J & J Snack Foods Corp.
Front cover page: Graphic of J&J Snack Foods Copr. LOGO and
drawing of SuperPretzel
1995 Annual Report
Profile
J & J Snack Foods Corp. is a special niche company that
manufactures, markets and distributes an expanding variety of
nutritional, popularly priced snack foods and beverages to the
food service and retail supermarket industries.
Our product offerings include soft pretzels; frozen carbonated
beverages; frozen juice bars and desserts; churros, a cinnamon
pastry; funnel cakes; cookies, muffins and baked health foods;
popcorn and other snack foods and drinks.
These tasty products are available throughout the U.S. and a
growing list of markets abroad. Consumers enjoy them in a variety
of settings, including:
* Snack bars and food stands in leading chain, department,
discount and convenience stores
* Malls and shopping centers
* Fast food outlets
* Stadiums and sports arenas
* Leisure and theme parks
* Movie theatres
* Schools, colleges and other institutions
In addition, a number of J & J's products are available through
supermarkets and warehouse club stores for home consumption.
Financial Highlights
J & J Snack Foods Corp. and Subsidiaries
Fiscal year ended in September
(In thousands except per share data)
1995 1994 1993 1992 1991
Sales $185,362 $174,425 $147,190 $126,927 $109,666
Net Earnings $5,804 $8,532 $8,350 $5,936 $6,079
Total Assets $123,309 $127,366 $121,494 $112,447 $104,412
Long-Term
Debt $5,011 $5,028 $5,043 $5,068 $2,411
Stockholders'
Equity $96,084 $100,545 $97,956 $90,065 $86,437
Common Share Data
Earnings Per
Share $.61 $.82 $.80 $.55 $.67
Book Value
Per Share $10.53 $10.17 $9.49 $8.66 $8.12
Common Shares Outstanding
At Year End 9,126 9,889 10,318 10,400 10,641
Graphic: Chart representation of Sales, Net Earnings and Stockholders equity
for the years 1991 through 1995. The information depicted is
contained in the above chart.
Graphic: Photograph of Gerald B. Shreiber President and Chairman of J&J
Snack Foods Corp.
Letter from the President
While preparing to write my President's Message for the year, I
struggled with an appropriate tone to describe our performance for
fiscal year 1995.
I didn't want to paint a glossed-over inaccurate picture of
rose-colored puffery, supported by selective numbers and facts.
Nor did I want to be too negative in view of our actual
performance and, given the dedicated and tireless effort of our
people.
Last year was, indeed, a year of challenges. Although our sales
climbed to a record $185.4 million -- our 24th consecutive year of
sales increases -- our earnings, impacted by a combination of
unrelated factors, declined to $5.8 million.
1995 Results in brief:
All in all, the numbers look like this:
* Sales grew 6.3% to $185.4 million.
* Net income declined to $5.8 million from $8.5 million.
* Earnings per share decreased to $.61 from $.82.
* Book value increased to $10.53 per share.
During fiscal year 1995, a combination of factors, including
higher costs of raw materials and packaging, increased competition
in our supermarket business sector, and economic problems and the
peso devaluation in Mexico, contributed to our earnings decline.
While we didn't achieve the overall goals and objectives we had
set for ourselves, we did, nevertheless, improve our position and
foundation in several key areas. In fiscal year 1995, we:
* Expanded our core food service markets.
* Developed new products, including soft pretzel line extensions
and fruit filled churros.
* Increased our manufacturing capability and improved our
efficiencies.
* Developed new channels of distribution.
* Acquired international marketing rights for ICEE.
While dealing with challenges in 1995 that negatively impacted our
earnings, we maintained our focus on expanding our markets for the
long term. On the cover of this year's annual report is an
illustration of a soft pretzel along with scenes depicting a
variety of market settings for our products. Our products and business
opportunities take us into a growing and diverse variety
of settings to sell our products, competing for "share of stomach"
at tens-of-thousands of locations including:
* Sports arenas, amusement and theme parks
* Mass merchandisers
* Malls and shopping centers
* Business and industry
* Schools, colleges and healthcare institutions
* Convenience stores
* Supermarkets and club stores
Over the years, we have improved our products and method of
presentation to the consumer so as to make them more available,
affordable and appealing.
Niche product leadership
SUPERPRETZEL soft pretzels is the recognized leader and has the
dominant share of the growing soft pretzel category. As the low
cost producer and market innovator, we plan on continuing our
category development and leadership. Our other niche products,
including TIO PEPE'S churros, LUIGI'S Real Italian Ice, SHAPE-UPS
frozen juice bars, THE FUNNEL CAKE FACTORY funnel cakes and our
ICEE and ARCTIC BLAST frozen carbonated beverages, are also the
market leaders in their niche categories.
The above group, while impacted by increased costs of raw
materials and packaging, continued to support and grow its niche
markets while defending its market share.
We particularly addressed problems related to our frozen
carbonated beverage business, which operates under the ICEE and
ARCTIC BLAST brands. Beverage sales of this group rose 3%,
reversing a decline in 1994 and operational efficiencies and other
strategies were put in place to improve performance and
profitability.
While competition is intense for the consumer discretionary
dollar, our nutritional snack foods and beverages are unique. Our
niche positioning and trade relations are excellent and our
customer base continues to expand. Over the years, we have
enhanced our position as a premier producer and have invested
heavily to maintain that edge.
25th Anniversary
As we look to fiscal 1996, our 25th Anniversary year, we are
enthusiastic and optimistic for the future. Nearly a quarter
century of business experience, leadership and growth, coupled
with our dedicated management, gives us great confidence for the
future.
Our business remains fertile and growable. We are the market
leaders in the snack food and beverage categories that we
participate in. We believe our products are relatively resistant
to cyclical recessionary pressures. We are financially sound and
our cash flow is strong. We plan on continuing to grow our
business through internal expansion and through possible
acquisitions. We will continue to manage our business for the long
term and we believe we are well positioned for the future.
Graphic of Mr. Shreiber's signature.
Gerald B. Shreiber
President and Chairman
December 1, 1995
Graphic: Picture of a box of SuperPretzel Bites and a SuperPretzel Graphic
Soft Pretzels
Graphic: Pictures of a box of SuperPretzel Bites, Softstix, SuperPretzel, and
banners for Sweet Dough Soft Pretzels and Bavarian Pretzel Bakery
The right snacks for today.
In today's fast-paced world, people have less time. They're making
the most of every minute and eating on the run wherever they go.
Today's health-conscious consumers want snacks that are
nutritious, as well as delicious. And parents continue to search
for ways to combat traditional "fast-food mania" by providing
equally fun and tasty treats for their children.
J & J Snack Foods is ideally positioned to benefit from these two
mega-trends. Our wide variety of wholesome and satisfying products
are available in more and more of the places where consumers find
themselves "grabbing a snack." At the local shopping mall; a
sporting event; a theme park; at school; or even a quick bite at
home.
As the largest producer of soft pretzels in the world, J & J Snack
Foods' flagship brand, SUPERPRETZEL soft pretzels, is "the
good-for-you snack." They're fat free, cholesterol free and all
natural -- qualities that continue to fuel our soft pretzel sales
in both our Food Service and Retail Supermarket divisions.
A growth strategy that works.
J & J's sales and marketing strategy for growth has produced
outstanding results across our product lines, and consists of two
fundamental principles:
* Create innovative new products for existing distribution
channels
* Develop new distribution channels for existing products
Over the years, we have created innovative new products by
introducing a number of line extensions to our flagship
SUPERPRETZEL brand. These include such products as SOFT PRETZEL
BITES, SOFTSTIX cheese-filled soft pretzel sticks, THE BIG CHEESE
cheese-filled soft pretzels, king size and one ounce soft pretzels
as well as proprietary and custom pretzel shapes.
