These acquisitions were accounted for under the purchase method of accounting, and their operations are included in the accompanying consolidated financial statements from their respective acquisition dates.
Although there are many factors that could impact our operating cash flow, most notably net earnings, we believe that our future operating cash flow, along with our borrowing capacity, our current cash and cash equivalent balances and our investment securities is sufficient to fund future growth and expansion. See Note C to these financial statements for a discussion of our investment securities.
Fluctuations in the value of the Mexican and Canadian currencies and the resulting translation of the net assets of our Mexican and Canadian subsidiaries caused a decrease of $577,000 in accumulated other comprehensive loss in 2010 and an increase of $1,428,000 in 2009 and a decrease of $3,000 in 2008. In 2010, sales of the two subsidiaries were $14,301,000 as compared to $11,658,000 in 2009 and $11,078,000 in 2008.
In our fiscal year ended September 25, 2010, we purchased and retired 203,507 shares of our common stock at a cost of $7,768,000 under a million share buyback authorization approved by the Company’s Board of Directors in February 2008. 49,804 shares were purchased in the fourth quarter of 2010 at a cost of $1,874,000. There remains 210,772 shares that can be purchased under the existing authorization.
In our fiscal year ended September 26, 2009, we purchased and retired 450,597 shares of our common stock at a cost of $12,510,000. Of the shares purchased and retired in 2009, 400,000 shares were purchased at the purchase price of $27.90 per share from Gerald B. Shreiber, Chairman of the Board, Chief Executive Officer and Director of the Company.
In our 2008 fiscal year ended September 27, 2008, we purchased and retired 135,124 shares of our common stock at a cost of $3,539,000.
In December 2006, we entered into an amended and restated loan agreement with our existing banks which provides for up to a $50,000,000 revolving credit facility repayable in December 2011. The agreement contains restrictive covenants and requires commitment fees in accordance with standard banking practice. There were no outstanding balances under the facility at September 25, 2010 and September 26, 2009. The significant financial covenants are:
We were in compliance with the financial covenants described above at September 25, 2010.
We self-insure, up to loss limits, certain insurable risks such as worker’s compensation and automobile liability claims. Accruals for claims under our self-insurance program are recorded on a claims-incurred basis. Under this program, the estimated liability for claims incurred but unpaid in fiscal years 2010 and 2009 was $2,200,000 and $2,300,000, respectively. In connection with certain self-insurance agreements, we customarily enter into letters of credit arrangements with our insurers. At September 25, 2010 and September 26, 2009, we had outstanding letters of credit totaling $8,175,000 and $8,675,000, respectively.
The following table presents our contractual cash flow commitments on long-term debt, operating leases and purchase commitments for raw materials and packaging. See Notes to the consolidated financial statements for additional information on our long-term debt and operating leases.
| | | | Payments Due by Period
(in thousands)
| |
|---|
| | | | Total
| | Less
Than
1 Year
| | 1–3
Years
| | 4–5
Years
| | After
5 Years
|
|---|
Long-term debt,
including current maturities | | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Capitalized lease obligations | | | | | 863 | | | | 244 | | | | 491 | | | | 128 | | | | — | |
| Purchase commitments | | | | | 44,000 | | | | 44,000 | | | | — | | | | — | | | | — | |
| Operating leases | | | | | 52,272 | | | | 8,913 | | | | 12,892 | | | | 8,134 | | | | 22,333 | |
| Total | | | | $ | 97,135 | | | $ | 53,157 | | | $ | 13,383 | | | $ | 8,262 | | | $ | 22,333 | |
The purchase commitments do not exceed our projected requirements over the related terms and are in the normal course of business.
Fiscal 2010 Compared to Fiscal 2009
Cash and cash equivalents and marketable securities held to maturity decreased $2,544,000, or 2%, to $116,446,000 from a year ago.
Trade receivables increased $8,449,000, or 14%, to $68,183,000 in 2010 due primarily to increased sales levels in our fourth quarter. Inventories increased $4,626,000 or 10% to $50,630,000 in 2010 due to increased sales levels and an increase in equipment parts needed to support our frozen beverage business.
Prepaid expenses and other increased to $6,067,000 from $1,910,000 last year because of estimated federal income tax payments made prior to the enactment of the law extending bonus depreciation.
Net property, plant and equipment increased $12,919,000 to $110,092,000 because purchases of fixed assets for the improvement and expansion of our manufacturing capabilities and frozen carbonated beverage business exceeded depreciation on existing assets, and because of the addition of $3,508,000 in fixed assets acquired in acquisitions and the purchase of a distribution freezer warehouse building which had previously been leased, for a purchase price of $5,794,000.
Other intangible assets, less accumulated amortization increased $6,159,000 to $55,284,000 due to intangible assets of $10,846,000 acquired in acquisitions net of amortization of $4,687,000.
Goodwill increased $9,756,000 to $70,070,000 from September 26, 2009 to September 25, 2010 as a result of the acquisition of California Churros.
Accounts payable and accrued liabilities increased $2,484,000 due to increased levels of business.
Accrued compensation expense increased 5% to $12,244,000 due to an increase in our employee base, a general increase in the level of pay rates and higher bonuses due to be paid.
Deferred income tax liabilities increased by $3,368,000 to $30,401,000 which related primarily to amortization of goodwill and other intangible assets and depreciation of property, plant and equipment.
Other long-term liabilities at September 25, 2010 include $1,249,000 of gross unrecognized tax benefits which decreased from $1,895,000 a year ago due to reductions for tax positions of prior years.
Common stock decreased $3,324,000 to $38,453,000 in 2010 because increases totalling $4,444,000 from the exercise of incentive and nonqualified stock options, stock issued under our stock purchase plan for employees, stock issued under our deferred stock plan and share-based compensation expense were less than the repurchase of common stock of $7,768,000 by $3,324,000.
Net cash provided by operating activities decreased $12,625,000 to $68,008,000 in 2010 primarily because of increases in accounts receivable, inventories and prepaid expenses and other of $8,629,000, $4,422,000 and
21
$4,101,000, respectively, compared to decreases in accounts receivable, inventories and prepaid expenses and other in 2009 of $1,144,000, $2,993,000 and $37,000, respectively. The net change in accounts receivable and inventories of $21,326,000 was partially offset by higher net earnings of $7,097,000 and higher depreciation and amortization of fixed assets of $1,835,000.
Net cash used in investing activities decreased $6,370,000 to $41,455,000 in 2010 from $47,825,000 in 2009 primarily because of increased proceeds from marketable securities, net of purchases, which netted $16,866,000 compared to net purchases of marketable securities of $20,976,000 in 2009; which were partially offset by payments for purchases of companies, net of cash acquired in 2010, of $25,185,000 and by increased purchases of property, plant and equipment of $6,341,000 in 2010 compared to 2009.
Net cash used in financing activities of $12,609,000 in 2010 compared to net cash used by financing activities of $15,740,000 in 2009. The decrease was caused by a decrease of $4,742,000 in payments to repurchase common stock.
In 2010, the major variables in determining our net increase in cash and cash equivalents and marketable securities were our net earnings, depreciation and amortization of fixed assets, purchases of property, plant and equipment, purchases of companies, payments of cash dividend and the repurchase of common stock. Other variables which in the past have had a significant impact on our change in cash and cash equivalents are proceeds from borrowings and payments of long-term debt. As discussed in results of operations, our net earnings may be influenced by many factors. Depreciation and amortization of fixed assets is primarily determined by past purchases of property, plant and equipment although it could be impacted by a significant acquisition. Purchases of property, plant and equipment are primarily determined by our ongoing normal manufacturing and marketing requirements but could be increased significantly for manufacturing expansion requirements or large frozen beverage customer needs. From time to time, we have repurchased common stock and we anticipate that we will do so again in the future. We are actively seeking acquisitions that could be a significant use of cash. Although the balance of our long-term debt is $0 at September 25, 2010, we may borrow in the future depending on our needs.
Fiscal 2009 Compared to Fiscal 2008
Cash and cash equivalents and marketable securities held to maturity net of a decline in auction market preferred stock increased $37,055,000, or 45%, to $118,990,000 from a year ago primarily because net cash provided by operating activities of $80,633,000 was more than cash used for purchases of property, plant and equipment by $53,443,000, which was partially offset by cash used in financing activities of $15,740,000.
Trade receivables decreased $1,442,000, or 2%, to $59,734,000 in 2009 due primarily to better management of receivables. Inventories decreased $3,091,000 or 6% to $46,004,000 in 2009 due to lower unit costs of inventories, improved management and timing.
Net property, plant and equipment increased $4,109,000 to $97,173,000 because purchases of fixed assets for the improvement and expansion of our manufacturing capabilities and frozen carbonated beverage business exceeded depreciation on existing assets.
Other intangible assets, less accumulated amortization decreased $4,508,000 to $49,125,000 due completely to amortization.
Goodwill was unchanged at $60,314,000 from September 27, 2008 to September 26, 2009.
Accounts payable and accrued liabilities decreased $14,000.
Accrued compensation expense increased 14% to $11,656,000 due to an increase in our employee base, a general increase in the level of pay rates and higher bonuses due to be paid.
Deferred income tax liabilities increased by $3,977,000 to $27,033,000 which related primarily to amortization of goodwill and other intangible assets and depreciation of property, plant and equipment.
Other long-term liabilities at September 26, 2009 include $1,895,000 of gross unrecognized tax benefits.
22
Common stock decreased $6,638,000 to $41,777,000 in 2009 because increases totalling $4,923,000 from the exercise of incentive and nonqualified stock options, stock issued under our stock purchase plan for employees and share-based compensation expense were less than the repurchase of common stock of $12,510,000 by $6,638,000.
Net cash provided by operating activities increased $25,736,000 to $80,633,000 in 2009 primarily because of the increase to net earnings of $13,404,000 and decreases in accounts receivable, inventories and prepaid expenses totalling $4,174,000 compared to increases in those assets totalling $7,686,000 last year.
Net cash used in investing activities increased $28,971,000 to $47,825,000 in 2009 from $18,854,000 in 2008 primarily because of increased purchases of marketable securities, net of proceeds.
Net cash used in financing activities of $15,740,000 in 2009 compared to net cash used by financing activities of $7,600,000 in 2008. The increase was caused primarily by an increase of $8,971,000 in payments to repurchase common stock.
In 2009, the major variables in determining our net increase in cash and cash equivalents and marketable securities were our net earnings, depreciation and amortization of fixed assets, purchases of property, plant and equipment and the repurchase of common stock. Other variables which in the past have had a significant impact on our change in cash and cash equivalents are payments for the purchase of companies, proceeds from borrowings and payments of long-term debt. As discussed in results of operations, our net earnings may be influenced by many factors. Depreciation and amortization of fixed assets is primarily determined by past purchases of property, plant and equipment although it could be impacted by a significant acquisition. Purchases of property, plant and equipment are primarily determined by our ongoing normal manufacturing and marketing requirements but could be increased significantly for manufacturing expansion requirements or large frozen beverage customer needs. From time to time, we have repurchased common stock and we anticipate that we will do so again in the future. We are actively seeking acquisitions that could be a significant use of cash. Although the balance of our long-term debt is $0 at September 26, 2009, we may borrow in the future depending on our needs.
Item 7A.Quantitative And Qualitative Disclosures About Market Risk
The following is the Company’s quantitative and qualitative analysis of its financial market risk:
Interest Rate Sensitivity
The Company has in the past entered into interest rate swaps to limit its exposure to interest rate risk and may do so in the future if the Board of Directors feels that such non-trading purpose is in the best interest of the Company and its shareholders. As of September 25, 2010, the Company had no interest rate swap contracts.
