the Company's Form
S-8 dated May 16, 1996).
11.1 Computation of Earnings Per Common Share. (Page
19.)
13.1 Company's 1997 Annual Report to Shareholders
(except for the captions and information thereof
expressly incorporated by reference in this Form
10-K, the Annual Report to Shareholders is provided
solely for the information of the Securities and
Exchange Commission and is not deemed "filed" as
part of the Form 10-K.) (Page 20.)
22.1 Subsidiaries of J & J Snack Foods Corp. (Page 53.)
24.1 Consent of Independent Certified Public Accountants.
(Page 54.)
*Compensatory Plan
(b)Reports on Form 8-K
No reports on Form 8-K have been filed by the Company
during the last quarter of the period covered by this
report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
December 19, 1997 By /s/ Gerald B. Shreiber
Gerald B. Shreiber,
Chairman of the Board,
President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
December 19, 1997 /s/ Robert M. Radano
Robert M. Radano, Senior Vice
President, Sales, Chief
Operating Officer and Director
December 19, 1997 /s/ Dennis G. Moore
Dennis G. Moore, Senior Vice
President, Chief Financial
Officer and Director
December 19, 1997 /s/ Stephen N. Frankel
Stephen N. Frankel, Director
December 19, 1997 /s/ Peter G. Stanley
Peter G. Stanley, Director
December 19, 1997 /s/ Leonard M. Lodish
Leonard M. Lodish, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
December 19, 1997 By_______________________________
Gerald B. Shreiber,
Chairman of the Board,
President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
_______________________________
December 19, 1997 Robert M. Radano
Senior Vice President, Sales,
Chief Operating Officer and
Director
_______________________________
December 19, 1997 Dennis G. Moore, Senior Vice
President, Chief Financial
Officer and Director
_______________________________
December 19, 1997 Stephen N. Frankel, Director
_______________________________
December 19, 1997 Peter G. Stanley, Director
________________________________
December 19, 1997 Leonard M. Lodish, Director
16
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS ON SCHEDULE
Board of Directors
J & J Snack Foods Corp.
In connection with our audit of the consolidated financial statements of J &
J Snack Foods Corp. and Subsidiaries referred to in our report dated November 4,
1997 (except for Note Q, as to which the date is December 8, 1997), which is
included in the Annual Report to Shareholders and incorporated by reference in
Part II of this form, we have also audited Schedule II for each of the three
years in the period ended September 27, 1997 (52 weeks, 53 weeks and 52 weeks,
respectively). In our opinion, this schedule presents fairly, in all material
respects, the information required to be set forth therein.
GRANT THORNTON LLP
Philadelphia, Pennsylvania
November 4, 1997 (except for Note Q, as to which the date
is December 8, 1997)
17
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Opening Charged to Closing
Year Description balance expense Deductions balance
1997 Allowance for doubtful accounts $257,000 $252,000 $117,000(1) $392,000
1996 Allowance for doubtful accounts 271,000 64,000 78,000(1) 257,000
1995 Allowance for doubtful accounts 296,000 81,000 106,000(1) 271,000
__________
(1) Write-off uncollectible accounts receivable.
18
EXHIBIT 11.1
J & J SNACK FOODS CORP.
COMPUTATION OF EARNINGS PER COMMON SHARE
Fiscal year ended
September 27,September 28,September 30,
1997 1996 1995
Primary Earnings Per Share
Net earnings $ 8,159,000 $ 5,843,000 $ 5,804,000
Weighted average number of
common shares outstanding
during year 8,780,000 8,940,000 9,436,000
Add common equivalent shares
(as determined by the
application of the treasury
stock method) representing
shares issuable upon assumed
exercise of stock options 205,000 73,000 108,000
Weighted average number of
common shares used in
calculation of primary
earnings per share 8,985,000 9,013,000 9,544,000
Earnings per common share
assuming no dilution $.91 $.65 $.61
Fully Diluted Earnings Per Share
Net earnings $ 8,159,000 $ 5,843,000 $ 5,804,000
Weighted average number of common
shares outstanding during year 8,780,000 8,940,000 9,436,000
Add common equivalent shares (as
determined by the application
of the treasury stock method)
representing shares issuable
upon assumed exercise of stock
options 205,000 75,000 106,000
Weighted average number of
common shares used in calcu-
lation of fully diluted
earnings per share 8,985,000 9,015,000 9,542,000
Earnings per common share
assuming full dilution $.91 $.65 $.61
J&J Snack Foods Corp.
6000 Central Highway
Pennsauken, NJ 08109
(609) 665-9533
1997 Annual Report
Here we grow again...
Profile
J&J Snack Foods Corp. over the years has grown to new heights by
adapting to a changing environment, and by continuing to expand
its own unique core products and market niches.
J & J is a manufacturer, marketer and distributor of an expanding
variety of nutritional, popularly priced snack foods and beverages
for the food service and retail supermarket industries. The
Company is listed on the NASDAQ exchange as "JJSF".
Our expanding portfolio of products includes soft pretzels; frozen
carbonated beverages; frozen juice bars and desserts; churros, a
cinnamon pastry; funnel cakes; cookies and baked health goods; and
other snack foods and drinks. Consumers can enjoy these products
in a variety of settings, including:
* Snack bars and food stands in leading chain, department,
discount and convenience stores
* Malls and shopping centers
* Fast food outlets
* Stadiums and sports arenas
* Leisure and theme parks
* Movie theatres
* Schools, colleges and other institutions
* Supermarkets and warehouse club stores
As we prepare for the future, J & J Snack Foods Corp. plans to
continue to evolve by capitalizing on new opportunities wherever
they may be found.
Contents
Financial Highlights 1
Letter From the President 2
Soft Pretzels 4
Frozen Desserts 7
Other Snack Foods 9
Frozen Carbonated Beverages 11
Our Family of Brands 13
Financial Information 14
Corporate Information 29
Financial Highlights
Fiscal year ended in September
(In thousands except per share data)
1997 1996 1995 1994 1993
Net Sales $220,318 $186,018 $185,362 $174,425 $147,190
Net Earnings $8,159 $5,843 $5,804 $8,532 $8,350
Total Assets $136,827 $123,128 $123,309 $127,366 $121,494
Long-Term Debt $5,028 $5,010 $5,011 $5,028 $5,043
Stockholders' Equity $105,904 $96,708 $96,084 $100,545 $97,956
Common Share Data
Earnings Per Share $.91 $.65 $.61 $.82 $.80
Book Value Per Share $11.97 $11.05 $10.53 $10.17 $9.49
Common Shares Outstanding
At Year End 8,850 8,749 9,126 9,889 10,318
Letter from the President
Fiscal year '97 was a good year for J & J Snack Foods Corp. A
growth year. A year of opportunity. A very profitable year. A
fulfilling year. Satisfying and exciting. As exciting as being . .
. being "kissed by a wolf". What??!! "Kissed by a wolf" . . . did
I say that? Did I actually write that? Do I mean that? Here I go
again with one of my offbeat (or maybe onbeat) annual report
messages that likens the curious and conspicuous challenges of the
business world we live in to the animal world we draw parallels
from.
Let's consider this picture for a moment. For the wolf and I to
relate and embrace together, we both had to work through certain
things:
* Judgment and trust, coupled with old fashioned instincts
* Careful decisions
* A fondness or like for each other
* Integration into each other's world
Similarly, all of these qualities relate and influence our
business success, not only this year, but historically over the
years.
We grew our business because we made careful decisions, guided by
good judgment, trust and instinct, and we integrated new products,
with new people from businesses we acquired to our pack or our
world. As a result, the year was as successful and fulfilling as
being "kissed by a wolf".
1997 results in brief . . .
* Sales grew 18% to $220.3 million
* Net income rose 40% to $8.2 million
* EPS increased 40% to $.91
* Book value increased to $11.97 per share
* We made several selective key acquisitions
And we committed the company and its people -- we dedicated and
challenged ourselves -- to growth, successful, profitable growth.
Here We Grow Again: After a relatively modest sales gain last
year, we assessed our opportunities for category growth in our
core businesses. Last year, in my Annual Report message, I stated
". . . JJSF has significant growth and operational improvement
opportunities in all of our core businesses. Internal expansion,
new product development, and future acquisitions to complement our
divisions are planned". This statement, reinforced by efforts and
accomplishments from key staff, became the basis and cornerstone
for activity and growth in fiscal '97.
Niche Products: Here We Grow Again: Soft pretzel sales grew in
fiscal '97 and benefited from volume generated from acquired
businesses. Our flagship brand SUPERPRETZEL continued to lead the
category, and we also positioned ourselves to benefit for future
growth with the addition of two regional soft pretzel companies,
Bakers Best and Pretzels, Inc., acquired early this year. Both
companies have been smoothly and successfully consolidated into
our operating system and are expected to provide future benefits.
In addition, we continue to develop new and innovative products
including our PRETZEL GOURMET EXPRESS branded concept, designed to
expand the category and our leadership position, as well as
capture identified opportunities in college campus and business
dining.
Frozen juice bars and desserts, enhanced by our acquisition of
Mama Tish's International Foods, a manufacturer of Italian ices
and sorbets, had an excellent year with a whopping 76% sales
increase. Our LUIGI'S Real Italian ices, SHAPE-UPS frozen juice
bars and FROSTAR continue to provide incremental growth and lead
their categories. Bakery sales, primarily ready-to-bake raw cookie
dough products, increased sharply and our churro sales also added
to our overall food service growth.
