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 26, 1998
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, 1999, there were 9,106,556 shares of the Registrant's
Common Stock outstanding.
INDEX
Page
Number
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - December 26, 1998 and
September 26, 1998.................................... 3
Consolidated Statements of Earnings - Three Months
Ended December 26, 1998 and December 27, 1997......... 5
Consolidated Statements of Cash Flows - Three Months
Ended December 26, 1998 and December 27, 1997......... 6
Notes to the Consolidated Financial Statements........... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.................................... 10
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 26, September 26,
1998 1998
(Unaudited)
Current assets
Cash and cash equivalents $ 1,345,000 $ 3,204,000
Accounts receivable 26,379,000 34,388,000
Inventories 17,633,000 16,447,000
Prepaid expenses and deposits 1,663,000 1,104,000
47,020,000 55,143,000
Property, plant and equipment,
at cost
Land 755,000 839,000
Buildings 5,432,000 5,432,000
Plant machinery and equipment 60,381,000 60,275,000
Marketing equipment 128,267,000 126,653,000
Transportation equipment 1,949,000 2,149,000
Office equipment 5,607,000 5,446,000
Improvements 10,673,000 10,616,000
Construction in progress 3,002,000 1,154,000
216,066,000 212,564,000
Less accumulated depreciation
and amortization 115,512,000 112,444,000
100,554,000 100,120,000
Other assets
Goodwill, trademarks and rights,
less accumulated amortization 51,129,000 51,871,000
Long term investment securities
held to maturity 3,006,000 3,127,000
Sundry 3,077,000 3,000,000
57,212,000 57,998,000
$204,786,000 $213,261,000
See accompanying notes to the consolidated financial statements.
3
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND December 26, September 26,
STOCKHOLDERS' EQUITY 1998 1998
(Unaudited)
Current liabilities
Current maturities of long-
term debt $ 8,212,000 $ 8,423,000
Accounts payable 20,862,000 23,222,000
Accrued liabilities 6,959,000 8,914,000
36,033,000 40,559,000
Long-term debt, less current
maturities 29,860,000 32,199,000
Revolving credit line 13,500,000 16,000,000
Deferred income 362,000 435,000
Deferred income taxes 4,379,000 4,387,000
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, 9,038,000 and
8,872,000, respectively 39,483,000 39,120,000
Accumulated other comprehensive
income (1,667,000) (1,694,000)
Retained earnings 82,836,000 82,255,000
120,652,000 119,681,000
$204,786,000 $213,261,000
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 26, December 27,
1998 1997
Net Sales $60,549,000 $52,191,000
Cost of goods sold 29,567,000 27,516,000
Gross profit 30,982,000 24,675,000
Operating expenses
Marketing 19,607,000 15,859,000
Distribution 6,676,000 5,009,000
Administrative 2,540,000 2,316,000
Amortization of
intangibles and
deferred costs 739,000 527,000
29,562,000 23,711,000
Operating income 1,420,000 964,000
Other income (deductions)
Investment income 126,000 178,000
Interest expense (879,000) (304,000)
Sundry 255,000 16,000
Earnings before
income taxes 922,000 854,000
Income taxes 341,000 308,000
NET EARNINGS
$ 581,000 $ 546,000
Earnings per diluted share $ .06 $ .06
Weighted average number
of diluted shares 9,541,000 9,230,000
Earnings per basic share $ .06 $ .06
Weighted average number
of basic shares 9,036,000 8,865,000
See accompanying notes to the consolidated financial statements.