Our second principle is visible in the number of new locations
where our pretzels can be found. In the past year, we continued to
expand soft pretzel distribution to consumers through various
alternative product delivery systems through schools and home
delivery services, which helped contribute to an overall 13%
increase in food service soft pretzel sales.
SUPERPRETZEL: The gold standard.
SUPERPRETZEL soft pretzels are "the perfect snack." Recognized as
the gold standard of soft pretzels, it is the brand consumers have
come to know and trust. For customers with existing food service
facilities, we provide the well known SUPERPRETZEL soft pretzel
brand, which can stand alone or work together with other branded
merchandising concepts.
SUPERPRETZEL generates revenue even for customers without
traditional snack bar facilities, thanks to our branded concept
programs and innovative use of specially designed mobile
merchandising units. College campuses and warehouse club stores
are among those enjoying added revenue generating food service
operations.
Feeling the heat in the freezer case.
The SUPERPRETZEL product line, including SUPERPRETZEL soft
pretzels, SOFT PRETZEL BITES and SOFTSTIX, is the number one brand
of soft pretzels in the retail supermarket. These microwaveable
pretzels make it easy for consumers to enjoy a soft, warm,
delicious treat at home or at work -- in just seconds.
Graphic: Drawing of baseball park packed with fans eating
SuperPretzels
This year, however, has been a challenging one. Significant and
increased competition for freezer space from other soft pretzels
and hot snacks, together with slower category growth, has impacted
our performance.
Although overall supermarket sales of our soft pretzel products
declined by 2% for the year, mostly due to volume declines of
SOFTSTIX, our core retail SUPERPRETZEL soft pretzels grew
slightly. We are in the process of implementing programs and
marketing strategies which are designed to regain positive
momentum in building the soft pretzel category in supermarkets.
A new twist on pretzels.
As the market leader and innovator, we are always working to
further improve our existing soft pretzel products and introduce
new items to the marketplace. Our research and development
department continues to create soft pretzel line extensions in new
flavors, shapes and sizes.
This year marked the introduction of a new soft pretzel product to
our Food Service division: SWEET DOUGH soft pretzels. These soft
pretzels offer an exciting twist on the conventional soft pretzel
using a non-traditional sweet dough recipe. They're delicious
plain or dipped in butter and topped with cinnamon sugar.
Near the end of our fourth quarter, tests were initiated on a new
cinnamon raisin pretzel for an existing large food service
customer. Other new products are in various stages of development
and commercialization.
Snackin' at the pretzel shoppe.
Consumers continue to flock to our BAVARIAN PRETZEL BAKERY outlets
for a healthy snack on the run. This J & J subsidiary operates
approximately 80 retail outlets in regional malls primarily
throughout the Mid-Atlantic states, all company owned and
operated.
Retail sales at BAVARIAN PRETZEL BAKERY grew by 6% for the year.
The menu offerings were expanded at many locations to include our
new SWEET DOUGH soft pretzels along with a host of other J & J
snack items. BAVARIAN PRETZEL BAKERY enables us to compete in the
growing retail pretzel shoppe marketplace and provides a natural
extension to our distribution channels.
It's Fun! It's Healthy! It's SUPERPRETZEL!
No wonder kids, parents and schools love SUPERPRETZEL! It's the
perfect fat free school lunch or snack item. Our soft pretzel
products meet the requirements for the U.S.D.A. National School
Lunch/Breakfast Program.
Graphic: Drawing of a SuperPretzel
A Super Selling Tool
J & J offers a wide array of branded merchandising and equipment
programs which are available to our thousands of food service
customers.
These units, which prominently display our eye-catching
SUPERPRETZEL logo, provide food service customers with everything
they need. The result is higher consumer recognition and increased
sales.
Graphic: Picture of a SuperPretzel display case
Frozen Desserts
Graphic: Picture of a LUIGI'S reqtail package, LUIGI'S, shap-ups
and FROSTAR logos.
Our frozen products are hot! hot! hot!
Our two-fold growth strategy of product development and market
expansion has resulted in healthy sales gains for J & J's other
niche products, including frozen juice bars and desserts, marketed
under the LUIGI'S, SHAPE-UPS and FROSTAR brands.
Frozen dessert products for the Food Service division experienced
growth this year largely due to the new LUIGI'S Real Italian Ice
squeeze-up tubes, which helped produce a sales increase of 26% for
the year.
LUIGI'S is another good-for-you niche product benefitting from the
consumer's desire to eat healthier foods. An excellent alternative
to ice cream, it's a refreshing taste treat that is fat free,
cholesterol free and dairy free.
We also enjoyed continued strength in our SHAPE-UPS and FROSTAR
brands. These frozen treats are both made with real fruit juice
and are sold primarily through school food service. Like our soft
pretzels, SHAPE-UPS carry the Child Nutrition (CN) Label and are
approved by the U.S.D.A. for the National School Lunch Program.
They're nutritious, fun to eat, and a favorite of kids nationwide.
Graphic: Artist drawing of children
The squeeze is on!
LUIGI'S Real Italian Ice squeeze-up tubes, which were introduced
last year in a 4 oz. size, were rolled out nationally this year
with better than expected results. Squeeze-ups are currently being
sold in snack bars, convenience stores, leisure and theme parks
and pizzeria restaurants. And they're even being served on a major
airline!
Made with real fruit juice, LUIGI'S 4 oz. squeeze-ups are also
being sold in a wide variety of retail outlets to complement our
other snack foods. A variety pack was designed for sale in
warehouse club stores and is experiencing strong sales growth.
And, to generate LUIGI'S sales at stadiums and arenas, we
introduced an exclusive 8 oz. squeeze-up tube toward the end of
our year.
A growing year in grocery.
Retail supermarket sales of LUIGI'S Real Italian Ice experienced
another strong growth year, thanks in part to today's health
conscious consumers. Sales and market share increased
significantly. We also introduced and successfully gained
distribution of a new variety pack to the marketplace.
Industry retail information reports indicate that this year's
sales have resulted in LUIGI'S becoming the number one brand of
Italian Ice in the supermarket freezer.
Sizing Up Each Market
LUIGI'S Real Italian Ice is available in 6-oz. cups for retail
supermarkets, and 4-oz. and 8-oz. squeeze-up tubes for food
service sales. No matter what the size, LUIGI'S is a delicious,
fat free, cholesterol free and dairy free treat for kids of all
ages.
Graphic: Pictures of three LUIGI'S products
Other Snack Foods
Graphic: Picture of Churros and Funnel Cake graphic
Viva TIO PEPE!
J & J Snack Foods Corp. produces a variety of other niche snack
foods including TIO PEPE'S churros, a crispy, cinnamon-sugared,
doughnut-like snack of Hispanic origin. Churro sales were down
only slightly for the year despite a large decline in sales to one
customer that discontinued the product offering.
Traditionally well known in the West and Southwest, churros are
now becoming more familiar to consumers nationwide due to
increased exposure. In keeping with our strategy to create new
market niches for existing products, in 1995 we increased churro
sales through warehouse club stores and in retail supermarkets in
Western and Southwest markets.
In our continuing effort to expand our international business, a
churro program was introduced in Mexico through our ICEE division.
Additionally, our export sales of churros to the Far East continue
to grow.
Graphic: Artist rendering of a Churros concession stand
Churros and fruit -- ole !
In our fourth quarter we developed a new food service line
extension which is being introduced in fiscal '96, TIO PEPE'S
fruit filled churros. They combine the traditional churro cinnamon
pastry with delicious fruit and cream fillings. It's a scrumptious
and wholesome combination!
Our filled churros will appeal to food service locations beyond
traditional snack bars. They're also perfect for school food
service, since they meet both bread and fruit requirements for the
U.S.D.A. National School Breakfast/Lunch Program.
Funnel cakes made easy.
