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 June 26, 1999
or
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number: 0-14616
J & J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
(State or other jurisdication of (I.R.S. Employer
incorporation or organization) Identification No.)
6000 Central Highway, Pennsauken, NJ 08109
(Address of principal executive offices)
Telephone (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 July 19, 1999, there were 8,973,465 shares of the
Registrant's Common Stock outstanding.
INDEX
Page
Number
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets _ June 26, 1999
and September 26, 1998 3
Consolidated Statements of Earnings _ Three
Months and Nine Months Ended June 26, 1999
and June 27, 1998 5
Consolidated Statements of Cash Flows _ Nine
Months Ended June 26, 1999 and June 27, 1998 6
Notes to the Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 14
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 15
PART I.FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
ASSETS
June 26, September 26,
1999 1998
(Unaudited)
Current assets
Cash and cash equivalents $ 6,673 $ 3,204
Accounts receivable 34,784 34,388
Inventories 17,468 16,447
Prepaid expenses and deposits 1,776 1,104
60,701 55,143
Property, plant and equipment,
at cost
Land 745 839
Buildings 5,386 5,432
Plant machinery and
equipment 64,861 60,275
Marketing equipment 132,757 126,653
Transportation equipment 2,030 2,149
Office equipment 6,151 5,446
Improvements 11,697 10,616
Construction in progress 1,711 1,154
225,338 212,564
Less accumulated deprecia-
tion and amortization 124,618 112,444
100,720 100,120
Other assets
Goodwill, trademarks and
rights,less accumulated
amortization 51,536 51,871
Long term investment
securities held to
maturity 2,855 3,127
Sundry 2,923 3,000
57,314 57,998
$218,735 $213,261
See accompanying notes to the consolidated financial
statements.
3
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND June 26, September 26,
STOCKHOLDERS' EQUITY 1999 1998
(Unaudited)
(dollars in thousands,
except share information)
Current liabilities
Current maturities of
long-term debt $ 8,163 $ 8,423
Accounts payable 25,444 23,222
Accrued liabilities 10,638 8,914
44,245 40,559
Long-term debt, less
current maturities 25,853 32,199
Revolving credit line 20,000 16,000
Deferred income 282 435
Deferred income taxes 4,384 4,387
Stockholders' equity
Capital stock
Preferred, $1 par value;
authorized, 5,000,000
shares; none issue - -
Common, no par value;
authorized 25,000,000
shares; issued and
outstanding, 8,966,000
and 9,036,000,
respectively 35,880 39,120
Accumulated other comprehen-
sive income (1,629) (1,694)
Retained earnings 89,720 82,255
123,971 119,681
$218,735 $213,261
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 Nine months ended
June 26, June 27 , June 26, June 27,
1999 1998 1999 1998
Net Sales $82,094 $73,276 $205,551 $184,335
Cost of goods sold 37,967 34,750 96,857 91,303
Gross profit 44,127 38,526 108,694 93,032
Operating expenses
Marketing 23,379 21,496 63,721 55,536
Distribution 7,545 6,807 21,239 17,799
Administrative 2,782 2,257 7,936 7,273
Amortization of
intangibles and
deferred costs 753 730 2,254 1,939
34,459 31,290 95,150 82,547
Operating income 9,668 7,236 13,544 10,485
Other income (deductions)
Investment income 116 87 362 384
Interest expense (871) (948) (2,523) (2,153)
Sundry 143 1,111 466 819
Earnings before
income taxes 9,056 7,486 11,849 9,535
Income taxes 3,351 2,770 4,384 3,528
NET EARNINGS $ 5,705 $ 4,716 $ 7,465 $ 6,007
Earnings per diluted
share $ .60 $ .50 $ .78 $ .64
Weighted average number
of diluted shares 9,471 9,455 9,540 9,315
Earnings per basic
share $ .64 $ .52 $ .83 $ .67
Weighted average number
of basic shares 8,984 8,994 9,038 8,918
See accompanying notes to the consolidated financial
statements.
