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 27,December 25, 2004
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 (856) 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
Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange
Act)
X Yes No
As of April 20, 2004,January 15, 2005, there were 8,910,9409,046,287 shares of the
Registrant's Common Stock outstanding.
INDEX
Page
Number
Part I. Financial Information
Item l. Consolidated Financial Statements
Consolidated Balance Sheets March 27,- December 25, 2004
(unaudited) and September 27, 200325, 2004 3
Consolidated Statements of Operations - Three
Months and Six Months Ended March 27,December 25, 2004 and March 29,December
27, 2003 (unaudited) 5
Consolidated Statements of Cash Flows Six- Three
Months Ended March 27,December 25, 2004 and March 29,December
27, 2003 (unaudited) 6
Notes to the Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 18
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 21
Item 4. Controls and Procedures 21
Part II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 23
Item 6. Exhibits and Reports on Form 8-K 23
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
March 27,December 25, September 27,25,
2004 20032004
(Unaudited)
Current assets
Cash and cash equivalents $ 34,66556,683 $ 37,69456,100
Marketable securities 5,000 -
Accounts receivable 41,665 38,16137,611 47,986
Inventories 29,129 23,20231,948 29,587
Prepaid expenses and other 1,567 1,348
107,026 100,4051,606 1,354
Deferred Income Taxes 3,385 3,385
136,233 138,412
Property, plant and equipment,
at cost
Land 606 606556 556
Buildings 5,106 5,1064,497 4,497
Plant machinery and
equipment 98,824 93,122101,727 100,442
Marketing equipment 175,743 173,360183,372 182,136
Transportation equipment 950 9091,090 1,037
Office equipment 8,181 7,3948,517 8,411
Improvements 15,069 15,65414,904 15,070
Construction in progress 3,910 2,458
308,389 298,6092,518 2,731
317,181 314,880
Less accumulated deprecia-
tion and amortization 219,525 211,494
88,864 87,115229,425 225,406
87,756 89,474
Other assets
Goodwill 46,477 45,85046,477
Other intangible assets, less accumulated
amortization 2,656 1,231
Long term investment
securities held to
maturity - 275net 1,681 1,804
Other 1,577 1,807
50,710 49,163
$246,600 $236,6831,137 1,257
49,295 49,538
$273,284 $277,424
See accompanying notes to the consolidated financial
statements.
3
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
(in thousands)
LIABILITIES AND March 27,December 25, September 27,25,
STOCKHOLDERS' EQUITY 2004 2003
(Unaudited)2004
(unaudited)
Current liabilities
Accounts payable $ 30,88929,675 $ 27,25234,497
Accrued liabilities 11,690 12,806
42,579 40,05812,196 13,149
41,871 47,646
Deferred income taxes 13,374 13,37419,153 19,153
Other long-term liabilities 598 687
13,972 14,061477 529
19,630 19,682
Stockholders' equity
Capital stock
Preferred, $1 par value;
authorized, 5,000
shares; none issued - -
Common, no par value;
authorized 25,000
shares; issued and
outstanding, 8,9069,022 and
8,757,8,784 shares, respectively 30,479 28,14333,334 33,069
Accumulated other comprehen-
sive loss (1,975) (1,957)(1,994) (2,061)
Retained earnings 161,545 156,378
190,049 182,564
$246,600 $236,683180,443 179,088
211,783 210,096
$273,284 $277,424
See accompanying notes to the consolidated financial
statements.
4
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
Three months ended Six months ended
MarchMonths Ended
December 25, December 27, March 29, March 27, March 29,
2004 2003
2004 2003
Net Sales $95,214 $81,408 $175,159 $158,652$98,521 $79,945
Cost of goods sold 64,468 54,532 119,775 109,71168,525 55,307
Gross profit 30,746 26,876 55,384 48,94129,996 24,638
Operating expenses
Marketing 12,898 11,870 24,122 22,73312,848 11,224
Distribution 7,889 6,490 14,849 12,6188,923 6,960
Administrative 4,633 3,887 8,341 7,2094,319 3,708
Other general expense
(income) expense 203 6 170 (52)
25,623 22,253 47,482 42,508252 (33)
26,342 21,859
Operating income 5,123 4,623 7,902 6,4333,654 2,779
Other income (expenses)
Investment income 112 88 229 186322 117
Interest expense (28) (22) (57) (54)and other (24) (29)
Earnings before
income taxes 5,207 4,689 8,074 6,5653,952 2,867
Income taxes 1,865 1,688 2,907 2,3631,470 1,042
NET EARNINGS $ 3,3422,482 $ 3,001 $ 5,167 $ 4,2021,825
Earnings per diluted
share $.36 $.33 $.57 $.46$ .27 $ .20
Weighted average number
of diluted shares 9,170 9,069 9,105 9,1529,235 9,039
Earnings per basic share $.38 $.34 $.58 $ .48.27 $ .21
Weighted average number
of basic shares 8,877 8,737 8,834 8,7349,032 8,792
See accompanying notes to the consolidated financial
statements.
