UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended December 25, 1999
or
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number: 0-14616
J & J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
(State or other jurisdication of (I.R.S. Employer
incorporation or organization) Identification No.)
6000 Central Highway, Pennsauken, NJ 08109
(Address of principal executive offices)
Telephone (856) 665-9533
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
X Yes No
As of January 14, 2000, there were 9,017,183 shares of the
Registrant's Common Stock outstanding.
INDEX
Page
Number
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - December 25, 1999
and September 25, 1999 3
Consolidated Statements of Earnings - Three
Months Ended December 25, 1999 and December
26, 1998 5
Consolidated Statements of Cash Flows - Three
Months Ended December 25, 1999 and December
26, 1998 6
Notes to the Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 13
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
ASSETS
December 25, September 25,
1999 1999
(Unaudited)
Current assets
Cash and cash equivalents $ 1,685 $ 5,945
Short term investment
securities held to maturity 925 924
Accounts receivable 28,343 31,881
Inventories 17,582 16,187
Prepaid expenses and deposits 1,861 1,130
50,396 56,067
Property, plant and equipment,
at cost
Land 795 745
Buildings 5,586 5,386
Plant machinery and
equipment 66,893 66,305
Marketing equipment 142,348 138,335
Transportation equipment 2,072 2,049
Office equipment 6,539 6,308
Improvements 11,975 11,769
Construction in progress 2,431 1,356
238,639 232,253
Less accumulated deprecia-
tion and amortization 135,470 130,292
103,169 101,961
Other assets
Goodwill, trademarks and
rights,less accumulated
amortization 50,864 50,821
Long term investment
securities held to
maturity 1,740 1,925
Sundry 2,547 2,906
55,151 55,652
$208,716 $213,680
See accompanying notes to the consolidated financial
statements.
3
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND December 25, September 25,
STOCKHOLDERS' EQUITY 1999 1999
(dollars in thousands,
except share information)
Current liabilities
Current maturities of
long-term debt $ 8,159 $ 8,214
Accounts payable 22,536 23,272
Accrued liabilities 6,885 8,418
37,580 39,904
Long-term debt, less
current maturities 30,687 34,660
Deferred income taxes 7,702 7,702
Other long-term liabilities 204 245
Stockholders' equity
Capital stock
Preferred, $1 par value;
authorized, 5,000,000
shares; none issued - -
Common, no par value;
authorized 25,000
shares; issued and
outstanding, 9,008
and 9,000,respectively 36,969 36,251
Accumulated other comprehen-
sive income (1,611) (1,601)
Retained earnings 97,185 96,519
132,543 131,169
$208,716 $213,680
See accompanying notes to the consolidated financial
statements.
4
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
December 25, December 26,
1999 1998
Net Sales $65,950 $60,549
Cost of goods sold 33,381 29,567
Gross profit 32,569 30,982
Operating expenses
Marketing 20,398 19,607
Distribution 7,101 6,676
Administrative 2,791 2,540
Amortization of
intangibles and
deferred costs 745 739
31,035 29,562
Operating income 1,534 1,420
Other income (deductions)
Investment income 136 126
Interest expense (686) (879)
Sundry 73 255
Earnings before
income taxes 1,057 922
Income taxes 391 341
NET EARNINGS $ 666 $ 581
Earnings per diluted share $ .07 $ .06
Weighted average number
of diluted shares 9,381 9,541
Earnings per basic share $ .07 $ .06
Weighted average number
of basic shares 9,004 9,036
See accompanying notes to the consolidated financial
statements
5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in thousands)
December 25, December 26,
1999 1998
Operating activities:
Net earnings $ 666 $ 581
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization
of fixed assets 6,354 5,878
Amortization of intangibles 911 851
Other adjustments (48) (24)
Changes in assets and liabilities,
net of effects from purchase of
companies
Decrease in accounts receivable 3,542 8,039
Increase in inventories (1,132) (1,159)
Increase in prepaid expenses (731) (556)
Decrease in accounts payable
and accrued liabilities (1,676) (4,409)
Net cash provided by operating
activities 7,886 9,201
Investing activities:
Purchase of property, plant
and equipment (7,177) (6,509)
Payments for purchases of
companies, net of cash
acquired and debt assumed (1,280) -
Proceeds from investments
held to maturity 185 115
Other 68 21
Net cash used in investing
activities (8,204) (6,373)
Financing activities:
Proceeds from issuance of stock 102 363
Proceeds from borrowings 3,000 -
Payments to repurchase common stock (19) -
Payments of long-term debt (7,025) (5,050)
Net cash used in financing
activities (3,942) (4,687)
Net decrease in cash and
cash equivalents (4,260) (1,859)
Cash and cash equivalents at
beginning of period 5,945 3,204
Cash and cash equivalents at
end of period $ 1,685 $1,345
See accompanying notes to the consolidated financial
statements
6
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 In the opinion of management, the accompanying
unaudited consolidated financial statements contain
all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the
financial position and the results of operations and
cash flows.
