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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 24, 2005
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 (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
Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange
Act)
X Yes No
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange
Act).
Yes X No
As of January 14, 2006, there were 18,314,716 shares
of the Registrant's Common Stock outstanding.
INDEX
Page
Number
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - December 24, 2005
(unaudited) and September 24, 2005 3
Consolidated Statements of Operations(unaudited)-
Three Months Ended December 24, 2005 and
December 25, 2004 5
Consolidated Statements of Cash Flows(unaudited)-
Three Months Ended December 24, 2005 and December
25, 2004 6
Notes to the Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 18
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 21
Item 4. Controls and Procedures 21
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 23
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
December 24, September 24,
2005 2005
(Unaudited)
Current assets
Cash and cash equivalents $ 15,552 $ 15,795
Marketable securities 61,650 54,225
Accounts receivable, net 44,142 46,921
Inventories 36,500 33,684
Prepaid expenses and other 1,512 1,215
Deferred Income Taxes 2,404 2,393
161,760 154,233
Property, plant and equipment,
at cost
Land 556 556
Buildings 4,497 4,497
Plant machinery and
equipment 106,852 105,815
Marketing equipment 188,665 188,601
Transportation equipment 1,281 1,271
Office equipment 9,053 8,966
Improvements 15,282 15,083
Construction in progress 1,712 1,354
327,898 326,143
Less accumulated deprecia-
tion and amortization 239,945 237,098
87,953 89,045
Other assets
Goodwill 53,622 53,622
Other intangible assets, net 6,760 7,043
Other 2,178 1,981
62,560 62,646
$312,273 $305,924
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 24, September 24,
STOCKHOLDERS' EQUITY 2005 2005
(unaudited)
Current liabilities
Accounts payable $ 42,544 $ 37,029
Accrued liabilities 13,085 14,731
Dividends payable 1,372 1,142
57,001 52,902
Deferred income taxes 17,987 17,987
Other long-term liabilities 234 273
18,221 18,260
Stockholders' equity
Capital stock
Preferred, $1 par value;
authorized, 10,000
shares; none issued - -
Common, no par value;
authorized 50,000
shares; issued and
outstanding, 18,297 and
18,271 shares, respectively 36,689 36,091
Accumulated other comprehen-
sive loss (1,865) (1,918)
Retained earnings 202,227 200,589
237,051 234,762
$312,273 $305,924
All share amounts reflect the 2-for-1 stock split effective
January 5, 2006.
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)
Three Months Ended
December 24, December 25,
2005 2004
Net Sales $108,571 $98,521
Cost of goods sold (1) 75,454 68,525
Gross profit 33,117 29,996
Operating expenses
Marketing (2) 13,697 12,848
Distribution (3) 10,356 8,923
Administrative (4) 4,795 4,319
Other general expense 72 252
28,920 26,342
Operating income 4,197 3,654
Other income (expenses)
Investment income 703 322
Interest expense and other (29) (24)
Earnings before
income taxes 4,871 3,952
Income taxes 1,861 1,470
NET EARNINGS $ 3,010 $ 2,482
Earnings per diluted
share $ .16 $ .13
Weighted average number
of diluted shares 18,697 18,470
Earnings per basic share $ .16 $ .14
Weighted average number
of basic shares 18,328 18,064
(1) Includes share-based compensation expense of $59 for
the three months ended December 24, 2005.
(2) Includes share-based compensation expense of $115 for
the three months ended December 24, 2005.
(3) Includes share-based compensation expense of $5 for
the three months ended December 24, 2005.
(4) Includes share-based compensation expense of $81 for
the three months ended December 24, 2005.
All share amounts reflect the 2-for-1 stock split effective
January 5, 2006.
See accompanying notes to the consolidated financial
statements.