Interest Rate Risk
At September 25, 2010, the Company had no long-term debt obligations.
Purchasing Risk
The Company’s most significant raw material requirements include flour, shortening, corn syrup, sugar, juice, cheese, chocolate, and a variety of nuts. The Company attempts to minimize the effect of future price fluctuations related to the purchase of raw materials primarily through forward purchasing to cover future manufacturing requirements, generally for periods from 1 to 12 months. Future contracts are not used in combination with forward purchasing of these raw materials. The Company’s procurement practices are intended to reduce the risk of future price increases, but also may potentially limit the ability to benefit from possible price decreases.
Foreign Exchange Rate Risk
The Company has not entered into any forward exchange contracts to hedge its foreign currency rate risk as of September 25, 2010 because it does not believe its foreign exchange exposure is significant.
Item 8.Financial Statements And Supplementary Data
The financial statements of the Company are filed under this Item 8, beginning on page F-1 of this report.
23
Item 9.Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
None.
Item 9A.Controls And Procedures
Disclosure Controls and Procedures
We carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended for financial reporting, as of September 25, 2010. Based on that evaluation, our chief executive officer and chief financial officer concluded that these controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported as specified in Securities and Exchange Commission rules and forms. There were no changes in these controls or procedures identified in connection with the evaluation of such controls or procedures that occurred during our last fiscal quarter, or in other factors that have materially affected, or are reasonably likely to materially affect these controls or procedures. There were no changes in the Company’s internal controls over financial reporting that occurred during our last fiscal quarter.
Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. These disclosure controls and procedures include, among other things, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the chief executive officer and chief financial officer and effected by the board of directors and management 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 and includes those policies and procedures that:
| • | | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
| • | | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and board of directors; |
| • | | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of September 25, 2010. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on our assessment, our management believes that, as of September 25, 2010, our internal control over financial reporting is effective. There have been no changes that occurred during our fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
24
Our independent registered public accounting firm, Grant Thornton LLP, audited our internal control over financial reporting as of September 25, 2010. Their report, dated December 7, 2010, expressed an unqualified opinion on our internal control over financial reporting. That report appears in Item 15 of Part IV of this Annual Report on Form 10-K and is incorporated by reference to this Item 9A.
Item 9B.Other Information
There was no information required on Form 8-K during the quarter that was not reported.
PART III
Item 10.Directors, Executive Officers and Corporate Governance
Portions of the information concerning directors and executive officers, appearing under the captions “Information Concerning Nominees For Election To Board” and “Information Concerning Continuing Directors And Executive Officers” and information concerning Section 16(a) Compliance appearing under the caption “Compliance with Section 16(a) of the Securities Exchange Act of 1934” in the Company’s Proxy Statement filed with the Securities and Exchange Commission in connection with the Annual Meeting of Shareholders to be held on February 9, 2011 (“2010 Proxy Statement”) is incorporated herein by reference.
Portions of the information concerning the Audit Committee, the requirement for an Audit Committee Financial Expert and the Nominating Committee in the Company’s 2010 Proxy Statement filed with the Securities and Exchange Commission in connection with the Annual Meeting of Shareholders to be held on February 9, 2011, is incorporated herein by reference.
The Company has adopted a Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act of 2002, which applies to the Company’s principal executive officer and senior financial officers. The Company has also adopted a Code of Business Conduct and Ethics which applies to all employees. The Company will furnish any person, without charge, a copy of the Code of Ethics upon written request to J & J Snack Foods Corp., 6000 Central Highway, Pennsauken, New Jersey 08109, Attn: Dennis Moore. A copy of the Code of Ethics can also be found on our website atwww.jjsnack.com. Any waiver of any provision of the Code of Ethics granted to the principal executive officer or senior financial officer may only be granted by a majority of the Company’s disinterested directors. If a waiver is granted, information concerning the waiver will be posted on our websitewww.jjsnack.com for a period of 12 months.
Item 11.Executive Compensation
Information concerning executive compensation appearing in the Company’s 2010 Proxy Statement under the caption “Management Remuneration” is incorporated herein by reference.
The following is a list of the executive officers of the Company and their principal past occupations or employment. All such persons serve at the pleasure of the Board of Directors and have been elected to serve until the Annual Meeting of Shareholders on February 9, 2011 or until their successors are duly elected.
Name
| | | | Age
| | Position
|
|---|
| Gerald B. Shreiber | | | | | 69 | | | Chairman of the Board, President, Chief Executive Officer and Director |
| Dennis G. Moore | | | | | 55 | | | Senior Vice President, Chief Financial Officer, Secretary, Treasurer and Director |
| Robert M. Radano | | | | | 61 | | | Senior Vice President, Sales and Chief Operating Officer |
| Dan Fachner | | | | | 50 | | | President of The ICEE Company Subsidiary |
| Gerard G. Law | | | | | 36 | | | Senior Vice President, Western Operations |
| Robert J. Pape | | | | | 53 | | | Senior Vice President, Sales and Marketing |
25
Gerald B. Shreiber is the founder of the Company and has served as its Chairman of the Board, President, and Chief Executive Officer since its inception in 1971. His term as a director expires in 2015.
Dennis G. Moore joined the Company in 1984. He served in various controllership functions prior to becoming the Chief Financial Officer in June 1992. His term as a director expires in 2012.
Robert M. Radano joined the Company in 1972 and in May 1996 was named Chief Operating Officer of the Company. Prior to becoming Chief Operating Officer, he was Senior Vice President, Sales responsible for national food service sales of J & J.
Dan Fachner has been an employee of ICEE-USA Corp., which was acquired by the Company in May 1987, since 1979. He was named Senior Vice President of The ICEE Company in April 1994 and became President in May 1997.
Gerard G. Law joined the Company in 1992. He served in various manufacturing and sales management capacities prior to becoming Senior Vice President, Western Operations in 2009.
Robert J. Pape joined the Company in 1998. He served in various sales and sales management capacities prior to becoming Senior Vice President, Sales and Marketing in 2010.
Item 12. | | Security Ownership Of Certain Beneficial Owners And Management And Related
Stockholder Matters |
Information concerning the security ownership of certain beneficial owners and management appearing in the Company’s 2010 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management” is incorporated herein by reference.
The following table details information regarding the Company’s existing equity compensation plans as of September 25, 2010.
| | | | (a) | | (b) | | (c) |
|---|
Plan Category
| | | | Number of
securities to
be issued upon
exercise of
outstanding
options, warrants
and rights
| | Weighted-average
exercise price
of outstanding
options, warrants
and rights
| | Number of
securities remaining
available for future
issuance under
equity compensation
plans (excluding
securities reflected
in column (a))
|
|---|
Equity compensation plans approved
by security holders | | | | | 672,000 | | | $ | 28.22 | | | | 1,207,000 | |
Equity compensation plans not approved
by security holders | | | | | — | | | | — | | | | — | |
| Total | | | | | 672,000 | | | $ | 28.22 | | | | 1,207,000 | |
Item 13.Certain Relationships And Related Transactions, and Director Independence
Information concerning the Certain Relationships and Related Transactions, and Director Independence in the Company’s 2010 Proxy Statement is incorporated herein by reference.
Item 14.Principal Accounting Fees And Services
Information concerning the Principal Accountant Fees and Services in the Company’s 2010 Proxy Statement is incorporated herein by reference.
PART IV
Item 15.Exhibits, Financial Statement Schedules
| (a) | | The following documents are filed as part of this Report: |
26
The financial statements filed as part of this report are listed on the Index to Consolidated Financial Statements and Financial Statements Schedule on page F-1.
| (2) | | Financial Statement Schedule — Page S-1 |
Schedule II — Valuation and Qualifying Accounts
All other schedules are omitted either because they are not applicable or because the information required is contained in the financial statements or notes thereto.
| 3.1 | | Amended and Restated Certificate of Incorporation filed February 28, 1990 (Incorporated by reference from the Company’s Form 10-Q dated May 4, 1990). |
| 3.2 | | Revised Bylaws adopted May 17, 2006 (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006). |
| 4.3 | | Amended and Restated Loan Agreement dated December 1, 2006 by and among J & J Snack Foods Corp. and Certain of its Subsidiaries and Citizens Bank of Pennsylvania, as Agent (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006). |
| 10.1 | | Proprietary Exclusive Manufacturing Agreement dated July 17, 1984 between J & J Snack Foods Corp. and Wisco Industries, Inc. (Incorporated by reference from the Company’s Form S-1 dated February 4, 1986, file no. 33-2296). |
| 10.2* | | J & J Snack Foods Corp. Stock Option Plan (Incorporated by reference from the Company’s Definitive Proxy Statement dated December 19, 2002). |
| 10.3* | | Adoption Agreement for MFS Retirement Services, Inc. Non-Standardized 401(K) Profit Sharing Plan and Trust, effective September 1, 2004 (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006). |
| 10.4* | | J & J Snack Foods Corp. Directors’ and Consultants’ Deferred Compensation Plan adopted November 21, 2005 (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006). |
| 10.7 | | Lease dated August 29, 1995 between J & J Snack Foods Corp. and 5353 Downey Associated Ltd. for the lease of the Vernon, CA facility (Incorporated by reference from the Company’s Form 10-K dated December 21, 1995). |
| 10.8* | | J & J Snack Foods Corp. Employee Stock Purchase Plan (Incorporated by reference from the Company’s Form S-8 dated May 16, 1996). |
| 10.11 | | Amendment No. 1 to Lease dated August 29, 1995 between J & J Snack Foods Corp. and 5353 Downey Associated Ltd. for the lease of the Vernon, CA facility (Incorporated by reference from the Company’s Form 10-K dated December 18, 2002). |
| 10.14 | | Leases and amendments to leases between Liberty Venture I, LP and J & J Snack Foods Corp. for the three buildings located in Bridgeport, New Jersey (Incorporated by reference from the Company’s Form 10-K dated December 8, 2009). |
| 10.15** | | Amendment No. 2 to Lease dated August 29, 1995 between J & J Snack Foods Corp. and 5353 Downey Associated Ltd. for the lease of the Vernon, CA facility. |
| 10.16** | | Amendment to Lease dated January 1, 1996 between Country Home Bakers, LLC and Borck Associates Limited Partnership for the lease of the Atlanta, GA facility. |
| 14.1 | | Code of Ethics Pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 (Incorporated by reference from the Company’s 10-Q dated July 20, 2004). |
| 21.1** | | Subsidiaries of J & J Snack Foods Corp. |
27
| 23.1** | | Consent of Independent Registered Public Accounting Firm. |
| 31.1** | | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2** | | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1** | | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002. |
| 32.2** | | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002. |
| * | | Compensatory Plan |
| ** | | Filed Herewith |
28
SIGNATURES
Pursuant to the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | J & J SNACK FOODS CORP. |
| |
| December 7, 2010 | | | | By | | /s/ Gerald B. Shreiber |
| | | | | | | Gerald B. Shreiber,
Chairman of the Board,
President, Chief Executive
Officer and Director
(Principal Executive Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| December 7, 2010 | | | | | | /s/ Gerald B. Shreiber |
| | | | | | | Gerald B. Shreiber,
Chairman of the Board,
President, Chief Executive
Officer and Director
(Principal Executive Officer) |
| |
| December 7, 2010 | | | | | | /s/ Dennis G. Moore |
| | | | | | | Dennis G. Moore, Senior Vice
President, Chief Financial
Officer and Director
(Principal Financial Officer)
(Principal Accounting Officer) |
| |
| December 7, 2010 | | | | | | /s/ Sidney R. Brown |
| | | | | | | Sidney R. Brown, Director |
| |
| December 7, 2010 | | | | | | /s/ Peter G. Stanley |
| | | | | | | Peter G. Stanley, Director |
| |
| December 7, 2010 | | | | | | /s/ Leonard M. Lodish |
| | | | | | | Leonard M. Lodish, Director |
29
J & J SNACK FOODS CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Financial Statements:
| | | | | | |
| Report of Independent Registered Public Accounting Firm | | | | | F-2 | |
| Consolidated Balance Sheets as of September 25, 2010 and September 26, 2009 | | | | | F-3 | |
| Consolidated Statements of Earnings for fiscal years ended September 25, 2010, September 26, 2009 and September 27, 2008 | | | | | F-4 | |
| Consolidated Statement of Changes in Stockholders’ Equity for the fiscal years ended September 25, 2010, September 26, 2009 and September 27, 2008 | | | | | F-5 | |
| Consolidated Statements of Cash Flows for fiscal years ended September 25, 2010, September 26, 2009 and September 27, 2008 | | | | | F-6 | |
| Notes to Consolidated Financial Statements | | | | | F-7 | |
Financial Statement Schedule:
| | | | | | |
| Schedule II — Valuation and Qualifying Accounts | | | | | S-1 | |
F-1
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
J & J Snack Foods Corp. and Subsidiaries
We have audited the accompanying consolidated balance sheets of J & J Snack Foods Corp. and Subsidiaries as of September 25, 2010 and September 26, 2009, and the related consolidated statements of earnings, changes in stockholders’ equity, and cash flows for each of the three fiscal years in the period ended September 25, 2010 (52 weeks, 52 weeks, and 52 weeks, respectively). Our audits of the basic financial statements included the financial statement schedule listed in the index appearing under Item 15. We have also audited J & J Snack Foods Corp. and Subsidiaries’ internal control over financial reporting as of September 25, 2010, based on criteria established inInternal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). J & J Snack Foods Corp. and Subsidiaries’ management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and financial statement schedule and an opinion on J & J Snack Foods Corp. and Subsidiaries’ internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of J & J Snack Foods Corp. and Subsidiaries as of September 25, 2010 and September 26, 2009, and the consolidated results of its operations and its consolidated cash flows for each of the three fiscal years in the period ended September 25, 2010 (52 weeks, 52 weeks and 52 weeks) in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. In our opinion, J & J Snack Foods Corp. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of September 25, 2010, based on criteria established inInternal Control-Integrated Framework issued by COSO.