5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
December 26, December 27,
1998 1997
Operating activities:
Net earnings $ 581,000 $ 546,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization of fixed
assets 5,878,000 4,715,000
Amortization of intangibles 851,000 640,000
Other adjustments (24,000) 191,000
Changes in assets and liabilities, net
of effects from purchase of companies
Decrease in accounts receivable 8,039,000 3,702,000
(Increase) decrease in inventories (1,159,000) 13,000
Increase in prepaid expenses (556,000) (32,000)
Decrease in accounts payable and
accrued liabilities (4,409,000) (1,527,000)
Net cash provided by operating activities 9,201,000 8,248,000
Investing activities:
Purchases of property, plant and equipment (6,509,000) (5,427,000)
Payments for purchases of companies, net of
cash acquired and debt assumed - (8,967,000)
Proceeds from investments held to maturity 115,000 135,000
Proceeds from investments available for sale - 495,000
Other 21,000 787,000
Net cash used in investing activities (6,373,000)(12,977,000)
Financing activities:
Proceeds from issuance of common stock 363,000 277,000
Proceeds from borrowings - 50,000,000
Payments of long-term debt (5,050,000)(42,222,000)
Net cash (used in) provided by
financing activities (4,687,000) 8,055,000
Net (decrease) increase in cash
and cash equivalents (1,859,000) 3,326,000
Cash and cash equivalents at beginning of period 3,204,000 1,401,000
Cash and cash equivalents at end of period $ 1,345,000 $ 4,727,000
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 26, 1998 and December 27, 1997 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 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 26, 1998.
Note 2 The Company's calculation of earnings per share in
accordance with SFAS No. 128, "Earnings Per Share," is as
follows:
Three Months Ended December 26, 1998
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic EPS
Net Income available
to common stockholders $581,000 9,036,000 $.06
Effect of Dilutive Securities
Options - 505,000 -
Diluted EPS
Net Income available to common
stockholders plus assumed
conversions $581,000 9,541,000 $.06
7
Three Months Ended December 27, 1997
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic EPS
Net Income available
to common stockholders $ 546,000 8,865,000 $.06
Effect of Dilutive Securities
Options - 365,000 -
Diluted EPS
Net Income available to common
stockholders plus assumed
conversions $ 546,000 9,230,000 $.06
Note 3 Inventories consist of the following:
December 26, September 26,
1998 1998
Finished goods $ 8,415,000 $ 8,054,000
Raw materials 2,565,000 2,190,000
Packaging materials 2,296,000 2,239,000
Equipment parts & other 4,357,000 3,964,000
$17,633,000 $16,447,000
Note 4 The Company adopted SFAS No. 130, "Reporting Comprehensive
Income" in the first quarter of this fiscal year. SFAS No.
130 establishes new standards for reporting comprehensive
income, which includes net income as well as certain other
items which result in a change to equity during the period.
The adoption of SFAS No. 130 had no impact on the Company's
financial position or results of operations. During the
first quarters of 1998 and 1997, total comprehensive
income, which for the Company included net income and
foreign currency translation adjustments, amounted to
$608,000 and $502,000, respectively.
In June 1997, the FASB issued SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information,"
which is effective for all periods beginning after December
15, 1997, but is not required to be applied for interim
reporting in the initial year of adoption. The Company is
currently evaluating the impact of SFAS No. 131 on the
disclosures included in its annual financial statement.
In June 1998, the FASB issued Statement No. 133 "Accounting
for Derivative Instruments and Hedging Activities" (SFAS
No. 133). SFAS No. 133 is required to be adopted in years
beginning after June 15, 1999. Management does not
anticipate the adoption of SFAS No. 133 will have a
significant effect on earnings or the financial position of
the Company.
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 quarters ended December 26, 1998 and December 27, 1997,
fluctuations in the value of the Mexican peso caused an increase of
$27,000 and a decrease of $44,000, respectively, in stockholders'
equity because of the revaluation of the net assets of the Company's
Mexican frozen carbonated beverage subsidiary.
Available to the Company are unsecured general purpose bank lines
of credit totalling $30,000,000. Borrowings under the lines at
December 26, 1998 were $13,500,000.
Results of Operations
Net sales increased $8,358,000 or 16% to $60,549,000 for the three
months ended December 26, 1998 compared to the three months ended
December 27, 1997, in part due to the December 1997 acquisition of
National ICEE Corporation. The increase is attributed primarily to
volume increases.
Sales to food service customers increased $2,121,000 or 9% in the
first quarter to $24,791,000. Soft pretzel sales to the food service
market increased 7% to $15,423,000 in the quarter primarily due to
increased sales to one customer. Italian ice and frozen juice treat
and dessert sales decreased 1% to $4,287,000 in the three months.
Churro sales to food service customers increased 13% to $2,799,000 in
the quarter.