5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in thousands)
Nine months ended
June 26, June 27,
1999 1998
Operating activities:
Net earnings $ 7,465 $ 6,007
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization
of fixed assets 17,898 16,101
Amortization of intangibles 2,614 2,318
Other adjustments (32) 217
Changes in assets and liabilities,
net of effects from purchase of
companies
Increase in accounts receivable (335) (3,114)
(Increase)decrease in inventories (678) 406
Increase in prepaid expenses (669) (314)
Increase in accounts payable
and accrued liabilities 3,757 6,273
Net cash provided by operating
activities 30,020 27,894
Investing activities:
Purchases of property, plant
and equipment (18,774) (23,271)
Payments for purchases of
companies, net of cash
acquired and debt assumed (2,336) (12,200)
Proceeds from investments held
to maturity 255 175
Proceeds from investments
available for sale - 495
Other 200 498
Net cash used in investing
activities (20,655) (34,303)
Financing activities:
Proceeds from borrowings 4,000 53,120
Proceeds from issuance of common
stock 2,335 1,955
Payments to repurchase common stock (5,625) -
Payments of long-term debt (6,606) (47,327)
Net cash (used in) provided by
financing activities (5,896) 7,748
Net increase in cash and
cash equivalents 3,469 1,339
Cash and cash equivalents at
beginning of period 3,204 1,401
Cash and cash equivalents at
end of period $ 6,673 $ 2,740
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
nine months ended June 26, 1999 and June 27, 1998
are not necessarily indicative of results for the
full year. Sales of the Company's retail stores are
generally higher in the first quarter due to the
holiday shopping season. Sales of the Company's
frozen carbonated beverages and Italian ice 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 26, 1998.
Note 2 The Company's calculation of earnings per share in
accordance with SFAS No. 128, "Earnings Per Share,"
is as follows:
Three Months Ended June 26, 1999
Income Shares Per Share
(Numerator)(Denominator) Amount
(in thousands,
except per share amounts)
Basic EPS
Net Income available
to common stockholders $5,705 8,984 $.64
Effect of Dilutive Securities
Options - 487 (.04)
Diluted EPS
Net Income available to
common stockholders plus
assumed conversions $5,705 9,471 $.60
7
Nine Months Ended June 26, 1999
Income Shares Per Share
(Numerator)(Denominator) Amount
(in thousands,
except per share amounts)
Basic EPS
Net Income available
to common stockholders $7,465 9,038 $.83
Effect of Dilutive Securities
Options - 502 (.05)
Diluted EPS
Net Income available to common
stockholders plus assumed
conversions $7,465 9,540 $.78
Three Months Ended June 27, 1998
Income Shares Per Share
(Numerator)(Denominator) Amount
(in thousands,
except per share amounts)
Basic EPS
Net Income available
to common stockholders $4,716 8,994 $.52
Effect of Dilutive Securities
Options - 461 (.02)
Diluted EPS
Net Income available to common
stockholders plus assumed
conversions $4,716 9,455 $.50
Nine Months Ended June 27, 1998
Income Shares Per Share
(Numerator)(Denominator) Amount
(in thousands,
except per share amounts)
Basic EPS
Net Income available
to common stockholders $6,007 8,918 $.67
Effect of Dilutive Securities
Options - 397 (.03)
Diluted EPS
Net Income available to
common stockholders plus
assumed conversions $6,007 9,315 $.64
8
Note 3 Inventories consist of the following:
June 26, September 26,
1999 1998
(in thousands)
Finished goods $ 9,030 $ 8,054
Raw materials 2,220 2,190
Packaging materials 1,882 2,239
Equipment parts & other 4,336 3,964
$17,468 $16,447
Note 4 The Company adopted SFAS No. 130, "Reporting
Comprehensive Income" in the first quarter of this
fiscal year. SFAS No. 130 establishes new standards
for reporting comprehensive income, which includes
net income as well as certain other items which
result in a change to equity during the period. The
adoption of SFAS No. 130 had no impact on the
Company's financial position or results of
operations. During the third quarters of 1999 and
1998 and the nine months of 1999 and 1998, total
comprehensive income, which for the Company included
net income and foreign currency translation
adjustments, amounted to $5,709,000 and $4,649,000,
and $7,530,000 and $5,848,000, respectively.