Philadelphia, Pennsylvania
December 7, 2010
F-2
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | | September 25,
2010
| | September 26,
2009
|
|---|
| | | | (in thousands, except share amounts) | |
|---|
Assets
| | | | | | | | | | |
Current Assets
| | | | | | | | | | |
| Cash and cash equivalents | | | | $ | 74,665 | | | $ | 60,343 | |
| Marketable securities held to maturity | | | | | 15,481 | | | | 38,653 | |
Receivables
| | | | | | | | | | |
| Trade, less allowances of $591 and $623, respectively | | | | | 68,183 | | | | 59,734 | |
| Other | | | | | 1,692 | | | | 808 | |
| Inventories | | | | | 50,630 | | | | 46,004 | |
| Prepaid expenses and other | | | | | 6,067 | | | | 1,910 | |
| Deferred income taxes | | | | | 3,813 | | | | 3,659 | |
| Total current assets | | | | | 220,531 | | | | 211,111 | |
| |
| Property, Plant and Equipment, at cost | | | | | 414,403 | | | | 383,156 | |
| Less accumulated depreciation and amortization | | | | | 304,311 | | | | 285,983 | |
| | | | | | 110,092 | | | | 97,173 | |
| |
Other Assets
| | | | | | | | | | |
| Goodwill | | | | | 70,070 | | | | 60,314 | |
| Other intangible assets, net | | | | | 55,284 | | | | 49,125 | |
| Marketable securities held to maturity | | | | | 26,300 | | | | 19,994 | |
| Other | | | | | 1,717 | | | | 2,110 | |
| | | | | | 153,371 | | | | 131,543 | |
| | | | | $ | 483,994 | | | $ | 439,827 | |
| |
Liabilities and Stockholders’ Equity
| | | | | | | | | | |
Current Liabilities
| | | | | | | | | | |
| Current obligations under capital leases | | | | $ | 244 | | | $ | 96 | |
| Accounts payable | | | | | 52,338 | | | | 48,204 | |
| Accrued liabilities | | | | | 4,269 | | | | 5,919 | |
| Accrued compensation expense | | | | | 12,244 | | | | 11,656 | |
| Dividends payable | | | | | 1,986 | | | | 1,804 | |
| Total current liabilities | | | | | 71,081 | | | | 67,679 | |
| |
| Long-term obligations under capital leases | | | | | 619 | | | | 285 | |
| Deferred income taxes | | | | | 30,401 | | | | 27,033 | |
| Other long-term liabilities | | | | | 1,318 | | | | 1,986 | |
| |
Stockholders’ Equity
| | | | | | | | | | |
| Preferred stock, $1 par value; authorized, 10,000,000 shares; none issued | | | | | — | | | | — | |
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding
18,491,000 and 18,526,000 respectively | | | | | 38,453 | | | | 41,777 | |
| Accumulated other comprehensive loss | | | | | (2,854 | ) | | | (3,431 | ) |
| Retained earnings | | | | | 344,976 | | | | 304,498 | |
| | | | | | 380,575 | | | | 342,844 | |
| | | | | $ | 483,994 | | | $ | 439,827 | |
The accompanying notes are an integral part of these statements.
F-3
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share information)
| | | | Fiscal year ended
| |
|---|
| | | | September 25,
2010
(52 weeks)
| | September 26,
2009
(52 weeks)
| | September 27,
2008
(52 weeks)
|
|---|
| Net Sales | | | | $ | 696,703 | | | $ | 653,047 | | | $ | 629,359 | |
| Cost of goods sold(1) | | | | | 468,923 | | | | 444,203 | | | | 442,452 | |
| Gross profit | | | | | 227,780 | | | | 208,844 | | | | 186,907 | |
Operating expenses
| | | | | | | | | | | | | | |
| Marketing(2) | | | | | 72,103 | | | | 69,493 | | | | 69,792 | |
| Distribution(3) | | | | | 52,146 | | | | 49,705 | | | | 52,609 | |
| Administrative(4) | | | | | 24,282 | | | | 22,713 | | | | 21,545 | |
| Other general expense (income) | | | | | 2,087 | | | | (5 | ) | | | (375 | ) |
| | | | | | 150,618 | | | | 141,906 | | | | 143,571 | |
| Operating income | | | | | 77,162 | | | | 66,938 | | | | 43,336 | |
| |
Other income (expenses)
| | | | | | | | | | | | | | |
| Investment income | | | | | 1,114 | | | | 1,386 | | | | 2,665 | |
| Interest expense and other | | | | | (179 | ) | | | (115 | ) | | | (116 | ) |
| | | | | | 935 | | | | 1,271 | | | | 2,549 | |
| |
| Earnings before income taxes | | | | | 78,097 | | | | 68,209 | | | | 45,885 | |
| |
| Income taxes | | | | | 29,688 | | | | 26,897 | | | | 17,977 | |
| |
| NET EARNINGS | | | | $ | 48,409 | | | $ | 41,312 | | | $ | 27,908 | |
| |
| Earnings per diluted share | | | | $ | 2.59 | | | $ | 2.21 | | | $ | 1.47 | |
| |
| Weighted average number of diluted shares | | | | | 18,703 | | | | 18,713 | | | | 19,008 | |
| |
| Earnings per basic share | | | | $ | 2.61 | | | $ | 2.23 | | | $ | 1.49 | |
| |
| Weighted average number of basic shares | | | | | 18,528 | | | | 18,516 | | | | 18,770 | |
| (1) | | Includes share-based compensation expense of $182 for the year ended September 25, 2010, $211 for the year ended September 26, 2009 and $229 for the year ended September 27, 2008. |
| (2) | | Includes share-based compensation expense of $448 for the year ended September 25, 2010, $729 for the year ended September 26, 2009 and $799 for the year ended September 27, 2008. |
| (3) | | Includes share-based compensation expense of $21 for the year ended September 25, 2010, $21 for the year ended September 26, 2009 and $23 for the year ended September 27, 2008. |
| (4) | | Includes share-based compensation expense of $597 for the year ended September 25, 2010, $755 for the year ended September 26, 2009 and $800 for the year ended September 27, 2008. |
The accompanying notes are an integral part of these statements.
F-4
J & J Snack Foods Corp. and Subsidiaries
Consolidated Statement of Changes in Stockholders’ Equity
(in thousands)
| | | | Common Stock
| |
|---|
| | | | Shares
| | Amount
| | Accumulated
Other
Comprehensive
Loss
| | Retained
Earnings
| | Total
| | Comprehensive
Income
|
|---|
| Balance at September 30, 2007 | | | | | 18,702 | | | $ | 47,280 | | | $ | (2,006 | ) | | $ | 250,308 | | | $ | 295,582 | | | | | |
| Cumulative effective of change in accounting for income taxes | | | | | — | | | | — | | | | — | | | | (925 | ) | | | (925 | ) | | | | |
| Issuance of common stock upon exercise of stock options | | | | | 150 | | | | 2,029 | | | | — | | | | — | | | | 2,029 | | | | | |
| Issuance of common stock for employee stock purchase plan | | | | | 31 | | | | 782 | | | | — | | | | — | | | | 782 | | | | | |
| Foreign currency translation adjustment | | | | | — | | | | — | | | | 3 | | | | — | | | | 3 | | | $ | 3 | |
| Issuance of common stock under deferred stock plan | | | | | — | | | | 388 | | | | — | | | | — | | | | 388 | | | | | |
| Dividends declared | | | | | — | | | | — | | | | — | | | | (6,925 | ) | | | (6,925 | ) | | | | |
| Share-based compensation | | | | | — | | | | 1,475 | | | | — | | | | — | | | | 1,475 | | | | | |
| Repurchase of common stock | | | | | (135 | ) | | | (3,539 | ) | | | — | | | | — | | | | (3,539 | ) | | | | |
| Net earnings | | | | | — | | | | — | | | | — | | | | 27,908 | | | | 27,908 | | | | 27,908 | |
| Comprehensive income | | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | 27,911 | |
| Balance at September 27, 2008 | | | | | 18,748 | | | $ | 48,415 | | | $ | (2,003 | ) | | $ | 270,366 | | | $ | 316,778 | | | | | |
| Issuance of common stock upon exercise of stock options | | | | | 198 | | | | 3,284 | | | | — | | | | — | | | | 3,284 | | | | | |
| Issuance of common stock for employee stock purchase plan | | | | | 26 | | | | 687 | | | | — | | | | — | | | | 687 | | | | | |
| Foreign currency translation adjustment | | | | | — | | | | — | | | | (1,428 | ) | | | — | | | | (1,428 | ) | | $ | (1,428 | ) |
| Issuance of common stock under deferred stock plan | | | | | 5 | | | | 368 | | | | — | | | | — | | | | 368 | | | | | |
| Dividends declared | | | | | — | | | | — | | | | — | | | | (7,180 | ) | | | (7,180 | ) | | | | |
| Share-based compensation | | | | | — | | | | 1,533 | | | | — | | | | — | | | | 1,533 | | | | | |
| Repurchase of common stock | | | | | (451 | ) | | | (12,510 | ) | | | — | | | | — | | | | (12,510 | ) | | | | |
| Net earnings | | | | | — | | | | — | | | | — | | | | 41,312 | | | | 41,312 | | | | 41,312 | |
| Comprehensive income | | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | 39,884 | |
| Balance at September 26, 2009 | | | | | 18,526 | | | $ | 41,777 | | | $ | (3,431 | ) | | $ | 304,498 | | | $ | 342,844 | | | | | |
| Issuance of common stock upon exercise of stock options | | | | | 142 | | | | 2,325 | | | | — | | | | — | | | | 2,325 | | | | | |
| Issuance of common stock for employee stock purchase plan | | | | | 22 | | | | 726 | | | | — | | | | — | | | | 726 | | | | | |
| Foreign currency translation adjustment | | | | | — | | | | — | | | | 577 | | | | — | | | | 577 | | | $ | 577 | |
| Issuance of common stock under deferred stock plan | | | | | 5 | | | | 280 | | | | — | | | | — | | | | 280 | | | | | |
| Dividends declared | | | | | — | | | | — | | | | — | | | | (7,931 | ) | | | (7,931 | ) | | | | |
| Share-based compensation | | | | | — | | | | 1,113 | | | | — | | | | — | | | | 1,113 | | | | | |
| Repurchase of common stock | | | | | (204 | ) | | | (7,768 | ) | | | — | | | | — | | | | (7,768 | ) | | | | |
| Net earnings | | | | | — | | | | — | | | | — | | | | 48,409 | | | | 48,409 | | | | 48,409 | |
| Comprehensive income | | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | 48,986 | |
| Balance at September 25, 2010 | | | | | 18,491 | | | $ | 38,453 | | | $ | (2,854 | ) | | $ | 344,976 | | | $ | 380,575 | | | | | |
The accompanying notes are an integral part of these statements.