5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in thousands)
Six months ended
March 27, March 29,Three Months Ended
December 25, December 23,
2004 20032004
Operating activities:
Net earnings $ 5,1672,482 $ 4,2021,825
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization
of fixed assets 11,688 12,8365,681 5,872
Amortization of intangibles
and deferred costs 474 384173 194
Other 83 (291)108 (35)
Changes in assets and liabilities,
net of effects from purchase of
companies
(Increase)decreaseDecrease in accounts receivable (1,059) 2,18110,376 5,814
Increase in inventories (2,225) (4,812)
Increase(2,407) (1,985)
(Increase) decrease in
prepaid expenses (130) (210)
Increase(252) 194
Decrease in accounts payable
and accrued liabilities 1,254 103(6,953) (5,342)
Net cash provided by operating
activities 15,252 14,3939,208 6,537
Investing activities:
PurchasesPurchase of property, plant
and equipment (8,482) (8,262)(4,308) (3,185)
Payments for purchase of companies net of cash acquired (12,668) - (1,631)
Proceeds from investments
held to maturity - 275
305Purchase of marketable securities (5,000) -
Proceeds from disposalsdisposal of
property and equipment 424 1,880238 200
Other 24 (200)113 40
Net cash used in investing
activities (20,427) (6,277)(8,957) (4,301)
Financing activities:
Proceeds from issuance of stock 2,146 882
Payments to repurchase common stock - (6,210)265 380
Net cash provided by
(used in)
financing activities 2,146 (5,328)265 380
Effect of exchange rate on cash
and cash equivalents 67 (67)
Net (decrease) increase in cash
and cash equivalents (3,029) 2,788583 2,549
Cash and cash equivalents at
beginning of period 56,100 37,694 14,158
Cash and cash equivalents at
end of period $ 34,665 $ 16,946$56,683 $40,243
See accompanying notes to the consolidated financial
statements.
6
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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. Certain prior year amounts have been
reclassified to conform to the current period
presentation. These reclassifications had no effect
on reported net earnings.
The results of operations for the three months and
six months ended
March 27,December 25, 2004 and March 29,December 27, 2003 are not
necessarily indicative of results for the full year.
Sales of our retail stores are generally higher in
the first quarter due to the holiday shopping
season. Sales of our frozen beverages and frozen
juice bars and ices are generally higher in the
third and fourth quarters due to warmer weather.
While we believe 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'sour Annual Report on Form 10-K for the
year ended September 27, 2003.25, 2004.
Note 2 We recognize revenue from Food Service, Retail
Supermarkets, The Restaurant Group and Frozen
Beverage products at the time the products are
shipped to third parties. When we perform services
for others under time and material agreements,
revenue is recognized upon the completion of the
services. We also sell fixed-fee service contracts.
The terms of coverage range between 12 and 60
months. We record deferred income on service
contracts which is amortized by the straight-line
method over the term of the contracts. We provide an
allowance for doubtful receivables after taking into
account historical experience and other factors.
Note 3 Depreciation of equipment and buildings is provided
for by the straight-line method over the assets'
estimated useful lives. Amortization of improvements
is provided for by the straight-line method over the
term of the lease or the assets' estimated useful
lives, whichever is shorter. Licenses and rights
arising from acquisitions are amortized by the
7
straight-line method over periods ranging from 4 to
20 years.
Note 4 Our calculation of earnings per share in accordance
with SFAS No. 128, "Earnings Per Share," is as
follows:
Three Months Ended March 27,December 25, 2004
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
Basic EPS
Net Earnings available
to common stockholders $3,342 8,877 $.38$2,482 9,032 $.27
Effect of Dilutive Securities
Options - 293 (.02)203 -
Diluted EPS
Net Earnings available to
common stockholders plus
assumed conversions $3,342 9,170 $.36
Six Months Ended March 27, 2004
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
Basic EPS
Net Earnings available
to common stockholders $5,167 8,834 $.58
Effect of Dilutive Securities
Options - 271 (.01)
Diluted EPS
Net Earnings available to
common stockholders plus
assumed conversions $5,167 9,105 $.57
92,394 anti-dilutive weighted shares have been excluded in
the computation of the six months ended March 27, 2004
diluted EPS because the options' exercise price is greater
than the average market price of the common stock.
8$2,482 9,235 $.27
Three Months Ended March 29,December 27, 2003
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
Basic EPS
Net Earnings available
to common stockholders $1,825 8,792 $ 3,001 8,737 $.34.21
Effect of Dilutive Securities
Options - 332247 (.01)
Diluted EPS
Net Earnings available to
common stockholders plus
assumed conversions $3,001 9,069 $.33
95,794$1,825 9,039 $ .20
92,394 anti-dilutive weighted shares have been excluded in
the computation of the three months ended March 29, 2003
diluted EPS because the options' exercise price is greater
than the average market price of the common stock.
Six Months Ended March 29, 2003
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
Basic EPS
Net Earnings available
to common stockholders $4,202 8,734 $.48
Effect of Dilutive Securities
Options - 418 (.02)
Diluted EPS
Net Earnings available to
common stockholders plus
assumed conversions $4,202 9,152 $.46
95,794 anti-dilutive weighted shares have been excluded in
the computation of the six months ended March 29,December 27, 2003
diluted EPS because the options' exercise price is greater
than the average market price of the common stock.
Note 5 The Company accounts for stock options under SFAS
No. 123, "Accounting for Stock-Based Compensation",
as amended by SFAS No. 148, which contains a fair
8
value-based method for valuing stock-based
compensation that entities may use, which measures
9
compensation cost at the grant date based on the
fair value of the award. Compensation is then
recognized over the service period, which is usually
the vesting period. Alternatively, SFAS No. 123
permits entities to continue accounting for employee
stock options and similar equity instruments under
Accounting Principles Board (APB) Opinion 25,
"Accounting for Stock Issued to Employees".