5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in thousands)
Three Months Ended
December 24, December 25,
2005 2004
Operating activities:
Net earnings $ 3,010 $ 2,482
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization
of fixed assets 5,651 5,681
Amortization of intangibles
and deferred costs 400 173
Share-based compensation 260 -
Deferred income taxes (11) -
Other 4 108
Changes in assets and liabilities,
net of effects from purchase of
companies
Decrease in accounts receivable 2,779 10,376
Increase in inventories (2,980) (2,407)
Increase in prepaid expenses (296) (252)
Increase (decrease)in accounts
payable and accrued liabilities 3,830 (6,953)
Net cash provided by operating
activities 12,647 9,208
Investing activities:
Purchase of property, plant
and equipment (4,709) (4,308)
Purchase of marketable securities (13,325) (13,000)
Proceeds from sale of marketable
securities 5,900 5,000
Proceeds from disposal of
property and equipment 145 238
Other (150) 113
Net cash used in investing
activities (12,139) (11,957)
Financing activities:
Proceeds from issuance of stock 338 265
Payments of cash dividend (1,142) -
Net cash (used in) provided by
financing activities (804) 265
Effect of exchange rate on cash
and cash equivalents 53 67
Net decrease in cash
and cash equivalents (243) (2,417)
Cash and cash equivalents at
beginning of period 15,795 19,600
Cash and cash equivalents at
end of period $15,552 $17,183
See accompanying notes to the consolidated financial
statements.
6
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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 24, 2005 and December 25, 2004 are not
necessarily indicative of results for the full year.
Sales of our retail stores are generally higher in
the first quarter due to the holiday shopping
season. Sales of our frozen beverages and frozen
juice bars and ices are generally higher in the
third and fourth quarters due to warmer weather.
While we believe 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 our Annual Report on Form 10-K for the
year ended September 24, 2005.
Note 2 We recognize revenue from Food Service, Retail
Supermarkets, The Restaurant Group and Frozen
Beverage products at the time the products are
shipped to third parties. When we perform services
under service contracts for frozen beverage
dispenser machines, revenue is recognized upon the
completion of the services on specified machines.
We provide an allowance for doubtful receivables
after taking into consideration historical
experience and other factors.
Note 3 Depreciation of equipment and buildings is provided
for by the straight-line method over the assets'
estimated useful lives. Amortization of improvements
is provided for by the straight-line method over the
7
term of the lease or the assets' estimated useful
lives, whichever is shorter. Licenses and rights
arising from acquisitions are amortized by the
straight-line method over periods ranging from 4 to
20 years.
Note 4 Our calculation of earnings per share in accordance
with SFAS No. 128, "Earnings Per Share," is as
follows (all share amounts reflect the 2-for-1 stock
split effective January 5, 2006):
Three Months Ended December 24, 2005
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
Basic EPS
Net Earnings available
to common stockholders $3,010 18,328 $.16
Effect of Dilutive Securities
Options - 369 -
Diluted EPS
Net Earnings available to
common stockholders plus
assumed conversions $3,010 18,697 $.16
146,471 anti-dilutive shares have been excluded from the
computation of diluted EPS because the options' exercise
price is greater than the average market price of the
common stock.
Three Months Ended December 25, 2004
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
Basic EPS
Net Earnings available
to common stockholders $2,482 18,064 $.14
Effect of Dilutive Securities
Options - 406 (.01)
Diluted EPS
Net Earnings available to
common stockholders plus
assumed conversions $2,482 18,470 $.13
8
Note 5 Effective with this fiscal year, the Company follows
FASB Statement No. 123(R), "Share-Based Payment".
Statement 123(R) requires that the compensation cost
relating to share-based payment transactions be
recognized in financial statements. That cost is
measured based on the fair value of the equity or
liability instruments issued.
Statement 123(R) covers a wide range of share-based
compensation arrangements including share options,
restricted share plans, performance-based awards,
share appreciation rights, and employee share
purchase plans.
In addition to the accounting standard that sets
forth the financial reporting objectives and related
accounting principles, Statement 123(R) includes an
appendix of implementation guidance that provides
expanded guidance on measuring the fair value of
share-based payment awards.
