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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 December 30, 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 jurisdiction 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 January 15, 2001, there were 8,427,211 shares of the
Registrant's Common Stock outstanding.
INDEX
Page
Number
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - December 30, 2000
(unaudited) and September 30, 2000 3
Consolidated Statements of Earnings - Three
Months Ended December 30, 2000 and December
25, 1999 (unaudited) 5
Consolidated Statements of Cash Flows - Three
Months Ended December 30, 2000 and December
25, 1999 (unaudited) 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 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
(in thousands)
ASSETS
December 30, September 30,
2000 2000
(Unaudited)
Current assets
Cash and cash equivalents $ 3,231 $ 1,379
Accounts receivable 25,832 33,626
Inventories 24,902 21,473
Prepaid expenses and other 2,056 1,418
56,021 57,896
Property, plant and equipment,
at cost
Land 795 795
Buildings 5,586 5,586
Plant machinery and
equipment 84,226 75,817
Marketing equipment 156,821 156,093
Transportation equipment 2,095 2,043
Office equipment 7,179 6,981
Improvements 14,384 12,705
Construction in progress 1,384 1,304
272,470 261,324
Less accumulated deprecia-
tion and amortization 158,498 152,155
113,972 109,169
Other assets
Goodwill, trademarks and
rights,less accumulated
amortization 48,089 48,768
Long term investment
securities held to
maturity 1,550 1,620
Sundry 2,641 2,586
52,280 52,974
$222,273 $220,039
See accompanying notes to the consolidated financial
statements.
3
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
(in thousands)
LIABILITIES AND December 30, September 30,
STOCKHOLDERS' EQUITY 2000 2000
Current liabilities
Current maturities of
long-term debt $ 10,119 $ 2,186
Accounts payable 21,640 24,913
Accrued liabilities 7,245 8,728
39,004 35,827
Long-term debt, less
current maturities 43,523 42,481
Deferred income taxes 8,340 8,340
Other long-term liabilities 88 117
51,951 50,938
Stockholders' equity
Capital stock
Preferred, $1 par value;
authorized, 5,000,000
shares; none issued - -
Common, no par value;
authorized 25,000
shares; issued and
outstanding, 8,416
and 8,522,respectively 27,178 28,403
Accumulated other comprehen-
sive income (1,654) (1,616)
Retained earnings 105,794 106,487
131,318 133,274
$222,273 $220,039
See accompanying notes to the consolidated financial
statements.
4
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
December 30, December 25,
2000 1999
Net Sales $70,070 $65,506
Cost of goods sold 36,052 33,381
Gross profit 34,018 32,125
Operating expenses
Marketing 24,365 21,154
Distribution 6,305 5,901
Administrative 3,105 2,791
Amortization of
intangibles and
deferred costs 681 745
34,456 30,591
Operating (loss) income (438) 1,534
Other income (deductions)
Investment income 81 136
Interest expense (786) (686)
Sundry 43 73
(Loss) earnings before
income taxes (1,100) 1,057
Income taxes (407) 391
NET (LOSS) EARNINGS $ (693) $ 666
(Loss) earnings per diluted
share $(.08) $ .07
Weighted average number
of diluted shares 8,419 9,381
(Loss) earnings per basic share $(.08) $ .07
Weighted average number
of basic shares 8,419 9,004
See accompanying notes to the consolidated financial statements
5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in thousands)
December 30, December 25,
2000 1999
Operating activities:
Net (loss) earnings $ (693) $ 666
Adjustments to reconcile net (loss)
earnings to net cash provided
by operating activities:
Depreciation and amortization
of fixed assets 7,404 6,354
Amortization of intangibles 844 911
Other adjustments (9) (48)
Changes in assets and liabilities,
net of effects from purchase of
companies
Decrease in accounts receivable 7,723 3,542
Increase in inventories (3,232) (1,132)
Increase in prepaid expenses (638) (731)
Decrease in accounts payable
and accrued liabilities (4,640) (1,676)
Net cash provided by operating
activities 6,759 7,886
Investing activities:
Purchase of property, plant
and equipment (3,291) (7,177)
Payments for purchases of
companies, net of cash
acquired and debt assumed (9,414) (1,280)
Proceeds from investments
held to maturity 70 185
Other 119 68
Net cash used in investing
activities (12,516) (8,204)
Financing activities:
Proceeds from issuance of stock 34 102
Proceeds from borrowings 13,000 3,000
Payments to repurchase common stock (1,400) (19)
Payments of long-term debt (4,025) (7,025)
Net cash provided by(used in)
financing activities 7,609 (3,942)
Net increase (decrease) in cash
and cash equivalents 1,852 (4,260)
Cash and cash equivalents at
beginning of period 1,379 5,945
Cash and cash equivalents at
end of period $ 3,231 $1,685
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. Certain prior year amounts have been
reclassified to conform to the current period
presentation. These reclassifications had no effect
on reported net earnings.