ICEE-USA: Here We Grow Again: Our frozen beverage business -- ICEE
and ARCTIC BLAST brands -- was a shining star during fiscal '97.
In addition to achieving solid sales increases, the strengthening
and improvement of operations provided major contributions to
profitability.
Our strategic alliance with IMI Cornelius, a beverage equipment
manufacturer, has resulted in significant improvements in key
areas of dispenser reliability and performance. Through unique
programs and advanced information systems, our customer service
network has become state-of-the-art in speed and efficiency.
In August, Dan Fachner, an 18-year veteran of ICEE, was promoted
to President of ICEE-USA. Dan and his staff have been instrumental
in implementing operational improvements which have resulted in
ICEE's dramatic turnaround over the past few years.
Acquisition of National ICEE: Here We Grow Again: In December
1997, we acquired National ICEE Corporation (National). National
markets and distributes ICEE beverages in the eastern half of the
United States. National ICEE has revenue of approximately $40
million and will nearly double our sales in this beverage
category. This acquisition will provide us with an exciting
opportunity to expand our business and the category on a national
basis under a single consolidated leadership. It is our goal to
affect this transition of National ICEE and its operations on an
accelerated schedule.
Looking Ahead: Fiscal 1998. Programs are in place to develop and
increase sales in all categories. Every effort will be made to
integrate the National ICEE acquisition as efficiently as possible
in order to achieve the desired synergies and economies of scale.
Our new year is already off and running. We're committed to
another "Here We Grow Again" year. We are optimistic about fiscal
'98 and beyond. And, we look forward to being "kissed by the wolf"
again!
Gerald B. Shreiber
President and Chairman
December 8, 1997
(Photograph)
Caption: Gerry Shreiber at Wolf Park in Battle Ground, Indiana,
where he serves as a Director.
SOFT PRETZELS
Growth Begins with Establishing Strong Roots and then Branching
Out.
In 1971, soft pretzels were the single product line that launched
our Company. And in 1997, soft pretzels continued to provide the
strong base for our Company to grow and build on.
Today, J & J stands as the world's largest manufacturer of soft
pretzel products. Our flagship brand, SUPERPRETZEL, is America's
Favorite Soft Pretzel -- enjoyed by millions of people each year
at home, school, work and play.
SUPERPRETZEL is more than just a brand. It has grown to become a
full line of innovative soft pretzel products that today are
shaped, flavored and filled to satisfy the diverse desires and
appetites of today's consumers.
It's the foundation for an expanding family of soft pretzel
products that J & J has built through an ongoing strategy of
product development, expanded distribution, market penetration and
strategic acquisitions.
Let's twist again -- and again -- and again.
Our Food Service division's soft pretzel sales grew by 5% in 1997
due to two strategic, complementary acquisitions.
At the start of the fiscal year, J & J acquired the assets of
Bakers Best Snack Foods, a Pennsylvania manufacturer of soft
pretzels selling to both the food service and retail supermarket
industries under the brand name DUTCH TWIST.
In November, we acquired Pretzels, Inc., a Dallas, Texas based
manufacturer of soft pretzels selling under the TEXAS TWIST brand.
Both companies have been smoothly consolidated into our sales and
marketing strategies in order to maximize efficiencies. And both
are complementary to our existing businesses.
The addition of these two brands to the J & J family has added new
products and product lines, such as GOURMET SOFT PRETZEL ROLLS, a
fresh approach to extend the usage of soft pretzels for
sandwiches.
Pretzels, pretzels everywhere.
J & J's soft pretzels are the right snack food, at the right time,
in all the right places.
Marketed under the J & J family of brand names, our soft pretzel
products benefit from the awareness of the relationship between
food choices and good health. They provide great tasting,
nutritious products for consumers to enjoy anytime, anywhere.
Our products are available at tens-of-thousands of high-traffic
snack bar locations across the country.
You'll find J & J products at malls and shopping centers, chain
stores, convenience stores, stadiums and sports arenas, amusement,
leisure and theme parks, movie theatres, business and industry
cafeterias, fast food outlets and warehouse club stores.
And since young people are the world's greatest snackers, our
branded soft pretzels have become the big snack on campus at
thousands of schools, colleges and universities, where they
provide bread requirements for U.S.D.A. approved school lunch and
breakfast programs. Additionally, a number of these products are
also available in retail supermarkets.
This past year saw sales gains from expanded distribution into
additional club store locations as well as new market penetration
in the international arena. We continue to pursue our interest
internationally where we currently have distribution in the U.K.,
Israel and the Pacific Rim.
Merchandising -- what a concept!
One key to putting pretzels in the hands of every hungry consumer
is to develop innovative merchandising systems. And J & J has
developed some of the best.
Our branded soft pretzel concepts make it easy for customers to
add a food service operation -- even if they don't have snack bar
facilities or a traditional food service location. Our popular
SUPERPRETZEL line offers a complete array of branded point-of-sale
materials, display cases and specially designed mobile
merchandising units. These systems can stand alone or complement
other food service operations.
Building on the success of SUPERPRETZEL, we recently launched an
upscale branded concept to capitalize on America's growing taste
for premium snacks and the evolving trends in the food service
industry. It's called PRETZEL GOURMET EXPRESS, and it's already
meeting with positive customer acceptance.
PRETZEL GOURMET EXPRESS is a turn-key concept that features a
premium line of delicious flavored and filled soft pretzels. And
it offers customers a complete package that includes proprietary
merchandising equipment and a comprehensive marketing and
promotional program.
It's a jungle out there.
Ask any food company: The world's toughest environment isn't the
Amazon, the Sahara or the North Pole. It's the retail supermarket
and, more specifically, the highly competitive freezer case in the
supermarket.
Despite the competitive pressures of this environment, J & J
remains king of the supermarket soft pretzel category, with our
SUPERPRETZEL brand maintaining its strong leadership position.
Overall supermarket sales increased by 3% this year, thanks to the
added volume of our newly acquired businesses.
Our retail supermarket product line currently includes
SUPERPRETZEL soft pretzels, SOFT PRETZEL BITES, SOFTSTIX, CINNAMON
RAISIN MINI'S and the newly acquired DUTCH TWIST labels. These
products allow consumers to enjoy our satisfying treats at home
with convenient preparation in the oven or microwave.
However, we continue to be impacted by increased freezer case
competition in soft pretzels and hot snacks/appetizers, as well as
an overall decline in the soft pretzel category. And while the
supermarket environment may not become any friendlier in the near
future, we remain determined to not only survive, but thrive.
Success is in store at J & J's own outlets.
This past year we integrated our BAVARIAN PRETZEL BAKERY and
PRETZEL GOURMET retail stores under the banner of the J & J
Restaurant Group. This division, which operates approximately 80
company-owned retail stores in regional malls primarily throughout
the Mid-Atlantic states, experienced a healthy sales increase of
16% for 1997. And we're not done yet.
We're working vigorously to increase traffic flow at our retail
locations and encourage higher sales per customer. To accomplish
this, we recently introduced taste-tempting new flavored pretzels
and are currently testing a variety of distinctive new product
entries.
In addition, J & J is developing strategic relationships with
several other national food service leaders to access new branded
products that will expand our menu offerings and further increase
sales.
(Graphic inserts)
Captions:
The original SUPERPRETZEL soft pretzel...
Grew into new shapes, sizes and varieties...
Including flavored and filled line extensions to meet the desires
of today's consumers.
FROZEN DESSERTS
Growth is Enriched by Adopting New Members Into the Family.
What a year it was for frozen dessert products in the Food Service
division, where sales rose a spectacular 76%! This incredible
record was the result of valuable new family members, along with
the continued popularity of some long-time J & J frozen favorites.
Lookin' good LUIGI'S.
Sales of our LUIGI'S Real Italian Ice squeeze-up tubes continued
their track record of growth, largely on the strength of increased
distribution in club stores.
This well-established and growing brand is a favorite of consumers
nationwide, who enjoy LUIGI'S at snack bars, convenience stores,
leisure and theme parks, arenas, pizzeria restaurants, club stores
and retail supermarkets.
We also added a new twist to sales growth with the introduction of
LUIGI'S ITALIAN TWISTERS, a value-added extension that combines
vanilla ice cream with swirls of Italian ice for a unique taste
treat.
Welcome to the family.
The biggest news of 1997 was a very cool marriage.
In January, we acquired the assets of Mama Tish's International
Foods, a leading manufacturer of Italian ices and sorbets selling
to both the food service and retail supermarket venues.
With a dowry of popular, upscale brands, MAMA TISH'S is the
perfect addition to our existing frozen desserts family, which
includes not only LUIGI'S, but also SHAPE-UPS, FROSTAR and
MAZZONES.
To maximize operating efficiencies, J & J is consolidating all
manufacturing of MAMA TISH'S products at our existing facility in
Scranton, Pennsylvania.
The best frozen stuff on earth.
From the MAMA TISH'S clan, we also welcomed an exciting new line
Made From The Best Stuff On Earth*: SNAPPLE ICE, a frozen ice
treat in popular SNAPPLE* beverage flavors, under license from
Snapple Beverage Corp.
In the fourth quarter we successfully gained national distribution
of SNAPPLE ICE in a major convenience store chain, which helped
contribute to our overall sales gains.
SHAPE-UPS: The family scholars.
The J & J frozen dessert family continues to do well in school,
thanks to the popularity of our SHAPE-UPS frozen fruit juice bars.
