SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
_______________________
Date of Report December 8, 1997
(Date of earliest event reported)
J & J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
New Jersey 0-14616 22-1935537
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or organization) Identification Number)
6000 Central Highway,
Pennsauken, New Jersey 08109
(Address, including zip code, of
Principal Executive Offices)
(609) 665-9533
(Registrant's telephone number,
including area code)
Item 2. Acquisition or Disposition of Assets
On December 8, 1997, J & J Snack Foods Corp. ("Registrant")
through its ICEE-USA Corp. subsidiary ("ICEE") acquired all of
the common stock of National ICEE Corporation ("NIC"), a marketer
and distributor of frozen carbonated beverages under the
tradename ICEE, with approximate annual sales of $40,000,000. As
a result of the acquisition, 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 eleven states.
The purchase price paid to the former shareholders of NIC
was $9,000,000 in the form of cash. Additionally, ICEE assumed
approximately $44,000,000 of debt, of which approximately
$42,000,000 was retired at closing. The source of cash utilized
to retire the debt and to fund the purchase price was a
$40,000,000 term loan and a revolving line of credit with the
Registrant's existing banks.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired
Audited Balance Sheets, March 29, 1997 and March 30, 1996
Audited Statement of Operations, years ended March 29,
1997 and March 30, 1996
Audited Statement of Stockholders' Equity (Deficiency),
years ended March 29, 1997 and March 30, 1996
Audited Statement of Cash Flows, years ended March 29,
1997 and March 30, 1996
Unaudited Balance Sheet, September 27, 1997
Unaudited Statement of Operations for the six months
ended September 27, 1997
Unaudited Statement of Stockholders' Equity
(Deficiency)for the six months ended September 27,
1997
Unaudited Statement of Cash Flows for the six months
ended September 27, 1997
(b) Pro forma financial information
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
The following unaudited pro forma condensed combined
financial statements give effect to the acquisition of
NIC by the Registrant on December 8, 1997. This pro
forma information has been prepared utilizing the
historical financial statements of NIC and the
Registrant. This information should be read in
conjunction with the historical financial statements
and notes thereto of the Registrant which are
incorporated by reference to the Registrant's Form 10-K
and the historical financial statements of NIC which
are incorporated within this Form 8-K. The pro forma
financial data is provided for comparative purposes
only and does not purport to be indicative of the
results which actually would have been obtained if the
acquisition had been effected on the dates indicated or
of the results which may be obtained in the future.
The pro forma financial information is based on the
purchase method of accounting for the acquisition. The
pro forma adjustments are described in the accompanying
Sheet and Notes to Unaudited Pro Forma Condensed
Combined Statement of Income. The Unaudited Pro Forma
condensed combined statements of income for the year
ended September 28, 1997 assume that the acquisition of
NIC had occurred on September 29, 1996 (combining the
results for the twelve months ended September 27, 1997
for NIC and the year ended September 27, 1997 for the
Registrant.) The unaudited pro forma condensed combined
balance sheet at September 27, 1997 assumes that the
acquisition of NIC had occurred on September 27, 1997
(combining the balance sheets for NIC and the
Registrant as of September 27, 1997.)
Acquisition
The Purchase consideration payable to the former
shareholders of NIC consisted of $9,000,000.
Assumptions
Purchase Price Allocation
Although the Registrant does not have complete
information at this time as to the fair value of NIC's
individual assets and liabilities, an estimate of the
eventual allocation of the purchase price was made on
the basis of available information. The eventual
allocation of the purchase price will be made on the
basis of appraisals and valuations which give effect to
various factors including the nature and intended
future use ofassets acquired in determining their
value. It is not anticipated that any change in the
allocation price will be material from the pro forma
adjustments.
For purpose of pro forma presentations, the excess
purchase price over the net assets acquired is being
amortized over an estimated life of twenty years.
In addition to historical information, the pro
forma financial information contains forward-looking
state- ments. 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.
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
Registrant undertakes no obligation to publicly revise
or update these forward-looking statements to reflect
events or circumstances that arise after the date
hereof.
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 hereunto duly authorized.
J & J SNACK FOODS CORP.
By:_____________________________
Dennis G. Moore
Senior Vice President & Chief
Financial Officer
Date: February 20, 1998
NATIONAL ICEE CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
MARCH 29, 1997 AND MARCH 30, 1996
NATIONAL ICEE CORPORATION
TABLE OF CONTENTS
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996
PAGE
NUMBER
Independent Auditor's Report 2
Consolidated Financial Statements:
Balance sheet 3
Operations 4
Stockholders' (deficiency) 5
Cash flows 6 & 7
Notes to financial statements 8 to 19
INDEPENDENT AUDITOR'S REPORT
May 21, 1997
Officers and Directors
National Icee Corporation
Philadelphia, Pennsylvania
We have audited the accompanying consolidated balance sheet of
National Icee Corporation as of March 29, 1997 and March 30, 1996
and the related consolidated statements of operations,
stockholders' (deficiency), and cash flows for the years ended.