Funnel cakes are "the original carnival treat" that J & J has
turned into a growing business, marketing a line of frozen
pre-cooked and dry mix funnel cakes under THE FUNNEL CAKE FACTORY
brand name. Our unique, frozen funnel cakes make preparation
easier than ever before. In fact, just heat and serve -- no more
mixing, measuring or frying required.
Our funnel cakes are also approved by the U.S.D.A. for the
National School Breakfast Program. They are sold through our Food
Service division to school food service, snack bars and amusement
parks.
Churros on the Move!
We've placed our innovative new mobile merchandising carts at
warehouse club stores nationwide.
These carts give thousands of shoppers the chance to try our
churros, which can then be purchased from the frozen foods section
for home consumption.
Graphic: Picture of a Churros display case
Frozen Carbonated Beverages (FCB)
Graphic: Picture of a box of Churros and Churros and Funnel Cake Graphics
A refreshing way to chill out.
Ice-cold and bubbly, our ICEE and ARCTIC BLAST brands are among
the most refreshing drinks available in what has become a fiercely
competitive beverage market.
These semi-frozen beverages, which are served from our proprietary
dispensing equipment, are marketed and distributed by ICEE-USA,
the FCB division of J & J Snack Foods Corp. Whether sipped through
a straw or eaten with a spoon, they're a growing favorite of
consumers of all ages.
We're continually working to put our frozen beverages in the hands
of more consumers in more locations. Today, they can be found in
thousands of outlets throughout North America, including many
outlets where our soft pretzels and other snack foods are sold.
Finding liquidity in frozen assets.
Sales this year resulted in a modest increase of 1% in frozen
carbonated beverages and related products, despite a sharp sales
decline at our Mexican FCB subsidiary due to the troubled Mexican
economy and peso devaluation.
Graphic: Drawing of a snack food stand that is in the shape of a giant ICEE
Frozen Carbonated Beverage dispensing machine. The stand is staffed by a
sales person who is dispensing SuperPretzels and ICEE beverages to customers.
In order to provide for future gains by the frozen carbonated
beverage product line, we made key improvements throughout the
year. These included an aggressive new promotional program and the
development of a new kiosk designed for a mass merchandiser.
We also improved the efficiency of our syrup distribution system
by utilizing third party distribution, where appropriate, for a
segment of our customers. This plan will be expanded on a
selective basis.
New, "friendlier" dispensers.
The proprietary dispensing equipment manufactured by the FCB
division is a major factor in expanding our customer base. In
1995, we made several design and operational improvements in both
our standard ICEE floor model dispenser and our counter top
dispenser, which is used where space is a limitation. The results
have been improved reliability and more "user-friendly" machines.
A warm reception for a cool product.
The distribution of ARCTIC FREEZE, a new frozen beverage product,
was expanded to both school locations and other retailers this
past year. ARCTIC FREEZE is offered in two formulations, one of
which contains 50% fruit juice and carries the U.S.D.A. approved
Child Nutrition (CN) Label.
An expanding cold front.
Our ICEE-USA subsidiary is the largest distributor of frozen
carbonated beverages in North America, with branches and
warehouses positioned to serve our customers. Our ICEE products
are distributed in the western United States, Canada and Mexico,
while ARCTIC BLAST is sold primarily in the East.
During the year, we acquired the international rights for the sale
of ICEE products and are currently exploring opportunities to
develop the international market for FCB.
A Promotional Blast
To support our customers' retail sales efforts, we provide topical
in-store promotions and attention-getting point-of-sale materials.
Graphic: Pictures of ICEE and ARCTIC BLAST promotional material
J & J Snack Foods Corp. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Fiscal 1995 (53 weeks) Compared to Fiscal 1994 (52 weeks)
Net sales increased $10,937,000 or 6% in fiscal 1995 compared to
fiscal 1994 to $185,362,000. Net sales, excluding sales of Western
Syrup Company in both years, increased $13,084,000 or 8% to
$184,431,000 for the year.
During the third quarter, the Company sold its syrup and flavor
manufacturing subsidiary, Western Syrup Company, to an unrelated
third party for cash and notes. The Company does not anticipate
that the sale of Western will have a material impact on its
operations or financial position.
Sales to food service customers increased $10,455,000 or 15% to
$79,382,000 in fiscal 1995. Soft pretzel sales to the food service
market increased 13% to $51,032,000 and churro sales decreased 1%
to $9,512,000. Excluding a large sales decline to one customer,
sales of churros increased $824,000 or 10%. New channels of
distribution and new products accounted for most of the added
pretzel volume. Frozen juice bar and dessert sales increased 26%
to $13,571,000 due to expanded distribution and new products.
Sales of products to retail supermarkets increased $2,897,000 or
8% to $41,300,000 in fiscal 1995 due to higher unit volume. Total
soft pretzel sales to retail supermarkets were $26,043,000, a
decrease of 2% from fiscal 1994. Sales of the flagship
SUPERPRETZEL brand soft pretzels, excluding SOFTSTIX, increased 3%
to $21,708,000. The increase was substantially less than in prior
years due to increased competition. SOFTSTIX sales decreased
$1,340,000 or 26% to $3,839,000 from the previous year. LUIGI'S
Real Italian Ice sales increased $3,533,000 or 33% to $14,358,000
due to increased distribution and market share.
Frozen carbonated beverage and related product sales increased
$590,000 or 1% to $43,600,000 in fiscal 1995 even though sales of
the Company's Mexican frozen carbonated beverage subsidiary were
down $1,232,000 or 39% for the year due to the devaluation of the
peso and the business downturn in Mexico. Beverage sales alone
increased 3% to $41,736,000.
Bakery sales decreased $1,471,000 or 13% to $9,485,000 in fiscal
1995 due to lower unit volume. The decline was due to a reduction
in purchases by a single customer. Bavarian Pretzel Bakery sales
increased 6% to $10,664,000 for the year.
Gross profit on sales declined to 50% for fiscal 1995 compared to
53% for fiscal 1994. The percentage decrease is primarily
attributable to higher packaging and raw material costs and
increased manufacturing overhead costs due to recent expansions of
production capacities.
Total operating expenses increased $6,196,000 to $85,481,000 in
fiscal 1995 and as a percentage of sales increased to 46% from 45%
in fiscal 1994. Marketing expenses as a percent of sales increased
approximately 2% of sales to 32% of sales in 1995 from 29% in 1994
due primarily to higher retail supermarket promotional and
advertising spending and increased equipment costs, which includes
depreciation, installation and service costs, in our frozen
carbonated beverage division. Distribution expenses decreased to
10% of sales in 1995 from 11% in 1994 due primarily to the use of
alternate channels of distribution and more efficient operations
in our frozen carbonated beverage division. Administrative
expenses decreased approximately 1/2% of sales to 4% of sales in
1995 due to higher sales volume and reduced expenses.
Operating income decreased $5,395,000 or 43% to $7,008,000 in
fiscal 1995. Decreases in operating income and increases in
operating losses were across all product lines.
Investment income increased in fiscal year 1995 due to a higher
level of invested funds and higher interest and dividend rates on
investments. Interest expense decreased $52,000 to $399,000
because of debt reduction.
Sundry income increased $789,000 to $1,365,000 for the fiscal year
principally due to gains on disposals of certain property and
equipment.
The effective income tax rate was 38% in both fiscal 1995 and
1994.
Net earnings decreased $2,728,000 or 32% in fiscal 1995 to
$5,804,000.
The Financial Accounting Standards Board (the FASB) issued a new
standard, FAS No. 107, "Disclosure About Fair Value of Financial
Instruments," which requires all entities to disclose the
estimated fair value of their financial instrument assets and
liabilities. The Company will be required to implement this new
standard in its fiscal year 1996. Implementation of this standard
will have no effect on earnings.