SHAPE-UPS carry the U.S.D.A. approved Child Nutrition (CN) Label
and are made with real fruit juice. They are a favorite of school
children nationwide.
The power couple.
As the #1 and #2 retail Italian ice brands, respectively, LUIGI'S
and MAMA TISH'S add up to one powerful pair in the supermarket.
The addition of the MAMA TISH'S Italian ice line pushed our retail
supermarket sales of frozen desserts up 19% for the year. The MAMA
TISH'S brand is positioned as a premium line which complements our
all-family LUIGI'S brand. Both offer consumers a delicious,
refreshing, healthy alternative for an anytime taste treat.
(Graphic insert)
Caption:
Our family of frozen desserts includes: LUIGI'S, the #1 selling
Italian ice in the retail supermarket, SHAPE-UPS, which are
enjoyed by school children everywhere and the newest members,
squeeze-up tubes in unique flavors and varieties.
*SNAPPLE and MADE FROM THE BEST STUFF ON EARTH are registered
trademarks of Snapple Beverage Corp.
OTHER SNACK FOODS
Growth is Accelerated by Leaping on New Opportunities for Sales
and Profits.
J&J produces a variety of other niche snack foods which include
churros, funnel cakes, cookies and other baked goods.
The West Coast Bakery is jumpin'.
In our bakery business, J & J is capitalizing on opportunities by
remaining alert to changing customer needs. As a result, we've
taken sales and profits to new levels in fiscal 1997.
Sales at our West Coast Bakery jumped 132% for the fiscal year due
to a strong frozen cookie dough program for a large club store
chain, a successful new product introduction and continued growth
in the industrial ingredient business.
Churro's star continues to rise.
Through our geographic expansion efforts, more and more consumers
are discovering what people in the West and Southwest have known
for years: TIO PEPE'S churros are a sweet treat anywhere.
These crispy, cinnamon-sugared, doughnut-like snacks of Hispanic
origin are growing in popularity and gaining in sales. And even
long-time fans are discovering the versatility of churros through
our delicious new fruit-filled varieties. As a result, Food
Service churros sales grew this year, led by increases in sales
and distribution of TIO PEPE'S fruit filled churros. Retail
churros experienced significant growth both in existing and newly
entered geographic markets.
Cookies catapult to new heights.
Through innovative retailing systems and irresistible products,
our cookie business continues to capture an increasing share of
this large market.
Our PRETZELCOOKIES, a line of pretzel-shaped cookies introduced
last year, have grown substantially this year through increased
distribution. In addition, they have recently gained U.S.D.A.
recognition as the equivalent of one bread requirement on school
menus, clearing the way for entry into the school food service
market.
MRS. GOODCOOKIE, a fresh-baked cookie retailing system, was
introduced at the end of the fiscal year. With seven delectable
varieties, along with baking and merchandising equipment, MRS.
GOODCOOKIE is poised for a very sweet future.
Consumers flip for funnel cakes.
Our FUNNEL CAKE FACTORY brand offers a unique line of frozen,
pre-cooked, pre-shaped funnel cakes that are a cinch to prepare
and a joy to eat. And in 1997, sales of these delicious treats
grew by over 50%.
One of the most exciting new markets for funnel cakes is schools,
where we experienced large sales increases after being approved by
the U.S.D.A. for school menus. Growth has also continued in
traditional markets such as leisure and theme parks.
(Graphic inserts)
Captions:
A line of fruit and creme filled churros has helped to drive the
growth of our churro business.
Innovative products and programs have jump started our Bakery's
growth.
Our frozen funnel cakes continue to experience sales growth
through new distribution gains.
FROZEN CARBONATED BEVERAGES (FCB)
Growth is Heightened by Changing with the Environment to Find New
Ways to Soar.
In our Frozen Carbonated Beverage (FCB) division, fiscal 1997 was
a time of positive change, bringing new customers, new partners,
new service enhancements and a colorful new look.
Together, these changes contributed to solid growth, with a sales
gain of 8% and a significant increase in profits.
Hot brands.
The FCB division, whose ICEE and ARCTIC BLAST brands are marketed
and distributed by ICEE-USA, is the largest distributor of frozen
carbonated beverages in North America. In the western United
States, as well as Canada and Mexico, we distribute both the ICEE
and ARCTIC BLAST brands while ARCTIC BLAST is also distributed in
the remainder of the United States.
These semi-frozen beverages which are served from our proprietary
dispensing equipment are enjoyed by sipping through a straw or
eating with a spoon. Our refreshing beverages are available at
almost 10,000 food service locations -- including many outlets
where our soft pretzels and other snack foods are sold.
Going where the thirst is.
In 1997, we continued to place our products in high-traffic
locations where people have a thirst for a super-cold,
super-delicious beverage. We added several new chain accounts
including movie theatres, convenience stores and other retail
outlets.
In addition, we began testing new non carbonated frozen product
lines that are designed to increase consumption among adults.
Powerful partnerships.
We have continued to expand our use of outside distributors,
greatly enhancing the efficiency of our syrup distribution system.
And we realized ongoing operational benefits through our new
alliance with IMI Cornelius, the world's largest manufacturer of
beverage dispensing equipment. This strong alliance has also
enabled us to sell FCB equipment in addition to our lease and
bundled programs.
Super service.
To better serve the customers of our branch office network, we've
continued to upgrade our centralized customer service department.
Today, this department supports our branches by providing
state-of-the-art response to customer needs.
A cool new image.
Finally, to keep up with changing tastes, we gave our ICEE brand
an exciting new image with contemporary graphics designed to
appeal to a broad range of consumers.
This new image is one more example of how J & J Snack Foods is
continually evolving to meet the needs of our ever-changing
market.
(Graphic insert)
Caption:
Our FCB division is taking off with new customers, partners,
graphics and service enhancements.
(Graphics inserted)
Management's Discussion & Analysis of Financial Condition and
Results of Operations
In addition to historical information, this discussion and
analysis contains forward-looking statements. 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. Important
factors that might cause such a difference include, but are not
limited to, those discussed in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis
only as of the date hereof. The Company undertakes 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
Fiscal 1997 Compared to Fiscal 1996
Net sales increased $34,300,000 or 18% to $220,318,000 in fiscal
1997 from $186,018,000 in fiscal 1996. Excluding sales of acquired
businesses, net sales increased $16,395,000 or 9% for the year.
Sales to food service customers increased $15,432,000 or 18% to
$101,936,000 in fiscal 1997. Excluding sales of acquired
businesses, sales to food service customers increased $2,675,000
or 3% for the year. Soft pretzel sales to the food service market
increased 5% to $57,668,000. Excluding sales of acquired
businesses, food service soft pretzel sales decreased $636,000 or
1% from last year. Two customers accounted for approximately
$2,500,000 of lower pretzel sales in 1997 compared to 1996. Churro
sales increased 3% to $10,403,000. Frozen juice bar and dessert
sales increased 76% to $28,210,000. Approximately 75% of the juice
bar and dessert sales increase resulted from sales of acquired
businesses.
Sales of products to retail supermarkets increased $3,384,000 or
9% to $40,302,000 in fiscal 1997. Total soft pretzel sales to
retail supermarkets were $24,504,000, an increase of 3% from
fiscal 1996. Excluding sales of an acquired business, sales to
retail supermarkets decreased 2% or $919,000 for the year. Sales
of our flagship SUPERPRETZEL brand soft pretzels, excluding
SOFTSTIX and CINNAMON RAISIN MINI'S, decreased 7% to $18,157,000.
SOFTSTIX sales decreased $701,000 or 26% to $2,018,000 from the
previous year. Sales of Italian ice increased $2,335,000 or 19% to
$14,553,000 in 1997 from $12,218,000 in 1996 due to sales of Mama
Tish's International Foods which was acquired during the second
quarter. Excluding sales of Mama Tish's, Italian ice sales were
down 4% for the year.
Frozen carbonated beverage and related product sales increased
$3,558,000 or 8% to $47,915,000 in fiscal 1997. Beverage sales
alone increased 4% to $43,594,000 for the year. Excluding last
year's pricing adjustment to one customer and an unusually high
sales of promotional cups to another customer, beverage sales
increased 7%.
Bakery sales increased $10,225,000 or 132% to $17,956,000 in
fiscal 1997 due to increased product sales to one customer. Sales
of our Bavarian Pretzel Bakery increased 16% to $12,209,000 for
the year. Excluding sales from an acquired business, Bavarian
Pretzel Bakery sales increased 8% or $856,000 for the year.
Gross profit on sales was 49% of sales in both 1997 and 1996.
Total operating expenses increased $12,449,000 to $96,519,000 in
fiscal 1997 but as a percentage of sales decreased to 44% from 45%
in fiscal 1996. Marketing expenses as a percentage of sales
dropped to 30% in 1997 from 32% in 1996. This decline was due
primarily to overhead efficiencies resulting from higher sales
levels. Distribution expenses were 9% of sales in 1997 and 1996.
Administrative expenses increased to 5% of sales in 1997 from 4%
in 1996 due to increased litigation costs.
Operating income increased $3,692,000 or 46% to $11,640,000 in
fiscal 1997.
Investment income decreased $796,000 or 56% in fiscal year 1997
due to a sharply lower level of investable funds which were used
to pay for acquisitions. Interest expense increased $66,000 or 18%
due to short-term borrowings.