Entities that continue to account for stock options
using APB Opinion 25 are required to make pro forma
disclosures of net income and earnings per share, as
if the fair value-based method of accounting defined
in SFAS No. 123 had been applied.applied (see Note 6).
At March 27,December 25, 2004, the Company has one stock-basedtwo stock-
based employee compensation plan.plans. The Company
accounts for this planthese plans under the recognition and
measurement principles of APB No. 25, "Accounting
for Stock Issued to Employees", and related
interpretations. Stock-based employee compensation
costs are not reflected in net income, as all
options granted under the plans had an exercise
price equal to the market value of the underlying
common stock on the date of grant. The following
table illustrates the effect on net income and
earnings per share if the Company had applied the
fair value recognition provisions of SFAS No. 123,
to stock-based employee compensation.
109
Three Months Ended
Six Months Ended
MarchDecember 25, December 27, March 29, March 27, March 29,
2004 2003
2004 2003(in thousands, except
per share amounts)
Net income,
as reported $3,342 $3,001 $5,167 $4,202$2,482 $1,825
Less: stock-based
compensation
costs determined
under fair value
based method for
all awards 287 325 573 666209 281
Net income, pro
forma $3,055 $2,676 $4,594 $3,536$2,273 $1,544
Earnings per share
of common stock -
basic:
As reported $ .38.27 $ .34 $ .58 $ .48.21
Pro forma $ .34.25 $ .31 $ .52 $ .40.18
Earnings per share
of common stock -
diluted:
As reported $ .36.27 $ .33 $ .57 $ .46.20
Pro forma $ .33.25 $ .30 $ .50 $ .39.17
The fair value of each option grant is estimated on
the date of grant using the Black-Scholes options-pricingoptions-
pricing model with the following weighted average
assumptions used for grants in fiscal 2003 and fiscal 2004: expected
volatility of 43% and 15%; risk-free interest ratesrate of 3.07%
and 3.24%rates ranging between 2.27% and 3.49%; and
expected lives ranging between 5 and 10 years.
Note 6 In November 2002, FASB Interpretation 45,
"Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" (FIN 45), was issued. FIN
45 requires a guarantor entity, at the inception of
a guarantee covered by the measurement provisions of
the interpretation, to record a liability for the
fair value of the obligation undertaken in issuing
the guarantee.
We previously did not record a liability when
guaranteeing obligations unless it became probable
that we would have to perform under the guarantee.
FIN 45 applies prospectively to guarantees we issue
or modify subsequent to December 31, 2002, but has
11
certain disclosure requirements effective for
interim and annual periods ending after December 15,
2002. The adoption of FIN 45 did not have a
significant impact on our consolidated financial
position, results of operations or cash flows.
In January 2003,2004, the FASB issued InterpretationStatement 151,
"Inventory Costs, an amendment of ARB No. 46, Consolidation43,
Chapter 4".
Statement 151 retains the general principle of Variable Interest Entities (FIN
46)ARB
43, Chapter 4, "Inventory Pricing (AC Section I78)",
that inventories are presumed to be stated at cost;
however, it amends ARB 43 to clarify that
10
. abnormal amounts of idle facilities, freight,
handling costs, and spoilage should be recognized
as charges of the current period
. allocation of fixed production overheads to
inventories should be based on the normal
capacity of the production facilities.
Statement 151 defines normal capacity as the
production expected to be achieved over a number of
periods or seasons under normal circumstances,
taking into account the loss of capacity resulting
from planned maintenance. The Board concluded that
normal capacity refers to a range of production
levels that will vary based on business- and
industry-specific factors. Accordingly, an entity
will have to use judgment to determine when
production is outside the range of expected
variation in production (either abnormally low or
abnormally high). In general, a variable interest entityperiods of abnormally low
production (for example, periods in which there is
a
corporation, partnership, trustsignificantly lower demand, labor and material
shortages exist, or any other legal
structure usedthere is unplanned equipment
downtime) the amount of fixed overhead allocated to
each unit of production should not be increased.
However, in periods of abnormally high production
the amount of fixed overhead allocated to each unit
of production is decreased to assure inventories are
not measured above cost.
The guidance in Statement 151 is effective for
business purposes that either (a)
does not have equity investors with voting rights or
(b) has equity investors thatinventory costs incurred during fiscal years
beginning after June 15, 2005 and should be applied
prospectively. Since we essentially follow the
guidelines of Statement 151, we do not provide
sufficient financial resources foranticipate
the entityadoption to
support its activities. FIN 46 requires certain
variable interest entities to be consolidated by the
primary beneficiary of the entity if the investors
do not have the characteristics of a controlling
financial interest or do not have sufficient equity
at risk for the entity to finance its activities
without additional subordinated financial support
from other parties. The consolidation requirements
of FIN 46 apply immediately to variable interest
entities created after January 31, 2003. We adopted
the provisions of FIN 46 effective February 1, 2003
and such adoption did not have a material impact on our
consolidated financial statements since we
currently have no variable interest entities.statements.
In December 2003,2004, the FASB issued FIN 46R with
respectStatement No.