The FASB issued a new standard, FAS No. 123, "Accounting for
Stock-Based Compensation," which contains a fair value-based
method for valuing stock-based compensation that entities may use,
which measures compensation cost at the grant date based on the
fair value of the award. Compensation is then recognized over the
service period, which is usually the vesting period.
Alternatively, the standard permits entities to continue
accounting for employee stock options and similar equity
instruments under APB Opinion 25, "Accounting for Stock Issued to
Employees." Entities that continue to account for stock options
using APB Opinion 25 are required to make pro forma disclosures of
net income and earnings per share, as if the fair value-based
method of accounting defined in FAS No. 123 had been applied. The
Company has not determined which method it will follow in the
future. The Company will be required to adopt the new standard in
its fiscal year 1997.
The FASB issued a new standard, FAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of," which provides guidance on when to recognize and how
to measure impairment losses of long-lived assets and certain
identifiable intangibles and how to value long-lived assets to be
disposed of. The Company anticipates that the impact of FAS No.
121 on the financial position and results of operations of the
Company, when adopted, will not be material. The Company is
required to adopt this new standard in its fiscal year 1997.
The Company adopted FAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which provides
guidance on accounting and reporting for investments in equity
securities with readily determinable fair values and for all
investments in debt securities. The Company adopted this new
standard in the first quarter of the current fiscal year with no
impact on earnings.
Results of Operations
Fiscal 1994 (52 weeks) Compared to Fiscal 1993 (52 weeks)
Net sales increased $27,235,000 or 19% in fiscal 1994 compared to
fiscal 1993 to $174,425,000. Net sales, excluding sales of
Bavarian Pretzel Bakery, increased $17,184,000 or 12% to
$164,374,000 for the year.
Sales to food service customers increased $9,950,000 or 17% to
$68,927,000 in fiscal 1994. Soft pretzel sales to the food service
market increased 21% to $45,246,000 and churro sales increased 18%
to $9,603,000. Expanded unit volume accounted for virtually all of
the dollar increases and resulted from increased warehouse club
store, fast food chain, convenience store, school, movie theatre
and stadium business. Frozen juice bar and dessert sales increased
13% to $10,806,000.
Sales of products to retail supermarkets increased $8,426,000 or
28% to $38,403,000 in fiscal 1994 primarily due to higher unit
volume. Total soft pretzel sales to retail supermarkets were
$26,453,000, an increase of 36% from fiscal 1993. Sales of the
flagship SUPERPRETZEL brand soft pretzels, excluding SOFTSTIX,
increased 29% to $20,977,000. SOFTSTIX sales increased $2,008,000
to $5,179,000 in the year primarily due to expanded distribution.
LUIGI'S Real Italian Ice sales increased $1,299,000 or 14% to
$10,825,000 due to higher unit volume and a price increase. The
price increase accounted for approximately 50% of the dollar sales
increase.
Frozen carbonated beverage and related product sales decreased
$2,463,000 or 5% to $43,010,000 in fiscal 1994. Beverage sales
alone decreased 6% to $40,371,000 even though there were an
increased number of our frozen carbonated beverage dispensers at
customer locations. The sales decrease was caused by continuing
significant declines in unit sales to the division's largest
customer and by temporary and permanent removals and relocations
of our frozen carbonated beverage dispensers at chain and
convenience store accounts, as well as by other less directly
identifiable factors.
Bakery sales increased $1,697,000 or 18% to $10,956,000 in fiscal
1994 due to higher unit volume. One customer accounted for
substantially all of the increase. Syrup and topping product sales
decreased $426,000 or 12% to $3,078,000 due to lower unit volume.
Gross profit on sales was 53% for fiscal 1994 compared to 55% for
fiscal 1993. Excluding Bavarian, gross profit as a percentage of
sales was 55% in both fiscal years.
Total operating expenses increased $10,400,000 in fiscal 1994 and
as a percentage of sales decreased to 45% from 47% in fiscal 1993.
Excluding Bavarian, operating expenses as a percentage of sales
increased 1% to 48% in 1994. Marketing expenses, exclusive of
Bavarian, increased from 29% to 31% for the year primarily because
of higher frozen carbonated beverage marketing expenses combined
with lower frozen carbonated beverage sales compared to last year.
Distribution expenses, exclusive of Bavarian, were 12% of sales in
both years. Administrative expenses, exclusive of Bavarian,
decreased less than 1% to 4% of sales in the current year from 5%
last year primarily because of higher sales volume.
Group health insurance costs for fiscal year 1994 decreased
approximately $1,000,000 from last year's amounts due to a change
in programs effected during last year's third quarter. Most of the
decreases were in operating expenses.
Operating income increased $196,000 or 2% to $12,403,000 in fiscal
1994.
Investment income increased slightly in fiscal year 1994 due to a
higher level of invested funds. Interest expense increased $86,000
to $451,000 in 1994 because of the Bavarian acquisition and
because interest on the borrowings related to the expansion of the
East Coast freezer storage warehouse was capitalized during the
construction period in 1993 but was fully expensed in 1994.
Sundry income increased $403,000 to $576,000 for the fiscal year
principally due to the sale of idle land.
The effective income tax rates were 38% in fiscal 1994 and 36% in
fiscal 1993. The increase of slightly more than 1% in the
effective income tax rate was caused by higher federal income tax
rates in 1994 and miscellaneous factors. The Financial Accounting
Standards Board (the FASB) issued a new standard, FAS No. 109,
"Accounting for Income Taxes," which significantly changes the
accounting for deferred income taxes. The statement provides for a
liability approach under which deferred income taxes are provided
based upon enacted tax laws and rates applicable to the periods in
which the taxes become payable. The Company adopted this new
standard in the quarter ended December 25, 1993. The adoption of
the standard did not have a significant impact on net earnings for
fiscal year 1994.
Net earnings increased $182,000 or 2% in fiscal 1994 to
$8,532,000.
Acquisitions, Liquidity and Capital Resources
In May 1994, the Company acquired the assets of The Funnel Cake
Factory, Inc., a manufacturer and distributor of funnel cake
products. The acquisition was paid for with cash and stock.
In October 1993, all of the common stock of Bavarian Soft
Pretzels, Inc., a specialty snack food retailer operating in
malls, was acquired. The acquisition was paid for with cash.
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.
The devaluation of the Mexican peso in December 1994 caused a
reduction of $1,121,000 in stockholders' equity for the 1995
fiscal year because of the revaluation of the net assets of the
Company's Mexican frozen carbonated beverage subsidiary. The
Company experienced a dollar decline in the sales of this
subsidiary of about 50% since the devaluation. The Company
anticipates that the sales decline from prior year levels will
continue at least through the first quarter of the 1996 fiscal
year. In 1995, sales of the Mexican subsidiary decreased to
$1,966,000 from $3,198,000 in 1994.
Under share repurchase programs initiated in fiscal year 1992, the
Company purchased and retired 709,000 shares of its common stock
at a cost of $8,467,000 in fiscal years 1994 and 1993. Under an
additional share repurchase program initiated in fiscal year 1994,
the Company is authorized to acquire an additional 1,000,000
shares of its common stock. The Company repurchased and retired
854,600 shares at a cost of $10,118,000 in fiscal years 1995 and
1994 under this authorization. Total purchases of Company stock in
1995 under the repurchase programs were 801,000 shares at a cost
of $9,447,000.
Available to the Company are unsecured general purpose bank lines
of credit totalling $25,000,000. There were no borrowings under
these general bank lines of credit at September 30, 1995.
Fiscal 1995 Compared to Fiscal 1994
The combined balance of cash and cash equivalents and marketable
securities increased $3,456,000 from $11,064,000 in 1994 to
$14,520,000 in 1995 primarily because of the investment of
proceeds from long-term investments into cash equivalents.
Receivables increased $328,000 to $16,846,000 primarily because of
higher sales levels.
Inventories decreased $510,000 to $11,009,000 primarily because of
the sale of Western Syrup Company.