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 National Icee Corporation as of March 29,
1997 and March 30, 1996 and the consolidated results of its
operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
Margolis & Company P.C.
Certified Public Accountants
NATIONAL ICEE CORPORATION
CONSOLIDATED BALANCE SHEET
MARCH 29, MARCH 30,
1997 1996
ASSETS
Current assets:
Cash $ 255,561 $ 48,638
Accounts receivable, net of
allowance for doubtful
accounts of $175,000 and
$142,000, respectively 3,106,641 2,581,373
Inventory 2,366,610 2,344,594
Prepaid expenses and other
current assets 4,924,033 4,842,573
Total current assets 10,652,845 9,817,178
Property and equipment, less
accumulated depreciation 27,348,084 29,229,557
Non-compete covenants 447,546 564,195
Other intangible assets 1,060,308 386,403
Other assets 161,032 160,608
Deferred income taxes 3,787,000 3,270,000
$43,456,815 $43,427,941
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
Current liabilities:
Demand notes, related parties $ 678,459 $ 734,456
Revolving credit, bank 19,800,000 -
Line of credit, bank 3,875,000 1,180,000
Current portion of long-term debt 264,923 219,873
Accounts payable and accrued expenses 3,027,548 3,604,738
Unearned purchase rebates 164,500 132,000
Deferred income 3,333 73,646
Total current liabilities 27,813,763 5,944,713
Revolving credit, bank - 20,000,000
Long-term debt, less current portion 1,296,796 966,719
Subordinated debt 19,030,127 18,574,616
Unearned purchase rebates 120,639 274,585
Deferred income 28,350 31,674
Total liabilities 48,289,675 45,792,307
Stockholders' (deficiency) ( 4,832,860) ( 2,364,366)
$43,456,815 $43,427,941
The notes to consolidated financial statements are an integral
part of the above statement.
NATIONAL ICEE CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED
MARCH 29, MARCH 30,
1997 1996
Sales $37,887,678 $36,946,167
Cost of sales 13,672,334 13,634,007
Gross profit 24,215,344 23,312,160
Selling and administrative expenses 17,729,012 16,842,190
Income before depreciation and amortization,
interest, royalty and other (income) 6,486,332 6,469,970
Other (income) expenses:
Depreciation and amortization 6,537,342 6,022,515
Interest, net 3,059,659 2,986,384
Royalty income ( 70,313) ( 93,750)
Other ( 54,862) ( 39,121)
9,471,826 8,876,028
Loss before credit for income taxes ( 2,985,494) ( 2,406,058)
Credit for income taxes ( 517,000) ( 916,000)
Net loss ($ 2,468,494) ($1,490,058)
The notes to consolidated financial statements are an integral
part of the above statement.
NATIONAL ICEE CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
(a) (b)
Balance, April 1, 1995 $30,854 $1,909,407 ($2,808,813) ($5,756) ($874,308)
Net loss - - ( 1,490,058) - ( 1,490,058)
Balance,
March 30, 1996 30,854 1,909,407 ( 4,298,871) ( 5,756)( 2,364,366)
Net loss - - ( 2,468,494) - ( 2,468,494)
Balance,
March 29, 1997 $30,854 $1,909,407 ( $6,767,365) ($5,756)($4,832,860)
(a)$.10 par value; 700,000 shares authorized; 308,540 shares issued at
March 29, 1997 and March 30, 1996.
(b) 818 shares (at cost)
The notes to consolidated financial statements are an integral part of the
above statement.
NATIONAL ICEE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED
MARCH 29, MARCH 30,
1997 1996
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net loss ($2,468,494) ($1,490,058)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Deferred income taxes (517,000) (916,000)
Deferred income earned (73,637) (97,074)
Amortization 421,975 416,217
Allowance for doubtful accounts 33,000 92,000
Depreciation 6,115,367 5,606,298
Accrued interest expense 660,524 600,106
Gain on sale of equipment (367,478) -
(Increase) decrease in operating assets:
Accounts receivable (71,921) 130,789
Inventory 127,992 381,662
Prepaid expenses and other current assets 179,425 ( 296,332)
Other assets 3,936 1,006
(Decrease) in operating liabilities:
Accounts payable and accrued expenses (1,875,290) ( 305,654)
Net cash provided by operating activities 2,168,399 4,122,960
Cash flows from investing activities:
Proceeds from sales of equipment and
intangible assets 1,198,168 -
Acquisitions, manufacturing and
rebuilding of property and equipment (2,839,674) ( 3,651,405)
Purchase of business (1,800,000) -
Net cash (used in) investing activities (3,441,506) ( 3,651,405)
Cash flows from financing activities:
Proceeds from demand notes 50,174 26,592
Repayments of demand notes (124,347) ( 9,555)
Proceeds from line of credit, bank 2,104,306 -
Repayment of revolving credit, bank (200,000) (70,000)
Proceeds from long-term and subordinated debt 19,686 71,160
Repayments of long-term and subordinated debt ( 248,343) ( 402,994)
Purchase rebates earned ( 121,446) ( 129,273)
Net cash provided by (used in)
financing activities 1,480,030 ( 514,070)
Net increase (decrease) in cash 206,923 (42,515)
Cash at beginning of year 48,638 91,153
Cash at end of year $ 255,561 $ 48,638
The notes to conslidated financial statements are an integral
part of the above statement.
