UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended March 31, 2001
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 jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6000 Central Highway, Pennsauken, NJ 08109
(Address of principal executive offices)
Telephone (856) 665-9533
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
As of April 20, 2001, there were 8,524,937 shares of the
Registrant's Common Stock outstanding.
INDEX
Page
Number
Part I. Financial Information
Item 1.Consolidated Financial Statements
Consolidated Balance Sheets - March 31, 2001
(unaudited) and September 30, 2000 3
Consolidated Statements of Earnings - Three
Months and Six Months Ended March 31, 2001
and March 25, 2000 (unaudited) 5
Consolidated Statements of Cash Flows - Six
Months Ended March 31, 2001 and March 25, 2000 6
Notes to the Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 13
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 16
Part II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 17
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
March 31, September 30,
2001 2000
(Unaudited)
Current assets
Cash and cash equivalents $ 3,558 $ 1,379
Accounts receivable 29,245 33,626
Inventories 28,397 21,473
Prepaid expenses and other 1,998 1,418
63,198 57,896
Property, plant and equipment,
at cost
Land 795 795
Buildings 5,586 5,586
Plant machinery and
equipment 85,330 75,817
Marketing equipment 158,680 156,093
Transportation equipment 568 2,043
Office equipment 7,253 6,981
Improvements 14,617 12,705
Construction in progress 741 1,304
273,570 261,324
Less accumulated deprecia-
tion and amortization 163,218 152,155
110,352 109,169
Other assets
Goodwill, trademarks and
rights,less accumulated
amortization 48,712 48,768
Long term investment
securities held to
maturity 1,550 1,620
Sundry 2,766 2,586
53,028 52,974
$226,578 $220,039
See accompanying notes to the consolidated financial statements.
3
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
(in thousands)
LIABILITIES AND March 31, September 30,
STOCKHOLDERS' EQUITY 2001 2000
(unaudited)
Current liabilities
Current maturities of
long-term debt $ 10,116 $ 2,186
Accounts payable 24,784 24,913
Accrued liabilities 7,700 8,728
42,600 35,827
Long-term debt, less
current maturities 43,506 42,481
Deferred income taxes 8,340 8,340
Other long-term liabilities 81 117
51,927 50,938
Stockholders' equity
Capital stock
Preferred, $1 par value;
authorized, 5,000
shares; none issued - -
Common, no par value;
authorized 25,000
shares; issued and
outstanding, 8,446
and 8,522, respectively 27,512 28,403
Accumulated other comprehen-
sive loss (1,622) (1,616)
Retained earnings 106,161 106,487
132,051 133,274
$226,578 $220,039
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)
Three months ended Six months ended
March 31, March 25, March 31, March 25,
2001 2000 2001 2000
Net Sales $76,807 $67,813 $146,877 $133,319
Cost of goods sold 39,698 32,592 75,750 65,973
Gross profit 37,109 35,221 71,127 67,346
Operating expenses
Marketing 25,449 23,857 49,814 45,011
Distribution 6,491 6,264 12,796 12,165
Administrative 3,231 2,776 6,336 5,567
Amortization of
intangibles and
deferred costs 670 739 1,351 1,484
35,841 33,636 70,297 64,227
Operating income 1,268 1,585 830 3,119
Other income (deductions)
Investment income 90 104 171 240
Interest expense (918) (652) (1,704) (1,338)
Sundry 142 138 185 211
Earnings (loss) before
income taxes 582 1,175 (518) 2,232
Income taxes(benefit) 215 435 (192) 826
NET EARNINGS(LOSS) $ 367 $ 740 $ (326) $ 1,406
Earnings (loss) per
diluted share $ .04 $ .08 $(.04) $ .15
Weighted average number
of diluted shares 8,631 9,329 8,425 9,355
Earnings (loss) per
basic share $ .04 $ .08 $(.04) $ .16
Weighted average number
of basic shares 8,431 9,014 8,425 9,009
See accompanying notes to the consolidated financial statements.
