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, 1995
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 20, 1995, there were 9,358,918 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, 1995 and
September 24, 1994................................... 3
Consolidated Statements of Earnings - Three Months and
Six Months Ended March 25, 1995 and March 26, 1994... 5
Consolidated Statements of Cash Flows - Six Months
Ended March 25, 1995 and March 26, 1994.............. 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 25, September 24,
1995 1994
(Unaudited)
Current assets
Cash and cash equivalents $ 2,723,000 $ 6,621,000
Marketable securities available
for sale 6,827,000 4,443,000
Accounts receivable 15,016,000 17,176,000
Inventories 12,332,000 11,519,000
Prepaid expenses and deposits 1,983,000 1,611,000
38,881,000 41,370,000
Property, plant and equipment,
at cost
Land 983,000 973,000
Buildings 5,119,000 5,119,000
Plant machinery and equipment 38,462,000 35,045,000
Marketing equipment 70,916,000 70,311,000
Transportation equipment 2,219,000 2,622,000
Office equipment 3,497,000 3,355,000
Improvements 5,300,000 4,741,000
Construction in progress 414,000 750,000
126,910,000 122,916,000
Less accumulated depreciation
and amortization 65,892,000 59,788,000
61,018,000 63,128,000
Other assets
Goodwill, trademarks and rights,
less accumulated amortization 9,353,000 9,793,000
Long term investments available
for sale 2,495,000 -
Long term investments held to
maturity 7,032,000 10,764,000
Sundry 1,717,000 2,311,000
20,597,000 22,868,000
$120,496,000 $127,366,000
See accompanying notes to the consolidated financial statements.
3
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND March 25, September 24,
STOCKHOLDERS' EQUITY 1995 1994
(Unaudited)
Current liabilities
Current maturities of long-
term debt $ 15,000 $ 15,000
Accounts payable 11,013,000 11,854,000
Accrued liabilities 4,810,000 4,537,000
15,838,000 16,406,000
Long-term debt, less current
maturities 5,021,000 5,028,000
Deferred income 692,000 692,000
Deferred income taxes 4,693,000 4,695,000
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, 9,382,000 and
9,889,000, respectively 43,897,000 49,946,000
Foreign currency translation
adjustment (1,261,000) -
Retained earnings 51,616,000 50,599,000
94,252,000 100,545,000
$120,496,000 $127,366,000
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 25, March 26, March 25, March 26,
1995 1994 1995 1994
Net Sales $40,317,000 $40,271,000 $81,534,000 $78,676,000
Cost of goods sold 20,033,000 19,593,000 40,455,000 37,569,000
Gross profit 20,284,000 20,678,000 41,079,000 41,107,000
Operating expenses
Marketing 13,478,000 11,990,000 26,802,000 24,093,000
Distribution 4,487,000 4,647,000 9,019,000 8,891,000
Administrative 2,072,000 1,961,000 4,040,000 3,957,000
Amortization of
intangibles and
deferred costs 217,000 196,000 433,000 409,000
20,254,000 18,794,000 40,294,000 37,350,000
Operating income 30,000 1,884,000 785,000 3,757,000
Other income (deductions)
Investment income 299,000 282,000 591,000 572,000
Interest expense (114,000) (119,000) (212,000) (231,000)
Sundry 534,000 533,000 466,000 577,000
Earnings before
income taxes 749,000 2,580,000 1,630,000 4,675,000
Income taxes 282,000 970,000 613,000 1,758,000
NET EARNINGS $ 467,000 $ 1,610,000 $ 1,017,000 $ 2,917,000
Earnings per common
share $ .05 $ .15 $ .11 $ .27
Weighted average number
of shares 9,467,000 10,662,000 9,660,000 10,661,000
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 25, March 26,
1995 1994
Cash flows from operating activities:
Net earnings $ 1,017,000 $ 2,917,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization of fixed
assets 7,379,000 6,586,000
Amortization of intangibles and deferred
costs 508,000 482,000
(Decrease) increase in deferred income taxes (2,000) 293,000
Other adjustments 10,000 (398,000)
Changes in assets and liabilities
Decrease in accounts receivable 2,057,000 985,000
(Increase) decrease in inventories (1,023,000) 28,000
(Increase) in prepaid expenses (372,000) (316,000)
(Decrease) increase in accounts payable