F-5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| | | | Fiscal year ended
| |
|---|
| | | | September 25,
2010
(52 weeks)
| | September 26,
2009
(52 weeks)
| | September 27,
2008
(52 weeks)
|
|---|
Operating activities:
| | | | | | | | | | | | | | |
| Net earnings | | | | $ | 48,409 | | | $ | 41,312 | | | $ | 27,908 | |
Adjustments to reconcile net earnings to net cash provided by operating activities:
| | | | | | | | | | | | | | |
| Depreciation and amortization of fixed assets | | | | | 24,498 | | | | 22,663 | | | | 22,181 | |
| Amortization of intangibles and deferred costs | | | | | 5,354 | | | | 5,090 | | | | 5,289 | |
| Gains from disposals and impairment of property & equipment | | | | | (14 | ) | | | (31 | ) | | | (174 | ) |
| Share-based compensation | | | | | 1,248 | | | | 1,716 | | | | 1,851 | |
| Deferred income taxes | | | | | 3,219 | | | | 3,839 | | | | 3,446 | |
Changes in assets and liabilities, net of effects from purchase of companies:
| | | | | | | | | | | | | | |
| (Increase) decrease in accounts receivable | | | | | (8,629 | ) | | | 1,144 | | | | (4,701 | ) | | |
| (Increase) decrease in inventories | | | | | (4,422 | ) | | | 2,993 | | | | (2,448 | ) |
| (Increase) decrease in prepaid expenses and other | | | | | (4,101 | ) | | | 37 | | | | (537 | ) |
| Increase in accounts payable and accrued liabilities | | | | | 2,446 | | | | 1,870 | | | | 2,082 | |
| Net cash provided by operating activities | | | | | 68,008 | | | | 80,633 | | | | 54,897 | |
| |
Investing activities:
| | | | | | | | | | | | | | |
| Purchases of property, plant and equipment | | | | | (33,531 | ) | | | (27,190 | ) | | | (22,781 | ) |
| Payments for purchases of companies, net of cash acquired | | | | | (25,185 | ) | | | — | | | | — | |
| Purchase of marketable securities | | | | | (50,496 | ) | | | (66,380 | ) | | | (2,470 | ) |
| Proceeds from redemption and sales of marketable securities | | | | | 67,362 | | | | 10,204 | | | | — | |
| Purchase of auction market preferred stock | | | | | — | | | | — | | | | (10,500 | ) |
| Proceeds from redemption and sales of auction market preferred stock | | | | | — | | | | 35,200 | | | | 16,500 | |
| Proceeds from disposal of property and equipment | | | | | 407 | | �� | | 326 | | | | 932 | |
| Other | | | | | (12 | ) | | | 15 | | | | (535 | ) |
| Net cash used in investing activities | | | | | (41,455 | ) | | | (47,825 | ) | | | (18,854 | ) |
| |
Financing activities:
| | | | | | | | | | | | | | |
| Payments to repurchase common stock | | | | | (7,768 | ) | | | (12,510 | ) | | | (3,539 | ) |
| Proceeds from issuance of common stock | | | | | 3,051 | | | | 3,971 | | | | 2,811 | |
| Payments of cash dividend | | | | | (7,749 | ) | | | (7,108 | ) | | | (6,781 | ) |
| Payments on capitalized lease obligations | | | | | (143 | ) | | | (93 | ) | | | (91 | ) |
| Net cash used in financing activities | | | | | (12,609 | ) | | | (15,740 | ) | | | (7,600 | ) |
| Effect of exchange rate on cash and cash equivalents | | | | | 378 | | | | (990 | ) | | | 3 | |
| Net increase in cash and cash equivalents | | | | | 14,322 | | | | 16,078 | | | | 28,446 | |
| Cash and cash equivalents at beginning of year | | | | | 60,343 | | | | 44,265 | | | | 15,819 | |
| Cash and cash equivalents at end of year | | | | $ | 74,665 | | | $ | 60,343 | | | $ | 44,265 | |
The accompanying notes are an integral part of these statements.
F-6
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
J & J Snack Foods Corp. and Subsidiaries (the Company) manufactures, markets and distributes a variety of nutritional snack foods and beverages to the food service and retail supermarket industries. A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows.
1. Principles of Consolidation
The consolidated financial statements include the accounts of J & J Snack Foods Corp. and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in the consolidated financial statements.
2. Revenue Recognition
We recognize revenue from our products when the products are shipped to our customers. Repair and maintenance equipment service revenue is recorded when it is performed provided the customer terms are that the customer is to be charged on a time and material basis or on a straight-line basis over the term of the contract when the customer has signed a service contract. Revenue is recognized only where persuasive evidence of an arrangement exists, our price is fixed or estimable and collectability is reasonably assured. We record offsets to revenue for allowances, end-user pricing adjustments, trade spending, coupon redemption costs and returned product. Customers generally do not have the right to return product unless it is damaged or defective.
All amounts billed to customers related to shipping and handling are classified as revenues. Our product costs include amounts for shipping and handling, therefore, we charge our customers shipping and handling fees at the time the products are shipped or when services are performed. The cost of shipping products to the customer is recognized at the time the products are shipped to the customer and our policy is to classify them as Distribution expenses. The cost of shipping products to the customer classified as Distribution expenses was $52,146,000, $49,705,000 and $52,609,000 for the fiscal years ended 2010, 2009 and 2008, respectively.
During the years ended September 25, 2010, September 26, 2009 and September 27, 2008, we sold $16,185,000, $16,745,000 and $11,881,000, respectively, of repair and maintenance service contracts related to frozen beverage machines. At September 25, 2010 and September 26, 2009, deferred income on repair and maintenance service contracts was $1,416,000 and $1,424,000, respectively, of which $67,000 and $90,000 is included in other long-term liabilities as of September 25, 2010 and September 26, 2009, respectively and the balance is reflected as short-term and included in accrued liabilities on the consolidated balance sheet. Repair and maintenance service contract income of $16,192,000, $16,451,000 and $11,911,000 was recognized for the fiscal years ended 2010, 2009 and 2008, respectively.
3. Foreign Currency
Assets and liabilities in foreign currencies are translated into U.S. dollars at the rate of exchange prevailing at the balance sheet date. Revenues and expenses are translated at the average rate of exchange for the period. The cumulative translation adjustment is recorded as a separate component of stockholders’ equity and changes to such are included in comprehensive income.
4. Use of Estimates
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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.
5. Cash Equivalents
Cash equivalents are short-term, highly liquid investments with original maturities of three months or less.
F-7
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
6. Concentrations of Credit Risk and Accounts Receivable
We maintain cash balances at financial institutions located in various states. Some of our accounts are insured by the Federal Deposit Insurance Corporation up to $250,000. We customarily maintain cash balances in excess of these insurance limits. Some of our cash is in bank accounts which are insured by the Federal Deposit Insurance Corporation with no limit.
Other financial instruments that could potentially subject us to concentrations of credit risk are trade accounts receivable; however, such risks are limited due to the large number of customers comprising our customer base and their dispersion across geographic regions. We usually have approximately 10 customers with accounts receivable balances of between $1 million and $7 million.
We have several large customers that account for a significant portion of our sales. Our top ten customers accounted for 42%, 43% and 42% of our sales during fiscal years 2010, 2009 and 2008, respectively, with our largest customer accounting for 8% of our sales in 2010, 9% in 2009 and 9% in 2008. Three of the ten customers are food distributors who sell our product to many end users.
The majority of our accounts receivable are due from trade customers. Credit is extended based on evaluation of our customers’ financial condition and collateral is not required. Accounts receivable payment terms vary and are stated in the financial statements at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the payment terms are considered past due. We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss history, customers’ current ability to pay their obligations to us, and the condition of the general economy and the industry as a whole. We write off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts.
7. Inventories
Inventories are valued at the lower of cost (determined by the first-in, first-out or weighted-average method) or market. We recognize abnormal amounts of idle facilities, freight, handling costs, and spoilage as charges of the current period. Additionally, we allocate fixed production overheads to inventories based on the normal capacity of our production facilities. We calculate 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. This requires us to use judgment to determine when production is outside the range of expected variation in production (either abnormally low or abnormally high). In periods of abnormally low production (for example, periods in which there is significantly lower demand, labor and material shortages exist, or there is unplanned equipment downtime) the amount of fixed overhead allocated to each unit of production is not 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.
We review for slow moving and obsolete inventory and a reserve is established for the value of inventory that we estimate will not be used. At September 25, 2010 and September 26, 2009, our reserve for inventory was $4,189,000 and $4,209,000, respectively.
8. Investment Securities
We classify our investment securities in one of three categories: held to maturity, trading, or available for sale; however, we have classified our auction market preferred stock separately in our statement of cash flows because of the failure of the auction market beginning in February 2008. The balance of our investment portfolio consists solely of investments classified as held to maturity. See Note C for further information on our holdings of investment securities.
F-8
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
9. Depreciation and Amortization
Depreciation of equipment and buildings is provided for by the straight-line method over the assets’ estimated useful lives. We review our equipment and buildings to ensure that they provide economic benefit and are not impaired.
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 straight-line method over periods ranging from 3 to 20 years.
We use market value tests and discounted cash flow models to test goodwill and other intangible assets for impairment. These assets are reviewed for impairment annually or more frequently as a triggering event, such as the loss of a major customer, might occur.
10. Fair Value of Financial Instruments
The carrying value of our short-term financial instruments, such as accounts receivables and accounts payable, approximate their fair values, based on the short-term maturities of these instruments.
We account for our income taxes under the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities.