Sales of products to retail supermarkets increased $884,000 or 13%
to $7,741,000 in the first quarter. Soft pretzel sales for the first
quarter were up 15% to $5,675,000. Sales of our flagship SUPERPRETZEL
brand soft pretzels, excluding SOFTSTIX, increased 12% in the first
quarter. Sales of Italian Ice increased $134,000 or 9% to $1,632,000
in the first quarter.
Frozen carbonated beverage and related product sales increased
$4,398,000 or 35% to $16,875,000 in the first quarter in part due to
the December 1997 acquisition of National ICEE Corporation. Beverage
sales alone increased 49% to $14,986,000. Equipment Sales decreased
$999,000 from the year ago quarter.
Bakery sales increased $1,021,000 or 16% to $7,243,000 in the
first quarter. Sales of Bavarian Pretzel Bakery decreased $66,000 or
2% to $3,899,000 in the quarter from last year.
9
Gross profit as a percentage of sales increased to 51% in the
current first quarter from 47% in the year ago period. This gross
profit percentage increase is primarily attributable to higher gross
profit percentages of the increased frozen carbonated beverage sales.
Total operating expenses increased $5,851,000 in the first quarter
and as a percentage of sales increased to 49% from 45% in last year's
same quarter.
Marketing expenses increased to 32% of sales from 30% in last year's
first quarter. Distribution expenses increased to 11% of sales from
10% in last year's quarter. Administrative expenses were 4% of sales
in both periods. The increase in marketing and distribution expenses as
a percent of sales is due to the higher operating expenses of the
increased frozen carbonated beverage sales. Amortization of
intangibles and deferred costs increased to $739,000 from $527,000 last
year because of the amortization of goodwill of National ICEE
Corporation.
Operating income increased 47%, or $456,000, to $1,420,000 in the
first quarter from $964,000 in last year's quarter.
Interest expense increased $575,000 from last year's quarter to
$879,000 this year due to the assumption and subsequent refinancing of
the debt of National ICEE Corporation.
Sundry income increased to $255,000 this year from $16,000 last
year due to the favorable settlement of litigation.
The effective income tax rate has been estimated at 37% in this
year compared to 36% in last year's quarter.
Net earnings increased $35,000 or 6% in the current three month
period to $581,000.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in the Company's assessment of
its sensitivity to market risk since its presentation set forth, in
item 7a. "Quantitative and Qualitative Disclosures About Market Risk,"
in its 1998 annual report on Form 10-K filed with the SEC.
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 26, 1998.
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 29, 1999 /s/ Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: January 29, 1999 /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 29,
Gerald B. Shreiber
President
Dated: January 29, 1999
Dennis G. Moore
Senior Vice President and
Chief Financial Officer<PAGE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-25-1999
<PERIOD-END> DEC-26-1998
<CASH> 1345
<SECURITIES> 0
<RECEIVABLES> 26973
<ALLOWANCES> (594)
<INVENTORY> 17633
<CURRENT-ASSETS> 47020
<PP&E> 216066
<DEPRECIATION> (115512)
<TOTAL-ASSETS> 204786
<CURRENT-LIABILITIES> 36033
<BONDS> 43360
0
0
<COMMON> 39483
<OTHER-SE> 81169
<TOTAL-LIABILITY-AND-EQUITY> 204786
<SALES> 60549
<TOTAL-REVENUES> 60549
<CGS> 29567
<TOTAL-COSTS> 29562
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 879
<INCOME-PRETAX> 922
<INCOME-TAX> 341
<INCOME-CONTINUING> 581
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 581
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-26-1998
<PERIOD-END> DEC-27-1997
<CASH> 4727
<SECURITIES> 0
<RECEIVABLES> 25258
<ALLOWANCES> (580)
<INVENTORY> 17371
<CURRENT-ASSETS> 47969
<PP&E> 193759
<DEPRECIATION> (100760)
<TOTAL-ASSETS> 195861
<CURRENT-LIABILITIES> 36819
<BONDS> 48452
0
0
<COMMON> 37186
<OTHER-SE> 69498
<TOTAL-LIABILITY-AND-EQUITY> 195861
<SALES> 52191
<TOTAL-REVENUES> 52191
<CGS> 27516
<TOTAL-COSTS> 23711
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 304
<INCOME-PRETAX> 854
<INCOME-TAX> 308
<INCOME-CONTINUING> 546
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 546
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
