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 March 29, 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 April 24, 1997, there were 8,766,241 shares of the Registrant's Common
Stock outstanding.
<PAGE>
INDEX
Page
Number
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - March 29, 1997 and
September 28, 1996................................... 3
Consolidated Statements of Earnings - Three Months and
Six Months Ended March 29, 1997 and March 30, 1996... 5
Consolidated Statements of Cash Flows - Six Months
Ended March 29, 1997 and March 30, 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 1. Legal Proceedings................................... 12
Item 4. Submission of Matters to a Vote of Security Holders. 12
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 March 29, September 28,
1997 1996
(Unaudited)
Current assets
Cash and cash equivalents $ 486,000 $ 10,547,000
Marketable securities available
for sale - 1,217,000
Accounts receivable 24,341,000 18,202,000
Inventories 14,493,000 11,276,000
Prepaid expenses and deposits 1,236,000 980,000
40,556,000 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 50,454,000 41,158,000
Marketing equipment 83,249,000 81,144,000
Transportation equipment 1,778,000 1,754,000
Office equipment 4,373,000 3,727,000
Improvements 7,543,000 7,053,000
Construction in progress 1,834,000 1,326,000
155,169,000 142,100,000
Less accumulated depreciation
and amortization 90,376,000 83,890,000
64,793,000 58,210,000
Other assets
Goodwill, trademarks and rights,
less accumulated amortization 20,223,000 9,326,000
Long term investment securities
available for sale 495,000 990,000
Long term investment securities
held to maturity 3,411,000 9,497,000
Sundry 2,892,000 2,883,000
27,021,000 22,696,000
$132,370,000 $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 March 29, September 28,
STOCKHOLDERS' EQUITY 1997 1996
(Unaudited)
Current liabilities
Short-term borrowings $ 2,000,000 $ -
Current maturities of long-
term debt 8,000 8,000
Accounts payable 13,868,000 10,394,000
Accrued liabilities 9,527,000 7,038,000
25,403,000 17,440,000
Long-term debt, less current
maturities 5,006,000 5,010,000
Deferred income 615,000 567,000
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, 8,767,000 and
8,749,000, respectively 36,099,000 35,818,000
Foreign currency translation
adjustment (1,419,000) (1,356,000)
Retained earnings 63,263,000 62,246,000
97,943,000 96,708,000
$132,370,000 $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 Six months ended
March 29, March 30, March 29, March 30,
1997 1996 1997 1996
Net Sales $50,305,000 $42,138,000 $93,906,000 $85,001,000
Cost of goods sold 25,909,000 21,580,000 48,367,000 43,276,000
Gross profit 24,396,000 20,558,000 45,539,000 41,725,000
Operating expenses
Marketing 15,706,000 13,585,000 30,062,000 27,465,000
Distribution 4,664,000 4,241,000 9,117,000 8,484,000
Administrative 2,194,000 1,828,000 4,178,000 3,724,000
Amortization of
intangibles and
deferred costs 436,000 207,000 782,000 415,000
23,000,000 19,861,000 44,139,000 40,088,000
Operating income 1,396,000 697,000 1,400,000 1,637,000
Other income (deductions)
Investment income 141,000 365,000 396,000 776,000
Interest expense (122,000) (91,000) (215,000) (191,000)
Sundry 26,000 (13,000) 33,000 4,000
Earnings before
income taxes 1,441,000 958,000 1,614,000 2,226,000
Income taxes 535,000 333,000 597,000 774,000
NET EARNINGS $ 906,000 $ 625,000 $ 1,017,000 $ 1,452,000
Earnings per common
share $ .10 $ .07 $ .11 $ .16
Weighted average number
of shares 8,910,000 9,101,000 8,885,000 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)
Six months ended
March 29, March 30
1997 1996
Cash flows from operating activities:
Net earnings $ 1,017,000 $ 1,452,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization of fixed
assets 8,241,000 7,648,000
Amortization of intangibles and deferred
costs 969,000 511,000
Other adjustments 58,000 (19,000)
Changes in assets and liabilities
(Increase) decrease in accounts receivable (4,686,000) 1,449,000
(Increase) decrease in inventories (1,996,000) 320,000
(Increase) decrease in prepaid expenses (209,000) 264,000
Increase (decrease) in accounts payable
and accrued liabilities 2,563,000 (1,553,000)
Net cash provided by operating activities 5,957,000 10,072,000
Cash flows from investing activities:
Purchases of property, plant and equipment (6,927,000) (6,060,000)