The effective income tax rate was 32% in 1997 and 35% in 1996. The
lower rate in 1997 is primarily due to adjustments relating to
settlements of federal tax matters.
Net earnings increased $2,316,000 or 40% in fiscal 1997 to
$8,159,000.
Results of Operations
Fiscal 1996 (52 weeks) Compared to Fiscal 1995 (53 weeks)
Net sales increased $656,000, or less than 1%, to $186,018,000 in
fiscal 1996 from $185,362,000 in fiscal 1995.
Sales to food service customers increased $7,122,000 or 9% to
$86,504,000 in fiscal 1996. Soft pretzel sales to the food service
market increased 7% to $54,704,000. Two customers accounted for
essentially all of the soft pretzel sales increase. Churro sales
increased 6% to $10,113,000. Frozen juice bar and dessert sales
increased 18% to $16,033,000. Approximately 40% of the juice bar
and dessert sales resulted from sales of an acquired business.
Sales of products to retail supermarkets decreased $4,382,000 or
11% to $36,918,000 in fiscal 1996. Total soft pretzel sales to
retail supermarkets were $23,799,000, a decrease of 9% from fiscal
1995. The sales decline 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% to $19,478,000. SOFTSTIX sales decreased $1,120,000
or 29% to $2,719,000 from the previous year. LUIGI'S Real Italian
Ice sales decreased $2,140,000 or 15% to $12,218,000 due to a cold
and rainy summer in the eastern half of the United States and
increased competition. Excepting LUIGI'S Real Italian Ice, the
retail supermarket decreases were due primarily to changes in unit
volume. A price increase accounted for approximately $900,000 of
LUIGI'S Real Italian Ice sales for the year.
Frozen carbonated beverage and related product sales increased
$757,000 or 2% to $44,357,000 in fiscal 1996. Beverage sales alone
increased less than 1% to $41,914,000 for the year. A pricing
adjustment to one customer and increased sales of promotion cups
to another customer accounted for essentially all of the sales
increases. Sales of the Company's Mexican frozen carbonated
beverage subsidiary were down $193,000 or 10% for the year due to
the devaluation of the peso and continuing economic problems in
Mexico.
Bakery sales decreased $1,754,000 or 18% to $7,731,000 in fiscal
1996 due to lower unit volume. Sales of our Bavarian Pretzel
Bakery decreased 1% to $10,508,000 for the year. Excluding sales
from an acquired business, Bavarian Pretzel Bakery sales decreased
7% or $734,000 for the year.
Gross profit on sales declined less than one-half of one percent
to 49% for fiscal 1996 compared to 50% for fiscal 1995. The
percentage decrease is entirely attributable to higher flour
costs.
Total operating expenses decreased $1,411,000 to $84,070,000 in
fiscal 1996 and as a percentage of sales decreased to 45% from 46%
in fiscal 1995. Marketing expenses as a percentage of sales were
32% in both years. Distribution expenses decreased to 9% of sales
in 1996 from 10% in 1995 due to the use of alternate channels of
distribution in our food service business and changes in methods
of distribution in our frozen carbonated beverage division.
Administrative expenses were 4% of sales in 1996 and 1995.
Operating income increased $940,000 or 13% to $7,948,000 in fiscal
1996. Excluding a pricing adjustment to frozen carbonated beverage
sales, operating income increased $415,000 or 6% to $7,423,000 for
the year.
Investment income increased $99,000 or 7% in fiscal year 1996 due
to a higher level of invested funds. Interest expense decreased
$34,000 to $365,000 for the year.
Sundry income decreased $1,331,000 in 1996 to $34,000 for the
year. 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 was 35% in 1996 and 38% in 1995.
Net earnings increased $39,000 or 1% in fiscal 1996 to $5,843,000.
Acquisitions, Liquidity and Capital Resources
In December 1997, the Company acquired controlling interest in
National ICEE Corporation. National ICEE Corporation, with annual
sales of approximately $40 million, markets and distributes frozen
carbonated beverages primarily in the eastern half of the United
States. The Company has incurred approximately $50 million of debt
to complete the acquisition. The following are the unaudited pro
forma results of operations for the fiscal years 1997 and 1996
assuming the above had occurred at the beginning of that fiscal
year:
1997 1996
Sales $258,206,000 $222,964,000
Net Earnings $6,129,000 $4,279,000
Earnings per common share $.68 $.47
In January 1997, the Company acquired the assets of Mama Tish's
International Foods by assuming certain liabilities. Mama Tish's
is a manufacturer and distributor of Italian ices, sorbets and
other frozen juice products with annual sales of approximately $15
million.
In November 1996, the Company acquired all of the common stock of
Pretzels, Inc. for cash. Trading as TEXAS TWIST, Pretzels, Inc. is
a soft pretzel manufacturer selling to both the food service and
retail supermarket industries.
In October 1996, the Company acquired the assets of Bakers Best
Snack Food Corp. for cash. Bakers Best is a manufacturer of soft
pretzels selling to both the food service and retail supermarket
industries.
In May 1996, the Company acquired the assets of Mazzone
Enterprises, Inc. for cash and by assuming certain of its
liabilities. Mazzone Enterprises is a manufacturer and distributor
of Italian ices and other specialty frozen desserts.
In April 1996, 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.
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.
Beginning in December 1994, the devaluation of the Mexican peso
caused reductions of $53,000, $235,000 and $1,121,000 in
stockholders' equity for the 1997, 1996 and 1995 fiscal years,
respectively, because of the revaluation of the net assets of the
Company's Mexican frozen carbonated beverage subsidiary. The
Company experienced a dollar decline in the sales of this
subsidiary of about 50% in fiscal year 1995 after the devaluation.
In 1995, sales of the Mexican subsidiary decreased to $1,966,000
from $3,198,000 in 1994. In 1996, sales decreased 10% to
$1,773,000 and in 1997 were $1,783,000.
Under various share repurchase programs authorized by the Board of
Directors, the Company purchased and retired 433,000 shares of its
common stock at a cost of $5,029,000 in fiscal year 1996, and
801,000 shares at a cost of $9,447,000 in fiscal year 1995. Under
the most recent share repurchase authorization, 712,000 shares
remain to be repurchased.
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. The sale of
Western has not had a material impact on the Company's operations.
Available to the Company are unsecured general-purpose bank lines
of credit totalling $30,000,000. The credit facilities are renewed
annually. There were no borrowings under these general bank lines
of credit at September 27, 1997.
The Financial Accounting Standards Board ("FASB") has issued
Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share" ("EPS"), which is effective for financial
statements issued after December 31, 1997. Once effective, the new
standard eliminates primary and fully diluted EPS and instead
requires presentation of basic and diluted EPS in conjunction with
the disclosure of the methodology used in computing such EPS.
Basic 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 or other contracts to issue common stock were exercised
and converted into common stock. The effect of adopting this new
standard is not expected to be material.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income," which is effective for years beginning
after December 15, 1997. This new standard requires entities
presenting a complete set of financial statements to include
details of comprehensive income. Comprehensive income consists of
net income or loss for the current period and income, expenses,
gains and losses that bypass the income statement and are reported
directly in a separate component of equity. The effect of adopting
this new standard is not expected to be material.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which is
effective for all periods beginning after December 15, 1997. SFAS
No. 131 requires that public business enterprises report certain
information about operating segments in complete sets of financial
statements of the enterprise and in condensed financial statements
of interim periods issued to shareholders. It also requires that
public business enterprises report certain information about their
products and services, the geographic areas in which they operate,
and their major customers. The effect of adopting this new
standard is not expected to be material.
Fiscal 1997 Compared to Fiscal 1996
The combined balance of cash and cash equivalents and marketable
securities decreased $10,363,000 from $11,764,000 in 1996 to
$1,401,000 in 1997 primarily because of the use of cash for
acquisitions.
Trade receivables increased $6,105,000 or 35% to $23,382,000 in
1997, and inventories increased $2,259,000 or 20% to $13,535,000
in 1997 from 1996 primarily because of higher sales levels.
Other receivables increased $1,151,000 to $2,076,000 in 1997 due
to an increase in reimbursements due from the Company's insurance
carrier.
Property, plant and equipment increased $22,248,000 primarily
because of expenditures for dispensers required for the expansion
of the frozen carbonated beverage business, for ovens and portable
merchandisers required for the expansion of the food service
business and for the expansion and upgrading of production and
warehousing capability at the Company's manufacturing facilities.
Additionally, property, plant and equipment from acquisitions
accounted for approximately one-third of the overall increase.
Goodwill, trademarks and rights, net of accumulated amortization
increased $12,133,000 to $21,459,000 primarily because of goodwill
and restrictive covenants acquired in the Bakers Best Snack Food
Corp., Pretzels, Inc. and Mama Tish's International Foods
acquisitions. Long-term investments decreased $6,652,000 to
$3,835,000 primarily because proceeds from sales of these
investments were used for acquisitions. Sundry assets increased by
$181,000 from 1996 primarily because of an increase in funding of
various long-term merchandising agreements.
Accounts payable and accrued liabilities increased $4,535,000 in
1997 from $17,432,000 in 1996 due primarily to higher sales
levels.
Deferred income decreased $35,000 primarily as a result of the
reduction in the Company's guarantees related to the sale of its
Hawaiian ICEE operations.
Common stock increased $1,090,000 in 1997 to $36,908,000 primarily
because of the exercise of incentive stock options.
Net cash provided by operating activities decreased $1,509,000 to
$20,371,000 in 1997 from $21,880,000 in 1996 primarily because of
an increase in accounts receivable.