Statement 123(R) replaces FASB Statement No. 123,
Accounting for Stock-Based Compensation, and
supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees. Statement 123, as originally
issued in 1995, established as preferable a fair-
value-based method of accounting for share-based
payment transactions with employees. However, that
Statement permitted entities the option of
continuing to apply the guidance in Opinion 25, as
long as the footnotes to financial statements
disclosed what net income would have been had the
preferable fair-value-based method been used. The
impact of Statement 123(R), if it had been in
effect, on the net earnings and related per share
amounts of our fiscal years ended in September 2005,
2004 and 2003 were disclosed in Note A13 Accounting
for Stock-Based Compensation of our Financial
Statements included in our Form 10-k for the fiscal
year ended September 24, 2005.
Since the Company adopted Statement 123(R) using the
modified-prospective-transition-method, prior
periods have not been restated. Under this method,
we are required to record compensation expense for
all awards granted after the date of adoption and
9
for the unvested portion of previously granted
awards that remain outstanding as of the beginning
of the period of adoption. We measured share-based
compensation cost using the Black-Scholes option
pricing model.
At December 24, 2005, the Company has two stock-
based employee compensation plans. Share-based
compensation of $171,000, net of a tax benefit of
$89,000, or $.01 per share, was recognized for the
three months ended December 24, 2005. The Company
anticipates that share-based compensation will not
exceed $1,200,000, net of tax benefits, or
approximately $.065 per share for the year ending
September 30, 2006. Reported net income, adjusting
for share-based compensation that would have been
recognized in last year's quarter if Statement
123(R) had been followed is (all share amounts
reflect the 2-for-1 stock split effective January 5,
2006):
10
Three Months Ended
December 24, December 25,
2005 2004
(in thousands, except
per share amounts)
Net income,
as reported $3,010 $2,482
Less: share-based
compensation
costs determined
under fair value
based method for
all awards - 209
Adjusted net income $3,010 $2,273
Earnings per share
of common stock -
basic:
As reported $ .16 $ .14
Share-based compensation costs - (.01)
Adjusted net earnings $ .16 $ .13
Earnings per share
of common stock -
diluted:
As reported $ .16 $ .13
Share-based compensation costs - (.01)
Adjusted net earnings $ .16 $ .12
The fair value of each option grant is estimated on
the date of grant using the Black-Scholes options-
pricing model with the following weighted average
assumptions used for grants in fiscal 2006: expected
volatility of 34%; risk-free interest rate of 4.37%
and expected lives ranging between 5 and 10 years.
Expected volatility is based on the historical
volatility of the price of our common shares over
the past 53 months for 5 year options and 10 years
for 10 year options. We use historical information
to estimate expected life and forfeitures within the
valuation model. The expected term of awards
represents the period of time that options granted
11
are expected to be outstanding. The risk-free rate
for periods within the expected life of the option
is based on the U.S. Treasury yield curve in effect
at the time of grant. Compensation cost is
recognized using a straight-line method over the
vesting or service period and is net of estimated
forfeitures.
Note 6 In December 2004, the FASB issued Statement 151,
"Inventory Costs, an amendment of ARB No. 43,
Chapter 4".
Statement 151 retains the general principle of ARB
43, Chapter 4, "Inventory Pricing (AC Section I78)",
that inventories are presumed to be stated at cost;
however, it amends ARB 43 to clarify that
. abnormal amounts of idle facilities, freight,
handling costs, and spoilage should be recognized
as charges of the current period
. allocation of fixed production overheads to
inventories should be based on the normal
capacity of the production facilities.
Statement 151 defines normal capacity as the
production expected to be achieved over a number of
periods or seasons under normal circumstances,
taking into account the loss of capacity resulting
from planned maintenance. The Board concluded that
normal capacity refers to a range of production
levels that will vary based on business- and
industry-specific factors. Accordingly, an entity
will have to use judgment to determine when
production is outside the range of expected
variation in production (either abnormally low or
abnormally high). In periods of abnormally low
production (for example, periods in which there is
significantly lower demand, labor and material
shortages exist, or there is unplanned equipment
downtime) the amount of fixed overhead allocated to
each unit of production should not be increased.
However, in periods of abnormally high production
the amount of fixed overhead allocated to each unit
of production is decreased to assure inventories are
not measured above cost.