NATIONAL ICEE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
YEAR ENDED
MARCH 29, MARCH 30,
1997 1996
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $2,443,740 $2,370,731
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
In 1996, the Company incurred a trademark claim in Oklahoma City
and in settlement thereof, Sooner Icee, Inc. reduced the purchase
price of the franchise costs and operating rights and its long-
term debt obligation from the Company in the amount of $27,827
(see Notes 7 and 10).
During the fiscal year ended March 29, 1997, the Company acquired
the common stock of Icee Ventures, Inc. for $2,225,000 of which
$425,000 was payable as a Note to Individual (see Notes 4 and 10)
and the remaining amount of $1,800,000 was borrowed against the
bank line of credit. In addition, the Company is obligated to
the former stockholder of Icee Ventures, Inc. in the amount of
$200,000 for a non-compete covenant (see Notes 6 and 10).
During 1997, the Company agreed to offset equipment held under a
lease from a stockholder against subordinated debt to a relative
of the stockholder in the amount of $208,057. The equipment had
a cost of $350,000 and accumulated depreciation of $141,943.
The notes to consolidated financial statements are an integral
part of the above statement.
NATIONAL ICEE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996
1. Nature of Business and Summary of Significant Accounting
Policies
Nature of business - The Company operates predominately as a
distributor of food and beverage products which are
dispensed from machines it places, under exclusive
arrangements, in retail stores generally located in the
eastern United States.
Principles of consolidation - The accompanying consolidated
financial statements include the accounts of National Icee
Corporation and its wholly-owned subsidiaries, FCB Syrups,
Inc. and Icee Ventures, Inc. All material intercompany
accounts and transactions have been eliminated in
consolidation.
Use of estimates - The presentation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
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.
Fiscal year - The Company's fiscal year ends on the Saturday
closest to March 31. The fiscal years ended 1997 and 1996
each reflect a 52-week period.
Inventory - Inventory is valued at the lower of cost or
market, cost being determined on a first-in, first-out
basis.
Depreciation and amortization - Depreciation and
amortization of property and equipment and intangible assets
is provided by use of the straight-line method over their
respective estimated useful lives.
A patent, obtained in April, 1984, is being amortized over
17 years.
Franchise costs and operating rights are being amortized
over five years.
Non-compete covenants are being amortized over periods of
four to eight years.
Excess of cost of investment over net assets of businesses
acquired - The excess of cost of investment over the fair
value of net assets acquired prior to November 1, 1970 and
included in other intangible assets in the amount of
$155,252 is not being amortized because, in the opinion of
management, such value is of a permanent nature. The value
is reviewed by management on a periodic basis and an
amortization program will be established should future
events render such treatment appropriate. The excess of
cost of investment over the fair value of net assets
acquired after November 1, 1970 is being amortized on a
straight line basis over 15 years.
Capitalization of manufacturing and rebuilding costs - The
Company has its own dispenser manufacturing and rebuilding
department. Applicable costs for parts, internal labor and
related overhead are capitalized.
NATIONAL ICEE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996
1. Nature of Business and Summary of Significant Accounting
Policies - Continued
Advertising material on hand - The Company creates
advertising material for point of sale marketing. In
management's opinion, the advertising materials have a
future benefit and are expensed as the material is
distributed to customer locations. Advertising expense
totaled $506,437 and $672,848 for the years ended in 1997
and 1996, respectively.
Basis of presentation - The Company has had losses for the
past several years and at March 29, 1997 there is a net
stockholders' deficiency of $4,832,860. Although this may
indicate an uncertainty as to the Company's ability to
continue as a going concern, the Company has taken action to
mitigate these concerns.
The Company significantly reduced its overhead for the year
ended March 30, 1996 and the number of dispensers
manufactured for its own use. In addition, the Company
hired a marketing specialist to improve the visibility and
recognition of its products at over 8,000 locations and has
additional marketing resources and expertise available from
The Coca-Cola Company. The Coca-Cola Company has been and
will continue to assist the Company with opportunities to
supply FCB Syrups and/or dispensers to The Coca-Cola
Company's customer base. In addition, the Company acquired
a new territory during fiscal year ended March 29, 1997.
Although the Company's operating overhead increased for the
year ended March 29, 1997 as a result of the acquisition,
management believes this acquisition will help to improve
sales and income from operations in future years. The
Company expects to show improved operating and cash flow
results in the future from these improvements and available
resources. The consolidated financial statements do not
include any adjustments that might result from the outcome
of this uncertainty.
