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 December 28, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-14616
J & J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
New Jersey 22-1935537
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6000 Central Highway, Pennsauken, NJ 08109
(Address of principal executive offices)
Telephone (609) 665-9533
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[X] Yes [ ] No
As of January 22, 1997, there were 8,753,570 shares of the Registrant's
Common Stock outstanding.
<PAGE>
INDEX
Page
Number
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - December 28, 1996 and
September 28, 1996.................................... 3
Consolidated Statements of Earnings - Three Months
Ended December 28, 1996 and December 30, 1995......... 5
Consolidated Statements of Cash Flows - Three Months
Ended December 28, 1996 and December 30, 1995......... 6
Notes to the Consolidated Financial Statements........... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.................... 11
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS December 28, September 28,
1996 1996
(Unaudited)
Current assets
Cash and cash equivalents $ 219,000 $ 10,547,000
Investment securities available
for sale 454,000 1,217,000
Accounts receivable 17,035,000 18,202,000
Inventories 11,694,000 11,276,000
Prepaid expenses and deposits 1,263,000 980,000
30,665,000 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 45,197,000 41,158,000
Marketing equipment 82,736,000 81,144,000
Transportation equipment 1,631,000 1,754,000
Office equipment 4,353,000 3,727,000
Improvements 7,427,000 7,053,000
Construction in progress 1,882,000 1,326,000
149,164,000 142,100,000
Less accumulated depreciation
and amortization 87,372,000 83,890,000
61,792,000 58,210,000
Other assets
Goodwill, trademarks and rights,
less accumulated amortization 16,882,000 9,326,000
Long term investment securities
available for sale 990,000 990,000
Long term investment securities
held to maturity 9,207,000 9,497,000
Sundry 2,884,000 2,883,000
29,963,000 22,696,000
$122,420,000 $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 December 28, September 28,
STOCKHOLDERS' EQUITY 1996 1996
(Unaudited)
Current liabilities
Current maturities of long-
term debt $ 8,000 $ 8,000
Accounts payable 10,142,000 10,394,000
Accrued liabilities 6,317,000 7,038,000
16,467,000 17,440,000
Long-term debt, less current
maturities 5,008,000 5,010,000
Deferred income 618,000 567,000
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, 8,750,000 and
8,749,000, respectively 35,987,000 35,818,000
Foreign currency translation
adjustment (1,420,000) (1,356,000)
Retained earnings 62,357,000 62,246,000
96,924,000 96,708,000
$122,420,000 $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
December 28, December 30,
1996 1995
Net Sales $43,601,000 $42,863,000
Cost of goods sold 22,458,000 21,696,000
Gross profit 21,143,000 21,167,000
Operating expenses
Marketing 14,356,000 13,880,000
Distribution 4,453,000 4,243,000
Administrative 1,984,000 1,896,000
Amortization of
intangibles and
deferred costs 346,000 208,000
21,139,000 20,227,000
Operating income 4,000 940,000
Other income (deductions)
Investment income 255,000 411,000
Interest expense (93,000) (100,000)
Sundry 7,000 17,000
Earnings before
income taxes 173,000 1,268,000
Income taxes 62,000 441,000
NET EARNINGS $ 111,000 $ 827,000
Earnings per common
share $ .01 $ .09
Weighted average number
of shares 8,860,000 9,186,000
See accompanying notes to the consolidated financial statements.
5J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
December 28, December 30,
1996 1995
Cash flows from operating activities:
Net earnings $ 111,000 $ 827,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization of fixed
assets 4,016,000 3,827,000
Amortization of intangibles and deferred
costs 448,000 250,000
Other adjustments 69,000 (9,000)
Changes in assets and liabilities
Decrease in accounts receivable 1,834,000 3,498,000
Decrease (increase) in inventories (219,000) 99,000
Decrease (increase) in prepaid expenses (237,000) 439,000
Decrease in accounts payable and
accrued liabilities (2,069,000) (1,449,000)
Net cash provided by operating activities 3,953,000 7,482,000
Cash flows from investing activities:
Purchases of property, plant and equipment (3,643,000) (2,541,000)
Payments for purchases of companies, net of
cash acquired and debt assumed (11,842,000) -
Proceeds from investments held to maturity 285,000 195,000
Payments for investments held to maturity - (1,750,000)
Proceeds from investments available for sale 761,000 1,850,000
Payments for investments available for sale - (1,407,000)
Other 151,000 60,000
Net cash used in investing activities (14,288,000) (3,593,000)
Cash flows from financing activities:
Proceeds from issuance of common stock 9,000 24,000
Payments to repurchase common stock - (1,370,000)
Payments of long-term debt (2,000) (17,000)
Net cash used in financing activities 7,000 (1,363,000)
Net increase (decrease) in cash
and cash equivalents (10,328,000) 2,526,000
Cash and cash equivalents at beginning of period 10,547,000 10,696,000
Cash and cash equivalents at end of period $ 219,000 $13,222,000
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 ended December
28, 1996 and December 30, 1995 are not necessarily indicative
of results for the full year. Sales of the Company's retail
stores are generally higher in the first quarter due to the
holiday shopping season. Sales of the Company's frozen
carbonated beverages are generally higher in the third and
fourth quarters due to warmer weather.