and accrued liabilities (615,000) 671,000
Net cash provided by operating activities 8,959,000 11,248,000
Cash flows from investing activities:
Capital expenditures (6,193,000) (8,906,000)
Payments for purchase of companies, net of
cash acquired and debt assumed - (623,000)
Proceeds from investments held to maturity 230,000 2,976,000
Payments for investments held to maturity (500,000) (3,568,000)
Proceeds from investments available for sale 2,085,000 1,720,000
Payments for investments available for sale (2,981,000) (6,052,000)
Decrease in bond trust fund 549,000 721,000
Proceeds from sale of property and equipment 27,000 574,000
Other (18,000) (10,000)
Net cash used in investing activities (6,801,000) (13,168,000)
Cash flows from financing activities:
Proceeds from issuance of common stock 254,000 367,000
Payments to repurchase common stock (6,303,000) -
Payments of long-term debt (7,000) (287,000)
Net cash (used in) provided by
financing activities (6,056,000) 80,000
Net increase (decrease) in cash
and cash equivalents (3,898,000) (1,840,000)
Cash and cash equivalents at beginning of period 6,621,000 8,457,000
Cash and cash equivalents at end of period $ 2,723,000 $ 6,617,000
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 25, 1995 and March 26, 1994 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 24, 1994.
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 25, September 24,
1995 1994
Finished goods $ 5,397,000 $ 5,538,000
Raw materials 1,501,000 1,293,000
Packaging materials 2,338,000 1,777,000
Equipment parts & other 3,096,000 2,911,000
$12,332,000 $11,519,000
Note 4 The Company adopted FAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" at December 24, 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
7
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 $37,000 in the quarter ended March 25, 1995 with a $3,000
gain realized and $2,085,000 in the six months ended March 25,
1995 with a gain of $3,000 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 March 25, 1995 are summarized as follows:
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Available for Sale Securities
Equity Securities $2,157,000 $12,000 $ 12,000 $2,157,000
Corporate Debt Securities 996,000 - 69,000 927,000
Municipal Government Securities 6,169,000 - 53,000 6,116,000
$9,322,000 $12,000 $134,000 $9,200,000
Held to Maturity Securities
Corporate Debt Securities $1,027,000 $ - $ 60,000 $ 967,000
Municipal Government Securities 5,505,000 - 184,000 5,321,000
Other 500,000 - - 500,000
$7,032,000 $ - $244,000 $6,788,000
The following table lists the maturities of debt securities held at
March 25, 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$4,670,000 $4,641,000 $ - $ -
Due after one year
through five years 2,000,000 1,967,000 7,032,000 6,788,000
Due after five years 495,000 435,000 - -
Total $7,165,000 $7,043,000 $7,032,000 $6,788,000
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.
The devaluation of the Mexican peso caused a reduction of $654,000 and
$1,261,000 in stockholders' equity for the three months and six months ended
March 25, 1995, respectively. The Company is experiencing a dollar decline
in the sales of its Mexican frozen carbonated beverage subsidiary of about 65%
due primarily to the devaluation. The Company anticipates that the sales
decline from last year's levels will continue for at least the balance of its
fiscal year. In fiscal year 1994, sales of the Mexican subsidiary were
$2,687,000.
During the six months ended March 25, 1995, the Company purchased and
retired 539,100 shares of its common stock at a cost of $6,303,000.
Subsequent to the second 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.
Available to the Company are unsecured general purpose bank lines of
credit totalling $25,000,000.
Results of Operations
Net sales increased slightly to $40,317,000 for the three months and
$2,858,000 or 4% to $81,534,000 for the six months ended March 25, 1995.
Sales to food service customers increased $985,000 or 6% in the second
quarter to $17,952,000 and $3,153,000 or 9% to $36,902,000 in the six months.
