J&J Snack Foods Corp.

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, 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 July 21, 1995, there were 9,339,993 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, 1995 and September 24, 1994................................... 3 Consolidated Statements of Earnings - Three Months and Nine Months Ended June 24, 1995 and June 25, 1994.... 5 Consolidated Statements of Cash Flows - Nine Months Ended June 24, 1995 and June 25, 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 June 24, September 24, 1995 1994 (Unaudited) Current assets Cash and cash equivalents $ 9,310,000 $ 6,621,000 Marketable securities available for sale 4,825,000 4,443,000 Accounts receivable 17,066,000 17,176,000 Inventories 10,989,000 11,519,000 Prepaid expenses and deposits 1,712,000 1,611,000 43,902,000 41,370,000 Property, plant and equipment, at cost Land 819,000 973,000 Buildings 5,119,000 5,119,000 Plant machinery and equipment 37,705,000 35,045,000 Marketing equipment 73,652,000 70,311,000 Transportation equipment 2,219,000 2,622,000 Office equipment 3,468,000 3,355,000 Improvements 5,038,000 4,741,000 Construction in progress 902,000 750,000 128,922,000 122,916,000 Less accumulated depreciation and amortization 68,552,000 59,788,000 60,370,000 63,128,000 Other assets Goodwill, trademarks and rights, less accumulated amortization 8,862,000 9,793,000 Long term investments available for sale 990,000 - Long term investments held to maturity 6,881,000 10,764,000 Sundry 2,602,000 2,311,000 19,335,000 22,868,000 $123,607,000 $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 June 24, September 24, STOCKHOLDERS' EQUITY 1995 1994 (Unaudited) Current liabilities Current maturities of long- term debt $ 15,000 $ 15,000 Accounts payable 11,478,000 11,854,000 Accrued liabilities 5,592,000 4,537,000 17,085,000 16,406,000 Long-term debt, less current maturities 5,016,000 5,028,000 Deferred income 692,000 692,000 Deferred income taxes 4,678,000 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, 9,359,000 and 9,889,000, respectively 43,612,000 49,946,000 Foreign currency translation adjustment (1,070,000) - Retained earnings 53,594,000 50,599,000 96,136,000 100,545,000 $123,607,000 $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 Nine months ended June 24, June 25, June 24, June 25, 1995 1994 1995 1994 Net Sales $47,876,000 $45,166,000 $129,410,000 $123,842,000 Cost of goods sold 24,262,000 21,602,000 64,717,000 59,171,000 Gross profit 23,614,000 23,564,000 64,693,000 64,671,000 Operating expenses Marketing 14,955,000 12,652,000 41,757,000 36,745,000 Distribution 4,570,000 4,770,000 13,589,000 13,661,000 Administrative 1,789,000 1,894,000 5,829,000 5,851,000 Amortization of intangibles and deferred costs 214,000 218,000 647,000 627,000 21,528,000 19,534,000 61,822,000 56,884,000 Operating income 2,086,000 4,030,000 2,871,000 7,787,000 Other income (deductions) Investment income 353,000 286,000 944,000 858,000 Interest expense (92,000) (112,000) (304,000) (343,000) Sundry 823,000 (106,000) 1,289,000 471,000 Earnings before income taxes 3,170,000 4,098,000 4,800,000 8,773,000 Income taxes 1,192,000 1,541,000 1,805,000 3,299,000 NET EARNINGS $ 1,978,000 $ 2,557,000 $ 2,995,000 $ 5,474,000 Earnings per common share $ .21 $ .25 $ .31 $ .52 Weighted average number of shares 9,482,000 10,267,000 9,660,000 10,529,000 See accompanying notes to the consolidated financial statements. 5 J & J SNACK FOODS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine months ended June 24, June 25, 1995 1994 Cash flows from operating activities: Net earnings $ 2,995,000 $ 5,474,000 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization of fixed assets 11,101,000 10,189,000 Amortization of intangibles and deferred costs 762,000 742,000 Gain from disposals of property & equipment (1,132,000) (416,000) (Decrease) increase in deferred income taxes (17,000) 417,000 Other adjustments (104,000) - Changes in assets and liabilities Increase in accounts receivable (55,000) (38,000) Increase in inventories (168,000) (1,514,000) Increase in prepaid expenses (199,000) (449,000) Increase in accounts payable and accrued liabilities 975,000 1,794,000 Net cash provided by operating activities 14,158,000 16,199,000 Cash flows from investing activities: Capital expenditures (9,933,000) (14,230,000) Proceeds from sale of company 405,000 - Payments for purchase of companies, net of