Additionally, we recognize a liability for income taxes and associated penalties and interest for tax positions taken or expected to be taken in a tax return which are more likely than not to be overturned by taxing authorities (“uncertain tax positions”). We have not recognized a tax benefit in our financial statements for these uncertain tax positions.
On September 30, 2007, the first day of the 2008 fiscal year, we recognized a $925,000 decrease to opening retained earnings from the cumulative effect of recognizing a liability for uncertain tax positions. As of September 25, 2010 and September 26, 2009, the total amount of gross unrecognized tax benefits is $1,249,000 and $1,895,000, respectively, all of which would impact our effective tax rate over time, if recognized. We recognize interest and penalties related to income tax matters as a part of the provision for income taxes. The Company had $429,000 and $742,000 of accrued interest and penalties as of September 25, 2010 and September 26, 2009, respectively. We recognized $7,000 and $3,000 of penalties and interest in the years ended September 25, 2010 and September 26, 2009, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| | | | (in thousands) |
|---|
| Balance at September 26, 2009 | | | | $ | 1,895 | |
| Additions based on tax positions related to the current year | | | | | 158 | |
| Reductions for tax positions of prior years | | | | | (750 | ) |
| Settlements | | | | | (54 | ) |
| Balance at September 25, 2010 | | | | $ | 1,249 | |
In addition to our federal tax return and tax returns for Mexico and Canada, we file tax returns in all states that have a corporate income tax. Virtually all the returns noted above are open for examination for three to four years.
F-9
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
12. Earnings Per Common Share
Basic earnings per common share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period. Diluted EPS takes into consideration the potential dilution that could occur if securities (stock options) or other contracts to issue common stock were exercised and converted into common stock.
Our calculation of EPS is as follows:
| | | | Fiscal Year Ended September 25, 2010
| |
|---|
| | | | Income
(Numerator)
| | Shares
(Denominator)
| | Per Share
Amount
|
|---|
| | | | (in thousands, except per share amounts) | |
|---|
Earnings Per Basic Share
| | | | | | | | | | | | | | |
| Net Income available to common stockholders | | | | $ | 48,409 | | | | 18,528 | | | $ | 2.61 | |
Effect of Dilutive Securities
| | | | | | | | | | | | | | |
| Options | | | | | — | | | | 175 | | | | (.02 | ) |
Earnings Per Diluted Share
| | | | | | | | | | | | | | |
| Net Income available to common stockholders plus assumed conversions | | | | $ | 48,409 | | | | 18,703 | | | $ | 2.59 | |
110,900 anti-dilutive shares have been excluded in the computation of 2010 diluted EPS because the options’ exercise price is greater than the average market price of the common stock.
| | | | Fiscal Year Ended September 26, 2009
| |
|---|
| | | | Income
(Numerator)
| | Shares
(Denominator)
| | Per Share
Amount
|
|---|
| | | | (in thousands, except per share amounts) | |
|---|
Earnings Per Basic Share
| | | | | | | | | | | | | | |
| Net Income available to common stockholders | | | | $ | 41,312 | | | | 18,516 | | | $ | 2.23 | |
Effect of Dilutive Securities
| | | | | | | | | | | | | | |
| Options | | | | | — | | | | 197 | | | | (.02 | ) |
Earnings Per Diluted Share
| | | | | | | | | | | | | | |
| Net Income available to common stockholders plus assumed conversions | | | | $ | 41,312 | | | | 18,713 | | | $ | 2.21 | |
114,236 anti-dilutive shares have been excluded in the computation of 2009 diluted EPS because the options’ exercise price is greater than the average market price of the common stock.
| | | �� | Fiscal Year Ended September 27, 2008
| |
|---|
| | | | Income
(Numerator)
| | Shares
(Denominator)
| | Per Share
Amount
|
|---|
| | | | (in thousands, except per share amounts) | |
|---|
Earnings Per Basic Share
| | | | | | | | | | | | | | |
| Net Income available to common stockholders | | | | $ | 27,908 | | | | 18,770 | | | $ | 1.49 | |
Effect of Dilutive Securities
| | | | | | | | | | | | | | |
| Options | | | | | — | | | | 238 | | | | (.02 | ) |
Earnings Per Diluted Share
| | | | | | | | | | | | | | |
| Net Income available to common stockholders plus assumed conversions | | | | $ | 27,908 | | | | 19,008 | | | $ | 1.47 | |
273,471 anti-dilutive shares have been excluded in the computation of 2008 diluted EPS because the options’ exercise price is greater than the average market price of the common stock.
F-10
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
13. Accounting for Stock-Based Compensation
At September 25, 2010, the Company has three stock-based employee compensation plans. Share-based compensation was recognized as follows:
| | | | Fiscal year ended
| |
|---|
| | | | September 25,
2010
| | September 26,
2009
| | September 27,
2008
|
|---|
| | | | (in thousands, except per share amounts) | |
|---|
| Stock options | | | | $ | 592 | | | $ | 508 | | | $ | 1,019 | |
| Stock purchase plan | | | | | 184 | | | | 237 | | | | 137 | |
| Deferred stock issued to outside directors | | | | | 138 | | | | 138 | | | | 138 | |
| Restricted stock issued to an employee | | | | | 28 | | | | 87 | | | | 100 | |
| | | | | $ | 942 | | | $ | 970 | | | $ | 1,394 | |
| |
| Per diluted share | | | | $ | .05 | | | $ | .05 | | | $ | .07 | |
| |
| The above compensation is net of tax benefits | | | | $ | 306 | | | $ | 746 | | | $ | 457 | |
At September 25, 2010, the Company has unrecognized compensation expense of approximately $960,000 to be recognized over the next three fiscal years.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model with the following weighted average assumptions used for grants in fiscal 2010, 2009 and 2008: expected volatility of 29.0% for fiscal year 2010, 23.3% for year 2009 and 25.2% for year 2008; weighted average risk-free interest rates of 2.21%, 2.70% and 3.60%; dividend rate of 1.2%, 1.2% and 1.1% and expected lives ranging between 5 and 10 years for all years. An expected forfeiture rate of 13% was used for fiscal year 2010, and 15% was used for 2009 and 2008.
Expected volatility is based on the historical volatility of the price of our common shares over the past 50 to 54 months for 5 year options and 10 years for 10 year options. We use historical information to estimate expected life and forfeitures within the valuation model. The expected term of awards represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation cost is recognized using a straight-line method over the vesting or service period and is net of estimated forfeitures.
14. Advertising Costs
Advertising costs are expensed as incurred. Total advertising expense was $2,751,000, $2,267,000, and $1,666,000 for the fiscal years 2010, 2009 and 2008, respectively.
15. Commodity Price Risk Management
Our most significant raw material requirements include flour, shortening, corn syrup, sugar, juice, cheese, chocolate, and a variety of nuts. We attempt to minimize the effect of future price fluctuations related to the purchase of raw materials primarily through forward purchasing to cover future manufacturing requirements, generally for periods from 1 to 12 months. As of September 25, 2010, we have approximately $44 million of such commitments. Futures contracts are not used in combination with forward purchasing of these raw materials. Our procurement practices are intended to reduce the risk of future price increases, but also may potentially limit the ability to benefit from possible price decreases. Our policy is to recognize estimated losses on purchase commitments when they occur. At each of the last three fiscal year ends, we did not have any material losses on our purchase commitments.
F-11
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
16. Research and Development Costs
Research and development costs are expensed as incurred. Total research and development expense was $866,000, $761,000 and $571,000 for the fiscal years 2010, 2009 and 2008, respectively.
17. Recent Accounting Pronouncements
In December 2007, the FASB issued guidance expanding the definition of a business combination and requiring the fair value of the purchase price of an acquisition, including the issuance of equity securities, to be determined on the acquisition date. The guidance also requires that all assets, liabilities, contingent considerations, and contingencies of an acquired business be recorded at fair value at the acquisition date. In addition, the guidance requires that acquisition costs generally be expensed in the period incurred and changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period to impact income tax expense. We adopted this guidance for the acquisitions we made in our fiscal year 2010.
In August 2008, the FASB issued guidance that revises the factors that a company should consider to develop renewal or extension assumptions used in estimating the useful life of a recognized intangible asset. The new guidance will apply to all intangible assets acquired after the guidance’s effective date. The guidance also requires new disclosures for all intangible assets recognized as of, and subsequent to, the effective date. The underlying purpose of the guidance is to improve the consistency between the period of expected cash flows used to measure the fair value of a recognized intangible asset and the useful life of an intangible asset. This guidance was effective for our 2010 fiscal year. The adoption of this guidance had no impact on our consolidated financial statements.
In April 2009, the FASB issued guidance that amends the provisions in its guidance issued in December 2007 for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. This revised guidance eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria, included in the December 2007 guidance and carries forward most of the provisions related to acquired contingencies in its June 2001 guidance. This guidance was effective for contingent assets and contingent liabilities acquired in business combinations for which the acquisition date was on or after the beginning of our fiscal year 2010. The effect of this guidance on our consolidated financial statements will depend upon the nature, terms and size of any acquired contingencies consummated in fiscal year 2010 or later. For the acquisitions we made in fiscal year 2010, the adoption of this guidance had no effect on our consolidated financial statements.
18. Reclassifications
Certain prior year financial statement amounts have been reclassified to be consistent with the presentation for the current year.
NOTE B — ACQUISITIONS
On January 31, 2006, we acquired the stock of ICEE of Hawaii. ICEE of Hawaii, headquartered in Waipahu, Hawaii, distributes ICEE frozen beverages and related products throughout the Hawaiian islands.
On May 26, 2006, The ICEE Company, our frozen carbonated beverage distribution company, acquired the SLUSH PUPPIE branded business from Dr. Pepper/Seven Up, Inc., a Cadbury Schweppes Americas Beverages Company for $18.1 million plus approximately $4.3 million in working capital. SLUSH PUPPIE, North America’s leading brand for frozen non-carbonated beverages, is sold through an existing established distributor network to over 20,000 locations in the United States and Canada as well as to certain international markets.
On January 9, 2007 we acquired the assets of Hom/Ade Foods, Inc., a manufacturer and distributor of biscuits and dumplings sold under the MARY B’S and private label store brands to the supermarket industry. Hom/Ade is headquartered in Pensacola, Florida.
F-12
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE B — ACQUISITIONS (Continued)
On January 31, 2007 we acquired the assets of Radar Inc., a manufacturer and seller of fig and fruit bars selling its products under the brand DADDY RAY’S. Headquartered and with its manufacturing facility in Moscow Mills, Missouri (outside of St. Louis), Radar, Inc. sells to the retail grocery segment and mass merchandisers, both branded and private label.
On April 2, 2007, we acquired the WHOLE FRUIT Sorbet and FRUIT-A-FREEZE Fruit Bar brands, along with related assets including a manufacturing facility located in Norwalk, California which sells primarily to the supermarket industry.
On June 25, 2007, we acquired the assets of an ICEE distributor in Kansas.
In February 2010, we acquired the assets of Parrot Ice, a manufacturer and distributor of a premium brand frozen beverage sold primarily in convenience stores. Revenues from Parrot Ice were approximately $1.5 million for our 2010 fiscal year.
In June 2010, we acquired the assets of California Churros, a manufacturer and distributor of a premium brand churro. Revenues from California Churros were approximately $2.5 million for our 2010 fiscal year.
