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 24, 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 July 19, 2000, there were 8,562,093 shares of the
Registrant's Common Stock outstanding.
INDEX
Page
Number
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - June 24, 2000
and September 25, 1999 3
Consolidated Statements of Earnings - Three
Months and Nine Months Ended June 24, 2000
and June 26, 1999 5
Consolidated Statements of Cash Flows - Nine
Months Ended June 24, 2000 and June 26, 1999 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 24, September 25,
2000 1999
(Unaudited)
Current assets
Cash and cash equivalents $ 1,027 $ 5,945
Short term investment
securities held to maturity - 924
Accounts receivable 37,771 31,881
Inventories 19,859 16,187
Prepaid expenses and deposits 2,352 1,130
61,009 56,067
Property, plant and equipment,
at cost
Land 795 745
Buildings 5,586 5,386
Plant machinery and
equipment 72,607 66,305
Marketing equipment 151,046 138,335
Transportation equipment 1,995 2,049
Office equipment 6,834 6,308
Improvements 12,336 11,769
Construction in progress 3,056 1,356
254,255 232,253
Less accumulated deprecia-
tion and amortization 145,959 130,292
108,296 101,961
Other assets
Goodwill, trademarks and
rights,less accumulated
amortization 49,445 50,821
Long term investment
securities held to
maturity 1,740 1,925
Sundry 2,793 2,906
53,978 55,652
$223,283 $213,680
See accompanying notes to the consolidated financial
statements.
3
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND June 24, September 25,
STOCKHOLDERS' EQUITY 2000 1999
(Unaudited)
(dollars in thousands,
except share information)
Current liabilities
Current maturities of
long-term debt $ 30,143 $ 8,214
Accounts payable 29,172 23,272
Accrued liabilities 8,538 8,418
67,853 39,904
Long-term debt, less
current maturities 17,657 34,660
Deferred income taxes 7,702 7,702
Other long-term liabilities 148 245
25,507 42,607
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, 8,542,000
and 9,000,000,
respectively 28,682 36,251
Accumulated other comprehen-
sive income (1,694) (1,601)
Retained earnings 102,935 96,519
129,923 131,169
$223,283 $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 Nine months ended
June 24, June 26, June 24, June 26,
2000 1999 2000 1999
Net Sales $89,579 $82,094 $223,770 $205,551
Cost of goods sold 42,524 37,967 108,497 96,857
Gross profit 47,055 44,127 115,273 108,694
Operating expenses
Marketing 27,326 23,379 70,709 63,721
Distribution 7,606 7,545 22,271 21,239
Administrative 2,815 2,782 8,382 7,936
Amortization of
intangibles and
deferred costs 688 753 2,172 2,254
38,435 34,459 103,534 95,150
Operating income 8,620 9,668 11,739 13,544
Other income (deductions)
Investment income 72 116 312 362
Interest expense (761) (871) (2,099) (2,523)
Sundry 21 143 232 466
Earnings before
income taxes 7,952 9,056 10,184 11,849
Income taxes 2,942 3,351 3,768 4,384
NET EARNINGS $ 5,010 $ 5,705 $ 6,416 $ 7,465
Earnings per diluted
share $ .56 $ .60 $ .70 $ .78
Weighted average number
of diluted shares 8,890 9,471 9,200 9,540
Earnings per basic
share $ .57 $ .64 $ .72 $ .83
Weighted average number
of basic shares 8,728 8,984 8,915 9,038
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 24, June 26,
2000 1999
Operating activities:
Net earnings $ 6,416 $ 7,465
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization
of fixed assets 19,767 17,898
Amortization of intangibles 2,594 2,614
Other adjustments 9 (32)
Changes in assets and liabilities,
net of effects from purchase of
companies
Increase in accounts receivable (5,856) (335)
Increase in inventories (3,448) (678)
Increase in prepaid expenses (1,222) (669)
Increase in accounts payable
and accrued liabilities 6,557 3,757
Net cash provided by operating
activities 24,817 30,020
Investing activities:
Purchases of property, plant
and equipment (25,926) (18,774)
Payments for purchases of
companies, net of cash
acquired and debt assumed (1,280) (2,336)
Proceeds from investments held
to maturity 1,109 255
Other (361) 200
Net cash used in investing
activities (26,458) (20,655)
Financing activities:
Proceeds from borrowings 15,000 4,000
Proceeds from issuance of common
stock 1,186 2,335
Payments to repurchase common stock (9,390) (5,625)
Payments of long-term debt (10,073) (6,606)
Net cash (used in) provided by
financing activities (3,277) (5,896)
Net (decrease) increase in cash
and cash equivalents (4,918) 3,469
Cash and cash equivalents at
beginning of period 5,945 3,204
Cash and cash equivalents at
end of period $ 1,027 $ 6,673