Payments for purchases of companies, net of
cash acquired and debt assumed (19,052,000) -
Proceeds from investments held to maturity 6,075,000 350,000
Payments for investments held to maturity - (1,750,000)
Proceeds from investments available for sale 1,710,000 3,465,000
Payments for investments available for sale - (2,558,000)
Proceeds from sale of property and equipment 134,000 81,000
Other (74,000) (35,000)
Net cash used in investing activities (18,134,000) (6,507,000)
Cash flows from financing activities:
Proceeds from short-term borrowing 2,000,000 -
Proceeds from issuance of common stock 120,000 122,000
Payments to repurchase common stock - (2,910,000)
Payments of long-term debt (4,000) (18,000)
Net cash provided by (used in)
financing activities 2,116,000 (2,806,000)
Net (decrease) increase in cash
and cash equivalents (10,061,000) 759,000
Cash and cash equivalents at beginning of period 10,547,000 10,696,000
Cash and cash equivalents at end of period $ 486,000 $11,455,000
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 six months
ended March 29, 1997 and March 30, 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 ("EPS")are based on the weighted average
number of common shares outstanding, including common stock
equivalents (stock options). The Financial Accounting Standards
Board ("FASB") has issued a Statement of Financial Accounting
Standard ("SFAS") No. 128, Earnings Per Share, which is effective
for financial statements issued after December 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:
March 29, September 28,
1997 1996
Finished goods $ 7,743,000 $ 5,534,000
Raw materials 2,216,000 1,387,000
Packaging materials 2,188,000 2,009,000
Equipment parts & other 2,346,000 2,346,000
$14,493,000 $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 March 29, 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 - 7,000 488,000
Municipal Government Securities - - - -
$ 495,000 $12,000 $ 7,000 $ 500,000
Held to Maturity Securities
Corporate Debt Securities $ 981,000 $ 4,000 $ 16,000 $ 969,000
Municipal Government Securities 1,930,000 3,000 53,000 1,880,000
Other 500,000 - - 500,000
$3,411,000 $ 7,000 $ 69,000 $3,349,000
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 cash expected to be provided by future operations and its
available lines of credit are its primary sources of short term liquidity.
The Company believes that these sources, along with its borrowing capacity,
are sufficient to fund future growth and expansion.
In the six months ended March 29, 1997, the devaluation of the Mexican
peso caused a reduction of $63,000 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 March 29, 1997
were $2,000,000.
Results of Operations
Net sales increased $8,167,000 or 19% to $50,305,000 for the three
months and $8,905,000 or 10% to $93,906,000 for the six months ended March
29, 1997 compared to the six months ended March 30, 1996. Excluding sales
of acquired businesses, net sales increased $3,526,000 or 8% for the three
months and $2,244,000 or 3% for the six months.
Sales to food service customers increased $4,344,000 or 22% in the
second quarter to $24,044,000 and $3,658,000 or 9% for the six months.
Excluding sales of acquired businesses, sales to food service customers
increased $1,172,000 or 6% for the quarter and decreased $737,000 or 2% for
the six months. All of the $737,000 sales decrease was the result of non
recurring equipment sales in last year's first quarter. Soft pretzel sales
to the food service market increased 12% to $14,840,000 in the second quarter
and 5% to $29,295,000 in the six months. Excluding sales of acquired
businesses, food service soft pretzel sales increased $428,000 or 3% in the
second quarter and decreased $455,000 or 2% in the six month period. Two
customers accounted for all of the six months' sales decrease. Italian ice
9
and frozen juice treat and dessert sales increased 89% to $5,639,000 in the
three months and 56% to $9,167,000 in the six months. Over 70% of the
Italian ice and frozen juice and dessert sales increase was from sales of
acquired businesses. Churro sales to food service customers decreased 8% to
$2,379,000 in the second quarter and 2% to $4,848,000 in the six months.
Sales of products to retail supermarkets increased $1,109,000 or 12%
to $10,316,000 in the second quarter and 8% to $17,742,000 in the first half.