2. Prepaid Expenses and Other Current Assets
MARCH 29, MARCH 30,
1997 1996
Dispenser parts $3,597,182 $3,639,284
Advertising material on hand 896,446 610,095
Other 430,405 593,194
$4,924,033 $4,842,573
NATIONAL ICEE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996
3. Note Receivable - Stock Purchase
In prior years, common stock was issued pursuant to an
incentive stock option plan to certain officers in exchange
for their personal notes. Outstanding balances were as
follows:
MARCH 29, MARCH 30,
1997 1996
Current portion included with
"other current assets" $11,250 $14,250
Non-current portion included
with "other assets" 11,000 18,500
$22,250 $32,750
4. Acquisition of Territory
On June 14, 1996, the Company acquired 100% of the stock of
Icee Ventures, Inc. for $2,225,000. The acquisition was
funded with a note payable to the sole stockholder in the
amount of $425,000 and cash of $1,800,000, which was
borrowed on the bank line of credit. The acquisition has
been accounted for using the purchase method of accounting,
and accordingly, the purchase price has been allocated to
the assets purchased and the liabilities assumed based on
the fair values at the date of acquisition. The excess of
the purchase price over the fair values of the net assets
acquired was $532,000 and has been included with other
intangible assets (see Note 7), which is being amortized on
a straight-line basis over 15 years. The total purchase
price was allocated as follows:
Accounts receivable $ 486,347
Inventory 150,008
Prepaid expenses and
other current assets 260,885
Property and equipment, net 2,432,963
Other intangible assets 779,231
Other assets 4,360
Accounts payable and accrued expenses ( 1,298,100)
Debt obligations, line of credit,
bank (1) ( 590,694)
$2,225,000
(1)The Company utilized its bank line of credit to pay off
$700,000 of Icee Ventures, Inc.'s obligations to the
bank and stockholder, some of which occurred prior to
June 14, 1996, in addition to the $1,800,000 borrowed
for the acquisition.
The operating results of the acquired business has been
included in the consolidated statement of operations from
the date of acquisition.
In addition, the Company entered into a non-compete covenant
agreement over five years with the former stockholder under
a note obligation (see Note 10).
NATIONAL ICEE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996
5. Property and Equipment, at Cost
MARCH 29, MARCH 30,
1997 1996
Land, buildings and improvements $ 607,736 $ 595,412
Dispensers 62,587,982 57,292,172
Warehouse and office equipment 1,501,423 1,014,880
Vehicles 225,941 75,892
64,923,082 58,978,356
Less accumulated depreciation 37,574,998 29,748,799
$27,348,084 $29,229,557
Internal manufacturing and rebuilding costs for dispensers
were approximately $1,907,239 and $2,563,511 for the years
ended in 1997 and 1996, respectively.
6. Non-Compete Covenants
MARCH 29, MARCH 30,
1997 1996
Southeastern Icee, Inc.
- Florida Territory $ 650,000 $ 650,000
Southeastern Icee, Inc.
- Georgia Territory 220,000 220,000
Icee of St. Louis, Inc. 650,000 650,000
Sooner Icee, Inc. 547,597 547,597
Icee Ventures, Inc. 200,000 -
Icee of Memphis, Inc. 84,186 84,186
Icee of Plano, Inc. 50,000 50,000
Golden Spread Icee, Inc. 25,000 25,000
2,426,783 2,226,783
Less accumulated amortization 1,979,237 1,662,588
$ 447,546 $ 564,195
7. Other Intangible Assets
MARCH 29, MARCH 30,
1997 1996
Excess of cost of investment over
net assets of businesses
acquired $ 687,252 $155,252
Patent 98,408 98,408
Franchise costs and operating rights 755,504 508,273
1,541,164 761,933
Less accumulated amortization 480,856 375,530
$1,060,308 $386,403
NATIONAL ICEE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996
8. Demand Notes, Related Parties
The Company is indebted on demand notes payable to various
officers and minority stockholders. The notes bear interest
at 10%. Related party interest was $134,252 and $178,223
for the years ended March 29, 1997 and March 30, 1996,
respectively.
9. Bank Debt
The Company refinanced its CoreStates Bank debt on
September 19, 1994 with NationsBank of Georgia. The credit
facility consists of a line of credit and a revolving
credit. The credit facility allows the Company to pay a
floating interest rate or a rate based on LIBOR for fixed
periods of 1, 2, 3 or 6 months, for either the entire amount
of the indebtedness or a portion thereof. The floating rate
interest is payable quarterly in arrears on the last
business day of each March, June, September and December.
The LIBOR interest is payable the last day of the applicable
period and three months after the first day for the six-
month period.
MARCH 29, MARCH 30,
1997 1996
Line of credit, NationsBank of Georgia, maximum
borrowing limit of $5,000,000; floating interest at
the greater of the federal funds effective rate plus
1/2% or prime rate plus 1/8%, or LIBOR plus
2 1/4% (effective interest rate was 8.625% at
March 29, 1997); maturing December 31, 1997 $ 3,875,000 $ 1,180,000
Revolving credit, NationsBank of Georgia, maximum
borrowing limit of $20,000,000; floating interest at
the greater of the federal funds effective rate plus
1/2% or prime rate, or LIBOR plus 2% (effective
interest rates were 7.31% on $13,000,000, 7.64% on
$4,000,000 and 8.5% on $3,000,000 at March 29,
1997); maturing December 31, 1997 $19,800,000 $20,000,000
The line of credit and revolving credit are collateralized
by accounts receivable, inventory property and equipment,
and the common stock of the Company. They are also
guaranteed by a principal stockholder.
