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 25, 2000
or
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number: 0-14616
J & J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
(State or other jurisdication of (I.R.S. Employer
incorporation or organization) Identification No.)
6000 Central Highway, Pennsauken, NJ 08109
(Address of principal executive offices)
Telephone (856) 665-9533
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
X Yes No
As of April 21, 2000, there were 8,810,183 shares of the
Registrant's Common Stock outstanding.
INDEX
Page
Number
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - March 25, 2000
and September 25, 1999 3
Consolidated Statements of Earnings - Three
Months and Six Months Ended March 25, 2000
and March 27, 1999 5
Consolidated Statements of Cash Flows - Six
Months Ended March 25, 2000 and March 27, 1999 6
Notes to the Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 15
Part II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
ASSETS
March 25, September 25,
2000 1999
(Unaudited)
Current assets
Cash and cash equivalents $ 2,477 $ 5,945
Short term investment
securities held to maturity - 924
Accounts receivable 31,119 31,881
Inventories 19,718 16,187
Prepaid expenses and deposits 2,273 1,130
55,587 56,067
Property, plant and equipment,
at cost
Land 795 745
Buildings 5,586 5,386
Plant machinery and
equipment 70,773 66,305
Marketing equipment 145,621 138,335
Transportation equipment 2,052 2,049
Office equipment 6,687 6,308
Improvements 12,163 11,769
Construction in progress 2,352 1,356
246,029 232,253
Less accumulated deprecia-
tion and amortization 140,921 130,292
105,108 101,961
Other assets
Goodwill, trademarks and
rights,less accumulated
amortization 50,133 50,821
Long term investment
securities held to
maturity 1,740 1,925
Sundry 2,455 2,906
54,328 55,652
$215,023 $213,680
See accompanying notes to the consolidated financial
statements.
3
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
(dollars in thousands,except share information)
LIABILITIES AND March 25, September 25,
STOCKHOLDERS' EQUITY 2000 1999
Current liabilities
Current maturities of
long-term debt $ 8,151 $ 8,214
Accounts payable 24,062 23,272
Accrued liabilities 6,624 8,418
38,837 39,904
Long-term debt, less
current maturities 35,667 34,660
Deferred income taxes 7,702 7,702
Other long-term liabilities 176 245
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, 8,980,000
and 9,000,000,
respectively 36,292 36,251
Accumulated other comprehen-
sive income (1,576) (1,601)
Retained earnings 97,925 96,519
132,641 131,169
$215,023 $213,680
See accompanying notes to the consolidated financial
statements.
4
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
Three months ended Six months ended
March 25, March 27, March 25, March 27,
2000 1999 2000 1999
Net Sales $68,241 $62,908 $134,191 $123,457
Cost of goods sold 32,592 29,323 65,973 58,890
Gross profit 35,649 33,585 68,218 64,567
Operating expenses
Marketing 22,985 20,735 43,383 40,342
Distribution 7,564 7,018 14,665 13,694
Administrative 2,776 2,614 5,567 5,154
Amortization of
intangibles and
deferred costs 739 762 1,484 1,501
34,064 31,129 65,099 60,691
Operating income 1,585 2,456 3,119 3,876
Other income (deductions)
Investment income 104 120 240 246
Interest expense (652) (773) (1,338) (1,652)
Sundry 138 68 211 323
Earnings before
income taxes 1,175 1,871 2,232 2,793
Income taxes 435 692 826 1,033
NET EARNINGS $ 740 $ 1,179 $ 1,406 $ 1,760
Earnings per diluted
share $ .08 $ .12 $ .15 $ .18
Weighted average number
of diluted shares 9,329 9,638 9,355 9,579
Earnings per basic
share $ .08 $ .13 $ .16 $ .19
Weighted average number
of basic shares 9,014 9,095 9,009 9,066
See accompanying notes to the consolidated financial
statements.