The purchase price allocation for the California Churros acquisition and other acquisitions, including Parrot Ice, which were made during the 2010 fiscal year is as follows:
| | | | California
Churros
| | Other
|
|---|
| | | | (in thousands) | |
|---|
| Working Capital | | | | $ | 1,075 | | | $ | — | |
| Property, plant & equipment | | | | | 2,373 | | | | 1,135 | |
| Trade Names | | | | | 4,024 | | | | — | |
| Customer Relationships | | | | | 6,737 | | | | — | |
| Covenant not to Compete | | | | | 35 | | | | 50 | |
| Goodwill | | | | | 9,756 | | | | — | |
| | | | | $ | 24,000 | | | $ | 1,185 | |
The goodwill and intangible assets acquired in the business combinations are recorded at fair value. To measure fair value for such assets, we use techniques including discounted expected future cash flows (Level 3 input).
Acquisition costs of $184,000 for these acquisitions is included in administrative and other general expense.
NOTE C — INVESTMENT SECURITIES
We have classified our investment securities as marketable securities held to maturity and auction market preferred stock (AMPS). The FASB defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the FASB has established three levels of inputs that may be used to measure fair value:
| Level 1 | | | | Observable inputs such as quoted prices in active markets for identical assets or liabilities; |
| Level 2 | | | | Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and |
| Level 3 | | | | Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. |
We have concluded that the carrying value of certificates of deposit placed through the Certificate of Deposit Account Registry Service equals fair market value. Other marketable securities held to maturity values are derived solely from level 1 inputs.
F-13
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C — INVESTMENT SECURITIES (Continued)
The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at September 25, 2010 are summarized as follows:
| | | | Amortized
Cost
| | Gross
Unrealized
Gains
| | Fair
Unrealized
Losses
| | Market
Value
|
|---|
| | | | (in thousands) | |
|---|
| US Government Agency Debt | | | | $ | 8,000 | | | $ | 53 | | | $ | — | | | $ | 8,053 | |
| FDIC Backed Corporate Debt | | | | | 13,107 | | | | 144 | | | | — | | | | 13,251 | |
| Certificates of Deposit | | | | | 20,674 | | | | 5 | | | | — | | | | 20,679 | |
| | | | | $ | 41,781 | | | $ | 202 | | | $ | — | | | $ | 41,983 | |
All of the certificates of deposit are within the FDIC limits for insurance coverage.
The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at September 26, 2009 are summarized as follows:
| | | | Amortized
Cost
| | Gross
Unrealized
Gains
| | Fair
Unrealized
Losses
| | Market
Value
|
|---|
| | | | (in thousands) | |
|---|
| US Government Agency Debt | | | | $ | 6,009 | | | $ | 22 | | | $ | 1 | | | $ | 6,030 | |
| FDIC Backed Corporate Debt | | | | | 13,213 | | | | 198 | | | | — | | | | 13,411 | |
| Certificates of Deposit | | | | | 39,425 | | | | 21 | | | | 3 | | | | 39,443 | |
| | | | | $ | 58,647 | | | $ | 241 | | | $ | 4 | | | $ | 58,884 | |
All of the certificates of deposit are within the FDIC limits for insurance coverage.
The amortized cost and fair value of the Company’s held to maturity securities by contractual maturity at September 25, 2010 and September 26, 2009 are summarized as follows:
| | | | September 25, 2010
| | September 26, 2009
| |
|---|
| | | | Amortized
Cost
| | Fair
Market
Value
| | Amortized
Cost
| | Fair
Market
Value
|
|---|
| | | | (in thousands) | |
|---|
| Due in one year or less | | | | $ | 15,481 | | | $ | 15,501 | | | $ | 38,653 | | | $ | 38,668 | |
| Due after one year through five years | | | | | 26,300 | | | | 26,482 | | | | 19,994 | | | | 20,216 | |
| Total held to maturity securities | | | | $ | 41,781 | | | $ | 41,983 | | | $ | 58,647 | | | $ | 58,884 | |
| Less current portion | | | | | 15,481 | | | | 15,501 | | | | 38,653 | | | | 38,668 | |
| Long term held to maturity securities | | | | $ | 26,300 | | | $ | 26,482 | | | $ | 19,994 | | | $ | 20,216 | |
Proceeds from the sale and redemption of marketable securities were $67,362,000 and $10,204,000 in the years ended September 25, 2010 and September 26, 2009, respectively, and none in the year ended September 27, 2008, with no gain or loss recorded. We use the specific identification method to determine the cost of securities sold.
F-14
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE D — INVENTORIES
Inventories consist of the following:
| | | | September 25,
2010
| | September 26,
2009
|
|---|
| | | | (in thousands) | |
|---|
| Finished goods | | | | $ | 22,171 | | | $ | 19,913 | |
| Raw materials | | | | | 8,702 | | | | 8,060 | |
| Packaging materials | | | | | 4,727 | | | | 5,141 | |
| Equipment parts and other | | | | | 15,030 | | | | 12,890 | |
| | | | | $ | 50,630 | | | $ | 46,004 | |
Inventory is presented net of an allowance for obsolescence of $4,189,000 and $4,209,000 as of fiscal year ends 2010 and 2009, respectively.
NOTE E — PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
| | | | September 25,
2010
| | September 26,
2009
| | Estimated
Useful Lives
|
|---|
| | | | (in thousands) | |
|---|
| Land | | | | $ | 2,016 | | | $ | 1,416 | | | | | — |
| Buildings | | | | | 13,266 | | | | 8,672 | | | | 15–39.5 | years |
| Plant machinery and equipment | | | | | 144,697 | | | | 133,758 | | | | 5–20 | years |
| Marketing equipment | | | | | 214,545 | | | | 202,708 | | | | 5–7 | years |
| Transportation equipment | | | | | 3,785 | | | | 2,733 | | | | 5 | years |
| Office equipment | | | | | 12,690 | | | | 11,461 | | | | 3–5 | years |
| Improvements | | | | | 19,590 | | | | 18,454 | | | | 5–20 | years |
| Construction in progress | | | | | 3,814 | | | | 3,954 | | | | | — |
| | | | | $ | 414,403 | | | $ | 383,156 | | | | | |
NOTE F — GOODWILL AND INTANGIBLE ASSETS
Our four reporting units, which are also reportable segments, are Food Service, Retail Supermarket, The Restaurant Group and Frozen Beverages.
The carrying amount of acquired intangible assets for the reportable segments are as follows:
| | | | September 25, 2010
| | September 26, 2009
| |
|---|
| | | | Gross
Carrying
Amount
| | Accumulated
Amortization
| | Gross
Carrying
Amount
| | Accumulated
Amortization
|
|---|
| | | | (in thousands) | |
|---|
Food Service
| | | | | | | | | | | | | | | | | | |
Indefinite lived intangible assets
| | | | | | | | | | | | | | | | | | |
| Trade Names | | | | $ | 12,204 | | | $ | — | | | $ | 8,180 | | | $ | — | |
| |
Amortized intangible assets
| | | | | | | | | | | | | | | | | | |
| Non compete agreements | | | | | 470 | | | | 351 | | | | 435 | | | | 282 | |
| Customer relationships | | | | | 40,024 | | | | 15,160 | | | | 33,287 | | | | 11,526 | |
| Licenses and rights | | | | | 3,606 | | | | 2,287 | | | | 3,606 | | | | 2,061 | |
| | | | | $ | 56,304 | | | $ | 17,798 | | | $ | 45,508 | | | $ | 13,869 | |
F-15
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE F — GOODWILL AND INTANGIBLE ASSETS (Continued)
| | | | September 25, 2010
| | September 26, 2009
| |
|---|
| | | | Gross
Carrying
Amount
| | Accumulated
Amortization
| | Gross
Carrying
Amount
| | Accumulated
Amortization
|
|---|
| | | | (in thousands) | |
|---|
| |
Retail Supermarket
| | | | | | | | | | | | | | | | | | |
Indefinite lived intangible assets
| | | | | | | | | | | | | | | | | | |
| Trade Names | | | | $ | 2,731 | | | $ | — | | | $ | 2,731 | | | $ | — | |
| |
The Restaurant Group
| | | | | | | | | | | | | | | | | | |
Amortized intangible assets
| | | | | | | | | | | | | | | | | | |
| Licenses and rights | | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| |
Frozen Beverages
| | | | | | | | | | | | | | | | | | |
Indefinite lived intangible assets
| | | | | | | | | | | | | | | | | | |
| Trade Names | | | | $ | 9,315 | | | $ | — | | | $ | 9,315 | | | $ | — | |
| |
Amortized intangible assets
| | | | | | | | | | | | | | | | | | |
| Non compete agreements | | | | | 198 | | | | 165 | | | | 148 | | | | 141 | |
| Customer relationships | | | | | 6,478 | | | | 2,876 | | | | 6,478 | | | | 2,212 | |
| Licenses and rights | | | | $ | 1,601 | | | $ | 504 | | | $ | 1,601 | | | $ | 434 | |
| | | | | $ | 17,592 | | | $ | 3,545 | | | $ | 17,542 | | | $ | 2,787 | |
The gross carrying amount of intangible assets is determined by applying a discounted cash flow model to the future sales and earnings associated with each intangible asset or is set by contract cost. The amortization period used for definite lived intangible assets is set by contract period or by the period over which the bulk of the discounted cash flow is expected to be generated. We currently believe that we will receive the benefit from the use of the trade names classified as indefinite lived intangible assets indefinitely and they are therefore not amortized.
Licenses and rights are being amortized by the straight-line method over periods ranging from 3 to 20 years and amortization expense is reflected throughout operating expenses.
Intangible assets of $10,796,000 were acquired in the food service segment in the California Churros acquisition in fiscal year 2010.
Aggregate amortization expense of intangible assets for the fiscal years 2010, 2009 and 2008 was $4,687,000, $4,508,000 and $4,700,000.
Estimated amortization expense for the next five fiscal years is approximately $4,800,000 in 2011, $4,400,000 in 2012, 2013 and 2014 and $4,300,000 in 2015. The weighted average amortization period of the intangible assets is 10.1 years.
Goodwill
The carrying amounts of goodwill for the reportable segments are as follows:
| | | | Food
Service
| | Retail
Supermarkets
| | Restaurant
Group
| | Frozen
Beverages
| | Total
|
|---|
| | | | (in thousands) | |
|---|
Balance at
September 25, 2010 | | | | $ | 33,744 | | | $ | — | | | $ | 386 | | | $ | 35,940 | | | $ | 70,070 | |
Balance at
September 26, 2009 | | | | $ | 23,988 | | | $ | — | | | $ | 386 | | | $ | 35,940 | | | $ | 60,314 | |
F-16
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE F — GOODWILL AND INTANGIBLE ASSETS (Continued)
The carrying value of goodwill is determined based on the excess of the purchase price of acquisitions over the estimated fair value of tangible and intangible net assets. Goodwill is not amortized but is evaluated annually by management for impairment. Our analysis is based on a combination of the income approach, which estimates the fair value based on future discounted cash flows, and the market approach, which estimates the fair value based on comparable market prices. Under the income approach the Company used a discounted cash flow which requires Level 3 inputs such as: annual growth rates, discount rates based upon the weighted average cost of capital and terminal values based upon our stock market multiples. There were no impairment charges in 2010, 2009 or 2008.
Goodwill of $9,756,000 was acquired in the food service segment in the California Churros acquisition in fiscal year 2010.
NOTE G — LONG-TERM DEBT
In December 2006, we entered into an amended and restated loan agreement with our existing banks which provides for up to a $50,000,000 revolving credit facility repayable in December 2011, with the availability of repayments without penalty. The agreement contains restrictive covenants and requires commitment fees in accordance with standard banking practice. As of September 25, 2010 and September 26, 2009, there were no outstanding balances under the facility.