The credit facility is subject to certain financial
covenants as defined in the loan agreement, including the
ratio of current assets to current liabilities (excluding
NationsBank debt) of no less than 2.0 to 1.0, and certain
minimum cash flow requirements. As of March 29, 1997, the
Company was in violation of the fixed coverage ratio which
stipulates that the cash operating profit should be 1.25 of
the sum of interest expense plus 10% of senior indebtedness
(as defined in the bank debt agreement). The actual ratio
was 1.19 as of March 29, 1997.
NATIONAL ICEE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996
10. Long-Term Debt
MARCH 29, MARCH 30,
1997 1996
Note, Southeastern Icee, Inc. (Georgia Territory),
with an initial installment of principal of $100,000
paid December, 1994, and the balance payable in
annual installments of $112,500 plus interest at
1 point above prime rate, maturing August, 2002 $ 675,000 $ 787,500
Notes, individual, for acquisition of Icee of Memphis
Territory; payable in monthly installments of
$6,833 through December, 1994; $6,000 through
December, 1998; and $3,000 through December,
2000; including interest at 9% 172,308 226,140
Note, Sooner Icee, Inc., payable in quarterly
installments of $6,957 plus interest at 1 point
above prime rate, maturing November, 1999 48,697 76,523
Note, individual, for acquisition of Sooner Icee, Inc.;
payable in quarterly installments of $6,429 plus
interest at 1 point over prime rate, maturing
November, 1999 70,714 96,429
Note, individual, for non-compete agreement in
acquisition of Icee Ventures, Inc., payable in quarterly
installments of $12,164 including interest at 8 1/4%,
maturing June, 2001 170,000 -
Note, individual, for acquisition of Icee Ventures,
Inc., payable in quarterly installments of $31,250
beginning September, 1998 plus interest of 8 1/4%,
maturing December, 2001 425,000 -
1,561,719 1,186,592
Less current portion (due in one year) 264,923 219,873
$1,296,796 $ 966,719
Maturities, excluding the revolving and line of credit,
NationsBank, are as follows:
YEAR ENDING IN
1998 $ 264,923
1999 379,485
2000 328,797
2001 291,014
2002 185,000
Thereafter 112,500
$1,561,719
The prime rate of interest at March 29, 1997 was 8.5%.
NATIONAL ICEE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996
11. Subordinated Debt
Debt subordinated to the NationsBank debt consisted of the
following:
Convertible note - Coca-Cola Financial Corporation (the
"Holder"), interest at 6% per annum payable in quarterly
installments. The amount of the note was $7,000,000 at the
end of both years. The note matures October 1, 1998. The
Company may prepay the note after October, 1996, including a
premium of up to 1.7% of the principal. Prior to maturity,
the note may be converted by the Holder into the equivalent
of 22% of the Company's common stock. In addition, if
certain events occur, the Holder may: accelerate the
maturity of the note; require the Company to repurchase all
of the Company's stock from the Holder, if the note was
converted; or the Company's stockholders may be required to
sell all of their stock to the Holder. Under the terms of
this agreement, the Holder can designate two members for the
Board of Directors of the Company. The Company has
appointed the two designees to the Board of Directors.
Convertible notes - Coca-Cola Financial Corporation (the
"Holder"), original amounts totaling $9,000,000 with
interest accruing at 3% compounded quarter-annually for Note
A, 7.497% per annum for Note B, 9.516% per annum for Note C
and 9.359% per annum for Note D. The balance of the notes
were $11,041,115 and $10,465,042 at March 29, 1997 and March
30, 1996, respectively. The notes, including interest,
mature December 23, 1999 for $12,810,257. The Holder and
the Company have options to convert the convertible notes
to stock prior to maturity as follows:
SHARES
BY HOLDER BY COMPANY ORIGINAL MATURITY
Note A Common 78,695 78,695 $4,479,365 $ 5,521,766
Note B Preferred 26,715 1,520,635 2,558,105
Common 26,715
Note C Preferred 17,568 1,000,000 1,609,359
Common 17,568
Note D Preferred 35,156 2,000,000 3,121,027
Common 35,156
$9,000,000 $12,810,257
Notes payable - Stockholders and other related parties, no
specific repayment terms, bearing interest at 10% per annum.
The balances of the notes were $650,012 and $770,574 at
March 29, 1997 and March 30, 1996, respectively.
Notes payable - Non-profit institutions, various 5-10 year
notes with interest payable semi-annually at 9% to 12% per
annum. The balances of the notes were $339,000 for both
years.