5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands) Six months ended
March 31, March 25,
2001 2000
Operating activities:
Net (loss) earnings $ (326) $ 1,406
Adjustments to reconcile net (loss)
earnings to net cash provided
by operating activities:
Depreciation and amortization
of fixed assets 14,907 12,932
Amortization of intangibles 1,637 1,733
Other adjustments 20 (74)
Changes in assets and liabilities,
net of effects from purchase of
companies
Decrease in accounts receivable 4 203 762
Increase in inventories (6,685) (3,345)
Increase in prepaid expenses (580) (1,143)
Decrease in accounts payable
and accrued liabilities (1,050) (438)
Net cash provided by operating
activities 12,126 11,833
Investing activities:
Purchases of property, plant
and equipment (6,594) (15,646)
Payments for purchases of
companies, net of cash
acquired and debt assumed (11,330) (1,280)
Proceeds from investments held
to maturity 70 1,109
Other (16) 165
Net cash used in investing
activities (17,870) (15,652)
Financing activities:
Proceeds from borrowings 13,000 10,000
Proceeds from issuance of common
stock 367 427
Payments to repurchase common stock (1,400) (1,020)
Payments of long-term debt (4,044) (9,056)
Net cash provided by financing
activities 7,923 351
Net increase(decrease) in
cash and cash equivalents 2,179 (3,468)
Cash and cash equivalents at
beginning of period 1,379 5,945
Cash and cash equivalents at
end of period $ 3,558 $ 2,477
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. Certain prior year amounts have been
reclassified to conform to the current period presentation.
These reclassifications had no effect on reported net earnings.
The results of operations for the three months and six months
ended March 31, 2001 and March 25, 2000 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 frozen juice bars and ices 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 30, 2000.
Note 2 The Company's calculation of earnings per share in accordance
with SFAS No. 128, "Earnings Per Share," is as follows:
7
Three Months Ended March 31, 2001
Income Shares Per Share
(Numerator)(Denominator) Amount
(in thousands,
except per share amounts)
Basic EPS
Net Income available
to common stockholders $ 367 8,431 $.04
Effect of Dilutive Securities
Options - 200 -
Diluted EPS
Net Income available to
common stockholders plus
assumed conversions $ 367 8,631 $.04
Six Months Ended March 31, 2001
Income Shares Per Share
(Numerator)(Denominator) Amount
(in thousands,
except per share amounts)
Basic EPS
Net Loss available
to common stockholders $ (326) 8,425 $(.04)
Effect of Dilutive Securities
Options* - - -
Diluted EPS
Net Income available to common
stockholders plus assumed
conversions $ (326) 8,425 $(.04)
*No effect was given to the options as inclusion would be
antidilutive.
8
Three Months Ended March 25, 2000
Income Shares Per Share
(Numerator)(Denominator) Amount
(in thousands,
except per share amounts)
Basic EPS
Net Income available
to common stockholders $ 740 9,014 $.08
Effect of Dilutive Securities
Options - 315 -
Diluted EPS
Net Income available to common
stockholders plus assumed
conversions $ 740 9,329 $.08
Six Months Ended March 25, 2000
Income Shares Per Share
(Numerator)(Denominator) Amount
(in thousands,
except per share amounts)
Basic EPS
Net Income available
to common stockholders $1,406 9,009 $.16
Effect of Dilutive Securities
Options - 346 (.01)
Diluted EPS
Net Income available to
common stockholders plus
assumed conversions $1,406 9,355 $.15
Note 3 Inventories consist of the following:
March 31, September 30,
2001 2000
(in thousands)
Finished goods $17,294 $10,714
Raw materials 2,372 2,136
Packaging materials 2,911 2,532
Equipment parts & other 5,820 6,091
$28,397 $21,473
9
Note 4 Using the guidelines set forth in SFAS No. 131, the Company has
two reportable segments: Snack Foods and 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 Six Months Ended
March 31, March 25, March 31, March 25,
2001 2000 2001 2000
(in thousands)
Sales:
Snack Foods $ 56,784 $ 47,738 $106,777 $ 92,932
Frozen Beverages 20,023 20,075 40,100 40,387
$ 76,807 $ 67,813 $146,877 $133,319
Depreciation and Amortization:
Snack Foods $ 4,087 $ 3,460 $ 8,088 $ 6,844
Frozen Beverages 4,209 3,940 8,456 7,821
$ 8,296 $ 7,400 $ 16,544 $ 14,665
Earnings(Loss) Before Taxes:
Snack Foods $ 3,758 $ 3,556 $ 5,572 $ 6,917
Frozen Beverages (3,176) (2,381) (6,090) (4,685)
$ 582 $ 1,175 $ (518) $ 2,232
Capital Expenditures:
Snack Foods $ 1,129 $ 5,309 $ 2,860 $ 7,749
Frozen Beverages 2,174 3,160 3,734 7,897
$ 3,303 $ 8,469 $ 6,594 $ 15,646
Assets:
Snack Foods $134,145 $114,645 $134,145 $114,645
Frozen Beverages 92,433 100,378 92,433 100,378
$226,578 $215,023 $226,578 $215,023
10
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. In June 2000, SFAS
138 was issued, "Accounting for Certain Derivative Instruments
and Certain Hedging Activities, an amendment of SFAS 133".