In June 1997, the FASB issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and
Related Information," which is effective for all
periods beginning after December 15, 1997, but is
not required to be applied for interim reporting in
the initial year of adoption. The Company is
currently evaluating the impact of SFAS No. 131 on
the disclosures included in its annual financial
statement.
In June 1998, the FASB issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging
Activities". Subsequent to this statement, the FASB
issued SFAS No. 137, which amended the effective
date of SFAS No. 133 to be all fiscal quarters of
all fiscal years beginning after June 15, 2000.
Based on the Company's minimal use of derivatives at
the current time, management does not anticipate the
adoption of SFAS No. 133 will have a significant
9
impact on earnings or financial position of the
Company. However, the impact from adopting SFAS No.
133 will depend on the nature and purpose of the
derivatives instruments in use by the Company at
that time.
10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
The Company's current cash and marketable securities
balances and cash expected to be provided by future
operations are its primary sources of liquidity. The
Company believes that these sources, along with its
borrowing capacity, are sufficient to fund future growth
and expansion.
In the three months ended June 26, 1999 and June 27,
1998, fluctuations in the value of the Mexican peso caused
an increase of $4,000 and a decrease of $67,000,
respectively, in stockholders' equity because of the
revaluation of the net assets of the Company's Mexican
frozen carbonated beverage subsidiary. In the nine month
periods, the increase was $65,000 in fiscal year 1999 and
the decrease was $159,000 in fiscal year 1998.
In February 1999, the Company acquired the Camden
Creek Bakery cookie business from Schwan's Sales
Enterprises, Inc., Marshall, MN for cash. Camden Creek
sells frozen ready-to-bake cookies to the food service
industry with approximate annual sales of $5,000,000.
In April 1999, the Company purchased and retired
250,000 shares of its common stock at a cost of $5,625,000.
The Company purchased the stock from its President and
Chief Executive Officer.
Available to the Company are unsecured general purpose
bank lines of credit totaling $30,000,000. Borrowings
under the lines at June 26, 1999 were $20,000,000.
Results of Operations
Net sales increased $8,818,000 or 12% to $82,094,000
for the three months and $21,216,000 or 12% to $205,551,000
for the nine months ended June 26, 1999 compared to the
nine months ended June 27, 1998.
Sales to food service customers increased $3,827,000
or 14% in the third quarter to $32,116,000 and $9,299,000
11
or 12% to $84,925,000 for the nine months. Approximately
17% of the third quarter and nine month sales increases
resulted from the acquisition of the Camden Creek Bakery
cookie business. Soft pretzels sales to the food service
market increased 3% to $15,764,000 in the third quarter and
5% to $47,488,000 in the nine months due primarily to
increased unit sales to one customer. Italian ice and
frozen juice treat and dessert sales increased 21% to
$9,807,000 in the three months and 13% to $19,727,000 in
the nine months due primarily to increased unit sales to
one customer. Churro sales to food service customers
increased 7% to $3,217,000 in the third quarter and 12% to
$9,173,000 in the nine months due primarily to increased
unit sales to one customer.
Sales of products to retail supermarkets increased
$2,103,000 or 20% to $12,548,000 in the third quarter and
15% to $30,991,000 in the nine months due in part to a new
advertising campaign. Soft pretzel sales for the third
quarter were up 10% and for the nine months were up 13%
from last year to $5,250,000 and $18,534,000, respectively.
Sales of our flagship SUPERPRETZEL brand soft pretzels,
excluding SOFTSTIX, increased 13% in the third quarter and
12% for the nine months. Sales of Italian ice increased
$840,000 or 16% to $6,104,000 in the third quarter and
increased $1,035,000 or 11% to $10,307,000 in the nine
months.