123(R), "Share-Based Payment". Statement 123(R)
requires that the compensation cost relating to
variable interest entities created before
January 31, 2003, which among other things, revisedshare-based payment transactions be recognized in
financial statements. That cost will be measured
based on the implementation date to the first fiscal year or
interim period ending after March 15, 2004, with the
exception of Special Purpose Entities (SPE). The
consolidation requirements apply to all SPE's in the
first fiscal year or interim period ending after
December 15, 2003. We adopted the provisions of FIN
46R effective December 29, 2003 and such adoption
did not have a material impact on our consolidated
financial statements since we currently have no
SPE's.
On May 15, 2003, the FASB issued SFAS No. 150,
"Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity."
SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial
instruments with characteristics of both liabilities
and equity.
12
Mostfair value of the guidance in SFAS No. 150equity or liability
instruments issued.
This statement is effective for all financial instruments entered into or
modified after May 31, 2003, and otherwise is
effective at the beginningas of the first interim
or annual reporting period beginningthat begins after June
15, 2003.2005.
Statement 123(R) covers a wide range of share-based
11
compensation arrangements including share options,
restricted share plans, performance-based awards,
share appreciation rights, and employee share
purchase plans.
In addition to the accounting standard that sets
forth the financial reporting objectives and related
accounting principles, Statement 123(R) includes an
appendix of implementation guidance that provides
expanded guidance on measuring the fair value of
share-based payment awards.
Statement 123(R) replaces FASB Statement No. 123,
Accounting for Stock-Based Compensation, and
supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees. Statement 123, as originally
issued in 1995, established as preferable a fair-
value-based method of accounting for share-based
payment transactions with employees. However, that
Statement permitted entities the option of
continuing to apply the guidance in Opinion 25, as
long as the footnotes to financial statements
disclosed what net income would have been had the
preferable fair-value-based method been used. We
anticipate implementing this new standard in the
fourth quarter of our fiscal year 2005. The adoptionimpact
of SFAS No. 150 did not have a materialthis new standard, if it had been in effect, on
the net earnings and related per share amounts of
our consolidated financial position, resultsfiscal years ended in September 2004, 2003 and
2002 were disclosed in Note A13 Accounting for
Stock-Based Compensation of operations or cash flows.our Financial Statements
included in our Form 10-k for the fiscal year ended
September 25, 2004. The impact of this new
standard, if it had been in effect, on the net
earnings and related per share amounts of our fiscal
quarter ended December 25, 2004 is disclosed in Note
5.
Note 7 Inventories consist of the following:
March 27,December 25, September 27,25,
2004 20032004
(unaudited)
(in thousands)
(unaudited)
Finished goods $15,169 $10,537$15,050 $13,691
Raw materials 3,335 2,7755,092 4,556
Packaging materials 2,918 2,9753,433 2,984
Equipment parts & other 7,707 6,915
$29,129 $23,2028,373 8,356
$31,948 $29,587
Note 8 We principally sell our products to the food service
and retail supermarket industries. We also
12
distribute our products directly to the consumer
through our chain of retail stores referred to as
The Restaurant Group. Sales and results of our
frozen beverages business are monitored separately
from the balance of our food service business and
restaurant group because of different distribution
and capital requirements. We maintain separate and
discrete financial information for the four
operating segments mentioned above which is
available to our Chief Operating Decision Makers.
We have applied no aggregate criteria to any of
these operating segments in order to determine
reportable segments. Our four reportable segments
are Food Service, Retail Supermarkets, The
Restaurant Group and Frozen Beverages. All inter-
segment net sales and expenses have been eliminated
in computing net sales and operating income (loss).
These segments are described below.
Food Service
The primary products sold toby the food service group
are soft pretzels, frozen juice treats and desserts,
churros and baked goods. Our customers in the food
service industry include snack bars and food stands
in chain, department and discount stores; malls and
shopping centers; fast food outlets; stadiums and
13
sports arenas; leisure and theme parks; convenience
stores; movie theatres; warehouse club stores;
schools, colleges and other institutions. Within
the food service industry, our products are
purchased by the consumer primarily for consumption
at the point-of-sale.
Retail Supermarkets
The primary products sold to the retail supermarket
industry are soft pretzel products, including
SUPERPRETZEL, LUIGI'S Real Italian Ice, MINUTE MAID
Juice Bars and Soft Frozen Lemonade, ICEE Squeeze Up
Tubes and TIO PEPE'S Churros. Within the retail
supermarket industry, our frozen and prepackaged
products are purchased by the consumer for
consumption at home.
The Restaurant Group
We sell direct to the consumer through our
Restaurant Group, which operates BAVARIAN PRETZEL
BAKERY and PRETZEL GOURMET, our chain of specialty
snack food retail outlets.
13
Frozen Beverages
We sell frozen beverages to the food service
industry, including our restaurant group, primarily
under the names ICEE and ARCTIC BLAST in the United
States, Mexico and Canada.