5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in thousands)
Six months ended
March 25, March 27,
2000 1999
Operating activities:
Net earnings $ 1,406 $ 1,760
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization
of fixed assets 12,932 11,811
Amortization of intangibles 1,733 1,734
Other adjustments (74) (15)
Changes in assets and liabilities,
net of effects from purchase of
companies
Decrease in accounts receivable 762 5,744
Increase in inventories (3,345) (1,246)
Increase in prepaid expenses (1,143) (841)
Decrease in accounts payable
and accrued liabilities (438) (4,447)
Net cash provided by operating
activities 11,833 14,500
Investing activities:
Purchases of property, plant
and equipment (15,646) (12,629)
Payments for purchases of
companies, net of cash
acquired and debt assumed (1,280) (2,336)
Proceeds from investments held
to maturity 1,109 245
Other 165 (17)
Net cash used in investing
activities (15,652) (14,737)
Financing activities:
Proceeds from borrowings 10,000 2,000
Proceeds from issuance of common
stock 427 1,507
Payments to repurchase common stock (1,020) -
Payments of long-term debt (9,056) (4,585)
Net cash provided by financing
activities 351 (1,078)
Net (decrease) increase in
cash and cash equivalents (3,468) (1,315)
Cash and cash equivalents at
beginning of period 5,945 3,204
Cash and cash equivalents at
end of period $ 2,477 $ 1,889
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 25, 2000 and March 27, 1999
are not necessarily indicative of results for the
full year. Sales of the Company's retail stores are
generally higher in the first quarter due to the
holiday shopping season. Sales of the Company's
frozen beverages and Italian ice are generally
higher in the third and fourth quarters due to
warmer weather.
While the Company believes that the disclosures
presented are adequate to make the information not
misleading, it is suggested that these consolidated
financial statements be read in conjunction with the
consolidated financial statements and the notes
included in the Company's Annual Report on Form 10-K
for the year ended September 25, 1999.
Note 2 The Company's calculation of earnings per share in
accordance with SFAS No. 128, "Earnings Per Share,"
is as follows:
Three Months Ended March 25, 2000
Income Shares Per Share
(Numerator)(Denominator) Amount
(in thousands,
except per share amounts)
Basic EPS
Net Income available
to common stockholders $ 740 9,014 $.08
Effect of Dilutive Securities
Options - 315 -
Diluted EPS
Net Income available to
common stockholders plus
assumed conversions $ 740 9,329 $.08
7
Six Months Ended March 25, 2000
Income Shares Per Share
(Numerator)(Denominator) Amount
(in thousands,
except per share amounts)
Basic EPS
Net Income available
to common stockholders $1,406 9,009 $.16
Effect of Dilutive Securities
Options - 346 (.01)
Diluted EPS
Net Income available to common
stockholders plus assumed
conversions $1,406 9,355 $.15
Three Months Ended March 27, 1999
Income Shares Per Share
(Numerator)(Denominator) Amount
(in thousands,
except per share amounts)
Basic EPS
Net Income available
to common stockholders $1,179 9,095 $.13
Effect of Dilutive Securities
Options - 543 (.01)
Diluted EPS
Net Income available to common
stockholders plus assumed
conversions $1,179 9,638 $.12
Six Months Ended March 27, 1999
Income Shares Per Share
(Numerator)(Denominator) Amount
(in thousands,
except per share amounts)
Basic EPS
Net Income available
to common stockholders $1,760 9,066 $.19
Effect of Dilutive Securities
Options - 513 (.01)
Diluted EPS
Net Income available to
common stockholders plus
assumed conversions $1,760 9,579 $.18
8
Note 3 Inventories consist of the following:
March 25, September 25,
2000 1999
(in thousands)
Finished goods $ 9,185 $ 8,118
Raw materials 2,359 1,579
Packaging materials 2,441 1,770
Equipment parts & other 5,733 4,720
$19,718 $16,187
Note 4 In fiscal year 1999, the Company adopted SFAS No.
131, "Disclosures about Segments of an Enterprise
and Related Information". SFAS No. 131 superceded
SFAS 14, "Financial Reporting for Segments of a
Business Enterprise", replacing the "industry
segment" approach with the "management approach".
The management approach designates the internal
organization that is used by management for making
operating decisions and assessing performance as the
source of the Company's reportable segments, as well
as disclosures about products and services and major
customers. The adoption of SFAS No. 131 did not
affect the results of operations or the financial
position of the Company.
Using the guidelines set forth in SFAS No. 131, the
Company has two reportable segments: Snack Foods and
Frozen Beverages. Snack Foods manufactures and
distributes snack foods and bakery items. Frozen
beverages markets and distributes frozen beverage
products. The segments are managed as strategic
business units due to their distinct production
processes and capital requirements.