The results of operations for the three months ended
December 25, 1999 and December 26, 1998 are not
necessarily indicative of results for the full year.
Sales of the Company's retail stores are generally
higher in the first quarter due to the holiday
shopping season. Sales of the Company's frozen
beverages and Italian ice are generally higher in
the third and fourth quarters due to warmer weather.
While the Company believes that the disclosures
presented are adequate to make the information not
misleading, it is suggested that these consolidated
financial statements be read in conjunction with the
consolidated financial statements and the notes
included in the Company's Annual Report on Form 10-K
for the year ended September 25, 1999.
Note 2 The Company's calculation of earnings per share in
accordance with SFAS No. 128, "Earnings Per Share,"
is as follows:
Three Months Ended December 25, 1999
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
Basic EPS
Net Income available
to common stockholders $ 666 9,004 $.07
Effect of Dilutive Securities
Options - 377 -
Diluted EPS
Net Income available to
common stockholders plus
assumed conversions $ 666 9,381 $.07
7
Three Months Ended December 26, 1998
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
Basic EPS
Net Income available
to common stockholders $ 581 9,036 $.06
Effect of Dilutive Securities
Options - 505 -
Diluted EPS
Net Income available to common
stockholders plus assumed
conversions $ 581 9,541 $.06
Note 3 Inventories consist of the following:
December 25, September 25,
1999 1999
(in thousands)
Finished goods $ 8,349 $ 8,118
Raw materials 1,819 1,579
Packaging materials 2,233 1,770
Equipment parts & other 5,181 4,720
$17,582 $16,187
Note 4 In fiscal year 1999, the Company adopted SFAS No.
131, "Disclosures about Segments of an Enterprise
and Related Information". SFAS No. 131 superceded
SFAS 14, "Financial Reporting for Segments of a
Business Enterprise", replacing the "industry
segment" approach with the "management approach".
The management approach designates the internal
organization that is used by management for making
operating decisions and assessing performance as the
source of the Company's reportable segments, as well
as disclosures about products and services and major
customers. The adoption of SFAS No. 131 did not
affect the results of operations or the financial
position of the Company.
Using the guidelines set forth in SFAS No. 131, the
Company has two reportable segments: Snack Foods and
8
Frozen Beverages. Snack Foods manufactures and
distributes snack foods and bakery items. Frozen
Beverages markets and distributes frozen beverage
products. The segments are managed as strategic
business units due to their distinct production
processes and capital requirements.
The Company evaluates each segment's performance
based on income or loss before taxes, excluding
corporate and other unallocated expenses and non-
recurring charges. Information regarding the
operations in these reportable segments is as
follows:
Three Months Ended
December 25, December 26,
1999 1998
(in thousands)
Sales:
Snack Foods $ 45,638 $ 43,674
Frozen Beverages 20,312 16,875
$ 65,950 $ 60,549
Depreciation and Amortization:
Snack Foods $ 3,384 $ 3,155
Frozen Beverages 3,881 3,574
$ 7,265 $ 6,729
Income Before Taxes:
Snack Foods $ 3,360 $ 2,799
Frozen Beverages (2,303) (1,877)
$ 1,057 $ 922
Capital Expenditures:
Snack Foods $ 2,440 $ 2,938
Frozen Beverages 4,737 3,571
$ 7,177 $ 6,509
Assets:
Snack Foods $106,603 $105,360
Frozen Beverages 102,113 99,426
$208,716 $204,786
Sales to a single Snack Foods' customer were
approximately 11% and 12% of the Company's sales for
the periods ending December 25, 1999 and December
26, 1998, respectively.
9
Note 5 In June 1998, SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities" was
issued. Subsequent to this statement, SFAS No. 137
was issued, which amended the effective date of SFAS
No. 133 to be all fiscal quarters of all fiscal
years beginning after June 15, 2000. Based on the
Company's minimal use of derivatives at the current
time, management does not anticipate the adoption of
SFAS No. 133 will have a significant impact on
earnings or financial position of the Company.