Property, plant and equipment increased $7,717,000 primarily
because of expenditures for dispensers required for the expansion
of the frozen carbonated beverage business, for ovens and portable
merchandisers required for the expansion of the food service
business and for the expansion and upgrading of production
capability at the Company's manufacturing facilities which were
offset by declines resulting from the sale of Western Syrup
Company, disposals and a foreign currency translation adjustment
recorded because of the devaluation of the Mexican peso.
Goodwill, trademarks and rights, net of accumulated amortization
decreased $1,149,000 to $8,644,000 primarily because of
amortization. Long-term investments decreased $2,429,000 to
$8,335,000 primarily because of the investment of proceeds from
long-term investments into cash equivalents. Sundry assets
increased by $302,000 from 1994 primarily because of a note
receivable accepted as part of the payment for the purchase of
Western Syrup Company by a third party offset by use of bond trust
funds.
Accounts payable decreased $1,247,000 primarily because of a
decline in deposits received for equipment purchases, a decline in
vendor advances and the sale of Western Syrup Company.
Accrued liabilities increased $1,385,000 in 1995 from $4,537,000
in 1994 due to higher sales rebates due customers, higher income
taxes accrued and a provision for closed stores at Bavarian
Pretzel Bakery.
Common stock decreased $9,144,000 in 1995 to $40,802,000 because
of payments by the Company to repurchase and retire its stock.
A foreign currency translation adjustment of ($1,121,000) was
recorded in 1995 due to the revaluation of the net assets of the
Company's Mexican frozen carbonated beverage subsidiary. The
revaluation was necessitated by the sharp devaluation of the
Mexican peso.
Net cash provided by operating activities decreased $2,579,000 to
$20,588,000 in 1995 from $23,167,000 in 1994 primarily because of
lower net earnings.
Net cash used in investing activities decreased $10,382,000 to
$7,353,000 in 1995 from $17,735,000 in 1994 primarily because of
lower capital expenditures of $5,651,000, no payments for
purchases of companies compared to $1,523,000 in 1994, an increase
of $4,282,000 in net proceeds from investments, and higher
proceeds of $323,000 from the sales of operations and disposals of
property and equipment offset by the lower use of funds from the
bond trust fund of $1,287,000. Capital expenditures decreased by
$5,651,000 in 1995 from 1994 primarily because of lower
expenditures by our frozen carbonated beverage division.
Net cash used in financing activities increased to $9,160,000 in
1995 compared to $7,268,000 used in 1994 primarily because of an
increase in the purchase of the Company's common stock of
$2,168,000.
Fiscal 1994 Compared to Fiscal 1993
The combined balance of cash and cash equivalents and marketable
securities decreased $4,724,000 from $15,788,000 in 1993 to
$11,064,000 in 1994 primarily because funds were redirected to
long-term investments.
Receivables increased $1,037,000 to $17,176,000 primarily because
of higher sales levels.
Inventories increased $1,019,000 to $11,519,000 because of higher
sales levels and inventory required for Bavarian Pretzel Bakery.
Prepaid expenses and deposits increased to $1,611,000 in 1994 from
$1,035,000 in 1993 because of deposits made for equipment
purchases.
Property, plant and equipment increased $18,532,000 primarily
because of expenditures for additional dispensers required for the
expansion of the frozen carbonated beverage business, for ovens
and portable merchandisers required for the expansion of the food
service business and for the expansion of production capacity at
the Company's primary East Coast manufacturing facility.
Goodwill, trademarks and rights, net of accumulated amortization
increased $441,000 to $9,793,000 because of the acquisitions of
Bavarian Pretzel Bakery and The Funnel Cake Factory, Inc.
Long-term investments increased $4,138,000 to $10,764,000 because
of the long-term investment of excess funds. Sundry assets
decreased by $2,330,000 from 1994 primarily because of the use of
$1,942,000 of bond trust funds.
Accounts payable increased $2,693,000 primarily because of
increased production requirements and deposits received for
equipment purchases.
Deferred income of $692,000 was recorded on the sale of the
Company's Hawaiian ICEE operations.
Common stock decreased $5,943,000 in 1994 to $49,946,000 because
of payments by the Company to repurchase and retire its stock.
Net cash provided by operating activities increased $2,948,000 to
$23,167,000 in 1994 from $20,219,000 in 1993 because of increased
depreciation and amortization of fixed assets, accounts payable
and accrued liabilities.
Net cash used in investing activities increased $6,182,000 to
$17,735,000 in 1994 from $11,553,000 in 1993 primarily because
increased capital expenditures of $3,167,000, higher payments for
purchases of companies of $1,322,000 and a decline of $4,670,000
in net proceeds from investments offset an increase in proceeds of
$1,500,000 from the sales of operations, property and equipment
and the increased use of funds from the bond trust fund of
$1,110,000. Capital expenditures increased by $3,167,000 in 1994
from 1993 primarily because of expenditures to increase production
capacity at the Company's primary East Coast manufacturing
facility.
Net cash used in financing activities increased to $7,268,000 in
1994 compared to $774,000 used in 1993 primarily because of an
increase in the purchase of the Company's common stock of
$5,421,000.
Consolidated Statements of Earnings
Fiscal year ended
September 30, September 24, September 25,
1995 1994 1993
(53 weeks) (52 weeks) (52 weeks)
Net sales $185,362,000 $174,425,000 $147,190,000
Cost of goods sold 92,873,000 82,737,000 66,098,000
Gross profit 92,489,000 91,688,000 81,092,000
Operating expenses
Marketing 58,444,000 51,428,000 43,364,000
Distribution 18,591,000 19,071,000 17,351,000
Administrative 7,585,000 7,936,000 7,321,000
Amortization of intangibles
and deferred costs 861,000 850,000 849,000
85,481,000 79,285,000 68,885,000
Operating income 7,008,000 12,403,000 12,207,000
Other income (deductions)
Investment income 1,327,000 1,145,000 1,113,000
Interest expense (399,000) (451,000) (365,000)
Sundry 1,365,000 576,000 173,000
2,293,000 1,270,000 921,000
Earnings before
income taxes 9,301,000 13,673,000 13,128,000
Income taxes 3,497,000 5,141,000 4,778,000
NET EARNINGS $5,804,000 $8,532,000 $8,350,000
Earnings per common share $.61 $.82 $.80
Weighted average
number of shares 9,544,000 10,430,000 10,431,000
The accompanying notes are an integral part of these statements.
Consolidated Balance Sheets
September 30, September 24,
1995 1994
Assets
Current Assets
Cash and cash equivalents $10,696,000 $6,621,000
Marketable securities
available for sale 3,824,000 4,443,000
Receivables
Trade, less allowance
of $271,000 and $296,000,
respectively 16,846,000 16,518,000
Other 621,000 658,000
Inventories 11,009,000 11,519,000
Prepaid expenses and deposits 1,498,000 1,611,000
Total current assets 44,494,000 41,370,000
Property, Plant and
Equipment, at cost 130,633,000 122,916,000
Less accumulated
depreciation and amortization 71,410,000 59,788,000
59,223,000 63,128,000
Other Assets
Goodwill, trademarks
and rights, less accumulated
amortization of $5,147,000
and $4,353,000, respectively 8,644,000 9,793,000
Long-term investments
available for sale 990,000 --
Long-term investments
held to maturity 7,345,000 10,764,000
Sundry 2,613,000 2,311,000
19,592,000 22,868,000
$123,309,000 $127,366,000
Liabilities and Stockholders' Equity
Current Liabilities
Current maturities
of long-term debt $16,000 $15,000
Accounts payable 10,607,000 11,854,000
Accrued liabilities 5,922,000 4,537,000
Total current liabilities 16,545,000 16,406,000
Long-Term Debt, less current maturities 5,011,000 5,028,000
Deferred Income 666,000 692,000
Deferred Income Taxes 5,003,000 4,695,000
Commitments -- --
Stockholders' Equity
Capital stock
Preferred, $1 par value;
authorized, 5,000,000 shares;
none issued -- --
Common, no par value;
authorized, 25,000,000 shares;
issued and outstanding,
9,126,000 and 9,889,000,
respectively 40,802,000 49,946,000
Foreign currency
translation adjustment (1,121,000) --
Retained earnings 56,403,000 50,599,000
96,084,000 100,545,000
$123,309,000 $127,366,000
The accompanying notes are an integral part of these statements.