cash acquired and debt assumed - (1,535,000) Proceeds from investments held to maturity 375,000 7,949,000 Payments for investments held to maturity (500,000) (4,171,000) Proceeds from investments available for sale 5,610,000 1,720,000 Payments for investments available for sale (2,981,000) (7,358,000) Proceeds from disposals of property & equipment 1,351,000 646,000 Decrease in bond trust fund 655,000 1,480,000 Other (106,000) (35,000) Net cash used in investing activities (5,124,000) (15,534,000) Cash flows from financing activities: Proceeds from issuance of common stock 273,000 749,000 Payments to repurchase common stock (6,607,000) (5,582,000) Payments of long-term debt (11,000) (766,000) Net cash used in financing activities (6,345,000) (5,599,000) Net increase (decrease) in cash and cash equivalents 2,689,000 (4,934,000) Cash and cash equivalents at beginning of period 6,621,000 8,457,000 Cash and cash equivalents at end of period $ 9,310,000 $ 3,523,000 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 nine months ended June 24, 1995 and June 25, 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: June 24, September 24, 1995 1994 Finished goods $ 4,907,000 $ 5,538,000 Raw materials 1,147,000 1,293,000 Packaging materials 2,137,000 1,777,000 Equipment parts & other 2,798,000 2,911,000 $10,989,000 $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 7 are classified as held to maturity and are reported at amortized cost. As the Company does not engage in security trading, the 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 $3,525,000 in the quarter ended June 24, 1995 with a $18,000 gain realized and $5,610,000 in the nine months ended June 24, 1995 with a gain of $21,000 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 June 24, 1995 are summarized as follows: Gross Gross Fair Amortized Unrealized Unrealized Market Cost Gains Losses Value Available for Sale Securities Equity Securities $ - $12,000 $ - $ 12,000 Corporate Debt Securities 996,000 - 55,000 941,000 Municipal Government Securities 4,819,000 1,000 23,000 4,797,000 $5,815,000 $13,000 $ 78,000 $5,750,000 Held to Maturity Securities Corporate Debt Securities $1,021,000 $ 1,000 $ 28,000 $ 994,000 Municipal Government Securities 5,360,000 41,000 146,000 5,255,000 Other 500,000 - - 500,000 $6,881,000 $42,000 $174,000 $6,749,000 The following table lists the maturities of debt securities held at June 24, 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 $4,825,000 $4,807,000 $ - $ - Due after one year through five years 495,000 488,000 6,881,000 6,749,000 Due after five years 495,000 443,000 - - Total $5,815,000 $5,738,000 $6,881,000 $6,749,000 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 $1,071,000 in stockholders' equity for the nine months ended June 24, 1995 because of the revaluation of the net assets of the Company's frozen carbonated beverage subsidiary. The Company is experiencing a dollar decline in the sales of this subsidiary of about 50% 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 $3,198,000. During the nine months ended June 24, 1995, the Company purchased and retired 564,100 shares of its common stock at a cost of $6,607,000. During the third 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 $2,710,000 or 6% to $47,876,000 for the three months and $5,568,000 or 4% to $129,410,000 for the nine months ended June 24, 1995. Net sales, excluding sales of Western Syrup Company for all periods, increased $3,490,000 or 8% for the three months and $7,720,000 or 6% for the nine month period. Sales to food service customers increased $2,332,000 or 13% in the third quarter to $19,623,000 and $5,485,000 or 11% to $56,525,000 in the nine months. Soft pretzel sales to the food service market increased 11% to $12,502,000 in the third quarter and 10% to $37,092,000 in the nine months due primarily to expanded unit volume. New channels of distribution and new products accounted for most of the added pretzel volume. Frozen juice treat and dessert sales increased 35% to $3,458,000 in the three months and 13% to $8,971,000 in the nine months. Churro sales to food service customers decreased 2% to $2,548,000 in the third quarter and 4% to $6,861,000 in the nine months. One customer accounted for all of the churros sales decrease. All food service sales increases were due primarily to expanded unit volume. 