12
The guidance in Statement 151 is effective for
inventory costs incurred during fiscal years
beginning after June 15, 2005 and should be applied
prospectively. Since we essentially follow the
guidelines of Statement 151, the adoption did not
have a material impact on our financial statements.
Note 7 Inventories consist of the following:
December 24, September 24,
2005 2005
(unaudited)
(in thousands)
Finished goods $19,954 $16,016
Raw materials 5,785 4,935
Packaging materials 1,956 3,485
Equipment parts & other 8,805 9,248
$36,500 $33,684
Note 8 We principally sell our products to the food service
and retail supermarket industries. We also
distribute our products directly to the consumer
through our chain of retail stores referred to as
The Restaurant Group. Sales and results of our
frozen beverages business are monitored separately
from the balance of our food service business and
restaurant group because of different distribution
and capital requirements. We maintain separate and
discrete financial information for the four
operating segments mentioned above which is
available to our Chief Operating Decision Makers.
We have applied no aggregate criteria to any of
these operating segments in order to determine
reportable segments. Our four reportable segments
are Food Service, Retail Supermarkets, The
Restaurant Group and Frozen Beverages. All inter-
segment net sales and expenses have been eliminated
in computing net sales and operating income (loss).
These segments are described below.
Food Service
The primary products sold by the food service group
are soft pretzels, frozen juice treats and desserts,
churros and baked goods. Our customers in the food
13
service industry include snack bars and food stands
in chain, department and discount stores; malls and
shopping centers; fast food outlets; stadiums and
sports arenas; leisure and theme parks; convenience
stores; movie theatres; warehouse club stores;
schools, colleges and other institutions. Within
the food service industry, our products are
purchased by the consumer primarily for consumption
at the point-of-sale.
Retail Supermarkets
The primary products sold to the retail supermarket
industry are soft pretzel products, including
SUPERPRETZEL, LUIGI'S Real Italian Ice, MINUTE MAID
Juice Bars and Soft Frozen Lemonade, BARQ'S FLOATZ
and ICEE Squeeze-Up Tubes and TIO PEP'S Churros.
Within the retail supermarket industry, our frozen
and prepackaged products are purchased by the
consumer for consumption at home.
The Restaurant Group
We sell direct to the consumer through our
Restaurant Group, which operates BAVARIAN PRETZEL
BAKERY and PRETZEL GOURMET, our chain of specialty
snack food retail outlets.
Frozen Beverages
We sell frozen beverages to the food service
industry, including our restaurant group, primarily
under the names ICEE and ARCTIC BLAST in the United
States, Mexico and Canada.
The Chief Operating Decision Maker for Food Service,
Retail Supermarkets and The Restaurant Group and the
Chief Operating Decision Maker for Frozen Beverages
monthly review and evaluate operating income and
sales in order to assess performance and allocate
resources to each individual segment. In addition,
the Chief Operating Decision Makers review and
evaluate depreciation, capital spending and assets
of each segment on a quarterly basis to monitor cash
flow and asset needs of each segment. Information
regarding the operations in these four reportable
segments is as follows:
14
Three Months Ended
December 24, December 25,
2005 2004
(in thousands)
Sales to external customers:
Food Service $ 74,616 $ 61,472
Retail Supermarket 7,236 6,985
The Restaurant Group 1,238 1,817
Frozen Beverages 25,481 28,247
$108,571 $ 98,521
Depreciation and Amortization:
Food Service $ 3,511 $ 3,267
Retail Supermarket - -
The Restaurant Group 33 65
Frozen Beverages 2,507 2,522
$ 6,051 $ 5,854
Operating Income (Loss):
Food Service (1) $ 5,628 $ 4,296
Retail Supermarket (2) 257 260
The Restaurant Group 1 (220)
Frozen Beverages (3) (1,689) (682)
$ 4,197 $ 3,654
Capital Expenditures:
Food Service $ 2,670 $ 1,867
Retail Supermarket - -
The Restaurant Group - 23
Frozen Beverages 2,039 2,418
$ 4,709 $ 4,308
Assets:
Food Service $217,979 $182,803
Retail Supermarket - -
Restaurant Group 1,052 1,461
Frozen Beverages 93,242 89,020
$312,273 $273,284
(1) Includes share-based compensation expense of $184 for
the three months ended December 24, 2005.