The Chief Operating Decision Maker for Food Service,
Retail Supermarkets and The Restaurant Group and the
Chief Operating Decision Maker for Frozen Beverages
monthly review and evaluate operating income and
sales in order to assess performance and allocate
resources to each individual segment. In addition,
the Chief Operating Decision Makers review and
evaluate depreciation, capital spending and assets
of each segment on a quarterly basis to monitor cash
flow and asset needs of each segment. Information
regarding the operations in these four reportable
segments is as follows:
14
Three Months Ended
Six Months Ended
MarchDecember 25, December 27, March 29, March 27, March 29,
2004 2003
2004 2003
(in thousands)
Sales to External Customers:external customers:
Food Service $ 60,74761,472 $ 47,267 $108,688 $ 91,07347,941
Retail Supermarket 9,289 9,393 15,566 15,1326,985 6,277
The Restaurant Group 1,971 2,353 4,539 5,4431,817 2,568
Frozen Beverages 23,207 22,395 46,366 47,00428,247 23,159
$ 95,21498,521 $ 81,408 $175,159 $158,65279,945
Depreciation and Amortization:
Food Service $ 3,5063,267 $ 3,271 $ 6,788 $ 6,6113,282
Retail Supermarket - -
- -The Restaurant Group 99 147 210 30465 111
Frozen Beverages 2,491 2,594 5,164 6,3052,522 2,673
$ 6,0965,854 $ 6,012 $ 12,162 $ 13,2206,066
Operating Income(Loss):
Food Service $ 5,2974,296 $ 4,869 $ 8,145 $ 7,5322,848
Retail Supermarket 717 560 776 146260 59
The Restaurant Group (466) (313) (414) (183)(220) 52
Frozen Beverages (425) (493) (605) (1,062)(682) (180)
$ 5,1233,654 $ 4,623 $ 7,902 $ 6,4332,779
Capital Expenditures:
Food Service $ 2,4661,867 $ 2,869 $ 3,702 $ 4,2671,236
Retail Supermarket - -
The Restaurant Group 23 9
Frozen Beverages 2,418 1,940
$ 4,308 $ 3,185
Assets:
Food Service $182,803 $149,318
Retail Supermarket - -
Restaurant Group 6 28 15 481,461 2,292
Frozen Beverages 2,758 2,169 4,765 3,947
$ 5,230 $ 5,066 $ 8,482 $ 8,262
Assets:
Food Service $162,166 $136,172 $162,166 $136,172
Retail Supermarket - - - -
Restaurant Group 1,654 2,542 1,654 2,542
Frozen Beverages 82,780 80,199 82,780 80,199
$246,600 $218,913 $246,600 $218,91389,020 81,868
$273,284 $233,478
Note 9 We follow SFAS No. 142 "Goodwill and Intangible
Assets".Assets." SFAS No. 142 includes requirements to test
goodwill and indefinite lived intangible assets for
impairment rather than amortize them; accordingly,
we no longer amortize goodwill.
Our four reporting units, which are also reportable
segments, are Food Service, Retail Supermarkets, The
Restaurant Group and Frozen Beverages.
Each of the
segments have goodwill and indefinite lived
intangible assets.
15
The carrying amount of acquired intangible assets
for the Food Service, Retail Supermarkets, The
Restaurant Group and Frozen Beverage segments as of
March 27,December 25, 2004 are as follows:
Gross Net
Carrying Accumulated Carrying
Amount Amortization Amount
(in thousands)
FOOD SERVICE
Amortized intangible assets
Licenses and rights $3,730 $1,137 $2,593$3,082 $1,451 $1,631
RETAIL SUPERMARKETS
Amortized intangible assets
Licenses and rights $ - $ - $ -
THE RESTAURANT GROUP
Amortized Intangible Assetsintangible assets
Licenses and rights $ 20- $ 20- $ -
FROZEN BEVERAGES
Amortized intangible assets
Licenses and rights $ 201 $ 138151 $ 6350
Licenses and rights are being amortized by the
straight-line method over periods ranging from 4 to 20
years and amortization expense is reflected throughout
operating expenses. TheThere were no changes in the gross
carrying amount of intangible assets for the three and six months
ended March
27, 2004 increased by $1,663,000 related to the acquisition
of Country Home Bakers, Inc.December 25, 2004. Aggregate amortization expense of
intangible assets for the three3 months ended March 27,December 25, 2004
and March 29,December 27, 2003 was $161,000$123,000 and $77,000,
respectively and for the six months ended March 27, 2004
and March 29, 2003 was $239,000 and $155,000,$78,000,
respectively.
Estimated amortization expense for the next five
fiscal years is approximately $570,000$440,000 in 2004 and 2005, and $500,000$375,000 in
2006 and 2007, $323,000 in 2008 and 2008.
16$149,000 in 2009. The
weighted average amortization period of the intangible
assets is 8.33 years.
Goodwill
The carrying amounts of goodwill for the Food Service,
Retail Supermarket, Restaurant Group and Frozen Beverage
segments are as follows:
16
Food Retail Restaurant Frozen
Service Supermarket
Group Beverages Total
(in thousands)
Balance at
March 27,December 25,
2004 $14,241 $ - $386 $31,850 $46,477
As a result of the quarterly impairment testing performed,
we deemed it necessary to record an impairment charge of $52,000
within the Restaurant Group segment. The Restaurant Group segment
is comprised solely of retail stores. The impairment charge is
the result of diminished operating performance at certain of
these stores.
17
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
Our current cash and marketable securities balances
and cash expected to be provided by future operations are
our primary sources of liquidity. We believe that these
sources, along with our borrowing capacity, are sufficient
to fund future growth and expansion.
The Company's Board of Directors declared a cash
dividend of $.125 per common share payable January 5, 2005
to shareholders of record on December 15, 2004. The
dividend totalled $1,127,000. This was the first cash
dividend paid by the Company. The Company anticipates that
its Board of Directors will continue to declare quarterly
cash dividends; however, the continuance of cash dividends
is not guaranteed and is dependent on many factors.
