UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended June 28, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-14616
J & J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
New Jersey 22-1935537
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6000 Central Highway, Pennsauken, NJ 08109
(Address of principal executive offices)
Telephone (609) 665-9533
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
As of July 21, 1997, there were 8,831,128 shares of the Registrant's Common
Stock outstanding. <PAGE>
INDEX
Page
Number
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - June 28, 1997 and
September 28, 1996................................. 3
Consolidated Statements of Earnings - Three Months and
Nine Months Ended June 28, 1997 and June 29, 1996.. 5
Consolidated Statements of Cash Flows - Nine Months
Ended June 28, 1997 and June 29, 1996.............. 6
Notes to the Consolidated Financial Statements........ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K................... 12
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS June 28, September 28,
1997 1996
(Unaudited)
Current assets
Cash and cash equivalents $ 32,000 $ 10,547,000
Marketable securities available
for sale - 1,217,000
Accounts receivable 29,596,000 18,202,000
Inventories 14,412,000 11,276,000
Prepaid expenses and deposits 763,000 980,000
44,803,000 42,222,000
Property, plant and equipment,
at cost
Land 819,000 819,000
Buildings 5,119,000 5,119,000
Plant machinery and equipment 51,841,000 41,158,000
Marketing equipment 87,350,000 81,144,000
Transportation equipment 1,817,000 1,754,000
Office equipment 4,535,000 3,727,000
Improvements 7,743,000 7,053,000
Construction in progress 2,187,000 1,326,000
161,411,000 142,100,000
Less accumulated depreciation
and amortization 93,735,000 83,890,000
67,676,000 58,210,000
Other assets
Goodwill, trademarks and rights,
less accumulated amortization 20,347,000 9,326,000
Long term investment securities
available for sale 495,000 990,000
Long term investment securities
held to maturity 3,371,000 9,497,000
Sundry 2,824,000 2,883,000
27,037,000 22,696,000
$139,516,000 $123,128,000
See accompanying notes to the consolidated financial statements.
3
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND June 28, September 28,
STOCKHOLDERS' EQUITY 1997 1996
(Unaudited)
Current liabilities
Short-term borrowings $ 1,500,000 $ -
Current maturities of long-
term debt 8,000 8,000
Accounts payable 18,457,000 10,394,000
Accrued liabilities 9,225,000 7,038,000
29,190,000 17,440,000
Long-term debt, less current
maturities 5,004,000 5,010,000
Deferred income 550,000 567,000
Deferred income taxes 3,403,000 3,403,000
Stockholders' equity
Capital stock
Preferred, $1 par value;
authorized, 5,000,000
shares; none issued - -
Common, no par value;
authorized, 25,000,000
shares; issued and
outstanding, 8,797,000 and
8,749,000, respectively 36,374,000 35,818,000
Foreign currency translation
adjustment (1,426,000) (1,356,000)
Retained earnings 66,421,000 62,246,000
101,369,000 96,708,000
$139,516,000 $123,128,000
See accompanying notes to the consolidated financial statements.
4
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three months ended Nine months ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
Net Sales $63,448,000 $49,091,000 $157,354,000 $134,092,000
Cost of goods sold 32,404,000 24,805,000 80,771,000 68,081,000
Gross profit 31,044,000 24,286,000 76,583,000 66,011,000
Operating expenses
Marketing 17,764,000 15,180,000 47,826,000 42,645,000
Distribution 5,263,000 4,439,000 14,380,000 12,923,000
Administrative 2,619,000 1,776,000 6,797,000 5,500,000
Amortization of
intangibles and
deferred costs 451,000 230,000 1,233,000 645,000
26,097,000 21,625,000 70,236,000 61,713,000
Operating income 4,947,000 2,661,000 6,347,000 4,298,000
Other income (deductions)
Investment income 94,000 328,000 490,000 1,104,000
Interest expense (111,000) (89,000) (326,000) (280,000)
Sundry 83,000 (30,000) 116,000 (26,000)
Earnings before
income taxes 5,013,000 2,870,000 6,627,000 5,096,000
Income taxes 1,855,000 1,020,000 2,452,000 1,794,000
NET EARNINGS $ 3,158,000 $ 1,850,000 $ 4,175,000 $ 3,302,000
Earnings per common
share $ .35 $ .21 $ .47 $ .36
Weighted average number
of shares 9,003,000 8,921,000 8,924,000 9,144,000
See accompanying notes to the consolidated financial statements.