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 24, 2000 and June 26, 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 frozen juice bars and ices 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 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 June 24, 2000
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands,
except per share amounts)
Basic EPS
Net Income available
to common stockholders $5,010 8,728 $.57
Effect of Dilutive Securities
Options - 162 (.01)
Diluted EPS
Net Income available to
common stockholders plus
assumed conversions $5,010 8,890 $.56
7
Nine Months Ended June 24, 2000
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands,
except per share amounts)
Basic EPS
Net Income available
to common stockholders $6,416 8,915 $.72
Effect of Dilutive Securities
Options - 285 (.02)
Diluted EPS
Net Income available to common
stockholders plus assumed
conversions $6,416 9,200 $.70
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
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
8
Note 3 Inventories consist of the following:
June 24, September 25,
2000 1999
(in thousands)
Finished goods $ 9,137 $ 8,118
Raw materials 2,033 1,579
Packaging materials 2,888 1,770
Equipment parts & other 5,801 4,720
$19,859 $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 Nine Months Ended
June 24, June 26, June 24, June 26,
2000 1999 2000 1999
(in thousands)
Sales:
Snack Foods $ 59,735 $ 54,011 $153,539 $144,558
Frozen Beverages 29,844 28,083 70,231 60,993
$ 89,579 $ 82,094 $223,770 $205,551
Depreciation and Amortization:
Snack Foods $ 3,632 $ 3,311 $ 10,476 $ 9,662
Frozen Beverages 4,064 3,656 11,885 10,850
$ 7,696 $ 6,967 $ 22,361 $ 20,512
Income Before Taxes:
Snack Foods $ 4,118 $ 5,187 $ 11,035 $ 12,801
Frozen Beverages 3,834 3,869 (851) (952)
$ 7,952 $ 9,056 $ 10,184 $ 11,849
Capital Expenditures:
Snack Foods $ 5,079 $ 3,435 $ 12,828 $ 10,060
Frozen Beverages 5,201 2,710 13,098 8,714
$ 10,280 $ 6,145 $ 25,926 $ 18,774
Assets:
Snack Foods $116,988 $116,340 $116,988 $116,340
Frozen Beverages 106,295 102,395 106,295 102,395
$223,283 $218,735 $223,283 $218,735
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
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 future expected operating cash flow
along with its borrowing capacity are its primary sources
of liquidity. The Company believes that these sources are
sufficient to fund future growth and expansion.
In the three months ended June 24, 2000 and June 26,
1999, fluctuations in the value of the Mexican peso caused
a decrease of $118,000 and a increase of $4,000,
respectively, in stockholders' equity because of the
revaluation of the net assets of the Company's Mexican
frozen beverage subsidiary. In the nine month periods, the
decrease was $93,000 in fiscal year 2000 and the increase
was $65,000 in fiscal year 1999.
In the three months ended June 24, 2000, the Company
purchased and retired 531,800 shares of its common stock at
a cost of $8,370,000. In the nine months ended June 24,
2000, the Company purchased and retired 583,000 shares of
its common stock at a cost of $9,390,000. The Company is
authorized to purchase and retire an additional 417,000
shares under a buyback authorization approved by the Board
of Directors in December 1999.
Available to the Company are unsecured general purpose
bank lines of credit totaling $30,000,000. Borrowings
under the lines at June 24, 2000 were $22,000,000. As the
bank lines of credit expire in December 2000, the Company
has classified the borrowings as a current obligation on
its balance sheet. Although these lines expire in December
2000, it is management's intent to renegotiate these
financings prior to their due date.
Results of Operations
Net sales increased $7,485,000 or 9% to $89,579,000
for the three months and $18,219,000 or 9% to $223,770,000
for the nine months ended June 24, 2000 compared to the
nine months ended June 26, 1999.
11
SNACK FOODS
Sales to food service customers of $32,204,000 in the
third quarter and $85,202,000 in the nine months were
essentially unchanged from last year's periods. Excluding
sales resulting from acquisitions, sales would have
decreased approximately 1% for the third quarter and 3% for
the nine months. Soft pretzels sales to the food service
market decreased 5% to $15,027,000 in the third quarter and
6% to $44,865,000 in the nine months due primarily to lower
unit sales to three customers. Frozen juice bars and ices
sales decreased less than 1% to $9,753,000 in the three
months and increased 3% to $20,398,000 in the nine months.