In the three monthsquarters ended March 27,December 25, 2004 and March 29,December
27, 2003 fluctuations in the valuation of the Mexican peso
caused an increase of $49,000$67,000 and aan decrease of $70,000,
respectively,$67,000 in
stockholders' equity, respectively, because of the
revaluationtranslation of the net assets of the Company's Mexican
frozen beverage subsidiary. In the six month periods, there
was a decrease of $18,000 in fiscal year 2004 and a
decrease of $99,000 in fiscal year 2003.
On January 5, 2004, we acquired the assets of Country
Home Bakers, Inc. for approximately $13 million in cash.
Country Home Bakers, Inc., with its manufacturing facility
in Atlanta, GA, manufactures and distributes bakery
products to the food service and supermarket industries.
Its product line includes cookies, biscuits, and frozen
doughs sold under the names READI-BAKE, COUNTRY HOME and
private labels sold through supermarket in-store bakeries.
Total annual sales are estimated to be approximately $55
million.
Our general-purpose bank credit line provides for up
to a $50,000,000 revolving credit facility. The agreement
contains restrictive covenants and requires commitment fees
in accordance with standard banking practice. There were no
outstanding balances under this facility at March 27,December 25,
2004.
The expiration date of the credit line has been extended to
December 2006.
Results of Operations
Net sales increased $13,806,000$18,576,000 or 17%23% to $98,521,000
for the three months to $95,214,000 and $16,507,000 or 10% to
$175,159,000 for the six months ended March 27,December 25, 2004 compared to
the three and six months ended March 29,December 27, 2003. Approximately
$12,500,000 of the sales increase resulted from the
acquisition of Country Home Bakers in January 2004.
Excluding these sales, sales increased approximately 8%.
18
FOOD SERVICE
Sales to food service customers increased $13,531,000
or 28% in the first quarter to $61,472,000. Excluding
Country Home Bakers, sales increased $1,051,000 or 2%.
Soft pretzel sales increased $332,000 or 2% from last year
to $19,216,000 in this year's quarter as higher sales to
warehouse club stores and convenience stores offset
declines to other customers, including declines due to the
National Hockey League strike. Italian ice and frozen juice
treat and dessert sales increased 8% to $6,117,000 in the
three months primarily due to increased sales to school
food service and warehouse club stores. Churro sales to
food service customers increased 6% to $3,374,000 in the
quarter primarily due to increased sales to international
markets. Sales of bakery products increased 66% to
$31,617,000 from $19,080,000 last year. Excluding sales
from the acquisition of Country Home Bakers, Inc. in January 2004, net sales increased
$1,991,000 or 2% for the three months and $4,692,000 or 3%
for the six months ended March 27, 2004 compared to the
three and six months ended March 29, 2003.
18
FOOD SERVICE
Sales to food service customers increased $13,480,000
or 29% in the second quarter to $60,747,000 and increased
$17,615,000 or 19% for the six months. Excluding sales from
the acquisition of Country Home Bakers, Inc., sales to food
service customers increased $1,665,000, or 4% in the second
quarter and increased $5,800,000, or 6% for the six months.
Soft pretzel sales to the food service market decreased 1%
to $20,357,000 in the second quarter and increased 4% to
$39,241,000 in the six months. The 1% decrease in pretzel
sales for the quarter compares to a 19% increase in the
year ago quarter and resulted from a drop-off in sales to
one customer which had increased significantly in the year
ago quarter. Italian ice and frozen juice treat and dessert
sales decreased 12% to $6,763,000 in the three months and
4% to $12,415,000 in the six months due to decreased sales
to warehouse club stores who have replaced some of our
products with low carb products. Churro sales to food
service customers increased 3% to $3,199,000 in the second
quarter and were up 3% to $6,382,000 in the six months.
Sales of bakery products increased $14,475,000 or 97% in
the second quarter to $29,358,000 and increased $16,403,000
or 51% for the six months. Excluding sales from the
acquisition of Country Home Bakers, Inc., sales of
bakery products increased $2,660,000 or 18% inwere essentially unchanged from the second quarteryear
ago period with increases and $4,588,000 or 14% for the six months due to increased
sales to existing customers and sales to newdecreases among many
customers. The changes in sales throughout the food
service segment were from a combination of volume changes
and price increases.
RETAIL SUPERMARKETS
Sales of products to retail supermarkets decreased
$104,000increased
$708,000 or 1% to $9,289,000 in the second quarter and
increased 3% to $15,566,00011% in the first half.quarter. Soft pretzel sales
for the secondfirst quarter were up 3%18% to $5,774,000 and
were up 7% to $9,981,000 for the six months$4,960,000 due mainly
to sales of our recently introduced PRETZELFILS. Sales of
frozen juices and ices decreased $141,000 or 4%increased 2% to $3,848,000$2,531,000 in the
second quarter and were essentially
unchanged at $6,338,000 in the first half, althoughdue to slightly higher case volume with higher
sales of frozen juicesLUIGI'S Real Italian Ice and ices were down about 12% for the
quarterBARQ'S FLOATZ
offsetting continuing declines in sales of MINUTE MAID and
six months.ICEE products due to a general decline and lost
distribution.