SFAS 133, as amended by SFAS 138, requires that all derivative
instruments be recorded on the balance sheet at their
respective fair values. Changes in the fair value of
derivatives are recorded each period in current earnings or
other comprehensive income,
depending on the designation of the hedge transaction. The
Company adopted SFAS 133, as amended by SFAS 138, in the first
quarter of fiscal year 2001. Based on the Company's minimal use
of derivatives at the current time, the adoption of this
standard did not have a significant impact on earnings or
financial position of the Company.
In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements (SAB 101) which addresses certain criteria
for revenue recognition. SAB 101, as amended by SAB 101A and
SAB 101B, outlines the criteria that must be met to recognize
revenue and provides guidance for disclosures related to
revenue recognition policies.
The Company implemented the applicable provisions of SAB 101 as
amended by SAB 101A in the first quarter of fiscal year 2001.
Management believes the Company's revenue recognition policies
comply with the guidance contained in the SAB and, therefore,
the Company's results of operations were not materially
affected.
In May 2000, The Emerging Issues Task Force reached consensus
opinions on Issue 00-14, "Accounting for Certain Sales
Incentives (Issue 00-14)". Issue 00-14 pertains to the
recognition, measurement, and income statement classification
of certain sales
11
incentives, including discounts, coupons, rebates, and free
products or services received by the
customer. The issue requires certain incentives to be
classified as a reduction of revenue. The Company reclassed
approximately $553,000 and $428,000 of sales incentives from
marketing expense to reduction of sales in the three months
ended March 31, 2001 and March 25, 2000, respectively, and
approximately $1,137,000 and $872,000 in the six months ended
March 31, 2001 and March 25, 2000, respectively.
12
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 three months ended March 31, 2001 and March 25, 2000,
fluctuations in the valuation of the Mexican peso caused increases of
$32,000 and $35,000, respectively, in stockholders' equity because of
the revaluation of the net assets of the Company's Mexican frozen
beverage subsidiary. In the six month periods, there was a decrease of
$6,000 in fiscal year 2001 and an increase of $25,000 in fiscal year
2000.
In November 2000, the Company acquired the assets of Uptown
Bakeries for cash. Uptown Bakeries, located in Bridgeport, NJ, is a
fresh bakery products manufacturer with approximately $17,000,000 in
annual sales.
In February 2001, the Company acquired the assets, and exclusive
rights for food service channels, of Chill brand fruit ices. Chill Ices
have approximately $3 million in annual foodservice sales.
In December 2000, the Company refinanced its unsecured term loan
and its general-purpose bank credit line with a general purpose
unsecured bank credit line of $60,000,000. The new agreement contains
restrictive covenants and requires commitment fees in accordance with
standard banking practice. Borrowings under the line at March 31, 2001
were $48,000,000.
In the six months ended March 31, 2001, the Company purchased and
retired 109,300 shares of its common stock at a cost of $1,400,000.
Under a buyback authorization approved by the Board of Directors in
fiscal year 2000, 277,000 shares remain to be purchased.
13
Results of Operations
Net sales increased $8,994,000 or 13% to $76,807,000 for the three
months and $13,558,000 or 10% to $146,877,000
for the six months ended March 31, 2001 compared to the six months ended
March 25, 2000. Excluding sales resulting from acquisitions, sales
increased 7% for the three month period and 5% for the six month period
compared to a year ago.
SNACK FOODS
Sales to food service customers increased $6,964,000
or 26% in the second quarter to $33,847,000 and increased
$8,701,000 or 16% for the six months. Excluding sales resulting from
acquisitions, sales would have increased 9% for the second quarter and
4% for the six months. Soft pretzel sales to the food service market
increased 12% to
$16,160,000 in the second quarter and 2% to $30,530,000 in the six
months. Excluding sales resulting from acquisitions, food service soft
pretzel sales would have increased 7% in the second quarter and would
have decreased 1% in the six month period. Frozen juice bars and ices
sales increased 2% to $6,461,000 in the three months and sales of
$10,612,000 in the six month period were essentially unchanged from a
year ago. Churro sales to food service customers increased 17% to
$2,929,000 in the second quarter and 13% to $5,599,000 in the six
months. Cookie sales increased 24% to $3,268,000 in the second quarter
and 28% to $6,972,000 in the six months.