5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
June 28, June 29,
1997 1996
Cash flows from operating activities:
Net earnings $ 4,175,000 $ 3,302,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization of fixed
assets 12,532,000 11,566,000
Amortization of intangibles and deferred
costs 1,454,000 900,000
Gain from disposals of property &
equipment (12,000) (17,000)
Other adjustments 12,000 221,000
Changes in assets and liabilities
Increase in accounts receivable (10,209,000) (495,000)
Increase in inventories (1,803,000) (780,000)
Decrease in prepaid expenses 264,000 559,000
Increase (decrease) in accounts payable
and accrued liabilities 6,394,000 (1,621,000)
Net cash provided by operating activities 12,807,000 13,635,000
Cash flows from investing activities:
Purchases of property, plant and equipment (14,147,000) (10,214,000)
Payments for purchase of companies, net of
cash acquired and debt assumed (18,873,000) (2,637,000)
Proceeds from investments held to maturity 6,116,000 410,000
Payments for investments held to maturity - (2,750,000)
Proceeds from investments available for sale 1,710,000 4,152,000
Payments for investments available for sale - (4,393,000)
Proceeds from sale of property and equipment 187,000 156,000
Other (205,000) (475,000)
Net cash used in investing activities (25,212,000) (15,751,000)
Cash flows from financing activities:
Proceeds from short-term borrowing 1,500,000 -
Proceeds from issuance of common stock 396,000 139,000
Payments to repurchase common stock - (4,149,000)
Payments of long-term debt (6,000) (30,000)
Net cash used in financing activities 1,890,000 (4,040,000)
Net increase (decrease) in cash and
cash equivalents (10,515,000) (6,156,000)
Cash and cash equivalents at beginning of period 10,547,000 10,696,000
Cash and cash equivalents at end of period $ 32,000 $ 4,540,000
See accompanying notes to the consolidated financial statements.
6
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to
present fairly the financial position and the results of
operations and cash flows.
The results of operations for the three months and nine months
ended June 28, 1997 and June 29, 1996 are not necessarily
indicative of results for the full year. Sales of the Company's
retail stores are generally higher in the first quarter due to
the holiday shopping season. Sales of the Company's frozen
carbonated beverages and Italian ice products are generally
higher in the third and fourth quarters due to seasonal factors.
While the Company believes that the disclosures presented are
adequate to make the information not misleading, it is suggested
that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the
notes included in the Company's Annual Report on Form 10-K for
the year ended September 28, 1996.
Note 2 Earnings per share are based on the weighted average number of
common shares outstanding, including common stock equivalents
(stock options).
The Financial Accou nting St andards Board ("FASB") has issued a
Statement of Financial Accounting Standard ("SFAS") No. 128,
Earnings Per Share, which is effective for financial statements
issued after Dec ember 15, 1997. Once effective, this 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 net income by the
weighted average number of common shares outstanding for 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 adoption of this new standard is not expected to have a
material impact on the disclosure of EPS. The effect of adopting
this new standard has not been determined.
7
Note 3 Inventories consist of the following:
June 28, September 28,
1997 1996
Finished goods $ 7,642,000 $ 5,534,000
Raw materials 1,839,000 1,387,000
Packaging materials 2,570,000 2,009,000
Equipment parts & other 2,361,000 2,346,000
$14,412,000 $11,276,000
Note 4 The amortized cost, unrealized gains and losses, and fair market
values of the Company's investment securities available for sale
and held to maturity at June 28, 1997 are summarized as follows:
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Available for Sale Securities
Equity Securities $ - $12,000 $ - $ 12,000
Corporate Debt Securities 495,000 - 8,000 487,000
Municipal Government Securities - - - -
$ 495,000 $12,000 $ 8,000 $ 499,000
Held to Maturity Securities
Corporate Debt Securities $ 976,000 $ 1,000 $ - $ 977,000
Municipal Government Securities 1,895,000 3,000 29,000 1,869,000
Other 500,000 - - 500,000
$3,371,000 $ 4,000 $ 29,000 $3,346,000
The amortized cost, 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 securities
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 securities
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 500,000 - - 500,000
$9,497 000 $ 37,000 $ 75,000 $9,459,000
8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
The Company's current cash and marketable securities balances and cash
expected to be provided by future operations are its primary sources of
liquidity. The Company believes that these sources, along with its borrowing
capacity, are sufficient to fund future growth and expansion.
In the nine months ended June 28, 1997, the devaluation of the Mexican
peso caused a reduction of $70,000 in stockholders' equity because of the
revaluation of the net assets of the Company's Mexican frozen carbonated
beverage subsidiary.
In January 1997, the Company acquired the assets of Mama Tish's
International Foods for the assumption of some of its liabilities. Mama Tish
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 with annual sales of approximately $1.4 million.
In October 1996, the Company acquired the assets of Bakers Best Snack
Foods Corp. for cash. Bakers Best is a manufacturer of soft pretzels selling
to both the food service and retail supermarket industries with annual sales
of approximately $4 million.
Available to the Company are unsecured general purpose bank lines of
credit totalling $30,000,000. Borrowings under the lines at June 28, 1997 were
$1,500,000.
Results of Operations
Net sales increased $14,357,000 or 29% to $63,448,000 for the three
months and $23,262,000 or 17% to $157,354,000 for the nine months ended June
28, 1997 compared to the nine months ended June 29, 1996. Excluding sales of
acquired businesses, net sales increased $7,025,000 or 14% for the three months
and $9,269,000 or 7% for the nine months.