Consolidated Statement of Stockholders' Equity
Foreign
Currency
Common Stock Translation Retained
Shares Amount Adjustment Earnings Total
Balance at
September 27, 1992 10,400,000 $56,348,000 $ -- $33,717,000 $90,065,000
Issuance of common
stock upon exercise
of stock options 151,000 1,399,000 -- -- 1,399,000
Repurchase of
common stock. (233,000) (1,858,000) -- -- (1,858,000)
Net earnings for the
fiscal year ended
September 25, 1993 -- -- -- 8,350,000 8,350,000
Balance at
September 25, 1993 10,318,000 55,889,000 -- 42,067,000 97,956,000
Issuance of common stock
Exercise of stock
options 80,000 936,000 -- -- 936,000
Acquisition 20,000 400,000 -- -- 400,000
Repurchase of
common stock (529,000) (7,279,000) -- -- (7,279,000)
Net earnings for the
fiscal year ended
September 24, 1994 -- -- -- 8,532,000 8,532,000
Balance at
September 24, 1994 9,889,000 49,946,000 -- 50,599,000 100,545,000
Issuance of common stock
upon exercise of stock
options 38,000 303,000 -- -- 303,000
Foreign currency
translation adjustment -- -- (1,121,000) -- (1,121,000)
Repurchase of
common stock. (801,000)(9,447,000) -- -- (9,447,000)
Net earnings for the
fiscal year ended
September 30, 1995 -- -- -- 5,804,000 5,804,000
Balance at
September 30, 1995 9,126,000 $40,802,000 $(1,121,000) $56,403,000 $96,084,000
The accompanying notes are an integral part of these statements.
Consolidated Statements of Cash Flows
Fiscal year ended
September 30, September 24, September 25,
1995 1994 1993
(53 weeks) (52 weeks) (52 weeks)
Cash flows from operating activities:
Net earnings $5,804,000 $8,532,000 $8,350,000
Adjustments to reconcile net
earnings to net cash
provided by operating activities:
Depreciation and amortization
of fixed assets 15,040,000 13,797,000 11,815,000
Amortization of intangibles
and deferred costs 1,016,000 1,011,000 1,017,000
Gains from disposals of property
and equipment (1,222,000) (416,000) (82,000)
Increase (decrease) in deferred
income taxes 308,000 (73,000) 496,000
Other adjustments (123,000) -- (61,000)
Changes in assets and liabilities,
net of effects from purchase of companies
Increase in accounts receivable (443,000) (1,184,000) (2,013,000)
Increase in inventories (235,000) (400,000) (827,000)
Decrease (increase) in
prepaid expenses 15,000 (556,000) 339,000
Increase in accounts payable
and accrued liabilities 428,000 2,456,000 1,185,000
Net cash provided by operating
activities 20,588,000 23,167,000 20,219,000
Cash flows from investing activities:
Capital expenditures (12,935,000) (18,586,000) (15,419,000)
Proceeds from sales of operations 405,000 1,100,000 --
Payments for purchase of companies,
net of cash acquired and debt assumed -- (1,523,000) (201,000)
Proceeds from investments held
to maturity 405,000 4,606,000 210,000
Payments for investments
held to maturity (1,000,000) (4,171,000) (2,609,000)
Proceeds from investments
available for sale 6,609,000 6,020,000 15,910,000
Payments for investments
available for sale (2,981,000) (7,704,000) (10,090,000)
Decrease in bond trust fund 655,000 1,942,000 832,000
Proceeds from disposals of
property and equipment 1,620,000 602,000 202,000
Other (131,000) (21,000) (388,000)
Net cash used in
investing activities (7,353,000) (17,735,000) (11,553,000)
Cash flows from financing activities:
Proceeds from issuance of
common stock 303,000 786,000 1,204,000
Payments to repurchase
common stock (9,447,000) (7,279,000) (1,858,000)
Payments of long-term debt (16,000) (775,000) (137,000)
Other -- -- 17,000
Net cash used in
financing activities (9,160,000) (7,268,000) (774,000)
Net increase (decrease) in
cash and cash equivalents 4,075,000 (1,836,000) 7,892,000
Cash and cash equivalents
at beginning of year 6,621,000 8,457,000 565,000
Cash and cash equivalents
at end of year $10,696,000 $6,621,000 $8,457,000
The accompanying notes are an integral part of these statements.
Notes to Consolidated Financial Statements
Note A -- Summary of 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 all its wholly-owned subsidiaries. All
material intercompany balances and transactions have been
eliminated in the consolidated statements.
2. Revenue Recognition
The Company recognizes revenue when its product is shipped.
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.
4. Cash Equivalents
Cash equivalents are short-term, highly liquid investments with
original maturities of three months or less. Cash equivalents were
$11,524,000 and $4,895,000 at September 30, 1995 and September 24,
1994, respectively.
5. Concentrations of Credit Risk
Concentrations of credit risk with respect to trade receivables
are limited due to the dispersion of the Company's customers over
different industries and geographies.
6. Inventories
Inventories are valued at the lower of cost (determined by the
first-in, first-out method) or market.
7. Depreciation and Amortization
Depreciation of equipment and buildings is provided for by the
straight-line and accelerated methods over estimated useful lives.
Amortization of improvements is provided for by the straight-line
method over the term of the lease or the estimated useful life,
whichever is shorter. Goodwill, trademarks and rights arising from
acquisitions are being amortized by the straight-line method over
periods ranging from 5 to 30 years. Management reviews the
realization of goodwill based upon past and expected performance
of acquired businesses.
The FASB issued a new standard, FAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of," which provides guidance on when to recognize and how
to measure impairment losses of long-lived assets and certain
identifiable intangibles and how to value long-lived assets to be
disposed of. The Company anticipates that the impact of FAS No.
121 on the financial position and results of operations of the
Company, when adopted, will not be material. The Company is
required to adopt this new standard in its fiscal year 1997.
8. Financial Instruments
The FASB issued a new standard, FAS No. 107, "Disclosure About
Fair Value of Financial Instruments," which requires all entities
to disclose the estimated fair value of their financial instrument
assets and liabilities. The Company will be required to implement
this new standard in its fiscal year 1996.
9. Income Taxes
The Company adopted, effective September 26, 1993, FAS No. 109,
"Accounting For Income Taxes." Under the liability method
specified by FAS No. 109, 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 which will be in effect when these differences reverse.
Deferred tax expense is the result of changes in deferred tax
assets and liabilities. The principal types of differences between
assets and liabilities for financial statement and tax return
purposes are vacation accruals, insurance reserves, deferred
income and accumulated depreciation.
The deferred method, used in years prior to fiscal 1994, required
the Company to provide for deferred tax expense based on certain
items of income and expense which were reported in different years
in the financial statements and the tax returns as measured by the
tax rate in effect for the year the difference occurred. The
cumulative effect of the change in accounting on years prior to
fiscal 1994 did not have a material impact on the Company's net
earnings for the year ended September 24, 1994.
10. Investments in Debt and Equity Securities
The Company adopted, effective September 25, 1994, FAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities," which provides guidance on accounting and reporting
for investments in equity securities with readily determinable
fair values and for all investments in debt securities. The
adoption of FAS No. 115 did not have a material impact on the
financial position and results of operations of the Company.