Sales of products to retail supermarkets increased
$2,686,000 or 23% to $14,515,000 in the second quarter and
32% to $25,237,000 in the first half. Soft pretzel sales for the second
quarter were up 6% to $8,060,000 and were up 13% to $14,959,000 for the
six months. Sales of our flagship SUPERPRETZEL brand soft pretzels,
excluding SOFTSTIX, increased 4% in the second quarter and
11% for the six months. Sales of frozen juices and ices increased
$2,238,000 or 55% to $6,298,000 in the second quarter and $4,374,000 or
76% to $10,154,000 in the first half primarily due to sales of the
Company's MINUTE MAID brand licensed products which were introduced in
last year's second quarter.
14
Bakery sales decreased $342,000 or 6% to $5,605,000 in the second
quarter and $998,000 or 7% to $13,060,000 in the first six months due to
decreased unit sales to one customer. Sales of our Bavarian Pretzel
Bakery decreased 9% to $2,817,000 in the second quarter and were
essentially unchanged at $6,781,000 for the six month period. The second
quarter sales decrease was caused primarily by decreased mall traffic.
FROZEN BEVERAGES
Frozen beverage and related product sales were essentially
unchanged with sales of $20,023,000 in the second quarter and were down
$287,000 or 1% to $40,100,000 in the six months. Beverage sales alone
increased 1% in the second quarter and the first half to $16,229,000 and
$33,405,000, respectively, although gross profit on beverage sales
decreased approximately 1% in the quarter and in the six months compared
to last year. Service and lease revenue decreased $169,000 in the second
quarter and increased $249,000 to $5,479,000 in the six months.
CONSOLIDATED
Gross profit as a percentage of sales decreased to 48% in the
current year's three and six month periods from 52% and 51% in the
corresponding periods last year. The gross profit percentage decline in
this year's periods is primarily related to the inclusion of Uptown
Bakeries which has a low gross profit percentage relative to the balance
of the Company's business.
Total operating expenses increased $2,205,000 in the second
quarter and as a percentage of sales decreased to 47% from 50% in last
year's same quarter. For the first half, operating expenses increased
$6,070,000 and as a percentage of sales were 48% in both years.
Marketing expenses decreased to 33% of sales in this year's three month
period from 35% of sales last year. For the six month period, marketing
expenses were 34% of sales in both years. The drop in marketing
percentage in the second quarter is caused by Uptown Bakeries which has
little marketing expense. Distribution expenses decreased to 8% of
sales in this year's second quarter from 9% last year;
15
and were 9% of sales in both years' six month period. The drop in
distribution expense percentage in the second quarter was caused by
Uptown Bakeries which has little distribution expense. Administrative
expenses as a percent of sales were at 4% for all periods reported.
Operating income decreased $317,000 or 20% to $1,268,000 in the
second quarter and $2,289,000 or 73% to $830,000 in the first half.
For the three and six months, interest expense increased $266,000
and $366,000, respectively, due primarily to debt incurred to fund
acquisitions.
The effective income tax rate has been estimated at 37% in
all periods.
Net earnings decreased $373,000 or 50% in the current
three month period to $367,000 and a net loss of $326,000 for the six
months compared to net earnings of $1,406,000 in the year ago period.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in the Company's assessment of
its sensitivity to market risk since its presentation set forth, in item
7a. "Quantitative and Qualitative Disclosures About Market Risk," in
its 2000 annual report on Form 10-K filed with the SEC.
16
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The results of voting at the Annual Meeting of Shareholders held
on February 8, 2001 is as follows:
Absentees
Votes Cast and Broker
For Against Withheld Non Votes
Election of Robert
M. Radano as
Director 6,574,100 - 72,623 -
Election of Peter
G. Stanley as
Director 6,574,100 - 72,623 -
The Company had 8,414,793 shares outstanding on December 4, 2000
the record date.
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 March 31, 2001.
17
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: April 27, 2001 /s/Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: April 27, 2001 /s/Dennis G. Moore
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
18