THE RESTAURANT GROUP
Sales of our Restaurant Group decreased 16%29% to
$1,971,000$1,817,000 in the second quarter and 17% to $4,539,000 for
the six month period.first quarter. The sales decreases weredecrease was
caused primarily by decreased mall traffic and the closing
or
licensing of unprofitable stores. During thestores in fiscal year 2004. Sales of stores
open for both year's quarter eight
19
stores were closed or licensed to others, leaving a total
of 38 open at quarter end.down about 1%. Operating
income was impacted during the quarter by approximately
$160,000$285,000 of store closing costs.and related costs for stores
closed in January 2005.
FROZEN BEVERAGES
Frozen beverage and related product sales increased
4%$5,088,000 or 22% to $23,207,000$28,247,000 in the second quarter and decreased $638,000
or 1% to $46,366,000 in the six month period. Excluding the
sale of equipment to one customer in last year's first quarter, sales would have been up about 2% for the six
months.quarter.
Beverage sales alone increased 6%1% to $17,629,000 in$17,575,000 for the
second quarter and 2%primarily due to $35,040,000 in the six months.increased sales of frozen
19
uncarbonated beverage products. Service revenue increased
2%$1,225,000 or 30% from the first quarter of fiscal year
2004 to $3,898,000$5,340,000 in this year's first quarter. Sales of
beverage machines were $3,927,000 higher this year than
last with sales to two customers accounting for more than
half of the increase. Profit margins on sales of machines
were lower than in the secondpast due to competition and the
unusually high volume which put a strain on our cost
structure. Overall profitability in the quarter and 14%was
impacted by higher general costs compared to $8,013,000 for the six months.last year
without corresponding sales volume increases.
CONSOLIDATED
Gross profit as a percentage of sales decreased less
than 1/2 of one percent to 32%
in the current year's three month period from 33% last year
and increased to 32% in the six months period30% from 31% a
year ago.last year. The
decrease inwas caused by the second quarter resulted
primarily from increased sales of bakery products. The
increase in the six months was caused primarily by a lower
level of allowanceslow margin
beverage machines in our retail supermarket business and
reduced depreciationfrozen beverages segment.
Gross profit percentage for the balance of our
frozen beverage dispensing
machines.business was essentially unchanged from last year as
pricing and increases in volume were able to offset general
cost increases.
Total operating expenses increased $3,370,000$4,483,000 in the
secondfirst quarter butand as a percentage of sales remained atwere 27%. For the first half, operating expenses increased
$4,974,000 but as a percentage of sales also remained at
27%. in both
year's quarters. Marketing expenses decreased to 14%13% of
sales from 14% in last year's first quarter. The decrease
was caused primarily by the second quarter from 15% last year andhigher machine sales of the
frozen beverage business which incurred little marketing
expense. Distribution expenses were 14%at 9% of sales in both
years' six month periods.years. Distribution expenses were
8%costs would have increased
approximately 3/4 of one percentage point of sales in all periodsbut for
the higher machine sales of the frozen beverage business.
The increase was due primarily to higher fuel and trucking
costs. Administrative expenses as a percent of sales
declined 2/10 of one percent of sales although they were 5% for all periods.up
16% in dollars primarily due to the acquisition of Country
Home Bakers and higher legal expenses. Other general
expense of $252,000 in this year's quarter included
$285,000 of asset writedowns and costs relating to the
early closing of Restaurant Group stores.
Operating income increased $500,000 or 11%31% to $5,123,000 in the second quarter and $1,469,000 or 23% to
$7,902,000 in the first half.$3,654,000 this year
from $2,779,000 a year ago.
Operating income was impacted by approximately
$800,000$550,000 of higher group medical and liability insurance
costs and commodity unit costs in the first six months of the yearquarter
compared to last year; we
expect these costs to continue to increase for the
foreseeable future. The trend in commodity costs has
overall been moderately unfavorable; although recent sharp
increases in the price of eggs, shortening, butter and
cheese, if sustained, could have a significant impact on
our operating income as long as prices remain at their high
levels. Additionally, flour prices, currently 15-20% above
20
prior year levels, could impact our operating income as
well over the foreseeable future.year.
The effective income tax rate has been estimated at
37%
20
this year; an increase from 36% for all periods reported.in 2004. The increase is
due to a higher level of state taxes.
Net earnings increased $341,000 or 11%36% to $2,482,000 in this
year's first quarter compared to net earnings of $1,825,000
in the current
three month period to $3,342,000 and increased 23% to
$5,167,000 in the six months this year from $4,202,000 last
year.ago period.
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 20032004 annual report on Form 10-K
filed with the SEC.
Item 4. Controls and Procedures
Quarterly evaluation of the Company's Disclosure and
Internal Controls. The Company evaluated (i) the
effectiveness of the design and operation of its
disclosure controls and procedures (the "Disclosure
Controls") as of the end of the period covered by
this Form 10-Q and (ii) any changes in internal
controls over financial reporting that occurred
during the secondfirst quarter of its fiscal year. This
evaluation ("Controls Evaluation") was done under
the supervision and with the participation of
management, including the Chief Executive Officer
("CEO") and Chief Financial Officer ("CFO").