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).
Note 3 Inventories consist of the following:
December 28, September 28,
1996 1996
Finished goods $ 5,346,000 $ 5,534,000
Raw materials 1,850,000 1,387,000
Packaging materials 2,063,000 2,009,000
Equipment parts & other 2,435,000 2,346,000
$11,694,000 $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 December 28, 1996
are summarized as follows:
7
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 - 35,000 460,000
Municipal Government Securities 949,000 2,000 - 951,000
$1,444,000 $11,000 $ 35,000 $1,420,000
Held to Maturity Securities
Corporate Debt Securities $ 987,000 $11,000 $ 4,000 $ 994,000
Municipal Government Securities 7,720,000 56,000 171,000 7,605,000
Other 500,000 - - 500,000
$9,207,000 $ 67,000 $175,000 $9,099,000
The amortized cost, unrealized gains and losses, and fair market values
of the Company's available for sale and held to maturity securities held at
September 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 quarter ended December 28, 1996, the devaluation of the
Mexican peso caused a reduction of $64,000 in stockholders' equity because
of the revaluation of the net assets of the Company's Mexican frozen
carbonated beverage subsidiary.
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.
Results of Operations
Net sales increased $738,000 or 2% to $43,601,000 for the three
months ended December 28, 1996 compared to the three months ended December
30, 1995. Excluding sales of acquired businesses, net sales decreased
$1,285,000 or 3% for the quarter.
Sales to food service customers decreased $686,000 or 3% in the first
quarter to $21,690,000. Excluding sales of acquired businesses, sales to
food service customers decreased $1,909,000 for the period. Approximately
70% of the $1,909,000 sales decrease was the result of non recurring
equipment sales in last year's quarter. Soft pretzel sales to the food
service market decreased 2% to $14,455,000 in the quarter. Excluding
sales of acquired businesses, food service soft pretzels decreased
$883,000 or 6%. Two customers accounted for all of this decrease. Frozen
juice treat and dessert sales increased 22% to $3,528,000 in
the quarter. Virtually all of the frozen juice and dessert sales increase
was from sales of acquired businesses. Churro sales to food service
customers increased 5% to $2,469,000.
Sales of products to retail supermarkets increased $146,000 or 2% to
$7,426,000 in the first quarter. Excluding sales of an acquired business,
sales to retail supermarkets decreased 3%. Soft pretzel sales for the
first quarter were up 8% to $6,325,000 due primarily to increased
distribution of CINNAMON RAISIN MINI'S and sales of an acquired business.
SOFTSTIX sales decreased
9
$232,000 to $570,000 in the quarter. Sales of the flagship SUPERPRETZEL
brand soft pretzels, excluding SOFTSTIX and CINNAMON RAISIN, decreased 4%
in the first quarter. Sales of Luigi's Real Italian Ice decreased
$301,000 or 25% to $883,000 in the first quarter.
Frozen carbonated beverage and related product sales decreased
$198,000 or 2% to $8,290,000 in the first quarter. Beverage sales alone
decreased 4% to $7,669,000 even though there were more frozen carbonated
beverage machines at customer locations due to continuing sales declines
at our mass merchandising chain customers.
Bakery sales increased $991,000 or 63% to $2,569,000 in the first
quarter due to increased product sales to one customer. Sales of Bavarian
Pretzel Bakery increased $485,000 or 15% to $3,626,000 in the quarter due
primarily to sales of an acquired business.
Gross profit as a percentage of sales decreased to 48% in the current
first quarter from 49% in the year ago period. This gross profit
percentage decrease is primarily attributable to lower gross profit
percentages of acquired businesses and higher costs of raw materials.
Total operating expenses increased $912,000 in the first quarter and
as a percentage of sales increased to 48% from 47% in last year's same
quarter. Marketing expenses increased to 33% of sales from 32% in last
year's first quarter. The increase in marketing expense as a percent of
sales is attributable to increased spending in our food service business
combined with lower sales. Distribution expenses were 10% of sales in both
year's first quarter. Administrative expenses increased fractionally to
5% of sales from 4% of sales last year. Amortization of intangibles and
deferred costs increased to $346,000 from $208,000 because of the
amortization of goodwill of acquired businesses.
Operating income decreased $936,000 to $4,000 in the first quarter
from $940,000 in last year's quarter.
Investment income decreased $156,000 to $255,000 in the quarter from
last year due primarily to a lower level of investable funds.
Interest expense remained essentially unchanged from last year's
quarter.
The effective income tax rate has been estimated at 36% in this
year's first quarter compared to 35% last year.
Net earnings decreased $716,000 or 87% in the current three month
period to $111,000.
10
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 December 28, 1996.
11
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: January 31, 1997 /s/ Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: January 31, 1997 /s/ Dennis G. Moore
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
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: January 31, 1997
Gerald B. Shreiber
President
Dated: January 31, 1997
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
12
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