The Company evaluates each segment's performance
based on income or loss before taxes, excluding
corporate and other unallocated expenses and non-
recurring charges. Information regarding the
operations in these reportable segments is as
follows:
9
Three Months Ended Six Months Ended
March 25, March 27, March 25, March 27,
2000 1999 2000 1999
(in thousands)
Sales:
Snack Foods $ 48,166 $ 46,873 $ 93,804 $ 90,547
Frozen Beverages 20,075 16,035 40,387 32,910
$ 68,241 $ 62,908 $134,191 $123,457
Depreciation and Amortization:
Snack Foods $ 3,460 $ 3,196 $ 6,844 $ 6,351
Frozen Beverages 3,940 3,620 7,821 7,194
$ 7,400 $ 6,816 $ 14,665 $ 13,545
Income Before Taxes:
Snack Foods $ 3,556 $ 4,816 $ 6,917 $ 7,615
Frozen Beverages (2,381) (2,945) (4,685) (4,822)
$ 1,175 $ 1,871 $ 2,232 $ 2,793
Capital Expenditures:
Snack Foods $ 5,309 $ 3,687 $ 7,749 $ 6,625
Frozen Beverages 3,160 2,433 7,897 6,004
$ 8,469 $ 6,120 $ 15,646 $ 12,629
Assets:
Snack Foods $114,645 $114,829 $114,645 $114,829
Frozen Beverages 100,378 94,784 100,378 94,784
$215,023 $209,613 $215,023 $209,613
Sales to a single Snack Foods' customer were
approximately 10% of the Company's sales for the six
months ending March 27, 1999 and less than 10% for
all other periods reported.
Note 5 In June 1998, SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities" was
issued. Subsequent to this statement, SFAS No. 137
was issued, which amended the effective date of SFAS
No. 133 to be all fiscal quarters of all fiscal
years beginning after June 15, 2000. Based on the
Company's minimal use of derivatives at the current
time, management does not anticipate the adoption of
SFAS No. 133 will have a significant impact on
earnings or financial position of the Company.
However, the impact from adopting SFAS No. 133 will
10
depend on the nature and purpose of the derivatives
instruments in use by the Company at that time.
11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
The Company's current cash and marketable securities
balances and cash expected to be provided by future
operations are its primary sources of liquidity. The
Company believes that these sources, along with its
borrowing capacity, are sufficient to fund future growth
and expansion.
In the three months ended March 25, 2000 and March 27,
1999, fluctuations in the valuation of the Mexican peso
caused an increase of $35,000 and a increase of $34,000,
respectively, in stockholders' equity because of the
revaluation of the net assets of the Company's Mexican
frozen carbonated beverage subsidiary. In the six month
periods, the increase was $10,000 in fiscal year 2000 and
the increase was $61,000 in fiscal year 1999.
In the six months ended March 25, 2000, the Company
purchased and retired 51,200 shares of its common stock at
a cost of $1,020,000.
Available to the Company are unsecured general purpose
bank lines of credit totaling $30,000,000. Borrowings
under the lines at March 25, 2000 were $16,000,000.
Although the bank lines of credit expire in December, 2000,
the Company has classified the borrowings as long term on
its balance sheet as the Company has the intent and ability
to refinance the lines so that the Company will not be
required to pay off any unpaid balances at December 31,
2000.
Results of Operations
Net sales increased $5,333,000 or 8% to $68,241,000
for the three months and $10,734,000 or 9% to $134,191,000
for the six months ended March 25, 2000 compared to the six
months ended March 27, 1999.
SNACK FOODS
Sales to food service customers decreased $1,260,000
12
or 4% in the second quarter to $26,883,000 and increased
$189,000 or less than 1% for the six months. Excluding
sales resulting from acquisitions, sales would have
decreased 7% for the second quarter and 4% for the six
months. Soft pretzel sales to the food service market
decreased 12% to $14,402,000 in the second quarter and 6%
to $29,838,000 in the six months. Lower sales to two
customers accounted for most of the pretzel sales'
decrease. Frozen juice bars and ices sales increased 10% to
$6,338,000 in the three months and 7% to $10,645,000 in the
six months due primarily to increased unit sales to one
customer. Churro sales to food service customers decreased
21% to $2,499,000 in the second quarter and 17% to
$4,953,000 in the six months due primarily to decreased
unit sales to two customers. Cookie sales increased 32% to
$2,636,000 in the second quarter and 64% to $5,454,000 in
the six months due primarily to the acquisition of the
Camden Creek Bakery cookie business.