(2) Includes share-based compensation expense of $13 for
the three months ended December 24, 2005.
(3) Includes share-based compensation expense of $63 for
the three months ended December 24, 2005.
15
Note 9 We follow SFAS No. 142 "Goodwill and Intangible
Assets." SFAS No. 142 includes requirements to test
goodwill and indefinite lived intangible assets for
impairment rather than amortize them; accordingly,
we no longer amortize goodwill.
Our four reporting units, which are also reportable
segments, are Food Service, Retail Supermarkets, The
Restaurant Group and Frozen Beverages.
The carrying amount of acquired intangible assets
for the Food Service, Retail Supermarkets, The
Restaurant Group and Frozen Beverage segments as of
December 24, 2005 are as follows:
Gross Net
Carrying Accumulated Carrying
Amount Amortization Amount
(in thousands)
FOOD SERVICE
Amortized intangible assets
Licenses and rights $8,913 $2,185 $6,728
RETAIL SUPERMARKETS
Amortized intangible assets
Licenses and rights $ - $ - $ -
THE RESTAURANT GROUP
Amortized intangible assets
Licenses and rights $ - $ - $ -
FROZEN BEVERAGES
Amortized intangible assets
Licenses and rights $ 201 $ 169 $ 32
Licenses and rights are being amortized by the
straight-line method over periods ranging from 4 to 20
years and amortization expense is reflected throughout
operating expenses. There were no changes in the gross
carrying amount of intangible assets for the three months
16
ended December 24, 2005. Aggregate amortization expense of
intangible assets for the 3 months ended December 24, 2005
and December 25, 2004 was $283,000 and $123,000,
respectively.
Estimated amortization expense for the next five
fiscal years is approximately $1,200,000 in 2006 and 2007,
$1,100,000 in 2008 and $900,000 in 2009 and 2010. The
weighted average amortization period of the intangible
assets is 10.50 years.
Goodwill
The carrying amounts of goodwill for the Food Service,
Retail Supermarket, Restaurant Group and Frozen Beverage
segments are as follows:
Food Retail Restaurant Frozen
Service Supermarket Group Beverages Total
(in thousands)
Balance at
December 24,
2005 $21,386 $ - $386 $31,850 $53,622
17
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
Our current cash and marketable securities balances
and cash expected to be provided by future operations are
our primary sources of liquidity. We believe that these
sources, along with our borrowing capacity, are sufficient
to fund future growth and expansion.
The Company's Board of Directors declared a 2-for-1
stock split per common share to be distributed January 5,
2006 to shareholders of record on December 15, 2005 and a
cash dividend of $.075 per common share payable January 5,
2006, after the stock split, to shareholders of record on
December 15, 2005. The cash dividend totalled $1,372,000.
The Company anticipates that its Board of Directors will
continue to declare quarterly cash dividends; however, the
continuance of cash dividends is not guaranteed and is
dependent on many factors.
In the quarters ended December 24, 2005 and December
25, 2004 fluctuations in the valuation of the Mexican peso
caused an increase of $53,000 and an increase of $67,000 in
stockholders' equity, respectively, because of the
translation of the net assets of the Company's Mexican
frozen beverage subsidiary.
In March 2005, we acquired all of the assets of
Snackworks LLC, d/b/a Bavarian Brothers, a manufacturer of
soft pretzels headquartered in Rancho Cucamonga,
California. Snackworks operates production facilities in
California and Chambersburg, Pennsylvania and markets its
products under the brand names SERIOUSLY TWISTED!, BAVARIAN
BROTHERS and CINNAPRETZEL. Snackworks sells throughout the
continental United States primarily to mass merchandisers
and theatres.
This acquisition was accounted for under the purchase
method of accounting, and its operations are included in
the consolidated financial statements from its acquisition
date.