The results of operations for the three months ended
December 30, 2000 and December 25, 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 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 30, 2000.
Note 2 The Company's calculation of earnings per share in
accordance with SFAS No. 128, "Earnings Per Share,"
is as follows:
7
Three Months Ended December 30, 2000
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
Basic EPS
Net Loss available
to common stockholders $ (693) 8,419 $(.08)
Effect of Dilutive Securities
Options* - - -
Diluted EPS
Net Loss available to
common stockholders plus
assumed conversions $ (693) 8,419 $(.08)
*No effect was given to the options as inclusion would be
anti-dilutive.
Three Months Ended December 25, 1999
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
Basic EPS
Net Income available
to common stockholders $ 666 9,004 $.07
Effect of Dilutive Securities
Options - 377 -
Diluted EPS
Net Income available to common
stockholders plus assumed
conversions $ 666 9,381 $.07
Note 3 Inventories consist of the following:
December 30, September 30,
2000 2000
(in thousands)
Finished goods $13,537 $10,714
Raw materials 2,378 2,136
Packaging materials 2,825 2,532
Equipment parts & other 6,162 6,091
$24,902 $21,473
8
Note 4 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:
Three Months Ended
December 30, December 25,
2000 1999
(in thousands)
Sales:
Snack Foods $ 50,577 $ 45,638
Frozen Beverages 20,077 20,312
$ 70,654 $ 65,950
Depreciation and Amortization:
Snack Foods $ 4,001 $ 3,384
Frozen Beverages 4,247 3,881
$ 8,248 $ 7,265
(Loss) Earnings Before Taxes:
Snack Foods $ 1,814 $ 3,360
Frozen Beverages (2,914) (2,303)
$ (1,100) $ 1,057
Capital Expenditures:
Snack Foods $ 1,731 $ 2,440
Frozen Beverages 1,560 4,737
$ 3,291 $ 7,177
Assets:
Snack Foods $125,419 $106,603
Frozen Beverages 96,854 102,113
$222,273 $208,716
Sales to a single Snack Foods' customer were 11% of
the Company's sales for the period ending December
25, 1999.
9
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. In June 2000,
SFAS 138 was issued, "Accounting for Certain
Derivative Instruments and Certain Hedging
Activities, an amendment of SFAS 133". SFAS 133, as
amended by SFAS 138, requires that all derivative
instruments be recorded on the balance sheet at
their respective fair values. Changes in the fair
value of derivatives are recorded each period in
current earnings or other comprehensive income,
depending on the designation of the hedge
transaction. The Company adopted SFAS 133, as
amended by SFAS 138, in the first quarter of fiscal
year 2001. Based on the Company's minimal use of
derivatives at the current time, the adoption of
this standard did not have a significant impact on
earnings or financial position of the Company.
In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements (SAB
101) which addresses certain criteria for revenue
recognition. SAB 101, as amended by SAB 101A and
SAB 101B, outlines the criteria that must be met to
recognize revenue and provides guidance for
disclosures related to revenue recognition policies.
The Company implemented the applicable provisions of
SAB 101 as amended by SAB 101A in the first quarter
of fiscal year 2001. Management believes the
Company's revenue recognition policies comply with
the guidance contained in the SAB and, therefore,
the Company's results of operations were not
materially affected.
In May 2000, The Emerging Issues Task Force reached
consensus opinions on Issue 00-14, "Accounting for
Certain Sales Incentives (Issue 00-14)". Issue 00-
14 pertains to the recognition, measurement, and
income statement classification of certain sales
incentives, including discounts, coupons, rebates,
and free products or services received by the
10
customer. The issue requires certain incentives to
be classified as a reduction of revenue. The
Company reclassed approximately $584,000 and
$444,000 of sales incentives from marketing expense
to reduction of sales in the three months ended
December 30, 2000 and December 25, 1999,
respectively.