Churro sales to food service customers decreased 6% to
$3,020,000 in the third quarter and 13% to $7,973,000 in
the nine months due primarily to decreased unit sales to
two customers. Cookie sales increased 10% to $2,225,000 in
the third quarter due to increased unit sales and 52% to
$7,679,000 in the nine months due to the acquisition of the
Camden Creek cookie business and increased unit sales.
Sales of products to retail supermarkets increased
$5,215,000 or 42% to $17,763,000 in the third quarter and
22% to $37,698,000 in the nine months. Soft pretzel sales
for the third quarter were up 16% and for the nine months
were up 4% from last year to $6,067,000 and $19,313,000,
respectively. Sales of our flagship SUPERPRETZEL brand soft
pretzels, excluding SOFTSTIX, increased 15% in the third
quarter and 1% for the nine months. An advertising program
which began in last year's first quarter helped boost year
ago pretzel sales for the nine month period. Sales of
frozen juice bars and ices increased $4,530,000 or 68% to
$11,167,000 in the third quarter and increased $6,009,000
or 55% to $16,947,000 in the nine months. Sales of the
Companys Minute Maid* brand licensed products, introduced
in the second quarter, accounted for most of the frozen
juice bars and ices' sales increase.
Bakery sales increased $323,000 or 5% to $6,852,000 in
the third quarter and $1,919,000 or 10% to $20,910,000 in
the nine months due to increased unit sales across our
*Minute Maid is a registered trademark of The Coca-Cola
Company.
12
customer base. Sales of our Bavarian Pretzel Bakery
increased 3% to $2,916,000 in the third quarter and 1% to
$9,729,000 in the nine month period.
FROZEN BEVERAGES
Frozen beverage and related product sales increased
$1,761,000 or 6% to $29,844,000 in the third quarter and
$9,238,000 or 15% to $70,231,000 in the nine months.
Beverage sales alone increased 9% in the third quarter to
$25,454,000 and 11% to $58,482,000 in the nine months and
gross profit on beverage sales increased 7% in the quarter
and 6% in the nine months. Service and lease revenue
increased $813,000 in the third quarter and $4,610,000 in
the nine months due primarily to service provided to one
customer.
Gross profit as a percentage of sales decreased to 53%
and 52% in the current third quarter and nine months,
respectively, from 54% and 53% in the corresponding periods
last year. The gross profit percentage decrease in the
third quarter is primarily due to cost overruns during
start up manufacturing of our Minute Maid brand licensed
products which was begun during the Company's second
quarter and lower foodservice pretzel and churro sales. For
the nine months, the gross profit percentage decrease is
attributable to cost overruns during start up manufacturing
of our Minute Maid brand licensed products which was begun
during the Company's second quarter, lower foodservice
pretzel and churro sales, and lower gross profit
percentages of the increased service and lease revenue of
our frozen beverage business.
Total operating expenses increased $3,976,000 in the
third quarter and as a percentage of sales increased to 43%
from 42% in last year's same quarter. For the nine months,
operating expenses increased $8,384,000 and as a percentage
of sales was 46% in both years. Marketing expenses
increased to 31% of sales in this year's third quarter from
29% last year and increased less than one percentage point
of sales to 32% of sales in the nine months from 31% of
sales last year primarily due to the higher level of sales
of products to retail supermarkets which generally require
13
higher marketing expenses as a percentage of sales.
Distribution expenses decreased less than one percentage
point of sales to 8% of sales in the third quarter from 9%
in last year's quarter and were 10% of sales in both year's
nine months period. Administration expenses were 3% and 4%
of sales in both year's third quarter and nine months,
respectively.
Operating income decreased $1,048,000 or 11% to
$8,620,000 in the third quarter and $1,805,000 or 13% to
$11,739,000 in the nine months.
For the three and nine months, interest expense
decreased $110,000 and $424,000, respectively, due to lower
debt levels.
The effective income tax rate has been estimated at
37% in all periods reported.
Net earnings decreased $695,000 or 12% in the current
three month period to $5,010,000 and $1,049,000 or 14% in
the current nine month period to $ 6,416,000.
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.
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
24, 2000.
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: August 1, 2000 /s/ Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: August 1, 2000 /s/ Dennis G. Moore
Senior Vice President and
Chief Financial Officer
16
5
1,000
3-MOS
SEP-30-2000
JUN-24-2000
1027
0
38503
(732)
19859
61009
254255
(145959)
223283
67853
17657
0
0
28682
101241
223283
223770
223770
108497
103534
0
0
2099
10184
3768
6416
0
0
0
6416
0.72
0.70