Soft pretzel sales to the food service market increased 7% to $12,271,000 in
the second quarter and 10% to $24,590,000 in the six months due to expanded
unit volume. Increased penetration in warehouse clubs and schools and new
products accounted for most of the added pretzel volume. Frozen juice treat
and dessert sales increased 6% to $2,644,000 in the three months and 3% to
$5,513,000 in the six months. Churro sales to food service customers
decreased 10% to $2,147,000 in the second quarter and 5% to $4,313,000 in the
six months. One customer accounted for all of the churro sales decrease. All
foodservice sales increases and decreases were due primarily to changes in
unit volume.
Sales of products to retail supermarkets increased $532,000 or 6% to
$10,119,000 in the second quarter and less than 1% to $17,502,000 in the first
half. Soft pretzel sales for the second quarter were up 2% to $8,038,000 and
for the six months were down 2% to $14,131,000. The sales decline for the six
9
months was due primarily to increased competition. Sales of the flagship
SUPERPRETZEL brand soft pretzels, excluding SOFTSTIX, increased 3% in the
second quarter and were essentially unchanged in the six months. Softstix
sales decreased $77,000 or 6% to $1,261,000 in the second quarter and $387,000
or 14% to $2,411,000 in the six months. Sales of Luigi's Real Italian Ice
increased $324,000 or 21% to $1,848,000 in the second quarter and $567,000 or
24% to $2,935,000 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 decreased $742,000
or 9% to $7,514,000 in the second quarter and $417,000 or 3% to $16,249,000
in the six months. Sales of the Company's Mexican frozen carbonated beverage
subsidiary were down $482,000 or 65% in the second quarter and $491,000 or 35%
in the six months due to the devaluation of the peso and the business downturn
in Mexico. Equipment and parts sales were down $214,000 or 76% in the second
quarter and $188,000 or 60% in the six months due to reduced demand. Beverage
sales alone decreased 5% to $7,147,000 in the second quarter and were
essentially unchanged in the six months with sales of $15,361,000 even though
there were an increased number of frozen carbonated beverage dispensers at
customer locations primarily because of lower sales in Mexico and the net loss
of higher volume accounts elsewhere.
Bakery sales decreased $670,000 or 27% to $1,799,000 in the second
quarter and increased $141,000 or 3% to $4,286,000 in the first six months.
The three month decline was due to a reduction of purchases by a single
customer. Syrup and topping product sales decreased $207,000 and $441,000 in
the second quarter and six months, respectively.
Gross profit as a percentage of sales decreased to 50% in the current
three and six month periods from 51% and 52% in the corresponding periods last
year. This gross profit percentage decrease is primarily attributable to
higher raw material and packaging costs, increased manufacturing overhead
costs due to recent expansions of production capacity and lower selling prices
on incremental foodservice sales.
Total operating expenses increased $1,460,000 in the second quarter and
as a percentage of sales increased to 50% from 47% in last year's same
quarter. For the first half, operating expenses increased $2,944,000 and as
a percentage of sales increased to 49% from 47% last year. Marketing expenses
increased from 30% to 33% in the second quarter and from 31% to 33% in the six
months primarily because of higher frozen carbonated beverage marketing
expenses combined with lower frozen carbonated beverage sales compared to last
year and higher retail supermarket advertising and marketing allowance
spending. Distribution expenses were 11% of sales in all periods.
Administrative expenses were 5% of sales in all periods.
Operating income decreased $1,854,000 or 98% to $30,000 in the second
quarter and $2,972,000 or 79% to $785,000 in the first half.
10
Investment income increased in the second quarter and six months due
to higher levels of interest rates on invested funds. Interest expense
decreased slightly in the second quarter and six months due to the reduction
of debt.
Sundry income of $534,000 in the quarter was essentially unchanged from
last year while sundry decreased $111,000 to $466,000 in the six months. This
year's second quarter sundry income included a gain on an insurance settlement
and last year's amount included a gain on the sale of land.
The effective income tax rate has been estimated at 38% in all periods.
Net earnings decreased $1,143,000 or 71% in the current three month
period to $467,000 and $1,900,000 or 65% in the current six month period to
$1,017,000.
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 25, 1995.
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: April 28, 1995 /s/ Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: April 28, 1995 /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: April 28, 1995
Gerald B. Shreiber
President
Dated: April 28, 1995
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
13