NATIONAL ICEE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996
12. Purchase Rebates
On September 1, 1991, the Company entered into an agreement
with The Coca-Cola Company under which it became the
Company's sole supplier of frozen carbonated beverage
syrups. The contract, which ran through December 31, 1996,
required the Company to purchase approximately 12.2 million
gallons of Coca-Cola Classic and Flavored FCB syrup subject
to minimum amounts each year. The agreement will continue
to stay in effect until the 12.2 million gallons of FCB
syrups are purchased by the Company. Purchase rebates were
earned as follows:
MARCH 29, MARCH 30,
1997 1996
Unearned total, beginning of year $406,585 $535,858
Rebates earned during year (121,446) (129,273)
Unearned total, end of year $285,139 $406,585
At the inception of the agreement, the Company received the
full amount of the rebates to be earned. The rebates are
earned based on the gallons of FCB syrups the Company
purchases. If the agreement is terminated by the Company
and it does not meet the minimum required purchases, the
remaining unearned purchase rebates are refundable to Coca-
Cola, with interest.
The rebates earned during the year have been reported as a
financing activity for purpose of the statement of cash
flows.
13. Deferred Income
Royalty Income:
On September 1, 1991, the Company received from The Coca-
Cola Company an advance of $500,000 representing royalties
to be earned by the Company as it makes The Coca-Cola
Company's cherry flavored frozen carbonated beverage syrup
available to its customers on an exclusive basis. The
royalties were earned ratably over the 64-month life of the
agreement.
MARCH 29, MARCH 30,
1997 1996
Deferred royalty income, beginning of year $70,313 $164,063
Royalties earned during year ( 70,313) ( 93,750)
Deferred royalty income, end of year - 70,313
Current portion - 70,313
Long-term portion $ - $ -
NATIONAL ICEE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996
13. Deferred Income - Continued
Non-Compete Covenant:
A covenant not-to-compete in the amount of $50,000 from the
sale of the Louisiana Territory in 1994 is being amortized
over 15 years.
MARCH 29, MARCH 30,
1997 1996
Current portion $ 3,333 $ 3,333
Long-term portion $28,350 $31,674
14. Income Taxes
The Company follows the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"), which requires the recognition of deferred tax
liabilities and assets for the expected future tax
consequences of events that have been included in the
financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on
the differences between the financial statement and tax
bases of assets and liabilities using tax rates in effect
for the year in which the differences are expected to
reverse.
The components of the deferred tax assets and liabilities
were as follows:
MARCH 29, MARCH 30,
1997 1996
Deferred tax assets:
Net operating loss carryforwards $7,884,000 $7,383,000
Alternative minimum tax credits 205,000 205,000
Amortizable goodwill and non-complete 346,000 281,000
Bad debt reserve 68,000 55,000
Total gross deferred tax assets 8,503,000 7,924,000
Less - valuation allowance 783,000 253,000
7,720,000 7,671,000
Deferred tax liabilities:
Depreciation 3,933,000 4,401,000
Net deferred tax assets $3,787,000 $3,270,000
The Company has various tax credits and net operating loss
carryforwards available as follows:
a) Alternative minimum tax credits of approximately
$205,000 are available to offset future income taxes on
an indefinite carryforward basis.
b) Net operating tax loss carryforwards of approximately
$20,319,000 are available only for regular income tax
purposes and $9,523,000 for alternative minimum tax
purposes, which will expire over the period from 2007 to
2012.
A valuation allowance is provided to reduce the deferred tax
assets to a level which, more likely than not, will be
realized. The net deferred tax assets reflect management's
estimate of the amount which will be realized from future
profitability which can be predicted with reasonable
certainty, as a result of management's downsizing the
Company's overhead and significant reductions in the number
of dispensers manufactured. The valuation allowance for
deferred tax assets as of March 31, 1997 was $783,000 of
which $415,000 relates to federal net operating losses and
$368,000 relates to state net operating losses that more
than likely will expire before being utilized.
The credit for income taxes consisted of the following:
FEDERAL STATE TOTAL
1997:
Current $ - $ - $ -
Deferred 458,000 59,000 517,000
Total $ 458,000 $ 59,000 $ 517,000
1996:
Current $ - $ - $ -
Deferred 795,000 121,000 916,000
Total $ 795,000 $ 121,000 $ 916,000
15. Stock Warrants and Options
Stock Warrants:
During the year ended March 30, 1991, the Company adopted a
Common Stock Purchase Warrant Plan under which up to 65,000
warrants may be sold at a price of $.25 per warrant,
allowing the purchaser to buy one share of common stock at a
price of $21.30 per share for each warrant presented. The
warrnts expired on March 31, 1996.
At March 28, 1992, warrants to purchase 62,477 shares of the
Company's common stock had been issued, none had been
exercised and shares of common stock in that amount had been
reserved for that purpose.
Incentive Stock Option Plan:
The Company has a non-qualified stock option plan (the
"Plan") that provides for the issuance of up to 30,000
shares of common stock, in the aggregate, through the
granting and exercise of options by specified employees at
an option price based on the net book value of the Company
plus 10%. The Plan will end April 12, 1999, the tenth
anniversary of
NATIONAL ICEE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996
its effective date. Stock options had been granted for a
total of 17,300 shares of which 14,155 shares were exercised
prior to April 1, 1995.