9 Sales of products to retail supermarkets increased $1,856,000 or 21% to $10,868,000 in the third quarter and $1,915,000 or 7% to $28,370,000 in the nine months. Soft pretzel sales for the third quarter were up 8% to $5,292,000 and for the nine months were up less than 1% to $19,423,000. Sales of the flagship SUPERPRETZEL brand soft pretzels, excluding SOFTSTIX, increased 10% in the third quarter and 2% in the nine months due to unit volume increases. Softstix sales decreased $178,000 to $600,000 in the third quarter and $565,000 to $3,011,000 in the nine months. Sales of Luigi's Real Italian Ice increased $1,456,000 or 37% to $5,339,000 in the third quarter and $2,023,000 or 32% in the nine months. All of the retail supermarket increases and decreases were due primarily to changes in unit volume. Frozen carbonated beverage and related product sales decreased $243,000 or 2% to $12,222,000 in the third quarter and $660,000 or 2% to $28,471,000 in the nine months. Sales of the Company's Mexican frozen carbonated beverage subsidiary were down $433,000 or 46% in the third quarter and $924,000 or 39% in the nine months due to the devaluation of the peso and the business downturn in Mexico. Equipment and parts sales were down $89,000 or 55% in the third quarter and $276,000 or 58% in the nine months due to reduced demand. Beverage sales alone decreased 2% to $11,602,000 in the third quarter and 1% to $26,963,000 in the nine months primarily because of lower sales in Mexico and the net loss of higher volume accounts elsewhere. Bakery sales decreased $518,000 or 16% to $2,798,000 in the third quarter and $377,000 or 5% to $7,084,000 in the nine months. The decline was due to a reduction in purchases by a single customer. Bavarian Pretzel Bakery sales increased 3% to $2,365,000 in the third quarter and 6% to $8,029,000 in the nine month period. Gross profit as a percentage of sales decreased to 49% and 50% in the current three and nine month periods from 52% in the comparable periods last year. The gross profit percentage decreases are primarily attributable to higher packaging and raw material costs and increased manufacturing overhead costs due to recent expansions of production capacities. Total operating expenses increased $1,994,000 in the third quarter and as a percentage of sales increased to 45% from 43% in last year's same quarter. For the nine months, operating expenses increased $4,938,000 and as a percentage of sales increased to 48% from 46% last year. Marketing expenses increased from 28% to 31% in the third quarter and from 30% to 32% in the nine 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 promotional spending. Distribution expenses decreased to 10% of sales in this year's third quarter from 11% last year and were 11% of sales in both nine month periods. Administrative expenses were 4% of sales in both three month periods and 5% of sales in both nine month periods. Operating income decreased $1,944,000 or 48% to $2,086,000 in the third quarter and $4,916,000 or 63% to $2,871,000 in the nine months. 10 Investment income increased in the third quarter and nine months due primarily to higher levels of interest rates on invested funds. Interest expense decreased in the third quarter and nine months due to the reduction of debt. Sundry income of $823,000 in the third quarter compared to sundry expense of $106,000 in last year's quarter, and for the nine months, sundry income of $1,289,000 this year compared to $471,000 last year. The sundry income this year included gains on insurance settlements, gains on sales of land and a gain on the sale of Western Syrup Company, while last year's nine month income included a gain on the sale of land. The effective income tax rate has been estimated at 38% in all periods. Net earnings decreased $579,000 or 23% in the current three month period to $1,978,000 and decreased $2,479,000 or 45% in the current nine month period to $2,995,000. 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 June 24, 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: August 2, 1995 /s/ Gerald B. Shreiber Gerald B. Shreiber President Dated: August 2, 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: August 2, 1995 Gerald B. Shreiber President Dated: August 2, 1995 Dennis G. Moore Senior Vice President and Chief Financial Officer 13

5 1000 9-MOS SEP-30-1995 JUN-24-1995 9310 4825 17325 (259) 10989 43902 128922 (68552) 123607 17085 5016 43612 0 0 52524 123607 129410 129410 64717 61822 0 0 304 4800 1805 2995 0 0 0 2995 0.31 0.31