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 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission File Number: 0-14616
J & J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
New Jersey 22-1935537
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6000 Central Highway, Pennsauken, NJ 08109
(Address of principal executive offices)
Telephone (609) 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 30, 1996, there were 8,836,970 shares of the Registrant's Common
Stock outstanding.
INDEX
Page
Number
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - March 30, 1996 and
September 30, 1995................................... 3
Consolidated Statements of Earnings - Three Months and
Six Months Ended March 30, 1996 and March 25, 1995... 5
Consolidated Statements of Cash Flows - Six Months
Ended March 30, 1996 and March 25, 1995.............. 6
Notes to the Consolidated Financial Statements.......... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.................... 12
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS March 30, September 30,
1996 1995
(Unaudited)
Current assets
Cash and cash equivalents $ 11,455,000 $ 10,696,000
Marketable securities available
for sale 2,896,000 3,824,000
Accounts receivable 15,974,000 17,467,000
Inventories 10,659,000 11,009,000
Prepaid expenses and deposits 1,231,000 1,498,000
42,215,000 44,494,000
Property, plant and equipment,
at cost
Land 819,000 819,000
Buildings 5,119,000 5,119,000
Plant machinery and equipment 39,948,000 39,006,000
Marketing equipment 77,768,000 75,085,000
Transportation equipment 1,879,000 2,086,000
Office equipment 3,336,000 3,002,000
Improvements 5,193,000 5,036,000
Construction in progress 1,865,000 480,000
135,927,000 130,633,000
Less accumulated depreciation
and amortization 78,537,000 71,410,000
57,390,000 59,223,000
Other assets
Goodwill, trademarks and rights,
less accumulated amortization 8,245,000 8,644,000
Long term investments available
for sale 990,000 990,000
Long term investments held to
maturity 8,734,000 7,345,000
Sundry 2,526,000 2,613,000
20,495,000 19,592,000
$120,100,000 $123,309,000
See accompanying notes to the consolidated financial statements.
3
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND March 30, September 30,
STOCKHOLDERS' EQUITY 1996 1995
(Unaudited)
Current liabilities
Current maturities of long-
term debt $ 3,000 $ 16,000
Accounts payable 10,926,000 10,607,000
Accrued liabilities 4,019,000 5,922,000
14,948,000 16,545,000
Long-term debt, less current
maturities 5,006,000 5,011,000
Deferred income 627,000 666,000
Deferred income taxes 5,003,000 5,003,000
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, 8,930,000 and
9,126,000, respectively 38,014,000 40,802,000
Foreign currency translation
adjustment (1,353,000) (1,121,000)
Retained earnings 57,855,000 56,403,000
94,516,000 96,084,000
$120,100,000 $123,309,000
See accompanying notes to the consolidated financial statements.
4
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three months ended Six months ended
March 30, March 25, March 30, March 25,
1996 1995 1996 1995
Net Sales $42,138,000 $40,317,000 $85,001,000 $81,534,000
Cost of goods sold 21,580,000 20,033,000 43,276,000 40,455,000
Gross profit 20,558,000 20,284,000 41,725,000 41,079,000
Operating expenses
Marketing 13,585,000 13,478,000 27,465,000 26,802,000
Distribution 4,241,000 4,487,000 8,484,000 9,019,000
Administrative 1,828,000 2,072,000 3,724,000 4,040,000
Amortization of
intangibles and
deferred costs 207,000 217,000 415,000 433,000
19,861,000 20,254,000 40,088,000 40,294,000
Operating income 697,000 30,000 1,637,000 785,000
Other income (deductions)
Investment income 365,000 299,000 776,000 591,000
Interest expense (91,000) (114,000) (191,000) (212,000)
Sundry (13,000) 534,000 4,000 466,000
Earnings before
income taxes 958,000 749,000 2,226,000 1,630,000
Income taxes 333,000 282,000 774,000 613,000
NET EARNINGS $ 625,000 $ 467,000 $ 1,452,000 $ 1,017,000
Earnings per common
share $ .07 $ .05 $ .16 $ .11
Weighted average number
of shares 9,101,000 9,467,000 9,144,000 9,660,000
See accompanying notes to the consolidated financial statements.