16. Icee Dispenser Sales
The Company sold dispensers to other Icee operators during
the fiscal year ended March 29, 1997. The total proceeds
from these sales were $1,042,228, the cost of the dispensers
and the accumulated depreciation were $1,362,434 and
$664,134, respectively. The proceeds and net book value were
recorded to sales and cost of sales, respectively, in the
statement of operations for the year ended March 29, 1997.
The Company manufactured new dispensers for resale costing
$945,885 which were sold for $1,178,450 and have been
recorded to cost of sales and sales, respectively, in the
statement of operations for the year ended March 30, 1996.
17. Leases and Commitment
a) Administrative office - The Company has a five-year
lease which commenced in 1994 with an annual rental of
approximately $120,000.
b) Warehouses - Annual commitments on leases are as
follows:
YEAR ENDING IN
1998 $876,060
1999 554,298
2000 352,573
2001 173,490
2002 116,496
Thereafter 917,168
Administrative and warehouse rentals amounted to
$1,159,317 and $1,159,356 for the years ended in 1997
and 1996, respectively, including $107,771 and $107,318
for locations leased from the Company's principal
stockholder and other related parties.
c) Trucks and cars - The Company has leases for generally
50 months and after 13 months the Company has the option
of returning the vehicle. At termination, the Company
is liable for the difference between the fair market
value and the depreciated value if the fair market value
is less than the depreciated value on the leasing
company's books, or the Company will receive a
reimbursement from the leasing company if the fair
market value is greater than the depreciated value on
the leasing company's books. Rentals totaled
approximately $914,000 and $1,175,000, net of
reimbursements of $244,000 and $104,000 for the years
ended in 1997 and 1996, respectively. Rentals for truck
and car leases should approximate $1,000,000 for each of
the following three years.
d) The Company entered into a consulting agreement which
provides for quarterly installments of $10,750 beginning
March 31, 1993 through December 31, 1999.
NATIONAL ICEE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 29, 1997 AND MARCH 30, 1996
18. Profit-Sharing Plan
The Company has a defined contribution profit-sharing plan
for the benefit of substantially all its eligible employees.
The Plan's year end is December 31. In 1996 the plan was
amended to provide for participants' contributions under a
401(k) provision. The Company's contributions to the profit
sharing plan are at the discretion of the Board of Directors
up to the maximum allowed by IRS regulations. The profit
sharing contributions was $50,000 and $25,000 during each of
the years ended in 1997 and 1996, respectively.
All participants' contributions and investments are
directed by the plan participants and are held in a trust
for the benefit of plan participants. All employees are
100% vested in their contributions and earnings thereon, but
become vested in the Company's contributions and earnings at
10% per year from year one to year four and 20% per year in
year five and thereafter with full vesting after seven
years.
19. Major Customers
The Company's sales to one of its customers accounted for
16% of sales for the year ended March 29, 1997 and to two of
its customers accounting for a combined 24% of sales for the
year ended March 30, 1996.
NATIONAL ICEE CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEET
SEPTEMBER 27, 1997
ASSETS
Current assets:
Cash $ 9,257
Accounts receivable, net of alowance
for doubtful accounts of $175,000 4,231,548
Inventory 2,849,321
Prepaid expenses and other current assets 4,780,755
Total current assets 11,870,881
Property and equipment, less accumulated
depreciation 26,144,698
Non-compete covenants 373,170
Other intangible assets 1,007,508
Other assets 218,868
Deferred income taxes 3,787,000
$43,402,125
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
Current liabilities:
Demand notes, related parties $ 690,787
Revolving credit, bank 17,870,000
Line of credit, bank 3,875,000
Current portion of long-term debt 298,873
Accounts payable and accrued expenses 3,432,770
Unearned purchase rebates 164,500
Deferred income 3,333
Total current liabilites 26,335,263
Long-term debt, less current portion 1,091,631
Subordinated debt 19,327,079
Unearned purchase rebates 32,918
Deferred income 26,688
Total liabilities 46,813,579
Stockholders' (deficiency) (3,411,454)
$43,402,125
NATIONAL ICEE CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 27, 1997
Sales $24,733,196
Cost of sales 9,166,637
Gross profit 15,566,559
Selling and administrative expenses 9,460,704
Income before depreciation and amortization,
interest and other (income) 6,105,855
Other (income) expenes:
Depreciation and amortization 3,249,982
Interest, net 1,604,767
Other (170,300)
4,684,449
Net income $ 1,421,406
NATIONAL ICEE CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIENCY)
FOR THE SIX MONTHS ENDED SEPTEMBER 27, 1997
Additional
Common Paid-In (Accumulated) Treasury
Stock Capital Deficit) Stock Total
(a) (b)
Balance, March 29, 1997 $30,854 $1,909,407 $(6,767,365) $(5,756) $(4,832,860)
Net income - - 1,421,406 - 1,421,406
Balance, Sept. 27, 1997 $30,854 $1,909,407 $(5,345,959) $(5,756) $(3,411,454)
(a) $.10 par value; 700,000 shares authorized; 308,540 shares issued at
September 27,1997.