Net cash used in investing activities increased $13,311,000 to
$30,473,000 in 1997 from $17,162,000 in 1996 primarily because of
payments for purchases of companies, net of cash acquired and debt
assumed and higher capital expenditures. Capital expenditures
increased by $5,101,000 in 1997 from 1996 because of increased
expenditures for dispensers for the expansion of the frozen
carbonated beverage business.
There was net cash provided by financing activities of $956,000 in
1997 compared to a net use of $4,867,000 in 1996. The use in 1996
was for the Company's repurchase of common stock.
Fiscal 1996 Compared to Fiscal 1995
The combined balance of cash and cash equivalents and marketable
securities decreased $2,756,000 from $14,520,000 in 1995 to
$11,764,000 in 1996 primarily because of the investment of
proceeds from short-term investments into long-term investments.
Receivables and inventories increased slightly from last year.
Prepaid expenses and deposits decreased $518,000 to $980,000
because there were deposits of $585,000 at the end of last year
for equipment being manufactured for resale for the Company by an
outside vendor.
Property, plant and equipment increased $11,467,000 primarily
because of expenditures for dispensers required for the expansion
of the frozen carbonated beverage business, for ovens and portable
merchandisers required for the expansion of the food service
business and for the expansion and upgrading of production and
warehousing capability at the Company's manufacturing facilities.
Goodwill, trademarks and rights, net of accumulated amortization
increased $682,000 to $9,326,000 primarily because of goodwill and
restrictive covenants acquired in the Mazzone Enterprises, Inc.
and Pretzel Gourmet Corp. acquisitions. Long-term investments
increased $2,152,000 to $10,487,000 primarily because of the
investment of proceeds from short-term investments into long-term
investments. Sundry assets increased by $270,000 from 1995
primarily because of an increase in parts inventory used by our
ICEE-USA Corp. subsidiary for the remanufacture of frozen
carbonated beverage machines.
Accrued liabilities increased $1,116,000 in 1996 from $5,922,000
in 1995 due to an increase in income taxes accrued.
Deferred income decreased $99,000 primarily as a result of the
reduction in the Company's guarantees related to the sale of its
Hawaiian ICEE operations.
Deferred income taxes decreased $1,600,000 substantially as a
result of changes to book versus tax depreciation timing
differences.
Common stock decreased $4,984,000 in 1996 to $35,818,000 because
of payments by the Company to repurchase and retire its stock.
A foreign currency translation adjustment of ($235,000) was
recorded in 1996 due to the revaluation of the net assets of the
Company's Mexican frozen carbonated beverage subsidiary. The
revaluation was necessitated by the continuing devaluation of the
Mexican peso.
Net cash provided by operating activities increased $1,292,000 to
$21,880,000 in 1996 from $20,588,000 in 1995 primarily because of
an increase in depreciation and amortization of fixed assets and
amortization of intangibles and deferred costs.
Net cash used in investing activities increased $9,809,000 to
$17,162,000 in 1996 from $7,353,000 in 1995 primarily because of
higher capital expenditures of $1,545,000, payments for purchases
of companies of $2,739,000 in 1996 compared to none in 1995, a
decrease of $2,653,000 in net proceeds from investments, a
decrease in proceeds of $1,834,000 from the sales of operations
and disposals of property and equipment, and the lower use of
funds from the bond trust fund of $654,000. Capital expenditures
increased by $1,545,000 in 1996 from 1995 primarily because of
increased expenditures on marketing equipment for our food service
business.
Net cash used in financing activities decreased to $4,867,000 in
1996 compared to $9,160,000 used in 1995 primarily because of a
decrease in the purchase of the Company's common stock of
$4,418,000.
Consolidated Statements of Earnings
Fiscal year ended
September 27, September 28, September 30,
1997 1996 1995
(52 weeks) (52 weeks) (53 weeks)
Net sales $220,318,000 $186,018,000 $185,362,000
Cost of goods sold 112,159,000 94,000,000 92,873,000
Gross profit 108,159,000 92,018,000 92,489,000
Operating expenses
Marketing 65,231,000 58,604,000 58,444,000
Distribution 19,197,000 17,264,000 18,591,000
Administrative 10,326,000 7,309,000 7,585,000
Amortization of
intangibles and
deferred costs 1,765,000 893,000 861,000
96,519,000 84,070,000 85,481,000
Operating income 11,640,000 7,948,000 7,008,000
Other income (deductions)
Investment income 630,000 1,426,000 1,327,000
Interest expense (431,000) (365,000) (399,000)
Sundry 112,000 34,000 1,365,000
311,000 1,095,000 2,293,000
Earnings before
income taxes 11,951,000 9,043,000 9,301,000
Income taxes 3,792,000 3,200,000 3,497,000
NET EARNINGS $8,159,000 $5,843,000 $5,804,000
Earnings per common share $.91 $.65 $.61
Weighted average
number of shares 8,985,000 9,013,000 9,544,000
The accompanying notes are an integral part of these statements.
Consolidated Balance Sheets
September 27, September 28,
1997 1996
Assets
Current Assets
Cash and cash equivalents $1,401,000 $10,547,000
Investment securities available for sale -- 1,217,000
Receivables
Trade, less allowance of $392,000
and $257,000, respectively 23,382,000 17,277,000
Other 2,076,000 925,000
Inventories 13,535,000 11,276,000
Prepaid expenses and deposits 853,000 980,000
Total current assets 41,247,000 42,222,000
Property, Plant and Equipment, at cost 164,348,000 142,100,000
Less accumulated depreciation and amortization 97,126,000 83,890,000
67,222,000 58,210,000
Other Assets
Goodwill, trademarks and rights,
less accumulated amortization of
$6,883,000 and $5,364,000, respectively 21,459,000 9,326,000
Long-term investment securities available
for sale 495,000 990,000
Long-term investment securities held
to maturity 3,340,000 9,497,000
Sundry 3,064,000 2,883,000
28,358,000 22,696,000
$136,827,000 $123,128,000
Liabilities and Stockholders' Equity
Current Liabilities
Current maturities of long-term debt $16,000 $8,000
Accounts payable 13,315,000 10,394,000
Accrued liabilities 8,652,000 7,038,000
Total current liabilities 21,983,000 17,440,000
Long-Term Debt, less current maturities 5,028,000 5,010,000
Deferred Income 532,000 567,000
Deferred Income Taxes 3,380,000 3,403,000
Commitments -- --
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, 8,850,000 and 8,749,000,
respectively 36,908,000 35,818,000
Foreign currency translation adjustment (1,409,000) (1,356,000)
Retained earnings 70,405,000 62,246,000
105,904,000 96,708,000
$136,827,000 $123,128,000
The accompanying notes are an integral part of these statements.
Consolidated Statements of Changes in Stockholders' Equity
Foreign
Common Stock Currency
Translation Retained
Shares Amount Adjustment Earnings Total
Balance at
Sept 25, 1994 9,889,000 $49,946,000 $ -- $50,599,000 $100,545,000
Issuance of common stock
upon exercise of stock
options 38,000 303,000 -- -- 303,000
Foreign currency
translation
adjustment -- -- (1,121,000) -- (1,121,000)
Repurchase of
common stock (801,000) (9,447,000) -- -- (9,447,000)
Net earnings for the
fiscal year ended
September 30, 1995 -- -- -- 5,804,000 5,804,000
Balance at
September 30, 1995 9,126,000 40,802,000 (1,121,000) 56,403,000 96,084,000
Issuance of common stock
upon exercise of
stock options 56,000 199,000 -- -- 199,000
Adjustments to common
stock for
acquisition -- (154,000) -- -- (154,000)
Foreign currency
translation
adjustment -- -- (235,000) -- (235,000)
Repurchase of common
stock (433,000) (5,029,000) -- -- (5,029,000)
Net earnings for the
fiscal year ended
September 28, 1996 -- -- -- 5,843,000 5,843,000
Balance at
September 28, 1996 8,749,000 35,818,000 (1,356,000) 62,246,000 96,708,000
Issuance of common stock
upon exercise of
stock options 84,000 945,000 -- -- 945,000
Issuance of common stock
for employee stock
purchase plan 17,000 145,000 -- -- 145,000
Foreign currency
translation
adjustment -- -- (53,000) -- (53,000)
Net earnings for the
fiscal year ended
September 27, 1997 -- -- -- 8,159,000 8,159,000
Balance at
September 27, 1997 8,850,000 $36,908,000$(1,409,000)$70,405,000 $105,904,000
The accompanying notes are an integral part of this statement.