11. Earnings Per Common Share
Earnings per share are based on the weighted average number of
common shares outstanding, including common stock equivalents
(stock options).
12. Accounting for Stock-Based Compensation
The FASB issued a new standard, FAS No. 123, "Accounting for
Stock-Based Compensation," which contains a fair value-based
method for valuing stock-based compensation that entities may use,
which measures compensation cost at the grant date based on the
fair value of the award. Compensation is then recognized over the
service period, which is usually the vesting period.
Alternatively, the standard permits entities to continue
accounting for employee stock options and similar equity
instruments under APB Opinion 25, "Accounting for Stock Issued to
Employees." Entities that continue to account for stock options
using APB Opinion 25 are required to make pro forma disclosures of
net income and earnings per share, as if the fair value-based
method of accounting defined in FAS No. 123 had been applied. The
Company has not determined which method it will follow in the
future. The Company will be required to adopt the new standard in
its fiscal year 1997.
Note B -- Acquisitions
In May 1994, the Company acquired the assets of The Funnel Cake
Factory, Inc., a manufacturer and distributor of funnel cake
products. The acquisition was paid for with cash and stock.
In October 1993, all of the common stock of Bavarian Soft
Pretzels, Inc., a specialty snack food retailer operating in
malls, was acquired. The acquisition was paid for with cash.
The acquisitions were accounted for under the purchase method of
accounting and the operations are included in the consolidated
financial statements from the respective acquisition dates. The
impact of the acquisitions on the results of operations is not
significant.
Note C -- Credit Arrangements
The Company has available general unsecured bank lines of credit
of $25,000,000 at rates below the prime rate. The loan agreements
specify net worth and other financial covenants. The entire
amounts of these lines of credit were available at September 30,
1995.
Note D -- Marketable Securities
The Company adopted FAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," effective September
25, 1994. This new standard requires investments in securities to
be classified in one of three categories: held to maturity,
trading and available for sale. Debt securities that the Company
has the positive intent and ability to hold to maturity are
classified as held to maturity and are reported at amortized cost.
As the Company does not engage in security trading, the balance of
its debt securities and any equity securities are classified as
available for sale. Net unrealized gains and losses for such
securities, net of tax are reported as a separate component of
stockholders' equity and excluded from the determination of net
income.
Proceeds on sales of securities classified as available for sale
were $6,600,000 in the year ended September 30, 1995 with a gain
of $21,000 realized. The Company uses the specific identification
method to determine the cost of securities sold.
The amortized cost, unrealized gains and losses, and fair market
values of the Company's available for sale and held to maturity
securities held at September 30, 1995 are summarized as follows:
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Available for
sale securities
Equity securities $ -- $12,000 $ -- $12,000
Corporate debt
securities 996,000 -- 46,000 950,000
Municipal govern-
-ment securities 3,818,000 6,000 8,000 3,816,000
$4,814,000 $18,000 $54,000 $4,778,000
Held to maturity
securities
Corporate debt
securities $1,015,000 $8,000 $15,000 $1,008,000
Municipal govern-
-ment securities 5,830,000 11,000 195,000 5,646,000
Other 500,000 -- -- 500,000
$7,345,000 $19,000 $210,000 $7,154,000
The following table lists the maturities of debt securities held
at September 30, 1995 classified as available for sale and held to
maturity:
Available for Sale Held to Maturity
Estimated Estimated
Amortized Fair Market Amortized Fair Market
Cost Value Cost Value
Due in one
year or less $3,824,000 $3,816,000 $ -- $ --
Due after
one year
through
five years 495,000 500,000 7,345,000 7,154,000
Due after
five years 495,000 450,000 -- --
Total $4,814,000 $4,766,000 $7,345,000 $7,154,000
Note E -- Inventories
Inventories consist of the following:
September 30, September 24,
1995 1994
Finished goods $5,669,000 $5,538,000
Raw materials 1,019,000 1,293,000
Packaging materials 1,947,000 1,777,000
Equipment parts and other 2,374,000 2,911,000
$11,009,000 $11,519,000
Note F -- Property, Plant and Equipment
Property, plant and equipment consist of the following:
September 30, September 24, Estimated
1995 1994 Useful Lives
Land $819,000 $973,000 --
Buildings 5,119,000 5,119,000 15-39.5 years
Plant
machinery and
equipment 39,006,000 35,045,000 5-10 years
Marketing
equipment 75,085,000 70,311,000 5 years
Transportation
equipment 2,086,000 2,622,000 5 years
Office
equipment 3,002,000 3,355,000 3-5 years
Improvements 5,036,000 4,741,000 5-20 years
Construction
in progress 480,000 750,000 --
$130,633,000 $122,916,000
Note G -- Accrued Liabilities
Included in accrued liabilities is accrued compensation of
$2,423,000 and $2,263,000 as of September 30, 1995 and September
24, 1994, respectively.
Note H -- Long-Term Debt
Long-term debt consists of the following:
September 30, September 24,
1995 1994
7.25% redeemable economic
development revenue bonds
payable December 2005; interest
payable semi-annually (subject
to debt limitation and minimum
stockholders' equity covenants) $5,000,000 $5,000,000
Other 27,000 43,000
5,027,000 5,043,000
Less current maturities 16,000 15,000
$5,011,000 $5,028,000
Annual principal payments of long-term debt as of September 30,
1995 are as follows:
1996 $16,000
1997 7,000
1998 4,000
1999 --
2000 --
2001 and thereafter 5,000,000
$5,027,000
Note I -- Deferred Income
Deferred income consists of the Company's unrecognized gain on the
sale of its ICEE operations in Hawaii to the former President of
ICEE-USA Corp. in July 1994 for $1,100,000 in cash. Under the
terms of the sale, the Company has guaranteed the payment of a
bank note by the newly formed company, ICEE of Hawaii, Inc.,
through the issuance of a letter of credit. The Company's
guarantee is collateralized by the assets of ICEE of Hawaii, Inc.
The Company recognizes gain on the sale as the principal due on
the bank note is reduced through payments by ICEE of Hawaii, Inc.
During the year ended September 30, 1995, $25,000 was recognized.
Note J -- Income Taxes
Effective September 26, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the
liability method. The income tax provision for fiscal year 1993
has not been restated and there was no material cumulative effect.
Fiscal year ended
September 30, September 24, September 25,
1995 1994 1993
(liability (liability (deferred
method) method) method)
Current
U.S. Federal $2,841,000 $4,829,000 $3,305,000
Foreign 63,000 98,000 261,000
State 285,000 449,000 248,000
3,189,000 5,376,000 3,814,000
Deferred (Benefit)
U.S. Federal 359,000 (259,000) 905,000
Foreign (43,000) 33,000 (71,000)
State (8,000) (9,000) 130,000
308,000 (235,000) 964,000
$3,497,000 $5,141,000 $4,778,000
The deferred income tax provision as of September 25, 1993
(deferred method) was comprised of the following:
Fixed asset accounting and depreciation methods $529,000
Benefit of tax carry forwards 233,000
Provision for workers' compensation (34,000)
Other 236,000
$964,000
The provisions for income taxes differ from the amounts computed
by applying the federal income tax rate of approximately 34% to
earnings before income taxes for the following reasons:
Fiscal year ended
September 30, September 24, September 25,
1995 1994 1993
(liability (liability (deferred
method) method) method)
Income taxes at
statutory rates $3,162,000 $4,649,000 $4,464,000
Increase (decrease) in
taxes resulting from:
State income taxes,
net of federal income
tax benefit 194,000 282,000 238,000
Non-taxable income (315,000) (310,000) (278,000)
Other 456,000 520,000 354,000
$3,497,000 $5,141,000 $4,778,000
Deferred tax assets and liabilities consist of the following:
September 30, September 24,
1995 1994
Deferred tax assets
Vacation accrual $256,000 $231,000
Insurance reserve 222,000 226,000
Deferred income 247,000 256,000
Other, net 449,000 420,000
1,174,000 1,133,000
Deferred tax liabilities
Depreciation of property
and equipment 6,115,000 5,774,000
Other, net 62,000 54,000
6,177,000 5,828,000
$5,003,000 $4,695,000
Note K -- 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 30, 1995:
Plants and
Offices Equipment Total
1996 $2,935,000 $1,838,000 $4,773,000
1997 2,590,000 1,456,000 4,046,000
1998 2,310,000 1,109,000 3,419,000
1999 2,075,000 738,000 2,813,000
2000 1,823,000 613,000 2,436,000
2001 and
thereafter 11,696,000 613,000 12,309,000
$23,429,000 $6,367,000 $29,796,000
Total rent expense was $6,141,000, $6,407,000 and $3,598,000 for
fiscal years 1995, 1994 and 1993, respectively. Rent expense in
1995 and 1994 includes approximately $2,300,000 each year for
Bavarian's retail stores.