Excluding sales of acquired businesses, sales to retail supermarkets were
flat in the quarter and up 1% for the six months. Soft pretzel sales for the
second quarter and six months were up 8% to $7,647,000 and $13,972,000,
respectively, due to increased distribution of CINNAMON RAISIN MINI'S and
sales of an acquired business. SOFTSTIX sales decreased $228,000 to $582,000
or 28% in the second quarter and $460,000 or 29% in the six months. Sales of
the flagship SUPERPRETZEL brand soft pretzels, excluding SOFTSTIX and
CINNAMON RAISIN, decreased 9% in the second quarter and 6% for the six
months. Sales of Italian ice increased $408,000 or 22% to $2,287,000 in the
second quarter and $107,000 or 3% to $3,170,000 in the first half 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 3% in the
quarter and 12% in the first half.
Frozen carbonated beverage and related product sales increased $135,000
or 2% to $9,013,000 in the second quarter and decreased $63,000 or less than
1% to $17,303,000 in the six months. Beverage and beverage cup and lid sales
alone decreased 4% in both the second quarter and first half to $8,098,000
and $15,767,000, 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 16% for the second quarter and 5%
for the six months.
Bakery sales increased $1,951,000 or 93% to $4,055,000 in the second
quarter and $2,942,000 or 80% to $6,624,000 in the first six months due to
increased product sales to one customer.
Sales of our Bavarian Pretzel Bakery increased 28% to $2,877,000 in the
second quarter and 21% to $6,503,000 in the six month period due primarily
to sales of an acquired business.
Gross profit as a percentage of sales decreased to48 % in the current
three and six month periods from 49% in the corresponding periods last year.
This gross profit percentage decrease is primarily attributable to lower
gross profit percentages of acquired businesses and the increased bakery
sales.
Total operating expenses increased $3,139,000 in the second quarter but
as a percentage of sales decreased to 46% from 47% in last year's same
quarter. For the first half, operating expenses increased $4,051,000 and as
a percentage of sales were 47% in both year's period. Marketing expenses
decreased to 31% of sales in this year's quarter from 32% last year and were
32% of sales in both six month periods. Distribution expenses decreased to
9% of sales in this year's second quarter from 10% of sales last year and
10
were 10% of sales this year and last for the six month period. The decrease
in distribution expenses as a percent of sales in this year's second quarter
resulted from a one time settlement with a freight carrier.
Operating income increased $699,000 or 100% to $1,396,000 in the second
quarter and $237,000 or 14% to $1,400,000 in the first half. Excluding a
pricing adjustment to frozen carbonated beverage sales in last year's second
quarter and a one time settlement with a freight carrier in this year's
second quarter, operating income increased $874,000 in the second quarter and
decreased $62,000 in the first half.
Investment income decreased $224,000 to $141,000 in the second quarter
and $380,000 to $396,000 in the six months due primarily to sharply lower
levels of investable funds which were used to pay for acquisitions.
Interest expense increased $31,000 and $24,000 in the quarter and six
months, respectively due to increased borrowings.
The effective income tax rate has been estimated at 37% in this year's
periods compared to 35% in both periods last year. The increased rate is
caused by a lower amount of tax free income in the current year.
Net earnings increased $281,000 or 45% in the current three month
period to $906,000 and decreased $435,000 or 30% in the current six month
period to $1,017,000.
11
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
In April 1997, a jury in Los Angeles, California returned a verdict
against the Company for $1.7 million compensatory plus $2.5 million punitive
damages in litigation brought by a former employee alleging same sex
harassment by a Company supervisor. The Company has subsequently settled the
case for an amount substantially less than the amount awarded. The Company
believes it is likely it will recover its settlement costs from its insurance
carrier who failed to settle the case within policy limits.
Item 4. Submission of Matters to a Vote of Security Holders
The results of voting at the Annual Meeting of Shareholders held on
February 5, 1997 is as follows:
Votes Cast Absentees and
Matter For Against Withheld Broker
Non Votes
Election of Dennis G. Moore
as Director 7,871,183 - 464,127 -
Election of Robert M. Radano
as Director 7,871,183 - 464,127 -
Amendment to the Company's
1992 Stock Option Plan
increasing the maximum number
of shares issuable under the
Plan by 500,000 shares to a
total of 1,500,000 shares 4,753,700 1,929,241 270,700 1,381,669
The Company had 8,749,970 shares outstanding on December 9, 1996,
the record date.
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 March 29, 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: May 8, 1997 /s/ Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: May 8, 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: May 8, 1997
Gerald B. Shreiber
President
Dated: May 8, 1997
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
13
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