Our general-purpose bank credit line provides for up
to a $50,000,000 revolving credit facility. The agreement
18
contains restrictive covenants and requires commitment fees
in accordance with standard banking practice. There were no
outstanding balances under this facility at December 24,
2005.
Results of Operations
Net sales increased $10,050,000 or 10% to $108,571,000
for the three months ended December 24, 2005 compared to
the three months ended December 25, 2004. Approximately
$3,109,000 of the sales increase resulted from the
acquisition of Snackworks LLC in March 2005. Excluding
these sales, sales increased approximately 7%.
FOOD SERVICE
Sales to food service customers increased $13,144,000
or 21% in the first quarter to $74,616,000. Excluding
Snackworks LLC, sales increased $10,035,000 or 16%. Soft
pretzel sales increased $4,492,000 or 23% from last year to
$23,708,000 in this year's quarter and without sales from
the Snackworks LLC acquisition, sales increased 7% with the
increase spread among our customer base. Italian ice and
frozen juice treat and dessert sales increased 10% to
$6,731,000 in the three months primarily due to increased
sales to school food service. Churro sales to food service
customers increased 45% to $4,880,000 in the quarter
primarily due to increased sales to three customers. Sales
of bakery products increased 20% to $38,021,000 from
$31,617,000 last year due primarily to increased sales to
private label customers. The changes in sales throughout
the food service segment were from a combination of volume
changes and price increases.
RETAIL SUPERMARKETS
Sales of products to retail supermarkets increased
$251,000 to $7,236,000 or 4% in the first quarter. Soft
pretzel sales for the first quarter were up 4% to
$5,158,000. Sales of frozen juices and ices decreased 9% to
$2,298,000 in the quarter due to continuing declines in
sales of MINUTE MAID, ICEE and BARQ'S FLOATZ products due
to a general decline and lost distribution.
19
THE RESTAURANT GROUP
Sales of our Restaurant Group decreased 32% to
$1,238,000 in the first quarter. The sales decrease was
caused primarily by the closing of unprofitable stores in
fiscal year 2005. Sales of stores open for both year's
quarter were down about 4%. Operating income was impacted
during the quarter by approximately $60,000 of store
closing and related costs compared to approximately
$285,000 in last year's quarter.
FROZEN BEVERAGES
Frozen beverage and related product sales decreased
$2,766,000 or 10% to $25,481,000 in the first quarter.
Beverage sales alone decreased 3% to $17,132,000 for the
quarter primarily due to a change in pricing programs for a
major customer. Service revenue decreased less than 1%
to $5,302,000 in this year's first quarter because sales to
one customer were down approximately $649,000 from a year
ago. Sales of beverage machines were $2,299,000 lower this
year as last year's quarter had an unusually high level of
machine sales. Overall profitability in the quarter was
impacted by higher general costs compared to last year
compounded by the sales volume decreases.
CONSOLIDATED
Gross profit as a percentage of sales was essentially
unchanged from last year at 30.50% as efficiencies from
higher volume and pricing offset higher commodity costs of
approximately $600,000, higher utilities costs in our
manufacturing plants of approximately $500,000 and higher
insurance liability costs of about $250,000, along with
general cost increases.
Total operating expenses increased $2,578,000 in the
first quarter and as a percentage of sales were 27% in both
years' quarters. Marketing expenses were 13% of sales in
both years' quarters. Distribution expenses increased less
than 1/2 of one percent to 10% this year from 9% last year.
The increase was due primarily to higher fuel and trucking
costs. Administrative expenses as a percent of sales were
essentially unchanged at 4% of sales for both years. Other
general expense of $72,000 in this year's quarter decreased
20
from $252,000 last year because of lower asset writedowns
and costs relating to the early closing of Restaurant Group
stores.
Operating income increased 15% to $4,197,000 this year
from $3,654,000 a year ago. Excluding the impact of share-
based compensation expense recognized this year and not
last year, operating income increased 22% in the quarter.
The effective income tax rate has been estimated at
38% this year; an increase from 37% in 2005's first
quarter. The increase is due to a higher level of state
taxes.