Consolidated Statements of Cash Flows
Fiscal year ended
September 27, September 28, September 30,
1997 1996 1995
(52 weeks) (52 weeks) (53 weeks)
Operating activities:
Net earnings $8,159,000 $5,843,000 $5,804,000
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and
amortization of fixed
assets 17,090,000 15,613,000 15,040,000
Amortization of
intangibles and
deferred costs 2,180,000 1,262,000 1,016,000
(Gains) losses from
disposals of property
and equipment (26,000) 44,000 (1,222,000)
Increase (decrease) in
deferred income taxes (23,000) (1,600,000) 308,000
Other adjustments 14,000 (24,000) (123,000)
Changes in assets and
liabilities, net of effects
from purchase of companies
Increase in accounts
receivable (6,615,000) (488,000) (443,000)
Increase in inventories (1,008,000) (30,000) (235,000)
Decrease in prepaid
expenses 174,000 572,000 15,000
Increase in accounts
payable and accrued
liabilities 426,000 688,000 428,000
Net cash provided by
operating activities 20,371,000 21,880,000 20,588,000
Investing activities:
Purchases of property,
plant and equipment (19,581,000) (14,480,000) (12,935,000)
Proceeds from sales
of operations -- -- 405,000
Payments for purchase of
companies, net of cash
acquired and debt assumed (18,601,000) (2,739,000) --
Proceeds from investments
held to maturity 6,146,000 575,000 405,000
Payments for investments
held to maturity -- (2,750,000) (1,000,000)
Proceeds from investments
available for sale 1,710,000 7,133,000 6,609,000
Payments for investments
available for sale -- (4,578,000) (2,981,000)
Decrease in bond trust fund -- 1,000 655,000
Proceeds from disposals of
property and equipment 273,000 191,000 1,620,000
Other (420,000) (515,000) (131,000)
Net cash used in
investing activities (30,473,000) (17,162,000) ( 7,353,000)
Financing activities:
Proceeds from issuance
of common stock 930,000 183,000 303,000
Payments to repurchase
common stock -- (5,029,000) (9,447,000)
Other 26,000 (21,000) (16,000)
Net cash provided by
(used in) financing
activities 956,000 (4,867,000) (9,160,000)
Net (decrease) increase
in cash and cash
equivalents (9,146,000) (149,000) 4,075,000
Cash and cash equivalents at
beginning of year 10,547,000 10,696,000 6,621,000
Cash and cash equivalents at
end of year $1,401,000 $10,547,000 $10,696,000
The accompanying notes are an integral part of these statements.
Notes to Consolidated Financial Statements
Note A - Summary of Significant Accounting Policies
J & J Snack Foods Corp. and Subsidiaries (the Company)
manufactures, markets and distributes a variety of nutritional
snack foods and beverages to the food service and retail
supermarket industries. A summary of the significant accounting
policies consistently applied in the preparation of the
accompanying consolidated financial statements follows.
1. Principles of Consolidation
The consolidated financial statements include the accounts of J &
J Snack Foods Corp. and its wholly-owned subsidiaries. All
material intercompany balances and transactions have been
eliminated in the consolidated financial statements.
2. Revenue Recognition
The Company recognizes revenue when its product is shipped.
The Company sells service contracts covering frozen carbonated
beverage machines sold. The terms of coverage range between 12 and
48 months. The Company records deferred income on service
contracts and amortizes these contracts by the straight-line
method over the term of the contracts.
3. Foreign Currency
Assets and liabilities in foreign currencies are translated into
U.S. dollars at the rate of exchange prevailing at the balance
sheet date. Revenues and expenses are translated at the average
rate of exchange for the period. The cumulative translation
adjustment is recorded as a separate component of stockholders'
equity.
4. Use of Estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
5. Cash Equivalents
Cash equivalents are short-term, highly liquid investments with
original maturities of three months or less.
6. Concentrations of Credit Risk
Concentrations of credit risk with respect to trade receivables
are limited due to the dispersion of the Company's customers over
different industries and geographies.
7. Inventories
Inventories are valued at the lower of cost (determined by the
first-in, first-out method) or market.
8. Depreciation and Amortization
Depreciation of equipment and buildings is provided for by the
straight-line and accelerated methods over the estimated useful
lives. Amortization of improvements is provided for by the
straight-line method over the term of the lease or the estimated
useful life, whichever is shorter. Goodwill, trademarks and rights
arising from acquisitions are being amortized by the straight-line
method over periods ranging from 5 to 30 years. Management reviews
the realization of goodwill based upon past and expected
performance of individual acquired businesses.
In fiscal year 1997, the Company adopted a new standard issued by
the Financial Accounting Standards Board ("FASB"), Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," which provides guidance on when to recognize and
how to measure impairment losses of long-lived assets and certain
identifiable intangibles and how to value long-lived assets to be
disposed of. There was no material impact as a result of the
adoption of SFAS No. 121 on the financial position and results of
operations of the Company.
9. Fair Value of Financial Instruments
The Company adopted SFAS No. 107, "Disclosures About Fair Value of
Financial Instruments," which requires entities to disclose the
estimated fair value of their assets and liabilities considered to
be financial instruments. Financial instruments consist primarily
of cash and cash equivalents, investments and long-term debt.
Based on the borrowing rates currently available to the Company,
long-term debt approximates fair value at September 27, 1997 and
September 28, 1996.
10. Income Taxes
The Company accounts for its 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 which will be in effect when
these differences reverse. Deferred tax expense is the result of
changes in deferred tax assets and liabilities. The principal
types of differences between assets and liabilities for financial
statement and tax return purposes are vacation accruals, insurance
reserves, deferred income and accumulated depreciation.
11. Earnings Per Common Share
Earnings per common share are based on the weighted-average number
of common shares outstanding, including common stock equivalents
(stock options).
The FASB has issued SFAS No. 128, "Earnings Per Share" ("EPS"),
which is effective for financial statements issued after December
31, 1997. Once effective, the new standard eliminates primary and
fully diluted EPS and instead requires presentation of basic and
diluted EPS in conjunction with the disclosure of the methodology
used in computing such EPS. Basic 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 or other contracts to issue common stock
were exercised and converted into common stock. The effect of
adopting this new standard is not expected to be material.
12. Accounting for Stock-Based Compensation
In fiscal 1997, the Company adopted a new standard issued by the
FASB, SFAS No. 123, "Accounting for Stock-Based Compensation,"
which contains a fair value-based method for valuing stock-based
compensation that entities may use, which measures compensation
cost at the grant date based on the fair value of the award.
Compensation is then recognized over the service period, which is
usually the vesting period. The Company has chosen an alternative,
permitted by the standard, to continue accounting for employee
stock options and similar equity instruments under Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees."
13. Advertising Costs
Advertising costs are expensed as incurred. Total advertising
expense was $3,892,000, $4,119,000 and $3,971,000 for the fiscal
years 1997, 1996 and 1995, respectively.
14. Recent Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income," which is effective for years beginning
after December 15, 1997. This new standard requires entities
presenting a complete set of financial statements to include
details of comprehensive income. Comprehensive income consists of
net income or loss for the current period and income, expenses,
gains and losses that bypass the income statement and are reported
directly in a separate component of equity. The effect of adopting
this new standard is not expected to be material.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which is
effective for all periods beginning after December 15, 1997. SFAS
No. 131 requires that public business enterprises report certain
information about operating segments in complete sets of financial
statements of the enterprise and in condensed financial statements
of interim periods issued to shareholders. It also requires that
public business enterprises report certain information about their
products and services, the geographic areas in which they operate,
and their major customers.
Note B - Acquisitions
In January 1997, the Company acquired the assets of Mama Tish's
International Foods by assuming certain of its liabilities. Mama
Tish's is a manufacturer and distributor of Italian ices, sorbets
and other frozen juice products with annual sales of approximately
$15 million. Mama Tish's accounted for approximately $10 million
of sales in 1997 and $850,000 of net earnings.
In November 1996, the Company acquired all of the common stock of
Pretzels, Inc. for cash. Trading as TEXAS TWIST, Pretzels, Inc. is
a soft pretzel manufacturer selling to both the food service and
retail supermarket industries.
In October 1996, the Company acquired the assets of Bakers Best
Snack Food Corp. for cash. Bakers Best is a manufacturer of soft
pretzels selling to both the food service and retail supermarket
industries.
In May 1996, the Company acquired the assets of Mazzone
Enterprises, Inc. for cash and by assuming certain liabilities.
Mazzone Enterprises is a manufacturer and distributor of Italian
ices and other specialty frozen desserts.
In April 1996, 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.
The acquisitions were accounted for under the purchase method of
accounting, and the operations are included in the consolidated
financial statements from the respective acquisition dates. The
impact of the above acquisitions, on the respective acquisition
dates, was not significant on the results of operations of the
Company.
Note C - Credit Arrangements
The Company has available general unsecured bank lines of credit
of $30,000,000 at rates below the prime rate. The credit
facilities are renewed annually. The loan agreements specify net
worth and other financial covenants. The entire amounts of these
lines of credit were available at September 27, 1997 and September
28, 1996.
Note D - Investment Securities
The Company classifies its investments in securities in one of
three categories: held to maturity, trading and available for
sale. Debt securities that the Company has the positive intent and
ability to hold to maturity are classified as held to maturity and
are reported at amortized cost. As the Company does not engage in
securities trading, the balance of its debt securities and any
equity securities are classified as available for sale. Net
unrealized gains and losses for such securities, net of income
tax, are reported as a separate component of stockholders' equity
and excluded from the determination of net income.
Proceeds on sales of securities classified as available for sale
were $1,710,000, $7,133,000 and $6,609,000 for fiscal years 1997,
1996 and 1995, respectively. The Company uses the specific
identification method to determine the cost of securities sold. No
material gains or losses were realized on sales of investment
securities.