However, the impact from adopting SFAS No. 133 will
depend on the nature and purpose of the derivatives
instruments in use by the Company at that time.
10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
The Company's current cash and marketable securities
balances and cash expected to be provided by future
operations are its primary sources of liquidity. The
Company believes that these sources, along with its
borrowing capacity, are sufficient to fund future growth
and expansion.
In the quarters ended December 25, 1999 and December
26, 1998 fluctuations in the valuation of the Mexican peso
caused a decrease of $10,000 and an increase of $27,000 in
stockholders' equity because of the revaluation of the net
assets of the Company's Mexican frozen beverage subsidiary.
Available to the Company are unsecured general purpose
bank lines of credit totalling $30,000,000. Borrowings
under the lines at December 25, 1999 were $9,000,000.
Results of Operations
Net sales increased $5,401,000 or 9% for the three
months ended December 25, 1999 compared to the three months
ended December 26, 1998.
SNACK FOODS
Sales to food service customers increased $1,449,000
or 6% in the first quarter to $26,240,000. Approximately
80% of this increase resulted from the acquisition of the
Camden Creek Bakery cookie business in February 1999. Soft
pretzel sales of $15,436,000 to the food service market
were essentially unchanged from last year. Italian ice and
frozen juice treat and dessert sales increased 3% to
$4,432,000 in the three months. Churro sales to food
service customers decreased 12% to $2,454,000 in the
quarter due primarily to decreased unit sales to one
customer. Cookie sales increased 113% to $2,818,000 from
$1,325,000 last year primarily due to the acquisition of
the Camden Creek cookie business.
Sales of products to retail supermarkets decreased
$188,000 or 2% in the first quarter. Soft pretzel sales
for the first quarter were down 3% to $5,488,000. Sales
of the flagship SUPERPRETZEL brand soft pretzels, excluding
SOFTSTIX, decreased 8% in the first quarter. An
11
advertising campaign which began in last year's first
quarter helped boost year ago pretzel sales. Sales of
Italian Ice decreased $36,000 or 2% to $1,596,000 in the
first quarter.
Bakery sales increased $868,000 or 12% to $8,111,000
in the first quarter due to increased sales across our
customer base. Sales of our Bavarian Pretzel Bakery
decreased $165,000 or 4% to $3,734,000 in the quarter from
last year.
FROZEN BEVERAGES
Frozen beverage and related product sales increased
$3,437,000 or 20% to $20,312,000 in the first quarter.
Beverage sales alone increased 13% to $16,982,000 and gross
profit on beverage sales increased 6%. Service and lease
revenue increased $1,492,000 from the first quarter of
fiscal year 1999 due primarily to service provided to one
customer.
Gross profit as a percentage of sales decreased to 49%
in the current first quarter from 51% in the year ago
period. This gross profit percentage decrease is primarily
attributable to lower gross profit percentages of the
increased service and lease revenue of our frozen beverage
business.
Total operating expenses increased $1,473,000 in the
first quarter but as a percentage of sales decreased to
47% from 49% in last year's same quarter. Marketing
expenses decreased to 31% of sales from 32% in last year's
first quarter. Distribution expenses and administrative
expenses as a percent of sales remained at 11% and 4%,
respectively, compared to last year. The decrease in
marketing expenses as a percent of sales is due to lower
advertising and allowance costs in our retail supermarket
business.
Operating income increased 8%, or $114,000 to
$1,534,000 in the first quarter from $1,420,000 in last
year's quarter.
Interest expense decreased $193,000 from last year's
quarter to $686,000 this year due to lower debt levels.
12
Sundry income decreased to $73,000 this year from
$255,000 last year. Last year's sundry income included
$250,000 from the favorable settlement of litigation.
The effective income tax rate has been estimated at
37% this year compared to 37% in last year's quarter.
Net earnings increased $85,000 or 15% in the current
three month period to $666,000.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
There has been no material change in the Company's
assessment of its sensitivity to market risk since its
presentation set forth, in item 7a. "Quantitative and
Qualitative Disclosures About Market Risk," in its 1998
annual report on Form 10-K filed with the SEC.
13
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None
b) Reports on Form 8-K - There were no reports
on Form 8-K for the three months ended
December 25, 1999.
14
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned
thereunto duly authorized.
J & J SNACK FOODS CORP.
Dated: February 2, 2000 /s/ Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: February 2, 2000 /s/ Dennis G. Moore
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
15