Net earnings increased 21% to $3,010,000 in this
year's first quarter compared to net earnings of $2,482,000
in the year ago period. Excluding the impact of share-based
compensation expense recognized this year and not last
year, net earnings increased 28%.
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 2005 annual report on Form 10-K
filed with the SEC.
Item 4. Controls and Procedures
The Chief Executive Officer and the Chief Financial
Officer of the Company (its principal executive
officer and principal financial officer,
respectively) have concluded, based on their
evaluation as of a date within 90 days prior to the
date of the filing of this Report, that the
Company's disclosure controls and procedures are
effective to ensure that information required to be
disclosed by the Company in the reports filed or
submitted by it under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized
and reported within the time periods specified in
the SEC's rules and forms, and include controls and
procedures designed to ensure that information
21
required to be disclosed by the Company in such
reports is accumulated and communicated to the
Company's management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate
to allow timely decisions regarding required
disclosure.
There were no significant changes in the Company's
internal controls or in other factors that could
significantly affect these controls subsequent to
the date of such evaluation.
22
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
31.1 & Certification Pursuant to Section 302 of
31.2 the Sarbanes-Oxley Act of 2002
99.5 Certification Pursuant to the 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
b) Reports on Form 8-K - Reports on Form 8-K were
filed on November 3, 2005 and November 22, 2005.
23
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 23, 2006 /s/ Gerald B. Shreiber
Gerald B. Shreiber
President
Dated: January 23, 2006 /s/ Dennis G. Moore
Dennis G. Moore
Senior Vice President and
Chief Financial Officer
24
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Dennis G. Moore, certify that:
1. I have reviewed this report on Form 10-Q of J & J
Snack Foods Corp.;
2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officers and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal controls and
procedures for financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) designed such disclosure controls and
procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure
that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the
period in which this report is being prepared;
b) designed such internal controls and
procedures for financial reporting, or caused such internal
controls over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance
with generally accepted accounting principles;
c) evaluated the effectiveness of the
registrant's disclosure controls and procedures and
presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on
such evaluation; and
d) disclosed in this report any change in the
registrant's internal control over financial reporting that
occurred during the registrant's first fiscal quarter that
has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officers and I
have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the
registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies and material
weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that
involves management or other employees who have a
significant role in the registrant's internal controls over
financial reporting.
Date: January 23, 2006
/s/ Dennis G. Moore
Dennis G. Moore
Chief Financial Officer
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Gerald B. Shreiber, certify that:
1. I have reviewed this report on Form 10-Q of J & J
Snack Foods Corp.;
2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officers and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal controls and
procedures for financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) designed such disclosure controls and
procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure
that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the
period in which this report is being prepared;
b) designed such internal controls and
procedures for financial reporting, or caused such internal
controls over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance
with generally accepted accounting principles;
c) evaluated the effectiveness of the
registrant's disclosure controls and procedures and
presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on
such evaluation; and
d) disclosed in this report any change in the
registrant's internal control over financial reporting that
occurred during the registrant's first fiscal quarter that
has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officers and I
have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the
registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies and material
weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that
involves management or other employees who have a
significant role in the registrant's internal controls over
financial reporting.
Date: January 23, 2006
/s/ Gerald B. Shreiber
Gerald B. Shreiber
Chief Executive Officer
Exhibit 99.5
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (Section 1350 of Chapter 63 of Title 18 of the United
States Code), each of the undersigned officers of J & J
Snack Foods Corp. (the "Company"), does hereby certify with
respect to the Quarterly Report of the Company on Form 10-Q
for the quarter ended December 24, 2005 (the "Report")
that:
(1) The Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the
Company.
Dated: January 23, 2006
/s/ Dennis G. Moore
Dennis G. Moore
Chief Financial Officer
Dated: January 23, 2006
/s/ Gerald B. Shreiber
Gerald B. Shreiber
Chief Executive Officer
The foregoing certification is being furnished solely
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Section 1350 of Chapter 63 of Title 18 of the United
States Code) and is not being filed as part of the Report
or as a separate disclosure document.