The amortized cost, gross unrealized gains and losses, and fair
market values of the Company's investment securities available for
sale and held to maturity at September 27, 1997 are summarized as
follows:
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Available for sale
Corporate debt securities $495,000 $ -- $ -- $495,000
Held to maturity
Corporate debt securities $970,000 $19,000 $ -- $989,000
Municipal government
securities 1,870,000 3,000 (8,000) 1,865,000
Other debt securities 500,000 -- -- 500,000
$3,340,000 $22,000 $(8,000) $3,354,000
The amortized cost, gross unrealized gains and losses, and fair
market values of the Company's investment securities available for
sale and held to maturity at September 28, 1996 are summarized as
follows:
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Available for sale
Equity securities $ -- $9,000 $ -- $9,000
Corporate debt securities 495,000 -- (52,000) 443,000
Municipal government
securities 1,712,000 6,000 (2,000) 1,716,000
$2,207,000 $15,000 $(54,000) $2,168,000
Held to maturity
Corporate debt securities $992,000 $9,000 $(8,000) $993,000
Municipal government
securities 8,005,000 28,000 (67,000) 7,966,000
Other debt securities 500,000 -- -- 500,000
$9,497,000 $37,000 $(75,000) $9,459,000
The following table lists the maturities of investment securities
classified as available for sale and held to maturity at September
27, 1997:
Held to Maturity
Available for Sale Fair
Amortized Fair Market Amortized Market
Cost Value Cost Value
Due after one year through
five years $ -- $ -- $3,340,000 $3,354,000
Due after five years 495,000 495,000 -- --
$495,000 $495,000 $3,340,000 $3,354,000
Note E - Inventories
Inventories consist of the following:
September 27, September 28,
1997 1996
Finished goods $7,108,000 $5,534,000
Raw materials 1,789,000 1,387,000
Packaging materials 2,262,000 2,009,000
Equipment parts and other 2,376,000 2,346,000
$13,535,000 $11,276,000
Note F - Property, Plant and Equipment
Property, plant and equipment consist of the following:
September 27, September 28, Estimated
1997 1996 Useful Lives
Land $819,000 $819,000 --
Buildings 5,340,000 5,119,000 15-39.5 years
Plant machinery and equipment 51,891,000 41,158,000 5-10 years
Marketing equipment 90,988,000 81,144,000 5 years
Transportation equipment 1,856,000 1,754,000 5 years
Office equipment 4,792,000 3,727,000 3-5 years
Improvements 7,837,000 7,053,000 5-20 years
Construction in progress 825,000 1,326,000 --
$164,348,000 $142,100,000
Note G - Accrued Liabilities
Included in accrued liabilities is accrued compensation of
$3,275,000 and $2,560,000 as of September 27, 1997 and September
28, 1996, respectively.
Note H - Long-Term Debt
Long-term debt consists of the following:
September 27, September 28,
1997 1996
7.25% redeemable economic development revenue
bonds payable December 2005; interest
payable semiannually (subject to debt
limitation and minimum stockholders'
equity covenants) $5,000,000 $5,000,000
Other 44,000 18,000
5,044,000 5,018,000
Less current maturities 16,000 8,000
$5,028,000 $5,010,000
Annual principal payments of long-term debt as of September 27,
1997 are as follows:
1998 $16,000
1999 11,000
2000 9,000
2001 8,000
2002 --
2003 and thereafter 5,000,000
$5,044,000
Note I - Deferred Income
1. Sale of ICEE Operations in Hawaii
Deferred income consists of the Company's unrecognized gain on the
sale of its ICEE operations in Hawaii to the former President of
ICEE-USA Corp. in July 1994 for $1,100,000 in cash. Under the
terms of the sale, the Company has guaranteed the payment of a
bank note by the purchaser, ICEE of Hawaii, Inc., through the
issuance of a letter of credit. The Company's guarantee is
collateralized by the assets of ICEE of Hawaii, Inc. The Company
recognizes gain on the sale as the principal due on the bank note
is reduced through payments by ICEE of Hawaii, Inc. The Company
recognized gains of $76,000, $83,000 and $25,000 for the fiscal
years ended 1997, 1996 and 1995, respectively.
2. Service Contracts
During the years ended September 27, 1997 and September 28, 1996,
the Company sold $296,000 and $143,000, respectively, of service
contracts related to its frozen carbonated beverage machines. At
September 27, 1997, deferred income on service contracts was
$283,000, of which $186,000 is reflected as short-term and
included in accrued liabilities on the consolidated balance sheet.
Service contract income of $179,000 and $14,000 was recognized for
the fiscal years ended 1997 and 1996, respectively.
Note J - Income Taxes
Income tax expense is as follows:
Fiscal year ended
September 27, September 28, September 30,
1997 1996 1995
Current (Benefit)
U.S. Federal $3,381,000 $4,538,000 $2,841,000
Foreign 40,000 (31,000) 63,000
State 394,000 293,000 285,000
3,815,000 4,800,000 3,189,000
Deferred (Benefit)
U.S. Federal (3,000) (1,552,000) 359,000
Foreign (23,000) -- (43,000)
State 3,000 (48,000) (8,000)
(23,000) (1,600,000) 308,000
$3,792,000 $3,200,000 $3,497,000
The provisions for income taxes differ from the amounts computed
by applying the federal income tax rate of approximately 34% to
earnings before income taxes for the following reasons:
Fiscal year ended
September 27, September 28, September 30,
1997 1996 1995
Income taxes at statutory
rates $4,063,000 $3,075,000 $3,162,000
Increase (decrease) in taxes
resulting from:
State income taxes, net
of federal income tax
benefit 267,000 193,000 194,000
Nontaxable income (120,000) (343,000) (315,000)
Other, net (418,000) 275,000 456,000
$3,792,000 $3,200,000 $3,497,000
Deferred tax assets and liabilities consist of the following:
September 27, September 28,
1997 1996
Deferred tax assets
Vacation accrual $296,000 $257,000
Insurance reserve 404,000 355,000
Deferred income 272,000 280,000
Other, net 537,000 501,000
1,509,000 1,393,000
Deferred tax liabilities
Depreciation of property
and equipment 4,237,000 4,720,000
Other, net 652,000 76,000
4,889,000 4,796,000
$3,380,000 $3,403,000
Note K - Commitments
1. Lease Commitments
The following is a summary of approximate future minimum rental
commitments for noncancellable operating leases with terms of more
than one year as of September 27, 1997:
Plants and Offices Equipment Total
1998 $5,496,000 $1,949,000 $7,445,000
1999 4,678,000 1,596,000 6,274,000
2000 4,059,000 1,345,000 5,404,000
2001 3,062,000 843,000 3,905,000
2002 2,144,000 91,000 2,235,000
2003 and thereafter 12,537,000 91,000 12,628,000
$31,976,000 $5,915,000 $37,891,000
Total rent expense was $6,002,000, $5,748,000 and $5,860,000 for
fiscal years 1997, 1996 and 1995, respectively.
2. Other Commitments
Additionally, the Company is a party to litigation which
management currently believes will not have a material adverse
effect on the Company's financial condition or results of
operations.
Note L - Capital Stock
Under various share repurchase programs authorized by the Board of
Directors, the Company purchased and retired 433,000 shares of its
common stock at a cost of $5,029,000 in fiscal year 1996, and
801,000 shares at a cost of $9,447,000 in fiscal year 1995. Under
the most recent share repurchase authorization, 712,000 shares
remain to be repurchased.
Note M - Stock Options
The Company has a Stock Option Plan (the "Plan"). Pursuant to the
Plan, stock options may be granted to officers and key employees
of the Company which qualify as incentive stock options as well as
stock options which are nonqualified. The exercise price of
incentive stock options is at least the fair market value of the
common stock on the date of grant. The exercise price for
nonqualified options is determined by a committee of the Board of
Directors. The options are generally exercisable after three years
and expire no later than ten years from date of grant. There were
1,500,000 shares reserved under the Plan; options for 643,000
shares remain unissued as of September 27, 1997.
The Company has a nonqualified stock option plan for nonemployee
directors and the Chief Executive Officer of the Company whereby a
total of 340,000 shares of common stock may be issued. Under this
plan, each nonemployee director is granted options to purchase
3,000 shares of common stock, and the Chief Executive Officer is
granted options to purchase 25,000 shares annually. The option
price is equal to the fair market value of the common stock at the
date of grant, and the options expire ten years after the date of
grant. Other nonqualified options have been issued to the Chief
Executive Officer, directors and certain employees.
The Company has adopted only the disclosure provisions of SFAS No.
123, "Accounting for Stock-Based Compensation." It applies APB
Opinion No. 25 and related interpretations in accounting for its
plans and does not recognize compensation expense for its
stock-based compensation plans. Had compensation cost for the
plans been determined based on the fair value of the options at
the grant date consistent with SFAS No. 123, the Company's net
earnings and earnings per common share would have been reduced to
the pro forma amounts indicated below:
Fiscal year ended
September 27, September 28,
1997 1996
Net Earnings:
As reported $8,159,000 $5,843,000
Pro forma 7,697,000 5,786,000
Earnings Per Common Share:
As reported $.91 $.65
Pro forma .86 .64
These pro forma amounts may not be representative of future
disclosures because they do not take into effect pro forma
compensation expense related to grants before October 1, 1995. The
fair value of these options is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions for grants in fiscal 1997 and 1996,
respectively: expected volatility of 30% for both years; risk-free
interest rates of 6.71% and 6.45%; and expected lives ranging
between 4.5 and 7 years for both years.