Note L -- Capital Stock
Under share repurchase programs initiated in fiscal year 1992, the
Company purchased and retired 709,000 shares of its common stock
at a cost of $8,467,000 in fiscal years 1994 and 1993. Under an
additional share repurchase program initiated in fiscal year 1994,
the Company is authorized to acquire an additional 1,000,000
shares of its common stock. The Company repurchased and retired
854,600 shares at a cost of $10,118,000 in fiscal years 1995 and
1994 under this authorization. Total purchases of Company stock in
1995 under the repurchase programs were 801,000 shares at a cost
of $9,447,000.
Note M -- Stock Options
In fiscal year 1992, the Company adopted a Stock Option Plan (the
"Plan") which replaces the former Incentive Stock Option Plan.
Pursuant to the Plan, stock options may be granted to officers and
key employees of the Company which qualify as incentive stock
options as well as stock options which are non-qualified. 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 non-qualified 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 1,000,000 shares reserved under the
Plan; options for 504,000 shares remain unissued as of September
30, 1995.
In fiscal year 1991, the Company adopted a nonstatutory stock
option plan for non-employee directors and the Chief Executive
Officer of the Company whereby a total of 340,000 shares of common
stock may be issued. Under the plan, each non-employee director is
granted options to purchase 3,000 shares of common stock and the
Chief Executive Officer is granted options to purchase 25,000
shares annually. The option price is equal to the fair market
value of the common stock at the date of grant and the options
expire ten years after date of grant. Other non-qualified options
have been issued to the Chief Executive Officer, directors and
certain employees.
The following is a summary of stock options:
Incentive Non-Qualified
Stock Options Stock Options
Balance at September 27, 1992
Shares 550,129 225,026
Prices $5.75-14.16 $2.50-12.88
Granted
Shares 119,500 37,000
Prices $13.63-15.75 $13.63
Exercised
Shares 139,250 11,786
Prices $5.75-12.88 $7.50-9.81
Cancelled
Shares 31,800 958
Prices $7.25-12.88 $5.89
Incentive Non-Qualified
Stock Options Stock Options
Balance at September 25, 1993
Shares 498,579 249,282
Prices $5.75-15.75 $2.50-13.63
Granted
Shares 147,691 37,000
Prices $11.00 $11.00
Exercised
Shares 76,067 4,282
Prices $5.75-14.00 $5.89
Cancelled
Shares 20,125 --
Prices $7.25-14.00 --
Balance at September 24, 1994
Shares 550,078 282,000
Prices $7.25-15.75 $2.50-13.63
Granted
Shares 147,500 47,000
Prices $11.00-12.50 $11.75-11.88
Exercised
Shares 37,675 --
Prices $7.25-8.63 --
Cancelled
Shares 17,091 --
Prices $11.00-13.63 --
Balance at September 30, 1995
Shares 642,812 329,000
Prices $7.25-15.75 $2.50-13.63
Note N -- 401(k) Profit Sharing Plan
The Company maintains a 401(k) profit sharing plan for its
employees. Under the plan, the Company may make discretionary
profit-sharing and matching 401(k) contributions. Contributions of
$242,000, $204,000 and $146,000 were made in fiscal years 1995,
1994 and 1993, respectively.
Note O -- Cash Flow Information
The following is supplemental cash flow information:
Fiscal year ended
September 30, September 24, September 25,
1995 1994 1993
Cash paid for:
Interest (net of amount
capitalized) $395,000 $451,000 $367,000
Income taxes 2,826,000 5,024,000 4,425,000
Non-cash investing and financing activities:
During 1993, $17,000 of capital lease obligations were incurred
when the Company entered into leases for new equipment.
Report of Independent Certified Public Accountants
The Shareholders and Board of Directors
J & J SNACK FOODS CORP.
Graphic: Grant Thornton Letterhead
We have audited the accompanying consolidated balance sheets of J
& J Snack Foods Corp. and Subsidiaries as of September 30, 1995
and September 24, 1994, and the related consolidated statements of
earnings, stockholders' equity, and cash flows for each of the
fiscal years in the three year period ended September 30, 1995 (53
weeks, 52 weeks and 52 weeks, respectively). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of J & J Snack Foods Corp. and Subsidiaries at September
30, 1995 and September 24, 1994, and the consolidated results of
their operations and their cash flows for each of the fiscal years
in the three year period ended September 30, 1995 in conformity
with generally accepted accounting principles.
As disclosed in Note D, the Company adopted Financial Accounting
Standard No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," effective September 25, 1994.
Graphic: Grant Thornton signature
Grant Thornton LLP
Philadelphia, Pennsylvania
November 7, 1995
Corporate Information
Officers
Gerald B. Shreiber
Chairman of the Board,
President and Chief Executive Officer
Dennis G. Moore
Senior Vice President,
Chief Financial Officer,
Secretary and Treasurer
Robert M. Radano
Senior Vice President, Sales
John S. Schiavo
Senior Vice President, West
Donald M. Taylor
Vice President and General Manager of Eastern Operations
Directors
Gerald B. Shreiber
Chairman of the Board,
President and Chief Executive Officer
Dennis G. Moore
Senior Vice President,
Chief Financial Officer,
Secretary and Treasurer
Stephen N. Frankel
President, Stephen N. Frankel Realtor, Inc.
Peter G. Stanley
Executive Vice President,
Tri-Arc Financial Services, Inc.
Leonard M. Lodish
Samuel R. Harrell Professor,
Marketing Department of the Wharton
School, University of Pennsylvania
Quarterly Common Stock Data
Market Price
Fiscal 1995 High Low
1st Quarter 12 7/8 11 1/4
2nd Quarter 12 10
3rd Quarter 13 10 1/8
4th Quarter 13 3/8 11 3/8
Fiscal 1994
1st Quarter 20 3/8 17 1/8
2nd Quarter 20 3/4 17 3/8
3rd Quarter 18 1/4 10 7/8
4th Quarter 13 1/4 12 1/8
Stock Listing
The common stock of J & J Snack Foods Corp. is traded on the
over-the-counter market on the NASDAQ National Market System with
the symbol JJSF.
Transfer Agent and Registrar
Midlantic National Bank
Metro Park Plaza
P.O. Box 600
Edison, NJ 08818
Auditors
Grant Thornton LLP
Counsel
Blank, Rome, Comisky & McCauley
Annual Meeting
The Annual Meeting of Shareholders is scheduled for Wednesday,
February 7, 1996 at 10:00 a.m. at the Hilton at Cherry Hill, 2349
W. Marlton Pike, Cherry Hill, New Jersey
Form 10-K
Copies of the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K may be obtained without charge by
writing to:
J & J Snack Foods Corp.
6000 Central Highway
Pennsauken, NJ 08109
Attention: Dennis G. Moore