5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
March 30, March 25
1996 1995
Cash flows from operating activities:
Net earnings $ 1,452,000 $ 1,017,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization of fixed
assets 7,648,000 7,379,000
Amortization of intangibles and deferred
costs 511,000 508,000
(Decrease) increase in deferred income taxes - (2,000)
Other adjustments (19,000) 10,000
Changes in assets and liabilities
Decrease in accounts receivable 1,449,000 2,057,000
Decrease (increase) in inventories 320,000 (1,023,000)
Decrease (increase) in prepaid expenses 264,000 (372,000)
Decrease in accounts payable
and accrued liabilities (1,553,000) (615,000)
Net cash provided by operating activities 10,072,000 8,959,000
Cash flows from investing activities:
Capital expenditures (6,060,000) (6,193,000)
Proceeds from investments held to maturity 350,000 230,000
Payments for investments held to maturity (1,750,000) (500,000)
Proceeds from investments available for sale 3,465,000 2,085,000
Payments for investments available for sale (2,558,000) (2,981,000)
Decrease in bond trust fund 1,000 549,000
Proceeds from sale of property and equipment 81,000 27,000
Other (36,000) (18,000)
Net cash used in investing activities (6,507,000) (6,801,000)
Cash flows from financing activities:
Proceeds from issuance of common stock 122,000 254,000
Payments to repurchase common stock (2,910,000) (6,303,000)
Payments of long-term debt (18,000) (7,000)
Net cash (used in) provided by
financing activities (2,806,000) (6,056,000)
Net increase (decrease) in cash
and cash equivalents 759,000 (3,898,000)
Cash and cash equivalents at beginning of period 10,696,000 6,621,000
Cash and cash equivalents at end of period $11,455,000 $ 2,723,000
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 and six months
ended March 30, 1996 and March 25, 1995 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 carbonated
beverages are generally higher in the third and fourth quarters
due to seasonal factors.
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, 1995.
Note 2 Earnings per share are based on the weighted average number of
common shares outstanding, including common stock equivalents
(stock options).
Note 3 Inventories consist of the following:
March 30, September 30,
1996 1995
Finished goods $ 5,457,000 $ 5,669,000
Raw materials 1,097,000 1,019,000
Packaging materials 2,093,000 1,947,000
Equipment parts & other 2,012,000 2,374,000
$10,659,000 $11,009,000
Note 4 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 March 30, 1996 are summarized as follows:
7
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Available for Sale Securities
Equity Securities $ - $12,000 $ - $ 12,000
Corporate Debt Securities 669,000 - 63,000 606,000
Municipal Government Securities 3,217,000 5,000 5,000 3,217,000
$3,886,000 $17,000 $ 68,000 $3,835,000
Held to Maturity Securities
Corporate Debt Securities $1,004,000 $ - $ 7,000 $ 997,000
Municipal Government Securities 7,230,000 - 138,000 7,092,000
Other 500,000 - - 500,000
$8,734,000 $ - $145,000 $8,589,000
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 government 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 government 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
Note 5 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 provide
these new disclosures at September 29, 1996.
8
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 six months ended March 30, 1996, the devaluation of the Mexican
peso caused a reduction of $232,000 in stockholders' equity because of the
revaluation of the net assets of the Company's Mexican frozen carbonated
beverage subsidiary. For the six months ended March 30, 1996, dollar sales
of this subsidiary were about 20% lower than a year ago due to the devaluation
and continuing economic problems in Mexico; however, for the three months
ended March 30, 1996, dollars sales increased 44% from the year earlier
period.
During the six months ended March 30, 1996, the Company purchased and
retired 243,000 shares of its common stock at a cost of $2,910,000.
During the third quarter of fiscal year 1995, the Company sold its
syrup and flavor manufacturing subsidiary, Western Syrup Company, to an
unrelated third party for cash and notes. During the three and six months
ended March 25, 1995 Western Syrup Company generated an after tax loss of
approximately $110,000 and $280,000, respectively. The Company does not
anticipate that the sale of Western will have a material impact on its
operations or financial position.
Available to the Company are unsecured general purpose bank lines of
credit totalling $25,000,000.
Results of Operations
Net sales increased $1,821,000 or 5% to $42,138,000 for the three
months and $3,467,000 or 4% to $85,001,000 for the six months ended March 30,
1996. Net sales, excluding sales of Western Syrup Company for all periods,
increased 6% for the three months and 5% for the six months. Excluding a
pricing adjustment to frozen carbonated beverage sales, net sales increased
3% for the three months and 4% for the six months.