NOTE H — OBLIGATIONS UNDER CAPITAL LEASES
Obligations under capital leases consist of the following:
| | | | September 25,
2010
| | September 26,
2009
|
|---|
| | | | (in thousands) | |
|---|
Capital lease obligations, with interest at 5.8%, payable in monthly
installments of $14,625, through May 2014 | | | | $ | 578 | | | $ | — | |
Capital lease obligations, with interest at 2.6%, payable in monthly
installments of $8,700, through August 2013 | | | | | 285 | | | | 381 | |
| | | | | | 863 | | | | 381 | |
| Less current portion | | | | | 244 | | | | 96 | |
| | | | | $ | 619 | | | $ | 285 | |
NOTE I — INCOME TAXES
Income tax expense (benefit) is as follows:
| | | | Fiscal year ended
| |
|---|
| | | | September 25,
2010
| | September 26,
2009
| | September 27,
2008
|
|---|
| | | | (in thousands) | |
|---|
Current
| | | | | | | | | | | | | | |
| U.S. Federal | | | | $ | 21,020 | | | $ | 18,574 | | | $ | 11,417 | |
| Foreign | | | | | 970 | | | | 706 | | | | 844 | |
| State | | | | | 4,484 | | | | 3,744 | | | | 2,270 | |
| | | | | | 26,474 | | | | 23,024 | | | | 14,531 | |
F-17
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I — INCOME TAXES (Continued)
| | | | Fiscal year ended
| |
|---|
| | | | September 25,
2010
| | September 26,
2009
| | September 27,
2008
|
|---|
| | | | (in thousands) | |
|---|
| |
Deferred
| | | | | | | | | | | | | | |
| U.S. Federal | | | | $ | 2,692 | | | $ | 3,106 | | | $ | 2,983 | |
| Foreign | | | | | (48 | ) | | | 109 | | | | (168 | ) |
| State | | | | | 570 | | | | 658 | | | | 631 | |
| | | | | | 3,214 | | | | 3,873 | | | | 3,446 | |
| | | | | $ | 29,688 | | | $ | 26,897 | | | $ | 17,977 | |
The provisions for income taxes differ from the amounts computed by applying the statutory federal income tax rate of approximately 35% to earnings before income taxes for the following reasons:
| | | | Fiscal year ended
| |
|---|
| | | | September 25,
2010
| | September 26,
2009
| | September 27,
2008
|
|---|
| | | | (in thousands) | |
|---|
| Income taxes at statutory rates | | | | $ | 27,334 | | | $ | 23,873 | | | $ | 16,059 | |
Increase (decrease) in taxes resulting from:
| | | | | | | | | | | | | | |
| State income taxes, net of federal income tax benefit | | | | | 3,403 | | | | 2,958 | | | | 1,918 | |
| Domestic production activities deduction | | | | | (850 | ) | | | (400 | ) | | | (450 | ) |
| Other, net | | | | | (199 | ) | | | 466 | | | | 450 | |
| | | | | $ | 29,688 | | | $ | 26,897 | | | $ | 17,977 | |
Deferred tax assets and liabilities consist of the following:
| | | | September 25,
2010
| | September 26,
2009
|
|---|
| | | | (in thousands) | |
|---|
Deferred tax assets
| | | | | | | | | | |
| Vacation accrual | | | | $ | 1,334 | | | $ | 1,233 | |
| Insurance accrual | | | | | 3,098 | | | | 2,943 | |
| Deferred income | | | | | 60 | | | | 67 | |
| Allowances | | | | | 1,881 | | | | 1,902 | |
| Inventory capitalization | | | | | 573 | | | | 499 | |
| Share-based compensation | | | | | 1,209 | | | | 1,113 | |
| Other, net | | | | | 56 | | | | 65 | |
| | | | | | 8,211 | | | | 7,822 | |
Deferred tax liabilities
| | | | | | | | | | |
| Amortization of goodwill and other intangible assets | | | | | 14,885 | | | | 13,388 | |
| Depreciation of property and equipment | | | | | 19,907 | | | | 17,793 | |
| Other, net | | | | | 7 | | | | 15 | |
| | | | | | 34,799 | | | | 31,196 | |
| | | | | $ | 26,588 | | | $ | 23,374 | |
F-18
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE J — COMMITMENTS
1. Lease Commitments
The following is a summary of approximate future minimum rental commitments for non-cancelable operating leases with terms of more than one year as of September 25, 2010:
| | | | Plants and
Offices
| | Equipment
| | Total
|
|---|
| | | | (in thousands) | |
|---|
| 2011 | | | | $ | 4,900 | | | $ | 4,013 | | | $ | 8,913 | |
| 2012 | | | | | 4,603 | | | | 2,732 | | | | 7,335 | |
| 2013 | | | | | 4,270 | | | | 1,287 | | | | 5,557 | |
| 2014 | | | | | 3,919 | | | | 495 | | | | 4,414 | |
| 2015 | | | | | 3,586 | | | | 134 | | | | 3,720 | |
| 2016 and thereafter | | | | | 22,327 | | | | 6 | | | | 22,333 | |
| | | | | $ | 43,605 | | | $ | 8,667 | | | $ | 52,272 | |
Total rent expense was $13,099,000, $12,856,000 and $12,907,000 for fiscal years 2010, 2009 and 2008, respectively.
2. Other Commitments
We are a party to litigation which has arisen in the normal course of business which management currently believes will not have a material adverse effect on our financial condition or results of operations.
We self-insure, up to loss limits, certain insurable risks such as worker’s compensation and automobile liability claims. Accruals for claims under our self-insurance program are recorded on a claims incurred basis. Our total recorded liability for all years’ claims incurred but not yet paid was $7,300,000 and $7,100,000 at September 25, 2010 and September 26, 2009, respectively. In connection with certain self-insurance agreements, we customarily enter into letters of credit arrangements with our insurers. At September 25, 2010 and September 26, 2009, we had outstanding letters of credit totaling $8,175,000 and $8,675,000, respectively.
NOTE K — CAPITAL STOCK
In our fiscal year ended September 25, 2010, we purchased and retired 203,507 shares of our common stock at a cost of $7,768,000 under a million share buyback authorization approved by the Company’s Board of Directors in February 2008. 49,804 shares were purchased in the fourth quarter of 2010 at a cost of $1,874,000. There remains 210,772 shares that can be purchased under the existing authorization.
In our fiscal year ended September 26, 2009, we purchased and retired 450,597 shares of our common stock at a cost of $12,510,000. Of the shares purchased and retired in 2009, 400,000 shares were purchased at the purchase price of $27.90 per share from Gerald B. Shreiber, Chairman of the Board, Chief Executive Officer and Director of the Company.
In our 2008 fiscal year ended September 27, 2008, we purchased and retired 135,124 shares of our common stock at a cost of $3,539,000.
NOTE L — STOCK OPTIONS
We have a Stock Option Plan (the “Plan”). Pursuant to the Plan, stock options may be granted to officers and our key employees which qualify as incentive stock options as well as stock options which are nonqualified. The exercise price of incentive stock options is at least the fair market value of the common stock on the date of grant. The exercise price for nonqualified options is determined by a committee of the Board of Directors. The options are generally exercisable after three years and expire no later than ten years from date of grant. There were 1,400,000
F-19
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L — STOCK OPTIONS (Continued)
shares reserved under the Plan; options for 610,000 shares remain unissued as of September 25, 2010. There are options that were issued under an option plan that has since expired that are still outstanding.
We have an Employee Stock Purchase Plan (“ESPP”) whereby employees purchase stock by making contributions through payroll deductions for six month periods. The purchase price of the stock is 85% of the lower of the market price of the stock at the beginning of the six-month period or the end of the six-month period. In fiscal years 2010, 2009 and 2008 employees purchased 22,143, 25,803 and 31,366 shares at average purchase prices of $32.70, $26.63 and $24.93, respectively. ESPP expense of $184,000, $237,000 and $137,000 was recognized for fiscal years 2010, 2000 and 2008, respectively.
A summary of the status of our stock option plans as of fiscal years 2010, 2009 and 2008 and the changes during the years ended on those dates is represented below:
| | | | Incentive Stock Options
| | Nonqualified Stock Options
| |
|---|
| | | | Stock
Options
Outstanding
| | Weighted-
Average
Exercise
Price
| | Stock
Options
Outstanding
| | Weighted-
Average
Exercise
Price
|
|---|
| Balance, September 30, 2007 | | | | | 673,405 | | | $ | 21.87 | | | | 459,354 | | | $ | 16.12 | |
| Granted | | | | | 96,345 | | | | 33.22 | | | | 20,000 | | | | 34.17 | |
| Exercised | | | | | (111,768 | ) | | | 16.57 | | | | (77,000 | ) | | | 9.66 | |
| Cancelled | | | | | (44,150 | ) | | | 26.36 | | | | (5,000 | ) | | | 38.54 | |
| |
| Balance, September 27, 2008 | | | | | 613,832 | | | | 24.29 | | | | 397,354 | | | | 18.00 | |
| Granted | | | | | 4,500 | | | | 32.13 | | | | — | | | | — | |
| Exercised | | | | | (169,388 | ) | | | 18.73 | | | | (71,000 | ) | | | 10.70 | |
| Cancelled | | | | | (20,000 | ) | | | 26.79 | | | | (20,000 | ) | | | 20.02 | |
| |
| Balance, September 26, 2009 | | | | | 428,944 | | | | 26.45 | | | | 306,354 | | | | 19.55 | |
| Granted | | | | | 101,330 | | | | 36.77 | | | | 20,000 | | | | 41.75 | |
| Exercised | | | | | (92,760 | ) | | | 16.40 | | | | (72,354 | ) | | | 10.12 | |
| Cancelled | | | | | (19,505 | ) | | | 33.47 | | | | (10,000 | ) | | | 38.81 | |
| | | | | | | | | | | | | | | | | | | |
| Balance, September 25, 2010 | | | | | 418,009 | | | $ | 30.86 | | | | 244,000 | | | $ | 23.38 | |
| Exercisable Options, September 25, 2010 | | | | | 235,089 | | | | | | | | 184,000 | | | | | |
The weighted-average fair value of incentive options granted during fiscal years ended September 25, 2010, September 26, 2009 and September 27, 2008 was $9.12, $7.13 and $7.99, respectively. The weighted-average fair value of non-qualified stock options granted during the fiscal years ended September 25, 2010 and September 27, 2008 was $17.33 and $15.21, respectively. There were no non-qualified options granted during the fiscal year ended September 26, 2009. The total intrinsic value of stock options exercised was $5.1 million, $5.4 million and $3.2 million in fiscal years 2010, 2009 and 2008, respectively.