Sales to food service customers increased $8,766,000 or 41% in the third
quarter to $29,940,000 and $12,424,000 or 20% for the nine months. Excluding
sales of acquired businesses, sales to food service customers increased
$2,722,000 or 13% for the quarter and increased $1,985,000 or 3% for the nine
months. Soft pretzel sales to the food service market increased 8% to
$14,183,000 in the third quarter and 6% to $43,478,000 in the nine months.
Excluding sales of acquired businesses, food service soft pretzel sales
increased $134,000 or 1% in the third quarter and decreased $321,000 or 1% in
the nine month period. Italian ice and frozen juice treat and dessert sales
increased 160% to $11,363,000 in the three months and 100% to $20,530,000 in
the nine months. Approximately 75% of the Italian ice and frozen juice and
9
dessert sales increase was from sales of acquired businesses. Churro sales to
food service customers increased 9% to $2,807,000 in the third quarter and 2%
to $7,655,000 in the nine months.
Sales of products to retail supermarkets increased $644,000 or 6% to
$11,105,000 in the third quarter and 7% to $28,847,000 in the nine months.
Excluding sales of acquired businesses, sales to retail supermarkets were down
6% in the quarter and 3% for the nine months. Soft pretzel sales for the third
quarter were down 2% and for the nine months were up 5% from last year to
$4,898,000 and $18,870,000, respectively. SOFTSTIX sales decreased $67,000
or 17% to $337,000 in the third quarter and $527,000 or 26% in the nine months.
Sales of the flagship SUPERPRETZEL brand soft pretzels, excluding SOFTSTIX and
CINNAMON RAISIN, decreased 11% in the third quarter and 8% for the nine months.
Sales of Italian ice increased $609,000 or 12% to $5,879,000 in the third
quarter and $716,000 or 9% to $9,049,000 in the nine months due to sales of
Mama Tish International Foods, which was acquired during the second quarter.
Excluding sales of Mama Tish, Italian ice sales were down 6% in the quarter and
8% in the nine months.
Frozen carbonated beverage and related product sales increased
$1,226,000 or 10% to $14,039,000 in the third quarter and $1,163,000 or 4% to
$31,342,000 in the nine months. Beverage and beverage cup and lid sales alone
increased 4% in the third quarter and decreased less than 1% in the nine months
to $12,498,000 and $28,265,000, respectively. Excluding last year's unusually
high level of promotional cup sales to one customer and a pricing adjustment,
beverage and beverage cup and lid sales increased 4% for the nine months.
Bakery sales increased $3,384,000 or 156% to $5,547,000 in the third
quarter and $6,326,000 or 108% to $12,171,000 in the first nine months due to
increased product sales to one customer.
Sales of our Bavarian Pretzel Bakery increased 14% to $2,817,000 in the
third quarter and 18% to $9,320,000 in the nine month period. Excluding sales
of an acquired business, sales were up 11% in the third quarter and 8% in the
nine months.
Gross profit as a percentage of sales was 49% in all periods reported.
Total operating expenses increased $4,472,000 in the third quarter and
as a percentage of sales decreased to 41% from 44% in last year's same quarter.
For the nine months, operating expenses increased $8,523,000 and as a
percentage of sales decreased to 45% from 46% last year. Marketing expenses
decreased to 28% of sales in this year's third quarter from 31% last year and
to 30% of sales in the nine month period this year from 32% last year.
Distribution expenses decreased to 8% of sales in this year's third quarter
from 9% of sales last year and to 9% of sales in this year's nine month period
from 10% in the year ago period. The declines in marketing and distribution
10
expenses as a percentage of sales were due primarily to overhead efficiencies
resulting from higher sales levels. Administration expenses were 4% of sales
in all periods.
Operating income increased $2,286,000 or 86% to $4,947,000 in the third
quarter and $2,049,000 or 48% to $6,347,000 in the nine months.
Investment income decreased $234,000 or 71% in the third quarter and
$614,000 or 56% in the nine months due to sharply lower levels of investable
funds which were used to pay for acquisitions. Interest expense increased
$22,000 and $46,000 in the quarter and nine months, respectively due to
increased borrowings.
The effective income tax rate has been estimated at 37% in this year's
periods compared to 36% and 35% respectively in last year's third quarter and
nine months. The increased rate is caused by a lower amount of tax free income
in the current year.
Net earnings increased $1,308,000 or 71% in the current three month
period to $3,158,000 and $873,000 or 26% in the current nine month period to
$4,175,000.
11
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None
b) Reports on Form 8-K - There were no reports on Form 8-K
for the three months ended June 28, 1997.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
J & J SNACK FOODS CORP.
Dated: August 12, 1997 /s/ Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: August 12, 1997 /s/ Dennis G. Moore
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
J & J SNACK FOODS CORP.
Dated: August 12, 1997
Gerald B. Shreiber
President
Dated: August 12, 1997
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
13
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