Frozen carbonated beverage and related product sales
increased $2,168,000 or 8% to $28,083,000 in the third
quarter and $5,828,000 or 11% to $60,993,000 in the nine
months. Beverage sales alone of $23,488,000 were
essentially unchanged in the third quarter from a year ago
and increased 8% in the nine months to $52,453,000. Sales
revenues were impacted by changes in billing practices
resulting in lower revenues per gallon purchased by
customers but which did not result in an overall drop in
profit margin. Gross profit dollars on beverage sales
increased 6% in the third quarter from a year ago.
Bakery sales increased $885,000 or 16% to $6,529,000
in the third quarter and $2,602,000 or 16% to $18,991,000
in the first nine months due to increased unit sales across
our customer base. Sales of our Bavarian Pretzel Bakery
decreased 6% to $2,818,000 in the third quarter and 5% to
12
$9,651,000 in the nine month period primarily due to fewer
stores.
Gross profit as a percentage of sales increased to 54%
and 53% in the current third quarter and nine months,
respectively, from 53% and 50% in the corresponding periods
last year. The gross profit percentage increase in the
third quarter is primarily due to improved efficiencies in
our Italian ice and frozen dessert plant in Scranton, PA.
For the nine months, the gross profit percentage increase
is attrituable to the increased efficiencies at our
Scranton, PA facility and to increased gross profit
percentages of frozen carbonated beverage sales and
increased sales of higher margin frozen carbonated
beverages due to the acquisition of National ICEE
Corporation late in the 1998 first quarter.
Total operating expenses increased $3,169,000 in the
third quarter and as a percentage of sales decreased to
42% from 43% in last year's same quarter. For the nine
months, operating expenses increased $12,603,000 and as a
percentage of sales increased to 46% from 45% last year.
Marketing expenses decreased to 28% of sales in this year's
third quarter from 29% last year due primarily to higher
sales levels and increased to 31% of sales in this year's
nine month period compared to 30% last year. The increase
in the nine month period is due primarily to substantially
higher advertising and marketing spending to promote sales
to retail supermarkets. Distribution expenses were 9% of
sales in both year's third quarter and 10% of sales in both
year's nine month period. Administration expenses were 3%
and 4% of sales in both year's third quarter and nine
months, respectively.
Operating income increased $2,432,000 or 34% to
$9,668,000 in the third quarter and $3,059,000 or 29% to
$13,544,000 in the nine months.
For the nine months, interest expense increased
$370,000 due to the assumption and subsequent refinancing
of the debt of National ICEE Corporation. For the third
quarter, interest expense decreased due to lower interest
rates and reduced debt.
Sundry income decreased by $968,000 in the third
13
quarter and $353,000 in the nine months. For the third
quarter period, the decrease in sundry income was due to
the inclusion in last year's third quarter of $1,028,000 in
income resulting from the successful settlement of certain
litigation. The decline for the nine month period was due
to the inclusion last year of the income resulting from the
litigation settlement which was partially offset by
$419,000 in write offs and reserves for the closing down of
unprofitable stores of our Restaurant Group.
The effective income tax rate has been estimated at
37% in all periods reported.
Net earnings increased $989,000 or 21 % in the current
three month period to $5,705,000 and $1,458,000 or 24% in
the current nine month period to $7,465,000.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
There has been no material change in the Company's
assessment of its sensitivity to market risk since its
presentation set forth, in item 7a. "Quantitative and
Qualitative Disclosures About Market Risk," in its 1998
annual report on Form 10-K filed with the SEC.
14
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 June
26,1999.
15
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: July 30, 1999 /s/ Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: July 30, 1999 /s/ Dennis G. Moore
Senior Vice President and
Chief Financial Officer
16
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: July 30, 1999 _________________________
Gerald B. Shreiber
President
Dated: July 30, 1999 _________________________
Senior Vice President and
Chief Financial Officer
16