A summary of the status of the Company's option plans as of fiscal
years 1997, 1996 and 1995 and the changes during the years ended
on those dates is represented below:
Incentive Nonqualified
Stock Options Stock Options
Stock Weighted- Stock Weighted-
Options Average Options Average
Out- Exercise Out- Exercise
standing Price standing Price
Balance, September 25, 1994 550,078 $11.10 282,000 $9.59
Granted 147,500 $11.76 44,000 $11.78
Exercised (37,675) $8.01 -- --
Cancelled (17,091) $11.43 -- --
Balance, September 30, 1995 642,812 $11.42 326,000 $9.88
Granted 292,826 $10.00 34,000 $12.25
Exercised (21,000) $8.71 (45,000) $2.50
Cancelled (169,145) $12.03 -- --
Balance, September 28, 1996 745,493 $10.97 315,000 $11.27
Granted 267,743 $11.53 34,000 $12.75
Exercised (84,200) $9.38 -- --
Cancelled (52,650) $11.15 -- --
Balance, September 27, 1997 876,386 $11.26 349,000 $11.41
Exercisable Options,
September 27, 1997 312,562 315,000
The weighted-average fair value of incentive options granted
during fiscal years ended September 27, 1997 and September 28,
1996 was $4.24 and $3.62, respectively. The weighted-average fair
value of nonqualified stock options granted during fiscal years
ended September 27, 1997 and September 28, 1996 was $5.97 and
$5.70, respectively.
The following table summarizes information about incentive stock
options outstanding at September 27, 1997:
Options Outstanding Options Exercisable
Number Weighted- Number
Outstanding Average Weighted- Exercisable Weighted-
at Remaining Average at Average
Range of September Contractual Exercise September Exercise
Exercise Prices 27, 1997 Life Price 27, 1997 Price
$7.25 30,000 2.5 years $7.25 30,000 $7.25
$9.75-$13.625 846,386 3.5 years $11.41 282,562 $12.23
876,386 312,562
The following table summarizes information about non-qualified
options outstanding at September 27, 1997:
Options Outstanding Options Exercisable
Number Weighted- Number
Outstanding Average Weighted- Exercisable Weighted-
at Remaining Average at Average
Range of September Contractual Exercise September Exercise
Exercise Prices 27, 1997 Life Price 27, 1997 Price
$5.88-$7.50 33,000 1.1 years $6.83 33,000 $6.83
$10.75-$13.63 316,000 5.5 years $11.89 282,000 $11.79
349,000 315,000
Note N - 401(k) Profit-Sharing Plan
The Company maintains a 401(k) profit-sharing plan for its
employees. Under this plan, the Company may make discretionary
profit-sharing and matching 401(k) contributions. Contributions of
$404,000, $313,000 and $242,000 were made in fiscal years 1997,
1996 and 1995, respectively.
Note O - Major Customer Information
One customer accounted for 10% of the Company's sales for the
fiscal year ended September 27, 1997.
Note P - Cash Flow Information
The following is supplemental cash flow information:
Fiscal year ended
September 27, September 28, September 30,
1997 1996 1995
Cash paid for:
Interest $431,000 $367,000 $395,000
Income taxes 4,469,000 3,077,000 2,826,000
Note Q - Subsequent Event
In December 1997, the Company acquired controlling interest in
National ICEE Corporation. National ICEE Corporation markets and
distributes frozen carbonated beverages primarily in the eastern
half of the United States with annual sales of approximately $40
million. The Company has incurred approximately $50 million of
debt to complete the acquisition. The following are the unaudited
pro forma results of operations for the fiscal years 1997 and 1996
assuming the above had occurred at the beginning of that fiscal
year:
1997 1996
Sales $258,206,000 $222,964,000
Net Earnings $6,129,000 $4,279,000
Earnings per common share $.68 $.47
Report of Independent Certified Public Accountants
Shareholders and Board of Directors
J & J Snack Foods Corp.
We have audited the accompanying consolidated balance sheets of J
& J Snack Foods Corp. and Subsidiaries as of September 27, 1997
and September 28, 1996, and the related consolidated statements of
earnings, changes in stockholders' equity and cash flows for each
of the fiscal years in the three-year period ended September 27,
1997 (52 weeks, 52 weeks and 53 weeks, respectively). These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of J & J Snack Foods Corp. and Subsidiaries as of
September 27, 1997 and September 28, 1996, and the consolidated
results of their operations and their consolidated cash flows for
each of the fiscal years in the three-year period ended September
27, 1997 in conformity with generally accepted accounting
principles.
Grant Thornton, LLP
Philadelphia, Pennsylvania
November 4, 1997 (except for Note Q, as to which the date is
December 8, 1997)
Corporate Information
Directors
Gerald B. Shreiber
Chairman of the Board, President and Chief Executive Officer
Dennis G. Moore
Senior Vice President, Chief Financial Officer, Secretary and
Treasurer
Robert M. Radano
Senior Vice President and Chief Operating Officer
Stephen N. Frankel
President, Stephen N. Frankel Realtor, Inc.
Peter G. Stanley
Consultant
Leonard M. Lodish, Ph.D.
Samuel R. Harrell Professor, Marketing Department of the Wharton
School, University of Pennsylvania
Officers
Gerald B. Shreiber
Chairman of the Board, President and Chief Executive Officer
Dennis G. Moore
Senior Vice President, Chief Financial Officer, Secretary and
Treasurer
Robert M. Radano
Senior Vice President and Chief Operating Officer
Robyn Shreiber Cook
Senior Vice President, West
Paul L. Hirschman
Vice President, Information Systems
Dan Fachner
President of ICEE-USA Corp. Subsidiary
Officers of Subsidiary Companies
J & J Snack Foods Corp. of New Jersey
Anthony P. Harrison II
Vice President, Quality Control and Research & Development
John P. Heim
Vice President, Engineering & Manufacturing
Michael Karaban
Vice President, Marketing
H. Robert Long
Vice President, Distribution
Craig S. Parker
Vice President, School Food Service
Milton L. Segal
Vice President, Purchasing
Steven J. Taylor
Vice President, Sales
J & J Snack Foods Corp. of California
Don Smith
Vice President, Research and Development
MIA Products
T.J. Couzens
Vice President/General Manager
ICEE-USA Corp.
Kent Galloway
Vice President and Chief Financial Officer
Joe Boulanger
Vice President/General Manager Western Zone
Lou Fiorentino
Vice President/General Manager Eastern Zone
Rick Naylor
Vice President/General Manager Central Zone
Rod Sexton
Vice President of Service Operations
ICEE de Mexico, S.A. DE C.V.
Andres Gonzalez
Vice President
J & J Restaurant Group
Robert F. Puccio
President
Pretzels, Inc.
Gary Powell
President
Quarterly Common Stock Data
Market Price
Fiscal 1997 High Low
1st Quarter 14 1/8 10 5/8
2nd Quarter 14 1/8 10 1/2
3rd Quarter 16 1/8 11 1/4
4th Quarter 17 1/4 14 1/2
Fiscal 1996
1st Quarter 13 1/4 11
2nd Quarter 12 3/4 11
3rd Quarter 13 3/4 11 3/8
4th Quarter 12 1/8 9 7/8
Stock Listing
The common stock of J & J Snack Foods Corp. is traded on the
over-the-counter market on the NASDAQ National Market System with
the symbol JJSF.
Transfer Agent and Registrar
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
Independent Accountants
Grant Thornton LLP
Counsel
Blank, Rome, Comisky & McCauley
Annual Meeting
The Annual Meeting of Shareholders is scheduled for Wednesday,
February 4, 1998 at 10:00 a.m. at the Hilton at Cherry Hill, 2349
W. Marlton Pike, Cherry Hill, New Jersey.
Form 10-K
Copies of the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K may be obtained without charge by
writing to:
J & J Snack Foods Corp.
6000 Central Highway
Pennsauken, NJ 08109
Attention: Dennis G. Moore
EXHIBIT 22.1 - SUBSIDIARIES OF J & J SNACK FOODS CORP.
Place of
Incorporation
J & J Snack Foods Investment Corp. Delaware
ICEE-USA Corp. Delaware
J & J Snack Foods Corp. of New Jersey New Jersey
J & J Snack Foods Corp. of California California
J & J Snack Foods Corp./Midwest Illinois
J & J Snack Foods Corp./Mia Pennsylvania
J & J Snack Foods Corp. of Pennsylvania Pennsylvania
J & J Snack Foods Sales Corp. New Jersey
J & J Snack Foods Sales Corp. of Texas Texas
J & J Snack Foods Transport Corp. New Jersey
Trotter Soft Pretzels, Inc. Pennsylvania
American Snack Foods Corp. Pennsylvania
Snack Foods Acquisition Corp. Delaware
ICEE-Canada, Inc. Canada
ICEE DE MEXICO, S.A. DE C.V. Mexico
J & J Restaurant Group, Inc. Pennsylvania
Mazzone Enterprises, Inc. Illinois
Bakers Best Snack Food Corp. Pennsylvania
Pretzels, Inc. Texas
53
EXHIBIT 24.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated November 4, 1997 (except for
Note Q, as to which the date is December 8, 1997) accompanying the consolidated
financial statements and schedules incorporated by reference or included in the
Annual Report of J & J Snack Foods Corp. and Subsidiaries on Form 10-K for the
year ended September 27, 1997. We hereby consent to the incorporation by
reference of said reports in the Registration Statement of J & J Snack Foods
Corp. and Subsidiaries on Forms S-8 (File No. 333-03833, effective May 16, 1996,
File No. 33-87532, effective December 16, 1994 and File No. 33-50036, effective
July 24, 1992).
GRANT THORNTON LLP
Philadelphia, Pennsylvania
December 15, 1997
54
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