F-20
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L — STOCK OPTIONS (Continued)
The following table summarizes information about incentive stock options outstanding at September 25, 2010:
| | | | Options Outstanding
| | Options Exercisable
| |
|---|
Range of
Exercise Prices
| | | | Number
Outstanding
at
September 25,
2010
| | Weighted-
Average
Remaining
Contractual
Life
| | Weighted
Average
Exercise
Price
| | Number
Exercisable
at
September 25,
2010
| | Weighted-
Average
Exercise
Price
|
|---|
| $10.60 – $10.60 | | | | | 82,632 | | | | .9 | years | | $ | 10.60 | | | | 82,632 | | | $ | 10.60 | |
| $27.45 – $41.06 | | | | | 245,477 | | | | 2.5 | years | | $ | 33.74 | | | | 62,557 | | | $ | 29.94 | |
| $41.50 – $41.60 | | | | | 89,900 | | | | 1.2 | years | | $ | 41.60 | | | | 89,900 | | | $ | 41.60 | |
| | | | | | 418,009 | | | | | | | | | | | | 235,089 | | | | | |
The following table summarizes information about nonqualified stock options outstanding at September 25, 2010:
| | | | Options Outstanding
| | Options Exercisable
| |
|---|
Range of
Exercise Prices
| | | | Number
Outstanding
at
September 25,
2010
| | Weighted-
Average
Remaining
Contractual
Life
| | Weighted
Average
Exercise
Price
| | Number
Exercisable
at
September 25,
2010
| | Weighted-
Average
Exercise
Price
|
|---|
| $10.30 – $10.30 | | | | | 62,000 | | | | .6 | years | | $ | 10.30 | | | | 62,000 | | | $ | 10.30 | |
| $19.77 – $20.43 | | | | | 82,000 | | | | 2.2 | years | | $ | 19.93 | | | | 82,000 | | | $ | 19.93 | |
| $29.78 – $41.75 | | | | | 100,000 | | | | 7.2 | years | | $ | 34.32 | | | | 40,000 | | | $ | 30.44 | |
| | | | | | 244,000 | | | | | | | | | | | | 184,000 | | | | | |
NOTE M — 401(k) PROFIT-SHARING PLAN
We maintain a 401(k) profit-sharing plan for our employees. Under this plan, we may make discretionary profit-sharing and matching 401(k) contributions. Contributions of $1,436,000, $1,354,000 and $1,411,000 were made in fiscal years 2010, 2009 and 2008, respectively.
NOTE N — CASH FLOW INFORMATION
The following is supplemental cash flow information:
| | | | Fiscal Year Ended
| |
|---|
| | | | September 25,
2010
| | September 26,
2009
| | September 27,
2008
|
|---|
| | | | (in thousands) | |
|---|
Cash paid for:
| | | | | | | | | | | | | | |
| Interest | | | | $ | 76 | | | $ | 14 | | | $ | 21 | |
| Income taxes | | | | | 31,379 | | | | 21,345 | | | | 13,896 | |
| |
Non cash items:
| | | | | | | | | | | | | | |
| Capital leases | | | | $ | 625 | | | $ | — | | | $ | — | |
NOTE O — SEGMENT REPORTING
We principally sell our products to the food service and retail supermarket industries. We also 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
F-21
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE O — SEGMENT REPORTING (Continued)
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 by the food service segment are soft pretzels, frozen juice treats and desserts, churros and baked goods. Our customers in the food service segment include snack bars and food stands in chain, department and discount stores; malls and shopping centers; fast food outlets; stadiums and sports arenas; leisure and theme parks; convenience stores; movie theatres; warehouse club stores; schools, colleges and other institutions. Within the food service channel, our products are purchased by the consumer primarily for consumption at the point-of-sale.
Retail Supermarkets
The primary products sold by the retail supermarket segment are soft pretzel products — including SUPERPRETZEL, frozen juice treats and desserts including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE FRUIT frozen fruit bars, WHOLE FRUIT Sorbet, ICEE Squeeze-Up Tubes and TIO PEPE’S Churros. Within the retail supermarket channel, 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 two BAVARIAN PRETZEL BAKERY retail stores.
Frozen Beverages
We sell frozen beverages and related products and beverage machines to the food service channel, and our Restaurant Group, primarily under the names ICEE, SLUSH PUPPIE, PARROT ICE and ARCTIC BLAST in the United States, Mexico and Canada. We also provide repair and maintenance service to customers for customers’ owned equipment.
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 detailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales is considered to be the one and only key variable monitored by the Chief Operating Decision Makers and management when determining each segment’s and the company’s financial condition and operating performance. 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:
| | | | Fiscal year ended
| |
|---|
| | | | September 25,
2010
| | September 26,
2009
| | September 27,
2008
|
|---|
| | | | (in thousands) | |
|---|
Sales to External Customers:
| | | | | | | | | | | | | | |
Food Service
| | | | | | | | | | | | | | |
| Soft pretzels | | | | $ | 100,694 | | | $ | 99,471 | | | $ | 99,784 | |
| Frozen juices and ices | | | | | 47,273 | | | | 50,272 | | | | 51,206 | |
| Churros | | | | | 31,732 | | | | 29,404 | | | | 25,286 | |
| Bakery | | | | | 234,032 | | | | 229,371 | | | | 217,398 | |
| Other | | | | | 23,228 | | | | 9,235 | | | | 6,520 | |
| | | | | $ | 436,959 | | | $ | 417,753 | | | $ | 400,194 | |
F-22
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE O — SEGMENT REPORTING (Continued)
| | | | Fiscal year ended
| |
|---|
| | | | September 25,
2010
| | September 26,
2009
| | September 27,
2008
|
|---|
| | | | (in thousands) | |
|---|
Retail Supermarket
| | | | | | | | | | | | | | |
| Soft pretzels | | | | $ | 30,463 | | | $ | 30,506 | | | $ | 27,559 | |
| Frozen juices and ices | | | | | 48,288 | | | | 37,819 | | | | 31,742 | |
| Coupon redemption | | | | | (3,399 | ) | | | (3,753 | ) | | | (2,722 | ) |
| Other | | | | | 767 | | | | 586 | | | | 533 | |
| | | | | $ | 76,119 | | | $ | 65,158 | | | $ | 57,112 | |
| |
| The Restaurant Group | | | | $ | 847 | | | $ | 1,257 | | | $ | 1,635 | |
| |
Frozen Beverages
| | | | | | | | | | | | | | |
| Beverages | | | | $ | 128,125 | | | $ | 112,983 | | | $ | 113,903 | |
| Repair and maintenance service | | | | | 40,410 | | | | 42,013 | | | | 38,803 | |
| Machine sales | | | | | 11,964 | | | | 11,729 | | | | 14,794 | |
| Other | | | | | 2,279 | | | | 2,154 | | | | 2,918 | |
| | | | | $ | 182,778 | | | $ | 168,879 | | | $ | 170,418 | |
| |
| Consolidated Sales | | | | $ | 696,703 | | | $ | 653,047 | | | $ | 629,359 | |
| |
Depreciation and Amortization:
| | | | | | | | | | | | | | |
| Food Service | | | | $ | 17,221 | | | $ | 16,530 | | | $ | 16,655 | |
| Retail Supermarket | | | | | — | | | | — | | | | — | |
| The Restaurant Group | | | | | 31 | | | | 33 | | | | 54 | |
| Frozen Beverages | | | | | 12,600 | | | | 11,190 | | | | 10,761 | |
| | | | | $ | 29,852 | | | $ | 27,753 | | | $ | 27,470 | |
Operating Income(Loss):
| | | | | | | | | | | | | | |
| Food Service | | | | $ | 50,255 | | | $ | 45,024 | | | $ | 24,784 | |
| Retail Supermarket | | | | | 11,281 | | | | 7,442 | | | | 4,665 | |
| The Restaurant Group | | | | | (35 | ) | | | (64 | ) | | | (140 | ) |
| Frozen Beverages | | | | | 15,661 | | | | 14,536 | | | | 14,027 | |
| | | | | $ | 77,162 | | | $ | 66,938 | | | $ | 43,336 | |
Capital Expenditures:
| | | | | | | | | | | | | | |
| Food Service | | | | $ | 18,392 | | | $ | 14,979 | | | $ | 11,898 | |
| Retail Supermarket | | | | | — | | | | — | | | | — | |
| The Restaurant Group | | | | | — | | | | — | | | | — | |
| Frozen Beverages | | | | | 15,139 | | | | 12,211 | | | | 10,883 | |
| | | | | $ | 33,531 | | | $ | 27,190 | | | $ | 22,781 | |
Assets:
| | | | | | | | | | | | | | |
| Food Service | | | | $ | 343,513 | | | $ | 309,988 | | | $ | 277,481 | |
| Retail Supermarket | | | | | — | | | | — | | | | — | |
| The Restaurant Group | | | | | 503 | | | | 557 | | | | 629 | |
| Frozen Beverages | | | | | 139,978 | | | | 129,282 | | | | 130,298 | |
| | | | | $ | 483,994 | | | $ | 439,827 | | | $ | 408,408 | |
F-23
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE P — QUARTERLY FINANCIAL DATA (UNAUDITED)
| | | | Fiscal Year Ended September 25, 2010
| |
|---|
| | | | Net Sales
| | Gross
Profit
| | Net
Earnings
| | Net Earnings
Per
Diluted
Share(1)
|
|---|
| | | | (in thousands, except per share information) | |
|---|
1st Quarter | | | | $ | 149,102 | | | $ | 46,019 | | | $ | 7,091 | | | $ | .38 | |
2nd Quarter | | | | | 157,361 | | | | 49,797 | | | | 9,000 | | | | .48 | |
3rd Quarter | | | | | 189,729 | | | | 65,031 | | | | 15,861 | | | | .85 | |
4th Quarter | | | | | 200,511 | | | | 66,933 | | | | 16,457 | | | | .88 | |
| Total | | | | $ | 696,703 | | | $ | 227,780 | | | $ | 48,409 | | | $ | 2.59 | |
| | | | Fiscal Year Ended September 26, 2009
| |
|---|
| | | | Net Sales
| | Gross
Profit
| | Net
Earnings
| | Net Earnings
Per
Diluted
Share(1)
|
|---|
| | | | (in thousands, except per share information) | |
|---|
1st Quarter | | | | $ | 141,142 | | | $ | 40,682 | | | $ | 4,319 | | | $ | .23 | |
2nd Quarter | | | | | 149,352 | | | | 45,377 | | | | 7,244 | | | | .39 | |
3rd Quarter | | | | | 179,761 | | | | 61,034 | | | | 14,929 | | | | .80 | |
4th Quarter | | | | | 182,792 | | | | 61,751 | | | | 14,820 | | | | .79 | |
| Total | | | | $ | 653,047 | | | $ | 208,844 | | | $ | 41,312 | | | $ | 2.21 | |
| (1) | | Total of quarterly amounts do not necessarily agree to the annual report amounts due to separate quarterly calculations of weighted average shares outstanding |
F-24
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
Year
| | | | Description
| | Opening
Balance
| | Charged to
Expense
| | Deductions
| | Closing
Balance
|
|---|
| 2010 | | | | Allowance for doubtful accounts | | $ | 623,000 | | | $ | 493,000 | | | $ | 525,000 | (1) | | $ | 591,000 | |
| 2009 | | | | Allowance for doubtful account | | $ | 926,000 | | | $ | 492,000 | | | $ | 795,000 | (1) | | $ | 623,000 | |
| 2008 | | | | Allowance for doubtful accounts | | $ | 1,052,000 | | | $ | 502,000 | | | $ | 628,000 | (1) | | $ | 926,000 | |
| |
| 2010 | | | | Inventory Reserve | | $ | 4,209,000 | | | $ | 1,509,000 | | | $ | 1,529,000 | (2) | | $ | 4,189,000 | |
| 2009 | | | | Inventory Reserve | | $ | 3,817,000 | | | $ | 2,036,000 | | | $ | 1,644,000 | (2) | | $ | 4,209,000 | |
| 2008 | | | | Inventory Reserve | | $ | 2,864,000 | | | $ | 3,149,000 | | | $ | 2,196,000 | (2) | | $ | 3,817,000 | |
| (1) | | Write-off of uncollectible accounts receivable. |
| (2) | | Disposals of obsolete inventory. |
S-1