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 quarters ended December 30, 2000 and December
25, 1999 fluctuations in the valuation of the Mexican peso
caused a decrease of $38,000 and a decrease of $10,000 in
stockholders' equity because of the revaluation of the net
assets of the Company's Mexican frozen beverage subsidiary.
In November 2000, the Company acquired the assets of
Uptown Bakeries for cash. Uptown Bakeries, located in
Bridgeport, NJ, is a fresh bakery products manufacturer
with approximately $17,000,000 in annual sales.
In December 2000, the Company refinanced its unsecured
term loan and its general-purpose bank credit line with a
general purpose unsecured bank credit line of $60,000,000.
The new agreement contains restrictive covenants and
requires commitment fees in accordance with standard
banking practice. Borrowings under the line at December
30, 2000 were $48,000,000.
In the quarter ended December 30, 2000, the Company
purchased and retired 109,300 shares of its common stock at
a cost of $1,400,000. Under a buyback authorization
approved by the Board of Directors in fiscal year 2000,
277,000 shares remain to be purchased.
Results of Operations
Net sales increased $4,704,000 or 7% for the three
months ended December 30, 2000 compared to the three months
ended December 25, 1999. Excluding sales resulting from the
acquisition of Uptown Bakeries, sales increased 4% compared
to the year ago period.
12
SNACK FOODS
Sales to food service customers increased $1,737,000
or 7% in the first quarter to $27,977,000. Excluding Uptown
Bakeries' sales, food service sales declined 1% from last
year. Soft pretzel sales decreased $1,066,000 or 7% from
last year to $14,370,000 in this year's quarter. Italian
ice and frozen juice treat and dessert sales decreased 4%
to $4,276,000 in the three months. Churro sales to food
service customers increased 9% to $2,670,000 in the
quarter. Cookie sales increased 31% to $3,704,000 from
$2,818,000 last year.
Sales of products to retail supermarkets increased
$3,488,000 or 49% in the first quarter. Soft pretzel sales
for the first quarter were up 23% to $6,774,000. Sales of
the flagship SUPERPRETZEL brand soft pretzels, excluding
SOFTSTIX, increased 23% in the first quarter. Softstix
sales increased 52% to $1,194,000 from $787,000 last year.
Sales of frozen juices and ices increased $2,146,000 or
125% to $3,856,000 in the first quarter primarily due to
sales of the Company's MINUTE MAID brand licensed products
which were introduced in last year's second quarter.
Bakery sales decreased $656,000 or 8% to $7,455,000 in
the first quarter due to decreased unit sales to one
customer. Sales of our Bavarian Pretzel Bakery increased
$230,000 or 6% to $3,964,000 in the quarter from last year
due to an increase in the number of stores.
All of the snack foods sales' increase and decreases
were due to changes in unit volume.
FROZEN BEVERAGES
Frozen beverage and related product sales decreased
$235,000 or 1% to $20,077,000 in the first quarter.
Beverage sales alone increased 1% to $17,176,000 although
gross profit on beverage sales decreased 2%. Service and
lease revenue increased $418,000 or 20% from the first
quarter of fiscal year 2001 due primarily to service
provided to one customer.
13
CONSOLIDATED
Gross profit as a percentage of sales was 49% in both
years' first quarter.
Total operating expenses increased $3,865,000 in the
first quarter and as a percentage of sales increased to
49% from 47% in last year's same quarter. Marketing
expenses increased to 35% of sales from 32% in last year's
first quarter. Distribution expenses and administrative
expenses as a percent of sales remained at 9% and 4%,
respectively, compared to last year. The increase in
marketing expenses as a percent of sales is due primarily
to lower frozen beverage sales and food service sales
(excluding sales from Uptown Bakeries) combined with higher
frozen beverage and food service marketing expenses and
higher sales to retail supermarkets as a percentage of the
Company's overall sales.
An operating loss of $438,000 in this year's first
quarter compared to operating income of $1,534,000 in last
year's quarter.
Interest expense increased $100,000 from last year's
quarter to $786,000 this year due primarily to debt
incurred to acquire Uptown Bakeries.
The effective income tax rate has been estimated at
37% this year compared to 37% in last year's quarter.
A net loss of $693,000 in this year's first quarter
compared to net earnings of $666,000 in the year ago
period.
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
December 30, 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: January 29, 2001 /s/ Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: January 29, 2001 /s/ Dennis G. Moore
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
16