Sales to food service customers increased $1,748,000 or 10% in the
second quarter to $19,700,000 and $5,174,000 or 14% to $42,076,000 in the six
months. Soft pretzel sales to the food service market increased 8% to
$13,211,000 in the second quarter and 14% to $27,945,000 in the six months due
to increased distribution. Two customers accounted for over 85% of the soft
pretzel sales increase in both the three and six month periods. Frozen juice
treat and dessert sales increased 13% to $2,989,000 in the three months and
7% to $5,891,000 in the six months. Churro sales to food service customers
increased 20% to $2,584,000 in the second quarter and 15% to $4,944,000 in the
six months. All foodservice sales increases were due primarily to changes in
unit volume. Approximately 17% of the overall first half increase in sales
to foodservice customers was accounted for by equipment sales.
9
Sales of products to retail supermarkets decreased $912,000 or 9% to
$9,207,000 in the second quarter and 6% to $16,487,000 in the first half. Soft
pretzel sales for the second quarter were down 12% to $7,106,000 and for the
six months were down 8% to $12,977,000. The sales decline for the second
quarter and six months was due to increased competition and a decline in
overall supermarket soft pretzel sales. Sales of the flagship SUPERPRETZEL
brand soft pretzels, excluding SOFTSTIX, decreased 11% in the second quarter
and 7% for the six months. Softstix sales decreased $451,000 or 36% to
$810,000 in the second quarter and $799,000 or 33% to $1,612,000 in the six
months. Sales of Luigi's Real Italian Ice increased $31,000 or 2% to
$1,879,000 in the second quarter and $128,000 or 4% to $3,063,000 in the first
half. All of the retail supermarket increases and decreases were due
primarily to changes in unit volume.
Frozen carbonated beverage and related product sales increased
$1,364,000 or 18% to $8,878,000 in the second quarter and $1,117,000 or 7%
to $17,366,000 in the six months. Beverage sales alone increased 18% to
$8,401,000 in the second quarter and increased 7% to $16,369,000 in the six
months. A pricing adjustment and increased sales of promotional cups to one
customer accounted for virtually all of the three and six month sales
increases.
Bakery sales increased $305,000 or 17% to $2,104,000 in the second
quarter and decreased $604,000 or 14% to $3,682,000 in the first six months.
The changes in sales were due to increases and decreases in unit volume.
Sales of our Bavarian Pretzel Bakery decreased 9% to $2,249,000 in the
second quarter and 5% to $5,390,000 in the six month period.
Gross profit as a percentage of sales decreased to 49% in the current
three and six month periods from 50% in the corresponding periods last year.
This gross profit percentage decrease is primarily attributable to higher raw
material and packaging costs.
Total operating expenses decreased $393,000 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 decreased $206,000 and as a
percentage of sales decreased to 47% from 49% last year. Marketing expenses
were 32% and 33% of sales in both year's three and six month periods,
respectively. Distribution expenses decreased to 10% of sales in both periods
this year from 11% of sales last year due primarily to changes in methods of
distribution in our frozen carbonated beverage subsidiary. Administration
expenses decreased to 4% of sales in both periods this year from 5% of sales
last year due to a combination of lower overall expenses and an increase in
sales volume.
Operating income increased $667,000 to $697,000 in the second quarter
and $852,000 or 109% to $1,637,000 in the first half. Excluding a pricing
adjustment to frozen carbonated beverage sales, operating income increased
$142,000 to $172,000 in the second quarter and $327,000 or 42% to $1,112,000
in the first half.
Investment income increased $66,000 to $365,000 in the second quarter
and $185,000 to $776,000 in the six months due primarily to higher levels of
investable funds.
10
Sundry income of $534,000 in the second quarter last year decreased
to an expense of $13,000 in this year's second quarter and sundry income
decreased $462,000 to $4,000 in the six month period. Last year's second
quarter and six months sundry income included a gain on an insurance
settlement.
The effective income tax rate has been estimated at 35% in this year's
first quarter compared to 38% last year. The lower rate this year is due to
tax benefits derived by our Mexican subsidiary and other factors.
Net earnings increased $158,000 or 34% in the current three month
period to $625,000 and $435,000 or 43% in the current six month period to
$1,452,000.
11
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 March 30, 1996.
12
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: May 3, 1996 /s/ Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: May 3, 1996 /s/ Dennis G. Moore
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
13
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: May 3, 1996
Gerald B. Shreiber
President
Dated: May 3, 1996
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
13