(b) 818 shares (at cost)
NATIONAL ICEE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 27, 1997
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net income $1,421,406
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income earned (1,662)
Amortization 127,176
Depreciation 3,125,698
Accrued interest expense 327,301
Loss on sales of equipment 21,385
(Increase) decrease in operating assets:
Accounts receivable (1,124,907)
Inventory (482,711)
Prepaid expenses and other current assets 143,278
Other assets (57,836)
Increase in operating liabilities:
Accounts payable and accrued expenses 405,222
Net cash provided by operating activities 3,904,350
Cash flows from investing activities:
Proceeds from sales of equipment 241,621
Acquisitions, manufacturing and rebuilding
of property and equipment (2,185,318)
Net cash (used in) investing activities (1,943,697)
Cash flow from financing activities:
Proceeds from demand notes 25,486
Repayment of demand notes (28,006)
Repayment of revolving credit, bank (1,930,000)
Proceeds from long-term and subordinated debt 78,653
Repayment of long-term and subordinated debt (265,369)
Purchase rebates earned (87,721)
Net cash (used in) financing activities (2,206,957)
Net (decrease) in cash (246,304)
Cash at beginning of period 255,561
Cash at end of period $ 9,257
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $1,226,473
NATIONAL ICEE CORPORATION ("NIC") AND J & J SNACK FOODS CORP. ("J & J")
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
FOR THE YEAR ENDED SEPTEMBER 27, 1997
Historical
J & J NIC Pro Forma
ASSETS September 27, September 27, Adjustments Combined
1997 1997
Cash and cash
equivalents $ 1,401,000 $ 9,000 $ $ 1,410,000
Receivables 25,458,000 4,232,000 29,690,000
Inventories 13,535,000 3,866,000 17,401,000
Prepaid Expenses and
Deposits 853,000 264,000 (70,000)(A) 1,047,000
Total Current Assets 41,247,000 8,371,000 (70,000) 49,548,000
Property, Plant and
Equipment, net 67,222,000 26,145,000 93,367,000
Other Assets 6,899,000 7,506,000 (3,787,000)(C)10,618,000
Goodwill, trademarks and
rights, net 21,459,000 1,381,000 20,968,000 (B)43,808,000
$136,827,000 $43,403,000 $17,111,000 $197,341,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Line of credit - 21,745,000 21,745,000
Current maturities of
long-term debt 16,000 990,000 1,006,000
Accounts payable 13,315,000 3,432,000 16,747,000
Accrued liabilities 8,652,000 201,000 4,700,000 (D)13,553,000
Total Current Liabilities 21,983,000 26,368,000 4,700,000 53,051,000
Long-term debt, less current
maturities 5,028,000 20,419,000 9,000,000 (E)34,447,000
Deferred income 532,000 27,000 559,000
Deferred income taxes 3,380,000 - 3,380,000
Stockholders' Equity
(deficiency) 105,904,000 (3,411,000) 3,411,000(F)105,904,000
$136,827,000 $43,403,000 $17,111,000 $197,341,000
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(A) to record the reclass of prepaid acquisition costs
(B) to record the excess of the purchase price over the net assets
acquired
(C) to write off the deferred tax asset not deemed to be realizable
(D) to record estimated acquisition costs, including an estimate of income
tax liability
(E) to record the purchase price paid to the former shareholders of NIC
(F) to eliminate the Stockholder's Deficiency of NIC
NATIONAL ICEE CORPORATION ("NIC")AND J & J SNACK FOODS CORP. ("J & J")
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED SEPTEMBER 27, 1997
Historical
J & J NIC Pro Forma
September 27, September 27, Adjustments Combined
1997 1997
Sales $220,318,000 $39,634,000 $ $259,952,000
Cost of Sales 112,159,000 14,344,000 (1,800,000)(A) 124,703,000
Gross Profit 108,159,000 25,290,000 1,800,000 135,249,000
Selling and
Administrative Expenses 77,249,000 18,627,000 (1,700,000)(A) 94,176,000
Operating Income 30,910,000 6,663,000 3,500,000 41,073,000
Depreciation
and Amortization 19,270,000 6,731,000 (500,000)(B) 25,501,000
Investment Income 630,000 - 630,000
Interest Expense (431,000) (3,151,000) (200,000)(D) (3,782,000)
Other Income 112,000 190,000 302,000
Income (loss)
before taxes 11,951,000 (3,029,000) 3,800,000 12,722,000
Income Taxes (benefit) 3,792,000 (520,000) 805,000(C) 4,077,000
Net Earnings $ 8,159,000 $(2,509,000) $ 2,995,000 $ 8,645,000
Earnings per common share $0.91 $(8.17) $0.96
Weighted Average Number
of Shares 8,985,000 307,000 8,985,000
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(A) to reflect reduction of costs and expenses attributable to synergies
and benefits from consolidation
(B) to provide for reduced depreciation and amortization based on the
allocation of purchase price to fixed assets and the excess of
the purchase price over net assets acquired
(C) to record income taxes on the increase in earnings before taxes of
the combined entity over the earnings before taxes of J & J at
J & J's historical rate of 37% of earnings before taxes
(D) to reflect additional interest expense on borrowings