Limitations on the Effectiveness of Controls. A
control system, no matter how well conceived and
operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system
are met. Further, the design of a control system
must reflect the fact that there are resource
constraints, and the benefits of controls must be
considered relative to their costs. Because of the
inherent limitations in all control systems, no
evaluation of controls can provide absolute
assurance that all control issues and instances of
fraud, if any, within the Company have been
detected. Because of the inherent limitations in a
cost effective control system, misstatements due to
21
error or fraud may occur and not be detected. The
Company conducts periodic evaluations of its
internal controls to enhance, where necessary, its
procedures and controls.
21
Conclusions. Based upon the Controls Evaluation,
the CEO and CFO have concluded that the Disclosure
Controls are effective in reaching a reasonable
level of assurance that information required to be
disclosed by the Company in the reports that it
files or submits is recorded, processed, summarized
and reported within the time period specified in the
SEC's rules and forms and that management is timely
alerted to material information relating to the
Company during the period when its periodic reports
are being prepared. However, the CEO and CFO did
become aware of significant deficiencies in our
internal controls in the areas of account
reconciliations and segregation of duties in some of
our disbursements, inventory and purchasing
functions. We believe that these deficiencies did
not affect the accuracy of our financial statements
included in this report. In order to correct these
deficiencies, the Company is continuing to enforce
existing policies and improving segregation of
duties where applicable. Additionally, in accord
with the U.S. Securities and Exchange Commission's
requirements, the CEO and CFO conducted an
evaluation of the Company's internal control over
financial reporting (the "Internal Controls") to
determine whether there have been any changes in
Internal Controls that occurred during the quarter
which have materially affected or which are
reasonablereasonably likely to materially affect Internal
Controls. Based on this evaluation, there have been
no such changes in Internal Controls during the
quarter covered by this report.
22
PART II. OTHER INFORMATION
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, 2004 is as follows:
Absentees
Votes Cast and Broker
For Against Withheld Non Votes
Election of
Leonard Lodish
as Director 7,423,008 - 305,813 -
Election of
Sidney Brown
as Director 7,427,524 - 301,297 -
Proposal to
approve certain
performance-
based compensation
for Gerald B.
Shreiber 6,385,899 323,246 - -
The Company had 8,783,402 shares outstanding on
December 8, 2003 the record date.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
4.4 Second Amendment to the Loan Agreement
dated as of December 4, 2001 by and among
J & J Snack Foods Corp. and Certain of its
Subsidiaries and Citizens Bank of
Pennsylvania, as Agent
31.1 & Certification Pursuant to Section 302 of
31.2 the Sarbanes-Oxley Act of 2002
99.5 Certification Pursuant to the 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
b) ReportReports on Form 8-K - ReportReports on Form 8-K for the
three months ended December 27, 2003 waswere
filed on January 22,November 3, 2004 and December 2, 2004.
23
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: September 9, 2004January 20, 2005 /s/ Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: September 9, 2004January 20, 2005 /s/ Dennis G. Moore
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
24
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Dennis G. Moore, certify that:
1. I have reviewed this report on Form 10-Q of J & J
Snack Foods Corp.;
2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officers and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal controls and
procedures for financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) designed such disclosure controls and
procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure
that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the
period in which this report is being prepared;
b) designed such internal controls and
procedures for financial reporting, or caused such internal
controls over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance
with generally accepted accounting principles;
c) evaluated the effectiveness of the
registrant's disclosure controls and procedures and
presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on
such evaluation; and
d) disclosed in this report any change in the
registrant's internal control over financial reporting that
occurred during the registrant's secondfirst fiscal quarter that
has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officers and I
have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the
registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies and material
weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that
involves management or other employees who have a
significant role in the registrant's internal controls over
financial reporting.
Date: September 9, 2004January 20, 2005
/s/ Dennis G. Moore
Dennis G. Moore
Chief Financial Officer
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Gerald B. Shreiber, certify that:
1. I have reviewed this report on Form 10-Q of J & J
Snack Foods Corp.;
2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officers and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal controls and
procedures for financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) designed such disclosure controls and
procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure
that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the
period in which this report is being prepared;
b) designed such internal controls and
procedures for financial reporting, or caused such internal
controls over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance
with generally accepted accounting principles;
c) evaluated the effectiveness of the
registrant's disclosure controls and procedures and
presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on
such evaluation; and
d) disclosed in this report any change in the
registrant's internal control over financial reporting that
occurred during the registrant's secondfirst fiscal quarter that
has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officers and I
have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the
registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies and material
weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that
involves management or other employees who have a
significant role in the registrant's internal controls over
financial reporting.
Date: September 9, 2004January 20, 2005
/s/ Gerald B. Shreiber
Gerald B. Shreiber
Chief Executive Officer
Exhibit 99.5
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (Section 1350 of Chapter 63 of Title 18 of the United
States Code), each of the undersigned officers of J & J
Snack Foods Corp. (the "Company"), does hereby certify with
respect to the Quarterly Report of the Company on Form 10-Q
for the quarter ended March 27,December 25, 2004 (the "Report")
that:
(1) The Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the
Company.
Dated: September 9, 2004January 20, 2005
/s/ Dennis G. Moore
Dennis G. Moore
Chief Financial Officer
Dated: September 9, 2004January 20, 2005
/s/ Gerald B. Shreiber
Gerald B. Shreiber
Chief Executive Officer
The foregoing certification is being furnished solely
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Section 1350 of Chapter 63 of Title 18 of the United
States Code) and is not being filed as part of the Report
or as a separate disclosure document.