Sales of products to retail supermarkets increased
$1,680,000 or 16% to $12,257,000 in the second quarter and
8% to $19,935,000 in the first half. Soft pretzel sales for
the second quarter were up 2% to $7,633,000 and were
essentially unchanged at $13,246,000 for the six months.
Sales of our flagship SUPERPRETZEL brand soft pretzels,
excluding SOFTSTIX, decreased 2% in the second quarter and
4% for the six months. An advertising program which began
in last year's first quarter helped boost year ago pretzel
sales. Sales of frozen juice bars and ices increased
$1,489,000 or 58% to $4,060,000 in the second quarter and
$1,577,000 or 38% to $5,780,000 in the first half due to
sales of new products.
Bakery sales increased $728,000 or 14% to $5,947,000
in the second quarter and $1,596,000 or 13% to $14,058,000
in the first six months due to increased unit sales across
our customer base. Sales of our Bavarian Pretzel Bakery
increased 5% to $3,079,000 in the second quarter and were
essentially unchanged at $6,813,000 for the six month
period.
FROZEN BEVERAGES
Frozen beverage and related product sales increased
$4,040,000 or 25% to $20,075,000 in the second quarter and
13
$7,477,000 or 23% to $40,387,000 in the six months.
Beverage sales alone increased 14% in the second quarter
and the first half to $16,046,000 and $33,028,000,
respectively, and gross profit on beverage sales increased
7% in the quarter and 6% in the six months. Service and
lease revenue increased $2,306,000 in the second quarter
and $3,798,000 in the six months due primarily to services
provided to one customer.
Gross profit as a percentage of sales decreased to 52%
and 51% in the current year's three and six month periods
from 53% and 52% in the corresponding periods last year.
This gross profit percentage decrease is primarily
attributable to lower gross profit percentages of the
increased service and lease revenue of our frozen beverage
business and lower foodservice pretzel and churro sales.
Total operating expenses increased $2,935,000 in the
second quarter and as a percentage of sales increased less
than / of one percent to 50% from 49% in last year's same
quarter. For the first half, operating expenses increased
$4,408,000 and as a percentage of sales were 49% in both
years. Marketing expenses increased to 34% of sales in
this year's three month period from 33% of sales last year.
For the six month period, marketing expenses decreased less
than / of one percent of sales to 32% from 33% in 1999.
Distribution expenses and administrative expenses as a
percent of sales remained at 11% and 4%, respectively, for
all periods reported. The increase in marketing expenses
as a percent of sales in this year's second quarter is
primarily attributable to lower foodservice sales during
the period.
Operating income decreased $871,000 or 35% to
$1,585,000 in the second quarter and $757,000 or 20% to
$3,119,000 in the first half.
For the three and six months, interest expense
decreased $121,000 and $314,000, respectively, due to lower
debt levels.
The effective income tax rate has been estimated at
37% in all periods.
Net earnings decreased $439,000 or 37% in the current
14
three month period to $740,000 and $354,000 or 20% in the
current six month period to $1,406,000.
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 1999
annual report on Form 10-K filed with the SEC.
15
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of xSecurity Holders
The results of voting at the Annual Meeting of
Shareholders held on February 3, 2000 is as follows:
Absentees
Votes Cast and Broker
For Against Withheld Non Votes
Election of Gerald
B. Shreiber as
Director 7,246,425 - 870,056 -
Increase in the
number of shares of
Common Stock for
issuance under the
Company's Stock
Option Plan for
officers and key
employees excluding
the Chief Executive
Officer 4,883,912 3,215,991 - 46,578
Increase in the
number of shares
of Common Stock
for issuance under
the Company's Non-
statutory Stock
Option Plan for
Non-Employee Directors
and Chief Executive
Officer 7,558,593 541,090 - 46,798
The Company had 9,007,435 shares outstanding on
December 6, 1999, the record date.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None
b) Reports on Form 8-K - There were no reports on Form
8-K for the three months ended March 25, 2000.
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: May 2, 2000 /s/Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: May 2, 2000 /s/Dennis G. Moore
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
17
5
1,000
3-MOS
SEP-30-2000
MAR-25-2000
2477
0
31865
(746)
19718
55587
246029
(140921)
215023
38837
35667
0
0
36292
96349
215023
134191
134191
65973
65099
0
0
1338
2232
826
1406
0
0
0
1406
0.16
0.15